<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NUVEEN INVESTMENT QUALITY MUNICIPAL FUND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[NUVEEN LOGO]
June , 1996
DEAR SHAREHOLDER:
We are pleased to invite you to the Annual Meetings of Shareholders of each of
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., and Nuveen Insured Municipal Opportunity Fund, Inc.
The meetings are scheduled for Thursday, July 25, 1996 at 10:30 a.m., Chicago
time, in the 6th floor auditorium of The Northern Trust Company, 50 South
LaSalle Street, Chicago, Illinois.
At the Annual Meetings, all shareholders will be asked to consider and approve a
very important proposal. The Funds' management seeks to update the terms of the
Money Market Cumulative Preferred Stock or Municipal Auction Rate Cumulative
Preferred Stock, as the case may be, (MuniPreferred(R)) to conform with the
state-of-the-art terms of more recent MuniPreferred offerings (as more fully
described in the attached proxy statement). We believe the proposals will
provide a wider range of investment choices and simplify investing in and owning
shares of MuniPreferred, potentially making MuniPreferred an even better
investment. If approved, the terms of the MuniPreferred would be amended to,
among other things, offer the following advantages:
- Eliminate Master Purchaser's Letters
- Refine Maximum Dividend Rate Provisions
- Increase Flexibility in Establishing Extended Rate Periods
You will also be asked to elect directors and ratify the selection of
independent auditors.
WHETHER OR NOT YOU PLAN TO JOIN US, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
We appreciate your continued support and confidence in Nuveen and our family of
investments.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
President
<PAGE> 3
<TABLE>
<S> <C>
NOTICE OF ANNUAL MEETINGS 333 West Wacker Drive
OF SHAREHOLDERS Chicago, Illinois
JULY 25, 1996 60606
(800) 257-8787
</TABLE>
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.
June , 1996
TO THE SHAREHOLDERS OF THE ABOVE FUNDS:
Notice is hereby given that the Annual Meeting of Shareholders of each of 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. and Nuveen Insured Municipal Opportunity Fund, Inc., each a
Minnesota corporation (individually, a "Fund" and, collectively, the "Funds"),
will be held in the 6th floor auditorium of The Northern Trust Company, 50 South
LaSalle Street, Chicago, Illinois, on Thursday, July 25, 1996, at 10:30 a.m.,
Chicago time, for the following purposes:
MATTERS TO BE VOTED ON BY ALL SHAREHOLDERS OF EACH FUND:
1. To elect four (4) directors to serve until the next Annual Meeting and
until their successors shall have been duly elected and qualified.
2. To ratify the selection of Ernst & Young LLP as independent auditors for
the fiscal year ending October 31, 1996.
3. To approve amendments to the terms of the Fund's Money Market Cumulative
Preferred Stock or Municipal Auction Rate Cumulative Preferred Stock, as the
case may be.
4. To transact such other business as may properly come before the Annual
Meeting.
MATTER TO BE VOTED ON BY EACH FUND'S HOLDERS OF MONEY MARKET CUMULATIVE
PREFERRED STOCK OR MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK ONLY:
To elect two (2) directors to serve until the next Annual Meeting and until
their successors shall have been duly elected and qualified.
Shareholders of record of each Fund at the close of business on May 28, 1996 are
entitled to notice of and to vote at that Fund's Annual Meeting.
IN ORDER TO AVOID DELAY AND ADDITIONAL EXPENSE FOR YOUR FUND, AND TO ASSURE THAT
YOUR SHARES ARE REPRESENTED, IF YOU DO NOT EXPECT TO BE PRESENT IN PERSON AT
YOUR ANNUAL MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND MAIL THE ENCLOSED
PROXY AS PROMPTLY AS POSSIBLE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
James J. Wesolowski
Secretary
<PAGE> 4
<PAGE> 5
<TABLE>
<S> <C>
JOINT PROXY STATEMENT 333 West Wacker Drive
JUNE , 1996 Chicago, Illinois
60606
(800) 257-8787
</TABLE>
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.
GENERAL INFORMATION
This Joint Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of each of Nuveen Performance Plus Municipal Fund, Inc.
("Performance Plus"), Nuveen Municipal Advantage Fund, Inc. ("Municipal
Advantage"), Nuveen Investment Quality Municipal Fund, Inc. ("Investment
Quality"), Nuveen Insured Quality Municipal Fund, Inc. ("Insured Quality"),
Nuveen Select Quality Municipal Fund, Inc ("Select Quality"), Nuveen Quality
Income Municipal Fund, Inc. ("Quality Income") and Nuveen Insured Municipal
Opportunity Fund, Inc. ("Insured Municipal Opportunity") (individually, a "Fund"
and, collectively, the "Funds"), of proxies to be voted at the Annual Meeting of
Shareholders of each Fund to be held on July 25, 1996 (for each Fund, an "Annual
Meeting" and, collectively, the "Annual Meetings"), and at any and all
adjournments thereof.
On the matters coming before each Fund's Annual Meeting as to which a choice has
been specified by the shareholders of that Fund on the proxy, the shares of that
Fund will be voted accordingly. If no choice is so specified, the shares of each
Fund will be voted FOR the election of the four nominees for director to be
elected by all shareholders and the two nominees for director to be elected by
holders of Money Market Cumulative Preferred Stock, in the case of Performance
Plus, or Municipal Auction Rate Cumulative Preferred Stock ("MuniPreferred(R)")
in the case of the other Funds (for convenience, shares of Performance Plus'
Money Market Cumulative Preferred Stock shall also be referred to in this Joint
Proxy Statement as shares of MuniPreferred), as listed in this Joint Proxy
Statement, FOR ratification of the selection of Ernst & Young LLP as the Fund's
independent auditors and FOR approval of the amendments to the terms of the
Fund's MuniPreferred. Shareholders of any Fund who execute proxies may revoke
them at any time before they are voted by filing with that Fund a written notice
of revocation, by delivering a duly executed proxy bearing a later date, or by
attending that Annual Meeting and voting in person.
The Board of Directors of each Fund has determined that the use of this Joint
Proxy Statement for the Fund's Annual Meeting is in the best interest of the
Fund and its shareholders in light of the similar matters being considered and
voted on by the shareholders. Shareholders of each Fund will vote separately on
each proposal relating to their Fund, and a vote on a proposal by the
shareholders of one Fund will not affect the vote on the proposal by the
shareholders of another Fund.
The following table indicates which shareholders are solicited with respect to
each matter:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MATTER COMMON STOCK MUNIPREFERRED
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Election of Directors by all Shareholders (Ms. Impellizzeri and X X
Messrs. Brown, Dean and Sawers nominated for each Fund)
- --------------------------------------------------------------------------------------------------------
Election of Directors by MuniPreferred only (Mrs. Rosenheim and X
Mr. Schwertfeger nominated for each Fund)
- --------------------------------------------------------------------------------------------------------
Ratify Selection of Auditors X X
- --------------------------------------------------------------------------------------------------------
Approval of amendments to the terms of the Fund's MuniPreferred X X
- --------------------------------------------------------------------------------------------------------
</TABLE>
A quorum of shareholders is required to take action at each Fund's Annual
Meeting. A majority of the shares entitled to vote at each Annual Meeting,
represented in person or by proxy, will constitute a quorum of shareholders at
that Annual Meeting, except that for each Fund the election of the two nominees
to be elected by holders of MuniPreferred, 33 1/3% of the MuniPreferred shares
entitled to vote and represented in person or by proxy will constitute a quorum.
Votes cast by proxy or in person at each Annual Meeting will be tabulated by the
inspectors of election appointed for that Annual Meeting. The inspectors of
election will determine whether or not a quorum is present at the Annual
Meeting. The inspectors of election will treat abstentions and "broker
non-votes" (i.e., shares held by brokers or nominees, typically in "street
name," as to which (i) instructions have not been received from the beneficial
owners or persons entitled to vote and
1
<PAGE> 6
(ii) the broker or nominee does not have discretionary voting power on a
particular matter) as present for purposes of determining a quorum.
For purposes of determining the approval of the matters submitted to the
shareholders for a vote, abstentions and broker non-votes will be treated as
shares voted against the election of directors, against ratification of the
selection of independent auditors and against approval of the amendments to the
terms of the Fund's MuniPreferred. The details of each proposal to be voted on
by the shareholders of each Fund and the vote required for approval of each
proposal are set forth under the description of each proposal below.
Shares of a series of MuniPreferred of a Fund held in "street name" for which
voting instructions have not been received as of one business day before the
meeting, or, if adjourned, one business day before the day to which the meeting
is adjourned, and that would otherwise be treated as "broker non-votes" may,
pursuant to Rule 452 of the New York Stock Exchange, be voted by the broker on
each item in the same proportion as the votes cast by all MuniPreferred
shareholders of that series of that Fund who have voted on the item.
As of May 28, 1996, there were issued and outstanding: shares of
common stock and 4,000 shares of each series of MuniPreferred, Series M, T, W
and F, of Performance Plus; shares of common stock and 3,000 shares
of each series of MuniPreferred, Series M, T, W and F, of Municipal Advantage;
shares of common stock and 2,500 shares of each series of
MuniPreferred, Series M, T, W and F, of Investment Quality; shares of
common stock and 2,600 shares of each series of MuniPreferred, Series M, T, W
and F, of Insured Quality; shares of common stock and 2,000 shares of
each series of MuniPreferred, Series M and T and 2,800 shares of each series of
MuniPreferred Series W and F of Select Quality; shares of common
stock, 3,000 shares of each series of MuniPreferred, Series M, T, W, and F and
4,000 shares of MuniPreferred, Series TH, of Quality Income; and
shares of common stock and 4,000 shares of each series of MuniPreferred, Series
M, T, W, TH1, TH2 and F of Insured Municipal Opportunity. Those persons who were
shareholders of record at the close of business on May 28, 1996 will be entitled
to one vote for each share held.
This Joint Proxy Statement is first being mailed to shareholders of the Funds on
or about June , 1996.
2
<PAGE> 7
SUMMARY OF PROPOSAL 3
Proposal 3 would amend the terms of the MuniPreferred in an effort to simplify
investing in and owning shares of MuniPreferred. The proposal would, among other
things, accomplish the following:
1. ELIMINATE MASTER PURCHASER'S LETTERS. A purchaser of MuniPreferred is
presently required to sign a master purchaser's letter. In order to simplify the
investment process, the proposal would eliminate this requirement.
2. INCREASE NUMBER OF EXTENDED RATE PERIODS. The Fund currently may extend a
rate period from the minimum 7 days to 28 days, 182 days, 1 year, 3 years or 5
years. The proposal would provide the Fund with the ability to select an
extended rate period of any length divisible by seven days up to five years. By
providing the Fund with a greater number of extended rate periods to choose
from, the Fund would have greater flexibility in managing its capital structure
and MuniPreferred shareholders would have a wider range of investment choices.
3. ELIMINATE DEEMED HOLD ORDERS FOR EXTENDED RATE PERIODS. Currently, if a
MuniPreferred shareholder fails to submit an order at an auction, such owner is
deemed to have submitted a hold order. For rate periods of up to 28 days, a
deemed hold order is viewed as a convenience to shareholders who wish to
continue to hold shares, alleviating the need to submit an order at each weekly
auction. To avoid, however, having MuniPreferred shareholders inadvertently hold
MuniPreferred for rate periods of more than 28 days, the proposal would treat
inaction on the part of shareholders when orders are due prior to a rate period
of more than 28 days as a sell order.
Proposal 3 also would result in administrative conveniences and potential cost
savings to the Fund.
The foregoing is a summary of certain provisions of Proposal 3 and should be
read in conjunction with the full description of the Proposal. AS DESCRIBED
THEREIN, THE BOARD OF DIRECTORS OF EACH FUND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE APPROVAL OF PROPOSAL 3.
3
<PAGE> 8
1. ELECTION OF DIRECTORS OF EACH FUND
At each Fund's Annual Meeting, six (6) directors are to be elected to serve
until the next Annual Meeting and until their successors shall have been duly
elected and qualified. Under the terms of each Fund's Articles of Incorporation,
as amended, under normal circumstances holders of MuniPreferred are entitled to
elect two (2) directors, and the remaining directors are to be elected by
holders of common stock and MuniPreferred, voting together as a single class.
The members of the Board of Directors and the nominees for election to the Board
are the same for each Fund. Table I below shows the nominees for director of
each Fund to be elected by holders of common stock and MuniPreferred, voting
together as a single class. Table II below shows the nominees for director of
each Fund to be elected by holders of MuniPreferred only. The affirmative vote
of a majority of the shares present and entitled to vote at each Fund's Annual
Meeting will be required to elect the directors of that Fund.
It is the intention of the persons named in the enclosed proxy to vote the
shares represented thereby for the election of the nominees listed below unless
the proxy is marked otherwise. Each of the nominees has agreed to serve as a
director of each Fund if elected; however, should any nominee become unable or
unwilling to accept nomination or election, the proxies for each Fund will be
voted for one or more substitute nominees designated by that Fund's present
Board of Directors.
Tables I and II below show each nominee's age, principal occupations and other
business affiliations, the year in which each nominee was first elected or
appointed a director of each Fund and the number of shares of common stock of
the Funds and of all funds managed by Nuveen Advisory Corp. (excluding money
market funds) which each nominee beneficially owned as of April 30, 1996. All of
the nominees, except Anthony T. Dean, were last elected to the Board of
Directors at the 1995 annual meeting of shareholders. Mr. Dean will be standing
for election by each Fund's shareholders for the first time at the Annual
Meeting to fill a vacancy that will occur upon the retirement of Richard J.
Franke from each Fund's Board of Directors on June 30, 1996. Mr. Franke's
contributions to the Funds are greatly appreciated. As of April 30, 1996, Mr.
Franke owned 1,000 shares of each of Performance Plus, Municipal Advantage,
Insured Quality, Select Quality, Quality Income and Insured Municipal
Opportunity, and 500 shares of Investment Quality. In addition to the vacancy
that will occur upon the retirement of Mr. Franke, there is currently another
vacancy on each Fund's Board. Each Fund's nominating committee is considering
candidates for that vacancy.
EACH FUND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF THE NOMINEES NAMED BELOW.
TABLE I
NOMINEES FOR DIRECTOR FOR EACH FUND TO BE ELECTED BY ALL SHAREHOLDERS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FULL SHARES OF COMMON STOCK
BENEFICIALLY OWNED
APRIL 30, 1996
----------------------------
NAME, AGE AND PRINCIPAL OCCUPATIONS OF YEAR FIRST ELECTED ALL NUVEEN
NOMINEES AS OF APRIL 30, 1996(1) OR APPOINTED A DIRECTOR THE FUNDS(2) FUNDS(3)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lawrence H. Brown (61) 1993--All Funds 695 3,637
Director of the Funds; retired in August 1989 as
Senior Vice President of The Northern Trust
Company.
*Anthony T. Dean (51) Nominee 0 5,695
Director nominee of the Funds and President-elect
(effective July 1, 1996); President and Trustee of
the Select Tax-Free Portfolios advised by Nuveen
Institutional Advisory Corp. (since July 1994);
President-elect (effective July 1, 1996) and
Executive Vice President and Director of The John
Nuveen Company (since March 1992) and John Nuveen &
Co. Incorporated; Director of Nuveen Advisory Corp.
(since October 1992) and Nuveen Institutional
Advisory Corp. (since October 1992).
Anne E. Impellizzeri (63) 1994--All Funds 1,000 2,000
Director of the Funds; President and Chief Executive
Officer of Blanton-Peale, Institutes of Religion
and Health (since December 1990); prior thereto, Vice
President of New York City Partnership (from 1987 to
1990) and Vice President of Metropolitan Life
Insurance Company (from 1980 to 1987).
Peter R. Sawers (63) 1991--All Funds 2,525 8,281
Director of the Funds; Adjunct Professor of Business
and Economics, University of Dubuque, Iowa (since
January 1991); Adjunct Professor, Lake Forest
Graduate School of Management, Lake Forest, Illinois
(since January 1992); prior thereto, Executive
Director, Towers Perrin Australia (management
consultant); Chartered Financial Analyst; Certified
Management Consultant.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 9
TABLE II
NOMINEES FOR DIRECTOR FOR EACH FUND
TO BE ELECTED BY HOLDERS OF MUNIPREFERRED
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
FULL SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
APRIL 30, 1996
----------------------------
NAME, AGE AND PRINCIPAL OCCUPATIONS OF YEAR FIRST ELECTED ALL NUVEEN
NOMINEES AS OF APRIL 30, 1996(1) OR APPOINTED A DIRECTOR THE FUNDS(2) FUNDS(3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Margaret K. Rosenheim (69) 1989-- Performance Plus, 0 5,329
Director of the Funds; Helen Ross Professor of Municipal Advantage
Social Welfare Policy, School of Social Service
Administration, University of Chicago. 1990-- Investment Quality,
Insured Quality
1991-- Select Quality,
Quality Income,
Insured Municipal
Opportunity
*Timothy R. Schwertfeger (47) 1994-- All Funds 5,000 94,921
President and Director of the Funds (since July
1994), Chairman-elect (effective July 1, 1996);
Chairman-elect (effective July 1, 1996) and
Executive Vice President and Director of The John
Nuveen Company (since March 1992) and John Nuveen
& Co. Incorporated; Director of Nuveen Advisory
Corp. (since October 1992) and Nuveen
Institutional Advisory Corp. (since October
1992).
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(*) "Interested person" as defined in the Investment Company Act of 1940, as
amended, by reason of being an officer or director of the Funds' investment
adviser, Nuveen Advisory Corp.
(1) The director nominees of the Funds, except Anthony T. Dean, are board
members of 21 Nuveen open-end funds and 53 Nuveen closed-end funds managed by
Nuveen Advisory Corp. ("NAC Funds"). Mr. Dean is a board member nominee of 18
closed-end NAC Funds and is a board member of five closed-end funds managed by
Nuveen Institutional Advisory Corp. ("NIAC Funds") Mr. Schwertfeger is a board
member nominee of each of the NIAC Funds.
(2) The shares shown in this column include for: Lawrence H. Brown, 695 shares
of Insured Municipal Opportunity; Anne E. Impellizzeri, 1,000 shares of Insured
Municipal Opportunity; Peter R. Sawers, 1,265 shares of Municipal Advantage and
1,260 shares of Insured Quality; and Timothy R. Schwertfeger, 5,000 shares of
Insured Municipal Opportunity. These persons have sole voting power and sole
investment power, except that Mr. Schwertfeger's shares of Insured Municipal
Opportunity are held jointly with his wife. No director nominee beneficially
owned as much as 1% of any Fund's outstanding Common Stock or beneficially owned
any shares of MuniPreferred of any of the Funds except Timothy R. Schwertfeger's
wife holds 4 shares of MuniPreferred of Performance Plus and 2 shares of
MuniPreferred of Quality Income.
(3) The number shown reflects the aggregate number of common shares beneficially
owned in all of the NAC Funds referred to in note (1) above (excluding money
market funds).
The directors affiliated with John Nuveen & Co. Incorporated ("Nuveen") or
Nuveen Advisory Corp. (the "Adviser") serve without any compensation from the
Funds. Directors who are not affiliated with Nuveen or the Adviser receive a
$45,000 annual retainer for serving as a director or trustee, as the case may
be, of all funds sponsored by Nuveen and managed by the Adviser and a $1,000 fee
per day plus expenses for attendance at all meetings held on a day on which a
regularly scheduled Board meeting is held, a $1,000 fee per day plus expenses
for attendance in person or a $500 fee per day plus expenses for attendance by
telephone at a meeting held on a day on which no regular Board meeting is held,
and a $250 fee per day plus expenses for attendance in person or by telephone at
a meeting of the executive committee. The annual retainer, fees and expenses are
allocated among the funds managed by the Adviser on the basis of relative net
asset sizes. Each Fund has adopted a Directors' Deferred Compensation Plan
pursuant to which a director of that 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.
The tables below show, for each director who is not affiliated with Nuveen or
the Adviser, the aggregate compensation paid by each Fund for its fiscal year
ended October 31, 1995 and the total compensation that Nuveen funds accrued for
each director during the calendar year 1995, including any interest accrued for
directors on deferred compensation. The rate of
5
<PAGE> 10
earnings on deferred compensation is equivalent to the average net earnings
rate, computed on a quarterly basis, on the shares of such Nuveen fund.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL
COMPENSATION
NUVEEN FUNDS
AGGREGATE COMPENSATION FROM THE FUNDS ACCRUED FOR
DIRECTORS(2)
---------------------------------------------------------------------------------
INSURED
PERFORMANCE MUNICIPAL INVESTMENT INSURED SELECT QUALITY MUNICIPAL
NAME OF DIRECTOR PLUS ADVANTAGE QUALITY QUALITY QUALITY INCOME OPPORTUNITY
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence H. Brown $1,817 1,386 1,195 1,244 1,119 1,708 2,472 55,500
Anne E. Impellizzeri $1,187 1,386 1,195 1,244 1,119 1,708 2,472 63,000
Margaret K. Rosenheim $1,964(1) 1,494 1,286 1,339 1,203 1,845 2,677 60,750(3)
Peter R. Sawers $1,817 1,386 1,195 1,244 1,119 1,708 2,472 55,500
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $249 in interest accrued on deferred compensation from prior years.
(2) Includes compensation for service on the boards of the NAC Funds.
(3) Includes $1,572 in interest accrued on deferred compensation from prior
years.
Richard J. Franke, Margaret K. Rosenheim and Timothy R. Schwertfeger currently
serve as members of the executive committee of the Board of Directors of each
Fund. The executive committee of each Fund, which meets between regular meetings
of the Board of Directors, is authorized to exercise all of the powers of the
Board of Directors. The respective executive committees of each Fund held twelve
meetings during the fiscal year ended October 31, 1995.
Each Fund's Board of Directors has an audit committee composed of Lawrence H.
Brown, Anne E. Impellizzeri, Margaret K. Rosenheim and Peter R. Sawers,
directors who are not "interested persons." The audit committee reviews the work
and any recommendations of the Fund's independent auditors. Based on such
review, it is authorized to make recommendations to the Board of Directors. The
respective audit committees of the Funds held two meetings during the fiscal
year ended October 31, 1995.
Nomination of those directors who are not "interested persons" of each Fund is
committed to a nominating committee composed of the directors who are not
"interested persons" of that Fund. It identifies and recommends individuals to
be nominated for election as non-interested directors. The nominating committees
of each Fund held one meeting during the fiscal year ended October 31, 1995. No
policy or procedure has been established as to the recommendation of director
nominees by shareholders.
Each Fund's Board of Directors held five meetings during the fiscal year ended
October 31, 1995. During the last fiscal year, each director attended 75% or
more of each Fund's Board meetings and the committee meetings (if a member
thereof), except that Mr. Franke was unable to attend certain executive
committee meetings held solely to declare dividends. His attendance at executive
committee meetings only which he was scheduled to attend was less than 75%.
Each Fund has the same executive officers. The following table sets forth
information as of April 30, 1996 with respect to each executive officer of the
Funds, other than executive officers who are directors and reflected above.
Officers of the Funds receive no compensation from the Funds. The term of office
of all officers will expire at the first meeting of the Board of Directors of
each Fund after the Annual Meeting, which Board of Directors' meeting is
presently scheduled to be held on July 25, 1996 for each Fund; however, as
previously mentioned, Mr. Franke will be retiring from the Board of Directors
effective June 30, 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NAME, AGE AND PRINCIPAL OCCUPATIONS FOR PAST FIVE YEARS POSITION AND OFFICES WITH FUNDS
- -------------------------------------------------------------------------------------------------------
<S> <C>
William M. Fitzgerald, 32 Vice President
Vice President of Nuveen Advisory Corp. (since December 1995); (since 1996)
prior thereto, Assistant Vice President (from September 1992 to
December 1995) and Assistant Portfolio Manager (from June 1988 to
September 1992) of Nuveen Advisory Corp.
Kathleen M. Flanagan, 48 Vice President
Vice President of John Nuveen & Co. Incorporated. (since 1994)
Richard J. Franke, 64 Chairman of the Board
Chairman of the Board and Director of the John Nuveen Company (since each Fund's organization)
(since March 1992), John Nuveen & Co. Incorporated, Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.; formerly
Chairman of the Board and Board Member of the Nuveen Funds advised
by Nuveen Institutional Advisory Corp. (from inception to August
1994); Certified Financial Planner.
J. Thomas Futrell, 40 Vice President
Vice President of Nuveen Advisory Corp. (since 1991)
Steven J. Krupa, 38 Vice President
Vice President of Nuveen Advisory Corp. (since 1990)
Anna R. Kucinskis, 50 Vice President
Vice President of John Nuveen & Co. Incorporated. (since 1991)
</TABLE>
6
<PAGE> 11
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
NAME, AGE AND PRINCIPAL OCCUPATIONS FOR PAST FIVE YEARS POSITION AND OFFICES WITH FUNDS
- -------------------------------------------------------------------------------------------------------
<S> <C>
Larry W. Martin, 44 Vice President (since 1993) &
Vice President (since September 1992), Assistant Secretary and Assistant Secretary (since 1988)
Assistant General Counsel of John Nuveen & Co. Incorporated; Vice
President (since May 1993) and Assistant Secretary of Nuveen
Advisory Corp.; Vice President (since May 1993) and Assistant
Secretary (since January 1992) of Nuveen Institutional Advisory
Corp.; Assistant Secretary (since February 1993) of The John Nuveen
Company; Director of Nuveen, Duff & Phelps Investment Advisors
(since January 1995).
O. Walter Renfftlen, 56 Vice President & Controller
Vice President and Controller of The John Nuveen Company (since (since each Fund's organization)
March 1992), John Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory Corp.
Thomas C. Spalding, Jr., 44 Vice President
Vice President of Nuveen Advisory Corp. and Nuveen Institutional (since each Fund's organization)
Advisory Corp.; Chartered Financial Analyst.
H. William Stabenow, 61 Vice President & Treasurer
Vice President and Treasurer of The John Nuveen Company (since (since each Fund's organization)
March 1992), John Nuveen & Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional Advisory Corp. (since January 1992).
James J. Wesolowski, 45 Vice President & Secretary
Vice President, General Counsel and Secretary of The John Nuveen (since each Fund's organization)
Company (since March 1992), John Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.
Gifford R. Zimmerman, 39 Vice President (since 1993) &
Vice President (since September 1992), Assistant Secretary and Assistant Secretary (since 1988)
Assistant General Counsel of John Nuveen & Co. Incorporated; Vice
President (since May 1993) and Assistant Secretary of Nuveen
Advisory Corp.; Vice President (since May 1993) and Assistant
Secretary (since January 1992) of Nuveen Institutional Advisory
Corp.
- -------------------------------------------------------------------------------------------------------
</TABLE>
On April 30, 1996, directors and executive officers of the Funds as a group
beneficially owned the following Fund shares: Performance Plus, no shares of
common stock and 4 shares of MuniPreferred; Municipal Advantage, 16,265 shares
of common stock (less than 1%) and no shares of MuniPreferred; Investment
Quality, no shares of common stock or of MuniPreferred; Insured Quality, 5,260
shares of common stock (less than 1%) and no shares of MuniPreferred; Select
Quality, no shares of common stock or of MuniPreferred; Quality Income, 750
shares of common stock (less than 1%) and 8 shares of MuniPreferred; and Insured
Municipal Opportunity, 12,695 shares of common stock (less than 1%) and 2 shares
of MuniPreferred. On April 30, 1996, directors, director nominees and executive
officers of the Funds as a group beneficially owned 194,736 common shares of all
funds managed by the Adviser (excluding money market funds). As of April 30,
1996, no person is known to the Funds to have owned beneficially more than five
percent of the shares of Common Stock or MuniPreferred of any Fund.
Section 30(f) of the Investment Company Act of 1940, as amended (the "1940
Act"), and Section 16(a) of the Securities Exchange Act of 1934, as amended,
require each Fund's officers and directors, investment adviser, affiliated
persons of the investment adviser and persons who own more than ten percent of a
registered class of the Funds' equity securities to file forms reporting their
affiliation with that Fund and reports of ownership and changes in ownership of
that Fund's shares with the Securities and Exchange Commission (the "SEC") and
the New York Stock Exchange. These persons and entities are required by SEC
regulation to furnish the Funds with copies of all Section 16(a) forms they
file. Based on a review of these forms furnished to each Fund, each Fund
believes that during the fiscal year ended October 31, 1995, all Section 16(a)
filing requirements applicable to that Fund's officers and directors, investment
adviser and affiliated persons of the investment adviser were complied with,
except that one report on Form 5 was filed after the applicable deadline on
behalf of Lawrence H. Brown in connection with his purchase of additional shares
of common stock of Insured Municipal Opportunity.
2. SELECTION OF INDEPENDENT AUDITORS
The members of each Fund's Board of Directors who are not "interested persons"
of that Fund have unanimously selected Ernst & Young LLP, independent public
accountants, as independent auditors, to audit the books and records of that
Fund for the fiscal year ending October 31, 1996. Ernst & Young LLP has served
each Fund in this capacity since that Fund was organized and has no direct or
indirect financial interest in that Fund except as independent auditors. The
selection of Ernst & Young LLP as independent auditors of each Fund is being
submitted to the shareholders for ratification, which requires the affirmative
vote of a majority of the shares of each Fund present and entitled to vote on
the matter. A representative of Ernst & Young LLP is expected to be present at
the Annual Meetings and will be available to respond to any appropriate
questions raised at the Annual Meetings and to make a statement if he or she
wishes.
EACH FUND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS.
7
<PAGE> 12
3. AMENDMENT AND RESTATEMENT OF THE STATEMENT
The Board of Directors of each Fund has proposed that each Statement
Establishing and Fixing the Rights and Preferences of MuniPreferred (the
"Statement") for each Fund, be amended and restated. The proposed Amendment and
Restatement (the "Amendment") would make certain changes to the terms of the
Statement in order to provide greater flexibility, simplify and clarify the
terminology and organization of the Statement and, in general, bring the
Statement into conformity with the terms of MuniPreferred issued by other more
recent Nuveen-sponsored closed-end funds, thereby resulting in administrative
convenience and potential cost savings to the Fund.
EACH FUND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE APPROVAL OF THE AMENDMENT.
Because the proposed separate amendments to the Statement for each Fund are
interrelated and set forth in a single restatement of each such Fund's
Statement, they will be voted upon by each Fund as a single amendment. For each
Fund, the affirmative vote of the holders of at least a majority of the shares
of common stock and shares of MuniPreferred present in person or by proxy and
entitled to vote, voting as a single class, and the affirmative vote of the
holders of at least 66 2/3% of the outstanding shares of each series of
MuniPreferred, each voting as a separate class, are required to approve the
Amendment.
Set forth below is a description and explanation of the various revisions to
each Fund's Statement that are embodied in each such Fund's Amendment. To the
extent a particular revision applies only to one or more Funds, it is generally
because the revision is already incorporated into the Statement for the other
Funds. Certain revisions, to the extent that they relate to a Taxable Allocation
by a Fund and the resulting Gross-up payments, are not being proposed for
Performance Plus because that Fund is not required to make Taxable Allocations
by the Internal Revenue Service. Where a proposed revision is described as
intended to clarify a provision of the Statement, the revision is designed to
reflect the Board of Directors' interpretation of the current provision without
making any substantive change.
Unless the context requires otherwise, capitalized terms used but not defined
shall have the meanings ascribed to such terms in (a) the Statement or the
Amendment and (b) Annex A hereto. The summary of the Amendment set forth below
is qualified in its entirety by reference to the Amendment, a copy of which is
available from the Fund upon request without charge.
A. DIVIDEND PAYMENT PROVISIONS (SECTION 2 OF PART I OF THE AMENDMENT)
1. FREQUENCY OF DIVIDEND PAYMENTS DURING SPECIAL RATE PERIODS
The Amendment would provide the Fund with the flexibility to pay dividends more
frequently during Special Rate Periods. Current provisions in the Statement
require dividends to be paid every fourth week after the first day of a 28-day
Special Rate Period, approximately every 13th week during a 182-day Special Rate
Period, and approximately every three months during longer Special Rate Periods.
The Amendment provides that dividends on shares of MuniPreferred will be payable
during Special Rate Periods consisting of 28 Rate Period Days or fewer on a
weekly basis, and during any Special Rate Period consisting of more than 28 Rate
Period Days, at such times as the Fund sets forth in the Notice of Special Rate
Period. Since sellers of MuniPreferred are subject to taxation at capital gains
rates on the portion of the sale price that represents accrued dividends,
whereas the dividends when paid constitute tax-exempt income, the greater the
amount of accrued dividends at a time when a holder sells shares of
MuniPreferred outside of an Auction, the greater the possible adverse tax effect
to the seller. This potential tax burden to sellers is likely to result in less
favorable bids in an Auction for a Special Rate Period, thereby increasing the
cost to the Fund of designating a Special Rate Period. The ability to fix more
frequent Dividend Payment Dates during Special Rate Periods would reduce the
amount of unpaid dividends that accrue between Dividend Payment Dates, which
should result in a lower Applicable Rate for Special Rate Periods, thereby
reducing the cost to the Fund of Special Rate Periods.
2. RESUMPTION OF AUCTIONS AFTER FAILURES TO DEPOSIT; LATE CHARGES
The Amendment, in order to conform the Statement to current Moody's guidelines,
would require the Fund to arrange to pay a late charge to a beneficial owner of
shares of MuniPreferred if there has been a Failure to Deposit with respect to
such shares. The Moody's guidelines require the Fund, in addition to curing a
Failure to Deposit before resuming Auctions for shares of MuniPreferred with
respect to which such Failure to Deposit has occurred, to pay a late charge to
beneficial owners of such shares before resuming Auctions therefor.
The Statement currently provides for each Fund except Performance Plus and
Municipal Advantage, and is proposed to be amended to provide for Performance
Plus and Municipal Advantage, that if any Failure to Deposit shall occur during
any Rate Period of shares of MuniPreferred (other than any Special Rate Period
of 4 or more Dividend Periods (1 year or more) or any Rate Period succeeding any
Special Rate Period of 4 or more Dividend Periods during which a Failure to
Deposit occurred that has not been cured), no Auction will be held for such
shares for the next Rate Period thereof and the Fund shall pay dividends on such
shares at a penalty rate for such next Rate Period. If, however, the Fund, at
its option, cures such Failure to Deposit and pays a late charge prior to 12:00
Noon, New York City time, on the third business day next
8
<PAGE> 13
succeeding the date on which such Failure to Deposit occurred, the penalty
dividend rate will be lower than it would otherwise be. Further, the Fund's
failure to pay the late charge will not result in the Fund's inability to resume
Auctions for shares of MuniPreferred with respect to which there has been a
Failure to Deposit. As long as the Fund cures such Failure to Deposit no later
than 12:00 Noon, New York City time, on the fourth business day preceding any
Auction Date for such shares, the Fund may resume Auctions for such shares on
such date. If any Failure to Deposit shall occur during any Special Rate Period
of shares of MuniPreferred of 4 or more Dividend Periods (or during any Rate
Period succeeding any Special Rate Period of 4 or more Dividend Periods during
which a Failure to Deposit occurred that has not been cured), the Fund shall pay
dividends on such shares at a penalty rate for the next Rate Period thereof, but
only if the Fund shall fail to cure such Failure to Deposit by 12:00 Noon, New
York City time, on the fourth business day preceding the Auction Date for such
next Rate Period. If the Fund so cures such Failure to Deposit, it may resume
Auctions with respect to such shares on such Auction Date and pay dividends on
such shares at the rate determined in Auctions.
For Performance Plus and Municipal Advantage, the Statement currently provides
that if a Failure to Deposit with respect to shares of MuniPreferred shall occur
during any Rate Period thereof (other than any Special Rate Period of 4 or more
Dividend Periods or any Rate Period succeeding any Special Rate Period of 4 or
more Dividend Periods during which a Failure to Deposit occurred that has not
been cured), and such Failure to Deposit shall not have been cured and a late
charge paid, in each case as of 12:00 Noon on the third business day next
succeeding such Failure to Deposit, no Auctions will thereafter be held for such
shares, and the dividend rate for such shares for each Dividend Period
commencing after such Failure to Deposit shall be a rate per annum equal to 200%
of LIBOR on the first day of each such Dividend Period. This provision was
designed to enable the Fund to resume Auctions with respect to shares of
MuniPreferred in the event of "ministerial" Failures to Deposit with respect to
such shares (e.g., Failures to Deposit caused by inadvertence or communications
mishaps) that are cured within 3 days, while compelling the Fund to pay a
penalty dividend rate on such shares for so long as they remain outstanding in
the event of Failures to Deposit that are not so cured. The Fund believes that
the current provision is needlessly onerous. The Amendment would provide that
the penalty dividend rate be the Maximum Rate, or in certain cases, a
"stepped-up" Maximum Rate (i.e., the Maximum Rate, using for purposes of
calculating the Rate Multiple, a prevailing rating that is deemed to be "Below
ba3-/BB-"), instead of 200% of LIBOR. The Statement also currently provides that
if any Failure to Deposit shall occur with respect to shares of MuniPreferred
during a Special Rate Period of 4 or more Dividend Periods, or during any Rate
Period succeeding any Special Rate Period of 4 or more Dividend Periods during
which a Failure to Deposit occurred that has not been cured, the dividend rate
for such shares for each Subsequent Rate Period thereof to and including the
Subsequent Rate Period during which such Failure to Deposit is cured in
accordance with the second preceding paragraph above shall be a rate per annum
equal to 200% of the highest of (1) the Applicable Rate for such shares during
such Special Rate Period, (2) the Treasury Rate for such Special Rate Period on
the first day of each such Subsequent Rate Period and (3) the "AA" Composite
Commercial Paper Rate for Minimum Rate Periods on the first day of each such
Subsequent Rate Period. The Amendment would simplify the foregoing by providing
that the penalty rate for such Subsequent Rate Periods will be a "stepped-up"
Maximum Rate. Finally, as the Amendment would eliminate 200% of LIBOR as the
penalty dividend rate, the Amendment would also delete the appropriate
references to LIBOR from the Statement.
3. CALCULATION OF LATE CHARGE
The Amendment would provide that when the Fund is required to pay a late charge,
the amount of the late charge would be determined by reference to one of several
different benchmark rates, designed to conform with the length of the Rate
Period in which such late charge is to be paid. Under current provisions of the
Statement, a late charge is determined by reference to the "AA" Composite
Commercial Paper Rate, which is a short-term benchmark rate. Because the
Amendment grants enhanced flexibility with respect to determining the length of
Special Rate Periods and enlarges the circumstances in which the Fund may be
required to pay a late charge, the Fund believes that a short-term benchmark
rate would not be appropriate for determining late charges occurring during such
longer term Special Rate Periods. Accordingly, the Amendment would substitute
the defined term "Reference Rate" for the "AA" Composite Commercial Paper Rate
for this purpose. The "Reference Rate" embodies a number of different benchmark
rates for different Rate Periods, permitting the selection of a rate that
conforms more closely to the length of the Rate Period to which it applies.
4. ELIMINATE REQUIREMENT THAT DIVIDEND PAYMENT DATE MUST BE FOLLOWED BY A
BUSINESS DAY [FOR PERFORMANCE PLUS, MUNICIPAL ADVANTAGE, INVESTMENT
QUALITY, INSURED QUALITY AND SELECT QUALITY ONLY]
The Amendment would eliminate the requirement that dividends be paid on shares
of MuniPreferred on a business day that is immediately followed by a business
day. This requirement was designed to assure that beneficial owners of shares of
MuniPreferred would be able to use their dividend payments on the day
immediately following a Dividend Payment Date. Now, however, all the
Broker-Dealers that participate in Auctions for shares of MuniPreferred have
represented to the Funds that they or their affiliates will make dividends
available in same-day funds on each Dividend Payment Date to the beneficial
owners of shares of MuniPreferred for which they serve as Agent Members. Since
beneficial owners of shares of MuniPreferred will receive dividends in same-day
funds on Dividend Payment Dates, the requirement that the day after a Dividend
Payment Date be a business day is no longer needed. This modification will
benefit the Fund by minimizing the
9
<PAGE> 14
number of times each year that regular Dividend Payment Dates must be moved to
another day, thereby reducing the frequency of non-standard Rate Periods.
B. GROSS-UP PAYMENT PROVISIONS (SECTION 3 OF PART I, SECTION 5 OF PART II AND
SECTION 4 OF APPENDIX A TO THE AMENDMENT) [NOT APPLICABLE TO PERFORMANCE
PLUS]
The Amendment would expand the circumstances under which the Fund would be
required to make Gross-up Payments in order to provide greater certainty to
investors, which should result in more favorable bids for shares of
MuniPreferred at Auctions. The Amendment would require the Fund to make Gross-up
Payments in the case of any Special Rate Period of more than 28 Rate Period Days
whenever net capital gains or other income taxable for Federal income tax
purposes is allocated to a dividend on shares of MuniPreferred with or without
notice in advance of the Auction for the Special Rate period. The Fund believes
that the proposed amendment is in its best interest because the Fund has
determined that it may not be able to give advance notice of its intent to
allocate net capital gains or other income taxable for Federal income tax
purposes to dividends on shares of MuniPreferred in the case of such longer-term
Special Rate Periods. Rather than have bidders in Auctions bid up the dividend
rate for any such Special Rate Period because of the uncertainty of whether and
to what extent the Fund might make such an allocation of taxable income, the
Fund believes if it is required to make such Gross-Up Payments, bids placed in
Auctions will result in lower dividend rates because of the greater certainty
regarding taxable allocations.
In addition, the Amendment would change the way in which a Gross-up Payment is
calculated to take into account the different Federal income tax rates
applicable to ordinary income and net capital gains at the time such Gross-up
Payment is made as opposed to when the related tax event occurred. The
notification provisions applicable to Gross-up Payments also would be amended to
require notification of the Gross-up Payment prior to the end of the calendar
year in which the Gross-up Payment is made. Finally, the Amendment clarifies
that a Gross-up Payment will not be made if a holder of MuniPreferred receives a
Taxable Allocation upon a reallocation of income or gain by the Internal Revenue
Service.
C. SPECIAL RATE PERIOD PROVISIONS (SECTION 4 OF PART I OF AMENDMENT)
1. GREATER FLEXIBILITY IN DESIGNATING SPECIAL RATE PERIODS
The Amendment would permit the Fund, at its option, to designate Special Rate
Periods consisting of any number of Rate Period Days that is evenly divisible by
seven and is not more than 1,820, subject to certain minor adjustments. This
contrasts with the current provisions of the Statement, which only authorize
Special Rate Periods of 28 or 182 Rate Period Days or 1, 3 or 5 years. The added
flexibility will better enable the Fund to respond to changing market conditions
in managing its capital structure.
2. NOTICE OF SPECIAL RATE PERIOD
The Amendment would permit the Fund to give less than the currently required 20
days written notice (by publication and mail) of the designation of a Special
Rate Period, if the Auction Agent permits such shorter notice. It would also
permit the Fund to notify the Auction Agent of its determination to exercise or
not to exercise an option to proceed with a proposed Special Rate Period after
the specified deadline of 11:00 a.m., New York City time, on the business day
next preceding the first day of such Special Rate Period, if the Auction Agent
agrees to accept such shorter notice. Both of these changes would give the Fund
more time to make decisions concerning the designation of Special Rate Periods,
thereby putting the Fund in a better position to respond to changing market
conditions.
3.INFORMATION FOR RATING AGENCIES IN CONNECTION WITH
NOTICE OF SPECIAL RATE PERIOD
The Amendment would make certain changes intended to more clearly describe the
information required to be furnished to rating agencies together with a Notice
of a Special Rate Period, to permit the rating agencies to determine that
Moody's Eligible Assets or S&P's Eligible Assets at that time satisfy such
rating agency guidelines.
4.REDEMPTION PRICE [FOR PERFORMANCE PLUS, MUNICIPAL ADVANTAGE AND
INVESTMENT QUALITY ONLY]
The Amendment would provide that a designation of a Special Rate Period shall be
effective if the Redemption Price of any shares of MuniPreferred that have been
called for redemption have been deposited with the Auction Agent, as opposed to
the current provisions of the Statement, which require the Redemption Price to
have been paid to the holders of such shares.
5. OTHER REVISIONS
The Amendment would also make other conforming changes to make the language of
the Statement consistent with the changes described above.
10
<PAGE> 15
D. VOTING RIGHTS PROVISIONS (SECTION 5 OF PART I OF THE AMENDMENT)
1.RIGHT OF HOLDERS OF MUNIPREFERRED TO ELECT MAJORITY OF DIRECTORS
UNDER CERTAIN CIRCUMSTANCES
The Amendment would clarify that holders of the Fund's preferred stock have the
right to elect a majority of the Fund's directors (i) in the event that
dividends on preferred stock have been in arrears for two years or (ii) pursuant
to the provisions of the 1940 Act.
2. ISSUANCE OF ADDITIONAL PREFERRED STOCK [FOR PERFORMANCE PLUS, MUNICIPAL
ADVANTAGE AND INVESTMENT QUALITY ONLY]
The Amendment would eliminate the requirement for shareholder approval to issue
additional shares of Preferred Stock which would result in the aggregate
liquidation preference of all shares of Preferred Stock outstanding exceeding a
specified ceiling amount, which amount is set forth in the Statement, but only
if Moody's or S&P is then rating the shares of MuniPreferred and only if each
rating agency then rating shares of MuniPreferred confirms in writing to the
Fund that such additional issuance would not impair the rating then assigned to
shares of MuniPreferred by such rating agency.
The Statement currently provides that the Board of Directors, without the vote
or consent to the holders of shares of MuniPreferred, but subject to certain
rating agency approvals, may from time to time authorize and create, and the
Fund may from time to time issue, 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, but only if, after giving effect to any
such issuance, the aggregate liquidation preference of all shares of Preferred
Stock of the Fund then outstanding, exclusive of accumulated and unpaid
dividends, would not exceed the ceiling amount specified in the Statement. The
Fund believes that, so long as either Moody's or S&P is rating the shares of
MuniPreferred and the Fund is required--as a precondition for issuing additional
shares of Preferred Stock--to obtain written confirmation from each rating
agency then rating the shares of MuniPreferred that any such additional issuance
would not impair the rating then assigned to shares of MuniPreferred by such
rating agency, the holders of shares of MuniPreferred will be adequately
protected in the event such additional issuance results in an aggregate
liquidation preference of all shares of Preferred Stock outstanding, including
MuniPreferred, in excess of the ceiling amount. Accordingly, the Fund proposes
that the current ceiling be eliminated, as long as the precondition described
above is satisfied. Although the Fund does not currently intend to issue
additional shares of Preferred Stock, elimination of the ceiling would enable
the Fund to manage its capital structure more efficiently in response to
changing market conditions.
The Amendment would also clarify that any additional issuance of shares of
Preferred Stock of the Fund will not be deemed to affect the preferences, rights
or powers of holders of shares of MuniPreferred as long as each rating agency
then rating the shares of MuniPreferred confirms in writing to the Fund that any
such additional issuance would not impair the rating then assigned to shares of
MuniPreferred by such rating agency.
3. ELIMINATE SUPERMAJORITY VOTE OF MUNIPREFERRED TO AUTHORIZE CERTAIN
ACTIONS
The Amendment would decrease the number of shares of MuniPreferred required to
approve certain actions of the Fund from 66 2/3% of the outstanding number of
such shares to a majority thereof. The actions currently requiring the approval
of a supermajority of MuniPreferred shares that would be affected by the
Amendment include (i) the authorization, creation or issuance of stock, under
certain circumstances, ranking prior to or on a parity with MuniPreferred with
respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the Fund, or increasing the authorized
amount of any series of MuniPreferred, or (ii) amending the Fund's Articles of
Incorporation, including the Statement, whether by merger, consolidation or
otherwise, so as to affect any preference, right or power of MuniPreferred or
the holders thereof. The Fund believes that decreasing the number of shares
required to approve these actions to a majority is in the best interest of the
Fund, because it will eliminate the ability of the holders of a minority of
shares of MuniPreferred to prevent the Fund from taking action that has been
approved by the holders of at least a majority of such shares.
4. CLARIFY AUTHORITY OF THE FUND TO AMEND CERTAIN DEFINITIONS
The Fund is currently authorized to amend, alter or repeal certain definitions
included in the Statement pursuant to requirements imposed by Moody's and S&P,
provided that the Fund has received confirmation from each rating agency that
the amendment would not impair the rating it has assigned to shares of
MuniPreferred. The Amendment would extend this same authority to definitions
included in the Statement as predicates for the definitions required by the
rating agencies, subject to the same condition.
E. MUNIPREFERRED BASIC MAINTENANCE AMOUNT PROVISIONS
(SECTION 7 OF PART I OF THE AMENDMENT)
The Amendment would modify the occasions when the Fund must provide
MuniPreferred Basic Maintenance Reports to Moody's and S&P, while retaining the
current requirements regarding the furnishing of these reports to the Auction
Agent.
11
<PAGE> 16
The Amendment would also amend the definition of the term "Quarterly Valuation
Date" to mean the last business day of each February, May, August and November
of each year. These amendments are solely for the administrative convenience of
the Fund and the rating agencies.
F. CERTAIN RATING AGENCY RESTRICTIONS (SECTION 10 OF PART I OF THE AMENDMENT)
1. BORROWING BY THE FUND
In conformity with rating agency guidelines, the Amendment would prohibit the
Fund from borrowing money unless the Fund obtains written confirmation from
Moody's or S&P, as appropriate, that the borrowing would not impair the rating
assigned to shares of MuniPreferred by the rating agency, except that the Fund
may 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" (i.e., the borrowing is to be repaid within
60 days and is not to be extended or renewed), is evidenced by a promissory note
or other evidence of indebtedness and is in an amount not exceeding 5% of the
value of the total assets of the Fund at the time of the borrowing for purposes
of the foregoing.
2. ISSUANCE OF ADDITIONAL MUNIPREFERRED
The Amendment provides that, so long as Moody's or S&P is rating shares of
MuniPreferred, the Fund could issue additional shares of existing series of
MuniPreferred if it obtains prior confirmation that such issuance would not
impair the rating assigned to such shares by the rating agency.
3. DESIGNATION OF PRICING SERVICE
The Amendment clarifies that, in conformity with S&P guidelines, the pricing
service referred to in the definition of Market Value is J.J. Kenny.
G. REDEMPTION PROVISIONS (SECTION 11 OF PART I OF THE AMENDMENT)
1. OPTIONAL REDEMPTIONS DURING SPECIAL RATE PERIODS
The Amendment would provide that shares of MuniPreferred may be optionally
redeemed on the second business day preceding each Dividend Payment Date during
any Special Rate Period without the payment of a redemption premium, unless the
applicable Notice of Special Rate Period provides otherwise, and that a Notice
of Special Rate Period may provide otherwise only if the Board of Directors, in
consultation with the Broker-Dealer(s) for such shares for such Special Rate
Period, determines that placing restrictions on the Fund's ability to optionally
redeem shares of MuniPreferred is in the best interest of the Fund. The
Statement currently restricts optional redemption of MuniPreferred without a
redemption premium to certain portions of certain Special Rate Periods. The Fund
believes that by providing greater flexibility to optionally redeem shares of
MuniPreferred during Special Rate Periods, the Amendment would enhance the
utility of Special Rate Periods by permitting the Fund to tailor the redemption
provisions applicable during such periods to the market conditions prevailing at
the time.
2. REDEMPTION SUBJECT TO CONDITIONS PRECEDENT
The Statement currently provides that if the Fund mails a Notice of Redemption
with respect to shares of MuniPreferred, it must redeem the shares of
MuniPreferred subject thereto on the date fixed for redemption (or as soon as
practicable thereafter if legally available funds are not available on that
date). The Amendment would provide that the Board of Directors may establish
conditions in a Notice of Redemption that must be satisfied before the Fund is
obligated to effect any such redemption. The Fund believes that the Amendment
would give the Board of Directors greater flexibility and avoid unnecessary
costs associated with certain redemptions. For example, although the Fund does
not currently intend to redeem shares of MuniPreferred, the current provision
might have the effect of increasing the Fund's financing costs if the Fund were
to redeem shares of MuniPreferred and issue new preferred shares in their place.
Increased costs might result because the Fund effectively would be compelled to
close the offering of the new shares of preferred stock before mailing a Notice
of Redemption with respect to shares of MuniPreferred in order to be assured
that it will have adequate funds available to effect the redemption--which, as
described above, becomes mandatory upon the mailing of the Notice of
Redemption--on the date fixed for redemption. This may lead to a situation in
which the Fund must pay dividends both on the new shares of preferred stock and
on the shares of MuniPreferred (until the date fixed for their redemption).
Since the dividend rate that the Fund must pay on the new preferred shares may
exceed the rate of return the Fund is able to obtain upon investing the proceeds
of the offering of the new shares, the Fund may experience losses resulting from
"negative arbitrage." The proposed amendment would permit the Fund to provide in
a Notice of Redemption that the redemption of shares of MuniPreferred is
conditioned on the closing of the offering of the new preferred shares, thereby
enabling the Fund to structure financings such that the redemption of the shares
of MuniPreferred occurs simultaneously upon the closing of the new offering,
which would eliminate the need to pay dividends simultaneously on both the
shares of MuniPreferred and the new shares of preferred stock.
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<PAGE> 17
3. RATING AGENCY CONDITIONS
In order to conform the statement to current Moody's guidelines, the Amendment
would (i) clarify (for each Fund except Performance Plus and Municipal
Advantage) and provide (for Performance Plus and Municipal Advantage) that the
Fund may not on any date mail a Notice of Redemption relating to an optional
redemption of shares of MuniPreferred unless on such date the Discounted Value
of Moody's Eligible Assets (if Moody's is then rating 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 and (ii) provide that, for this purpose, 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.
For Performance Plus, the Amendment would provide that the Fund must effect a
mandatory redemption of Shares of MuniPreferred on or prior to the 40th day
after the relevant Cure Date (as opposed to the 45th day, as is currently the
case) in order to conform the Statement to current Moody's guidelines.
4. DECREASE NOTICE REQUIREMENT [FOR PERFORMANCE PLUS, MUNICIPAL ADVANTAGE
AND INVESTMENT QUALITY ONLY]
The Statement currently provides that, in the event the Fund determines or is
required to redeem shares of MuniPreferred, it must mail a Notice of Redemption
with respect to such shares to the holders thereof not less than 30 nor more
than 45 days prior to the date fixed for redemption. The Amendment would
substitute 20 days for 30 days in order to enhance the Fund's flexibility with
respect to the timing of optional redemptions.
H. LIQUIDATION RIGHTS (SECTION 12 OF PART I OF THE AMENDMENT)
The Amendment would amend the liquidation rights provisions contained in the
Statement to clarify that accumulated dividends payable in connection with a
dissolution, liquidation or winding up of affairs of the Fund will accumulate
to, but will not include, the date of final distribution.
I. MISCELLANEOUS PROVISIONS (SECTION 13 OF PART I OF THE AMENDMENT)
The Amendment would provide, for the administrative convenience of the Fund,
that the Fund may, by resolution of its Board of Directors duly adopted and
without shareholder approval, amend the Amendment to add additional shares to an
existing series of MuniPreferred (and terms relating thereto) to the series and
shares of MuniPreferred theretofore described therein, provided the Fund obtains
certain rating agency approvals. However, the Fund does not currently intend to
issue additional shares of an existing series of MuniPreferred.
The Statement currently provides that any shares of MuniPreferred that at any
time have been redeemed or purchased by the Fund shall, after such redemption or
purchase, have the status of authorized but unissued preferred shares. The
Amendment would amend the Statement to provide that 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 Shares 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 the Amendment relating to such series) shall cease to be of
further effect and shall cease to be part of the Articles.
The Amendment would delete the provision in the Statement that any notice given
under the Statement shall be deemed given on the earlier of the date received or
the date seven days after which such notice is mailed. This provision has no
independent significance in the Statement and may be read to conflict with other
notice provisions in the Amendment.
J. AUCTION PROCEDURES (PART II OF THE AMENDMENT)
1. ELIMINATION OF MASTER PURCHASER'S LETTER
The Amendment would alter the Auction Procedures contained in the Statement to
eliminate the requirement that a purchaser of shares execute a Master
Purchaser's Letter. The Statement currently provides that a prospective
beneficial owner of shares of MuniPreferred must execute a Master Purchaser's
Letter. The Fund proposes to eliminate this requirement in order to simplify the
investment process. In its place, unless the Fund permits otherwise, only
Broker-Dealers (who, in their broker-dealer agreements with the Fund, will bind
themselves to the types of provisions contained in a Master Purchaser's Letter)
will be considered Existing Holders for purposes of submitting orders to the
Auction Agent. The Amendment also provides that, unless the Fund permits
otherwise, a beneficial owner of shares of MuniPreferred may sell, transfer or
otherwise dispose of shares of MuniPreferred only pursuant to a bid or sell
order placed by such beneficial owner's Broker-Dealer with the Auction Agent or
to a Broker-Dealer (provided that 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 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 to be sold, transferred or disposed of
immediately after such sale, transfer or disposition).
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<PAGE> 18
In order to effectuate the foregoing proposals, the Amendment would modify
certain provisions of the Auction Procedures, as well as the definitions of
Existing Holder and Potential Holder, and would add definitions of "Beneficial
Owner" and "Potential Beneficial Owner."
2. TRANSFER OF MUNIPREFERRED
The Amendment is designed to preserve the results of an Auction to the greatest
extent practicable in the event an Existing Holder or Beneficial Owner of shares
of MuniPreferred fails to deliver any shares of MuniPreferred that it is
required to deliver under the Auction Procedures. Thus, a bidder for shares of
MuniPreferred in an Auction would not be permitted to break its purchase simply
because, by reason of a seller's failure to deliver, the bidder is not able to
purchase all the shares for which it had bid. The Statement currently provides
that in the case of any transfer of shares of MuniPreferred outside of an
Auction, the Existing Holder of such shares, its Broker-Dealer or its Agent
Member has the obligation to advise the Auction Agent of the transfer. The Fund
believes that it is more appropriate to place that obligation on the
Broker-Dealer transferee (or other permitted transferee) rather than on the
transferor, and that placing that obligation on the transferee will result in a
more accurate tracking of owners of shares of MuniPreferred and, consequently, a
more efficient Auction process.
Experience with the various Nuveen-sponsored closed-end investment companies has
shown that their shares of auction-rate cumulative preferred stock are
frequently transferred outside of auctions without compliance with applicable
notification provisions, making it difficult for the Auction Agent to maintain
an accurate registry of owners for the purpose of conducting auctions. The
Amendment is designed to remedy the possible confusion that may result, by
giving the Auction Agent conclusive and binding authority to determine the
Existing Holders of shares of MuniPreferred for the purpose of conducting
Actions. However, as the Amendment might cause unreasonable hardship to a
Broker-Dealer in situations where the Auction Agent has determined that the
Broker-Dealer is the Existing Holder of a greater number of shares than the
number of shares which the Broker-Dealer believes itself to be the Existing
Holder of--resulting in potential liability to the Broker-Dealer if the
Broker-Dealer fails to deliver the "excess" shares pursuant to sell orders, it
would provide relief from that liability if the Broker-Dealer indicates to the
Auction Agent that it does not believe that it is the Existing Holder of the
"excess" shares. The Amendment would also provide similar relief to a
Broker-Dealer who is deemed to submit a sell order in respect of shares that
were transferred without compliance with applicable notification requirements.
3. ADJUSTMENTS TO MAXIMUM RATE
The Amendment would provide that the Maximum Rate for Rate Periods consisting of
fewer than 28 Rate Period Days shall be determined by reference to a percentage
based on the credit rating of the shares times the higher of the applicable "AA"
Composite Commercial Paper Rate or the Taxable Equivalent of the Short-Term
Municipal Bond Rate. The Statement currently provides that the Maximum Rate
payable on shares of MuniPreferred for any Minimum Rate Period thereof or any
Special Rate Period thereof consisting of 28 Rate Period Days be determined by
reference to a percentage based on the credit rating of the shares times the
applicable "AA" Composite Commercial Paper Rate.
Under certain market conditions, the Fund has observed that the Maximum Rate
determined by using the applicable "AA" Composite Commercial Paper Rate has been
lower than the Maximum Rate that would have been determined by using the taxable
equivalent of an index based on municipal bonds. Bids above the Maximum Rate
submitted by Existing Holders are treated like sell orders and bids by Potential
Holders above the Maximum Rate are rejected. Therefore, raising the permissible
Maximum Rate should give greater assurance that Sufficient Clearing Bids will
continue to exist in Auctions for shares of MuniPreferred (i.e., that Auctions
will be successful). While raising the permissible Maximum Rate could, in
certain circumstances, increase the amount of dividends that the Fund might
otherwise be required to pay on the shares of MuniPreferred and, to that extent,
decrease the amount of net investment income that might otherwise be available
for distribution to holders of shares of Common Stock, the Fund believes that
the proposed Maximum Rate provisions should help assure the holders of shares of
MuniPreferred that they will be able to sell their shares of MuniPreferred in
Auctions when they so desire. As a result of this greater certainty, the
proposed Maximum Rate provisions would preserve the efficiency of the shares of
MuniPreferred as a financing vehicle for the Fund.
4.MAXIMUM RATE FOR SPECIAL RATE PERIODS OF MORE THAN 182 DAYS
BUT LESS THAN 365 DAYS
The Fund proposes to substitute the term "Treasury Bill Rate" for "AA" Composite
Commercial Paper Rate for purposes of determining the Maximum Rate in respect of
Special Rate Periods of more than 182 but fewer than 365 Rate Period Days. The
Fund believes that the Treasury Bill Rate is more appropriate than the "AA"
Composite Commercial Paper Rate in those circumstances because it more precisely
correlates to the length of such Special Rate Periods.
The Statement currently provides that, in the case of Special Rate Periods of
less than 1 year, the Maximum Rate on shares of MuniPreferred shall be equal to
a percentage based on the credit rating of such shares times the applicable "AA"
Composite Commercial Paper Rate. However, the only Special Rate Periods of less
than 1 year that may now be designated by the Fund are Special Rate Periods of
28 Rate Period Days or 182 Rate Period Days--for which the applicable "AA"
Composite Commercial Rate, in the Fund's judgment, is a suitable rate for
purposes of determining the Maximum Rate (except as described above under
"Adjustments to Maximum Rate"). However, if the Fund is granted enhanced
flexibility
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<PAGE> 19
with respect to determining the length of Special Rate Periods of more than 182
but fewer than 365 Rate Period Days, the "AA" Composite Commercial Paper Rate,
in the Fund's judgment, is not suitable.
Further, the Fund proposes to revise the definition of "AA" Composite Commercial
Paper Rate to accommodate Special Rate Periods of between 14 and 182 Rate Period
Days.
5. FEDERAL TAX RATE USED TO CALCULATE RATE MULTIPLE [NOT APPLICABLE TO
PERFORMANCE PLUS]
The definition of "Rate Multiple" currently provides that, in the event the Fund
has notified the Auction Agent of its intent to allocate taxable income to
shares of MuniPreferred prior to the Auction establishing the dividend rate for
such shares, the applicable percentage in the table contained in the definition
of "Rate Multiple" shall be divided by the quantity 1 minus the maximum marginal
regular Federal income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate, whichever is greater. The
Amendment would substitute for the quantity described above, the quantity 1
minus the maximum marginal regular Federal income tax rate applicable to
ordinary income or the maximum marginal regular Federal corporate income tax
rate applicable to ordinary income, whichever is greater. The purpose of the
substitution is to clarify that the Federal income tax rates applicable to
ordinary income, as opposed to rates applicable to net capital gain, are to be
used for purposes of deriving the Rate Multiple.
6. DIVIDEND RATE DETERMINATIONS FOR ALL HOLD ORDERS
The proposed amendments to the formula for determining the dividend rate
applicable to shares of a series of MuniPreferred in the event all shares of
such series are the subject of hold orders in an Auction for shares of such
series (i.e.; an "all hold order rule") are designed to accommodate the Fund's
proposed enhanced flexibility with respect to determining the length of Special
Rate Periods by varying the benchmark rates used in calculating the applicable
dividend rates depending on the length of the Special Rate Periods.
For Performance Plus, the Amendment would tax-adjust the "AA" Composite
Commercial Paper Rate to take into account the higher of 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 addition, for each Fund, the Amendment would provide that, in the event all
shares of a series of MuniPreferred are the subject of hold orders in an Auction
for a Special Rate Period consisting of fewer than 183 Rate Period Days, the
Applicable Rate shall be equal (or determined by reference) to the lesser of (i)
the Kenny Index and (ii) the product of (x) the applicable "AA" Composite
Commercial Paper Rate and (y) 1 minus the maximum marginal regular Federal
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is
greater. As the Kenny Index represents a tax-free rate, the Fund believes that
it is a more appropriate benchmark rate for purposes of determining the all hold
order rate than the applicable tax-adjusted "AA" Composite Commercial Paper
Rate.
7. DEEMED SELL ORDERS FOR CERTAIN SPECIAL RATE PERIODS
The Statement currently provides that if a beneficial owner of shares of
MuniPreferred fails to submit an order in respect of those shares in an Auction,
such beneficial owner will be deemed to have submitted a hold order in respect
of those shares. The Fund believes that in the usual case--where Auctions for
shares of MuniPreferred are held relatively frequently (i.e., on a weekly
basis)--this "deemed hold order" mechanism provides convenience to beneficial
owners in that it relieves them of the need to submit an order to their
Broker-Dealer in situations where they desire to continue to hold shares of
MuniPreferred regardless of the dividend rate thereon.
However, if the Fund designates a relatively long-term Special Rate Period and a
short-term investor in shares of MuniPreferred neglects to place a sell order in
the Auction for such Special Rate Period, the investor may be locked into a
longer term investment that he or she does not want. To guard against this
possibility, the Fund proposes that, in the event an investor fails to place an
order in respect of shares of MuniPreferred in an Auction for a Special Rate
Period of more than 28 Rate Period Days, the investor will be deemed to have
placed a sell order in respect of those shares.
8. GLOBAL CERTIFICATE
The Statement currently provides that all of the shares of each series of
MuniPreferred outstanding from time to time shall be represented by one global
certificate registered in the name of DTC or its nominee. The purpose of this
provision is to assure maximum administrative convenience to the Fund and the
Auction Agent in connection with paying dividends on shares of MuniPreferred and
conducting Auctions with respect thereto. The proposed amendments would amend
the current provision by providing that it shall be effective only prior to the
commencement of any right of holders of preferred shares to elect a majority of
the Fund's directors.
9. MISCELLANEOUS
Finally, the Amendment would update and add certain definitions to the Statement
to conform the Statement to current rating agency guidelines; would make certain
other minor changes to the Statement; and would correct typographical errors and
omissions and inaccurate cross-references.
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<PAGE> 20
In the case of Performance Plus, the Amendment would redesignate the shares of
"Money Market Cumulative Preferred Stock ("MMP")" as "Municipal Auction Rate
Cumulative Preferred Stock ("MuniPreferred")." In the case of Municipal
Advantage and Investment Quality, the Amendment would change the name of the
shares of MuniPreferred issued pursuant to each respective statement from "MPS"
to "MuniPreferred."
INFORMATION ABOUT THE FUNDS' INVESTMENT ADVISER
The Adviser, located at 333 West Wacker Drive, Chicago, Illinois, serves as
investment adviser and manager for each Fund. The Adviser is a wholly-owned
subsidiary of Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen is
a subsidiary of The John Nuveen Company which in turn is approximately 78% owned
by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located at 385
Washington Street, St. Paul, Minnesota 55102, and is principally engaged in
providing property-liability insurance through subsidiaries. Nuveen acted as
co-managing underwriter for Performance Plus, in its initial public offering of
common stock in June 1989 and its public offering of MuniPreferred in October
1989; for Municipal Advantage, in its initial public offering of common stock in
December 1989 and its public offering of MuniPreferred in March 1990; for
Investment Quality, in its initial public offering of common stock in June 1990
and its public offering of MuniPreferred in September 1990; for Insured Quality,
in its initial public offering of common stock in December 1990 and its public
offering of MuniPreferred in March 1991; for Select Quality, in its initial
public offering of common stock in March 1991 and its public offering of
MuniPreferred in June 1991; for Quality Income, in its initial public offering
of common stock in June 1991 and its public offering of MuniPreferred in October
1991; and for Insured Municipal Opportunity, in its initial public offering of
common stock in September 1991 and its public offering of MuniPreferred in
December 1991 and February 1992.
SHAREHOLDER PROPOSALS
To be considered for presentation at the Annual Meeting of Shareholders of any
of the Funds to be held in 1997, a shareholder proposal must be received at the
offices of that Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not later
than , 1997.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement, and all other costs in connection with the
solicitation of proxies, will be paid by the Funds pro rata based on the number
of shareholder accounts. Additional solicitation may be made by letter,
telephone or telegraph by officers of each Fund, by officers or employees of
John Nuveen & Co. Incorporated or Nuveen Advisory Corp., or by dealers and their
representatives. The Funds have engaged Tritech Services to assist in the
solicitation of proxies at a total estimated cost of $25,000.
ANNUAL REPORT DELIVERY
Annual reports were sent to shareholders of record of each Fund following each
Fund's fiscal year end. EACH FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT AND SEMI-ANNUAL REPORT (WHICH WILL SOON BE AVAILABLE) UPON
REQUEST. SUCH WRITTEN OR ORAL REQUESTS SHOULD BE DIRECTED TO SUCH FUND AT 333
WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606 OR BY CALLING 1-800-257-8787.
GENERAL
Management does not intend to present and does not have reason to believe that
others will present any other items of business at any Fund's Annual Meeting.
However, if other matters are properly presented to the Annual Meeting for a
vote, the proxies will be voted upon such matters in accordance with the
judgment of the persons acting under the proxies.
A list of shareholders entitled to be present and to vote at each Fund's Annual
Meeting will be available at the offices of the Funds, 333 West Wacker Drive,
Chicago, Illinois, for inspection by any shareholder during regular business
hours for ten days prior to the date of that Annual Meeting.
Failure of a quorum to be present at any Annual Meeting will necessitate
adjournment and will subject that Fund to additional expense. The persons named
in the enclosed proxy may also move for an adjournment of any Annual Meeting to
permit further solicitation of proxies with respect to any of the proposals if
they determine that adjournment and further solicitation is reasonable and in
the best interests of the shareholders. Under each Fund's By-Laws, an
adjournment of a meeting requires the affirmative vote of a majority of the
shares present in person or represented by proxy at the meeting.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
James J. Wesolowski
Secretary
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<PAGE> 21
ANNEX A
GLOSSARY OF TERMS
"'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 discount rate
times the number of days in which such commercial paper matures and the
denominator of which shall be 360.
"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.
"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.
"APPLICABLE RATE" shall mean the rate per annum payable with respect to shares
of a series of MuniPreferred as determined pursuant to Section 2 of Part I of
the Amendment.
"AUCTION" shall mean each periodic implementation of the Auction Procedures.
"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 the Amendment.
"AUCTION DATE," with respect to any Rate Period, shall mean the Business Day
next preceding the first day of such Rate Period.
"AUCTION PROCEDURES" shall mean the procedures for conducting Auctions set forth
in Part II of the Amendment.
"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.
"BOARD OF DIRECTORS" or "Board" shall mean the Board of Directors of the Fund or
any duly authorized committee thereof.
"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 the Amendment, 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.
A-1
<PAGE> 22
"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 the Amendment.
"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.
"CODE" means the Internal Revenue Code of 1986, as amended.
"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.
"COMMON STOCK" shall mean the common stock, par value $.01 per share, of the
Fund.
"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.
"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.
"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 Section 2 of Part I of the Amendment.
"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.
"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.
"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.
"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 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 Section 11 of Part I of the Amendment; 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 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.
A-2
<PAGE> 23
"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.
"KENNY INDEX" shall have the meaning specified in the definition of "Taxable
Equivalent of the Short-Term Municipal Bond Rate."
"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.
"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.
"MAXIMUM RATE," or 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 the Amendment,
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 the Amendment, 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.
"MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate Period
Days.
"MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware corporation,
and its successors.
[FOR EACH FUND EXCEPT INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY:
"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
A-3
<PAGE> 24
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.]
[FOR INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY ONLY:
"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
(i) (A) in the event such Municipal Obligation is covered by an Original Issue
Insurance policy or a Portfolio Insurance policy which does not provide the Fund
with the option to obtain Permanent Insurance with respect to such Municipal
Obligation, or is not covered by bond insurance, the Moody's or S&P rating on
such Municipal Obligation, (B) in the event such Municipal Obligation is covered
by a Secondary Market Insurance policy, the Moody's insurance claims-paying
ability rating of the insurer of the policy, or (C) in the event such Municipal
Obligation is covered by a Portfolio Insurance policy which provides the Fund
with the option to obtain a Permanent Insurance with respect to such Municipal
Obligation, at the Fund's option, the Moody's or S&P rating on such Municipal
Obligation or the Moody's insurance claims-paying ability rating of the issuer
of the Portfolio Insurance policy and (ii) 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 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
A-4
<PAGE> 25
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 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.
[FOR INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY ONLY:
For purposes of determining as of any Valuation Date whether the Fund has
Moody's Eligible Assets with an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount, the Fund shall include as a liability in
the calculation of the MuniPreferred Basic Maintenance Amount an amount
calculated semi-annually equal to 150% of the estimated cost of obtaining
Permanent Insurance with respect to Moody's Eligible Assets that are (i) covered
by Portfolio Insurance policies which provide the Fund with the option to obtain
such Permanent Insurance and (ii) discounted by a Moody's Discount Factor
determined by reference to the insurance claims-paying ability rating of the
issuer of such Portfolio Insurance policy.]
"MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a given Valuation
Date and ending 56 days thereafter.
"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 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
A-5
<PAGE> 26
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>
"MUNICIPAL OBLIGATION" shall mean "Municipal Obligation" as defined in the
Fund's Registration Statement.
"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 of Part I of
the Amendment 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 of Part I of the Amendment
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); (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 the Amendment) 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).
"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 the Amendment) as of a given Valuation
Date, shall mean the seventh Business Day following such Valuation Date.
A-6
<PAGE> 27
"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.
"1940 ACT" shall mean the Investment Company Act of 1940, as amended.
"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).
"NOTICE OF REDEMPTION" shall mean any notice with respect to the redemption of
shares of MuniPreferred pursuant to Section 11 of Part I of the Amendment.
"NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to a Special
Rate Period of shares of MuniPreferred pursuant to Section 4 of Part I of the
Amendment.
"ORIGINAL ISSUE INSURANCE" shall mean "Original Issue Insurance" as defined in
the Fund's Registration Statement.
"ORDER" AND "ORDERS" shall have the respective meanings specified in Section 1
of Part II of the Amendment.
"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.
"PERMANENT INSURANCE" shall mean "Permanent Insurance" as defined in the Fund's
Registration Statement.
"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.
"PORTFOLIO INSURANCE" shall mean "Portfolio Insurance" as defined in the Fund's
Registration Statement.
"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.
"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.
"PREFERRED STOCK" hall mean the Preferred Stock of the Fund, and includes shares
of MuniPreferred.
"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
A-7
<PAGE> 28
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 a 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 to the
Amendment 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 to the Amendment and the
Fund shall take all reasonable action to enable such rating agency to provide a
rating for such shares.
"RATE PERIOD," with respect to shares of a series of MuniPreferred, shall mean
the Initial Rate Period of shares of such series and any Subsequent Rate Period,
including any Special Rate Period, of shares of such series.
"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 the Amendment or
paragraph (b) of Section 4 of Part I of the Amendment.
"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.
"REDEMPTION PRICE" shall mean the applicable redemption price specified in
Section 11 of Part I of the Amendment.
"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.
"REGISTRATION STATEMENT" shall mean 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.
"S&P" shall mean Standard & Poor's Corporation, a New York corporation, and its
successors.
[FOR EACH FUND EXCEPT INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY:
"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:
<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
A-8
<PAGE> 29
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.]
[FOR INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY ONLY:
"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
(i)(A) in the event such Municipal Obligation is covered by an Original Issue
Insurance policy or a Portfolio Insurance policy which does not provide the Fund
with the option to obtain Permanent Insurance with respect to such Municipal
Obligation, or is not covered by bond insurance, the S&P or Moody's rating on
such Municipal Obligation, (B) in the event such Municipal Obligation is covered
by a Secondary Market Insurance policy, the S&P insurance claims-paying ability
rating of the issuer of the policy, or (C) in the event such Municipal
Obligation is covered by a Portfolio Insurance policy which provides the Fund
with the option to obtain Permanent Insurance with respect to such Municipal
Obligation, at the Fund's option, the S&P or Moody's rating on such Municipal
Obligation or the S&P insurance claims-paying ability rating of the issuer of
the Portfolio Insurance policy and (ii) 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:
<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 and (ii) no
S&P Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold. 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.]
[FOR EACH FUND EXCEPT INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY:
"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
A-9
<PAGE> 30
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.
[FOR INSURED QUALITY AND INSURED MUNICIPAL OPPORTUNITY ONLY:
"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
(provided, however, that such Moody's-rated Municipal Obligations will be
included in 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 further provided that, for purposes of determining the S&P
Discount Factor applicable to any such Moody's-rated Municipal Obligation, such
Municipal Obligation will be deemed to have an S&P rating which is one full
rating category lower than its Moody's rating); (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 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; and
(2) Long-term Municipal Obligations 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.
For purposes of determining as of any Valuation Date whether the Fund has S&P
Eligible Assets with an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount, the Fund shall include as a liability in
the calculation of the MuniPreferred Basic Maintenance Amount an amount
calculated semi-annually equal to 150% of the estimated cost of obtaining
Permanent Insurance with respect to S&P Eligible Assets that are (i) covered by
Portfolio Insurance policies which provide the Fund with the option to obtain
such Permanent Insurance and (ii) discounted by an S&P Discount Factor
determined by reference to the insurance claims-paying ability rating of the
issuer of such Portfolio Insurance policy.]
"S&P EXPOSURE PERIOD" shall mean the maximum period of time following a
Valuation Date that the Fund has under the Amendment 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 the Amendment).
"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.
"SECONDARY MARKET INSURANCE" shall mean "Secondary Market Insurance" as defined
in the Fund's Registration Statement.
"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.
"SPECIAL RATE PERIOD," with respect to shares of a series of MuniPreferred,
shall mean a Rate Period of shares of such series designated by the Fund
pursuant to Section 4 of Part I of the Amendment consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to certain adjustments.
A-10
<PAGE> 31
"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.
"SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the respective
meanings specified in Section 3 of Part II of the Amendment.
"SUBSEQUENT RATE PERIOD," with respect to shares of a series of MuniPreferred,
shall mean the period from and including the first day following 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.
"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.
"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.
"SUFFICIENT CLEARING BIDS" shall have the meaning specified in Section 3 of Part
II of the Amendment.
"TAXABLE ALLOCATION" shall mean any allocation by the Fund of net capital gains
or other income taxable for Federal income tax purposes to a dividend paid on
shares of MuniPreferred without advance notice thereof having been given to the
Auction Agent as provided in Section 5 of Part II of the Amendment.
"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.
"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.
"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.
"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.
"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
A-11
<PAGE> 32
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.
"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.
"VALUATION DATE" shall mean, for purposes of determining whether the Fund is
maintaining the MuniPreferred Basic Maintenance Amount, each Business Day.
"VOLATILITY FACTOR" means the Moody's Volatility Factor or the S&P Volatility
Factor, as the case may be.
APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH (B)(III) OF SECTION 3 OF PART II OF
STATEMENT.
For purpose of subparagraph (b)(iii) of Section 3 of Part II of the Amendment,
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-12
<PAGE> 33
At the upcoming Annual Meeting, all shareholders will be asked to consider and
approve a very important proposal. The Fund's management seeks to update the
terms of the Municipal Auction Rate Cumulative Preferred Stock
(MuniPreferred(R)) to conform with the state-of-the-art terms of more recent
MuniPreferred offerings (as more fully described in the enclosed proxy
statement). We believe the proposals will provide a wider range of investment
choices and simplify investing in and owning shares of MuniPreferred,
potentially providing you with an even better investment. If approved, the
terms of the MuniPreferred would be amended to, among other things, offer the
following advantages:
/ / Eliminate Master Purchaser's Letters
/ / Refine Maximum Dividend Rate Provisions
/ / Increase Flexibility in Establishing Extended Rate Periods
WHETHER OR NOT YOU PLAN TO JOIN US, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
Please fold at perforation before detaching
- --------------------------------------------------------------------------------
PROXY BALLOT
NUVEEN INVESTMENT QUALITY MUNICIPAL FUND, INC.
COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 25, 1996
The undersigned hereby appoints Timothy R. Schwertfeger and James J.
Wesolowski, and each of them, with full power of substitution, Proxies for the
undersigned to represent and vote the common stock of the undersigned at the
Annual Meeting of Shareholders of Nuveen Investment Quality Municipal Fund,
Inc. to be held on July 25, 1996, or any adjournment or adjournments thereof:
1. Election of Directors:
NOMINEES: Lawrence H. Brown, Anthony T. Dean, Anne E. Impellizzeri, Peter R.
Sawers.
2. Ratification of the selection of Ernst & Young LLP as independent auditors
for the fiscal year ending October 31, 1996.
3. Approval of amendments to the terms of the Fund's Municipal Auction Rate
Cumulative Preferred Stock.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
You are encouraged to specify your choices by marking the appropriate boxes ON
THE REVERSE SIDE. If you do not mark any boxes, your Proxy will be voted in
accordance with the Board of Directors' recommendations. Please sign, date and
return this Proxy card promptly using the enclosed envelope.
SEE REVERSE SIDE
NQM796
<PAGE> 34
<TABLE>
<S><C>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND THE PROPOSALS: Please mark your votes as in this example. /X/
____________________________________________________________________________________________________________________________________
1. ELECTION OF DIRECTORS: / / FOR / / WITHHOLD authority / / WITHHOLD authority to vote
(SEE REVERSE FOR NOMINEES) all nominees to vote for all nominees for nominees indicated below:
INSTRUCTIONS: _______________________________
To grant authority to vote FOR ALL nominees, mark the box on the left above OR
do not mark any box above.
To WITHHOLD authority to vote FOR ALL nominees, mark the box in the middle above.
To WITHHOLD authority to vote FOR ANY ONE OR MORE of the nominees, mark the box
on the right above AND write each nominee's name in the space provided.
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE FOR AGAINST ABSTAIN
FISCAL YEAR ENDING OCTOBER 31, 1996. / / / / / /
3. APPROVAL OF AMENDMENTS TO THE TERMS OF THE FUND'S MUNICIPAL AUCTION RATE CUMULATIVE
PREFERRED STOCK. / / / / / /
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
____________________________________________________________________________________________________________________________________
THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, SUCH SHARES WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR THE PROPOSALS SET FORTH ON THIS PROXY.
Please be sure to sign and date this Proxy.
______________________________________________________
Shareholder sign here___________________Date__________
Co-owner sign here______________________Date__________
NOTE: Please sign exactly as your name appears on this Proxy. If signing for
estates, trusts or corporations, title or capacity should be stated. If shares
are held jointly, each holder should sign.
/ / BK --796 NQM796
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<PAGE> 35
At the upcoming Annual Meeting, all shareholders will be asked to consider and
approve a very important proposal. The Fund's management seeks to update the
terms of the Municipal Auction Rate Cumulative Preferred Stock
(MuniPreferred(R)) to conform with the state-of-the-art terms of more recent
MuniPreferred offerings (as more fully described in the enclosed proxy
statement). We believe the proposals will provide a wider range of investment
choices and simplify investing in and owning shares of MuniPreferred,
potentially providing you with an even better investment. If approved, the
terms of the MuniPreferred would be amended to, among other things, offer the
following advantages:
/ / Eliminate Master Purchaser's Letters
/ / Refine Maximum Dividend Rate Provisions
/ / Increase Flexibility in Establishing Extended Rate Periods
WHETHER OR NOT YOU PLAN TO JOIN US, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
Please fold at perforation before detaching
- --------------------------------------------------------------------------------
NUVEEN INVESTMENT QUALITY MUNICIPAL FUND, INC. PROXY BALLOT
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK, SERIES M, T, W AND F
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 25, 1996
The undersigned hereby appoints Timothy R. Schwertfeger and James J.
Wesolowski, and each of them, with full power of substitution, Proxies for the
undersigned to represent and vote the shares of Municipal Auction Rate
Cumulative Preferred Stock, Series M, T, W and F, of the undersigned at the
Annual Meeting of Shareholders of Nuveen Investment Quality Municipal Fund,
Inc. to be held on July 25, 1996, or any adjournment or adjournments thereof:
1. Election of Directors:
NOMINEES:--BY ALL SHAREHOLDERS: Lawrence H. Brown, Anthony T. Dean, Anne E.
Impellizzeri, Peter R. Sawers.
NOMINEES:--BY HOLDERS OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK
ONLY: Margaret K. Rosenheim, Timothy R. Schwertfeger.
2. Ratification of the selection of Ernst & Young LLP as independent auditors
for the fiscal year ending October 31, 1996.
3. Approval of amendments to the terms of the Fund's Municipal Auction Rate
Cumulative Preferred Stock.
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
If the undersigned is a broker-dealer, it hereby instructs the proxies,
pursuant to Rule 452 of the New York Stock Exchange, to vote any uninstructed
shares of Municipal Auction Rate Cumulative Preferred Stock, Series M, T, W and
F, in the same proportion as votes cast by holders of Municipal Auction Rate
Cumulative Preferred Stock, Series M, T, W and F, who have responded to this
proxy solicitation.
You are encouraged to specify your choices by marking the appropriate boxes ON
THE REVERSE SIDE. If you do not mark any boxes, your Proxy will be voted in
accordance with the Board of Directors' recommendations. Please sign, date and
return this Proxy card promptly using the enclosed envelope.
SEE REVERSE SIDE
NQM796-P
<PAGE> 36
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES AND THE PROPOSALS: Please mark your votes as in this example. /X/
____________________________________________________________________________________________________________________________________
1. ELECTION OF DIRECTORS: / / FOR / / WITHHOLD authority / / WITHHOLD authority to vote
(SEE REVERSE FOR NOMINEES) all nominees to vote for all nominees for nominees indicated below:
INSTRUCTIONS: _______________________________
To grant authority to vote FOR ALL nominees, mark the box on the left above OR
do not mark any box above.
To WITHHOLD authority to vote FOR ALL nominees, mark the box in the middle above.
To WITHHOLD authority to vote FOR ANY ONE OR MORE of the nominees, mark the box
on the right above AND write each nominee's name in the space provided.
FOR AGAINST ABSTAIN
2. RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR THE / / / / / /
FISCAL YEAR ENDING OCTOBER 31, 1996.
3. APPROVAL OF AMENDMENTS TO THE TERMS OF THE FUND'S MONEY MARKET CUMULATIVE PREFERRED / / / / / /
STOCK .
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
____________________________________________________________________________________________________________________________________
THE SHARES TO WHICH THIS PROXY RELATES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, SUCH SHARES WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR THE PROPOSALS SET FORTH ON THIS PROXY.
Please be sure to sign and date this Proxy.
______________________________________________________
Shareholder sign here___________________Date__________
Co-owner sign here______________________Date__________
NOTE: Please sign exactly as your name appears on this Proxy. If signing for
estates, trusts or corporations, title or capacity should be stated. If shares
are held jointly, each holder should sign.
/ / BK --796 NQM796-P
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