<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 MICHIGAN QUALITY INCOME 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
August , 1996
DEAR SHAREHOLDER:
We are pleased to invite you to the Annual Meeting of Shareholders of Nuveen
Michigan Quality Income Municipal Fund, Inc. The meeting is scheduled for
Thursday, October 10, 1996 at 10:30 a.m., Chicago time, in the 31st floor
conference room of John Nuveen & Co. Incorporated, 333 West Wacker Drive,
Chicago, Illinois.
At the Annual Meeting, 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 attached proxy statement). We believe the proposal 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,
Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman
<PAGE> 3
<TABLE>
<S> <C>
NOTICE OF ANNUAL MEETING 333 West Wacker Drive
OF SHAREHOLDERS - Chicago, Illinois
OCTOBER 10, 1996 60606
(312) 917-7700
</TABLE>
NUVEEN MICHIGAN QUALITY INCOME MUNICIPAL FUND, INC.
August , 1996
TO THE SHAREHOLDERS OF THE ABOVE FUND:
Notice is hereby given that the Annual Meeting of Shareholders of Nuveen
Michigan Quality Income Municipal Fund, Inc., a Minnesota corporation, (the
"Fund"), will be held in the 31st floor conference room of John Nuveen & Co.
Incorporated, 333 West Wacker Drive, Chicago, Illinois, on Thursday, October 10,
1996, at 10:30 a.m., Chicago time, for the following purposes:
MATTERS TO BE VOTED ON BY ALL SHAREHOLDERS OF THE FUND:
1. To elect four (4) Board Members to serve until the next Annual Meeting
and until their successors shall have been duly elected and qualified.
2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the fiscal year ending July 31, 1997.
3. To approve amendments to the terms of the Fund's Municipal Auction Rate
Cumulative Preferred Stock.
4. To transact such other business as may properly come before the Annual
Meeting.
MATTER TO BE VOTED ON BY THE FUND'S HOLDERS OF SHARES OF MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED ONLY:
To elect two (2) Board Members to serve until the next Annual Meeting and until
their successors shall have been duly elected and qualified.
Shareholders of record of the Fund at the close of business on August 12, 1996
are entitled to notice of and to vote at the 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
<TABLE>
<S> <C>
PROXY STATEMENT 333 West Wacker Drive
AUGUST , 1996 Chicago, Illinois
60606
(312) 917-7700
</TABLE>
NUVEEN MICHIGAN QUALITY INCOME MUNICIPAL FUND, INC.
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board" and each director a "Board Member") of Nuveen
Michigan Quality Income Municipal Fund, Inc. ("Michigan Quality" or the Fund),
of proxies to be voted at the Annual Meeting of Shareholders of the Fund to be
held on October 10, 1996 ("Annual Meeting"), and at any and all adjournments
thereof.
On the matters coming before the Fund's Annual Meeting as to which a choice has
been specified by the shareholders of the Fund on the proxy, the shares of the
Fund will be voted accordingly. If no choice is so specified, the shares of the
Fund will be voted FOR the election of the four Board nominees to be elected by
all shareholders and the two Board nominees to be elected by holders of shares
of Municipal Auction Rate Cumulative Preferred Stock ("MuniPreferred(R)"), as
listed in this Proxy Statement, and FOR ratification of the selection of Ernst &
Young LLP as the Fund's independent auditors. Shareholders of the Fund who
execute proxies may revoke them at any time before they are voted by filing with
the Fund a written notice of revocation, by delivering a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
The following table indicates which shareholders are solicited with respect to
each matter:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
MATTER COMMON SHARES MUNIPREFERRED
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Election of Board Members by all Shareholders (Lawrence Brown, Anthony X X
Dean, Anne Impellizzeri and Peter Sawers nominated)
- --------------------------------------------------------------------------------------------------------
Election of Board Members by MuniPreferred only (Margaret Rosenheim and X
Timothy Schwertfeger nominated)
- --------------------------------------------------------------------------------------------------------
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 the Fund's Annual
Meeting. A majority of the shares entitled to vote at the Annual Meeting,
represented in person or by proxy, will constitute a quorum of shareholders at
the Annual Meeting, except that for the election of the two Board Member
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 the Annual Meeting will be tabulated
by the inspectors of election appointed for the 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 (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 for a vote of
the shareholders of the Fund, abstentions and broker non-votes will be treated
as shares voted against the election of Board Members, and 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 the Fund and the vote required for approval of
each proposal are set forth under the description of each proposal below.
Shares of MuniPreferred, Series TH, 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 (if
such broker is a New York Stock Exchange Member) on each item in the same
proportion as the votes cast by the MuniPreferred shareholders who have voted on
the item. Rule 452 permits such proportionate voting if, among other things, (i)
a minimum of 30% of the outstanding Shares of MuniPreferred, Series TH, has been
voted by the holders of such shares and (ii) less than 10% of the outstanding
shares of MuniPreferred, Series TH, voted against the item. For purposes of
meeting the 30% test, abstentions will be treated as shares "voted" and, for
purposes of meeting the 10% test, abstentions will not be treated as voting
against the item.
As of August 12, 1996, there were issued and outstanding: common shares
and 3,200 shares of MuniPreferred, Series TH, the Fund. Those persons who were
shareholders of record at the close of business on August , 1996 will be
entitled to one vote for each share held.
This Proxy Statement is first being mailed to shareholders of the Fund on or
about August , 1996.
1
<PAGE> 5
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 should be read in
conjunction with the full description of the Proposal. AS DESCRIBED THEREIN, THE
BOARD OF DIRECTORS OF THE FUND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE APPROVAL OF PROPOSAL 3.
2
<PAGE> 6
1. ELECTION OF BOARD MEMBERS OF THE FUND
At the Fund's Annual Meeting, six (6) Board Members 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 the Fund's organizational documents,
under normal circumstances holders of MuniPreferred are entitled to elect two
(2) Board Members, and the remaining Board Members are to be elected by holders
of common shares and MuniPreferred, voting together as a single class. Table I
below shows the nominated Board Members of the Fund to be elected by holders of
common shares and MuniPreferred, voting together as a single class. Table II
below shows the nominated Board Members of the Fund to be elected by holders of
MuniPreferred only. The affirmative vote of a majority of the shares present and
entitled to vote at the Annual Meeting of the Fund will be required to elect the
Board Members of the 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
Board Member of the Fund if elected; however, should any nominee become unable
or unwilling to accept nomination or election, the proxies for the Fund will be
voted for one or more substitute nominees designated by the Fund's present
Board.
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 Board Member of the Fund and the number of common shares of the Fund
and of all Nuveen funds (excluding money market funds) that each nominee
beneficially owned as of July 31, 1996. All of the nominees, except Anthony T.
Dean, were last elected to the Board at the Annual Meeting of Shareholders. Mr.
Dean will be standing for election by the Fund's shareholders for the first time
at the Annual Meeting of Shareholders. Mr. Dean was appointed to the Board to
fill a vacancy that occurred upon the retirement of Richard J. Franke from John
Nuveen & Co. Incorporated and the Board of the Fund on June 30, 1996. Mr.
Franke's contributions to the Fund are greatly appreciated.
There is currently one vacancy on the Fund's Board. The Fund's nominating
committee is considering candidates for that vacancy.
3
<PAGE> 7
TABLE I
NOMINEES FOR THE FUND TO BE
ELECTED BY ALL SHAREHOLDERS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
FULL COMMON SHARES
BENEFICIALLY OWNED
JULY 31, 1996
-------------------
ALL
NAME, AGE AND PRINCIPAL OCCUPATIONS OF YEAR FIRST ELECTED THE NUVEEN
NOMINEES AS OF JULY 31, 1996(1) OR APPOINTED A BOARD MEMBER FUND FUNDS(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lawrence H. Brown (62) 1993 --
Board Member of the Fund; retired in August 1989 as Senior
Vice President of The Northern Trust Company.
*Anthony T. Dean (51) 1996 --
Board Member and President of the Fund (since July 1,
1996); Chairman and Trustee of the Select Tax-Free
Portfolios advised by Nuveen Institutional Advisory Corp.
(since July 1, 1996); President (since July 1, 1996) and
Executive Vice-President and Director of the John Nuveen
Company (since March, 1992), John Nuveen & Co.
Incorporated, Nuveen Advisory Corp. (since October, 1992)
and Nuveen Institutional Advisory Corp. (since October
1992).
Anne E. Impellizzeri (63) 1994 --
Board Member of the Fund; 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 1988).
Peter R. Sawers (63) 1991 --
Board Member of the Fund; 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>
TABLE II
NOMINEES FOR THE FUND TO BE ELECTED BY HOLDERS OF
MUNIPREFERRED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
FULL COMMON SHARES
BENEFICIALLY OWNED
JULY 31, 1996
-------------------
ALL
NAME, AGE AND PRINCIPAL OCCUPATIONS OF YEAR FIRST ELECTED THE NUVEEN
NOMINEES AS OF JULY 31, 1996(1) OR APPOINTED A BOARD MEMBER FUND FUNDS(2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Margaret K. Rosenheim (69) 1991 --
Board Member of the Fund; Helen Ross Professor of Social
Welfare Policy, School of Social Service Administration,
University of Chicago.
*Timothy R. Schwertfeger (47) 1994
Chairman (since July 1, 1996) and Board Member of the Fund
(since July 1994); Chairman (since July 1, 1996),
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 Fund investment
adviser, Nuveen Advisory Corp.
(1) The Board Members are directors or trustees, as the case may be, of 21
Nuveen open-end funds and 53 Nuveen closed-end funds. In addition, Mr. Dean is a
board member of five open-end funds managed by Nuveen Institutional Advisory
Corp.
(2) The number shown reflects the aggregate number of common shares beneficially
owned by the nominee in all of the funds managed by Nuveen Advisory Corp. and
referred to in note (1) above (excluding money market funds).
The Board Members affiliated with John Nuveen & Co. Incorporated ("Nuveen") or
Nuveen Advisory Corp. (the "Adviser") serve without any compensation from the
Fund. Board Members 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
4
<PAGE> 8
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. The Fund has adopted a Directors' Deferred Compensation Plan
pursuant to which a Board Member of the Fund may elect to have all or a portion
of the Board Member's fee deferred. Board Members 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 Board Member wishes to begin
deferral.
The table below shows, for each Board Member who is not affiliated with Nuveen
or the Adviser, the compensation paid by the Fund for its fiscal year ended July
31, 1996 and the total compensation that Nuveen funds accrued for each Board
Member during the calendar year 1995, including any interest accrued for Board
Members on deferred compensation. The rate of earnings on deferred compensation
is equivalent to the average net earnings rate, computed on a quarterly basis,
on the shares of such Nuveen fund.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
TOTAL
COMPENSATION ON
NUVEEN FUNDS
ACCRUED FOR
BOARD
NAME OF BOARD MEMBER COMPENSATION FROM THE FUND MEMBERS(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lawrence H. Brown $55,500
Anne E. Impellizzeri 63,000
Margaret K. Rosenheim 62,322(2)
Peter R. Sawers 55,500
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes compensation for service on the boards of Nuveen open-end funds
and Nuveen closed-end funds. Also includes amounts for Nuveen funds that
existed for part of the year, estimated as if the funds had existed for the
entire year.
(2) Includes $1,512 in interest accrued on deferred compensation from prior
years.
Anthony T. Dean, Margaret K. Rosenheim and Timothy R. Schwertfeger serve as
members of the executive committee of the Board of the Fund. The executive
committee of the Fund, which meets between regular meetings of the Board, is
authorized to exercise all of the powers of the Board. The executive committee
of the Fund held [twelve] meetings during the fiscal year ended July 31, 1996.
The Fund's Board has an audit committee composed of Lawrence H. Brown, Anne E.
Impellizzeri, Margaret K. Rosenheim and Peter R. Sawers, Board Members 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. The audit committee of the Fund
held [two] meetings during the fiscal year ended July 31, 1996.
Nomination of those Board Members who are not "interested persons" of the Fund
is committed to a nominating committee composed of the Board Members who are not
"interested persons" of the Fund. The Committee identifies and recommends
individuals to be nominated for election as non-interested Board Members. The
nominating committee of the Fund held [one] meeting during the fiscal year ended
July 31, 1996. No policy or procedure has been established as to the
recommendation of Board Member nominees by shareholders.
The Fund's Board held [five] meetings during the fiscal year ended July 31,
1996. During the last fiscal year, each Board Member attended [75%] or more of
the Fund's Board meetings and the committee meetings (if a member thereof).
The following table sets forth information as of July 31, 1996 with respect to
each executive officer of the Fund, other than executive officers who are Board
Members and reflected above. Officers of the Fund receive no compensation from
the Fund. The term of office of all officers will expire at the first meeting of
the Board of the Fund following the Annual Meeting of Shareholders, which Board
meeting is presently scheduled to be held on , 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES WITH
NAME, AGE AND PRINCIPAL OCCUPATIONS FUNDS
- -------------------------------------------------------------------------------------------------------
<S> <C>
William M. Fitzgerald, 32 Vice President (since July
Vice President of Nuveen Advisory Corp. (since December, 1995); prior 1996)
thereto, Assistant Vice President (from September, 1992 to December,
1995) and Assistant Portfolio Manager (from June, 1988 to September,
1992) of Nuveen Advisory Corp.; Chartered Financial Analyst.
Kathleen M. Flanagan, 49 Vice President (since 1994)
Vice President of John Nuveen & Co. Incorporated
J. Thomas Futrell, 41 Vice President (since 1992)
Vice President of Nuveen Advisory Corp.; Chartered Financial Analyst.
Steven J. Krupa, 38 Vice President (since 1992)
Vice President of Nuveen Advisory Corp.
</TABLE>
5
<PAGE> 9
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES WITH
NAME, AGE AND PRINCIPAL OCCUPATIONS FUNDS
- -------------------------------------------------------------------------------------------------------
<S> <C>
Anna R. Kucinskis, 50 Vice President (since 1992)
Vice President of John Nuveen & Co. Incorporated.
Larry W. Martin, 45 Vice President (since 1993) &
Vice President (since September 1992), Assistant Secretary and Assistant Secretary (since
Assistant General Counsel of John Nuveen & Co. Incorporated; Vice 1992)
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, 57 Vice President & Controller
Vice President and Controller of The John Nuveen Company (since March (since 1992)
1992), John Nuveen & Co. Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp.
Thomas C. Spalding, Jr., 45 Vice President (since 1992)
Vice President of Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.; Chartered Financial Analyst.
H. William Stabenow, 62 Vice President & Treasurer
Vice President and Treasurer of The John Nuveen Company (since March (since 1992)
1992), John Nuveen & Co. Incorporated, Nuveen Advisory Corp. and
Nuveen Institutional Advisory Corp. (since January 1992).
James J. Wesolowski, 46 Vice President & Secretary
Vice President, General Counsel and Secretary of The John Nuveen (since 1992)
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
Assistant General Counsel of John Nuveen & Co. Incorporated; Vice 1992)
President (since May 1993) and Assistant Secretary of Nuveen Advisory
Corp.; Vice President (since May 1993) and Assistant Secretary (since
January 1992) of Nuveen Institutional Advisory Corp.
- -------------------------------------------------------------------------------------------------------
</TABLE>
On July 31, 1996, Board Members and executive officers of the Fund as a group
did not beneficially own any common shares or MuniPreferred of the Fund. On July
31, 1996, Board Members and executive officers of the Fund as a group
beneficially owned common shares of all funds managed by the Adviser
(excluding money market funds). As of July 31, 1996, no person is known to the
Fund to have owned beneficially more than five percent of the common shares or
MuniPreferred of the 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 the Fund's officers and Board Members, investment adviser, affiliated
persons of the investment adviser and persons who own more than ten percent of a
registered class of the Fund's equity securities to file forms reporting their
affiliation with the Fund and reports of ownership and changes in ownership of
the 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 Fund with copies of all Section 16(a) forms they file.
Based on a review of these forms furnished to the Fund, the Fund believes that
during the fiscal year ended July 31, 1996, all Section 16(a) filing
requirements applicable to the Fund's officers and Board Members, investment
adviser and affiliated persons of the investment adviser were complied with.
2. SELECTION OF INDEPENDENT AUDITORS
The members of the Fund's Board who are not "interested persons" of the Fund
have unanimously selected Ernst & Young LLP, independent public accountants, as
independent auditors, to audit the books and records of the Fund for the fiscal
year ending July 31, 1997. Ernst & Young LLP has served the Fund in this
capacity since the Fund was organized and has no direct or indirect financial
interest in the Fund except as independent auditors. The selection of Ernst &
Young LLP as independent auditors of the Fund is being submitted to the
shareholders for ratification, which requires the affirmative vote of a majority
of the shares of the Fund present and entitled to vote on the matter. A
representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and will be available to respond to any appropriate questions raised at
the Annual Meeting and to make a statement if he or she wishes. THE FUND'S BOARD
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
SELECTION OF INDEPENDENT AUDITORS.
3. AMENDMENT AND RESTATEMENT OF THE STATEMENT
The Board proposed that the Statement Establishing and Fixing the Rights and
Preferences of MuniPreferred (the "Statement") for the 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
6
<PAGE> 10
MuniPreferred issued by other more recent Nuveen-sponsored closed-end funds,
thereby resulting in administrative convenience and potential cost savings to
the Fund.
THE FUND'S BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE AMENDMENT.
Because the proposed separate amendments to the Statement for the Fund are
interrelated and set forth in a single restatement of the Fund's Statement, it
will be voted upon by the Fund as a single amendment. For the 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 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 the
Fund's Statement that are embodied in the Fund's Amendment. Where a proposed
revision is described as intended to clarify a provision of the Statement, the
revision is designed to reflect the Board's 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 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
succeeding the date on which such Failure to Deposit occurred, the penalty
dividend rate will be lower than it would otherwise be. 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.
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
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<PAGE> 11
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.
B. GROSS-UP PAYMENT PROVISIONS (SECTION 3 OF PART I, SECTION 5 OF PART II AND
SECTION 4 OF APPENDIX A TO THE AMENDMENT)
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. OTHER REVISIONS
The Amendment would also make other conforming changes to make the language of
the Statement consistent with the changes described above.
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<PAGE> 12
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.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.
3.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. 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.
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<PAGE> 13
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.
3. RATING AGENCY CONDITIONS
In order to conform the statement to current Moody's guidelines, the Amendment
would (i) clarify and provide 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.
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
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<PAGE> 14
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).
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.
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<PAGE> 15
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 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
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
combined regular Federal and Michigan individual income tax rate applicable to
ordinary income (taking into account the Federal income tax deductibility of
state taxes paid or incurred) 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 combined
regular Federal and Michigan individual income tax rate applicable to ordinary
income (taking into account the Federal income tax deductibility of state taxes
paid or incurred) 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.
In addition, 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 combined regular
Federal and Michigan individual income tax rate applicable to ordinary income
(taking into account the Federal income tax deductibility of state taxes paid or
incurred) 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.
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<PAGE> 16
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.
ANNUAL REPORT DELIVERY
Annual reports were sent to shareholders of record of the Fund following the
Fund's fiscal year end. THE FUND WILL FURNISH, WITHOUT CHARGE, A COPY OF ITS
JULY 31, 1995 ANNUAL REPORT AND ITS MORE RECENT SEMI-ANNUAL REPORT UPON REQUEST.
SUCH WRITTEN OR ORAL REQUESTS SHOULD BE DIRECTED TO THE FUND AT 333 WEST WACKER
DRIVE, CHICAGO, ILLINOIS 60606 OR BY CALLING 1-800-257-8787. THE ANNUAL REPORT
FOR THE FISCAL YEAR ENDED JULY 31, 1996 IS EXPECTED TO BE AVAILABLE ON OR BEFORE
SEPTEMBER 29, 1996.
INFORMATION ABOUT THE FUNDS' INVESTMENT ADVISER
The Adviser, located at 333 West Wacker Drive, Chicago, Illinois, serves as
investment adviser and manager for the 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 the Fund in its initial public offering of common
shares in October and November 1991 and its public offering of MuniPreferred in
February 1992.
SHAREHOLDER PROPOSALS
To be considered for presentation at the Annual Meeting of Shareholders of the
Funds to be held in 1997, a shareholder proposal must be received at the offices
of the Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not later than May
, 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 Fund. Additional solicitation may
be made by letter, telephone or telegraph by officers of the Fund, by officers
or employees of John Nuveen & Co. Incorporated or Nuveen Advisory Corp., or by
dealers and their representatives. The Fund has engaged Tritech Services to
assist in the solicitation of proxies at a total estimated cost of $ .
GENERAL
Management does not intend to present and does not have reason to believe that
others will present any other items of business at the 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.
13
<PAGE> 17
A list of shareholders entitled to be present and to vote at the 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 the Annual Meeting.
Failure of a quorum to be present at the Annual Meeting will necessitate
adjournment and will subject the Fund to additional expense. The persons named
in the enclosed proxy may also move for an adjournment of the 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 the 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
14
<PAGE> 18
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.
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<PAGE> 19
"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 the 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.
In the event that a defeased obligation which is an S&P Eligible Asset does not
meet the criteria of an Escrowed Bond, such Municipal Obligation will be deemed
to remain in the Issue Type Category into which it fell prior to such
defeasance.
"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 and Michigan 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 combined regular Federal and Michigan
individual income tax rate applicable to ordinary income (taking
A-2
<PAGE> 20
into account the Federal income tax deductibility of state taxes paid or
incurred) 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.
"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.
"ISSUE TYPE CATEGORY" shall mean, with respect to a Municipal Obligation
acquired by the Fund, (A) for purposes of calculating Moody's Eligible Assets as
of any Valuation Date, one of the following categories into which such Municipal
Obligation falls based upon a good faith determination by the Fund: health care
issues (including issues related to teaching and non-teaching hospitals, public
or private); housing issues (including issues related to single- and
multi-family housing projects); educational facilities issues (including issues
related to public and private schools); student loan issues; resource recovery
issues; transportation issues (including issues related to mass transit,
airports and highways); industrial development bond issues (including issues
related to pollution control facilities); utility issues (including issues
related to the provision of gas, water, sewers and electricity); general
obligation issues; lease obligations (including certificates of participation);
escrowed bonds; and other issues ("Other Issues") not falling within one of the
aforementioned categories; and (B) for purposes of calculating S&P Eligible
Assets as of any Valuation Date, one of the following categories into which such
Municipal Obligation falls based upon a good faith determination by the Fund:
health care issues (including issues related to teaching and non-teaching
hospitals, public or private); housing issues (including issues related to
single- and multi-family housing projects); educational facilities issues
(including issues related to public and private schools); student loan issues;
transportation issues (including issues related to mass transit, airports and
highways); industrial development bond issues (including issues related to
pollution control facilities); public power utilities issues (including issues
related to the provision of electricity, either singly or in combination with
the provision of other utilities, and issues related only to the provision of
gas); water and sewer utilities issues (including issues related to the
provision of water and sewers as well as combination utilities not falling
within the public power utilities category); special utilities issues (including
issues related to resource recovery, solid waste and irrigation as well as other
utility issues not falling within the public power and water and sewer utilities
categories; general obligation issues; lease obligations (including certificates
of participation); Escrowed bonds; and other issues ("Other Issues") not falling
within one of the aforementioned categories.
"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 Cross-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 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, is such then-ending Rate Period was 364
Rate Period Days or fewer, of 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
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<PAGE> 21
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.
"MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted
Value of any Moody's Eligible Asset, the percentage determined by reference to
the rating on such asset and the shortest Exposure Period set forth opposite
such rating that is the same length as or is longer than the Moody's Exposure
Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
RATING CATEGORY
----------------------------------------------------
EXPOSURE PERIOD AAA* AA* A* BAA* (V)MIG-1** SP-1+**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7 weeks 166 % 175% 185% 222 % 150% 163%
8 weeks or less but greater than seven weeks 169 180 190 226 151 164
9 weeks or less but greater than eight weeks 174 186 197 230 152 165
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Moody's rating.
** 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 A 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.
Except for general obligation bonds, Municipal Obligations issued by the same
issuer and rated Baa by Moody's or A by S&P, may comprise no more than 3% of
total Moody's Eligible Assets; such 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 5% of total Moody's
Eligible Assets; and such Baa, A and AA-rated Municipal Obligations, if any,
together with any Municipal Obligations issued by the same issuer and rated Aa
by Moody's or AAA by S&P, may comprise no more than 10% 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 falling within a particular Issue Type
Category and rated Baa by Moody's or A by S&P, may comprise no more than 10% of
total Moody's Eligible Assets; such Baa and A-rated Municipal Obligations, if
any, together with any Municipal Obligations falling within a particular Issue
Type Category and rated A by Moody's or AA by S&P, may comprise no more than 20%
of total Moody's Eligible Assets; and such Baa, A and AA-rated Municipal
Obligations, if any, together with any Municipal Obligations falling within a
particular Issue Type Category and rated Aa by Moody's or AAA by S&P, may
comprise no more than 30% of total Moody's Eligible Assets. Notwithstanding any
other provision of this definition, (A) in the case of general obligation
Municipal Obligations only, Municipal Obligations issues by issuers located
within the same county and rated Baa by Moody's or A by S&P, may comprise no
more than 3% of Moody's Eligible Assets; such Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by issuers
located within the same county and rated A by Moody's or AA by S&P, may comprise
no more than 5% of Moody's Eligible Assets; and such Baa, A and AA-rated
Municipal Obligations, if any, together with any Municipal Obligations issued by
issuers located within the same county and rated Aa by Moody's or AAA by S&P may
comprise no more than 10% of Moody's Eligible Assets; and (B) in no event may
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<PAGE> 22
(i) student loan Municipal Obligations comprise more than 10% of Moody's
Eligible Assets; (ii) resource recovery Municipal Obligations comprise more than
10% of Moody's Eligible Assets; and (iii) Other Issues comprise more than 10% of
Moody's Eligible Assets. For purposes of applying the foregoing requirements,
the county that comprises the City of Detroit and its contiguous counties shall
be treated as a single county, Moody's Eligible Assets shall be calculated
without including cash, and Municipal Obligations rated MIG-1, 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,
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.
"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 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
A-5
<PAGE> 23
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 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.
"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.
"ORDER" AND "ORDERS" shall have the respective meanings specified in Section 1
of Part II of the Amendment.
"OTHER ISSUES" shall have the respective meanings specified in the definition of
"Issue Type Category."
"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 shared 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.
"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.
A-6
<PAGE> 24
"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" shall 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 combined regular Federal
and Michigan individual income tax rate applicable to ordinary income (taking
into account the Federal income tax deductibility of state taxes paid or
incurred) or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income, whichever is greater.
For purposes of this definition, the "prevailing rating" of shares of a series
of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a rating
of "aa3" or better by Moody's and AA- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, (ii) if not "aa3"/AA- or higher, then
"a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or
better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below, (iii) if
not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such shares have a
rating of "baa3" or better by Moody's and BBB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or
higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of
"ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or 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 of any
A-7
<PAGE> 25
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 1 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 Date 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.
"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 200 % 205% 220% 260 %
22 Business Days 180 185 200 240
10 Business Days 165 170 185 225
7 Business Days 160 165 180 220
3 Business Days 140 145 160 200
- ---------------------------------------------------------------------------------------------------------
</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 rated by S&P
but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any such
Moody's-rated short-term Municipal Obligations which have demand features
exercisable within 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution with
a short-term rating of at least A-1+ from S&P; and FURTHER PROVIDED that such
Moody's-rated short-term Municipal Obligations may comprise no more than 50% of
short-term Municipal Obligations that qualify as S&P Eligible Assets; (ii) no
S&P Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold; and (iii) except as set forth in clause (i) above, in the case
of any Municipal Obligation that is not rated by S&P but qualifies as an S&P
Eligible Asset pursuant to clause (iii) of that definition, such Municipal
Obligation will be deemed to have an S&P rating one full rating category lower
than the S&P rating category that is the equivalent of the rating category in
which such Municipal Obligation is placed by Moody's. For purposes of the
foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, rated MIG-1
or VMIG-1 by Moody's, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating, shall be
considered to be short-term Municipal Obligations.
"S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably deposited
by the Fund for the payment of any liabilities within the meaning of
MuniPreferred Basic Maintenance Amount), Receivables for Municipal Obligations
Sold or a Municipal Obligation owned by the Fund that (i) is interest bearing
and pays interest at least semi-annually, (ii) is payable with respect to
principal and interest in U.S. Dollars; (iii) is publicly rated BBB or higher by
S&P or, if not rated by S&P but rated by Moody's, is rated at least A by
Moody's; (iv) is not part of a private placement of Municipal Obligations; and
(v) is part of an issue of Municipal Obligations with an original issue size of
at least $10 million or, if of an issue with an original issue size below $10
million (but in no event below $5 million), is issued by an issuer with a total
of at least $50 million of securities outstanding. Special utilities issues that
are not rated by S&P shall not comprise S&P Eligible Assets. Solely for purposes
of this definition, the term "Municipal Obligation" means any obligation the
interest on which is exempt from regular Federal income taxation and which is
issued by any of the fifty United States, the District of Columbia or any of the
territories of the United States, their subdivisions, counties, cities, towns,
villages, school districts and agencies (including authorities and special
districts created by the states), and federally sponsored agencies such as local
housing authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer or
guarantor (excluding bond insurers) shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible
Assets, provided that 2% is added to the applicable S&P Discount Factor
for every 1% by which the Market Value of such Municipal Obligations
exceeds 5% of the aggregate Market Value of S&P Eligible Assets;
A-8
<PAGE> 26
(2) Municipal Obligations (excluding Escrowed Bonds) of any one Issue Type
Category 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; provided, however, that
general obligation issues will be considered S&P Eligible Assets only to
the extent the Market Value of such general obligation issues does not
exceed 30% of the aggregate Market Value of S&P Eligible Assets;
(3) 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
(4) Non-Michigan Long-term Municipal Obligations issued by issuers in any
one state or territory shall be considered S&P Eligible Assets only to
the extent that the Market Value of such Municipal Obligations does not
exceed 20% of the aggregate Market Value of S&P Eligible Assets.
"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.
"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.
"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
A-9
<PAGE> 27
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 for the Business Day next preceding such date; (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 lessor 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 combined regular
Federal and Michigan individual income tax rate applicable to ordinary income
(taking into account the Federal income tax deductibility of State taxes paid or
incurred) or the maximum marginal combined 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
A-10
<PAGE> 28
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 combined regular Federal and Michigan individual income tax
rate applicable to ordinary income (taking into account the Federal income tax
deductibility of State taxes paid or incurred) 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-11
<PAGE> 29
NUM1096
<PAGE> 30
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 MICHIGAN QUALITY INCOME MUNICIPAL FUND, INC. PROXY BALLOT
COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 10, 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 Michigan Quality Income Municipal
Fund, Inc. to be held on October 10, 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 July 31, 1997.
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
NUM1096
<PAGE> 31
<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
nominees 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 July 31, 1997.
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 NUM1096 NUM1096
</TABLE>
<PAGE> 32
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 MICHIGAN QUALITY INCOME MUNICIPAL FUND, INC. PROXY BALLOT
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK, SERIES TH
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 10, 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 TH, of the undersigned at the Annual Meeting
of Shareholders of Nuveen Michigan Quality Income Municipal Fund, Inc. to be
held on October 10, 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 July 31, 1997.
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 that is a New York Stock Exchange
member, 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 TH, in the same proportion as votes cast by
holders of Municipal Auction Rate Cumulative Preferred Stock, Series TH, 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
NUM1096-P
<PAGE> 33
w
<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.
FOR AGAINST ABSTAIN
2. Ratification of the selection of Ernst & Young LLP as independent auditors for the fiscal / / / / / /
year ending July 31, 1997.
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 NUM1096 NUM1096-P
</TABLE>
