<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1997
1933 ACT FILE NO. 333-
1940 ACT FILE NO. 811-5570
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] PRE-EFFECTIVE AMENDMENT NO.
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 15
NUVEEN PREMIUM
INCOME MUNICIPAL 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 AND ZIP
CODE)
(312) 917-7700
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
GIFFORD R. ZIMMERMAN, ESQ.--VICE PRESIDENT AND ASSISTANT SECRETARY
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
NAME AND ADDRESS (NUMBER, STREET, CITY, STATE AND ZIP CODE) OF AGENT FOR SERVICE
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
DAVID A. STURMS JOSEPH H. NESLER
VEDDER, PRICE, KAUFMAN & KAMMHOLZ SIDLEY & AUSTIN
222 NORTH LASALLE STREET ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60601 CHICAGO, ILLINOIS 60603
</TABLE>
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
======================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Municipal Auction Rate Cumulative
Preferred Stock, Series M, T, W,
TH, F........................... 5,000 shrs.(1) $25,000 $125,000,000 $37,878.79
======================================================================================================================
</TABLE>
(1) The Fund will offer, in the aggregate, up to 5,000 shares of Municipal
Auction Rate Cumulative Preferred Stock, Series M, T, W, TH and F, at an
offering price of $25,000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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 SUCH STATE.
================================================================================
<PAGE> 2
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
CROSS REFERENCE SHEET
PART A--PROSPECTUS
<TABLE>
<CAPTION>
ITEMS IN PART A OF FORM N-2 LOCATION IN PROSPECTUS
--------------------------- ----------------------
<S> <C> <C>
Item 1. Outside Front Cover Cover Page
Item 2. Inside Front and Outside Back Cover Page Inapplicable
Item 3. Fee Table and Synopsis Inapplicable
Item 4. Financial Highlights Financial Highlights
Item 5. Plan of Distribution Cover Page; Prospectus Summary; The
Auction; Underwriting
Item 6. Selling Shareholders Inapplicable
Item 7. Use of Proceeds Use of Proceeds; Investment Objective
and Policies
Item 8. General Description of the Registrant Cover Page; Prospectus Summary; The
Fund; Investment Objective and Policies;
Description of MuniPreferred;
Description of Common Stock
Item 9. Management Prospectus Summary; Management of the
Fund; Custodian, Transfer Agent,
Dividend Disbursing Agent and Redemption
Agent
Item 10. Capital Stock, Long-Term Debt, and Other Securities Capitalization; Investment Objective and
Policies; Description of MuniPreferred;
The Auction; Description of Common
Stock; Certain Provisions in the
Articles of Incorporation; Tax Matters
Item 11. Defaults and Arrears on Senior Securities Inapplicable
Item 12. Legal Proceedings Inapplicable
Item 13. Table of Contents of the Statement of Table of Contents for the Statement of
Additional Information
</TABLE>
PART B--STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
LOCATION IN STATEMENT OF
ITEMS IN PART B OF FORM N-2 ADDITIONAL INFORMATION
--------------------------- ------------------------
<S> <C> <C>
Item 14. Cover Page Cover Page
Item 15. Table of Contents Cover Page
Item 16. General Information and History Inapplicable
Item 17. Investment Objective and Policies Investment Objective and Policies;
Certain Trading Strategies of the Fund;
Portfolio Transactions
Item 18. Management Management of the Fund; Portfolio
Transactions
Item 19. Control Persons and Principal Holders of Securities Management of the Fund; Certain Owners
of Record
Item 20. Investment Advisory and Other Services Management of the Fund; Experts
Item 21. Brokerage Allocation and Other Practices Portfolio Transactions
Item 22. Tax Status Tax Matters
Item 23. Financial Statements
</TABLE>
PART C -- OTHER INFORMATION
Items 24-33 have been answered in Part C of this Registration Statement.
<PAGE> 3
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 such State.
NUVEEN LOGO SUBJECT TO COMPLETION
AUGUST 13, 1997
PROSPECTUS
$125,000,000
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED(R)")
1,000 SHARES SERIES M
1,000 SHARES SERIES T
1,000 SHARES SERIES W
1,000 SHARES SERIES TH
1,000 SHARES SERIES F
LIQUIDATION PREFERENCE $25,000 PER SHARE
-------------------------
Nuveen Premium Income Municipal Fund, Inc. (the "Fund") is a closed-end,
diversified management investment company. The Fund's investment objective is a
high level of current income exempt from regular Federal income tax, consistent
with preservation of capital. The Fund seeks to achieve this objective by
investing in a diversified portfolio of investment grade tax-exempt Municipal
Obligations. See "Investment Objective and Policies." No assurance can be given
that the Fund's investment objective will be achieved. All or a portion of the
Fund's dividends may be subject to the Federal alternative minimum tax. The
Fund's principal office is located at 333 West Wacker Drive, Chicago, Illinois
60606, and its telephone number is (312) 917-7700. Investors are advised to read
this Prospectus, which sets forth concisely the information about the Fund that
a prospective investor ought to know before investing, and retain it for future
reference. A Statement of Additional Information dated , 1997
containing additional information regarding the Fund has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference in
its entirety into this Prospectus. A copy of the Statement of Additional
Information, the table of contents of which appears on page of this
Prospectus, may be obtained without charge by calling the Fund at (800)
257-8787. In addition, the Securities and Exchange Commission maintains a web
site (http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information filed electronically
with the Commission.
The Fund is offering 1,000 shares of Series M MuniPreferred, 1,000 shares of
Series T MuniPreferred, 1,000 shares of Series W MuniPreferred, 1,000 shares of
Series TH MuniPreferred and 1,000 shares of Series F MuniPreferred. The shares
of MuniPreferred offered hereby are referred to herein collectively as "New
MuniPreferred." The Fund currently has outstanding 2,800 shares of Series M
MuniPreferred, 2,800 shares of Series T MuniPreferred, 2,800 shares of Series W
MuniPreferred, 2,800 shares of Series TH MuniPreferred and 2,800 shares of
Series F MuniPreferred. The shares of MuniPreferred currently outstanding are
referred to herein collectively as "Existing MuniPreferred" and together with
the New MuniPreferred, or each separately, are referred to as "MuniPreferred."
(continued on reverse side)
-------------------------
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 UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
(R) Registered trademark of John Nuveen & Co., Incorporated
<TABLE>
<CAPTION>
======================================================================================================================
PRICE TO PROCEEDS TO
PUBLIC(1) SALES LOAD(2) FUND(3)
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Per Share................................................ $25,000 $281.25 $24,718.75
- ----------------------------------------------------------------------------------------------------------------------
Total.................................................... $125,000,000 $1,406,250 $123,593,750
======================================================================================================================
</TABLE>
(1) Plus accumulated dividends, if any, from the Date of Original Issue.
(2) The Fund and Nuveen Advisory Corp. (the "Adviser") have agreed to indemnify
the several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended, and the Investment Company Act
of 1940, as amended.
(3) Before deducting costs payable by the Fund, estimated at $310,879.
The shares of New MuniPreferred are offered by the several Underwriters
named herein, subject to prior sale, when, as and if issued to and accepted by
them and subject to approval of certain legal matters by counsel for the
Underwriters. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that the
shares of New MuniPreferred will be delivered to the Underwriters through the
facilities of The Depository Trust Company as follows: Series M MuniPreferred on
or about Tuesday, [September 30, 1997]; Series T MuniPreferred on or about
Wednesday, [October 1, 1997]; on Series W MuniPreferred on or about Thursday,
[October 2, 1997]; on Series TH MuniPreferred on or about Friday, [October 3,
1997]; and on Series F MuniPreferred on or about Monday, [October 6, 1997].
-------------------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS INCORPORATED
GOLDMAN, SACHS & CO.
JOHN NUVEEN & CO. INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
SMITH BARNEY INC.
-------------------------
The date of this Prospectus is , 1997.
<PAGE> 4
(Continued from Cover)
Dividends on shares of MuniPreferred, to the extent payable from tax-exempt
income earned on the Fund's investments, will be exempt from regular Federal
income tax in the hands of owners of such shares. All or a portion of the Fund's
dividends may be subject to the Federal alternative minimum tax. In the past,
the Fund has made nonproportionate designations of dividends between its
preferred stockholders and common stockholders such that dividends paid to
holders of preferred stock are designated as exempt interest dividends to the
extent such dividends do not exceed the Fund's exempt interest income under a
special "grandfather" provision contained in Revenue Ruling 89-81. Currently,
the Fund intends to allocate proportionately the Fund's taxable ordinary income
and capital gains, if any, to both common and preferred stockholders. The Fund
shall, in the case of a Minimum Rate Period or a Special Rate Period of 28 Rate
Period Days or fewer, and may, in the case of any other Special Rate Period,
give notice of the amount of any income taxable for Federal income tax purposes
to be included in a dividend on shares of MuniPreferred in advance of the
related Auction. See "The Auction--Auction Procedures." The amount of any such
taxable income allocable to shares of MuniPreferred will depend upon the amount
of such income realized by the Fund, but is not generally expected to be
significant. See "Tax Matters."
The dividend rate for shares of New MuniPreferred of a particular series
for the initial Rate Period for such shares shall be equal to the dividend rate
for shares of Existing MuniPreferred of the same series established in the first
Auction for shares of such series preceding the date of issuance of such shares
of New MuniPreferred. For each Subsequent Rate Period of such shares, the
dividend rate for such shares will be the Applicable Rate for such shares in
effect from time to time determined, except as described herein, on the basis of
Orders placed in an Auction conducted on the Business Day preceding the
commencement of such Subsequent Rate Period. The Applicable Rate for such shares
that results from an Auction for any Rate Period for such shares will not exceed
the Maximum Rate for such shares. The Broker-Dealers maintain a secondary
trading market in shares of MuniPreferred outside of Auctions, but are not
obligated to do so, and may discontinue such activity at any time. There can be
no assurance that such secondary trading market in shares of MuniPreferred will
provide owners with liquidity of investment. Shares may be transferred outside
of Auctions only to a Broker-Dealer or such other persons as may be permitted by
the Fund. The shares of MuniPreferred of each series are redeemable by the Fund
as described herein.
Dividends on shares of New MuniPreferred of a particular series shall
accumulate at the Applicable Rate for shares of such series commencing as
follows: Series M MuniPreferred on Tuesday, [September 30, 1997]; Series T
MuniPreferred on Wednesday, [October 1, 1997]; Series W MuniPreferred on
Thursday, [October 2, 1997]; Series TH MuniPreferred on Friday, [October 3,
1997]; and Series F MuniPreferred on Monday, [October 6, 1997]. Except as
described herein, dividends shall be payable on shares of Series M MuniPreferred
on Tuesday, [October 7, 1997], and thereafter on each Tuesday; Series T
MuniPreferred on Wednesday, [October 8, 1997], and thereafter on each Wednesday;
Series W MuniPreferred on Thursday, [October 9, 1997], and thereafter on each
Thursday; Series TH MuniPreferred on Friday, [October 10, 1997], and thereafter
on each Friday; and Series F MuniPreferred on Tuesday, [October 14, 1997], and
thereafter on each Monday. Any Subsequent Rate Period of shares of a series of
MuniPreferred will be a Minimum Rate Period (7 Rate Period Days) unless the
Fund, subject to certain conditions, designates such Subsequent Rate Period as a
Special Rate Period. See "Description of MuniPreferred--Dividends and Dividend
Periods--Designation of Special Rate Periods."
<PAGE> 5
PROSPECTUS SUMMARY
The following information is qualified in its entirety by reference to the
more detailed information included elsewhere in this Prospectus and the Fund's
Amended and Restated Statement Establishing and Fixing the Rights and
Preferences of Municipal Auction Rate Cumulative Preferred Stock attached as
Appendix A to this Prospectus (the "Statement"). Capitalized terms used but not
defined therein shall have the meanings given to such terms in the Statement.
THE FUND
Nuveen Premium Income Municipal Fund, Inc. (the "Fund") is a closed-end,
diversified management investment company. See "The Fund." The Fund's shares of
common stock, $.01 par value ("Common Stock"), are traded on the New York Stock
Exchange under the symbol "NPI." See "Description of Common Stock." As of April
30, 1997, the Fund had 63,785,431 shares of Common Stock outstanding, 14,000
shares of Preferred Stock outstanding and net assets of approximately
$1,300,108,093.
INVESTMENT OBJECTIVE
The Fund's investment objective is a high level of current income exempt
from regular Federal income tax, consistent with preservation of capital. The
Fund seeks to achieve this objective by investing in a diversified portfolio of
investment grade tax-exempt Municipal Obligations. See "Investment Objective and
Policies." No assurance can be given that the Fund's investment objective will
be achieved. In seeking to achieve its investment objective, the Fund may employ
certain trading strategies, such as financial futures and options transactions,
subject to certain restrictions. See "Portfolio Transactions" in the Statement
of Additional Information.
INVESTMENT ADVISER
Nuveen Advisory Corp. (the "Adviser") acts as the Fund's investment
adviser. The Adviser is a wholly-owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"), an investment banking firm that has specialized in the
underwriting and distribution of tax-exempt securities throughout its history.
See "Management of the Fund" and "Underwriting."
THE OFFERING
The Fund is offering 1,000 shares of Series M MuniPreferred, 1,000 shares
of Series T MuniPreferred, 1,000 shares of Series W MuniPreferred, 1,000 shares
of Series TH MuniPreferred and 1,000 Shares of Series F MuniPreferred, each at a
purchase price of $25,000 per share. However, the offering of each series is
independent of the offering of each other series, and no offering is contingent
upon the closing of any other offering. Certain information presented in this
Prospectus, however, assumes that each offering is made and effected as
contemplated, but there can be no assurance that this will be the case. Shares
of MuniPreferred are being offered by the Underwriters listed under
"Underwriting." Except as otherwise described herein, the rights and preferences
of each series of MuniPreferred are identical.
DIVIDENDS AND DIVIDEND PERIODS
The dividend rate for shares of New MuniPreferred of a particular series
for the initial Rate Period for such shares shall be equal to the dividend rate
for shares of Existing MuniPreferred of the same series established in the first
Auction for shares of such series preceding the date of issuance of such shares
of New MuniPreferred. For each Subsequent Rate Period of such shares, the
dividend rate for such shares will be the Applicable Rate for such shares in
effect from time to time determined, except as described herein, on the basis of
Orders placed in an Auction conducted on the Business Day preceding the
commencement of such Subsequent Rate Period. The Applicable Rate for such shares
that results from an Auction for any Rate Period for such shares will not exceed
the Maximum Rate for such shares.
2
<PAGE> 6
Dividends on shares of New MuniPreferred of a particular series shall
accumulate at the Applicable Rate for shares of such series commencing as
follows: Series M MuniPreferred on Tuesday, [September 30, 1997]; Series T
MuniPreferred on Wednesday, [October 1, 1997]; Series W MuniPreferred on
Thursday, [October 2, 1997]; Series TH MuniPreferred on Friday, [October 3,
1997]; and Series F MuniPreferred on Monday, [October 6, 1997]. Except as
described herein, dividends shall be payable on shares of Series M MuniPreferred
on Tuesday, [October 7, 1997], and thereafter on each Tuesday; Series T
MuniPreferred on Wednesday, [October 8, 1997], and thereafter on each Wednesday;
Series W MuniPreferred on Thursday, [October 9, 1997], and thereafter on each
Thursday; Series TH MuniPreferred on Friday, [October 10, 1997], and thereafter
on each Friday; and Series F MuniPreferred on Tuesday, [October 14, 1997], and
thereafter on each Monday. Any Subsequent Rate Period of shares of a series of
MuniPreferred will be a Minimum Rate Period (7 Rate Period Days) unless the
Fund, subject to certain conditions, designates such Subsequent Rate Period as a
Special Rate Period. See "Description of MuniPreferred -- Dividends and Dividend
Periods -- Designation of Special Rate Periods."
TAXATION
Dividends on shares of MuniPreferred, to the extent payable from tax-exempt
income earned on the Fund's investments, will be exempt from regular Federal
income tax in the hands of owners of such shares. All or a portion of the Fund's
dividends may be subject to the Federal alternative minimum tax. In the past,
the Fund has made nonproportionate designations of dividends between its
preferred stockholders and common stockholders such that dividends paid to
holders of preferred stock are designated as exempt interest dividends to the
extent such dividends do not exceed the Fund's exempt interest income under a
special "grandfather" provision contained in Revenue Ruling 89-81. Currently,
the Fund intends to allocate proportionately the Fund's investment company
taxable income and net capital gain, if any, to both common and preferred
stockholders. The Fund shall, in the case of a Minimum Rate Period or a Special
Rate Period of 28 Rate Period Days or fewer, and may, in the case of any other
Special Rate Period, give notice of the amount of any income taxable for Federal
income tax purposes to be included in a dividend on shares of MuniPreferred in
advance of the related Auction. See "The Auction -- Auction Procedures." The
amount of any such investment company taxable income and net capital gain
allocable to shares of MuniPreferred will depend upon the amount of such income
and gain realized by the Fund, but is not generally expected to be significant.
See "Tax Matters."
RATINGS
It is a condition to the issuance of shares of New MuniPreferred of each
series that such shares be issued with a rating of "aaa" from Moody's or AAA
from S&P. See "Description of MuniPreferred -- Rating Agency Guidelines."
REDEMPTION
Unless the Fund waives its right of redemption with respect to shares of a
series of MuniPreferred in a notice establishing a Special Rate Period of such
shares, shares of MuniPreferred of such series are redeemable by the Fund in
whole or in part on the second Business Day preceding any Dividend Payment Date
for such shares. Shares of MuniPreferred are redeemable by the Fund in whole
under certain other circumstances. In the event the Fund does not timely cure a
failure to meet certain rating agency guidelines, the Fund will be required to
redeem certain shares of MuniPreferred. See "Description of MuniPreferred --
Redemption" and "-- Rating Agency Guidelines."
LIQUIDATION PREFERENCE
The liquidation preference of the shares of each series of New
MuniPreferred will be $25,000 per share plus accumulated but unpaid dividends,
if any, thereon. See "Description of MuniPreferred -- Liquidation."
3
<PAGE> 7
VOTING RIGHTS
The holders of Preferred Stock, including MuniPreferred, voting as a
separate class, have the right to elect at least two directors at all times and
to elect a majority of the directors in the event two years' dividends on the
Preferred Stock are unpaid. In each case, the remaining directors will be
elected by holders of shares of Common Stock and shares of Preferred Stock,
including MuniPreferred, voting together as a single class. The holders of
shares of Preferred Stock, including MuniPreferred, will vote as a separate
class or classes on certain other matters as required under the Articles, the
1940 Act and Minnesota law. See "Description of MuniPreferred -- Voting Rights"
and "Certain Provisions in the Articles of Incorporation."
SECONDARY MARKET TRADING
The Broker-Dealers maintain a secondary trading market in shares of
MuniPreferred outside of Auctions, but are not obligated to do so, and may
discontinue such activity at any time. There can be no assurance that such
secondary trading market in shares of MuniPreferred will provide owners with
liquidity of investment. Shares may be transferred outside of Auctions only to a
Broker-Dealer or such other persons as may be permitted by the Fund. See "The
Auction -- Secondary Market Trading and Transfer of MuniPreferred."
4
<PAGE> 8
FINANCIAL HIGHLIGHTS
The table below shows financial information for the Fund, expressed in
terms of one share outstanding throughout the period. The information in the
table is covered by the report of Ernst & Young LLP except where noted. The
report is contained in this Registration Statement and is available from the
Fund.
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED 10/31
ENDED -------------------------------------------------
4/30/97+++ 1996 1995 1994 1993
---------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of period... $ 14.960 $ 15.110 $ 14.140 $ 16.300 $ 15.790
Operating performance
Net investment
income.............. .573 1.158 1.235 1.256 1.431
Net realized &
unrealized gain
(loss) from
investments......... (.173) (.097) 1.006 (2.016)*** .612
Dividends from
tax-exempt net
investment income
To Common
shareholders........ (.477) (.965) (1.056) (1.172) (1.364)
To Preferred
shareholders+....... (.094) (.196) (.215) (.156) (.169)
Distributions from
capital gains
To Common
shareholders........ (.029) (.050) -- (.072) --
To Preferred
shareholders+....... -- -- -- -- --
Organization and
offering costs and
Preferred share
underwriting
discounts............. -- -- -- -- --
Net asset value end of
period................ 14.760 14.960 15.110 14.140 16.300
Per Common share market
value end of period... 14.125 14.500 14.375 13.250 17.750
Total investment return
on market value**..... .93% 8.24% 16.88% (19.13)% 20.96%
Total return on net
asset value**......... 2.06% 5.92% 14.84% (5.88)% 12.33%
Ratios/Supplemental
data
Net assets end of
period (in
thousands).......... $1,291,656 $1,304,192 $1,313,673 $1,252,208 $1,213,064
Ratio of expenses to
average net
assets++............ .76%* .75% .76% .77% .79%
Ratio of net
investment income to
average net
assets++............ 5.66%* 5.67% 6.13% 6.08% 6.28%
Portfolio turnover
rate................ 3% 16% 12% 15% 11%
<CAPTION>
FIVE
MONTHS YEAR ENDED 5/31
ENDED ------------------------------------ 6/22/89 TO
10/31/92 1992 1991 1990 5/31/90
-------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of period... $ 15.760 $ 15.180 $ 14.600 $ 14.720 $ 14.050
Operating performance
Net investment
income.............. .602 1.492 1.504 1.508 1.101
Net realized &
unrealized gain
(loss) from
investments......... .023 .492 .532 (.115) .741
Dividends from
tax-exempt net
investment income
To Common
shareholders........ (.516) (1.135) (1.080) (1.080) (.747)
To Preferred
shareholders+....... (.079) (.269) (.376) (.433) (.268)
Distributions from
capital gains
To Common
shareholders........ -- -- -- -- --
To Preferred
shareholders+....... -- -- -- -- --
Organization and
offering costs and
Preferred share
underwriting
discounts............. -- -- -- -- (.157)
Net asset value end of
period................ 15.790 15.760 15.180 14.600 14.720
Per Common share market
value end of period... 15.875 16.250 15.375 15.000 14.875
Total investment return
on market value**..... .73% 13.32% 10.14% 8.39% 4.38%
Total return on net
asset value**......... 3.46% 11.72% 11.88% 6.74% 10.44%
Ratios/Supplemental
data
Net assets end of
period (in
thousands).......... $1,173,329 $1,167,042 $1,127,103 $1,090,365 $1,089,152
Ratio of expenses to
average net
assets++............ .78%* .66% .65% .65% .62%*
Ratio of net
investment income to
average net
assets++............ 6.33%* 6.71% 6.97% 6.98% 6.92%*
Portfolio turnover
rate................ 2% 2% 1% 4% 7%
</TABLE>
- -------------------------
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if
any, and changes in net asset value per share.
*** Includes ($.187) effect of the Fund's Rights Offering of shares as a price
below NAV and costs of the offering.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
+++ Unaudited.
5
<PAGE> 9
THE FUND
Nuveen Premium Income Municipal Fund, Inc. (the "Fund") is a closed-end,
diversified management investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund was incorporated
under the laws of the State of Minnesota on April 15, 1988. In 1988, the Fund
issued an aggregate of 50,000,000 shares of Common Stock, par value $.01 per
share, pursuant to the initial public offering thereof and commenced its
operations. The Fund's Common Stock is traded on the New York Stock Exchange
(the "Exchange") under the symbol "NPI." In November 1988, the Fund issued an
aggregate of 3,500 shares of Remarketed Preferred Stock with a liquidation
preference of $100,000 per share (the "Preferred Shares"). In January, 1994, the
Fund issued rights to subscribe for an aggregate of 17,695,926 additional shares
of Common Stock. 30,187,275 rights were subscribed for, which were converted
into 10,062,425 shares of Common Stock. On August 10, 1995, the Fund conducted a
4-for-1 preferred stock split which was effected by means of the division of
each outstanding Remarketed Preferred Stock into four shares, with a liquidation
preference of $25,000 per share, for an aggregate of 14,000 shares of Remarketed
Preferred Stock. On August 12, 1997 the terms of the Fund's preferred stock were
amended, converting the Fund's Preferred Stock into MuniPreferred (the
"Amendment"). The Fund's principal office is located at 333 West Wacker Drive,
Chicago, Illinois 60606, and its telephone number is (312) 917-7700.
USE OF PROCEEDS
The net proceeds of this offering will be approximately $123,282,871 after
payment of the sales load and estimated offering costs.
The net proceeds of the offering will be invested in accordance with the
Fund's investment objective and policies as stated below. It is presently
anticipated that the Fund will be able to invest substantially all of the net
proceeds in Municipal Obligations that meet that objective and these policies at
or shortly (within six to eight weeks) after the completion of the offering. To
the extent that all of the proceeds cannot be so invested, pending such
investment, they will be invested in high quality, short-term tax-exempt money
market securities or in high quality Municipal Obligations with relatively low
volatility (such as pre-refunded and intermediate-term securities), to the
extent such securities are available. If necessary to invest fully the net
proceeds of the offerings immediately, the Fund may also purchase, as temporary
investments, short-term taxable investments of the type described under
"Investment Objective and Policies -- Portfolio Investments," the income on
which is subject to regular Federal income tax.
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<PAGE> 10
CAPITALIZATION
(UNAUDITED)
The following table sets forth the capitalization of the Fund as of May 31,
1997 and as adjusted to give effect to the issuance of the shares of New
MuniPreferred offered hereby.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Shareholders' Equity:
Preferred Stock, $25,000 stated value per share, at
liquidation value; 1,000,000 shares authorized (14,000
shares issued and 19,000 shares issued, as adjusted,
respectively).......................................... $ 350,000,000 $ 475,000,000
Common Stock, $.01 par value per share; 200,000,000 shares
authorized, 63,785,431 shares outstanding*............. 637,854 637,854
Paid-in surplus........................................... 903,352,774 901,635,645
-------------- --------------
Balance of undistributed net investment income............ 788,144 788,144
Accumulated net realized gain (loss) from investment
transactions........................................... (13,839) (13,839)
Net unrealized appreciation of investments................ 45,676,975 45,676,975
-------------- --------------
Net Assets........................................ $1,300,441,908 $1,423,724,779
============== ==============
</TABLE>
- ---------------
* None of these outstanding shares are held by or for the account of the Fund.
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<PAGE> 11
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide, through investment in a
professionally managed portfolio of tax-exempt Municipal Obligations, a high
level of current income exempt from regular Federal income tax, consistent with
the preservation of capital.
PORTFOLIO INVESTMENTS
Except to the extent the Fund invests in temporary investments as described
above under "Use of Proceeds" and in the Statement of Additional Information
under "Investment Objective and Policies -- Portfolio Investments," the Fund
will, as a fundamental policy, invest substantially all of its net assets in
tax-exempt 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 in unrated Municipal
Obligations which, in the opinion of the Adviser, have credit characteristics
equivalent to, and will be of comparable quality to, Municipal Obligations rated
within the four highest grades by Moody's or S&P, provided that the Fund may not
invest more than 20% of its net assets in such unrated Municipal Obligations. A
general description of Moody's and S&P's ratings of Municipal Obligations is set
forth in Appendix A to the Statement of Additional Information.
The foregoing investment objective and policies are fundamental policies of
the Fund and may not be changed without the approval of the holders of a
majority of the outstanding shares of Common Stock and shares of Preferred
Stock, including MuniPreferred, voting together as a single class, and of the
holders of a majority of the outstanding shares of Preferred Stock, including
MuniPreferred, voting as a separate class. For the purposes of the foregoing,
"Investment Restrictions," below, and the first paragraph under "Description of
MuniPreferred -- Voting Rights," below, "majority of the outstanding," when used
with respect to particular shares of the Fund, means (i) 67% or more of the
shares present at a meeting, if the holders of more than 50% of the shares are
present or represented by proxy, or (ii) more than 50% of the shares, whichever
is less. See "Description of MuniPreferred -- Voting Rights" for additional
information with respect to the voting rights of holders of Preferred Stock.
If current market conditions persist, the Fund expects to invest
substantially all the net proceeds of this offering in Municipal Obligations
which are rated within the three highest grades of the investment grade category
and which may not be redeemed at the option of the issuer of any such Municipal
Obligations for approximately seven to eight years from the date of purchase by
the Fund. Subject to market availability, the Fund would likely seek to invest
approximately 10% of the net proceeds of the offering in unrated Municipal
Obligations.
The Fund has not established any limit on the percentage of its portfolio
that may be invested in Municipal Obligations subject to the alternative minimum
tax provisions of Federal tax law, and a substantial portion of the income
produced by the Fund may be includable in alternative minimum taxable income.
Shares of MuniPreferred therefore would not ordinarily be a suitable investment
for investors who are subject to the Federal alternative minimum tax. The
suitability of an investment in shares of MuniPreferred will depend upon a
comparison of the after-tax yield likely to be provided from the Fund with that
from comparable tax-exempt investments not subject to the alternative minimum
tax, and from comparable fully taxable investments, in light of each such
investor's tax position. Special considerations apply to corporate investors. In
addition, the dividends paid on shares of MuniPreferred during specified Rate
Periods will include an allocated portion of any net capital gains or other
income taxable for Federal income tax purposes realized by the Fund. See "Tax
Matters."
MUNICIPAL OBLIGATIONS
"Municipal Obligations" are debt obligations issued by states, cities and
local authorities, and certain possessions and territories of the United States,
to obtain funds for various public purposes, including the construction and
maintenance of such public facilities as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal
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<PAGE> 12
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. Municipal Obligations in which the Fund will invest
bear interest that, in the opinion of bond counsel to the issuer, is exempt from
regular Federal income tax, although such interest may be subject to the Federal
alternative minimum 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.
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.
The 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 obligations are fixed at the
time the buyer enters into the commitment. Beginning on the date the Fund enters
into a commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund is required under the rules of the Commission to maintain in a
segregated account cash and liquid assets equal in value to the purchase price
due on the settlement date. Income generated by assets in such a segregated
account may be taxable. The commitment to purchase securities on a when-issued
or delayed delivery basis may involve an element of risk because the value of
the securities is subject to market fluctuation. No interest accrues to the
purchaser prior to settlement of the transaction, and at the time of delivery
the market value may be less than cost.
INVESTMENT RESTRICTIONS
Except as described below, the Fund, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding shares of
Common Stock and Preferred Stock, including shares of MuniPreferred, voting
together as a single class, and of the holders of a majority of the outstanding
shares of Preferred Stock, including shares of MuniPreferred, voting as a
separate class:
(1) Issue senior securities, as defined in the 1940 Act, other than
Preferred Stock, except to the extent such issuance might be involved with
respect to borrowings described under subparagraph (3) under "Investment
Objective and Policies -- 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 Fund -- 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 be
applicable to Municipal Obligations other than those Municipal Obligations
backed only by the assets and revenues of non-governmental users, nor shall
it apply to Municipal Obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
(3) Invest in securities other than Municipal Obligations and
temporary investments as described above under "Use of Proceeds" and in the
Statement of Additional Information under "Investment Objective and
Policies -- Portfolio Investments"; and
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<PAGE> 13
(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.
Notwithstanding subparagraphs (1) and (3) above, restrictions imposed by
Moody's or S&P, or both, on engaging in futures and options transactions as
described in the Statement of Additional Information under "Certain Trading
Strategies of the Fund -- Financial Futures and Options Transactions," are not
fundamental policies and may be changed by the Fund from time to time without
shareholder approval; provided, however, that if Moody's or S&P, or both, are
rating the shares of MuniPreferred, the Fund must receive written confirmation
from Moody's or S&P, or both, as appropriate, that such change would not impair
the ratings then assigned by Moody's and S&P to shares of MuniPreferred.
See "Investment Objective and Policies -- Investment Restrictions" in the
Statement of Additional Information for a description of additional fundamental
and non-fundamental policies of the Fund.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The management of the Fund, including general supervision of the duties
performed by the Adviser under its investment management agreement with the
Fund, is the responsibility of its Board of Directors. There are eight directors
of the Fund, two of whom are "interested persons" (as defined in the 1940 Act)
and six of whom are "disinterested persons." The names and business addresses of
the directors and officers of the Fund and their principal occupations and other
affiliations during the past five years are set forth under "Management of the
Fund" in the Statement of Additional Information.
INVESTMENT ADVISER
Nuveen Advisory Corp. (the "Adviser"), 333 West Wacker Drive, Chicago,
Illinois 60606, acts as the investment adviser for, and manages the investment
and reinvestment of the assets of, the Fund. The Adviser also administers the
Fund's business affairs, provides office facilities and equipment and certain
clerical, bookkeeping and administrative services, and permits any of its
officers or employees to serve without compensation as directors or officers of
the Fund if elected to such positions.
The Adviser was organized in 1976 and is a wholly-owned subsidiary of John
Nuveen & Co. Incorporated ("Nuveen"), 333 West Wacker Drive, Chicago, Illinois
60606. Founded in 1898, Nuveen currently sponsors 102 investment company
portfolios (including the Fund), having approximately $37 billion of assets
under management. Nuveen is a subsidiary of The John Nuveen Company which, in
turn, is a majority-owned subsidiary of The St. Paul Companies, Inc., a
management company of St. Paul, Minnesota, principally engaged in providing
property-liability insurance through subsidiaries.
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay for the services and facilities provided by the
Adviser an annual management fee, payable on a monthly basis, in an amount equal
to .6500 of 1% of the first $125,000,000 of the Fund's average daily net assets
(i.e., the average daily value of the Fund's total assets less the accrued
liabilities of the Fund), .6375 of 1% of the next $125,000,000 in net assets,
..6250 of 1% of the next $250,000,000 in net assets, .6125 of 1% of the next
$500,000,000 in net assets, .6000 of 1% of the next $1,000,000,000 in net assets
and .5875 of 1% in excess of $2,000,000,000 in net assets. The Fund paid
aggregate management fees of $8,045,628 for the fiscal year ended October 31,
1996, for an effective management fee rate of .62% per annum.
In addition to the fee of the Adviser, the Fund pays all other costs and
expenses of its operations, including compensation of its trustees (other than
those affiliated with the Adviser), custodian, transfer and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of repurchasing
shares, expenses of preparing, printing and distributing shareholder reports,
notices, proxy statements and reports to governmental agencies, and taxes, if
any.
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<PAGE> 14
PORTFOLIO MANAGEMENT
The Adviser places orders for the purchase and sale of portfolio securities
for the Fund. Consistent with Rule 10f-3 under the 1940 Act, portfolio
securities may be purchased from Nuveen or its affiliates. Since the date of its
inception, overall portfolio management strategy for the Fund has been
determined by the Adviser under the general supervision and direction of Thomas
C. Spalding, Jr., a Vice President of the Fund's Adviser and of the Fund. Mr.
Spalding has been employed by Nuveen since 1976 and by the Adviser since 1978,
and has managerial responsibility with respect to all Nuveen open-end and
exchange-traded funds managed by the Adviser. Since July 1989, the day-to-day
management of the Fund, including credit analysis and the execution of portfolio
transactions, has been the responsibility of J. Thomas Futrell, a Vice President
of the Adviser since February 1991. Prior thereto he served as Assistant Vice
President from August 1988 to February 1991 and Assistant Portfolio Manager from
April 1986 to August 1988. Mr. Futrell is a Chartered Financial Analyst. He
currently manages eleven Nuveen-sponsored investment companies. See "Management
of the Fund -- Directors and Officers" in the Statement of Additional
Information for additional information about Mr. Futrell.
DESCRIPTION OF MUNIPREFERRED
The following is a brief description of the terms of the shares of New
MuniPreferred. This description does not purport to be complete and is subject
to and qualified in its entirety by reference to the more detailed description
of the shares of MuniPreferred in the Fund's Amended and Restated Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock attached as Appendix A to this Prospectus (the
"Statement").
GENERAL
The Fund's Articles authorize the issuance of 1,000,000 shares of preferred
stock, par value $.01 per share, which may be issued from time to time in such
series and with such designations, preferences and other rights, qualifications,
limitations and restrictions as are determined in a resolution of the Fund's
Board. The Statement authorizes the issuance of shares of MuniPreferred as
follows: Series M -- 10,000; Series T -- 10,000; Series W -- 10,000; Series
TH -- 10,000; and Series F -- 10,000. The Fund currently has outstanding shares
of Existing MuniPreferred as follows: Series M -- 2,800; Series T -- 2,800;
Series W -- 2,800; Series TH -- 2,800; and Series F -- 2,800. All shares of New
MuniPreferred will have a liquidation preference of $25,000 per share plus an
amount equal to accumulated but unpaid dividends (whether or not earned or
declared).
The shares of New MuniPreferred of each series will rank on parity with
shares of any other series of MuniPreferred, and with shares of any other series
of preferred stock of the Fund as to the payment of dividends and the
distribution of assets upon liquidation. All shares of MuniPreferred carry one
vote per share on all matters on which such shares are entitled to be voted.
Shares of MuniPreferred are, when issued, fully paid and non-assessable and have
no preemptive, conversion or exchange rights or rights to cumulative voting.
DIVIDENDS AND DIVIDEND PERIODS
GENERAL. The initial Rate Period of shares of a series of New
MuniPreferred of a particular series will be a period consisting of seven days.
Any Subsequent Rate Period of shares of a series of MuniPreferred will be a
Minimum Rate Period (7 Rate Period Days), unless the Fund, subject to certain
conditions, designates such Subsequent Rate Period as a Special Rate Period. See
"Designation of Special Rate Periods" below.
Dividends on shares of each series of New MuniPreferred shall be payable,
when, as and if declared by the Board out of funds legally available therefor in
accordance with the Fund's Articles, including the Statement and applicable law,
on shares of (a) MuniPreferred, Series M, on Tuesday, [October 7, 1997], and
thereafter on each Tuesday; (b) MuniPreferred, Series T, on Wednesday, [October
8, 1997], and thereafter on each Wednesday; (c) MuniPreferred, Series W, on
Thursday, [October 9, 1997], and thereafter on each Thursday; (d) MuniPreferred,
Series TH, on Friday, [October 10, 1997], and thereafter on each Friday; and
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<PAGE> 15
(e) MuniPreferred, Series F, Tuesday [October 14, 1997], and thereafter on each
Monday; provided, however, that (i) if the Monday or the Tuesday on which
dividends would otherwise be payable as set forth above is not a Business Day,
then such Dividends shall be payable on such shares on the first Business Day
that falls after such Monday or Tuesday, as the case may be; (ii) if the
Wednesday, Thursday or Friday on which dividends would otherwise be payable as
set forth above is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such Wednesday,
Thursday or Friday, as the case may be; and (iii) the Fund may specify different
Dividend Payment Dates in respect of any Special Rate Period of more than 28
Rate Period Days.
The amount of dividends per share payable on shares of a series of
MuniPreferred on any date on which dividends shall be payable on shares of such
series shall be computed by multiplying the Applicable Rate for shares of such
series in effect for such Dividend Period or Dividend Periods or part thereof
for which dividends have not been paid by a fraction, the numerator of which
shall be the number of days in such Dividend Period or Dividend Periods or part
thereof and the denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other Dividend Periods, and
applying the rate obtained against $25,000.
Dividends will be paid through the Securities Depository on each Dividend
Payment Date in accordance with its normal procedures, which currently provide
for it to distribute dividends in next-day funds to Agent Members, who in turn
are expected to distribute such dividend payments to the persons for whom they
are acting as agents. Each of the current Broker-Dealers, however, has indicated
to the Fund that such Broker-Dealer or the Agent Member designated by such
Broker-Dealer will make such dividend payments available in same-day funds on
each Dividend Payment Date to customers that use such Broker-Dealer or its
designee as Agent Member.
Dividends on shares of New MuniPreferred of a particular series shall
accumulate at the Applicable Rate for shares of such series commencing as
follows: Series M MuniPreferred on Tuesday, [September 30, 1997]; Series T
MuniPreferred on Wednesday, [October 1, 1997]; Series W MuniPreferred on
Thursday, [October 2, 1997]; Series TH MuniPreferred on Friday, [October 3,
1997]; and Series F MuniPreferred on Monday, [October 6, 1997]. The dividend
rate for shares of New MuniPreferred of a particular series for the initial Rate
Period for such shares shall be equal to the dividend rate for shares of
Existing MuniPreferred of the same series established in the first Auction for
shares of such series preceding the date of issuance of such shares of New
MuniPreferred. For each Subsequent Rate Period of shares of New MuniPreferred of
a particular series, the dividend rate for such shares will be the Applicable
Rate for such shares that the Auction Agent advises the Fund results from an
Auction, except as provided below. The Applicable Rate that results from an
Auction for shares of any series of MuniPreferred will not be greater than the
Maximum Rate for shares of such series, which is:
(a) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period, the
product of (i) the Reference Rate on such Auction Date for the next Rate
Period of shares of such series and (ii) the Rate Multiple on such Auction
Date, unless shares of such series have or had a Special Rate Period (other
than a Special Rate Period of 28 Rate Period Days or fewer) and an Auction
at which Sufficient Clearing Bids existed has not yet occurred for a
Minimum Rate Period of shares of such series after such Special Rate
Period, in which case the higher of:
(A) the dividend rate on shares of such series for the then-ending
Rate Period; and
(B) the product of (x) the higher of (I) the Reference Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to the then ending Rate Period of
shares of such series, if such then-ending Rate Period was more than 364
Rate Period Days, and (II) the Reference Rate on such Auction Date for a
Rate Period equal in length to such Special Rate Period of shares of
such series, if such Special Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such
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<PAGE> 16
Auction Date for a Rate Period equal in length to such Special Rate
Period, if such Special Rate Period was more than 364 Rate Period Days
and (y) the Rate Multiple on such Auction Date; or
(b) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period, the
product of (i) the highest of (x) the Reference Rate on such Auction Date
for a Rate Period equal in length to the then-ending Rate Period of shares
of such series, if such then-ending Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate Period
equal in length to the then-ending Rate Period of shares of such series, if
such then-ending Rate Period was more than 364 Rate Period Days, (y) the
Reference Rate on such Auction Date for the Special Rate Period for which
the Auction is being held if such Special Rate Period is 364 Rate Period
Days or fewer or the Treasury Note Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special
Rate Period is more than 364 Rate Period Days, and (z) the Reference Rate
on such Auction Date for Minimum Rate Periods and (ii) the Rate Multiple on
such Auction Date.
If an Auction for any Subsequent Rate Period of shares of any series of
MuniPreferred is not held for any reason other than as described below, the
dividend rate on shares of such series for such Subsequent Rate Period will be
the Maximum Rate for shares of such series on the Auction Date for such
Subsequent Rate Period.
If the Fund fails to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the redemption price of, any shares of any series
of MuniPreferred during any Rate Period thereof (other than any Special Rate
Period of more than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period of more than 364 Rate Period Days during which such a
failure occurred that has not been cured) (such late charge to be paid only in
the event Moody's is rating such shares at the time the Fund cures such
failure), and, prior to 12:00 Noon on the third Business Day next succeeding the
date such failure occurred, such failure shall have been cured and the Fund
shall have paid a late charge, as described in the Statement, no Auction will be
held in respect of shares of such series for the first Subsequent Rate Period
thereof thereafter and the dividend rate for shares of such series for such
Subsequent Rate Period will be the Maximum Rate for shares of such series on the
Auction Date for such Subsequent Rate Period.
If the Fund fails to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the redemption price of, any shares of any series
of MuniPreferred during any Rate Period thereof (other than any Special Rate
Period of more than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period of more than 364 Rate Period Days during which such a
failure occurred that has not been cured), and, prior to 12:00 Noon on the third
Business Day next succeeding the date on which such failure occurred, such
failure shall not have been cured or the Fund shall not have paid a late charge,
as described more fully in the Statement, no Auction will be held in respect of
shares of such series for the first Subsequent Rate Period thereof thereafter
(or for any Rate Period thereof thereafter to and including the Rate Period
during which such failure is so cured and such late charge so paid), and the
dividend rate for shares of such series for each such Subsequent Rate Period
shall be a rate per annum equal to the Maximum Rate for shares of such series on
the Auction Date for such Subsequent Rate Period (but with the prevailing rating
for shares of such series, for purposes of determining such Maximum Rate, being
deemed to be "Below 'ba3'/BB-").
If the Fund fails to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the redemption price of, any shares of any series
of MuniPreferred during a Special Rate Period thereof of more than 364 Rate
Period Days, or during any Rate Period thereof succeeding any Special Rate
Period of more than 364 Rate Period Days during which such a failure occurred
that has not been cured, and such failure shall not have been cured or the Fund
shall not have paid a late charge, as described more fully in the Statement, no
Auction will be held in respect of shares of such series for such Subsequent
Rate Period thereof (or for any Rate Period thereof thereafter to and including
the Rate Period during which such failure is so cured and such late charge so
paid) (such late charge to be paid only in the event Moody's is rating such
shares at the time the Fund cures such failure), and the dividend rate for
shares of such series for each such Subsequent Rate Period shall be a rate per
annum equal to the Maximum Rate for shares of such series on the
13
<PAGE> 17
Auction Date for each such Subsequent Rate Period (but with the prevailing
rating for shares of such series, for purposes of determining such Maximum Rate,
being deemed to be "Below 'ba3'/BB-").
A failure to pay dividends on or the redemption price of shares of any
series of MuniPreferred shall have been cured with respect to any Rate Period
thereof if, within the respective time periods described in the Statement, the
Fund shall have paid to the Auction Agent (a) all accumulated and unpaid
dividends on the shares of such series and (b) without duplication, the
redemption price for shares, if any, of such series for which notice of
redemption has been mailed by the Fund; provided, however, that the foregoing
clause (b) shall not apply to the Fund's failure to pay the redemption price in
respect of shares of MuniPreferred when the related notice of redemption
provides that redemption of such shares is subject to one or more conditions
precedent and any such condition precedent shall not have been satisfied at the
time or times and in the manner specified in such notice of redemption.
GROSS-UP PAYMENTS. Holders of shares of MuniPreferred are entitled to
receive, when, as and if declared by the Fund's Board, out of funds legally
available therefor in accordance with the Fund's Articles, including the
Statement and applicable law, dividends in an amount equal to the aggregate
Gross-up Payments in accordance with the following:
If, in the case of any Minimum Rate Period or any Special Rate Period of 28
Rate Period Days or fewer, the Fund allocates any net capital gains or other
income taxable for Federal income tax purposes to a dividend paid on shares of
MuniPreferred without having given advance notice thereof to the Auction Agent
as described under "The Auction -- Auction Procedures" (a "Taxable Allocation")
below solely by reason of the fact that such allocation is made retroactively as
a result of the redemption of all or a portion of the outstanding shares of
MuniPreferred or the liquidation of the Fund, the Fund will, prior to the end of
the calendar year in which such dividend was paid, provide notice thereof to the
Auction Agent and direct the Fund's dividend disbursing agent to send such
notice with a Gross-up Payment to each holder of shares (initially Cede & Co.,
as nominee of the Securities Depository) that was entitled to such dividend
payment during such calendar year at such holder's address as the same appears
or last appeared on the stock books of the Fund.
If, in the case of any Special Rate Period of more than 28 Rate Period
Days, the Fund makes a Taxable Allocation to a dividend paid on shares of
MuniPreferred, the Fund shall, prior to the end of the calendar year in which
such dividend was paid, provide notice thereof to the Auction Agent and direct
the Fund's dividend disbursing agent to send such notice with a Gross-up Payment
to each holder of shares that was entitled to such dividend payment during such
calendar year at such holder's address as the same appears or last appeared on
the stock books of the Fund.
The Fund shall not be required to make Gross-up Payments with respect to
any net capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the Fund.
A "Gross-up Payment" means payment to a holder of shares of MuniPreferred
of an amount which, when taken together with the aggregate amount of Taxable
Allocations made to such holder to which such Gross-up Payment relates, would
cause such holder's dividends in dollars (after Federal income tax consequences)
from the aggregate of such Taxable Allocations and the related Gross-up Payment
to be equal to the dollar amount of the dividends which would have been received
by such holder if the amount of the aggregate Taxable Allocations would have
been excludable from the gross income of such holder. Such Gross-up Payment
shall be calculated: (a) without consideration being given to the time value of
money; (b) assuming that no holder of shares of MuniPreferred is subject to the
Federal alternative minimum tax with respect to dividends received from the
Fund; and (c) assuming that each Taxable Allocation and each Gross-up Payment
(except to the extent such Gross-up Payment is designated as an exempt-interest
dividend under Section 852(b)(5) of the Internal Revenue Code or successor
provisions) would be taxable in the hands of each holder of shares of
MuniPreferred at the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or net capital gains, as applicable, or the
maximum marginal regular Federal corporate income tax rate applicable to
ordinary income or net capital gains, as applicable, whichever is greater, in
effect at the time such Gross-up Payment is made.
14
<PAGE> 18
RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. Except as otherwise
described herein, for so long as any shares of MuniPreferred are outstanding,
the Fund may not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in, or in options,
warrants or rights to subscribe for or purchase, its shares of Common Stock) in
respect of its shares of Common Stock or call for redemption, redeem, purchase
or otherwise acquire for consideration any of its shares of Common Stock (except
by conversion into or exchange for shares of the Fund ranking junior to the
shares of MuniPreferred as to the payment of dividends and the distribution of
assets upon liquidation), unless (a) full cumulative dividends on shares of each
series of MuniPreferred through its most recently ended Dividend Period shall
have been paid or shall have been declared and sufficient funds for the payment
thereof deposited with the Auction Agent; (b) the Fund shall have redeemed the
full number of shares of MuniPreferred required to be redeemed by any provision
for mandatory redemption pertaining thereto; and (c) immediately after such
transaction the Discounted Value of the Fund's portfolio would at least equal
the MuniPreferred Basic Maintenance Amount in accordance with guidelines of the
rating agency or agencies then rating the shares of MuniPreferred.
Except as set forth in the next sentence, no dividends shall be declared or
paid or set apart for payment on the shares of any class or series of Fund
shares ranking, as to the payment of dividends, on a parity with shares of
MuniPreferred for any period unless full cumulative dividends have been or
contemporaneously are declared and paid on the shares of each series of
MuniPreferred through its most recent Dividend Payment Date. When dividends are
not paid in full upon the shares of each series of MuniPreferred through its
most recent Dividend Payment Date or upon the shares of any other class or
series of shares ranking on a parity as to the payment of dividends with shares
of MuniPreferred through their most recent respective dividend payment dates,
all dividends declared upon shares of MuniPreferred and any such other class or
series of shares ranking on a parity as to the payment of dividends with shares
of MuniPreferred shall be declared pro rata so that the amount of dividends
declared per share on shares of MuniPreferred and such other class or series of
shares shall in all cases bear to each other the same ratio that accumulated
dividends per share on the shares of MuniPreferred and such other class or
series of shares bear to each other.
DESIGNATION OF SPECIAL RATE PERIODS The Fund, at its option, may designate
any succeeding Subsequent Rate Period of shares of a series of MuniPreferred as
a Special Rate Period consisting of a specified number of Rate Period Days
evenly divisible by seven and not more than 1,820 (approximately 5 years),
subject to certain adjustments. A designation of a Special Rate Period shall be
effective only if, among other things, (a) the Fund shall have given certain
notices to the Auction Agent, (b) an Auction for shares of such series shall
have been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction and (c) if the Fund shall have mailed
a notice of redemption with respect to any shares of such series, the redemption
price with respect to such shares shall have been deposited with the Auction
Agent.
REDEMPTION
MANDATORY REDEMPTION. In the event the Fund does not timely cure a failure
to maintain (a) a Discounted Value of its portfolio equal to the MuniPreferred
Basic Maintenance Amount or (b) the 1940 Act MuniPreferred Asset Coverage, in
each case in accordance with the requirements of the rating agency or agencies
then rating the shares of MuniPreferred, shares of MuniPreferred will be subject
to mandatory redemption on a date specified by the Fund's Board out of funds
legally available therefor in accordance with the Fund's Articles, including the
Statement, and applicable law, at the redemption price of $25,000 per share plus
an amount equal to accumulated but unpaid dividends thereon (whether or not
earned or declared) to (but not including) the date fixed for redemption. Any
such redemption will be limited to the number of shares of MuniPreferred
necessary to restore the required Discounted Value or the 1940 Act MuniPreferred
Asset Coverage, as the case may be.
15
<PAGE> 19
OPTIONAL REDEMPTION. Shares of MuniPreferred of each series are redeemable,
at the option of the Fund:
(a) as a whole or from time to time in part, on the second Business
Day preceding any Dividend Payment Date for shares of such series, out of
funds legally available therefor in accordance with the Fund's Articles,
including the Statement, and applicable law, at the redemption price of
$25,000 per share plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the date
fixed for redemption; provided, however, that (i) shares of such series may
not be redeemed in part if after such partial redemption fewer than 500
shares of such series would remain outstanding and (ii) the notice
establishing a Special Rate Period of shares of such series, as delivered
to the Auction Agent and filed with the Secretary of the Fund, may provide
that shares of such series shall not be redeemable during the whole or any
part of such Special Rate Period (except as provided in clause (b) below)
or shall be redeemable during the whole or any part of such Special Rate
Period only upon payment of such redemption premium or premiums as shall be
specified therein; and
(b) as a whole but not in part, out of funds legally available
therefor in accordance with the Fund's Articles, including the Statement,
and applicable law, on the first day following any Dividend Period thereof
included in a Rate Period of more than 364 Rate Period Days if, on the date
of determination of the Applicable Rate for shares of such series for such
Rate Period, such Applicable Rate equaled or exceeded on such date of
determination the Treasury Note Rate for such Rate Period, at a redemption
price of $25,000 per share plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared) to (but not
including) the date fixed for redemption.
Notwithstanding the foregoing, if any dividends on shares of a series of
MuniPreferred (whether or not earned or declared) are in arrears, no shares of
such series shall be redeemed unless all outstanding shares of such series are
simultaneously redeemed, and the Fund shall not purchase or otherwise acquire
any shares of such series; provided, however, that the foregoing shall not
prevent the purchase or acquisition of all outstanding shares of such series
pursuant to the successful completion of an otherwise lawful purchase or
exchange offer made on the same terms to, and accepted by, holders of all
outstanding shares of such series.
LIQUIDATION
Subject to the rights of holders of any series or class or classes of
shares ranking on a parity with shares of MuniPreferred with respect to the
distribution of assets upon liquidation of the Fund, upon a liquidation of the
Fund, whether voluntary or involuntary, the holders of shares of MuniPreferred
then outstanding will be entitled to receive and to be paid out of the assets of
the Fund available for distribution to its shareholders, before any payment or
distribution shall be made on the shares of Common Stock, an amount equal to the
liquidation preference with respect to such shares ($25,000 per share), plus an
amount equal to all dividends thereon (whether or not earned or declared)
accumulated but unpaid to (but not including) the date of final distribution in
same-day funds, together with any applicable Gross-up Payments in connection
with the liquidation of the Fund. After the payment to the holders of shares of
MuniPreferred of the full preferential amounts provided for as described herein,
the holders of shares of MuniPreferred as such shall have no right or claim to
any of the remaining assets of the Fund.
Neither the sale of all or substantially all the property or business of
the Fund, nor the merger or consolidation of the Fund into or with any other
corporation nor the merger or consolidation of any other corporation into or
with the Fund, shall be a liquidation, whether voluntary or involuntary, for the
purposes of the foregoing paragraph.
RATING AGENCY GUIDELINES
The Fund is required under Moody's and S&P guidelines to maintain assets
having in the aggregate a Discounted Value at least equal to the MuniPreferred
Basic Maintenance Amount. Moody's and S&P have each established separate
guidelines for determining Discounted Value. To the extent any particular
portfolio holding does not satisfy the applicable rating agency's guidelines,
all or a portion of such holding's value will not be included in the calculation
of Discounted Value (as defined by such rating agency). The Moody's and
16
<PAGE> 20
S&P guidelines do not impose any limitations on the percentage of the Fund's
assets that may be invested in holdings not eligible for inclusion in the
calculation of the Discounted Value of the Fund's portfolio. The amount of such
assets included in the portfolio at any time may vary depending upon the rating,
diversification and other characteristics of the eligible assets included in the
portfolio, although it is not anticipated that in the normal course of business
the value of such assets would exceed 20% of the Fund's total assets. The
MuniPreferred Basic Maintenance Amount includes the sum of (a) the aggregate
liquidation preference of shares of MuniPreferred then outstanding and (b)
certain accrued and projected payment obligations of the Fund.
The Fund is also required under rating agency guidelines to maintain, with
respect to shares of MuniPreferred, as of the last Business Day of each month in
which any such shares are outstanding, asset coverage of at least 200% with
respect to senior securities which are shares, including MuniPreferred (or such
other asset coverage as may in the future be specified in or under the 1940 Act
as the minimum asset coverage for senior securities which are shares of a
closed-end investment company as a condition of declaring dividends on its
shares of common stock) ("1940 Act MuniPreferred Asset Coverage"). Based on the
composition of the portfolio of the Fund and market conditions as of July 31,
1997, 1940 Act MuniPreferred Asset Coverage with respect to shares of
MuniPreferred, assuming the issuance on the date thereof of all shares of New
MuniPreferred offered hereby and giving effect to the deduction of sales load
and offering costs related thereto estimated at $1,717,129, would have been
computed as follows:
<TABLE>
<C> <C> <C> <C> <C>
Value of Fund assets less liabilities
not constituting senior securities = $1,455,893,491 = 307%
- ------------------------------------------------------------ -------------- ---
Senior securities representing indebtedness plus liquidation
value of
the shares of MuniPreferred $ 475,000,000
</TABLE>
In the event the Fund does not timely cure a failure to maintain (a) a
Discounted Value of its portfolio equal to the MuniPreferred Basic Maintenance
Amount or (b) the 1940 Act MuniPreferred Asset Coverage, in each case in
accordance with the requirements of the rating agency or agencies then rating
the shares of MuniPreferred, the Fund will be required to redeem shares of
MuniPreferred as described under "Redemption -- Mandatory Redemption" above.
The Fund may, but is not required to, adopt any modifications to the
guidelines that may hereafter be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings described
above or a withdrawal of ratings altogether. In addition, any rating agency
providing a rating for the shares of MuniPreferred may, at any time, change or
withdraw any such rating. The Fund's Board may, without shareholder approval,
amend, alter or repeal any or all of the definitions and related provisions
which have been adopted by the Fund pursuant to the rating agency guidelines in
the event the Fund receives written confirmation from Moody's or S&P, or both,
as appropriate, that any such amendment, alteration or repeal would not impair
the ratings then assigned by Moody's and S&P to shares of MuniPreferred.
As recently described by Moody's and S&P, a preferred stock rating is an
assessment of the capacity and willingness of an issuer to pay preferred stock
obligations. The ratings on the shares of MuniPreferred are not recommendations
to purchase, hold or sell those shares, inasmuch as the ratings do not comment
as to market price or suitability for a particular investor. The rating agency
guidelines described above also do not address the likelihood that an owner of
shares of MuniPreferred will be able to sell such shares in an Auction or
otherwise. The ratings are based on current information furnished to Moody's and
S&P by the Fund and the Adviser and information obtained from other sources. The
ratings may be changed, suspended or withdrawn as a result of changes in, or the
unavailability of, such information.
A rating agency's guidelines will apply to shares of MuniPreferred only so
long as such rating agency is rating such shares. The Fund will pay certain fees
to Moody's or S&P, or both, for rating shares of MuniPreferred.
17
<PAGE> 21
VOTING RIGHTS
Except as otherwise indicated in this Prospectus or as otherwise required
by applicable law, holders of shares of MuniPreferred will have equal voting
rights with holders of shares of Common Stock and any Preferred Stock (one vote
per share) and will vote together with holders of shares of Common Stock and any
Preferred Stock as a single class.
In connection with the election of the Fund's directors, holders of
outstanding shares of Preferred Stock, including MuniPreferred, voting as a
separate class, are entitled to elect two of the Fund's directors, and the
remaining directors are elected by holders of shares of Common Stock and shares
of Preferred Stock, including MuniPreferred, voting together as a single class.
In addition, if at any time dividends (whether or not earned or declared) on
outstanding shares of Preferred Stock, including MuniPreferred, shall be due and
unpaid in an amount equal to two full years' dividends thereon, and sufficient
cash or specified securities shall not have been deposited with the Auction
Agent for the payment of such dividends, then, as the sole remedy of holders of
outstanding shares of Preferred Stock, including MuniPreferred, the number of
directors constituting the Fund's Board shall be automatically increased by the
smallest number that, when added to the two directors elected exclusively by the
holders of shares of Preferred Stock, including shares of MuniPreferred, as
described above, would constitute a majority of the Fund's Board as so increased
by such smallest number; and at a special meeting of shareholders which will be
called and held as soon as practicable, and at all subsequent meetings at which
directors are to be elected, the holders of shares of Preferred Stock, including
shares of MuniPreferred, voting as a separate class, will be entitled to elect
the smallest number of additional directors that, together with the two
directors which such holders will be in any event entitled to elect, constitutes
a majority of the total number of directors of the Fund as so increased. The
terms of office of the persons who are directors at the time of that election
will continue. If the Fund thereafter shall pay, or declare and set apart for
payment, in full all dividends payable on all outstanding shares of Preferred
Stock, including MuniPreferred, the voting rights stated in the preceding
sentence shall cease, and the terms of office of all of the additional directors
elected by the holders of shares of Preferred Stock, including MuniPreferred
(but not of the directors with respect to whose election the holders of Common
Stock were entitled to vote or the two directors the holders of shares of
Preferred Stock have the right to elect in any event), will terminate
automatically.
So long as any shares of MuniPreferred are outstanding, the Fund will not,
without the affirmative vote of the holders of at least a majority of the shares
of MuniPreferred outstanding at the time (voting separately as one class):
(a) authorize, create or issue any class or series of stock ranking
prior to or on a parity with shares of MuniPreferred with respect to the
payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund or authorize, execute
or issue additional shares of any series of MuniPreferred (except that (i)
the Fund may, without the vote of the holders of MuniPreferred offered
hereby, authorize, create or issue additional series of MuniPreferred,
additional shares of any series of MuniPreferred or other classes or series
of shares of Preferred Stock ranking on a parity with MuniPreferred with
respect to the payment of dividends and the distribution of assets upon
liquidation if, after giving effect thereto, the aggregate liquidation
preference of all shares of Preferred Stock then outstanding, exclusive of
accumulated and unpaid dividends, would not exceed $350,000,000; provided,
however, that the Fund obtains written confirmation from Moody's (if
Moody's is then rating the shares of MuniPreferred) and S&P (if S&P is then
rating the shares of MuniPreferred) that the issuance of any such
additional class or series would not impair the rating then assigned by
such rating agency to the MuniPreferred, and (ii) so long as either Moody's
or S&P is rating the shares of MuniPreferred, the Fund may, without the
vote of the holders of MuniPreferred, authorize, create or issue classes or
series of Preferred Stock ranking on a parity with the MuniPreferred with
respect to the payment of dividends and the distribution of assets upon
liquidation notwithstanding that, after giving effect thereto, the
aggregate liquidation preference of all shares of Preferred Stock then
outstanding would exceed $350,000,000; provided, however, that the Fund
obtains written confirmation from Moody's (if Moody's is then rating the
shares of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred) that the
18
<PAGE> 22
issuance of any such additional class or series would not impair the rating
then assigned by such rating agency to the MuniPreferred) or
(b) amend, alter or repeal the provisions of the Articles, whether by
merger, consolidation or otherwise, so as to affect any preference, right
or power of such shares of MuniPreferred or the holders thereof;
provided, however, that (i) none of the actions permitted by the exception to
(a) above will be deemed to affect such preferences, rights or powers and (ii)
the authorization, creation and issuance of classes or series of stock ranking
junior to the MuniPreferred with respect to the payment of dividends and the
distribution of assets upon liquidation will be deemed to affect such
preferences, rights or powers only if Moody's or S&P is then rating the
MuniPreferred and such issuance would, at the time thereof, cause the Fund not
to satisfy the 1940 Act MuniPreferred Asset Coverage or the MuniPreferred Basic
Maintenance Amount. So long as any shares of MuniPreferred are outstanding, the
Fund shall not, without the affirmative vote of the holders of at least 66 2/3%
of the shares of MuniPreferred outstanding at the time (voting separately as a
class) file a voluntary application for relief under Federal bankruptcy law or
any similar application under state law for so long as the Fund is solvent and
does not foresee becoming insolvent.
To the extent that shares of MuniPreferred constitute a series of stock
under Minnesota law and to the extent the holders of such shares are empowered
under Minnesota law to vote as a class on the actions set forth in the preceding
paragraph, the Fund will not approve any such action without the affirmative
vote of the holders of at least a majority of the shares of MuniPreferred of
such series outstanding at the time (voting separately as a class). The Fund's
Board may, however, without approval of the holders of MuniPreferred, amend,
alter or repeal any or all of the definitions and related provisions required to
be contained in the Articles by the rating agencies in the event the Fund
receives written confirmation from the appropriate rating agency that any such
amendment, alteration or repeal would not impair the ratings then assigned to
shares of MuniPreferred by such rating agency. Unless a higher percentage is
provided for under the Articles (see "Certain Provisions in the Articles of
Incorporation"), the affirmative vote of the holders of a majority of the
outstanding shares of Preferred Stock, including shares of MuniPreferred, voting
as a separate class, will be required to approve any plan of reorganization (as
such term is defined under the 1940 Act) adversely affecting such shares or any
action requiring a vote of security holders under Section 13(a) of the 1940 Act
including, among other things, changes in the Fund's investment objective or
changes in the investment restrictions described as fundamental policies under
"Investment Objective and Policies -- Investment Restrictions." The class vote
of holders of shares of MuniPreferred described above will in each case be in
addition to a separate vote of the requisite percentage of shares of Common
Stock and shares of MuniPreferred, voting as a single class, necessary to
authorize the action in question.
The foregoing voting provisions will not apply with respect to shares of
MuniPreferred if, at or prior to the time when a vote is required, such shares
shall have been (i) redeemed or (ii) called for redemption and sufficient funds
shall have been deposited in trust to effect such redemption.
19
<PAGE> 23
THE AUCTION
GENERAL
The Statement provides that, except as otherwise described herein, the
Applicable Rate for the shares of each series of MuniPreferred, including the
shares of New MuniPreferred to be issued in this offering, for each Rate Period
of shares of such series after the Initial Rate Period thereof shall be equal to
the rate per annum that the Auction Agent advises has resulted on the Business
Day preceding the first day of such Subsequent Rate Period (an "Auction Date")
from implementation of the auction procedures (the "Auction Procedures") set
forth in the Statement and summarized below, in which persons determine to hold
or offer to sell or, based on dividend rates bid by them, offer to purchase or
sell shares of such series. Each periodic implementation of the Auction
Procedures is referred to herein as an "Auction." See the Statement for a more
complete description of the Auction process.
AUCTION PROCEDURES
Prior to the Submission Deadline on each Auction Date for shares of a
series of MuniPreferred, each customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder
of shares of such series (a "Beneficial Owner") may submit orders ("Orders")
with respect to shares of such series to that Broker-Dealer as follows:
- Hold Order -- indicating its desire to hold shares of such series
without regard to the Applicable Rate for shares of such series for the
next Rate Period thereof.
- Bid -- indicating its desire to sell shares of such series at $25,000
per share if the Applicable Rate for shares of such series for the next
Rate Period thereof is less than the rate specified in such Bid (also
known as a hold-at-a-rate order).
- Sell Order -- indicating its desire to sell shares of such series at
$25,000 per share without regard to the Applicable Rate for shares of
such series for the next Rate Period thereof.
A Beneficial Owner may submit different types of Orders to its
Broker-Dealer with respect to shares of a series of MuniPreferred then held by
such Beneficial Owner. A Beneficial Owner of shares of such series that submits
a Bid with respect to shares of such series to its Broker-Dealer having a rate
higher than the Maximum Rate for shares of such series on the Auction Date
therefor will be treated as having submitted a Sell Order with respect to such
shares to its Broker/Dealer. A Beneficial Owner of shares of such series that
fails to submit an Order with respect to such shares to its Broker-Dealer will
be deemed to have submitted a Hold Order with respect to such shares of such
series to its Broker-Dealer; provided however, that if a Beneficial Owner of
shares of such series fails to submit an Order with respect to shares of such
series to its Broker-Dealer for an Auction relating to a Rate Period of more
than 28 Rate Period Days, such Beneficial Owner will be deemed to have submitted
a Sell Order with respect to such shares to its Broker-Dealer. A Sell Order
shall constitute an irrevocable offer to sell the shares of MuniPreferred
subject thereto. A Beneficial Owner that offers to become the Beneficial Owner
of additional shares of MuniPreferred is, for purposes of such offer, a
Potential Beneficial Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of shares of a
series of MuniPreferred but that wishes to purchase shares of such series, or
that is a Beneficial Owner of shares of such series that wishes to purchase
additional shares of such series (in each case, a "Potential Beneficial Owner"),
may submit Bids to its Broker-Dealer in which it offers to purchase shares of
such series at $25,000 per share if the Applicable Rate for shares of such
series for the next Rate Period thereof is not less than the rate specified in
such Bid. A Bid placed by a Potential Beneficial Owner of shares of such series
specifying a rate higher than the Maximum Rate for shares of such series on the
Auction Date therefor will not be accepted.
The Broker-Dealers in turn will submit the Orders of their respective
customers who are Beneficial Owners and Potential Beneficial Owners to the
Auction Agent, designating themselves (unless otherwise permitted by the Fund)
as Existing Holders in respect of shares subject to Orders submitted or deemed
submitted to them by Beneficial Owners and as Potential Holders in respect of
shares subject to Orders
20
<PAGE> 24
submitted to them by Potential Beneficial Owners. However, neither the Fund nor
the Auction Agent will be responsible for a Broker-Dealer's failure to comply
with the foregoing. Any Order placed with the Auction Agent by a Broker-Dealer
as or on behalf of an Existing Holder or a Potential Holder will be treated in
the same manner as an Order placed with a Broker-Dealer by a Beneficial Owner or
Potential Beneficial Owner. Similarly, any failure by a Broker-Dealer to submit
to the Auction Agent an Order in respect of any shares of MuniPreferred held by
it or customers who are Beneficial Owners will be treated in the same manner as
a Beneficial Owner's failure to submit to its Broker-Dealer an Order in respect
of shares of MuniPreferred held by it. A Broker-Dealer may also submit Orders to
the Auction Agent for its own account as an Existing Holder or Potential Holder,
provided it is not an affiliate of the Fund.
If Sufficient Clearing Bids for shares of a series of MuniPreferred exist
(that is, the number of shares of such series subject to Bids submitted or
deemed submitted to the Auction Agent by Broker-Dealers as or on behalf of
Potential Holders with rates equal to or lower than the Maximum Rate for shares
of such series is at least equal to the number of shares of such series subject
to Sell Orders submitted or deemed submitted to the Auction Agent by
Broker-Dealers as or on behalf of Existing Holders), the Applicable Rate for
shares of such series for the next succeeding Rate Period thereof will be the
lowest rate specified in the Submitted Bids which, taking into account such rate
and all lower rates bid by Broker-Dealers as or on behalf of Existing Holders
and Potential Holders, would result in Existing Holders and Potential Holders
owning all the shares of such series available for purchase in the Auction. If
Sufficient Clearing Bids for shares of a series of MuniPreferred do not exist,
the Applicable Rate for shares of such series for the next succeeding Rate
Period thereof will be the Maximum Rate for shares of such series on the Auction
Date therefor. In such event, Beneficial Owners of shares of such series that
have submitted or are deemed to have submitted Sell Orders may not be able to
sell in such Auction all shares of such series subject to such Sell Orders. If
Broker-Dealers submit or are deemed to have submitted to the Auction Agent Hold
Orders with respect to all Existing Holders of shares of a series of
MuniPreferred, the Applicable Rate for shares of such series for the next
succeeding Rate Period thereof will be the All Hold Order Rate.
The Auction Procedures include a pro rata allocation of shares for purchase
and sale, which may result in an Existing Holder continuing to hold or selling,
or a Potential Holder purchasing, a number of shares of a series of
MuniPreferred that is fewer than the number of shares of such series specified
in its Order. To the extent the allocation procedures have that result,
Broker-Dealers that have designated themselves as Existing Holders or Potential
Holders in respect of customer Orders will be required to make appropriate pro
rata allocations among their respective customers.
Settlement of purchases and sales will be made on the next Business Day
(also a Dividend Payment Date) after the Auction Date through the Securities
Depository. Purchasers will make payment through their Agent Members in same-day
funds to the Securities Depository against delivery to their respective Agent
Members. The Securities Depository will make payment to the sellers' Agent
Members in accordance with the Securities Depository's normal procedures, which
now provide for payment against delivery by their Agent Members in same-day
funds.
The Auctions for shares of MuniPreferred, Series M, Series T, Series W,
Series TH and Series F will normally be held every Monday, Tuesday, Wednesday,
Thursday and Friday, respectively, and each Subsequent Rate Period of shares of
such series will normally begin on the following Tuesday, Wednesday, Thursday,
Friday and Monday, respectively.
Whenever the Fund intends to include any net capital gains or other income
taxable for Federal income tax purposes in any dividend on shares of
MuniPreferred, the Fund shall, in the case of Minimum Rate Periods or Special
Rate Periods of 28 Rate Period Days or fewer, and may, in the case of any other
Special Rate Period, notify the Auction Agent of the amount to be so included
not later than the Dividend Payment Date next preceding the Auction Date on
which the Applicable Rate for such dividend is to be established. Whenever the
Auction Agent receives such notice from the Fund, it will be required in turn to
notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance
with its Broker-Dealer Agreement, will be required to notify its customers who
are Beneficial Owners and Potential Beneficial Owners believed by it to be
interested in submitting an Order in the Auction to be held on such Auction
Date.
21
<PAGE> 25
SECONDARY MARKET TRADING AND TRANSFER OF MUNIPREFERRED
The Broker-Dealers maintain a secondary trading market in shares of
MuniPreferred outside of Auctions, but are not obligated to do so, and may
discontinue such activity at any time. There can be no assurance that such
secondary trading market in shares of MuniPreferred will provide owners with
liquidity of investment. The shares of MuniPreferred are not registered on any
stock exchange or on the Nasdaq Stock Market. Investors who purchase shares in
an Auction for a Special Rate Period should note that because the dividend rate
on such shares will be fixed for the length of such Rate Period, the value of
the shares may fluctuate in response to changes in interest rates, and may be
more or less than their original cost if sold on the open market in advance of
the next Auction therefor, depending upon market conditions.
A Beneficial Owner or an Existing Holder may sell, transfer or otherwise
dispose of shares of MuniPreferred only in whole shares and only (1) pursuant to
a Bid or Sell Order placed with the Auction Agent in accordance with the Auction
Procedures, (2) to a Broker-Dealer or (3) to such other persons as may be
permitted by the Fund; provided, however, that (a) a sale, transfer or other
disposition of shares of MuniPreferred from a customer of a Broker-Dealer who is
listed on the records of that Broker-Dealer as the holder of such shares to that
Broker-Dealer or another customer of that Broker-Dealer shall not be deemed to
be a sale, transfer or other disposition for purposes of the foregoing if such
Broker-Dealer remains the Existing Holder of the shares so sold, transferred or
disposed of immediately after such sale, transfer or disposition and (b) in the
case of all transfers other than pursuant to Auctions, the Broker-Dealer (or
other person, if permitted by the Fund) to whom such transfer is made shall
advise the Auction Agent of such transfer.
DESCRIPTION OF COMMON STOCK
In addition to the shares of MuniPreferred, the Articles authorize the
issuance of up to 200,000,000 shares of Common Stock, par value $.01 per share.
All shares of Common Stock have equal non-cumulative voting rights and equal
rights with respect to dividends, assets and liquidation. Shares of Common Stock
are fully paid and non-assessable when issued and have no pre-emptive,
conversion or exchange rights. So long as any shares of MuniPreferred are
outstanding, the Fund is not permitted to declare dividends on, make any
distributions with respect to, or purchase its Common Stock unless, at the time
of such declaration, distribution or purchase, as applicable (and after giving
effect thereto), all accumulated dividends on Preferred Stock have been paid.
CERTAIN PROVISIONS IN THE ARTICLES OF INCORPORATION
The 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 Articles require the affirmative vote of the holders of at
least 66 2/3% of the Fund's shares of Common Stock and shares of Preferred Stock
(including shares of MuniPreferred) then entitled to be voted, voting together
as a single class, except as described below, to authorize any of the following
transactions:
(1) conversion of the Fund from a closed-end to an open-end investment
company,
(2) a merger or consolidation of the Fund with another corporation or
a reorganization or recapitalization,
(3) a sale, lease or transfer of all or substantially all of the
Fund's assets (other than in the regular course of the Fund's investment
activities), or
(4) a 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 shares of
Common Stock and shares of Preferred Stock (including shares of MuniPreferred),
voting together as a single class, is required. In the case of the conversion of
the Fund to an open-end investment company, or in the case of any of the
foregoing transactions constituting a plan of reorganization (as such term
22
<PAGE> 26
is used in the Investment Company Act of 1940, as amended) which adversely
affects the holders of shares of Preferred Stock (including shares of
MuniPreferred), the action in question will also require the approval of the
holders of 66 2/3% of the shares of Preferred Stock (including shares of
MuniPreferred) voting as a separate class; provided, however, that such separate
class vote shall be a majority vote if the action in question has previously
been approved, adopted or authorized by the affirmative vote of 66 2/3% of the
total number of directors fixed in accordance with the By-Laws. The 66 2/3%
votes required under certain circumstances to approve the conversion of the Fund
from a closed-end to an open-end investment company or to approve the other
transactions described above are higher than those required by the 1940 Act. The
Fund's Board believes that the provisions of the Articles relating to such
higher votes are in the best interest of the Fund and its shareholders.
Reference should be made to the Articles on file with the Commission for
the full text of these provisions, which could have the effect of depriving
shareholders of an opportunity to sell their shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
the Fund.
REPURCHASE OF SHARES OF COMMON STOCK;
CONVERSION TO OPEN-END FUND
The Fund is a closed-end investment company and as such its holders of
Common Stock will not have the right to cause the Fund to redeem their shares.
Shares of Common Stock trade in the open market at a price that is a function of
several factors, including net asset value and yield. Although the shares of a
closed-end investment company such as the Fund that invests substantially all of
its assets in investment-grade municipal obligations have generally traded at a
premium to net asset value, such shares have occasionally traded at a discount
to net asset value. The Fund's Board of Directors has currently determined that,
at least annually, it will consider action that might be taken to reduce or
eliminate any material discount from net asset value in respect of shares of
Common Stock, which may include the repurchase of such shares in the open market
or in private transactions, the making of a tender offer for such shares at net
asset value or the conversion of the Fund to an open-end investment company.
There can be no assurance, however, that the Fund's Board will decide to take
any of these actions, or that share repurchases or tender offers, if undertaken,
will reduce market discount. In addition, see "Description of
MuniPreferred -- Dividends and Dividend Periods -- Restrictions on Dividends and
Other Distributions" for a discussion of the limitations on the Fund's ability
to engage in certain transactions.
Subject to its investment limitations, the Fund may borrow to finance the
repurchase of shares or to make a tender offer. Interest on any borrowings to
finance share repurchase transactions or the accumulation of cash by the Fund in
anticipation of share repurchases or tenders will reduce the Fund's net income.
Any share repurchase or tender offer that might be approved by the Fund's Board
would have to comply with the Securities Exchange Act of 1934, as amended, and
the 1940 Act and the rules and regulations thereunder.
Although the decision to take action in response to a discount from net
asset value will be made by the Fund's Board at the time it considers such
issue, it is the Fund's Board's present policy, which may be changed by the
Fund's Board, not to authorize repurchases of shares of the Fund's Common Stock
or a tender offer for such shares if (1) such transactions, if consummated,
would (a) result in the delisting of the Common Stock from the Exchange, or (b)
impair the Fund's status as a regulated investment company under the Code (which
would make the Fund a taxable entity, causing the Fund's income to be taxed at
the corporate level in addition to the taxation of shareholders who receive
dividends from the Fund) or as a regulated closed-end investment company under
the 1940 Act; (2) the Fund would not be able to liquidate portfolio securities
in an orderly manner and consistent with the Fund's investment objectives and
policies in order to repurchase shares; or (3) there is, in the Fund's Board's
judgment, any (a) material legal action or proceeding instituted or threatened
challenging such transactions or otherwise materially adversely affecting the
Fund, (b) general suspension of or limitation on prices for trading securities
on the Exchange, (c) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by United States or New York State
banks in which the Fund invests, (d) material limitation affecting the Fund or
the issuers of its portfolio securities by Federal or state authorities on the
extension of credit by lending institutions or on the exchange of
23
<PAGE> 27
foreign currency, (e) commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, or (f) other event or condition which would have a material adverse
effect (including any adverse tax effect) on the Fund or its shareholders if
shares were repurchased. The Fund's Board may in the future modify these
conditions in light of experience.
Conversion to an open-end company would require the approval of the holders
of the Fund's outstanding shares of Common Stock and shares of MuniPreferred,
voting together as a single class, and of the holders of shares of MuniPreferred
voting as a separate class. See "Certain Provisions in the Articles of
Incorporation" for a discussion of voting requirements applicable to conversion
of the Fund to an open-end company. Shareholders of an open-end investment
company may require the company to redeem their shares at any time (except in
certain circumstances as authorized by or under the 1940 Act) at their net asset
value, less such redemption charge, if any, as might be in effect at the time of
redemption. If the Fund converted to an open-end company, it would be required
to redeem all shares of MuniPreferred then outstanding. In addition, the Fund
could be required to liquidate portfolio securities to meet required and
requested redemptions, and its shares of Common Stock would no longer be listed
on the Exchange. The Board of Directors may at any time propose conversion of
the Fund to an open-end company depending upon their judgment as to the
advisability of such action in light of circumstances then prevailing.
Before deciding whether to take any action in response to a discount from
net asset value, the Fund's Board would consider all relevant factors, including
the extent and duration of the discount, the liquidity of the Fund's portfolio,
the impact of any action that might be taken on the Fund or its shareholders,
and market considerations. Based on these considerations, even if the Fund's
shares of Common Stock should trade at a discount, the Fund's Board may
determine that, in the interest of the Fund and its shareholders, no action
should be taken.
24
<PAGE> 28
TAX MATTERS
FEDERAL INCOME TAX MATTERS
The Fund qualifies under Subchapter M of the Code as a regulated investment
company and satisfies conditions which enable dividends on shares of Common
Stock or shares of MuniPreferred which 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. The
IRS currently requires that a regulated investment company that has two or more
classes of shares must designate to each such class proportionate amounts of
each type of its income for each tax year based upon the percentage of total
dividends distributed to each class for such year. In the past, the Fund has
designated exempt-interest dividends disproportionately to holders of Preferred
Stock and designated net capital gain and investment company taxable income to
its Common Stock pursuant to a special "grandfather" provision contained in
Revenue Ruling 89-81. Currently, the Fund, which intends to distribute
substantially all of its net income and gains to its shareholders, intends to
allocate net capital gains (i.e., the excess of net long-term capital gain over
net short-term capital loss) and investment company taxable income, if any,
proportionately between its shares of Common Stock and shares of MuniPreferred.
The amount of taxable income allocable to shares of MuniPreferred will
depend upon the amount of such income realized by the Fund, including any net
income received from taxable temporary investments, but is not generally
expected to be significant. Annually, the Fund will inform each owner of shares
of MuniPreferred of the amount and nature of the income and gains allocated to
the owner by the Fund. If the Fund allocates net capital gain or investment
company taxable income without first notifying owners of shares of
MuniPreferred, in certain circumstances payments will be made to such owners to
offset the tax effect thereof. See "Description of MuniPreferred -- Dividends
and Dividend Periods -- Gross-up Payments."
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals based on certain items of tax preference. Interest
on certain Municipal Obligations is included as an item of tax preference in
determining the amount of a taxpayer's alternative minimum taxable income. To
the extent that the Fund receives income from Municipal Obligations treated as
tax preference items for purposes of the alternative minimum tax, a portion of
the dividends paid by it, although otherwise exempt from Federal income tax,
will be taxable to owners of shares to the extent that their tax liability is
determined under the 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
exempt-interest dividends received from each Fund, are included in calculating
adjusted current earnings. For taxable years beginning after December 31, 1997,
certain small corporations are not subject to the alternative minimum tax. A
corporation qualifies for such exemption provided that (i) for the corporation's
first taxable year beginning after December 31, 1996, its average annual gross
receipts for the three prior taxable year period does not exceed $5,000,000 and
(ii) the corporation's average annual gross receipts for each three prior
taxable year period thereafter does not exceed $7,500,000.
A more detailed summary of the provisions of the Code and regulations
thereunder presently in effect as they directly govern the taxation of the Fund
and their respective shareholders appears in the Statement of Additional
Information. These provisions and interpretations 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 Federal income
tax matters.
STATE AND LOCAL TAX MATTERS
The exemption from Federal income tax for exempt-interest dividends does
not necessarily result in exemption for such dividends under the income or other
tax laws of any state or local taxing authority. Some states exempt from state
income tax that portion of any exempt-interest dividend that is derived from
interest received by a regulated investment company on its holdings of
securities of that state and its political
25
<PAGE> 29
subdivisions and instrumentalities. Therefore, the Fund will report annually to
its shareholders the percentage of interest income earned by the Fund during the
preceding year on tax-exempt obligations indicating, on a state-by-state basis,
the source of such income. Owners of shares of MuniPreferred are advised to
consult with their own tax advisers about state and local tax matters.
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT
AND REDEMPTION AGENT
The Custodian of the assets of the Fund and the transfer agent and dividend
disbursing agent with respect to the Fund's Common Stock is The Chase Manhattan
Bank, a banking corporation organized under the laws of the state of New York
and a member bank of the Federal Reserve System, with its principal place of
business at One Chase Plaza, New York, New York 10081, and its corporate
transfer office at 4 New York Plaza, New York, New York 10004. Bankers Trust
Company, 4 Albany Street, New York, New York 10006, a banking corporation
organized under the laws of New York, is the Auction Agent with respect to
shares of MuniPreferred and acts as transfer agent, registrar, dividend
disbursing agent, and redemption agent with respect to such shares.
UNDERWRITING
Subject to the terms and conditions set forth in the several Purchase
Agreements among the Fund, the Underwriters named below (the "Underwriters") and
the Adviser with respect to the five series of New MuniPreferred offered hereby,
the Fund has agreed to sell to the Underwriters, and the Underwriters, for whom
Merrill Lynch, Pierce, Fenner and Smith Incorporated, Alex. Brown & Sons
Incorporated, Goldman, Sachs & Co., John Nuveen & Co. Incorporated, Lehman
Brothers, PaineWebber Incorporated, Prudential Securities Incorporated, and
Smith Barney, Inc. are acting as representatives (the "Representatives"), have
severally agreed to purchase, the respective numbers of shares of such series as
set forth after their names below. Each Purchase Agreement with respect to a
particular series provides that the obligations of the Underwriters are subject
to certain conditions precedent and that the Underwriters will be obligated to
purchase all of the shares of such series if any are purchased. However, the
offering of each series is independent of the offering of each other series, and
no offering is contingent upon the closing of any other offering. Certain
information presented in this Prospectus, however, assumes that each offering is
made and effected as contemplated, but there can be no assurance that this will
be the case.
<TABLE>
<CAPTION>
UNDERWRITER SERIES M SERIES T SERIES W SERIES TH SERIES F
----------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Merrill Lynch, Pierce, Fenner and Smith,
Incorporated....................................... 125 125 125 125 125
Alex. Brown & Sons Incorporated...................... 125 125 125 125 125
Goldman, Sachs & Co. ................................ 125 125 125 125 125
John Nuveen & Co. Incorporated....................... 125 125 125 125 125
Lehman Brothers...................................... 125 125 125 125 125
PaineWebber Incorporated............................. 125 125 125 125 125
Prudential Securities Incorporated................... 125 125 125 125 125
Smith Barney Inc. ................................... 125 125 125 125 125
----- ----- ----- ----- -----
Total...................................... 1,000 1,000 1,000 1,000 1,000
===== ===== ===== ===== =====
</TABLE>
The Representatives have advised the Fund that the Underwriters propose
initially to offer the shares of MuniPreferred to the public at the offering
price set forth on the cover page of this Prospectus, and to certain dealers at
such price less a concession not in excess of $150 per share. The sales load of
$281.25 per share is equal to 1.125% of the initial public offering price. The
Underwriters may allow and such dealers may reallow a discount not in excess of
$37.50 per share to certain other dealers. After the initial public offering,
the public offering price, concession and discount may be changed. Investors
must pay for any shares of New MuniPreferred purchased in this offering on or
before the following dates: [September 30, 1997] (Series M MuniPreferred);
[October 1, 1997] (Series T MuniPreferred); [October 2, 1997] (Series W
MuniPreferred); [October 3, 1997] (Series TH MuniPreferred); and [October 6,
1997] (Series F MuniPreferred).
26
<PAGE> 30
The Fund and the Adviser have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities arising under the Securities
Act of 1933, as amended, and the 1940 Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Fund anticipates that the Underwriters may from time to time act as
brokers or dealers in connection with the execution of its portfolio
transactions after they have ceased to be Underwriters. The Underwriters are
active underwriters of, and dealers in, securities and act as market makers in a
number of such securities, and therefore can be expected to engage in portfolio
transactions with the Fund.
Each of the Underwriters or one of their respective affiliates will act in
Auctions as Broker- Dealers as set forth under "The Auction."
John Nuveen & Co. Incorporated, one of the Underwriters, is the parent
company of the Fund's Adviser.
The principal business addresses of the Representatives listed on the cover
page of this Prospectus are as follows: Merrill Lynch, Pierce, Fenner and Smith
Incorporated, World Financial Center, North Tower, 250 Vesey Street, New York,
New York 10281; Alex. Brown & Sons Incorporated, 135 E. Baltimore Street,
Baltimore, Maryland 21202; Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004; John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago,
Illinois 60606; Lehman Brothers, 3 World Financial Center, New York, New York
10285; PaineWebber Incorporated, 1285 Avenue of Americas, New York, New York
10019; Prudential Securities Incorporated, One New York Plaza, New York, New
York 10292; and Smith Barney Inc., 390 Greenwich Street, New York, New York
10013.
LEGAL OPINIONS
Certain legal matters in connection with the shares of MuniPreferred
offered hereby will be passed upon for the Fund by Vedder, Price, Kaufman &
Kammholz, Chicago, Illinois, and for the Underwriters by Sidley & Austin,
Chicago, Illinois. Vedder, Price, Kaufman & Kammholz and Sidley & Austin will
rely as to certain matters of Minnesota law on the opinion of Dorsey & Whitney,
Minneapolis, Minnesota.
AVAILABLE INFORMATION
The Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and 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 New York Regional Office, Seven World Trade Center, New York,
New York 10048 and Chicago Regional Office, Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports,
proxy statements and other information concerning the Fund can also be inspected
at the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
Additional information regarding the Fund and the shares of MuniPreferred
offered hereby is contained in the Registration Statement on Form N-2, including
amendments, exhibits and schedules thereto, relating to such shares filed by the
Fund with the Commission, Washington, D.C. This Prospectus does not contain all
of the information set forth in the Registration Statement, including any
amendments, exhibits and schedules thereto. For further information with respect
to the Fund and the shares offered hereby, reference is made to the Registration
Statement. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. Copies of the Registration Statement may be
inspected without charge at the Commission's principal office in Washington,
D.C., and copies of all or any part thereof may be obtained from the Commission
upon the payment of certain fees prescribed by the Commission. In addition,
copies can be found on the internet at www.Nuveen.com.
27
<PAGE> 31
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies........................... S-1
Certain Trading Strategies of the Fund...................... S-4
Management of the Fund...................................... S-7
Portfolio Transactions...................................... S-11
Net Asset Value............................................. S-12
Additional Information Concerning the Auctions for
MuniPreferred............................................. S-12
Tax Matters................................................. S-14
Experts..................................................... S-18
Certain Owners of Record.................................... S-
Report of Independent Auditors.............................. S-19
Financial Statements........................................ S-
Ratings of Investments (Appendix A)......................... A-1
</TABLE>
28
<PAGE> 32
APPENDIX A
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
AMENDMENT AND RESTATEMENT OF
STATEMENT ESTABLISHING AND FIXING THE RIGHTS
AND PREFERENCES OF
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED")
A-1
<PAGE> 33
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
</TABLE>
DEFINITIONS................................................. 1
"AA" Composite Commercial Paper Rate................... 1
Accountant's Confirmation.............................. 2
Affiliate.............................................. 2
Agent Member........................................... 2
Anticipation Notes..................................... 2
Applicable Rate........................................ 2
Articles............................................... 2
Auction................................................ 2
Auction Agency Agreement............................... 2
Auction Agent.......................................... 2
Auction Date........................................... 2
Auction Procedures..................................... 2
Available MuniPreferred................................ 2
Benchmark Rate......................................... 2
Beneficial Owner....................................... 2
Bid and "Bids"......................................... 2
Bidder and Bidders..................................... 2
Board of Directors..................................... 2
Broker-Dealer.......................................... 3
Broker-Dealer Agreement................................ 3
Business Day........................................... 3
Code................................................... 3
Commercial Paper Dealers............................... 3
Common Stock........................................... 3
Cure Date.............................................. 3
Date of Original Issue................................. 3
Deposit Securities..................................... 3
Discounted Value....................................... 3
[Reserved]............................................. 3
[Reserved]............................................. 3
Dividend Payment Date.................................. 3
Dividend Period........................................ 3
Existing Holder........................................ 3
Failure to Deposit..................................... 3
Federal Tax Rate Increase.............................. 4
Fund................................................... 4
Gross-up Payment....................................... 4
Holder................................................. 4
Hold Order and Hold Orders............................. 4
Independent Accountant................................. 4
Initial Rate Period.................................... 4
Interest Equivalent.................................... 4
Issue Type Category.................................... 4
Kenny Index............................................ 4
Late Charge............................................ 4
Liquidation Preference................................. 4
Market Value........................................... 4
i
A-2
<PAGE> 34
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Maximum Potential Gross-up Payment Liability........... 4
Maximum Rate........................................... 5
[Reserved]............................................. 5
Minimum Rate Period.................................... 5
Moody's................................................ 5
Moody's Discount Factor................................ 5
Moody's Eligible Asset................................. 5
Moody's Exposure Period................................ 5
Moody's Volatility Factor.............................. 5
MuniPreferred.......................................... 6
MuniPreferred Basic Maintenance Amount................. 6
MuniPreferred Basic Maintenance Cure Date.............. 7
MuniPreferred Basic Maintenance Report................. 7
Municipal Obligations.................................. 7
1940 Act............................................... 7
1940 Act Cure Date..................................... 7
1940 Act MuniPreferred Asset Coverage.................. 7
Notice of Redemption................................... 7
Notice of Special Rate Period.......................... 7
Order and Orders....................................... 7
Original Issue Insurance............................... 7
Other Issues........................................... 7
Outstanding............................................ 7
Permanent Insurance.................................... 8
Person................................................. 8
Portfolio Insurance.................................... 8
Potential Beneficial Owner............................. 8
Potential Holder....................................... 8
Preferred Stock........................................ 8
Quarterly Valuation Date............................... 8
Rate Multiple.......................................... 8
Rate Period............................................ 8
Rate Period Days....................................... 8
Receivables for Municipal Obligations Sold............. 8
Redemption Price....................................... 8
Reference Rate......................................... 8
Registration Statement................................. 8
S&P.................................................... 8
S&P Discount Factor.................................... 9
S&P Eligible Asset..................................... 9
S&P Exposure Period.................................... 9
S&P Volatility Factor.................................. 9
Secondary Market Insurance............................. 9
Securities Depository.................................. 9
Sell Order and Sell Orders............................. 9
Special Rate Period.................................... 9
Special Redemption Provisions.......................... 9
Submission Deadline.................................... 9
Submitted Bid and Submitted Bids....................... 9
Submitted Hold Order and Submitted Hold Orders......... 9
Submitted Order and Submitted Orders................... 9
</TABLE>
ii
A-3
<PAGE> 35
<TABLE>
<S> <C>
Submitted Sell Order and Submitted Sell Orders.......................... 9
Subsequent Rate Period.................................................. 9
Substitute Commercial Paper Dealer...................................... 9
Substitute U.S. Government Securities Dealer............................ 9
Sufficient Clearing Bids................................................ 10
Taxable Allocation...................................................... 10
Taxable Income.......................................................... 10
Taxable Equivalent of the Short-Term Municipal Bond
Rate................................................................... 10
Transitional Rate Period................................................ 10
Treasury Bill........................................................... 10
Treasury Bill Rate...................................................... 10
Treasury Note........................................................... 10
Treasury Note Rate...................................................... 10
U.S. Government Securities Dealer....................................... 11
Valuation Date.......................................................... 11
Volatility Factor....................................................... 11
Voting Period........................................................... 11
Winning Bid Rate........................................................ 11
PART I....................................................................... 12
1. Number of Authorized Shares...................................... 12
2. Dividends........................................................ 12
(a) Ranking..................................................... 12
(b) Cumulative Cash Dividends................................... 12
(c) Dividends Cumulative From Date of Original Issue............ 12
(d) Dividend Payment Dates and Adjustment Thereof............... 12
(e) Dividend Rates and Calculation of Dividends................. 12
(i) Dividend Rates.......................................... 12
(ii) Calculation of Dividends............................... 14
(f) Curing a Failure to Deposit................................. 14
(g) Dividend Payments by Fund to Auction Agent.................. 14
(h) Auction Agent as Trustee of Dividend Payments by Fund....... 15
(i) Dividends Paid to Holders................................... 15
(j) Dividends Credited Against Earliest Accumulated But Unpaid
Dividends................................................... 15
(k) Dividends Designated as Exempt-Interest Dividends........... 15
3. Gross-up Payments................................................ 15
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate
Period Days or Fewer........................................ 15
(b) Special Rate Periods of More Than 28 Rate Period Days....... 15
(c) No Gross-up Payments In the Event of a Reallocation......... 15
4. Designation of Special Rate Periods.............................. 16
(a) Length of and Preconditions for Special Rate Period......... 16
(b) Adjustment of Length of Special Rate Period................. 16
(c) Notice of Proposed Special Rate Period...................... 16
(d) Notice of Special Rate Period............................... 17
(e) Failure to Deliver Notice of Special Rate Period............ 17
5. Voting Rights.................................................... 17
(a) One Vote Per Share of MuniPreferred......................... 17
(b) Voting For Additional Directors............................. 18
(i) Voting Period........................................... 18
(ii) Notice of Special Meeting.............................. 18
(iii) Terms of Office of Existing Directors................. 18
</TABLE>
iii
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<PAGE> 36
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(iv) Terms of Office of Certain Directors to Terminate Upon
Termination of Voting Period................................ 18
(c) Holders of MuniPreferred To Vote On Certain Other Matters... 19
(i) Increases in Capitalization............................. 19
(ii) 1940 Act Matters....................................... 19
(d) Board May Take Certain Actions Without Shareholder
Approval.................................................... 20
(e) Voting Rights Set Forth Herein Are Sole Voting Rights....... 20
(f) No Preemptive Rights or Cumulative Voting................... 20
(g) Voting for Directors Sole Remedy for Fund's Failure to Pay
Dividends................................................... 20
(h) Holders Entitled to Vote.................................... 20
6. 1940 Act MuniPreferred Asset Coverage............................ 21
7. MuniPreferred Basic Maintenance Amount........................... 21
8. [Reserved]....................................................... 22
9. Restrictions on Dividends and Other Distributions................ 22
(a) Dividends on Preferred Stock Other Than MuniPreferred....... 22
(b) Dividends and Other Distributions With Respect to Common
Stock Under the 1940 Act.................................... 23
(c) Other Restrictions On Dividends and Other Distributions..... 23
10. Rating Agency Restrictions....................................... 23
11. Redemption....................................................... 24
(a) Optional Redemption......................................... 24
(b) Mandatory Redemption........................................ 25
(c) Notice of Redemption........................................ 26
(d) No Redemption Under Certain Circumstances................... 26
(e) Absence of Funds Available for Redemption................... 26
(f) Auction Agent as Trustee of Redemption Payments by Fund..... 26
(g) Shares for Which Notice of Redemption Has Been Given Are No
Longer Outstanding.......................................... 26
(h) Compliance With Applicable Law.............................. 27
(i) Only Whole Shares of MuniPreferred May Be Redeemed.......... 27
12. Liquidation Rights............................................... 27
(a) Ranking..................................................... 27
(b) Distributions Upon Liquidation.............................. 27
(c) Pro Rata Distributions...................................... 27
(d) Rights of Junior Stock...................................... 27
(e) Certain Events Not Constituting Liquidation................. 28
13. Miscellaneous.................................................... 28
(a) Amendment of Appendix A to Add Additional Series............ 28
(b) Appendix A Incorporated By Reference........................ 28
(c) No Fractional Shares........................................ 28
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or
Otherwise Acquired by the Fund.............................. 28
(e) Board May Resolve Ambiguities............................... 28
(f) Headings Not Determinative.................................. 28
(g) Notices..................................................... 28
PART II...................................................................... 29
1. Orders........................................................... 29
2. Submission of Orders by Broker-Dealers to Auction Agent.......... 30
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and 32
Applicable Rate..................................................
4. Acceptance and Rejection of Submitted Bids and Submitted Sell
Orders and Allocation of Shares.................................. 33
</TABLE>
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<PAGE> 37
<TABLE>
<S><C> <C>
5. Notification of Allocations...................................... 35
6. Auction Agent.................................................... 35
7. Transfer of Shares of MuniPreferred.............................. 35
8. Global Certificate............................................... 35
Appendix A................................................................... A-1
Section 1. Designation As To Series.................................. A-1
Section 2. Number of Authorized Shares Per Series.................... A-2
Section 3. Exceptions to Certain Definitions......................... A-3
Section 4. Certain Definitions....................................... A-3
Section 5. Initial and Transitional Rate Periods..................... A-7
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the
Heading "Definitions" in this Statement............................... A-7
Section 7. Party Named for Purposes of the Definition of "Rate
Multiple" in this Statement........................................... A-7
Section 8. Additional Definitions.................................... A-7
Section 9. Dividend Payment Dates.................................... A-7
Section 10. Amount for Purposes of Subparagraph (c)(i) of Section 5 of
Part I of this Statement.............................................. A-8
Section 11. Redemption Provisions Applicable to Initial Rate
Periods............................................................... A-8
Section 12. Applicable Rate for Purposes of Subparagraph (b)(iii) of
Section 3 of Part II of this Statement................................ A-8
</TABLE>
v
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<PAGE> 38
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC., a Minnesota corporation (the
"Fund"), certifies to the Secretary of State of the State of Minnesota that:
First: Pursuant to authority expressly vested in the Board of Directors of
the Fund by Article FIFTH of the Fund's Articles of Incorporation, as amended
(which, as hereafter restated or amended from time to time are, together with
this Statement, herein called the "Articles"), the Board of Directors has, by
resolution, designated the preferences, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption of
shares of the Fund's authorized Preferred Stock, par value $.01 per share,
liquidation preference $25,000 per share, having such designation or
designations as to series as is set forth in Section 1 of Appendix A hereto and
such number of shares per such series as is set forth in Section 2 of Appendix A
hereto.
Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of each series of MuniPreferred described in Section 1 of Appendix A hereto are
as follows (each such series being referred to herein as a series of
MuniPreferred, and shares of all such series being referred to herein
individually as a share of MuniPreferred and collectively as shares of
MuniPreferred):
DEFINITIONS
Except as otherwise specifically provided in Section 3 of Appendix A
hereto, as used in Parts I and II of this Statement, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) "AA" COMPOSITE COMMERCIAL PAPER RATE," on any date for any Rate Period
of shares of a series of MuniPreferred, shall mean (i) (A) in the case of any
Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period
Days, the interest equivalent of the 30-day rate; provided, however, that if
such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial
Paper Rate is being used to determine the Applicable Rate for shares of such
series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven-day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but
fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate
Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but
fewer than 120 Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the 120-day and
180-day rates; and (7) 162 or more but fewer than 183 Rate Period Days, the
interest equivalent of the 180-day rate, in each case on commercial paper placed
on behalf of issuers whose corporate bonds are rated "AA" by S&P or the
equivalent of such rating by S&P or another rating agency, as made available on
a discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day next preceding such date; or (ii) in the event that the Federal
Reserve Bank of New York does not make available any such rate, then the
arithmetic average of such rates, as quoted on a discount basis or otherwise, by
the Commercial Paper Dealers to the Auction Agent for the close of business on
the Business Day next preceding such date. If any Commercial Paper Dealer does
not quote a rate required to determine the "AA" Composite Commercial Paper Rate,
the "AA" Composite Commercial Paper Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining Commercial Paper Dealer or
Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Fund to provide such rate or
rates not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers, as the case may be, or, if the Fund does not select any such Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining
Commercial Paper Dealer or Commercial Paper Dealers. For purposes of this
definition, the "interest equivalent" of a rate stated on a discount basis (a
"discount rate") for commercial paper of a given days' maturity shall be equal
to the quotient (rounded upwards to the next higher one-thousandth (.001) of 1%)
of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y)
a fraction, the numerator of which shall be the product of the
1
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<PAGE> 39
discount rate times the number of days in which such commercial paper matures
and the denominator of which shall be 360.
(b) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.
(c) "AFFILIATE" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by, in
control of or under common control with the Fund; provided, however, that no
Broker-Dealer controlled by, in control of or under common control with the Fund
shall be deemed to be an Affiliate nor shall any corporation or any Person
controlled by, in control of or under common control with such corporation one
of the directors, trustees or executive officers of which is a director of the
Fund be deemed to be an Affiliate solely because such director, trustee or
executive officer is also a director of the Fund.
(d) "AGENT MEMBER" shall mean a member of or participant in the Securities
Depository that will act on behalf of a Bidder.
(e) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes (TANs), Revenue
Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs), Grant
Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation Notes
(BANs) that are rated by S&P.
(f) "APPLICABLE RATE" shall have the meaning specified in subparagraph
(e)(i) of Section 2 of Part I of this Statement.
(g) "ARTICLES" shall have the meaning specified on the first page of this
Statement.
(h) "AUCTION" shall mean each periodic implementation of the Auction
Procedures.
(i) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Fund
and the Auction Agent which provides, among other things, that the Auction Agent
will follow the Auction Procedures for purposes of determining the Applicable
Rate for shares of a series of MuniPreferred so long as the Applicable Rate for
shares of such series is to be based on the results of an Auction.
(j) "AUCTION AGENT" shall mean the entity appointed as such by a resolution
of the Board of Directors in accordance with Section 6 of Part II of this
Statement.
(k) "AUCTION DATE," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.
(l) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions
set forth in Part II of this Statement.
(m) "AVAILABLE MUNIPREFERRED" shall have the meaning specified in paragraph
(a) of Section 3 of Part II of this Statement.
(n) "BENCHMARK RATE" shall have the meaning specified in Section 12 of
Appendix A hereto.
(o) "BENEFICIAL OWNER," with respect to shares of a series of
MuniPreferred, means a customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of
shares of such series.
(p) "BID" and "BIDS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(q) "BIDDER" and "BIDDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement; provided, however, that
neither the Fund nor any affiliate thereof shall be permitted to be a Bidder in
an Auction, except that any Broker-Dealer that is an affiliate of the Fund may
be a Bidder in an Auction, but only if the Orders placed by such Broker-Dealer
are not for its own account.
(r) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Fund or
any duly authorized committee thereof.
2
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<PAGE> 40
(s) "BROKER-DEALER" shall mean any broker-dealer, commercial bank or other
entity permitted by law to perform the functions required of a Broker-Dealer in
Part II of this Statement, that is a member of, or a participant in, the
Securities Depository or is an affiliate of such member or participant, has been
selected by the Fund and has entered into a Broker-Dealer Agreement that remains
effective.
(t) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Fund, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to
follow the procedures specified in Part II of this Statement.
(u) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange is
open for trading and which is neither a Saturday, Sunday nor any other day on
which banks in The City of New York, New York, are authorized by law to close.
(v) "CODE" means the Internal Revenue Code of 1986, as amended.
(w) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated or, in lieu of any thereof, their respective affiliates or
successors, if such entity is a commercial paper dealer.
(x) "COMMON STOCK" shall mean the common stock, par value $.01 per share,
of the Fund.
(y) "CURE DATE" shall mean the MuniPreferred Basic Maintenance Cure Date or
the 1940 Act Cure Date, as the case may be.
(z) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of
MuniPreferred, shall mean the date on which the Fund initially issued such
shares.
(aa) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated
at least A-1+ or SP-1+ by S&P, except that, for purposes of subparagraph (a)(v)
of Section 11 of Part I of this Statement, such Municipal Obligations shall be
considered "Deposit Securities" only if they are also rated P-1, MIG-1 or VMIG-1
by Moody's.
(bb) "DISCOUNTED VALUE," as of any Valuation Date, shall mean, (i) with
respect to an S&P Eligible Asset, the quotient of the Market Value thereof
divided by the applicable S&P Discount Factor and (ii)(a) with respect to a
Moody's Eligible Asset that is not currently callable as of such Valuation Date
at the option of the issuer thereof, the quotient of the Market Value thereof
divided by the applicable Moody's Discount Factor, or (b) with respect to a
Moody's Eligible Asset that is currently callable as of such Valuation Date at
the option of the issuer thereof, the quotient of (1) the lesser of the Market
Value or call price thereof, including any call premium, divided by (2) the
applicable Moody's Discount Factor.
(cc) [RESERVED]
(dd) [RESERVED]
(ee) "DIVIDEND PAYMENT DATE," with respect to shares of a series of
MuniPreferred, shall mean any date on which dividends are payable on shares of
such series pursuant to the provisions of paragraph (d) of Section 2 of Part I
of this Statement.
(ff) "DIVIDEND PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the Date of Original
Issue of shares of such series to but excluding the initial Dividend Payment
Date for shares of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding the next
succeeding Dividend Payment Date for shares of such series.
(gg) "EXISTING HOLDER," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may be
permitted by the Fund) that is listed on the records of the Auction Agent as a
holder of shares of such series.
(hh) "FAILURE TO DEPOSIT," with respect to shares of a series of
MuniPreferred, shall mean a failure by the Fund to pay to the Auction Agent, not
later than 12:00 noon, New York City time, (A) on the Business Day next
preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend
3
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<PAGE> 41
Payment Date in The City of New York, New York, the full amount of any dividend
(whether or not earned or declared) to be paid on such Dividend Payment Date on
any share of such series or (B) on the Business Day next preceding any
redemption date in funds available on such redemption date for shares of such
series in The City of New York, New York, the Redemption Price to be paid on
such redemption date for any share of such series after notice of redemption is
mailed pursuant to paragraph (c) of Section 11 of Part I of this Statement;
provided, however, that the foregoing clause (B) shall not apply to the Fund's
failure to pay the Redemption Price in respect of shares of MuniPreferred when
the related Notice of Redemption provides that redemption of such shares is
subject to one or more conditions precedent and any such condition precedent
shall not have been satisfied at the time or times and in the manner specified
in such Notice of Redemption.
(ii) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the
definition of "Moody's Volatility Factor."
(jj) "FUND" shall mean the entity named on the first page of this
Statement, which is the issuer of the shares of MuniPreferred.
(kk) "GROSS-UP PAYMENT" shall have the meaning specified in Section 4 of
Appendix A hereto.
(ll) "HOLDER," with respect to shares of a series of MuniPreferred, shall
mean the registered holder of such shares as the same appears on the stock books
of the Fund.
(mm) "HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(nn) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants under
the Securities Act of 1933, as amended from time to time.
(oo) "INITIAL RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of such
series in Section 5 of Appendix A hereto.
(pp) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
(qq) "ISSUE TYPE CATEGORY," if defined in Section 4 of Appendix A hereto,
shall have the meaning specified in that section.
(rr) "KENNY INDEX" shall have the meaning specified in the definition of
"Taxable Equivalent of the Short-Term Municipal Bond Rate."
(ss) "LATE CHARGE" shall have the meaning specified in subparagraph
(e)(1)(B) of Section 2 of Part I of this Statement.
(tt) "LIQUIDATION PREFERENCE," with respect to a given number of shares of
MuniPreferred, means $25,000 times that number.
(uu) "MARKET VALUE" of any asset of the Fund shall mean the market value
thereof determined by the pricing service designated from time to time by the
Board of Directors. Market Value of any asset shall include any interest accrued
thereon. The pricing service values portfolio securities at the mean between the
quoted bid and asked price or the yield equivalent when quotations are readily
available. Securities for which quotations are not readily available are valued
at fair value as determined by the pricing service using methods which 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.
(vv) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation
Date, shall mean the aggregate amount of Gross-up Payments that would be due if
the Fund were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized net
capital gains and other taxable income earned by the Fund, as of the end of the
calendar month immediately preceding such Valuation Date, and assuming such
Gross-up Payments are fully taxable.
4
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<PAGE> 42
(ww) "MAXIMUM RATE," for shares of a series of MuniPreferred on any Auction
Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this Statement,
the product of (A) the Reference Rate on such Auction Date for the next
Rate Period of shares of such series and (B) the Rate Multiple on such
Auction Date, unless shares of such series have or had a Special Rate
Period (other than a Special Rate Period of 28 Rate Period Days or fewer)
and an Auction at which Sufficient Clearing Bids existed has not yet
occurred for a Minimum Rate Period of shares of such series after such
Special Rate Period, in which case the higher of:
(A) the dividend rate on shares of such series for the then-ending
Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period of
shares of such series, if such then-ending Rate Period was more than 364
Rate Period Days, and (y) the Reference Rate on such Auction Date for a
Rate Period equal in length to such Special Rate Period of shares of
such series, if such Special Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate Period
equal in length to such Special Rate Period, if such Special Rate Period
was more than 364 Rate Period Days and (2) the Rate Multiple on such
Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this Statement,
the product of (A) the highest of (1) the Reference Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period of
shares of such series, if such then-ending Rate Period was 364 Rate Period
Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate
Period equal in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was more than 364 Rate Period Days,
(2) the Reference Rate on such Auction Date for the Special Rate Period for
which the Auction is being held if such Special Rate Period is 364 Rate
Period Days or fewer or the Treasury Note Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special
Rate Period is more than 364 Rate Period Days, and (3) the Reference Rate
on such Auction Date for Minimum Rate Periods and (B) the Rate Multiple on
such Auction Date.
(xx) [RESERVED]
(yy) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate
Period Days.
(zz) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
(aaa) "MOODY'S DISCOUNT FACTOR" shall have the meaning specified in Section
4 of Appendix A hereto.
(bbb) "MOODY'S ELIGIBLE ASSET" shall have the meaning specified in Section
4 of Appendix A hereto.
(ccc) "MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a given
Valuation Date and ending 56 days thereafter.
(ddd) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date, (i)
in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate
Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or more,
a multiplicative factor equal to 275%, except as otherwise provided in the last
sentence of this definition; (ii) in the case of any Special Rate Period of more
than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to
203%; (iii) in the case of any Special Rate Period of more than 35 but fewer
than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the
case of any Special Rate Period of more than 42 but fewer than 50 Rate Period
Days, a multiplicative factor equal to 226%; and (v) in the case of any Special
Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative
factor equal to 235%. If, as a result of the enactment of changes to the Code,
the greater of the
5
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<PAGE> 43
maximum marginal Federal individual income tax rate applicable to ordinary
income and the maximum marginal Federal corporate income tax rate applicable to
ordinary income will increase, such increase being rounded up to the next five
percentage points (the "Federal Tax Rate Increase"), until the effective date of
such increase, the Moody's Volatility Factor in the case of any Rate Period
described in (i) above in this definition instead shall be determined by
reference to the following table:
<TABLE>
<CAPTION>
FEDERAL TAX RATE INCREASE VOLATILITY FACTOR
- ------------------------- -----------------
<S> <C>
5%................................................ 295%
10%................................................. 317%
15%................................................. 341%
20%................................................. 369%
25%................................................. 400%
30%................................................. 436%
35%................................................. 477%
40%................................................. 525%
</TABLE>
(eee) "MUNIPREFERRED" shall have the meaning set forth on the first page of
this Statement.
(fff) "MUNIPREFERRED BASIC MAINTENANCE AMOUNT," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of shares of MuniPreferred outstanding on such date multiplied by $25,000
(plus the product of the number of shares of any other series of Preferred Stock
outstanding on such date multiplied by the liquidation preference of such
shares), plus any redemption premium applicable to shares of MuniPreferred (or
other Preferred Stock) then subject to redemption; (B) the aggregate amount of
dividends that will have accumulated at the respective Applicable Rates (whether
or not earned or declared) to (but not including) the first respective Dividend
Payment Dates for shares of MuniPreferred outstanding that follow such Valuation
Date (plus the aggregate amount of dividends, whether or not earned or declared,
that will have accumulated in respect of other outstanding shares of Preferred
Stock to, but not including, the first respective dividend payment dates for
such other shares that follow such Valuation Date); (C) the aggregate amount of
dividends that would accumulate on shares of each series of MuniPreferred
outstanding from such first respective Dividend Payment Date therefor through
the 56th day after such Valuation Date, at the Maximum Rate (calculated as if
such Valuation Date were the Auction Date for the Rate Period commencing on such
Dividend Payment Date) for a Minimum Rate Period of shares of such series to
commence on such Dividend Payment Date, assuming, solely for purposes of the
foregoing, that if on such Valuation Date the Fund shall have delivered a Notice
of Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of this
Part I with respect to shares of such series, such Maximum Rate shall be the
higher of (a) the Maximum Rate for the Special Rate Period of shares of such
series to commence on such Dividend Payment Date and (b) the Maximum Rate for a
Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, multiplied by the Volatility Factor applicable to a Minimum Rate
Period, or, in the event the Fund shall have delivered a Notice of Special Rate
Period to the Auction Agent pursuant to Section 4(d)(i) of this Part I with
respect to shares of such series designating a Special Rate Period consisting of
56 Rate Period Days or more, the Volatility Factor applicable to a Special Rate
Period of that length (plus the aggregate amount of dividends that would
accumulate at the maximum dividend rate or rates on any other shares of
Preferred Stock outstanding from such respective dividend payment dates through
the 56th day after such Valuation Date, as established by or pursuant to the
respective statements establishing and fixing the rights and preferences of such
other shares of Preferred Stock) (except that (1) if such Valuation Date occurs
at a time when a Failure to Deposit (or, in the case of shares of Preferred
Stock other than MuniPreferred, a failure similar to a Failure to Deposit) has
occurred that has not been cured, the dividend for purposes of calculation would
accumulate at the current dividend rate then applicable to the shares in respect
of which such failure has occurred and (2) for those days during the period
described in this subparagraph (C) in respect of which the Applicable Rate in
effect immediately prior to such Dividend Payment Date will remain in effect
(or, in the case of shares of Preferred Stock other than MuniPreferred, in
respect of which the dividend rate or rates in effect immediately prior to such
respective dividend payment dates will remain in effect), the dividend for
purposes of calculation would accumulate at such Applicable Rate (or other rate
or rates, as the case may be) in respect of those days);
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<PAGE> 44
(D) the amount of anticipated expenses of the Fund for the 90 days subsequent to
such Valuation Date; (E) the amount of the Fund's Maximum Potential Gross-up
Payment Liability in respect of shares of MuniPreferred (and similar amounts
payable in respect of other shares of Preferred Stock pursuant to provisions
similar to those contained in Section 3 of Part I of this Statement) as of such
Valuation Date; and (F) any current liabilities as of such Valuation Date to the
extent not reflected in any of (i)(A) through (i)(E) (including, without
limitation, any payables for Municipal Obligations purchased as of such
Valuation Date and any liabilities incurred for the purpose of clearing
securities transactions) less (ii) the value (i.e., for purposes of current
Moody's guidelines, the face value of cash, short-term Municipal Obligations
rated MIG-1, VMIG-1 or P-1, and short-term securities that are the direct
obligation of the U.S. government, provided in each case that such securities
mature on or prior to the date upon which any of (i)(A) through (i)(F) become
payable, otherwise the Moody's Discounted Value) of any of the Fund's assets
irrevocably deposited by the Fund for the payment of any of (i)(A) through
(i)(F).
(ggg) "MUNIPREFERRED BASIC MAINTENANCE CURE DATE," with respect to the
failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount (as
required by paragraph (a) of Section 7 of Part I of this Statement) as of a
given Valuation Date, shall mean the seventh Business Day following such
Valuation Date.
(hhh) "MUNIPREFERRED BASIC MAINTENANCE REPORT" shall mean a report signed
by the President, Treasurer or any Senior Vice President or Vice President of
the Fund which sets forth, as of the related Valuation Date, the assets of the
Fund, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the MuniPreferred Basic Maintenance Amount.
(iii) "MUNICIPAL OBLIGATIONS" shall mean "Municipal Obligations" as defined
in the Fund's registration statement on Form N-2 on file with the Securities and
Exchange Commission, as such registration statement may be amended from time to
time (the "Registration Statement").
(jjj) "1940 ACT" shall mean the Investment Company Act of 1940, as amended
from time to time.
(kkk) "1940 ACT CURE DATE," with respect to the failure by the Fund to
maintain the 1940 Act MuniPreferred Asset Coverage (as required by Section 6 of
Part I of this Statement) as of the last Business Day of each month, shall mean
the last Business Day of the following month.
(lll) "1940 ACT MUNIPREFERRED ASSET COVERAGE" shall mean asset coverage, as
defined in Section 18(h) of the 1940 Act, of at least 200% with respect to all
outstanding senior securities of the Fund which are stock, including all
outstanding shares of MuniPreferred (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage for
senior securities which are stock of a closed-end investment company as a
condition of declaring dividends on its common stock).
(mmm) "NOTICE OF REDEMPTION" shall mean any notice with respect to the
redemption of shares of MuniPreferred pursuant to paragraph (c) of Section 11 of
Part I of this Statement.
(nnn) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to
a Special Rate Period of shares of MuniPreferred pursuant to subparagraph (d)(i)
of Section 4 of Part I of this Statement.
(ooo) "ORDER" AND "ORDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "ORIGINAL ISSUE INSURANCE," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(qqq) "OTHER ISSUES," if defined in Section 4 of Appendix A hereto, shall
have the meaning specified in that section.
(rrr) "OUTSTANDING" shall mean, as of any Auction Date with respect to
shares of a series of MuniPreferred, the number of shares of such series
theretofore issued by the Fund except, without duplication, (i) any shares of
such series theretofore cancelled or delivered to the Auction Agent for
cancellation or redeemed by the Fund, (ii) any shares of such series as to which
the Fund or any Affiliate thereof shall be an Existing Holder and (iii) any
shares of such series represented by any certificate in lieu of which a new
certificate has been executed and delivered by the Fund.
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(sss) "PERMANENT INSURANCE," if defined in Section 4 of Appendix A hereto,
shall have the meaning specified in that section.
(ttt) "PERSON" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
(uuu) "PORTFOLIO INSURANCE," if defined in Section 4 of Appendix A hereto,
shall have the meaning specified in that section.
(vvv) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of
MuniPreferred, shall mean a customer of a Broker-Dealer that is not a Beneficial
Owner of shares of such series but that wishes to purchase shares of such
series, or that is a Beneficial Owner of shares of such series that wishes to
purchase additional shares of such series.
(www) "POTENTIAL HOLDER," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other person as may be
permitted by the Fund) that is not an Existing Holder of shares of such series
or that is an Existing Holder of shares of such series that wishes to become the
Existing Holder of additional shares of such series.
(xxx) "PREFERRED STOCK" shall mean the preferred stock of the Fund, and
includes the shares of MuniPreferred.
(yyy) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each
February, May, August and November of each year, commencing on the date set
forth in Section 6 of Appendix A hereto.
(zzz) "RATE MULTIPLE" shall have the meaning specified in Section 4 of
Appendix A hereto.
(aaaa) "RATE PERIOD," with respect to shares of a series of MuniPreferred,
shall mean the Initial Rate Period, and any Transitional Rate Period, of shares
of such series and any Subsequent Rate Period, including any Special Rate
Period, of shares of such series.
(bbbb) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means
the number of days that would constitute such Rate Period or Dividend Period but
for the application of paragraph (d) of Section 2 of Part I of this Statement or
paragraph (b) of Section 4 of Part I of this Statement.
(cccc) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean (A) for
purposes of calculation of Moody's Eligible Assets as of any Valuation Date, no
more than the aggregate of the following: (i) the book value of receivables for
Municipal Obligations sold as of or prior to such Valuation Date if such
receivables are due within five business days of such Valuation Date, and if the
trades which generated such receivables are (x) settled through clearing house
firms with respect to which the Fund has received prior written authorization
from Moody's or (y) with counterparties having a Moody's long-term debt rating
of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations
sold as of or prior to such Valuation Date which generated receivables, if such
receivables are due within five business days of such Valuation Date but do not
comply with either of the conditions specified in (i) above, and (B) for
purposes of calculation of S&P Eligible Assets as of any Valuation Date, the
book value of receivables for Municipal Obligations sold as of or prior to such
Valuation Date if such receivables are due within five business days of such
Valuation Date.
(dddd) "REDEMPTION PRICE" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this Statement.
(eeee) "REFERENCE RATE" shall mean (i) the higher of the Taxable Equivalent
of the Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper
Rate in the case of Minimum Rate Periods and Special Rate Periods of 28 Rate
Period Days or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case
of Special Rate Periods of more than 28 Rate Period Days but fewer than 183 Rate
Period Days; and (iii) the Treasury Bill Rate in the case of Special Rate
Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days.
(ffff) "REGISTRATION STATEMENT" has the meaning specified in the definition
of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.
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(hhhh) "S&P DISCOUNT FACTOR" shall have the meaning specified in Section 4
of Appendix A hereto.
(iiii) "S&P ELIGIBLE ASSET" shall have the meaning specified in Section 4
of Appendix A hereto.
(jjjj) "S&P EXPOSURE PERIOD" shall mean the maximum period of time
following a Valuation Date that the Fund has under this Statement to cure any
failure to maintain, as of such Valuation Date, the Discounted Value for its
portfolio at least equal to the MuniPreferred Basic Maintenance Amount (as
described in paragraph (a) of Section 7 of Part I of this Statement).
(kkkk) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation Date, a
multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period
or any Special Rate Period of 28 Rate Period Days or fewer; (ii) 268% in the
case of any Special Rate Period of more than 28 Rate Period Days but fewer than
183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of
more than 182 Rate Period Days.
(llll) "SECONDARY MARKET INSURANCE," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(mmmm) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Fund which agrees to follow the procedures required to be followed by such
securities depository in connection with shares of MuniPreferred.
(nnnn) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(oooo) "SPECIAL RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall have the meaning specified in paragraph (a) of Section 4 of
Part I of this Statement.
(pppp) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in
subparagraph (a)(i) of Section 11 of Part I of this Statement.
(qqqq) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York City time, on
any Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the Auction
Agent from time to time.
(rrrr) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.
(ssss) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(tttt) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.
(uuuu) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(vvvv) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the first day following
the Transitional Rate Period (or, if no Transitional Rate Period, the Initial
Rate Period) of shares of such series to but excluding the next Dividend Payment
Date for shares of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding the next
succeeding Dividend Payment Date for shares of such series; provided, however,
that if any Subsequent Rate Period is also a Special Rate Period, such term
shall mean the period commencing on the first day of such Special Rate Period
and ending on the last day of the last Dividend Period thereof.
(wwww) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean The First Boston
Company or Morgan Stanley & Co. Incorporated or their respective affiliates or
successors, if such entity is a commercial paper dealer; provided, however, that
none of such entities shall be a Commercial Paper Dealer.
(xxxx) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" shall mean The First
Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their
respective affiliates or successors, if such entity is
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a U.S. Government securities dealer; provided, however, that none of such
entities shall be a U.S. Government Securities Dealer.
(yyyy) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(zzzz) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3
of Part I of this Statement.
(aaaaa) "TAXABLE INCOME" shall have the meaning specified in Section 12 of
Appendix A hereto.
(bbbbb) "TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND RATE," on any
date for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days
or fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on
an interest equivalent basis equal to the Kenny S&P 30 day High Grade Index or
any successor index (the "Kenny Index") (provided, however, that any such
successor index must be approved by Moody's (if Moody's is then rating the
shares of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred)), made available for the Business Day immediately preceding such
date but in any event not later than 8:30 A.M., New York City time, on such date
by Kenny S&P Evaluation Services or any successor thereto, based upon 30-day
yield evaluations at par of short-term bonds the interest on which is excludable
for regular Federal income tax purposes under the Code of "high grade" component
issuers selected by Kenny S&P Evaluation Services or any such successor from
time to time in its discretion, which component issuers shall include, without
limitation, issuers of general obligation bonds, but shall exclude any bonds the
interest on which constitutes an item of tax preference under Section 57(a)(5)
of the Code, or successor provisions, for purposes of the "alternative minimum
tax," divided by (B) 1.00 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income (in each case
expressed as a decimal), whichever is greater; provided, however, that if the
Kenny Index is not made so available by 8:30 A.M., New York City time, on such
date by Kenny S&P Evaluation Services or any successor, the Taxable Equivalent
of the Short-Term Municipal Bond Rate shall mean the quotient of (A) the per
annum rate expressed on an interest equivalent basis equal to the most recent
Kenny Index so made available for any preceding Business Day, divided by (B)
1.00 minus the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income (in each case expressed as a
decimal), whichever is greater.
(ccccc) "TRANSITIONAL RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of such
series in Section 5 of Appendix A hereto.
(ddddd) "TREASURY BILL" shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of 364 days or less.
(eeeee) "TREASURY BILL RATE," on any date for any Rate Period, shall mean
(i) the bond equivalent yield, calculated in accordance with prevailing industry
convention, of the rate on the most recently auctioned Treasury Bill with a
remaining maturity closest to the length of such Rate Period, as quoted in The
Wall Street Journal on such date for the Business Day next preceding such date;
or (ii) in the event that any such rate is not published in The Wall Street
Journal, then the bond equivalent yield, calculated in accordance with
prevailing industry convention, as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned Treasury Bill
with a remaining maturity closest to the length of such Rate Period, as
determined by bid price quotations as of the close of business on the Business
Day immediately preceding such date obtained from the U.S. Government Securities
Dealers to the Auction Agent.
(fffff) "TREASURY NOTE" shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of five years or less but
more than 364 days.
(ggggg) "TREASURY NOTE RATE," on any date for any Rate Period, shall mean
(i) the yield on the most recently auctioned Treasury Note with a remaining
maturity closest to the length of such Rate Period, as quoted in The Wall Street
Journal on such date for the Business Day next preceding such date; or (ii) in
the event that any such rate is not published in The Wall Street Journal, then
the yield as calculated by reference to the arithmetic average of the bid price
quotations of the most recently auctioned Treasury Note with a
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remaining maturity closest to the length of such Rate Period, as determined by
bid price quotations as of the close of business on the Business Day immediately
preceding such date obtained from the U.S. Government Securities Dealers to the
Auction Agent. If any U.S. Government Securities Dealer does not quote a rate
required to determine the Treasury Bill Rate or the Treasury Note Rate, the
Treasury Bill Rate or the Treasury Note Rate shall be determined on the basis of
the quotation or quotations furnished by the remaining U.S. Government
Securities Dealer or U.S. Government Securities Dealers and any Substitute U.S.
Government Securities Dealers selected by the Fund to provide such rate or rates
not being supplied by any U.S. Government Securities Dealer or U.S. Government
Securities Dealers, as the case may be, or, if the Fund does not select any such
Substitute U.S. Government Securities Dealer or Substitute U.S. Government
Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S.
Government Securities Dealers.
(hhhhh) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman Government
Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc and Morgan
Guaranty Trust Company of New York or their respective affiliates or successors,
if such entity is a U.S. Government securities dealer.
(iiiii) "VALUATION DATE" shall mean, for purposes of determining whether
the Fund is maintaining the MuniPreferred Basic Maintenance Amount, each
Business Day.
(jjjjj) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the
greater of the Moody's Volatility Factor and the S&P Volatility Factor.
(kkkkk) "VOTING PERIOD" shall have the meaning specified in paragraph (b)
of Section 5 of Part I of this Statement.
(lllll) "WINNING BID RATE" shall have the meaning specified in paragraph
(a) of Section 3 of Part II of this Statement.
Any additional definitions specifically set forth in Section 8 of Appendix
A hereto shall be incorporated herein and made part hereof by reference thereto.
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PART I.
1. NUMBER OF AUTHORIZED SHARES.
The number of authorized shares constituting a series of MuniPreferred
shall be as set forth with respect to such series in Section 2 of Appendix A
hereto.
2. DIVIDENDS.
(a) RANKING. The shares of a series of MuniPreferred shall rank on a parity
with each other, with shares of any other series of MuniPreferred and with
shares of any other series of Preferred Stock as to the payment of dividends by
the Fund.
(b) CUMULATIVE CASH DIVIDENDS. The Holders of shares of MuniPreferred of
any series shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, cumulative cash dividends
at the Applicable Rate for shares of such series, determined as set forth in
paragraph (e) of this Section 2, and no more (except to the extent set forth in
Section 3 of this Part I), payable on the Dividend Payment Dates with respect to
shares of such series determined pursuant to paragraph (d) of this Section 2.
Holders of shares of MuniPreferred shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on shares of MuniPreferred. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on shares of MuniPreferred which may be in arrears, and,
except to the extent set forth in subparagraph (e)(i) of this Section 2, no
additional sum of money shall be payable in respect of any such arrearage.
(c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE. Dividends on shares
of MuniPreferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
(d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF. The Dividend Payment
Dates with respect to shares of a series of MuniPreferred shall be as set forth
with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as "Series
F MuniPreferred" or "Series M MuniPreferred" in Section 1 of Appendix A
hereto, if the Monday or Tuesday, as the case may be, on which dividends
would otherwise be payable on shares of such series is not a Business Day,
then such dividends shall be payable on such shares on the first Business
Day that falls after such Monday or Tuesday, as the case may be, and (B) in
the case of a series of MuniPreferred designated as "Series T
MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in
Section 1 of Appendix A hereto, if the Wednesday, Thursday or Friday, as
the case may be, on which dividends would otherwise be payable on shares of
such series is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such Wednesday,
Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto, the Fund in its
discretion may establish the Dividend Payment Dates in respect of any
Special Rate Period of shares of a series of MuniPreferred consisting of
more than 28 Rate Period Days; provided, however, that such dates shall be
set forth in the Notice of Special Rate Period relating to such Special
Rate Period, as delivered to the Auction Agent, which Notice of Special
Rate Period shall be filed with the Secretary of the Fund; and further
provided that (1) any such Dividend Payment Date shall be a Business Day
and (2) the last Dividend Payment Date in respect of such Special Rate
Period shall be the Business Day immediately following the last day
thereof, as such last day is determined in accordance with paragraph (b) of
Section 4 of this Part I.
(e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS.
(i) DIVIDEND RATES. The dividend rate on shares of MuniPreferred of
any series during the period from and after the Date of Original Issue of
shares of such series to and including the last day of the Initial Rate
Period of shares of such series shall be equal to the rate per annum set
forth with respect to
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shares of such series under "Designation" in Section 1 of Appendix A
hereto. For any Transitional Rate Period and for each Subsequent Rate
Period of shares of such series thereafter, the dividend rate on shares of
such series shall be equal to the rate per annum that results from an
Auction for shares of such series on the Auction Date next preceding such
Transitional Rate Period or Subsequent Rate Period, as the case may be;
provided, however, that if:
(A) an Auction for any such Transitional Rate Period or Subsequent
Rate Period is not held for any reason other than as described below,
the dividend rate on shares of such series for such Transitional Rate
Period or Subsequent Rate Period will be the Maximum Rate for shares of
such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect to
shares of such series during any Rate Period thereof (other than any
Special Rate Period consisting of more than 364 Rate Period Days or any
Rate Period succeeding any Special Rate Period consisting of more than
364 Rate Period Days during which a Failure to Deposit occurred that has
not been cured), but, prior to 12:00 Noon, New York City time, on the
third Business Day next succeeding the date on which such Failure to
Deposit occurred, such Failure to Deposit shall have been cured in
accordance with paragraph (f) of this Section 2 and the Fund shall have
paid to the Auction Agent a late charge ("Late Charge") equal to the sum
of (1) if such Failure to Deposit consisted of the failure timely to pay
to the Auction Agent the full amount of dividends with respect to any
Dividend Period of the shares of such series, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period during
which such Failure to Deposit occurs on the Dividend Payment Date for
such Dividend Period by (y) a fraction, the numerator of which shall be
the number of days for which such Failure to Deposit has not been cured
in accordance with paragraph (f) of this Section 2 (including the day
such Failure to Deposit occurs and excluding the day such Failure to
Deposit is cured) and the denominator of which shall be 360, and
applying the rate obtained against the aggregate Liquidation Preference
of the outstanding shares of such series and (2) if such Failure to
Deposit consisted of the failure timely to pay to the Auction Agent the
Redemption Price of the shares, if any, of such series for which Notice
of Redemption has been mailed by the Fund pursuant to paragraph (c) of
Section 11 of this Part I, an amount computed by multiplying (x) 200% of
the Reference Rate for the Rate Period during which such Failure to
Deposit occurs on the redemption date by (y) a fraction, the numerator
of which shall be the number of days for which such Failure to Deposit
is not cured in accordance with paragraph (f) of this Section 2
(including the day such Failure to Deposit occurs and excluding the day
such Failure to Deposit is cured) and the denominator of which shall be
360, and applying the rate obtained against the aggregate Liquidation
Preference of the outstanding shares of such series to be redeemed, no
Auction will be held in respect of shares of such series for the
Transitional Rate Period or Subsequent Rate Period thereof and the
dividend rate for shares of such series for such Transitional Rate
Period or Subsequent Rate Period will be the Maximum Rate for shares of
such series on the Auction Date for such Transitional Rate Period or
Subsequent Rate Period;
(C) any Failure to Deposit shall have occurred with respect to
shares of such series during any Rate Period thereof (other than any
Special Rate Period consisting of more than 364 Rate Period Days or any
Rate Period succeeding any Special Rate Period consisting of more than
364 Rate Period Days during which a Failure to Deposit occurred that has
not been cured), and, prior to 12:00 Noon, New York City time, on the
third Business Day next succeeding the date on which such Failure to
Deposit occurred, such Failure to Deposit shall not have been cured in
accordance with paragraph (f) of this Section 2 or the Fund shall not
have paid the applicable Late Charge to the Auction Agent, no Auction
will be held in respect of shares of such series for the Transitional
Rate Period or first Subsequent Rate Period thereof thereafter (or for
any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable
Late Charge to the Auction Agent (the condition set forth in this clause
(2) to apply only in the event Moody's is rating such shares at the time
the Fund cures such Failure to Deposit), in each case no later than
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12:00 Noon, New York City time, on the fourth Business Day prior to the
end of such Rate Period), and the dividend rate for shares of such
series for the Transitional Rate Period or each such Subsequent Rate
Period shall be a rate per annum equal to the Maximum Rate for shares of
such series on the Auction Date for such Transitional Rate Period or
Subsequent Rate Period (but with the prevailing rating for shares of
such series, for purposes of determining such Maximum Rate, being deemed
to be "Below "ba3"/BB-"); or
(D) any Failure to Deposit shall have occurred with respect to
shares of such series during a Special Rate Period thereof consisting of
more than 364 Rate Period Days, or during any Rate Period thereof
succeeding any Special Rate Period consisting of more than 364 Rate
Period Days during which a Failure to Deposit occurred that has not been
cured, and, prior to 12:00 Noon, New York City time, on the fourth
Business Day preceding the Auction Date for the Rate Period subsequent
to such Rate Period, such Failure to Deposit shall not have been cured
in accordance with paragraph (f) of this Section 2 or, in the event
Moody's is then rating such shares, the Fund shall not have paid the
applicable Late Charge to the Auction Agent (such Late Charge, for
purposes of this subparagraph (D), to be calculated by using, as the
Reference Rate, the Reference Rate applicable to a Rate Period (x)
consisting of more than 182 Rate Period Days but fewer than 365 Rate
Period Days and (y) commencing on the date on which the Rate Period
during which Failure to Deposit occurs commenced), no Auction will be
held in respect of shares of such series for such Subsequent Rate Period
(or for any Rate Period thereof thereafter to and including the Rate
Period during which (1) such Failure to Deposit is cured in accordance
with paragraph (f) of this Section 2 and (2) the Fund pays the
applicable Late Charge to the Auction Agent (the condition set forth in
this clause (2) to apply only in the event Moody's is rating such shares
at the time the Fund cures such Failure to Deposit), in each case no
later than 12:00 Noon, New York City time, on the fourth Business Day
prior to the end of such Rate Period), and the dividend rate for shares
of such series for each such Subsequent Rate Period shall be a rate per
annum equal to the Maximum Rate for shares of such series on the Auction
Date for such Subsequent Rate Period (but with the prevailing rating for
shares of such series, for purposes of determining such Maximum Rate,
being deemed to be "Below "ba3"/BB-") (the rate per annum at which
dividends are payable on shares of a series of MuniPreferred for any
Rate Period thereof being herein referred to as the "Applicable Rate"
for shares of such series).
(ii) CALCULATION OF DIVIDENDS. The amount of dividends per share
payable on shares of a series of MuniPreferred on any date on which
dividends shall be payable on shares of such series shall be computed by
multiplying the Applicable Rate for shares of such series in effect for
such Dividend Period or Dividend Periods or part thereof for which
dividends have not been paid by a fraction, the numerator of which shall be
the number of days in such Dividend Period or Dividend Periods or part
thereof and the denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other Dividend Periods, and
applying the rate obtained against $25,000.
(f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to
shares of a series of MuniPreferred shall have been cured (if such Failure to
Deposit is not solely due to the willful failure of the Fund to make the
required payment to the Auction Agent) with respect to any Rate Period of shares
of such series if, within the respective time periods described in subparagraph
(e)(i) of this Section 2, the Fund shall have paid to the Auction Agent (A) all
accumulated and unpaid dividends on shares of such series and (B) without
duplication, the Redemption Price for shares, if any, of such series for which
Notice of Redemption has been mailed by the Fund pursuant to paragraph (c) of
Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Fund's failure to pay the Redemption Price in
respect of shares of MuniPreferred when the related Redemption Notice provides
that redemption of such shares is subject to one or more conditions precedent
and any such condition precedent shall not have been satisfied at the time or
times and in the manner specified in such Notice of Redemption.
(g) DIVIDEND PAYMENTS BY FUND TO AUCTION AGENT. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of
MuniPreferred, an aggregate amount of funds available on the next Business Day
in The
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City of New York, New York, equal to the dividends to be paid to all Holders of
shares of such series on such Dividend Payment Date.
(h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY FUND. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(i) DIVIDENDS PAID TO HOLDERS. Each dividend on shares of MuniPreferred
shall be paid on the Dividend Payment Date therefor to the Holders thereof as
their names appear on the stock books of the Fund on the Business Day next
preceding such Dividend Payment Date.
(j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID
DIVIDENDS. Any dividend payment made on shares of MuniPreferred shall first be
credited against the earliest accumulated but unpaid dividends due with respect
to such shares. Dividends in arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to the Holders as their names appear on the stock books of the Fund on
such date, not exceeding 15 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS. Dividends on shares
of MuniPreferred shall be designated as exempt-interest dividends up to the
amount of tax-exempt income of the Fund, to the extent permitted by, and for
purposes of, Section 852 of the Code.
3. GROSS-UP PAYMENTS.
Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE PERIOD DAYS OR
FEWER. If, in the case of any Minimum Rate Period or any Special Rate Period of
28 Rate Period Days or fewer, the Fund allocates any net capital gains or other
income taxable for Federal income tax purposes to a dividend paid on shares of
MuniPreferred without having given advance notice thereof to the Auction Agent
as provided in Section 5 of Part II of this Statement (such allocation being
referred to herein as a "Taxable Allocation") solely by reason of the fact that
such allocation is made retroactively as a result of the redemption of all or a
portion of the outstanding shares of MuniPreferred or the liquidation of the
Fund, the Fund shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent and direct the
Fund's dividend disbursing agent to send such notice with a Gross-up Payment to
each Holder of such shares that was entitled to such dividend payment during
such calendar year at such Holder's address as the same appears or last appeared
on the stock books of the Fund.
(b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS. If, in the case
of any Special Rate Period of more than 28 Rate Period Days, the Fund makes a
Taxable Allocation to a dividend paid on shares of MuniPreferred, the Fund
shall, prior to the end of the calendar year in which such dividend was paid,
provide notice thereof to the Auction Agent and direct the Fund's dividend
disbursing agent to send such notice with a Gross-up Payment to each Holder of
shares that was entitled to such dividend payment during such calendar year at
such Holder's address as the same appears or last appeared on the stock books of
the Fund.
(c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The Fund shall not
be required to make Gross-up Payments with respect to any net capital gains or
other taxable income determined by the Internal Revenue Service to be allocable
in a manner different from that allocated by the Fund.
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4. DESIGNATION OF SPECIAL RATE PERIODS.
(a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Fund, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred as a Special Rate Period consisting of more
than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Fund wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event the Fund
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last day of such Special Rate Period
is not (a) a Tuesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series M MuniPreferred" in Section 1 of Appendix A
hereto, (b) a Wednesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series T MuniPreferred" in Section 1 of Appendix A
hereto, (c) a Thursday that is a Business Day in the case of a series of
MuniPreferred designated as "Series W MuniPreferred" in Section 1 of Appendix A
hereto, (d) a Friday that is a Business Day in the case of a series of
MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of Appendix A
hereto, or (e) a Monday that is a Business Day in the case of a series of
MuniPreferred designated as "Series F MuniPreferred" in Section 1 of Appendix A
hereto, then the Fund shall designate such Subsequent Rate Period as a Special
Rate Period consisting of the period commencing on the first day following the
end of the immediately preceding Rate Period and ending (a) on the first Monday
that is followed by a Tuesday that is a Business Day preceding what would
otherwise be such last day, in the case of Series M MuniPreferred, (b) on the
first Tuesday that is followed by a Wednesday that is a Business Day preceding
what would otherwise be such last day, in the case of Series T MuniPreferred,
(c) on the first Wednesday that is followed by a Thursday that is a Business Day
preceding what would otherwise be such last day, in the case of Series W
MuniPreferred, (d) on the first Thursday that is followed by a Friday that is a
Business Day preceding what would otherwise be such last day, in the case of
Series TH MuniPreferred, and (e) on the first Sunday that is followed by a
Monday that is a Business Day preceding what would otherwise be such last day,
in the case of Series F MuniPreferred.
(c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section
4, not less than 20 (or such lesser number of days as may be agreed to from time
to time by the Auction Agent) nor more than 30 days prior to the date the Fund
proposes to designate as the first day of such Special Rate Period (which shall
be such day that would otherwise be the first day of a Minimum Rate Period),
notice shall be (i) published or caused to be published by the Fund in a
newspaper of general circulation to the financial community in The City of New
York, New York, which carries financial news, and (ii) mailed by the Fund by
first-class mail, postage prepaid, to the Holders of shares of such series. Each
such notice shall state (A) that the Fund may exercise its option to designate a
succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Fund will, by 11:00
A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Fund shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.
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(d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of MuniPreferred as to which notice
has been given as set forth in paragraph (c) of this Section 4 (or such later
time or date, or both, as may be agreed to by the Auction Agent), the Fund shall
deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Fund has determined to designate the next succeeding Rate Period of shares
of such series as a Special Rate Period, specifying the same and the first
day thereof, (B) the Auction Date immediately prior to the first day of
such Special Rate Period, (C) that such Special Rate Period shall not
commence if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate
Period, Moody's Eligible Assets (if Moody's is then rating such series) and
S&P Eligible Assets (if S&P is then rating such series) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount as of such Business Day (assuming for purposes of the
foregoing calculation that (a) the Maximum Rate is the Maximum Rate on such
Business Day as if such Business Day were the Auction Date for the proposed
Special Rate Period, and (b) the Moody's Discount Factors applicable to
Moody's Eligible Assets are determined by reference to the first Exposure
Period longer than the Exposure Period then applicable to the Fund, as
described in the definition of Moody's Discount Factor herein); or
(ii) a notice stating that the Fund has determined not to exercise its
option to designate a Special Rate Period of shares of such series and that
the next succeeding Rate Period of shares of such series shall be a Minimum
Rate Period.
(e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Fund fails to
deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of
this Section 4 (and, in the case of the notice described in subparagraph (d)(i)
of this Section 4, a MuniPreferred Basic Maintenance Report to the effect set
forth in such subparagraph (if either Moody's or S&P is then rating the series
in question)) with respect to any designation of any proposed Special Rate
Period to the Auction Agent by 11:00 A.M., New York City time, on the second
Business Day next preceding the first day of such proposed Special Rate Period
(or by such later time or date, or both, as may be agreed to by the Auction
Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent
with respect to such Special Rate Period to the effect set forth in subparagraph
(d)(ii) of this Section 4. In the event the Fund delivers to the Auction Agent a
notice described in subparagraph (d)(i) of this Section 4, it shall file a copy
of such notice with the Secretary of the Fund, and the contents of such notice
shall be binding on the Fund. In the event the Fund delivers to the Auction
Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund
will provide Moody's (if Moody's is then rating the series in question) and S&P
(if S&P is then rating the series in question) a copy of such notice.
5. VOTING RIGHTS.
(a) ONE VOTE PER SHARE OF MUNIPREFERRED. Except as otherwise provided in
the Articles or as otherwise required by law, (i) each Holder of shares of
MuniPreferred shall be entitled to one vote for each share of MuniPreferred held
by such Holder on each matter submitted to a vote of shareholders of the Fund,
and (ii) the holders of outstanding shares of Preferred Stock, including each
share of MuniPreferred, and of shares of Common Stock shall vote together as a
single class; provided, however, that, at any meeting of the shareholders of the
Fund held for the election of directors, the holders of outstanding shares of
Preferred Stock, including MuniPreferred, represented in person or by proxy at
said meeting, shall be entitled, as a class, to the exclusion of the holders of
all other securities and classes of capital stock of the Fund, to elect two
directors of the Fund, each share of Preferred Stock, including each share of
MuniPreferred, entitling the
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holder thereof to one vote. Subject to paragraph (b) of this Section 5, the
holders of outstanding shares of Common Stock and Preferred Stock, including
MuniPreferred, voting together as a single class, shall elect the balance of the
directors.
(b) VOTING FOR ADDITIONAL DIRECTORS.
(i) VOTING PERIOD. During any period in which any one or more of the
conditions described in subparagraphs (A) or (B) of this subparagraph
(b)(i) shall exist (such period being referred to herein as a "Voting
Period"), the number of directors constituting the Board of Directors shall
be automatically increased by the smallest number that, when added to the
two directors elected exclusively by the holders of shares of Preferred
Stock, including shares of MuniPreferred, would constitute a majority of
the Board of Directors as so increased by such smallest number; and the
holders of shares of Preferred Stock, including MuniPreferred, shall be
entitled, voting as a class on a one-vote-per-share basis (to the exclusion
of the holders of all other securities and classes of capital stock of the
Fund), to elect such smallest number of additional directors, together with
the two directors that such holders are in any event entitled to elect. A
Voting Period shall commence:
(A) if at the close of business on any dividend payment date
accumulated dividends (whether or not earned or declared) on any
outstanding share of Preferred Stock, including MuniPreferred, equal to
at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of shares of Preferred Stock are
entitled under the 1940 Act to elect a majority of the directors of the
Fund.
Upon the termination of a Voting Period, the voting rights described in
this subparagraph (b)(i) shall cease, subject always, however, to the revesting
of such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).
(ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the
accrual of any right of the holders of shares of Preferred Stock to elect
additional directors as described in subparagraph (b)(i) of this Section 5,
the Fund shall notify the Auction Agent and the Auction Agent shall call a
special meeting of such holders, by mailing a notice of such special
meeting to such holders, such meeting to be held not less than 10 nor more
than 20 days after the date of mailing of such notice. If the Fund fails to
send such notice to the Auction Agent or if the Auction Agent does not call
such a special meeting, it may be called by any such holder on like notice.
The record date for determining the holders entitled to notice of and to
vote at such special meeting shall be the close of business on the fifth
Business Day preceding the day on which such notice is mailed. At any such
special meeting and at each meeting of holders of shares of Preferred Stock
held during a Voting Period at which directors are to be elected, such
holders, voting together as a class (to the exclusion of the holders of all
other securities and classes of capital stock of the Fund), shall be
entitled to elect the number of directors prescribed in subparagraph (b)(i)
of this Section 5 on a one-vote-per-share basis.
(iii) TERMS OF OFFICE OF EXISTING DIRECTORS. The terms of office of
all persons who are directors of the Fund at the time of a special meeting
of Holders and holders of other Preferred Stock to elect directors shall
continue, notwithstanding the election at such meeting by the Holders and
such other holders of the number of directors that they are entitled to
elect, and the persons so elected by the Holders and such other holders,
together with the two incumbent directors elected by the Holders and such
other holders of Preferred Stock and the remaining incumbent directors
elected by the holders of the Common Stock and Preferred Stock, shall
constitute the duly elected directors of the Fund.
(iv) TERMS OF OFFICE OF CERTAIN DIRECTORS TO TERMINATE UPON
TERMINATION OF VOTING PERIOD. Simultaneously with the termination of a
Voting Period, the terms of office of the additional directors elected by
the Holders and holders of other Preferred Stock pursuant to subparagraph
(b)(i) of this Section 5 shall terminate, the remaining directors shall
constitute the directors of the Fund and the voting rights of the Holders
and such other holders to elect additional directors pursuant to
subparagraph (b)(i)
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of this Section 5 shall cease, subject to the provisions of the last
sentence of subparagraph (b)(i) of this Section 5.
(c) HOLDERS OF MUNIPREFERRED TO VOTE ON CERTAIN OTHER MATTERS.
(i) INCREASES IN CAPITALIZATION. So long as any shares of
MuniPreferred are outstanding, the Fund shall not, without the affirmative
vote or consent of the Holders of at least a majority of the shares of
MuniPreferred outstanding at the time, in person or by proxy, either in
writing or at a meeting, voting as a separate class: (a) authorize, create
or issue any class or series of stock ranking prior to or on a parity with
shares of MuniPreferred with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund, or authorize, create or issue additional shares of any
series of MuniPreferred (except that, notwithstanding the foregoing, but
subject to the provisions of paragraph (c) of Section 10 of this Part I,
the Board of Directors, without the vote or consent of the Holders of
MuniPreferred, may from time to time authorize and create, and the Fund may
from time to time issue, additional shares of any series of MuniPreferred
or classes or series of Preferred Stock ranking on a parity with shares of
MuniPreferred with respect to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Fund; provided, however, that if Moody's or S&P is not then rating the
shares of MuniPreferred, the aggregate liquidation preference of all
Preferred Stock of the Fund outstanding after any such issuance, exclusive
of accumulated and unpaid dividends, may not exceed the amount set forth in
Section 10 of Appendix A hereto) or (b) amend, alter or repeal the
provisions of the Articles, including this Statement, whether by merger,
consolidation or otherwise, so as to affect any preference, right or power
of such shares of MuniPreferred or the Holders thereof; provided, however,
that (i) none of the actions permitted by the exception to (a) above will
be deemed to affect such preferences, rights or powers, (ii) a division of
a share of MuniPreferred will be deemed to affect such preferences, rights
or powers only if the terms of such division adversely affect the Holders
of shares of MuniPreferred and (iii) the authorization, creation and
issuance of classes or series of stock ranking junior to shares of
MuniPreferred with respect to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Fund, will be deemed to affect such preferences, rights or powers only if
Moody's or S&P is then rating shares of MuniPreferred and such issuance
would, at the time thereof, cause the Fund not to satisfy the 1940 Act
MuniPreferred Asset Coverage or the MuniPreferred Basic Maintenance Amount.
So long as any shares of MuniPreferred are outstanding, the Fund shall not,
without the affirmative vote or consent of the Holders of at least 66 2/3%
of the shares of MuniPreferred outstanding at the time, in person or by
proxy, either in writing or at a meeting, voting as a separate class, file
a voluntary application for relief under Federal bankruptcy law or any
similar application under state law for so long as the Fund is solvent and
does not foresee becoming insolvent. To the extent that shares of
MuniPreferred constitute a series of stock under Minnesota law and to the
extent the Holders of such shares are empowered under the Minnesota
Business Corporation Act to vote as a class on the actions set forth above
in this subparagraph (c)(i), the Fund shall not approve any such action
without the affirmative vote or consent of the Holders of at least a
majority of the shares of MuniPreferred of such series outstanding at the
time, in person or by proxy, either in writing or at a meeting (voting as a
separate class).
(ii) 1940 ACT MATTERS. Unless a higher percentage is provided for in
the Articles, (A) the affirmative vote of the Holders of at least a
majority of the shares of Preferred Stock, including MuniPreferred,
outstanding at the time, voting as a separate class, shall be required to
approve any conversion of the Fund from a closed-end to an open-end
investment company and (B) the affirmative vote of the Holders of a
"majority of the outstanding shares of Preferred Stock," including
MuniPreferred, voting as a separate class, shall be required to approve any
plan of reorganization (as such term is used in the 1940 Act) adversely
affecting such shares. The affirmative vote of the Holders of a "majority
of the outstanding shares of Preferred Stock," including MuniPreferred,
voting as a separate class, shall be required to approve any action not
described in the first sentence of this Section 5(c)(ii) requiring a vote
of security holders of the Fund under Section 13(a) of the 1940 Act. For
purposes of the foregoing, "majority of the outstanding shares of Preferred
Stock" means (i) 67% or more of such shares present at a meeting, if the
Holders of more than 50% of such shares are present or represented by
proxy, or
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(ii) more than 50% of such shares, whichever is less. In the event a vote
of Holders of MuniPreferred is required pursuant to the provisions of
Section 13(a) of the 1940 Act, the Fund shall, not later than ten Business
Days prior to the date on which such vote is to be taken, notify Moody's
(if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P is
then rating the shares of MuniPreferred) that such vote is to be taken and
the nature of the action with respect to which such vote is to be taken.
The Fund shall, not later than ten Business Days after the date on which
such vote is taken, notify Moody's (if Moody's is then rating the shares of
MuniPreferred) of the results of such vote.
(d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board
of Directors, without the vote or consent of the shareholders of the Fund, may
from time to time amend, alter or repeal any or all of the definitions of the
terms listed below, or any provision of this Statement viewed by Moody's or S&P
as a predicate for any such definition, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights or powers of shares
of MuniPreferred or the Holders thereof; provided, however, that the Board of
Directors receives written confirmation from Moody's (such confirmation being
required to be obtained only in the event Moody's is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Deposit Securities, Discounted Value, Receivables for
Municipal Obligations Sold, Issue Type Category and Other Issues as such terms
apply to S&P Eligible Assets and (y) S&P Discount Factor, S&P Eligible Asset,
S&P Exposure Period and S&P Volatility Factor) and S&P (such confirmation being
required to be obtained only in the event S&P is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Discounted Value, Receivables for Municipal Obligations Sold,
Issue Type Category and Other Issues as such terms apply to Moody's Eligible
Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's
Exposure Period and Moody's Volatility Factor) that any such amendment,
alteration or repeal would not impair the ratings then assigned by Moody's or
S&P, as the case may be, to shares of MuniPreferred:
<TABLE>
<S> <C>
Deposit Securities Moody's Volatility Factor
Discounted Value 1940 Act Cure Date
Escrowed Bonds 1940 Act MuniPreferred Asset Coverage
Issue Type Category Other Issues
Market Value Quarterly Valuation Date
Maximum Potential Gross-up Payment Liability Receivables for Municipal Obligations Sold
MuniPreferred Basic Maintenance Amount S&P Discount Factor
MuniPreferred Basic Maintenance Cure Date S&P Eligible Asset
MuniPreferred Basic Maintenance Report S&P Exposure Period
Moody's Discount Factor S&P Volatility Factor
Moody's Eligible Asset Valuation Date
Moody's Exposure Period Volatility Factor
</TABLE>
(e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless otherwise
required by law, the Holders of shares of MuniPreferred shall not have any
relative rights or preferences or other special rights other than those
specifically set forth herein.
(f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of shares of
MuniPreferred shall have no preemptive rights or rights to cumulative voting.
(g) VOTING FOR DIRECTORS SOLE REMEDY FOR FUND'S FAILURE TO PAY
DIVIDENDS. In the event that the Fund fails to pay any dividends on the shares
of MuniPreferred, the exclusive remedy of the Holders shall be the right to vote
for directors pursuant to the provisions of this Section 5.
(h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights of the
Holders to vote on any matter, whether such right is created by this Statement,
by the other provisions of the Articles, by statute or otherwise, no Holder
shall be entitled to vote any share of MuniPreferred and no share of
MuniPreferred shall be deemed to be "outstanding" for the purpose of voting or
determining the number of shares required to constitute a quorum if, prior to or
concurrently with the time of determination of shares entitled to vote or shares
deemed outstanding for quorum purposes, as the case may be, the requisite Notice
of Redemption with
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respect to such shares shall have been mailed as provided in paragraph (c) of
Section 11 of this Part I and the Redemption Price for the redemption of such
shares shall have been deposited in trust with the Auction Agent for that
purpose. No share of MuniPreferred held by the Fund or any affiliate of the Fund
(except for shares held by a Broker-Dealer that is an affiliate of the Fund for
the account of its customers) shall have any voting rights or be deemed to be
outstanding for voting or other purposes.
6. 1940 ACT MUNIPREFERRED ASSET COVERAGE.
The Fund shall maintain, as of the last Business Day of each month in which
any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred Asset
Coverage.
7. MUNIPREFERRED BASIC MAINTENANCE AMOUNT.
(a) So long as shares of MuniPreferred are outstanding, the Fund shall
maintain, on each Valuation Date, and shall verify to its satisfaction that it
is maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the MuniPreferred Basic
Maintenance Amount (if S&P is then rating the shares of MuniPreferred) and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the MuniPreferred Basic Maintenance Amount (if Moody's is then rating the
shares of MuniPreferred).
(b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Fund fails to satisfy the MuniPreferred
Basic Maintenance Amount, and on the third Business Day after the MuniPreferred
Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred),
Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction
Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) a
MuniPreferred Basic Maintenance Report as of the date of such failure or such
MuniPreferred Basic Maintenance Cure Date, as the case may be, which will be
deemed to have been delivered to the Auction Agent if the Auction Agent receives
a copy or telecopy, telex or other electronic transcription thereof and on the
same day the Fund mails to the Auction Agent for delivery on the next Business
Day the full MuniPreferred Basic Maintenance Report. The Fund shall also deliver
a MuniPreferred Basic Maintenance Report to (i) the Auction Agent (if either
Moody's or S&P is then rating the shares of MuniPreferred) as of (A) the
fifteenth day of each month (or, if such day is not a Business Day, the next
succeeding Business Day) and (B) the last Business Day of each month, (ii)
Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P
is then rating the shares of MuniPreferred) as of any Quarterly Valuation Date,
in each case on or before the third Business Day after such day, and (iii) S&P,
if and when requested for any Valuation Date, on or before the third Business
Day after such request. A failure by the Fund to deliver a MuniPreferred Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be
delivery of a MuniPreferred Basic Maintenance Report indicating the Discounted
Value for all assets of the Fund is less than the MuniPreferred Basic
Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a MuniPreferred
Basic Maintenance Report in accordance with paragraph (b) of this Section 7
relating to a Quarterly Valuation Date, the Fund shall cause the Independent
Accountant to confirm in writing to S&P (if S&P is then rating the shares of
MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred)
and the Auction Agent (if either S&P or Moody's is then rating the shares of
MuniPreferred) (i) the mathematical accuracy of the calculations reflected in
such Report (and in any other MuniPreferred Basic Maintenance Report, randomly
selected by the Independent Accountant, that was delivered by the Fund during
the quarter ending on such Quarterly Valuation Date) and (ii) that, in such
Report (and in such randomly selected Report), the Fund determined in accordance
with this Statement whether the Fund had, at such Quarterly Valuation Date (and
at the Valuation Date addressed in such randomly-selected Report), S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) of an aggregate
Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount
and Moody's Eligible Assets (if Moody's is then rating the shares of
MuniPreferred) of an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount (such confirmation being herein called
the "Accountant's Confirmation").
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(d) Within ten Business Days after the date of delivery of a MuniPreferred
Basic Maintenance Report in accordance with paragraph (b) of this Section 7
relating to any Valuation Date on which the Fund failed to satisfy the
MuniPreferred Basic Maintenance Amount, and relating to the MuniPreferred Basic
Maintenance Cure Date with respect to such failure to satisfy the MuniPreferred
Basic Maintenance Amount, the Fund shall cause the Independent Accountant to
provide to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if
Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if
either S&P or Moody's is then rating the shares of MuniPreferred) an
Accountant's Confirmation as to such MuniPreferred Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to paragraph (c) or
(d) of this Section 7 shows that an error was made in the MuniPreferred Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation was required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets (if S&P is then
rating the shares of MuniPreferred) or Moody's Eligible Assets (if Moody's is
then rating the shares of MuniPreferred), as the case may be, of the Fund was
determined by the Independent Accountant, the calculation or determination made
by such Independent Accountant shall be final and conclusive and shall be
binding on the Fund, and the Fund shall accordingly amend and deliver the
MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating the shares
of MuniPreferred), Moody's (if Moody's is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating
the shares of MuniPreferred) promptly following receipt by the Fund of such
Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of any shares of MuniPreferred, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred)
and Moody's (if Moody's is then rating the shares of MuniPreferred) a
MuniPreferred Basic Maintenance Report as of the close of business on such Date
of Original Issue. Within five Business Days of such Date of Original Issue, the
Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P
is then rating the shares of MuniPreferred) (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the Discounted Value of S&P
Eligible Assets reflected thereon equals or exceeds the MuniPreferred Basic
Maintenance Amount reflected thereon.
(g) On or before 5:00 p.m., New York City time, on the third Business Day
after either (i) the Fund shall have redeemed Common Stock or (ii) the ratio of
the Discounted Value of S&P Eligible Assets or the Discounted Value of Moody's
Eligible Assets to the MuniPreferred Basic Maintenance Amount is less than or
equal to 105%, the Fund shall complete and deliver to S&P (if S&P is then rating
the shares of MuniPreferred) or Moody's (if Moody's is then rating the shares of
MuniPreferred), as the case may be, a MuniPreferred Basic Maintenance Report as
of the date of either such event.
8. [RESERVED]
9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) DIVIDENDS ON PREFERRED STOCK OTHER THAN MUNIPREFERRED. Except as set
forth in the next sentence, no dividends shall be declared or paid or set apart
for payment on the shares of any class or series of stock ranking, as to the
payment of dividends, on a parity with shares of MuniPreferred for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid on the shares of each series of MuniPreferred through its most recent
Dividend Payment Date. When dividends are not paid in full upon the shares of
each series of MuniPreferred through its most recent Dividend Payment Date or
upon the shares of any other class or series of stock ranking on a parity as to
the payment of dividends with shares of MuniPreferred through their most recent
respective dividend payment dates, all dividends declared upon shares of
MuniPreferred and any other such class or series of stock ranking on a parity as
to the payment of dividends with shares of MuniPreferred shall be declared pro
rata so that the amount of dividends declared per share on shares of
MuniPreferred and such other class or series of stock shall in all cases bear to
each other the same ratio that accumulated dividends per share on the shares of
MuniPreferred and such other class or series of stock bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
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MuniPreferred shall be based on the Applicable Rate for such share for the
Dividend Periods during which dividends were not paid in full).
(b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON STOCK UNDER
THE 1940 ACT. The Board of Directors shall not declare any dividend (except a
dividend payable in shares of Common Stock), or declare any other distribution,
upon shares of Common Stock, or purchase shares of Common Stock, unless in every
such case the shares of Preferred Stock have, at the time of any such
declaration or purchase, an asset coverage (as defined in and determined
pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may
in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common stock) after
deducting the amount of such dividend, distribution or purchase price, as the
case may be.
(c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so long as
any share of MuniPreferred is outstanding, and except as set forth in paragraph
(a) of this Section 9 and paragraph (c) of Section 12 of this Part I, (A) the
Fund shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, Common Stock or other
stock, if any, ranking junior to the shares of MuniPreferred as to the payment
of dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of the Common Stock or any other stock of the Fund
ranking junior to or on a parity with the shares of MuniPreferred as to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up, or call for redemption, redeem, purchase or otherwise acquire for
consideration any shares of Common Stock or any other such junior stock (except
by conversion into or exchange for stock of the Fund ranking junior to the
shares of MuniPreferred as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), or any such parity stock
(except by conversion into or exchange for stock of the Fund ranking junior to
or on a parity with MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless (i)
full cumulative dividends on shares of each series of MuniPreferred through its
most recently ended Dividend Period shall have been paid or shall have been
declared and sufficient funds for the payment thereof deposited with the Auction
Agent and (ii) the Fund has redeemed the full number of shares of MuniPreferred
required to be redeemed by any provision for mandatory redemption pertaining
thereto, and (B) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to shares of MuniPreferred
as to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of Common Stock or any other stock of the
Fund ranking junior to shares of MuniPreferred as to the payment of dividends or
the distribution of assets upon dissolution, liquidation or winding up, or call
for redemption, redeem, purchase or otherwise acquire for consideration any
shares of Common Stock or any other such junior stock (except by conversion into
or exchange for stock of the Fund ranking junior to shares of MuniPreferred as
to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless immediately after such transaction the
Discounted Value of Moody's Eligible Assets (if Moody's is then rating the
shares of MuniPreferred) and S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) would each at least equal the MuniPreferred Basic
Maintenance Amount.
10. RATING AGENCY RESTRICTIONS.
For so long as any shares of MuniPreferred are outstanding and Moody's or
S&P, or both, are rating such shares, the Fund will not, unless it has received
written confirmation from Moody's or S&P, or both, as appropriate, that any such
action would not impair the ratings then assigned by such rating agency to such
shares, engage in any one or more of the following transactions:
(a) buy or sell futures or write put or call options;
(b) borrow money, except that the Fund may, without obtaining the written
confirmation described above, borrow money for the purpose of clearing
securities transactions if (i) the MuniPreferred Basic
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Maintenance Amount would continue to be satisfied after giving effect to such
borrowing and (ii) such borrowing (A) is privately arranged with a bank or other
person and is evidenced by a promissory note or other evidence of indebtedness
that is not intended to be publicly distributed or (B) is for "temporary
purposes," is evidenced by a promissory note or other evidence of indebtedness
and is in an amount not exceeding 5 per centum of the value of the total assets
of the Fund at the time of the borrowing; for purposes of the foregoing,
"temporary purpose" means that the borrowing is to be repaid within sixty days
and is not to be extended or renewed;
(c) issue additional shares of any series of MuniPreferred or any class or
series of stock ranking prior to or on a parity with shares of MuniPreferred
with respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Fund, or reissue any shares of
MuniPreferred previously purchased or redeemed by the Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred to in the
definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. REDEMPTION.
(a) OPTIONAL REDEMPTION.
(i) Subject to the provisions of subparagraph (v) of this paragraph
(a), shares of MuniPreferred of any series may be redeemed, at the option
of the Fund, as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for shares of such series,
out of funds legally available therefor, at a redemption price per share
equal to the sum of $25,000 plus an amount equal to accumulated but unpaid
dividends thereon (whether or not earned or declared) to (but not
including) the date fixed for redemption; provided, however, that (1)
shares of a series of MuniPreferred may not be redeemed in part if after
such partial redemption fewer than 500 shares of such series remain
outstanding; (2) unless otherwise provided in Section 11 of Appendix A
hereto, shares of a series of MuniPreferred are redeemable by the Fund
during the Initial Rate Period thereof only on the second Business Day next
preceding the last Dividend Payment Date for such Initial Rate Period; and
(3) subject to subparagraph (ii) of this paragraph (a), the Notice of
Special Rate Period relating to a Special Rate Period of shares of a series
of MuniPreferred, as delivered to the Auction Agent and filed with the
Secretary of the Fund, may provide that shares of such series shall not be
redeemable during the whole or any part of such Special Rate Period (except
as provided in subparagraph (iv) of this paragraph (a)) or shall be
redeemable during the whole or any part of such Special Rate Period only
upon payment of such redemption premium or premiums as shall be specified
therein ("Special Redemption Provisions").
(ii) A Notice of Special Rate Period relating to shares of a series of
MuniPreferred for a Special Rate Period thereof may contain Special
Redemption Provisions only if the Fund's Board of Directors, after
consultation with the Broker-Dealer or Broker-Dealers for such Special Rate
Period of shares of such series, determines that such Special Redemption
Provisions are in the best interest of the Fund.
(iii) If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to subparagraph (i) of this
paragraph (a), the number of shares of such series to be redeemed shall be
determined by the Board of Directors, and such shares shall be redeemed pro
rata from the Holders of shares of such series in proportion to the number
of shares of such series held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of this paragraph
(a), shares of any series of MuniPreferred may be redeemed, at the option
of the Fund, as a whole but not in part, out of funds legally available
therefor, on the first day following any Dividend Period thereof included
in a Rate Period consisting of more than 364 Rate Period Days if, on the
date of determination of the Applicable Rate for
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shares of such series for such Rate Period, such Applicable Rate equalled
or exceeded on such date of determination the Treasury Note Rate for such
Rate Period, at a redemption price per share equal to the sum of $25,000
plus an amount equal to accumulated but unpaid dividends thereon (whether
or not earned or declared) to (but not including) the date fixed for
redemption.
(v) The Fund may not on any date mail a Notice of Redemption pursuant
to paragraph (c) of this Section 11 in respect of a redemption contemplated
to be effected pursuant to this paragraph (a) unless on such date (a) the
Fund has available Deposit Securities with maturity or tender dates not
later than the day preceding the applicable redemption date and having a
value not less than the amount (including any applicable premium) due to
Holders of shares of MuniPreferred by reason of the redemption of such
shares on such redemption date and (b) the Discounted Value of Moody's
Eligible Assets (if Moody's is then rating the shares of MuniPreferred) and
the Discounted Value of S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) each at least equal the MuniPreferred Basic
Maintenance Amount, and would at least equal the MuniPreferred Basic
Maintenance Amount immediately subsequent to such redemption if such
redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of
Moody's Eligible Assets at least equals the MuniPreferred Basic Maintenance
Amount, the Moody's Discount Factors applicable to Moody's Eligible Assets
shall be determined by reference to the first Exposure Period longer than
the Exposure Period then applicable to the Fund, as described in the
definition of Moody's Discount Factor herein.
(b) MANDATORY REDEMPTION. The Fund shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Directors for redemption, certain of the shares of MuniPreferred, if
the Fund fails to have either Moody's Eligible Assets with a Discounted Value or
S&P Eligible Assets with a Discounted Value greater than or equal to the
MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act
MuniPreferred Asset Coverage, in accordance with the requirements of the rating
agency or agencies then rating the shares of MuniPreferred, and such failure is
not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be. The number of shares of MuniPreferred to be
redeemed shall be equal to the lesser of (i) the minimum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, would have
resulted in the Fund's having both Moody's Eligible Assets with a Discounted
Value and S&P Eligible Assets with a Discounted Value greater than or equal to
the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro
rata among shares of MuniPreferred and other Preferred Stock (and, then, pro
rata among each series of MuniPreferred) subject to redemption or retirement.
The Fund shall effect such redemption on the date fixed by the Fund therefor,
which date shall not be earlier than 20 days nor later than 40 days after such
Cure Date, except that if the Fund does not have funds legally available for the
redemption of all of the required number of shares of MuniPreferred and shares
of other Preferred Stock which are subject to redemption or retirement or the
Fund otherwise is unable to effect such redemption on or prior to 40 days after
such Cure Date, the Fund shall redeem those shares of MuniPreferred and shares
of other Preferred Stock which it was unable to redeem on the earliest
practicable date on which it is able to effect such redemption. If fewer than
all of the outstanding shares of a series of MuniPreferred are to be redeemed
pursuant to this paragraph (b), the number of shares of such series to be
redeemed shall be redeemed pro rata from the Holders of shares of such series in
proportion to the number of shares of such series held by such Holders.
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(c) NOTICE OF REDEMPTION. If the Fund shall determine or be required to
redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of
this Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first class mail, postage prepaid, to each Holder of the shares of
such series to be redeemed, at such Holder's address as the same appears on the
stock books of the Fund on the record date established by the Board of
Directors. Such Notice of Redemption shall be so mailed not less than 20 nor
more than 45 days prior to the date fixed for redemption. Each such Notice of
Redemption shall state: (i) the redemption date; (ii) the number of shares of
MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for
shares of such series; (iv) the Redemption Price; (v) the place or places where
the certificate(s) for such shares (properly endorsed or assigned for transfer,
if the Board of Directors shall so require and the Notice of Redemption shall so
state) are to be surrendered for payment of the Redemption Price; (vi) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date; and (vii) the provisions of this Section 11 under which such
redemption is made. If fewer than all shares of a series of MuniPreferred held
by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder
shall also specify the number of shares of such series to be redeemed from such
Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section
11 that such redemption is subject to one or more conditions precedent and that
the Fund shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
(e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor, such redemption shall be
made as soon as practicable to the extent such funds become available. Failure
to redeem shares of MuniPreferred shall be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the Fund shall have
failed, for any reason whatsoever, to deposit in trust with the Auction Agent
the Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed; provided, however, that the foregoing shall not
apply in the case of the Fund's failure to deposit in trust with the Auction
Agent the Redemption Price with respect to any shares where (1) the Notice of
Redemption relating to such redemption provided that such redemption was subject
to one or more conditions precedent and (2) any such condition precedent shall
not have been satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding the fact that the Fund may not have
redeemed shares of MuniPreferred for which a Notice of Redemption has been
mailed, dividends may be declared and paid on shares of MuniPreferred and shall
include those shares of MuniPreferred for which a Notice of Redemption has been
mailed.
(f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY FUND. All moneys
paid to the Auction Agent for payment of the Redemption Price of shares of
MuniPreferred called for redemption shall be held in trust by the Auction Agent
for the benefit of Holders of shares so to be redeemed.
(g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER
OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares shall
no longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance
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with the Notice of Redemption of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors shall so
require and the Notice of Redemption shall so state), the Redemption Price shall
be paid by the Auction Agent to the Holders of shares of MuniPreferred subject
to redemption. In the case that fewer than all of the shares represented by any
such certificate are redeemed, a new certificate shall be issued, representing
the unredeemed shares, without cost to the Holder thereof. The Fund shall be
entitled to receive from the Auction Agent, promptly after the date fixed for
redemption, any cash deposited with the Auction Agent in excess of (i) the
aggregate Redemption Price of the shares of MuniPreferred called for redemption
on such date and (ii) all other amounts to which Holders of shares of
MuniPreferred called for redemption may be entitled. Any funds so deposited that
are unclaimed at the end of 90 days from such redemption date shall, to the
extent permitted by law, be repaid to the Fund, after which time the Holders of
shares of MuniPreferred so called for redemption may look only to the Fund for
payment of the Redemption Price and all other amounts to which they may be
entitled. The Fund shall be entitled to receive, from time to time after the
date fixed for redemption, any interest on the funds so deposited.
(h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption pursuant to
this Section 11, the Fund shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the 1940 Act
and Minnesota law, but shall effect no redemption except in accordance with the
1940 Act and Minnesota law.
(i) ONLY WHOLE SHARES OF MUNIPREFERRED MAY BE REDEEMED. In the case of any
redemption pursuant to this Section 11, only whole shares of MuniPreferred shall
be redeemed, and in the event that any provision of the Articles would require
redemption of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.
12. LIQUIDATION RIGHTS.
(a) RANKING. The shares of a series of MuniPreferred shall rank on a parity
with each other, with shares of any other series of MuniPreferred and with
shares of any other series of Preferred Stock as to the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Fund.
(b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of shares of MuniPreferred then outstanding shall be entitled to receive
and to be paid out of the assets of the Fund available for distribution to its
shareholders, before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Fund ranking junior to the
MuniPreferred upon dissolution, liquidation or winding up, an amount equal to
the Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same-day funds,
together with any payments required to be made pursuant to Section 3 of this
Part I in connection with the liquidation of the Fund. After the payment to the
Holders of the shares of MuniPreferred of the full preferential amounts provided
for in this paragraph (b), the Holders of MuniPreferred as such shall have no
right or claim to any of the remaining assets of the Fund.
(c) PRO RATA DISTRIBUTIONS. In the event the assets of the Fund available
for distribution to the Holders of shares of MuniPreferred upon any dissolution,
liquidation, or winding up of the affairs of the Fund, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled pursuant to paragraph (b) of this Section 12, no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the shares of MuniPreferred with
respect to the distribution of assets upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) RIGHTS OF JUNIOR STOCK. Subject to the rights of the holders of shares
of any series or class or classes of stock ranking on a parity with the shares
of MuniPreferred with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund, after payment shall have
been made in full to the Holders of the shares of MuniPreferred as provided in
paragraph (b) of this Section 12, but not prior
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thereto, any other series or class or classes of stock ranking junior to the
shares of MuniPreferred with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund shall, subject
to the respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the Holders
of the shares of MuniPreferred shall not be entitled to share therein.
(e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of all or
substantially all the property or business of the Fund, nor the merger or
consolidation of the Fund into or with any other corporation nor the merger or
consolidation of any other corporation into or with the Fund shall be a
dissolution, liquidation or winding up, whether voluntary or involuntary, for
the purposes of this Section 12.
13. MISCELLANEOUS.
(a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject to the
provisions of paragraph (c) of Section 10 of this Part I, the Board of Directors
may, by resolution duly adopted, without shareholder approval (except as
otherwise provided by this Statement or required by applicable law), amend
Appendix A hereto to (1) reflect any amendments hereto which the Board of
Directors is entitled to adopt pursuant to the terms of this Statement without
shareholder approval and (2) add additional series of MuniPreferred or
additional shares of a series of MuniPreferred (and terms relating thereto) to
the series and shares of MuniPreferred theretofore described thereon. Each such
additional series and all such additional shares shall be governed by the terms
of this Statement.
(b) APPENDIX A INCORPORATED BY REFERENCE. Appendix A hereto is incorporated
in and made a part of this Statement by reference thereto.
(c) NO FRACTIONAL SHARES. No fractional shares of MuniPreferred shall be
issued.
(d) STATUS OF SHARES OF MUNIPREFERRED REDEEMED, EXCHANGED OR OTHERWISE
ACQUIRED BY THE FUND. Shares of MuniPreferred which are redeemed, exchanged or
otherwise acquired by the Fund shall return to the status of authorized and
unissued shares of Preferred Stock without designation as to series. Upon the
redemption, exchange or other acquisition by the Fund of all outstanding shares
of a series of MuniPreferred, all provisions of the Articles relating to such
series (including, without limitation, all provisions of this Statement relating
to such series) shall cease to be of further effect and shall cease to be part
of the Articles. Upon the occurrence of any such event, the Board of Directors
shall have the power, pursuant to Minnesota Statutes Section 302A.135,
Subdivision 5 or any successor provision and without shareholder action, to
cause restated articles of incorporation of the Fund or other appropriate
documents to be prepared and filed with the Secretary of State of the State of
Minnesota which reflect such removal from the Articles of all such provisions
relating to such series or, if appropriate, the cancellation of this Statement,
or both.
(e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by applicable
law, the Board of Directors may interpret or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Statement with respect to any series of MuniPreferred
prior to the issuance of shares of such series.
(f) HEADINGS NOT DETERMINATIVE. The headings contained in this Statement
are for convenience of reference only and shall not affect the meaning or
interpretation of this Statement.
(g) NOTICES. All notices or communications, unless otherwise specified in
the By-Laws of the Fund or this Statement, shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid.
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PART II.
1. ORDERS.
(a) Prior to the Submission Deadline on each Auction Date for shares of a
series of MuniPreferred:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner desires to continue
to hold without regard to the Applicable Rate for shares of such series
for the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell if
the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be less than the rate per
annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for shares of such series for the
next succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive
Auction in a commercially reasonable manner, contact Potential Beneficial
Owners (by telephone or otherwise), including Persons that are not
Beneficial Owners, on such lists to determine the number of shares, if any,
of such series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall not be less than the
rate per annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, of information referred to in clause (i)(A), (i)(B), (i)(C) or
(ii) of this paragraph (a) is hereinafter referred to as an "Order" and
collectively as "Orders" and each Beneficial Owner and each Potential Beneficial
Owner placing an Order with a Broker-Dealer, and such Broker-Dealer placing an
Order with the Auction Agent, is hereinafter referred to as a "Bidder" and
collectively as "Bidders"; an Order containing the information referred to in
clause (i)(A) of this paragraph (a) is hereinafter referred to as a "Hold Order"
and collectively as "Hold Orders"; an Order containing the information referred
to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as
a "Bid" and collectively as "Bids"; and an Order containing the information
referred to in clause (i)(C) of this paragraph (a) is hereinafter referred to as
a "Sell Order" and collectively as "Sell Orders."
(b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of
a series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in
such Bid if the Applicable Rate for shares of such series determined on
such Auction Date shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such
series to be determined as set forth in clause (iv) of paragraph (a) of
Section 4 of this Part II if the Applicable Rate for shares of such
series determined on such Auction Date shall be equal to the rate
specified therein; or
(C) the number of Outstanding shares of such series specified in
such Bid if the rate specified therein shall be higher than the Maximum
Rate for shares of such series, or such number or a lesser number of
Outstanding shares of such series to be determined as set forth in
clause (iii) of paragraph (b) of Section 4 of this Part II if the rate
specified therein shall be higher than the
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Maximum Rate for shares of such series and Sufficient Clearing Bids for
shares of such series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of
shares of a series of MuniPreferred subject to an Auction on any Auction
Date shall constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in
such Sell Order; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (iii) of paragraph (b) of Section 4 of
this Part II if Sufficient Clearing Bids for shares of such series do
not exist;
provided, however, that a Broker-Dealer that is an Existing Holder with respect
to shares of a series of MuniPreferred shall not be liable to any Person for
failing to sell such shares pursuant to a Sell Order described in the proviso to
paragraph (c) of Section 2 of this Part II if (1) such shares were transferred
by the Beneficial Owner thereof without compliance by such Beneficial Owner or
its transferee Broker-Dealer (or other transferee person, if permitted by the
Fund) with the provisions of Section 7 of this Part II or (2) such Broker-Dealer
has informed the Auction Agent pursuant to the terms of its Broker-Dealer
Agreement that, according to such Broker-Dealer's records, such Broker-Dealer
believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
shares of a series of MuniPreferred subject to an Auction on any Auction
Date shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in
such Bid if the Applicable Rate for shares of such series determined on
such Auction Date shall be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (v) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series determined on
such Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred other than whole
shares shall be valid.
2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent prior
to the Submission Deadline on each Auction Date all Orders for shares of
MuniPreferred of a series subject to an Auction on such Auction Date obtained by
such Broker-Dealer, designating itself (unless otherwise permitted by the Fund)
as an Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares
of such series:
(A) the number of shares, if any, of such series subject to any
Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to any Bid
of such Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any
Sell Order of such Existing Holder; and
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(iv) to the extent such Bidder is a Potential Holder of shares of such
series, the rate and number of shares of such series specified in such
Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of
MuniPreferred of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding shares of
MuniPreferred of a series subject to an Auction held by such Existing Holder,
such Orders shall be considered valid in the following order of priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by such Existing Holder, and if the
number of shares of such series subject to such Hold Orders exceeds the
number of Outstanding shares of such series held by such Existing Holder,
the number of shares subject to each such Hold Order shall be reduced pro
rata to cover the number of Outstanding shares of such series held by such
Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent with
the same rate and the number of Outstanding shares of such series
subject to such Bids is greater than such excess, such Bids shall be
considered valid up to and including the amount of such excess, and the
number of shares of such series subject to each Bid with the same rate
shall be reduced pro rata to cover the number of shares of such series
equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of such series is submitted to the Auction
Agent with different rates, such Bids shall be considered valid in the
ascending order of their respective rates up to and including the amount
of such excess; and
(D) in any such event, the number, if any, of such Outstanding
shares of such series subject to any portion of Bids considered not
valid in whole or in part under this clause (ii) shall be treated as the
subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of such series shall be considered
valid up to and including the excess of the number of Outstanding shares of
such series held by such Existing Holder over the sum of shares of such
series subject to valid Hold Orders referred to in clause (i) above and
valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
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(f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.
3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND APPLICABLE
RATE.
(a) Not earlier than the Submission Deadline on each Auction Date for
shares of a series of MuniPreferred, the Auction Agent shall assemble all valid
Orders submitted or deemed submitted to it by the Broker-Dealers in respect of
shares of such series (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to individually as a "Submitted Hold
Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as
a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted
Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders")
and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over
the number of Outstanding shares of such series subject to Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
MuniPreferred" of such series);
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to
Submitted Bids of Potential Holders specifying one or more rates equal
to or lower than the Maximum Rate for shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to
Submitted Bids of Existing Holders specifying one or more rates higher
than the Maximum Rate for shares of such series; and
(C) the number of Outstanding shares of such series subject to
Submitted Sell Orders
(in the event such excess or such equality exists (other than
because the number of shares of such series in subclauses (B) and (C)
above is zero because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), such Submitted Bids in subclause (A)
above being hereinafter referred to collectively as "Sufficient Clearing
Bids" for shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
shares of such series) which if:
(A) (I) each such Submitted Bid of Existing Holders specifying such
lowest rate and (II) all other such Submitted Bids of Existing Holders
specifying lower rates were rejected, thus entitling such Existing
Holders to continue to hold the shares of such series that are subject
to such Submitted Bids; and
(B) (I) each such Submitted Bid of Potential Holders specifying
such lowest rate and (II) all other such Submitted Bids of Potential
Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such
series which, when added to the number of Outstanding shares of such
series to be purchased by such Potential Holders described in subclause
(B) above, would equal not less than the Available MuniPreferred of such
series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of
the Maximum Rate for shares of the series of MuniPreferred for which an Auction
is being held on the Auction Date and, based on such determination, the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that the
Applicable Rate for all shares of such series for the next succeeding Rate
Period thereof shall be equal to the Winning Bid Rate for shares of such
series so determined;
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(ii) if Sufficient Clearing Bids for shares of such series do not
exist (other than because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), that the Applicable Rate for all shares
of such series for the next succeeding Rate Period thereof shall be equal
to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to
Submitted Hold Orders, that the Applicable Rate for all shares of such
series for the next succeeding Rate Period thereof shall be as set forth in
Section 12 of Appendix A hereto.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF SHARES. Existing Holders shall continue to hold the shares of
MuniPreferred that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph (a) of Section 3 of this Part II, the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected by the
Auction Agent and the Auction Agent shall take such other action as set forth
below:
(a) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have been made, all Submitted Sell Orders with respect to shares of such series
shall be accepted and, subject to the provisions of paragraphs (d) and (e) of
this Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of MuniPreferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the shares of MuniPreferred subject to such Submitted Bid, unless
the number of Outstanding shares of MuniPreferred subject to all such
Submitted Bids shall be greater than the number of shares of MuniPreferred
("remaining shares") in the excess of the Available MuniPreferred of such
series over the number of shares of MuniPreferred subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in which event
such Submitted Bid of such Existing Holder shall be rejected in part, and
such Existing Holder shall be entitled to continue to hold shares of
MuniPreferred subject to such Submitted Bid, but only in an amount equal to
the number of shares of MuniPreferred of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred held by
such Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such series;
and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available MuniPreferred of such series over the number of
shares of MuniPreferred subject to Submitted Bids described in clauses (ii)
through (iv) of this paragraph (a) by a fraction, the numerator of which
shall be the number of Outstanding shares of MuniPreferred subject to such
Submitted Bid and the denominator of which shall be the aggregate number of
Outstanding shares of MuniPreferred subject to such Submitted Bids made by
all such Potential Holders that specified a rate equal to the Winning Bid
Rate for shares of such series.
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(b) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have not been made (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), subject to the provisions of
paragraph (d) of this Section 4, Submitted Orders for shares of such series
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids for shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of MuniPreferred subject to such
Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each
Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or
Submitted Sell Order to sell the shares of such series subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by multiplying the
number of shares of such series subject to Submitted Bids described in
clause (ii) of this paragraph (b) by a fraction, the numerator of which
shall be the number of Outstanding shares of such series held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted Sell
Orders.
(c) If all of the Outstanding shares of a series of MuniPreferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of
MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it
shall determine in its sole discretion, round up or down the number of shares of
MuniPreferred of such series to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date as a result of such procedures so that the
number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of paragraph
(a) of this Section 4, any Potential Holder would be entitled or required to
purchase less than a whole share of a series of MuniPreferred on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate shares of MuniPreferred of such series for purchase among
Potential Holders so that only whole shares of MuniPreferred of such series are
purchased on such Auction Date as a result of such procedures by any Potential
Holder, even if such allocation results in one or more Potential Holders not
purchasing shares of MuniPreferred of such series on such Auction Date.
(f) Based on the results of each Auction for shares of a series of
MuniPreferred, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such series
to be sold by Potential Holders and Existing Holders and, with respect to each
Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, shares of MuniPreferred of such series.
Notwithstanding any provision of the Auction Procedures or the Settlement
Procedures to the contrary, in the event an Existing Holder or Beneficial Owner
of shares of a series of MuniPreferred with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in whole
or in part, or submitted or is deemed to have submitted a Sell Order for such
shares that was accepted in whole or in part, fails to instruct its Agent Member
to deliver such shares against payment therefor, partial deliveries of shares of
MuniPreferred that have been made in respect of
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Potential Holders' or Potential Beneficial Owners' Submitted Bids for shares of
such series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver shares of MuniPreferred of any
series or to pay for shares of MuniPreferred of any series sold or purchased
pursuant to the Auction Procedures or otherwise.
5. NOTIFICATION OF ALLOCATIONS. Whenever the Fund intends to include any net
capital gains or other income taxable for Federal income tax purposes in any
dividend on shares of MuniPreferred, the Fund shall, in the case of a Minimum
Rate Period or a Special Rate Period of 28 Rate Period Days or fewer, and may,
in the case of any other Special Rate Period, notify the Auction Agent of the
amount to be so included not later than the Dividend Payment Date next preceding
the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Fund, it
will be required in turn to notify each Broker-Dealer, who, on or prior to such
Auction Date, in accordance with its Broker-Dealer Agreement, will be required
to notify its Beneficial Owners and Potential Beneficial Owners of shares of
MuniPreferred believed by it to be interested in submitting an Order in the
Auction to be held on such Auction Date.
6. AUCTION AGENT. For so long as any shares of MuniPreferred are outstanding,
the Auction Agent, duly appointed by the Fund to so act, shall be in each case a
commercial bank, trust company or other financial institution independent of the
Fund and its affiliates (which however, may engage or have engaged in business
transactions with the Fund or its affiliates) and at no time shall the Fund or
any of its affiliates act as the Auction Agent in connection with the Auction
Procedures. If the Auction Agent resigns or for any reason its appointment is
terminated during any period that any shares of MuniPreferred are outstanding,
the Board of Directors shall use its best efforts promptly thereafter to appoint
another qualified commercial bank, trust company or financial institution to act
as the Auction Agent. The Auction Agent's registry of Existing Holders of shares
of a series of MuniPreferred shall be conclusive and binding on the
Broker-Dealers. A Broker-Dealer may inquire of the Auction Agent between 3:00
p.m. on the Business Day preceding an Auction for shares of a series of
MuniPreferred and 9:30 a.m. on the Auction Date for such Auction to ascertain
the number of shares of such series in respect of which the Auction Agent has
determined such Broker-Dealer to be an Existing Holder. If such Broker-Dealer
believes it is the Existing Holder of fewer shares of such series than specified
by the Auction Agent in response to such Broker-Dealer's inquiry, such
Broker-Dealer may so inform the Auction Agent of that belief. Such Broker-Dealer
shall not, in its capacity as Existing Holder of shares of such series, submit
Orders in such Auction in respect of shares of such series covering in the
aggregate more than the number of shares of such series specified by the Auction
Agent in response to such Broker-Dealer's inquiry.
7. TRANSFER OF SHARES OF MUNIPREFERRED. Unless otherwise permitted by the Fund,
a Beneficial Owner or an Existing Holder may sell, transfer or otherwise dispose
of shares of MuniPreferred only in whole shares and only pursuant to a Bid or
Sell Order placed with the Auction Agent in accordance with the procedures
described in this Part II or to a Broker-Dealer; provided, however, that (a) a
sale, transfer or other disposition of shares of MuniPreferred from a customer
of a Broker-Dealer who is listed on the records of that Broker-Dealer as the
holder of such shares to that Broker-Dealer or another customer of that
Broker-Dealer shall not be deemed to be a sale, transfer or other disposition
for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder
of the shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers other than pursuant
to Auctions, the Broker-Dealer (or other Person, if permitted by the Fund) to
whom such transfer is made shall advise the Auction Agent of such transfer.
8. GLOBAL CERTIFICATE. Prior to the commencement of a Voting Period, (i) all of
the shares of a series of MuniPreferred outstanding from time to time shall be
represented by one global certificate registered in the
35
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<PAGE> 73
name of the Securities Depository or its nominee and (ii) no registration of
transfer of shares of a series of MuniPreferred shall be made on the books of
the Fund to any Person other than the Securities Depository or its nominee. The
foregoing restriction on registration of transfer shall be conspicuously noted
on the face or back of the certificates of MuniPreferred in such a manner as to
comply with the requirements of Minnesota Statute Section 302A.429, Subd. 2, and
Section 8-204 of the Uniform Commercial Code as in effect in the State of
Minnesota, or any successor provisions.
IN WITNESS WHEREOF, NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC., has caused
these presents to be signed in its name and on its behalf by its Vice President
and attested by its Assistant Secretary, and the said officers of the Fund
further acknowledged said instrument to be the corporate act of the Fund, and
stated under penalty of perjury that to the best of their knowledge, information
and belief the matters and facts therein set forth with respect to approval are
true in all material respects, all on August 11, 1997.
NUVEEN PREMIUM INCOME MUNICIPAL FUND,
INC.
BY:
----------------------------------
Gifford R. Zimmerman
Vice President
ATTEST:
------------------------------
Larry W. Martin
Assistant Secretary
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<PAGE> 74
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
APPENDIX A
SECTION 1. DESIGNATION AS TO SERIES.
SERIES M: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series M." Upon the effectiveness of
this Statement, each share of Remarketed Preferred Stock, Series A, of the Fund
outstanding immediately prior to the effectiveness of this Statement shall cease
to be a share of Remarketed Preferred Stock and shall become instead a share of
Series M MuniPreferred. Each share of Series M MuniPreferred shall, for purposes
hereof, be deemed to have a Date of Original Issue of August 12, 1997; have an
Applicable Rate for its Initial Rate Period equal to 3.64% per annum; have an
initial Dividend Payment Date of August 28, 1997; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. Any
shares of Series M MuniPreferred issued after the effective date of this
Statement shall be issued on the first day of a Rate Period of the then
outstanding shares of Series M MuniPreferred; shall have, for such Rate Period,
an Applicable Rate equal to the Applicable Rate for shares of such series
established in the first Auction for shares of such series preceding the date of
such issuance; and shall have such other preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth in
the Articles applicable to Preferred Stock of the Fund, as set forth in Part I
and Part II of this Statement. The Series M MuniPreferred shall constitute a
separate series of Preferred Stock of the Fund, and each share of Series M
MuniPreferred shall be identical except as provided in Section 11 of Part I of
this Statement.
SERIES T: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series T." Upon the effectiveness of
this Statement, each share of Remarketed Preferred Stock, Series B, of the Fund
outstanding immediately prior to the effectiveness of this Statement shall cease
to be a share of Remarketed Preferred Stock and shall become instead a share of
Series T MuniPreferred. Each share of Series T MuniPreferred shall, for purposes
hereof, be deemed to have a Date of Original Issue of August 12, 1997; have an
Applicable Rate for its Initial Rate Period equal to 3.00% per annum; have an
initial Dividend Payment Date of September 4, 1997; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. Any
shares of Series T MuniPreferred issued after the effective date of this
Statement shall be issued on the first day of a Rate Period of the then
outstanding shares of Series T MuniPreferred; shall have, for such Rate Period,
an Applicable Rate equal to the Applicable Rate for shares of such series
established in the first Auction for shares of such series preceding the date of
such issuance; and shall have such other preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth in
the Articles applicable to Preferred Stock of the Fund, as set forth in Part I
and Part II of this Statement. The Series T MuniPreferred shall constitute a
separate series of Preferred Stock of the Fund, and each share of Series T
MuniPreferred shall be identical except as provided in Section 11 of Part I of
this Statement.
SERIES W: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series W." Upon the effectiveness of
this Statement, each share of Remarketed Preferred Stock, Series E, of the Fund
outstanding immediately prior to the effectiveness of this Statement shall cease
to be a share of Remarketed Preferred Stock and shall become instead a share of
Series W MuniPreferred. Each share of Series W MuniPreferred shall, for purposes
hereof, be deemed to have a Date of Original Issue of August 12, 1997; have an
Applicable Rate for its Initial Rate Period equal to 3.54% per annum; have an
initial Dividend Payment Date of August 14, 1997; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. Any
shares of Series W MuniPreferred issued after the effective date of this
Statement shall be issued on the first day of a Rate Period of the then
outstanding shares of
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<PAGE> 75
Series W MuniPreferred; shall have, for such Rate Period, an Applicable Rate
equal to the Applicable Rate for shares of such series established in the first
Auction for shares of such series preceding the date of such issuance; and shall
have such other preferences, limitations and relative voting rights, in addition
to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this
Statement. The Series W MuniPreferred shall constitute a separate series of
Preferred Stock of the Fund, and each share of Series W MuniPreferred shall be
identical except as provided in Section 11 of Part I of this Statement.
SERIES TH: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series TH." Upon the effectiveness of
this Statement, each share of Remarketed Preferred Stock, Series C, of the Fund
outstanding immediately prior to the effectiveness of this Statement shall cease
to be a share of Remarketed Preferred Stock and shall become instead a share of
Series TH MuniPreferred. Each share of Series TH MuniPreferred shall, for
purposes hereof, be deemed to have a Date of Original Issue of August 12, 1997;
have an Applicable Rate for its Initial Rate Period equal to 3.65% per annum;
have an initial Dividend Payment Date of August 14, 1997; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. Any
shares of Series TH MuniPreferred issued after the effective date of this
Statement shall be issued on the first day of a Rate Period of the then
outstanding shares of Series TH MuniPreferred; shall have, for such Rate Period,
an Applicable Rate equal to the Applicable Rate for shares of such series
established in the first Auction for shares of such series preceding the date of
such issuance; and shall have such other preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth in
the Articles applicable to Preferred Stock of the Fund, as set forth in Part I
and Part II of this Statement. The Series TH MuniPreferred shall constitute a
separate series of Preferred Stock of the Fund, and each share of Series TH
MuniPreferred shall be identical except as provided in Section 11 of Part I of
this Statement.
SERIES F: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series F." Upon the effectiveness of
this Statement, each share of Remarketed Preferred Stock, Series D, of the Fund
outstanding immediately prior to the effectiveness of this Statement shall cease
to be a share of Remarketed Preferred Stock and shall become instead a share of
Series F MuniPreferred. Each share of Series F MuniPreferred shall, for purposes
hereof, be deemed to have a Date of Original Issue of August 12, 1997; have an
Applicable Rate for its Initial Rate Period equal to 3.44% per annum; have an
initial Dividend Payment Date of August 21, 1997; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. Any
shares of Series F MuniPreferred issued after the effective date of this
Statement shall be issued on the first day of a Rate Period of the then
outstanding shares of Series F MuniPreferred; shall have, for such Rate Period,
an Applicable Rate equal to the Applicable Rate for shares of such series
established in the first Auction for shares of such series preceding the date of
such issuance; and shall have such other preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth in
the Articles applicable to Preferred Stock of the Fund, as set forth in Part I
and Part II of this Statement. The Series F MuniPreferred shall constitute a
separate series of Preferred Stock of the Fund, and each share of Series F
MuniPreferred shall be identical except as provided in Section 11 of Part I of
this Statement.
SECTION 2. NUMBER OF AUTHORIZED SHARES PER SERIES.
The number of authorized shares constituting Series M MuniPreferred is
10,000; Series T MuniPreferred is 10,000; Series W MuniPreferred is 10,000;
Series TH MuniPreferred is 10,000; and Series F MuniPreferred is 10,000.
A-2
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<PAGE> 76
SECTION 3. EXCEPTIONS TO CERTAIN DEFINITIONS.
Notwithstanding the definitions contained under the heading "Definitions"
in this Statement, the following terms shall have the following meanings for
purposes of this Statement:
Not applicable.
SECTION 4. CERTAIN DEFINITIONS.
For purposes of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"ESCROWED BONDS" shall mean Municipal Obligations that (i) have been
determined to be legally defeased in accordance with S&P's legal defeasance
criteria, (ii) have been determined to be economically defeased in
accordance with S&P's economic defeasance criteria and assigned a rating of
AAA by S&P, (iii) are not rated by S&P but have been determined to be
legally defeased by Moody's or (iv) have been determined to be economically
defeased by Moody's and assigned a rating no lower than the rating that is
Moody's equivalent of S&P's AAA rating.
"GROSS-UP PAYMENT" means payment to a Holder of shares of
MuniPreferred of an amount which, when taken together with the aggregate
amount of Taxable Allocations made to such Holder to which such Gross-up
Payment relates, would cause such Holder's dividends in dollars (after
Federal income tax consequences) from the aggregate of such Taxable
Allocations and the related Gross-up Payment to be equal to the dollar
amount of the dividends which would have been received by such Holder if
the amount of such aggregate Taxable Allocations would have been excludable
from the gross income of such Holder. Such Gross-up Payment shall be
calculated (i) without consideration being given to the time value of
money; (ii) assuming that no Holder of shares of MuniPreferred is subject
to the Federal alternative minimum tax with respect to dividends received
from the Fund; and (iii) assuming that each Taxable Allocation and each
Gross-up Payment (except to the extent such Gross-up Payment is designated
as an exempt-interest dividend under Section 852(b)(5) of the Code or
successor provisions) would be taxable in the hands of each Holder of
shares of MuniPreferred at the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or net capital gains, as
applicable, or the maximum marginal regular Federal corporate income tax
rate applicable to ordinary income or net capital gains, as applicable,
whichever is greater, in effect at the time such Gross-up Payment is made.
"MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined
by reference to the rating on such asset and the shortest Exposure Period
set forth opposite such rating that is the same length as or is longer than
the Moody's Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
-------------------------------------------------------------------------------
EXPOSURE PERIOD AAA* AA* A* BAA* OTHER**(V) MIG-1*** SP-1+***
--------------- ---- --- -- ---- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks....................... 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but greater
than seven weeks............ 154 164 173 205 235 137 149
9 weeks or less but greater
than eight weeks............ 158 169 179 209 242 138 150
</TABLE>
- -------------------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
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<PAGE> 77
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or
have a demand feature at par exercisable in 30 days or less or 125% as long as
such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less and (ii)
no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold.
"MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash,
(ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's
but rated by S&P, is rated at least BBB by S&P (provided, however, that for
purposes of determining the Moody's Discount Factor applicable to any such
S&P-rated Municipal Obligation, such Municipal Obligation (excluding any
short-term Municipal Obligation) shall be deemed to have a Moody's rating
which is one full rating category lower than its S&P rating), (iii) does
not have its Moody's rating suspended by Moody's, and (iv) is part of an
issue of Municipal Obligations of at least $10,000,000. Municipal
Obligations issued by any one issuer and rated BBB by S&P may comprise no
more than 4% of total Moody's Eligible Assets; such BBB-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated Baa by Moody's or A by S&P, may comprise no more than
6% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated A by Moody's or AA by S&P, may comprise no more than
10% of total Moody's Eligible Assets; and such BBB, Baa, A and AA-rated
Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated Aa by Moody's or AAA by S&P, may
comprise no more than 20% of total Moody's Eligible Assets. For purposes of
the foregoing sentence, any Municipal Obligation backed by the guaranty,
letter of credit or insurance issued by a third party shall be deemed to be
issued by such third party if the issuance of such third party credit is
the sole determinant of the rating on such Municipal Obligation. Municipal
Obligations issued by issuers located within a single state or territory
and rated BBB by S&P may comprise no more than 12% of total Moody's
Eligible Assets; such BBB-rated Municipal Obligations, if any, together
with any Municipal Obligations issued by issuers located within the same
state or territory and rated Baa by Moody's or A by S&P, may comprise no
more than 20% of total Moody's Eligible Assets; such BBB, Baa and A-rated
Municipal Obligations, if any, together with any Municipal Obligations
issued by issuers located within the same state or territory and rated A by
Moody's or AA by S&P, may comprise no more than 40% of total Moody's
Eligible Assets; and such BBB, Baa, A and AA-rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Aa by Moody's or AAA by S&P,
may comprise no more than 60% of total Moody's Eligible Assets. For
purposes of applying the foregoing requirements, a Municipal Obligation
shall be deemed to be rated BBB by S&P if rated BBB-, BBB or BBB+ by S&P,
Moody's Eligible Assets shall be calculated without including cash, and
Municipal Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by
Moody's, rated A-1+/AA or SP-1+/AA by S&P, shall be considered to have a
long-term rating of A. When the Fund sells a Municipal Obligation and
agrees to repurchase such Municipal Obligation at a future date, such
Municipal Obligation shall be valued at its Discounted Value for purposes
of determining Moody's Eligible Assets, and the amount of the repurchase
price of such Municipal Obligation shall be included as a liability for
purposes of calculating the MuniPreferred Basic Maintenance Amount. When
the Fund purchases a Moody's Eligible Asset and agrees to sell it at a
future date, such Eligible Asset shall be valued at the amount of cash to
be received by the Fund upon such future date, provided that the
counterparty to the transaction has a long-term debt rating of at least A2
from Moody's and the transaction has a term of no more than 30 days,
otherwise such Eligible Asset shall be valued at the Discounted Value of
such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage,
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Fund will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes
that are not then due and payable or that can be paid thereafter without
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<PAGE> 78
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Fund by Nuveen Advisory Corp., United States Trust Company of New York or
the Auction Agent and (d) Liens by virtue of any repurchase agreement; or (ii)
deposited irrevocably for the payment of any liabilities for purposes of
determining the MuniPreferred Basic Maintenance Amount.
"RATE MULTIPLE," for shares of a series of MuniPreferred on any Auction
Date for shares of such series, shall mean the percentage, determined as
set forth below, based on the prevailing rating of shares of such series in
effect at the close of business on the Business Day next preceding such
Auction Date:
<TABLE>
<CAPTION>
PREVAILING RATING PERCENTAGE
----------------- ----------
<S> <C>
"aa3"/AA- or higher......................................... 110%
"a3"/A-..................................................... 125%
"baa3"/BBB-................................................. 150%
"ba3"/BB-................................................... 200%
Below "ba3"/BB-............................................. 250%
</TABLE>
provided, however, that in the event the Fund has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is
greater.
For purposes of this definition, the "prevailing rating" of shares of a
series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a
rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent
of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher,
then "a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or
better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below, (iii) if
not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such shares have a
rating of "baa3" or better by Moody's and BBB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or
higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of
"ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "aa3"/AA- or higher,
"a3"/A-, "baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; provided, however,
that if such shares are rated by only one rating agency, the prevailing rating
will be determined without reference to the rating of any other rating agency.
The Fund shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor
Moody's shall make such a rating available, the party set forth in Section 7 of
Appendix A or its successor shall select at least one nationally recognized
statistical rating organization (as that term is used in the rules and
regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended from time to time) to act as a substitute
rating agency in respect of shares of the series of MuniPreferred set forth
opposite such party's name in Section 7 of Appendix A and the Fund shall take
all reasonable action to enable such rating agency to provide a rating for such
shares.
"S&P DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest
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<PAGE> 79
Exposure Period set forth opposite such rating that is the same length as
or is longer than the S&P Exposure Period, in accordance with the table set
forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
--------------------------
EXPOSURE PERIOD AAA* AA* A* BBB*
--------------- ---- --- -- ----
<S> <C> <C> <C> <C>
40 Business Days...................................... 190% 195% 210% 250%
22 Business Days...................................... 170 175 190 230
10 Business Days...................................... 155 160 175 215
7 Business Days....................................... 150 155 170 210
3 Business Days....................................... 130 135 150 190
</TABLE>
- -------------------------
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 125% if such Municipal Obligations are not rated by
S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any
such Moody's-rated short-term Municipal Obligations which have demand features
exercisable within 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution with
a short-term rating of at least A-1+ from S&P; and further provided that such
Moody's-rated short-term Municipal Obligations may comprise no more than 50% of
short-term Municipal Obligations that qualify as S&P Eligible Assets; (ii) no
S&P Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold; and (iii) except as set forth in clause (i) above, in the case
of any Municipal Obligation that is not rated by S&P but qualifies as an S&P
Eligible Asset pursuant to clause (iii) of that definition, such Municipal
Obligation will be deemed to have an S&P rating one full rating category lower
than the S&P rating category that is the equivalent of the rating category in
which such Municipal Obligation is placed by Moody's. For purposes of the
foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, rated MIG-1
or VMIG-1 by Moody's, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating, shall be
considered to be short-term Municipal Obligations.
"S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably
deposited by the Fund for the payment of any liabilities within the meaning of
MuniPreferred Basic Maintenance Amount), Receivables for Municipal Obligations
Sold or a Municipal Obligation owned by the Fund that (i) is interest bearing
and pays interest at least semi-annually; (ii) is payable with respect to
principal and interest in U.S. Dollars; (iii) is publicly rated BBB or higher by
S&P or, if not rated by S&P but rated by Moody's, is rated at least A by
Moody's; (iv) is not part of a private placement of Municipal Obligations; and
(v) is part of an issue of Municipal Obligations with an original issue size of
at least $20 million or, if of an issue with an original issue size below $20
million (but in no event below $10 million), is issued by an issuer with a total
of at least $50 million of securities outstanding. Solely for purposes of this
definition, the term "Municipal Obligation" means any obligation the interest on
which is exempt from regular Federal income taxation and which is issued by any
of the fifty United States, the District of Columbia or any of the territories
of the United States, their subdivisions, counties, cities, towns, villages,
school districts and agencies (including authorities and special districts
created by the states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer
or guarantor (excluding bond insurers) shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Municipal Obligations exceeds 5% of
the aggregate Market Value of S&P Eligible Assets;
(2) Municipal Obligations rated by Moody's but not rated by S&P shall
be considered S&P Eligible Assets only to the extent the Market Value of
such Municipal Obligations does not exceed 50% of the aggregate Market
Value of S&P Eligible Assets; and
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<PAGE> 80
(3) Long-Term Municipal Obligations (excluding Escrowed Bonds) issued
by issuers in any one state or territory shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 20% of the aggregate Market Value of S&P Eligible Assets.
SECTION 5. INITIAL AND TRANSITIONAL RATE PERIODS.
The Initial Rate Period for shares of Series M MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 28, 1997. The Transitional Rate Period for shares of Series M
MuniPreferred shall be the period from and including August 28, 1997 to but
excluding September 9, 1997.
The Initial Rate Period for shares of Series T MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
September 4, 1997. The Transitional Rate Period for shares of Series T
MuniPreferred shall be the period from and including September 4, 1997 to but
excluding September 10, 1997.
The Initial Rate Period for shares of Series W MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 14, 1997.
The Initial Rate Period for shares of Series TH MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 14, 1997. The Transitional Rate Period for shares of Series TH
MuniPreferred shall be the period from and including August 14, 1997 to but
excluding August 22, 1997.
The Initial Rate Period for shares of Series F MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 21, 1997. The Transitional Rate Period for shares of Series F
MuniPreferred shall be the period from and including August 21, 1997 to but
excluding September 2, 1997.
SECTION 6. DATE FOR PURPOSES OF PARAGRAPH (YYY) CONTAINED UNDER THE HEADING
"DEFINITIONS" IN THIS STATEMENT.
August 31, 1997.
SECTION 7. PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE" IN THIS
STATEMENT.
<TABLE>
<CAPTION>
PARTY: SERIES OF MUNIPREFERRED:
- ------ ------------------------
<S> <C>
Merrill, Lynch, Pierce, Fenner & Smith Incorporated......... Series M
Merrill, Lynch, Pierce, Fenner & Smith Incorporated......... Series T
Merrill, Lynch, Pierce, Fenner & Smith Incorporated......... Series W
Merrill, Lynch, Pierce, Fenner & Smith Incorporated......... Series TH
Merrill, Lynch, Pierce, Fenner & Smith Incorporated......... Series F
</TABLE>
SECTION 8. ADDITIONAL DEFINITIONS.
Not applicable.
SECTION 9. DIVIDEND PAYMENT DATES.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of:
Series M MuniPreferred, for the Initial Rate Period on Thursday,
August 28, 1997, for the Transitional Rate Period on Tuesday, September 9,
1997, and on each Tuesday thereafter;
A-7
A-49
<PAGE> 81
Series T MuniPreferred, for the Initial Rate Period on Thursday, September
4, 1997, for the Transitional Rate Period on Wednesday, August 13, 1997, and on
each Wednesday thereafter;
Series W MuniPreferred, for the Initial Rate Period on Thursday, August 14,
1997, and on each Thursday thereafter;
Series TH MuniPreferred, for the Initial Rate Period on Thursday, August
14, 1997, for the Transitional Rate Period on Friday, August 22, 1997, and on
each Friday thereafter; and
Series F MuniPreferred, for the Initial Rate Period on Thursday, August 21,
1997, for the Transitional Rate Period on Tuesday, September 2, 1997, and on
each Monday thereafter.
SECTION 10. AMOUNT FOR PURPOSES OF SUBPARAGRAPH (C)(I) OF SECTION 5 OF PART I OF
THIS STATEMENT.
$350,000,000.
SECTION 11. REDEMPTION PROVISIONS APPLICABLE TO INITIAL RATE PERIODS.
Not applicable.
SECTION 12. APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH(B)(III) OF SECTION 3 OF
PART II OF THIS STATEMENT.
For purposes of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be equal to the lesser of the Kenny
Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the
product of (A)(I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary income,
whichever is greater; provided, however, that if the Fund has notified the
Auction Agent of its intent to allocate to shares of such series in such Rate
Period any net capital gains or other income taxable for Federal income tax
purposes ("Taxable Income"), the Applicable Rate for shares of such series for
such Rate Period will be (i) if the Taxable Yield Rate (as defined below) is
greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the Taxable
Yield Rate is less than or equal to the Benchmark Rate, then the rate equal to
the sum of (x) the lesser of the Kenny Index (if such Rate Period consists of
fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied
by the factor set forth in the preceding clause (B) and (y) the product of the
maximum marginal regular Federal individual income tax rate applicable to
ordinary income or the maximum marginal regular Federal corporate income tax
applicable to ordinary income, whichever is greater, multiplied by the Taxable
Yield Rate. For purposes of the foregoing, Taxable Yield Rate means the rate
determined by (a) dividing the amount of Taxable Income available for
distribution per such share of MuniPreferred by the number of days in the
Dividend Period in respect of which such Taxable Income is contemplated to be
distributed, (b) multiplying the amount determined in (a) above by 365 (in the
case of a Dividend Period of 7 Rate Period Days) or 360 (in the case of any
other Dividend Period), and (c) dividing the amount determined in (b) above by
$25,000.
A-8
A-50
<PAGE> 82
APPENDIX B
TAXABLE EQUIVALENT YIELD TABLE
The following tables demonstrate the effects for individuals of Federal
income taxes by showing the return that an individual would have to earn on a
taxable investment to equal a given tax-free return. The tables below use tax
rates based upon published 1997 marginal Federal tax rates (15%, 28%, 31%, 36%
and 39.6%). See "Tax Matters -- Federal Income Tax Matters."
In all cases, (i) the tables are for illustrative purposes only and are not
intended to predict the actual return an individual might earn on an investment
in the Fund, (ii) the Federal income tax rates have been rounded to the
nearest 1/2 of 1%, and (iii) the Federal income tax rates reflect the current
Federal tax limitations on itemized deductions and personal exemptions, which
may raise the effective tax rate and taxable equivalent yield for taxpayers
above certain income levels. Such limitations are subject to certain maximums,
which depend on the number of exemptions claimed and the total amount of the
taxpayer's itemized deductions. For example, the limitation on itemized
deductions will not cause a taxpayer to lose more than 80% of his allowable
itemized deductions, with certain exceptions. The tax rates shown here may be
higher or lower than an individual's actual tax rate. Investors should consult
their tax advisers to determine their actual tax rates.
MARGINAL TAX RATES FOR JOINT TAXPAYERS WITH FOUR PERSONAL EXEMPTIONS
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED
TAXABLE GROSS MARGINAL
INCOME INCOME RATE 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00%
- ------------------- ------------------- -------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - $41,200 $0 - $121,200 15.00% 3.53% 3.82% 4.12% 4.41% 4.71% 5.00% 5.29% 5.59% 5.88%
$41,200 - $99,600 $0 - $121,200 28.00% 4.17% 4.51% 4.86% 5.21% 5.56% 5.90% 6.25% 6.60% 6.94%
$121,200 - $181,800 29.00% 4.23% 4.58% 4.93% 5.28% 5.63% 5.99% 6.34% 6.69% 7.04%
$99,600 - $151,750 $0 - $121,200 31.00% 4.35% 4.71% 5.07% 5.43% 5.80% 6.16% 6.52% 6.88% 7.25%
$121,200 - $181,800 32.00% 4.41% 4.78% 5.15% 5.51% 5.88% 6.25% 6.62% 6.99% 7.35%
$181,800 - $304,300 34.50% 4.58% 4.96% 5.34% 5.73% 6.11% 6.49% 6.87% 7.25% 7.63%
$151,750 - $271,050 $121,200 - $181,800 37.00% 4.76% 5.16% 5.56% 5.95% 6.35% 6.75% 7.14% 7.54% 7.94%
$181,800 - $304,300 40.00% 5.00% 5.42% 5.83% 6.25% 6.67% 7.08% 7.50% 7.92% 8.33%
Over $304,000 37.00% 4.76% 5.16% 5.56% 5.95% 6.35% 6.75% 7.14% 7.54% 7.94%
Over $271,500 $121,200-$304,300 44.00% 5.36% 5.80% 6.25% 6.70% 7.14% 7.59% 8.04% 8.48% 8.93%
Over $304,300 41.00% 5.08% 5.51% 5.93% 6.36% 6.78% 7.20% 7.63% 8.05% 8.47%
</TABLE>
MARGINAL TAX RATES FOR SINGLE TAXPAYERS WITH ONE PERSONAL EXEMPTION
<TABLE>
<CAPTION>
FEDERAL
FEDERAL ADJUSTED
TAXABLE GROSS MARGINAL
INCOME INCOME RATE 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50% 4.75% 5.00%
- ------------------- ------------------- -------- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$0 - $24,650 $0 - $121,200 15.00% 3.53% 3.82% 4.12% 4.41% 4.71% 5.00% 5.29% 5.59% 5.88%
$24,650 - $59,750 $0 - $121,200 28.00% 4.17% 4.51% 4.86% 5.21% 5.56% 5.90% 6.25% 6.60% 6.94%
$59,750 - $124,650 $0 - $121,200 31.00% 4.35% 4.71% 5.07% 5.43% 5.80% 6.16% 6.52% 6.88% 7.25%
$121,200 - $243,700 32.50% 4.44% 4.81% 5.19% 5.56% 5.93% 6.30% 6.67% 7.04% 7.41%
$124,650 - $271,050 $121,200 - $243,700 38.00% 4.84% 5.24% 5.65% 6.05% 6.45% 6.85% 7.26% 7.66% 8.06%
Over $243,700 37.00% 4.76% 5.16% 5.56% 5.95% 6.35% 6.75% 7.14% 7.54% 7.94%
Over $271,500 Over $243,700 41.00% 5.08% 5.51% 5.93% 6.36% 6.78% 7.20% 7.63% 8.05% 8.47%
</TABLE>
B-1
<PAGE> 83
======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY...................... 2
FINANCIAL HIGHLIGHTS.................... 5
THE FUND................................ 6
USE OF PROCEEDS......................... 6
CAPITALIZATION.......................... 7
INVESTMENT OBJECTIVE AND POLICIES....... 8
MANAGEMENT OF THE FUND.................. 10
DESCRIPTION OF MUNIPREFERRED............ 11
THE AUCTION............................. 20
DESCRIPTION OF COMMON STOCK............. 22
CERTAIN PROVISIONS IN THE ARTICLES OF
INCORPORATION......................... 22
REPURCHASE OF SHARES OF COMMON STOCK;
CONVERSION TO OPEN-END FUND........... 23
TAX MATTERS............................. 25
CUSTODIAN, TRANSFER AGENT, DIVIDEND
DISBURSING AGENT AND REDEMPTION
AGENT................................. 26
UNDERWRITING............................ 26
LEGAL OPINIONS.......................... 27
AVAILABLE INFORMATION................... 27
Nuveen Premium Income Municipal Fund,
Inc. Amendment and Restatement of
Statement Establishing and Fixing the
Rights and Preferences of Municipal
Auction Rate Cumulative Preferred
Stock ("MuniPreferred")............... A-1
Taxable Equivalent Yield Table.......... B-1
</TABLE>
======================================================
======================================================
$125,000,000
NUVEEN
PREMIUM INCOME
MUNICIPAL FUND, INC.
MUNICIPAL AUCTION
RATE CUMULATIVE
PREFERRED STOCK
MUNIPREFERRED(R)
1,000 SHARES SERIES M
1,000 SHARES SERIES T
1,000 SHARES SERIES W
1,000 SHARES SERIES TH
1,000 SHARES SERIES F
-----------------
PROSPECTUS
-----------------
MERRILL LYNCH & CO.
ALEX. BROWN & SONS INCORPORATED
GOLDMAN, SACHS & CO.
JOHN NUVEEN & CO., INCORPORATED
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
, 1997
======================================================
<PAGE> 84
SUBJECT TO COMPLETION
AUGUST 13, 1997
NUVEEN PREMIUM
INCOME MUNICIPAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relating to this offering does not
constitute a prospectus, but should be read in conjunction with the Prospectus
relating thereto dated , 1997 (the "Prospectus"). This Statement of
Additional Information does not include all information that a prospective
investor should consider before purchasing shares of MuniPreferred in this
offering, and investors should obtain and read the Prospectus prior to
purchasing such Shares. A copy of the Prospectus may be obtained without charge
by calling (800) 257-8787. Capitalized terms used but not defined in this
Statement of Additional Information have the meanings ascribed to them in the
Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies........................... S-1
Certain Trading Strategies of the Fund...................... S-4
Management of the Fund...................................... S-7
Portfolio Transactions...................................... S-11
Net Asset Value............................................. S-12
Additional Information Concerning the Auctions for
MuniPreferred............................................. S-12
Tax Matters................................................. S-14
Certain Owners of Record.................................... S-18
Experts..................................................... S-18
Report of Independent Auditors.............................. S-19
Financial Statements........................................ S-20
Ratings of Investments...................................... A-1
</TABLE>
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS , 1997.
<PAGE> 85
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide, through investment in a
professionally managed portfolio of tax-exempt Municipal Obligations, a high
level of current income exempt from regular Federal income tax, consistent with
the preservation of capital.
PORTFOLIO INVESTMENTS
Except to the extent the Fund invests in temporary investments as described
in this Statement of Additional Information, the Fund will, as a fundamental
policy, invest substantially all of its net assets in tax-exempt 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 in unrated Municipal Obligations which, in
the opinion of the Adviser, have credit characteristics equivalent to, and will
be of comparable quality to, Municipal Obligations rated within the four highest
grades by Moody's or S&P, provided that the Fund may not invest more than 20% of
its net assets in such unrated Municipal Obligations.
The foregoing investment objective and policies are fundamental policies of
the Fund and may not be changed without the approval of the holders of a
majority of the outstanding shares of Common Stock and shares of Preferred
Stock, including MuniPreferred, voting together as a single class, and of the
holders of a majority of the outstanding shares of Preferred Stock, including
MuniPreferred, voting as a separate class. For the purposes of the foregoing and
"Investment Restrictions," below, "majority of the outstanding," when used with
respect to particular shares of the Fund, means (i) 67% or more of the shares
present at a meeting, if the holders of more than 50% of the shares are present
or represented by proxy, or (ii) more than 50% of the shares, whichever is less.
See "Description of MuniPreferred -- Voting Rights" in the Prospectus for
additional information with respect to the voting rights of holders of Preferred
Stock.
If current market conditions persist, the Fund expects to invest
substantially all the net proceeds of the offerings in Municipal Obligations
which are rated within the three highest grades of the investment grade category
and which may not be redeemed at the option of the issuer of any such Municipal
Obligations for approximately seven to eight years from the date of purchase by
the Fund. See "Certain Trading Strategies of The Fund -- Portfolio Trading and
Turnover Rate." Subject to market availability, the Fund would likely seek to
invest approximately 10% of the net proceeds of the offerings in unrated
Municipal Obligations.
The Fund has not established any limit on the percentage of its portfolio
that may be invested in Municipal Obligations subject to the alternative minimum
tax provisions of Federal tax law, and a substantial portion of the income
produced by the Fund may be includable in alternative minimum taxable income.
Shares of MuniPreferred therefore would not ordinarily be a suitable investment
for investors who are subject to the Federal alternative minimum tax. The
suitability of an investment in shares of MuniPreferred will depend upon a
comparison of the after-tax yield likely to be provided from the Fund with that
from comparable tax-exempt investments not subject to the alternative minimum
tax, and from comparable fully taxable investments, in light of each such
investor's tax position. Special considerations apply to corporate investors. In
addition, the dividends paid on shares of MuniPreferred during specified Rate
Periods will include an allocated portion of any net capital gains or other
income taxable for Federal income tax purposes realized by the Fund. See "Tax
Matters."
During temporary defensive periods (e.g., times when, in the Adviser's
opinion, temporary imbalances of supply and demand or other temporary
dislocations in the tax-exempt bond market adversely affect the price at which
long-term or intermediate-term Municipal Obligations are available), and in
order to keep cash on hand fully invested, the Fund may invest any percentage of
its assets in temporary investments, the income on which may be subject to
regular Federal income taxes. Temporary investments are high quality, short-term
securities which may be either tax-exempt or taxable. The Fund intends to invest
in taxable temporary investments only in the event that suitable tax-exempt
temporary investments are not available at reasonable prices and yields.
Tax-exempt temporary investments include various obligations issued by state and
local governmental issuers, such as tax-exempt notes (bond anticipation notes,
tax anticipation notes and revenue
S-1
<PAGE> 86
anticipation notes or other such Municipal Obligations maturing in three years
or less from the date of issuance) and municipal commercial paper. The Fund will
invest only in taxable temporary investments which are U.S. Government
securities or securities rated within the highest grade by Moody's or S&P, and
which mature within one year from the date of purchase or carry a variable or
floating rate of interest. See Appendix A for a general description of Moody's
and S&P's ratings of securities in such categories. Taxable temporary
investments of a Fund may include certificates of deposit issued by U.S. banks
with assets of at least $1 billion, or commercial paper or corporate notes,
bonds or debentures with a remaining maturity of one year or less, or repurchase
agreements. See "Certain Trading Strategies of The Fund--Repurchase Agreements."
To the extent the Fund invests in temporary investments the income on which is
subject to regular Federal income taxes, the Fund will not at such times be in a
position to achieve its investment objective of providing current income exempt
from regular Federal income taxes.
The foregoing policies as to ratings of portfolio investments will apply
only at the time of the purchase of a security, and the Fund will not be
required to dispose of securities in the event Moody's or S&P downgrades its
assessment of the credit characteristics of a particular issuer.
MUNICIPAL OBLIGATIONS
Included within the general category of Municipal Obligations described in
the Prospectus are participations in lease obligations or installment purchase
contract obligations (hereinafter collectively called "Municipal Lease
Obligations") of municipal authorities or entities. Although 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, the Fund's ability to
recover under the lease in the event of non-appropriation or default will be
limited solely to the repossession of the leased property, without recourse to
the general credit of the lessee, and disposition or releasing of the property
might prove difficult. The 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. As used in the Prospectus and in this Statement of
Additional Information, 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, the Fund emphasizes investments in Municipal Obligations with long-term
maturities.
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.
S-2
<PAGE> 87
INVESTMENT RESTRICTIONS
Except as described below, the Fund, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding common
stock and preferred stock of the Fund, including MuniPreferred, voting together
as a single class, and of the holders of a majority of the outstanding preferred
stock of the Fund, including MuniPreferred, voting as a separate class:
(1) Issue senior securities, as defined in the 1940 Act, other than
preferred stock, 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 Fund -- 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 Fund -- 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
objectives, 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 other than those Municipal Obligations
backed only by the assets and revenues of non-governmental users, nor shall
it apply to Municipal Obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities;
(6) Purchase or sell real estate, but this shall not prevent the Fund
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 Fund -- 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 objectives, policies and limitations;
(9) Invest in securities other than Municipal Obligations and
temporary investments as described under "Investment Objective and
Policies -- 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 those
officers and directors of the Adviser, who individually own beneficially
more
S-3
<PAGE> 88
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 the Fund, means (i) 67% or more of the shares
present at a meeting, if the holders of more than 50% of the shares are present
or represented by proxy, or (ii) more than 50% of the shares, whichever is less.
For the purpose of applying the limitation set forth in subparagraph (10)
above, an issuer shall be deemed the sole issuer of a security when its assets
and revenues are separate from other governmental entities and its securities
are backed only by its assets and revenues. Similarly, in the case of a
non-governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to be
the sole issuer. Where a security is also backed by the enforceable obligation
of a superior or unrelated governmental or other entity, it shall also be
included in the computation of securities owned that are issued by such
governmental or other entity. Where a security is guaranteed by a governmental
entity or some other facility, such as a bank guarantee or letter of credit,
such a guarantee or letter of credit would be considered a separate security and
would be treated as an issue of such government or other entity.
In addition to the limitations set forth above, the Fund will not, as a
matter of operating policy, (1) 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, (2) invest for the purpose of
exercising control or management, (3) invest more than 10% of its total assets
in securities that are unmarketable, illiquid or not readily marketable
(securities that cannot reasonably be sold within seven days, including
repurchase agreements maturing in more than seven days), or (4) borrow in excess
of 5% of its total assets if and so long as its preferred shares are
outstanding. These policies are not fundamental and may be changed by the Board
of the 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.
The Fund has no intention to file a voluntary application for relief under
Federal bankruptcy law or any similar application under state law for so long as
the Fund is solvent and does not foresee becoming insolvent.
CERTAIN TRADING STRATEGIES OF THE FUND
PORTFOLIO TRADING AND TURNOVER RATE
Portfolio trading may be undertaken to accomplish the investment objective
of the Fund in relation to actual and anticipated movements in interest rates.
In addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what the Adviser believes to
be a temporary price disparity between the two securities. Temporary price
disparities between two comparable securities may result from supply and demand
imbalances where, for example, a temporary oversupply of certain bonds may cause
a temporarily low price for such bonds, as compared with other bonds of like
quality and characteristics. The Fund may also engage to a limited extent in
short-term trading consistent with its investment objective. Securities may be
sold in anticipation of a market decline (a rise in interest rates) or purchased
in anticipation of a market rise (a decline in interest rates) and later sold,
but the Fund will not engage in trading solely to recognize a gain.
Subject to the foregoing, the Fund will attempt to achieve its investment
objective by prudent selection of Municipal Obligations with a view to holding
them for investment. While there can be no assurance thereof, the Fund
anticipates that its annual portfolio turnover rate generally will not exceed
100%. However, the rate of turnover will not be a limiting factor when the Fund
deems it desirable to sell or purchase securities. Therefore, depending upon
market conditions, the Fund's annual portfolio turnover rate may exceed 100% in
particular years.
S-4
<PAGE> 89
WHEN-ISSUED AND DELAYED DELIVERY
The 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. (When-issued transactions normally settle within 30-45 days).
On such transactions the payment obligation and the interest rate are fixed at
the time the buyer enters into the commitment. Beginning on the date the Fund
enters into a commitment to purchase securities on a when-issued or delayed
delivery basis, it is required under the rules of the Securities and Exchange
Commission (the "Commission") to maintain in a segregated account cash or liquid
assets, equal in value to the purchase price due on the settlement date. Income
generated by assets in such a segregated account which provides taxable income
for Federal income tax purposes is includable in the taxable income of the Fund.
The Fund currently intends to allocate net capital gains and other income
taxable for Federal income tax purposes, if any, proportionately between its
common stock and shares of its MuniPreferred, and dividends paid on shares of
its MuniPreferred during specified periods will include an allocated portion of
any such net capital gains and other taxable income. See "Tax Matters." The
commitment to purchase securities on a when-issued or delayed delivery basis may
involve an element of risk because the value of the securities is subject to
market fluctuation. No interest accrues to the purchaser prior to settlement of
the transaction, and at the time of delivery the market value may be less than
cost.
FINANCIAL FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of 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 the
Fund. The Fund has no 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, the 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 the Fund may decline on
account of an increase in interest rates and to hedge against increases in the
cost of the securities the Fund intends to purchase as a result of a decline in
interest rates. The use of futures and options for hedging purposes can be
expected to result in taxable income or gain. The Fund currently intends to
allocate any taxable income or gain proportionately between its common stock and
shares of its MuniPreferred. See "Tax Matters."
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 the 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 the 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 the 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 the Fund only for hedging purposes,
these futures and options portfolio strategies should not subject the Fund to
those risks frequently associated with speculation in futures or options
transactions. Regulations of the Commodity Futures Trading Commission (the
"CFTC") applicable to the 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 the Fund do not exceed 5% of the
market value of its assets. The Fund will not 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. The Fund will not
sell futures unless the Fund owns the instruments underlying the
S-5
<PAGE> 90
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, for taxable years beginning prior
to August 5, 1997, the 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, the Fund will not 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 the Fund,
with such cash being maintained in a segregated account. These requirements and
limitations may limit the Fund's ability to engage in hedging transactions. So
long as Moody's or S&P, or both, are rating the Fund's shares of MuniPreferred,
that Fund will only engage in futures or options transactions in accordance with
the then-current guidelines of such rating agencies, and only after it has
received written confirmation from Moody's and S&P, as appropriate, that such
transactions would not impair the ratings then assigned by Moody's and S&P to
such shares.
DESCRIPTION OF FINANCIAL FUTURES AND OPTIONS. A futures contract is a
contract between a seller and a buyer for the sale and purchase of specified
property at a specified future date for a specified price. An option is a
contract that gives the holder of the option the right, but not the obligation,
to buy (in the case of a call option) specified property from, or to sell (in
the case of a put option) specified property to, the writer of the option for a
specified price during a specified period prior to the option's expiration.
Financial futures contracts and options cover specified debt securities (such as
U.S. Treasury securities) or indexes designed to correlate with price movements
in certain categories of debt securities. At least one exchange trades futures
contracts on an index designed to correlate with the long-term municipal bond
market. Financial futures contracts and options on financial futures contracts
are traded on exchanges regulated by the CFTC. Options on certain financial
instruments and financial indexes are traded on securities markets regulated by
the Commission. Although futures contracts and options on 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 the 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 the 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 the 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 the Fund decides to use futures contracts or options on
futures contracts for hedging purposes, the 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 the Fund that are greater than those which would
otherwise be applicable to the Fund under applicable rules of the exchanges and
the CFTC.
REPURCHASE AGREEMENTS
As temporary investments, the Fund may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of securities
(U.S. government securities or Municipal Obligations)
S-6
<PAGE> 91
agrees to repurchase the same security at a specified price on a future date
agreed upon by the parties. The agreed-upon repurchase price determines the
yield during the Fund's holding period. Repurchase agreements are considered to
be loans collateralized by the underlying security that is the subject of the
repurchase contract. Income generated from transactions in repurchase agreements
will be taxable. See "Tax Matters." 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 the Fund is limited to
the ability of the issuer to pay the agreed-upon repurchase price on the
delivery date; however, although the value of the underlying collateral at the
time the transaction is entered into always equals or exceeds the agreed-upon
repurchase price, if the value of the collateral declines, there is a risk of
loss of both principal and interest. In the event of default, the collateral may
be sold but the Fund might incur a loss if the value of the collateral declines,
and might incur disposition costs or experience delays in connection with
liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, realization upon the collateral by
the Fund may be delayed or limited. The Adviser will monitor the value of the
collateral at the time the transaction is entered into and at all times
subsequent during the term of the repurchase agreement in an effort to determine
that such value always equals or exceeds the agreed-upon repurchase price. In
the event the value of the collateral declines below the repurchase price, the
Adviser will demand additional collateral from the issuer to increase the value
of the collateral to at least that of the repurchase price, including interest.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The management of the Fund, including general supervision of the duties
performed by the Adviser under the Investment Management Agreement, is the
responsibility of its Board of Directors. There are eight directors of the Fund,
two of whom are "interested persons" (as defined in the 1940 Act) and six of
whom are "disinterested persons." The names and business addresses of the
directors and officers of the Fund and their principal occupations and other
affiliations during the past five years are set forth below, with those
directors who are "interested persons" of the Fund indicated by an asterisk.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME, AGE AND ADDRESS FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
- ------------------------ -------------------------- --------------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger*, 48 Chairman of the Board and Trustee and President (since July 1996) of
333 West Wacker Drive Director the Nuveen Select Tax-Free Portfolios
Chicago, IL 60606 advised by Nuveen Institutional Advisory
Corp.; Chairman (since July 1996) and
Director of The John Nuveen Company, John
Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.
Anthony T. Dean*, 52 President and Director Chairman (since July 1996) and Trustee
333 West Wacker Drive (since July 1994) of the Nuveen Select
Chicago, IL 60606 Tax-Free Portfolios advised by Nuveen
Institutional Advisory Corp; President
(since July 1996) and Director of The John
Nuveen Company, John Nuveen & Co.
Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
Robert P. Bremner, 57 Director Private investor and management consultant.
3725 Huntington Street,
N.W.
Washington, D.C. 20015
Lawrence H. Brown, 63 Director Retired in August 1989 as Senior Vice
201 Michigan Avenue President of The Northern Trust Company.
Highwood, IL 60040
Anne E. Impellizzeri, 64 Director President and Chief Executive Officer of
3 West 29th Street Blanton-Peale Institute, a training and
New York, NY 10001 counseling organization.
</TABLE>
S-7
<PAGE> 92
<TABLE>
<CAPTION>
POSITIONS AND OFFICES WITH
NAME, AGE AND ADDRESS FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
--------------------- -------------------------- --------------------------------------------
<S> <C> <C>
Peter R. Sawers, 64 Director Adjunct Professor of Business and Economics,
22 The Landmark University of Dubuque, Iowa; Adjunct
Northfield, IL 60093 Professor, Lake Forest Graduate School of
Management, Lake Forest, Illinois; prior
thereto, Executive Director, Towers Perrin
Australia (management consultant); Chartered
Financial Analyst; Certified Management
Consultant.
William J. Schneider, 52 Director Senior Partner, Miller-Valentine Group, a
4000 Miller-Valentine Ct. development and contract company; Vice
P.O. Box 744 President, Miller-Valentine Realty, Inc., a
Dayton, OH 45401 commercial real estate company
Judith M. Stockdale, 49 Director Executive Director (since 1994) of the
35 East Wacker Drive Gaylord and Dorothy Donnelley Foundation, a
Chicago, IL 60601 private family foundation; prior thereto,
Executive Director (from 1990 to 1994) of
the Great Lakes Protection Fund.
William M. Fitzgerald, 32 Vice President Assistant Vice President (from September
333 West Wacker Drive 1992 to December 1995) and Assistant
Chicago, IL 60606 Portfolio Manager (from June 1988 to
September 1992) of Nuveen Advisory Corp.;
Chartered Financial Analyst.
Kathleen A. Flanagan, 50 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated; Vice President (since June
Chicago, IL 60606 1996) of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
J. Thomas Futrell, 42 Vice President Vice President of Nuveen Advisory Corp.;
333 West Wacker Drive Chartered Financial Analyst.
Chicago, IL 60606
Steven J. Krupa, 40 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Anna R. Kucinskis, 51 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated.
Chicago, IL 60606
Larry W. Martin, 46 Vice President and Vice President (since September, 1992),
333 West Wacker Drive Assistant Secretary Assistant Secretary and Assistant General
Chicago, IL 60606 Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and
Assistant Secretary of Nuveen Advisory Corp.
and Nuveen Institutional Advisory Corp.;
Assistant Secretary (since February 1993) of
The John Nuveen Company.
Edward F. Neild, IV, 32 Vice President Vice President of Nuveen Advisory Corp. and
333 West Wacker Drive Nuveen Institutional Advisory Corp. (since
Chicago, IL 60606 September 1996); prior thereto, Assistant
Vice President of Nuveen Advisory Corp.
(from December 1993 to September 1996) and
Nuveen Institutional Advisory Corp. (from
May 1995 to September 1996; previously,
Portfolio Manager of Nuveen Advisory Corp.;
Chartered Financial Analyst.
O. Walter Renfftlen, 57 Vice President and Vice President and Controller of The John
333 West Wacker Drive Controller Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
</TABLE>
S-8
<PAGE> 93
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS DURING PAST FIVE
NAME, AGE AND ADDRESS WITH FUND YEARS
- ----------------------------- ---------------------- ------------------------------------------
<S> <C> <C>
Thomas C. Spalding, Jr., 45 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive and Nuveen Institutional Advisory Corp.;
Chicago, IL 60606 Chartered Financial Analyst.
H. William Stabenow, 63 Vice President and Vice President and Treasurer of The John
333 West Wacker Drive Treasurer Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
Gifford R. Zimmerman, 40 Vice President and Vice President (since September 1992),
333 West Wacker Drive Assistant Secretary Assistant Secretary and Assistant General
Chicago, IL 60606 Counsel of John Nuveen & Co. Incorporated;
Vice President (since May 1993) and
Assistant Secretary of Nuveen Advisory
Corp. and Nuveen Institutional Advisory
Corp.
</TABLE>
At the next annual meeting of the Fund's shareholders, the holders of
MuniPreferred, voting as a separate class, will elect two directors, and holders
of outstanding Common Stock and MuniPreferred, voting together as a single
class, will elect six directors. See "Description of MuniPreferred -- Voting
Rights" in the Prospectus.
The directors affiliated with John Nuveen & Co. Incorporated ("Nuveen") or
Nuveen Advisory Corp. (the "Adviser") serve without any compensation from the
Fund. Directors who are not affiliated with Nuveen or the Adviser receive a
$32,500 annual retainer for serving as a director or trustee, as the case may
be, of all exchange-traded 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 the exchange-traded funds managed by the
Adviser on the basis of relative net asset sizes. The Fund has adopted a
Directors' Deferred Compensation Plan pursuant to which a director of the Fund
may elect to have all or a portion of the 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. In addition, the Directors who are not affiliated with Nuveen or
the Adviser receive a $27,500 annual retainer for services as a director or
trustee, as the case may be, of all open-end funds sponsored by Nuveen and
managed by the Adviser and similar per day meeting and other expenses.
Timothy R. Schwertfeger, Anthony T. Dean and Peter R. Sawers serve as
members of the Executive Committee of the Board of Directors. The Executive
Committee, which meets between regular meetings of the Board of Directors, is
authorized to exercise all of the powers of the Board of Directors.
S-9
<PAGE> 94
The table below shows, for each director who is not affiliated with Nuveen
or the Adviser, the aggregate compensation paid by the Fund for its fiscal year
ended October 31, 1996 and the total compensation that Nuveen funds accrued for
each director during the calendar year 1996, 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 the Fund.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE NUVEEN FUNDS
COMPENSATION ACCRUED FOR
NAME OF DIRECTOR FROM THE FUND DIRECTORS(1)
---------------- ------------- -------------
<S> <C> <C>
Robert P. Bremner(2)................................ 0 0
Lawrence H. Brown................................... 1,940 59,000
Anne E. Impellizzeri................................ 1,940 59,000
Peter R. Sawers..................................... 1,940 59,000
William J. Schneider(2)............................. 0 0
Judith M. Stockdale(2).............................. 0 0
</TABLE>
- ---------------
(1) Includes compensation for service on the boards of 42 Nuveen open-end funds
and 52 Nuveen closed-end funds managed by Nuveen Advisory Corp. ("NAC
Funds")
(2) Messrs. Bremner and Schneider were appointed to the Board of the Fund in May
1997 and were elected to the Boards of other NAC Funds effective December
31, 1996 and January 31, 1997. Ms. Stockdale was appointed to the Board of
the NAC Funds, including the Fund, effective July 1, 1997.
At July 31, 1997, the Fund's officers and directors as a group owned less
than 1% of the outstanding shares of Common Stock and no shares of
MuniPreferred.
INVESTMENT ADVISER
Nuveen Advisory Corp. (the "Adviser"), 333 West Wacker Drive, Chicago,
Illinois 60606, acts as the investment adviser for, and manages the investment
and reinvestment of the assets of, the Fund. The Adviser also administers the
Fund's business affairs, provides office facilities and equipment and certain
clerical, bookkeeping and administrative services, and permits any of its
officers or employees to serve without compensation as directors or officers of
the Fund if elected to such positions.
Under the Management Agreement the Fund has agreed to pay an annual
management fee as follows:
MANAGEMENT FEE SCHEDULE
<TABLE>
<CAPTION>
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 Fund paid aggregate management fees of $8,045,628, $7,947,123 and
$7,859,410 for the fiscal years ended October 31, 1996, 1995 and 1994, for an
effective management fee rate of .62%, .62% and .62%, respectively.
S-10
<PAGE> 95
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>
Timothy R. Schwertfeger....................... Chairman of the Board and Director,
Chairman of the Board and Director John Nuveen & Co. Incorporated
(Principal Executive Officer)
333 West Wacker Drive
Chicago, Illinois 60606
Anthony T. Dean............................... President and Director,
President and Director John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
John P. Amboian............................... Executive Vice President,
Executive Vice President John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606
</TABLE>
As of July 31, 1997, no person is known to the Fund to have owned
beneficially more than five percent of the shares of common stock or preferred
stock of the Fund.
PORTFOLIO TRANSACTIONS
The Adviser, in effecting purchases and sales of portfolio securities for
the account of the 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 Fund has not paid and does 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 the 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 the 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 the 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 Fund. Subject to applicable laws
and regulations, the Adviser will attempt to allocate equitably portfolio
transactions among the Fund and the portfolios of its other clients purchasing
or selling securities whenever decisions are made to purchase or sell securities
by the Fund and one or more of such other clients simultaneously. In making such
allocations, the main factors to be considered will be the respective investment
objective of the Fund and such other clients, the relative size of the portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other clients, the size of investment
commitments generally held by the Fund and such other clients and opinions of
the persons responsible for recommending investments to the Fund and such other
clients. While this procedure could have a detrimental effect on the price or
amount of the securities available to the Fund from time to time, it is the
opinion of the Board of the Fund that the
S-11
<PAGE> 96
benefits available from the Adviser's organization will outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
Notwithstanding the similarity of the investment objective of the Fund with
those of other funds managed by the Adviser, the Fund will be separately managed
and the composition of its investment portfolio will differ. Accordingly, the
investment performance of the Fund will likely not be the same as other funds.
Under the 1940 Act, the Fund may not purchase portfolio securities from any
underwriting syndicate of which Nuveen is a member except under certain limited
conditions set forth in Rule 10f-3. The Rule sets forth requirements relating
to, among other things, the terms of an issue of Municipal Obligations purchased
by the 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 the Fund, including a
majority of the directors thereof who are not interested persons of the Fund.
For the fiscal years ended October 31, 1996, October 31, 1995 and October
31, 1994, the Fund did not pay any brokerage commissions.
NET ASSET VALUE
In determining the net asset value of the Fund, the Fund's custodian
utilizes the valuations of portfolio securities furnished by a pricing service
approved by the Board of Directors. 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 will constitute a majority of the
securities held by the Fund) are valued at fair value as determined by the
pricing service using methods which 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 by the officers of the Fund under the general
supervision of the Board of Directors.
ADDITIONAL INFORMATION CONCERNING
THE AUCTIONS FOR MUNIPREFERRED
GENERAL
AUCTION AGENCY AGREEMENT. The Fund has entered into an Auction Agency
Agreement (the "Auction Agency Agreement") with the Auction Agent (currently,
Bankers Trust Company) which provides, among other things, that the Auction
Agent will follow the Auction Procedures for purposes of determining the
Applicable Rate for shares of each series of MuniPreferred so long as the
Applicable Rate for shares of such series is to be based on the results of an
Auction.
BROKER-DEALER AGREEMENTS. Each Auction requires the participation of one or
more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Fund, which provide for the participation of those
Broker-Dealers in Auctions for shares of MuniPreferred. See "Broker-Dealers"
below.
SECURITIES DEPOSITORY. The Depository Trust Company ("DTC") will act as the
Securities Depository for the Agent Members with respect to shares of each
series of MuniPreferred. One certificate for all of the shares of each series of
MuniPreferred will be registered in the name of Cede, as nominee of the
Securities Depository. Such certificate will bear a legend to the effect that
such certificate is issued subject to the provisions restricting transfers of
shares of MuniPreferred contained in the Statement. The Fund will also issue
stop-transfer instructions to the transfer agent for shares of each series of
MuniPreferred. Prior to the commencement of the right of holders of preferred
shares to elect a majority of the Fund's directors, as described under
"Description of MuniPreferred -- Voting Rights" in the Prospectus, Cede will be
the holder
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<PAGE> 97
of record of all shares of each series of MuniPreferred and owners of such
shares will not be entitled to receive certificates representing their ownership
interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs services
for its participants (including the Agent Members), some of whom (and/or their
representatives) own DTC. DTC maintains lists of its participants and will
maintain the positions (ownership interests) held by each such participant (the
"Agent Member") in shares of MuniPreferred, whether for its own account or as a
nominee for another person.
CONCERNING THE AUCTION AGENT
The Auction Agent is acting as agent for the Fund in connection with
Auctions. In the absence of bad faith or negligence on its part, the Auction
Agent will not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the Auction
Agency Agreement and will not be liable for any error of judgment made in good
faith unless the Auction Agent will have been negligent in ascertaining the
pertinent facts.
The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders of shares of MuniPreferred, the Auction Agent's registry of
Existing Holders, the results of Auctions and notices from any Broker-Dealer (or
other Person, if permitted by the Fund) with respect to transfers described
under "Description of MuniPreferred -- The Auction -- Secondary Market Trading
and Transfer of MuniPreferred" in the Prospectus. The Auction Agent is not
required to accept any such notice for an Auction unless it is received by the
Auction Agent by 3:00 p.m., New York City time, on the Business Day preceding
such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon notice to
the Fund on a date no earlier than 45 days after such notice. If the Auction
Agent should resign, the Fund will use its best efforts to enter into an
agreement with a successor Auction Agent containing substantially the same terms
and conditions as the Auction Agency Agreement. The Fund may remove the Auction
Agent provided that prior to such removal the Fund shall have entered into such
an agreement with a successor Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for shares of MuniPreferred will pay
to each Broker-Dealer, from funds provided by the Fund, a service charge at the
annual rate of 1/4 of 1% in the case of any Auction immediately preceding a Rate
Period of less than one year, or a percentage agreed to by the Fund and the
Broker-Dealers in the case of any Auction immediately preceding a Rate Period of
one year or longer, of the purchase price of shares of MuniPreferred placed by
such Broker-Dealer at such Auction. For the purposes of the preceding sentence,
shares of MuniPreferred will be placed by a Broker-Dealer if such shares were
(a) the subject of Hold Orders deemed to have been submitted to the Auction
Agent by the Broker Dealer and were acquired by such Broker-Dealer for its own
account or were acquired by such Broker-Dealer for its customers who are
Beneficial Owners or (b) the subject of an Order submitted by such Broker-Dealer
that is (i) a Submitted Bid of an Existing Holder that resulted in such Existing
Holder continuing to hold such shares as a result of the Auction or (ii) a
Submitted Bid of a Potential Holder that resulted in such Potential Holder
purchasing such shares as a result of the Auction or (iii) a valid Hold Order.
The Fund may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one Broker-Dealer
Agreement is in effect after such termination.
The Broker-Dealer Agreements provides that a Broker-Dealer (other than an
affiliate of the Fund) may submit Orders in Auctions for its own account, unless
the Fund notifies all Broker-Dealers that they may no longer do so, in which
case Broker-Dealers may continue to submit Hold Orders and Sell Orders for their
own accounts. Any Broker-Dealer that is an affiliate of the Fund may submit
Orders in Auctions, but only if such Orders are not for its own account. If a
Broker-Dealer submits an Order for its own account in any Auction, it might have
an advantage over other Bidders because it would have knowledge of all Orders
submitted by it in
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<PAGE> 98
that Auction; such Broker-Dealer, however, would not have knowledge of Orders
submitted by other Broker-Dealers in that Auction.
TAX MATTERS
The following is based upon the advice of Vedder, Price, Kaufman &
Kammholz, counsel to the Funds.
The Fund qualifies under Subchapter M of the Code as a regulated investment
company and satisfies conditions which enable dividends on common stock or
shares of MuniPreferred which are attributable to interest on Municipal
Obligations to be exempt from Federal income tax in the hands of owners of such
stock, subject to the possible application of the alternative minimum tax.
To qualify under Subchapter M for tax treatment as a regulated investment
company, the Fund must, among other things: (a) distribute to its shareholders
at least 90% of the sum of (i) its investment company taxable income (as that
term is defined in the Code determined without regard to the deduction for
dividends paid) and (ii) its net tax-exempt income; (b) with respect to taxable
years beginning prior to August 5, 1997, 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 the Fund (i) at least
50% of the market value of the 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 the
Fund's total assets, and to not more than 10% of the outstanding voting
securities of such issuer; and (ii) not more than 25% of the market value of the
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, the Fund may be
restricted in the selling of portfolio securities held for less than three
months (but only for its taxable year ending October 31, 1997) and in the
utilization of certain of the investment techniques described under "Investment
Objectives and Policies of the Funds -- Investment Restrictions" above. If in
any year the Fund should fail to qualify under Subchapter M for tax treatment as
a regulated investment company, the Fund would incur a regular Federal corporate
income tax upon its taxable income for that year, and distributions to its
shareholders would be taxable to such holders as ordinary income to the extent
of the earnings and profits of the 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, the 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.
The Fund intends to qualify to pay "exempt-interest" dividends on its
shares of Common Stock and shares of MuniPreferred 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, the 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 the 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 the 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 Objective and
Policies -- Municipal Obligations" above. Gains of the 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
the Fund of net income received, if any, from taxable temporary investments
S-14
<PAGE> 99
and net short-term capital gains, if any, realized by the Fund will be taxable
to its shareholders as ordinary income. Distributions by the Fund of net capital
gains, if any, are taxable as long-term capital gain, regardless of the length
of time the shareholder has owned shares of Common Stock or shares of
MuniPreferred of the Fund. As long as the 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 IRS currently requires that a regulated investment company that has two
or more classes of shares must designate to each such class proportionate
amounts of each type of its income for each tax year based upon the percentage
of total dividends distributed to each class for such year. Under a special
"grandfather" provision contained in Revenue Ruling 89-81, regulated investment
companies can make non-proportionate designations pursuant to a rule described
in a registration statement filed with the Securities and Exchange Commission
prior to June 13, 1989. In the past, the Fund has designated exempt-interest
dividends disproportionately to holders of Preferred Stock and designated net
capital gain and investment company taxable income to holders of its Common
Stock pursuant to this "grandfather" provision. Currently, the Fund intends each
year to allocate, to the fullest extent practicable, net tax-exempt interest,
net capital gains (i.e., the excess of net long-term capital gain over net
short-term capital loss) and other taxable income, if any, between its shares of
Common Stock and shares of MuniPreferred in proportion to the total dividends
paid to each class with respect to such year. To the extent permitted under
applicable law, the Fund reserves the right to make special allocations of
income within a class, consistent with the objectives of the Fund. If, (a) in
the case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period
Days or fewer, the Fund retroactively allocates any net capital gains or other
taxable income for Federal income tax purposes to shares of its MuniPreferred as
a result of the redemption of all or a portion of the outstanding shares of its
MuniPreferred or the liquidation of the Fund without having given advance notice
thereof as required by the Statement or (b) in the case of any Special Rate
Period of more than 28 Rate Period Days, the Fund allocates any net capital
gains or other taxable income for Federal income tax purposes to shares of its
MuniPreferred without having given advance notice thereof as described above,
the Fund will arrange to make certain payments to owners of shares of its
MuniPreferred to which such allocation was made to offset the Federal income tax
effect thereof as described under "Description of MuniPreferred -- Dividends
and Dividend Periods -- Gross-up Payments" in the Prospectus.
In general, except as discussed above, dividends on the Fund's shares of
MuniPreferred will be exempt from Federal income tax in the hands of owners of
such shares subject to the possible application of the alternative minimum tax.
The Fund intends to allocate net capital gains and other taxable income, if any,
proportionately between its shares of Common Stock and shares of MuniPreferred.
The Fund shall, in the case of a Minimum Rate Period or a Special Rate Period of
28 Rate Period Days, and may, in the case of any other Special Rate Period,
notify the Auction Agent of the amount of any net capital gains or other income
taxable for Federal income tax purposes to be included in any dividend on shares
of its MuniPreferred prior to the Auction establishing the Applicable Rate for
such dividend. The amount of taxable income allocable to the Fund's shares of
MuniPreferred will depend upon the amount of such income realized by the Fund,
but is not generally expected to be significant. Except for dividends paid on
shares of MuniPreferred which include an allocated portion of any net capital
gains or other taxable income, the Fund anticipates that all other dividends
paid on shares of its MuniPreferred will constitute exempt-interest dividends
for Federal income tax purposes.
The Fund has received an opinion of counsel to the effect that, the manner
in which the Fund intends to allocate items of tax-exempt income, net capital
gains and other taxable income, if any, between its shares of Common Stock and
shares of MuniPreferred will be respected for Federal income tax purposes. This
opinion of counsel represents only counsel's best legal judgment, and is not
binding on the IRS or the courts. Currently there is no guidance from the IRS or
other sources specifically addressing whether the Fund's method for making such
allocations will be respected for Federal income tax purposes, and it is
possible that the IRS could disagree with counsel's opinion. If the IRS were to
disagree with the Fund's allocation, it either could assert the need to
reallocate the Fund's net capital gains or other taxable income or it could
disallow a portion of the Fund's dividends paid deduction. In the event of a
reallocation, some of the dividends identified by that Fund as tax-exempt to
owners of its shares of MuniPreferred may be recharacterized as additional
capital gain or other taxable income. Under these circumstances, the Fund would
not be required to make gross-up
S-15
<PAGE> 100
payments to such owners to offset the tax effect of such reallocation. In
addition, a reallocation or a disallowance of part of the Fund's dividends paid
deduction would likely cause the Fund to be liable for income tax on any
reallocated taxable income and possibly an excise tax. Counsel has advised the
Fund that, in its opinion, if the IRS were to challenge in court the Fund's
allocations of income and gain, the IRS should not prevail.
In order for any distributions to owners of the Fund's shares of
MuniPreferred to be eligible to be treated as exempt-interest dividends, such
shares of MuniPreferred must be treated as stock for Federal income tax
purposes. The Fund has received an opinion of counsel to the effect that its
shares of MuniPreferred will constitute stock of the Fund for Federal income tax
purposes and, therefore, distributions declared and paid at the Applicable Rate
as dividends with respect to the Fund's shares of MuniPreferred, to the extent
paid out of current or accumulated earnings and profits of the Fund, will
constitute dividends for Federal income tax purposes. This opinion of counsel is
based, among other things, on (a) a revenue ruling published by the IRS in 1990,
which holds that a preferred stock that has its dividend rate periodically set
pursuant to an auction process substantially similar to the auction process to
be established for the Fund's shares of MuniPreferred is treated as stock for
Federal income tax purposes and (b) the Fund's representation to counsel that
there is no express or implied agreement between or among a Broker-Dealer or any
other party and the Fund, Nuveen or any owner of the Fund's shares of
MuniPreferred that the Broker-Dealer or other party will guarantee or otherwise
arrange to ensure that an owner of such shares will be able to sell such shares.
This opinion represents only counsel's best legal judgment and is not binding on
the IRS or the courts.
If at any time when the Fund's shares of MuniPreferred are outstanding the
Fund fails to meet the MuniPreferred Basic Maintenance Amount or the 1940 Act
MuniPreferred Asset Coverage, the Fund will be required to suspend distributions
to holders of its shares of Common Stock until such maintenance amount or asset
coverage, as the case may be, is restored. See "Description of
MuniPreferred -- Dividends and Dividend Periods -- Restrictions on Dividends and
Other Distributions" in the Prospectus. This may prevent the Fund from
distributing at least 90% of its investment company taxable income and net
tax-exempt income, and may therefore jeopardize the Fund's qualification for
taxation as a regulated investment company or cause the Fund to incur a tax
liability or a non-deductible 4% excise tax on the undistributed taxable income
(including gain), or both. Upon failure to meet the MuniPreferred Basic
Maintenance Amount or the 1940 Act MuniPreferred Asset Coverage, the Fund will
be required to redeem its shares of MuniPreferred in order to maintain or
restore such maintenance amount or asset coverage and avoid the adverse
consequences to the Fund and its shareholders of failing to qualify as a
regulated investment company. There can be no assurance, however, that any such
redemption would achieve such objectives.
The Code provides that interest on indebtedness incurred or continued to
purchase or carry the 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, the
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."
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<PAGE> 101
The Fund may, at its option, redeem shares of its MuniPreferred in whole or
in part, and is required to redeem shares of its MuniPreferred to the extent
required to maintain the MuniPreferred Basic Maintenance Amount and the 1940 Act
MuniPreferred Asset Coverage. Gain or loss, if any, resulting from a redemption
of the shares of MuniPreferred will be taxed as gain or loss from the sale or
exchange of the shares of MuniPreferred under Section 302 of the Code rather
than as a dividend, but only if the redemption distribution (a) is deemed not to
be essentially equivalent to a dividend, (b) is in complete redemption of an
owner's interest in the Fund, (c) is substantially disproportionate with respect
to the owner, or (d) with respect to non-corporate owners, is in partial
liquidation of the Fund. For purposes of (a), (b) and (c) above, an owner's
common shares ownership of the Fund will be taken into account.
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,
distributions of net long-term capital gains and any gain from the sale or other
disposition of the Fund's shares of MuniPreferred 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, in the case of an individual, 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 the Fund (and received by
the shareholders) on December 31 of the year declared.
The sale or other disposition of shares of common stock or shares of
MuniPreferred of the Fund will normally result in capital gain or loss to
shareholders. 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 short-term capital gains and ordinary
income will be taxed at a maximum rate of 39.6% while other capital gains of
non-corporate taxpayers may be taxed at more favorable rates as described below.
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 the 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.
For taxable years ending after May 6, 1997, non-corporate investors who
dispose of capital assets held for more than eighteen (18) months generally will
pay tax upon disposition of those assets at a 10% rate if they are in the lowest
tax bracket (for 1997, singles with taxable income of $24,650 or less and
married couples filing jointly with taxable income of $41,200 or less), and at a
20% rate if they are in higher tax brackets. Gain on capital assets held for
more than one (1) year but not more than eighteen (18) months will be subject to
a 28% maximum rate (15% for investors in the lowest tax bracket). In addition,
generally commencing with taxable years beginning after December 31, 2000 and
subject to certain conditions, the gain resulting from certain capital assets
held for more than five years will be taxed at an 8% rate for investors in the
lowest tax bracket and an 18% rate for other investors.
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 the 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. The Fund
will annually supply a report indicating the percentage of the Fund's income
attributable to Municipal Obligations subject to the Federal alternative minimum
tax.
S-17
<PAGE> 102
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 the Fund that would otherwise be tax-exempt, is
included in calculating a corporation's adjusted current earnings.
For taxable years beginning after December 31, 1997, certain small
corporations are not subject to the alternative minimum tax. A corporation
qualifies for such exemption provided that (i) for the corporation's first
taxable year beginning after December 31, 1996, its average annual gross
receipts for the three prior taxable year period does not exceed $5,000,000 and
(ii) the corporation's average annual gross receipts for each three prior
taxable year period thereafter does not exceed $7,500,000.
Tax-exempt income, including exempt-interest dividends paid by the Fund, is
taken into account in calculating the amount of social security and railroad
retirement benefits that may be subject to Federal income tax.
The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of the Fund's
shares who do not furnish to the Fund their correct taxpayer identification
number (in the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The 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 the Fund.
The value of common shares acquired pursuant to the 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
taxation of the 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 the 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.
CERTAIN OWNERS OF RECORD
As of July 31, 1997, no person is known to the Fund to own of record or
beneficially five percent or more of the outstanding shares of Common Stock or
MuniPreferred.
EXPERTS
The Statement of Net Assets of the Fund as of , 199 appearing
in this Prospectus has been audited by Ernst & Young LLP, Sears Tower, 233 South
Wacker Drive, Chicago, Illinois 60606, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and is included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing. Ernst & Young audits and reports on the Fund's annual financial
statements, reviews certain regulatory reports and the Fund's Federal income tax
returns, and performs other professional accounting, auditing, tax and advisory
services when engaged to do so by the Fund.
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<PAGE> 103
FINANCIAL STATEMENTS
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<PAGE> 104
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
ALASKA -- 0.7%
$ 1,770,000 Alaska Housing Finance Corporation, Insured Mortgage
Program Bonds, 1990 First Series, 7.800%, 12/01/30..... Aa1 12/00 at 102 $ 1,781,700
880,000 Alaska State Housing Finance Corporation, Collateralized
Home Mortgage Bonds, 1987 Series B, 8.750%, 12/01/16... Aaa 6/98 at 102 900,152
6,000,000 North Slope Borough, Alaska, General Obligation Refunding
Bonds of 1988, Series G, 8.350%, 6/30/98............... A- No Opt. Call 6,275,700
ARIZONA -- 1.6%
3,160,000 The Industrial Development Authority of the City of
Phoenix, Arizona, Home Purchase Mortgage Revenue Bonds
(GNMA Mortgage-Backed Securities Program), Series
1988B, 8.200%, 4/01/22 (Alternative Minimum Tax)....... AAA 10/98 at 102 3,289,592
12,465,000 The Industrial Development Authority of the County of
Pima (Arizona), Industrial Development Lease Obligation
Refunding Revenue Bonds, 1988 Series A (Irvington
Project), 7.250%, 7/15/10.............................. Aaa 1/02 at 103 13,748,770
3,795,000 The Industrial Development Authority of the County of
Pima, Single Family Mortgage Revenue Bonds (GNMA
Mortgage-Backed Securities Program), Series 1988,
8.125%, 9/01/20 (Alternative Minimum Tax).............. AAA 3/99 at 102 3,951,658
CALIFORNIA -- 15.9%
17,000,000 California Health Facilities Financing Authority, Kaiser
Permanente, Medical Care Program, Semiannual Tender
Revenue Bonds, 1985 Tender Bonds, 5.550%, 8/15/25...... AA 2/02 at 101 16,039,840
14,650,000 California Health Facilities Financing Authority,
Hospital Revenue Bonds (Children's Hospital of Los
Angeles), 1991 Series A, 7.125%, 6/01/21 (Pre-refunded
to 6/01/01)............................................ Aaa 6/01 at 102 16,218,576
26,725,000 State Public Works Board of the State of California,
Lease Revenue Refunding Bonds (The Regents of the
University of California), 1993 Series A (Various
University of California Projects), 5.500%, 6/01/21.... A1 6/03 at 102 25,178,424
11,395,000 State Public Works Board of the State of California,
Lease Revenue Bonds (Department of Corrections), 1993
Series E (California State Prison-Madera County (II)),
5.500%, 6/01/15........................................ A No Opt. Call 11,221,340
15,975,000 State of California Department of Transportation East Bay
State Building Authority, Certificates of
Participation, Series 1991A, 6.500%, 3/01/16........... A 3/01 at 102 16,636,525
13,000,000 State of California, Various Purpose General Obligation
Refunding Bonds, 5.150%, 10/01/19...................... A1 10/03 at 102 11,893,570
15,285,000 Los Angeles Convention and Exhibition Center Authority,
Lease Revenue Bonds, 1993 Refunding Series A, The City
of Los Angeles (California), 5.375%, 8/15/18........... Aaa 8/03 at 102 14,414,978
5,000,000 Department of Water and Power of The City of Los Angeles,
California, Electric Plant Refunding Revenue Bonds,
Second Issue of 1993, 4.750%, 11/15/19................. Aaa 11/03 at 102 4,290,850
12,250,000 Los Angeles County Transportation Commission
(California), Sales Tax Revenue Refunding Bonds, Series
1991-B, 5.750%, 7/01/18................................ AA- 7/01 at 100 12,167,313
1,285,000 City of Martinez (California), Home Mortgage Revenue
Bonds, 1983 Issue A, 10.750%, 2/01/16.................. Aaa No Opt. Call 1,953,637
</TABLE>
S-20
<PAGE> 105
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
CALIFORNIA (Continued)
$ 4,125,000 Redevelopment Agency of the City of Moorpark, Moorpark
Redevelopment Project, 1993 Tax Allocation Bonds,
6.125%, 10/01/18....................................... A- 10/03 at 102 $ 4,140,881
20,000,000 City of Pomona, California, Single Family Mortgage
Revenue Refunding Bonds (GNMA and FNMA Mortgage-Backed
Securities), Series 1990A, 7.600%, 5/01/23............. Aaa No Opt. Call 25,015,200
3,955,000 City of Redlands, California, Refunding Certificates of
Participation (Loma Linda University Medical Center
Project), Series 1993-D, 5.000%, 12/01/22.............. Aaa 12/03 at 102 3,485,383
5,000,000 Sacramento, California, Municipal Utility District,
Electric Revenue Refunding Bonds, 1993 Series D,
5.250%, 11/15/20....................................... Aaa 11/03 at 102 4,616,000
San Bernardino Joint Powers Financing Authority, Tax
Allocation Refunding Bonds, Series 1995A:
6,675,000 5.750%, 10/01/15......................................... Aaa 10/05 at 102 6,655,843
12,500,000 5.750%, 10/01/25......................................... Aaa 10/05 at 102 12,404,125
3,000,000 San Diego Public Facilities Financing Authority Sewer
Revenue Bonds, Series 1993, 5.250%, 5/15/20............ Aaa 5/03 at 102 2,771,940
17,540,000 The Regents of the University of California, Refunding
Revenue Bonds (Multiple Purpose Projects), Series B,
4.750%, 9/01/21........................................ Aaa 9/03 at 102 14,920,226
COLORADO -- 2.9%
City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1991D:
9,450,000 7.750%, 11/15/13 (Alternative Minimum Tax)............... Baa No Opt. Call 11,241,248
8,275,000 7.750%, 11/15/21 (Alternative Minimum Tax)............... Baa 11/01 at 102 9,106,555
3,500,000 City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1992B, 7.250%, 11/15/23
(Alternative Minimum Tax).............................. Baa 11/02 at 102 3,765,160
8,700,000 City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1992C, 6.750%, 11/15/22
(Alternative Minimum Tax).............................. Baa 11/02 at 102 9,040,170
3,115,000 Colorado Local Single Family Mortgage Revenue Bonds (City
and County of Denver, Colorado -- Issuer, GNMA
Mortgage-Backed Securities Program), Series 1988A,
8.125%, 12/01/20 (Alternative Minimum Tax)............. AAA 12/98 at 102 3,235,052
1,023,489 El Paso County, Colorado, Single Family Mortgage Revenue
Tax-Exempt Refunding Bonds, Series 1992A Class A-2,
8.750%, 6/01/11........................................ Aaa No Opt. Call 1,103,230
DISTRICT OF COLUMBIA -- 2.1%
10,740,000 District of Columbia, Hospital Revenue Refunding Bonds
(Providence Hospital Issue), Series 1988A, 7.875%,
12/01/15............................................... AA 12/98 at 102 11,455,069
14,800,000 District of Columbia Housing Finance Agency,
Collateralized Single Family Mortgage Revenue Bonds,
Series 1988E-4, 6.375%, 6/01/26 (Alternative Minimum
Tax)................................................... AAA 12/04 at 103 15,043,756
FLORIDA -- 4.4%
9,775,000 Florida Housing Finance Agency, GNMA Collateralized Home
Ownership Mortgage Revenue Bonds, 1988 Series G1 Bonds,
8.300%, 6/01/20 (Alternative Minimum Tax).............. Aaa 12/98 at 103 10,172,256
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
FLORIDA (Continued)
$ 9,290,000 State of Florida, Full Faith and Credit Department of
Transportation Right-of-Way Acquisition and Bridge
Construction Bonds, Series 1995, 5.800%, 7/01/21....... Aa 7/05 at 101 $ 9,247,266
Greater Orlando Aviation Authority, Airport Facilities
Revenue Bonds, Series 1988 of the City of Orlando,
Florida (Alternative Minimum Tax):
1,470,000 8.375%, 10/01/16 (Pre-refunded to 10/01/98)............ A1 10/98 at 102 1,580,735
13,530,000 8.375%, 10/01/16....................................... A1 10/98 at 102 14,439,216
City of Pensacola Health Facilities Authority, Health
Facilities Revenue Refunding Bonds, Series 1988
(Daughters of Charity National Health System Sacred
Heart Hospital of Pensacola Florida):
11,655,000 7.875%, 1/01/08 (Pre-refunded to 1/01/98).............. Aaa 1/98 at 101 1/2 12,130,407
9,435,000 7.875%, 1/01/11 (Pre-refunded to 1/01/98).............. Aaa 1/98 at 101 1/2 9,819,854
GEORGIA -- 3.2%
7,700,000 Municipal Electric Authority of Georgia, Power Revenue
Bonds, Series Q, 8.375%, 1/01/16....................... A 1/98 at 102 8,071,448
5,850,000 Municipal Electric Authority of Georgia, Power Revenue
Bonds, Series O, 8.125%, 1/01/17....................... A 1/98 at 102 6,117,053
2,210,000 Urban Residential Finance Authority of the City of
Atlanta, Georgia, Single Family Mortgage Revenue Bonds
(GNMA Collateralized Home Mortgage Program), Series
1988, in cooperation with the Housing Authority of
Fulton County, Georgia, 8.250%, 10/01/21 (Alternative
Minimum Tax)........................................... AAA 10/98 at 103 2,300,522
23,420,000 Development Authority of Monroe County (Georgia),
Pollution Control Revenue Bonds (Georgia Power Company
Plant Scherer Project), Second Series 1994, 6.750%,
10/01/24............................................... A1 10/99 at 102 24,376,707
ILLINOIS -- 5.2%
8,230,000 Illinois Development Finance Authority, Pollution Control
Refunding Revenue Bonds, 1994 Series A (Illinois Power
Company Project), 5.700%, 2/01/24...................... Aaa 2/04 at 102 8,025,238
8,500,000 Illinois Educational Facilities Authority, Revenue
Refunding Bonds, The University of Chicago, Series
1993B, 5.600%, 7/01/24................................. Aa1 7/03 at 102 8,095,400
5,000,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1992 (Highland Park Hospital), 6.200%,
10/01/22............................................... Aaa 10/02 at 102 5,084,300
2,000,000 Illinois Health Facilities Authority Revenue Bonds,
Series 1997A (Highland Park Hospital Project), 5.750%,
10/01/26 (WI).......................................... Aaa 10/07 at 102 1,948,700
12,700,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1988B (Evangelical Hospitals Corporation),
8.100%, 1/01/08 (Pre-refunded to 1/01/99).............. Aaa 1/99 at 102 13,584,682
5,890,000 Illinois Housing Development Authority, Residential
Mortgage Revenue Bonds, 1988 Series C, 8.100%, 2/01/22
(Alternative Minimum Tax).............................. Aa 8/98 at 102 6,087,079
5,695,000 Illinois Housing Development Authority, Residential
Mortgage Revenue Bonds, 1988 Series C, 8.100%,
8/01/17................................................ Aa 8/98 at 103 5,968,303
6,000,000 City of Chicago (Illinois), Chicago-O'Hare International
Airport, General Airport Second Lien, Revenue Refunding
Bonds, 1993 Series C, 5.000%, 1/01/18.................. Aaa 1/04 at 102 5,402,400
5,000,000 City of Chicago, Collateralized Single Family Mortgage
Revenue Bonds, Series 1996-A, 7.000%, 9/01/27
(Alternative Minimum Tax).............................. Aaa 3/06 at 105 5,477,850
</TABLE>
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<PAGE> 107
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
ILLINOIS (Continued)
$ 785,000 Regional Transportation Authority, Cook, DuPage, Kane,
Lake, McHenry and Will Counties, Illinois, General
Obligation Bonds, Series 1992B, 9.000%, 6/01/06........ Aaa No Opt. Call $ 998,449
4,925,000 Regional Transportation Authority, Cook, DuPage, Kane,
Lake, McHenry and Will Counties, Illinois, General
Obligation Bonds, Series 1992A, 9.000%, 6/01/06........ Aaa No Opt. Call 6,264,157
INDIANA -- 3.7%
2,550,000 Indiana State Office Building Commission, Correctional
Facilities Program Revenue Bonds, Series 1995A, 5.500%,
7/01/20................................................ Aaa 7/05 at 102 2,445,119
30,000,000 The Indianapolis Local Public Improvement Bond Bank,
Series 1988 D Bonds, 8.500%, 2/01/18 (Pre-refunded to
2/01/98)............................................... N/R 2/98 at 102 31,588,800
8,000,000 Metropolitan School District of Steuben County Middle
School Building Corporation, First Mortgage Bonds,
Series 1995, Steuben County, Indiana, 6.375%,
7/15/16................................................ Aaa 7/05 at 102 8,396,960
5,300,000 Whitley County Middle School Building Corporation, First
Mortgage Bonds, Series 1994, Columbia City, Indiana,
6.250%, 7/15/15........................................ Aaa 1/04 at 102 5,488,150
IOWA -- 0.8%
3,000,000 Iowa Finance Authority, Private College Refunding Revenue
Bonds (Drake University Project), Series 1996, 5.400%,
12/01/16............................................... Aaa 12/05 at 102 2,868,900
5,785,000 Iowa Finance Authority, Variable Rate Demand Industrial
Revenue Refunding Bonds, Series A 1989 (Urbandale Hotel
Corporation Project No. 00475), 8.500%, 8/01/16
(Alternative Minimum Tax) (Pre-refunded to 7/15/14).... AAA 7/14 at 100 7,521,136
KANSAS -- 0.8%
9,345,000 Sedgwick County, Kansas and Shawnee County, Kansas, GNMA
Collateralized Mortgage Revenue Bonds, 1988 Series E,
8.250%, 11/01/20 (Alternative Minimum Tax)............. AAA 11/98 at 103 9,764,404
LOUISIANA -- 0.8%
7,660,000 Louisiana Public Facilities Authority, Extended Care
Facilities Revenue Bonds (Comm-Care Corporation
Project), Series 1994, 11.000%, 2/01/14................ BBB No Opt. Call 10,323,229
MASSACHUSETTS -- 0.9%
3,000,000 Massachusetts Industrial Finance Agency, Resource
Recovery Revenue Bonds, SEMASS Project, Series 1991B,
9.250%, 7/01/15 (Alternative Minimum Tax).............. N/R 7/01 at 103 3,362,970
8,800,000 Massachusetts Water Resources Authority General Revenue
Bonds, 1992 Series A, 5.500%, 7/15/22.................. A 7/02 at 100 8,258,184
MICHIGAN -- 1.6%
4,000,000 School District of the City of Detroit, Wayne County,
Michigan, School Building and Site Improvement and
Refunding Bonds (Unlimited Tax General Obligation),
Series 1993, 5.400%, 5/01/13........................... AA 5/03 at 102 3,885,320
8,870,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Bonds, Series 1995-A, 5.000%, 7/01/25.................. Aaa 7/05 at 100 7,862,279
9,625,000 Livonia Public Schools School District, County of Wayne,
State of Michigan, 1993 Refunding Bonds, 5.500%,
5/01/21................................................ Aaa 5/03 at 102 9,187,448
MINNESOTA -- 3.5%
4,375,000 Minnesota Housing Finance Agency, Single Family Mortgage
Bonds, 1988 Series C, 8.500%, 7/01/19 (Alternative
Minimum Tax)........................................... AA+ 7/98 at 102 4,513,600
</TABLE>
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<PAGE> 108
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
MINNESOTA (Continued)
$ 2,945,000 The Minneapolis/Saint Paul Housing Finance Board, Single
Family Mortgage Revenue Bonds (Minneapolis/Saint Paul
Family Housing Program, Phase X, FNMA and GNMA
Mortgage-Backed Securities Program), Series 1994,
7.500%, 11/01/27 (Alternative Minimum Tax)............. AAA 11/04 at 102 $ 3,093,870
21,970,000 The Housing and Redevelopment Authority of the City of
Saint Paul, Minnesota, Sales Tax Revenue Refunding
Bonds (Civic Center Project), Series 1996, 7.100%,
11/01/23............................................... Aaa 11/15 at 103 25,818,046
2,900,000 The Housing and Redevelopment Authority of the City of
Saint Paul, Minnesota, Single Family Mortgage Revenue
Bonds, Refunding Series 1991-B, 7.250%, 9/01/11........ Aa No Opt. Call 3,047,871
8,175,000 Port Authority of the City of Saint Paul, Energy Park Tax
Increment Revenue Refunding Bonds, Series 1988, 8.000%,
12/01/07 (Pre-refunded to 12/01/98).................... AAA 12/98 at 102 8,529,877
MISSOURI -- 1.6%
7,000,000 Missouri Housing Development Commission Single Family
Mortgage Revenue Bonds (Homeownership Loan Program),
1996 Series C, 7.450%, 9/01/27 (Alternative Minimum
Tax)................................................... AAA 3/07 at 105 7,703,570
11,120,000 Francis Howell School District, St. Charles County,
Missouri, General Obligation Refunding Bonds, Series
1994A, 7.800%, 3/01/08................................. Aaa No Opt. Call 13,518,918
NEVADA -- 0.8%
10,000,000 Clark County School District, Nevada, General Obligation,
School Improvement Bonds, Series 1988A, 8.000%, 3/01/08
(Pre-refunded to 3/01/98).............................. N/R 3/98 at 102 10,521,300
NEW HAMPSHIRE -- 2.3%
10,000,000 Business Finance Authority of the State of New Hampshire,
Pollution Control Refunding Revenue Bonds (The United
Illuminating Company Project-1993 Series A), 5.875%,
10/01/33............................................... BBB- 10/03 at 102 9,292,200
11,000,000 New Hampshire Housing Finance Authority, Single Family
Mortgage Revenue Bonds, 1993 Series B, 6.050%,
7/01/25................................................ Aa 7/03 at 102 10,998,900
9,135,000 New Hampshire Hosing Finance Authority Single Family
Mortgage Acquisition Revenue Bonds, 1996 Series B,
6.400%, 1/01/27 (Alternative Minimum Tax).............. Aa 7/06 at 102 9,268,645
NEW MEXICO -- 0.4%
5,445,000 New Mexico Mortgage Finance Authority, Single Family
Mortgage Purchase Refunding Senior Bonds, 1992 Series
A, 6.900%, 7/01/24..................................... Aa1 7/02 at 102 5,659,097
NEW YORK -- 10.0%
12,365,000 New York State Energy Research and Development Authority,
Facilities Revenue Bonds, Series 1993 A (Consolidated
Edison Company of New York, Inc. Project), 6.000%,
3/15/28 (Alternative Minimum Tax)...................... A1 3/03 at 102 12,375,510
20,030,000 New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home FHA-Insured Mortgage Revenue
Bonds, 1993 Series B, 5.500%, 2/15/22.................. AAA 2/04 at 102 18,953,988
18,000,000 Metropolitan Transportation Authority (New York),
Commuter Facilities 1987 Service Contract Bonds, Series
2, 8.000%, 7/01/18 (Pre-refunded to 7/01/98)........... Aaa 7/98 at 102 19,166,040
</TABLE>
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<PAGE> 109
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
NEW YORK (Continued)
$ 7,060,000 Municipal Assistance Corporation for the City of New York
(A Public Benefit Corporation of the State of New
York), Series 61 Bonds, 6.875%, 7/01/07 (Pre-refunded
to 7/01/97)............................................ AA 7/97 at 102 $ 7,237,277
11,540,000 Municipal Assistance Corporation for the City of New
York, New York, Series 60 Bonds, 7.000%, 7/01/06
(Pre-refunded to 7/01/97).............................. AA 7/97 at 102 11,832,077
7,500,000 The City of New York, General Obligation Bonds, Fiscal
1991 Series 9.500%, 6/01/03............................ Baa1 No Opt. Call 9,029,025
10,000,000 The City of New York, General Obligation Bonds, Fiscal
1996 Series G, 5.750%, 2/01/07......................... Baa1 2/06 at 9,999,000
101 1/2
10,000,000 The City of New York, General Obligation Bonds, Fiscal
1997 Series G, 6.000%, 10/15/26........................ Baa1 10/07 at 101 9,710,700
12,930,000 New York City Municipal Water Finance Authority, Water
and Sewer Revenue Bonds, Fiscal 1993 Series A, 5.500%,
6/15/20................................................ A2 6/02 at 100 12,164,544
10,000,000 New York City Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Fiscal 1996 Series B,
5.750%, 6/15/26........................................ Aaa 6/06 at 101 9,936,300
7,955,000 New York City Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Series 1992C, 6.500%,
6/15/21 (Pre-refunded to 6/15/97)...................... Aaa 6/97 at 8,100,815
101 1/2
NORTH CAROLINA -- 1.3%
16,415,000 North Carolina Eastern Municipal Power Agency, Power
System Revenue Bonds, Refunding Series 1988A, 8.000%,
1/01/21 (Pre-refunded to 1/01/98)...................... Aaa 1/98 at 102 17,183,058
OHIO -- 1.4%
7,065,000 Ohio Housing Finance Agency, Single Family Mortgage
Revenue Bonds (GNMA Mortgage-Backed Securities
Program), 1988 Series B, 8.250%, 12/15/19 (Alternative
Minimum Tax)........................................... AAA 12/98 at 102 7,473,357
11,300,000 State of Ohio, Turnpike Revenue Bonds, 1994 Series A,
Issued by the Ohio Turnpike Commission, 5.750%,
2/15/24................................................ AA- 2/04 at 102 11,139,427
OKLAHOMA -- 1.5%
11,770,000 Oklahoma Housing Finance Agency, GNMA Collateralized
Single Family Mortgage Revenue Bonds, Series 1988A,
8.250%, 12/01/20 (Alternative Minimum Tax)............. AAA 12/98 at 102 12,261,986
6,750,000 Washington County Medical Authority (Bartlesville,
Oklahoma), Hospital Revenue Bonds (Jane Phillips
Episcopal Hospital), Series 1989A, 8.500%, 11/01/10
(Pre-refunded to 5/01/99).............................. N/R 5/99 at 102 7,373,498
PENNSYLVANIA -- 4.2%
10,000,000 Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue Bonds, Series 1993-37A, 5.450%,
10/01/17............................................... AA+ 10/03 at 102 9,606,900
14,500,000 County of Allegheny, Pennsylvania, Airport Revenue Bonds,
Series 1988C (Greater Pittsburgh International
Airport), 8.250%, 1/01/16 (Alternative Minimum Tax).... Aaa 1/98 at 102 15,140,030
12,875,000 Allegheny County Hospital Development Authority
(Pennsylvania), Health Center Revenue Bonds, Series
1992A (Presbyterian University Health System, Inc.
Project), 6.250%, 11/01/23............................. Aaa 11/02 at 100 13,190,180
5,000,000 The School District of Philadelphia, Pennsylvania,
General Obligation Bonds, Series B of 1995, 5.500%,
9/01/25................................................ Aaa 9/05 at 102 4,782,100
10,180,000 City of Philadelphia, Pennsylvania, Water and Sewer
Revenue Bonds, Sixteenth Series, 7.500%, 8/01/10
(Pre-refunded to 8/01/01).............................. AAA 8/01 at 102 11,414,325
</TABLE>
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<PAGE> 110
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
SOUTH CAROLINA -- 1.2%
$ 17,250,000 South Carolina Jobs-Economic Development Authority,
Hospital Revenue Bonds (Anderson Area Medical Center,
Inc.), Series 1996, 5.250%, 2/01/26.................... Aaa 2/06 at 102 $ 15,894,840
TEXAS -- 9.0%
10,305,000 Alliance Airport Authority, Inc., Special Facilities
Revenue Bonds, Series 1990 (American Airlines, Inc.
Project), 7.500%, 12/01/29 (Alternative Minimum Tax)... Baa2 12/00 at 102 10,994,405
11,020,000 Brazos River Authority (Texas), Collateralized Pollution
Control Revenue Bonds (Texas Utilities Electric Company
Project), Series 1994A, 7.875%, 3/01/21 (Alternative
Minimum Tax)........................................... Baa1 3/01 at 102 12,027,008
10,095,000 Brazos River Authority (Texas), Collateralized Revenue
Refunding Bonds (Houston Lighting & Power Company
Project), Series 1988A, 8.250%, 5/01/19................ A2 5/98 at 102 10,593,794
5,565,000 Dallas-Forth Worth International Airport Facility
Improvement Corporation, American Airlines, Inc.
Revenue Bonds, Series 1990, 7.500%, 11/01/25
(Alternative Minimum Tax).............................. Baa2 11/00 at 102 5,918,934
40,000,000 Harris County Health Facilities Development Corporation,
Adjustable Convertible Extendable Securities (Greater
Houston Pooled Health Care Loan Program), Series 1985B,
7.375%, 12/01/25 (Mandatory put 12/01/98).............. Aa3 11/97 at 100 40,324,000
3,385,000 Harris County, Texas, Toll Road Senior Lien Revenue
Bonds, Series 1985-B, 8.700%, 8/15/17 (Pre-refunded to
8/15/97)............................................... AAA 8/97 at 103 3,533,297
12,700,000 Harris County, Texas, Toll Road Multiple Mode Senior Lien
Revenue Bonds, Series 1985-D, 8.300%, 8/15/17
(Pre-refunded to 8/15/98).............................. AAA 8/98 at 103 13,728,573
15,000,000 Harris County, Texas, Toll Road Senior Lien Revenue
Refunding Bonds, Series 1994, 5.300%, 8/15/13.......... Aaa 8/04 at 102 14,639,250
4,500,000 Tyler Health Facilities Development Corporation, Hospital
Refunding Revenue Bonds (East Texas Hospital Foundation
Project), Series 1988A, 8.250%, 11/01/06 (Pre-refunded
to 11/01/98)........................................... N/R 11/98 at 102 4,840,380
UTAH -- 2.3%
6,550,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, 1987 Series D, 8.625%, 7/01/21........ A1 7/97 at 102 6,728,291
3,000,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, 1987 Series C, 8.625%, 7/01/21
(Pre-refunded to 7/01/97).............................. Aaa 7/97 at 102 3,083,820
20,000,000 Intermountain Power Agency (Utah), Power Supply Revenue
Bonds, Series 1987B, 7.200%, 7/01/19................... A1 7/97 at 102 20,497,000
VIRGINIA -- 0.3%
1,000,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1987 Series C, Subseries C-7, 8.375%,
1/01/28 (Alternative Minimum Tax)...................... Aa1 1/99 at 102 1,002,860
3,355,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1992 Series B-AMT, Subseries B-7,
5.650%, 1/01/27 (Alternative Minimum Tax).............. Aa1 1/02 at 102 3,215,231
WASHINGTON -- 12.1%
5,000,000 Washington Health Care Facilities Authority, Revenue
Bonds, Series 1987 (Virginia Mason Medical Center,
Seattle), 8.000%, 7/01/15.............................. Aaa 7/97 at 102 5,133,200
12,900,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1993A, 5.700%,
7/01/17................................................ Aaa 7/03 at 102 12,589,368
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
WASHINGTON (Continued)
$ 23,370,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1993B, 5.600%,
7/01/15................................................ Aaa 7/03 at 102 $ 22,755,135
4,300,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1989B, 7.250%,
7/01/15 (Pre-refunded to 1/01/00)...................... Aaa 1/00 at 102 4,660,684
15,960,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1989A, 7.500%,
7/01/15 (Pre-refunded to 7/01/99)...................... Aaa 7/99 at 102 17,243,024
7,500,000 Washington Public Power Supply System, Nuclear Project
No. 2 Refunding Revenue Bonds, Series 1991A, 6.000%,
7/01/12................................................ Aa1 7/01 at 100 7,539,000
14,440,000 Washington Public Power Supply System, Nuclear Project
No. 2 Refunding Revenue Bonds, Series 1993A, 5.750%,
7/01/12................................................ Aa1 7/03 at 102 14,259,067
6,770,000 Washington Public Power Supply System, Nuclear Project
No. 2 Refunding Revenue Bonds, Series 1993B, 5.625%,
7/01/12................................................ Aa1 7/03 at 102 6,600,953
21,530,000 Washington Public Power Supply System, Nuclear Project
No. 3 Refunding Revenue Bonds, Series 1993C, 5.375%,
7/01/15................................................ Aa1 7/03 at 102 20,175,763
13,500,000 Washington Public Power Supply System, Nuclear Project
No. 3 Refunding Revenue Bonds, Series 1989B, 7.250%,
7/01/15 (Pre-refunded to 1/01/00)...................... Aaa 1/00 at 102 14,632,380
17,050,000 Municipality of Metropolitan Seattle, (Seattle,
Washington), Sewer Refunding Revenue Bonds, Series Z,
5.500%, 1/01/33........................................ Aaa 1/03 at 102 15,882,580
6,360,000 Public Utility District No. 1 of Snohomish County,
Washington, Generation System Revenue Bonds, Series
1993, 5.500%, 1/01/14.................................. Aaa 1/03 at 100 6,213,720
7,000,000 City of Spokane, Washington, Regional Solid Waste
Management System Revenue Bonds, Series 1989B, 7.750%,
1/01/11 (Alternative Minimum Tax)...................... Aaa 1/99 at 102 7,460,250
WEST VIRGINIA -- 1.2%
15,000,000 West Virginia Housing Development Fund, Housing Finance
Bonds, 1992 Series D, 7.050%, 11/01/24................. Aaa 5/02 at 102 15,776,250
PUERTO RICO -- 0.4%
5,250,000 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series 5.500%, 7/01/25.......................... Baa1 7/05 at 100 4,938,833
- --------------------------------------------------------------------------------------------------------------------------
$1,234,983,489 Total Investments -- (cost $1,230,212,288) -- 98.1%................................... 1,267,025,305
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES
-- 0.4%
$ 1,300,000 The Medical Clinic Board of the City of Birmingham-UAHSF,
Medical Clinic Revenue Bonds, UAHSF Series 1991,
Variable Rate Demand Bonds, 3.850%, 12/01/26+.......... A-1+ 1,300,000
700,000 Irvine Ranch Water District Variable Rate Demand Bonds,
3.750%, 6/01/15+....................................... VMIG-1 700,000
700,000 Health and Educational Facilities Authority of the State
of Missouri, Variable Rate Demand Bonds, Health
Facilities Revenue Bonds (St. Francis' Medical Center),
Series 1996A, 4.100%, 6/01/26+......................... A-1+ 700,000
225,000 New York City Municipal Water Finance Water and Sewer
System Revenue 1994 G, Variable Rate Demand Bonds,
3.950%, 6/15/24+....................................... VMIG-1 225,000
1,700,000 Santa Clara County Transit District, Refunding Equipment
Trust Certificates, Variable Rate Demand Bonds, 3.950%,
6/01/15+............................................... VMIG-1 1,700,000
</TABLE>
S-27
<PAGE> 112
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
$ 4,625,000 Total Temporary Investments -- 0.4%................................................... $ 4,625,000
- --------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities -- 1.5%................................................. 20,005,604
--------------------------------------------------------------------------------------------------------
Net Assets -- 100%.................................................................... $1,291,655,909
--------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
STANDARD NUMBER OF MARKET MARKET
& POOR'S MOODY'S SECURITIES VALUE PERCENT
-------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Summary of AAA Aaa 69 $ 652,255,010 51%
ratings* AA+, AA, AA- Aa1, Aa, Aa2, Aa3 25 241,147,958 19
portfolio of A+ A1 8 117,069,453 9
investments A, A- A, A2, A3 9 83,479,469 7
(excluding BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 13 115,386,467 9
temporary Non-Rated Non-Rated 5 57,689,948 5
investments):
- -----------------------------------------------------------------------------------------------------
TOTAL 129 $1,267,025,305 100%
=== ============== ===
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
<TABLE>
<S> <C>
* Ratings: Using the higher of Standard & Poor's or Moody's
rating.
N/R Investment is not rated.
** 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.
(WI) Security purchased on 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.
</TABLE>
See accompanying notes to financial statements.
S-28
<PAGE> 113
STATEMENT OF NET ASSETS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NPI
---
<S> <C>
ASSETS
Investments in municipal securities, at market value (note
1)........................................................ $1,267,025,305
Temporary investments in short-term municipal securities, at
amortized cost (note 1)................................... 4,625,000
Cash........................................................ 26,414
Receivables:
Interest.................................................. 26,724,221
Investments sold.......................................... 1,072,936
Other assets................................................ 635,017
--------------
Total assets......................................... 1,300,108,893
--------------
LIABILITIES
Payable for investments purchased........................... 1,920,692
Accrued expenses:
Management fees (note 6).................................. 652,468
Other..................................................... 270,459
Preferred share dividends payable........................... 538,423
Common share dividends payable.............................. 5,070,942
--------------
Total liabilities.................................... 8,452,984
--------------
Net assets (note 7)......................................... $1,291,655,909
==============
Preferred shares, at liquidation value...................... $ 350,000,000
==============
Preferred shares outstanding................................ 14,000
==============
Common shares outstanding................................... 63,785,431
==============
Net asset value per Common share outstanding (net assets
less Preferred shares at liquidation value, divided by
Common shares outstanding)................................ $ 14.76
==============
</TABLE>
See accompanying notes to financial statements.
S-29
<PAGE> 114
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NPI
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1)......................... $41,411,281
-----------
EXPENSES:
Management fees (note 6).................................. 3,985,487
Preferred shares -- remarketing/auction fees.............. 408,330
Preferred shares -- dividend disbursing agent fees........ 14,815
Shareholders' servicing agent fees and expenses........... 111,755
Custodian's fees and expenses............................. 79,049
Directors' fees and expenses (note 6)..................... 19,588
Professional fees......................................... 13,907
Shareholders' reports -- printing and mailing expenses.... 137,721
Stock exchange listing fees............................... 26,180
Investor relations expense................................ 55,534
Other expenses............................................ 30,227
-----------
Total expenses....................................... 4,882,593
-----------
Net investment income............................. 36,528,688
-----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and
3)........................................................ 78,189
Net change in unrealized appreciation or depreciation of
investments............................................... (10,840,877)
-----------
Net gain (loss) from investments.................. (10,762,688)
-----------
Net increase in net assets from operations.................. $25,766,000
===========
</TABLE>
See accompanying notes to financial statements.
S-30
<PAGE> 115
STATEMENT OF CHANGES IN NET ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
NPI
--------------------------------
SIX MONTHS YEAR ENDED
ENDED 4/30/97 10/31/96
------------- ----------
<S> <C> <C>
OPERATIONS
Net investment income....................................... $ 36,528,688 $ 73,868,581
Net realized gain from investment transactions (notes 1 and
3)........................................................ 78,189 1,864,659
Net change in unrealized appreciation or depreciation of
investments............................................... (10,840,877) (8,027,802)
-------------- --------------
Net increase in net assets from operations............. 25,766,000 67,705,438
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Common shareholders.................................... (30,425,648) (61,521,076)
Preferred shareholders................................. (6,013,674) (12,507,980)
From accumulated net realized gains from investment
transactions:
Common shareholders.................................... (1,862,536) (3,157,383)
-------------- --------------
Decrease in net assets from distributions to
shareholders........................................... (38,301,858) (77,186,439)
-------------- --------------
Net increase (decrease) in net assets.................. (12,535,858) (9,481,001)
Net assets at beginning of period........................... 1,304,191,767 1,313,672,768
-------------- --------------
Net assets at end of period................................. $1,291,655,909 $1,304,191,767
============== ==============
Balance of undistributed net investment income at end of
period.................................................... $ 776,890 $ 687,524
============== ==============
</TABLE>
See accompanying notes to financial statements.
S-31
<PAGE> 116
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(UNAUDITED)
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At April 30, 1997, the National Fund (the "Fund") covered in this report
and its corresponding New York Stock Exchange symbols is Nuveen Premium Income
Municipal Fund, Inc. (NPI).
The Fund invests primarily in a diversified portfolio of municipal
obligations issued by state and local government authorities. The Fund
registered under the Investment Company Act of 1940 as a closed-end, diversified
management investment companies.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in the Fund's investment portfolio are
provided by a pricing service approved and supervised by the Fund's Board of
Directors. When price quotes are not readily available (which is usually the
case for municipal securities), the pricing service establishes fair market
value based on yields or prices of municipal bonds of comparable quality, type
of issue, coupon, maturity and rating, indications of value from securities
dealers and general market conditions. 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 Fund has
instructed the custodian to segregate assets in a separate account with a
current value at least equal to the amount of its purchase commitments. At April
30, 1997, the Fund had an outstanding purchase commitment of $1,920,692.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted
for amortization of premiums and accretion of discounts on long-term debt
securities when required for federal income tax purposes.
Federal Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
tax-exempt net investment income, in addition to any significant amounts of net
realized capital gains and/or market discount realized from investment
transactions. The Fund currently consider significant net realized capital gains
and/or market discount as amounts in excess of $.001 per Common share.
Furthermore, Fund intends to satisfy conditions which will enable interest from
municipal securities, which is exempt from regular federal income tax, to retain
such tax-exempt status when distributed to shareholders of the Fund. Net
realized capital gain and market discount distributions are subject to federal
taxation.
Dividends and Distributions to Shareholders
Tax-exempt 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 capital gains and/or market discount from investment
transactions are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryovers.
S-32
<PAGE> 117
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997
(UNAUDITED)
Distributions to shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount are recorded on the ex-dividend
date. The amount and timing of 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 occur and will be classified as either distributions in
excess of net investment income, distributions in excess of net realized gains
and/or distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Preferred Shares
The Fund has issued and outstanding 2,800 shares of each Series A, B, C, D
and E $25,000 stated value Preferred shares. The dividend rate on each Series
may change every 28 days as set by the auction agent, except for series E which
may change every seven days.
Derivative Financial Instruments
The Fund may invest in transactions in certain derivative financial
instruments including futures, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Fund authorized
to invest in such financial instruments, and may do so in the future, it did not
make any such investments during the six months ended April 30, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
2. FUND SHARES
There were no share transactions during the six months ended April 30,
1997, or during the year ended October 31, 1996.
3. SECURITIES TRANSACTIONS
Purchase and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the six months ended April
30, 1997, were as follows:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
PURCHASES
Investments in municipal securities......................... $35,291,613
Temporary municipal investments............................. 33,325,000
SALES AND MATURITIES
Investments in municipal securities......................... 37,126,820
Temporary municipal investments............................. 28,800,000
===========
</TABLE>
At April 30, 1997, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
S-33
<PAGE> 118
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997
(UNAUDITED)
4. DISTRIBUTIONS TO COMMON SHAREHOLDERS
On May 1, 1997, the Fund declared a Common share dividend distribution of
$.0765 from its tax-exempt net investment income which was paid June 2, 1997, to
shareholders of record on May 15, 1997.
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at April 30, 1997, were as follows:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
Gross unrealized:
appreciation.............................................. $42,399,109
depreciation.............................................. (5,586,092)
-----------
Net unrealized appreciation................................. $36,813,017
===========
</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, the
Fund pays an annual management fee, payable monthly, at the rates set forth
below, which are based upon the average daily net asset value of the Fund:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
----------------------------- --------------
<S> <C>
For the first $125 million.................................. .6500 of 1%
For the next $125 million................................... .6375 of 1
For the next $250 million................................... .6250 of 1
For the next $500 million................................... .6125 of 1
For the next $1 billion..................................... .6000 of 1
For net assets over $2 billion.............................. .5875 of 1
</TABLE>
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Fund 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
Fund from the Adviser.
7. COMPOSITION OF NET ASSETS
At April 30, 1997, net assets consisted of:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
Preferred shares, $25,000 stated value per share, at
liquidation value......................................... $ 350,000,000
Common shares, $.01 par value per share..................... 637,854
Paid-in surplus............................................. 903,352,774
Balance of undistributed net investment income.............. 776,890
Accumulated net realized gain (loss) from investment
transactions.............................................. 75,374
Net unrealized appreciation of investments.................. 36,813,017
--------------
Net assets................................................ $1,291,655,909
==============
Authorized shares:
Common.................................................... 200,000,000
Preferred................................................. 1,000,000
==============
</TABLE>
S-34
<PAGE> 119
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
APRIL 30, 1997
(UNAUDITED)
8. INVESTMENT COMPOSITION
The Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At April 30, 1997, the revenue sources by municipal
purpose for these investments, expressed as a percent of total investments, were
as follows:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
Revenue Bonds:
Housing Facilities........................................ 14%
Electric Utilities........................................ 11
Health Care Facilities.................................... 10
Transportation............................................ 7
Pollution Control Facilities.............................. 9
Educational Facilities.................................... 4
Lease Rental Facilities................................... 3
Water/Sewer Facilities.................................... 5
Other..................................................... 7
General Obligation Bonds.................................... 8
Escrowed Bonds.............................................. 22
---
100%
===
</TABLE>
48% of the long-term and intermediate-term investments owned by the Fund
are either 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, both of which ensure the timely payment of principal and interest in
the event of default. Such insurance or escrow, however, does not guarantee the
market value of the municipal securities or the value of any of the Fund's
shares.
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 the Fund.
9. OTHER MATTERS
On June 3, 1997, after notice to shareholders, the federal district court
in Chicago approved the settlement of litigation pending and a similar lawsuit
(dismissed in December 1996) which was pending in state court in Hennepin
County, Minnesota, against John Nuveen & Co., Incorporated, Nuveen Advisory
Corp., current and former directors of two of the Nuveen exchange-traded
investment companies, Nuveen Municipal Value Fund, Inc. and Nuveen Premium
Income Municipal Fund, Inc., inside counsel to Nuveen & Co. (collectively the
"Nuveen Defendants") and the two Funds' former outside legal counsel, making
various allegations with respect to the two Funds' January 1994 rights
offerings. The settlement, which in no way constitutes an admission of liability
by any defendant, will be paid one half each by the insurer for the Funds'
former outside counsel and by the insurer for the Nuveen Defendants. The
settlement will become final 30 days after its approval, absent appeal. If
appealed, the settlement will become final if and when the district court's
approval is affirmed.
S-35
<PAGE> 120
FINANCIAL HIGHLIGHTS
(UNAUDITED)
Selected data for a Common Share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED 10/31
ENDED -------------------------------------------------
4/30/97 1996 1995 1994 1993
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of
period............... $ 14.960 $ 15.110 $ 14.140 $ 16.300 $ 15.790
Operating performance
Net investment
income............. .573 1.158 1.235 1.256 1.431
Net realized &
unrealized gain
(loss) from
investments........ (.173) (.097) 1.006 (2.016)*** .612
Dividends from
tax-exempt net
investment income
To Common
shareholders....... (.477) (.965) (1.056) (1.172) (1.364)
To Preferred
shareholders+...... (.094) (.196) (.215) (.156) (.169)
Distributions from
capital gains
To Common
shareholders....... (.029) (.050) -- (.072) --
To Preferred
shareholders+...... -- -- -- -- --
Organization and
offering costs and
Preferred share
underwriting
discounts............ -- -- -- -- --
Net asset value end of
period............... 14.760 14.960 15.110 14.140 16.300
Per Common share
market value end of
period............... 14.125 14.500 14.375 13.250 17.750
Total investment
return on market
value**.............. .93% 8.24% 16.88% (19.13)% 20.96%
Total return on net
asset value**........ 2.06% 5.92% 14.84% (5.88)% 12.33%
Ratios/Supplemental
data
Net assets end of
period (in
thousands)......... $1,291,656 $1,304,192 $1,313,673 $1,252,208 $1,213,064
Ratio of expenses to
average net
assets++........... .76%* .75% .76% .77% .79%
Ratio of net
investment income
to average net
assets++........... 5.66%* 5.67% 6.13% 6.08% 6.28%
Portfolio turnover
rate............... 3% 16% 12% 15% 11%
<CAPTION>
FIVE
MONTHS YEAR ENDED 5/31
ENDED ------------------------------------ 6/22/89 TO
10/31/92 1992 1991 1990 5/31/90
-------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Net asset value
beginning of
period............... $ 15.760 $ 15.180 $ 14.600 $ 14.720 $ 14.050
Operating performance
Net investment
income............. .602 1.492 1.504 1.508 1.101
Net realized &
unrealized gain
(loss) from
investments........ .023 .492 .532 (.115) .741
Dividends from
tax-exempt net
investment income
To Common
shareholders....... (.516) (1.135) (1.080) (1.080) (.747)
To Preferred
shareholders+...... (.079) (.269) (.376) (.433) (.268)
Distributions from
capital gains
To Common
shareholders....... -- -- -- -- --
To Preferred
shareholders+...... -- -- -- -- --
Organization and
offering costs and
Preferred share
underwriting
discounts............ -- -- -- -- (.157)
Net asset value end of
period............... 15.790 15.760 15.180 14.600 14.720
Per Common share
market value end of
period............... 15.875 16.250 15.375 15.000 14.875
Total investment
return on market
value**.............. .73% 13.32% 10.14% 8.39% 4.38%
Total return on net
asset value**........ 3.46% 11.72% 11.88% 6.74% 10.44%
Ratios/Supplemental
data
Net assets end of
period (in
thousands)......... $1,173,329 $1,167,042 $1,127,103 $1,090,365 $1,089,152
Ratio of expenses to
average net
assets++........... .78%* .66% .65% .65% .62%*
Ratio of net
investment income
to average net
assets++........... 6.33%* 6.71% 6.97% 6.98% 6.92%*
Portfolio turnover
rate............... 2% 2% 1% 4% 7%
</TABLE>
- -------------------------
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if
any, and changes in net asset value per share.
*** Includes ($.187) effect of the Fund's Rights Offering of shares as a price
below NAV and costs of the offering.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
S-36
<PAGE> 121
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
ALASKA -- 0.8%
$ 1,950,000 Alaska Housing Finance Corporation, Insured Mortgage
Program Bonds, 1990 First Series, 7.800%, 12/01/30..... Aa1 12/00 at 102 $ 1,983,950
1,470,000 Alaska State Housing Finance Corporation, Collateralized
Home Mortgage Bonds, 1987 Series B, 8.750%, 12/01/16... Aaa 6/98 at 102 1,522,141
6,000,000 North Slope Borough, Alaska, General Obligation Refunding
Bonds of 1988, Series G, 8.350%, 6/30/98............... A- No Opt. Call 16,383,220
ARIZONA -- 1.6%
3,160,000 The Industrial Development Authority of the City of
Phoenix, Arizona, Home Purchase Mortgage Revenue Bonds
(GNMA Mortgage-Backed Securities Program), Series
1988B, 8.200%, 4/01/22 (Alternative Minimum Tax)....... AAA 10/98 at 102 3,315,061
12,510,000 The Industrial Development Authority of the County of
Pima (Arizona), Industrial Development Lease Obligation
Refunding Revenue Bonds, 1988 Series A (Irvington
Project), 7.250%, 7/15/10.............................. Aaa 1/02 at 103 13,870,337
4,035,000 The Industrial Development Authority of the County of
Pima, Single Family Mortgage Revenue Bonds (GNMA
Mortgage-Backed Securities Program), Series 1988,
8.125%, 9/01/20 (Alternative Minimum Tax).............. AAA 3/99 at 102 4,228,599
CALIFORNIA -- 15.8%
17,000,000 California Health Facilities Financing Authority, Kaiser
Permanente, Medical Care Program, Semiannual Tender
Revenue Bonds, 1985 Tender Bonds, 5.550%, 8/15/25...... AA 2/02 at 101 16,235,510
14,650,000 California Health Facilities Financing Authority,
Hospital Revenue Bonds (Children's Hospital of Los
Angeles), 1991 Series A, 7.125%, 6/01/21 (Pre-refunded
to 6/01/01)............................................ Aaa 6/01 at 102 16,507,181
26,725,000 State Public Works Board of the State of California,
Lease Revenue Refunding Bonds (The Regents of the
University of California), 1993 Series A (Various
University of California Projects), 5.500%, 6/01/21.... A1 16/03 at 102 25,295,747
11,395,000 State Public Works Board of the State of California,
Lease Revenue Bonds (Department of Corrections), 1993
Series E (California State Prison -- Madera County
(II)), 5.500%, 6/01/15................................. A No Opt. Call 11,205,729
15,975,000 State of California Department of Transportation, East
Bay State Building Authority, Certificates of
Participation, Series 1991A, 6.500%, 3/01/16........... A 3/01 at 102 16,640,519
13,000,000 State of California, Various Purpose General Obligation
Refunding Bonds, 5.150%, 10/01/19...................... A1 10/03 at 102 12,020,580
15,285,000 Los Angeles Convention and Exhibition Center Authority,
Lease Revenue Bonds, 1993 Refunding Series A, The City
of Los Angeles, California, 5.375%, 8/15/18............ Aaa 8/03 at 102 14,585,711
12,250,000 Los Angeles County Transportation Commission, California,
Sales Tax Revenue Refunding Bonds, Series 1991-B,
5.750%, 7/01/18........................................ AA- 7/01 at 100 12,121,743
1,285,000 City of Martinez, California, Home Mortgage Revenue
Bonds, 1983 Issue A, 10.750%, 2/01/16.................. Aaa No Opt. Call 1,962,709
4,125,000 Redevelopment Agency of the City of Moorpark, Moorpark
Redevelopment Project, 1993 Tax Allocation Bonds,
6.125%, 10/01/18....................................... A- 10/03 at 102 4,133,168
20,000,000 City of Pomona, California, Single Family Mortgage
Revenue Refunding Bonds (GNMA and FNMA Mortgage-Backed
Securities), Series 1990A, 7.600%, 5/01/23............. Aaa No Opt. Call 23,700,200
</TABLE>
S-37
<PAGE> 122
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
CALIFORNIA (Continued)
$ 3,955,000 City of Redlands, California, Refunding Certificates of
Participation (Loma Linda University Medical Center
Project), Series 1993-D, 5.000%, 12/01/22.............. Aaa 12/03 at 102 $ 3,554,082
5,000,000 Sacramento, California, Municipal Utility District,
Electric Revenue Refunding Bonds, 1993 Series D,
5.250%, 11/15/20....................................... Aaa 11/03 at 102 4,679,450
San Bernardino Joint Powers Financing Authority, Tax
Allocation Refunding Bonds, Series 1995A:
6,675,000 5.750%, 10/01/15....................................... Aaa 10/05 at 102 6,704,170
12,500,000 5.750%, 10/01/25....................................... Aaa 10/05 at 102 12,490,500
3,000,000 Redevelopment Agency of the City and County of San
Francisco, Multifamily Housing Refunding Revenue Bonds,
Series 1994 (GNMA Collateralized - South Beach Marina
Project), 5.700%, 3/01/29.............................. Aaa 3/04 at 102 2,930,460
6,455,000 The Regents of the University of California, Refunding
Revenue Bonds (Multiple Purpose Projects), Series C,
5.000%, 9/01/11........................................ Aaa 9/03 at 102 6,152,131
17,540,000 The Regents of the University of California, Refunding
Revenue Bonds (Multiple Purpose Projects), Series B,
4.750%, 9/01/21........................................ Aaa 9/03 at 102 15,203,497
COLORADO--2.9%
City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1991D:
9,325,000 7.750%, 11/15/13 (Alternative Minimum Tax)............. Baa No Opt. Call 11,101,226
8,250,000 7.750%, 11/15/21 (Alternative Minimum Tax)............. Baa 11/01 at 102 9,142,155
3,500,000 City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1992B, 7.250%, 11/15/23
(Alternative Minimum Tax).............................. Baa 11/02 at 102 3,772,370
8,700,000 City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1992C, 6.750%, 11/15/22
(Alternative Minimum Tax).............................. Baa 11/02 at 102 9,024,075
3,465,000 Colorado Local Single Family Mortgage Revenue Bonds, City
and County of Denver, Colorado, GNMA Mortgage-Backed
Securities Program, Series 1988A, 8.125%, 12/01/20
(Alternative Minimum Tax).............................. AAA 12/98 at 102 3,621,549
1,083,276 El Paso County, Colorado, Single Family Mortgage Revenue
Tax-Exempt Refunding Bonds, Series 1992A Class A-2,
8.750%, 6/01/11........................................ Aaa No Opt. Call 1,175,247
DISTRICT OF COLUMBIA -- 2.1%
11,040,000 District of Columbia, Hospital Revenue Refunding Bonds
(Providence Hospital Issue), Series 1988A, 7.875%,
12/01/15............................................... Aa 12/98 at 102 11,910,504
14,800,000 District of Columbia Housing Finance Agency,
Collateralized Single Family Mortgage Revenue Bonds,
Series 1988E-4, 6.375%, 6/01/26 (Alternative Minimum
Tax)................................................... AAA 12/04 at 103 15,087,564
FLORIDA -- 4.5%
10,250,000 Florida Housing Finance Agency, GNMA Collateralized Home
Ownership Mortgage Revenue Bonds, 1988 Series G1 Bonds,
8.300%, 6/01/20 (Alternative Minimum Tax).............. Aaa 12/98 at 103 10,695,875
9,290,000 State of Florida, Full Faith and Credit, Department of
Transportation Right-of-Way Acquisition and Bridge
Construction Bonds, Series 1995, 5.800%, 7/01/21....... Aa 7/05 at 101 9,374,632
Greater Orlando Aviation Authority, Airport Facilities
Revenue Bonds, Series 1988 of the City of Orlando,
Florida:
1,470,000 8.375%, 10/01/16 (Alternative Minimum Tax) (Pre-refunded
to 10/01/98)........................................... A1 10/98 at 102 1,610,414
13,530,000 8.375%, 10/01/16 (Alternative Minimum Tax)............. A1 10/98 at 102 14,637,566
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
FLORIDA (Continued)
City of Pensacola Health Facilities Authority, Health
Facilities Revenue Refunding Bonds, Series 1988
(Daughters of Charity National Health System Sacred
Heart Hospital of Pensacola Florida):
$ 11,655,000 7.875%, 1/01/08 (Pre-refunded to 1/01/98).............. Aaa 1/98 at $ 12,346,608
101 1/2
9,435,000 7.875%, 1/01/11 (Pre-refunded to 1/01/98).............. Aaa 1/98 at 9,994,873
101 1/2
GEORGIA -- 3.2%
7,700,000 Municipal Electric Authority of Georgia, Power Revenue
Bonds, Series Q, 8.375%, 1/01/16....................... A 1/98 at 102 8,205,967
5,850,000 Municipal Electric Authority of Georgia, Power Revenue
Bonds, Series Q, 8.125%, 1/01/17....................... A 1/98 at 102 6,217,965
2,410,000 Urban Residential Finance Authority of the City of
Atlanta, Georgia, Single Family Mortgage Revenue Bonds
(GNMA Collateralized Home Mortgage Program), Series
1988, in cooperation with the Housing Authority of
Fulton County, Georgia, 8.250%, 10/01/21 (Alternative
Minimum Tax)........................................... AAA 10/98 at 103 2,522,306
23,420,000 Development Authority of Monroe County, Georgia,
Pollution Control Revenue Bonds (Georgia Power Company
Plant Scherer Project), Second Series 1994, 6.750%,
10/01/24............................................... A1 10/99 at 102 24,446,733
ILLINOIS -- 5.2%
8,230,000 Illinois Development Finance Authority, Pollution Control
Refunding Revenue Bonds, 1994 Series A (Illinois Power
Company Project), 5.700%, 2/01/24...................... Aaa 2/04 at 102 8,133,791
8,500,000 Illinois Educational Facilities Authority, Revenue
Refunding Bonds, The University of Chicago, Series
1993B, 5.600%, 7/01/24................................. Aa1 7/03 at 102 8,159,150
5,000,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1992 (Highland Park Hospital), 6.200%,
10/01/22............................................... Aaa 10/02 at 102 5,136,400
13,400,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1988B (Evangelical Hospitals Corporation),
8.100%, 1/01/08 (Pre-refunded to 1/01/99).............. Aaa 1/99 at 102 14,656,250
Illinois Housing Development Authority, Residential
Mortgage Revenue Bonds, 1988 Series C:
7,020,000 8.100%, 8/01/17........................................ Aa 8/98 at 103 7,410,803
6,250,000 8.100%, 2/01/22 (Alternative Minimum Tax).............. Aa 8/98 at 102 6,496,313
5,900,000 City of Chicago, Illinois, Chicago - O'Hare International
Airport, General Airport Second Lien, Revenue Refunding
Bonds, 1993 Series C, 5.000%, 1/01/18.................. Aaa 1/04 at 102 5,365,106
5,000,000 City of Chicago, Collateralized Single Family Mortgage
Revenue Bonds, Series 1996-A, 7.000%, 9/01/27
(Alternative Minimum Tax).............................. Aaa 3/06 at 105 5,519,400
785,000 Regional Transportation Authority, Cook, DuPage, Kane,
Lake, McHenry and Will Counties, Illinois, General
Obligation Bonds, Series 1992B, 9.000%, 6/01/06........ Aaa No Opt. Call 1,018,577
4,925,000 Regional Transportation Authority, Cook, DuPage, Kane,
Lake, McHenry and Will Counties, Illinois, General
Obligation Bonds, Series 1992A, 9.000%, 6/01/06........ Aaa No Opt. Call 6,390,434
INDIANA -- 3.7%
2,550,000 Indiana State Office Building Commission, Correctional
Facilities Program Revenue Bonds, Series 1995A, 5.500%,
7/01/20................................................ Aaa 7/05 at 102 2,469,497
30,000,000 The Indianapolis Local Public Improvement Bond Bank,
Series 1988 D Bonds, 8.500%, 2/01/18 (Pre-refunded to
2/01/98)............................................... N/R 2/98 at 102 32,162,700
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
INDIANA (Continued)
$ 8,000,000 Metropolitan School District of Steuben County Middle
School Building Corporation, First Mortgage Bonds,
Series 1995, Steuben County, Indiana, 6.375%,
7/15/16................................................ Aaa 7/05 at 102 $ 8,644,000
5,300,000 Whitley County Middle School Building Corporation, First
Mortgage Bonds, Series 1994, Columbia City, Indiana,
6.250%, 7/15/15........................................ Aaa 1/04 at 102 5,628,812
IOWA -- 0.8%
3,000,000 Iowa Finance Authority, Private College Refunding Revenue
Bonds (Drake University Project), Series 1996, 5.400%,
12/01/16............................................... Aaa 12/05 at 102 2,919,240
5,785,000 Iowa Finance Authority, Variable Rate Demand Industrial
Revenue Refunding Bonds, Series A 1989 (Urbandale Hotel
Corporation Project No. 00475), 8.500%, 8/01/16
(Alternative Minimum Tax) (Pre-refunded to 7/15/14).... AAA 7/14 at 100 7,718,694
KANSAS -- 0.8%
9,815,000 Sedgwick County, Kansas and Shawnee County, Kansas, GNMA
Collateralized Mortgage Revenue Bonds, 1988 Series E,
8.250%, 11/01/20 (Alternative Minimum Tax)............. AAA 11/98 at 103 10,311,933
LOUISIANA -- 0.9%
7,660,000 Louisiana Public Facilities Authority, Extended Care
Facilities Revenue Bonds (Comm-Care Corporation
Project), Series 1994, 11.000%, 2/01/14................ BBB No Opt. Call 10,291,133
1,610,000 East Baton Rouge Mortgage Finance Authority, Single
Family Mortgage Revenue Refunding Bonds (GNMA and FNMA
Mortgage-Backed Securities Program), Series 1993B
Bonds, 5.300%, 10/01/14................................ Aaa 10/03 at 102 1,531,271
MASSACHUSETTS -- 0.9%
3,000,000 Massachusetts Industrial Finance Agency, Resource
Recovery Revenue Bonds, Semass Project, Series 1991B,
9.250%, 7/01/15 (Alternative Minimum Tax).............. N/R 7/01 at 103 3,354,720
8,800,000 Massachusetts Water Resources Authority, General Revenue
Bonds, 1990 Series A, 5.500%, 7/15/22.................. A 7/02 at 100 8,499,920
MICHIGAN -- 1.6%
4,000,000 School District of the City of Detroit, Wayne County,
Michigan, School Building and Site Improvement and
Refunding Bonds (Unlimited Tax General Obligation),
Series 1993, 5.400%, 5/01/13........................... Aa 5/03 at 102 3,908,280
8,870,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Bonds, Series 1995-A, 5.000%, 7/01/25.................. Aaa 7/05 at 100 8,026,374
9,625,000 Livonia Public Schools School District, County of Wayne,
State of Michigan, 1993 Refunding Bonds, 5.500%,
5/01/21................................................ Aaa 5/03 at 102 9,292,456
MINNESOTA -- 4.3%
13,645,000 Minnesota Housing Finance Agency, Single Family Mortgage
Bonds, 1988 Series C, 8.500%, 7/01/19 (Alternative
Minimum Tax)........................................... AA+ 7/98 at 102 14,317,835
2,945,000 The Minneapolis/Saint Paul Housing Finance Board, Single
Family Mortgage Revenue Bonds (Minneapolis/Saint Paul
Family Housing Program, Phase X, FNMA and GNMA
Mortgage-Backed Securities Program), Series 1994,
7.500%, 11/01/27 (Alternative Minimum Tax)............. AAA 11/04 at 102 3,099,377
21,970,000 The Housing and Redevelopment Authority of the City of
Saint Paul, Minnesota, Sales Tax Revenue Refunding
Bonds (Civic Center Project), Series 1996, 7.100%,
11/01/23............................................... Aaa 11/15 at 103 26,202,301
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
MINNESOTA (Continued)
$ 2,900,000 Housing and Redevelopment Authority of the City of Saint
Paul, Minnesota, Single Family Mortgage Revenue Bonds,
Refunding Series 1991-B, 7.250%, 9/01/11............... Aa No Opt. Call $ 3,064,923
8,635,000 Port Authority of the City of Saint Paul, Energy Park Tax
Increment Revenue Refunding Bonds, Series 1988, 8.000%,
12/01/07 (Pre-refunded to 12/01/98).................... AAA 12/98 at 102 9,285,906
MISSOURI -- 1.6%
7,000,000 Missouri Housing Development Commission Single Family
Mortgage Revenue Bonds (Homeownership Loan Program),
1996 Series C, 7.450%, 9/01/27 (Alternative Minimum
Tax)................................................... AAA 3/07 at 105 7,727,090
11,120,000 Francis Howell School District, St. Charles County,
Missouri, General Obligation Refunding Bonds, Series
1994A, 7.800%, 3/01/08................................. AAA No Opt. Call 13,712,739
NEVADA -- 0.8%
10,000,000 Clark County School District, Nevada, General Obligation,
School Improvement Bonds, Series 1988A, 8.000%, 3/01/08
(Pre-Refunded to 3/01/98).............................. N/R 3/98 at 102 10,681,500
NEW HAMPSHIRE -- 2.3%
10,000,000 Business Finance Authority of the State of New Hampshire,
Pollution Control Refunding Revenue Bonds (The United
Illuminating Company Project -- 1993 Series A), 5.875%,
10/01/33............................................... BBB- 10/03 at 102 9,312,400
11,000,000 New Hampshire Housing Finance Authority, Single Family
Mortgage Revenue Bonds, 1993 Series B, 6.050%,
7/01/25................................................ Aa 7/03 at 102 11,050,380
9,135,000 New Hampshire Housing Finance Authority Single Family
Mortgage Acquisition Revenue Bonds, 1996 Series B,
6.400%, 1/01/27 (Alternative Minimum Tax).............. Aa 7/06 at 10 29,287,920
NEW MEXICO -- 0.5%
5,655,000 New Mexico Mortgage Finance Authority, Single Family
Mortgage Purchase Refunding Senior Bonds, 1992 Series
A, 6.900%, 7/01/24..................................... Aa1 7/02 at 102 5,921,068
NEW YORK -- 9.0%
12,365,000 New York State Energy Research and Development Authority,
Facilities Revenue Bonds, Series 1993 A (Consolidated
Edison Company of New York, Inc. Project), 6.000%,
3/15/28 (Alternative Minimum Tax)...................... A1 3/03 at 102 12,401,848
16,960,000 New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home FHA-Insured Mortgage Revenue
Bonds, 1993 Series B, 5.500%, 2/15/22.................. AAA 2/04 at 102 16,276,851
18,000,000 Metropolitan Transportation Authority, New York, Commuter
Facilities 1987 Service Contract Bonds, Series 2,
8.000%, 7/01/18 (Pre-refunded to 7/01/98).............. Aaa 7/98 at 102 19,486,440
11,540,000 Municipal Assistance Corporation for the City of New York
(A Public Benefit Corporation of the State of New
York), Series 60 Bonds, 7.000%, 7/01/06................ Aa 7/97 at 102 11,970,327
7,060,000 Municipal Assistance Corporation for the City of New York
(A Public Benefit Corporation of the State of New
York), Series 61 Bonds, 6.875%, 7/01/07................ Aa 7/97 at 102 7,332,304
7,500,000 The City of New York, General Obligation Bonds, Fiscal
1991 Series B, 9.500%, 6/01/03......................... Baal No Opt. Call 9,128,400
10,000,000 The City of New York, General Obligation Bonds, Fiscal
1996 Series G, 5.750%, 2/01/07......................... Baa1 2/06 at 9,930,300
101 1/2
12,930,000 New York City Municipal Water Finance Authority, Water
and Sewer Revenue Bonds, Fiscal 1993 Series A, 5.500%,
6/15/20................................................ A 6/02 at 100 12,282,336
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
NEW YORK (Continued)
$ 10,000,000 New York City Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Fiscal 1996 Series B,
5.750%, 6/15/26........................................ Aaa 6/06 at 101 $ 9,992,200
7,955,000 New York City Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Series 1992C, 6.500%,
6/15/21 (Pre-refunded to 6/15/97)...................... Aaa 6/97 at 8,209,003
101 1/2
NORTH CAROLINA -- 1.6%
16,415,000 North Carolina Eastern Municipal Power Agency, Power
System Revenue Bonds, Refunding Series 1988 A, 8.000%,
1/01/21 (Pre-refunded to 1/01/98)...................... Aaa 1/98 at 102 17,481,975
North Carolina Eastern Municipal Power Agency, Power
System Revenue Bonds, Refunding Series 1987 A:
395,000 7.250%, 1/01/21 (Pre-refunded to 1/01/97)................ Aaa 1/97 at 102 405,175
2,605,000 7.250%, 1/01/21.......................................... Baa1 1/97 at 102 2,661,138
OHIO -- 1.5%
7,540,000 Ohio Housing Finance Agency, Single Family Mortgage
Revenue Bonds (GNMA Mortgage-Backed Securities
Program), 1988 Series B, 8.250%, 12/15/19 (Alternative
Minimum Tax)........................................... AAA 12/98 at 102 7,974,153
11,300,000 State of Ohio, Turnpike Revenue Bonds, 1994 Series A,
Issued by the Ohio Turnpike Commission, 5.750%,
2/15/24................................................ AA- 2/04 at 102 11,260,337
OKLAHOMA -- 1.6%
12,730,000 Oklahoma Housing Finance Agency, GNMA Collateralized
Single Family Mortgage Revenue Bonds, Series 1988A,
8.250%, 12/01/20 (Alternative Minimum Tax)............. AAA 12/98 at 102 13,303,232
6,750,000 Washington County Medical Authority (Bartlesville,
Oklahoma), Hospital Revenue Bonds (Jane Phillips
Episcopal Hospital), Series 1989A, 8.500%, 11/01/10
(Pre-refunded to 5/01/99).............................. BBB 5/99 at 102 7,528,208
PENNSYLVANIA -- 4.2%
10,000,000 Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue Bonds, Series 1993-37A, 5.450%,
10/01/17............................................... AA+ 10/03 at 102 9,672,500
14,500,000 County of Allegheny, Pennsylvania, Airport Revenue Bonds,
Series 1988C (Greater Pittsburgh International
Airport), 8.250%, 1/01/16 (Alternative Minimum Tax).... Aaa 1/98 at 102 15,391,170
12,875,000 Allegheny County Hospital Development Authority
(Pennsylvania), Health Center Revenue Bonds, Series
1992A (Presbyterian University Health System, Inc.
Project ), 6.250%, 11/01/23............................ Aaa 11/02 at 100 13,319,703
5,000,000 The School District of Philadelphia, Pennsylvania,
General Obligation Bonds, Series B of 1995, 5.500%,
9/01/25................................................ Aaa 9/05 at 102 4,869,200
10,180,000 City of Philadelphia, Pennsylvania, Water and Sewer
Revenue Bonds, Sixteenth Series, 7.500%, 8/01/10
(Pre-refunded to 8/01/01).............................. AAA 8/01 at 102 11,639,201
SOUTH CAROLINA -- 1.2%
17,250,000 South Carolina Jobs -- Economic Development Authority,
Hospital Revenue Bonds (Anderson Area Medical Center,
Inc.), Series 1996, 5.250%, 2/01/26.................... Aaa 2/06 at 102 16,114,950
TEXAS -- 8.0%
10,305,000 Alliance Airport Authority, Inc., Special Facilities
Revenue Bonds, Series 1990 (American Airlines, Inc.
Project), 7.500%, 12/01/29 (Alternative Minimum Tax)... Baa2 12/00 at 102 10,983,893
10,095,000 Brazos River Authority, Texas, Collateralized Revenue
Refunding Bonds (Houston Lighting & Power Company
Project), Series 1988A, 8.250%, 5/01/19................ A2 5/98 at 102 10,774,494
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
TEXAS (Continued)
$ 5,565,000 Dallas-Forth Worth International Airport Facility
Improvement Corporation, American Airlines, Inc.
Revenue Bonds, Series 1990, 7.500%, 11/01/25
(Alternative Minimum Tax).............................. Baa2 11/00 at 102 $ 5,926,836
40,000,000 Harris County Health Facilities Development Corporation,
Adjustable Convertible Extendable Securities (Greater
Houston Pooled Health Care Loan Program), Series 1985B,
7.375%, 12/01/25 (Mandatory put 12/01/98).............. Aa3 11/96 at 40,324,000
100 1/2
3,385,000 Harris County, Texas, Toll Road Senior Lien Revenue
Bonds, Series 1985-B, 8.700%, 8/15/17 (Pre-refunded to
8/15/97)............................................... AAA 8/97 at 103 3,612,472
12,700,000 Harris, County, Texas, Toll Road Multiple Mode Senior
Lien Revenue Bonds, Series 1985-D, 8.300%, 8/15/17
(Pre-refunded to 8/15/98).............................. AAA 8/98 at 103 13,975,969
15,000,000 Harris County, Texas, Toll Road Senior Lien Revenue
Refunding Bonds, Series 1994, 5.300%, 8/15/13.......... Aaa 8/04 at 102 14,616,450
4,500,000 Tyler Health Facilities Development Corporation, Hospital
Refunding Revenue Bonds (East Texas Hospital Foundation
Project), Series 1988A, 8.250%, 11/01/06 (Pre-refunded
to 11/01/98)........................................... AA 11/98 at 102 4,933,080
UTAH -- 2.4%
6,550,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, 1987 Series D, 8.625%, 7/01/21........ Aa 7/97 at 102 6,866,496
3,000,000 Intermountain Power Agency, Utah, Power Supply Revenue
Refunding Bonds, 1987 Series C, 8.625%, 7/01/21
(Pre-refunded to 7/01/97).............................. Aaa 7/97 at 102 3,154,140
20,000,000 Intermountain Power Agency (Utah), Power Supply Revenue
Bonds, Series 1987B, 7.200%, 7/01/19................... Aa 7/97 at 102 20,781,200
VIRGINIA -- 0.8%
1,000,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1987 Series C, Subseries C-7, 8.375%,
1/01/28 (Alternative Minimum Tax)...................... Aa1 11/99 at 102 1,012,960
Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1992 Series B-AMT, Subseries B-7:
2,445,000 5.600%, 7/01/21 (Alternative Minimum Tax)................ Aa1 1/02 at 102 2,298,765
7,605,000 5.650%, 1/01/27 (Alternative Minimum Tax)................ Aa1 1/02 at 102 7,164,747
WASHINGTON -- 11.9%
5,000,000 Washington Health Care Facilities Authority, Revenue
Bonds, Series 1987 (Virginia Mason Medical Center,
Seattle), 8.000%, 7/01/15.............................. Aaa 7/97 at 102 5,225,050
12,900,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1993A, 5.700%,
7/01/17................................................ Aaa 7/03 at 102 12,691,278
22,370,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1993B, 5.600%,
7/10/15................................................ Aaa 7/03 at 102 21,774,958
4,300,000 Washington Public Power Supply System, Nuclear Project
No. 1 Refunding Revenue Bonds, Series 1989B, 7.250%,
7/10/15 (Pre-refunded to 1/01/00)...................... Aaa 1/00 at 102 4,737,697
Washington Public Power Supply System, Nuclear Project
No. 1, Refunding Revenue Bonds, Series 1989A:
4,060,000 7.500%, 7/01/15 (Pre-refunded to 7/01/99)................ Aaa 7/99 at 102 4,459,991
11,900,000 7.500%, 7/01/15 (Pre-refunded to 7/01/99)................ Aa1 7/99 at 102 13,085,002
7,500,000 Washington Public Power Supply System, Nuclear Project
No. 2, Refunding Revenue Bonds, Series 1991A, 6.000%,
7/01/12................................................ Aa1 7/01 at 100 7,530,975
14,440,000 Washington Public Power Supply System, Nuclear Project
No. 2 Refunding Revenue Bonds, Series 1993A, 5.750%,
7/01/12................................................ Aa1 7/03 at 102 14,270,041
</TABLE>
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NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI) -- (CONTINUED)
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL OPT. CALL MARKET
AMOUNT DESCRIPTION RATINGS* PROVISIONS** VALUE
--------- ----------- -------- ------------ ------
<C> <S> <C> <C> <C>
WASHINGTON (Continued)
$ 6,770,000 Washington Public Power Supply System, Nuclear Project
No. 2 Refunding Revenue Bonds, Series 1993B, 5.625%,
7/01/12................................................ Aa1 7/03 at 102 $ 6,604,338
21,530,000 Washington Public Power Supply System, Nuclear Project
No. 3 Refunding Revenue Bonds, Series 1993C, 5.375%,
7/01/15................................................ Aa1 7/03 at 102 20,247,888
13,500,000 Washington Public Power Supply System, Nuclear Project
No. 3 Refunding Revenue Bonds, Series 1989B, 7.250%,
7/01/15 (Pre-refunded to 1/01/00)...................... Aaa 1/00 at 102 14,874,165
17,050,000 Municipality of Metropolitan Seattle, Seattle,
Washington, Sewer Refunding Revenue Bonds, Series Z,
5.500%, 1/01/33........................................ Aaa 1/03 at 102 16,142,940
6,360,000 Public Utility District No. 1 of Snohomish County,
Washington, Generation System Revenue Bonds, Series
1993, 5.500%, 1/01/14.................................. Aaa 1/03 at 100 6,265,807
7,000,000 City of Spokane, Washington, Regional Solid Waste
Management System Revenue Bonds, Series 1989B, 7.750%,
1/01/11 (Alternative Minimum Tax)...................... Aaa 1/99 at 102 7,585,830
WEST VIRGINIA -- 1.2%
15,000,000 West Virginia Housing Development Fund, Housing Finance
Bonds, 1992 Series D, 7.050%, 11/01/24................. Aa1 5/02 at 102 15,865,950
PUERTO RICO -- 0.4%
5,250,000 Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series X, 5.500%, 7/01/25....................... Baa1 7/05 at 100 4,971,224
- --------------------------------------------------------------------------------------------------------------------------
$1,237,073,276 Total Investments -- (cost $1,232,758,410) -- 98.1%................................... 1,280,412,304
- --------------------------------------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES
-- 0.1%
$ 100,000 Maricopa County, Arizona Pollution Control Corporation,
Pollution Control Revenue Refunding Bonds, (Arizona
Public Service Company Palo Verde Project), 1994 Series
C, Variable Rate Demand Bonds, 3.600%, 5/01/29+........ A-1+ 100,000
Other Assets Less Liabilities -- 1.8%................................................. 23,679,463
Net Assets -- 100%.................................................................... $1,304,191,767
<CAPTION>
STANDARD NUMBER OF MARKET MARKET
& POOR'S MOODY'S SECURITIES VALUE PERCENT
-------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Summary of AAA Aaa 69 $ 633,219,899 49%
ratings* AA+, AA, AA- Aa1, Aa, Aa2, Aa3 31 322,463,921 25
portfolio of A+ A1 6 90,412,888 7
investments A, A- A, A2, A3 9 84,343,318 7
(excluding BBB+, BBB, BBB- Baa1, Baa, Baa2, Baa3 13 103,773,358 8
temporary Non-Rated Non-Rated 3 46,198,920 4
investments):
- -----------------------------------------------------------------------------------------------------
TOTAL..................................................... 131 $1,280,412,304 100%
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
<TABLE>
<S> <C>
* 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.
** 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.
+ 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.
</TABLE>
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.
S-44
<PAGE> 129
STATEMENT OF NET ASSETS
OCTOBER 31, 1996
<TABLE>
<CAPTION>
NPI
---
<S> <C>
ASSETS
Investments in municipal securities, at market value (note
1)........................................................ $1,280,412,304
Temporary investments in short-term municipal securities, at
amortized cost (note 1)................................... 100,000
Cash........................................................ 417,891
Receivables:
Interest.................................................. 26,961,591
Investments sold.......................................... 2,092,226
Other assets................................................ 605,101
--------------
Total assets......................................... 1,310,589,113
--------------
LIABILITIES
Accrued expenses:
Management fees (note 6).................................. 680,514
Other..................................................... 339,840
Preferred share dividends payable........................... 306,050
Common share dividends payable.............................. 5,070,942
--------------
Total liabilities.................................... 6,397,346
--------------
Net assets (note 7)......................................... $1,304,191,767
==============
Preferred shares, at liquidation value...................... $ 350,000,000
==============
Preferred shares outstanding................................ 14,000
==============
Common shares outstanding................................... 63,785,431
==============
Net asset value per Common share outstanding (net assets
less Preferred shares at liquidation value, divided by
Common shares outstanding)................................ $ 14.96
==============
</TABLE>
See accompanying notes to financial statements.
S-45
<PAGE> 130
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
NPI
---
<S> <C>
INVESTMENT INCOME
Tax-exempt interest income (note 1)......................... $83,668,548
-----------
Expenses:
Management fees (note 6).................................. 8,045,628
Preferred shares -- remarketing/auction fees.............. 816,659
Preferred shares -- dividend disbursing agent fees........ 30,000
Shareholders' servicing agent fees and expenses........... 273,678
Custodian's fees and expenses............................. 114,442
Directors' fees and expenses (note 6)..................... 42,961
Professional fees......................................... 37,297
Shareholders' reports -- printing and mailing expenses.... 257,036
Stock exchange listing fees............................... 44,336
Investor relations expense................................ 97,531
Other expenses............................................ 40,399
-----------
Total expenses....................................... 9,799,967
-----------
Net investment income............................. 73,868,581
-----------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
Net realized gain from investment transactions, net of
taxes, if applicable (notes 1 and 3)...................... 1,864,659
Net change in unrealized appreciation or depreciation of
investments............................................... (8,027,802)
-----------
Net gain (loss) from investments.................. (6,163,143)
-----------
Net increase in net assets from operations.................. $67,705,438
===========
</TABLE>
See accompanying notes to financial statements.
S-46
<PAGE> 131
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
NPI
--------------------------------
YEAR ENDED YEAR ENDED
10/31/96 10/31/95
---------- ----------
<S> <C> <C>
OPERATIONS
Net investment income....................................... $ 73,868,581 $ 78,793,817
Net realized gain (loss) from investment transactions, net
of taxes, if applicable (notes 1 and 3)................... 1,864,659 4,129,049
Net change in unrealized appreciation or depreciation of
investments............................................... (8,027,802) 59,644,723
-------------- --------------
Net increase in net assets from operations................ 67,705,438 142,567,589
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (note 1)
From undistributed net investment income:
Common shareholders.................................... (61,521,076) (67,357,422)
Preferred shareholders................................. (12,507,980) (13,745,101)
From accumulated net realized gains from investment
transactions:
Common shareholders.................................... (3,157,383) --
-------------- --------------
Decrease in net assets from distributions to
shareholders........................................... (77,186,439) (81,102,523)
-------------- --------------
Net increase (decrease) in net assets.................. (9,481,001) 61,465,066
Net assets at beginning of year............................. 1,313,672,768 1,252,207,702
-------------- --------------
Net assets at end of year................................... $1,304,191,767 $1,313,672,768
============== ==============
Balance of undistributed net investment income at end of
year...................................................... $ 687,524 $ 847,999
============== ==============
</TABLE>
See accompanying notes to financial statements.
S-47
<PAGE> 132
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
At October 31, 1996, the National Fund (the "Fund") covered in this report
and its corresponding New York Stock Exchange symbol is Nuveen Premium Income
Municipal Fund, Inc. (NPI).
The Fund invests primarily in a diversified portfolio of municipal
obligations issued by state and local government authorities. The Fund is
registered under the Investment Company Act of 1940 as a closed-end, diversified
management investment company.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its 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 Fund has
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
October 31, 1996, there were no such purchase commitments in the Fund.
Interest Income
Interest income is determined on the basis of interest accrued, adjusted
for amortization of premiums and accretion of discounts on long-term debt
securities when required for federal income tax purposes.
Federal Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies by distributing to
shareholders all of their tax-exempt net investment income, in addition to any
significant amounts of net realized capital gains and/or market discount
realized from investment transactions. The Fund currently considers significant
net realized capital gains and/or market discount as amounts in excess of $.001
per Common share. Furthermore, the Fund intends to satisfy conditions which will
enable interest from municipal securities, which is exempt from regular federal
income tax, to retain such tax-exempt status when distributed to shareholders of
the Fund. All regular monthly income dividends paid during the year ended
October 31, 1996, have been designated Exempt Interest Dividends which are
exempt from regular federal personal income tax. Net realized capital gain and
market discount distributions are subject to federal taxation.
Dividends and Distributions to Shareholders
Tax-exempt 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 capital gains and/or market discount from investment
transactions are distributed to shareholders not less frequently than annually.
Furthermore, capital gains are distributed only to the extent they exceed
available capital loss carryovers.
S-48
<PAGE> 133
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996
Distributions to shareholders of tax-exempt net investment income, net
realized capital gains and/or market discount 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 occur and will be classified as either distributions in
excess of net investment income, distributions in excess of net realized gains
and/or distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
Preferred Shares
The Board of Directors of the Fund approved a 4 for 1 split of the Fund's
Preferred shares effective as of the close of business on August 9, 1995, which
lowered the stated value from $100,000 to $25,000 per share.
The Fund has issued and outstanding 2,800 shares of each Series A, B, C, D
and E $25,000 stated value Preferred shares. The dividend rate on each Series
may change every 28 days as set by the auction agent, except for series E which
may change every seven days.
Derivative Financial Instruments
In October 1994, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 119 Disclosure about Derivative
Financial Instruments and Fair Value of Financial Instruments which prescribes
disclosure requirements for transactions in certain derivative financial
instruments including futures, forward, swap, and option contracts, and other
financial instruments with similar characteristics. Although the Fund is
authorized to invest in such financial instruments, and may do so in the future,
it did not make any such investments during the year ended October 31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period.
2. FUND SHARES
There were no share transactions during the year ended October 31, 1996, or
the year ended October 31, 1995.
3. SECURITIES TRANSACTIONS
Purchase and sales (including maturities) of investments in municipal
securities and temporary municipal investments during the year ended October 31,
1996, were as follows:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
PURCHASES
Investments in municipal securities......................... $230,329,706
Temporary municipal investments............................. 175,150,000
SALES AND MATURITIES
Investments in municipal securities......................... 206,132,550
Temporary municipal investments............................. 178,550,000
============
</TABLE>
S-49
<PAGE> 134
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996
At October 31, 1996, the identified cost of investments owned for federal
income tax purposes was the same as the cost for financial reporting purposes
for the Fund.
4. DISTRIBUTIONS TO COMMON SHAREHOLDERS
On November 1, 1996, the Fund declared a Common share dividend distribution
of $.0795 from its tax-exempt net investment income which was paid December 2,
1996, to shareholders of record on November 15, 1996.
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of
investments at October 31, 1996, were as follows:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
Gross unrealized:
Appreciation.............................................. $51,365,713
Depreciation.............................................. (3,711,819)
-----------
Net unrealized appreciation................................. $47,653,894
===========
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Fund's investment management agreements with Nuveen Advisory Corp
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, the 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 the Fund:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
----------------------------- --------------
<S> <C>
For the first $125,000,000.................................. .65 of 1%
For the next $125,000,000................................... .6375 of 1
For the next $250,000,000................................... .625 of 1
For the next $500,000,000................................... .6125 of 1
For the next $1,000,000,000................................. .6 of 1
For net assets over $2,000,000,000.......................... .5875 of 1
</TABLE>
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Fund pays 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
Fund from the Adviser.
S-50
<PAGE> 135
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996
7. COMPOSITION OF NET ASSETS
At October 31, 1996, net assets consisted of:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
Preferred shares, $25,000 stated value per share, at
liquidation value......................................... $ 350,000,000
Common shares, $.01 par value per share..................... 637,854
Paid-in surplus............................................. 903,352,773
Balance of undistributed net investment income.............. 687,524
Accumulated net realized gain (loss) from investment
transactions.............................................. 1,859,722
Net unrealized appreciation of investments.................. 47,653,894
--------------
Net assets................................................ $1,304,191,767
==============
Authorized shares:
Common.................................................... 200,000,000
Preferred................................................. 1,000,000
==============
</TABLE>
8. INVESTMENT COMPOSITION
The Fund invests in municipal securities which include general obligation,
escrowed and revenue bonds. At October 31, 1996, the revenue sources by
municipal purpose for these investments, expressed as a percent of total
investments, were as follows:
<TABLE>
<CAPTION>
NPI
---
<S> <C>
Revenue Bonds:
Housing Facilities........................................ 16%
Electric Utilities........................................ 11
Health Care Facilities.................................... 9
Transportation............................................ 7
Educational Facilities.................................... 5
Pollution Control Facilities.............................. 8
Lease Rental Facilities................................... 4
Water / Sewer Facilities.................................. 4
Other..................................................... 8
General Obligation Bonds.................................... 7
Escrowed Bonds.............................................. 21
---
100%
===
</TABLE>
Certain long-term and intermediate-term investments owned by the Fund are
either 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, both of which ensure the timely payment of principal and interest in
the event of default. Such insurance or escrow, however, does not guarantee the
market value of the municipal securities or the value of any of the Fund's
shares.
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 the Fund.
9. OTHER MATTERS
As previously reported, certain legal actions challenging the Fund's 1993
rights offering brought by certain Fund shareholders are pending in federal
district court in Chicago against John Nuveen & Co. Incorporated ("Nuveen"),
Nuveen Advisory Corp., the directors of the Fund, in-house counsel to Nuveen
S-51
<PAGE> 136
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OCTOBER 31, 1996
(collectively "the Nuveen Defendants"), and the Fund's former outside legal
counsel. Certain of the claims in these actions are asserted on behalf of Fund
shareholders and certain are asserted on behalf of the Fund.
On November 4, 1996, a Memorandum of Understanding was signed on behalf of
the plaintiffs by their counsel and on behalf of the Nuveen Defendants by their
counsel, pursuant to which the above litigation will be settled contingent on
agreement by the parties on settlement documentation, approval by the Court of
that final settlement documentation, resolution of related claims involving the
Funds' former outside counsel, and certain other contingencies. A similar
agreement has been reached between plaintiffs and the Fund's former outside
counsel. The settlements, which in no way constitute an admission of liability
by any defendant, will be paid one half each by the insurer for the Fund's
former outside counsel and by the insurer for the Nuveen Defendants. The
Memorandum of Understanding provides that the settlement amounts will be paid
primarily to the Fund's shareholders allegedly injured by the rights offering
and that the Fund will be reimbursed for litigation related expenses and will
receive any amounts after shareholder claims are satisfied. If the Court
preliminary approves the settlement and related documentation, shareholders will
receive formal notification which will include information on the shareholders'
rights under the settlement and the procedure for filing any claims. Thereafter,
the Court will conduct a hearing to determine whether to grant final approval of
the settlement.
S-52
<PAGE> 137
FINANCIAL HIGHLIGHTS
OCTOBER 31, 1996
Selected data for a Common Share outstanding throughout each period is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED 10/31
-------------------------------------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value beginning of
period........................... $ 15.110 $ 14.140 $ 16.300 $ 15.790
Operating performance
Net investment income............ 1.158 1.235 1.256 1.431
Net realized & unrealized gain
(loss) from investments........ (.097) 1.006 (2.016)*** .612
Dividends from tax-exempt net
investment income
To Common shareholders........... (.965) (1.056) (1.172) (1.364)
To Preferred shareholders+....... (.196) (.215) (.156) (.169)
Distributions from capital gains
To Common shareholders........... (.050) -- (.072) --
To Preferred shareholders+....... -- -- -- --
Organization and offering costs
and Preferred share underwriting
discounts........................ -- -- -- --
Net asset value end of period..... 14.960 15.110 14.140 16.300
Per Common share market value end
of period........................ 14.500 14.375 13.250 17.750
Total investment return on market
value**.......................... 8.24% 16.88% (19.13)% 20.96%
Total return on net asset
value**.......................... 5.92% 14.84% (5.88)% 12.33%
Ratios/Supplemental data
Net assets end of period (in
thousands)..................... $1,304,192 $1,313,673 $1,252,208 $1,213,064
Ratio of expenses to average net
assets++....................... .75% .76% .77% .79%
Ratio of net investment income to
average net assets++........... 5.67% 6.13% 6.08% 6.28%
Portfolio turnover rate.......... 16% 12% 15% 11%
<CAPTION>
FIVE
MONTHS YEAR ENDED 5/31
ENDED ------------------------------------ 6/22/89 TO
10/31/92 1992 1991 1990 5/31/90
-------- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of
period........................... $ 15.760 $ 15.180 $ 14.600 $ 14.720 $ 14.050
Operating performance
Net investment income............ .602 1.492 1.504 1.508 1.101
Net realized & unrealized gain
(loss) from investments........ .023 .492 .532 (.115) .741
Dividends from tax-exempt net
investment income
To Common shareholders........... (.516) (1.135) (1.080) (1.080) (.747)
To Preferred shareholders+....... (.079) (.269) (.376) (.433) (.268)
Distributions from capital gains
To Common shareholders........... -- -- -- -- --
To Preferred shareholders+....... -- -- -- -- --
Organization and offering costs
and Preferred share underwriting
discounts........................ -- -- -- -- (.157)
Net asset value end of period..... 15.790 15.760 15.180 14.600 14.720
Per Common share market value end
of period........................ 15.875 16.250 15.375 15.000 14.875
Total investment return on market
value**.......................... .73% 13.32% 10.14% 8.39% 4.38%
Total return on net asset
value**.......................... 3.46% 11.72% 11.88% 6.74% 10.44%
Ratios/Supplemental data
Net assets end of period (in
thousands)..................... $1,173,329 $1,167,042 $1,127,103 $1,090,365 $1,089,152
Ratio of expenses to average net
assets++....................... .78%* .66% .65% .65% .62%*
Ratio of net investment income to
average net assets++........... 6.33%* 6.71% 6.97% 6.98% 6.92%*
Portfolio turnover rate.......... 2% 2% 1% 4% 7%
</TABLE>
- -------------------------
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains distributions, if
any, and changes in net asset value per share.
*** Includes ($.187) effect of the Fund's Rights Offering of shares as a price
below NAV and costs of the offering.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
S-53
<PAGE> 138
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Nuveen Premium Income Municipal Fund, Inc.
We have audited the accompanying statement of net assets, including the
portfolio of investments, of Nuveen Premium Income Municipal Fund, Inc. as of
October 31, 1996, and the related statements of operations and changes in net
assets and the financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's 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
October 31, 1996, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Nuveen Premium Income Municipal Fund, Inc., at October 31, 1996, and the results
of its operations, changes in its net assets and its financial highlights for
the periods indicated therein in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Chicago, Illinois
December 13, 1996
S-54
<PAGE> 139
APPENDIX A
RATINGS OF INVESTMENTS
STANDARD & POOR'S CORPORATION -- A brief description of the applicable
Standard & Poor's Corporation ("S&P") rating symbols and their meanings (as
published by S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees. The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished by
the issuer or obtained by S&P from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances. The ratings are based, in varying degrees, on the
following considerations:
1. Likelihood of default -- capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization, or other arrangement
under the laws of bankruptcy and other laws affecting creditors'
rights.
INVESTMENT GRADE
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A 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", "CLARK CURBO" 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.
A-1
<PAGE> 140
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The "B" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "BB" or "BB-" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
The "CCC" rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied "B" or "B-" rating.
CLARK CURBO The rating "CLARK CURBO" 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).
A-2
<PAGE> 141
-- 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.
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
A-3
<PAGE> 142
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
CON(--) Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
Aa1, A1, Baa1, Ba1 and B1.
SHORT-TERM LOANS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
A-4
<PAGE> 143
MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less
well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
S.G. This designation denotes speculative quality. Debt
instruments in this category lack margins of protection.
COMMERCIAL PAPER
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- 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> 144
NUVEEN PREMIUM
INCOME MUNICIPAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
, 1997
NPI 9/97
<PAGE> 145
PART C -- OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
PART I
Statement of Net Assets, October 31, 1996 (audited)
Statement of Net Assets, April 30, 1997 (unaudited)
Statement of Operations for
Statement of Changes in Net Assets for
Portfolio of Investments,
(2) EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index
located elsewhere herein.
ITEM 25: MARKETING ARRANGEMENTS
See Sections and of the Purchase Agreement filed as an Exhibit
herein.
ITEM 26: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission fees $ 37,879
Printing and engraving expenses 100,000
Legal fees 80,000
Accounting expenses 3,000
Rating Agency fees 75,000
Blue Sky filing fees and expenses 10,000
Miscellaneous expenses 5,000
--------
Total* $310,879
========
</TABLE>
- ---------------
[*Estimated]
ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 28: NUMBER OF HOLDERS OF SECURITIES
At July 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
<S> <C>
Common Stock, $.01 par value................................ 43,665
Preferred Stock, $.01 par value............................. 21,000
</TABLE>
ITEM 29: 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
C-1
<PAGE> 146
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 Investment
Trust Errors and Omission policies in the aggregate amount of $40,000,000 (with
a maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of the
Registrant or where he or she had reasonable cause to believe this conduct was
unlawful).
Section 7 of the Purchase Agreement filed as Exhibit h to this Registration
Statement provides for each of the parties thereto, including the Registrant and
the Underwriters, to indemnify the others, their directors, certain of their
officers and directors and persons who control them against certain liabilities
in connection with the offering described herein, including liabilities under
the Federal securities laws.
ITEM 30: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following
open-end management type investment companies; Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Flagship
Admiral Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen
California Performance Plus Municipal Fund, Inc., Nuveen New York Performance
Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc.,
C-2
<PAGE> 147
Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California Municipal
Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc.,
Nuveen California Investment Quality Municipal Fund, Inc., Nuveen New York
Investment Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund,
Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey
Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality
Municipal Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California
Select Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal
Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier
Insured Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund 2,
Inc., Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen
Insured New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities
Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen
Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income
Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc.,
Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California Premium
Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Municipal Fund
2, Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium
Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen
Washington Premium Income Municipal Fund, Nuveen Connecticut Premium Income
Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri
Premium Income Municipal Fund, Nuveen North Carolina Premium Income Municipal
Fund, Nuveen California Premium Income Municipal Fund, and Nuveen Insured
Premium Income Municipal Fund 2. Nuveen Advisory Corp. has no other clients or
business at the present time. The principal business address for all of these
investment companies is 333 West Wacker Drive, Chicago, Illinois 60606.
ITEM 31: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains Articles of Incorporation, By-Laws, minutes of directors and
shareholders meetings, and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
maintained by Nuveen Advisory Corp. It also maintains all the required records
in its capacity as transfer, dividend paying, and shareholder service agent with
respect to shares of the Registrant's Common Stock. Bankers Trust Company, 4
Albany Street, New York, New York 10006, maintains all required records in its
capacity as transfer agent, registrar, dividend disbursing agent and redemption
agent with respect to shares of the Registrant's Municipal Auction Rate
Cumulative Preferred Stock.
ITEM 32: MANAGEMENT SERVICES
Not applicable
ITEM 33: UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement, or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
(2) Not applicable
(3) Not applicable
(4) Not applicable
C-3
<PAGE> 148
(5) Registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as a
part of a registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant under Rule 497(h) under the
Securities Act of 1933 shall be deemed to be a part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(6) Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of receipt
of a written or oral request, any Statement of Additional Information.
(7) 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
director, 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.
C-4
<PAGE> 149
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois, on the 13th day of
August, 1997.
NUVEEN PREMIUM INCOME
MUNICIPAL 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ O. WALTER RENFFTLEN Vice President and August 13, 1997
- ------------------------------------------------ Controller (Principal
O. Walter Renfftlen Financial and Accounting
Officer)
Timothy R. Schwertfeger* Chairman of the Board and
Director (Principal
Executive Officer)
Anthony T. Dean* President and Director
By /s/ LARRY W. MARTIN
Robert P. Bremner* Director -----------------------
Larry W. Martin
Lawrence H. Brown* Director Attorney-in-Fact
Anne E. Impellizzeri* Director August 13, 1997
Peter R. Sawers* Director
William J. Schneider* Director
</TABLE>
- ---------------
* An original power of attorney authorizing, among others, Timothy R.
Schwertfeger, Anthony T. Dean, Gifford R. Zimmerman, Larry W. Martin, 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 are filed herewith.
C-5
<PAGE> 150
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED NUMBERED
PAGE EXHIBIT PAGE
- ------------ ------- --------
<S> <C> <C>
a. Restated Articles of Incorporation of Registrant, as
amended, including the Statement Establishing and Fixing the
Rights and Preferences of Registrant's Municipal Auction
Rate Cumulative Preferred Stock.............................
b. By-Laws of Registrant.......................................
c. Not applicable..............................................
d.1 Basic Terms of Auction Agency Agreement, including form of
request and acceptance letter related thereto...............
d.2 Basic Terms of Broker-Dealer Agreement, including form of
request and acceptance letter related thereto...............
d.3 Form of Letter of Representation to The Depository Trust
Company relating to each Series of MuniPreferred............
e. Dividend Reinvestment Plan..................................
f. Not applicable..............................................
g. Investment Management Agreement.............................
h. Form of Purchase Agreement(a)...............................
i. Deferred Compensation Plan for Non-Employee Directors.......
j.1 Exchange Traded Fund Custody Agreement......................
j.2 Fund Accounting Agreement...................................
k. Not applicable..............................................
1.1 Opinion and consent of Vedder, Price, Kaufman &
Kammholz(a).................................................
1.2 Opinion and consent of Dorsey & Whitney(a)..................
m. Not applicable..............................................
n. Consent of Ernst & Young(a).................................
o. Not applicable..............................................
p. Not applicable..............................................
q. Not applicable..............................................
r. Financial Data Schedule(a)..................................
s. Powers of Attorney..........................................
</TABLE>
- -------------------------
(a) To be filed by Amendment.
C-6
<PAGE> 1
EXHIBIT 99.a
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
Nuveen Premium Income Municipal Fund, Inc., a corporation organized and
existing under and by virtue of the Minnesota Business Corporation Act (the
"Corporation"), does here by certify:
FIRST: That, at a meeting duly held on July 21, 1988, the Executive
Committee of the Board of Directors of the Corporation, acting for and on
behalf of such Board, duly adopted the following resolutions setting forth
amendments to the Eleventh Article of the Articles of Incorporation of the
Corporation, as set forth below:
RESOLVED, that the Articles of Incorporation of the Corporation be amended
by striking paragraph (a) of Article ELEVENTH in its entirety and
substituting in lieu thereof the following paragraph (a):
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 and outstanding Preferred Stock, voting as a single
class, shall be required to approve, adopt or authorize (i) a
conversion of the Corporation from a closed-end investment company to
an open-end investment company, (ii) a merger or consolidation of the
Corporation with any other corporation or a reorganization or
recapitalization, (iii) a sale, lease or transfer of all or
substantially all of the assets of the Corporation (other than in the
regular course of the Corporation's investment activities), or (iv) a
liquidation or dissolution of the Corporation, unless such action has
previously been approved, adopted or authorized by the affirmative
vote of two-thirds of the total number of directors fixed in
accordance with the By-Laws, in which case the affirmative vote of
the holders of at least a majority of the outstanding Common Stock
and outstanding Preferred Stock, voting as a single class, shall be
required. Except as may otherwise be required by law, in the case
of the conversion
<PAGE> 2
of the Corporation from a closed-end investment company to an open-end
investment company, or in the case of any of the foregoing
transactions constituting a plan of reorganization (as such term is
used in the Investment Company Act of 1940, as amended) which
adversely affects the holders of shares of Preferred Stock, approval,
adoption or authorization of the action in question will also require
the affirmative vote of the holders of sixty-six and two-thirds
percent (66-2/3%) of the shares of Preferred Stock voting as a
separate class; provided, however, that such separate class vote shall
be a majority vote if the action in question has previously been
approved, adopted or authorized by the affirmative vote of two-thirds
of the total number of directors fixed in accordance with the By-Laws.
SECOND: That the above-described amendment was submitted to and approved
by the sole stockholder of the Corporation on July 21, 1988, and duly
adopted in accordance with the provisions of Sections 302A.131 and 302A.135 of
the Minnesota Business Corporation Act.
IN WITNESS WHEREOF, Nuveen Premium Income Municipal Fund, Inc. has caused
these Articles of Amendment to be signed by a Vice President of the Corporation,
and to be attested to by an Assistant Secretary of the Corporation, this 21st
day of July, 1988.
NUVEEN PREMIUM INCOME
MUNICIPAL FUND, INC.
By: /s/ James J. Wesolowski
----------------------
ATTEST:
By: Larry W. Martin
------------------
-2-
<PAGE> 3
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 James J. Wesolowski and Larry W. Martin personally
known to me to be the same persons whose names are subscribed
to the foregoing Articles of Amendment, appeared before me
this day in person and acknowledged that they signed and delivered
the foregoing Articles of Amendment as their free and voluntary
act, for the uses and purposes therein set forth.
Given under my hand and official seal this 21st day of
July, 1988.
Jane Bensley
-----------------------
Notary Public
(SEAL)
"OFFICIAL SEAL"
Jane Bensley
Notary Public, State of Illinois
My Commission Expires 8/18/90
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JUL 22 1988
Joan Andersen Growe
Secretary of State
<PAGE> 4
RESTATED ARTICLES OF INCORPORATION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
(formerly Nuveen Leveraged Municipals, Inc.)
* * * * * *
FIRST: The name and address of the incorporator
are as follows:
Name Address
James J. Wesolowski 333 West Wacker Drive
Chicago, Illinois 60606
SECOND: The name of the Corporation is: Nuveen
Premium Income Municipal 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 other-
wise dispose of or turn to account or
realize upon securities and other nego-
tiable or non-negotiable instruments,
obligations and evidences of indebted-
ness created or issued by any persons,
firms, associations, corporations,
syndicates, combinations, organizations,
governments or subdivisions thereof, and
generally deal in any such securities
and other negotiable or non-negotiable
instruments, obligations and evidences
of indebtedness; and to exercise, as
owner or holder of any securities or
<PAGE> 5
other instruments, all rights, powers,
and privileges in respect thereof; and
to do any and all acts and things for
the preservation protection, improve-
ment, and enhancement in value of any
and all such securities or other instru-
ments and, in general, to conduct the
business of an closed-end investment
company as that term is defined in the
Act of Congress entitled the Investment
Company Act of 1940, as amended;
To issue and sell shares of its own
capital stock from time to time on such
terms and conditions, for such purposes
and for such amount or kind of considera-
tion (including without limitation
thereto, securities) now or hereafter
permitted by the laws of the State of
Minnesota and by these Articles of Incor-
poration as its Board of Directors may
determine; and
To engage in any lawful act or ac-
tivity for which corporations may be
organized under the Minnesota Business
Corporation Act.
The enumeration herewith of the
objects and purposes of the Corporation
shall be construed as powers as well as
objects and purposes and shall not be
deemed to exclude by inference any powers,
objects or purposes which the Corporation
is empowered to exercise, whether expressly
by force of the laws of the State of
Minnesota now or hereafter in effect, or
impliedly by the reasonable construction
of such laws.
FOURTH: The address of the registered office of
the Corporation in the State of Minnesota is 405 Second Avenue
South, Minneapolis, Minnesota 55401. The name of its resident
agent at such address is CT Corporation System, Inc,
-2-
<PAGE> 6
FIFTH: The total number of shares of stock which
the Corporation is authorized to issue is Two Hundred and
One Million (201,000,000), consisting of One Million
(1,000,000) shares of preferred stock, par value $.01 per
share and of the aggregate par value of Ten Thousand Dollars
($10,000) (the "Preferred Stock") and Two Hundred Million
(200,000,000) shares of common stock, par value $.01 per
share and of the aggregate par value of Two Million Dollars
($2,000,000) (the "Common Stock"). There shall be no
cumulative voting. The designations and powers, preferences
and rights, and the qualifications, limitations and restric-
tions thereof, of each of the classes of stock of the Corpo-
ration are as follows:
(a) Preferred Stock, The Preferred Stock shall
be issued from time to time in one or more series with
such distinctive serial designations and (i) may have
such voting powers, full or limited; (ii) may be subject
to redemption at such time or times and at such price
or prices; (iii) may be entitled to receive dividends
(which may be cumulative or noncumulative) at such rate
or rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the
dividends payable on any other class or classes of stock;
(iv) may have such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation;
-3-
<PAGE> 7
(v) may be made convertible into, or exchangeable for,
shares of any other class or classes or of any other
series of the same or any other class or classes of
stock of the Corporation, at such price or prices or at
such rates of exchange and with such adjustments; and
(vi) shall have such other relative, participating,
optional or other special rights, qualifications,
limitations or restrictions thereof, all as shall here-
after be stated and expressed in the resolution or
resolutions providing for the issue of such Preferred
Stock from time to time adopted by the Board of Directors
pursuant to authority so to do which is hereby expressly
vested in the Board,
(b) Common Stock.
(i) Subject to the rights of the holders of
the Preferred Stock of the Corporation, 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 distribut-
able assets of the Corporation.
(ii) 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
-4-
<PAGE> 8
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.
(iii) Subject to the rights of the holders of
the Preferred Stock of the Corporation, 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. The Board of
Directors may direct that any dividends so declared
and distributed shall be paid in cash to the holder,
or, alternatively, may direct that any such dividends
be reinvested in full and fractional shares of the
Corporation if such holder elects to have them
reinvested.
(iv) If any shares of Common Stock shall have
been purchased or otherwise reacquired by the Cor-
poration 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
-5-
<PAGE> 9
of Common Stock of the Corporation shall not be
reduced by the number of any shares retired.
(v) The value of the net assets of the
Corporation as of any relevant time shall be deter-
mined by such person or persons (which term shall
include any firm, corporation, trust, or associa-
tion) 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 all liabilities, including expenses
incurred or accrued and unpaid, such reservations
as may be established to cover (A) taxes in respect
of net realized gains and potential taxes to be
paid in respect of the excess, if any, of the un-
realized gains over unrealized losses and (B) 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 deter-
mined at the time or times hereinbelow set forth
by dividing the value of the net assets of the
Corporation, less the liquidation value of out-
-6-
<PAGE> 10
standing shares of Preferred Stock and any accrued
and unpaid dividends thereon, by the total number
of outstanding shares of Common Stock (excluding
treasury shares). The Board of Directors is em-
powered, 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 pro-
vision 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.
The Corporation may suspend the determination
of net asset value (A) during any period when the Exchange
is closed (other than customary weekend and holiday
-7-
<PAGE> 11
closings), (B) 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 (C) for such other periods as the Commission
may by order permit for protection of the holders of shares of the Common
Stock.
(vi) 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
-8-
<PAGE> 12
Stock determined as provided in Paragraph (v) 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
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.
(vii) 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 riqht to participate upon
liquidation of the Corporation, but excluding the
right to receive a certificate representing frac-
tional shares,
-9-
<PAGE> 13
SIXTH: (a) The initial number of directors of
the Corporation shall be seven. The By-Laws of the Corporation
may fix the number of directors at a number greater or less than seven
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: Royce
A. Hoyle, Jr., Donald E. Sveen, Richard J. Franke, Robert C.
Sether, Margaret K. Rosenheim, Frank P. Wendt and William R.
Wilkerson.
(c) Any vacancy occurring in the Board of Directors
may be filled by a majority of the directors in office.
A new directorship resulting from an increase in the
number of directors shall be construed to be a vacancy.
Any director elected to fill a vacancy shall have the
same remaining term as that of the predecessor.
(d) A director may be removed from office only
for "Cause" (as hereinafter defined) and only by action
of at least sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of the class or classes of
capital stock that elected such director. "Cause" shall
-10-
<PAGE> 14
require willful misconduct, dishonesty, fraud or a felony
conviction.
(e) 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
shares of Common Stock and outstanding shares of Pre-
ferred Stock. In the event the holders of shares of
Common Stock or the holders of shares of Preferred Stock,
as the case may be, are required by law to approve such
an action by a class vote of such holders, such action
must be approved by the holders of at least sixty-six
and two-thirds percent (66-2/3%) of such holders or
such lower percentage as may be required by law.
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.
-11-
<PAGE> 15
(a) All corporate powers of the Corporation shall be
exercised by the Board of Directors except as otherwise
provided by law; provided, subject to the provisions of
paragraph (c) of this Article SEVENTH, the Board of Directors may
delegate the management of the assets of the Corporation and such
other functions as it may deem reasonable and proper to an
Investment Adviser, as such term is hereinbelow defined, pursuant
to a written contract. The Board of Directors may, by resolu-
tion 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 busi-
ness 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 an
organization in which any of its directors is a director,
officer, or legal representative or has a material
financial interest is not void
-12-
<PAGE> 16
or voidable because the director or directors or other
organizations are parties or because the director or directors
are present at the meeting of shareholders or the board or a
committee at which the contract or transaction is authorized,
approved or ratified, if: (i) the contract or transaction was,
and the person asserting the validity of the contract or
transaction sustains the burden of establishing that the contract
or transaction was, fair and reasonable as to the corporation
at the time it was authorized, approved, or ratified; (ii) the
material facts as to the contract or transaction and as to the
director's or directors' interest are fully disclosed or known to
the shareholders and the contract or transaction is approved in
good faith by the holders of a majority of the outstanding
shares, but shares owned by the interested director or direc-
tors 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
-13-
<PAGE> 17
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 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
-14-
<PAGE> 18
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 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
- 15 -
<PAGE> 19
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 or Preferred 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
-16-
<PAGE> 20
consistent with the provisions of these Articles of
Incorporation as to any of the following matters shall be final
and conclusive and shall be binding upon the Corporation and
every holder at any time of shares of its capital 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 con-
-17-
<PAGE> 21
stitutes 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 capital
stock of the Corporation. No provision of these Articles of
Incorporation shall be effective to (i) require a waiver of compliance
with any provision of the Securities Act of 1933, as amended, or the
Investment Company Act of 1940, as amended, or of any valid rule,
regulation or order of the Commission thereunder, or (ii) protect or
purport to protect any director or officer of the Corporation against
any 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
-18-
<PAGE> 22
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
-19-
<PAGE> 23
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
-20-
<PAGE> 24
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 and outstanding
Preferred Stock shall be required to approve, adopt or authorize (i) a
conversion of the Corporation from a closed-end investment company to an
open-end investment company, (ii) a merger or consolidation of the Corporation
with any other corporation or a reorganization or recapitalization, (iii) a
sale, lease or transfer of all or substantially all of the assets of the
Corporation (other than in the regular course of the Corporation's investment
activities), or (iv) a liquidation or dissolution of the Corporation, unless
such action has previously been approved, adopted or authorized
-21-
<PAGE> 25
by the affirmative vote of two-thirds of the total number of directors fixed in
accordance with the By-Laws, Except as may be otherwise required by law, in the
event of the conversion of the Corporation to an open-end investment company,
or in the event of any of the foregoing transactions constituting a plan of
reorganization (as such term is used in the Investment Company Act of 1940, as
amended) which adversely affects the Common Stock or the Preferred Stock, the
holders of shares of Common Stock and Preferred Stock entitled to be voted on
such matter shall vote separately by class, and the action in question must be
approved by the holders of at least sixty-six and two-thirds percent (66-2/3%)
of the outstanding shares of Common Stock and holders of sixty-six and
two-thirds percent (66-2/3%) of the outstanding shares of Preferred Stock, or
such lower percentage as may be required by law.
(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 shares of
Common Stock
-22-
<PAGE> 26
and outstanding shares of Preferred Stock. In the event the holders of shares
of Common Stock or the holders of shares of Preferred Stock, as the case may
be, are required by law to approve such an action by a class vote of such
holders, such action must be approved by the holders of at least sixty-six
and two-thirds percent (66-2/3%) of such holders or such lower percentage as
may be required by law.
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 prescribed by statute, and any contract rights
-23-
<PAGE> 27
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.
-24-
STATE OF MINNESOTA
DEPARTMENT OF STATE
FILED
JUL 15 1988
[SIG]
Secretary of State
<PAGE> 28
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
AMENDMENT AND RESTATEMENT OF
STATEMENT ESTABLISHING AND FIXING THE RIGHTS
AND PREFERENCES OF
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED(R)")
<PAGE> 29
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
DEFINITIONS................................................................................................................... 1
"AA" Composite Commercial Paper Rate..................................................................................... 1
Accountant's Confirmation................................................................................................ 1
Affiliate................................................................................................................ 2
Agent Member............................................................................................................. 2
Anticipation Notes....................................................................................................... 2
Applicable Rate.......................................................................................................... 2
Articles................................................................................................................. 2
Auction.................................................................................................................. 2
Auction Agency Agreement................................................................................................. 2
Auction Agent............................................................................................................ 2
Auction Date............................................................................................................. 2
Auction Procedures....................................................................................................... 2
Available MuniPreferred.................................................................................................. 2
Benchmark Rate........................................................................................................... 2
Beneficial Owner......................................................................................................... 2
Bid and "Bids"........................................................................................................... 2
Bidder and Bidders....................................................................................................... 2
Board of Directors....................................................................................................... 2
Broker-Dealer............................................................................................................ 3
Broker-Dealer Agreement.................................................................................................. 3
Business Day............................................................................................................. 3
Code..................................................................................................................... 3
Commercial Paper Dealers................................................................................................. 3
Common Stock............................................................................................................. 3
Cure Date................................................................................................................ 3
Date of Original Issue................................................................................................... 3
Deposit Securities....................................................................................................... 3
Discounted Value......................................................................................................... 3
[Reserved]............................................................................................................... 3
[Reserved]............................................................................................................... 3
Dividend Payment Date.................................................................................................... 3
Dividend Period.......................................................................................................... 3
Existing Holder.......................................................................................................... 3
Failure to Deposit....................................................................................................... 4
Federal Tax Rate Increase................................................................................................ 4
Fund..................................................................................................................... 4
Gross-up Payment......................................................................................................... 4
Holder................................................................................................................... 4
Hold Order and Hold Orders............................................................................................... 4
Independent Accountant................................................................................................... 4
Initial Rate Period...................................................................................................... 4
Interest Equivalent...................................................................................................... 4
Issue Type Category...................................................................................................... 4
Kenny Index.............................................................................................................. 4
Late Charge.............................................................................................................. 4
Liquidation Preference................................................................................................... 4
</TABLE>
i
<PAGE> 30
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Market Value............................................................................................................. 4
Maximum Potential Gross-up Payment Liability............................................................................. 5
Maximum Rate............................................................................................................. 5
[Reserved]............................................................................................................... 5
Minimum Rate Period...................................................................................................... 5
Moody's.................................................................................................................. 5
Moody's Discount Factor.................................................................................................. 5
Moody's Eligible Asset................................................................................................... 5
Moody's Exposure Period.................................................................................................. 5
Moody's Volatility Factor................................................................................................ 6
MuniPreferred............................................................................................................ 6
MuniPreferred Basic Maintenance Amount................................................................................... 6
MuniPreferred Basic Maintenance Cure Date................................................................................ 7
MuniPreferred Basic Maintenance Report................................................................................... 7
Municipal Obligations.................................................................................................... 7
1940 Act................................................................................................................. 7
1940 Act Cure Date....................................................................................................... 7
1940 Act MuniPreferred Asset Coverage.................................................................................... 7
Notice of Redemption..................................................................................................... 7
Notice of Special Rate Period............................................................................................ 7
Order and Orders......................................................................................................... 7
Original Issue Insurance................................................................................................. 7
Other Issues............................................................................................................. 8
Outstanding.............................................................................................................. 8
Permanent Insurance...................................................................................................... 8
Person................................................................................................................... 8
Portfolio Insurance...................................................................................................... 8
Potential Beneficial Owner............................................................................................... 8
Potential Holder......................................................................................................... 8
Preferred Stock.......................................................................................................... 8
Quarterly Valuation Date................................................................................................. 8
Rate Multiple............................................................................................................ 8
Rate Period.............................................................................................................. 8
Rate Period Days......................................................................................................... 8
Receivables for Municipal Obligations Sold............................................................................... 8
Redemption Price......................................................................................................... 9
Reference Rate........................................................................................................... 9
Registration Statement................................................................................................... 9
S&P...................................................................................................................... 9
S&P Discount Factor...................................................................................................... 9
S&P Eligible Asset....................................................................................................... 9
S&P Exposure Period...................................................................................................... 9
S&P Volatility Factor.................................................................................................... 9
Secondary Market Insurance............................................................................................... 9
Securities Depository.................................................................................................... 9
Sell Order and Sell Orders............................................................................................... 9
Special Rate Period...................................................................................................... 9
Special Redemption Provisions............................................................................................ 9
Submission Deadline...................................................................................................... 9
Submitted Bid and Submitted Bids......................................................................................... 9
</TABLE>
ii
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Submitted Hold Order and Submitted Hold Orders........................................................................... 9
Submitted Order and Submitted Orders.................................................................................... 10
Submitted Sell Order and Submitted Sell Orders.......................................................................... 10
Subsequent Rate Period.................................................................................................. 10
Substitute Commercial Paper Dealer...................................................................................... 10
Substitute U.S. Government Securities Dealer............................................................................ 10
Sufficient Clearing Bids................................................................................................ 10
Taxable Allocation...................................................................................................... 10
Taxable Income.......................................................................................................... 10
Taxable Equivalent of the Short-Term Municipal Bond Rate................................................................ 10
Transitional Rate Period................................................................................................ 10
Treasury Bill........................................................................................................... 11
Treasury Bill Rate...................................................................................................... 11
Treasury Note........................................................................................................... 11
Treasury Note Rate...................................................................................................... 11
U.S. Government Securities Dealer....................................................................................... 11
Valuation Date.......................................................................................................... 11
Volatility Factor....................................................................................................... 11
Voting Period........................................................................................................... 11
Winning Bid Rate........................................................................................................ 11
PART I. ..................................................................................................................... 12
1. Number of Authorized Shares..................................................................................... 12
2. Dividends....................................................................................................... 12
(a) Ranking................................................................................................. 12
(b) Cumulative Cash Dividends............................................................................... 12
(c) Dividends Cumulative From Date of Original Issue........................................................ 12
(d) Dividend Payment Dates and Adjustment Thereof........................................................... 12
(e) Dividend Rates and Calculation of Dividends............................................................. 12
(i) Dividend Rates................................................................................. 12
(ii) Calculation of Dividends....................................................................... 14
(f) Curing a Failure to Deposit............................................................................. 14
(g) Dividend Payments by Fund to Auction Agent.............................................................. 14
(h) Auction Agent as Trustee of Dividend Payments by Fund................................................... 14
(i) Dividends Paid to Holders............................................................................... 15
(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends.................................... 15
(k) Dividends Designated as Exempt-Interest Dividends....................................................... 15
3. Gross-up Payments............................................................................................... 15
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days or Fewer........................... 15
(b) Special Rate Periods of More Than 28 Rate Period Days................................................... 15
(c) No Gross-up Payments In the Event of a Reallocation..................................................... 15
4. Designation of Special Rate Periods............................................................................. 15
(a) Length of and Preconditions for Special Rate Period..................................................... 15
(b) Adjustment of Length of Special Rate Period............................................................. 16
(c) Notice of Proposed Special Rate Period.................................................................. 16
(d) Notice of Special Rate Period........................................................................... 16
(e) Failure to Deliver Notice of Special Rate Period........................................................ 17
5. Voting Rights................................................................................................... 17
(a) One Vote Per Share of MuniPreferred..................................................................... 17
(b) Voting For Additional Directors......................................................................... 17
(i) Voting Period................................................................................ 17
</TABLE>
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(ii) Notice of Special Meeting.................................................................... 18
(iii) Terms of Office of Existing Directors........................................................ 18
(iv) Terms of Office of Certain Directors to Terminate Upon Termination of Voting
Period....................................................................................... 18
(c) Holders of MuniPreferred To Vote On Certain Other Matters................................................ 18
(i) Increases in Capitalization.................................................................. 18
(ii) 1940 Act Matters............................................................................. 19
(d) Board May Take Certain Actions Without Shareholder Approval.............................................. 19
(e) Voting Rights Set Forth Herein Are Sole Voting Rights.................................................... 20
(f) No Preemptive Rights or Cumulative Voting................................................................ 20
(g) Voting for Directors Sole Remedy for Fund's Failure to Pay Dividends..................................... 20
(h) Holders Entitled to Vote................................................................................. 20
6. 1940 Act MuniPreferred Asset Coverage........................................................................... 20
7. MuniPreferred Basic Maintenance Amount.......................................................................... 20
8. [Reserved]...................................................................................................... 22
9. Restrictions on Dividends and Other Distributions............................................................... 22
(a) Dividends on Preferred Stock Other Than MuniPreferred.................................................... 22
(b) Dividends and Other Distributions With Respect to Common Stock Under the 1940 Act........................ 22
(c) Other Restrictions On Dividends and Other Distributions.................................................. 22
10. Rating Agency Restrictions...................................................................................... 23
11. Redemption...................................................................................................... 23
(a) Optional Redemption...................................................................................... 23
(b) Mandatory Redemption..................................................................................... 24
(c) Notice of Redemption..................................................................................... 25
(d) No Redemption Under Certain Circumstances................................................................ 25
(e) Absence of Funds Available for Redemption................................................................ 25
(f) Auction Agent as Trustee of Redemption Payments by Fund.................................................. 25
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer Outstanding........................... 25
(h) Compliance With Applicable Law........................................................................... 26
(i) Only Whole Shares of MuniPreferred May Be Redeemed....................................................... 26
12. Liquidation Rights.............................................................................................. 26
(a) Ranking.................................................................................................. 26
(b) Distributions Upon Liquidation........................................................................... 26
(c) Pro Rata Distributions................................................................................... 26
(d) Rights of Junior Stock................................................................................... 27
(e) Certain Events Not Constituting Liquidation.............................................................. 27
13. Miscellaneous................................................................................................... 27
(a) Amendment of Appendix A to Add Additional Series......................................................... 27
(b) Appendix A Incorporated By Reference..................................................................... 27
(c) No Fractional Shares..................................................................................... 27
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or Otherwise Acquired by the Fund.................. 27
(e) Board May Resolve Ambiguities............................................................................ 27
(f) Headings Not Determinative............................................................................... 27
(g) Notices.................................................................................................. 27
PART II. .................................................................................................................... 28
1. Orders.......................................................................................................... 28
2. Submission of Orders by Broker-Dealers to Auction Agent......................................................... 29
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate................................. 31
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares................... 32
</TABLE>
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<TABLE>
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5. Notification of Allocations..................................................................................... 34
6. Auction Agent................................................................................................... 34
7. Transfer of Shares of MuniPreferred............................................................................. 34
8. Global Certificate.............................................................................................. 34
Appendix A................................................................................................................... A-1
Section 1. Designation As To Series.................................................................................... A-1
Section 2. Number of Authorized Shares Per Series...................................................................... A-2
Section 3. Exceptions to Certain Definitions........................................................................... A-2
Section 4. Certain Definitions......................................................................................... A-2
Section 5. Initial and Transitional Rate Periods....................................................................... A-6
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading "Definitions" in this Statement A-6
Section 7. Party Named for Purposes of the Definition of "Rate Multiple" in this Statement............................. A-7
Section 8. Additional Definitions...................................................................................... A-7
Section 10. Amount for Purposes of Subparagraph (c)(i) of Section 5 of Part I of this Statement........................ A-7
Section 11. Redemption Provisions Applicable to Initial Rate Periods................................................... A-7
Section 12. Applicable Rate for Purposes of Subparagraph(b)(iii) of Section 3 of Part II of this Statement............. A-7
</TABLE>
V
<PAGE> 34
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC., a Minnesota corporation (the
"Fund"), certifies to the Secretary of State of the State of Minnesota that:
First: Pursuant to authority expressly vested in the Board of Directors
of the Fund by Article FIFTH of the Fund's Articles of Incorporation, as
amended (which, as hereafter restated or amended from time to time are,
together with this Statement, herein called the "Articles"), the Board of
Directors has, by resolution, designated the preferences, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption of shares of the Fund's authorized Preferred Stock,
par value $.01 per share, liquidation preference $25,000 per share, having such
designation or designations as to series as is set forth in Section 1 of
Appendix A hereto and such number of shares per such series as is set forth in
Section 2 of Appendix A hereto.
Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
shares of each series of MuniPreferred described in Section 1 of Appendix A
hereto are as follows (each such series being referred to herein as a series of
MuniPreferred, and shares of all such series being referred to herein
individually as a share of MuniPreferred and collectively as shares of
MuniPreferred):
DEFINITIONS
Except as otherwise specifically provided in Section 3 of Appendix A
hereto, as used in Parts I and II of this Statement, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) "AA" COMPOSITE COMMERCIAL RATE," on any date for any Rate Period of
shares of a series of MuniPreferred, shall mean (i)(A) in the case of any
Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period
Days, the interest equivalent of the 30-day rate; provided, however, that if
such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial
Paper Rate is being used to determine the Applicable Rate for shares of such
series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven-day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more
but fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99
Rate Period Days, the interest equivalent of the 90-day rate; (4) 99 or more
but fewer than 120 Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the 120-day and
180-day rates; and (7) 162 or more but fewer than 183 Rate Period Days, the
interest equivalent of the 180-day rate, in each case on commercial paper
placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or the
equivalent of such rating by S&P or another rating agency, as made available on
a discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day next preceding such date; or (ii) in the event that the Federal
Reserve Bank of New York does not make available any such rate, then the
arithmetic average of such rates, as quoted on a discount basis or otherwise,
by the Commercial Paper Dealers to the Auction Agent for the close of business
on the Business Day next preceding such date. If any Commercial Paper Dealer
does not quote a rate required to determine the "AA" Composite Commercial Paper
Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis
of the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer
or Substitute Commercial Paper Dealers selected by the Fund to provide such
rate or rates not being supplied by any Commercial Paper Dealer or Commercial
Paper Dealers, as the case may be, or, if the Fund does not select any such
Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by
the remaining Commercial Paper Dealer or Commercial Paper Dealers. For
purposes of this definition, the "interest equivalent" of a rate stated on a
discount basis (a "discount rate") for commercial paper of a given days'
maturity shall be equal to the quotient (rounded upwards to the next higher
one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the
difference between (x) 1.00 and (y) a fraction, the numerator of which shall be
the product of the discount rate times the number of days in which such
commercial paper matures and the denominator of which shall be 360.
(b) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.
<PAGE> 35
(c) "AFFILIATE" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by, in
control of or under common control with the Fund; provided, however, that no
Broker-Dealer controlled by, in control of or under common control with the
Fund shall be deemed to be an Affiliate nor shall any corporation or any Person
controlled by, in control of or under common control with such corporation one
of the directors, trustees or executive officers of which is a director of the
Fund be deemed to be an Affiliate solely because such director, trustee or
executive officer is also a director of the Fund.
(d) "AGENT MEMBER" shall mean a member of or participant in the
Securities Depository that will act on behalf of a Bidder.
(e) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes (TANs),
Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs),
Grant Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation
Notes (BANs) that are rated by S&P.
(f) "APPLICABLE RATE" shall have the meaning specified in subparagraph
(e)(i) of Section 2 of Part I of this Statement.
(g) "ARTICLES" shall have the meaning specified on the first page of this
Statement.
(h) "AUCTION" shall mean each periodic implementation of the Auction
Procedures.
(i) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Fund
and the Auction Agent which provides, among other things, that the Auction
Agent will follow the Auction Procedures for purposes of determining the
Applicable Rate for shares of a series of MuniPreferred so long as the
Applicable Rate for shares of such series is to be based on the results of an
Auction.
(j) "AUCTION AGENT" shall mean the entity appointed as such by a
resolution of the Board of Directors in accordance with Section 6 of Part II of
this Statement.
(k) "AUCTION DATE," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.
(l) "AUCTION PROCEDURES" shall mean the procedures for conducting
Auctions set forth in Part II of this Statement.
(m) "AVAILABLE MUNIPREFERRED" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(n) "BENCHMARK RATE" shall have the meaning specified in Section 12 of
Appendix A hereto.
(o) "BENEFICIAL OWNER," with respect to shares of a series of
MuniPreferred, means a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of such series.
(p) "BID and BIDS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(q) "BIDDER and BIDDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement; provided, however,
that neither the Fund nor any affiliate thereof shall be permitted to be a
Bidder in an Auction, except that any Broker-Dealer that is an affiliate of the
Fund may be a Bidder in an Auction, but only if the Orders placed by such
Broker-Dealer are not for its own account.
(r) "BOARD OF DIRECTORS" shall mean the Board of Directors of the Fund or
any duly authorized committee thereof.
(s) "BROKER-DEALER" shall mean any broker-dealer, commercial bank or
other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member or
participant, has been selected by the Fund and has entered into a Broker-Dealer
Agreement that remains effective.
2
<PAGE> 36
(t) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Fund, the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees
to follow the procedures specified in Part II of this Statement.
(u) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange
is open for trading and which is neither a Saturday, Sunday nor any other day
on which banks in The City of New York, New York, are authorized by law to
close.
(v) "CODE" means the Internal Revenue Code of 1986, as amended.
(w) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated or, in lieu of any thereof, their respective affiliates or
successors, if such entity is a commercial paper dealer.
(x) "COMMON STOCK" shall mean the common stock, par value $.01 per share,
of the Fund.
(y) "CURE DATE" shall mean the MuniPreferred Basic Maintenance Cure Date
or the 1940 Act Cure Date, as the case may be.
(z) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of
MuniPreferred, shall mean the date on which the Fund initially issued such
shares.
(aa) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated
at least A-1+ or SP-1+ by S&P, except that, for purposes of subparagraph (a)(v)
of Section 11 of Part I of this Statement, such Municipal Obligations shall be
considered "Deposit Securities" only if they are also rated P-1, MIG-1 or
VMIG-1 by Moody's.
(bb) "DISCOUNTED VALUE" as of any Valuation Date, shall mean, (i)
with respect to an S&P Eligible Asset, the quotient of the Market Value thereof
divided by the applicable S&P Discount Factor and (ii)(a) with respect to a
Moody's Eligible Asset that is not currently callable as of such Valuation Date
at the option of the issuer thereof, the quotient of the Market Value thereof
divided by the applicable Moody's Discount Factor, or (b) with respect to a
Moody's Eligible Asset that is currently callable as of such Valuation Date at
the option of the issuer thereof, the quotient of (1) the lesser of the Market
Value or call price thereof, including any call premium, divided by (2) the
applicable Moody's Discount Factor.
(cc) [RESERVED]
(dd) [RESERVED]
(ee) "DIVIDEND PAYMENT DATE," with respect to shares of a series of
MuniPreferred, shall mean any date on which dividends are payable on shares of
such series pursuant to the provisions of paragraph (d) of Section 2 of Part I
of this Statement.
(ff) "DIVIDEND PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the Date of Original
Issue of shares of such series to but excluding the initial Dividend
Payment Date for shares of such series and any period thereafter from and
including one Dividend Payment Date for shares of such series to but excluding
the next succeeding Dividend Payment Date for shares of such series.
(gg) "EXISTING HOLDER," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may be
permitted by the Fund) that is listed on the records of the Auction Agent as a
holder of shares of such series.
(hh) "FAILURE TO DEPOSIT," with respect to shares of a series of
MuniPreferred, shall mean a failure by the Fund to pay to the Auction Agent,
not later than 12:00 noon, New York City time, (A) on the Business Day next
preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend Payment Date in The City of New York, New York, the
full amount of any dividend (whether or not earned or declared) to be paid on
such Dividend Payment Date on any share of such series or (B) on the Business
Day next preceding any redemption date in funds available on such redemption
date for shares of such series in The City
3
<PAGE> 37
of New York, New York, the Redemption Price to be paid on such redemption date
for any share of such series after notice of redemption is mailed pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided, however,
that the foregoing clause (B) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related Notice
of Redemption provides that redemption of such shares is subject to one or more
conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(ii) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the
definition of "Moody's Volatility Factor."
(jj) "FUND" shall mean the entity named on the first page of this
Statement, which is the issuer of the shares of MuniPreferred.
(kk) "GROSS-UP PAYMENT" shall have the meaning specified in Section 4 of
Appendix A hereto.
(ll) "HOLDER," with respect to shares of a series of MuniPreferred, shall
mean the registered holder of such shares as the same appears on the stock
books of the Fund.
(mm) "HOLD ORDER" and "HOLD ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(nn) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants under
the Securities Act of 1933, as amended from time to time.
(oo) "INITIAL RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of such
series in Section 5 of Appendix A hereto.
(pp) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount
basis security which is equal to the yield on an equivalent interest-bearing
security.
(qq) "ISSUE TYPE CATEGORY," if defined in Section 4 of Appendix A hereto,
shall have the meaning specified in that section.
(rr) "KENNY INDEX" shall have the meaning specified in the definition of
"Taxable Equivalent of the Short-Term Municipal Bond Rate."
(ss) "LATE CHARGE" shall have the meaning specified in subparagraph (e)(1)
(B) of Section 2 of Part I of this Statement.
(tt) "LIQUIDATION PREFERENCE," with respect to a given number of shares of
MuniPreferred, means $25,000 times that number.
(uu) "MARKET VALUE" of any asset of the Fund shall mean the market value
thereof determined by the pricing service designated from time to time by the
Board of Directors. Market Value of any asset shall include any interest
accrued thereon. The pricing service values portfolio securities at the mean
between the quoted bid and asked price or the yield equivalent when quotations
are readily available. Securities for which quotations are not readily
available are valued at fair value as determined by the pricing service using
methods which 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.
(vv) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation
Date, shall mean the aggregate amount of Gross-up Payments that would be due if
the Fund were to make Taxable Allocations, with respect to any taxable year,
estimated based upon dividends paid and the amount of undistributed realized
net capital gains and other taxable income earned by the Fund,
4
<PAGE> 38
as of the end of the calendar month immediately preceding such Valuation Date,
and assuming such Gross-up Payments are fully taxable.
(ww) "MAXIMUM RATE," for shares of a series of MuniPreferred on any Auction
Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this Statement,
the product of (A) the Reference Rate on such Auction Date for the next
Rate Period of shares of such series and (B) the Rate Multiple on such
Auction Date, unless shares of such series have or had a Special Rate
Period (other than a Special Rate Period of 28 Rate Period Days or fewer)
and an Auction at which Sufficient Clearing Bids existed has not yet
occurred for a Minimum Rate Period of shares of such series after such
Special Rate Period, in which case the higher of:
(A) the dividend rate on shares of such series for the
then-ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference
Rate on such Auction Date for a Rate Period equal in length to the
then-ending Rate Period of shares of such series, if such then-ending
Rate Period was 364 Rate Period Days or fewer, or the Treasury
Note Rate on such Auction Date for a Rate Period equal in length to
the then-ending Rate Period of shares of such series, if such
then-ending Rate Period was more than 364 Rate Period Days, and (y)
the Reference Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period of shares of such series, if such
Special Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (2) the Rate Multiple on such
Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this Statement,
the product of (A) the highest of (1) the Reference Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period of
shares of such series, if such then-ending Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction Date for a
Rate Period equal in length to the then-ending Rate Period of shares of
such series, if such then-ending Rate Period was more than 364 Rate Period
Days, (2) the Reference Rate on such Auction Date for the Special Rate
Period for which the Auction is being held if such Special Rate Period is
364 Rate Period Days or fewer or the Treasury Note Rate on such Auction
Date for the Special Rate Period for which the Auction is being held if
such Special Rate Period is more than 364 Rate Period Days, and (3) the
Reference Rate on such Auction Date for Minimum Rate Periods and (B) the
Rate Multiple on such Auction Date.
(xx) [RESERVED]
(yy) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate
Period Days.
(zz) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
(aaa) "MOODY'S DISCOUNT FACTOR" shall have the meaning specified in
Section 4 of Appendix A hereto.
(bbb) "MOODY'S ELIGIBLE ASSET" shall have the meaning specified in
Section 4 of Appendix A hereto.
(ccc) "MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a
given Valuation Date and ending 56 days thereafter.
(ddd) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date,
(i) in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate
Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or
more, a multiplicative factor equal to 275%, except as otherwise provided in
the last sentence of this definition; (ii) in the case of any Special Rate
Period of more than 28 but fewer than 36 Rate Period Days, a multiplicative
factor equal to 203%; (iii) in the case of any Special Rate Period
5
<PAGE> 39
of more than 35 but fewer than 43 Rate Period Days, a multiplicative factor
equal to 217%; (iv) in the case of any Special Rate Period of more than 42 but
fewer than 50 Rate Period Days, a multiplicative factor equal to 226%; and (v)
in the case of any Special Rate Period of more than 49 but fewer than 57 Rate
Period Days, a multiplicative factor equal to 235%. If, as a result of the
enactment of changes to the Code, the greater of the maximum marginal Federal
individual income tax rate applicable to ordinary income and the maximum
marginal Federal corporate income tax rate applicable to ordinary income will
increase, such increase being rounded up to the next five percentage points
(the "Federal Tax Rate Increase"), until the effective date of such increase,
the Moody's Volatility Factor in the case of any Rate Period described in (i)
above in this definition instead shall be determined by reference to the
following table:
<TABLE>
<CAPTION>
FEDERAL TAX RATE INCREASE VOLATILITY FACTOR
------------------------- -----------------
<S> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
(eee) "MUNIPREFERRED" shall have the meaning set forth on the first page of
this Statement.
(fff) "MUNIPREFERRED BASIC MAINTENANCE AMOUNT," as of any Valuation Date,
shall mean the dollar amount equal to the sum of (i)(A) the product of the
number of shares of MuniPreferred outstanding on such date multiplied by
$25,000 (plus the product of the number of shares of any other series of
Preferred Stock outstanding on such date multiplied by the liquidation
preference of such shares), plus any redemption premium applicable to shares of
MuniPreferred (or other Preferred Stock) then subject to redemption; (B) the
aggregate amount of dividends that will have accumulated at the respective
Applicable Rates (whether or not earned or declared) to (but not including) the
first respective Dividend Payment Dates for shares of MuniPreferred outstanding
that follow such Valuation Date (plus the aggregate amount of dividends,
whether or not earned or declared, that will have accumulated in respect of
other outstanding shares of Preferred Stock to, but not including, the first
respective dividend payment dates for such other shares that follow such
Valuation Date); (C) the aggregate amount of dividends that would accumulate on
shares of each series of MuniPreferred outstanding from such first respective
Dividend Payment Date therefor through the 56th day after such Valuation Date,
at the Maximum Rate (calculated as if such Valuation Date were the Auction Date
for the Rate Period commencing on such Dividend Payment Date) for a Minimum
Rate Period of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation Date
the Fund shall have delivered a Notice of Special Rate Period to the Auction
Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such
series, such Maximum Rate shall be the higher of (a) the Maximum Rate for the
Special Rate Period of shares of such series to commence on such Dividend
Payment Date and (b) Maximum Rate for a Minimum Rate Period of shares of such
series to commence on such Dividend Payment Date, multiplied by the Volatility
Factor applicable to a Minimum Rate Period, or, in the event the Fund shall
have delivered a Notice of Special Rate Period to the Auction Agent pursuant to
Section 4(d)(i) of this Part I with respect to shares of such series
designating a Special Rate Period consisting of 56 Rate Period Days or more,
the Volatility Factor applicable to a Special Rate Period of that length (plus
the aggregate amount of dividends that would accumulate at the maximum dividend
rate or rates on any other shares of Preferred Stock outstanding from such
respective dividend payment dates through the 56th day after such Valuation
Date, as established by or pursuant to the respective statements establishing
and fixing the rights and preferences of such other shares of Preferred Stock)
(except that (1) if such Valuation Date occurs at a time when a Failure to
Deposit (or, in the case of shares of Preferred Stock other than MuniPreferred,
a failure similar to a Failure to Deposit) has occurred that has not been
cured, the dividend for purposes of calculation would accumulate at the current
dividend rate then applicable to the shares in respect of which such failure
has occurred and (2) for those days during the period described in this
subparagraph (C) in respect of which the Applicable Rate in effect immediately
prior to such Dividend Payment Date will remain in effect (or, in the case of
shares of Preferred Stock other than MuniPreferred, in respect of which the
dividend rate or rates in effect immediately prior to such respective dividend
payment dates will remain in effect), the dividend for purposes of calculation
would accumulate at such Applicable Rate (or other rate or rates, as the case
may be) in respect of those days);
6
<PAGE> 40
(D) the amount of anticipated expenses of the Fund for the 90 days subsequent
to such Valuation Date; (E) the amount of the Fund's Maximum Potential Gross-up
Payment Liability in respect of shares of MuniPreferred (and similar amounts
payable in respect of other shares of Preferred Stock pursuant to provisions
similar to those contained in Section 3 of Part I of this Statement) as of such
Valuation Date; and (F) any current liabilities as of such Valuation Date to
the extent not reflected in any of (i)(A) through (i)(E) (including, without
limitation, any payables for Municipal Obligations purchased as of such
Valuation Date and any liabilities incurred for the purpose of clearing
securities transactions) less (ii) the value (i.e., for purposes of current
Moody's guidelines, the face value of cash, short-term Municipal Obligations
rated MIG-1, VMIG-1 or P-1, and short-term securities that are the direct
obligation of the U.S. government, provided in each case that such securities
mature on or prior to the date upon which any of (i)(A) through (i)(F) become
payable, otherwise the Moody's Discounted Value) of any of the Fund's assets
irrevocably deposited by the Fund for the payment of any of (i)(A) through
(i)(F).
(ggg) "MUNIPREFERED BASIC MAINTENANCE CURE DATE," with respect to the
failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount (as
required by paragraph (a) of Section 7 of Part I of this Statement) as of a
given Valuation Date, shall mean the seventh Business Day following such
Valuation Date.
(hhh) "MUNIPREFERED BASIC MAINTENANCE REPORT" shall mean a report signed
by the President, Treasurer or any Senior Vice President or Vice President of
the Fund which sets forth, as of the related Valuation Date, the assets of the
Fund, the Market Value and the Discounted Value thereof (seriatim and in
aggregate), and the MuniPreferred Basic Maintenance Amount.
(iii) "MUNICIPAL OBLIGATIONS" shall mean "Municipal Obligations" as
defined in the Fund's registration statement on Form N-2 on file with the
Securities and Exchange Commission, as such registration statement may be
amended from time to time (the "Registration Statement").
(jjj) "1940 ACT" shall mean the Investment Company Act of 1940, as amended
from time to time.
(kkk) "1940 ACT CURE DATE," with respect to the failure by the Fund to
maintain the 1940 Act MuniPreferred Asset Coverage (as required by Section 6 of
Part I of this Statement) as of the last Business Day of each month, shall mean
the last Business Day of the following month.
(lll) "1940 ACT MUNIPREFERRED ASSET COVERAGE" shall mean asset coverage,
as defined in Section 18(h) of the 1940 Act, of at least 200% with respect
to all outstanding senior securities of the Fund which are stock, including all
outstanding shares of MuniPreferred (or such other asset coverage as may in the
future be specified in or under the 1940 Act as the minimum asset coverage for
senior securities which are stock of a closed-end investment company as a
condition of declaring dividends on its common stock).
(mmm) "NOTICE OF REDEMPTION" shall mean any notice with respect to the
redemption of shares of MuniPreferred pursuant to paragraph (c) of Section 11
of Part I of this Statement.
(nnn) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect
to a Special Rate Period of shares of MuniPreferred pursuant to subparagraph
(d)(i) of Section 4 of Part I of this Statement.
(ooo) "ORDER" AND "ORDERS" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "ORIGINAL ISSUE INSURANCE," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(qqq) "OTHERS ISSUES," if defined in Section 4 of Appendix A hereto, shall
have the meaning specified in that section.
(rrr) "OUTSTANDING" shall mean, as of any Auction Date with respect to
shares of a series of MuniPreferred, the number of shares of such series
theretofore issued by the Fund except, without duplication, (i) any shares of
such series theretofore cancelled or delivered to the Auction Agent for
cancellation or redeemed by the Fund, (ii) any shares of such series as to
which the Fund or any
7
<PAGE> 41
Affiliate thereof shall be an Existing Holder and (iii) any shares of such
series represented by any certificate in lieu of which a new certificate has
been executed and delivered by the Fund.
(sss) "PERMANENT INSURANCE," if defined in Section 4 of Appendix A hereto,
shall have the meaning specified in that section.
(ttt) "PERSON" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
(uuu) "PORTFOLIO INSURANCE," if defined in Section 4 of Appendix A hereto,
shall have the meaning specified in that section.
(vvv) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of
MuniPreferred, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase shares of
such series, or that is a Beneficial Owner of shares of such series that wishes
to purchase additional shares of such series.
(www) "POTENTIAL HOLDER," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other person as may
be permitted by the Fund) that is not an Existing Holder of shares of such
series or that is an Existing Holder of shares of such series that wishes to
become the Existing Holder of additional shares of such series.
(xxx) "PREFERRED STOCK" shall mean the preferred stock of the Fund, and
includes the shares of MuniPreferred.
(yyy) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each
February, May, August and November of each year, commencing on the date set
forth in Section 6 of Appendix A hereto.
(zzz) "RATE MULTIPLE" shall have the meaning specified in Section 4 of
Appendix A hereto.
(aaaa) "RATE PERIOD," with respect to shares of a series of MuniPreferred,
shall mean the Initial Rate Period, and any Transitional Rate Period, of shares
of such series and any Subsequent Rate Period, including any Special Rate
Period, of shares of such series.
(bbbb) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means
the number of days that would constitute such Rate Period or Dividend Period
but for the application of paragraph (d) of Section 2 of Part I of this
Statement or paragraph (b) of Section 4 of Part I of this Statement.
(cccc) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean (A) for
purposes of calculation of Moody's Eligible Assets as of any Valuation
Date, no more than the aggregate of the following: (i) the book value of
receivables for Municipal Obligations sold as of or prior to such Valuation
Date if such receivables are due within five business days of such Valuation
Date, and if the trades which generated such receivables are (x) settled
through clearing house firms with respect to which the Fund has received prior
written authorization from Moody's or (y) with counterparties having a Moody's
long-term debt rating of at least Baa3; and (ii) the Moody's Discounted Value
of Municipal Obligations sold as of or prior to such Valuation Date which
generated receivables, if such receivables are due within five business days of
such Valuation Date but do not comply with either of the conditions specified
in (i) above, and (B) for purposes of calculation of S&P Eligible Assets as of
any Valuation Date, the book value of receivables for Municipal Obligations
sold as of or prior to such Valuation Date if such receivables are due within
five business days of such Valuation Date.
(dddd) "REDEMPTION PRICE" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this Statement.
(eeee) "REFERENCE RATE" shall mean (i) the higher of the Taxable
Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial
Paper Rate in the case of Special Rate Periods of more than 28 Rate Period Days
but
8
<PAGE> 42
fewer than 183 Rate Period Days; and (iii) the Treasury Bill Rate in the case
of Special Rate Periods of more than 182 Rate Period Days but fewer than 365
Rate Period Days.
(ffff) "REGISTRATION STATEMENT" has the meaning specified in the
definition of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.
(hhhh) "S&P DISCOUNT FACTOR" shall have the meaning specified in Section 4
of Appendix A hereto.
(iiii) "S&P ELIGIBLE ASSET" shall have the meaning specified in Section 4
of Appendix A hereto.
(jjjj) "S&P EXPOSURE PERIOD" shall mean the maximum period of time
following a Valuation Date that the Fund has under this Statement to cure any
failure to maintain, as of such Valuation Date, the Discounted Value for its
portfolio at least equal to the MuniPreferred Basic Maintenance Amount (as
described in paragraph (a) of Section 7 of Part I of this Statement).
(kkkk) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation Date, a
multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period
or any Special Rate Period of 28 Rate Period Days or fewer; (ii) 268% in the
case of any Special Rate Period of more than 28 Rate Period Days but fewer than
183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of
more than 182 Rate Period Days.
(llll) "SECONDARY MARKET INSURANCE," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(mmmm) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and
its successors and assigns or any other securities depository selected by the
Fund which agrees to follow the procedures required to be followed by such
securities depository in connection with shares of MuniPreferred.
(nnnn) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(oooo) "SPECIAL RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall have the meaning specified in paragraph (a) of Section 4
of Part I of this Statement.
(pppp) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in
subparagraph (a)(i) of Section 11 of Part I of this Statement.
(qqqq) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York City time, on
any Auction Date or such other time on any Auction Date by which Broker-Dealers
are required to submit Orders to the Auction Agent as specified by the Auction
Agent from time to time.
(rrrr) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.
(ssss) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(tttt) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this Statement.
(uuuu) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
9
<PAGE> 43
(vvvv) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the first day following
the Transitional Rate Period (or, if no Transitional Rate Period, the Initial
Rate Period) of shares of such series to but excluding the next Dividend
Payment Date for shares of such series and any period thereafter from and
including one Dividend Payment Date for shares of such series to but excluding
the next succeeding Dividend Payment Date for shares of such series; provided,
however, that if any Subsequent Rate Period is also a Special Rate Period, such
term shall mean the period commencing on the first day of such Special Rate
Period and ending on the last day of the last Dividend Period thereof.
(wwww) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean The First Boston
Company or Morgan Stanley & Co. Incorporated or their respective affiliates or
successors, if such entity is a commercial paper dealer; provided, however,
that none of such entities shall be a Commercial Paper Dealer.
(xxxx) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" shall mean The First
Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their
respective affiliates or successors, if such entity is a U.S. Government
securities dealer; provided, however, that none of such entities shall be a
U.S. Government Securities Dealer.
(yyyy) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(zzzz) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3
of Part I of this Statement.
(aaaaa) "TAXABLE INCOME" shall have the meaning specified in Section 12
of Appendix A hereto.
(bbbbb) "TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND RATE," on any
date for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days
or fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on
an interest equivalent basis equal to the Kenny S&P 30 day High Grade Index or
any successor index (the "Kenny Index") (provided, however, that any such
successor index must be approved by Moody's (if Moody's is then rating the
shares of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred)), made available for the Business Day immediately preceding such
date but in any event not later than 8:30 A.M., New York City time, on such
date by Kenny S&P Evaluation Services or any successor thereto, based upon
30-day yield evaluations at par of short-term bonds the interest on which is
excludable for regular Federal income tax purposes under the Code of "high
grade" component issuers selected by Kenny S&P Evaluation Services or any such
successor from time to time in its discretion, which component issuers shall
include, without limitation, issuers of general obligation bonds, but shall
exclude any bonds the interest on which constitutes an item of tax preference
under Section 57(a)(5) of the Code, or successor provisions, for purposes of
the "alternative minimum tax," divided by (B) 1.00 minus the maximum marginal
regular Federal individual income tax rate applicable to ordinary income or
the maximum marginal regular Federal corporate income tax rate applicable to
ordinary income (in each case expressed as a decimal), whichever is greater;
provided, however, that if the Kenny Index is not made so available by 8:30
A.M., New York City time, on such date by Kenny S&P Evaluation Services or any
successor, the Taxable Equivalent of the Short-Term Municipal Bond Rate shall
mean the quotient of (A) the per annum rate expressed on an interest
equivalent basis equal to the most recent Kenny Index so made available for any
preceding Business Day, divided by (B) 1.00 minus the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate applicable to ordinary
income (in each case expressed as a decimal), whichever is greater.
(ccccc) "TRANSITIONAL RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of such
series in Section 5 of Appendix A hereto.
(ddddd) "TREASURY BILL" shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of 364 days or less.
(eeeee) "TREASURY BILL RATE," on any date for any Rate Period, shall mean
(i) the bond equivalent yield, calculated in accordance with prevailing
industry convention, of the rate on the most recently auctioned Treasury Bill
with a remaining maturity closest to the length of such Rate Period, as quoted
in The Wall Street Journal on such date for the Business Day next preceding
such
10
<PAGE> 44
date; or (ii) in the event that any such rate is not published in The Wall
Street Journal, then the bond equivalent yield, calculated in accordance with
prevailing industry convention, as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned Treasury
Bill with a remaining maturity closest to the length of such Rate Period, as
determined by bid price quotations as of the close of business on the Business
Day immediately preceding such date obtained from the U.S. Government
Securities Dealers to the Auction Agent.
(fffff) "TREASURY NOTE" shall mean a direct obligation of the U.S.
Government having a maturity at the time of issuance of five years or less but
more than 364 days.
(ggggg) "TREASURY NOTE RATE," on any date for any Rate Period, shall mean
(i) the yield on the most recently auctioned Treasury Note with a remaining
maturity closest to the length of such Rate Period, as quoted in The Wall
Street Journal on such date for the Business Day next preceding such date; or
(ii) in the event that any such rate is not published in The Wall Street
Journal, then the yield as calculated by reference to the arithmetic average of
the bid price quotations of the most recently auctioned Treasury Note with a
remaining maturity closest to the length of such Rate Period, as determined by
bid price quotations as of the close of business on the Business Day
immediately preceding such date obtained from the U.S. Government Securities
Dealers to the Auction Agent. If any U.S. Government Securities Dealer does
not quote a rate required to determine the Treasury Bill Rate or the Treasury
Note Rate, the Treasury Bill Rate or the Treasury Note Rate shall be determined
on the basis of the quotation or quotations furnished by the remaining U.S.
Government Securities Dealer or U.S. Government Securities Dealers and any
Substitute U.S. Government Securities Dealers selected by the Fund to provide
such rate or rates not being supplied by any U.S. Government Securities Dealer
or U.S. Government Securities Dealers, as the case may be, or, if the Fund does
not select any such Substitute U.S. Government Securities Dealer or Substitute
U.S. Government Securities Dealers, by the remaining U.S. Government Securities
Dealer or U.S. Government Securities Dealers.
(hhhhh) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman Government
Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc and Morgan
Guaranty Trust Company of New York or their respective affiliates or
successors, if such entity is a U.S. Government securities dealer.
(iiiii) "VALUATION DATE" shall mean, for purposes of determining whether
the Fund is maintaining the MuniPreferred Basic Maintenance Amount, each
Business Day.
(jjjjj) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the
greater of the Moody's Volatility Factor and the S&P Volatility Factor.
(kkkkk) "VOTING PERIOD" shall have the meaning specified in paragraph (b)
of Section 5 of Part I of this Statement.
(lllll) "WINNING BID RATE" shall have the meaning specified in paragraph
(a) of Section 3 of Part II of this Statement.
Any additional definitions specifically set forth in Section 8 of Appendix
A hereto shall be incorporated herein and made part hereof by reference
thereto.
11
<PAGE> 45
PART I.
1. NUMBER OF AUTHORIZED SHARES.
The number of authorized shares constituting a series of MuniPreferred
shall be as set forth with respect to such series in Section 2 of Appendix A
hereto.
2. DIVIDENDS.
(a) RANKING. The shares of a series of MuniPreferred shall rank on a
parity with each other, with shares of any other series of MuniPreferred and
with shares of any other series of Preferred Stock as to the payment of
dividends by the Fund.
(b) CUMULATIVE CASH DIVIDENDS. The Holders of shares of MuniPreferred of
any series shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, cumulative cash
dividends at the Applicable Rate for shares of such series, determined as set
forth in paragraph (e) of this Section 2, and no more (except to the extent
set forth in Section 3 of this Part I), payable on the Dividend Payment Dates
with respect to shares of such series determined pursuant to paragraph (d) of
this Section 2. Holders of shares of MuniPreferred shall not be entitled to
any dividend, whether payable in cash, property or stock, in excess of full
cumulative dividends, as herein provided, on shares of MuniPreferred. No
interest, or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on shares of MuniPreferred which may be in
arrears, and, except to the extent set forth in subparagraph (e)(i) of this
Section 2, no additional sum of money shall be payable in respect of any such
arrearage.
(c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE. Dividends on shares
of MuniPreferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
(d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF. The Dividend Payment
Dates with respect to shares of a series of MuniPreferred shall be as set forth
with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as
"Series F MuniPreferred" or "Series M MuniPreferred" in Section 1 of
Appendix A hereto, if the Monday or Tuesday, as the case may be, on which
dividends would otherwise be payable on shares of such series is not a
Business Day, then such dividends shall be payable on such shares on the
first Business Day that falls after such Monday or Tuesday, as the case
may be, and (B) in the case of a series of MuniPreferred designated as
"Series T MuniPreferred," "Series W MuniPreferred" or "Series TH
MuniPreferred" in Section 1 of Appendix A hereto, if the Wednesday,
Thursday or Friday, as the case may be, on which dividends would otherwise
be payable on shares of such series is not a Business Day, then such
dividends shall be payable on such shares on the first Business Day that
falls prior to such Wednesday, Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto, the Fund in its
discretion may establish the Dividend Payment Dates in respect of any
Special Rate Period of shares of a series of MuniPreferred consisting of
more than 28 Rate Period Days; provided, however, that such dates
shall be set forth in the Notice of Special Rate Period relating to such
Special Rate Period, as delivered to the Auction Agent, which Notice of
Special Rate Period shall be filed with the Secretary of the Fund; and
further provided that (1) any such Dividend Payment Date shall be a
Business Day and (2) the last Dividend Payment Date in respect of such
Special Rate Period shall be the Business Day immediately following the
last day thereof, as such last day is determined in accordance with
paragraph (b) of Section 4 of this Part I.
(e) DIVIDENDS RATES AND CALCULATION OF DIVIDENDS
(i) DIVIDENDS RATES. The dividend rate on shares of MuniPreferred
of any series during the period from and after the Date of Original
Issue of shares of such series to and including the last day of the
Initial Rate Period of shares of such series shall be equal to the rate
per annum set forth with respect to shares of such series under
"Designation" in Section 1 of Appendix A hereto. For any Transitional
Rate Period and for each Subsequent Rate Period of shares of such
12
<PAGE> 46
series thereafter, the dividend rate on shares of such series shall be equal to
the rate per annum that results from an Auction for shares of such series on
the Auction Date next preceding such Transitional Rate Period or Subsequent
Rate Period, as the case may be; provided, however, that if:
(A) an Auction for any such Transitional Rate Period or
Subsequent Rate Period is not held for any reason other than as
described below, the dividend rate on shares of such series for
such Transitional Rate Period or Subsequent Rate Period will be the
Maximum Rate for shares of such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect to
shares of such series during any Rate Period thereof (other than any
Special Rate Period consisting of more than 364 Rate Period Days or
any Rate Period succeeding any Special Rate Period consisting of more
than 364 Rate Period Days during which a Failure to Deposit occurred
that has not been cured), but, prior to 12:00 Noon, New York City
time, on the third Business Day next succeeding the date on which
such Failure to Deposit occurred, such Failure to Deposit shall have
been cured in accordance with paragraph (f) of this Section 2 and
the Fund shall have paid to the Auction Agent a late charge ("Late
Charge") equal to the sum of (1) if such Failure to Deposit consisted
of the failure timely to pay to the Auction Agent the full amount of
dividends with respect to any Dividend Period of the shares of such
series, an amount computed by multiplying (x) 200% of the Reference
Rate for the Rate Period during which such Failure to Deposit occurs
on the Dividend Payment Date for such Dividend Period by (y) a
fraction, the numerator of which shall be the number of days for
which such Failure to Deposit has not been cured in accordance with
paragraph (f) of this Section 2 (including the day such Failure
to Deposit occurs and excluding the day such Failure to Deposit is
cured) and the denominator of which shall be 360, and applying the
rate obtained against the aggregate Liquidation Preference of the
outstanding shares of such series and (2) if such Failure to Deposit
consisted of the failure timely to pay to the Auction Agent the
Redemption Price of the shares, if any, of such series for which
Notice of Redemption has been mailed by the Fund pursuant to
paragraph (c) of Section 11 of this Part I, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period during
which such Failure to Deposit occurs on the redemption date by (y) a
fraction, the numerator of which shall be the number of days for
which such Failure to Deposit is not cured in accordance with
paragraph (f) of this Section 2 (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is
cured) and the denominator of which shall be 360, and applying the
rate obtained against the aggregate Liquidation Preference of the
outstanding shares of such series to be redeemed, no Auction will be
held in respect of shares of such series for the Transitional Rate
Period or Subsequent Rate Period thereof and the dividend rate for
shares of such series for such Transitional Rate Period or Subsequent
Rate Period will be the Maximum Rate for shares of such series on the
Auction Date for such Transitional Rate Period or Subsequent Rate
Period;
(C) any Failure to Deposit shall have occurred with respect to
shares of such series during any Rate Period thereof (other than any
Special Rate Period consisting of more than 364 Rate Period Days or
any Rate Period succeeding any Special Rate Period consisting of
more than 364 Rate Period Days during which a Failure to Deposit
occurred that has not been cured), and, prior to 12:00 Noon, New York
City time, on the third Business Day next succeeding the date on
which such Failure to Deposit occurred, such Failure to Deposit shall
not have been cured in accordance with paragraph (f) of this Section
2 or the Fund shall not have paid the applicable Late Charge to the
Auction Agent, no Auction will be held in respect of shares of such
series for the Transitional Rate Period or first Subsequent Rate
Period thereof thereafter (or for any Rate Period thereof thereafter
to and including the Rate Period during which (1) such Failure to
Deposit is cured in accordance with paragraph (f) of this Section 2
and (2) the Fund pays the applicable Late Charge to the Auction Agent
(the condition set forth in this clause (2) to apply only in the
event Moody's is rating such shares at the time the Fund cures such
Failure to Deposit), in each case no later than 12:00 Noon, New York
City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for the
Transitional Rate Period or each such Subsequent Rate Period shall be
a rate per annum equal to the Maximum Rate for shares of such series
on the Auction Date for such Transitional Rate Period or Subsequent
Rate Period (but with the prevailing rating for shares of such
series, for purposes of determining such Maximum Rate, being deemed
to be "Below "ba3"/BB-"); or
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<PAGE> 47
(D) any Failure to Deposit shall have occurred with respect to
shares of such series during a Special Rate Period thereof consisting
of more than 364 Rate Period Days, or during any Rate Period thereof
succeeding any Special Rate Period consisting of more than 364
Rate Period Days during which a Failure to Deposit occurred that has
not been cured, and, prior to 12:00 Noon, New York City time, on the
fourth Business Day preceding the Auction Date for the Rate Period
subsequent to such Rate Period, such Failure to Deposit shall not
have been cured in accordance with paragraph (f) of this Section 2
or, in the event Moody's is then rating such shares, the Fund shall
not have paid the applicable Late Charge to the Auction Agent (such
Late Charge, for purposes of this subparagraph (D), to be calculated
by using, as the Reference Rate, the Reference Rate applicable to a
Rate Period (x) consisting of more than 182 Rate Period Days but
fewer than 365 Rate Period Days and (y) commencing on the date on
which the Rate Period during which Failure to Deposit occurs
commenced), no Auction will be held in respect of shares of such
series for such Subsequent Rate Period (or for any Rate Period
thereof thereafter to and including the Rate Period during which (1)
such Failure to Deposit is cured in accordance with paragraph (f) of
this Section 2 and (2) the Fund pays the applicable Late Charge to
the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the
Fund cures such Failure to Deposit), in each case no later than 12:00
Noon, New York City time, on the fourth Business Day prior to the end
of such Rate Period), and the dividend rate for shares of such series
for each such Subsequent Rate Period shall be a rate per annum equal
to the Maximum Rate for shares of such series on the Auction Date for
such Subsequent Rate Period (but with the prevailing rating for
shares of such series, for purposes of determining such Maximum Rate,
being deemed to be "Below "ba3"/BB-") (the rate per annum at which
dividends are payable on shares of a series of MuniPreferred for any
Rate Period thereof being herein referred to as the "Applicable Rate"
for shares of such series).
(ii) CALCULATION OF DIVIDENDS. The amount of dividends per
share payable on shares of a series of MuniPreferred on any date on which
dividends shall be payable on shares of such series shall be computed
by multiplying the Applicable Rate for shares of such series in effect for
such Dividend Period or Dividend Periods or part thereof for which
dividends have not been paid by a fraction, the numerator of which shall
be the number of days in such Dividend Period or Dividend Periods or part
thereof and the denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other Dividend Periods, and
applying the rate obtained against $25,000.
(f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to
shares of a series of MuniPreferred shall have been cured (if such Failure
to Deposit is not solely due to the willful failure of the Fund to make the
required payment to the Auction Agent) with respect to any Rate Period of
shares of such series if, within the respective time periods described in
subparagraph (e)(i) of this Section 2, the Fund shall have paid to the Auction
Agent (A) all accumulated and unpaid dividends on shares of such series and (B)
without duplication, the Redemption Price for shares, if any, of such series
for which Notice of Redemption has been mailed by the Fund pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided, however,
that the foregoing clause (B) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(g) DIVIDEND PAYMENTS BY FUND TO AUCTION AGENT. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of
MuniPreferred, an aggregate amount of funds available on the next Business Day
in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY FUND. All moneys
paid to the Auction Agent for the payment of dividends (or for the payment of
any Late Charge) shall be held in trust for the payment of such dividends (and
any such Late Charge) by the Auction Agent for the benefit of the Holders
specified in paragraph (i) of this Section 2. Any moneys paid to the Auction
Agent in accordance with the foregoing but not applied by the Auction Agent to
the payment of dividends (and any such Late Charge) will, to the extent
permitted by law, be repaid to the Fund at the end of 90 days from the date on
which such moneys were so to have been applied.
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<PAGE> 48
(i) DIVIDENDS PAID TO HOLDERS. Each dividend on shares of MuniPreferred
shall be paid on the Dividend Payment Date therefor to the Holders thereof as
their names appear on the stock books of the Fund on the Business Day next
preceding such Dividend Payment Date.
(j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID DIVIDENDS.
Any dividend payment made on shares of MuniPreferred shall first be credited
against the earliest accumulated but unpaid dividends due with respect to such
shares. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to
the Holders as their names appear on the stock books of the Fund on such date,
not exceeding 15 days preceding the payment date thereof, as may be fixed by
the Board of Directors.
(k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS. Dividends on
shares of MuniPreferred shall be designated as exempt-interest dividends up to
the amount of tax-exempt income of the Fund, to the extent permitted by, and
for purposes of, Section 852 of the Code.
3. GROSS-UP PAYMENTS.
Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE PERIOD DAYS
OR FEWER. If, in the case of any Minimum Rate Period or any Special Rate Period
of 28 Rate Period Days or fewer, the Fund allocates any net capital gains or
other income taxable for Federal income tax purposes to a dividend paid on
shares of MuniPreferred without having given advance notice thereof to the
Auction Agent as provided in Section 5 of Part II of this Statement (such
allocation being referred to herein as a "Taxable Allocation") solely by reason
of the fact that such allocation is made retroactively as a result of the
redemption of all or a portion of the outstanding shares of MuniPreferred or
the liquidation of the Fund, the Fund shall, prior to the end of the calendar
year in which such dividend was paid, provide notice thereof to the Auction
Agent and direct the Fund's dividend disbursing agent to send such notice with
a Gross-up Payment to each Holder of such shares that was entitled to such
dividend payment during such calendar year at such Holder's address as the same
appears or last appeared on the stock books of the Fund.
(b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS. If, in the
case of any Special Rate Period of more than 28 Rate Period Days, the Fund
makes a Taxable Allocation to a dividend paid on shares of MuniPreferred, the
Fund shall, prior to the end of the calendar year in which such dividend was
paid, provide notice thereof to the Auction Agent and direct the Fund's
dividend disbursing agent to send such notice with a Gross-up Payment to each
Holder of shares that was entitled to such dividend payment during such
calendar year at such Holder's address as the same appears or last appeared on
the stock books of the Fund.
(c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The Fund shall
not be required to make Gross-up Payments with respect to any net capital
gains or other taxable income determined by the Internal Revenue Service to be
allocable in a manner different from that allocated by the Fund.
4. DESIGNATION OF SPECIAL RATE PERIODS.
(a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Fund, at
its option, may designate any succeeding Subsequent Rate Period of shares of a
series of MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price
with respect to such shares shall have been deposited with the Auction Agent.
In the event the Fund wishes to designate any succeeding Subsequent Rate Period
for shares of a series of MuniPreferred as a Special Rate Period consisting of
more than 28 Rate Period Days, the Fund shall notify S&P (if S&P
15
<PAGE> 49
is then rating such series) and Moody's (if Moody's is then rating such
series) in advance of the commencement of such Subsequent Rate Period that the
Fund wishes to designate such Subsequent Rate Period as a Special Rate Period
and shall provide S&P (if S&P is then rating such series) and Moody's (if
Moody's is then rating such series) with such documents as either may request.
(b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event the Fund
wishes to designate a Subsequent Rate Period as a Special Rate Period,
but the day following what would otherwise be the last day of such Special Rate
Period is not (a) a Tuesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series M MuniPreferred" in Section 1 of Appendix A
hereto, (b) a Wednesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series T MuniPreferred" in Section 1 of Appendix A
hereto, (c) a Thursday that is a Business Day in the case of a series of
MuniPreferred designated as "Series W MuniPreferred" in Section 1 of Appendix A
hereto, (d) a Friday that is a Business Day in the case of a series of
MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of Appendix
A hereto, or (e) a Monday that is a Business Day in the case of a series of
MuniPreferred designated as "Series F MuniPreferred" in Section 1 of Appendix A
hereto, then the Fund shall designate such Subsequent Rate Period as a Special
Rate Period consisting of the period commencing on the first day following the
end of the immediately preceding Rate Period and ending (a) on the first Monday
that is followed by a Tuesday that is a Business Day preceding what would
otherwise be such last day, in the case of Series M MuniPreferred, (b) on the
first Tuesday that is followed by a Wednesday that is a Business Day preceding
what would otherwise be such last day, in the case of Series T MuniPreferred,
(c) on the first Wednesday that is followed by a Thursday that is a Business
Day preceding what would otherwise be such last day, in the case of Series W
MuniPreferred, (d) on the first Thursday that is followed by a Friday that is a
Business Day preceding what would otherwise be such last day, in the case of
Series TH MuniPreferred, and (e) on the first Sunday that is followed by a
Monday that is a Business Day preceding what would otherwise be such last day,
in the case of Series F MuniPreferred.
(c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this
Section 4, not less than 20 (or such lesser number of days as may be agreed to
from time to time by the Auction Agent) nor more than 30 days prior to the date
the Fund proposes to designate as the first day of such Special Rate Period
(which shall be such day that would otherwise be the first day of a Minimum
Rate Period), notice shall be (i) published or caused to be published by the
Fund in a newspaper of general circulation to the financial community in The
City of New York, New York, which carries financial news, and (ii) mailed by
the Fund by first-class mail, postage prepaid, to the Holders of shares of such
series. Each such notice shall state (A) that the Fund may exercise its option
to designate a succeeding Subsequent Rate Period of shares of such series as a
Special Rate Period, specifying the first day thereof and (B) that the Fund
will, by 11:00 A.M., New York City time, on the second Business Day next
preceding such date (or by such later time or date, or both, as may be agreed
to by the Auction Agent) notify the Auction Agent of either (x) its
determination, subject to certain conditions, to exercise such option, in which
case the Fund shall specify the Special Rate Period designated, or (y) its
determination not to exercise such option.
(d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York
City time, on the second Business Day next preceding the first day of any
proposed Special Rate Period of shares of a series of MuniPreferred as to which
notice has been given as set forth in paragraph (c) of this Section 4 (or such
later time or date, or both, as may be agreed to by the Auction Agent), the
Fund shall deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A)
that the Fund has determined to designate the next succeeding Rate Period
of shares of such series as a Special Rate Period, specifying the same and
the first day thereof, (B) the Auction Date immediately prior to
the first day of such Special Rate Period, (C) that such Special Rate
Period shall not commence if (1) an Auction for shares of such series
shall not be held on such Auction Date for any reason or (2) an Auction
for shares of such series shall be held on such Auction Date but
Sufficient Clearing Bids for shares of such series shall not exist in such
Auction, (D) the scheduled Dividend Payment Dates for shares of such
series during such Special Rate Period and (E) the Special Redemption
Provisions, if any, applicable to shares of such series in respect of such
Special Rate Period; such notice to be accompanied by a MuniPreferred
Basic Maintenance Report showing that, as of the third Business Day next
preceding such proposed Special Rate Period, Moody's Eligible Assets (if
Moody's is then rating such series) and S&P Eligible Assets (if S&P is
then rating such series) each have an aggregate Discounted Value at least
equal to the MuniPreferred Basic Maintenance Amount as of such Business
Day (assuming for purposes of the foregoing calculation that (a) the
Maximum Rate is the Maximum Rate on such Business Day as if such Business
Day were the Auction Date for the
16
<PAGE> 50
proposed Special Rate Period, and (b) the Moody's Discount Factors
applicable to Moody's Eligible Assets are determined by reference to the
first Exposure Period longer than the Exposure Period then applicable to
the Fund, as described in the definition of Moody's Discount Factor
herein); or
(ii) a notice stating that the Fund has determined not to
exercise its option to designate a Special Rate Period of shares of
such series and that the next succeeding Rate Period of shares of such
series shall be a Minimum Rate Period.
(e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Fund fails
to deliver either of the notices described in subparagraphs (d)(i) or (d)(ii)
of this Section 4 (and, in the case of the notice described in subparagraph
(d)(i) of this Section 4, a MuniPreferred Basic Maintenance Report to the
effect set forth in such subparagraph (if either Moody's or S&P is then rating
the series in question)) with respect to any designation of any proposed
Special Rate Period to the Auction Agent by 11:00 A.M., New York City time, on
the second Business Day next preceding the first day of such proposed Special
Rate Period (or by such later time or date, or both, as may be agreed to by the
Auction Agent), the Fund shall be deemed to have delivered a notice to the
Auction Agent with respect to such Special Rate Period to the effect set forth
in subparagraph (d)(ii) of this Section 4. In the event the Fund delivers to
the Auction Agent a notice described in subparagraph (d)(i) of this Section 4,
it shall file a copy of such notice with the Secretary of the Fund, and the
contents of such notice shall be binding on the Fund. In the event the Fund
delivers to the Auction Agent a notice described in subparagraph (d)(ii) of
this Section 4, the Fund will provide Moody's (if Moody's is then rating the
series in question) and S&P (if S&P is then rating the series in question) a
copy of such notice.
5. VOTING RIGHTS.
(a) ONE VOTE PER SHARE OF MUNIPREFERED. Except as otherwise provided in
the Articles or as otherwise required by law, (i) each Holder of shares of
MuniPreferred shall be entitled to one vote for each share of MuniPreferred
held by such Holder on each matter submitted to a vote of shareholders of the
Fund, and (ii) the holders of outstanding shares of Preferred Stock, including
each share of MuniPreferred, and of shares of Common Stock shall vote together
as a single class; provided, however, that, at any meeting of the shareholders
of the Fund held for the election of directors, the holders of outstanding
shares of Preferred Stock, including MuniPreferred, represented in person or by
proxy at said meeting, shall be entitled, as a class, to the exclusion of the
holders of all other securities and classes of capital stock of the Fund, to
elect two directors of the Fund, each share of Preferred Stock, including each
share of MuniPreferred, entitling the holder thereof to one vote. Subject to
paragraph (b) of this Section 5, the holders of outstanding shares of Common
Stock and Preferred Stock, including MuniPreferred, voting together as a single
class, shall elect the balance of the directors.
(b) VOTING FOR ADDITIONAL DIRECTORS.
(i) VOTING PERIOD. During any period in which any one or more
of the conditions described in subparagraphs (A) or (B) of this
subparagraph (b)(i) shall exist (such period being referred to herein as a
"Voting Period"), the number of directors constituting the Board of
Directors shall be automatically increased by the smallest number that,
when added to the two directors elected exclusively by the holders of
shares of Preferred Stock, including shares of MuniPreferred, would
constitute a majority of the Board of Directors as so increased by such
smallest number; and the holders of shares of Preferred Stock, including
MuniPreferred, shall be entitled, voting as a class on a one-vote-per-
share basis (to the exclusion of the holders of all other securities and
classes of capital stock of the Fund), to elect such smallest number of
additional directors, together with the two directors that such holders
are in any event entitled to elect. A Voting Period shall commence:
(A) if at the close of business on any dividend payment date
accumulated dividends (whether or not earned or declared) on any
outstanding share of Preferred Stock, including MuniPreferred, equal
to at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of shares of Preferred Stock are
entitled under the 1940 Act to elect a majority of the directors
of the Fund.
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<PAGE> 51
Upon the termination of a Voting Period, the voting rights described in
this subparagraph (b)(i) shall cease, subject always, however, to the revesting
of such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).
(ii) NOTICE OF SPECIAL MEETING. As soon as practicable after
the accrual of any right of the holders of shares of Preferred
Stock to elect additional directors as described in subparagraph (b)(i) of
this Section 5, the Fund shall notify the Auction Agent and the Auction
Agent shall call a special meeting of such holders, by mailing a notice of
such special meeting to such holders, such meeting to be held not less
than 10 nor more than 20 days after the date of mailing of such notice.
If the Fund fails to send such notice to the Auction Agent or if the
Auction Agent does not call such a special meeting, it may be called by
any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting shall be
the close of business on the fifth Business Day preceding the day on which
such notice is mailed. At any such special meeting and at each meeting of
holders of shares of Preferred Stock held during a Voting Period at which
directors are to be elected, such holders, voting together as a class (to
the exclusion of the holders of all other securities and classes of
capital stock of the Fund), shall be entitled to elect the number of
directors prescribed in subparagraph (b)(i) of this Section 5 on a
one-vote-per-share basis.
(iii) TERMS OF OFFICE OF EXISTING DIRECTORS. The terms of office
of all persons who are directors of the Fund at the time of a special
meeting of Holders and holders of other Preferred Stock to elect directors
shall continue, notwithstanding the election at such meeting by the
Holders and such other holders of the number of directors that they are
entitled to elect, and the persons so elected by the Holders and such
other holders, together with the two incumbent directors elected by the
Holders and such other holders of Preferred Stock and the remaining
incumbent directors elected by the holders of the Common Stock and
Preferred Stock, shall constitute the duly elected directors of the Fund.
(iv) TERMS OF OFFICE OF CERTAIN DIRECTORS TO TERMINATE UPON
TERMINATION OF VOTING PERIOD. Simultaneously with the termination of a
Voting Period, the terms of office of the additional directors elected by
the Holders and holders of other Preferred Stock pursuant to subparagraph
(b)(i) of this Section 5 shall terminate, the remaining directors
shall constitute the directors of the Fund and the voting rights of the
Holders and such other holders to elect additional directors pursuant to
subparagraph (b)(i) of this Section 5 shall cease, subject to the
provisions of the last sentence of subparagraph (b)(i) of this Section 5.
(c) HOLDERS OF MUNIPREFERRED TO VOTE ON CERTAIN OTHER MATTERS.
(i) INCREASES IN CAPITALIZATION. So long as any shares of
MuniPreferred are outstanding, the Fund shall not, without the affirmative
vote or consent of the Holders of at least a majority of the shares of
MuniPreferred outstanding at the time, in person or by proxy, either in
writing or at a meeting, voting as a separate class: (a) authorize, create
or issue any class or series of stock ranking prior to or on a parity with
shares of MuniPreferred with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund, or authorize, create or issue additional shares of
any series of MuniPreferred (except that, notwithstanding the foregoing,
but subject to the provisions of paragraph (c) of Section 10 of this Part
I, the Board of Directors, without the vote or consent of the Holders of
MuniPreferred, may from time to time authorize and create, and the Fund
may from time to time issue, additional shares of any series of
MuniPreferred or classes or series of Preferred Stock ranking on a parity
with shares of MuniPreferred with respect to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up of
the affairs of the Fund; provided, however, that if Moody's or S&P is not
then rating the shares of MuniPreferred, the aggregate liquidation
preference of all Preferred Stock of the Fund outstanding after any such
issuance, exclusive of accumulated and unpaid dividends, may not exceed
the amount set forth in Section 10 of Appendix A hereto) or (b) amend,
alter or repeal the provisions of the Articles, including this Statement,
whether by merger, consolidation or otherwise, so as to affect any
preference, right or power of such shares of MuniPreferred or the Holders
thereof; provided, however, that (i) none of the actions permitted by the
exception to (a) above will be deemed to affect such preferences, rights
or powers, (ii) a division of a share of MuniPreferred will be deemed to
affect such preferences, rights or powers only if the terms of such
division adversely affect the Holders of shares of MuniPreferred and (iii)
the authorization, creation and issuance of classes or series
18
<PAGE> 52
of stock ranking junior to shares of MuniPreferred with respect to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund, will be deemed
to affect such preferences, rights or powers only if Moody's or S&P is
then rating shares of MuniPreferred and such issuance would, at the time
thereof, cause the Fund not to satisfy the 1940 Act MuniPreferred Asset
Coverage or the MuniPreferred Basic Maintenance Amount. So long as any
shares of MuniPreferred are outstanding, the Fund shall not, without the
affirmative vote or consent of the Holders of at least 66 2/3% of the
shares of MuniPreferred outstanding at the time, in person or by proxy,
either in writing or at a meeting, voting as a separate class, file a
voluntary application for relief under Federal bankruptcy law or any
similar application under state law for so long as the Fund is solvent and
does not foresee becoming insolvent. To the extent that shares of
MuniPreferred constitute a series of stock under Minnesota law and to the
extent the Holders of such shares are empowered under the Minnesota
Business Corporation Act to vote as a class on the actions set forth above
in this subparagraph (c)(i), the Fund shall not approve any such action
without the affirmative vote or consent of the Holders of at least a
majority of the shares of MuniPreferred of such series outstanding at the
time, in person or by proxy, either in writing or at a meeting (voting as
a separate class).
(ii) 1940 ACT MATTERS. Unless a higher percentage is provided
for in the Articles, (A) the affirmative vote of the Holders of at least a
majority of the shares of Preferred Stock, including MuniPreferred,
outstanding at the time, voting as a separate class, shall be required to
approve any conversion of the Fund from a closed-end to an open-end
investment company and (B) the affirmative vote of the Holders of a
"majority of the outstanding shares of Preferred Stock," including
MuniPreferred, voting as a separate class, shall be required to approve
any plan of reorganization (as such term is used in the 1940 Act)
adversely affecting such shares. The affirmative vote of the Holders of a
"majority of the outstanding shares of Preferred Stock," including
MuniPreferred, voting as a separate class, shall be required to approve
any action not described in the first sentence of this Section 5(c)(ii)
requiring a vote of security holders of the Fund under Section 13(a) of
the 1940 Act. For purposes of the foregoing, "majority of the outstanding
shares of Preferred Stock" means (i) 67% or more of such shares present at
a meeting, if the Holders of more than 50% of such shares are present or
represented by proxy, or (ii) more than 50% of such shares, whichever is
less. In the event a vote of Holders of MuniPreferred is required
pursuant to the provisions of Section 13(a) of the 1940 Act, the Fund
shall, not later than ten Business Days prior to the date on which such
vote is to be taken, notify Moody's (if Moody's is then rating the shares
of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred) that such vote is to be taken and the nature of the action
with respect to which such vote is to be taken. The Fund shall, not later
than ten Business Days after the date on which such vote is taken, notify
Moody's (if Moody's is then rating the shares of MuniPreferred) of the
results of such vote.
(d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The
Board of Directors, without the vote or consent of the shareholders of the
definitions of the terms listed below, or any provision of this Statement
viewed by Moody's or S&P as a predicate for any such definition, and any such
amendment, alteration or repeal will not be deemed to affect the preferences,
rights or powers of shares of MuniPreferred or the Holders thereof; provided,
however, that the Board of Directors receives written confirmation from Moody's
(such confirmation being required to be obtained only in the event Moody's is
rating the shares of MuniPreferred and in no event being required to be
obtained in the case of the definitions of (x) Deposit Securities, Discounted
Value, Receivables for Municipal Obligations Sold, Issue Type Category and
Other Issues as such terms apply to S&P Eligible Assets and (y) S&P
Discount Factor, S&P Eligible Asset, S&P Exposure Period and S&P Volatility
Factor) and S&P (such confirmation being required to be obtained only in the
event S&P is rating the shares of MuniPreferred and in no event being required
to be obtained in the case of the definitions of (x) Discounted Value,
Receivables for Municipal Obligations Sold, Issue Type Category and Other
Issues as such terms apply to Moody's Eligible Assets, and (y) Moody's Discount
Factor, Moody's Eligible Asset, Moody's Exposure Period and Moody's Volatility
Factor) that any such amendment, alteration or repeal would not impair the
ratings then assigned by Moody's or S&P, as the case may be, to shares of
MuniPreferred:
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<PAGE> 53
<TABLE>
<S> <C>
Deposit Securities Moody's Volatility Factor
Discounted Value 1940 Act Cure Date
Escrowed Bonds 1940 Act MuniPreferred Asset Coverage
Issue Type Category Other Issues
Market Value Quarterly Valuation Date
Maximum Potential Gross-up Payment Liability Receivables for Municipal Obligations Sold
MuniPreferred Basic Maintenance Amount S&P Discount Factor
MuniPreferred Basic Maintenance Cure Date S&P Eligible Asset
MuniPreferred Basic Maintenance Report S&P Exposure Period
Moody's Discount Factor S&P Volatility Factor
Moody's Eligible Asset Valuation Date
Moody's Exposure Period Volatility Factor
</TABLE>
(e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless
otherwise required by law, the Holders of shares of MuniPreferred shall not
have any relative rights or preferences or other special rights other than
those specifically set forth herein.
(f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of shares
of MuniPreferred shall have no preemptive rights or rights to cumulative voting.
(g) VOTING FOR DIRECTORS SOLE REMEDY FOR FUND'S FAILURE TO PAY
DIVIDENDS. In the event that the Fund fails to pay any dividends on the shares
of MuniPreferred, the exclusive remedy of the Holders shall be the right to vote
for directors pursuant to the provisions of this Section 5.
(h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights
of the Holders to vote on any matter, whether such right is created by this
Statement, by the other provisions of the Articles, by statute or otherwise, no
Holder shall be entitled to vote any share of MuniPreferred and no share of
MuniPreferred shall be deemed to be "outstanding" for the purpose of voting or
determining the number of shares required to constitute a quorum if, prior to or
concurrently with the time of determination of shares entitled to vote or shares
deemed outstanding for quorum purposes, as the case may be, the requisite Notice
of Redemption with respect to such shares shall have been mailed as provided in
paragraph (c) of Section 11 of this Part I and the Redemption Price for the
redemption of such shares shall have been deposited in trust with the Auction
Agent for that purpose. No share of MuniPreferred held by the Fund or any
affiliate of the Fund (except for shares held by a Broker-Dealer that is an
affiliate of the Fund for the account of its customers) shall have any voting
rights or be deemed to be outstanding for voting or other purposes.
6. 1940 ACT MUNIPREFERRED ASSET COVERAGE.
The Fund shall maintain, as of the last Business Day of each month in
which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred
Asset Coverage.
7. MUNIPREFERRED BASIC MAINTENANCE AMOUNT.
(a) So long as shares of MuniPreferred are outstanding, the Fund
shall maintain, on each Valuation Date, and shall verify to its satisfaction
that it is maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the MuniPreferred Basic
Maintenance Amount (if S&P is then rating the shares of MuniPreferred) and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the MuniPreferred Basic Maintenance Amount (if Moody's is then rating the
shares of MuniPreferred).
(b) On or before 5:00 P.M., New York City time, on the third Business
Day after a Valuation Date on which the Fund fails to satisfy the MuniPreferred
Basic Maintenance Amount, and on the third Business Day after the MuniPreferred
Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of
MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred)
and the Auction Agent (if either S&P or Moody's is then rating the shares of
MuniPreferred) a MuniPreferred Basic Maintenance Report as of the date of such
failure or such
20
<PAGE> 54
MuniPreferred Basic Maintenance Cure Date, as the case may be, which will be
deemed to have been delivered to the Auction Agent if the Auction Agent receives
a copy or telecopy, telex or other electronic transcription thereof and on the
same day the Fund mails to the Auction Agent for delivery on the next Business
Day the full MuniPreferred Basic Maintenance Report. The Fund shall also
deliver a MuniPreferred Basic Maintenance Report to (i) the Auction Agent (if
either Moody's or S&P is then rating the shares of MuniPreferred) as of (A) the
fifteenth day of each month (or, if such day is not a Business Day, the next
succeeding Business Day) and (B) the last Business Day of each month, (ii)
Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P
is then rating the shares of MuniPreferred) as of any Quarterly Valuation Date,
in each case on or before the third Business Day after such day, and (iii) S&P,
if and when requested for any Valuation Date, on or before the third Business
Day after such request. A failure by the Fund to deliver a MuniPreferred Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be
delivery of a MuniPreferred Basic Maintenance Report indicating the Discounted
Value for all assets of the Fund is less than the MuniPreferred Basic
Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a
MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of
this Section 7 relating to a Quarterly Valuation Date, the Fund shall cause the
Independent Accountant to confirm in writing to S&P (if S&P is then rating the
shares of MuniPreferred), Moody's (if Moody's is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating
the shares of MuniPreferred) (i) the mathematical accuracy of the calculations
reflected in such Report (and in any other MuniPreferred Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered by
the Fund during the quarter ending on such Quarterly Valuation Date) and (ii)
that, in such Report (and in such randomly selected Report), the Fund determined
in accordance with this Statement whether the Fund had, at such Quarterly
Valuation Date (and at the Valuation Date addressed in such randomly-selected
Report), S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred)
of an aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the
shares of MuniPreferred) of an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount (such confirmation being herein called
the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery of a
MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of
this Section 7 relating to any Valuation Date on which the Fund failed to
satisfy the MuniPreferred Basic Maintenance Amount, and relating to the
MuniPreferred Basic Maintenance Cure Date with respect to such failure to
satisfy the MuniPreferred Basic Maintenance Amount, the Fund shall cause the
Independent Accountant to provide to S&P (if S&P is then rating the shares of
MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred)
and the Auction Agent (if either S&P or Moody's is then rating the shares of
MuniPreferred) an Accountant's Confirmation as to such MuniPreferred Basic
Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to paragraph
(c) or (d) of this Section 7 shows that an error was made in the MuniPreferred
Basic Maintenance Report for a particular Valuation Date for which such
Accountant's Confirmation was required to be delivered, or shows that a lower
aggregate Discounted Value for the aggregate of all S&P Eligible Assets (if S&P
is then rating the shares of MuniPreferred) or Moody's Eligible Assets (if
Moody's is then rating the shares of MuniPreferred), as the case may be, of the
Fund was determined by the Independent Accountant, the calculation or
determination made by such Independent Accountant shall be final and conclusive
and shall be binding on the Fund, and the Fund shall accordingly amend and
deliver the MuniPreferred Basic Maintenance Report to S&P (if S&P is then
rating the shares of MuniPreferred), Moody's (if Moody's is then rating the
shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is
then rating the shares of MuniPreferred) promptly following receipt by the Fund
of such Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first
Business Day after the Date of Original Issue of any shares of MuniPreferred,
the Fund shall complete and deliver to S&P (if S&P is then rating the shares of
MuniPreferred) and Moody's (if Moody's is then rating the shares of
MuniPreferred) a MuniPreferred Basic Maintenance Report as of the close of
business on such Date of Original Issue. Within five Business Days of such Date
of Original Issue, the Fund shall cause the Independent Accountant to confirm in
writing to S&P (if S&P is then rating the shares of MuniPreferred) (i) the
mathematical accuracy of the calculations reflected in such Report and (ii) that
the Discounted Value of S&P Eligible Assets reflected thereon equals or exceeds
the MuniPreferred Basic Maintenance Amount reflected thereon.
21
<PAGE> 55
(g) On or before 5:00 p.m., New York City time, on the third
Business Day after either (i) the Fund shall have redeemed Common Stock or (ii)
the ratio of the Discounted Value of S&P Eligible Assets or the Discounted
Value of Moody's Eligible Assets to the MuniPreferred Basic Maintenance Amount
is less than or equal to 105%, the Fund shall complete and deliver to S&P (if
S&P is then rating the shares of MuniPreferred) or Moody's (if Moody's is then
rating the shares of MuniPreferred), as the case may be, a MuniPreferred Basic
Maintenance Report as of the date of either such event.
8. [RESERVED]
9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) DIVIDENDS ON PREFERRED STOCK OTHER THAN MUNIPREFERRED. Except as
set forth in the next sentence, no dividends shall be declared or paid or set
apart for payment on the shares of any class or series of stock ranking, as to
the payment of dividends, on a parity with shares of MuniPreferred for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid on the shares of each series of MuniPreferred through its most
recent Dividend Payment Date. When dividends are not paid in full upon the
shares of each series of MuniPreferred through its most recent Dividend Payment
Date or upon the shares of any other class or series of stock ranking on a
parity as to the payment of dividends with shares of MuniPreferred through their
most recent respective dividend payment dates, all dividends declared upon
shares of MuniPreferred and any other such class or series of stock ranking on a
parity as to the payment of dividends with shares of MuniPreferred shall be
declared pro rata so that the amount of dividends declared per share on shares
of MuniPreferred and such other class or series of stock shall in all cases bear
to each other the same ratio that accumulated dividends per share on the shares
of MuniPreferred and such other class or series of stock bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
MuniPreferred shall be based on the Applicable Rate for such share for the
Dividend Periods during which dividends were not paid in full).
(b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON STOCK
UNDER THE 1940 ACT. The Board of Directors shall not declare any dividend
(except a dividend payable in shares of Common Stock), or declare any other
distribution, upon shares of Common Stock, or purchase shares of Common Stock,
unless in every such case the shares of Preferred Stock have, at the time of
any such declaration or purchase, an asset coverage (as defined in and
determined pursuant to the 1940 Act) of at least 200% (or such other asset
coverage as may in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities which are stock of a closed-end
investment company as a condition of declaring dividends on its common stock)
after deducting the amount of such dividend, distribution or purchase price, as
the case may be.
(c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so
long as any share of MuniPreferred is outstanding, and except as set forth in
paragraph (a) of this Section 9 and paragraph (c) of Section 12 of this
Part I, (A) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to the shares of
MuniPreferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up) in respect of the Common Stock or any
other stock of the Fund ranking junior to or on a parity with the shares of
MuniPreferred as to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption, redeem,
purchase or otherwise acquire for consideration any shares of Common Stock or
any other such junior stock (except by conversion into or exchange for stock of
the Fund ranking junior to the shares of MuniPreferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), or any such parity stock (except by conversion into or exchange
for stock of the Fund ranking junior to or on a parity with MuniPreferred as to
the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless (i) full cumulative dividends on shares of
each series of MuniPreferred through its most recently ended Dividend Period
shall have been paid or shall have been declared and sufficient funds for the
payment thereof deposited with the Auction Agent and (ii) the Fund has redeemed
the full number of shares of MuniPreferred required to be redeemed by any
provision for mandatory redemption pertaining thereto, and (B) the Fund shall
not declare, pay or set apart for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or in options,
warrants or rights to subscribe for or purchase, Common Stock or other stock,
if any, ranking junior to shares of MuniPreferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of Common Stock or any other stock of the Fund ranking
junior to shares of MuniPreferred as to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up, or call for
redemption, redeem, purchase or otherwise acquire for consideration any shares
of Common Stock or any other such
22
<PAGE> 56
junior stock (except by conversion into or exchange for stock of the Fund
ranking junior to shares of MuniPreferred as to the payment of dividends
and the distribution of assets upon dissolution, liquidation or winding up),
unless immediately after such transaction the Discounted Value of Moody's
Eligible Assets (if Moody's is then rating the shares of MuniPreferred) and S&P
Eligible Assets (if S&P is then rating the shares of MuniPreferred) would each
at least equal the MuniPreferred Basic Maintenance Amount.
10. RATING AGENCY RESTRICTIONS.
For so long as any shares of MuniPreferred are outstanding and
Moody's or S&P, or both, are rating such shares, the Fund will not, unless
it has received written confirmation from Moody's or S&P, or both, as
appropriate, that any such action would not impair the ratings then assigned by
such rating agency to such shares, engage in any one or more of the following
transactions:
(a) buy or sell futures or write put or call options;
(b) borrow money, except that the Fund may, without obtaining
the written confirmation described above, borrow money for the purpose of
clearing securities transactions if (i) the MuniPreferred Basic Maintenance
Amount would continue to be satisfied after giving effect to such borrowing and
(ii) such borrowing (A) is privately arranged with a bank or other person and is
evidenced by a promissory note or other evidence of indebtedness that is not
intended to be publicly distributed or (B) is for "temporary purposes," is
evidenced by a promissory note or other evidence of indebtedness and is in an
amount not exceeding 5 per centum of the value of the total assets of the Fund
at the time of the borrowing; for purposes of the foregoing, "temporary purpose"
means that the borrowing is to be repaid within sixty days and is not to be
extended or renewed;
(c) issue additional shares of any series of MuniPreferred or
any class or series of stock ranking prior to or on a parity with shares of
MuniPreferred with respect to the payment of dividends or the distribution of
assets upon dissolution, liquidation or winding up of the Fund, or reissue any
shares of MuniPreferred previously purchased or redeemed by the Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred
to in the definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. REDEMPTION.
(a) OPTIONAL REDEMPTION.
(i) Subject to the provisions of subparagraph (v) of
this paragraph (a), shares of MuniPreferred of any series may be
redeemed, at the option of the Fund, as a whole or from time to
time in part, on the second Business Day preceding any Dividend
Payment Date for shares of such series, out of funds legally
available therefor, at a redemption price per share equal to the sum
of $25,000 plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the
date fixed for redemption; provided, however, that (1) shares of a
series of MuniPreferred may not be redeemed in part if after such
partial redemption fewer than 500 shares of such series remain
outstanding; (2) unless otherwise provided in Section 11 of Appendix A
hereto, shares of a series of MuniPreferred are redeemable by the Fund
during the Initial Rate Period thereof only on the second Business Day
next preceding the last Dividend Payment Date for such Initial Rate
Period; and (3) subject to subparagraph (ii) of this paragraph (a),
the Notice of Special Rate Period relating to a Special Rate Period of
shares of a series of MuniPreferred, as delivered to the Auction Agent
and filed with the Secretary of the Fund, may provide that shares of
such series shall not be redeemable during the whole or any part of
such Special Rate Period (except as provided in subparagraph (iv) of
this paragraph (a)) or shall be redeemable during the whole
23
<PAGE> 57
or any part of such Special Rate Period only upon payment of such
redemption premium or premiums as shall be specified therein ("Special
Redemption Provisions").
(ii) A Notice of Special Rate Period relating to
shares of a series of MuniPreferred for a Special Rate Period thereof
may contain Special Redemption Provisions only if the Fund's
Board of Directors, after consultation with the Broker-Dealer or
Broker-Dealers for such Special Rate Period of shares of such series,
determines that such Special Redemption Provisions are in the best
interest of the Fund.
(iii) If fewer than all of the outstanding shares of a
series of MuniPreferred are to be redeemed pursuant to subparagraph
(i) of this paragraph (a), the number of shares of such series to be
redeemed shall be determined by the Board of Directors, and such
shares shall be redeemed pro rata from the Holders of shares of such
series in proportion to the number of shares of such series held by
such Holders.
(iv) Subject to the provisions of subparagraph (v) of
this paragraph (a), shares of any series of MuniPreferred may be
redeemed, at the option of the Fund, as a whole but not in part, out
of funds legally available therefor, on the first day following any
Dividend Period thereof included in a Rate Period consisting of more
than 364 Rate Period Days if, on the date of determination of the
Applicable Rate for shares of such series for such Rate Period, such
Applicable Rate equalled or exceeded on such date of determination
the Treasury Note Rate for such Rate Period, at a redemption price
per share equal to the sum of $25,000 plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned or
declared) to (but not including) the date fixed for redemption.
(v) The Fund may not on any date mail a Notice of
Redemption pursuant to paragraph (c) of this Section 11 in respect of
a redemption contemplated to be effected pursuant to this paragraph
(a) unless on such date (a) the Fund has available Deposit Securities
with maturity or tender dates not later than the day preceding the
applicable redemption date and having a value not less than the amount
(including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such
redemption date and (b) the Discounted Value of Moody's Eligible
Assets (if Moody's is then rating the shares of MuniPreferred) and the
Discounted Value of S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) each at least equal the MuniPreferred Basic
Maintenance Amount, and would at least equal the MuniPreferred Basic
Maintenance Amount immediately subsequent to such redemption if such
redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of
Moody's Eligible Assets at least equals the MuniPreferred Basic
Maintenance Amount, the Moody's Discount Factors applicable to Moody's
Eligible Assets shall be determined by reference to the first Exposure
Period longer than the Exposure Period then applicable to the Fund, as
described in the definition of Moody's Discount Factor herein.
(b) MANDATORY REDEMPTION. The Fund shall redeem, at a
redemption price equal to $25,000 per share plus accumulated but unpaid
dividends thereon (whether or not earned or declared) to (but not including) the
date fixed by the Board of Directors for redemption, certain of the shares of
MuniPreferred, if the Fund fails to have either Moody's Eligible Assets with a
Discounted Value or S&P Eligible Assets with a Discounted Value greater than or
equal to the MuniPreferred Basic Maintenance Amount or fails to maintain the
1940 Act MuniPreferred Asset Coverage, in accordance with the requirements of
the rating agency or agencies then rating the shares of MuniPreferred, and such
failure is not cured on or before the MuniPreferred Basic Maintenance Cure Date
or the 1940 Act Cure Date, as the case may be. The number of shares of
MuniPreferred to be redeemed shall be equal to the lesser of (i) the minimum
number of shares of MuniPreferred, together with all shares of other Preferred
Stock subject to redemption or retirement, the redemption of which, if deemed to
have occurred immediately prior to the opening of business on the Cure Date,
would have resulted in the Fund's having both Moody's Eligible Assets with a
Discounted Value and S&P Eligible Assets with a Discounted Value greater than or
equal to the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro
rata among shares of MuniPreferred and other Preferred Stock
24
<PAGE> 58
(and, then, pro rata among each series of MuniPreferred) subject to redemption
or retirement. The Fund shall effect such redemption on the date fixed by the
Fund therefor, which date shall not be earlier than 20 days nor later than 40
days after such Cure Date, except that if the Fund does not have funds legally
available for the redemption of all of the required number of shares of
MuniPreferred and shares of other Preferred Stock which are subject to
redemption or retirement or the Fund otherwise is unable to effect such
redemption on or prior to 40 days after such Cure Date, the Fund shall redeem
those shares of MuniPreferred and shares of other Preferred Stock which it was
unable to redeem on the earliest practicable date on which it is able to effect
such redemption. If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to this paragraph (b), the number of
shares of such series to be redeemed shall be redeemed pro rata from the Holders
of shares of such series in proportion to the number of shares of such series
held by such Holders.
(c) NOTICE OF REDEMPTION. If the Fund shall determine or be
required to redeem shares of a series of MuniPreferred pursuant to paragraph (a)
or (b) of this Section 11, it shall mail a Notice of Redemption with respect to
such redemption by first class mail, postage prepaid, to each Holder of the
shares of such series to be redeemed, at such Holder's address as the same
appears on the stock books of the Fund on the record date established by
the Board of Directors. Such Notice of Redemption shall be so mailed not less
than 20 nor more than 45 days prior to the date fixed for redemption. Each such
Notice of Redemption shall state: (i) the redemption date; (ii) the number of
shares of MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP
number for shares of such series; (iv) the Redemption Price; (v) the place or
places where the certificate(s) for such shares (properly endorsed or assigned
for transfer, if the Board of Directors shall so require and the Notice of
Redemption shall so state) are to be surrendered for payment of the Redemption
Price; (vi) that dividends on the shares to be redeemed will cease to accumulate
on such redemption date; and (vii) the provisions of this Section 11 under which
such redemption is made. If fewer than all shares of a series of MuniPreferred
held by any Holder are to be redeemed, the Notice of Redemption mailed to such
Holder shall also specify the number of shares of such series to be redeemed
from such Holder. The Fund may provide in any Notice of Redemption relating to
a redemption contemplated to be effected pursuant to paragraph (a) of this
Section 11 that such redemption is subject to one or more conditions precedent
and that the Fund shall not be required to effect such redemption unless each
such condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding
the provisions of paragraphs (a) or (b) of this Section 11, if any dividends
on shares of a series of MuniPreferred (whether or not earned or declared) are
in arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
(e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent
that any redemption for which Notice of Redemption has been mailed is not made
by reason of the absence of legally available funds therefor, such redemption
shall be made as soon as practicable to the extent such funds become available.
Failure to redeem shares of MuniPreferred shall be deemed to exist at any time
after the date specified for redemption in a Notice of Redemption when the Fund
shall have failed, for any reason whatsoever, to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares for which such
Notice of Redemption has been mailed; provided, however, that the foregoing
shall not apply in the case of the Fund's failure to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares where (1) the
Notice of Redemption relating to such redemption provided that such redemption
was subject to one or more conditions precedent and (2) any such condition
precedent shall not have been satisfied at the time or times and in the manner
specified in such Notice of Redemption. Notwithstanding the fact that the Fund
may not have redeemed shares of MuniPreferred for which a Notice of Redemption
has been mailed, dividends may be declared and paid on shares of MuniPreferred
and shall include those shares of MuniPreferred for which a Notice of
Redemption has been mailed.
(f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY FUND.
All moneys paid to the Auction Agent for payment of the Redemption Price of
shares of MuniPreferred called for redemption shall be held in trust by the
Auction Agent for the benefit of Holders of shares so to be redeemed.
(g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO
LONGER OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business
25
<PAGE> 59
Day next preceding the date fixed for redemption thereby, in funds available
on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares shall
no longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance with the Notice of Redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of
MuniPreferred subject to redemption. In the case that fewer than all of the
shares represented by any such certificate are redeemed, a new certificate shall
be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Fund shall be entitled to receive from the Auction Agent, promptly
after the date fixed for redemption, any cash deposited with the Auction Agent
in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred
called for redemption on such date and (ii) all other amounts to which Holders
of shares of MuniPreferred called for redemption may be entitled. Any funds so
deposited that are unclaimed at the end of 90 days from such redemption date
shall, to the extent permitted by law, be repaid to the Fund, after which time
the Holders of shares of MuniPreferred so called for redemption may look only to
the Fund for payment of the Redemption Price and all other amounts to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest on the funds so deposited.
(h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption
pursuant to this Section 11, the Fund shall use its best efforts to comply
with all applicable conditions precedent to effecting such redemption under the
1940 Act and Minnesota law, but shall effect no redemption except in accordance
with the 1940 Act and Minnesota law.
(i) ONLY WHOLE SHARES OF MUNIPREFERRED MAY BE REDEEMED. In the
case of any redemption pursuant to this Section 11, only whole shares of
MuniPreferred shall be redeemed, and in the event that any provision of the
Articles would require redemption of a fractional share, the Auction Agent shall
be authorized to round up so that only whole shares are redeemed.
12. LIQUIDATION RIGHTS.
(a) RANKING. The shares of a series of MuniPreferred shall
rank on a parity with each other, with shares of any other series of
MuniPreferred and with shares of any other series of Preferred Stock as to the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund.
(b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution,
liquidation or winding up of the affairs of the Fund, whether voluntary or
involuntary, the Holders of shares of MuniPreferred then outstanding shall be
entitled to receive and to be paid out of the assets of the Fund available for
distribution to its shareholders, before any payment or distribution shall be
made on the Common Stock or on any other class of stock of the Fund ranking
junior to the MuniPreferred upon dissolution, liquidation or winding up, an
amount equal to the Liquidation Preference with respect to such shares plus an
amount equal to all dividends thereon (whether or not earned or declared)
accumulated but unpaid to (but not including) the date of final distribution in
same-day funds, together with any payments required to be made pursuant to
Section 3 of this Part I in connection with the liquidation of the Fund. After
the payment to the Holders of the shares of MuniPreferred of the full
preferential amounts provided for in this paragraph (b), the Holders of
MuniPreferred as such shall have no right or claim to any of the remaining
assets of the Fund.
(c) PRO RATA DISTRIBUTIONS. In the event the assets of the Fund
available for distribution to the Holders of shares of MuniPreferred upon
any dissolution, liquidation, or winding up of the affairs of the Fund, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to paragraph (b) of this Section 12, no
such distribution shall be made on account of any shares of any other class or
series of Preferred Stock ranking on a parity with the shares of MuniPreferred
with respect to the distribution of assets upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) RIGHTS OF JUNIOR STOCK. Subject to the rights of the
holders of shares of any series or class or classes of stock ranking on a
parity with the shares of MuniPreferred with respect to the distribution of
assets upon dissolution, liquidation or winding
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<PAGE> 60
up of the affairs of the Fund, after payment shall have been made in full to
the Holders of the shares of MuniPreferred as provided in paragraph (b) of this
Section 12, but not prior thereto, any other series or class or classes of
stock ranking junior to the shares of MuniPreferred with respect to the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund shall, subject to the respective terms and provisions (if
any) applying thereto, be entitled to receive any and all assets remaining to
be paid or distributed, and the Holders of the shares of MuniPreferred shall
not be entitled to share therein.
(e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the
sale of all or substantially all the property or business of the Fund, nor
the merger or consolidation of the Fund into or with any other corporation nor
the merger or consolidation of any other corporation into or with the Fund shall
be a dissolution, liquidation or winding up, whether voluntary or involuntary,
for the purposes of this Section 12.
13. MISCELLANEOUS.
(a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject
to the provisions of paragraph (c) of Section 10 of this Part I, the Board of
Directors may, by resolution duly adopted, without shareholder approval
(except as otherwise provided by this Statement or required by applicable law),
amend Appendix A hereto to (1) reflect any amendments hereto which the Board of
Directors is entitled to adopt pursuant to the terms of this Statement without
shareholder approval and (2) add additional series of MuniPreferred or
additional shares of a series of MuniPreferred (and terms relating thereto) to
the series and shares of MuniPreferred theretofore described thereon. Each such
additional series and all such additional shares shall be governed by the terms
of this Statement.
(b) APPENDIX A INCORPORATED BY REFERENCE. Appendix A hereto is
incorporated in and made a part of this Statement by reference thereto.
(c) NO FRACTIONAL SHARES. No fractional shares of MuniPreferred
shall be issued.
(d) STATUS OF SHARES OF MUNIPREFERRED REDEEMED, EXCHANGED OR
OTHERWISE ACQUIRED BY THE FUND. Shares of MuniPreferred which are redeemed,
exchanged or otherwise acquired by the Fund shall return to the status of
authorized and unissued shares of Preferred Stock without designation as to
series. Upon the redemption, exchange or other acquisition by the Fund of all
outstanding shares of a series of MuniPreferred, all provisions of the Articles
relating to such series (including, without limitation, all provisions of this
Statement relating to such series) shall cease to be of further effect and shall
cease to be part of the Articles. Upon the occurrence of any such event, the
Board of Directors shall have the power, pursuant to Minnesota Statutes Section
302A.135, Subdivision 5 or any successor provision and without shareholder
action, to cause restated articles of incorporation of the Fund or other
appropriate documents to be prepared and filed with the Secretary of State of
the State of Minnesota which reflect such removal from the Articles of all such
provisions relating to such series or, if appropriate, the cancellation of this
Statement, or both.
(e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by
applicable law, the Board of Directors may interpret or adjust the
provisions of this Statement to resolve any inconsistency or ambiguity or to
remedy any formal defect, and may amend this Statement with respect to any
series of MuniPreferred prior to the issuance of shares of such series.
(f) HEADINGS NOT DETERMINATIVE. The headings contained in this
Statement are for convenience of reference only and shall not affect the
meaning or interpretation of this Statement.
(g) NOTICES. All notices or communications, unless otherwise
specified in the By-Laws of the Fund or this Statement, shall be sufficiently
given if in writing and delivered in person or mailed by first-class mail,
postage prepaid.
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<PAGE> 61
PART II.
1. ORDERS.
(a) Prior to the Submission Deadline on each Auction Date for
shares of a series of MuniPreferred:
(i) each Beneficial Owner of shares of such series
may submit to its Broker-Dealer by telephone or otherwise information as
to:
(A) the number of Outstanding shares, if any, of
such series held by such Beneficial Owner which such
Beneficial Owner desires to continue to hold without regard to
the Applicable Rate for shares of such series for the next
succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of
such series held by such Beneficial Owner which such Beneficial
Owner offers to sell if the Applicable Rate for shares of
such series for the next succeeding Rate Period of shares of such
series shall be less than the rate per annum specified by such
Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of
such series held by such Beneficial Owner which such Beneficial
Owner offers to sell without regard to the Applicable Rate
for shares of such series for the next succeeding Rate Period of
shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential
Beneficial Owners, shall in good faith for the purpose of conducting a
competitive Auction in a commercially reasonable manner, contact Potential
Beneficial Owners (by telephone or otherwise), including Persons that are
not Beneficial Owners, on such lists to determine the number of shares, if
any, of such series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall not be less than the
rate per annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, of information referred to in clause (i)(A), (i)(B), (i)(C) or
(ii) of this paragraph (a) is hereinafter referred to as an "Order" and
collectively as "Orders" and each Beneficial Owner and each Potential
Beneficial Owner placing an Order with a Broker-Dealer, and such Broker-Dealer
placing an Order with the Auction Agent, is hereinafter referred to as a
"Bidder" and collectively as "Bidders"; an Order containing the information
referred to in clause (i)(A) of this paragraph (a) is hereinafter referred to
as a "Hold Order" and collectively as "Hold Orders"; an Order containing the
information referred to in clause (i)(B) or (ii) of this paragraph (a) is
hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order
containing the information referred to in clause (i)(C) of this paragraph (a)
is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders."
(b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares
of a series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series
specified in such Bid if the Applicable Rate for shares of such
series determined on such Auction Date shall be less than the
rate specified therein;
(B) such number or a lesser number of Outstanding
shares of such series to be determined as set forth in clause
(iv) of paragraph (a) of Section 4 of this Part II if the
Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein; or
(C) the number of Outstanding shares of such series
specified in such Bid if the rate specified therein shall be
higher than the Maximum Rate for shares of such series, or such
number or a lesser number of Outstanding
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<PAGE> 62
shares of such series to be determined as set forth in clause
(iii) of paragraph (b) of Section 4 of this Part II if the rate
specified therein shall be higher than the Maximum Rate for
shares of such series and Sufficient Clearing Bids for shares of
such series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing
Holder of shares of a series of MuniPreferred subject to an Auction
on any Auction Date shall constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series
specified in such Sell Order; or
(B) such number or a lesser number of Outstanding
shares of such series as set forth in clause (iii) of paragraph
(b) of Section 4 of this Part II if Sufficient Clearing Bids
for shares of such series do not exist;
provided, however, that a Broker-Dealer that is an Existing Holder with respect
to shares of a series of MuniPreferred shall not be liable to any Person for
failing to sell such shares pursuant to a Sell Order described in the proviso
to paragraph (c) of Section 2 of this Part II if (1) such shares were
transferred by the Beneficial Owner thereof without compliance by such
Beneficial Owner or its transferee Broker-Dealer (or other transferee person,
if permitted by the Fund) with the provisions of Section 7 of this Part II or
(2) such Broker-Dealer has informed the Auction Agent pursuant to the terms of
its Broker-Dealer Agreement that, according to such Broker-Dealer's records,
such Broker-Dealer believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential
Holder of shares of a series of MuniPreferred subject to an
Auction on any Auction Date shall constitute an irrevocable offer to
purchase:
(A) the number of Outstanding shares of such series
specified in such Bid if the Applicable Rate for shares of
such series determined on such Auction Date shall be higher than
the rate specified therein; or
(B) such number or a lesser number of Outstanding
shares of such series as set forth in clause (v) of paragraph
(a) of Section 4 of this Part II if the Applicable Rate for
shares of such series determined on such Auction Date shall be
equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred other than
whole shares shall be valid.
2. SUBMISSION OF ORDER BY BROKER-DEALERS TO AUCTION AGENT.
(a) Each Broker-Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders for shares of
MuniPreferred of a series subject to an Auction on such Auction Date obtained by
such Broker-Dealer, designating itself (unless otherwise permitted by the Fund)
as an Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall
be the Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are
the subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder
of shares of such series:
(A) the number of shares, if any, of such series
subject to any Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series
subject to any Bid of such Existing Holder and the rate
specified in such Bid; and
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<PAGE> 63
(C) the number of shares, if any, of such series
subject to any Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of
shares of such series, the rate and number of shares of such series
specified in such Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of
MuniPreferred of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall
deem a Sell Order to have been submitted by or on behalf of such Existing
Holder covering the number of outstanding shares of such series held by such
Existing Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the
Auction Agent covering in the aggregate more than the number of Outstanding
shares of MuniPreferred of a series subject to an Auction held by such
Existing Holder, such Orders shall be considered valid in the following order
of priority:
(i) all Hold Orders for shares of such series shall be
considered valid, but only up to and including in the aggregate the
number of Outstanding shares of such series held by such Existing
Holder, and if the number of shares of such series subject to such
Hold Orders exceeds the number of Outstanding shares of such series
held by such Existing Holder, the number of shares subject to each
such Hold Order shall be reduced pro rata to cover the number of
Outstanding shares of such series held by such Existing Holder;
(ii) (A) any Bid for shares of such series shall be
considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder
over the number of shares of such series subject to any Hold Orders
referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of
an Existing Holder for shares of such series is submitted to the
Auction Agent with the same rate and the number of Outstanding
shares of such series subject to such Bids is greater than
such excess, such Bids shall be considered valid up to and
including the amount of such excess, and the number of shares of
such series subject to each Bid with the same rate shall be
reduced pro rata to cover the number of shares of such series
equal to such excess;
(C) subject to subclauses (A) and (B), if more than
one Bid of an Existing Holder for shares of such series is
submitted to the Auction Agent with different rates, such Bids
shall be considered valid in the ascending order of their
respective rates up to and including the amount of such excess;
and
(D) in any such event, the number, if any, of such
Outstanding shares of such series subject to any portion of Bids
considered not valid in whole or in part under this clause (ii)
shall be treated as the subject of a Bid for shares of such
series by or on behalf of a Potential Holder at the rate therein
specified; and
(iii) all Sell Orders for shares of such series shall be
considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder over
the sum of shares of such series subject to valid Hold Orders referred
to in clause (i) above and valid Bids referred to in clause (ii)
above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any
Potential Holder, each such Bid submitted shall be a separate Bid with the rate
and number of shares therein specified.
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<PAGE> 64
(f) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND APPLICABLE
RATE.
(a) Not earlier than the Submission Deadline on each Auction Date
for shares of a series of MuniPreferred, the Auction Agent shall assemble
all valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine for such series:
(i) the excess of the number of Outstanding shares of such
series over the number of Outstanding shares of such series subject to
Submitted Hold Orders (such excess being hereinafter referred to as the
"Available MuniPreferred" of such series);
(ii) from the Submitted Orders for shares of such series
whether:
(A) the number of Outstanding shares of such series
subject to Submitted Bids of Potential Holders specifying
one or more rates equal to or lower than the Maximum Rate for
shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series
subject to Submitted Bids of Existing Holders specifying one or
more rates higher than the Maximum Rate for shares of such
series; and
(C) the number of Outstanding shares of such series
subject to Submitted Sell Orders
(in the event such excess or such equality exists (other than
because the number of shares of such series in subclauses (B) and
(C) above is zero because all of the Outstanding shares of
such series are subject to Submitted Hold Orders), such Submitted
Bids in subclause (A) above being hereinafter referred to
collectively as "Sufficient Clearing Bids" for shares of such
series); and
(iii) if Sufficient Clearing Bids for shares of such series
exist, the lowest rate specified in such Submitted Bids (the "Winning Bid
Rate" for shares of such series) which if:
(A) (I) each such Submitted Bid of Existing Holders
specifying such lowest rate and (II) all other such Submitted
Bids of Existing Holders specifying lower rates were rejected,
thus entitling such Existing Holders to continue to hold the
shares of such series that are subject to such Submitted Bids;
and
(B) (I) each such Submitted Bid of Potential Holders
specifying such lowest rate and (II) all other such Submitted
Bids of Potential Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A)
above continuing to hold an aggregate number of Outstanding
shares of such series which, when added to the number of
Outstanding shares of such series to be purchased by such
Potential Holders described in subclause (B) above, would equal
not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the determinations
pursuant to paragraph (a) of this Section 3, the Auction Agent shall advise
the Fund of the Maximum Rate for shares of the series of MuniPreferred for which
an Auction is being
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<PAGE> 65
held on the Auction Date and, based on such determination, the Applicable
Rate for shares of such series for the next succeeding Rate Period thereof as
follows:
(i) if Sufficient Clearing Bids for shares of such series
exist, that the Applicable Rate for all shares of such series for the
next succeeding Rate Period thereof shall be equal to the Winning Bid Rate
for shares of such series so determined;
(ii) if Sufficient Clearing Bids for shares of such series do
not exist (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), that the Applicable Rate for
all shares of such series for the next succeeding Rate Period thereof
shall be equal to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are
subject to Submitted Hold Orders, that the Applicable Rate for all shares
of such series for the next succeeding Rate Period thereof shall be
as set forth in Section 12 of Appendix A hereto.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF SHARES. Existing Holders shall continue to hold the shares of
MuniPreferred that are subject to Submitted Hold Orders, and, based on
the determinations made pursuant to paragraph (a) of Section 3 of this Part II,
the Submitted Bids and Submitted Sell Orders shall be accepted or rejected by
the Auction Agent and the Auction Agent shall take such other action as set
forth below:
(a) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have been made, all Submitted Sell Orders with respect to shares of such series
shall be accepted and, subject to the provisions of paragraphs (d) and (e) of
this Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all
other Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such
series specifying any rate that is higher than the Winning Bid Rate
for shares of such series shall be accepted, thus requiring each such
Existing Holder to sell the shares of MuniPreferred subject to such
Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such
series specifying any rate that is lower than the Winning Bid Rate for
shares of such series shall be rejected, thus entitling each such Existing
Holder to continue to hold the shares of MuniPreferred subject to such
Submitted Bids;
(iii) Potential Holders' Submitted Bids for shares of such
series specifying any rate that is lower than the Winning Bid Rate for
shares of such series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares of such
series specifying a rate that is equal to the Winning Bid Rate for
shares of such series shall be rejected, thus entitling such Existing
Holder to continue to hold the shares of MuniPreferred subject to such
Submitted Bid, unless the number of Outstanding shares of MuniPreferred
subject to all such Submitted Bids shall be greater than the number of
shares of MuniPreferred ("remaining shares") in the excess of the
Available MuniPreferred of such series over the number of shares of
MuniPreferred subject to Submitted Bids described in clauses (ii) and
(iii) of this paragraph (a), in which event such Submitted Bid of such
Existing Holder shall be rejected in part, and such Existing Holder shall
be entitled to continue to hold shares of MuniPreferred subject to such
Submitted Bid, but only in an amount equal to the number of shares of
MuniPreferred of such series obtained by multiplying the number of
remaining shares by a fraction, the numerator of which shall be the number
of Outstanding shares of MuniPreferred held by such Existing Holder
subject to such Submitted Bid and the denominator of which shall be the
aggregate number of Outstanding shares of MuniPreferred subject to such
Submitted Bids made by all such Existing Holders that specified a rate
equal to the Winning Bid Rate for shares of such series; and
(v) each Potential Holder's Submitted Bid for shares of such
series specifying a rate that is equal to the Winning Bid Rate for shares
of such series shall be accepted but only in an amount equal to the number
of shares of such series obtained by multiplying the number of shares in
the excess of the Available MuniPreferred of such series over the
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<PAGE> 66
number of shares of MuniPreferred subject to Submitted Bids described in
clauses (ii) through (iv) of this paragraph (a) by a fraction, the
numerator of which shall be the number of Outstanding shares of
MuniPreferred subject to such Submitted Bid and the denominator of which
shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Potential Holders that
specified a rate equal to the Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have not been made (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), subject to the provisions of
paragraph (d) of this Section 4, Submitted Orders for shares of such series
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids for shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such
series specifying any rate that is equal to or lower than the Maximum
Rate for shares of such series shall be rejected, thus entitling such
Existing Holders to continue to hold the shares of MuniPreferred subject
to such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such
series specifying any rate that is equal to or lower than the Maximum
Rate for shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such
series specifying any rate that is higher than the Maximum Rate for
shares of such series and the Submitted Sell Orders for shares of such
series of each Existing Holder shall be accepted, thus entitling each
Existing Holder that submitted or on whose behalf was submitted any such
Submitted Bid or Submitted Sell Order to sell the shares of such series
subject to such Submitted Bid or Submitted Sell Order, but in both cases
only in an amount equal to the number of shares of such series obtained by
multiplying the number of shares of such series subject to Submitted Bids
described in clause (ii) of this paragraph (b) by a fraction, the
numerator of which shall be the number of Outstanding shares of such
series held by such Existing Holder subject to such Submitted Bid or
Submitted Sell Order and the denominator of which shall be the aggregate
number of Outstanding shares of such series subject to all such Submitted
Bids and Submitted Sell Orders.
(c) If all of the Outstanding shares of a series of MuniPreferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such
series shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of
MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as
it shall determine in its sole discretion, round up or down the number of
shares of MuniPreferred of such series to be purchased or sold by any Existing
Holder or Potential Holder on such Auction Date as a result of such procedures
so that the number of shares so purchased or sold by each Existing Holder or
Potential Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of
paragraph (a) of this Section 4, any Potential Holder would be entitled or
required to purchase less than a whole share of a series of MuniPreferred on
any Auction Date, the Auction Agent shall, in such manner as it shall determine
in its sole discretion, allocate shares of MuniPreferred of such series for
purchase among Potential Holders so that only whole shares of MuniPreferred of
such series are purchased on such Auction Date as a result of such procedures
by any Potential Holder, even if such allocation results in one or more
Potential Holders not purchasing shares of MuniPreferred of such series on such
Auction Date.
(f) Based on the results of each Auction for shares of a series of
MuniPreferred, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such
series to be sold by Potential Holders and Existing Holders and, with respect
to each Potential Holder and Existing Holder, to the extent that such aggregate
number of shares to be purchased and such aggregate number of shares to be sold
differ, determine to which other Potential Holder(s) or Existing Holder(s) they
shall deliver, or from which other Potential Holder(s) or Existing Holder(s)
they shall receive, as the case may be, shares of MuniPreferred of such series.
Notwithstanding any provision of the Auction Procedures or the Settlement
Procedures to the contrary, in the event an Existing Holder or Beneficial Owner
of shares of a series of MuniPreferred with respect to whom a
33
<PAGE> 67
Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a
Sell Order for such shares that was accepted in whole or in part, fails to
instruct its Agent Member to deliver such shares against payment therefor,
partial deliveries of shares of MuniPreferred that have been made in respect of
Potential Holders' or Potential Beneficial Owners' Submitted Bids for shares of
such series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver shares of MuniPreferred of any
series or to pay for shares of MuniPreferred of any series sold or purchased
pursuant to the Auction Procedures or otherwise.
5. NOTIFICATION OF ALLOCATIONS. Whenever the Fund intends to include any net
capital gains or other income taxable for Federal income tax purposes in any
dividend on shares of MuniPreferred, the Fund shall, in the case of a Minimum
Rate Period or a Special Rate Period of 28 Rate Period Days or fewer, and may,
in the case of any other Special Rate Period, notify the Auction Agent of the
amount to be so included not later than the Dividend Payment Date next
preceding the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the Fund,
it will be required in turn to notify each Broker-Dealer, who, on or prior to
such Auction Date, in accordance with its Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of MuniPreferred believed by it to be interested in submitting an Order
in the Auction to be held on such Auction Date.
6. AUCTION AGENT. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its affiliates (which however, may engage or have
engaged in business transactions with the Fund or its affiliates) and at no
time shall the Fund or any of its affiliates act as the Auction Agent in
connection with the Auction Procedures. If the Auction Agent resigns or for
any reason its appointment is terminated during any period that any shares of
MuniPreferred are outstanding, the Board of Directors shall use its best
efforts promptly thereafter to appoint another qualified commercial bank, trust
company or financial institution to act as the Auction Agent. The Auction
Agent's registry of Existing Holders of shares of a series of MuniPreferred
shall be conclusive and binding on the Broker-Dealers. A Broker-Dealer may
inquire of the Auction Agent between 3:00 p.m. on the Business Day preceding
an Auction for shares of a series of MuniPreferred and 9:30 a.m. on the
Auction Date for such Auction to ascertain the number of shares of such series
in respect of which the Auction Agent has determined such Broker-Dealer to be
an Existing Holder. If such Broker-Dealer believes it is the Existing Holder
of fewer shares of such series than specified by the Auction Agent in response
to such Broker-Dealer's inquiry, such Broker-Dealer may so inform the Auction
Agent of that belief. Such Broker-Dealer shall not, in its capacity as Existing
Holder of shares of such series, submit Orders in such Auction in respect of
shares of such series covering in the aggregate more than the number of shares
of such series specified by the Auction Agent in response to such
Broker-Dealer's inquiry.
7. TRANSFER OF SHARES OF MUNIPREFERRED. Unless otherwise permitted by the
Fund, a Beneficial Owner or an Existing Holder may sell, transfer or otherwise
dispose of shares of MuniPreferred only in whole shares and only pursuant to a
Bid or Sell Order placed with the Auction Agent in accordance with the
procedures described in this Part II or to a Broker-Dealer; provided, however,
that (a) a sale, transfer or other disposition of shares of MuniPreferred from
a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer as the holder of such shares to that Broker-Dealer or another
customer of that Broker-Dealer shall not be deemed to be a sale, transfer or
other disposition for purposes of this Section 7 if such Broker-Dealer remains
the Existing Holder of the shares so sold, transferred or disposed of
immediately after such sale, transfer or disposition and (b) in the case of all
transfers other than pursuant to Auctions, the Broker-Dealer (or other Person,
if permitted by the Fund) to whom such transfer is made shall advise the
Auction Agent of such transfer.
8. GLOBAL CERTIFICATE. Prior to the commencement of a Voting Period, (i) all
of the shares of a series of MuniPreferred outstanding from time to time shall
be represented by one global certificate registered in the name of the
Securities Depository or its nominee and (ii) no registration of transfer of
shares of a series of MuniPreferred shall be made on the books of the Fund to
any Person other than the Securities Depository or its nominee. The foregoing
restriction on registration of transfer shall be conspicuously noted on the
face or back of the certificates of MuniPreferred in such a manner as to comply
with the requirements of Minnesota Statute
34
<PAGE> 68
Section 302A.429, Subd. 2, and Section 8-204 of the Uniform Commercial Code as
in effect in the State of Minnesota, or any successor provisions.
IN WITNESS WHEREOF, NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC., has caused
these presents to be signed in its name and on its behalf by its Vice President
and attested by its Assistant Secretary, and the said officers of the Fund
further acknowledged said instrument to be the corporate act of the Fund, and
stated under penalty of perjury that to the best of their knowledge,
information and belief the matters and facts therein set forth with respect to
approval are true in all material respects, all on August 11, 1997.
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
BY:_______________________________________
Gifford R. Zimmerman
Vice President
ATTEST:________________________________
Larry W. Martin
Assistant Secretary
35
<PAGE> 69
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
APPENDIX A
SECTION 1. DESIGNATION AS TO SERIES.
SERIES M: A series of 10,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series M." Upon the
effectiveness of this Statement, each share of Remarketed Preferred Stock,
Series A, of the Fund outstanding immediately prior to the effectiveness of
this Statement shall cease to be a share of Remarketed Preferred Stock and
shall become instead a share of Series M MuniPreferred. Each share of Series M
MuniPreferred shall, for purposes hereof, be deemed to have a Date of Original
Issue of August 12, 1997; have an Applicable Rate for its Initial Rate Period
equal to % per annum; have an initial Dividend Payment Date of August 28, 1997;
and have such other preferences, limitations and relative voting rights, in
addition to those required by applicable law or set forth in the Articles
applicable to Preferred Stock of the Fund, as set forth in Part I and Part II
of this Statement. Any shares of Series M MuniPreferred issued after the
effective date of this Statement shall be issued on the first day of a Rate
Period of the then outstanding shares of Series M MuniPreferred; shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for
shares of such series established in the first Auction for shares of such
series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. The
Series M MuniPreferred shall constitute a separate series of Preferred Stock of
the Fund, and each share of Series M MuniPreferred shall be identical except as
provided in Section 11 of Part I of this Statement.
SERIES T: A series of 10,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series T." Upon the
effectiveness of this Statement, each share of Remarketed Preferred Stock,
Series B, of the Fund outstanding immediately prior to the effectiveness of
this Statement shall cease to be a share of Remarketed Preferred Stock and
shall become instead a share of Series T MuniPreferred. Each share of Series T
MuniPreferred shall, for purposes hereof, be deemed to have a Date of Original
Issue of August 12, 1997; have an Applicable Rate for its Initial Rate Period
equal to % per annum; have an initial Dividend Payment Date of September 4,
1997; and have such other preferences, limitations and relative voting rights,
in addition to those required by applicable law or set forth in the Articles
applicable to Preferred Stock of the Fund, as set forth in Part I and Part II
of this Statement. Any shares of Series T MuniPreferred issued after the
effective date of this Statement shall be issued on the first day of a Rate
Period of the then outstanding shares of Series T MuniPreferred; shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for
shares of such series established in the first Auction for shares of such
series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. The
Series T MuniPreferred shall constitute a separate series of Preferred Stock of
the Fund, and each share of Series T MuniPreferred shall be identical except as
provided in Section 11 of Part I of this Statement.
SERIES W: A series of 10,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series W." Upon the
effectiveness of this Statement, each share of Remarketed Preferred Stock,
Series E, of the Fund outstanding immediately prior to the effectiveness of
this Statement shall cease to be a share of Remarketed Preferred Stock and
shall become instead a share of Series W MuniPreferred. Each share of Series W
MuniPreferred shall, for purposes hereof, be deemed to have a Date of Original
Issue of August 12, 1997; have an Applicable Rate for its Initial Rate Period
equal to % per annum; have an initial Dividend Payment Date of August 14, 1997;
and have such other preferences, limitations and relative voting rights, in
addition to those required by applicable law or set forth in the Articles
applicable to Preferred Stock of the Fund, as set forth in Part I and Part II
of this Statement. Any shares of Series W MuniPreferred issued after the
effective date of this Statement shall be issued on the first day of a Rate
Period of the then outstanding shares of Series W MuniPreferred; shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for
shares of such series established in the first Auction for shares of such
series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this
Statement. The Series W MuniPreferred shall constitute a separate series
A-1
<PAGE> 70
of Preferred Stock of the Fund, and each share of Series W MuniPreferred shall
be identical except as provided in Section 11 of Part I of this Statement.
SERIES TH: A series of 10,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series TH." Upon the
effectiveness of this Statement, each share of Remarketed Preferred Stock,
Series C, of the Fund outstanding immediately prior to the effectiveness of
this Statement shall cease to be a share of Remarketed Preferred Stock and
shall become instead a share of Series TH MuniPreferred. Each share of Series
TH MuniPreferred shall, for purposes hereof, be deemed to have a Date of
Original Issue of August 12, 1997; have an Applicable Rate for its Initial Rate
Period equal to % per annum; have an initial Dividend Payment Date of August
14, 1997; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the
Articles applicable to Preferred Stock of the Fund, as set forth in Part I and
Part II of this Statement. Any shares of Series TH MuniPreferred issued after
the effective date of this Statement shall be issued on the first day of a Rate
Period of the then outstanding shares of Series TH MuniPreferred; shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for
shares of such series established in the first Auction for shares of such
series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. The
Series TH MuniPreferred shall constitute a separate series of Preferred Stock
of the Fund, and each share of Series TH MuniPreferred shall be identical
except as provided in Section 11 of Part I of this Statement.
SERIES F: A series of 10,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series F." Upon the
effectiveness of this Statement, each share of Remarketed Preferred Stock,
Series D, of the Fund outstanding immediately prior to the effectiveness of
this Statement shall cease to be a share of Remarketed Preferred Stock and
shall become instead a share of Series F MuniPreferred. Each share of Series F
MuniPreferred shall, for purposes hereof, be deemed to have a Date of Original
Issue of August 12, 1997; have an Applicable Rate for its Initial Rate Period
equal to % per annum; have an initial Dividend Payment Date of August 21, 1997;
and have such other preferences, limitations and relative voting rights, in
addition to those required by applicable law or set forth in the Articles
applicable to Preferred Stock of the Fund, as set forth in Part I and Part II
of this Statement. Any shares of Series F MuniPreferred issued after the
effective date of this Statement shall be issued on the first day of a Rate
Period of the then outstanding shares of Series F MuniPreferred; shall have,
for such Rate Period, an Applicable Rate equal to the Applicable Rate for
shares of such series established in the first Auction for shares of such
series preceding the date of such issuance; and shall have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. The
Series F MuniPreferred shall constitute a separate series of Preferred Stock of
the Fund, and each share of Series F MuniPreferred shall be identical except as
provided in Section 11 of Part I of this Statement.
SECTION 2. NUMBER OF AUTHORIZED SHARES PER SERIES.
The number of authorized shares constituting Series M MuniPreferred is
10,000; Series T MuniPreferred is 10,000; Series W MuniPreferred is 10,000;
Series TH MuniPreferred is 10,000; and Series F MuniPreferred is 10,000.
SERIES 3. EXCEPTIONS TO CERTAIN DEFINITIONS.
Notwithstanding the definitions contained under the heading "Definitions"
in this Statement, the following terms shall have the following meanings for
purposes of this Statement:
Not applicable.
SECTION 4. CERTAIN DEFINITIONS.
For purposes of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
A-2
<PAGE> 71
"ESCROWED BONDS" shall mean Municipal Obligations that (i) have been
determined to be legally defeased in accordance with S&P's legal defeasance
criteria, (ii) have been determined to be economically defeased in accordance
with S&P's economic defeasance criteria and assigned a rating of AAA by S&P,
(iii) are not rated by S&P but have been determined to be legally defeased by
Moody's or (iv) have been determined to be economically defeased by Moody's
and assigned a rating no lower than the rating that is Moody's equivalent of
S&P's AAA rating.
"GROSS-UP PAYMENT" means payment to a Holder of shares of MuniPreferred
of an amount which, when taken together with the aggregate amount of Taxable
Allocations made to such Holder to which such Gross-up Payment relates, would
cause such Holder's dividends in dollars (after Federal income tax
consequences) from the aggregate of such Taxable Allocations and the related
Gross-up Payment to be equal to the dollar amount of the dividends which
would have been received by such Holder if the amount of such aggregate
Taxable Allocations would have been excludable from the gross income of such
Holder. Such Gross-up Payment shall be calculated (i) without consideration
being given to the time value of money; (ii) assuming that no Holder of
shares of MuniPreferred is subject to the Federal alternative minimum tax
with respect to dividends received from the Fund; and (iii) assuming that
each Taxable Allocation and each Gross-up Payment (except to the extent such
Gross-up Payment is designated as an exempt-interest dividend under Section
852(b)(5) of the Code or successor provisions) would be taxable in the hands
of each Holder of shares of MuniPreferred at the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or net
capital gains, as applicable, or the maximum marginal regular Federal
corporate income tax rate applicable to ordinary income or net capital gains,
as applicable, whichever is greater, in effect at the time such Gross-up
Payment is made.
"MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set
forth opposite such rating that is the same length as or is longer than the
Moody's Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
--------------------
EXPOSURE PERIOD AAA* AA* A* BAA* OTHER**(V) MIG-1*** SP-1+***
- --------------------------- ---- ---- ---- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but greater
than seven weeks 154 164 173 205 235 137 149
9 weeks or less but greater
than eight weeks 158 169 179 209 242 138 150
</TABLE>
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or
have a demand feature at par exercisable in 30 days or less or 125% as long as
such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less and (ii)
no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold.
"MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash,
(ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's but
rated by S&P, is rated at least BBB by S&P (provided, however, that for
purposes of determining the Moody's Discount Factor applicable
A-3
<PAGE> 72
to any such S&P-rated Municipal Obligation, such Municipal Obligation
(excluding any short-term Municipal Obligation) shall be deemed to have a
Moody's rating which is one full rating category lower than its S&P rating),
(iii) does not have its Moody's rating suspended by Moody's, and (iv) is
part of an issue of Municipal Obligations of at least $10,000,000.
Municipal Obligations issued by any one issuer and rated BBB by S&P may
comprise no more than 4% of total Moody's Eligible Assets; such BBB-rated
Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated Baa by Moody's or A by S&P, may comprise
no more than 6% of total Moody's Eligible Assets; such BBB, Baa and A-rated
Municipal Obligations, if any, together with any Municipal Obligations
issued by the same issuer and rated A by Moody's or AA by S&P, may comprise
no more than 10% of total Moody's Eligible Assets; and such BBB, Baa, A and
AA-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P,
may comprise no more than 20% of total Moody's Eligible Assets. For
purposes of the foregoing sentence, any Municipal Obligation backed by the
guaranty, letter of credit or insurance issued by a third party shall be
deemed to be issued by such third party if the issuance of such third party
credit is the sole determinant of the rating on such Municipal Obligation.
Municipal Obligations issued by issuers located within a single state or
territory and rated BBB by S&P may comprise no more than 12% of total
Moody's Eligible Assets; such BBB-rated Municipal Obligations, if any,
together with any Municipal Obligations issued by issuers located within the
same state or territory and rated Baa by Moody's or A by S&P, may comprise
no more than 20% of total Moody's Eligible Assets; such BBB, Baa and A-rated
Municipal Obligations, if any, together with any Municipal Obligations
issued by issuers located within the same state or territory and rated A by
Moody's or AA by S&P, may comprise no more than 40% of total Moody's
Eligible Assets; and such BBB, Baa, A and AA-rated Municipal Obligations, if
any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Aa by Moody's or AAA by S&P,
may comprise no more than 60% of total Moody's Eligible Assets. For purposes
of applying the foregoing requirements, a Municipal Obligation shall be
deemed to be rated BBB by S&P if rated BBB-, BBB or BBB+ by S&P, Moody's
Eligible Assets shall be calculated without including cash, and Municipal
Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by Moody's, rated
A-1+/AA or SP-1+/AA by S&P, shall be considered to have a long-term rating
of A. When the Fund sells a Municipal Obligation and agrees to repurchase
such Municipal Obligation at a future date, such Municipal Obligation shall
be valued at its Discounted Value for purposes of determining Moody's
Eligible Assets, and the amount of the repurchase price of such Municipal
Obligation shall be included as a liability for purposes of calculating the
MuniPreferred Basic Maintenance Amount. When the Fund purchases a Moody's
Eligible Asset and agrees to sell it at a future date, such Eligible Asset
shall be valued at the amount of cash to be received by the Fund upon such
future date, provided that the counterparty to the transaction has a
long-term debt rating of at least A2 from Moody's and the transaction has a
term of no more than 30 days, otherwise such Eligible Asset shall be valued
at the Discounted Value of such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a Moody's
Eligible Asset to the extent it is (i) subject to any material lien, mortgage,
pledge, security interest or security agreement of any kind (collectively,
"Liens"), except for (a) Liens which are being contested in good faith by
appropriate proceedings and which Moody's has indicated to the Fund will not
affect the status of such asset as a Moody's Eligible Asset, (b) Liens for
taxes that are not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash advanced to
the Fund by Nuveen Advisory Corp., United States Trust Company of New York or
the Auction Agent and (d) Liens by virtue of any repurchase agreement; or (ii)
deposited irrevocably for the payment of any liabilities for purposes of
determining the MuniPreferred Basic Maintenance Amount.
"RATE MULTIPLE," for shares of a series of MuniPreferred on any Auction
Date for shares of such series, shall mean the percentage, determined as set
forth below, based on the prevailing rating of shares of such series in effect
at the close of business on the Business Day next preceding such Auction Date:
PREVAILING RATING PERCENTAGE
------------------- ----------
"aa3"/AA- or higher 110%
"a3"/A- 125%
"baa3"/BBB- 150%
"ba3"/BB- 200%
Below "ba3"/BB- 250%
A-4
<PAGE> 73
provided, however, that in the event the Fund has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is
greater.
For purposes of this definition, the "prevailing rating" of shares of a
series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a
rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent
of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher,
then "a3"/A- if such shares have a rating of "a3" or better by Moody's and A-
or better by S&P or the equivalent of such ratings by such agencies or a
substitute rating agency or substitute rating agencies selected as provided
below, (iii) if not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such
shares have a rating of "baa3" or better by Moody's and BBB- or better by S&P
or the equivalent of such ratings by such agencies or a substitute rating
agency or substitute rating agencies selected as provided below, (iv) if not
"aa3"/AA- or higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have
a rating of "ba3" or better by Moody's and BB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, and (v) if not "aa3"/AA-
or higher, "a3"/A-, "baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; provided,
however, that if such shares are rated by only one rating agency, the
prevailing rating will be determined without reference to the rating of any
other rating agency. The Fund shall take all reasonable action necessary to
enable either S&P or Moody's to provide a rating for shares of MuniPreferred.
If neither S&P nor Moody's shall make such a rating available, the party set
forth in Section 7 of Appendix A or its successor shall select at least one
nationally recognized statistical rating organization (as that term is used in
the rules and regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended from time to time) to act as a
substitute rating agency in respect of shares of the series of MuniPreferred
set forth opposite such party's name in Section 7 of Appendix A and the Fund
shall take all reasonable action to enable such rating agency to provide a
rating for such shares.
"S&P DISCOUNT FACTOR" shall mean, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set
forth opposite such rating that is the same length as or is longer than the
S&P Exposure Period, in accordance with the table set forth below:
RATING CATEGORY
------------------
EXPOSURE PERIOD AAA* AA* A* BBB*
---------------- ---- -------- ------ ----
[S] [C] [C] [C] [C]
40 Business Days 190% 195% 210% 250%
22 Business Days 170 175 190 230
10 Business Days 155 160 175 215
7 Business Days 150 155 170 210
3 Business Days 130 135 150 190
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 125% if such Municipal Obligations are not rated by
S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any
such Moody's-rated short-term Municipal Obligations which have demand features
exercisable within 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution with
a short-term rating of at least A-1+ from S&P; and further provided that such
Moody's-rated short-term Municipal Obligations may comprise no more than 50% of
short-term Municipal Obligations that qualify as S&P Eligible Assets; (ii) no
S&P Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold; and (iii) except as set forth in clause (i) above, in the
case of any Municipal Obligation that is not rated by S&P but qualifies as an
S&P Eligible Asset pursuant to clause (iii) of that definition, such Municipal
Obligation will be deemed to have an S&P rating one full rating category lower
than the S&P rating category that is the equivalent of the rating category in
which such Municipal Obligation is placed by Moody's. For purposes of the
foregoing, Anticipation Notes
A-5
<PAGE> 74
rated SP-1+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do
not mature or have a demand feature at par exercisable in 30 days and which do
not have a long-term rating, shall be considered to be short-term Municipal
Obligations.
"S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably
deposited by the Fund for the payment of any liabilities within the meaning
of MuniPreferred Basic Maintenance Amount), Receivables for Municipal
Obligations Sold or a Municipal Obligation owned by the Fund that (i) is
interest bearing and pays interest at least semi-annually; (ii) is payable
with respect to principal and interest in U.S. Dollars; (iii) is publicly
rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is
rated at least A by Moody's; (iv) is not part of a private placement of
Municipal Obligations; and (v) is part of an issue of Municipal Obligations
with an original issue size of at least $20 million or, if of an issue with
an original issue size below $20 million (but in no event below $10 million),
is issued by an issuer with a total of at least $50 million of securities
outstanding. Solely for purposes of this definition, the term "Municipal
Obligation" means any obligation the interest on which is exempt from regular
Federal income taxation and which is issued by any of the fifty United
States, the District of Columbia or any of the territories of the United
States, their subdivisions, counties, cities, towns, villages, school
districts and agencies (including authorities and special districts created
by the states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer or
guarantor (excluding bond insurers) shall be considered S&P Eligible Assets
only to the extent the Market Value of such Municipal Obligations does not
exceed 10% of the aggregate Market Value of S&P Eligible Assets, provided
that 2% is added to the applicable S&P Discount Factor for every 1% by which
the Market Value of such Municipal Obligations exceeds 5% of the aggregate
Market Value of S&P Eligible Assets;
(2) Municipal Obligations rated by Moody's but not rated by S&P shall be
considered S&P Eligible Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 50% of the aggregate Market Value of
S&P Eligible Assets; and
(3) Long-Term Municipal Obligations (excluding Escrowed Bonds) issued by
issuers in any one state or territory shall be considered S&P Eligible Assets
only to the extent the Market Value of such Municipal Obligations does not
exceed 20% of the aggregate Market Value of S&P Eligible Assets.
SECTION 5. INITIAL AND TRANSITIONAL RATE PERIODS.
The Initial Rate Period for shares of Series M MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 28, 1997. The Transitional Rate Period for shares of Series M
MuniPreferred shall be the period from and including August 28, 1997 to but
excluding September 9, 1997.
The Initial Rate Period for shares of Series T MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
September 4, 1997. The Transitional Rate Period for shares of Series T
MuniPreferred shall be the period from and including September 4, 1997 to but
excluding September 10, 1997.
The Initial Rate Period for shares of Series W MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 14, 1997.
The Initial Rate Period for shares of Series TH MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 14, 1997. The Transitional Rate Period for shares of Series TH
MuniPreferred shall be the period from and including August 14, 1997 to but
excluding August 22, 1997.
The Initial Rate Period for shares of Series F MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
August 21, 1997. The Transitional Rate Period for shares of Series F
MuniPreferred shall be the period from and including August 21, 1997 to but
excluding September 2, 1997.
SECTION 6. DATE FOR PURPOSES OF PARAGRAPH (YYY) CONTAINED UNDER THE HEADING
"DEFINITIONS" IN THIS STATEMENT.
A-6
<PAGE> 75
August 31, 1997.
SECTION 7. PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE" IN THIS
STATEMENT.
PARTY: SERIES OF MUNIPREFERRED:
-------------------------------------------------------------
Merrill, Lynch, Pierce, Fenner & Smith Incorporated Series M
Merrill, Lynch, Pierce, Fenner & Smith Incorporated Series T
Merrill, Lynch, Pierce, Fenner & Smith Incorporated Series W
Merrill, Lynch, Pierce, Fenner & Smith Incorporated Series TH
Merrill, Lynch, Pierce, Fenner & Smith Incorporated Series F
SECTION 8. ADDITIONAL DEFINITIONS
Not applicable.
SECTION 9. DIVIDEND PAYMENT DATES.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of:
Series M MuniPreferred, for the Initial Rate Period on Thursday, August
28, 1997, for the Transitional Rate Period on Tuesday, September 9, 1997, and
on each Tuesday thereafter;
Series T MuniPreferred, for the Initial Rate Period on Thursday,
September 4, 1997, for the Transitional Rate Period on Wednesday, August 13,
1997, and on each Wednesday thereafter;
Series W MuniPreferred, for the Initial Rate Period on Thursday, August
14, 1997, and on each Thursday thereafter;
Series TH MuniPreferred, for the Initial Rate Period on Thursday, August
14, 1997, for the Transitional Rate Period on Friday, August 22, 1997, and on
each Friday thereafter; and
Series F MuniPreferred, for the Initial Rate Period on Thursday, August
21, 1997, for the Transitional Rate Period on Tuesday, September 2, 1997, and
on each Monday thereafter.
SECTION 10. AMOUNT FOR PURPOSES OF SUBPARAGRAPH (C)(I) OF SECTION 5 OF PART I
OF THIS STATEMENT.
$350,000,000.
SECTION 11. REDEMPTION PROVISIONS APPLICABLE TO INITIAL RATE PERIODS.
Not applicable.
SECTION 12. APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH (B)(III) OF SECTION 3
OF PART II OF THIS STATEMENT.
For purposes of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall be equal to the lesser of
the Kenny Index (if such Rate Period consists of fewer than 183 Rate Period
Days) or the product of (A)(I) the "AA" Composite Commercial Paper Rate on such
Auction Date for
A-7
<PAGE> 76
such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary income,
whichever is greater; provided, however, that if the Fund has notified the
Auction Agent of its intent to allocate to shares of such series in such Rate
Period any net capital gains or other income taxable for Federal income tax
purposes ("Taxable Income"), the Applicable Rate for shares of such series for
such Rate Period will be (i) if the Taxable Yield Rate (as defined below) is
greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the Taxable
Yield Rate is less than or equal to the Benchmark Rate, then the rate equal to
the sum of (x) the lesser of the Kenny Index (if such Rate Period consists of
fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied
by the factor set forth in the preceding clause (B) and (y) the product of the
maximum marginal regular Federal individual income tax rate applicable to
ordinary income or the maximum marginal regular Federal corporate income tax
applicable to ordinary income, whichever is greater, multiplied by the Taxable
Yield Rate. For purposes of the foregoing, Taxable Yield Rate means the rate
determined by (a) dividing the amount of Taxable Income available for
distribution per such share of MuniPreferred by the number of days in the
Dividend Period in respect of which such Taxable Income is contemplated to be
distributed, (b) multiplying the amount determined in (a) above by 365 (in the
case of a Dividend Period of 7 Rate Period Days) or 360 (in the case of any
other Dividend Period), and (c) dividing the amount determined in (b) above by
$25,000.
A-8
<PAGE> 1
EXHIBIT 99.b
AMENDMENT TO BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
The By-Laws of Nuveen Premium Income Municipal Fund, Inc., a Minnesota
corporation, having been amended, by unanimous vote of the Board of Directors at
a meeting duly called, convened and held on October 26, 1994, to read as
follows:
RESOLVED, that Section 4.5 of the By-Laws be and it hereby is amended and
restated in its entirety to read as follows:
Section 4.5 The Chairman of the Board. The Chairman of the Board
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.
<PAGE> 2
AMENDMENT TO BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
The By-Laws of Nuveen Premium Income Municipal Fund, Inc., a Minnesota
corporation, have been amended, by unanimous vote of the Board of Directors at
a meeting duly called, convened and held on February 2, 1994, to read as
follows:
WHEREAS, the Board of Directors (Trustees) desires to amend the By-laws of the
Fund by adding Section 5.6(b) and revising what becomes Section 5.6(c) in order
to clarify certain provisions regarding the Board's ability to declare a record
date for the payment of dividends or other distributions or allocations.
NOW, THEREFORE, BE IT RESOLVED, that Section 5.6 of the By-Laws of the fund is
amended and restated in its entirety to read as follows:
Section 5.6 Record Date: Certification of Beneficial Owner. (a) The
directors may fix a date not more than sixty (60) days before the date of a
meeting of shareholders as the date for the determination of the holders of
shares entitled to notice of and entitled to vote at the meeting.
(b) The directors (trustees) may fix a date for determining shareholders
entitled to receive payment of any dividend or distribution or an allotment
of any rights or entitled to exercise any rights in respect of any change,
conversion or exchange of stock (shares).
(c) In the absence of any such fixed record date, (i) the date for the
determination of holders of shares entitled to notice of and entitled to
vote at a meeting of shareholders shall be the later of the close of
business on the day on which notice of the meeting is mailed or the
thirtieth day before the meeting, and (ii) the date for determining
shareholders entitled to receive payment of any dividend or distribution or
an allotment of any rights or entitled to exercise any rights in respect of
any change, conversion or exchange of stock (shares) shall be the close of
business on the day on which the resolution of the Board of Directors
(Trustees) is adopted.
(d) A resolution approved by the affirmative vote of a majority of the
directors (trustees) present may establish a procedure whereby a
shareholder may certify in writing to the Corporation (Trust) that all or a
portion of the shares registered in the name of the shareholder are held
for the account of one or more 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.
<PAGE> 3
AMENDMENT TO BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
The By-Laws of Nuveen Premium Income Municipal 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."
<PAGE> 4
053188-0239
AMENDED
BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL 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,
<PAGE> 5
not less than ten nor more than sixty days prior to the meeting, except where
the meeting is an adjourned meeting and the date, time and place of the meeting
were announced at the time of the adjournment.
Section 2.5 Quorum and Action. (a) The holders of a majority of the
voting power of the shares 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, the Minnesota Business Corporation Act
or the Corporation's Articles of Incorporation.
(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, the Minnesota Business Corporation Act or the Corporation's Articles
of Incorporation.
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
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<PAGE> 6
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 initial Board of
Directors shall consist of seven persons, which shall be the fixed number of
directors until changed.] The number of directors shall never be less than one.
The number of directors may be increased or, subject 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 directors who are elected at a
regular meeting of shareholders shall hold office until the next regular meeting
of shareholders and until their successors are elected and qualified, and
directors who are elected in the interim to fill vacancies and newly created
directorships shall hold office until qualified successors are elected at the
next regular or special meeting of the shareholders. Vacancies on the Board of
Directors resulting from the death, resignation, removal, or disqualification of
a director may be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum. Vacancies on the Board of Directors
resulting from newly created directorships may be filled by the affirmative vote
of a majority of the directors serving at the time of the increase.
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.
*The Board of Directors shall consist of six (6) (4/20/93) persons.
(Amended by resolution of the Board of Directors adopted on October 23, 1991.)
[deleted information in brackets]
<PAGE> 7
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
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 times as the Board 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 of 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
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<PAGE> 8
when a duly called or held meeting is convened, the directors present may
continue to transact business until 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
(A) all the votes entitled to be cast for the election of such 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 (B) 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
-5-
<PAGE> 9
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 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:
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<PAGE> 10
(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 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.
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<PAGE> 11
Section 4.9 Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company pursuant to a written agreement
designating such bank or trust company as custodian of the property of the
Corporation, as required by Section 6.7 of these By-Laws;
(b) keep accurate financial records for the Corporation;
(c) deposit all money, drafts, and checks in the name of and to the credit
of the Corporation in the banks and depositories designated by the Board;
(d) endorse for deposit all notes, checks, and drafts received by the
Corporation as ordered by the Board, making proper vouchers therefor;
(e) disburse corporate funds and issue checks and drafts in the name of
the Corporation, as ordered by the Board;
(f) render to the President and the Board, whenever requested, an account
of all transactions by the Treasurer and of the financial condition of the
Corporation; and
(g) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board or the President.
Section 4.10 The Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the shareholders;
(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
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<PAGE> 12
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 capital 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 an 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.
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<PAGE> 13
The Corporation shall also keep, at its principal executive office, or at
another place or places within the United States determined by the Board, a
record of the dates on which certificates representing shares were issued.
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
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<PAGE> 14
thereof, transfers of shares of the Corporation shall be made only on the books
of the Corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the Corporation, or with a transfer agent or a registrar and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. Except as may be otherwise provided by
law or these By-Laws, the person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation; provided that whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact, if known to an officer of
the Corporation, shall be so expressed in the entry of transfer.
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
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<PAGE> 15
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.
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 June 1 of each year and end on May 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
* The fiscal year of the Corporation shall begin on November 1 of each year
and end on October 31 of the succeeding year. (Amended 2/20/92)
[brackets mark deletion]
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<PAGE> 16
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 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 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.
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<PAGE> 17
Section 6.6 Approval of Firm of Independent Public Accountants. At any
regular meeting of the shareholders 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
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<PAGE> 18
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 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.
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<PAGE> 1
EXHIBIT 99.d.1
NUVEEN AUCTION AGENCY AGREEMENT
Basic Terms for Acting as Auction Agent
---------------------------------------
November 1, 1993
These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a bank or trust company identified in a Request and
Acceptance Letter will act as auction agent (an "Auction Agent") for Municipal
Auction Rate Cumulative Preferred Stock or Shares issued by an investment
company registered under the Investment Company Act of 1940, as amended, as
further identified by such Request and Acceptance Letter (a "Fund"), for which
Nuveen Advisory Corp. is the investment adviser.
- --------------------------------------------------------------------------------
The Fund proposes to issue shares of MuniPreferred(R) pursuant to its
Articles of Incorporation or Declaration of Trust, as amended or supplemented by
the Statement. The Fund desires that the Auction Agent perform certain duties
in connection with the MuniPreferred upon the terms and subject to the
conditions of the Agreement.
1. Definitions and Rules of Construction.
-------------------------------------
1.1 Terms Defined By Reference to Statement.
---------------------------------------
Capitalized terms not defined herein shall have the respective
meanings specified in the Statement.
1.2 Terms Defined Herein.
--------------------
As used herein and in the Settlement Procedures, the following terms
shall have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository that will act on behalf of a
Bidder.
(b) "Agreement" shall mean the Basic Terms, together with the Request
and Acceptance Letter relating to one or more series of MuniPreferred.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the auction procedures
constituting Part II of the form of Statement as of the filing thereof.
(e) "Authorized Officer" of the Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant
Treasurer and Assistant Secretary of the Auction Agent assigned to its
Corporate Trust and Agency Group and
<PAGE> 2
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a communication to the Fund.
(f) "Broker-Dealer Agreement" shall mean each agreement among the
Fund, the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(g) "Fund Officer" shall mean the Chairman of the Board of Directors
or Board of Trustees, as the case may be, each Vice Chairman of the Board
of Directors or Board of Trustees (whether or not designated by a number or
word or words added before or after the title "Vice Chairman"), the
President, each Vice President (whether or not designated by a number or
word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Fund and every other officer
or employee of the Fund designated as a "Fund Officer" for purposes hereof
in a notice to the Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par
value $.01 per share, of the Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of the Fund or any
committee thereof shall specify; as set forth in the Request and Acceptance
Letter.
(i) "Request and Acceptance Letter" shall mean the letter from the
Fund to the Auction Agent pursuant to which the Fund appoints the Auction
Agent and the Auction Agent accepts its appointment as auction agent for
the MuniPreferred.
(j) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.
(k) "Statement" shall mean the Statement Establishing and Fixing the
Rights and Preferences of, and authorizing the issuance of, one or more
series of Municipal Auction Rate Cumulative Preferred Stock or Municipal
Auction Rate Cumulative Preferred Shares, as filed by the Fund with the
office of the Secretary of State or other officer of the state where the
Fund was incorporated or organized, a copy of which is attached to the
Request and Acceptance Letter, as the same may be amended, supplemented or
modified from time to time.
1.3 Rules of Construction.
---------------------
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of the Agreement:
2
<PAGE> 3
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of the Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto" and other words of similar
import refer to the Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
-----------
2.1 Purpose; Incorporation by Reference of
Auction Procedures and Settlement Procedures.
--------------------------------------------
(a) The Statement for each series of MuniPreferred will provide that
the Applicable Rate for such series for each Subsequent Rate Period thereof
shall, except under certain conditions, be the rate per annum that a bank or
trust company appointed by the Fund advises results from implementation of the
Auction Procedures for such series. The Board of Directors or Board of
Trustees, as the case may be, of the Fund has adopted a resolution appointing
the Auction Agent as auction agent for purposes of the Auction Procedures for
each series of MuniPreferred. The Auction Agent accepts such appointment and
agrees to follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for each series of
MuniPreferred for each Subsequent Rate Period thereof for which the Applicable
Rate is to be determined by an Auction. Each periodic implementation of such
procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance
of Registry of Beneficial Owners.
--------------------------------
(a) Not later than seven days prior to the first Auction Date for the
first series of MuniPreferred subject to an Auction, the Fund shall provide the
Auction Agent with a list of the Broker-Dealers. Not later than seven days
prior to any Auction Date for any series of MuniPreferred for which any change
in such list of Broker-Dealers is to be effective, the Fund will notify the
Auction Agent in writing of such change and, if any such change involves the
addition of a Broker-Dealer to such list, shall cause to be delivered to the
Auction Agent for
3
<PAGE> 4
execution by the Auction Agent a Broker-Dealer Agreement signed by such Broker-
Dealer; provided, however, that if the Fund proposes to designate any Special
Rate Period of any series of MuniPreferred pursuant to Section 4 of Part I of
the Statement, not later than 11:00 A.M. on the Business Day next preceding the
Auction next preceding the first day of such Rate Period or by such later time
or date, or both, as may be agreed to by the Auction Agent, the Fund shall
provide the Auction Agent with a list of the Broker-Dealers for such series and
a manually signed copy of each Broker-Dealer Agreement or a new Schedule A to a
Broker-Dealer Agreement (which Schedule A shall replace and supersede any
previous Schedule A to such Broker-Dealer Agreement) with each Broker-Dealer for
such series. The Auction Agent and the Fund shall have entered into a Broker-
Dealer Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) In the event that any Auction Date for any series of MuniPreferred
shall be changed after the Auction Agent shall have given the notice referred to
in clause (vi) of paragraph (a) of the Settlement Procedures, or after the
notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent,
by such means as the Auction Agent deems practicable, shall give notice of such
change to the Broker-Dealers for such series not later than the earlier of 9:15
A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(c) (i) The Auction Agent shall maintain a registry of the
beneficial owners of the shares of MuniPreferred of each series who shall
constitute Existing Holders of shares of MuniPreferred of such series for
purposes of Auctions and shall indicate thereon the identity of the respective
Broker-Dealer of each Existing Holder, if any, on whose behalf such Broker-
Dealer submitted the most recent Order in any Auction which resulted in such
Existing Holder continuing to hold or purchasing shares of MuniPreferred of such
series. The Auction Agent shall keep such registry current and accurate. The
Fund shall provide or cause to be provided to the Auction Agent at or prior to
the Date of Original Issue of the shares of MuniPreferred of each series a list
of the initial Existing Holders of the shares of each such series of
MuniPreferred, the number of shares purchased by each such Existing Holder and
the respective Broker-Dealer of each such Existing Holder or the affiliate
thereof through which each such Existing Holder purchased such shares. The
Auction Agent shall advise the Fund in writing whenever the number of Existing
Holders is 500 or more. The Auction Agent may rely upon, as conclusive evidence
of the identities of the Existing Holders of shares of MuniPreferred of any
series (A) such list, (B) the results of Auctions, (C) notices from any Broker-
Dealer as described in the first sentence of Section 2.2(c)(iii) hereof and (D)
the results of any procedures approved by the Fund that have been devised for
the purpose of determining the identities of Existing Holders in situations
where shares of MuniPreferred may have been transferred without compliance with
any restriction on the transfer thereof set forth in the Auction Procedures.
(ii) In the event of any partial redemption of any series of
MuniPreferred, the Auction Agent shall, at least two Business Days prior to the
next Auction for such series, request each Broker-Dealer to provide the Auction
Agent with a list of Persons who such Broker-Dealer believes should remain
Existing Holders after such redemption based upon inquiries of those Persons
such Broker-Dealer believes are Beneficial Owners as a result
4
<PAGE> 5
of the most recent Auction and with respect to each such Person, the number of
shares of MuniPreferred of such series such Broker-Dealer believes are owned by
such Person after such redemption. In the absence of receiving any such
information from any Broker-Dealer, the Auction Agent may continue to treat the
Persons listed in its registry of Existing Holders as the beneficial owner of
the number of shares of MuniPreferred of such series shown in such registry.
(iii) The Auction Agent shall be required to register a
transfer of shares of MuniPreferred of any series from an Existing Holder of
such shares of MuniPreferred only if such transfer is to another Existing
Holder, or other Person if permitted by the Fund, and only if such transfer is
made (A) pursuant to an Auction, (B) the Auction Agent has been notified in
writing (I) in a notice substantially in the form of Exhibit C to the
Broker-Dealer Agreements by a Broker-Dealer of such transfer or (II) in a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreements by the
Broker-Dealer of any Existing Holder, or other Person if permitted by the Fund,
that purchased or sold such shares of MuniPreferred in an Auction of the failure
of such shares of MuniPreferred to be transferred as a result of such Auction or
(C) pursuant to procedures approved by the Fund that have been devised for the
purpose of determining the identities of Existing Holders in situations where
shares of MuniPreferred may have been transferred without compliance with any
restriction on the transfer thereof set forth in the Auction Procedures. The
Auction Agent is not required to accept any such notice for an Auction unless it
is received by the Auction Agent by 3:00 P.M. on the Business Day preceding such
Auction.
(d) The Auction Agent may request the Broker-Dealers, as set forth in
the Broker-Dealer Agreements, to provide the Auction Agent with a list of
Persons who such Broker-Dealer believes should be Existing Holders based upon
inquiries of those Persons such Broker-Dealer believes are Beneficial Owners as
a result of the most recent Auction and with respect to each such Person, the
number of shares of such series of MuniPreferred such Broker-Dealer believes to
be owned by such Person. The Auction Agent shall keep confidential such
registry of Existing Holders and shall not disclose the identities of the
Existing Holders of such shares of MuniPreferred to any Person other than the
Fund and the Broker-Dealer that provided such information.
2.3 Information Concerning Rates.
----------------------------
(a) The Rate Multiple on the date of the Agreement is set forth in the
Request and Acceptance Letter. If there is any change in the credit rating of
MuniPreferred by either of the rating agencies (or substitute or successor
rating agencies) referred to in the definition of "Rate Multiple" resulting in
any change in the Rate Multiple for MuniPreferred after the date of the Request
and Acceptance Letter, the Fund shall notify the Auction Agent in writing of
such change in the Rate Multiple prior to 12:00 Noon on the Business Day prior
to the next Auction Date for any series of MuniPreferred succeeding such change.
If the Fund designates all or a portion of any dividend on shares of any series
of MuniPreferred to consist of net capital gains or other income taxable for
Federal income tax purposes, it will indicate, in its notice in the
5
<PAGE> 6
form of Exhibit I hereto to the Auction Agent pursuant to Section 2.6 hereof,
the Rate Multiple for such series to be in effect for the Auction Date on which
the dividend rate for such dividend is to be fixed. In determining the Maximum
Rate for any series of MuniPreferred on any Auction Date as set forth in Section
2.3(b)(i) hereof, the Auction Agent shall be entitled to rely on the last Rate
Multiple for MuniPreferred of which it has most recently received notice from
the Fund (or, in the absence of such notice, the percentage set forth in the
Request and Acceptance Letter), except that if the Fund shall have notified the
Auction Agent of a Rate Multiple to be in effect for an Auction Date in
accordance with the preceding sentence, the Rate Multiple in effect for the next
succeeding Auction Date of any series of MuniPreferred shall be, unless the Fund
notifies the Auction Agent of a change in the Rate Multiple for such succeeding
Auction Date pursuant to this Section 2.3(a), the Rate Multiple that was in
effect on the first preceding Auction Date for MuniPreferred with respect to
which the dividend, the rate for which was fixed on such Auction Date, did not
include any net capital gains or other income taxable for Federal income tax
purposes.
(b) (i) On each Auction Date for any series of MuniPreferred, the
Auction Agent shall determine the Maximum Rate for such series. The Maximum
Rate for any series of MuniPreferred on any Auction Date shall be:
(A) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement,
the product of (1) the Reference Rate on such Auction Date for the next
Rate Period of such series and (2) the Rate Multiple on such Auction Date,
unless such series has or had a Special Rate Period (other than a Special
Rate Period of 28 Rate Period Days or fewer) and an Auction at which
Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate
Period of such series after such Special Rate Period, in which case the
higher of:
(1) the dividend rate on shares of such series for the then-
ending Rate Period; and
(2) the product of (x) the higher of (I) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of such series, if such then ending Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period
of such series, if such then ending Rate Period was more than 364 Rate
Period Days, and (II) the Reference Rate on such Auction Date for a
Rate Period equal in length to such Special Rate Period of such
series, if such Special Rate Period was 364 Rate Period Days or fewer,
or the Treasury Note Rate on such Auction Date for a Rate Period equal
in length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (y) the Rate Multiple on such
Auction Date; or
6
<PAGE> 7
(B) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement,
the product of (1) the highest of (x) the Reference Rate on such Auction
Date for a Rate-Period equal in length to the then-ending Rate Period of
such series, if such then-ending Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate Period
equal in length to the then-ending Rate Period of such Rate Period, if such
then-ending Rate Period was more than 364 Rate Period Days, (y) the
Reference Rate on such Auction Date for the Special Rate Period for which
the Auction is being held if such Special Rate Period is 364 Rate Period
Days or fewer or the Treasury Note Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special
Rate Period is more than 364 Rate Period Days, and (z) the Reference Rate
on such Auction Date for Minimum Rate Periods and (2) the Rate Multiple on
such Auction Date.
Not later than 9:30 A.M. on each Auction Date the Auction Agent shall notify the
Fund and the Broker-Dealers of the Maximum Rate so determined and the "AA"
Composite Commercial Paper Rate(s), the Taxable Equivalent of the Short-Term
Municipal Bond Rate(s), Treasury Note Rate(s) and Treasury Bill Rate(s), as the
case may be, used to make such determination.
(ii) From and after a Failure to Deposit by the Fund during any Rate
Period of any series of MuniPreferred, until such failure is cured and a Late
Charge (as defined in paragraph (a) of Section 2.7), is paid, in accordance with
subparagraph (e)(i) of Section 2 of Part I of the Statement, on the first day of
each Rate Period of such series the Auction Agent shall determine the Treasury
Note Rate for such Rate Period of more than 364 Rate Period Days and the
Reference Rate for Rate Periods of 364 Rate Period Days or fewer. Not later
than 9:30 A.M. on each such first day, the Auction Agent shall notify the Fund
of the applicable Reference Rate and Treasury Note Rate.
(iii) If any "AA" Composite Commercial Paper Rate, Taxable
Equivalent of the Short-Term Municipal Bond Rate, Treasury Note Rate or Treasury
Bill Rate, as the case may be, is not quoted on an interest or bond equivalent,
as the case may be, basis, the Auction Agent shall convert the quoted rate to
the interest or bond equivalent thereof as set forth in the definition of such
rate in the Statement if the rate obtained by the Auction Agent is quoted on a
discount basis, or if such rate is quoted on a basis other than an interest or
bond equivalent or discount basis the Auction Agent shall convert the quoted
rate to an interest or bond equivalent rate after consultation with the Fund as
to the method of such conversion.
(iv) If any "AA" Composite Commercial Paper Rate is to be based on
rates supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such "AA"
Composite Commercial Paper Rate, the Auction Agent shall immediately notify the
Fund so that the Fund can determine whether to select a Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or
7
<PAGE> 8
Commercial Paper Dealers. The Fund shall promptly advise the Auction Agent of
any such selection.
(v) If any Treasury Note Rate or Treasury Bill Rate is to be
based on rates supplied by U.S. Government Securities Dealers and one or more of
the U.S. Government Securities Dealers shall not provide a quotation for the
determination of such Treasury Rate, the Auction Agent shall immediately notify
the Fund so that the Fund can determine whether to select a Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers. The Fund shall
promptly advise the Auction Agent of any such selection.
(c) The maximum marginal tax rate referred to in the definition of
"Rate Multiple" in the Statement is referred to in this Agreement as the
"Highest Marginal Rate." The Highest Marginal Rate on the date of the Agreement
is set forth in the Request and Acceptance Letter. If there is any change in
the Highest Marginal Rate, the Fund shall notify the Auction Agent in writing of
such change prior to 12:00 Noon on the Business Day prior to the next Auction
Date for MuniPreferred succeeding such change. In determining the Maximum Rate
for any series of MuniPreferred on any Auction Date, the Auction Agent shall be
entitled to rely on the Highest Marginal Rate of which it has most recently
received notice from the Fund (or, in the absence of such notice, the percentage
set forth in the Request and Acceptance Letter).
2.4 Auction Schedule.
----------------
The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent
with the consent of the Fund, which consent shall not be unreasonably withheld.
The Auction Agent shall give written notice of any such change to each Broker-
Dealer. Such notice shall be given prior to the close of business on the
Business Day next preceding the first Auction Date on which any such change
shall be effective.
Time Event
- ---- -----
By 9:30 A.M. Auction Agent advises the Fund and Broker-Dealers
of the applicable Maximum Rate and the Reference
Rate(s) and Treasury Note Rate(s), as the case may
be, used in determining such Maximum Rate as set
forth in Section 2.3(b)(i) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as provided
in Section 2(a) of the Auction Procedures.
Submission Deadline is 1:30 P.M.
8
<PAGE> 9
Time Event
- ---- -----
Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to
Section 3(a) of the Auction Procedures.
By approximately 3:00 P.M. Auction Agent advises Fund of results of Auction
as provided in Section 3(b) of the Auction
Procedures.
Submitted Bids and Submitted Sell Orders are
accepted and rejected and shares of MuniPreferred
allocated as provided in Section 4 of the Auction
Procedures. Auction Agent gives notice of Auction
results as set forth in paragraph(a) of the
Settlement Procedures.
The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.5 Designation of Special Rate Period.
----------------------------------
(a) The Statement will provide that, subject to the Fund's option to
designate a Special Rate Period as referred to in paragraph (b) of this Section
2.5, (i) each Rate Period of any series of MuniPreferred will be a Minimum Rate
Period (a duration of seven days, subject to certain exceptions) and (ii) each
Rate Period following a Rate Period of any series of MuniPreferred that is other
than a Minimum Rate Period will be a Minimum Rate Period. Not less than 10 nor
more than 20 days prior to the last day of any such Rate Period that is not a
Minimum Rate Period, (i) the Fund shall deliver to the Auction Agent a notice of
the Auction Date of the next succeeding Auction for such series in the form of
Exhibit C hereto and (ii) the Auction Agent shall deliver such notice by first-
class mail, postage prepaid, to each Existing Holder of shares of such series at
the address set forth for such Existing Holder in the records of the Auction
Agent and to the Broker-Dealers for such series as promptly as practicable after
its receipt of such notice from the Fund.
(b) Pursuant to the Statement, the Fund may, at its option, designate
a Special Rate Period for any series of MuniPreferred in the manner described in
Section 4 of Part I of the Statement.
(i) If the Board of Directors or Board of Trustees, as the case
may be, proposes to designate any succeeding Subsequent Rate Period of any
series of MuniPreferred as a Special Rate Period, (A) the Fund shall
deliver to the Auction Agent a notice of such proposed Special Rate Period
in the form of Exhibit D hereto not less than 20 (or such lesser number of
days as may be agreed to from time to time by the Auction Agent) nor more
than 30 days prior to the first day of such proposed Special Rate Period
and (B) the Auction Agent on behalf of the Fund shall deliver such notice
9
<PAGE> 10
by first-class mail, postage prepaid, to each Existing Holder of shares of
such series of MuniPreferred at the address set forth for such Existing
Holder in the records of the Auction Agent and to the Broker-Dealers for
such series as promptly as practicable after its receipt of such notice
from the Fund.
(ii) If the Board of Directors or Board of Trustees, as the case
may be, determines to designate such succeeding Subsequent Rate Period as a
Special Rate Period, (A) the Fund shall deliver to the Auction Agent a
notice of such determination in the form of Exhibit E hereto not later than
11:00 A.M. on the second Business Day next preceding the first day of such
proposed Special Rate Period (or such later time or date, or both, as may
be agreed to by the Auction Agent) and (B) the Auction Agent shall deliver
such notice to the Broker-Dealers for such series not later than 3:00 P.M.
on such second Business Day (or, if the Auction Agent has agreed to a later
time or date, as promptly as practicable thereafter).
(iii) If the Fund shall deliver to the Auction Agent a notice
not later than 11:00 A.M. on the second Business Day next preceding the
first day of such proposed Special Rate Period (or such later time or date,
or both, as may be agreed to by the Auction Agent) stating that the Fund
has determined not to exercise its option to designate such succeeding
Subsequent Rate Period as a Special Rate Period, in the form of Exhibit F
hereto, or shall fail to timely deliver either such notice or a notice in
the form of Exhibit E hereto, the Auction Agent shall deliver a notice in
the form of Exhibit F hereto to the Broker-Dealers for such series not
later than 3:00 P.M. on such second Business Day (or, if the Auction Agent
has agreed to a later time or date, as promptly as practicable thereafter).
Such change in the length of any Rate Period shall not occur if (1) an Auction
for shares of such series shall not be held on such Auction Date for any reason
or (2) an Auction for shares of such series shall be held on such Auction Date
but Sufficient Clearing Bids for shares of such series shall not exist in such
Auction.
2.6 Allocation of Taxable Income.
----------------------------
The Fund shall, in the case of a Minimum Rate Period or a Special Rate
Period of 28 Rate Period Days or fewer, and may, in the case of any other
Special Rate Period, designate all or a portion of any dividend on shares of any
series of MuniPreferred to consist of net capital gains or other income taxable
for Federal income tax purposes by delivering to the Auction Agent a notice in
the form of Exhibit I hereto of such designation not later than the Dividend
Payment Date for such series next preceding the Auction Date on which the
dividend rate for such dividend is to be fixed. The Auction Agent will deliver
such notice to the Broker-Dealers for such series on the Business Day following
its receipt of such notice from the Fund. Within two Business Days after any
Auction Date involving the allocation of income taxable for Federal income tax
purposes, the Auction Agent shall notify each Broker-Dealer for
10
<PAGE> 11
the related series as to the dollar amount per share of such taxable income and
income exempt from Federal income taxation included in the related dividend.
2.7 Failure to Deposit.
------------------
(a) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured), but, prior to
12:00 Noon, New York City time, on the third Business Day next succeeding
the date on which such Failure to Deposit occurred, such Failure to Deposit
shall have been cured in accordance with Section 2.7(c) hereof and the Fund
shall have paid to the Auction Agent a late charge (a "Late Charge") equal
to the sum of (1) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the full amount of dividends with
respect to any Dividend Period on such shares, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period during which
such Failure to Deposit occurs on the Dividend Payment Date for such
Dividend Period by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit has not been cured in
accordance with Section 2.7(c) hereof (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the rate obtained
against the aggregate liquidation preference of the outstanding shares of
MuniPreferred and (2) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the Redemption Price of the shares of
MuniPreferred, if any, for which Notice of Redemption has been given by the
Fund, an amount computed by multiplying (x) 200% of the Reference Rate for
the Rate Period during which such Failure to Deposit occurs on the
redemption date by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit is not cured in accordance
with Section 2.7(c) hereof (including the day such Failure to Deposit
occurs and excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate obtained against
the aggregate liquidation preference of the outstanding shares of
MuniPreferred to the redeemed,
then the Auction Agent shall deliver a notice in the form of Exhibit G hereto by
first-class mail, postage prepaid, to the Broker-Dealers for such series not
later than one Business Day after its receipt of the payment from the Fund
curing such Failure to Deposit and such Late Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period
11
<PAGE> 12
of more than 364 Rate Period Days during which a Failure to Deposit
occurred but has not been cured), and, prior to 12:00 Noon, New York City
time, on the third Business Day next succeeding the date on which such
Failure to Deposit occurred, such Failure to Deposit shall not have been
cured in accordance with Section 2.7(c) hereof or the Fund shall not have
paid the applicable Late Charge to the Auction Agent; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during a Special Rate Period thereof of more than
364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured, and, prior to 12:00
noon, New York City time, on the fourth Business Day preceding the Auction
Date for the Rate Period subsequent to such Rate Period, such Failure to
Deposit shall not have been cured in accordance with Section 2.7(c) hereof
or the Fund shall not have paid the applicable Late Charge to the Auction
Agent in accordance with Section 2(e)(i)(D) of the Statement (such Late
Charge, for purposes of this clause (b)(iii) of this Section 2.7, to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days and (y)
commencing on the date on which the Rate Period during which Failure to
Deposit occurs commenced);
then the Auction Agent shall deliver a notice in the form of Exhibit H hereto to
the Broker-Dealers for such series not later than one Business Day after the
receipt of the payment from the Fund curing such Failure to Deposit and such
Late Charge.
(c) A Failure to Deposit with respect to shares of MuniPreferred shall
have been cured (if such Failure to Deposit is not solely due to the willful
failure to the Fund to make the required payment to the Auction Agent) with
respect to any Rate Period if, within the respective time periods described
immediately above, the Fund shall have paid to the Auction Agent (i) all
accumulated and unpaid dividends on the shares of MuniPreferred and (ii) without
duplication, the Redemption Price for the shares of MuniPreferred, if any, for
which Notice of Redemption has been mailed; provided, however, that the
foregoing clause (ii) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and each such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
2.8 Broker-Dealers.
--------------
(a) Not later than 12:00 Noon on each Auction Date for any series of
MuniPreferred, the Fund shall pay to the Auction Agent an amount in cash equal
to the aggregate fees payable to the Broker-Dealers for such series pursuant to
Section 2.8 of the Broker-Dealer Agreements for such series. The Auction Agent
shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer
Agreement.
12
<PAGE> 13
(b) The Fund shall obtain the consent of the Auction Agent prior to
selecting any Person to act as a Broker-Dealer, which consent shall not be
unreasonably withheld.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein if so directed by the Fund, provided that at least one Broker-
Dealer Agreement would be in effect for each series of MuniPreferred after such
termination.
(d) Subject to the Auction Agent's having consented to the selection
of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the Auction
Agent shall from time to time enter into such Broker-Dealer Agreements with one
or more Broker-Dealers as the Fund shall request, and shall enter into such
schedules to any such Broker-Dealer Agreements as the Fund shall request, which
schedules, among other things, shall set forth the series of MuniPreferred to
which such Broker-Dealer Agreement relates.
2.9 Ownership of Shares of MuniPreferred.
------------------------------------
The Fund shall notify the Auction Agent if the Fund or any affiliate
of the Fund acquires any shares of MuniPreferred of any series. Neither the
Fund nor any affiliate of the Fund shall submit any Order in any Auction for
MuniPreferred, except as set forth in the next sentence. Any Broker-Dealer that
is an affiliate of the Fund may submit Orders in Auctions, but only if such
Orders are not for its own account. For purposes of this Section 2.9, a Broker-
Dealer shall not be deemed to be an affiliate of the Fund solely because one or
more of the directors or executive officers of such Broker-Dealer or of any
Person controlled by, in control of or under common control with such Broker-
Dealer is also a director of the Fund. The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 2.9.
2.10 Access to and Maintenance of Auction Records.
--------------------------------------------
The Auction Agent shall, upon the receipt of prior written notice from
the Fund, afford to the Fund access at reasonable times during normal business
hours to all books, records, documents and other information concerning the
conduct and results of Auctions. The Auction Agent shall maintain records
relating to any Auction for a period of six years after such Auction, and such
records shall, in reasonable detail, accurately and fairly reflect the actions
taken by the Auction Agent hereunder.
3. The Auction Agent as Dividend and
Redemption Price Disbursing Agent.
---------------------------------
The Auction Agent, as dividend and redemption price disbursing agent,
shall pay to the Holders of shares of MuniPreferred of any series (i) on each
Dividend Payment Date for such series, dividends on the shares of MuniPreferred
of such series, (ii) on any date fixed for redemption of shares of MuniPreferred
of any series, the Redemption Price of any shares of such series called for
redemption and (iii) any Late Charge related to any payment of dividends
13
<PAGE> 14
or Redemption Price, in each case after receipt of the necessary funds from the
Fund with which to pay such dividends, Redemption Price or Late Charge. The
amount of dividends for any Rate Period for any series of MuniPreferred to be
paid by the Auction Agent to the Holders of such shares of such series will be
determined by the Fund as set forth in Section 2 of Part I of the Statement with
respect to such series. The Redemption Price of any shares to be paid by the
Auction Agent to the Holders will be determined by the Fund as set forth in
Section 11 of Part I of the Statement with respect to such series. The Fund
shall notify the Auction Agent in writing of a decision to redeem shares of any
series of MuniPreferred at least five days prior to the date a notice of
redemption is required to be mailed to the Holders of the shares to be redeemed
by paragraph (c) of Section 11 of Part I of the Statement. Such notice by the
Fund to the Auction Agent shall contain the information required by paragraph
(c) of Section 11 of Part I of the Statement to be stated in the notice of
redemption required to be mailed by the Fund to such Holders.
4. The Auction Agent as Transfer Agent and Registrar.
-------------------------------------------------
4.1 Issue of Stock or Shares Certificates.
-------------------------------------
Upon the Date of Original Issue of each series of MuniPreferred, one
or more certificates representing all of the shares of such series issued on
such date shall be issued by the Fund and, at the request of the Fund,
registered in the name of Cede & Co. and countersigned by the Auction Agent.
4.2 Registration of Transfer of Shares.
----------------------------------
Shares of each series of MuniPreferred shall be registered solely in
the name of the Securities Depository or its nominee.
4.3 Removal of Legend on Restricted Shares.
--------------------------------------
All requests for removal of legends on shares of MuniPreferred of any
series indicating restrictions on transfer shall be accompanied by an opinion of
counsel stating that such legends may be removed and such shares freely
transferred, such opinion to be delivered under cover of a letter from a Fund
Officer authorizing the Auction Agent to remove the legend on the basis of said
opinion.
4.4 Lost Stock or Share Certificates.
--------------------------------
The Auction Agent shall issue and register replacement certificates
for certificates represented to have been lost, stolen or destroyed upon the
fulfillment of such requirements as shall be deemed appropriate by the Fund and
the Auction Agent, subject at all times to provisions of law, the By-Laws of the
Fund governing such matters and resolutions adopted by the Fund with respect to
lost securities. The Auction Agent may issue new certificates in
14
<PAGE> 15
exchange for and upon the cancellation of mutilated certificates. Any request
by the Fund to the Auction Agent to issue a replacement or new certificate
pursuant to this Section 4.4 shall be deemed to be a representation and warranty
by the Fund to the Auction Agent that such issuance will comply with such
provisions of law and the By-Laws and resolutions of the Fund.
4.5 Disposition of Cancelled
Certificates; Record Retention.
------------------------------
The Auction Agent shall retain all stock or share certificates which
have been cancelled in transfer or exchange and all accompanying documentation
in accordance with applicable rules and regulations of the Securities and
Exchange Commission for two calendar years. Upon the expiration of this two-
year period, the Auction Agent shall deliver to the Fund the cancelled
certificates and accompanying documentation. The Fund shall also undertake to
furnish to the Securities and Exchange Commission and to the Board of Governors
of the Federal Reserve System, upon demand, at either the principal office or at
any regional office, complete, correct and current hard copies of any and all
such records. Thereafter such records shall not be destroyed by the Fund
without the concurrence of the Auction Agent.
4.6 Stock or Record Books.
---------------------
For so long as the Auction Agent is acting as the transfer agent for
any series of MuniPreferred pursuant to the Agreement, it shall maintain a stock
or record book containing a list of the Holders of the shares of MuniPreferred
of each such series. In case of any request or demand for the inspection of the
stock or record books of the Fund or any other books in the possession of the
Auction Agent, the Auction Agent will notify the Fund and secure instructions as
to permitting or refusing such inspection. The Auction Agent reserves the
right, however, to exhibit the stock or record books or other books to any
Person in case it is advised by its counsel that its failure to do so would be
unlawful.
4.7 Return of Funds.
---------------
Any funds deposited with the Auction Agent hereunder by the Fund for
any reason, including but not limited to redemption of shares of MuniPreferred
of any series, that remain unpaid after ninety days shall be repaid to the Fund
upon the written request of the Fund, together with interest, if any, earned
thereon.
5. Representations and Warranties of the Fund.
------------------------------------------
The Fund represents and warrants to the Auction Agent that:
(a) the Fund is a duly incorporated and existing corporation or a duly
organized and existing business trust in good standing under the laws of
the State of its incorporation or organization and has full corporate power
or all requisite power to
15
<PAGE> 16
execute and deliver the Agreement and to authorize, create and issue the
shares of MuniPreferred of each series and the shares of MuniPreferred of
each series when issued, will be duly authorized, validly issued, fully
paid and nonassessable;
(b) the Agreement has been duly and validly authorized, executed and
delivered by the Fund and constitutes the legal, valid and binding
obligation of the Fund;
(c) the form of the certificate evidencing the shares of MuniPreferred
of each series complies or will comply with all applicable laws of the
State of its incorporation or organization;
(d) when issued, the shares of MuniPreferred of each series will have
been duly registered under the Securities Act of 1933, as amended, and no
further action by or before any governmental body or authority of the
United States or of any state thereof is required in connection with the
execution and delivery of the Agreement or will have been required in
connection with the issuance of the shares of MuniPreferred of each series;
(e) the execution and delivery of the Agreement and the issuance and
delivery of the shares of MuniPreferred of each series do not and will not
conflict with, violate or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation
or Declaration of Trust (as amended by one or more Statements) or the By-
Laws of the Fund, any law or regulation, any order or decree of any court
or public authority having jurisdiction, or any mortgage, indenture,
contract, agreement or undertaking to which the Fund is a party or by which
it is bound the effect of which conflict, violation, default or breach
would be material to the Fund or the Fund and its subsidiaries taken as a
whole; and
(f) no taxes are payable upon or in respect of the execution of the
Agreement or the issuance of the shares of MuniPreferred of any series.
6. The Auction Agent.
-----------------
6.1 Duties and Responsibilities.
---------------------------
(a) The Auction Agent is acting solely as agent for the Fund hereunder
and owes no fiduciary duties to any Person, other than the Fund, by reason of
the Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreement, and no implied covenants
or obligations shall be read into the Agreement against the Auction Agent.
16
<PAGE> 17
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
the pertinent facts.
6.2 Rights of the Auction Agent.
---------------------------
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document believed in good faith
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Auction Agent believes in
good faith to have been given by the Fund or by a Broker-Dealer. The Auction
Agent may record telephone communications with the Fund or with the Broker-
Dealers or both.
(b) The Auction Agent may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
6.3 Auction Agent's Disclaimer.
--------------------------
The Auction Agent makes no representation as to the validity or
adequacy of the Agreement, the Broker-Dealer Agreements or the shares of
MuniPreferred of any series except that the Auction Agent hereby represents that
the Agreement has been duly authorized, executed and delivered by the Auction
Agent and constitutes a legal and binding obligation of the Auction Agent.
6.4 Compensation, Expenses and Indemnification.
------------------------------------------
(a) The Fund shall pay the Auction Agent from time to time reasonable
compensation for all services rendered by it under the Agreement and the Broker-
Dealer Agreements.
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<PAGE> 18
(b) The Fund shall reimburse the Auction Agent upon its request for
all reasonable out-of-pocket expenses, disbursements and advances incurred or
made by the Auction Agent in accordance with any provision of the Agreement and
the Broker-Dealer Agreements (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any expense or
disbursement attributable to its negligence or bad faith.
(c) The Fund shall indemnify the Auction Agent for and hold it
harmless against any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with its agency under the
Agreement and the Broker-Dealer Agreements, including the costs and expenses of
defending itself against any such claim or liability in connection with its
exercise or performance of any of its duties hereunder and thereunder.
7. Miscellaneous.
-------------
7.1 Term of Agreement.
-----------------
(a) The term of the Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Fund may terminate the
Agreement at any time by so notifying the Auction Agent, provided that the Fund
has entered into an agreement in substantially the form of the Agreement with a
successor Auction Agent. The Auction Agent may terminate the Agreement upon
written notice to the Fund on the date specified in such notice, which date
shall be no earlier than 45 days after the date of delivery of such notice.
(b) Except as otherwise provided in this paragraph (b), the respective
rights and duties of the Fund and the Auction Agent under the Agreement with
respect to any series of MuniPreferred shall cease upon termination of the
Agreement with respect to such series. The Fund's representations, warranties,
covenants and obligations to the Auction Agent under Sections 5 and 6.4 hereof
shall survive the termination of the Agreement with respect to any series of
MuniPreferred. Upon termination of the Agreement with respect to any series of
MuniPreferred, the Auction Agent shall, at the Fund's request, promptly deliver
to the Fund copies of all books and records maintained by it with respect to
MuniPreferred in connection with its duties hereunder.
18
<PAGE> 19
7.2 Communications.
--------------
Except for (i) communications authorized to be by telephone pursuant
to the Agreement or the Auction Procedures and (ii) communications in connection
with Auctions (other than those expressly required to be in writing), all
notices, requests and other communications to any party hereunder shall be in
writing (including telecopy or similar writing) and shall be given to such
party, addressed to it, at its address or telecopy number set forth below:
If to the Fund, [Name of Fund]
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
Telecopier No.: (312) 917-7942
Telephone No.: (312) 917-7700
If to the Auction Agent, to the
address or telecopy number set
forth in the Request and
Acceptance Letter,
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Fund by a Fund Officer and on
behalf of the Auction Agent by telephone (confirmed by telecopy or in writing)
by an Authorized Officer.
7.3 Entire Agreement.
----------------
The Agreement contains the entire agreement between the parties
relating to, and superseding any prior agreement between the parties relating
to, the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
between the parties relating to the subject matter hereof except for agreements
relating to the compensation of the Auction Agent.
7.4 Benefits.
--------
Nothing herein, express or implied, shall give to any Person, other
than the Fund, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.
19
<PAGE> 20
7.5 Amendment; Waiver.
-----------------
(a) The Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
7.6 Successors and Assigns.
----------------------
The Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of each of the Fund and
the Auction Agent.
7.7 Severability.
------------
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Governing Law.
-------------
The Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
If the Fund is a Massachusetts business trust, the following provision
is deemed to be included in the Basic Terms:
7.9 Declaration of Trust.
--------------------
The Fund's Declaration is on file with the Secretary of State of the
Commonwealth of Massachusetts. This Agreement has been executed on behalf of
the Fund by the Vice President and Treasurer of the Fund acting in such capacity
and not individually, and the obligations of the Fund set forth in this
Agreement are not binding upon any of the Fund's trustees, officers or
shareholders individually, but are binding only upon the assets and property of
the Fund.
20
<PAGE> 21
EXHIBIT A
---------
FORM OF
BROKER-DEALER AGREEMENT
-----------------------
<PAGE> 22
EXHIBIT B
---------
SETTLEMENT PROCEDURES
---------------------
<PAGE> 23
EXHIBIT C
---------
[NAME OF FUND]
NOTICE OF AUCTION DATE FOR
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for
Series ___ of the Fund's MuniPreferred is scheduled to be _______________, 19___
and the next Dividend Payment Date for Series ___ of the Fund's MuniPreferred
will be __________________, 19___.
[A Failure to Deposit in respect of the Series ___ MuniPreferred currently
exists. If, prior to 12:00 noon, New York City time, on the fourth Business Day
preceding the next scheduled Auction Date of the Series ____ MuniPreferred, such
Failure to Deposit is not cured or the applicable Late Charge is not paid, the
next Auction will not be held. Notice of the next Auction for the Series ___
MuniPreferred will be delivered when such Failure to Deposit is cured and the
applicable Late Charge is paid./1/]
[NAME OF FUND]
- ----------
/1/Include this language if a Failure to Deposit exists.
<PAGE> 24
EXHIBIT D
---------
[NAME OF FUND]
NOTICE OF PROPOSED CHANGE OF
LENGTH OF RATE PERIOD OF
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
[Name of Fund] (the "Fund") may exercise its option to designate the Rate
Period of its Series ____ MuniPreferred commencing [the first day of the Special
Rate Period] as a Special Rate Period.
By 11:00 A.M. on the second Business Day preceding the first day of such
proposed Special Rate Period, the Fund will notify ___________________ of either
(a) its determination to exercise such option, designating the length of such
Special Rate Period for such series or (b) its determination not to exercise
such option.
[NAME OF FUND]
Dated: ___________________, 19___
<PAGE> 25
EXHIBIT E
---------
[NAME OF FUND]
NOTICE OF CHANGE OF LENGTH OF RATE PERIOD
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined to
designate the Rate Period of its Series ____ MuniPreferred commencing on [the
first day of the Special Rate Period] as a Special Rate Period.
The Special Rate Period will be __________ [Rate Period Days].
The Auction Date for the Special Rate Period is [the Business Day next
preceding the first day of such Special Rate Period].
As a result of the Special Rate Period designation, the amount of
dividends payable on Series ____ MuniPreferred during the Special Rate Period
will be based on a 360-day year.
The Special Rate Period shall not commence if (a) an Auction for shares of
MuniPreferred shall not be held on such Auction Date for any reason or (b) an
Auction for shares of MuniPreferred shall be held on such Auction Date but
Sufficient Clearing Bids for such shares shall not exist in such Auction.
The scheduled Dividend Payment Dates for such series of MuniPreferred
during such Special Rate Period will be _________________________.
[Special Redemption Provisions, if any]
Attached hereto is a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate Period,
Moody's Eligible Assets (if Moody's is rating such shares of MuniPreferred) and
S&P Eligible Assets (if S&P is rating such shares of MuniPreferred) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance
Amount as of such Business Day (assuming for purposes of the foregoing
calculation that (i) the Maximum Rate is the Maximum Rate on such Business Day
as if such Business Day were the Auction Date for the proposed Special Rate
Period, and (ii) the Moody's Discount Factors applicable to Moody's Eligible
Assets are determined by
<PAGE> 26
reference to the first Moody's Exposure Period longer than the Moody's Exposure
Period then applicable to the Fund.)
[NAME OF FUND]
Dated: _____________, 19____
E-2
<PAGE> 27
EXHIBIT F
---------
[NAME OF FUND]
NOTICE OF DETERMINATION NOT TO CHANGE
LENGTH OF RATE PERIOD OF
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined not
to exercise its option to designate a Special Rate Period of its Series ___
MuniPreferred and the next succeeding Rate Period of such series will be a
Minimum Rate Period of ____ Rate Period Days.
[NAME OF FUND]
Dated: _______________, 19____
<PAGE> 28
EXHIBIT G
---------
[NAME OF FUND]
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its
Failure to Deposit and paid the applicable Late Charge with respect to its
Series ___ MuniPreferred. The dividend rate on the shares of Series ___
MuniPreferred for the current Dividend Period is _____________% per annum, the
Dividend Payment Date for the current Dividend Period is scheduled to be
_______________, 19___ and the next Auction Date is scheduled to be
_______________, 19___.
[NAME OF FUND]
Dated: ________________, 19___
<PAGE> 29
EXHIBIT H
---------
[NAME OF FUND]
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its
Failure to Deposit and paid the applicable Late Charge with respect to its
Series ____ MuniPreferred. The next Auction Date for the Series ____
MuniPreferred is scheduled to be on _________________, 19___.
[NAME OF FUND]
Dated: _________________, 19____
<PAGE> 30
EXHIBIT I
---------
[NAME OF FUND]
NOTICE OF
[CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME]/1/
DIVIDEND FOR
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that the amount of the dividend payable on
________________, 19____ for Series ____ of the Fund's MuniPreferred will be
determined by the Auction to be held on _______________, 19___. Up to [$ A ]/2/
[$ B ]/3/ per share of the dividend payable on such date as determined by such
Auction will consist of [capital gains]/2/ [ordinary income taxable for Federal
income tax purposes]/3/. If the dividend amount payable on such date as
determined by such Auction is less than [$ A ]/2/ [$ B ]/3/ per share, the
entire amount of the dividend will consist of [capital gains]/2/ [ordinary
income taxable for Federal income tax purposes]/3/. [To the extent such
dividend amount exceeds [$ A ] per share, any excess up to [$ B ] per share
will consist of ordinary income taxable for Federal income tax purposes.]/4/
Accordingly, the aforementioned composition of the dividend payable on
_______________, 19___ should be considered in determining Orders to be
submitted with respect to the Auction to be held on ________________, 19__. The
Rate Multiple in effect for such Auction will be ____%.
[NAME OF FUND]
- ----------
/1/Include language with respect to capital gains, taxable ordinary income
or both, depending on the character of the designation to be made with respect
to the dividend(s).
/2/Include bracketed material if a portion of the dividend will be
designated capital gains.
/3/Include bracketed material if a portion of the dividend will be
designated ordinary income taxable for Federal income tax purposes and no
portion of the dividend will be designated capital gains.
/4/Include bracketed material if a portion of the dividend will be
designated capital gains and a portion will be designated ordinary income
taxable for Federal income tax purposes.
<PAGE> 31
(Footnotes continued)
- ---------------------
A = the maximum amount of capital gains allocated to such series of
MuniPreferred to be included in such dividend, divided by the number of
shares of MuniPreferred.
B = the maximum amount of ordinary income taxable for Federal income tax
purposes allocated to such series of MuniPreferred to be included in such
dividend, divided by the number of shares in such series.
I-2
<PAGE> 1
EXHIBIT 99.d.2
NUVEEN BROKER-DEALER AGREEMENT
Basic Terms for Acting as a Broker-Dealer
-----------------------------------------
December 14, 1993
These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a broker-dealer identified in an Acceptance Letter
(together with its successors and assigns, a "BD") will act as a broker-dealer
for Municipal Auction Rate Cumulative Preferred Stock or Shares issued by
investment companies, now or hereafter organized, registered under the
Investment Company Act of 1940, as amended, as further identified by the Request
Letters (the "Funds"), for which Nuveen Advisory Corp. (the "Adviser") is the
investment adviser.
- --------------------------------------------------------------------------------
Each Fund has issued or may issue shares of MuniPreferred, pursuant to
its Articles of Incorporation or Declaration of Trust, as amended or
supplemented by the Statement of such Fund. A bank or trust company specified
in the Request Letter will act as the auction agent (the "Auction Agent") of
such Fund pursuant to authority granted it in the Auction Agency Agreement.
The Statement of each Fund will provide that, for each Subsequent Rate
Period of any series of MuniPreferred of such Fund then outstanding, the
Applicable Rate for such series for such Subsequent Rate Period shall, except
under certain conditions, be the rate per annum that the Auction Agent of such
Fund advises results from implementation of the Auction Procedures for such
series. The Board of Directors or Board of Trustees, as the case may be, of
each Fund will adopt a resolution appointing the Auction Agent as auction agent
for purposes of the Auction Procedures for each series of MuniPreferred of such
Fund.
The Auction Procedures of each Fund will require the participation of
one or more Broker-Dealers for each series of MuniPreferred of such Fund. BD
will act as a Broker-Dealer for each series of MuniPreferred of each Fund
identified in a Request Letter.
1. Definitions and Rules of Construction.
-------------------------------------
1.1. Terms Defined by Reference to Statement.
---------------------------------------
Capitalized terms not defined herein shall have the respective
meanings specified in the Statement of the relevant Fund.
1.2. Terms Defined Herein.
--------------------
As used herein and in the Settlement Procedures, the following terms
shall have the following meanings, unless the context otherwise requires:
<PAGE> 2
(a) "Acceptance Letter" shall mean the letter from Adviser to BD
pursuant to which the Adviser appoints BD as a Broker Dealer for each
series of MuniPreferred issued by any Fund that has executed a Request
Letter.
(b) "Agreement", with respect to any Fund, shall mean the Basic Terms,
together with the Acceptance Letter and the Request Letter relating to one
or more series of MuniPreferred of such Fund and any other substantially
similar agreement among such Fund, the Adviser, any Auction Agent for such
Fund and/or BD.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Agency Agreement", with respect to any Fund, shall mean
the Auction Agency Agreement between such Fund and the Auction Agent
relating to one or more series of MuniPreferred of such Fund.
(e) "Auction Procedures", with respect to any Fund, shall mean the
auction procedures constituting Part II of the form of Statement of such
Fund as of the filing thereof.
(f) "Authorized Officer" of an Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant
Treasurer and Assistant Secretary of such Auction Agent assigned to its
Corporate Trust and Agency Group and every other officer or employee of
such Auction Agent designated as an "Authorized Officer" for purposes of
the Agreement in a communication to BD.
(g) "BD Officer" shall mean each officer or employee of BD designated
as a "BD Officer" for purposes of the Agreement in a communication to any
Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par
value $.01 per share, of any Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of such Fund or any
committee thereof shall specify, as set forth in a Request Letter.
(i) "Request Letter", with respect to any Fund, shall mean the letter
from such Fund to the Adviser and the Auction Agent for such Fund pursuant
to which such Fund appoints BD as a Broker-Dealer for each series of
MuniPreferred of such Fund.
2
<PAGE> 3
(j) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
(k) "Statement", with respect to any Fund, shall mean the Statement
Establishing and Fixing the Rights and Preferences of, and authorizing the
issuance of, one or more series of Municipal Auction Rate Cumulative
Preferred Stock or Municipal Auction Rate Cumulative Preferred Shares, as
filed by such Fund with the office of the Secretary of State or other
officer of the state where such Fund was incorporated or organized, a copy
of which will be attached to the Request Letter of such Fund.
1.3. Rules of Construction.
---------------------
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of each Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of such Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto", and other words of similar
import refer to such Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
-----------
2.1. Purpose; Incorporation by Reference of Auction Procedures and
-------------------------------------------------------------
Settlement Procedures.
- ---------------------
(a) The provisions of the Auction Procedures of any Fund will be
followed by the Auction Agent of such Fund for the purpose of determining the
Applicable Rate for any Subsequent Rate Period of any series of MuniPreferred of
such Fund for which the Applicable Rate is to be determined by an Auction. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
3
<PAGE> 4
(c) BD agrees to act as, and assumes the obligations of, and
limitations and restrictions placed upon, a Broker-Dealer under each Agreement
for each series of MuniPreferred. BD understands that other Persons meeting the
requirements specified in the definition of "Broker-Dealer" contained in the
Auction Procedures may execute Agreements and participate as Broker-Dealers in
Auctions.
2.2. Preparation for Each Auction.
----------------------------
(a) Not later than 9:30 A.M. on each Auction Date for any series of
MuniPreferred, the Auction Agent for such series shall advise the Broker-Dealers
for such series by telephone of the Maximum Rate therefor and the Reference
Rate(s) and Treasury Note Rate(s), as the case may be, used in determining such
Maximum Rate.
(b) In the event that any Auction Date for any series of MuniPreferred
shall be changed after the Auction Agent for such series has given the notice
referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or
after the notice referred to in Section 2.5(a) hereof, if applicable, such
Auction Agent, by such means as such Auction Agent deems practicable, shall give
notice of such change to BD, if it is a Broker-Dealer for such series, not later
than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old
Auction Date.
(c) For purposes of maintaining its list of Existing Holders, the
Auction Agent for any series of MuniPreferred from time to time may request any
Broker-Dealer to provide such Auction Agent with a list of Persons who such
Broker-Dealer believes should be Existing Holders based upon inquiries of those
Persons such Broker-Dealer believes are Beneficial Owners as a result of the
most recent Auction and with respect to each such Person, the number of shares
of such series of MuniPreferred such Broker-Dealer believes are owned by such
Person. BD shall comply with any such request relating to a series of
MuniPreferred in respect of which BD was named a Broker-Dealer, and the Auction
Agent shall keep confidential any such information so provided by BD and shall
not disclose any information so provided by BD to any Person other than the Fund
and BD.
(d) BD agrees to maintain a list of customers relating to a series of
MuniPreferred and to use its best efforts, subject to existing laws and
regulations, to contact the customers on such list whom BD believes may be
interested in participating in the Auction on each Auction Date, as a Potential
Holder or a Potential Beneficial Owner, for the purposes set forth in the
Auction Procedures. Nothing herein shall require BD to submit an Order for any
customer in any Auction.
(e) The Auction Agent's registry of Existing Holders of shares of a
series of MuniPreferred shall be conclusive and binding on BD. BD may inquire
of the Auction Agent between 3:00 P.M. on the Business Day preceding an Auction
for shares of a series of MuniPreferred and 9:30 A.M. on the Auction Date for
such Auction to ascertain the number of shares of such series in respect of
which the Auction Agent has determined BD to be an
4
<PAGE> 5
Existing Holder. If BD believes it is the Existing Holder of fewer shares of
such series than specified by the Auction Agent in response to BD's inquiry, BD
may so inform the Auction Agent of that belief. BD shall not, in its capacity
as Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the number
of shares of such series specified by the Auction Agent in response to BD's
inquiry.
2.3. Auction Schedule; Method of Submission of Orders.
------------------------------------------------
(a) Each Fund and the Auction Agent for such Fund shall conduct
Auctions for MuniPreferred in accordance with the schedule set forth below.
Such schedule with respect to any series of MuniPreferred of any Fund may be
changed by the Auction Agent for such series with the consent of such Fund,
which consent shall not be unreasonably withheld. Such Auction Agent shall give
written notice of any such change to each Broker-Dealer of such series. Such
notice shall be given prior to the close of business on the Business Day next
preceding the first Auction Date on which such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent for such series advises such
Fund and the Broker-Dealers for such series
of the applicable Maximum Rate and the
Reference Rate(s) and Treasury Note
Rate(s), as the case may be, used in
determining such Maximum Rate as set
forth in Section 2.2(a) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Section 2(a) of the Auction
Procedures of such Fund. Submission
Deadline is 1:30 P.M.
Not earlier than 1:30 P.M. Auction Agent makes determinations
pursuant to Section 3(a) of the Auction
Procedures of such Fund.
5
<PAGE> 6
Time Event
---- -----
By approximately 3:00 P.M. Auction Agent advises Fund of results of
Auction as provided in Section 3(b) of the
Auction Procedures of such Fund.
Submitted Bids and Submitted Sell Orders
are accepted and rejected and shares of such
series of MuniPreferred allocated as
provided in Section 4 of the Auction
Procedures of such Fund.
Auction Agent gives notice of Auction
results as set forth in Section 2.4(a) hereof.
(b) BD shall submit Orders to the appropriate Auction Agent in writing
substantially in the form attached hereto as Exhibit B. BD shall submit a
separate Order to such Auction Agent for each Potential Holder or Existing
Holder with respect to whom BD is submitting an Order and shall not otherwise
net or aggregate such Orders prior to their submission to such Auction Agent.
(c) BD shall deliver to the appropriate Auction Agent (i) a written
notice in substantially the form attached hereto as Exhibit C of transfers of
shares of MuniPreferred to BD from another Person other than pursuant to an
Auction and (ii) a written notice substantially in the form attached hereto as
Exhibit D, of the failure of any shares of MuniPreferred to be transferred to or
by any Person that purchased or sold shares of MuniPreferred through BD pursuant
to an Auction. Such Auction Agent is not required to accept any such notice
described in clause (i) for an Auction unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day preceding such Auction.
(d) BD and other Broker-Dealers may submit Orders in Auctions for
their own accounts (including Orders for their own accounts where the Order is
placed beneficially for a customer) unless the relevant Fund shall have notified
BD and all other Broker-Dealers that they may no longer do so, in which case
Broker-Dealers may continue to submit Hold Orders and Sell Orders for their own
accounts.
(e) BD agrees to handle its customers' orders in accordance with its
duties under applicable securities laws and rules.
(f) To the extent that pursuant to Section 4 of the Auction Procedures
of any Fund, BD continues to hold, sells, or purchases a number of shares that
is fewer than the number of shares in an Order submitted by BD to the Auction
Agent in which BD designated itself as an Existing Holder or Potential Holder in
respect of customer Orders, BD shall make
6
<PAGE> 7
appropriate pro rata allocations among its customers for which it submitted
Orders of similar tenor. If as a result of such allocations, any Beneficial
Owner would be entitled or required to sell, or any Potential Beneficial Owner
would be entitled or required to purchase, a fraction of a share of
MuniPreferred on any Auction Date, BD shall, in such manner as it shall
determine in its sole discretion, round up or down the number of shares of
MuniPreferred to be purchased or sold on such Auction Date by any Beneficial
Owner or Potential Beneficial Owner on whose behalf BD submitted an Order so
that the number of shares so purchased or sold by each such Beneficial Owner or
Potential Beneficial Owner on such Auction Date shall be whole shares of
MuniPreferred.
2.4. Notices.
-------
(a) On each Auction Date for any series of MuniPreferred, the Auction
Agent for such series shall notify BD, if BD is a Broker-Dealer of such series,
by telephone of the results of the Auction as set forth in paragraph (a) of the
Settlement Procedures. By approximately 11:30 A.M. on the Business Day next
succeeding such Auction Date, the relevant Auction Agent shall confirm to BD in
writing the disposition of all Orders submitted by BD in such Auction.
(b) BD shall notify each Existing Holder, Potential Holder, Beneficial
Owner or Potential Beneficial Owner of shares of MuniPreferred with respect to
whom BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
2.5. Designation of Special Rate Period.
----------------------------------
(a) If any Fund delivers to its Auction Agent a notice of the Auction
Date for any series of MuniPreferred of such Fund for a Rate Period thereof that
next succeeds a Rate Period that is not a Minimum Rate Period in the form of
Exhibit C to the Auction Agency Agreement, and BD is a Broker-Dealer of such
series, the Auction Agent shall deliver such notice to BD as promptly as
practicable after its receipt of such notice from such Fund.
(b) If the Board of Directors or Board of Trustees, as the case may
be, of any Fund proposes to designate any succeeding Subsequent Rate Period of
any series of MuniPreferred of such Fund as a Special Rate Period and such Fund
delivers to its Auction Agent a notice of such proposed Special Rate Period in
the form of Exhibit D to the Auction Agency Agreement, and BD is a Broker-Dealer
for such series, such Auction Agent shall deliver such notice to BD as promptly
as practicable after its receipt of such notice from the Fund.
(c) If the Board of Directors or Board of Trustees, as the case may
be, of any Fund determines to designate such succeeding Subsequent Rate Period
as a Special Rate Period, and such Fund delivers to its Auction Agent a notice
of such Special Rate Period in the form of Exhibit E to the Auction Agency
Agreement not later than 11:00 A.M. on the second Business Day next preceding
the first day of such Rate Period (or by such later time or date, or both, as
7
<PAGE> 8
may be agreed to by such Auction Agent), and BD is a Broker-Dealer for such
series, such Auction Agent shall deliver such notice to BD not later than 3:00
P.M. on such second Business Day (or, if such Auction Agent has agreed to a
later time or date, as promptly as practicable thereafter).
(d) If any Fund shall deliver to its Auction Agent a notice not later
than 11:00 A.M. on the second Business Day next preceding the first day of any
Rate Period (or by such later time or date, or both, as may be agreed to by such
Auction Agent) stating that such Fund has determined not to exercise its option
to designate such succeeding Subsequent Rate Period as a Special Rate Period, in
the form of Exhibit F to the Auction Agency Agreement, or shall fail to timely
deliver either such notice or a notice in the form of Exhibit E to the Auction
Agency Agreement, and BD is a Broker-Dealer for such series, such Auction Agent
shall deliver a notice in the form of Exhibit F to the Auction Agency Agreement
to BD not later than 3:00 P.M. on such second Business Day (or, if such Auction
Agent has agreed to a later time or date, as promptly as practicable
thereafter).
2.6. Allocation of Taxable Income.
----------------------------
If any Fund delivers to its Auction Agent a notice in the form of
Exhibit I to the Auction Agency Agreement designating all or a portion of any
dividend on shares of any series of MuniPreferred of such Fund to consist of net
capital gains or other income taxable for Federal income tax purposes, and BD is
a Broker-Dealer for such series, such Auction Agent shall deliver such notice to
BD on the Business Day following its receipt of such notice from such Fund. On
or prior to the Auction Date referred to in such notice, BD will contact each of
its customers that is a Beneficial Owner of shares of such series of
MuniPreferred or a Potential Beneficial Owner of shares of such series of
MuniPreferred interested in submitting an Order in the Auction to be held on
such Auction Date, and BD will notify such Beneficial Owners and Potential
Beneficial Owners of the contents of such notice. BD will be deemed to have
notified such Beneficial Owners and Potential Beneficial Owners if, for each of
them, (i) BD makes a reasonable effort to contact such Beneficial Owner or
Potential Beneficial Owner by telephone, and (ii) upon failing to contact such
Beneficial Owner or Potential Beneficial Owner by telephone BD mails written
notification to such Beneficial Owner or Potential Beneficial Owner at the
mailing address indicated in the account records of BD.
The Auction Agent for any series of MuniPreferred shall be required to
notify BD if it is a Broker-Dealer for such series within two Business Days
after each Auction of such series that involves an allocation of income taxable
for Federal income tax purposes as to the dollar amount per share of such
taxable income and income exempt from Federal income taxation included in the
related dividend.
2.7. Failure to Deposit.
------------------
(a) If:
8
<PAGE> 9
(i) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period
Days or any Rate Period succeeding any Special Rate Period of more than 364
Rate Period Days during which a Failure to Deposit occurred that has not
been cured), but, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall have been cured in accordance with
Section 2.7 of the Auction Agency Agreement and such Fund shall have paid
to the Auction Agent for such series the applicable Late Charge as
described in Section 2.7 of the Auction Agency Agreement,
then, if BD is a Broker-Dealer for such series, such Auction Agent shall deliver
a notice in the form of Exhibit G to the Auction Agency Agreement by first-class
mail, postage prepaid, to BD not later than one Business Day after its receipt
of the payment from such Fund curing such Failure to Deposit and such Late
Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period
Days or any Rate Period succeeding any Special Rate Period of more than 364
Rate Period Days during which a Failure to Deposit occurred but has not
been cured), and, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall not have been cured as described in
Section 2.7 of the Auction Agency Agreement or such Fund shall not have
paid to the Auction Agent for such series the applicable Late Charge
described in Section 2.7 of the Auction Agency Agreement; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during a Special Rate
Period thereof of more than 364 Rate Period Days, or during any Rate Period
thereof succeeding any Special Rate Period of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not been cured,
and, prior to 12:00 noon, New York City time, on the fourth Business Day
preceding the Auction Date for the Rate Period subsequent to such Rate
Period, such Failure to Deposit shall not have been cured as described in
Section 2.7 of the Auction Agency Agreement or such Fund shall not have
paid to the Auction Agent for such series the applicable Late Charge
described in Section 2.7 of the Auction Agency Agreement;
9
<PAGE> 10
then such Auction Agent shall deliver a notice in the form of Exhibit H to the
Auction Agency Agreement to the Broker-Dealers for such series not later than
one Business Day after the receipt of the payment from such Fund curing such
Failure to Deposit and such Late Charge.
2.8. Service Charge to be Paid to BD.
-------------------------------
On the Business Day next succeeding each Auction Date for any series
of MuniPreferred specified in, or on Schedule A to, the Request Letter of any
Fund, the Auction Agent for such series shall pay to BD from moneys received
from such Fund an amount equal to the product of (a) (i) in the case of any
Auction Date immediately preceding a Rate Period of such series consisting of
364 Rate Period Days or fewer, 1/4 of 1%, or (ii) in the case of any Auction
Date immediately preceding a Rate Period of such series consisting of more than
364 Rate Period Days, such percentage as may be agreed upon by such Fund and BD
with respect to such Rate Period, times (b) a fraction, the numerator of which
is the number of Rate Period Days in the Rate Period therefor beginning on such
Business Day and the denominator of which is 365 if such Rate Period consists of
7 Rate Period Days and 360 for all other Rate Periods, times (c) $25,000 times
(d) the sum of (i) the aggregate number of shares of such series placed by BD in
such Auction that were (A) the subject of Submitted Bids of Existing Holders
submitted by BD and continued to be held as a result of such submission and (B)
the subject of Submitted Bids of Potential Holders submitted by BD and purchased
as a result of such submission plus (ii) the aggregate number of shares of such
series subject to valid Hold Orders (determined in accordance with paragraph (d)
of Section 2 of the Auction Procedures) submitted to the Auction Agent by BD
plus (iii) the number of shares of MuniPreferred deemed to be subject to Hold
Orders of Existing Holders pursuant to paragraph (c) of Section 2 of the Auction
Procedures of such Fund that were acquired by BD for its own account or were
acquired by BD for its customers who are Beneficial Owners.
For purposes of subclause (d)(iii) of the foregoing paragraph, if any
Existing Holder or Beneficial Owner who acquired shares of any series of
MuniPreferred through BD transfers those shares to another Person other than
pursuant to an Auction, then the Broker-Dealer for the shares so transferred
shall continue to be BD; provided, however, that if the transfer was effected
by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-
Dealer shall be the Broker-Dealer for such shares.
2.9. Settlement.
----------
(a) If any Existing Holder or Beneficial Owner with respect to whom BD
has submitted a Bid or Sell Order for shares of MuniPreferred of any series that
was accepted in whole or in part fails to instruct its Agent Member to deliver
the shares of MuniPreferred subject to such Bid or Sell Order against payment
therefor, BD, if it knows the identity of such Agent Member, shall instruct such
Agent Member to deliver such shares against payment therefor and, if such Agent
Member fails to comply with such instructions, BD may deliver to the Potential
Holder or Potential Beneficial Owner with respect to whom BD submitted a Bid for
shares of MuniPreferred of such series that was accepted in whole or in part a
number of
10
<PAGE> 11
shares of MuniPreferred of such series that is less than the number of shares of
MuniPreferred of such series specified in such Bid to be purchased by such
Potential Holder or Potential Beneficial Owner.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility or liability with respect to the failure of an Existing Holder,
Beneficial Owner, Potential Holder or Potential Beneficial Owner or its
respective Agent Member to deliver shares of MuniPreferred of any series or to
pay for shares of MuniPreferred of any series sold or purchased pursuant to the
Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing Holder
with respect to shares of a series of MuniPreferred and the Auction Procedures
provide that BD shall be deemed to have submitted a Sell Order in an Auction
with respect to such shares if BD fails to submit an Order in that Auction with
respect to such shares, BD shall have no liability to any Person for failing to
sell such shares pursuant to such a deemed Sell Order if (i) such shares were
transferred by the beneficial owner thereof without notification of such
transfer in compliance with the Auction Procedures or (ii) BD has indicated to
the Auction Agent pursuant to Section 2.2(e) of this Agreement that, according
BD's records, BD is not the Existing Holder of such shares.
(d) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of shares of a series of MuniPreferred with respect to whom a
Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a Sell
Order for such shares that was accepted in whole or in part, fails to instruct
its Agent Member to deliver such shares against payment therefor, partial
deliveries of shares of MuniPreferred that have been made in respect of
Potential Holders, or Potential Beneficial Owners' Submitted Bids for shares of
such series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.
(e) Notwithstanding the foregoing terms of this Section, any delivery
or non-delivery of shares of MuniPreferred of any series which represents any
departure from the results of an Auction for shares of such series, as
determined by the Auction Agent, shall be of no effect for purposes of the
registry of Existing Holders maintained by the Auction Agent pursuant to the
Auction Agency Agreement unless and until the Auction Agent shall have been
notified of such delivery or non-delivery.
(f) The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.9.
11
<PAGE> 12
3. The Auction Agent.
-----------------
3.1. Duties and Responsibilities.
---------------------------
(a) Each Auction Agent is acting solely as agent for the Funds with
whom such Auction Agent has entered into Request Letters and owes no fiduciary
duties to any other Person, other than such Funds, by reason of the Agreements
to which such Auction Agent is a party.
(b) Each Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreements to which it is a party,
and no implied covenants or obligations shall be read into such Agreements
against such Auction Agent.
(c) In the absence of bad faith or negligence on its part, each
Auction Agent shall not be liable for any action taken, suffered, or omitted or
for any error of judgment made by it in the performance of its duties under the
Agreements to which it is a party. Each Auction Agent shall not be liable for
any error of judgment made in good faith unless such Auction Agent shall have
been negligent in ascertaining the pertinent facts.
3.2. Rights of the Auction Agents.
----------------------------
(a) Each Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document believed in good faith
by it to be genuine. Each Auction Agent shall not be liable for acting upon any
telephone communication authorized by the Agreements to which it is a party that
such Auction Agent believes in good faith to have been given by the appropriate
Fund, by the Adviser or by a Broker-Dealer. Each Auction Agent may record
telephone communications with the Broker-Dealers.
(b) Each Auction Agent may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) Each Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.
3.3. Auction Agents' Disclaimers.
---------------------------
Each Auction Agent makes no representation as to the validity or
adequacy of the Agreements to which it is a party, the Auction Agency Agreements
to which it is a party or the shares of MuniPreferred of any series.
12
<PAGE> 13
4. Miscellaneous.
-------------
4.1. Termination.
-----------
Any party to any Agreement may terminate such Agreement at any time on
five days' notice to the other parties to such Agreement, provided that the Fund
party to such Agreement shall not terminate the Agreement unless at least one
Broker-Dealer Agreement would be in effect for each series of MuniPreferred of
such Fund after such termination. Each Agreement shall automatically terminate
with respect to any series of MuniPreferred with respect to which the relevant
Auction Agency Agreement has terminated.
4.2. Participant in Securities Depository; Payment of Dividends in
-------------------------------------------------------------
Same-Day Funds.
- --------------
(a) BD is, and shall remain for the term of the Agreements, a member
of, or participant in, the Securities Depository (or an affiliate of such a
member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the MuniPreferred
available in same-day funds on each Dividend Payment Date to customers that use
BD or affiliate as Agent Member.
4.3. Communications.
--------------
Except for (i) communications authorized to be by telephone by the
Agreement of any Fund or the Auction Procedures of such Fund and (ii)
communications in connection with Auctions (other than those expressly required
to be in writing), all notices, requests and other communications to any party
under such Agreement shall be in writing (including telecopy or similar writing)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to a Fund, [Name of Fund]
addressed: 333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
Telecopier No.: (312) 917-7942
Telephone No.: (312) 917-7700
If to the Adviser, Nuveen Advisory Corp.
addressed: 333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
13
<PAGE> 14
If to BD, to the
address or telecopy number
as set forth in the Acceptance
Letter,
If to an Action
Agent, to the address
or telecopy number as set
forth in the Request Letter,
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
an Auction Agent by an Authorized Officer of such Auction Agent. BD may record
telephone communications with any Auction Agent.
4.4. Entire Agreement.
----------------
Each Agreement contains the entire agreement among the parties thereto
relating to the subject matter thereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
among the parties thereto relating to the subject matter thereof. Each
Agreement supersedes any prior agreement to which BD was a party in respect of
any Fund.
4.5. Benefits.
--------
Nothing in any Agreement, express or implied, shall give to any
person, other than the Fund party to such Agreement, the Adviser, the Auction
Agent party to such Agreement and BD and their respective successors and
assigns, any benefit or any legal or equitable right, remedy or claim under such
Agreement.
4.6. Amendment; Waiver.
-----------------
(a) Each Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of any party to any Agreement to exercise any right or
remedy thereunder in the event of a breach thereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
14
<PAGE> 15
4.7. Successors and Assigns.
----------------------
Each Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of the Fund party to such
Agreement, the Adviser, the Auction Agent party to such Agreement and BD.
4.8. Severability.
------------
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
4.9. GOVERNING LAW.
-------------
EACH AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
4.10. Declaration of Trust.
--------------------
The Declaration of each Fund that is a Massachusetts business trust is
on file with the Secretary of State of the Commonwealth of Massachusetts. Each
Agreement to which a Fund that is a Massachusetts business trust is a party has
been executed on behalf of such Fund by the Vice President and Treasurer of such
Fund acting in such capacity and not individually, and the obligations of such
Fund set forth in such Agreement are not binding upon any of such Fund's
trustees, officers or shareholders individually, but are binding only upon the
assets and property of such Fund.
15
<PAGE> 16
EXHIBIT A
---------
SETTLEMENT PROCEDURES
---------------------
<PAGE> 17
<TABLE>
================================================================================================================================
<S> <C>
[AUCTION AGENT] AUCTION BID FORM NAME OF Broker-Dealer:
------------------------
AUTHORIZED
Submit to: SIGNATURE:
------------------------------------
TOTAL NUMBER OF ORDERS ON THIS BID FORM:
------
================================================================================================================================
</TABLE>
<PAGE> 18
EXHIBIT B
---------
[Name of Fund]
$_____ Municipal Auction Rate Cumulative Preferred
Stock [Shares], Series ____
$_____ Municipal Auction Rate Cumulative Preferred
Stock [Shares], Series ____
AUCTION DATE: _____________
ISSUE: ___________________ SERIES: _________
THE UNDERSIGNED Broker-Dealer SUBMITS THE FOLLOWING ORDERS ON BEHALF OF THE
BIDDER(S) LISTED BELOW:
<TABLE>
<CAPTION>
================================================================================================================================
ORDERS BY EXISTING HOLDERS- NUMBER OF SHARES OF MUNIPREFERRED ORDERS BY POTENTIAL NUMBER OF SHARES OF
HOLDERS- MUNIPREFERRED
POTENTIAL HOLDER BID/RATE
<S> <C> <C>
EXISTING HOLDER HOLD BID/RATE SELL 1. /
----------------- ------------------------
1. / 2. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
2. / 3. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
3. / 4. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
4. / 5. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
5. / 6. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
6. / 7. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
7. / 8. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
8. / 9. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
9. / 10. 1 /
--------------------------- ------ -------------------- -------- ---------------- ------------------------
10. / 11. 1 /
--------------------------- ------ -------------------- -------- ---------------- ------------------------
12. 1 /
- -------------------------------------------------------------------------------- ---------------- ------------------------
NOTES: 13. 1 /
- ------ ---------------- ------------------------
14. 1 /
---------------- ------------------------
1. If one or more Orders covering in the aggregate more than the number of 15. 1 /
outstanding shares of MuniPreferred held by any Existing holder are submitted, ---------------- ------------------------
such Orders shall be considered valid in the order of priority set forth in
the Auction Procedures.
2. A Hold Order or Sell Order may be placed only by an Existing Holder covering a
number of shares of MuniPreferred not greater than the number of shares of
MuniPreferred currently held by such Existing Holder.
3. Potential Holders may make Bids only, each of which must specify a rate. If
more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted shall be a separate Bid with the rate specified.
4. Bids may contain no more than three figures to the right of the decimal point
(.001 of 1%).
====================================================================================================================================
</TABLE>
<PAGE> 19
EXHIBIT C
---------
(To be used only for transfers made to a
Broker-Dealer other than pursuant to an Auction)
[NAME OF FUND]
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES],
SERIES ___
TRANSFER FORM
We are the Broker-Dealer to whom the Existing Holder or Beneficial Owner named
below transferred shares of the above series of MuniPreferred other than
pursuant to an Auction. We hereby notify you that such Existing Holder or
Beneficial Owner has transferred _______ shares of the above series of
MuniPreferred to us.
-------------------------------------------------
(Name of Existing Holder or
Beneficial Owner)
-------------------------------------------------
(Name of Broker-Dealer)
By:
----------------------------------------------
Printed Name:
Title:
<PAGE> 20
EXHIBIT D
---------
(To be used only for failures to deliver shares of
MuniPreferred sold pursuant to an Auction)
[NAME OF FUND]
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES],
SERIES ____
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
- -----------------------
I. We are a Broker-Dealer for ________________ (the "Purchaser"), which
purchased _______ shares of the above series of MuniPreferred in the
Auction held on _____ from the seller of such shares.
II. We are a Broker-Dealer for ____________ (the "Seller"), which sold ________
shares of the above series of MuniPreferred in the Auction held on ______
to the purchaser of such shares.
We hereby notify you that (check one) --
[_] the Seller failed to deliver such shares of MuniPreferred to the
Purchaser
[_] the Purchaser failed to make payment to the Seller upon delivery of
such shares of MuniPreferred
Name:
--------------------------------------------
(Name of Broker-Dealer)
By:
----------------------------------------------
Printed Name:
Title:
<PAGE> 21
[Form of Broker-Dealer Acceptance Letter]
Nuveen Advisory Corp.
December ___, 1993
[Broker-Dealer]
[Address]
Ladies and Gentlemen:
Reference is made to (a) the Broker-Dealer Agreements executed by the
Funds (as hereinafter defined) listed on Exhibit A hereto, Bankers Trust Company
and various broker-dealers, copies of which will be made available to you upon
request by Bankers Trust Company (the "Broker-Dealer Agreements") and (b) the
Nuveen Broker-Dealer Agreement-Basic Terms for Acting as a Broker-Dealer dated
December 14, 1993, receipt of which is hereby acknowledged by you (the "Basic
Terms"). For purposes of this letter ("Acceptance Letter") (a) "Fund" shall
mean any closed-end investment company registered under the Investment Company
Act of 1940, as amended, for which Nuveen Advisory Corp. acts as investment
adviser; (b) except as otherwise provided below, the terms of each Broker-Dealer
Agreement shall be incorporated herein by reference, and you shall be considered
BD for all purposes thereof, as if you were the Broker-Dealer signatory thereto
in the place of the actual Broker-Dealer signatory thereto; and (c) the Basic
Terms are incorporated herein by reference, you shall be considered BD for all
purposes thereof, Bankers Trust Company shall be considered the Auction Agent
for all purposes thereof, and each Fund not listed on Exhibit A hereto shall be
considered a Fund for all purposes thereof.
We hereby request that you act as a Broker-Dealer for the Money Market
Cumulative Preferred Stock ("MMP") of each series, and the Municipal Auction
Rate Cumulative Preferred Stock or Shares ("MPS" or "MuniPreferred") of each
series, of each Fund that executes a letter, substantially in the form attached
hereto as Exhibit B or Exhibit C, as appropriate, appointing you as a Broker-
Dealer ("Request Letter"). You hereby (a) accept such appointment as a Broker-
Dealer for each series of MMP, MPS or MuniPreferred of each Fund identified in a
Request Letter and (b) agree to act as BD in accordance with (1) the terms of
the Broker-Dealer Agreement relating to such Fund, in the case of any Fund
listed on Exhibit A hereto or (2) the Basic Terms, in the case of any other
Fund; provided, however, that:
2
<PAGE> 22
(1) for purposes of any such Broker-Dealer Agreement or the Basic
Terms, and notwithstanding any provision of any Broker-Dealer Agreement to the
contrary, your address, telecopy number and telephone number for communications
pursuant to such Broker-Dealer Agreement or the Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
and the address, telecopy number and telephone number of the Auction Agent for
communications pursuant to such Broker-Dealer or the Basic Terms shall be as
follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
(2) notwithstanding any provision of a Broker-Dealer Agreement to the
contrary, except as otherwise set forth herein, your appointment as Broker-
Dealer extends to each series of MMP, MPS or MuniPreferred issued by the Fund to
which such Broker-Dealer Agreement relates.
(3) the text of Section 2.9 of each Broker-Dealer Agreement shall be
deleted and the following shall be deemed to be inserted in its place:
(a) If any Existing Holder with respect to whom BD has submitted a Bid
or Sell Order for shares of MMP, MPS or MuniPreferred of any series that
was accepted in whole or in part fails to instruct its Agent Member to
deliver the shares of MMP, MPS or MuniPreferred subject to such Bid or Sell
Order against payment therefor, BD, if it knows the identity of such Agent
Member, shall instruct such Agent Member to deliver such shares against
payment therefor and, if such Agent Member fails to comply with such
instructions, BD may deliver to the Potential Holder with respect to whom
BD submitted a Bid for shares of MMP, MPS or MuniPreferred of such series
that was accepted in whole or in part a number of shares of MMP, MPS or
MuniPreferred of such
3
<PAGE> 23
series that is less than the number of shares of MMP, MPS, or MuniPreferred
of such series specified in such Bid to be purchased by such Potential
Holder.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility or liability with respect to the failure of an Existing
Holder or a Potential Holder or its respective Agent Member to deliver
shares of MMP, MPS or MuniPreferred of any series or to pay for shares of
MMP, MPS or MuniPreferred of any series sold or purchased pursuant to the
Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing
Holder with respect to shares of a series of MMP, MPS or MuniPreferred and
the Auction Procedures provide that BD shall be deemed to have submitted a
Sell Order in an Auction with respect to such shares if BD fails to submit
in Order in that Auction with respect to such shares, BD shall have no
liability to any Person for failing to sell such shares pursuant to such a
deemed Sell Order if (i) such shares were transferred by the beneficial
owner thereof without notification of such transfer in compliance with the
Auction Procedures or (ii) BD has informed the Auction Agent pursuant to
Section 2.2(g) of this Agreement that, according to BD's records, BD
believes it is not the Existing Holder of such shares.
(d) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder of
shares of a series of MMP, MPS or MuniPreferred with respect to whom a
Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a
Sell Order for such shares that was accepted in whole or in part, fails to
instruct its Agent Member to deliver such shares against payment therefor,
partial deliveries of shares of MMP, MPS or MuniPreferred that have been
made in respect of Potential Holders' Submitted Bids for shares of such
series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders.
(e) Notwithstanding the foregoing terms of this Section, any delivery
or non-delivery of shares of MMP, MPS or MuniPreferred of any series which
represents any departure from the results of an Auction for shares of such
series, as determined by the Auction Agent, shall be of no effect for
purposes of the registry of Existing Holders maintained by the Auction
Agent pursuant to the Auction Agency Agreement unless and until the Auction
Agent shall have been notified of such delivery or non-delivery.
(f) The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.9.
(4) a new Section 2.2(g) shall be added to each Broker-Dealer
Agreement, to read as follows:
4
<PAGE> 24
(g) The Auction Agent's registry of Existing Holders of shares of a
series of MMP, MPS or MuniPreferred shall be conclusive and binding on BD.
BD may inquire of the Auction Agent between 3:00 P.M. on the Business Day
preceding an Auction for shares of a series of MMP, MPS or MuniPreferred
and 9:30 A.M. on the Auction Date for such Auction to ascertain the number
of shares of such series in respect of which the Auction Agent has
determined BD to be an Existing Holder. If BD believes it is the Existing
Holder of fewer shares of such series than specified by the Auction Agent
in response to BD's inquiry, BD may so inform the Auction Agent of that
belief. BD shall not, in its capacity as Existing Holder of shares of such
series, submit Orders in such Auction in respect of shares of such series
covering in the aggregate more than the number of shares of such series
specified by the Auction Agent in response to BDs inquiry.
(5) a new sentence shall be added to the end of Section 2.2(d) of each
Broker-Dealer Agreement, to read as follows:
Nothing contained herein shall require BD to submit an Order for any
customer in any Auction.
You hereby acknowledge that, notwithstanding any provision of any
Broker-Dealer Agreement or the Basic Terms to the contrary, the Fund may (a)
upon five business days' notice to the Auction Agent and you, amend, alter or
repeal any of the provisions contained in any Broker-Dealer Agreement or the
Basic Terms, it being understood and agreed that you shall be deemed to have
accepted any such amendment, alteration or repeal if, after the expiration of
such five business day period, you submit an Order to the Auction Agent in
respect of the shares of MMP, MPS, MuniPreferred of the Fund or Funds to which
such amendment, alteration or repeal relates, and (b) upon two business days'
notice to the Auction Agent and you, exclude you from participating as a Broker-
Dealer in any particular Auction for any particular series of MMP, MPS or
MuniPreferred.
This Acceptance Letter shall be deemed to form part of each Broker-
Dealer Agreement and the Basic Terms.
Capitalized terms not defined in this Acceptance Letter shall have the
meanings ascribed to them in the relevant Broker-Dealer Agreement or the Basic
Terms, as the case may be.
5
<PAGE> 25
If the foregoing terms are acceptable to you, please so indicate in
the space provided below. This Acceptance Letter may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
NUVEEN ADVISORY CORP.
By:
-------------------------------------------
Name: H. William Stabenow
Title: Vice President and Treasurer
Accepted by and Agreed to as of
the date first written above:
[Broker-Dealer]
By:
------------------
Name:
Title:
6
<PAGE> 26
EXHIBIT A TO ACCEPTANCE LETTER
------------------------------
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity 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 Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen New Jersey Quality Income Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Municipal Market Opportunity 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 Ohio Quality Income Municipal Fund, Inc.
<PAGE> 27
EXHIBIT B TO ACCEPTANCE LETTER
------------------------------
[Form of Request Letter]
_____________________, 1993
FROM: All investment companies registered under the Investment Company Act
of 1940, as amended, for which Nuveen Advisor Corp. acts as investment
adviser and whose registration statements relating to shares of Money
Market Cumulative Preferred Stock or Municipal Auction Rate Cumulative
Preferred Stock or Shares have been declared effective by the
Securities and Exchange Commission on or prior to the date hereof.
TO: Nuveen Advisory Corp.
Bankers Trust Company
Ladies and Gentlemen:
Reference is made to (a) the respective Broker-Dealer Agreements,
previously executed by the Funds (as hereinafter defined) listed on Exhibit A
hereto, various Broker-Dealers and Bankers Trust Company (the "Broker-Dealer
Agreements"); (b) the respective Auction Agency Agreements previously executed
by the Funds listed on Exhibit A hereto and Bankers Trust Company (the "Auction
Agency Agreements"); (c) the Nuveen Broker-Dealer Agreement -- Basic Terms for
Acting as a Broker-Dealer dated December 14, 1993, receipt of which is hereby
acknowledged by you (the "Broker-Dealer Basic Terms"); and (d) the Nuveen
Auction Agency Agreement -- Basic Terms for Acting as Auction Agent dated
November 1, 1993, receipt of which is hereby acknowledged by you (the "Auction
Agency Basic Terms"). For purposes of this letter ("Request Letter"), (a)
"Fund" shall mean any closed-end investment company registered under the
Investment Company Act of 1940, as amended, for which Nuveen Advisory Corp. acts
as investment adviser; (b) except as otherwise provided below, the terms of each
Broker-Dealer Agreement shall be incorporated herein by reference, and each
Broker-Dealer listed on Exhibit B hereto shall be considered BD for all purposes
thereof, as if such Broker-Dealer were the Broker-Dealer signatory thereto in
the place of the actual Broker-Dealer signatory thereto; (c) the Broker-Dealer
Basic Terms are incorporated herein by reference, each Broker-Dealer listed on
Exhibit B hereto shall be considered BD for all purposes thereof, Bankers Trust
Company shall be considered the Auction Agent for all purposes thereof, and each
Fund referred to on Exhibit C hereto shall be considered a Fund for all purposes
thereof; (d) except as otherwise provided below, the terms of each Auction
Agency Agreement shall be incorporated herein by reference, and each Broker-
Dealer listed on Exhibit B shall be considered a Broker-Dealer for all purposes
thereof; and (e) the Auction Agency Basic Terms are incorporated herein by
reference, Bankers Trust Company shall be considered the
<PAGE> 28
Auction Agent for all purposes thereof, and each Fund referred to on Exhibit C
hereto shall be considered a Fund for all purposes thereof.
We hereby appoint the Broker-Dealers listed on Exhibit B hereto as
Broker-Dealers for the Money Market Cumulative Preferred Stock ("MMP") or
Municipal Auction Rate Cumulative Preferred Stock or Shares ("MPS" or
"MuniPreferred") of each series of each Fund listed on Exhibit A hereto or
referred to on Exhibit C hereto. Each such Broker-Dealer will act as BD in
respect of such series in accordance with (1) the terms of the Broker-Dealer
Agreement relating to such Fund, in the case of any Fund listed on Exhibit A
hereto, except as otherwise set forth in an Acceptance Letter relating to such
Broker-Dealer from Nuveen Advisory Corp, to such Broker-Dealer or (2) the
Broker-Dealer Basic Terms, in the case of any Fund referred to on Exhibit C
hereto; provided, however, that for purposes of any such Broker-Dealer Agreement
or the Broker-Dealer Basic Terms, and notwithstanding any provision of any
Broker-Dealer Agreement to the contrary, Bankers Trust Company's address,
telecopy number and telephone number for communications pursuant to such Broker-
Dealer Agreement or the Broker-Dealer Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Bankers Trust Company agrees to act as Auction Agent with respect to
shares of each series of MMP, MPS or MuniPreferred of each Fund listed on
Exhibit A or referred to on Exhibit C hereto in accordance with (1) the terms of
the Auction Agency Agreement relating to the MMP, MPS or MuniPreferred of such
Fund, in the case of any Fund listed on Exhibit A hereto or (2) the Auction
Agency Basic Terms, in the case of any Fund referred to on Exhibit C hereto;
provided, however, that Section 2.2(c)(i) of each Auction Agency Agreement shall
be amended to read as follows:
(c)(i) The Auction Agent shall maintain a registry of the beneficial
owners of the shares of MMP, MPS or MuniPreferred who shall constitute
Existing Holders of shares of MMP, MPS or MuniPreferred for purposes of
Auctions and shall indicate thereon the identity of the respective Broker-
Dealer of each Existing Holder, if any, on whose behalf such Broker-Dealer
submitted the most recent Order in any Auction which resulted in such
Existing Holder continuing to hold or purchasing shares of MMP, MPS or
MuniPreferred. The Auction Agent shall keep such registry current and
accurate. The Fund shall provide or cause to be provided to the Auction
Agent at or prior to the Date of Original Issue of the shares of MMP, MPS
or MuniPreferred a list of the initial Existing Holders of the shares of
MMP, MPS or MuniPreferred, the number of shares purchased by each such
Existing Holder and the respective Broker-Dealer of each such
2
<PAGE> 29
Existing Holder or the affiliate thereof through which each such Existing
Holer purchased such shares. The Auction Agent shall advise the Fund in
writing whenever the number of Existing Holders is 500 or more. The
Auction Agent may rely upon, as conclusive evidence of the identities of
the Existing Holders of shares of MMP, MPS or MuniPreferred (A) such list,
(B) the results of Auctions, (C) notices from any Existing Holder, the
Agent Member of any Existing Holder or the Broker-Dealer of any Existing
Holder as described in the first sentence of Section 2.2(c)(iii) hereof and
(D) the results of any procedures approved by the Fund that have been
devised for the purpose of determining the identities of Existing Holders
in situations where shares of MMP, MPS or MuniPreferred may have been
transferred without compliance with any restrictions on the transfer
thereof set forth in the Auction Procedures.
This Request Letter shall be deemed to form part of each Auction
Agency Agreement and the Auction Agency Basic Terms.
Capitalized terms not defined in this Request Letter shall have the
meanings ascribed to them in the relevant Broker-Dealer Agreement, Broker-Dealer
Basic Terms, Auction Agency Agreement or Auction Agency Basic Terms, as the case
may be.
3
<PAGE> 30
If the foregoing terms are acceptable to you, please so indicate in
the space provided below. This Request Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
All investment companies registered under the
Investment Company Act of 1940, as amended, for
which Nuveen Advisory Corp. acts as investment
adviser and whose registration statements
relating to shares of Money Market Cumulative
Preferred Stock or Municipal Auction Rate
Cumulative Preferred Stock or Shares have been
declared effective by the Securities and
Exchange Commission on or prior to the date
hereof.
By:
-------------------------------------------
Name: H. William Stabenow
Title: Vice President and
Treasurer of each Fund
Accepted and Agreed to as of
the date first written above:
NUVEEN ADVISORY CORP. BANKERS TRUST COMPANY
By By:
------------------------- -------------------------------------------
Name: H. William Stabenow Name: Sandra Becker Whalen
Title: Vice President and Title: Assistant Treasurer
Treasurer
cc: [Broker-Dealers]
4
<PAGE> 31
EXHIBIT A TO REQUEST LETTER
---------------------------
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage 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 Municipal Opportunity 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 Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen New Jersey Quality Income Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Municipal Market Opportunity 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 Ohio Quality Income Municipal Fund, Inc.
<PAGE> 32
EXHIBIT B TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE> 33
EXHIBIT C TO REQUEST LETTER
---------------------------
Each Fund not listed on Exhibit A whose registration statement
relating to shares of MMP, MPS or MuniPreferred has been declared effective by
the Securities and Exchange Commission on or prior to the date of the Request
Letter to which this Exhibit C is attached.
<PAGE> 34
EXHIBIT C TO ACCEPTANCE LETTER
------------------------------
[Form of Request Letter]
[Name(s) of Fund(s)]
__________________, 1993
Ladies and Gentlemen:
Reference is made to (a) the Nuveen Broker-Dealer Agreement -- Basic
Terms for Acting as a Broker-Dealer dated December 14, 1993, receipt of which is
hereby acknowledged by you (the "Broker-Dealer Basic Terms") and (b) the Nuveen
Auction Agency Agreement -- Basic Terms for Acting as Auction Agent dated
November 1, 1993, receipt of which is hereby acknowledged by you (the "Auction
Agency Basic Terms"). For purposes of this letter ("Request Letter"), (a)
"Fund" shall mean each undersigned closed-end investment company registered
under the Investment Company Act of 1940, as amended, for which Nuveen Advisory
Corp. acts as investment adviser; (b) the Broker-Dealer Basic Terms are
incorporated herein by reference, each Broker-Dealer listed on Exhibit A hereto
shall be considered BD for all purposes thereof, Bankers Trust Company shall be
considered the Auction Agent for all purposes thereof, and each Fund shall be
considered a Fund for all purposes thereof; and (c) the Auction Agency Basic
Terms are incorporated herein by reference, Bankers Trust Company shall be
considered the Auction Agent for all purposes thereof, and each Fund shall be
considered a Fund for all purposes thereof.
Each Fund hereby appoints the Broker-Dealers listed on Exhibit A
hereto as Broker-Dealers for each series of Money Market Cumulative Preferred
Stock ("MMP") or Municipal Auction Rate Cumulative Preferred Stock or Shares
("MPS" or "MuniPreferred") of such Fund. Each such Broker-Dealer will act as BD
in respect of each such series in accordance with the Broker-Dealer Basic Terms;
provided, however, that for purposes of the Broker-Dealer Basic Terms, Bankers
Trust Company's address, telecopy number and telephone number for communications
pursuant to the Broker-Dealer Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE> 35
Bankers Trust Company agrees to act as Auction Agent with respect to
shares of each series of MMP, MPS or MuniPreferred of each Fund in accordance
with the Auction Agency Basic Terms.
This Request Letter shall be deemed to form
part of the Auction Agency Basic Terms.
Capitalized terms not defined in this Request Letter shall have the
meanings ascribed to them in the Broker-Dealer Basic Terms or Auction Agency
Basic Terms, as the case may be.
If the foregoing terms are acceptable to you, please so indicate in
the space provided below. This Request Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
[NAME(S) OF FUND(S)]
By:
----------------------------------
Name: H. William Stabenow
Title: Vice President and
Treasurer of each Fund
Accepted and Agreed to as of
the date first written above:
NUVEEN ADVISORY CORP. BANKERS TRUST COMPANY
By: By:
------------------------------ ----------------------------------
Name: H. William Stabenow Name: Sandra Becker Whalen
Title: Vice President and Title: Assistant Treasurer
Treasurer
cc: [Broker-Dealers listed on Exhibit A]
2
<PAGE> 36
EXHIBIT A TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE> 1
EXHIBIT 99.d.3
[DTC LOGO]
BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED/AND
REMARKETED PREFERRED SECURITIES
Letter of Representations
(To be Completed by Issuer and Trust Company)
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
----------------------------------------------
(Name of Issuer)
BANKERS TRUST COMPANY
--------------------------------------
(Name of Trust Company)
Attention: General Counsel's Office September , 1997
The Depository Trust Company -------------------
55 Water Street; 49th Floor (Date)
New York, NY 10041-0099
Re: ________ Shares of Municipal Auction Rate Cumulative Preferred
Stock, Series __, par value $.01 per share of Nuveen Premium
Income Municipal Fund, Inc., CUSIP No.
(Issue Description, including CUSIP number)
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"), Trust Company will
act as transfer agent, registrar, dividend disbursing agent, and redemption
agent with respect to the Securities. The Securities will be issued pursuant to
a prospectus, private placement memorandum, or other such document authorizing
the issuance of the Securities dated _________, 1997 (the "Document"). Issuer is
distributing the Securities through The Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC,
and to act in accordance with its Rules with respect to the Securities, Issuer
and Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on ___________, 1997 there shall
be deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co. which
<PAGE> 2
represents the total number of Securities issued. Said certificate shall
remain in DTC's custody as provided in the Document. If, however, the aggregate
principal amount of the Securities exceeds $150 million, one certificate will be
issued with respect to each $150 million of principal amount and an additional
certificate will be issued with respect to any remaining principal amount.
Each $150 million Securities certificate shall bear the following legend:
Unless this certificate is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to Issuer or
its agent for registration of transfer, exchange, or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
the registered owner hereof, Cede & Co., has an interest herein.
2. In the event of any solicitation of consents from or voting by holders of
the Securities, Issuer shall establish a record date for such purposes (with no
provision for revocation of consents or votes by subsequent holders) and shall,
to the extent possible, send notice of such record date to DTC not less than 15
calender days in advance of such record date. Notices to DTC pursuant to this
Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212)
709-6896 or (212) 709-6897, and receipt of such notices shall be confirmed by
telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail
or by any other means shall be sent to DTC's Reorganization Department as
indicated in Paragraph 4.
3. In the event of a full or partial redemption of the outstanding
Securities, Issuer or Trust Company shall send a notice to DTC specifying: (a)
the number of Securities to be redeemed; and (b) the date such notice is to
be mailed to Security holders or published (the "Publication Date"). Such
notice shall be sent to DTC by a secure means (e.g., legible telecopy,
registered or certified mail, overnight delivery) in a timely manner designed
to assure that such notice is in DTC's possession no later than the close of
business on the business day before or, if possible, two business days before
the Publication Date. Issuer or Trust Company shall forward such notice either
in a separate secure transmission for each CUSIP number or in a secure
transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The
party sending such notice shall have a method to verify subsequently the
use of such means and the timeliness of such notice.) The Publication Date
shall be not be less than 20 days nor more than 45 days prior to the redemption
date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to
DTC's Call Notification Department at (516) 227-4039 or (516) 227-4190. If the
party sending the notice does not receive a telecopy receipt from DTC
confirming that the notice has been received, such party shall telephone
(516) 227-4070. Notices to DTC pursuant to this Paragraph by mail or by any
other means shall be sent to:
Manager: Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
4. In the event of an invitation to tender the Securities, notice by
Issuer or Trust Company to Security holders specifying the terms of the tender
and the Publication Date of such notice shall be sent to DTC by a secure means
in the manner set forth in the preceding Paragraph. Notices to DTC pursuant to
this Paragraph and notices of other corporate actions (including mandatory)
-2-
<PAGE> 3
tenders, exchanges, and capital changes) by telecopy shall be sent to DTC's
Reorganization Department at (212) 709-1093 or (212) 709-1094, and receipt of
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager: Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square: 23rd Floor
New York, NY 10004-2695
5. All notices and payments advices sent to DTC shall contain the CUSIP
number of the Securities.
6. The Document indicates that the dividend rate for the Securities may vary
from time to time. Absent other existing arrangements with DTC, Issuer or Trust
Company shall give DTC notice of each such change in the dividend rate, on the
same day that the new rate is determined, by telephoning the Supervisor of DTC's
Dividend Announcement Section at (212) 709-1270, or by telecopy sent to (212)
709-1723. Such verbal or telecopy notice shall be followed by prompt written
confirmation sent by a secure means in the manner set forth in Paragraph 3 to:
Manager: Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square: 22nd Floor
New York, NY 10004-2695
7. Issuer and Trust Company acknowledge that as long as Cede & Co. is
the sole record owner of the Securities, Cede & Co. shall be entitled to all
voting rights applicable to the Securities and to receive the full amount of
all dividends, liquidation proceeds, and redemption proceeds payable with
respect to the Securities. Issuer and Trust Company acknowledge that DTC shall
treat any DTC Participant ("Participant") having Securities credited to
its DTC accounts as entitled to the full benefits of ownership of such
Securities. Without limiting the generality of the preceding sentence, Issuer
and Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to receive dividends,
distributions, and voting rights, if any, in respect of Securities and, subject
to Paragraphs 11 and 12, to receive certificates evidencing Securities if such
certificates are to be issued in accordance with Issuer's certificate of
incorporation. (The treatment by DTC of the effects of the crediting by it of
Securities to the accounts of Participants described in the preceding two
sentences shall not affect the rights of Issuer, participants in auctions
relating to the Securities, purchasers, sellers, or holders of Securities
against any Participant.)
8. Transactions in the Securities shall be eligible for same-day funds
settlement in DTC's Same-Day Funds Settlement ("SDFS") system.
A. Dividend payment shall be received by Cede & Co. as nominee of DTC or
its registered assigns in same-day funds on each payment date (or the
equivalent in accordance with existing arrangements between Issuer or Trust
Company and DTC). Such payments shall
<PAGE> 4
be made payable to the order of Cede & Co. Absent any other existing
arrangements, such payments shall be addressed as follows:
Manager: Cash Receipts
Dividend Department
The Depository Trust Company
7 Hanover Square: 24th Floor
New York, NY 10004-2695
B. Redemption payments shall be made in same-day funds by Trust Company in
the manner set forth in the SDFS Paying Agent Operating Procedures, a
copy of which previously has been furnished to Trust Company.
9. DTC may direct Issuer or Trust Company to use any other number or address
as the number or address to which notices, payments of dividends, or redemption
proceeds may be sent. If requested, DTC will provide such instructions in
writing.
10. In the event of a redemption necessitating a reduction in the number of
Securities outstanding, DTC, in its discretion: (a) may request Issuer or Trust
Company to issue and authenticate a new Security certificate; or (b) may make an
appropriate notation on the Security certificate indicating the date and amount
of such reduction in the number of Securities outstanding, except in the case
of final redemption, in which case the certificate will be presented to Issuer
or Trust Company prior to payment, if required.
11. In the event that Issuer determines that beneficial owners of Securities
shall be able to obtain certificated Securities, Issuer or Trust Company shall
notify DTC of the availability of certificates. In such event, Issuer or Trust
Company shall issue, transfer, and exchange certificates in appropriate amounts,
as required by DTC and others.
12. DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to Issuer or
Trust Company (at which time DTC will confirm with Issuer or Trust Company the
aggregate principal amount of Securities outstanding). Under such circumstances,
at DTC's request Issuer and Trust Company shall cooperate fully with DTC by
taking appropriate action to make available one or more separate certificates
evidencing Securities to any DTC Participant having Securities credited to its
DTC accounts.
13. Issuer hereby authorizes DTC to provide to Trust Company security
position listings of Participants with respect to the Securities from time to
time at the request of Trust Company. Issuer also authorizes DTC, in the event
of a partial redemption of Securities, to provide Trust Company, upon request,
with the names of those Participants whose positions in Securities have been
selected for redemption by DTC. DTC will use its best efforts to notify Trust
Company of those Participants whose positions in Securities have been selected
for redemption by DTC. Issuer authorizes and instructs Trust Company to provide
DTC with such signatures, examples of signatures, and authorizations to act as
may be deemed necessary or appropriate by DTC to permit DTC to discharge its
obligations to its Participants and appropriate regulatory authorities. Such
requests for security position listings shall be sent to DTC's Reorganization
Department in the manner set forth in Paragraph 4.
<PAGE> 5
This authorization, unless revoked by Issuer shall continue with
respect to the Securities while any Securities are on deposit at DTC, until and
unless Trust Company shall no longer be acting. In such event, Issuer shall
provide DTC with similar evidence, satisfactory to DTC, of the authorization of
any successor thereto so to act.
14. Issuer: (a) understands that DTC has no obligation to, and will not
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC's Participants nor any person having an interest
in the Securities shall be deemed to have notice of the provisions of the
Security certificate(s) by virtue of submission of such certificate(s) to DTC.
15. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.
16. The Issuer's Articles of Incorporation provides that the Issuer
shall adjust the number of days in rate periods for Securities under
certain circumstances. If the Issuer determines to make such an adjustment, the
Issuer shall give DTC notice of such change in the number of days at least 10
calendar days prior to the rate period for which such change is to be
effective. Such notice shall be in writing and shall be forwarded by secure
means to the address set forth in paragraph 6 hereof.
17. The Issuer will notify DTC, at least 10 business days prior to the
payment date for a Gross-up Payment (as defined in the Document) in respect of
the Securities, of (i) the record date for holders of Securities entitled to
receive Gross-up Payments, (ii) the amount of Gross-up Payments payable on a
per share basis to such holders and (iii) the CUSIP number set forth on the
share certificate representing such Securities.
Notes: Very truly yours,
A. If there is a Trust Company
(as defined in this Letter of Nuveen Premium Income Municipal
Representations), Trust Company Fund, Inc.
as well as Issuer must sign this --------------------------------------------
Letter. If there is no Trust (Issuer)
Company, in signing this Letter
Issuer itself undertakes to
perform all of the By:
obligations set forth herein. -----------------------------------------
(Authorized Officer's Signature)
B. Schedule A contains statements
that DTC believes accurately
describe DTC, the method of Bankers Trust Company
effecting book-entry transfers --------------------------------------------
of securities distributed through (Trust Company)
DTC, and certain related matters.
By:
-----------------------------------------
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
BY:
----------------------------------
cc: Underwriter
Underwriter's Counsel
<PAGE> 1
EXHIBIT 99.e
NUVEEN EXCHANGE-TRADED FUNDS
(except Nuveen Municipal Value Fund, Inc.)
Terms and Conditions of the Dividend Reinvestment Plan
------------------------------------------------------
This Dividend Reinvestment Plan for the Nuveen Exchange-Traded Funds
advised by Nuveen Advisory Corp. 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> 2
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> 3
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> 4
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> 5
Nuveen Washington Premium Income Municipal Fund
5
<PAGE> 1
EXHIBIT-99.g
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 20th day of May, 1997 by and between Nuveen Premium
Income Municipal 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, 1997 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, 1998 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, 1998 and ratify and confirm the Agreement in all respects.
NUVEEN PREMIUM INCOME
MUNICIPAL FUND. INC.
By: /s/ Gifford R. Zimmerman
------------------------
Gifford R. Zimmerman
Vice President
ATTEST:
/s/ Karen Healy
- ------------------------
Karen Healy
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ J. Thomas Futrell
------------------------
J. Thomas Futrell
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 2
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 7th day of May, 1996 by and between Nuveen, Premium
Income Municipal 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, 1996 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, 1997 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, 1997 and ratify and confirm the Agreement in all respects.
NUVEEN PREMIUM INCOME
MUNICIPAL FUND. INC.
By: /s/ Gifford R. Zimmerman
------------------------
Gifford R. Zimmerman
Vice President
ATTEST:
/s/ Karen Healy
- ------------------------
Karen Healy
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ J. Thomas Futrell
------------------------
J. Thomas Futrell
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 3
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 9th day of May, 1995 by and between Nuveen Premium
Income Municipal 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 PREMIUM INCOME
MUNICIPAL FUND. INC.
By: /s/ Gifford R. Zimmerman
------------------------
Gifford R. Zimmerman
Vice President
ATTEST:
/s/ Karen Healy
- ------------------------
Karen Healy
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ J. Thomas Futrell
------------------------
J. Thomas Futrell
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 4
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 27th day of July, 1994 by and between Nuveen Premium
Income Municipal 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 PREMIUM INCOME
MUNICIPAL FUND. INC.
By: /s/ Gifford R. Zimmerman
------------------------
Gifford R. Zimmerman
Vice President
ATTEST:
/s/ Karen Healy
- ------------------------
Karen Healy
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ K. Erwin
------------------------
Katherine Erwin
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 5
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC.
AMENDMENT AND RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
Agreement made this 28th day of July, 1993, by and between NUVEEN
PREMIUM INCOME MUNICIPAL FUND, INC., a Minnesota corporation (the "Fund"), and
NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser"), to be effective
August 1, 1993.
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 April 27, 1992, 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 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, have approved the amendment to the Agreement
and the continuation of the Agreement until August 1, 1994 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 computed at an annual rate of:
<TABLE>
<CAPTION>
RATE Net Assets
------ --------------------------------
<S> <C>
.6500% For the first $125 million
.6375% For the next $125 million
.6250% For the next $250 million
.6125% For the next $500 million
.6000% For the next $1 billion
.5875% On assets of $2 billion and over
</TABLE>
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.
<PAGE> 6
2. The first paragraph of Section 7 shall be deleted in its entirety and
the following inserted in lieu thereof:
This Agreement shall continue in effect until August 1, 1994,
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 PREMIUM INCOME MUNICIPAL FUND, INC.
By: /s/ James Wesolowski
------------------------
James Wesolowski
Vice President
ATTEST:
/s/ Gifford R. Zimmerman
- ------------------------
Gifford R. Zimmerman
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ J. Thomas C. Spalding
------------------------
Thomas C. Spalding
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 7
Renewal of Investment Management Agreement
This Agreement made this 23rd day of February, 1993 by and between Nuveen
Premium Income Municipal 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 PREMIUM INCOME MUNICIPAL
FUND, INC.
By: /s/ James Wesolowski
------------------------
James Wesolowski
Vice President
ATTEST:
/s/ Gifford R. Zimmerman
- ------------------------
Gifford R. Zimmerman
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ J. Thomas C. Spalding
------------------------
Thomas C. Spalding
ATTEST:
/s/Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 8
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 27th day of April 1992, by and between NUVEEN PREMIUM
INCOME MUNICIPAL FUND, INC., a Minnesota corporation (the "Fund"), and NUVEEN
ADVISORY CORP., a Delaware corporation (the "Adviser"), to be effective May 1,
1992.
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 limitations 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.
<PAGE> 9
-2-
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 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 computed at an annual rate of .650 of 1% of the average daily net assets
for the first $500 million in net assets of the Fund, .625% of 1% of average
daily net assets in excess of $500 million but not more than $1 billion, and
..600 of 1% of average daily net assets in excess of $1 billion. 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 Advisor 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.
<PAGE> 10
-3-
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 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.
<PAGE> 11
-4-
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, 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.
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 voting securities of the
Fund, accompanied by appropriate notice.
<PAGE> 12
-5-
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 voting securities 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.
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.
<PAGE> 13
- 6 -
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement
to be executed on the day and year above written.
NUVEEN PREMIUM INCOME MUNICIPAL
FUND, INC.
By: /s/ James Wesolowski
---------------------------
James Wesolowski
Vice President
ATTEST:
/s/ Gifford R. Zimmerman
- ------------------------
Gifford R. Zimmerman
Assistant Secretary NUVEEN ADVISORY CORP.
By: /s/ J. Thomas C. Spalding
----------------------------
Thomas C. Spalding
Vice President
ATTEST:
/s/ Larry Martin
- ------------------------
Larry Martin
Assistant Secretary
<PAGE> 1
EXHIBIT 99.i
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> 2
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> 3
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> 1
EXHIBIT 99.j.1
EXCHANGE TRADED FUND CUSTODY AGREEMENT
THIS AGREEMENT is made this 1st day of January, 1991 by and between
NUVEEN PREMIUM INCOME MUNICIPAL 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;
(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;
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<PAGE> 2
(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 as amended 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 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.
2
<PAGE> 3
(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 electromechanical 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 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.
3
<PAGE> 4
(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 successors 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 monies 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 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
4
<PAGE> 5
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 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
5
<PAGE> 6
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 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.
6
<PAGE> 7
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 noncash 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 to
comply with all relevant provisions of the 1940 Act and applicable rules and
regulations
7
<PAGE> 8
thereunder. U.S. Trust will be liable for acts or omissions of any
subcustodian. U.S. Trust shall employ sub-custodians upon receipt of Proper
Instructions, but only in accordance with an applicable vote by the Board of
Directors of the Fund.
(b) Promptly after the close of business on each day U.S. Trust shall
furnish the Fund with confirmations and a summary of all transfers to or from
the account of the Fund during said day. Where securities are transferred to
the account of the Fund established at a Securities Depository or Book Entry
System pursuant to Section 8 hereof, U.S. Trust shall also by book-entry or
otherwise identify as belonging to such Fund the quantity of securities in a
fungible bulk of securities registered in the name of U.S. Trust (or its
nominee) or shown in U.S. Trust's account on the books of a Securities
Depository or Book-Entry System. At least monthly and from time to time, U.S.
Trust shall furnish the Fund with a detailed statement of the Property held for
the Fund under this Agreement.
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to U.S. Trust a certified resolution of the Board of Directors of the
Fund approving, authorizing and instructing U.S. Trust on a continuous and
ongoing basis until instructed to the contrary by Proper Instructions actually
received by U.S. Trust (i) to deposit in a Securities Depository or Book-Entry
System all securities of the Fund eligible for deposit therein and (ii) to
utilize a Securities Depository or Book-Entry System to the extent possible in
connection with the performance of its duties hereunder, including without
limitation settlements of purchases and sales of securities by the Fund, and
deliveries and returns of securities collateral in connection with borrowings.
Without limiting the generality of such use, it is agreed that the following
provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will 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
8
<PAGE> 9
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.
(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
9
<PAGE> 10
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 brokerdealer registered under the
Securities and Exchange Act of 1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions 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 by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures required
by Investment Company Act Release No. 10666, or any subsequent release or
releases of the
10
<PAGE> 11
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 Declaration or By-Laws or any vote or resolution of the Fund's
Board of Directors or any committee thereof. U.S. Trust shall be entitled to
rely upon any Proper Instructions actually received by U.S. Trust pursuant to
this Agreement. The Fund agrees that U.S. Trust shall incur no liability in
acting in good faith upon Proper Instructions given to U.S. Trust, except to
the extent such liability was incurred as a result of U.S. Trust's negligence
or willful misconduct. In accord with instructions from the Fund, as required
by accepted industry practice or as U.S. Trust may elect in effecting the
execution of Fund instructions, advances of cash or other Property made by U.S.
Trust, arising from the purchase, sale, redemption, transfer or other
disposition of Property of the Fund, or in connection with the disbursement of
funds to any party, or in payment of fees, expenses, claims or liabilities owed
to U.S. Trust by the Fund, or to any other party which has secured judgment 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
11
<PAGE> 12
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's
negligence or willful misconduct. U.S. Trust may electronically record, but
shall not be obligated to so record, any instructions given by telephone and
any other telephone discussions with respect to the Fund. In the event that the
Fund uses U.S. Trust's Asset Management system or any successor electronic
communications or information system, the Fund agrees that U.S. Trust is not
responsible for the consequences of the failure of that system to perform for
any reason, beyond the reasonable control of U.S. Trust, or the failure of any
communications carrier, utility, or communications network. In the event that
system is inoperable, the Fund agrees that it will accept the communication of
transaction instructions by telephone, facsimile transmission on equipment
compatible to U.S. Trust's facsimile receiving equipment or by letter, at no
additional charge to the Fund.
(c) U.S. Trust shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by U.S. Trust from
issuers of the securities being held for the Fund. With respect to tender or
exchange offers, U.S. Trust shall transmit promptly by facsimile to the Fund
all written information received by U.S. Trust from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making
the tender or exchange offer. If the Fund desires to
12
<PAGE> 13
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. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. U.S. Trust is authorized
to take the following action without Proper Instructions:
(a) COLLECTION OF INCOME AND OTHER PAYMENTS. U.S. Trust shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property of the Fund, and
promptly advise the Fund of such receipt and shall credit such
income, as collected, to the Fund. From time to time, U.S. Trust
may elect, but shall not be obligated, to credit the account with
interest, dividends or principal payments on payable or
contractual settlement date, in anticipation of receiving same
from a payor, central depository, broker or other agent employed
by the Fund or U.S. Trust. Any such crediting and posting shall be
at the Fund's sole risk, and U.S. Trust shall be authorized to
reverse any such advance posting in the event it does not receive
good funds from any such payor, central depository, broker or
agent of the Customer. U.S. Trust agrees to promptly notify the
Fund of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the
same day as received;
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<PAGE> 14
(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;
(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 therefore 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 therefore 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:
14
<PAGE> 15
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any issuer of securities or corporation, against receipt of such
certificates of deposit, interim receipts or other instruments or documents,
and cash, if any, as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to U.S. Trust of the monies borrowed, or upon receipt of adequate
collateral as agreed upon by the Fund and U.S. Trust which may be in the
form of cash or obligations issued by the U.S. government, its agencies or
instrumentalities, except that in cases where additional collateral is required
to secure a borrowing already made, subject to proper prior authorization,
further securities may be released 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
15
<PAGE> 16
(f) Deliver securities in accordance with the provisions of
any agreement among the Fund, U.S. Trust and a brokerdealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any
agreement among the Fund, U.S. Trust and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment of 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
16
<PAGE> 17
forth the purpose for which such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of
securities, options, futures contracts or options on futures contracts by the
investment advisor, the Fund shall deliver to U.S. Trust (as Custodian) Proper
Instructions specifying with respect to each such purchase: (a) the name of the
issuer and the title of the securities, (b) the number of shares of the
principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or the broker
through whom the purchase was made and (g) the Fund name. U.S. Trust shall upon
receipt of securities purchased by or for the Fund registered in the name of
the Fund or in the name of a nominee of U.S. Trust or of the Fund or in proper
form for transfer or upon receipt of evidence of title to options, futures
contracts or options on futures contracts purchased by the Fund, pay out of the
monies 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, (c)
the date of sale, (d) the sale price per unit, (e) the total amount payable to
17
<PAGE> 18
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 an unlimited number of authorized
shares.
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.
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
18
<PAGE> 19
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.
19. 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.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond U.S.
Trust's control, U.S. Trust shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall not have
liability with respect thereto. U.S. Trust shall enter into and shall maintain
in effect with appropriate parties one or more agreements making reasonable
provisions for back up emergency use of electronic data processing equipment to
the extent appropriate equipment is available.
19
<PAGE> 20
21. 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 misfeasance, bad faith, negligence or reckless disregard by
U.S. Trust of its duties under this Agreement.
22. 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.
20
<PAGE> 21
23. 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.
24. 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
sub-custodians 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 sub-custodian's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties under this Agreement or
any agreement between U.S. Trust and any nominee or subcustodian or (y) U.S.
Trust's own negligent failure to perform its duties under this Agreement. U.S.
Trust similarly agrees to indemnify and hold harmless the fund from all
liabilities and expenses arising directly or indirectly from U.S. Trust's or
such nominee's or sub-custodian's willful 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
sub-custodian's own negligent action, negligent failure to act, willful
21
<PAGE> 22
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.
25. 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 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.
22
<PAGE> 23
26. 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 of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
28. 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
23
<PAGE> 24
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. 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
24
<PAGE> 25
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. 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.
30. 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
25
<PAGE> 26
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.
31. FURTHER ACTIONS. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
32. 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.
33. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
26
<PAGE> 27
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: Jacqueline Binder By: Peter C. Arrighetti
---------------------------- -------------------------------
JACQUELINE BINDER PETER C. ARRIGHETTI
VICE PRESIDENT SENIOR VICE PRESIDENT
NUVEEN INSURED PREMIUM
MUNICIPAL FUND
Attest: Gifford R. Zimmermen By: O. Walter Renfftlen
---------------------------- -------------------------------
GIFFORD R. ZIMMERMEN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
27
<PAGE> 28
EXHIBIT A
CUSTODY SERVICE FEE
Administration and Maintenance Fee
.03% (3-Basis Points) on first $50 million
.02% (2-Basis Points) on next $50 million
.01% (1-Basis Point) on remainder
Transaction Fees
$15.00 Per Book Entry Transaction
$25.00 Per Physical Transaction
$35.00 Per Future Contract or Option Wire
$8.00 Per Wire Transfer
Earnings on Balances
An earning 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 PREMIUM INCOME MUNICIPAL UNITED STATES TRUST COMPANY
FUND, INC. OF NEW YORK
By /s/ O. Walter Rensstlen By [SIG]
------------------------------ ---------------------------
Title V.P. & Controller Title Vice President
--------------------------- ------------------------
Date 12-12-90 Date 12-11-90
---------------------------- ------------------------
<PAGE> 29
NUVEEN PREMIUM INCOME MUNICIPAL 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 PREMIUM INCOME
MUNICIPAL 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 shall and hereby does
<PAGE> 30
-2-
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 PREMIUM INCOME
MUNICIPAL FUND, INC.
/s/ Katherine A. Erwin [SIG]
- --------------------------------- ---------------------------------------
Assistant Secretary Vice President
ATTEST: UNITED STATES TRUST COMPANY OF NEW YORK
/s/ Jacqueline Binder [SIG]
- --------------------------------- ---------------------------------------
Assistant Secretary Vice President
<PAGE> 1
EXHIBIT 99.j.2
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made this 1st day of January, 1991, by and between,
Nuveen Premium Income Municipal Fund, Inc., a Minnesota Corporation (the
"Fund"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York State
chartered bank and trust company ("U.S. Trust").
W I T N E S S E T H:
WHEREAS, the Fund is a registered closed-end diversified management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Fund desires to hire U.S. Trust to provide the Fund
with certain accounting services, and U.S. Trust is willing to provide
such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints U.S. Trust to provide the
accounting services hereinafter set forth to the Fund, and U.S. Trust
accepts such appointment and agrees to provide such services, under the
terms and conditions set forth herein.
2. CALCULATION OF NET ASSET VALUE. U.S. Trust will calculate the
Fund's daily net asset value and the daily per-share net asset value in
accordance with the Fund's effective Registration Statement on Form N-2
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), including its current prospectus. If so directed,
U.S. Trust shall also calculate daily the net income of the Fund
<PAGE> 2
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
-2-
<PAGE> 3
obligation under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
unqualified opinion where required for any document for the Fund.
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> 4
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, national emergencies, explosion, flood, accident earthquake or other
catastrophe, fire, strike or other labor
-4-
<PAGE> 5
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 judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith or negligence on the part of U.S.
Trust in the performance of its obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless U.S. Trust, its directors, officers,
employees, shareholders, and agents from and against any and all claims,
demands, expenses and liabilities (whether with or without basis in fact or
law) of any and every nature which U.S. Trust may sustain or incur or which be
asserted against U.S. Trust by any person by reason of, or as a result of any
action taken or omitted to be taken by U.S. Trust in connection with its
appointment, in good faith, in reliance upon any law, act, regulation or
official interpretation of same even though the same may have been altered,
changed, amended or repealed subsequent to
-5-
<PAGE> 6
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 1, 1991, shall continue in force from year to year
thereafter, but only so long as such continuance is approved by U.S. Trust and
the Fund.
(b) Either party may terminate this Agreement on any date by
giving the other party at least ninety (90) days prior written notice
of such termination specifying the date fixed therefore.
(c) In the event that in connection with termination of
this Agreement a successor to any of U.S. Trust's duties or
responsibilities under this Agreement is designated by the Fund by written
notice to U.S. Trust, U.S. Trust shall, promptly upon such termination and at
the expense of the Fund, transfer all Required Records and shall cooperate in
the transfer of such duties and responsibilities, including provision for
assistance from the U.S. Trust's cognizant personnel in the establishment of
books, records, and other data by such successor.
14. ASSIGNMENT. Except as hereinafter provided, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective permitted
successors and assignees. U.S. Trust may, without further consent on the part
of the Fund, subcontract for the performance hereof with third parties who are
subsidiaries or other affiliates of U.S. Trust; provided, however, that U.S.
-6-
<PAGE> 7
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> 8
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 Premium Income
Municipal 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> 9
EXHIBIT A
FUND ACCOUNTING FEE
$18,000 PER ANNUM
<PAGE> 1
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, 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 file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 8th day of August 1997.
/s/ Timothy R. Schwertfeger
---------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of August 1997 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.
/s/ Karen L. Healy
-----------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE> 2
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, 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 file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 8th day of August 1997.
/s/ Anthony T. Dean
-----------------------
Anthony T. Dean
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of August 1997 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.
/s/ Karen L. Healy
-----------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE> 3
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, 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 file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 8th day of August 1997.
/s/ Robert P. Bremner
-----------------------
Robert P. Bremner
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of August 1997 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.
/s/ Karen L. Healy
-----------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE> 4
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, 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 file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 8th day of August 1997.
/s/ Lawrence H. Brown
-----------------------
Lawrence H. Brown
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of August 1997 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.
/s/ Karen L. Healy
-----------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE> 5
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, 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 file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 8th day of August 1997.
/s/ Anne E. Impellizzeri
------------------------
Anne E. Impellizzeri
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of August 1997 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.
/s/ Karen L. Healy
-----------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE> 6
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, 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 file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 8th day of August 1997.
/s/ Peter R. Sawers
-----------------------
Peter R. Sawers
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of August 1997 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.
/s/ Karen L. Healy
-----------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE> 7
NUVEEN PREMIUM INCOME MUNICIPAL 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 TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, LARRY W. MARTIN, GIFFORD R. ZIMMERMAN, and
THOMAS S. HARMAN, and each of them (with full power to each of them to act
alone) her true and lawful attorney-in-fact and agent, for her on her behalf
and in her name, place and stead, in any and all capacities, to sign, execute
and file one or more Registration Statements on Form N-2 under the Securities
Act of l933 and the Investment Company Act of l940, 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
registration thereof, or the issuance of shares thereof, 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 she 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 her hand this 6th day of August 1997.
/s/ William J. Schneider
------------------------
William J. Schneider
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 6th day of August 1997 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 her voluntary act and deed for the
intent and purposes therein set forth.
/s/ Marilee F. Gault
-----------------------
Notary Public
My Commission Expires: 5/6/02
