<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 12, 1999
1933 ACT FILE NO. 333-
1940 ACT FILE NO. 811-06379
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] PRE-EFFECTIVE AMENDMENT NO.
[ ] POST-EFFECTIVE AMENDMENT NO.
AND/OR
[ ] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] AMENDMENT NO. 17
NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC.
Enter Name of Registrant as Specified in Charter
333 WEST WACKER DRIVE, CHICAGO, ILLINOIS 60606
Address of Principal Executive Offices (Number, Street, City, State and Zip
Code)
(312) 917-7700
Registrant's Telephone Number, including Area Code
GIFFORD R. ZIMMERMAN, ESQ.-VICE PRESIDENT AND SECRETARY
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
Name and Address (Number, Street, City, State and Zip Code) of Agent for Service
COPIES OF COMMUNICATIONS TO:
Thomas S. Harman
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, DC 20036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
---------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING OFFERING PRICE AGGREGATE REGISTRATION
BEING REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Municipal Auction Rate Cumulative
Preferred Stock Series W2...... 3,240 shares $25,000 $81,000,000 $22,518
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</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATES AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
IN REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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<PAGE> 2
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
CROSS REFERENCE SHEET
PART A -- PROSPECTUS
<TABLE>
<CAPTION>
ITEMS IN PART A OF FORM N-2 LOCATION IN PROSPECTUS
--------------------------- ----------------------
<C> <S> <C>
Item 1. Outside Front Cover Cover Page
Item 2. Inside Front and Outside Back Cover Page Inapplicable
Item 3. Fee Table and Synopsis Inapplicable
Item 4. Financial Highlights Financial Highlights
Item 5. Plan of Distribution Cover Page; Prospectus Summary; The
Auction; Underwriting
Item 6. Selling Shareholders Inapplicable
Item 7. Use of Proceeds Use of Proceeds; Investment Objectives
and Policies
Item 8. General Description of the Registrant Cover Page; Prospectus Summary; The
Fund; Investment Objective and Policies;
Description of MuniPreferred; Common
Stock
Item 9. Management Prospectus Summary; Management of the
Fund; Other Service Providers
Item 10. Capital Stock, Long-Term Debt, and Other
Securities Capitalization; Investment Objectives
and Policies; Description of
MuniPreferred; The Auction; Common
Stock; Control of the Fund; Tax Matters
Item 11. Defaults and Arrears on Senior
Securities Inapplicable
Item 12. Legal Proceedings Legal Proceedings
Item 13. Table of Contents of the Statement of Table of Contents for the Statement of
Additional Information
</TABLE>
PART B -- STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
LOCATION IN DOCUMENT OF
ITEMS IN PART B OF FORM N-2 ADDITIONAL INFORMATION
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<C> <S> <C>
Item 14. Cover Page Cover Page
Item 15. Table of Contents Cover Page
Item 16. General Information and History Inapplicable
Item 17. Investment Objective and Policies Investment Objectives and Policies;
Certain Trading Strategies of the Fund;
Portfolio Transactions
Item 18. Management Management of the Fund; Portfolio
Transactions
Item 19. Control Persons and Principal Holders of
Securities Management of the Fund; Certain Owners
of Record
Item 20. Investment Advisory and Other Services Management of the Fund; Experts
Item 21. Brokerage Allocation and Other Practices Portfolio Transactions
Item 22. Tax Status Tax Matters
Item 23. Financial Statements
</TABLE>
PART C -- OTHER INFORMATION
Item 24-23 have been answered in Part C of this Registration Statement.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED(R)")
3,240 SHARES SERIES W2
LIQUIDATION PREFERENCE $25,000 PER SHARE
---------------------
This Prospectus Part A may not be distributed unless accompanied by the Part
B of the Nuveen Exchange-Traded Funds MuniPreferred Prospectus dated ,
1999, to which any reference in this Part A applies. This Prospectus set out the
information that a prospective investor should know before investing in the
Fund. You should retain both Parts of the Prospectus for future reference.
Nuveen Insured Municipal Opportunity Fund, Inc. (the "Fund") is a
closed-end, diversified management investment company. The Fund's primary
investment objective is current income exempt from regular Federal income tax.
The Fund's secondary investment objective is to enhance portfolio value relative
to the municipal bond market by investing in tax-exempt municipal bonds that, in
the opinion of the Fund's investment adviser, are underrated or undervalued or
that represent municipal market sectors that are undervalued. The Fund seeks to
achieve its investment objectives by investing substantially all of its assets
in a diversified portfolio of tax-exempt municipal bonds that either are insured
or are backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities to ensure principal and interest
payments. Municipal bonds backed by an escrow or trust account will not
constitute more than 20% of the Fund's assets. There is no assurance that the
Fund will achieve its objectives.
Dividends paid to MuniPreferred shareholders, to the extent payable from
tax-exempt income earned on the Fund's investments, will be exempt from regular
federal income tax. All or a portion of the Fund's exempt-interest dividends may
be subject to the alternative minimum tax and therefore MuniPreferred shares may
not be suitable for persons subject to this tax. The Fund is required to
allocate net capital gains and other taxable income, if any, proportionately
between common shares and MuniPreferred shares, based on the percentage of total
dividends distributed to each class for that year. The Fund, in the case of the
ordinary seven-day rate periods or special rate periods of no more than 28 days,
will give notice of taxable income to be included in a dividend on MuniPreferred
shares in advance of the auction for these shares, and may give advance notice
to MuniPreferred shareholders during longer rate periods or otherwise make
shareholders whole for taxes owing on dividends paid to shareholders that
include taxable income. The amount of taxable income allocated to MuniPreferred
shares will depend on the amount of taxable income the Fund realizes.
The Fund's principal office is located at 333 West Wacker Drive, Chicago,
Illinois 60606, and its telephone number is (800) 257-8787. A Statement of
Additional Information dated has been filed with the Securities and
Exchange Commission and is incorporated by reference in its entirety into this
Prospectus. You may receive a copy of the Statement of Additional Information,
the table of contents of which appears at page B-34 of this Prospectus, at no
charge by calling the Fund at (800) 257-8787. The Securities and Exchange
Commission maintains a web site (http://www.sec.gov) that contains the Statement
of Additional Information, other documents incorporated by reference, and other
information the Fund has filed electronically with the Commission, including
proxy statements and reports filed under the Securities Exchange Act of 1934.
This Prospectus (comprised of Parts A and B) does not contain all of the
information in the Fund's registration statement, including amendments,
exhibits, and schedules. Statements in this Prospectus about the contents of any
contract or other document are not necessarily complete and in each instance
reference is made to the copy of the contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by this reference.
The Fund is offering the shares of MuniPreferred, Series W2, listed above.
The shares are referred to in this Prospectus as "New MuniPreferred." Except as
otherwise described in this Prospectus, the terms of this offering and all other
series of MuniPreferred the Fund previously offered are the same. The dividend
rate for the initial rate period will be [X.XX%]. For subsequent rate periods,
MuniPreferred shares pay dividends based on a rate set at auction, usually
weekly. Prospective purchasers should carefully review the auction procedures
described beginning at Page B-23 of this Prospectus and should note: (1) a buy
order (called a "bid order") or sell order is a commitment to buy or sell
MuniPreferred shares based on the results of an auction; (2) auctions will be
conducted by telephone; and (3) purchases and sales will be settled on the next
business day after the auction. MuniPreferred shares are not listed on an
exchange. You may only buy or sell MuniPreferred shares through an order placed
at an auction with or through a broker-dealer that has entered into an agreement
with the auction agent and the Fund, or in a secondary market maintained by
certain broker-dealers. These broker-dealers are not required to maintain this
market and it may not provide you with liquidity.
---------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR ACCURATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(R) Registered Trademark of John Nuveen & Co. Incorporated
<TABLE>
<CAPTION>
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PRICE TO PROCEEDS TO
PUBLIC SALES LOAD(1) FUND(2)
<S> <C> <C> <C>
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Per Share................................................ $25,000 0.00% $0
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Total.................................................... $0 $0 $0
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</TABLE>
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(1) The Fund, not shareholders, pays the sales load. The Fund and Nuveen
Advisory Corp. have agreed to indemnify the underwriters against certain
liabilities, including those under the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended.
(2) Before deducting costs payable by the Fund, estimated at $ .
---------------------
The underwriters named below are offering New MuniPreferred shares subject to
prior sale, when, as, and if they accept the shares and subject to approval of
certain legal matters by counsel for the Underwriters. The Underwriters reserve
the right to withdraw, cancel, or modify this offer and to reject offers in
whole or in part. The Fund expects that the New MuniPreferred shares will be
delivered to the underwriters through the Depository Trust Company on or about
[month & day], 1999.
---------------------
[Underwriter name(s)]
---------------------
The date of this Prospectus Part A is , 1999.
<PAGE> 4
PROSPECTUS SUMMARY
The following information is a summary of more detailed information
included in Parts A and B of this Prospectus and the Fund's Statement of
Additional Information.
THE FUND AND ITS ADVISER
Nuveen Insured Municipal Opportunity Fund, Inc. (the "Fund") is a
closed-end, diversified management investment company. Nuveen Advisory Corp.
("Nuveen Advisory") is the Fund's investment adviser. Nuveen Advisory is
responsible for the selection and on-going monitoring of the Fund's investment
portfolio. As of October 31, 1998 the Fund had 80,587,879 shares shares of
common stock outstanding, and 24,000 MuniPreferred shares outstanding.
THE OFFERING
The Fund is offering 3,240 shares of New MuniPreferred. The purchase price
for this series is $25,000 per share. Although certain information in this
Prospectus assumes that the offering will occur as described, there can be no
assurance that this will be the case.
INVESTMENT OBJECTIVES
The Fund's primary investment objective is current income exempt from
regular Federal income tax. The Fund's secondary investment objective is to
enhance portfolio value relative to the municipal bond market by investing in
tax-exempt municipal bonds that, in the opinion of Nuveen Advisory, are
underrated or undervalued. The Fund seeks to achieve its investment objectives
by investing substantially all of its assets in a diversified portfolio of
tax-exempt municipal bonds that are either insured or are backed by an escrow or
trust account containing U.S. Government or U.S. Government agency securities.
Municipal bonds backed by an escrow or trust account will not constitute more
than 20% of the Fund's assets. There is no assurance that the Fund will achieve
its investment objectives. See "Investment Objectives and Policies."
RISK FACTORS
Risk is inherent in all investing. Therefore, before investing you should
consider certain risks carefully when you invest in the Fund. See "Risk Factors"
at Page B-5 of this Prospectus. The primary risks of investing in MuniPreferred
shares are: if an auction fails you may not be able to sell some or all of your
shares; because of the nature of the market for MuniPreferred shares, you may
receive less than the price you paid for your shares if you sell them outside of
the auction, especially when market interest rates are rising; a rating agency
could downgrade MuniPreferred shares, which could affect liquidity; the Fund may
be forced to redeem your shares to meet regulatory or rating agency
requirements; and in extraordinary circumstances the Fund may not earn
sufficient income from its investments to pay dividends.
TRADING MARKET
MuniPreferred shares are not listed on an exchange. Instead, you may buy or
sell MuniPreferred shares at an auction that normally is held weekly, by
submitting orders to a broker-dealer that has entered into an agreement with the
auction agent and the Fund (a "Broker-Dealer"), or to a broker-dealer that has
entered into a separate agreement with a Broker-Dealer. In addition to the
auctions, Broker-Dealers and other broker-dealers may maintain a secondary
trading market in MuniPreferred shares outside of auctions, but may discontinue
this activity at any time. There is no assurance that a secondary market will
provide shareholders with liquidity. You may transfer shares outside of auctions
only to or through a Broker-Dealer, a broker-dealer that has entered into a
separate agreement with a Broker-Dealer, or other persons as the Fund permits.
See "The Auction -- Secondary Market" at Page B-23 of this Prospectus. New
MuniPreferred will trade at auction starting in the week following this
offering.
The first auction date for New MuniPreferred will be Wednesday, [date],
1999, the business day before the dividend payment date for the initial rate
period for New MuniPreferred. The auction date for New
A-1
<PAGE> 5
MuniPreferred shares normally will be a Wednesday, and the start date for
subsequent rate periods normally will be the following business day, typically a
Thursday, unless the then-current rate period is a special rate period, or the
day that normally would be the auction date or the first day of the subsequent
rate period is not a business day.
DIVIDENDS AND RATE PERIODS
The dividend rate for the initial rate period on the shares offered in this
Prospectus will be [x.xx%]. For subsequent rate periods, New MuniPreferred
shares will pay dividends based on a rate set at these auctions, normally held
weekly. In most instances, dividends are also paid weekly, on the day following
the end of the rate period. The rate set at auction will not exceed the Maximum
Rate. See "Description of MuniPreferred -- Dividends and Rate Periods -- Maximum
Rate" at Page B-18 of this Prospectus.
Dividends on New MuniPreferred shares will accumulate at the initial rate
beginning on Thursday, , 1999. Dividends will be paid on shares of
New MuniPreferred on Thursday, [date] and normally thereafter on each Thursday.
If the Thursday on which dividends otherwise would be paid is not a business
day, then your dividends will be paid on the first business day that falls
before that Thursday.
The initial rate period will be seven days. Subsequent rate periods
generally will be seven days. If the Fund designates a special rate period of
14, 21, or 28 days, the dividend payment date will be the second, third, or
fourth Thursday (if it is a business day), respectively, after the first day of
the special rate period. The dividend payment date for a special rate period of
more than 28 days will be set out in the notice designating a special rate
period. See "Description of MuniPreferred -- Dividends and Rate
Periods -- Designation of Special Rate Periods" at Page B-17 of this Prospectus.
TAXATION
Because under normal circumstances the Fund will invest substantially all
of its assets in municipal bonds that pay interest exempt from regular Federal
income tax, the income you receive will be similarly exempt. Your income may be
subject to state and local taxes. All or a portion of the income from these
bonds will be subject to the Federal alternative minimum tax, so MuniPreferred
shares may not be a suitable investment if you are subject to this tax. Fund
income or gain taxable to shareholders will be allocated proportionately to
holders of MuniPreferred shares and common shares, based on the percentage of
total dividends paid to each class for that year. Accordingly, certain specified
MuniPreferred dividends may be subject to income tax on income or gains
attributed to the Fund. The Fund intends to notify shareholders, before any
applicable auction for a rate period of 28 days or less, of the amount of any
taxable income to be paid for the period relating to that auction. For longer
rate periods, the Fund may notify shareholders or otherwise make them whole for
taxes owing on dividends paid to shareholders that include taxable income. See
"Tax Matters" at Page B-30 of this Prospectus.
RATINGS
Shares of each series of MuniPreferred are issued with a rating of "Aaa"
from Moody's Investors Service, Inc. ("Moody's") and "AAAA" from Standard &
Poor's Corporation ("Standard & Poor's"). Because the Fund is required to
maintain at least one of these ratings, it must own portfolio securities of a
sufficient value and with adequate credit quality to meet the rating agencies'
guidelines. See "Description of MuniPreferred -- Asset Maintenance -- Rating
Agencies" at Page B-21 of this Prospectus.
REDEMPTION
Although the Fund does not ordinarily redeem MuniPreferred shares, it may
be required to redeem shares if, for example, the Fund does not meet an asset
coverage ratio required by law or correct a failure to meet a rating agency
guideline in a timely manner. The Fund voluntarily may redeem MuniPreferred
shares under certain conditions. See "Description of
MuniPreferred -- Redemption" and "Description of MuniPreferred -- Asset
Maintenance -- Rating Agencies" at Pages B-19 and B-21 of this Prospectus.
A-2
<PAGE> 6
LIQUIDATION PREFERENCE
The liquidation preference of New MuniPreferred shares will be $25,000 per
share plus any accumulated, unpaid dividends.
FINANCIAL HIGHLIGHTS
The table below shows financial information for the Fund, expressed in
terms of one share outstanding throughout the period. The information in the
table is covered by the report of Ernst & Young LLP except where noted. The
report is contained in the Statement of Additional Information and is available
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED 10/31
--------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of
period............................. $ 15.78 $ 15.54 $ 15.60 $ 14.04 $ 16.24
---------- ---------- ---------- ---------- ----------
Operating performance:
Net investment income.............. 1.21 1.23 1.24 1.25 1.24
Net realized & unrealized gain
(loss) from investments......... .28 .28 .02 1.60 (2.18)
---------- ---------- ---------- ---------- ----------
Total from investment operations..... 1.49 1.51 1.26 2.85 (.94)
---------- ---------- ---------- ---------- ----------
Dividends from tax-exempt net
investment income:
To Common shareholders............. (.97) (.98) (.98) (.98) (1.00)
To Preferred shareholders+......... (.26) (.26) (.26) (.31) (.25)
Distributions from capital gains:
To Common shareholders............. -- (.02) (.06) -- (.01)
To Preferred shareholders+......... -- (.01) (.02) -- --
---------- ---------- ---------- ---------- ----------
Total distributions........ (1.23) (1.27) (1.32) (1.29) (1.26)
---------- ---------- ---------- ---------- ----------
Net asset value end of period........ 16.04 15.78 15.54 15.60 14.04
Per Common share market value end of
period............................. 16.6250 15.7500 15.2500 14.8750 13.0000
Total investment return on
market value*............ 12.03% 10.18% 9.77% 22.78% (13.60)%
Total return on net asset
value*................... 7.99% 8.32% 6.50% 18.74% (7.59)%
Ratios/Supplemental data:
Net assets end of period (in
thousands)...................... $.1,892,589 $1,861,771 $1,837,731 $1,841,780 $1,717,023
Ratio of expenses to average net
assets++........................ .77% .78% .78% .79% .79%
Ratio of net investment income to
average net assets++............ 5.17% 5.34% 5.38% 5.59% 5.44%
Portfolio turnover rate............ 12% 8% 18% 16% 20%
</TABLE>
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* Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total Return on Net Asset Value is the combination
of reinvested dividend income, reinvested capital gains, if any, and changes
in net asset value per share.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
A-3
<PAGE> 7
THE FUND
The Fund is a closed-end, diversified management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"). The Fund
was organized as a Minnesota corporation on July 25, 1991, and may issue up to 1
million shares of MuniPreferred and up to 200 million shares of common stock. In
September and October 1991, the Fund issued 79,000,000 shares of common stock.
In December 1991, the Fund issued 6,000 shares of MuniPreferred stock in three
offerings (2,000 shares each of Series M, T, and TH1), and in February 1992, the
Fund issued 6,000 shares of MuniPreferred stock in three offerings (2,000 shares
each of Series W, TH2, and F). On January 6, 1994, the Fund conducted a 2-for-1
preferred stock split which was effected by dividing each outstanding share of
MuniPreferred into two shares, with a liquidation preference of $25,000 per
share, for an aggregate of 24,000 MuniPreferred shares. The Fund has 80,587,879
shares of common stock outstanding. The common stock trades on the New York
Stock Exchange under the symbol "NIO." The Fund's principal office is located at
333 West Wacker Drive, Chicago, Illinois 60606, and its telephone number is
(800) 257-8787.
USE OF PROCEEDS
The Fund will use the net proceeds of the offering, about $
after payment of underwriting discounts and offering costs, to buy municipal
bonds (see "Investment Objectives and Policies -- How the Fund Invests"). The
Fund expects to invest almost all of the proceeds in long-term municipal bonds
within eight to ten weeks after the offering concludes, but if it cannot, it
will invest in municipal bonds with shorter effective maturities or in high
quality, short-term tax-exempt securities. In the unlikely event that the Fund
cannot find suitable short-term, tax-exempt securities, the Fund may buy
short-term taxable securities. The income on these securities would be subject
to regular Federal income tax.
A-4
<PAGE> 8
CAPITALIZATION
(UNAUDITED)
The following table sets forth the capitalization of the Fund as of October
31, 1998 and as adjusted to give effect to the issuance of the shares of New
MuniPreferred offered hereby.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
-------------- --------------
<S> <C> <C>
Shareholders' Equity:
Preferred Stock, $25,000 stated value per share, at
liquidation value;
1,000,000 shares authorised (24,000 shares issued and
27,240 shares issued, as adjusted respectively)...... $ 600,000,000 $ 681,000,000
Common Stock, $.01 per value per share; 200,000,000 shares
authorised, 80,587,879 shares outstanding*............. 805,879 805,879
Paid-in surplus........................................... 1,120,862,058 1,120,149,558
Balance of undistributed net investment income............ 1,000,488 1,000,488
Accumulated net realized gain (loss) from investment
transactions........................................... 4,126,497 4,126,497
Net unrealised appreciation of investments................ 165,793,813 165,793,813
-------------- --------------
Net Assets........................................ $1,892,588,735 $1,972,876,235
============== ==============
</TABLE>
- ---------------
* None of these outstanding shares are held by or for the account of the Funds.
A-5
<PAGE> 9
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
The Fund's primary investment objective is current income exempt from
regular Federal income tax. The Fund's secondary investment objective is to
enhance portfolio value relative to the municipal bond market through
investments in tax-exempt municipal bonds that, in Nuveen Advisory's opinion,
are underrated or undervalued or that represent municipal market sectors that
are undervalued.
The Fund seeks to achieve its investment objectives by investing
substantially all of its assets in a diversified portfolio of tax-exempt
municipal bonds that are either covered by insurance guaranteeing the timely
payment of principal and interest thereon, or are backed by an escrow or trust
account containing sufficient U.S. Government or U.S. Government agency
securities to ensure timely payment of principal and interest. Municipal bonds
backed by an escrow or trust account will not constitute more than 20% of the
Fund's assets.
Underrated municipal bonds are those municipal bonds whose ratings do not,
in Nuveen Advisory's opinion, reflect their true value. They may be underrated
because of the time that has elapsed since their last ratings, or because rating
agencies have not fully taken into account positive factors, or for other
reasons. Undervalued municipal bonds are those bonds that, in Nuveen Advisory's
opinion, are worth more than their market value. They may be undervalued because
there is a temporary excess of supply in that particular sector (such as
hospital bonds, or bonds of a particular municipal issuer). Nuveen Advisory may
buy such a bond even if the value of that bond is consistent with the value of
other bonds in that sector. Municipal bonds also may be undervalued because
there has been a general decline in the market price of municipal bonds for
reasons that do not apply to the particular municipal bonds that Nuveen Advisory
considers undervalued. Nuveen Advisory believes that the prices of these
municipal bonds should ultimately reflect their true value. Therefore, the
Fund's secondary investment objective of enhancing portfolio value relative to
the municipal bond market refers to the Fund's objective of attempting to
realize above-average capital appreciation in a rising market, and to experience
less than average capital losses in a declining market. Capital appreciation,
alone, is not an investment objective. Rather, the Fund seeks to enhance
portfolio value relative to the municipal bond market by prudently selecting
municipal bonds, regardless of whether the market is rising or declining.
PORTFOLIO INVESTMENTS
Except to the extent that the Fund buys temporary investments as described
below, the Fund will, as a fundamental policy, invest substantially all of its
assets in tax-exempt municipal bonds that either are covered by insurance
guaranteeing the timely payment of principal and interest on the bonds, or are
backed by an escrow or trust account containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment of principal and
interest. Uninsured municipal bonds backed by an escrow or trust account will
not constitute more than 20% of the Fund's assets. These policies and the Fund's
investment objectives are fundamental policies, which cannot be changed without
the approval of the holders of a majority of the outstanding shares of common
shares and MuniPreferred shares, voting together, and of the holders of a
majority of the outstanding MuniPreferred shares, voting separately. As used in
this Prospectus, a majority of the outstanding shares' means the vote of (1) 67%
or more of the shares present at a meeting, if the holders of more than 50% of
the shares are present or represented by proxy; or (2) more than 50% of the
shares, whichever is less.
Each insured municipal bond that the Fund holds will either be (1) covered
by an insurance policy applicable to a specific security, whether obtained by
the issuer of the security or a third party at the time of original issuance, or
by the Fund or a third party after the original issuance, or (2) covered by
portfolio insurance through a master municipal insurance policy the Fund has
purchased. The Fund has bought, and will only buy, portfolio insurance from
insurers whose claims-paying ability Moody's rates "Aaa" or Standard & Poor's
rates "AAA."
A-6
<PAGE> 10
As of October 31, 1998, % of the Fund's total assets were invested in
bonds covered by a specific insurance policy, and % were covered by
portfolio insurance.
The Fund also may invest in municipal bonds that are backed by an escrow or
trust account containing securities issued or guaranteed by the U.S. Government
or U.S. Government agencies and backed by the full faith and credit of the
United States, in an amount that is sufficient to ensure the payment of interest
and principal. These bonds generally will not be insured. The Fund may buy
municipal bonds that have been (1) advance refunded, where the proceeds of the
refunding have been used to buy U.S. Government or U.S. Government agency
securities that are placed in escrow and whose interest and principal payments
are sufficient to cover the remaining scheduled debt service on that municipal
bond; or (2) issued under state or local housing finance programs that use the
issuance proceeds to fund mortgages that are then exchanged for U.S. Government
or U.S. Government agency securities and deposited with a trustee as security
for those municipal bonds. Both types of municipal bonds are normally regarded
as having the credit characteristics of the underlying U.S. Government or U.S.
Government agency securities.
The Fund is diversified for purposes of the 1940 Act. Consequently, as to
75% of its total assets, the Fund may not invest more than 5% of its total
assets in the securities of any single issuer.
UNDERWRITING
The principal underwriters are:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
John Nuveen & Co. Incorporated XXXX
[Underwriter] XXXX
[Underwriter] XXXX
</TABLE>
Each of the underwriters has agreed to buy all of the shares of
MuniPreferred if any are taken. John Nuveen & Co. Incorporated is the owner of
Nuveen Advisory, the Fund's investment adviser. Each of the underwriters may
participate in auctions of MuniPreferred, and also may act as Broker-Dealers for
MuniPreferred shares after the initial offering. The Fund and Nuveen Advisory
have agreed to indemnify the underwriters for certain liabilities under the
securities laws, or to contribute to payments the underwriters may have to make
if they are found liable under these laws.
The selling price to the public is $25,000 per share, which includes a
0.00% sales load. The selling price to selected dealers is $25,000 per share,
less a discount of $125 per share. You must pay for your MuniPreferred shares by
[date].
The principal business addresses of the underwriters are: John Nuveen & Co.
Incorporated, 333 West Wacker Drive, Chicago, IL 60606.
LEGAL OPINIONS
Morgan, Lewis & Bockius LLP, Washington, D.C., will pass on certain legal
matters for the Fund, and will pass on certain legal matters for the
underwriters. Morgan, Lewis & Bockius LLP will rely as to certain matters under
Minnesota law on the opinion of Dorsey & Whitney, Minneapolis, Minnesota.
EXPERTS
Ernst & Young, the Fund's independent auditors, have audited the financial
statements of the Fund at 10/31/98 and the selected per share data and ratios
set forth under the caption "Financial Highlights" for the period 1994 to
10/31/98, appearing in Part A of this Prospectus, as set forth on their report
appearing elsewhere in this Registration Statement, and are included in reliance
upon that report given upon Ernst & Young's authority as experts in accounting
and auditing.
A-7
<PAGE> 11
NUVEEN
EXCHANGE-TRADED FUNDS
MuniPreferred(R) Shares
Prospectus Part B dated , 1999
The Prospectus offering MuniPreferred shares for a Nuveen closed-end fund
is divided into two parts. Part A of the Prospectus relates exclusively to a
particular closed-end fund and provides specific information about the Fund's
portfolio, investment objectives, financial highlights, and risk factors. Part B
of the Prospectus provides more general information about MuniPreferred shares,
including a description of the municipal bonds in which each Fund invests, the
auction at which MuniPreferred shares are traded, dividends and rate periods,
tax status, and voting rights. You should read both parts of the Prospectus and
retain them for future reference. Except as provided in Part A or this Part B,
the information contained in this Part B will apply to each Fund.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR ACCURATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
(R)Registered Trademark of John Nuveen & Co. Incorporated
MUNICIPAL BONDS
States, local governments and municipalities issue municipal bonds to raise
money for public purposes such as building public facilities, refinancing
outstanding obligations, and financing internal operating expenses. Municipal
bonds are generally either general obligation bonds, which are backed by the
full faith and credit of the issuer and may be repaid from any revenue source,
or revenue bonds, which may be repaid only from the revenues of a specific
facility or source. Each Fund also may buy municipal bonds that represent
interests in lease obligations. These bonds carry special risks because the
issuer may not be required to appropriate money annually to make payments under
the lease. To reduce this risk, a Fund will only buy these bonds where the
issuer has a strong incentive to continue making appropriations until the
municipal bond matures. The Funds do not have any limits on investing in lease
obligations that do not contain a "non-appropriation" clause. A Fund may invest
no more than 10% of its net assets in municipal bonds issued by U.S. possessions
or territories, which pay interest exempt from regular Federal income tax.
Each Fund may buy municipal bonds that pay a variable or floating rate of
interest that changes with changes in specified market rates or indices, such as
a bank prime rate or a tax-exempt money market index. As used in this
Prospectus, the term "municipal bonds" includes municipal securities with
relatively short-term maturities. Some of these short-term securities may be
variable or floating rate securities. The Funds, however, intends to emphasize
investments in municipal bonds with long- or intermediate-term maturities.
Yields on municipal bonds depend on many factors, including the condition
of the general money market and the municipal bond market, the size of a
particular offering, and the maturity and rating of a particular municipal bond.
Moody's and Standard & Poor's ratings represent their opinions of the quality of
a particular municipal bond, but these ratings are general and are not absolute
quality standards. Therefore, municipal bonds with the same maturity, coupon,
and rating may have different yields, while municipal bonds with the same
maturity and coupon and different ratings may have the same yield. The market
value of municipal bonds will vary with changes in interest rates and in the
ability of their issuers to make interest and principal payments.
Obligations of municipal bond issuers are subject to bankruptcy,
insolvency, and other laws affecting the rights and remedies of creditors. These
obligations also may be subject to future Federal or state laws or referenda
that extend the time to payment of interest and/or principal, or that constrain
the enforcement of
B-1
<PAGE> 12
these obligations or the power of municipalities to levy taxes. Legislation or
other conditions may materially affect the power of a municipal bond issuer to
pay interest and/or principal when due.
PORTFOLIO INVESTMENTS
Each Fund buys municipal bonds with different maturities and intends to
maintain an average portfolio maturity of 15 to 30 years, although this may be
shortened depending on market conditions. As a result, a Fund's portfolio may
include long-term and intermediate-term municipal bonds. If the long-term
municipal bond market is unstable, a Fund may temporarily invest up to 100% of
its assets in temporary investments. Temporary investments are high quality,
generally uninsured, short-term municipal bonds that may either be tax-exempt or
taxable. Each Fund will buy taxable temporary investments only if suitable
tax-exempt temporary investments are not available at reasonable prices and
yields. Each Fund will invest only in taxable temporary securities that are U.S.
Government securities or corporate debt securities rated within the highest
grade by Moody's or Standard & Poor's, and that mature within one year from the
date of issuance. The Funds' policies on securities ratings only apply when the
Fund buys a security, and a Fund is not required to sell securities that have
been downgraded. See the Statement of Additional Information for a description
of securities ratings. Each Fund also may invest in taxable temporary
investments that are certificates of deposit from U.S. banks with assets of at
least $1 billion, or repurchase agreements. Each Fund is required to allocate
taxable income on temporary investments, if any, proportionately between common
shares and MuniPreferred shares, based on the percentage of total dividends
distributed to each class for that year.
INSURED FUNDS: MUNICIPAL BOND INSURANCE
The following discussion relates only to the following Funds: Nuveen
Insured Quality Municipal Fund, Inc.; Nuveen Insured Municipal Opportunity Fund,
Inc.; Nuveen Premier Insured Municipal Income Fund, Inc.; and Nuveen Insured
Premium Income Municipal Fund 2.
Each insured municipal bond a Fund acquires will be covered by a specific
insurance policy (either original issue insurance or secondary market insurance)
or portfolio insurance. While each Fund has obtained several policies of
portfolio insurance, a Fund may emphasize investments in municipal bonds insured
under specific insurance policies. Each Fund has obtained portfolio insurance
from the insurers described in the Statement of Additional Information and may
in the future obtain portfolio insurance from other insurers. In any event, each
Fund has obtained and in the future will only obtain portfolio insurance issued
by insurers whose claims-paying ability Moody's rates "Aaa" or Standard & Poor's
rates "AAA." There is no limit on the percentage of a Fund's assets that may be
invested in municipal bonds insured by any one insurer.
Municipal bonds covered by a specific insurance policy, rather than by
portfolio insurance, will be rated "Aaa" by Moody's or "AAA" by Standard &
Poor's, because of the rating of the insurer's claims-paying ability. Municipal
bonds covered by portfolio insurance, however, will be rated based primarily on
the credit characteristics of the issuer, without regard to the portfolio
insurance, and generally will be rated below "Aaa" or "AAA." While a Fund holds
a municipal bond covered by portfolio insurance, it will, effectively, be of the
same credit quality as a municipal bond covered by a specific insurance policy.
Each Fund's policy of buying municipal bonds insured by insurers whose
claims-paying ability is rated "Aaa" or "AAA" applies only when the Fund buys
the municipal bond. If either rating agency downgrades an insurer's
claims-paying ability, the Fund is not required to sell bonds covered by that
insurer's policies. If a rating agency downgrades its rating of an insurer, it
likely would downgrade its rating of a municipal bond covered by that insurer's
original issuance insurance or secondary market insurance. Municipal bonds in
the Fund's portfolio covered by that insurer's portfolio insurance also would be
downgraded. Moody's and Standard & Poor's continually assess the claims-paying
ability of insurers and the creditworthiness of municipal bond issuers, and the
Fund cannot guarantee that Moody's and Standard & Poor's will not downgrade
their ratings. The value of municipal bonds covered by portfolio insurance that
are in default or in significant risk of default will be determined by
separately establishing a value for the municipal bond and a value for the
portfolio insurance.
B-2
<PAGE> 13
Original Issue Insurance. The issuer of municipal bonds or a third party
buys original issue insurance for a particular issue of municipal bonds at the
time the municipal bonds are issued. Under this insurance, the insurer
unconditionally guarantees to the holder of the municipal bond the timely
payment of principal and interest when and as these payments become due if the
issuer does not pay them. However, if the due date of the principal is
accelerated because of mandatory or optional redemption (other than acceleration
because of a mandatory sinking fund payment), default or otherwise, the payments
guaranteed may be made in the amounts and at the times as principal payments
would have been due had there not been any acceleration. The insurer is
responsible for these payments less any amounts the holders receive from any
trustee for the municipal bonds issuer or from any other source. Original issue
insurance does not guarantee the payment of any redemption premium (except for
certain premium payments for certain small issue industrial development and
pollution control municipal bonds), the value of the Fund's shares or the market
value of municipal bonds, or payments of any tender purchase price upon the
tender of the municipal bonds. Original issue insurance also does not insure
against nonpayment of principal or interest on municipal bonds resulting from
the insolvency, negligence or any other act or omission of the trustee or other
paying agent for these bonds.
Original issue insurance remains in effect as long as the municipal bonds
it covers remain outstanding and the insurer remains in business, regardless of
whether the Fund ultimately disposes of these municipal bonds. Consequently,
original issue insurance may be considered to represent an element of market
value of the municipal bonds so insured, but the exact effect, if any, of this
insurance on the market value cannot be estimated.
Secondary Market Insurance. After a municipal bond is issued, the Fund or
a third party may purchase insurance on that security. Secondary market
insurance generally provides the same type of coverage as original issue
insurance and, as with original issue insurance, secondary market insurance
remains in effect as long as the municipal bonds it covers remain outstanding
and the insurer remains in business, regardless of whether the Fund ultimately
disposes of these municipal bonds.
One of the purposes of acquiring secondary market insurance for a
particular municipal bond is to enable the Fund to enhance the value of the
security. The Fund, for example, might seek to buy a particular municipal bond
and obtain secondary market insurance for it if, in Nuveen Advisory's opinion,
the market value of the security, as insured, would exceed the current value of
the security without insurance plus the cost of the secondary market insurance.
Similarly, if the Fund owns but wishes to sell a municipal bond that is then
covered by portfolio insurance, the Fund might seek to obtain secondary market
insurance for it if, in Nuveen Advisory's opinion, the net proceeds of the
Fund's sale of the security, as insured, would exceed the current value of the
security plus the cost of the secondary market insurance. In determining whether
to insure municipal bonds the Fund owns, an insurer will apply its own
standards, which correspond generally to the standards it has established for
determining the insurability of new issues of municipal bonds. See "Original
Issue Insurance" above.
Portfolio Insurance. Each Fund has purchased several policies of portfolio
insurance, each of which would guarantee the payment of principal and interest
on specified eligible municipal bonds the Fund has bought. Except as described
below, portfolio insurance generally provides the same type of coverage as
original issue insurance or secondary market insurance. Municipal bonds insured
under one portfolio insurance policy would generally not be insured under any
other policy the Fund buys. A municipal bond is eligible for coverage under a
policy if it meets certain requirements of the insurer. If a municipal bond is
already covered by original issue insurance or secondary market insurance, then
the security is not required to be additionally insured under any portfolio
insurance policy that the Fund may buy.
Each portfolio insurance policy will terminate for any municipal bond that
has been redeemed or that the Fund has sold, on the date of redemption or the
settlement date of sale, and an insurer will not have any liability thereafter
under a policy for any municipal bond, except that if the redemption date or
settlement date occurs after a record date and before the related payment date
for any municipal bond, the policy will terminate for that municipal bond on the
business day immediately following the payment date.
One or more portfolio insurance policies may provide the Fund, under an
irrevocable commitment of the insurer, with the option to exercise the right to
obtain permanent insurance for a municipal bond that the Fund
B-3
<PAGE> 14
will sell. The Fund would exercise the right to obtain permanent insurance upon
payment of a single, predetermined insurance premium payable from the sale
proceeds of the municipal bond. The Fund expects to exercise the right to obtain
permanent insurance for a municipal bond only if, in Nuveen Advisory's opinion,
upon the exercise the net proceeds from the sale of the municipal bond, as
insured, would exceed the proceeds from the sale of the security without
insurance.
The permanent insurance premium for each municipal bond is determined based
upon the insurability of each security as of the date the Fund originally bought
the security. This premium will not be increased or decreased for any change in
the security's creditworthiness, unless the security is in default as to payment
of principal or interest, or both. If this happens, the permanent insurance
premium will be subject to an increase predetermined at the date of the Fund's
purchase.
Each Fund generally intends to retain any insured bonds covered by
portfolio insurance that are in default or in significant risk of default and to
place a value on the insurance, which ordinarily will be the difference between
the market value of the defaulted bond and the market value of similar bonds of
minimum investment grade (that is, rated "Baa" or "BBB") that are not in
default. In certain circumstances, however, Nuveen Advisory may determine that
an alternative value for the insurance, such as the difference between the
market value of the defaulted bond and either its par value or the market value
of similar bonds that are not in default or in significant risk of default, is
more appropriate. To the extent that the Fund holds defaulted municipal bonds,
it may be limited in its ability to manage its investment portfolio and to
purchase other bonds. Except as described above for bonds covered by portfolio
insurance that are in default or subject to significant risk of default, the
Fund will not place any value on the insurance in valuing the municipal bonds it
holds.
Because each portfolio insurance policy will terminate for a particular
covered bond on the date a Fund sells that bond, the insurer will be liable only
for those payments of principal and interest that are then due and owing (unless
the Fund obtains permanent insurance). Portfolio insurance will not enhance the
marketability of the Fund's bonds, whether or not the bonds are in default or in
significant risk of default. On the other hand, because original issue insurance
and secondary market insurance will remain in effect as long as the municipal
bonds they cover are outstanding, these insurance policies may enhance the
marketability of these bonds even when they are in default or in significant
risk of default, but the exact effect, if any, on marketability, cannot be
estimated. Accordingly, the Fund may determine to retain or, alternatively, to
sell municipal bonds covered by original issue insurance or secondary market
insurance that are in default or in significant risk of default.
Each Fund generally pays the premiums for a portfolio insurance policy
monthly, and premiums are adjusted for purchases and sales of municipal bonds
covered by the policy during the month. The yield on the Fund's portfolio is
reduced to the extent of the insurance premiums the Fund pays which, in turn,
will depend upon the characteristics of the covered municipal bonds. If the Fund
were to buy secondary market insurance for any municipal bond then covered by a
portfolio insurance policy, the coverage and the obligation to pay monthly
premiums under the portfolio policy would cease.
INVESTMENT RESTRICTIONS
The following investment restrictions are fundamental policies of each Fund
which may not be changed without the approval of the holders of a majority of
the outstanding shares of common and MuniPreferred shares (voting together as a
single class) and of the holders of a majority of the outstanding shares of
MuniPreferred shares (voting as a separate class).
Each Fund may not:
- Invest more than 25% of its total assets in securities of issuers in any
one industry, other than municipal bonds issued by states and local
governments and their instrumentalities or agencies (not including those
backed only by the assets and revenues of non-governmental users), and
municipal bonds issued or guaranteed by the U.S. Government or its
instrumentalities or agencies; and
- Invest more than 5% of its total assets in securities of any one issuer
(not including securities of the U.S. Government and its agencies, or the
investment of 25% of the Fund's total assets).
B-4
<PAGE> 15
See the Statement of Additional Information for additional fundamental and
non-fundamental policies of each Fund.
Moody's and Standard & Poor's, in connection with establishing and
maintaining ratings on the Fund's MuniPreferred shares, restrict a Fund's
ability to borrow money, sell securities short, lend securities, buy and sell
futures contracts, and write put or call options. Each Fund does not expect that
these restrictions will adversely affect its ability to achieve its investment
objectives. These restrictions are not fundamental policies and a Fund may
change them without shareholder approval.
Except to the extent that a Fund invests in temporary investments, each
Fund will invest substantially all of its assets in municipal bonds that pay
interest that is exempt from regular federal income tax. No Fund has set any
limit on the percentage of its portfolio that may be invested in municipal bonds
subject to the Federal alternative minimum tax. Because a substantial part of
the income from these bonds is expected to be subject to the Federal alternative
minimum tax, MuniPreferred shares may not be a suitable investment for
shareholders subject to this tax. Suitability will depend on a comparison of the
Fund's likely after-tax yield with the likely after-tax yield from comparable
tax-exempt investments not subject to the alternative minimum tax, and with
fully taxable investments, in light of an investor=s tax position. Special
considerations apply to corporate shareholders. Dividends paid on MuniPreferred
shares may include an allocated portion of net capital gains or other Federal
taxable income. See "Tax Matters" and "The Auction -- Auction Dates; Advance
Notice of Allocation of Taxable Income."
RISK FACTORS
Risk is inherent in all investing. Investing in any investment company
security involves risk, including the risk that you may receive little or no
return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in MuniPreferred shares.
Auction Risk. You may not be able to sell your MuniPreferred shares at an
auction if the auction fails; that is, if there are more MuniPreferred shares
offered for sale than there are buyers for those shares. The Fund believes this
event is unlikely. Also, if you place hold orders (orders to retain
MuniPreferred shares) at an auction only at a specified rate, and that bid rate
exceeds the rate set at the auction, you will not retain your MuniPreferred
shares. Finally, if you buy shares or elect to retain shares without specifying
a rate below which you would not wish to continue to hold those shares, and the
auction sets a below-market rate, you may receive a lower rate of return on your
shares than the market rate. See "Description of MuniPreferred" and "The
Auction -- Summary of Auction Procedures" and "-- Acceptance or Rejection of
Bids."
Secondary Market Risk. If you try to sell your MuniPreferred shares
between auctions, you may not be able to sell any or all of your shares, or you
may not be able to sell them for $25,000 per share or $25,000 per share plus
accumulated dividends. If the Fund has designated a special rate period (a rate
period of more than 7 days), changes in interest rates could affect the price
you would receive if you sold your shares in the secondary market.
Broker-dealers that maintain a secondary trading market for MuniPreferred shares
are not required to maintain this market, and the Fund is not required to redeem
shares either if an auction or an attempted secondary market sale fails because
of a lack of buyers. MuniPreferred shares are not registered on a stock exchange
or the NASDAQ stock market. If you sell your MuniPreferred shares to a
broker-dealer between auctions, you may receive less than the price you paid for
them, especially when market interest rates have risen since the last auction.
Accrued MuniPreferred dividends, however, should at least partially compensate
for the increased market interest rates.
Ratings Risk. While Moody's and Standard & Poor's assign ratings of "Aaa"
or "AAA" to MuniPreferred shares (except for MuniPreferred shares of the Nuveen
Michigan Quality Income Municipal Fund, Inc., which are assigned ratings of Aa1
and AA+), the ratings do not eliminate or necessarily mitigate the risks of
investing in MuniPreferred shares. A rating agency could downgrade MuniPreferred
shares, which may make your shares less liquid at an auction or in the secondary
market, though probably with higher resulting dividend rates. If a rating agency
downgrades MuniPreferred shares, the Fund is required to alter its portfolio or
redeem MuniPreferred shares.
B-5
<PAGE> 16
Interest Rate Risk. The Fund issues MuniPreferred shares, which pay
dividends based on short-term rates, and uses the proceeds to buy municipal
bonds, which pay interest based on long-term yields. Long-term municipal bond
yields are typically, although not always, higher than short-term yields. So
long as the return on the Fund's long-term bond portfolio, net of Fund expenses,
exceeds MuniPreferred dividend rates, the investment of the proceeds of the
issuance of MuniPreferred will generate more income than is needed to pay
MuniPreferred dividends, and the excess will be used to pay higher dividends on
common shares. If short-term yields exceed the net rate of return on the Fund's
bond portfolio, the Fund could invest up to 100% of its assets in temporary,
short-term instruments. Only if MuniPreferred dividend rates were to greatly
exceed the Fund's net portfolio returns would the Fund need to sell municipal
bonds to pay MuniPreferred dividends, which would tend to reduce the amount of
the assets standing behind the MuniPreferred shares.
Inflation Risk. Inflation is the reduction in the purchasing power of
money resulting from the increase in the price of goods and services. Inflation
risk is the risk that the inflation adjusted (or "real") value of your
MuniPreferred investment or the income from that investment will be worth less
in the future. As inflation occurs, the real value of the MuniPreferred shares
and distributions declines. In an inflationary period, however, it is expected
that, through the auction process, MuniPreferred dividend rates would increase,
tending to offset this risk.
Credit Risk. Credit risk is the risk that an issuer of a municipal bond
will become unable to meet its obligation to make interest and principal
payments. In general, lower-rated municipal bonds are perceived to carry a
greater degree of risk that the issuer will lose its ability to make interest
and principal payments. Credit risk is reduced because of the Fund's asset
coverage ratio for MuniPreferred shares. See "Description of
MuniPreferred -- Asset Maintenance and Rating Agency Guidelines."
Year 2000 Risk. Nuveen Advisory relies on computer systems to manage the
Fund's investments, process shareholder transactions, and maintain shareholder
accounts. Because of the way computers historically have stored dates, some of
these systems currently may not be able to process activity occurring in the
year 2000. Nuveen Advisory is working with the Fund's service providers to adapt
their systems to address this "Year 2000" issue. Although there can be no
absolute assurance, Nuveen Advisory and the Fund expect that the necessary work
will be completed on a timely basis. In addition, Year 2000 issues may affect
the ability of municipal issuers to meet their interest and principal payment
obligations to their bond holders, and may adversely affect the bonds' credit
ratings and values. Nuveen Advisory is requesting information from municipal
issuers so that Nuveen Advisory can take the issuers' Year 2000 readiness, if
made available, into account in making investment decisions. There can be no
assurance that issuers will provide this information to Nuveen Advisory, or that
issuers will begin or complete the work necessary to address any Year 2000
issues on a timely basis.
State Concentration Risk. Some of the funds invest primarily in bonds from
a single state. These funds bear investment risk from the economic, political or
regulatory changes that could adversely affect municipal bond insurers in that
state and therefore the value of the fund's investment portfolio. See "General
Information for State Funds" for a discussion of the specific risks for each
state.
GENERAL INFORMATION FOR STATE FUNDS
Because the New York, California, Florida, New Jersey, Pennsylvania,
Michigan, and Texas Funds primarily purchase municipal bonds from a single
state, each fund also bears investment risk from economic, political or
regulatory changes that could adversely affect municipal bond issuers in that
state and therefore the value of the fund's investment portfolio. The following
discussion of special state considerations was obtained from official offering
statements of these issuers and the fund has not independently the facts in this
discussion. The discussion includes general state tax information related to an
investment in fund shares. Because tax laws are complex and often change, you
should consult your tax adviser about the state tax consequences of a specific
fund investment. See the Statement of Additional Information for further
information.
B-6
<PAGE> 17
FLORIDA
Florida is one of the nation's fastest growing states. Employment and
personal income growth have outpaced the nation since 1991 and recent economic
reports indicate that the State continues to experience job growth, although at
a more moderate pace. Population growth has slowed but remains relatively high.
Florida has a diverse economy with substantial insurance, banking, healthcare,
construction and trade sectors, yet it remains heavily dependent on the
agriculture and tourism industries.
Florida's unemployment rate of 4.5% in June 1998 was comparable to the
national average of 4.5% in June 1998 and lower than the State's 4.8% rate in
June 1997. Florida's 1997 per capita income of $25,255 is on a par with national
averages and slightly above regional levels. Because the State's significant
senior population relies more on fixed income than on wages, income levels in
the State are generally more stable over different phases of economic cycles.
A voter-approved amendment to Florida's Constitution that became effective
in 1996 limits the rate of growth of state revenues to the growth rate of
personal income. Revenues that are pledged to bonds, including new issuance, are
exempt from the limitation. Another recent constitutional amendment requires the
State to maintain a budget stabilization fund. The fund, which is expected to
reach the required 5% level by 1999, provides a counterbalance to the State's
reliance on economically-sensitive sales tax revenues. As of July 31, 1998,
Florida's general obligation debt carries ratings of AA+ by Standard & Poor's,
Aa2 by Moody's, and AA by Fitch.
Tax Treatment. Shares of the Florida Funds will not be subject to the
Florida intangible personal property tax. The Florida Funds hold only Florida
municipal bonds and U.S. Government securities. If a Florida Fund hold other
taxable securities, then your shares in that Florida Fund will be subject to the
Florida intangible personal property tax, except that the portion of your shares
attributable to the Florida Fund's investments in U.S. securities will not be
subject to the tax. Corporate shareholders of the Florida Funds also may be
subject to the Florida corporate income tax. Corporate shareholders should refer
to the Statement of Additional Information for more detailed information and are
urged to consult their tax adviser.
PENNSYLVANIA
Pennsylvania's economy, which is one of the weaker economies in the
Northeast, is expected to continue to lag national economic trends in the near
future. The sluggish economy is due in part to continued mergers and
acquisitions, expenditure reductions, and layoffs in the healthcare, defense,
and telecommunications industries, which are the most important to the
Commonwealth's economy.
As of January 1998, Pennsylvania's unemployment rate was 4.6% compared to
4.7% for the United States. Personal income in the Commonwealth for 1996 is
$299.0 billion, an increase of 4.9 percent over the previous year. During the
same period, national personal income increased at a rate of 5.6 percent. Based
on the 1996 personal income estimates, per capita income for 1996 is at $24,803
in the Commonwealth compared to per capita income in the United States of
$24,426.
General Fund collections for fiscal year 1997-98 were $676.1 million or
3.9% above estimate, and the General Fund budget for 1998-99 included
approximately $218 million of tax cuts. As of April 30, 1998, Pennsylvania's
general obligation debt carries ratings of AA- by Standard & Poor's, Aa3 by
Moody's, and AA by Fitch.
Tax Treatment. The Pennsylvania Fund's regular monthly dividends will not
be subject to the Pennsylvania personal income tax (and, for Philadelphia
residents, the Philadelphia School District income tax) to the extent they are
paid out of income earned on Pennsylvania municipal bonds or U.S. government
securities. You will be subject to Pennsylvania personal income tax (and, for
Philadelphia residents, the Philadelphia School District income tax), however,
to the extent the Pennsylvania Fund distributes any taxable income or realized
capital gains, or if you sell or exchange Pennsylvania Fund shares and realize a
capital gain on the transaction.
B-7
<PAGE> 18
The treatment of corporate shareholders of the Pennsylvania Fund is similar
to that described above, but corporate shareholders should consult their tax
adviser.
NEW YORK
New York State has historically been one of the wealthiest states in the
nation. For decades, however, the State's economy has grown more slowly than
that of the nation as a whole, gradually eroding the State's relative economic
affluence. Statewide, urban centers have experienced significant changes
involving migration of the more affluent to the suburbs and an influx of
generally less affluent residents. Regionally, the older Northeast cities have
suffered because of the relative success that the South and the West have had in
attracting people and business. The State has for many years had a very high
State and local tax burden relative to other states. The burden of State and
local taxation, in combination with the many other causes of regional economic
dislocation, has contributed to the decisions of some businesses and individuals
to relocate outside, or not locate within, the State.
The State's economy remains more reliant on the securities industry than is
the national economy. As a result, the State remains susceptible to downturns in
that industry, which could cause adverse changes in wage and employment levels.
1997 per capita personal income was $30,752 and the 1997 unemployment rate was
6.4%.
The State has projected continued moderate economic growth within New York
during 1998 and 1999, although growth rates will lessen gradually during the
course of the two years. Personal income growth is expected to be modest but
below 1997 levels largely because increases in 1998 year-end bonuses are
expected to be lower.
The State expects to end its 1997-98 fiscal year with an operating surplus
of approximately $1.8 billion. The State Legislature enacted the State's 1997-98
fiscal year budget on August 4, 1997, more than four months after the start of
that fiscal year.
As of January 20, 1998, the updated 1997-98 State Financial Plan (the
"Plan") projected total general fund receipts of $35.2 billion and disbursements
of $35.2 billion, representing increases in receipts and disbursements of $2.15
billion and $2.27 billion over 1996-97 fiscal year. The Plan projected a General
Fund balance of approximately $465 million at the close of the 1997-98 fiscal
year.
The Governor issued a proposed State budget for the 1998-99 fiscal year on
January 20, 1998, which projected a balanced general fund and receipts and
disbursements of $36.22 billion and $36.18 billion, respectively. As of May 11,
1998, the State legislature had not yet enacted, nor had the Governor and the
legislature reached an agreement on, the budget for the 1998-99 fiscal year
commencing on April 1, 1998. The Governor and the State's legislature have
agreed on or proposed a series of short-term stopgap spending measures to fund
state payrolls and advances to certain municipalities and certain state
programs. The delay in the enactment of the budget may negatively affect certain
proposed actions and reduce projected savings.
On June 4, 1997, New York City adopted a 1998 fiscal year budget, which
provided for $33.4 billion in spending. Due to increased tax revenues resulting
from increased Wall Street profits and tourism, New York City has estimated that
it may end the 1998 fiscal year with a surplus of $2.0 billion. On April 24,
1998, the Mayor outlined his proposed $34.1 billion Executive Budget. The
Mayor's proposed budget called for $595 million in additional spending cuts at
City agencies and a continuation of the personal income tax surcharge which is
due to expire. The 1998-99 budget proposal includes several tax reductions
including the elimination of the City's sales tax on all clothing and shoe
purchases under $110.
The Governor and the legislature have not agreed upon the level of State
aid to the City during the 1999 fiscal year and there can be no assurances that
further cuts will not be necessary to close additional budget gaps once a state
budget is adopted. If State or Federal aid in later years is less than the level
projected in the Mayor's proposal, projected savings may be negatively impacted
and the Mayor may be required to propose significant additional spending
reductions or tax increases to balance the City's budget for the 1999 and later
fiscal years. If the State, the State Agencies, New York City, other
municipalities or school districts were to suffer serious financial difficulties
jeopardizing their respective access to the public credit markets, or
B-8
<PAGE> 19
increasing the risk of a default, the market price of Municipal Obligations
issued by such entities could be adversely affected.
On March 5, 1997, New York Governor George Pataki signed legislation
creating The New York City Transitional Finance Authority, which is authorized
to issue up to $7.5 billion in bonds for capital spending by New York City. The
City had faced limitations on its borrowing capacity after 1998 under the
State's Constitution that would have prevented it from borrowing additional
funds, as a result of the decrease in real estate values within the City. The
first issuance of TFA debt occurred in October 1997.
Tax Treatment. The New York Funds' regular monthly dividends will not be
subject to New York state or New York city personal income taxes to the extent
they are paid out of income earned on New York municipal bonds or out of income
earned on obligations of U.S. territories and possessions. The portion of the
New York Funds' monthly dividends that is attributable to income earned on other
obligations will be subject to the New York state or the New York city personal
income taxes. You also will be subject to New York state and New York city
personal income taxes to the extent the New York Funds distribute any taxable
income or realized capital gains, or if you sell or exchange shares of the New
York Funds and realize a capital gain on the transaction.
The treatment of corporate and unincorporated business shareholders of the
New York Funds differs from that described above. Corporate shareholders should
refer to the statement of additional information for more detailed information
and are urged to consult their tax adviser.
NEW JERSEY
New Jersey has a diversified economic base comprised of various
manufacturing, construction and service industries. New Jersey ranks second
among the states in per capita personal income which was $32,654 in 1997.
While the national recession adversely affected the State's employment
rate, New Jersey's economy has since been accelerating and 1997 unemployment
rate was 5.1%.
The 1997 fiscal year audited general fund and available revenues were $17.4
billion against appropriations of $16.4 billion. The general fund surplus
totaled $281 million in fiscal year 1997. New Jersey's general obligation bonds
are rated Aa1 by Moody's and AA+ by Standard and Poor's.
Tax Treatment. The New Jersey Fund's regular monthly dividends will not be
subject to New Jersey gross income tax to the extent they are paid out of income
earned on or capital gains realized from the sale of New Jersey municipal bonds
or U.S. government securities. You will be subject to New Jersey gross income
tax, however, to the extent the New Jersey Fund distributes any taxable income.
If you realize a capital gain on the sale or exchange of shares of the New
Jersey Fund, you will not be subject to New Jersey gross income tax. If you
realize a capital loss on the sale or exchange of shares of the New Jersey Fund,
you may not use the loss to offset other New Jersey taxable capital gains.
The treatment of corporate shareholders of the New Jersey Fund differs from
that described above. Corporate shareholders should refer to the statement of
additional information for more detailed information and are urged to consult
their tax adviser.
CALIFORNIA
California's economy, the largest in the nation, is undergoing a slow,
steady growth following a recession from mid-1990 to late 1993 in which the
construction, manufacturing and financial services industries were adversely
affected, job losses were severe, and substantial, broad-based revenue
shortfalls affected both the state and local governments. The state's 1997
unemployment rate was 6.3% and average personal income was $26,570. California's
general obligation bonds are rated A1 by Moody's and A+ by Standard and Poor's.
The taxing authority of California's governmental entities is limited due
to the adoption of "Proposition 13" and other amendments to the California
Constitution. Proposition 13, adopted by voters in 1978, limits to 1% of full
cash value the rate of ad valorem property taxes on real property and generally
restricts the
B-9
<PAGE> 20
reassessment of property to 2% per year, except upon new construction or change
of ownership (subject to a number of exemptions). Because the basic 1% ad
valorem tax levy is applied against the assessed value of property as of the
owner's date of acquisition, the amount of tax on similarly situated properties
varies widely. The state and local governments are also subject to annual
"appropriations limits" imposed by Article XIIIB of the California Constitution,
which limits the state and local governments from spending the proceeds of tax
revenues, regulatory licenses, user charges or other fees beyond imposed
appropriations limits which are adjusted annually to reflect changes in cost of
living and population. Revenues in excess of the limitations are measured over a
two year cycle. Local governments must return any excess to taxpayers by rate
reductions; the state must refund 50% of any excess, with the other 50% paid to
schools and community colleges. A 1986 initiative statute called "Proposition
62" requires either a majority or 2/3 voter approval for any increase in general
or special taxes. Court decisions had struck down most of Proposition 62, but
the California Supreme Court upheld its constitutionality in September 1995.
Many aspects of the decision, such as whether it applies retroactively, remain
unclear, but its future effect will be to further limit the fiscal flexibility
of many local governments. The complex and ambiguous nature of the foregoing
limitations makes it impossible to fully determine their impact on California
Municipal Obligations or the ability of the state and local governments to pay
debt service on California Municipal Obligations.
On November 5, 1996, California voters approved Proposition 218 which added
Articles XIIIC and XIIID to the California Constitution, imposing certain vote
requirements and other limitations on the imposition of new or increased and in
some cases existing taxes, assessments and property-related fees and charges.
Proposition 218 also extends the initiative power to include the reduction or
repeal of any local taxes, assessments, fees and charges. This extension of the
initiative power is not limited to taxes imposed on or after the effective date
of Proposition 218, and could result in the retroactive repeal or reduction in
any existing taxes, assessments, fees or charges. If such a repeal or reduction
occurs in a particular California entity, the financial condition of that entity
may be adversely impacted and rating downgrades and/or defaults may result.
Additionally, the voter approval requirement reduces the financial flexibility
of local governments to deal with fiscal problems by limiting the ability to
increase taxes, assessments, fees or charges. In some cases, this loss of
flexibility may, and in fact has, been cited as the reason for rating
downgrades. No assurances can be given that California entities will be able to
raise taxes to meet future spending requirements. In addition, at this time it
is not clear exactly how a court will intepret Proposition 218.
California is estimated to end its 1996-97 fiscal year with a general fund
surplus of approximately $763 million, of which $312 million is reserved for
economic uncertainties reducing the accumulated budget deficit to approximately
$1.14 billion. As a result of the improved revenues, the state's cash position
has substantially recovered. Only $3 billion of cash flow borrowing was needed
during 1996-97, and about $3 billion is projected for 1997-98, with no external
borrowing over the end of the fiscal year. The Governor's proposed budget for
1997-98 projects $52.0 billion of revenues and transfers, and $51.7 billion of
expenditures, resulting in a budget reserve at June 30, 1998 of about $580
million. A number of issues related to the 1997-98 budget still have to be
resolved, including additional school funding and the Governor's proposals for
future health and welfare cuts.
California's finances have dramatically improved since 1994 and the economy
has further diversified. However, should the financial condition of California
deteriorate again, its credit ratings could be further reduced, and the market
value and marketability of all outstanding notes and bonds issued by California,
its public authorities or local governments could be adversely affected.
Tax Treatment. The California Funds' regular monthly dividends will not be
subject to California personal income taxes to the extent they are paid out of
income earned on California municipal obligations or U.S. government securities.
You will be subject to California personal income taxes, however, to the extent
the funds distribute any taxable income or realized capital gains, or if you
sell or exchange shares of the funds and realize capital gain on the
transaction.
The treatment of corporate shareholders of the funds differs from that
described above. Corporate shareholders should refer to the statement of
additional information for more detailed information and are urged to consult
their tax adviser.
B-10
<PAGE> 21
MICHIGAN
Michigan's economy has improved significantly since the 1980's. The State's
unemployment rate was 3.6% in June 1998, compared to the national average of
4.5%. Per capita income has increased each year over the past decade, and was
$25,560 in 1997. Population has remained stable in the State, increasing by a
negligible amount annually. The manufacturing industry and the presence of the
"Big 3" automobile manufacturers are the primary influence in the economy.
Despite recent strikes and lower automobile sales and profits, the positive
economic impact of the manufacturing industry has contributed to the tax base
and job growth.
Michigan's economic and financial improvements are reflected in the state's
rating of Aa1/AA+/AA+ by Moody's, Standard & Poor's and Fitch, respectively. All
three rating agencies upgraded the State's credit rating in 1998.
Tax Treatment. The Michigan Fund's regular monthly dividends will not be
subject to the Michigan individual income tax to the extent they are paid out of
income earned on Michigan municipal bonds or paid out of income earned on or
capital gains realized from, the sale of U.S. government securities. You will be
subject to Michigan personal income tax, however, to the extent the Michigan
Fund distributes any taxable income or realized capital gains (other than
capital gains realized from the sale of U.S. government securities), or if you
sell or exchange Michigan Fund shares and realize a capital gain on the
transaction. If you reside in a Michigan city that imposes local income taxes,
you will not be subject to these taxes on the Michigan Fund's distributions of
income attributable to interest earned on U.S. government securities or
municipal bonds, or to gains on the sale of U.S. government securities.
The treatment of corporate shareholders of the Michigan Fund differs from
that described above. Corporate shareholders should refer to the Statement of
Additional Information for more detailed information and are urged to consult
their tax adviser.
TEXAS
The State of Texas suffered during the 1980s from the depressed price of
oil and gas and overbuilding in the real estate market. The decline in oil
prices since 1986 and the recession that followed have had a severe effect on
the Texas banking and savings and loan industries, resulting in closings among
banks and savings and loans through the early 1990s. In recent years, the
State's overall financial situation has improved however, as Texas' economic
growth has outpaced that of the United States as a whole. In fiscal years 1993,
1994, 1995, 1996 and 1997, Texas' General Revenue Fund ended with cash surpluses
of $1.630 billion, $2.225 billion, $2.101 billion, $2.270 billion and $2.685
billion, respectively.
Tax treatment. All dividends and distributions Texas resident individuals
are not subject to taxation by Texas. However, Texas enacted significant changes
to its corporate franchise tax law for reporting years beginning January 1, 1992
and thereafter. These changes include the imposition of a tax measured by earned
surplus, in addition to the previously existing tax on a corporation's capital.
To the extent dividend and interest payments are made by a corporation not
incorporated in Texas, or another type of entity not legally domiciled in Texas,
such dividends and payments are not considered to be Texas sourced receipts for
franchise tax apportionment purposes.
Effective with franchise tax reports originally due after January l, 1994
(which are based upon accounting years ending in 1993), other taxable
distributions from the Series to corporations doing business in or incorporated
in Texas (such as the proceeds resulting from net gain upon the sale of Series
bonds) may be allocable to Texas as Texas sourced gross receipts for the earned
surplus component of the franchise tax if: (l) the activities of the recipient
corporation do not have a sufficient unitary connection with that corporation's
other activities conducted within the state giving rise to the underlying sale
of such assets; and (2) the recipient corporation has its commercial domicile in
Texas. The Texas legislature has proposed legislation that, if adopted, would
extend applicability of the franchise tax to numerous types of additional legal
entities.
MuniPreferred shares are not subject to property taxation by Texas or its
political subdivisions.
B-11
<PAGE> 22
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
Each Fund's Board of Directors is responsible for the management of the
Fund, including general supervision of Nuveen Advisory's duties.
INVESTMENT ADVISER AND PORTFOLIO MANAGERS
Nuveen Advisory was organized in 1976 and is a wholly-owned subsidiary of
John Nuveen & Co. Incorporated ("Nuveen"). The offices of Nuveen Advisory and
Nuveen are located at 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen
Advisory is responsible for the selection and ongoing monitoring of the bonds in
the Fund's investment portfolio. Nuveen Advisory also administers each Fund's
business affairs and provides office facilities, equipment and certain
administrative services. Nuveen Advisory may buy municipal bonds or other
portfolio investments for the Fund from Nuveen or its affiliates.
Founded in 1898, Nuveen currently sponsors 100 investment company
portfolios with approximately $39 billion of assets under management. Nuveen is
a subsidiary of The John Nuveen Company, which is a majority-owned subsidiary of
The St. Paul Companies.
PORTFOLIO MANAGERS
Michael Davern, a Vice President and Portfolio Manager of Nuveen Advisory
since 19 , manages Nuveen Michigan Quality Income Municipal Fund,
Inc. (since 19 ), and Nuveen Texas Quality Income Municipal Fund
(since 19 ). Mr. Davern manages 8 Nuveen-sponsored open-end and 7
other Nuveen-sponsored closed-end investment companies.
William Fitzgerald, a Vice President and Portfolio Manager of Nuveen
Advisory since 19 , manages Nuveen Municipal Market Opportunity
Fund, Inc. (since 19 ), Nuveen Quality Income Municipal Fund, Inc.
(since 19 ), Nuveen California Performance Plus Municipal Fund,
Inc. (since 19 ). Nuveen California Municipal Market Opportunity
Fund, Inc. (since 19 ), Nuveen California Investment Quality
Municipal Fund, Inc. (since 19 ), Nuveen California Select Quality
Municipal Fund, Inc. (since 19 ), and Nuveen California Quality
Income Municipal Fund, Inc. (since 19 ). Mr. Fitzgerald manages 2
Nuveen-sponsored open-end and 2 other Nuveen-sponsored closed-end investment
companies.
Thomas Futrell, a Vice President and Portfolio Manager of Nuveen Advisory
since 19 , manages Nuveen Premium Income Municipal Fund, Inc. (since 19 ),
Nuveen Investment Quality Municipal Fund, Inc. (since 19 ), and Nuveen New
Jersey Investment Quality Municipal Fund, Inc.(since 19 ). Mr. Futrell manages
5 Nuveen-sponsored open-end and 3 other Nuveen-sponsored closed-end investment
companies.
Richard Huber, a Vice President and Portfolio Manager of Nuveen Advisory
since 19 , manages Nuveen Municipal Advantage Fund, Inc. (since 19 ) and
Nuveen Select Quality Municipal Fund, Inc. (since 19 ). Mr. Huber manages 3
Nuveen-sponsored open-end investment companies.
Steven Krupa, a Vice President and Portfolio Manager of Nuveen Advisory
since 19 , manages Nuveen Insured Municipal Opportunity Fund, Inc. (since
19 ), Nuveen Insured Quality Municipal Fund, Inc. (since 19 ), Nuveen Premier
Insured Municipal Income Fund, Inc. (since 19 ), and Nuveen Insured Premium
Income Municipal Fund 2 (since 19 ). Mr. Krupa manages one Nuveen-sponsored
open-end investment company.
Edward Neild, a Managing Director and Portfolio Manager of Nuveen Advisory
since 19 , manages Nuveen Premium Income Municipal Fund 4, Inc. (since 19 ).
Mr. Neild manages one other Nuveen-sponsored closed-end investment company.
Thomas O'Shaughnessy, an Assistant Vice President and Portfolio Manager of
Nuveen Advisory since 19 , manages Nuveen Pennsylvania Investment Quality
Municipal Fund (since 19 ), Nuveen Florida
B-12
<PAGE> 23
Investment Quality Municipal Fund (since 19 ), and Nuveen Florida Quality
Income Municipal Fund (since 19 ). Mr. O'Shaughnessy manages 10
Nuveen-sponsored open-end and 4 other Nuveen-sponsored closed-end investment
companies.
Steven Peterson, a Vice President and Portfolio Manager of Nuveen Advisory
since 19 , manages Nuveen Premier Municipal Income Fund, Inc. (since 19 ),
Nuveen Premium Income Municipal Fund 2, Inc. (since 19 ), and Nuveen
Performance Plus Municipal Fund, Inc. (since 19 ). Mr. Peterson manages one
other Nuveen-sponsored closed-end investment company.
Daniel Solender manages Nuveen New York Select Quality Municipal Fund, Inc.
(since 19 ), Nuveen New York Quality Income Municipal Fund, Inc. (since 19 ),
Nuveen New York Performance Plus Municipal Fund, Inc. (since 19 ), and Nuveen
New York Investment Quality Municipal Fund, Inc. (since 19 ). Mr. Solender
manages 6 Nuveen-sponsored open-end and 9 other Nuveen-sponsored closed-end
investment companies.
For its services, Nuveen Advisory is paid an annual management fee, as a
percentage of average daily net asset value, according to the following
schedule:
MANAGEMENT FEES
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSET VALUE MANAGEMENT FEE
----------------------------- --------------
<S> <C>
For the first $125 million .6500%
For the next $125 million .6325%
For the next $250 million .6250%
For the next $500 million .6125%
For the next $1 billion .6000%
For assets over $2 billion .5750%
</TABLE>
In addition to the management fee, each Fund pays all other costs and
expenses of its operations, including fees to third-party service providers such
as the custodian and transfer agent, the compensation of its directors (other
than those affiliated with Nuveen Advisory), legal and accounting fees, and
printing expenses.
LEGAL PROCEEDINGS
In June 1996, certain shareholders (the "Plaintiffs") of six closed-end
funds advised by Nuveen Advisory (Nuveen Massachusetts Premium Income Municipal
Fund; Nuveen Insured Municipal Opportunity Fund, Inc.; Nuveen Insured Premium
Income Municipal Fund, Inc.; Nuveen Premium Income Municipal Fund 2, Inc.;
Nuveen Insured Premium Income Municipal Fund 2; and Nuveen Premium Income
Municipal Fund 4, Inc.) filed suit against these funds, Nuveen, Nuveen Advisory,
and two of the funds' former directors (collectively, the "Defendants"). The
suit, which is pending in federal district court for the Northern District of
Illinois, seeks damages, an injunction and other relief. The Plaintiffs allege
that the funds' directors and Nuveen Advisory breached their fiduciary duty. The
Plaintiffs also allege various misrepresentations and omissions in prospectuses
and shareholder reports about the use of leverage through the issuance and
auctioning of MuniPreferred and the calculation and payment of management fees
to Nuveen Advisory. The Plaintiffs filed a motion to certify a class of
plaintiffs (which would include current and former shareholders of all Nuveen
leveraged closed-end funds) and a motion to certify a class of defendants (which
would include the same leveraged closed-end funds). The Defendants are
vigorously defending the case and filed a motion to dismiss the entire lawsuit,
asserting that the lawsuit is without merit. The Plaintiffs' and Defendants'
motions are pending.
CERTAIN TRADING STRATEGIES OF THE FUND
When-Issued or Delayed Delivery Securities. Each Fund may buy municipal
bonds on a when-issued or delayed-delivery basis, paying for and taking delivery
of the bonds at a later date, normally within 15 to 45 days of the trade date.
These transactions may be more risky because the value of the bond to be
purchased
B-13
<PAGE> 24
may decline before the delivery date. When a Fund buys on a when-issued or
delayed-delivery basis, it establishes a separate account with its custodian
that consists at all times of cash, cash equivalents, or liquid securities
having a market value at least equal to the amount of the bonds the Fund has
committed to buy. A "when-issued" municipal bond will be covered under a
portfolio insurance policy upon the security's settlement date. See "Insured
Funds -- Municipal Bond Insurance."
Portfolio Trading and Turnover Rate. Each Fund may buy and sell municipal
bonds to accomplish its investment objectives in relation to actual and
anticipated changes in interest rates. A Fund also may sell one municipal bond
and buy another of comparable quality at about the same time to take advantage
of what Nuveen Advisory believes to be a temporary price disparity between the
two bonds that may result from imbalanced supply and demand. A Fund also may
engage in a limited amount of short-term trading, consistent with its investment
objectives. A Fund may sell securities in anticipation of a market decline (a
rise in interest rates) or buy securities in anticipation of a market rise (a
decline in interest rates) and later sell them, but the Fund will not engage in
trading solely to recognize a gain. A Fund will attempt to achieve its
investment objectives by prudently selecting municipal bonds with a view to
holding them for investment. Each Fund expects, though it cannot guarantee, that
its annual portfolio turnover rate generally will not exceed 100%. Turnover rate
will not be a limiting factor when a Fund deems it desirable to buy or sell
securities, so depending on market conditions, the turnover rate may exceed 100%
in some years.
DESCRIPTION OF MUNIPREFERRED
GENERAL
The following is a brief description of the terms of the New MuniPreferred
shares. This is not a complete description and is subject to and entirely
qualified by reference to a Fund's Articles of Incorporation or Declaration of
Trust and the Statement of Preferences. These documents are filed with the
Securities and Exchange Commission as exhibits to the Fund's registration
statement of which this Prospectus is a part, and copies may be obtained as
described under "Available Information." Many of the terms in this section have
a special meaning. Any terms in this section not defined have the meaning
assigned to them in the Statement of Preferences.
MuniPreferred shares are shares of preferred stock that pay dividends based
on a rate set an auction. The auction usually is held weekly, but may be held
less frequently. MuniPreferred shares may be bought and sold at these auctions
for $25,000 per share. Shares also may trade in the secondary market.
MuniPreferred shareholders, voting separately, elect at least two of a Fund's
directors and will elect a majority of the Fund's directors in the unlikely
event that the Fund fails to pay dividends to MuniPreferred shareholders for two
years. MuniPreferred shares have a liquidation preference of $25,000 per share
plus accumulated but unpaid dividends, whether or not earned or declared.
MuniPreferred shares are fully paid and non-assessable when issued and have
no preemptive, conversion, or exchange rights or rights to cumulative voting.
New MuniPreferred shares will rank equally with shares of all other
MuniPreferred series of a Fund, and with any other series of preferred stock of
the Fund, as to payment of dividends and the distribution of the Fund's assets
upon liquidation.
As long as either Moody's or Standard & Poor's is rating MuniPreferred
shares, a Fund may, without the vote of MuniPreferred shareholders, issue
additional series of MuniPreferred only if (1) any additional series ranks
equally with the outstanding MuniPreferred shares as to payment of dividends and
distribution of assets on liquidation; and (2) the Fund obtains written
confirmation from Moody's and/or Standard & Poor's that issuing additional
series of MuniPreferred would not impair the rating for outstanding
MuniPreferred shares.
DIVIDENDS AND RATE PERIODS
General. The following is a general description of dividends and rate
periods. The calculation of dividends and rate periods is complex and subject to
special rules. See the Statement of Additional Information for a description of
the terms used in this section and a more detailed discussion of this topic.
B-14
<PAGE> 25
The dividend rate for the initial rate period for New MuniPreferred shares
will be the rate set out on the cover of Part A of the Prospectus for a
particular Fund. For subsequent rate periods, New MuniPreferred shares will pay
dividends based on a rate set at these auctions, normally held weekly, but the
rate set at the auction will not exceed the Maximum Rate. See "Description of
MuniPreferred -- Dividends and Rate Periods -- Maximum Rate." Rate periods
generally will be seven days, and a rate period will begin on the first business
day after the auction. In most instances, dividends are also paid weekly, on the
day following the end of the rate period. Each Fund, subject to certain
conditions, may change the length of rate periods, designating them as "Special
Rate Periods." See "Description of MuniPreferred -- Dividends and Rate
Periods -- Designation of Special Rate Periods."
Dividend Payments. The dividend payment date will be the day after the
rate period ends. If your shares normally pay dividends on Monday or Tuesday,
and that day is not a business day, then your dividends will be paid on the
first business day that falls after that Monday or Tuesday. If your shares
normally pay dividends on Wednesday, Thursday, or Friday, and that day is not a
business day, then your dividends will be paid on the first business day that
falls before that Wednesday, Thursday, or Friday. See "Description of
MuniPreferred -- Dividends and Rate Periods -- Designation of Special Rate
Periods" for a discussion of payment dates for a special rate period.
Dividends on New MuniPreferred shares will be paid on the dividend payment
date to holders of record as their names appear on a Fund's stock books, on the
business day next preceding the dividend payment date. If dividends are in
arrears, they may be declared and paid at any time, to holders of record as
their names appear on the Fund's stock books, on that date, not more than 15
days before the payment date, as the Fund's Board of Directors may fix.
The Depository Trust Company, in accordance with its current procedures, is
expected to credit on each dividend payment date dividends received from a Fund
to the accounts of its agent members, in next-day funds. "Agent members" are
Broker-Dealers or broker-dealers that are members of or participants in the
Depository Trust Company who act on behalf of MuniPreferred shareholders. Agent
members, in turn, are expected to distribute these dividend payments to the
person for whom they are acting as agents. Each of the firms listed on the front
cover of Part A of the Prospectus, however, has indicated to the Funds that it
or the agent member it designates will make these dividend payments available in
same-day funds, rather than next-day funds, on each dividend payment date to
customers that use that Broker-Dealer or its designee as its agent member. A
MuniPreferred shareholder that does not use one of the firms listed on the front
cover of Part A of this Prospectus, or one of its affiliates, should contact his
or her Broker-Dealer or broker-dealer to determine whether it will make
dividends payments available to the shareholder in same-day or next-day funds.
If a Broker-Dealer or a broker-dealer that is an agent member of the Depository
Trust Company does not make dividends available to MuniPreferred shareholders in
same-day funds, these shareholders will not have funds available until the next
business day.
Dividend Rate Set at Auction. MuniPreferred shares pay dividends based on
a rate set at auction. The auction usually is held weekly, but may be held less
frequently. The auction sets the dividend rate, and MuniPreferred shares may be
bought and sold at the auction. Bankers Trust Company, the auction agent,
reviews orders from Broker-Dealers on behalf of existing shareholders that wish
to sell, hold at the auction rate, or hold only at a specified rate, and on
behalf of potential shareholders that wish to buy MuniPreferred shares, and
determines the lowest dividend rate that will result in all of the outstanding
MuniPreferred shares of that series continuing to be held. The shares in this
offering will trade at auction starting in the week following this offering. See
"The Auction."
Determination of Dividend Rate. Each Fund computes the dividends per share
by multiplying the dividend rate determined at the auction by the following
fraction: the numerator normally is seven and the denominator is 365. If a Fund
has designated a special rate period, then the numerator is the number of days
in the rate period, and the denominator is 360. In either case, this rate is
then multiplied against $25,000 to arrive at the dividend per share. The
numerator may be different if the rate period includes a holiday. If an auction
for any subsequent rate period of New MuniPreferred shares is not held for any
reason other than as
B-15
<PAGE> 26
described below, the dividend rate on those shares will be the Maximum Rate on
the auction date for that subsequent rate period.
Each Fund may only pay dividends when and if the Fund's Board of Directors
declares dividends out of monies legally available for this purpose, at the
applicable rate per year for this purpose and no more (except as described under
"Gross-Up Payments"), payable on the dates determined as described below. If the
Fund does not pay a dividend when the Board declares it, then that dividend will
be added to dividends payable on those MuniPreferred shares in the future.
Effect of Failure to Pay Dividends in Timely Manner. If a Fund fails to
pay, in a timely manner, the auction agent the full amount of any dividend on
any New MuniPreferred shares during any rate period (other than any special rate
period of more than 364 rate period days or any rate period succeeding any
special rate period of more than 364 rate period days during which a failure
occurred that has not been cured), but the Fund cures the failure and pays any
late charge before 12:00 noon on the third business day following the date the
failure occurred, no auction will be held for New MuniPreferred shares for the
first subsequent rate period thereafter, and the dividend rate for New
MuniPreferred shares for that subsequent rate period will be the Maximum Rate on
the auction date for that subsequent rate period.
If a Fund fails to pay, in a timely manner, the auction agent the full
amount of any dividend on any New MuniPreferred shares during any rate period
thereof (other than any special rate period of more than 364 rate period days or
any rate period succeeding any special rate period of more than 364 rate period
days during which a failure occurred that has not been cured), and the Fund does
not cure the failure and pay any late charge before 12:00 Noon on the third
business day next succeeding the date on which the failure occurred, no auction
will be held for New MuniPreferred shares for the first subsequent rate period
thereafter (or for any rate period thereafter, to and including the rate period
during which the failure is cured and the late charge is paid) (the late charge
is to be paid only in the event Moody's is rating the shares at the time the
Fund cures the failure), and the dividend rate for shares of that series for
each such subsequent rate period will be an annual rate equal to the Maximum
Rate on the auction date for that subsequent rate period (but with the
prevailing rating for New MuniPreferred, for purposes of determining the Maximum
Rate, being "Below "ba3"/BB-").
If a Fund fails to pay, in a timely manner, the auction agent the full
amount of any dividend on any shares of New MuniPreferred during a special rate
period of more than 364 rate period days, or during any rate period succeeding
any special rate period of more than 364 rate period days during which a failure
occurred that has not been cured, and the Fund does not cure the failure and pay
a late charge, no auction will be held for New MuniPreferred shares for that
subsequent rate period (or for any rate period thereafter, to and including the
rate period during which the failure is cured and the late charge paid) (the
late charge is to be paid only in the event Moody's is rating New MuniPreferred
shares at the time the Fund cures the failure), and the dividend rate for New
MuniPreferred shares for each such subsequent rate period will be an annual rate
equal to the Maximum Rate on the auction date for each such subsequent rate
period (but with the prevailing rating for New MuniPreferred, for purposes of
determining the Maximum Rate, being "Below "ba3"/BB-").
A Fund cures a failure to pay dividends on shares of New MuniPreferred for
any rate period thereof if, within the respective time periods described in the
Statement, by paying the auction agent all accumulated and unpaid dividends on
the New MuniPreferred shares.
Designation of Special Rate Periods. Each Fund may instruct the auction
agent to hold auctions and pay dividends less frequently than weekly. A Fund may
do this if, for example, Fund management expects that short-term rates might
increase or market conditions otherwise change, in an effort to optimize the
effect of the Fund's leverage on common shareholders. If a Fund decides to use a
special rate period, the special rate period will consist of a number of days
evenly divisible by seven and not more than 1,820 days (approximately five
years), subject to certain adjustments. The Funds do not currently expect to
hold auctions and pay dividends less frequently than weekly in the near future,
although this has happened in the past. If a Fund designates a special rate
period, changes in interest rates could affect the price you would receive if
you sold your shares in the secondary market.
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<PAGE> 27
Before a Fund designates a special rate period: (1) at least 20 and not
more than 30 days before the first day of the proposed special rate period, the
Fund must publish a notice of its intention to designate a special rate period
in a newspaper circulated to the financial community in New York, and must mail
a notice to MuniPreferred shareholders of that series of its intent to designate
a special rate period; (2) the Fund must inform the auction agent by 11:00 a.m.
Eastern time on the second business day before the first day of the proposed
special rate period; (3) an auction must have been held in the rate period
before the special rate period, and in that auction potential shareholders
seeking a dividend rate equal to or lower than the auction rate entered bid
orders for as many or more MuniPreferred shares than current shareholders
entering sell orders submitted and current shareholders entering bid orders and
seeking a dividend rate higher than the MuniPreferred auction rate submitted;
and (4) the Fund must deposit the redemption price with the auction agent for
any shares of that series it has decided to redeem.
If a Fund has designated a special rate period of 14, 21, or 28 days, then
dividends will be paid on the same day of the week on which dividends are paid
in a seven day rate period, but will be the second, third, or fourth such day,
respectively, after the first day of the special rate period. For example, if
your dividend payment date normally is Monday, the dividend payment date for a
special rate period of 14, 21, or 28 days will be the second, third, or fourth
Monday, respectively, after the first day of the special rate period. The
dividend payment date for a special rate period of more than 28 days will be set
out in the notice designating a special rate period. The dividend payment date
will be a business day, and the last dividend payment date for any special rate
period will be the business day immediately following the last day of the
special rate period. After any special rate period, the rate periods normally
will be seven days, and dividends on New MuniPreferred shares will be payable,
except as described below, on each succeeding regular dividend payment date, but
the Fund may further designate any subsequent rate period as a special rate
period.
Maximum Rate. The dividend rate that results from an auction for New
MuniPreferred will not be greater than the Maximum Rate, which is:
(a) for any auction date which is not the auction date immediately
prior to the first day of any proposed special rate period, the product of
(i) the "AA" Composite Commercial Paper Rate on that auction date for the
next rate period of New MuniPreferred shares and (ii) the Rate Multiple on
that auction date, unless New MuniPreferred shares 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 after that special rate period for a minimum rate period (seven
days) of New MuniPreferred shares, in which case the higher of:
(A) the dividend rate on New MuniPreferred shares for the
then-ending rate period, and
(B) the product of (x) the higher of (I) the "AA" Composite
Commercial Paper Rate on that auction date for a rate period equal in
length to the then-ending rate period of New MuniPreferred shares, if
the then-ending rate period was 364 rate period days or fewer, or the
Treasury Note Rate on that auction date for a rate period equal in
length to the then ending rate period of New MuniPreferred shares, if
the then-ending rate period was more than 364 rate period days, and (II)
the "AA" Composite Commercial Paper Rate on that auction date for a rate
period equal in length to that special rate period of New MuniPreferred
shares, if that special rate period was 364 rate period days or fewer,
or the Treasury Note Rate on that auction date for a rate period equal
in length to that special rate period, if that special rate period was
more than 364 rate period days and (y) the Rate Multiple on that auction
date; or
(b) for any auction date that is the auction date immediately prior to
the first day of any proposed special rate period, the product of (i) the
highest of (x) the "AA" Composite Commercial Paper Rate on that auction
date for a rate period equal in length to the then-ending rate period of
New MuniPreferred shares, if the then-ending rate period was 364 rate
period days or fewer, or the Treasury Note Rate on that auction date for a
rate period equal in length to the then-ending rate period of New
MuniPreferred shares, if the then-ending rate period was more than 364 rate
period days, (y) the "AA" Composite Commercial Paper Rate on that auction
date for the special rate period for which the auction is being held if
that special rate period is 364 rate period days or fewer or the Treasury
Note Rate on that auction
B-17
<PAGE> 28
date for the special rate period for which the auction is being held if
that special rate period is more than 364 rate period days, and (z) the
"AA" Composite Commercial Paper Rate on that auction date for minimum rate
periods and (ii) the Rate Multiple on that auction date.
The "AA" Composite Commercial Paper Rate and Treasury Notes Rates will be
the rates announced on the auction date for the business day immediately before
the auction date. See the Statement of Additional Information for a definition
of these rates. The "Rate Multiple" will be a percentage, determined as set out
below, based on the prevailing rating of MuniPreferred shares of that series in
effect at the close of business on the business day immediately before the
auction date. See the Statement of Additional Information for a description of
"prevailing rating."
<TABLE>
<CAPTION>
PREVAILING MUNIPREFFERED RATING PERCENTAGE
------------------------------- ----------
<S> <C>
aa3/AA- or higher........................................... 110%
a3/-........................................................ 125%
baa3/BBB-................................................... 150%
ba3/BB-..................................................... 200%
Below ba3/BB-............................................... 250%
</TABLE>
If a Fund has notified the auction agent that it intends to allocate
federal taxable income to MuniPreferred shares before the auction establishing
the Applicable Rate for those shares, the applicable percentage in the table
above will be divided by the quantity 1 minus the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or the maximum
marginal regular Federal corporate income tax rate, whichever is greater. If
only one rating agency is rating MuniPreferred shares, that agency's rating will
be the prevailing rating.
Restrictions on Dividends and Other Distributions. When a Fund has any
MuniPreferred shares outstanding, the Fund may not pay any dividend or
distribution (other than a stock dividend) to shareholders of its common stock
unless (1) it has paid all cumulative dividends on MuniPreferred shares; (2) it
has redeemed any MuniPreferred shares that it has called for mandatory
redemption, and (3) after paying the dividend, the Fund meets Moody's and
Standard & Poor's asset coverage requirements for "Aaa" and "AAA" ratings,
respectively (or Aa1 and AA+, in the case of the Nuveen Michigan Quality Income
Municipal Fund, Inc.).
Gross-Up Payments. If a Fund allocates net capital gains or other taxable
income on a dividend on MuniPreferred shares for a rate period of 28 days or
less the Fund usually will inform the auction agent of this fact before the next
auction. The auction agent will notify Broker-Dealers, who in turn are expected
to notify MuniPreferred shareholders and potential MuniPreferred shareholders.
If the Fund does not inform the auction agent that the dividend will include net
capital gains or other taxable income before the next auction, the Fund will,
before the end of the calendar year in which the dividend was paid, send a
"gross-up" payment to MuniPreferred shareholders.
If a Fund allocates net capital gains or other taxable income on a dividend
on MuniPreferred shares for a rate period of more than 28 days, the Fund will
send a "gross-up" payment to MuniPreferred shareholders before the end of the
calendar year in which the dividend was paid. A "gross-up" payment is the amount
of money that, when added to the taxable portion of a dividend, would equal the
amount of money you would have received if the entire distribution had been
tax-free. When the Fund calculates the gross-up payment, it does not take into
account the time value of money, and it assumes that you are in the highest
applicable federal tax bracket and that you are not subject to the federal
alternative minimum tax. See the Statement of Additional Information for
additional detail.
The Funds have received an opinion of counsel to the effect that the manner
in which the Funds intends to allocate items of tax-exempt income, net capital
gains and other taxable income, if any, between common shares and MuniPreferred
shares will be respected for Federal income tax purposes. This opinion of
counsel represents only counsel's best legal judgment, and is not binding on the
Internal Revenue Service or the courts. The Funds are not required to make
gross-up payments for any net capital gains or other taxable
B-18
<PAGE> 29
income the IRS determines is allocable in a manner different from the manner in
which the Funds allocated those gains or income. See "Tax Matters" in the
Statement of Additional Information.
REDEMPTION
You do not have the right to redeem your MuniPreferred shares. A Fund will
be required to redeem your shares in certain circumstances, and has the right to
redeem your MuniPreferred shares under certain conditions.
Mandatory Redemption. Each Fund is required under the 1940 Act to maintain
a ratio of total assets to MuniPreferred shares of at least two to one.
Essentially, for every two dollars of Fund assets, a Fund can issue one dollar
of MuniPreferred shares (measured by liquidation preference). Each Fund's
Articles of Incorporation or Declaration of Trust require it to redeem
MuniPreferred shares if it does not maintain this two to one ratio. After the
offering, each Fund expects that this ratio will be slightly less than three to
one. Each Fund also must redeem MuniPreferred shares if it fails to maintain the
rating agencies' MuniPreferred Basic Maintenance Amount. See "Description of
MuniPreferred -- Asset Maintenance -- Rating Agencies." The redemption price
will be $25,000 per share plus the amount of accumulated but unpaid dividends,
up to the redemption date. A Fund will redeem only the amount of MuniPreferred
shares necessary to comply with the 1940 Act restrictions, the rating agencies'
requirements, or both.
Optional Redemption. Each Fund may, but is not required to, redeem
MuniPreferred shares under certain conditions. The redemption price will be
$25,000 per share plus the amount of accumulated but unpaid dividends, up to the
redemption date. A Fund may redeem MuniPreferred shares in whole or in part, on
the second business day before any dividend payment date for shares of that
series, out of funds legally available, at the redemption price plus accumulated
dividends, but (1) the Fund may not redeem shares in part if after the partial
redemption there are fewer than 500 shares of that series outstanding; and (2)
the notice establishing a special rate period of shares of that series may
provide that shares of that series may not be redeemable during all or a part of
the special rate period, or shall be redeemable only upon payment of specified
redemption premiums. The Fund also may redeem shares as a whole but not in part,
out of funds legally available, on the first day after any rate period included
in a special rate period of more than 364 days if, on the date the dividend rate
was determined for shares of that series for the special rate period, the
dividend rate equaled or exceeded the yield on the most recently auctioned U.S.
Treasury note with a remaining maturity closest to the same special rate period.
Notice of Redemption. Notice of redemption will be made by mailing a
notice to each shareholder of any series to be redeemed, at least 20 but not
more than 45 days before the redemption date, at the address as it appears in a
Fund's stock books. The notice will state (1) the redemption date; (2) the
number of shares of each MuniPreferred series to be redeemed; (3) the CUSIP
number for that series; (4) the redemption price; (5) that the dividends on
shares to be redeemed will cease to accumulate on the redemption date; and (6)
the provisions of the Statement of Preferences under which the redemption is
made. If the Fund intends to redeem fewer than all of the shares of a series,
the notice will state the number of shares to be redeemed from the shareholder.
Other Redemption Procedures. If a Fund mails a notice of redemption, but
does not redeem shares because there are no legally available monies for this
purpose, the Fund will redeem shares as soon as practicable when monies are
legally available. The Fund will be deemed to have failed to redeem shares at
any time after a redemption date when the Fund has failed, for any reason, to
deposit the redemption price for those shares with the auction agent. Even if
the Fund has failed to redeem shares for which a notice has been mailed,
dividends on MuniPreferred shares may be declared and paid on all shares of
MuniPreferred, including those shares for which a notice of redemption has been
mailed.
When the Fund has mailed a notice of redemption and deposited monies
sufficient to redeem those shares with the auction agent, dividends on those
shares will cease to accumulate and the shares will no longer be deemed to be
outstanding for any purpose. All rights of the holders of these shares will
cease except for the right to receive the redemption price, but without any
interest or other payments, except as provided under "Description of
MuniPreferred -- Dividends and Rate Periods -- Gross-Up Payments." The Fund is
entitled
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<PAGE> 30
to receive from the auction agent, promptly after the redemption date, any
monies deposited in excess of the redemption price of the shares called for
redemption, and all other amounts to which MuniPreferred shares called for
redemption may be entitled. Any deposited funds that are unclaimed after 90 days
from the redemption date will, if permitted by law, be repaid to the Fund. After
this time MuniPreferred shareholders whose shares were called for redemption may
look only to the Fund for payment of the redemption price and all other amounts
to which they may be entitled. The Fund may receive, after the redemption date,
any interest on the funds deposited with the auction agent.
If any dividends on MuniPreferred shares of a series are in arrears, a Fund
may not voluntarily redeem any MuniPreferred shares of that series unless it
redeems all outstanding shares of that series simultaneously, and the Fund may
not buy or acquire any MuniPreferred shares of that series. This will not
prevent the Fund from buying or acquiring all of the outstanding shares of that
MuniPreferred series through the successful completion of an otherwise lawful
purchase or exchange offer made on the same terms to, and accepted by, all
holders of outstanding shares of that series of MuniPreferred.
LIQUIDATION
If a Fund is liquidated, MuniPreferred shareholders will receive $25,000
per share, plus all dividends that have been declared but not paid, and any
gross-up payments (see "Description of MuniPreferred -- Dividends and Rate
Periods -- Gross-Up Payments"), subject to the rights of holders of shares
ranking equally with MuniPreferred shares as to distribution of assets on
liquidation. MuniPreferred shareholders will receive these payments before any
common shareholders receive any payments or distributions. After MuniPreferred
shareholders have been paid, they will not have the right to receive any
remaining assets of the Fund. The Fund will not be considered "liquidated" if it
sells all or substantially all of its property, or merges or consolidates with
or into any other corporation.
ASSET MAINTENANCE AND RATING AGENCY GUIDELINES
1940 Act. The 1940 Act and each Fund's Articles of Incorporation or
Declaration of Trust require each Fund to maintain as of the last business day
of each month in which any MuniPreferred shares are outstanding, asset coverage
of at least 200% for senior securities that are stock, including MuniPreferred
shares (or other asset coverage that the 1940 Act may require in the future). If
a Fund fails to maintain this asset coverage, and the Fund does not cure this
failure as of the last business day of the following month, the Articles of
Incorporation or Declaration of Trust require the Fund under certain
circumstances to redeem MuniPreferred shares. See "Description of
MuniPreferred -- Redemption." Based on the composition of each Fund's portfolio
and market conditions as of the date of the offering, assuming the issuance of
all shares of New MuniPreferred for each Fund, and taking in account the
deduction of offering costs and underwriting discounts, the asset coverage for
each Fund's MuniPreferred shares would have been slightly less than 300%.
Rating Agencies. So long as a Fund has MuniPreferred shares outstanding,
the Fund is required to maintain ratings for MuniPreferred shares of "Aaa" from
Moody's or "AAA" from Standard & Poor's (Aa1 or AA+, in the case of the Nuveen
Michigan Quality Income Municipal Fund, Inc.). These ratings reflect the rating
agencies' opinion of the creditworthiness of MuniPreferred shares. The Fund will
pay fees to Moody's and/or Standard & Poor's, for these ratings. A preferred
stock rating is a rating agency's assessment of the issuer's capacity and
willingness to pay preferred share obligations. MuniPreferred ratings are not
recommendations to buy, hold, or sell MuniPreferred shares, because they do not
comment on market price or suitability for a particular investor. Ratings agency
guidelines do not address the likelihood that a shareholder will be able to sell
its shares at an auction or otherwise. The ratings are based on current
information the Fund and Nuveen Advisory furnish to the rating agencies, and on
information obtained from other sources. The rating agencies may change,
suspend, or withdraw their ratings because of changes in, or the unavailability
of, this information. No rating agency has rated the Fund's common stock.
Moody's and Standard & Poor's have developed guidelines the Funds must
follow to maintain these ratings. The guidelines are designed to ensure that
portfolio securities underlying MuniPreferred will be sufficiently varied, and
of sufficient quality and amount, to justify the assigned ratings. While the
guidelines do
B-20
<PAGE> 31
not have the force of law, each Fund has adopted them to obtain the rating
agencies' ratings on MuniPreferred. The guidelines supplement and in some cases
are more restrictive than the 1940 Act's requirements for closed-end funds that
issue preferred stock. A Fund may, but is not required to, adopt any
modifications to these guidelines that Moody's or Standard & Poor's may later
establish. If a Fund fails to adopt these modifications, however, the rating
agencies may change or withdraw their ratings. The rating agencies may at any
time change or withdraw their ratings. Because each Fund's Articles of
Incorporation or Declaration of Trust require it to maintain "Aaa" (from
Moody's) or "AAA" (from Standard & Poor's) ratings on MuniPreferred (Aa1 or AA+,
in the case of the Nuveen Michigan Quality Income Municipal Fund, Inc.), each
Fund would be required to take action if the rating agencies lowered or withdrew
their ratings. See "Description of MuniPreferred -- Redemption." A Fund's Board
of Directors may, without shareholder approval, change certain definitions or
restrictions that the Fund has adopted in connection with the rating agency
guidelines, but only if Moody's or Standard & Poor's has confirmed to the Fund
or the Board in writing that any change would not impair their ratings of
MuniPreferred.
The rating agencies also limit some of each Fund's activities. So long as a
rating agency is rating a Fund's MuniPreferred shares, the Fund will only enter
into futures or options transactions in accordance with that agency's guidelines
and after the rating agency confirms in writing that these transactions will not
impair the rating on MuniPreferred shares. In addition, a Fund may not, among
other things, (1) borrow money (except to clear securities transactions or pay
dividends and only if the Fund maintains the MuniPreferred Basic Maintenance
Amount, described below); (2) sell securities short, or (3) lend any securities,
unless the rating agency confirms in writing that the loan would not impair the
rating on MuniPreferred shares. Each Fund does not intend to borrow money; each
has an operating policy that prevents it from borrowing an amount greater than
5% of its total assets so long as MuniPreferred shares are outstanding; and the
rating agencies restrict each Fund's ability to borrow money. Nevertheless,
under certain circumstances each Fund is allowed to borrow money for temporary
or emergency purposes or to repurchase shares when borrowing is deemed to be in
the best interests of the common shareholders. See "Repurchase of Shares or
Conversion to Open-End Fund." If a Fund borrows, it would be required to pay
interest on that debt before it pays any dividends to MuniPreferred
shareholders, and it likely would have to repay the principal due before it
could pay the liquidation preference on MuniPreferred shares. Interest expense
will reduce the Fund's net investment income, and thus borrowing may impair the
Fund's ability to pay dividends to MuniPreferred shareholders. This risk will be
higher if the Fund borrows money at a variable interest rate that increases when
prevailing market rates increase.
MuniPreferred Basic Maintenance Amount. Moody's and Standard & Poor's
require each Fund to maintain assets having, in the aggregate, a "discounted
value" at least equal to the MuniPreferred Basic Maintenance Amount. Each rating
agency has its own guidelines for determining the "discounted value" of the
value of the Fund's portfolio holdings. The discount factors applied by each
rating agency to portfolio securities include the sensitivity of a security's
value to changes in interest rates, the liquidity and depth of the market for
the security, the security's credit quality, and how often the security is
marked to market. If a security in the Fund's portfolio does not meet a rating
agency's guidelines, all or part of it will not be included in the calculation
of "discounted value." See the Statement of Additional Information for a
detailed description of the Moody's and Standard & Poor's rating guidelines. In
addition, Standard & Poor's requires each Fund to meet a minimum liquidity
level. Both of these requirements are discussed below.
The Moody's and Standard & Poor's guidelines do not limit the percentage of
a Fund's assets that may be invested in holdings not eligible to be included in
calculating discounted value. The amount of these ineligible assets included in
the portfolio at any time may vary depending upon the rating, diversification
and other characteristics of the eligible assets included in the portfolio,
although each Fund does not expect that in the normal course of business the
value of these ineligible assets would exceed 20% of the Fund's total assets.
The MuniPreferred Basic Maintenance Amount is, on any day, the sum of the
liquidation preference value of MuniPreferred shares outstanding, accumulated
but unpaid dividends, estimated dividends for the next nine weeks, a Fund's
anticipated expenses for the next three months, any gross-up payments the Fund
intends to pay to MuniPreferred shareholders, and any other current liabilities;
minus the value of any assets the Fund has set aside to pay its current
liabilities.
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<PAGE> 32
If a Fund does not cure its failure to maintain the MuniPreferred Basic
Maintenance Amount, the Fund promptly will alter its portfolio to reattain the
MuniPreferred Basic Maintenance Amount, which will cause the Fund to incur
transaction costs and possible gains or losses on the sale of portfolio
securities. Further, if the Fund does not cure a failure in a timely manner and
Moody's and/or Standard & Poor's is rating MuniPreferred shares, the Fund will
be required to redeem MuniPreferred shares. See "Description of
MuniPreferred -- Redemption." Nuveen Advisory will not alter the Fund's
portfolio if, in its reasonable belief, the effect of the alteration would cause
the Fund to have "eligible" assets (assets that can be included in the
calculation of discounted value) on any business day with an aggregate
discounted value of less than the MuniPreferred Basic Maintenance Amount as of
the previous business day. If, however, on a business day the Fund has
"eligible" assets with an aggregate discounted value that exceeds the
MuniPreferred Basic Maintenance Amount by 5 percent or less as of the previous
business day, Nuveen Advisory will not alter the Fund's portfolio in a manner
reasonably expected to reduce the discounted value of the Fund's eligible
assets, unless the Fund confirms that after the alteration, the aggregate
discounted value of the Fund's eligible assets would exceed the MuniPreferred
Basic Maintenance Amount.
Minimum Liquidity. As long as Standard & Poor's is rating MuniPreferred
shares of a particular Fund, that Fund will maintain a "minimum liquidity
level." The Fund will be required to own cash and highly-rated municipal bonds,
on any business day: (1) with maturity or tender dates not later than the days
preceding the first dividend payment dates for each series of MuniPreferred
shares that follow that business day; and (2) having a value not less than the
aggregate amount of dividends for each MuniPreferred share of that series that
will accumulate up to the first dividend payment date that follows that business
day, minus the combined value of the Fund's cash and municipal bonds deposited
for the payment of MuniPreferred share dividends for that series.
VOTING RIGHTS
MuniPreferred shareholders generally have equal voting rights with common
shareholders (that is, each common or MuniPreferred share has one vote), and
will vote with them as a single class. MuniPreferred shareholders vote
separately in several circumstances. First, MuniPreferred shareholders vote as a
separate class to elect two of a Fund's directors, and to elect a majority of
the Fund's directors if the Fund fails to pay dividends to MuniPreferred
shareholders for two years. The common shareholders and the MuniPreferred
shareholders, voting together, will elect the remaining directors, in each case.
Second, holders of a majority of MuniPreferred shares, voting as a separate
class, must approve a Fund's conversion from a closed-end to an open-end fund,
or a plan of reorganization adversely affecting the MuniPreferred shares. Third,
holders of a majority of MuniPreferred shares, voting as a separate class, must
approve changes to a Fund's fundamental investment policies. When MuniPreferred
shareholders vote as a class, Minnesota law requires a vote of holders of a
majority of the MuniPreferred shares to approve the action, unless the Fund's
Articles of Incorporation or Declaration of Trust require a higher percentage.
Each Fund may not, without the approval of holders of a majority of the
MuniPreferred shares: (1) create or issue any class of security that ranks
superior to MuniPreferred, as to paying dividends or distributing assets if the
Fund liquidates, or (2) materially modify the Fund's Articles of Incorporation,
Declaration of Trust, or the Statement of Preferences to affect the rights or
powers of the MuniPreferred shareholders. Subject to certain rating agency
approvals, the Board, without the vote or consent of the MuniPreferred
shareholders, may from time to time authorize and create (and a Fund may from
time to time issue) additional shares of any series of MuniPreferred or classes
or series of preferred stock that rank equal to shares of MuniPreferred as to
the payment of dividends and the distribution of assets upon liquidation.
If you do not vote your MuniPreferred shares, and you hold your shares
through a member of the New York Stock Exchange, the Exchange's rules allow your
Broker-Dealer or broker-dealer to vote them for you and for all of its customers
who own MuniPreferred shares but have not voted, if: (1) the Broker-Dealer or
broker-dealer has sent you the proxy; (2) you have not instructed your
Broker-Dealer or broker-dealer how to vote your shares; (3) the owners of at
least 30% of the MuniPreferred shares of a particular Fund (or shares of each
series of a Fund's MuniPreferred shares, when a series-by-series vote is
required) have voted; (4) less than 10% of the MuniPreferred shares of a
particular Fund (or shares of each series of the Fund's
B-22
<PAGE> 33
MuniPreferred shares, when a series-by-series vote is required) have voted
against the proposal; (5) in situations when the common and MuniPreferred
shareholders vote together on the proposal, the common shareholders have
approved the proposal; and (6) a majority of the Fund's independent directors
approved the proposal. Your Broker-Dealer or broker-dealer will vote your shares
in the same proportion as all of its other customers who own MuniPreferred
shares and who actually voted. For example, if 60% of a Broker-Dealer's
customers who own MuniPreferred shares vote their shares, and 92% vote "for" a
proposal and 8% vote "against," then the Broker-Dealer will vote the remaining
40% of its customers= MuniPreferred shares 92% "for" and 8% "against." If you do
not hold your shares through a member of the New York Stock Exchange, your
Broker-Dealer, broker-dealer, or other nominee may not be able to vote your
shares for you and for all of its customers who own MuniPreferred shares but
have not voted, depending on the rules applicable to that Broker-Dealer,
broker-dealer, or nominee.
THE AUCTION
SUMMARY OF AUCTION PROCEDURES
The following is a brief summary of the auction procedures. They are
described in more detail after this summary. The auction procedures are
complicated, and there are exceptions to these procedures. Many of the terms in
this section have a special meaning. Any terms in this section not defined have
the meaning assigned to them in the Statement of Preferences. See the Statement
of Additional Information for a full description of the auction procedures. The
auction determines the Applicable Rate (the dividend rate) for MuniPreferred
shares, but the Applicable Rate will not be higher than the Maximum Rate. See
"Description of MuniPreferred -- Dividends and Rate Periods -- Maximum Rate."
You also may buy or sell shares in the auction.
If you own MuniPreferred, you may instruct, orally or in writing, a
Broker-Dealer or a broker-dealer that has entered into an agreement with a
Broker-Dealer, to enter an order in the auction. If your broker-dealer is not an
agent member of the Depository Trust Company, or an affiliate of an agent
member, it may submit orders for MuniPreferred shares to John Nuveen & Co.
Incorporated. Existing MuniPreferred shareholders can enter three kinds of
orders regarding their MuniPreferred shares: sell, bid, and hold.
- If you enter a sell order, you indicate that you want to sell shares of
MuniPreferred at $25,000 per share, no matter what the next rate period's
Applicable Rate will be.
- If you enter a bid (or "hold at a rate") order, you indicate that you
want to sell shares of MuniPreferred only if the next rate period's
Applicable Rate is less than the rate you specify.
- If you enter a hold order, you indicate that you want to continue to own
shares of MuniPreferred, no matter what the next rate period's Applicable
Rate will be.
You may enter different types of orders for your MuniPreferred shares, as
well as orders for additional MuniPreferred shares. All orders must be for whole
shares. All orders you submit are irrevocable. There are a fixed number of
MuniPreferred shares, and the Applicable Rate likely will vary from auction to
auction depending on the number of bidders, the number of shares the bidders
seek to buy, and general economic conditions including current interest rates.
If you own MuniPreferred shares and submit a bid higher than the Maximum Rate,
your bid will be treated as a sell order. If you do not enter an order, the
Broker-Dealer will assume that you want to continue to hold MuniPreferred
shares, but if you fail to submit an order and the rate period is longer than 28
days, the Broker-Dealer will treat your failure to submit a bid as a sell order.
If you do not currently own shares of MuniPreferred, or want to buy more
shares, you may instruct a Broker-Dealer, or a broker-dealer that has entered
into an agreement with a Broker-Dealer, to enter an bid order to buy shares in
an auction at $25,000 per share, at a specified dividend rate. If your bid
specifies a rate higher than the Maximum Rate, your order will not be accepted.
Broker-Dealers will submit orders from existing and potential shareholders
to the auction agent. Neither the Fund nor the auction agent will be responsible
for a Broker-Dealer's failure to submit orders from existing
B-23
<PAGE> 34
shareholders and potential shareholders. A Broker-Dealer's failure to submit
orders for MuniPreferred shares held by it or its customers will be treated in
the same manner as a shareholder's failure to submit an order to the
Broker-Dealer. A Broker-Dealer may submit orders to the auction agent for its
own account.
If the number of MuniPreferred shares of a series subject to bid orders
with a dividend rate equal to or lower than the Maximum Rate for shares of that
series is at least equal to the number of MuniPreferred shares of that series
subject to sell orders, then the Applicable Rate for the next rate period will
be the lowest rate submitted which, taking into account that rate and all lower
rates submitted in order from existing and potential shareholders, would result
in existing and potential shareholders owning all the MuniPreferred shares
available for purchase in the auction.
If the number of MuniPreferred shares of a series subject to bid orders
with a dividend rate equal to or lower than the Maximum Rate for shares of that
series is less than the number of MuniPreferred shares of that series subject to
sell orders, then the auction is considered to be a failed auction, and the
dividend rate will be the Maximum Rate. In that event, existing shareholders
that have submitted sell orders (or are treated as having submitted sell orders)
may not be able to sell any or all the shares for which they submitted sell
orders.
The auction agent will not accept a bid above the Maximum Rate. The purpose
of the Maximum Rate is to place an upper limit on MuniPreferred dividends and in
so doing to help protect the earnings available to pay common share dividends,
and to serve as the Applicable Rate in the event of a failed auction (that is,
an auction where there are more MuniPreferred shares offered for sale than there
are buyers for those shares).
If Broker-Dealers submit or are deemed to submit hold orders for all
outstanding shares of a series of MuniPreferred, this is considered an "all
hold" auction and the Applicable Rate for the next rate period will be the All
Hold Order Rate. See "The Auction -- Determination of Sufficient Clearing Bids,
Winning Bid Rate, and Applicable Rate" and the Statement of Additional
Information for a description of this rate.
The auction procedures include a pro rata allocation of shares for purchase
and sale. This may result in an existing shareholder continuing to hold or
selling, or a potential shareholder buying, fewer shares than the number of
shares in its order. If this happens, Broker-Dealers will be required to make
appropriate pro rata allocations among their customers.
Settlement of purchases and sales will be made on the next business day
(which also is a dividend payment date) after the auction date, through the
Depository Trust Company. Purchasers will pay for their shares through
Broker-Dealers in same-day funds to the Depository Trust Company against
delivery to the Broker-Dealers. The Depository Trust Company will make payment
to the sellers' Broker-Dealers in accordance with its normal procedures, which
require Broker-Dealers to make payment against delivery in same-day funds.
If a Fund plans to include any net capital gains or other federal taxable
income in a MuniPreferred dividend, it generally will notify the auction agent
of the amount to be included, at least a week before the next dividend payment
date for the rate period in which taxable income will be included in a dividend.
The auction agent will notify Broker-Dealers, who in turn will notify their
customers.
The following is a simplified example of how a typical auction works.
Assume that a Fund has 1000 outstanding shares of New MuniPreferred, and three
current shareholders. The three current shareholders and three potential
shareholders submit orders through Broker-Dealers at the auction:
<TABLE>
<S> <C> <C>
Current Shareholder A........ Owns 500 shares, wants to sell all Bid order of 3.5% rate for all 500
500 shares if auction rate is less shares
than 3.5%
Current Shareholder B........ Owns 300 shares, wants to hold Hold order -- will take the auction
rate
Current Shareholder C........ Owns 200 shares, wants to sell all Bid order of 3.3% rate for all 200
200 shares if auction rate is less shares
than 3.3%
</TABLE>
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<PAGE> 35
<TABLE>
<S> <C> <C>
Potential Shareholder D...... Wants to buy 200 shares Places order to buy at or above 3.4%
Potential Shareholder E...... Wants to buy 300 shares Places order to buy at or above 3.3%
Potential Shareholder F...... Wants to buy 200 shares Places order to buy at or above 3.5%
</TABLE>
The lowest dividend rate that will result in all 1000 shares of New
MuniPreferred continuing to be held is 3.4% (the offer by D). Therefore, the
Applicable Rate will be 3.4%. Current shareholders B and C will continue to own
their shares, and current shareholder A will sell its shares, because A's
dividend rate bid was higher than the Applicable Rate. Potential shareholder D
will buy 200 shares, and Potential shareholder E will buy 300 shares, because
their bid rates were at or below the Applicable Rate. Potential shareholder F
will not buy any shares because its bid rate was above the Applicable Rate.
The foregoing discussion is a summary of the auction procedures. What
follows is a more detailed explanation of the auction procedures.
AUCTION DATES; ADVANCE NOTICE OF ALLOCATION OF TAXABLE INCOME
An auction to determine the Applicable Rate for New MuniPreferred for each
rate period after the initial rate period will be held on the first business day
preceding the first day of the rate period. The date is the "auction date." The
auction date and the first day of the related rate period (which is also the
dividend payment date) must be business days but need not be consecutive days.
See "Description of MuniPreferred -- Dividends and Rate Periods" for information
about the circumstances under which the first day of a rate period or the
auction date, or both, may be moved to another date.
Whenever a Fund intends to include any net capital gains or other federal
taxable income in any MuniPreferred dividend, it will, for any rate period of 28
days or less, and may, for any rate period of more than 28 days, notify the
auction agent of the amount to be included, on or before the dividend payment
date next preceding the auction date on which the Applicable Rate is to be set.
When the auction agent receives this notice from the Fund, it will in turn
notify each Broker-Dealer who, on or before the auction date and in accordance
with its broker-dealer agreement, will notify its existing shareholders and
persons it believes are interested in submitting an order in that auction.
ORDERS BY EXISTING SHAREHOLDERS AND POTENTIAL SHAREHOLDERS
You may submit orders for an auction only through a Broker-Dealer (one that
has signed a dealer agreement with a Fund and the auction agent), or through a
broker-dealer that has entered into a correspondent arrangement with a
Broker-Dealer. Your order must be submitted before the submission deadline,
which is 1:30 p.m. Eastern time on the auction date. Your orders must indicate
whether you want to buy, sell, or hold some or all of your shares, and the
lowest dividend rate you will accept for the next rate period (normally one
week, although this can be extended). The auction agent selects the lowest
dividend rate bid that will result in all of the MuniPreferred continuing to be
held.
You may enter different types of orders for your MuniPreferred shares, as
well as orders for additional MuniPreferred shares. All orders you submit are
irrevocable. An existing shareholder's sell order will be an irrevocable offer
to sell MuniPreferred shares subject to the order. An existing shareholder's bid
order will be an irrevocable offer to sell MuniPreferred shares subject to the
order if the Applicable Rate is less than the rate specified in the bid order. A
potential shareholder's bid order will be an irrevocable offer to buy
MuniPreferred shares subject to the order if the Applicable Rate is equal to or
greater than the rate specified in the bid order. The number of shares you buy
or sell may be subject to proration.
Your order must be in whole shares. If you are an existing shareholder and
want to buy additional MuniPreferred shares, you will be treated as a potential
shareholder for those additional shares, for the purpose of determining the
priority of orders. See "The Auction -- Submission of Orders by Broker-Dealers
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<PAGE> 36
to Auction Agent." Broker-Dealer may contact prospective purchasers of
MuniPreferred to determine whether they wish to submit orders.
Any bid order that specifies a rate higher than the Maximum Rate will be
(1) treated as a sell order if an existing shareholder submits the order, and
(2) not be accepted if a potential shareholder submits the order. The auction
procedures establish the Maximum Rate that can result from an auction. See "The
Auction -- Determination of Sufficient Clearing Bids, Winning Bid Rate, and
Applicable Rate" and "The Auction -- Acceptance and Rejection of Orders and
Allocation of Shares."
SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT
Before the submission deadline, which is 1:30 p.m. Eastern time on each
auction date (or another time the auction agent specifies), each Broker-Dealer
will submit to the auction agent in writing all orders it obtained for the
auction. Any order submitted before the auction deadline will be irrevocable.
The auction agent is entitled to rely on the terms of any order a Broker-Dealer
submits. If any rate specified in a bid order contains more than three figures
to the right of the decimal point, the auction agent will round up that rate to
the next highest one-thousandth (.001) of 1%. If a potential shareholder submits
more than one bid order through a Broker-Dealer, each bid order will be treated
as a separate bid order with the rate and number of shares specified in the
order. If an existing shareholder submits through a Broker-Dealer one or more
orders covering in the aggregate more MuniPreferred shares of a series than the
existing shareholder owns, the orders will be considered valid in the following
order of priority:
1. All hold orders will be considered valid, up to and including in
the aggregate the number of MuniPreferred shares of that series the
shareholder owns.
2. (a) Any bid order will be considered valid, up to and including the
excess of the number of outstanding MuniPreferred shares of that series the
shareholder owns over the number of MuniPreferred shares of that series
subject to hold orders referred to in clause 1 above;
(b) subject to 2(a), if more than one bid order with the same
specified rate is submitted on behalf of an existing shareholder and the
number of MuniPreferred shares of that series subject to those bid
orders is greater than the excess, the bid orders will be considered
valid up to and including the amount of that excess, and the number of
MuniPreferred shares of that series subject to each bid order with the
same rate will be reduced pro rata to cover the number of MuniPreferred
shares of that series equal to the excess;
(c) subject to 2(a) and 2(b), if more than one bid order with
different rates is submitted on behalf of an existing shareholder, the
bid orders will be considered valid in the ascending order of their
respective rates up to an including the amount of that excess; and
(d) in any event, the number of shares subject to bids not valid
under this clause 2 will be treated as the subject of a bid order by a
potential shareholder at the rate specified in the order.
3. All sell orders will be considered valid, up to and including the
excess of the number of outstanding MuniPreferred shares of that series the
existing shareholder owns, over the sum of MuniPreferred shares of that
series subject to valid hold orders referred to in clause 1 above and valid
bid orders referred to in clause 2 above.
DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE, AND APPLICABLE RATE
The auction agent will assemble, not earlier than the submission deadline,
all valid orders submitted or deemed submitted by Broker-Dealers, for a series
of MuniPreferred. The auction agent will determine the excess of the number of
outstanding shares of that series of MuniPreferred over the number of
outstanding shares subject to submitted holder orders, and will then determine
whether "sufficient clearing bids" have been made in the auction. "Sufficient
clearing bids" means that the number of outstanding MuniPreferred shares of that
series that are the subject of bid orders submitted by potential shareholders
specifying a rate not higher than the Maximum Rate, equals or exceeds the number
of outstanding shares of that series that are the
B-26
<PAGE> 37
subject of sell orders submitted by existing shareholders (including the shares
of that series that are the subject of bid orders by existing shareholders
specifying rates higher than the Maximum Rate).
If sufficient clearing bids have been made, the auction agent will
determine the winning bid rate; that is, the lowest rate specified in the bid
orders which, taking into account the rates in the bid orders submitted by
existing shareholders, would result in existing shareholders continuing to hold
an aggregate number of outstanding MuniPreferred shares of that series which,
when added to the number of outstanding MuniPreferred shares of that series to
be bought by potential shareholders, would equal not less than the available
amount of outstanding MuniPreferred shares. The winning bid rate will be the
Applicable Rate for the next rate period for all outstanding shares of that
series.
If sufficient clearing bids have not been made (other than because all of
the outstanding MuniPreferred shares of that series are subject to hold orders),
the Applicable Rate for the next rate period for all outstanding shares of that
series will be the Maximum Rate. If sufficient clearing bids have not been made,
existing shareholders that submitted sell orders may not be able to sell any or
all of their shares in the auction, and will continue to hold those unsold
shares in the next rate period. Dividends in that next rate period may include
taxable income. See "The Auction -- Auction Dates; Advance Notice of Allocation
of Taxable Income" and " -- Acceptance and Rejection of Orders and Allocation of
Shares."
If all of the outstanding shares of MuniPreferred for that series are
subject to hold orders, the Applicable Rate for the next period for all shares
of that series will be the All Hold Order Rate, which is the product of:
(1) (a) the AA Composite Commercial Paper Rate on the auction date for
that rate period if the rate period is less than one year or (b) the
Treasury Rate on that auction date for that rate period if the rate period
is one year or more; and
(2) 1 minus the maximum marginal regular Federal individual income tax
rate applicable to ordinary income or the maximum marginal regular Federal
corporate income tax rate, whichever is greater.
If a Fund has notified the auction agent that it intends to allocate any
net capital gains or other Federally taxable income to MuniPreferred shares for
that rate period, the Applicable Rate in an "all hold" auction for the portion
of the dividends that represents the allocation of net capital gains or other
Federally taxable income will be the rate in clause (1)(a) or (1)(b), as
applicable, without being multiplied by the factor in clause (2). See
"Description of MuniPreferred -- Dividends and Rate Periods -- Maximum Rate" for
the definitions of "AA Composite Commercial Paper Rate" and "Treasury Rate."
ACCEPTANCE OR REJECTION OF ORDERS AND ALLOCATION OF SHARES.
Based on the determinations made under "Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate," and subject to the auction
agent's discretion to round and allocate shares as described below, the auction
agent will accept or reject submitted bid and sell orders in the order of
priority set out in the Auction Procedures. The result will be that existing and
potential shareholders will sell, continue to hold, and/or purchase outstanding
MuniPreferred shares of that series as described below. Existing shareholders
that submitted or were deemed to have submitted hold orders will continue to own
MuniPreferred shares subject to those hold orders.
Sufficient Clearing Bids. If sufficient clearing bids have been made in an
auction for a series of MuniPreferred:
1. Each existing shareholder that submitted a sell or bid order
specifying a rate higher than the winning bid rate will sell outstanding
MuniPreferred shares subject to that sell or bid order.
2. Each existing shareholder that submitted a bid order specifying a
rate lower than the winning bid rate will continue to hold outstanding
MuniPreferred shares subject to that bid order.
3. Each potential shareholder that submitted a bid order specifying a
rate lower than the winning bid rate will buy the number of outstanding
MuniPreferred shares subject to that bid order.
B-27
<PAGE> 38
4. Each existing shareholder that submitted a bid order specifying a
rate equal to the winning bid rate will continue to hold the outstanding
MuniPreferred shares subject to that bid order. But if the number of
outstanding MuniPreferred shares subject to all bid orders is greater than
the number of outstanding MuniPreferred shares in excess of the available
outstanding MuniPreferred shares of that series over the number of
outstanding MuniPreferred shares accounted for in clauses 2 and 3 above,
then each existing shareholder that submitted a bid order specifying a rate
equal to the winning bid rate will continue to hold a number of the
outstanding MuniPreferred shares subject to that bid order, determined on a
pro rata basis based on the number of outstanding MuniPreferred shares
subject to all bid orders by existing shareholders.
5. Each potential shareholder that submitted a bid order specifying a
rate equal to the winning bid rate will buy any shares of available
outstanding MuniPreferred shares not accounted for in clauses 2 through 4,
above, on a pro rata basis based on the number of outstanding MuniPreferred
shares subject to all bid orders.
Insufficient Clearing Bids. If sufficient clearing bids have not been made
in an auction for a series of MuniPreferred (unless this is because all
outstanding MuniPreferred shares of that series are subject to hold orders):
1. Each existing shareholder that submitted a bid order specifying a
rate equal to or lower than the Maximum Rate will continue to hold
outstanding MuniPreferred shares subject to that bid order.
2. Each potential shareholder that submitted a bid order specifying a
rate equal to or lower than the Maximum Rate will buy the number of
outstanding MuniPreferred shares subject to that bid order.
3. Each existing shareholder that submitted bid order specifying a
rate higher than the Maximum Rate, or a sell order, will sell a number of
outstanding MuniPreferred shares determined on a pro rata basis based on
the number of outstanding MuniPreferred shares subject to all bid and sell
orders.
If, because of the pro rata allocation described in clauses 4 and 5 in
"Sufficient Clearing Bids," or in clause 3 of "Insufficient Clearing Bids," any
existing shareholder would be entitled or required to sell, or any potential
shareholder would be entitled or required to buy, a fractional share of
MuniPreferred, the auction agent will, in its sole discretion, round up or down
to the nearest whole share the number of MuniPreferred shares sold or bought on
the auction date so that the number of shares an existing or potential
shareholder sells or buys will be whole shares.
If, because of the pro rata allocation described in clause 5 in "Sufficient
Clearing Bids," any potential shareholder would be entitled or required to buy
less than a whole MuniPreferred share, the auction agent will in its sole
discretion, allocate MuniPreferred shares for purchase among potential
shareholders so that any potential shareholders will only buy whole share, even
if this means that one or more potential shareholders will not buy any
MuniPreferred shares.
NOTIFICATION OF RESULTS; SETTLEMENT
The auction agent will notify, by telephone by approximately 3:00 p.m.
Eastern time on the auction date, each Broker-Dealer that submitted an order, of
the Applicable Rate for the next rate period and, if the order was a bid or sell
order, whether the order was accepted or rejected in whole or in part. Each
Broker-Dealer that submitted an order on behalf of an existing or potential
shareholder will notify that person of the Applicable Rate for the next rate
period and, if the order was a bid or sell order, whether the order was accepted
or rejected in whole or in part; and will confirm purchases and sales with each
existing or potential shareholder purchasing or selling shares as a result of
the auction. The auction agent will record each transfer of MuniPreferred shares
on the registry of existing shareholders it maintains.
In accordance with the Depository Trust Company's normal procedures, on the
business day after the auction date, purchases and sales of MuniPreferred shares
will be executed through the Depository Trust Company and the accounts of the
agent members will be debited and credited and shares delivered as necessary to
effect the purchases and sales of MuniPreferred shares as determined in the
auction. Purchasers
B-28
<PAGE> 39
will make payment though their agent members in same-day funds to the Depository
Trust Company against delivery through their agent members; the Depository Trust
Company will make payment in accordance with its normal procedures, which now
provide for payment against delivery by its agent members in same-day funds.
If any existing shareholder selling MuniPreferred shares in an auction
fails to deliver its shares, the Broker-Dealer of any buyer of shares in an
auction may deliver to that person a number of whole MuniPreferred shares that
is less than the number of shares that the person otherwise was to buy. In that
event, the Broker-Dealer will determine the number of MuniPreferred shares to be
delivered, and delivery of the lesser number of shares will constitute good
delivery.
AUCTION AGENT
The auction agent acts as an agent of each of the Funds. Unless the auction
agent acts in bad faith or negligently, it will not be liable for any action
taken, suffered, or omitted or for any error of judgment it makes in the
performance of its duties under the Auction Agency Agreement, and it will not be
liable for any error of judgment it makes in good faith unless it is negligent
in ascertaining the pertinent facts. The auction agent may terminate the Auction
Agency Agreement as to one or more Funds upon 45 days' notice to the Fund(s). If
the auction agent should resign, the Fund will use its best efforts to enter
into an agreement with a successor auction agent that contains substantially the
same terms and conditions as the Auction Agent Agreement. A Fund may remove the
auction agent, but before this removal, the Fund must have entered into an
agreement with a successor auction agent.
BROKER-DEALERS; PARTICIPATION FEE
After each auction, the auction agent will pay to each Broker-Dealer, from
monies a Fund provides, a participation fee at the annual rate of 1/4 of 1% of
the Fund's net assets for any auction immediately preceding a rate period of
less than one year. For a rate period of one year or longer, the amount will be
a percentage of the purchase price of MuniPreferred shares the broker-dealer
places at that auction, as the Fund and Broker-Dealers may agree. "Places at
auction" means that the shares were (1) the subject of hold orders deemed to be
sell orders made by existing shareholders who acquired their shares from that
Broker-Dealer; or (2) the subject of an order the Broker-Dealer submitted that
is (a) a bid order from an existing shareholder that results in the shareholder
continuing to hold those shares as a result of the auction; (b) a bid order from
a potential shareholder that results in the shareholder buying those shares as a
result of the auction; or (c) a valid hold order.
The broker-dealer agreements allow a Broker-Dealer (other than an affiliate
of a Fund), to submit orders in auctions for its own account, unless a Fund
notifies all Broker-Dealers that they may no longer do so. In that case,
Broker-Dealers may continue to submit hold and sell orders, but not bid orders,
for their own accounts. Any Broker-Dealer that is an affiliate of a Fund may
submit orders in auctions, but only if these orders are not for its own account.
If a Broker-Dealer submits an order for its own account in an auction, it might
have an advantage over other bidders because it would know about orders it
placed through the auction. This Broker-Dealer, however, would not know about
orders other Broker-Dealers submitted in the auction. A Fund may request that
the auction agent terminate one or more broker-dealer agreements at any time,
provided that at least one broker-dealer agreement is in effect after the
termination(s).
SECONDARY MARKET
Broker-Dealers and other broker-dealers may maintain a secondary trading
market for MuniPreferred shares, although they are not required to do so. The
secondary trading market in MuniPreferred shares may not provide you with
liquidity. MuniPreferred shares are not registered on a stock exchange or on the
Nasdaq Stock Market.
You may sell or transfer shares of MuniPreferred only in whole shares and
only: (1) pursuant to a bid or sell order placed with the auction agent in
accordance with the auction procedures; (2) to a Broker-Dealer or other
broker-dealer; or (3) to other persons as a Fund may permit; provided, however,
that (a) a sale or
B-29
<PAGE> 40
transfer of your shares (if you hold your shares in the name of a Broker-Dealer)
to that Broker-Dealer, or to another customer of that Broker-Dealer, will not be
considered a sale or transfer for purposes of the foregoing if that
Broker-Dealer remains the existing holder of the shares immediately after the
transaction; and (b) in the case of all transfers, other than through an
auction, the Broker-Dealer (or other person, if the Fund permits) receiving the
transfer will advise the auction agent of the transfer.
TAX MATTERS
Federal Income Tax Matters
The Fund qualifies as a regulated investment company under Subchapter M of
the Internal Revenue Code and intends to distribute substantially all of its net
income and gains to its shareholders. Therefore, it is not expected that the
Fund will be subject to any Federal income tax. Substantially all of the Fund's
dividends to the common shareholders and MuniPreferred shareholders will qualify
as "exempt-interest dividends." A shareholder treats an exempt- interest
dividend as interest on state and local bonds exempt from regular Federal income
tax. Some or all of an exempt-interest dividend, however, may be subject to
Federal alternative minimum tax imposed on the shareholder. Different Federal
alternative tax rules apply to individuals and to corporations. In addition to
exempt-interest dividends, the Fund also may distribute amounts that are treated
as long-term capital gain or ordinary income to its shareholders. The Fund will
allocate distributions to shareholders that are treated as tax-exempt interest
and as long-term capital gains and ordinary income, if any, proportionately
among the common and MuniPreferred shares. The Fund intends to notify
MuniPreferred shareholders in advance if it will allocate income that is not
exempt from regular Federal income tax. In certain circumstances the Fund will
make payments to MuniPreferred shareholders to offset the tax effects of the
taxable distribution. See "Description of MuniPreferred -- Dividends and Rate
Periods -- Gross-Up Payments" in Part B of this Prospectus. The Statement of
Additional Information contains a more detailed summary of the Federal tax rules
that apply to the Fund and its shareholders. Legislative, judicial or
administrative action may change the tax rules that apply to the Fund or its
shareholders. Any change may be retroactive for Fund transactions. You should
consult with your tax adviser about Federal income tax matters.
NATIONAL FUNDS: STATE AND LOCAL TAX MATTERS
While exempt-interest dividends are exempt from regular Federal income tax,
they may not be exempt from state or local income or other taxes. Some states
exempt from state income tax that portion of any exempt-interest dividend that
is derived from interest a regulated investment company receives on its holdings
of securities of that state and its political subdivisions and
instrumentalities. Therefore, the Fund will report annually to its shareholders
the percentage of interest income the Fund earned during the preceding year on
tax-exempt obligations and the Fund will indicate, on a state-by-state basis,
the source of this income. You should consult with your tax adviser about state
and local tax matters. See "General Information for State Funds."
COMMON STOCK
Common shares have equal voting rights and equal rights as to dividends,
assets, and liquidation. Common shares are fully paid and non-assessable when
issued and have no preemptive, conversion, or exchange rights. No Fund may
declare dividends or make any distributions on common shares, or repurchase
common shares, if it has declared but not paid all accumulated dividends on
MuniPreferred shares.
CONTROL OF THE FUND
Each Fund's Articles of Incorporation or Declaration of Trust may limit the
ability of other companies or persons to acquire control of the Fund. The
holders of at least two-thirds of the common and MuniPreferred shares, voting
together, must approve the Fund's conversion from a closed-end to an open-end
fund; its merger or consolidation; a sale, lease, or transfer of all or
substantially all of the Fund's assets (other than in the
B-30
<PAGE> 41
course of the Fund's regular investment activities); or the Fund's liquidation
or dissolution. If two-thirds of the Fund's directors vote to approve one of
these transactions, then the holders of at least a majority of the shares of
common and MuniPreferred, voting together, must approve the transaction.
These voting requirements are higher than legally required. They could have
the effect of making it more difficult for a third party to assume control of a
Fund or merge it with another fund. However, these voting requirements could
cause third parties seeking control of the Fund to negotiate the price to be
paid with Nuveen Advisory, and could assure the continuity of the Fund's
investment objectives and policies. Each Fund's Board believes that the higher
voting requirements are in the best interest of the Fund and its shareholders.
REPURCHASE OF SHARES OR CONVERSION TO AN OPEN-END FUND
Each of the Funds is a closed-end fund, and you do not have the right to
cause a Fund to redeem your MuniPreferred shares. MuniPreferred shares trade
primarily through the auction, while each Fund's common shares trade on the New
York Stock Exchange. Common shares may trade at a premium or a discount to net
asset value. Each Fund's Board of Directors will consider, at least annually,
whether it should take any action to reduce or eliminate a material discount
from net asset value of the common shares. The Board could authorize a Fund to
repurchase some of its common shares, make a tender offer for some of its common
shares, or convert the Fund to an open-end fund. All of these actions are
subject to certain legal restrictions. If the Fund repurchases common shares or
makes a tender offer, this may not reduce the discount. The Fund may borrow
money to repurchase common shares or pay for tendered shares. If the Fund
borrows, the costs of borrowing would reduce the Fund's net income. If the Fund
converted to an open-end fund, it could not have preferred stock outstanding.
The Fund would be required to redeem all outstanding MuniPreferred shares
(requiring in turn that the Fund liquidate a portion of its portfolio), and the
Fund's common shares would no longer be listed on the New York Stock Exchange.
The Board's present policy, which is subject to change, is that the Board
will not authorize any of these actions if: this would result in the delisting
of the common stock from the New York Stock Exchange or cause a Fund to lose its
tax-exempt status; the Fund could not sell portfolio securities in an orderly
manner, or without imposing significant tax consequences on remaining common
shareholders, sufficient to repurchase shares; there are material legal
challenges to the repurchase; the New York Stock Exchange suspends trading; or
there are other large-scale events that affect the Fund's ability to repurchase
its shares, such as a federal banking moratorium.
NET ASSET VALUE
The Funds' custodian calculates each Fund's net asset value. The custodian
uses prices for portfolio securities from a pricing service the Fund's Board of
Directors has approved. The pricing service values portfolio securities at the
mean between the quoted bid and asked price or the yield equivalent when
quotations are readily available. Securities for which quotations are not
readily available (which will constitute the majority of the Fund's portfolio
securities) are valued at fair value. The pricing service uses methods that
consider yields or prices of municipal bonds of comparable quality, type of
issue, coupon, maturity, and ratings; dealers= indications of value; and general
market conditions. The pricing service may use electronic data processing
techniques or a matrix system, or both. The Fund's officers review the pricing
service's procedures and valuations, under the general supervision of the Board
of Directors.
OTHER SERVICE PROVIDERS
The Chase Manhattan Bank, located at One Chase Plaza, New York, NY 10081,
is the Fund's custodian, and the transfer agent and dividend disbursing agent
for the Fund's common shares. Bankers Trust Company, located at 4 Albany Street,
New York, NY 10006, is the auction agent, transfer agent, registrar, dividend
disbursing agent and redemption agent for the MuniPreferred shares. Purchases
and sales of MuniPreferred shares are cleared and settled at the Depository
Trust Company, 55 Water Street, New York, NY 10041.
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<PAGE> 42
AVAILABLE INFORMATION
The Funds are subject to the informational requirements of the Securities
Exchange Act of 1934, the 1940 Act, and are required to file reports, proxy
statements and other information with the SEC. These documents can be inspected
and copied for a fee at the SEC's public reference room, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's New York Regional Office, Seven World
Trade Center, New York, New York 10048 and Chicago Regional Office, Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois,
60661-2511. Reports, proxy statements, and other information about the Funds can
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
This Part B of the Prospectus does not contain all of the information in
each Fund's registration statement, including amendments, exhibits, and
schedules. Statements in this Part B of the Prospectus about the contents of any
contract or other document are not necessarily complete and in each instance
reference is made to the copy of the contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by this reference.
Additional information about each Fund and MuniPreferred shares can be
found in the each Fund's Registration Statement (including amendments, exhibits,
and schedules) on Form N-2 filed with the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains each Fund's Registration Statement, other
documents incorporated by reference, and other information the Fund has filed
electronically with the Commission, including proxy statements and reports filed
under the Securities Exchange Act of 1934. Additional information may be found
on the Internet at http://www.nuveen.com.
B-32
<PAGE> 43
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies...........................
Certain Trading Strategies..................................
Management of the Fund......................................
Portfolio Transactions......................................
Net Asset Value.............................................
Additional Information about MuniPreferred Auctions.........
Tax Matters.................................................
Certain Owners of Record....................................
Experts.....................................................
Financial Statements........................................
Report of Independent Auditors..............................
Appendix A -- Securities Ratings............................
Appendix B -- Statement of Preferences......................
Appendix C -- Description of Insurers.......................
</TABLE>
B-33
<PAGE> 44
APPENDIX A
[Taxable Equivalent Yield Table(s)]
B-34
<PAGE> 45
STATEMENT OF ADDITIONAL INFORMATION DATED
____________, 1999 NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relating to this offering does
not constitute a prospectus, but should be read in conjunction with the
Prospectus relating thereto dated __________ , 1999 (the "Prospectus"). This
Statement of Additional Information does not include all information that a
prospective investor should consider before purchasing shares of MuniPreferred
in this offering, and investors should obtain and read the Prospectus prior to
purchasing such shares. A copy of the Prospectus may be obtained without charge
by calling (800) 257-8787. Capitalized terms used but not defined in this
Statement of Additional Information have the meanings assigned to them in the
Prospectus.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Investment Objectives and Policies ............... S-1
Certain Trading Strategies of the Fund ........... S-7
Management of the Fund ........................... S-10
Portfolio Transactions ........................... S-18
Net Asset Value .................................. S-20
Additional Information Concerning the Auctions for
MuniPreferred .................................... S-20
Tax Matters ...................................... S-22
Certain Owners of Record ......................... S-28
Experts .......................................... S-28
Financial Statements ............................. S-
Report of Independent Auditors ................... S-
Ratings of Investments ........................... A-1
Statement of Preferences ......................... B-1
Description of Insurers .......................... C-1
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVE
The Fund's primary investment objective is current income exempt from
regular Federal income tax. The Fund's secondary investment objective is to
enhance portfolio value relative to the municipal bond market through
investments in tax-exempt municipal bonds which, in Nuveen Advisory's opinion,
are underrated or undervalued or that represent municipal market sectors that
are undervalued. The Fund seeks to achieve its investment objectives by
investing
S-1
<PAGE> 46
all of its assets in a diversified portfolio of tax-exempt municipal bonds that
are either covered by insurance guaranteeing the timely payment of principal and
interest thereon, or are backed by an escrow or trust account containing
sufficient U.S. Government or U.S. Government agency securities to ensure timely
payment of principal and interest. Municipal bonds backed by an escrow or trust
account will not constitute more than 20% of the Fund's assets.
PORTFOLIO INVESTMENTS
Except to the extent that the Fund buys temporary investments as described
below, the Fund will, as a fundamental policy, invest substantially all of its
assets in tax-exempt municipal bonds that are either covered by insurance
guaranteeing the timely payment of principal and interest on the bonds, or are
backed by an escrow or trust account containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment of principal and
interest. Uninsured municipal bonds backed by an escrow or trust account will
not constitute more than 20% of the Fund's assets. These policies and the Fund's
investment objectives are fundamental policies, which cannot be changed without
the approval of the holders of a majority of the outstanding shares of common
shares and MuniPreferred shares, voting together, and of the holders of a
majority of the outstanding MuniPreferred shares, voting separately. As used in
this Prospectus, a "majority of the outstanding shares" means the vote of (1)
67% or more of the shares present at a meeting, if the holders of more than 50%
of the shares are present or represented by proxy; or (2) more than 50% of the
shares, whichever is less.
Each insured municipal bond that the Fund holds will either be (1) covered
by an insurance policy applicable to a specific security, whether obtained by
the issuer of the security or a third party at the time of original issuance, or
by the Fund or a third party after the original issuance, or (2) covered by
portfolio insurance through a master municipal insurance policy the Fund has
purchased. The Fund has bought, and will only buy, portfolio insurance from
insurers whose claims-paying ability Moody's rates "Aaa" or Standard & Poor's
rates "AAA."
The Fund also may invest in municipal bonds that are backed by an escrow or
trust account containing securities issued or guaranteed by the U.S. Government
or U.S. Government agencies and backed by the full faith and credit of the
United States, in an amount that is sufficient to ensure the payment of interest
and principal. These bonds generally will not be insured. The Fund may buy
municipal bonds that have been (1) advance refunded, where the proceeds of the
refunding have been used to buy U.S. Government or U.S. Government agency
securities that are placed in escrow and whose interest and principal payments
are sufficient to cover the remaining scheduled debt service on that municipal
bond; or (2) issued under state or local housing finance programs that use the
issuance proceeds to fund mortgages that are then exchanged for U.S. Government
or U.S. Government agency securities and deposited with a trustee as security
for those municipal bonds. Both types of municipal bonds are normally regarded
as having the credit characteristics of the underlying U.S. Government or U.S.
Government agency securities.
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<PAGE> 47
The Fund buys municipal bonds with different maturities and intends to
maintain an average portfolio maturity of 15 to 30 years, although this may be
shortened depending on market conditions. As a result, the Fund's portfolio may
include long-term and intermediate-term municipal bonds. If the long-term
municipal bond market is unstable, the Fund may temporarily invest up to 100% of
its assets in temporary investments. Temporary investments are high quality,
generally uninsured, short-term municipal bonds that may either be tax-exempt or
taxable. The Fund will buy taxable temporary investments only if suitable
tax-exempt temporary investments are not available at reasonable prices and
yields. The Fund will invest only in taxable temporary securities that are U.S.
Government securities or corporate debt securities rated within the highest
grade by Moody's or Standard & Poor's, and that mature within one year from the
date of issuance. The Fund's policies on securities ratings only apply when the
Fund buys a security, and the Fund is not required to sell securities that have
been downgraded. See Appendix A for a description of securities ratings. The
Fund also may invest in taxable temporary investments that are certificates of
deposit from U.S. banks with assets of at least $1 billion, or repurchase
agreements. The Fund is required to allocate taxable income on temporary
investments, if any, proportionately between common shares and MuniPreferred
shares, based on the percentage of total dividends distributed to each class for
that year.
The Fund has not established any limit on the percentage of its portfolio
that may be invested in Municipal Obligations subject to the alternative minimum
tax provisions of Federal tax law, and a substantial portion of the income
produced by the Fund may be includable in alternative minimum taxable income.
MuniPreferred shares therefore would not ordinarily be a suitable investment for
investors who are subject to the Federal alternative minimum tax. The
suitability of an investment in MuniPreferred shares will depend upon a
comparison of the after-tax yield likely to be provided from the Fund with that
from comparable tax-exempt investments not subject to the alternative minimum
tax, and from comparable fully taxable investments, in light of each such
investor's tax position. Special considerations apply to corporate investors. In
addition, the dividends paid on MuniPreferred shares during specified Rate
Periods will include an allocated portion of any net capital gains or other
income taxable for Federal income tax purposes the Fund realizes. See "Tax
Matters."
MUNICIPAL OBLIGATIONS
Included within the general category of Municipal Obligations described in
the Prospectus are participations in lease obligations or installment purchase
contract obligations (hereinafter collectively called "Municipal Lease
Obligations") of municipal authorities or entities. Although Municipal Lease
Obligations do not constitute general obligations of the municipality for which
the municipality's taxing power is pledged, a Municipal Lease Obligation is
ordinarily backed by the municipality's covenant to budget for, appropriate and
make the payments due under the Municipal Lease Obligation. However, certain
Municipal Lease Obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is
S-3
<PAGE> 48
appropriated for such purpose on a yearly basis. In the case of a
"non-appropriation" lease, the Fund's ability to recover under the lease in the
event of non-appropriation or default will be limited solely to the repossession
of the leased property, without recourse to the general credit of the lessee,
and disposition or releasing of the property might prove difficult. The Fund
seeks to minimize these risks by not investing more than 5% of its total
investment assets in Municipal Lease Obligations that contain
"non-appropriation" clauses, and by only investing in those "non-appropriation"
Municipal Lease Obligations where (a) the nature of the leased equipment or
property is such that its ownership or use is essential to a governmental
function of the municipality, (b) the lease payments will commence amortization
of principal at an early date that results in an average life of seven years or
less for the Municipal Lease Obligation, (c) appropriate covenants will be
obtained from the municipal obligor prohibiting the substitution or purchase of
similar equipment if lease payments are not appropriated, (d) the lease obligor
has maintained good market acceptability in the past, (e) the investment is of a
size that will be attractive to institutional investors and (f) the underlying
leased equipment has elements of portability or use, or both, that enhance its
marketability in the event foreclosure on the underlying equipment were ever
required.
Certain Municipal Obligations may carry variable or floating rates of
interest whereby the rate of interest is not fixed but varies with changes in
specified market rates or indexes, such as a bank prime rate or a tax-exempt
money market index. As used in the Prospectus and in this Statement of
Additional Information, the term Municipal Obligations also includes
obligations, such as tax-exempt notes, municipal commercial paper and Municipal
Lease Obligations, having relatively short-term maturities, although the Fund
emphasizes investments in Municipal Obligations with long-term maturities.
Obligations of issuers of Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Bankruptcy Reform Act of 1978, as amended. In
addition, Congress, state legislatures or referenda may in the future enact laws
affecting the obligations of these issuers by extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power or
ability of any issuer to pay, when due, the principal of and interest on its
Municipal Obligations may be materially affected.
INVESTMENT RESTRICTIONS
Except as described below, the Fund, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding shares of
common stock and preferred stock of the Fund, including MuniPreferred, voting
together as a single class, and of the holders of a majority of the outstanding
shares of preferred stock of the Fund, including MuniPreferred, voting as a
separate class:
S-4
<PAGE> 49
(1) Issue senior securities, as defined in the 1940 Act, other than preferred
stock, except to the extent such issuance might be involved with respect to
borrowings described under subparagraph (3) below or with respect to
transactions involving futures contracts or the writing of options within the
limits described under "Certain Trading Strategies of the Fund -- Financial
Futures and Options Transactions" below;
(2) Make short sales of securities or purchase any securities on margin (except
for such short-term credits as are necessary for the clearance of transactions),
or write or purchase put or call options, except to the extent that the purchase
of a standby commitment may be considered the purchase of a put, and except for
transactions involving options within the limits described under "Certain
Trading Strategies of the Fund -- Financial Futures and Options Transactions"
below;
(3) Borrow money, except from banks for temporary or emergency purposes or for
repurchase of its shares, and then only in an amount not exceeding one-third of
the value of its total assets including the amount borrowed; while any such
borrowings exceed 5% of its total assets, no additional purchases of investment
securities will be made;
(4) Underwrite any issue of securities, except to the extent that the purchase
of Municipal Obligations in accordance with its investment objective, policies
and limitations may be deemed to be an underwriting;
(5) Invest more than 25% of its total assets in securities of issuers in any one
industry; provided, however, that such limitation shall not apply to Municipal
Obligations other than those Municipal Obligations backed only by the assets and
revenues of non-governmental users, nor shall it apply to Municipal Obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities;
(6) Purchase or sell real estate, but this shall not prevent the Fund from
investing in Municipal Obligations secured by real estate or interests therein;
(7) Purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts within the limits described under
"Certain Trading Strategies of the Fund -- Financial Futures and Options
Transactions" below;
(8) Make loans, other than by entering into repurchase agreements and through
the purchase of Municipal Obligations or temporary investments in accordance
with its investment objective, policies and limitations;
(9) Invest in securities other than Municipal Obligations and temporary
investments as described under "Investment Objectives and Policies -- Portfolio
Investments" above; and purchase financial futures and options except within the
limits described in "Certain Trading Strategies of the Fund -- Financial Futures
and Options Transactions."
S-5
<PAGE> 50
(10) Invest more than 5% of its total assets in securities of any one issuer,
except that this limitation shall not apply to securities of the U.S.
Government, its agencies and instrumentalities or to the investment of 25% of
its total assets;
(11) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowings permitted by subparagraph (3) above, it may pledge securities having
a market value at the time of pledge not exceeding 20% of the value of its total
assets;
(12) Invest more than 10% of its total assets in repurchase agreements maturing
in more than seven days; and
(13) Purchase or retain the securities of any issuer other than its own
securities if, to its knowledge, those of its directors, or those officers and
directors of the Nuveen Advisory Corp. who individually own beneficially more
than 1/2 of 1% of the outstanding securities of such issuer, together own
beneficially more than 5% of such outstanding securities.
For the purpose of applying the limitation set forth in subparagraph (10) above,
an issuer shall be deemed the sole issuer of a security when its assets and
revenues are separate from other governmental entities and its securities are
backed only by its assets and revenues. Similarly, in the case of a
non-governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental user, then such non-governmental user would be deemed to be
the sole issuer. Where a security is also backed by the enforceable obligation
of a superior or unrelated governmental or other entity, it shall also be
included in the computation of securities owned that are issued by such
governmental or other entity. Where a security is guaranteed by a governmental
entity or some other facility, such as a bank guarantee or letter of credit, the
guarantee or letter of credit would be considered a separate security and would
be treated as an issue of that government or other entity.
In addition to the limitations set forth above, the Fund will not, as a
matter of operating policy, (1) invest more than 5% of its total assets in
unsecured obligations of issuers which, together with their predecessors, have
been in operation for less than three years, (2) invest for the purpose of
exercising control or management, (3) invest more than 10% of its total assets
in securities that are unmarketable, illiquid or not readily marketable
(securities that cannot reasonably be sold within seven days, including
repurchase agreements maturing in more than seven days), or (4) borrow in excess
of 5% of its total assets if and so long as its preferred shares are
outstanding. These policies are not fundamental and the Board may change them
without shareholder approval.
The restrictions and other limitations set forth above will apply only at
the time of purchase of securities and will not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of an
acquisition of securities.
S-6
<PAGE> 51
The Fund has no intention to file a voluntary application for relief under
Federal bankruptcy law or any similar application under state law for so long as
the Fund is solvent and does not foresee becoming insolvent.
CERTAIN TRADING STRATEGIES OF THE FUND
PORTFOLIO TRADING AND TURNOVER RATE
Portfolio trading may be undertaken to accomplish the investment objective
of the Fund in relation to actual and anticipated movements in interest rates.
In addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what Nuveen Advisory
believes to be a temporary price disparity between the two securities. Temporary
price disparities between two comparable securities may result from supply and
demand imbalances where, for example, a temporary oversupply of certain bonds
may cause a temporarily low price for such bonds, as compared with other bonds
of like quality and characteristics. The Fund may also engage to a limited
extent in short-term trading consistent with its investment objective.
Securities may be sold in anticipation of a market decline (a rise in interest
rates) or purchased in anticipation of a market rise (a decline in interest
rates) and later sold, but the Fund will not engage in trading solely to
recognize a gain.
Subject to the foregoing, the Fund will attempt to achieve its investment
objective by prudent selection of Municipal Obligations with a view to holding
them for investment. The Fund anticipates that its annual portfolio turnover
rate generally will not exceed 100%, although there can be no assurance of this.
However, the rate of turnover will not be a limiting factor when the Fund deems
it desirable to sell or purchase securities. Therefore, depending upon market
conditions, the Fund's annual portfolio turnover rate may exceed 100% in
particular years.
WHEN-ISSUED AND DELAYED DELIVERY
The Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise when
securities are purchased or sold with payment and delivery beyond the regular
settlement date. (When-issued transactions normally settle within 30-45 days).
On such transactions the payment obligation and the interest rate are fixed at
the time the buyer enters into the commitment. Beginning on the date the Fund
enters into a commitment to purchase securities on a when-issued or delayed
delivery basis, it is required under SEC rules to maintain in a segregated
account cash or liquid assets, equal in value to the purchase price due on the
settlement date. Income these assets generate in a segregated account ,which
provides taxable income for Federal income tax purposes, is includable in the
taxable income of the Fund. The Fund currently intends to allocate net capital
gains and other income taxable for Federal income tax purposes, if any,
proportionately between its common stock and its MuniPreferred shares, and
dividends paid on its MuniPreferred shares during specified periods will include
an allocated portion of any
S-7
<PAGE> 52
such net capital gains and other taxable income. See "Tax Matters." The
commitment to purchase securities on a when-issued or delayed delivery basis may
involve an element of risk because the value of the securities is subject to
market fluctuation. No interest accrues to the purchaser prior to settlement of
the transaction, and at the time of delivery the market value may be less than
cost.
FINANCIAL FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its investment portfolio
against market risk by engaging in transactions in financial futures contracts,
options on financial futures or options that either are based on an index of
long-term Municipal Obligations (i.e., those with remaining maturities averaging
20-30 years) or relate to debt securities whose prices Nuveen Advisory
anticipates to correlate with the prices of the Municipal Obligations the Fund
owns. The Fund has no present intention to engage in such hedging transactions
and in no event does it expect that any material portion of its assets would be
so committed. To accomplish such hedging, the Fund may take an investment
position in a futures contract or in an option which is expected to move in the
opposite direction from the position being hedged. Hedging may be utilized to
reduce the risk that the value of securities the Fund owns may decline on
account of an increase in interest rates and to hedge against increases in the
cost of the securities the Fund intends to purchase as a result of a decline in
interest rates. The use of futures and options for hedging purposes can be
expected to result in taxable income or gain. The Fund currently intends to
allocate any taxable income or gain proportionately between its common stock and
its MuniPreferred shares. See "Tax Matters."
The sale of financial futures or the purchase of put options on financial
futures or on debt securities or indexes is a means of hedging against the risk
of rising interest rates, whereas the purchase of financial futures or of call
options on financial futures or on debt securities or indexes is a means of
hedging the Fund's portfolio against an increase in the price of securities such
Fund intends to purchase. Writing a call option on a futures contract or on debt
securities or indexes may serve as a hedge against a modest decline in prices of
Municipal Obligations held in the Fund's portfolio, and writing a put option on
a futures contract or on debt securities or indexes may serve as a partial hedge
against an increase in the value of Municipal Obligations the Fund intends to
acquire. The writing of these options provides a hedge to the extent of the
premium received in the writing transaction.
Although certain risks are involved in futures and options transactions
(as discussed under "Risks of Futures and Options Transactions" below), because
the Fund will engage in these transactions only for hedging purposes, these
futures and options portfolio strategies should not subject the Fund to those
risks frequently associated with speculation in futures or options transactions.
Regulations of the Commodity Futures Trading Commission (the "CFTC") require
that the Fund engage in transactions in futures and options on futures only for
bona fide hedging purposes or if the aggregate initial margin deposits and
premiums the Fund pays do not exceed 5% of the market value of its assets. The
Fund will not purchase futures unless it has segregated
S-8
<PAGE> 53
cash, government securities or high grade liquid debt equal to the contract
price of the futures less any margin on deposit, or unless the purchase of a put
option covers the long futures position. The Fund will not sell futures unless
the Fund owns the instruments underlying the futures or owns options on such
instruments or owns a portfolio whose market price may be expected to move in
tandem with the market price of the instruments or index underlying the futures.
If the fund engages in transactions involving the purchase or writing of put and
call options on debt securities or indexes, the Fund will not purchase these
options if more than 5% of its assets would be invested in the premiums for
these options, and it will only write "covered" or "secured" options, where the
Fund holds the securities or cash required to be delivered upon exercise, with
such cash being maintained in a segregated account. These requirements and
limitations may limit the Fund's ability to engage in hedging transactions. So
long as Moody's or S&P, or both, are rating the Fund's MuniPreferred shares, the
Fund will only engage in futures or options transactions in accordance with the
then-current guidelines of such rating agencies, and only after it has received
written confirmation from Moody's and S&P, as appropriate, that these
transactions would not impair the ratings then assigned by Moody's and S&P to
such shares.
DESCRIPTION OF FINANCIAL FUTURES AND OPTIONS. A futures contract is a
contract between a seller and a buyer for the sale and purchase of specified
property at a specified future date for a specified price. An option is a
contract that gives the holder of the option the right, but not the obligation,
to buy (in the case of a call option) specified property from, or to sell (in
the case of a put option) specified property to, the writer of the option for a
specified price during a specified period prior to the option's expiration.
Financial futures contracts and options cover specified debt securities (such as
U.S. Treasury securities) or indexes designed to correlate with price movements
in certain categories of debt securities. At least one exchange trades futures
contracts on an index designed to correlate with the long-term municipal bond
market. Financial futures contracts and options on financial futures contracts
are traded on exchanges regulated by the CFTC. Options on certain financial
instruments and financial indexes are traded on securities markets regulated by
the Securities and Exchange Commission ("SEC"). Although futures contracts and
options on specified financial instruments call for settlement by delivery of
the financial instruments covered by the contracts, in most cases positions in
these contracts are closed out in cash by entering into offsetting liquidating
or closing transactions. Index futures and options are designed for cash
settlement only.
RISKS OF FUTURES AND OPTIONS TRANSACTIONS. There are certain risks
associated with the use of financial futures and options to hedge investment
portfolios. There may be an imperfect correlation between price movements of the
futures and options and price movements of the portfolio securities being
hedged. Losses may be incurred in hedging transactions, which could reduce the
portfolio gains that might have been realized if the hedging transactions had
not been entered into. The ability to close out positions in futures and options
depends upon the existence of a liquid secondary market, which may not exist for
all futures and options at all times. If the Fund engages in futures
transactions or in the writing of options on futures, it will be required to
maintain initial margin and maintenance margin and may be required to make daily
variation margin payments in accordance with applicable rules of the
S-9
<PAGE> 54
exchanges and the CFTC. If the Fund purchases a financial futures contract or a
call option or writes a put option in order to hedge the anticipated purchase of
Municipal Obligations, and if the Fund fails to complete the anticipated
purchase transaction, the Fund may have a loss or a gain on the futures or
options transaction that will not be offset by price movements in the Municipal
Obligations that were the subject of the anticipatory hedge. The cost of put
options on debt securities or indexes effectively increases the cost of the
securities subject to them, thereby reducing the yield otherwise available from
these securities. If the Fund decides to use futures contracts or options on
futures contracts for hedging purposes, the Fund will be required to establish
an account for such purposes with one or more CFTC-registered futures commission
merchants. A futures commission merchant could establish initial and maintenance
margin requirements for the Fund that are greater than those which would
otherwise apply to the Fund under applicable rules of the exchanges and the
CFTC.
REPURCHASE AGREEMENTS. The Fund may buy repurchase agreements as temporary
investments. A repurchase agreement is a contract in which the seller of
securities (U.S. government securities or municipal bonds) agrees to repurchase
the same securities from the buyer at a specified price on a future date. The
repurchase price determines the yield during the Fund's holding period.
Repurchase agreements are considered to be loans whose collateral is the
underlying security that is the subject of the repurchase agreement. Income from
repurchase agreements is taxable and required to be allocated between common
shares and MuniPreferred shares. See "Tax Matters" and "The Auction - Auction
Dates; Advance Notice of Allocation of Taxable Income." The Fund will enter into
repurchase agreements only with registered securities dealers or domestic banks
that, in Nuveen Advisory's opinion, present minimal credit risks. The risk to
the Fund is limited to the ability of the other party to pay the agreed-upon
repurchase price on the delivery date; however, although the value of the
underlying collateral at the time of the transaction always equals or exceeds
the repurchase price, if the value of the collateral declines there is a risk of
loss of principal and interest. If the other party defaults, the collateral may
be sold, but the Fund may lose money if the value of the collateral declines and
may have to pay the costs of the sale or experience delays in selling the
collateral. If the seller files for bankruptcy, the Fund may not be able to sell
the collateral quickly or at all. Nuveen Advisory will monitor the value of the
collateral at the time the Fund enters into a repurchase agreement and during
the term of the repurchase agreement to determine that at all times that value
of the collateral equals or exceeds the repurchase price. If the value of the
collateral is less than the repurchase price, Nuveen Advisory will demand
additional collateral from the other party to increase the value of the
collateral to at least the redemption price plus interest.
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Board of Directors is responsible for the management of the Fund,
including general supervision of the duties Nuveen Advisory performs under the
Investment Management Agreement. There are seven directors of the Fund, one of
whom is an "interested person" (as
S-10
<PAGE> 55
<PAGE> 56
defined in the 1940 Act) and six of whom are "disinterested persons." The names
and business addresses of the directors and officers of the Fund and their
principal occupations and other affiliations during the past five years are set
forth below, with those directors who are "interested persons" of the Fund
indicated by an asterisk.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS
AND ADDRESS WITH FUND DURING PAST FIVE YEARS
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Timothy R. Schwertfeger,* 49 Chairman of the Board and Director Chairman (since July 1996) and
333 West Wacker Drive Director of The John Nuveen
Chicago, IL 60606 Company, John Nuveen & Co.
Incorporated, Nuveen Advisory Corp.
and Nuveen Institutional Advisory
Corp.; prior thereto, Executive
Vice President; Chairman and
Director (since January 1997) of
Nuveen Asset Management, Inc.;
Director (since 1996) of
Institutional Capital Corporation
- ---------------------------------------- ------------------------------------- -------------------------------------
Robert P. Bremner, 58 Director Private investor and management
3725 Huntington Street, NW consultant.
Washington, D.C. 20015
- ---------------------------------------- ------------------------------------- -------------------------------------
Lawrence H. Brown, 64 Director Retired in August 1989 as Senior
201 Michigan Avenue Vice President of The Northern
Highwood, IL 60040 Trust Company
- ---------------------------------------- ------------------------------------- -------------------------------------
Anne E. Impellizzeri, 65 Director President and Chief Executive
3 West 29th Street Officer of Blanton-Peale Institute,
New York, NY 10001 a training and counseling
organization.
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
S-11
<PAGE> 57
<TABLE>
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Peter R. Sawers, 65 Director Adjunct Professor of
22 The Landmark Business and Economics,
Northfield, IL 60093 University of Dubuque,
Iowa; Adjunct Professor,
Lake Forest Graduate
School of Management, Lake
Forest, Illinois; prior
thereto, Executive
Director, Towers Perrin
Australia (management
consultant); Chartered
Financial Analyst;
Certified Management
Consultant.
- ---------------------------------------- ------------------------------------- -------------------------------------
William J. Schneider, 54 Director Senior Partner, Miller-Valentine
4000 Miller-Valentine Ct. Group, a development and contract
P.O. Box 744 company; Vice President,
Dayton, OH 45401 Miller-Valentine Realty, Inc., a
commercial real estate company.
- ---------------------------------------- ------------------------------------- -------------------------------------
Judith M. Stockdale, 50 Director Executive Director (since
35 East Wacker Drive 1994) of the Gaylord and
Chicago, IL 60601 Dorothy Donnelley
Foundation, a private
family foundation; prior
thereto, Executive
Director (from 1990 to
1994) of the Great Lakes
Protection Fund.
- ---------------------------------------- ------------------------------------- -------------------------------------
Alan G. Berkshire, 38 Vice President and Assistant Vice President and General Counsel
333 W. Wacker Drive Secretary (since September 1997) and
Chicago, IL 60606 Secretary (since May 1998) of the
John Nuveen Company, John Nuveen &
Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Corp., prior
thereto, Partner in the law firm of
Kirkland & Ellis.
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
S-12
<PAGE> 58
<TABLE>
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Peter H. D'Arrigo, 31 Vice President and Treasurer Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated (since January 1999),
Chicago, IL 60606 prior thereto, Assistant Vice
President (since January 1997);
formerly, Associate of John Nuveen
& Co. Incorporated; Chartered
Financial Analyst
- ---------------------------------------- ------------------------------------- -------------------------------------
Michael S. Davern, 41 Vice President Vice President of Nuveen Advisory
333 W. Wacker Drive Corp.; prior thereto, Vice
Chicago, IL 60606 President and Portfolio Manager of
Flagship Financial.
- ---------------------------------------- ------------------------------------- -------------------------------------
Lorna C. Ferguson, 53 Vice President Vice President of John Nuveen & Co.
333 W. Wacker Drive (since January 1998) of Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen
Institutional Advisory Corp.
- ---------------------------------------- ------------------------------------- -------------------------------------
William M. Fitzgerald, 34 Vice President Vice President of Nuveen Advisory
333 W. Wacker Drive Corp (since December 1995); prior
Chicago, IL 60606 thereto, Assistant Vice President
of Nuveen Advisory Corp. (from
September 1992 to December 1995);
Chartered Financial Analyst.
- ---------------------------------------- ------------------------------------- -------------------------------------
Stephen D. Foy, 44 Vice President and Controller Vice President of John Nuveen & Co.
333 W. Wacker Drive Incorporated.
Chicago, IL 60606
- ---------------------------------------- ------------------------------------- -------------------------------------
J. Thomas Futrell, 43 Vice President Vice President of Nuveen Advisory
333 W. Wacker Drive Corp.; Chartered Financial Analyst.
Chicago, IL 60606
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
S-13
<PAGE> 59
<TABLE>
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Richard A. Huber, 35 Vice President Vice President of Nuveen
333 W. Wacker Drive Institutional Advisory Corp. (since
Chicago, IL 60606 March 1998) and Nuveen Advisory
Corp. (since January 1997); prior
thereto, Vice and Portfolio Manager
of Flagship Financial.
- ---------------------------------------- ------------------------------------- -------------------------------------
Steven J. Krupa, 41 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp.
Chicago, IL 60606
- ---------------------------------------- ------------------------------------- -------------------------------------
Larry W. Martin, 47 Vice President and Assistant Vice President, Assistant Secretary
333 West Wacker Drive Secretary and Assistant General Counsel of
Chicago, IL 60606 John Nuveen & Co. Incorporated;
Vice President and Assistant
Secretary of Nuveen Advisory Corp.
and Nuveen Institutional Advisory
Corp.; Assistant Secretary of The
John Nuveen Company.
- ---------------------------------------- ------------------------------------- -------------------------------------
Edward F. Neild, IV, 33 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp. and Nuveen Institutional
Chicago, IL 60606 Advisory Corp. (since September
1996); prior thereto, Assistant
Vice President of Nuveen Advisory
Corp. (from December 1993 to
September 1996) and Nuveen
Institutional Advisory Corp. (from
May 1995 to September 1996;
Chartered Financial Analyst.
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
S-14
<PAGE> 60
<TABLE>
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
Stephen S. Peterson, 41 Vice President Vice President (since September
333 W. Wacker Drive 1997); previously Assistant Vice
Chicago, IL 60606 President of Nuveen Advisory Corp.
(since September 1996), Portfolio
Manager prior thereto; Chartered
Financial Analyst.
- ---------------------------------------- ------------------------------------- -------------------------------------
Stuart W. Rogers, 42 Vice President Vice President of John Nuveen & Co.
333 W. Wacker Drive Incorporated.
Chicago, IL 60606
- ---------------------------------------- ------------------------------------- -------------------------------------
Thomas C. Spalding, Jr., 47 Vice President Vice President of Nuveen Advisory
333 W. Wacker Drive Corp. and Nuveen Institutional
Chicago, IL 60606 Advisory Corp., Chartered
Financial Analyst.
- ---------------------------------------- ------------------------------------- -------------------------------------
William S. Swanson, 33 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated (since October 1997),
Chicago, IL 60606 prior thereto, Assistant Vice
President (since September 1996);
formerly, Associate of John Nuveen
& Co. Incorporated; Chartered
Financial Analyst.
- ---------------------------------------- ------------------------------------- -------------------------------------
Gifford R. Zimmerman, 42 Vice President and Secretary Vice President, Assistant Secretary
333 West Wacker Drive and Associate General Counsel of
Chicago, IL 60606 John Nuveen & Co. Incorporated;
Vice President and Assistant
Secretary of Nuveen Advisory Corp.
and Nuveen Institutional Advisory
Corp., Chartered Financial Analyst.
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
At the next annual meeting of the Fund's shareholders, the holders of
MuniPreferred, voting as a separate class, will elect two directors, and holders
of outstanding Common Stock
S-15
<PAGE> 61
and MuniPreferred, voting together as a single class, will elect five directors.
See "Description of MuniPreferred -- Voting Rights" in the Prospectus.
The Fund has adopted a Directors' Deferred Compensation Plan pursuant
to which a director of the Fund may elect to have all or a portion of the
director's fee deferred. Directors may defer fees for any calendar year by the
execution of a Participation Agreement before the beginning of the calendar year
during which the director wishes to begin deferral. .
Peter Sawers and Timothy R. Schwertfeger serve as members of the
Executive Committee of the Board of Directors. The Executive Committee, which
meets between regular meetings of the Board of Directors, is authorized to
exercise all of the powers of the Board of Directors. Mr. Schwertfeger is a
director or trustee, as the case of may be, of 100 Nuveen open-end and
closed-end funds advised by Nuveen Advisory and Nuveen Institutional Advisory
Corp. The directors of the Fund are directors or trustees, as the case may be,
of 36 open-end funds and 53 Nuveen closed-end funds advised by Nuveen Advisory.
The table below shows, for each director who is not affiliated with
Nuveen or Nuveen Advisory, the aggregate compensation the Fund paid for its
fiscal year ended October 31, 1998 and the total compensation that Nuveen funds
accrued for each director during the calendar year 1997. The Fund has no
retirement or pension plans. The officers and directors affiliated with Nuveen
serve without compensation from the Fund.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
AGGREGATE FROM NUVEEN FUNDS
COMPENSATION ACCRUED FOR
NAME OF DIRECTOR FROM THE FUND DIRECTORS(1)
- ---------------- ------------- -------------
<S> <C> <C>
Robert P. Bremner ............ $ 0 $ 0
Lawrence H. Brown ............ 1,940 59,000
Anne E. Impellizzeri ......... 1,940 59,000
Peter R. Sawers .............. 1,940 59,000
William J. Schneider ......... 0 0
Judith M. Stockdale .......... 0 0
</TABLE>
- ----------
(1) Includes compensation for service on the boards of 42 Nuveen open-end funds
and 52 Nuveen closed-end funds managed by Nuveen Advisory ("NAC Funds").
At October 31, 1998, the Fund's officers and directors as a group owned
less than 1% of the outstanding shares of Common Stock and no shares of
MuniPreferred.
INVESTMENT ADVISER
S-16
<PAGE> 62
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, acts as
the investment adviser for, and manages the investment and reinvestment of the
assets of, the Fund. Nuveen Advisory also administers the Fund's business
affairs, provides office facilities and equipment and certain clerical,
bookkeeping and administrative services, and permits any of its officers or
employees to serve without compensation as directors or officers of the Fund if
elected to such positions.
Under the Management Agreement the Fund has agreed to pay an annual
management fee as follows:
MANAGEMENT FEE SCHEDULE
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS RATE
------------------------ -----
<S> <C>
Up to $125 million.......................................... .6500%
$125 to $250 million........................................ .6375
$250 to $500 million........................................ .6250
$500 million to $1 billion.................................. .6125
$1 billion to $2 billion.................................... .6000
$2 billion and over......................................... .5875
</TABLE>
The Fund paid aggregate management fees of $8,045,628, $7,947,123 and
$7,859,410 for the fiscal years ended October 31, 1998, 1997 and 1996, for an
effective management fee rate of .62%, .62% and .62%, respectively.
Nuveen Advisory was organized in 1976 and is a wholly-owned subsidiary
of John Nuveen & Co. Incorporated ("Nuveen"), 333 West Wacker Drive, Chicago,
Illinois 60606. Nuveen is the co-managing underwriter of the Fund's shares.
Founded in 1898, Nuveen currently sponsors 100 investment company portfolios
(including the Fund). Nuveen and its affiliates have over $60 billion of net
assets under management or surveillance. Nuveen is a subsidiary of The John
Nuveen Company which, in turn, is a majority-owned subsidiary of The St. Paul
Companies, Inc., a management company of St. Paul, Minnesota, principally
engaged in providing property-liability insurance through subsidiaries.
The names, addresses and principal occupations of the principal
executive officers and the directors of Nuveen Advisory are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
---------------- ---------------------
<S> <C>
Timothy R. Schwertfeger...................Chairman of the Board and Director (Principal Executive
333 West Wacker Drive Officer), John Nuveen & Co. Incorporated
</TABLE>
S-17
<PAGE> 63
<TABLE>
<S> <C>
Chicago, Illinois 60606
John P. Amboian...........................Executive Vice President, John Nuveen & Co.
333 West Wacker Drive Incorporated
Chicago, Illinois 60606
</TABLE>
PORTFOLIO TRANSACTIONS
Nuveen Advisory, in effecting purchases and sales of portfolio
securities for the account of the Fund, places orders in such manner as, in the
opinion of its management, offers the best price and market for the execution of
each transaction. Portfolio securities are normally purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in such
securities, unless it appears that a better price or execution may be obtained
elsewhere. Portfolio securities are not purchased from Nuveen or its affiliates
except in compliance with the 1940 Act.
Generally, all portfolio transactions are effected on a principal (as
opposed to an agency) basis and, accordingly, the Fund has not paid and does not
expect to pay any brokerage commissions. Purchases from underwriters include a
commission or concession the issuer pays to the underwriter, and purchases from
dealers include the spread between the bid and asked price. Given the best price
and execution obtainable, it is the practice of the Fund to select dealers
which, in addition, furnish research information (primarily credit analyses of
issuers) and statistical and other services to Nuveen Advisory. It is not
possible to place a dollar value on information, statistical and other services
received from dealers. Since it is only supplementary to Nuveen Advisory's own
research efforts, the receipt of research information is not believed to reduce
significantly Nuveen Advisory's expenses. Any research benefits obtained are
available to all of Nuveen Advisory's other clients. While Nuveen Advisory is
primarily responsible for the placement of the business of the Fund, the
policies and practices of Nuveen Advisory in this regard must be consistent with
the foregoing and are at all times subject to Board review.
Nuveen Advisory reserves the right to, and does, manage other
investment accounts and investment companies for other clients which may have
investment objectives similar or identical to those of the Fund. Subject to
applicable laws and regulations, Nuveen Advisory will attempt to allocate
equitably portfolio transactions among the Fund and the portfolios of its other
clients purchasing or selling securities whenever Nuveen Advisory decides to
purchase or sell securities for the Fund and one or more other clients
simultaneously. In making these allocations, the main factors to be considered
will be the respective investment objectives of the Fund and such other clients,
the relative size of the portfolio holdings of the same or comparable
securities, the availability of cash for investment by the Fund and such other
clients, the size of investment commitments the Fund and other clients generally
hold, and opinions of the persons responsible for recommending investments to
the Fund and such other clients. While this procedure could have a detrimental
effect on the price or amount of the securities available to the Fund from time
to time, it is the opinion of the Board that the benefits available from Nuveen
Advisory's
S-18
<PAGE> 64
organization will outweigh any disadvantage that may arise from exposure to
simultaneous transactions. Notwithstanding the similarity of the investment
objective of the Fund with that of other funds Nuveen Advisory manages, the Fund
will be separately managed and the composition of its investment portfolio is
likely to differ. Accordingly, the investment performance of the Fund will
likely not be the same as other funds.
Under the 1940 Act, the Fund may not purchase portfolio securities from
any underwriting syndicate of which Nuveen is a member except under certain
limited conditions set forth in Rule 10f-3. The Rule sets forth requirements
relating to, among other things, the terms of an issue of Municipal Obligations
the Fund may purchase and the amount of Municipal Obligations the Fund may
purchase in any one issue. In addition, the Board must approve at least
quarterly purchases of securities made pursuant to the terms of the Rule,
including a majority of the directors who are not interested persons of the
Fund.
For the fiscal years ended October 31, 1998, October 31, 1997 and
October 31, 1996, the Fund did not pay any brokerage commissions.
S-19
<PAGE> 65
NET ASSET VALUE
In determining the net asset value of the Fund, the Fund's custodian
uses the valuations of portfolio securities a pricing service approved by the
Board furnishes. The pricing service values portfolio securities at the mean
between the quoted bid and asked price or the yield equivalent when quotations
are readily available. Securities for which quotations are not readily available
(which will constitute a majority of the securities the Fund holds) are valued
at fair value as the pricing service determines using methods which include
consideration of: yields or prices of municipal bonds of comparable quality,
type of issue, coupon, maturity and rating; indications as to value from
dealers; and general market conditions. The pricing service may employ
electronic data processing techniques or a matrix system, or both, to determine
valuations. The officers of the Fund, under the general supervision of the
Board, review procedures of the pricing service and its valuations.
ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR MUNIPREFERRED
GENERAL
AUCTION AGENCY AGREEMENT. The Fund has entered into an Auction Agency
Agreement (the "Auction Agency Agreement") with the Auction Agent (currently,
Bankers Trust Company) which provides, among other things, that the Auction
Agent will follow the Auction Procedures for purposes of determining the
Applicable Rate for shares of each series of MuniPreferred so long as the
Applicable Rate for shares of such series is to be based on the results of an
Auction.
BROKER-DEALER AGREEMENTS. Each Auction requires the participation of
one or more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers the
Fund selected, which provide for the participation of those Broker-Dealers in
Auctions for MuniPreferred shares. See "Broker-Dealers" below.
SECURITIES DEPOSITORY. The Depository Trust Company ("DTC") will act as
the Securities Depository for the Agent Members for shares of each series of
MuniPreferred. One certificate for all of the shares of each series of
MuniPreferred will be registered in the name of Cede, as nominee of the
Securities Depository. The certificate will bear a legend to the effect that the
certificate is issued subject to the provisions restricting transfers of
MuniPreferred shares of contained in the Statement. The Fund will also issue
stop-transfer instructions to the transfer agent for shares of each series of
MuniPreferred. Prior to the commencement of the right of holders of preferred
shares to elect a majority of the Fund's directors, as described under
"Description of MuniPreferred -- Voting Rights" in the Prospectus, Cede will be
the holder of record of all shares of each series of MuniPreferred and owners of
these shares will not be entitled to receive certificates representing their
ownership interest in these shares.
S-20
<PAGE> 66
DTC, a New York-chartered limited purpose trust company, performs
services for its participants (including the Agent Members), some of whom
(and/or their representatives) own DTC. DTC maintains lists of its participants
and will maintain the positions (ownership interests) each participant holds
(the "Agent Member") in MuniPreferred shares, whether for its own account or as
a nominee for another person.
THE AUCTION AGENT
The Auction Agent is acting as agent for the Fund in connection with
Auctions. In the absence of bad faith or negligence on its part, the Auction
Agent will not be liable for any action taken, suffered, or omitted or for any
error of judgment it makes in the performance of its duties under the Auction
Agency Agreement and will not be liable for any error of judgment made in good
faith unless the Auction Agent will have been negligent in ascertaining the
pertinent facts.
The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders of MuniPreferred shares, the Auction Agent's registry of
Existing Holders, the results of Auctions and notices from any Broker-Dealer (or
other Person, if the Fund permits) with respect to transfers described under
"Description of MuniPreferred -- The Auction -- Secondary Market Trading and
Transfer of MuniPreferred" in the Prospectus and notices from the Fund. The
Auction Agent is not required to accept any such notice for an Auction unless it
receives the notice by 3:00 p.m., New York City time, on the Business Day
preceding such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Fund on a date no earlier than 45 days after such notice. If the
Auction Agent should resign, the Fund will use its best efforts to enter into an
agreement with a successor Auction Agent containing substantially the same terms
and conditions as the Auction Agency Agreement. The Fund may remove the Auction
Agent provided that before the removal the Fund shall have entered into such an
agreement with a successor Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for MuniPreferred shares will pay
to each Broker-Dealer, from monies the Fund provides, a service charge at the
annual rate of 1/4 of 1% in the case of any Auction immediately preceding a Rate
Period of less than one year, or a percentage the Fund and the Broker-Dealers
agree upon in the case of any Auction immediately preceding a Rate Period of one
year or longer, of the purchase price of MuniPreferred shares these
Broker-Dealer placed at the Auction. For the purposes of the preceding sentence,
a Broker-Dealer places MuniPreferred shares if the shares were (a) the subject
of Hold Orders the Broker-Dealer was deemed to have been submitted to the
Auction Agent, and which the Broker-Dealer acquired for its own account or for
its customers who are Beneficial Owners or (b) the subject of an Order a
Broker-Dealer submitted that is (i) a Submitted Bid of an Existing Holder that
resulted in the Existing Holder continuing to hold the shares as a result of the
S-21
<PAGE> 67
Auction or (ii) a Submitted Bid of a Potential Holder that resulted in the
Potential Holder purchasing the shares as a result of the Auction or (iii) a
valid Hold Order.
The Fund may request the Auction Agent to terminate one or more
Broker-Dealer Agreements at any time, provided that at least one Broker-Dealer
Agreement is in effect after such termination.
The Broker-Dealer Agreements provides that a Broker-Dealer (other than
an affiliate of the Fund) may submit Orders in Auctions for its own account,
unless the Fund notifies all Broker-Dealers that they may no longer do so, in
which case Broker-Dealers may continue to submit Hold Orders and Sell Orders for
their own accounts. Any Broker-Dealer that is an affiliate of the Fund may
submit Orders in Auctions, but only if such Orders are not for its own account.
If a Broker-Dealer submits an Order for its own account in any Auction, it might
have an advantage over other Bidders because it would have knowledge of all
Orders it submits in that Auction; such Broker-Dealer, however, would not have
knowledge of Orders other Broker-Dealers submitted in that Auction.
TAX MATTERS
The following is based upon the advice of Morgan, Lewis & Bockius LLP,
counsel to the Fund.
The Fund qualifies under Subchapter M of the Code as a regulated
investment company and satisfies conditions which enable dividends on Common
Stock or MuniPreferred shares which are attributable to interest on Municipal
Obligations to be exempt from Federal income tax in the hands of owners of such
stock, subject to the possible application of the alternative minimum tax.
To qualify under Subchapter M for tax treatment as a regulated
investment company, the Fund must, among other things: (a) distribute to its
shareholders at least 90% of the sum of (i) its investment company taxable
income (as that term is defined in the Code determined without regard to the
deduction for dividends paid) and (ii) its net tax-exempt income; and (b)
diversify its holdings so that, at the end of each fiscal quarter of the Fund
(i) at least 50% of the market value of the Fund's assets is represented by
cash, cash items, U.S. government securities and securities of other regulated
investment companies, and other securities, with these other securities limited,
with respect to any one issuer, to an amount not greater in value than 5% of the
Fund's total assets, and to not more than 10% of the outstanding voting
securities of such issuer; and (ii) not more than 25% of the market value of the
Fund's assets is invested in the securities of any one issuer (other than U.S.
government securities or securities of other regulated investment companies). In
meeting these requirements of Subchapter M of the Code, the Fund may be
restricted in the utilization of certain of the investment techniques described
under "Investment Objective and Policies -- Investment Restrictions" above. If
in any year the Fund should fail to qualify under Subchapter M for tax treatment
as a regulated investment company, the Fund
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would incur a regular Federal corporate income tax upon its taxable income for
that year, and distributions to its shareholders would be taxable to such
holders as ordinary income to the extent of the earnings and profits of the
Fund. A regulated investment company that fails to distribute, by the close of
each calendar year, an amount equal to the sum of 98% of its ordinary taxable
income for such year and 98% of its capital gain net income for the one year
period ending October 31 in such year, plus any shortfalls from the prior year's
required distribution, is liable for a 4% excise tax on the portion of the
undistributed amount of such income that is less than the required amount for
such distributions. To avoid the imposition of this excise tax, the Fund
generally makes the required distributions of its ordinary taxable income, if
any, and its capital gain net income, to the extent possible, by the close of
each calendar year.
The Fund intends to qualify to pay "exempt-interest" dividends on its
shares of Common Stock and MuniPreferred shares as defined under the Code. Under
the Code, at the close of each quarter of its taxable year, if at least 50% of
the value of its total assets consists of Municipal Obligations, the Fund shall
be qualified to pay exempt-interest dividends to its shareholders.
Exempt-interest dividends are dividends or any part thereof (other than a
capital gain dividend) the Fund pays that are attributable to interest on
Municipal Obligations and that the Fund so designates. Exempt-interest dividends
will be exempt from Federal income tax, subject to the possible application of
the Federal alternative minimum tax. Insurance proceeds the Fund received under
any insurance policies for scheduled interest payments on defaulted Municipal
Obligations, as described herein, will be excludable from Federal gross income
under Section 103(a) of the Code. Gains of the Fund that are attributable to
market discount on certain Municipal Obligations acquired after April 30, 1993
are treated as ordinary income. Distributions to shareholders of net income
received, if any, from taxable temporary investments and net short-term capital
gains, if any, the Fund realizes will be taxable to its shareholders as ordinary
income. Distributions of net capital gains, if any, are taxable as long-term
capital gain, regardless of the length of time the shareholder has owned shares
of Common Stock or MuniPreferred shares of the Fund. The amount of taxable
income allocable to the Fund's MuniPreferred shares will depend upon the amount
of this income the Fund realizes, but is not generally expected to be
significant. Except for dividends paid on MuniPreferred shares which include an
allocated portion of any net capital gains or other taxable income, the Fund
anticipates that all other dividends paid on its MuniPreferred shares will
constitute exempt-interest dividends for Federal income tax purposes. Because
the taxable portion of the Fund's investment income consists primarily of
interest, as long as the Fund qualifies as a regulated investment company under
the Code, no part of its distributions to shareholders will qualify for the
dividends-received deduction for corporations.
The IRS currently requires that a regulated investment company that has
two or more classes of shares must designate to each such class proportionate
amounts of each type of its income for each tax year based upon the percentage
of total dividends distributed to each class for such year. Under a special
"grandfather" provision in IRS Revenue Ruling 89-81, regulated investment
companies can make non-proportionate designations pursuant to a rule
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described in a registration statement filed with the SEC before June 13, 1989.
In the past, the Fund designated exempt-interest dividends disproportionately to
holders of Preferred Stock and designated net capital gain and investment
company taxable income to holders of its Common Stock under this "grandfather"
provision. The Fund intends each year to allocate, to the fullest extent
practicable, net tax-exempt interest, net capital gains (that is, the excess of
net long-term capital gain over net short-term capital loss) and other taxable
income, if any, between its shares of Common Stock and MuniPreferred shares in
proportion to the total dividends paid to each class for that year. To the
extent permitted under applicable law, and consistent with the Fund's
objectives, the Fund reserves the right to make special allocations of income
within a class, as follows. The Fund shall, in the case of a Minimum Rate Period
or a Special Rate Period of 28 Rate Period Days, and may, in the case of any
other Special Rate Period, notify the Auction Agent of the amount of any net
capital gains or other income taxable for Federal income tax purposes to be
included in any dividend on shares of its MuniPreferred prior to the Auction
establishing the Applicable Rate for such dividend. If, (a) in the case of any
Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer,
the Fund allocates any net capital gains or other income taxable for Federal
income tax purposes to a dividend paid on shares of MuniPreferred without having
given advance notice thereof to the Auction Agent as the Statement requires
solely by reason of the fact that such allocation is made retroactively as a
result of the redemption of all or a portion of the outstanding shares of its
MuniPreferred or the liquidation of the Fund or (b) in the case of any Special
Rate Period of more than 28 Rate Period Days, the Fund allocates any net capital
gains or other taxable income for Federal income tax purposes to its
MuniPreferred shares without having given advance notice thereof as described
above, the Fund will arrange to make certain payments to owners of its
MuniPreferred shares to which such allocation was made to offset the Federal
income tax effect thereof as described under "Description of MuniPreferred --
Dividends and Rate Periods -- Gross-up Payments" in the Prospectus.
The Fund received an opinion of counsel, at the time the Fund first
issued MuniPreferred shares, to the effect that the manner in which the Fund
intends to allocate items of tax-exempt income, net capital gains and other
taxable income, if any, between its shares of Common Stock and MuniPreferred
shares will be respected for Federal income tax purposes. This opinion of
counsel represents only counsel's best legal judgment, and is not binding on the
IRS or the courts. Currently there is no guidance from the IRS or other sources
specifically addressing whether the Fund's method for making such allocations
will be respected for Federal income tax purposes, and it is possible that the
IRS could disagree with counsel's opinion. If the IRS were to disagree with the
Fund's allocation, it either could assert the need to reallocate the Fund's net
capital gains or other taxable income or it could disallow a portion of the
Fund's dividends paid deduction. In the event of a reallocation, some of the
dividends the Fund identified as tax-exempt to owners of its MuniPreferred
shares may be recharacterized as additional capital gain or other taxable
income. Under these circumstances, the Fund would not be required to make
gross-up payments to such owners to offset the tax effect of such reallocation.
In addition, a reallocation or a disallowance of part of the Fund's dividends
paid deduction would likely cause the Fund to be liable for income tax on any
reallocated taxable income and possibly an excise tax. Counsel
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has advised the Fund that, in its opinion, if the IRS were to challenge in court
the Fund's allocations of income and gain, the IRS should not prevail.
In order for any distributions to owners of the Fund's MuniPreferred
shares to be eligible to be treated as exempt-interest dividends, such
MuniPreferred shares must be treated as stock for Federal income tax purposes.
The Fund received an opinion of counsel, at the time the Fund first issued
MuniPreferred shares, to the effect that its MuniPreferred shares will
constitute stock of the Fund for Federal income tax purposes and, therefore,
distributions declared and paid at the Applicable Rate as dividends with respect
to the Fund's MuniPreferred shares, to the extent paid out of current or
accumulated earnings and profits of the Fund, will constitute dividends for
Federal income tax purposes. The opinion of counsel is based, among other
things, on (a) a revenue ruling the IRS published in 1990, which holds that a
preferred stock that has its dividend rate periodically set pursuant to an
auction process substantially similar to the auction process to be established
for the Fund's MuniPreferred shares is treated as stock for Federal income tax
purposes and (b) the Fund's representation to counsel that there is no express
or implied agreement between or among a Broker-Dealer or any other party and the
Fund, Nuveen or any owner of the Fund's shares of MuniPreferred that the
Broker-Dealer or other party will guarantee or otherwise arrange to ensure that
an owner of such shares will be able to sell such shares. This opinion
represents only counsel's best legal judgment and is not binding on the IRS or
the courts.
If at any time when the Fund's MuniPreferred shares are outstanding the
Fund fails to meet the MuniPreferred Basic Maintenance Amount or the 1940 Act
MuniPreferred Asset Coverage, the Fund will be required to suspend distributions
to holders of its shares of Common Stock until such maintenance amount or asset
coverage, as the case may be, is restored. See "Description of MuniPreferred --
Dividends and Rate Periods -- Restrictions on Dividends and Other Distributions"
in the Prospectus. This may prevent the Fund from distributing at least 90% of
its investment company taxable income and net tax-exempt income, and may
therefore jeopardize the Fund's qualification for taxation as a regulated
investment company or cause the Fund to incur a tax liability or a
non-deductible 4% excise tax on the undistributed taxable income (including
gain), or both. Upon failure to meet the MuniPreferred Basic Maintenance Amount
or the 1940 Act MuniPreferred Asset Coverage, the Fund will be required to
redeem its MuniPreferred shares in order to maintain or restore such maintenance
amount or asset coverage and avoid the adverse consequences to the Fund and its
shareholders of failing to qualify as a regulated investment company. There can
be no assurance, however, that any such redemption would achieve such
objectives.
The Code provides that interest on indebtedness incurred or continued
to purchase or carry the Fund's shares to which exempt-interest dividends are
allocated is not deductible. Under rules the IRS uses for determining when
borrowed funds are considered used for the purpose of purchasing or carrying
particular assets, the purchase or ownership of shares may be considered to have
been made with borrowed funds even though such funds are not directly used for
the purchase or ownership of such shares.
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The interest on private activity bonds in most instances is not
Federally tax-exempt to a person who is a "substantial user" of a facility these
bonds financed or a "related person" of a "substantial user." As a result, the
Fund may not be an appropriate investment for shareholders who are considered
either a "substantial user" or a "related person" within the meaning of the
Code. In general, a "substantial user" of a facility includes a "non-exempt
person who regularly uses a part of such facility in his trade or business."
"Related persons" are in general defined to include persons among whom there
exists a relationship, either by family or business, which would result in a
disallowance of losses in transactions among them under various provisions of
the Code (or if they are members of the same controlled group of corporations
under the Code), including a partnership and each of its partners (and their
spouses and minor children), an S corporation and each of its shareholders (and
their spouses and minor children) and various combinations of these
relationships. The foregoing is not a complete statement of all of the
provisions of the Code covering the definitions of "substantial user" and
"related person."
The Fund may, at its option, redeem its MuniPreferred shares in whole
or in part, and is required to redeem its MuniPreferred shares to the extent
required to maintain the MuniPreferred Basic Maintenance Amount and the 1940 Act
MuniPreferred Asset Coverage. Gain or loss, if any, resulting from a redemption
of the MuniPreferred shares will be taxed as gain or loss from the sale or
exchange of the MuniPreferred shares under Section 302 of the Code rather than
as a dividend, but only if the redemption distribution (a) is deemed not to be
essentially equivalent to a dividend, (b) is in complete redemption of an
owner's interest in the Fund, (c) is substantially disproportionate with respect
to the owner, or (d) for non-corporate owners, is in partial liquidation of the
Fund. For purposes of (a), (b) and (c) above, an owner's common share ownership
of the Fund will be taken into account.
Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S. withholding
tax at the rate of 30% (or possibly a lower rate an applicable tax treaty
provides) on distributions of taxable net investment income and net short-term
capital gains. To the extent received by foreign investors, exempt-interest
dividends, distributions of net long-term capital gains and any gain from the
sale or other disposition of the MuniPreferred shares generally are exempt from
U.S. taxation. Different tax consequences may result if the owner is engaged in
a trade or business in the United States or, in the case of an individual, is
present in the United States for more than 182 days during a taxable year.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January will be treated as having been distributed by the Fund (and received by
the shareholders) on December 31 of the year declared.
The sale or other disposition of MuniPreferred shares of the Fund will
normally result in capital gain or loss to shareholders. Present law taxes both
long-term and short-term capital gains of corporations at the rates applicable
to ordinary income. For non-corporate taxpayers, however,
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under current law short-term capital gains and ordinary income will be taxed at
a maximum rate of 39.6% while other capital gains of non-corporate taxpayers may
be taxed at more favorable rates. However, because of the limitations on
itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective rate of tax may be higher in certain
circumstances. Losses a shareholder realizes on the sale or exchange of shares
of the Fund held for six months or less are disallowed to the extent of any
distribution of exempt-interest dividends received with respect to such shares,
and, if not disallowed, such losses are treated as long-term capital losses to
the extent of any distribution of long-term capital gain received with respect
to such shares.
Non-corporate investors who dispose of capital assets held for more
than twelve (12) months generally will pay tax upon disposition of those assets
at a 10% rate if they are in the lowest tax bracket (for 1999, singles with
taxable income of $42,350 or less and married couples filing jointly with
taxable income of $43,050 or less), and at a 20% rate if they are in higher tax
brackets. In addition, beginning in the year 2001, for certain capital assets
held for more than five years, the 10% maximum capital gains rate will be
lowered to 8%, and in 2006 the 20% maximum capital gains rate will be lowered to
18%.
Federal tax law imposes an alternative minimum tax on both corporations
and individuals. Interest on certain Municipal Obligations, such as bonds issued
to make loans for housing purposes or to private entities (but not to certain
tax-exempt organizations such as universities and non-profit hospitals) is
included as an item of tax preference in determining the amount of a taxpayer's
alternative minimum taxable income. To the extent that the Fund receives income
from Municipal Obligations subject to the Federal alternative minimum tax, a
portion of the dividends it paid, although otherwise exempt from Federal income
tax, will be taxable to its shareholders to the extent that their tax liability
is determined under the alternative minimum tax. The Fund will annually supply a
report indicating the percentage of the Fund's income attributable to Municipal
Obligations subject to the Federal alternative minimum tax.
In addition, for certain corporations, alternative minimum taxable
income is increased by 75% of the difference between an alternative measure of
income ("adjusted current earnings") and the amount otherwise determined to be
the alternative minimum taxable income. Interest on all Municipal Obligations,
and therefore all distributions the Fund makes that would otherwise be
tax-exempt, is included in calculating a corporation's adjusted current
earnings.
Certain small corporations are not subject to the alternative minimum
tax. A corporation qualifies for such exemption provided that (i) for the
corporation's first taxable year beginning after December 31, 1996, its average
annual gross receipts for the three prior taxable year period does not exceed
$5,000,000 and (ii) the corporation's average annual gross receipts for each
three prior taxable year period thereafter does not exceed $7,500,000.
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Tax-exempt income, including exempt-interest dividends the Fund pays,
is taken into account in calculating the amount of social security and railroad
retirement benefits that may be subject to Federal income tax.
The Fund is required in certain circumstances to withhold 31% of
taxable dividends and certain other payments paid to non-corporate holders of
the Fund's shares who do not furnish to the Fund their correct taxpayer
identification number (in the case of individuals, their social security number)
and certain certifications, or who are otherwise subject to backup withholding.
The Code provides that every shareholder required to file a tax return
must include for information purposes on the return the amount of tax-exempt
interest received during the taxable year, including any exempt-interest
dividends received from the Fund.
This is a general, abbreviated summary of the provisions of the Code
and regulations thereunder presently in effect as they directly govern the
taxation of the Fund and its shareholders. These provisions are subject to
change by legislative or administrative action, and any change may be
retroactive with respect to the Fund's transactions. Moreover, the foregoing
does not address many of the factors that may be determinative of whether an
investor will be liable for the alternative minimum tax. Shareholders are
advised to consult their own tax advisers for more detailed information
concerning Federal income tax matters.
CERTAIN OWNERS OF RECORD
As of _______________, no person is known to the Fund to own of record or
beneficially five percent or more of the outstanding shares of Common Stock or
MuniPreferred.
EXPERTS
The Statement of Net Assets of the Fund as of October 31, 1998
appearing in this Prospectus has been audited by Ernst & Young LLP, Sears Tower,
233 South Wacker Drive, Chicago, Illinois 60606, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. Ernst & Young audits and reports on the Fund's annual
financial statements, reviews certain regulatory reports and the Fund's Federal
income tax returns, and performs other professional accounting, auditing, tax
and advisory services when engaged to do so by the Fund.
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APPENDIX A
RATINGS OF INVESTMENTS
STANDARD & POOR'S RATINGS GROUP -- A brief description of the applicable
Standard & Poor's Ratings Group ("S&P") rating symbols and their meanings (as
published by S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees. The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished by
the issuer or obtained by S&P from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances. The ratings are based, in varying degrees, on the
following considerations:
1. Likelihood of default -- capacity and willingness of the obligor as
to the timely payment of interest and repayment of principal in accordance with
the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
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BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
SPECULATIVE GRADE RATING
Debt rated "BB", "B", "CCC", "CLARK CURBO" and "C" is regarded as
having predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. "BB" indicates the least degree of speculation and
"C" the highest. While such debt will likely have some quality and protective
characteristics these are outweighed by major uncertainties or major exposures
to adverse conditions.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B Debt rated "B" has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC Debt rated "CCC" has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The "CCC" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B-" rating.
CLARK CURBO The rating "CLARK CURBO" typically is applied to debt subordinated
to senior debt that is assigned an actual or implied "CCC" debt rating.
C The rating "C" typically is applied to debt subordinated to senior debt
which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI The rating "CI" is reserved for income bonds on which no interest is
being paid.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period
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has not expired, unless S&P believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is federally
insured and interest is adequately collateralized.* In the case of certificates
of deposit the letter "L" indicates that the deposit, combined with other
deposits being held in the same right and capacity, will be honored for
principal and accrued pre-default interest up to the federal insurance limits
within 30 days after closing of the insured institution or, in the event that
the deposit is assumed by a successor insured institution, upon maturity.
* Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments and
cash flow.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
MUNICIPAL NOTES
An S&P note rating reflects the liquidity concerns and market access
risks unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
-- Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
NOTE RATING SYMBOLS ARE AS FOLLOWS:
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SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designation.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
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A commercial paper rating is not a recommendation to purchase, sell, or
hold a security, inasmuch as it does not comment as to market price or
suitability for a particular investor. The ratings are based on current
information furnished to S&P by the issuer or obtained by S&P from other sources
it considers reliable. S&P does not perform an audit in connection with any
rating and may, on occasion, rely on unaudited financial information. The
ratings may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information or based on other circumstances.
MOODY'S INVESTORS SERVICE, INC -- A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:
MUNICIPAL BONDS
AAA Bonds that are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA Bonds that are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA Bonds that are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
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B Bonds that are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA Bonds that are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Bonds that are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
CON(-) Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are bonds
secured by (a) earnings of projects under construction, (b) earnings of projects
unseasoned in operation experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition attaches.
Parenthetical rating denotes probable credit stature upon completion of
construction or elimination of basis of condition.
NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the symbols Aa1,
A1, Baa1, Ba1 and B1.
SHORT-TERM LOANS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although not
distinctly or predominantly speculative, there is specific risk.
S.G. This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.
A-6
<PAGE> 80
COMMERCIAL PAPER
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating
categories.
A-7
<PAGE> 81
APPENDIX B
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
AMENDMENT AND RESTATEMENT OF
STATEMENT ESTABLISHING AND FIXING THE RIGHTS
AND PREFERENCES OF
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED(R)")
<PAGE> 82
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
TABLE OF CONTENTS
Page
DEFINITIONS B-1
"AA" Composite Commercial Paper Rate B-1
Accountant's Confirmation B-2
Affiliate B-2
Agent Member B-2
Anticipation Notes B-2
Applicable Rate B-2
Articles B-2
Auction B-2
Auction Agency Agreement B-2
Auction Agent B-2
Auction Date B-2
Auction Procedures B-3
Available MuniPreferred B-3
Benchmark Rate B-3
Beneficial Owner B-3
Bid and Bids B-3
Bidder and Bidders B-3
Board of Directors B-3
Broker-Dealer B-3
Broker-Dealer Agreement B-3
Business Day B-3
Code B-3
Commercial Paper Dealers B-3
Common Stock B-3
Cure Date B-3
Date of Original Issue B-3
Deposit Securities B-4
Discounted Value B-4
Dividend Payment Date B-4
Dividend Period B-4
Existing Holder B-4
Failure to Deposit B-4
Federal Tax Rate Increase B-4
Fund B-5
Gross-up Payment B-5
Holder B-5
Hold Order and Hold Orders B-5
Independent Accountant B-5
Initial Rate Period B-5
Interest Equivalent B-5
Issue Type Category B-5
Kenny Index B-5
Late Charge B-5
Liquidation Preference B-5
Market Value B-5
Maximum Potential Gross-up Payment Liability B-5
Maximum Rate B-6
<PAGE> 83
Page
Moody's B-6
Moody's Discount Factor B-6
Moody's Eligible Asset B-7
Moody's Exposure Period B-7
Moody's Volatility Factor B-7
MuniPreferred B-7
MuniPreferred Basic Maintenance Amount B-7
MuniPreferred Basic Maintenance Cure Date B-8
MuniPreferred Basic Maintenance Report B-9
Municipal Obligations B-9
1940 Act B-9
1940 Act Cure Date B-9
1940 Act MuniPreferred Asset Coverage B-9
Notice of Redemption B-9
Notice of Special Rate Period B-9
Order and Orders B-9
Original Issue Insurance B-9
Other Issues B-9
Outstanding B-9
Permanent Insurance B-9
Person B-9
Portfolio Insurance B-10
Potential Beneficial Owner B-10
Potential Holder B-10
Preferred Stock B-10
Quarterly Valuation Date B-10
Rate Multiple B-10
Rate Period B-10
Rate Period Days B-10
Receivables for Municipal Obligations Sold B-10
Redemption Price B-10
Reference Rate B-11
Registration Statement B-11
S&P B-11
S&P Discount Factor B-11
S&P Eligible Asset B-11
S&P Exposure Period B-11
S&P Volatility Factor B-11
Secondary Market Insurance B-11
Securities Depository B-11
Sell Order and Sell Orders B-11
Special Rate Period B-11
Special Redemption Provisions B-11
Submission Deadline B-11
Submitted Bid and Submitted Bids B-12
Submitted Hold Order and Submitted Hold Orders B-12
Submitted Order and Submitted Orders B-12
Submitted Sell Order and Submitted Sell Orders B-12
Subsequent Rate Period B-12
Substitute Commercial Paper Dealer B-12
Substitute U.S. Government Securities Dealer B-12
Sufficient Clearing Bids B-12
Taxable Allocation B-12
Taxable Income B-12
<PAGE> 84
Page
Taxable Equivalent of the Short-Term Municipal Bond Rate B-12
Treasury Bill B-13
Treasury Bill Rate B-13
Treasury Note B-13
Treasury Note Rate B-13
U.S. Government Securities Dealer B-14
Valuation Date B-14
Volatility Factor B-14
Voting Period B-14
Winning Bid Rate B-14
PART I 15
1. Number of Authorized Shares. B-15
2. Dividends. B-15
(a) Ranking. B-15
(b) Cumulative Cash Dividends. B-15
(c) Dividends Cumulative From Date of Original Issue. B-15
(d) Dividend Payment Dates and Adjustment Thereof. B-15
(e) Dividend Rates and Calculation of Dividends. B-16
(i) Dividend Rates. B-16
(ii) Calculation of Dividends. B-17
(f) Curing a Failure to Deposit. B-18
(g) Dividend Payments by Fund to Auction Agent. B-18
(h) Auction Agent as Trustee of Dividend Payments by Fund. B-18
(i) Dividends Paid to Holders. B-18
(j) Dividends Credited Against Earliest Accumulated But
Unpaid Dividends. B-18
(k) Dividends Designated as Exempt-Interest Dividends. B-18
3. Gross-up Payments. B-19
(a) Minimum Rate Periods and Special Rate Periods of
28 Rate Period Days or Fewer. B-19
(b) Special Rate Periods of More Than 28 Rate Period Days. B-19
(c) No Gross-up Payments In the Event of a Reallocation. B-19
4. Designation of Special Rate Periods. B-19
(a) Length of and Preconditions for Special Rate Period. B-19
(b) Adjustment of Length of Special Rate Period. B-20
(c) Notice of Proposed Special Rate Period. B-20
(d) Notice of Special Rate Period. B-20
(e) Failure to Deliver Notice of Special Rate Period. B-21
5. Voting Rights. B-21
(a) One Vote Per Share of MuniPreferred. B-21
(b) Voting For Additional Directors. B-22
(i) Voting Period. B-22
(ii) Notice of Special Meeting. B-22
(iii) Terms of Office of Existing Directors. B-22
(iv) Terms of Office of Certain Directors to
Terminate Upon Termination of Voting
Period. B-23
(c) Holders of MuniPreferred To Vote On Certain Other
Matters. B-23
(i) Increases in Capitalization. B-23
(ii) 1940 Act Matters. B-24
(d) Board May Take Certain Actions Without Shareholder
Approval. B-24
(e) Voting Rights Set Forth Herein Are Sole Voting Rights. B-25
(f) No Preemptive Rights or Cumulative Voting. B-25
<PAGE> 85
Page
(g) Voting for Directors Sole Remedy for Fund's Failure
to Pay Dividends. B-25
(h) Holders Entitled to Vote. B-25
6. 1940 Act MuniPreferred Asset Coverage. B-25
7. MuniPreferred Basic Maintenance Amount. B-25
8. [Reserved] B-27
9. Restrictions on Dividends and Other Distributions. B-27
(a) Dividends on Preferred Stock Other Than MuniPreferred. B-27
(b) Dividends and Other Distributions With Respect to
Common Stock Under the 1940 Act. B-27
(c) Other Restrictions On Dividends and Other Distributions. B-27
10. Rating Agency Restrictions. B-28
11. Redemption. B-29
(a) Optional Redemption. B-29
(b) Mandatory Redemption. B-30
(c) Notice of Redemption. B-31
(d) No Redemption Under Certain Circumstances. B-31
(e) Absence of Funds Available for Redemption. B-31
(f) Auction Agent as Trustee of Redemption Payments by Fund. B-32
(g) Shares for Which Notice of Redemption Has Been Given Are
No Longer Outstanding. B-32
(h) Compliance With Applicable Law. B-32
(i) Only Whole Shares of MuniPreferred May Be Redeemed. B-32
12. Liquidation Rights. B-32
(a) Ranking. B-32
(b) Distributions Upon Liquidation. B-32
(c) Pro Rata Distributions. B-33
(d) Rights of Junior Stock. B-33
(e) Certain Events Not Constituting Liquidation. B-33
13. Miscellaneous. B-33
(a) Amendment of Appendix A to Add Additional Series. B-33
(b) Appendix A Incorporated By Reference. B-33
(c) No Fractional Shares. B-34
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or
Otherwise Acquired by the Fund. B-34
(e) Board May Resolve Ambiguities. B-34
(f) Headings Not Determinative. B-34
(g) Notices. B-34
PART II B-35
1. Orders. B-35
2. Submission of Orders by Broker-Dealers to Auction Agent. B-36
3. Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate. B-38
4. Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares. B-39
5. Notification of Allocations. B-42
6. Auction Agent. B-42
7. Transfer of Shares of MuniPreferred. B-42
8. Global Certificate. B-43
Appendix A B-A-1
Section 1. Designation As To Series. B-A-1
Section 2. Number of Authorized Shares Per Series. B-A-2
<PAGE> 86
Page
Section 3. Exceptions to Certain Definitions. B-A-2
Section 4. Certain Definitions. B-A-2
S&P Discount Factor B-A-6
S&P Eligible Asset B-A-7
Secondary Market Insurance B-A-8
Section 5. Initial Rate Periods. B-A-8
Section 6. Date for Purposes of Paragraph (yyy) Contained Under
the Heading "Definitions" in this Statement. B-A-8
Section 7. Party Named for Purposes of the Definition of
"Rate Multiple" in this Statement. B-A-8
Section 8. Additional Definitions. B-A-8
Section 9. Dividend Payment Dates. B-A-8
Section 10. Amount for Purposes of Subparagraph (c)(i) of
Section 5 of Part I of this Statement. B-A-9
Section 11. Redemption Provisions Applicable to Initial
Rate Periods. B-A-9
Section 12. Applicable Rate for Purposes of Subparagraph(b)
(iii) of Section 3 of Part II of this Statement.
<PAGE> 87
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC., a Minnesota corporation
(the "Fund"), certifies to the Secretary of State of the State of Minnesota
that:
First: Pursuant to authority expressly vested in the Board of Directors of
the Fund by Article FIFTH of the Fund's Articles of Incorporation, as amended
(which, as hereafter restated or amended from time to time are, together with
this Statement, herein called the "Articles"), the Board of Directors has, by
resolution, authorized the issuance of shares of the Fund's authorized Preferred
Stock, par value $.01 per share, liquidation preference $25,000 per share,
having such designation or designations as to series as is set forth in Section
1 of Appendix A hereto and such number of shares per such series as is set forth
in Section 2 of Appendix A hereto.
Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of each series of MuniPreferred described in Section 1 of Appendix A hereto are
as follows (each such series being referred to herein as a series of
MuniPreferred, and shares of all such series being referred to herein
individually as a share of MuniPreferred and collectively as shares of
MuniPreferred):
DEFINITIONS
Except as otherwise specifically provided in Section 3 of Appendix A
hereto, as used in Parts I and II of this Statement, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) ""AA" Composite Commercial Paper Rate," on any date for any Rate
Period of shares of a series of MuniPreferred, shall mean (i) (A) in the
case of any Minimum Rate Period or any Special Rate Period of fewer than 49
Rate Period Days, the interest equivalent of the 30-day rate; provided,
however, that if such Rate Period is a Minimum Rate Period and the "AA"
Composite Commercial Paper Rate is being used to determine the Applicable
Rate for shares of such series when all of the Outstanding shares of such
series are subject to Submitted Hold Orders, then the interest equivalent
of the seven-day rate, and (B) in the case of any Special Rate Period of
(1) 49 or more but fewer than 70 Rate Period Days, the interest equivalent
of the 60-day rate; (2) 70 or more but fewer than 85 Rate Period Days, the
arithmetic average of the interest
B-1
<PAGE> 88
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99
Rate Period Days, the interest equivalent of the 90-day rate; (4) 99 or
more but fewer than 120 Rate Period Days, the arithmetic average of the
interest equivalent of the 90-day and 120-day rates; (5) 120 or more but
fewer than 141 Rate Period Days, the interest equivalent of the 120-day
rate; (6) 141 or more but fewer than 162 Rate Period Days, the arithmetic
average of the 120-day and 180-day rates; and (7) 162 or more but fewer
than 183 Rate Period Days, the interest equivalent of the 180-day rate, in
each case on commercial paper placed on behalf of issuers whose corporate
bonds are rated "AA" by S&P or the equivalent of such rating by S&P or
another rating agency, as made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day next preceding
such date; or (ii) in the event that the Federal Reserve Bank of New York
does not make available any such rate, then the arithmetic average of such
rates, as quoted on a discount basis or otherwise, by the Commercial Paper
Dealers to the Auction Agent for the close of business on the Business Day
next preceding such date. If any Commercial Paper Dealer does not quote a
rate required to determine the "AA" Composite Commercial Paper Rate, the
"AA" Composite Commercial Paper Rate shall be determined on the basis of
the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Fund to
provide such rate or rates not being supplied by any Commercial Paper
Dealer or Commercial Paper Dealers, as the case may be, or, if the Fund
does not select any such Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers, by the remaining Commercial Paper Dealer or
Commercial Paper Dealers. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for
commercial paper of a given days' maturity shall be equal to the quotient
(rounded upwards to the next higher one-thousandth (.001) of 1%)of (A) the
discount rate divided by (B) the difference between (x) 1.00 and (y) a
fraction the numerator of which shall be the product of the discount rate
times the number of days in which such commercial paper matures and the
denominator of which shall be 360.
(b) "Accountant's Confirmation" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.
(c) "Affiliate" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by,
in control of or under common control with the Fund; provided, however,
that no Broker-Dealer controlled by, in control of or under common control
with the Fund shall be deemed to be an Affiliate nor shall any corporation
or any Person controlled by, in control of or under common control with
such corporation one of the directors, trustees or executive officers of
which is a director of the Fund be deemed to be an Affiliate solely because
such director, trustee or executive officer is also a director of the Fund.
(d) "Agent Member" shall mean a member of or participant in the
Securities Depository that will act on behalf of a Bidder.
(e) "Anticipation Notes" shall mean Tax Anticipation Notes (TANs),
Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation Notes
(TRANs), Grant Anticipation Notes (GANs) that are rated by S&P and Bond
Anticipation Notes (BANs) that are rated by S&P.
(f) "Applicable Rate" shall have the meaning specified in
subparagraph (e)(i) of Section 2 of Part I of this Statement.
(g) "Articles" shall have the meaning specified on the first page of
this Statement.
(h) "Auction" shall mean each periodic implementation of the Auction
Procedures.
(i) "Auction Agency Agreement" shall mean the agreement between the
Fund and the Auction Agent which provides, among other things, that the
Auction Agent will follow the
B-2
<PAGE> 89
Auction Procedures for purposes of determining the Applicable Rate for
shares of a series of MuniPreferred so long as the Applicable Rate for
shares of such series is to be based on the results of an Auction.
(j) "Auction Agent" shall mean the entity appointed as such by a
resolution of the Board of Directors in accordance with Section 6 of Part
II of this Statement.
(k) "Auction Date," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.
(l) "Auction Procedures" shall mean the procedures for conducting
Auctions set forth in Part II of this Statement.
(m) "Available MuniPreferred" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(n) "Benchmark Rate" shall have the meaning specified in Section 12 of
Appendix A hereto.
(o) "Beneficial Owner," with respect to shares of a series of
MuniPreferred, means a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of such series.
(p) "Bid" and "Bids" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(q) "Bidder" and "Bidders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement;
provided, however, that neither the Fund nor any affiliate thereof shall be
permitted to be a Bidder in an Auction, except that any Broker-Dealer that
is an affiliate of the Fund may be a Bidder in an Auction, but only if the
Orders placed by such Broker-Dealer are not for its own account.
(r) "Board of Directors" shall mean the Board of Directors of the Fund
or any duly authorized committee thereof.
(s) "Broker-Dealer" shall mean any broker-dealer, commercial bank or
other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member
or participant, has been selected by the Fund and has entered into a
Broker-Dealer Agreement that remains effective.
(t) "Broker-Dealer Agreement" shall mean an agreement among the Fund,
the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer
agrees to follow the procedures specified in Part II of this Statement.
(u) "Business Day" shall mean a day on which the New York Stock
Exchange is open for trading and which is neither a Saturday, Sunday nor
any other day on which banks in The City of New York, New York, are
authorized by law to close.
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Commercial Paper Dealers" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates
or successors, if such entity is a commercial paper dealer.
B-3
<PAGE> 90
(x) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Fund.
(y) "Cure Date" shall mean the MuniPreferred Basic Maintenance Cure
Date or the 1940 Act Cure Date, as the case may be.
(z) "Date of Original Issue," with respect to shares of a series of
MuniPreferred, shall mean the date on which the Fund initially issued such
shares.
(aa) "Deposit Securities" shall mean cash and Municipal Obligations
rated at least A-1+ or SP-1+ by S&P, except that, for purposes of
subparagraph (a)(v) of Section 11 of Part I of this Statement, such
Municipal Obligations shall be considered "Deposit Securities" only if they
are also rated P-1, MIG-1 or VMIG-1 by Moody's.
(bb) "Discounted Value," as of any Valuation Date, shall mean, (i)
with respect to an S&P Eligible Asset, the quotient of the Market Value
thereof divided by the applicable S&P Discount Factor and (ii) (a) with
respect to a Moody's Eligible Asset that is not currently callable as of
such Valuation Date at the option of the issuer thereof, the quotient of
the Market Value thereof divided by the applicable Moody's Discount Factor,
or (b) with respect to a Moody's Eligible Asset that is currently callable
as of such Valuation Date at the option of the issuer thereof, the quotient
of (1) the lesser of the Market Value or call price thereof, including any
call premium, divided by (2) the applicable Moody's Discount Factor.
(cc) [Reserved]
(dd) [Reserved]
(ee) "Dividend Payment Date," with respect to shares of a series of
MuniPreferred, shall mean any date on which dividends are payable on shares
of such series pursuant to the provisions of paragraph (d) of Section 2 of
Part I of this Statement.
(ff) "Dividend Period," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the Date of
Original Issue of shares of such series to but excluding the initial
Dividend Payment Date for shares of such series and any period thereafter
from and including one Dividend Payment Date for shares of such series to
but excluding the next succeeding Dividend Payment Date for shares of such
series.
(gg) "Existing Holder," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may
be permitted by the Fund) that is listed on the records of the Auction
Agent as a holder of shares of such series.
(hh) "Failure to Deposit," with respect to shares of a series of
MuniPreferred, shall mean a failure by the Fund to pay to the Auction
Agent, not later than 12:00 noon, New York City time, (A) on the Business
Day next preceding any Dividend Payment Date for shares of such series, in
funds available on such Dividend Payment Date in The City of New York, New
York, the full amount of any dividend (whether or not earned or declared)
to be paid on such Dividend Payment Date on any share of such series or (B)
on the Business Day next preceding any redemption date in funds available
on such redemption date for shares of such series in The City of New York,
New York, the Redemption Price to be paid on such redemption date for any
share of such series after notice of redemption is mailed pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided, however,
that the foregoing clause (B) shall not apply to the Fund's failure to pay
the Redemption Price in respect of shares of MuniPreferred when the related
Notice of Redemption provides that redemption of such shares is subject to
one or more conditions
B-4
<PAGE> 91
precedent and any such condition precedent shall not have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
(ii) "Federal Tax Rate Increase" shall have the meaning specified in
the definition of "Moody's Volatility Factor."
(jj) "Fund" shall mean the entity named on the first page of this
Statement, which is the issuer of the shares of MuniPreferred.
(kk) "Gross-up Payment" shall have the meaning specified in Section 4
of Appendix A hereto.
(ll) "Holder," with respect to shares of a series of MuniPreferred,
shall mean the registered holder of such shares as the same appears on the
stock books of the Fund.
(mm) "Hold Order" and "Hold Orders" shall have the respective
meanings specified in paragraph (a) of Section 1 of Part II of this
Statement.
(nn) "Independent Accountant" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants
under the Securities Act of 1933, as amended from time to time.
(oo) "Initial Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of
such series in Section 5 of Appendix A hereto.
(pp) "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
(qq) "Issue Type Category," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(rr) "Kenny Index" shall have the meaning specified in the definition
of "Taxable Equivalent of the Short-Term Municipal Bond Rate."
(ss) "Late Charge" shall have the meaning specified in subparagraph
(e)(1)(B) of Section 2 of Part I of this Statement.
(tt) "Liquidation Preference," with respect to a given number of
shares of MuniPreferred, means $25,000 times that number.
(uu) "Market Value" of any asset of the Fund shall mean the market
value thereof determined by the pricing service designated from time to
time by the Board of Directors. Market Value of any asset shall include any
interest accrued thereon. The pricing service values portfolio securities
at the mean between the quoted bid and asked price or the yield equivalent
when quotations are readily available. Securities for which quotations are
not readily available are valued at fair value as determined by the pricing
service using methods which include consideration of: yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market
conditions. The pricing service may employ electronic data processing
techniques or a matrix system, or both, to determine valuations.
(vv) "Maximum Potential Gross-up Payment Liability," as of any
Valuation Date, shall mean the aggregate amount of Gross-up Payments that
would be due if the Fund were to
B-5
<PAGE> 92
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.
(ww) "Maximum Rate," for shares of a series of MuniPreferred on any
Auction Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the Reference Rate on such Auction Date
for the next Rate Period of shares of such series and (B) the Rate
Multiple on such Auction Date, unless shares of such series have or
had a Special Rate Period (other than a Special Rate Period of 28 Rate
Period Days or fewer) and an Auction at which Sufficient Clearing Bids
existed has not yet occurred for a Minimum Rate Period of shares of
such series after such Special Rate Period, in which case the higher
of:
(A) the dividend rate on shares of such series for the
then-ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate
on such Auction Date for a Rate Period equal in length to the
then-ending Rate Period of shares of such series, if such
then-ending Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal
in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was more than 364 Rate
Period Days, and (y) the Reference Rate on such Auction Date for
a Rate Period equal in length to such Special Rate Period of
shares of such series, if such Special Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate
Period, if such Special Rate Period was more than 364 Rate Period
Days and (2) the Rate Multiple on such Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the highest of (1) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, (2) the Reference Rate on such Auction
Date for the Special Rate Period for which the Auction is being held
if such Special Rate Period is 364 Rate Period Days or fewer or the
Treasury Note Rate on such Auction Date for the Special Rate Period
for which the Auction is being held if such Special Rate Period is
more than 364 Rate Period Days, and (3) the Reference Rate on such
Auction Date for Minimum Rate Periods and (B) the Rate Multiple on
such Auction Date.
(xx) [Reserved]
(yy) "Minimum Rate Period" shall mean any Rate Period consisting of 7
Rate Period Days.
(zz) "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
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(aaa) "Moody's Discount Factor" shall have the meaning specified in
Section 4 of Appendix A hereto.
(bbb) "Moody's Eligible Asset" shall have the meaning specified in
Section 4 of Appendix A hereto.
(ccc) "Moody's Exposure Period" shall mean the period commencing on a
given Valuation Date and ending 56 days thereafter.
(ddd) "Moody's Volatility Factor" shall mean, as of any Valuation
Date, (i) in the case of any Minimum Rate Period, any Special Rate Period
of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate
Period Days or more, a multiplicative factor equal to 275%, except as
otherwise provided in the last sentence of this definition; (ii) in the
case of any Special Rate Period of more than 28 but fewer than 36 Rate
Period Days, a multiplicative factor equal to 203%; (iii) in the case of
any Special Rate Period of more than 35 but fewer than 43 Rate Period Days,
a multiplicative factor equal to 217%; (iv) in the case of any Special Rate
Period of more than 42 but fewer than 50 Rate Period Days, a multiplicative
factor equal to 226%; and (v) in the case of any Special Rate Period of
more than 49 but fewer than 57 Rate Period Days, a multiplicative factor
equal to 235%. If, as a result of the enactment of changes to the Code, the
greater of the 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 Volatility
Tax Rate Increase Factor
----------------- ----------
<S> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
(eee) "MuniPreferred" shall have the meaning set forth on the first
page of this Statement.
(fff) "MuniPreferred Basic Maintenance Amount," as of any Valuation
Date, shall mean the dollar amount equal to the sum of (i)(A) the product
of the number of shares of MuniPreferred outstanding on such date
multiplied by $25,000 (plus the product of the number of shares of any
other series of Preferred Stock outstanding on such date multiplied by the
liquidation preference of such shares), plus any redemption premium
applicable to shares of MuniPreferred (or other Preferred Stock) then
subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment
Dates for shares of MuniPreferred outstanding that follow such Valuation
Date (plus the aggregate amount of dividends, whether or not earned or
declared, that will have accumulated in respect of other outstanding shares
of Preferred Stock to, but not including, the first respective dividend
payment dates for such other shares that follow such Valuation Date);
(C) the aggregate amount of
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dividends that would accumulate on shares of each series of MuniPreferred
outstanding from such first respective Dividend Payment Date therefor
through the 56th day after such Valuation Date, at the Maximum Rate
(calculated as if such Valuation Date were the Auction Date for the Rate
Period commencing on such Dividend Payment Date) for a Minimum Rate Period
of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation
Date the Fund shall have delivered a Notice of Special Rate Period to the
Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to
shares of such series, such Maximum Rate shall be the higher of (a) the
Maximum Rate for the Special Rate Period of shares of such series to
commence on such Dividend Payment Date and (b) the Maximum Rate for a
Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, multiplied by the Volatility Factor applicable to a Minimum
Rate Period, or, in the event the Fund shall have delivered a Notice of
Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of
this Part I with respect to shares of such series designating a Special
Rate Period consisting of 56 Rate Period Days or more, the Volatility
Factor applicable to a Special Rate Period of that length (plus the
aggregate amount of dividends that would accumulate at the maximum dividend
rate or rates on any other shares of Preferred Stock outstanding from such
respective dividend payment dates through the 56th day after such Valuation
Date, as established by or pursuant to the respective statements
establishing and fixing the rights and preferences of such other shares of
Preferred Stock) (except that (1) if such Valuation Date occurs at a time
when a Failure to Deposit (or, in the case of shares of Preferred Stock
other than MuniPreferred, a failure similar to a Failure to Deposit) has
occurred that has not been cured, the dividend for purposes of calculation
would accumulate at the current dividend rate then applicable to the shares
in respect of which such failure has occurred and (2) for those days during
the period described in this subparagraph (C) in respect of which the
Applicable Rate in effect immediately prior to such Dividend Payment Date
will remain in effect (or, in the case of shares of Preferred Stock other
than MuniPreferred, in respect of which the dividend rate or rates in
effect immediately prior to such respective dividend payment dates will
remain in effect), the dividend for purposes of calculation would
accumulate at such Applicable Rate (or other rate or rates, as the case may
be) in respect of those days); (D) the amount of anticipated expenses of
the Fund for the 90 days subsequent to such Valuation Date; (E) the amount
of the Fund's Maximum Potential Gross-up Payment Liability in respect of
shares of MuniPreferred (and similar amounts payable in respect of other
shares of Preferred Stock pursuant to provisions similar to those contained
in Section 3 of Part I of this Statement) as of such Valuation Date; and
(F) any current liabilities as of such Valuation Date to the extent not
reflected in any of (i)(A) through (i)(E) (including, without limitation,
any payables for Municipal Obligations purchased as of such Valuation Date
and any liabilities incurred for the purpose of clearing securities
transactions) less (ii) the value (i.e., for purposes of current Moody's
guidelines, the face value of cash, short-term Municipal Obligations rated
MIG-1, VMIG-1 or P-1, and short-term securities that are the direct
obligation of the U.S. government, provided in each case that such
securities mature on or prior to the date upon which any of (i)(A) through
(i)(F) become payable, otherwise the Moody's Discounted Value) of any of
the Fund's assets irrevocably deposited by the Fund for the payment of any
of (i)(A) through (i)(F).
(ggg) "MuniPreferred Basic Maintenance Cure Date," with respect to the
failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount
(as required by paragraph (a) of Section 7 of Part I of this Statement) as
of a given Valuation Date, shall mean the seventh Business Day following
such Valuation Date.
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<PAGE> 95
(hhh) "MuniPreferred Basic Maintenance Report" shall mean a report
signed by the President, Treasurer or any Senior Vice President or Vice
President of the Fund which sets forth, as of the related Valuation Date,
the assets of the Fund, the Market Value and the Discounted Value thereof
(seriatim and in aggregate), and the MuniPreferred Basic Maintenance
Amount.
(iii) "Municipal Obligations" shall mean "Municipal Obligations"
as defined in the Fund's registration statement on Form N-2 on file with
the Securities and Exchange Commission, as such registration statement may
be amended from time to time (the "Registration Statement").
(jjj) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time.
(kkk) "1940 Act Cure Date," with respect to the failure by the
Fund to maintain the 1940 Act MuniPreferred Asset Coverage (as required by
Section 6 of Part I of this Statement) as of the last Business Day of each
month, shall mean the last Business Day of the following month.
(lll) "1940 Act MuniPreferred Asset Coverage" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Fund which are
stock, including all outstanding shares of MuniPreferred (or such other
asset coverage as may in the future be specified in or under the 1940 Act
as the minimum asset coverage for senior securities which are stock of a
closed-end investment company as a condition of declaring dividends on its
common stock).
(mmm) "Notice of Redemption" shall mean any notice with respect to
the redemption of shares of MuniPreferred pursuant to paragraph (c) of
Section 11 of Part I of this Statement.
(nnn) "Notice of Special Rate Period" shall mean any notice with
respect to a Special Rate Period of shares of MuniPreferred pursuant to
subparagraph (d)(i) of Section 4 of Part I of this Statement.
(ooo) "Order" and "Orders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "Original Issue Insurance," if defined in Section 4 of
Appendix A hereto, shall have the meaning specified in that section.
(qqq) "Other Issues," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(rrr) "Outstanding" shall mean, as of any Auction Date with
respect to shares of a series of MuniPreferred, the number of shares of
such series theretofore issued by the Fund except, without duplication, (i)
any shares of such series theretofore cancelled or delivered to the Auction
Agent for cancellation or redeemed by the Fund, (ii) any shares of such
series as to which the Fund or any Affiliate thereof shall be an Existing
Holder and (iii) any shares of such series represented by any certificate
in lieu of which a new certificate has been executed and delivered by the
Fund.
(sss) "Permanent Insurance," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(ttt) "Person" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a joint
venture or other entity or a government or any agency or political
subdivision thereof.
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<PAGE> 96
(uuu) "Portfolio Insurance," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(vvv) "Potential Beneficial Owner," with respect to shares of a series
of MuniPreferred, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase
shares of such series, or that is a Beneficial Owner of shares of such
series that wishes to purchase additional shares of such series.
(www) "Potential Holder," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other person as may
be permitted by the Fund) that is not an Existing Holder of shares of such
series or that is an Existing Holder of shares of such series that wishes
to become the Existing Holder of additional shares of such series.
(xxx) "Preferred Stock" shall mean the preferred stock of the Fund,
and includes the shares of MuniPreferred.
(yyy) "Quarterly Valuation Date" shall mean the last Business Day of
each February, May, August and November of each year, commencing on the
date set forth in Section 6 of Appendix A hereto.
(zzz) "Rate Multiple" shall have the meaning specified in Section 4 of
Appendix A hereto.
(aaaa) "Rate Period," with respect to shares of a series of
MuniPreferred, shall mean the Initial Rate Period of shares of such series
and any Subsequent Rate Period, including any Special Rate Period, of
shares of such series.
(bbbb) "Rate Period Days," for any Rate Period or Dividend Period,
means the number of days that would constitute such Rate Period or Dividend
Period but for the application of paragraph (d) of Section 2 of Part I of
this Statement or paragraph (b) of Section 4 of Part I of this Statement.
(cccc) "Receivables for Municipal Obligations Sold" shall mean (A) for
purposes of calculation of Moody's Eligible Assets as of any Valuation
Date, no more than the aggregate of the following: (i) the book value of
receivables for Municipal Obligations sold as of or prior to such Valuation
Date if such receivables are due within five business days of such
Valuation Date, and if the trades which generated such receivables are (x)
settled through clearing house firms with respect to which the Fund has
received prior written authorization from Moody's or (y) with
counterparties having a Moody's long-term debt rating of at least Baa3; and
(ii) the Moody's Discounted Value of Municipal Obligations sold as of or
prior to such Valuation Date which generated receivables, if such
receivables are due within five business days of such Valuation Date but do
not comply with either of the conditions specified in (i) above, and (B)
for purposes of calculation of S&P Eligible Assets as of any Valuation
Date, the book value of receivables for Municipal Obligations sold as of or
prior to such Valuation Date if such receivables are due within five
business days of such Valuation Date.
(dddd) "Redemption Price" shall mean the applicable redemption
price specified in paragraph (a) or (b) of Section 11 of Part I of this
Statement.
(eeee) "Reference Rate" shall mean (i) the higher of the Taxable
Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial
Paper Rate in the case of Special Rate Periods of more than 28 Rate
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<PAGE> 97
Period Days but fewer than 183 Rate Period Days; and (iii) the Treasury
Bill Rate in the case of Special Rate Periods of more than 182 Rate Period
Days but fewer than 365 Rate Period Days.
(ffff) "Registration Statement" has the meaning specified in the
definition of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.
(hhhh) "S&P Discount Factor" shall have the meaning specified in
Section 4 of Appendix A hereto.
(iiii) "S&P Eligible Asset" shall have the meaning specified in
Section 4 of Appendix A hereto.
(jjjj) "S&P Exposure Period" shall mean the maximum period of time
following a Valuation Date that the Fund has under this Statement to cure
any failure to maintain, as of such Valuation Date, the Discounted Value
for its portfolio at least equal to the MuniPreferred Basic Maintenance
Amount (as described in paragraph (a) of Section 7 of Part I of this
Statement).
(kkkk) "S&P Volatility Factor" shall mean, as of any Valuation Date,
a multiplicative factor equal to (i) 305% in the case of any Minimum Rate
Period or any Special Rate Period of 28 Rate Period Days or fewer; (ii)
268% in the case of any Special Rate Period of more than 28 Rate Period
Days but fewer than 183 Rate Period Days; and (iii) 204% in the case of any
Special Rate Period of more than 182 Rate Period Days.
(llll) "Secondary Market Insurance," if defined in Section 4 of
Appendix A hereto, shall have the meaning specified in that section.
(mmmm) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns or any other securities depository
selected by the Fund which agrees to follow the procedures required to be
followed by such securities depository in connection with shares of
MuniPreferred.
(nnnn) "Sell Order" and "Sell Orders" shall have the respective
meanings specified in paragraph (a) of Section 1 of Part II of this
Statement.
(oooo) "Special Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified in paragraph (a) of
Section 4 of Part I of this Statement.
(pppp) "Special Redemption Provisions" shall have the meaning
specified in subparagraph (a)(i) of Section 11 of Part I of this
Statement.
(qqqq) "Submission Deadline" shall mean 1:30 P.M., New York City
time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as
specified by the Auction Agent from time to time.
(rrrr) "Submitted Bid" and "Submitted Bids" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of
this Statement.
(ssss) "Submitted Hold Order" and "Submitted Hold Orders" shall have
the respective meanings specified in paragraph (a) of Section 3 of Part
II of this Statement.
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<PAGE> 98
(tttt) "Submitted Order" and "Submitted Orders" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of
this Statement.
(uuuu) "Submitted Sell Order" and "Submitted Sell Orders" shall have
the respective meanings specified in paragraph (a) of Section 3 of Part
II of this Statement.
(vvvv) "Subsequent Rate Period," with respect to shares of a series
of MuniPreferred, shall mean the period from and including the first day
following the Initial Rate Period of shares of such series to but excluding
the next Dividend Payment Date for shares of such series and any period
thereafter from and including one Dividend Payment Date for shares of such
series to but excluding the next succeeding Dividend Payment Date for
shares of such series; provided, however, that if any Subsequent Rate
Period is also a Special Rate Period, such term shall mean the period
commencing on the first day of such Special Rate Period and ending on the
last day of the last Dividend Period thereof.
(wwww) "Substitute Commercial Paper Dealer" shall mean The First
Boston Company or Morgan Stanley & Co. Incorporated or their respective
affiliates or successors, if such entity is a commercial paper dealer;
provided, however, that none of such entities shall be a Commercial Paper
Dealer.
(xxxx) "Substitute U.S. Government Securities Dealer" shall mean The
First Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated
or their respective affiliates or successors, if such entity is a U.S.
Government securities dealer; provided, however, that none of such entities
shall be a U.S. Government Securities Dealer.
(yyyy) "Sufficient Clearing Bids" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(zzzz) "Taxable Allocation" shall have the meaning specified in
Section 3 of Part I of this Statement.
(aaaaa) "Taxable Income" shall have the meaning specified in Section
12 of Appendix A hereto.
(bbbbb) "Taxable Equivalent of the Short-Term Municipal Bond Rate," on
any date for any Minimum Rate Period or Special Rate Period of 28 Rate
Period Days or fewer, shall mean 90% of the quotient of (A) the per annum
rate expressed on an interest equivalent basis equal to the Kenny S&P 30
day High Grade Index or any successor index (the "Kenny Index") (provided,
however, that any such successor index must be approved by Moody's (if
Moody's is then rating the shares of MuniPreferred) and S&P (if S&P is then
rating the shares of MuniPreferred)), made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M.,
New York City time, on such date by Kenny S&P Evaluation Services or any
successor thereto, based upon 30-day yield evaluations at par of short-term
bonds the interest on which is excludable for regular Federal income tax
purposes under the Code of "high grade" component issuers selected by Kenny
S&P Evaluation Services or any such successor from time to time in its
discretion, which component issuers shall include, without limitation,
issuers of general obligation bonds, but shall exclude any bonds the
interest on which constitutes an item of tax preference under Section
57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the maximum marginal
regular Federal individual income tax rate applicable to ordinary income or
the maximum marginal regular Federal corporate income tax rate applicable
to ordinary income (in each case expressed as a decimal), whichever is
greater; provided, however, that if the Kenny Index is not made so
available by 8:30 A.M., New York City time, on such date by Kenny S&P
Evaluation Services or any successor, the Taxable Equivalent of the
Short-Term Municipal Bond Rate shall mean the quotient of (A) the per annum
rate expressed on an interest equivalent basis equal to the most
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<PAGE> 99
recent Kenny Index so made available for any preceding Business Day,
divided by (B) 1.00 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary income (in
each case expressed as a decimal), whichever is greater.
(ccccc) "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.
(ddddd) "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.
(eeeee) "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.
(fffff) "Treasury Note Rate," on any date for any Rate Period, shall
mean (i) the yield on the most recently auctioned Treasury Note with a
remaining maturity closest to the length of such Rate Period, as quoted in
The Wall Street Journal on such date for the Business Day next preceding
such date; or (ii) in the event that any such rate is not published in The
Wall Street Journal, then the yield as calculated by reference to the
arithmetic average of the bid price quotations of the most recently
auctioned Treasury Note with a remaining maturity closest to the length of
such Rate Period, as determined by bid price quotations as of the close of
business on the Business Day immediately preceding such date obtained from
the U.S. Government Securities Dealers to the Auction Agent. If any U.S.
Government Securities Dealer does not quote a rate required to determine
the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill Rate or
the Treasury Note Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any Substitute U.S. Government
Securities Dealers selected by the Fund to provide such rate or rates not
being supplied by any U.S. Government Securities Dealer or U.S. Government
Securities Dealers, as the case may be, or, if the Fund does not select any
such Substitute U.S. Government Securities Dealer or Substitute U.S.
Government Securities Dealers, by the remaining U.S. Government Securities
Dealer or U.S. Government Securities Dealers.
(ggggg) "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.
(hhhhh) "Valuation Date" shall mean, for purposes of determining
whether the Fund is maintaining the MuniPreferred Basic Maintenance Amount,
each Business Day.
(iiiii) "Volatility Factor" shall mean, as of any Valuation Date, the
greater of the Moody's Volatility Factor and the S&P Volatility Factor.
(jjjjj) "Voting Period" shall have the meaning specified in paragraph
(b) of Section 5 of Part I of this Statement.
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<PAGE> 100
(kkkkk) "Winning Bid Rate" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
Any additional definitions specifically set forth in Section 8 of
Appendix A hereto shall be incorporated herein and made part hereof by reference
thereto.
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<PAGE> 101
PART I
1. Number of Authorized Shares.
The number of authorized shares constituting a series of MuniPreferred
shall be as set forth with respect to such series in Section 2 of Appendix A
hereto.
2. Dividends.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a parity
with each other, with shares of any other series of MuniPreferred and with
shares of any other series of Preferred Stock as to the payment of dividends by
the Fund.
(b) Cumulative Cash Dividends. The Holders of shares of MuniPreferred of
any series shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, cumulative cash dividends
at the Applicable Rate for shares of such series, determined as set forth in
paragraph (e) of this Section 2, and no more (except to the extent set forth in
Section 3 of this Part I), payable on the Dividend Payment Dates with respect to
shares of such series determined pursuant to paragraph (d) of this Section 2.
Holders of shares of MuniPreferred shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on shares of MuniPreferred. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on shares of MuniPreferred which may be in arrears, and,
except to the extent set forth in subparagraph (e)(i) of this Section 2, no
additional sum of money shall be payable in respect of any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on shares
of MuniPreferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend Payment
Dates with respect to shares of a series of MuniPreferred shall be as set forth
with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as "Series
F MuniPreferred" or "Series M MuniPreferred" in Section 1 of Appendix A
hereto, if the Monday or Tuesday, as the case may be, on which dividends
would otherwise be payable on shares of such series is not a Business Day,
then such dividends shall be payable on such shares on the first Business
Day that falls after such Monday or Tuesday, as the case may be, and (B) in
the case of a series of MuniPreferred designated as "Series T
MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in
Section 1 of Appendix A hereto, if the Wednesday, Thursday or Friday, as
the case may be, on which dividends would otherwise be payable on shares of
such series is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such Wednesday,
Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto, the Fund in its
discretion may establish the Dividend Payment Dates in respect of any
Special Rate Period of shares of a series of MuniPreferred consisting of
more than 28 Rate Period Days; provided, however, that such dates shall be
set forth in the Notice of Special Rate Period relating to such Special
Rate Period, as delivered to the Auction Agent, which Notice of Special
Rate Period shall be filed with the Secretary of the Fund; and further
provided that (1) any such Dividend Payment Date shall be a Business Day
and (2) the last Dividend Payment Date in respect of such Special Rate
Period shall be the Business Day immediately following the last day
thereof, as such last day is determined in accordance with paragraph (b) of
Section 4 of this Part I.
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(e) Dividend Rates and Calculation of Dividends. (i) Dividend Rates. The
dividend rate on shares of MuniPreferred of any series during the period from
and after the Date of Original Issue of shares of such series to and including
the last day of the Initial Rate Period of shares of such series shall be equal
to the rate per annum set forth with respect to shares of such series under
"Designation" in Section 1 of Appendix A hereto. For each Subsequent Rate Period
of shares of such series thereafter, the dividend rate on shares of such series
shall be equal to the rate per annum that results from an Auction for shares of
such series on the Auction Date next preceding such Subsequent Rate Period;
provided, however, that if:
(A) an Auction for any such Subsequent Rate Period is not held for any
reason other than as described below, the dividend rate on shares of such
series for such Subsequent Rate Period will be the Maximum Rate for shares
of such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect to shares
of such series during any Rate Period thereof (other than any Special Rate
Period consisting of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period consisting of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not been cured),
but, prior to 12:00 Noon, New York City time, on the third Business Day
next succeeding the date on which such Failure to Deposit occurred, such
Failure to Deposit shall have been cured in accordance with paragraph
(f) of this Section 2 and the Fund shall have paid to the Auction Agent a
late charge ("Late Charge") equal to the sum of (1) if such Failure to
Deposit consisted of the failure timely to pay to the Auction Agent the
full amount of dividends with respect to any Dividend Period of the shares
of such series, an amount computed by multiplying (x) 200% of the Reference
Rate for the Rate Period during which such Failure to Deposit occurs on the
Dividend Payment Date for such Dividend Period by (y) a fraction, the
numerator of which shall be the number of days for which such Failure to
Deposit has not been cured in accordance with paragraph (f) of this Section
2 (including the day such Failure to Deposit occurs and excluding the day
such Failure to Deposit is cured) and the denominator of which shall be
360, and applying the rate obtained against the aggregate Liquidation
Preference of the outstanding shares of such series and (2) if such Failure
to Deposit consisted of the failure timely to pay to the Auction Agent the
Redemption Price of the shares, if any, of such series for which Notice of
Redemption has been mailed by the Fund pursuant to paragraph (c) of Section
11 of this Part I, an amount computed by multiplying (x) 200% of the
Reference Rate for the Rate Period during which such Failure to Deposit
occurs on the redemption date by (y) a fraction, the numerator of which
shall be the number of days for which such Failure to Deposit is not cured
in accordance with paragraph (f) of this Section 2 (including the day such
Failure to Deposit occurs and excluding the day such Failure to Deposit is
cured) and the denominator of which shall be 360, and applying the rate
obtained against the aggregate Liquidation Preference of the outstanding
shares of such series to be redeemed, no Auction will be held in respect of
shares of such series for the Subsequent Rate Period thereof and the
dividend rate for shares of such series for such Subsequent Rate Period
will be the Maximum Rate for shares of such series on the Auction Date for
such Subsequent Rate Period;
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(C) any Failure to Deposit shall have occurred with respect to shares
of such series during any Rate Period thereof (other than any Special Rate
Period consisting of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period consisting of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not been cured),
and, prior to 12:00 Noon, New York City time, on the third Business Day
next succeeding the date on which such Failure to Deposit occurred, such
Failure to Deposit shall not have been cured in accordance with paragraph
(f) of this Section 2 or the Fund shall not have paid the applicable Late
Charge to the Auction Agent, no Auction will be held in respect of shares
of such series for the first Subsequent Rate Period thereof thereafter (or
for any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the Fund
cures such Failure to Deposit), in each case no later than 12:00 Noon, New
York City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate
Period (but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be "Below
"ba3'/BB-"); or
(D) any Failure to Deposit shall have occurred with respect to shares
of such series during a Special Rate Period thereof consisting of more than
364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period consisting of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured, and, prior to
12:00 Noon, New York City time, on the fourth Business Day preceding the
Auction Date for the Rate Period subsequent to such Rate Period, such
Failure to Deposit shall not have been cured in accordance with paragraph
(f) of this Section 2 or, in the event Moody's is then rating such shares,
the Fund shall not have paid the applicable Late Charge to the Auction
Agent (such Late Charge, for purposes of this subparagraph (D), to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days but fewer
than 365 Rate Period Days and (y) commencing on the date on which the Rate
Period during which Failure to Deposit occurs commenced), no Auction will
be held in respect of shares of such series for such Subsequent Rate Period
(or for any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the Fund
cures such Failure to Deposit), in each case no later than 12:00 Noon, New
York City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate
Period (but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be "Below
"ba3'/BB-") (the rate per annum at which dividends are payable on shares of
a series of MuniPreferred for any Rate Period thereof being herein referred
to as the "Applicable Rate" for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share payable on
shares of a series of MuniPreferred on any date on which dividends shall be
payable on shares of such series shall be computed by multiplying the Applicable
Rate for shares of such series in effect for such Dividend Period or Dividend
Periods or part thereof for which dividends have not been paid by a fraction,
the numerator of which shall be the number of days in such Dividend Period or
Dividend Periods or part thereof and the denominator of which shall be 365 if
such Dividend Period consists of 7 Rate Period Days and 360 for all other
Dividend Periods, and applying the rate obtained against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect to
shares of a series of MuniPreferred shall have been cured (if such Failure to
Deposit is not solely due to the willful failure of
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the Fund to make the required payment to the Auction Agent) with respect to any
Rate Period of shares of such series if, within the respective time periods
described in subparagraph (e)(i) of this Section 2, the Fund shall have paid to
the Auction Agent (A) all accumulated and unpaid dividends on shares of such
series and (B) without duplication, the Redemption Price for shares, if any, of
such series for which Notice of Redemption has been mailed by the Fund pursuant
to paragraph (c) of Section 11 of Part I of this Statement; provided, however,
that the foregoing clause (B) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(g) Dividend Payments by Fund to Auction Agent. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of
MuniPreferred, an aggregate amount of funds available on the next Business Day
in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Fund. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(i) Dividends Paid to Holders. Each dividend on shares of MuniPreferred
shall be paid on the Dividend Payment Date therefor to the Holders thereof as
their names appear on the stock books of the Fund on the Business Day next
preceding such Dividend Payment Date.
(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends.
Any dividend payment made on shares of MuniPreferred shall first be credited
against the earliest accumulated but unpaid dividends due with respect to such
shares. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to the
Holders as their names appear on the stock books of the Fund on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the
Board of Directors.
(k) Dividends Designated as Exempt-Interest Dividends. Dividends on shares
of MuniPreferred shall be designated as exempt-interest dividends up to the
amount of tax-exempt income of the Fund, to the extent permitted by, and for
purposes of, Section 852 of the Code.
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3. Gross-up Payments.
Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period
Days or Fewer. If, in the case of any Minimum Rate Period or any Special
Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net
capital gains or other income taxable for Federal income tax purposes to a
dividend paid on shares of MuniPreferred without having given advance
notice thereof to the Auction Agent as provided in Section 5 of Part II of
this Statement (such allocation being referred to herein as a "Taxable
Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding shares of MuniPreferred or the liquidation of the Fund, the
Fund shall, prior to the end of the calendar year in which such dividend
was paid, provide notice thereof to the Auction Agent and direct the Fund's
dividend disbursing agent to send such notice with a Gross-up Payment to
each Holder of such shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(b) Special Rate Periods of More Than 28 Rate Period Days. If, in the
case of any Special Rate Period of more than 28 Rate Period Days, the Fund
makes a Taxable Allocation to a dividend paid on shares of MuniPreferred,
the Fund shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent and direct
the Fund's dividend disbursing agent to send such notice with a Gross-up
Payment to each Holder of shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(c) No Gross-up Payments In the Event of a Reallocation. The Fund
shall not be required to make Gross-up Payments with respect to any net
capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the
Fund.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Fund, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred as a Special Rate Period consisting of more
than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Fund wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) Adjustment of Length of Special Rate Period. In the event the Fund
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last
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day of such Special Rate Period is not (a) a Tuesday that is a Business Day in
the case of a series of MuniPreferred designated as "Series M MuniPreferred" in
Section 1 of Appendix A hereto, (b) a Wednesday that is a Business Day in the
case of a series of MuniPreferred designated as "Series T MuniPreferred" in
Section 1 of Appendix A hereto, (c) a Thursday that is a Business Day in the
case of a series of MuniPreferred designated as "Series W MuniPreferred" in
Section 1 of Appendix A hereto, (d) a Friday that is a Business Day in the case
of a series of MuniPreferred designated as "Series TH MuniPreferred" in Section
1 of Appendix A hereto, (e) a Monday that is a Business Day in the case of a
series of MuniPreferred designated as "Series F MuniPreferred" in Section 1 of
Appendix A hereto, then the Fund shall designate such Subsequent Rate Period as
a Special Rate Period consisting of the period commencing on the first day
following the end of the immediately preceding Rate Period and ending (a) on the
first Monday that is followed by a Tuesday that is a Business Day preceding what
would otherwise be such last day, in the case of Series M MuniPreferred, (b) on
the first Tuesday that is followed by a Wednesday that is a Business Day
preceding what would otherwise be such last day, in the case of Series T
MuniPreferred, (c) on the first Wednesday that is followed by a Thursday that is
a Business Day preceding what would otherwise be such last day, in the case of
Series W MuniPreferred, (d) on the first Thursday that is followed by a Friday
that is a Business Day preceding what would otherwise be such last day, in the
case of Series TH MuniPreferred, and (e) on the first Sunday that is followed by
a Monday that is a Business Day preceding what would otherwise be such last day,
in the case of Series F MuniPreferred.
(c) Notice of Proposed Special Rate Period. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section
4, not less than 20 (or such lesser number of days as may be agreed to from time
to time by the Auction Agent) nor more than 30 days prior to the date the Fund
proposes to designate as the first day of such Special Rate Period (which shall
be such day that would otherwise be the first day of a Minimum Rate Period),
notice shall be (i) published or caused to be published by the Fund in a
newspaper of general circulation to the financial community in The City of New
York, New York, which carries financial news, and (ii) mailed by the Fund by
first-class mail, postage prepaid, to the Holders of shares of such series. Each
such notice shall state (A) that the Fund may exercise its option to designate a
succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Fund will, by 11:00
A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Fund shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of MuniPreferred as to which notice
has been given as set forth in paragraph (c) of this Section 4 (or such later
time or date, or both, as may be agreed to by the Auction Agent), the Fund shall
deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Fund has determined to designate the next succeeding Rate Period of shares
of such series as a Special Rate Period, specifying the same and the first
day thereof, (B) the Auction Date immediately prior to the first day of
such Special Rate Period, (C) that such Special Rate Period shall not
commence if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate
Period, Moody's Eligible Assets (if Moody's is then rating such series) and
S&P Eligible Assets (if S&P is then rating such series) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance
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Amount as of such Business Day (assuming for purposes of the foregoing
calculation that (a) the Maximum Rate is the Maximum Rate on such Business
Day as if such Business Day were the Auction Date for the proposed Special
Rate Period, and (b) the Moody's Discount Factors applicable to Moody's
Eligible Assets are determined by reference to the first Exposure Period
longer than the Exposure Period then applicable to the Fund, as described
in the definition of Moody's Discount Factor herein); or
(ii) a notice stating that the Fund has determined not to exercise its
option to designate a Special Rate Period of shares of such series and that
the next succeeding Rate Period of shares of such series shall be a Minimum
Rate Period.
(e) Failure to Deliver Notice of Special Rate Period. If the Fund fails to
deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of
this Section 4 (and, in the case of the notice described in subparagraph (d)(i)
of this Section 4, a MuniPreferred Basic Maintenance Report to the effect set
forth in such subparagraph (if either Moody's or S&P is then rating the series
in question)) with respect to any designation of any proposed Special Rate
Period to the Auction Agent by 11:00 A.M., New York City time, on the second
Business Day next preceding the first day of such proposed Special Rate Period
(or by such later time or date, or both, as may be agreed to by the Auction
Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent
with respect to such Special Rate Period to the effect set forth in subparagraph
(d)(ii) of this Section 4. In the event the Fund delivers to the Auction Agent a
notice described in subparagraph (d)(i) of this Section 4, it shall file a copy
of such notice with the Secretary of the Fund, and the contents of such notice
shall be binding on the Fund. In the event the Fund delivers to the Auction
Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund
will provide Moody's (if Moody's is then rating the series in question) and S&P
(if S&P is then rating the series in question) a copy of such notice.
5. Voting Rights.
(a) One Vote Per Share of MuniPreferred. Except as otherwise provided in
the Articles or as otherwise required by law, (i) each Holder of shares of
MuniPreferred shall be entitled to one vote for each share of MuniPreferred held
by such Holder on each matter submitted to a vote of shareholders of the Fund,
and (ii) the holders of outstanding shares of Preferred Stock, including each
share of MuniPreferred, and of shares of Common Stock shall vote together as a
single class; provided, however, that, at any meeting of the shareholders of the
Fund held for the election of directors, the holders of outstanding shares of
Preferred Stock, including MuniPreferred, represented in person or by proxy at
said meeting, shall be entitled, as a class, to the exclusion of the holders of
all other securities and classes of capital stock of the Fund, to elect two
directors of the Fund, each share of Preferred Stock, including each share of
MuniPreferred, entitling the holder thereof to one vote. Subject to paragraph
(b) of this Section 5, the holders of outstanding shares of Common Stock and
Preferred Stock, including MuniPreferred, voting together as a single class,
shall elect the balance of the directors.
(b) Voting For Additional Directors. (i) Voting Period. During any period
in which any one or more of the conditions described in subparagraphs (A) or (B)
of this subparagraph (b)(i) shall exist (such period being referred to herein as
a "Voting Period"), the number of directors constituting the Board of Directors
shall be automatically increased by the smallest number that, when added to the
two directors elected exclusively by the holders of shares of Preferred Stock,
including shares of MuniPreferred, would constitute a majority of the Board of
Directors as so increased by such smallest number; and the holders of shares of
Preferred Stock, including MuniPreferred, shall be entitled, voting as a class
on a one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital stock of the Fund), to elect such smallest
number of additional directors, together with the two directors that such
holders are in any event entitled to elect. A Voting Period shall commence:
(A) if at the close of business on any dividend payment date
accumulated dividends (whether or not earned or declared) on any
outstanding share of Preferred Stock, including
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MuniPreferred, equal to at least two full years' dividends shall be due and
unpaid and sufficient cash or specified securities shall not have been
deposited with the Auction Agent for the payment of such accumulated
dividends; or
(B) if at any time holders of shares of Preferred Stock are entitled
under the 1940 Act to elect a majority of the directors of the Fund.
Upon the termination of a Voting Period, the voting rights described in this
subparagraph (b)(i) shall cease, subject always, however, to the revesting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).
(ii) Notice of Special Meeting. As soon as practicable after the accrual
of any right of the holders of shares of Preferred Stock to elect additional
directors as described in subparagraph (b)(i) of this Section 5, the Fund shall
notify the Auction Agent and the Auction Agent shall call a special meeting of
such holders, by mailing a notice of such special meeting to such holders, such
meeting to be held not less than 10 nor more than 20 days after the date of
mailing of such notice. If the Fund fails to send such notice to the Auction
Agent or if the Auction Agent does not call such a special meeting, it may be
called by any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting shall be the
close of business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting of holders of
shares of Preferred Stock held during a Voting Period at which directors are to
be elected, such holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of capital stock of the Fund), shall
be entitled to elect the number of directors prescribed in subparagraph (b)(i)
of this Section 5 on a one-vote-per-share basis.
(iii) Terms of Office of Existing Directors. The terms of office of all
persons who are directors of the Fund at the time of a special meeting of
Holders and holders of other Preferred Stock to elect directors shall continue,
notwithstanding the election at such meeting by the Holders and such other
holders of the number of directors that they are entitled to elect, and the
persons so elected by the Holders and such other holders, together with the two
incumbent directors elected by the Holders and such other holders of Preferred
Stock and the remaining incumbent directors elected by the holders of the Common
Stock and Preferred Stock, shall constitute the duly elected directors of the
Fund.
(iv) Terms of Office of Certain Directors to Terminate Upon Termination of
Voting Period. Simultaneously with the termination of a Voting Period, the terms
of office of the additional directors elected by the Holders and holders of
other Preferred Stock pursuant to subparagraph (b)(i) of this Section 5 shall
terminate, the remaining directors shall constitute the directors of the Fund
and the voting rights of the Holders and such other holders to elect additional
directors pursuant to subparagraph (b)(i) of this Section 5 shall cease, subject
to the provisions of the last sentence of subparagraph (b)(i) of this Section 5.
(c) Holders of MuniPreferred To Vote On Certain Other Matters.
(i) Increases in Capitalization. So long as any shares of MuniPreferred are
outstanding, the Fund shall not, without the affirmative vote or consent of the
Holders of at least a majority of the shares of MuniPreferred outstanding at the
time, in person or by proxy, either in writing or at a meeting, voting as a
separate class: (a) authorize, create or issue any class or series of stock
ranking prior to or on a parity with shares of MuniPreferred with respect to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up of the affairs of the Fund, or authorize, create or issue
additional shares of any series of MuniPreferred (except that, notwithstanding
the foregoing, but subject to the provisions of paragraph (c) of Section 10 of
this Part I, the Board of Directors, without the vote or consent of the Holders
of MuniPreferred, may from time to time authorize and create, and the Fund may
from time to time issue, additional shares of any series of MuniPreferred or
classes or series of Preferred Stock ranking on a parity with shares of
MuniPreferred with respect to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund;
provided, however, that if Moody's or S&P is not then rating the shares of
MuniPreferred, the aggregate liquidation preference of all Preferred Stock of
the Fund
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outstanding after any such issuance, exclusive of accumulated and unpaid
dividends, may not exceed the amount set forth in Section 10 of Appendix A
hereto) or (b) amend, alter or repeal the provisions of the Articles, including
this Statement, whether by merger, consolidation or otherwise, so as to affect
any preference, right or power of such shares of MuniPreferred or the Holders
thereof; provided, however, that (i) none of the actions permitted by the
exception to (a) above will be deemed to affect such preferences, rights or
powers, (ii) a division of a share of MuniPreferred will be deemed to affect
such preferences, rights or powers only if the terms of such division adversely
affect the Holders of shares of MuniPreferred and (iii) the authorization,
creation and issuance of classes or series of stock ranking junior to shares of
MuniPreferred with respect to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund,
will be deemed to affect such preferences, rights or powers only if Moody's or
S&P is then rating shares of MuniPreferred and such issuance would, at the time
thereof, cause the Fund not to satisfy the 1940 Act MuniPreferred Asset Coverage
or the MuniPreferred Basic Maintenance Amount. So long as any shares of
MuniPreferred are outstanding, the Fund shall not, without the affirmative vote
or consent of the Holders of at least 66 2/3% of the shares of MuniPreferred
outstanding at the time, in person or by proxy, either in writing or at a
meeting, voting as a separate class, file a voluntary application for relief
under Federal bankruptcy law or any similar application under state law for so
long as the Fund is solvent and does not foresee becoming insolvent. To the
extent that shares of MuniPreferred constitute a series of stock under Minnesota
law and to the extent the Holders of such shares are empowered under the
Minnesota Business Corporation Act to vote as a class on the actions set forth
above in this subparagraph (c)(i), the Fund shall not approve any such action
without the affirmative vote or consent of the Holders of at least a majority of
the shares of MuniPreferred of such series outstanding at the time, in person or
by proxy, either in writing or at a meeting (voting as a separate class).
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(ii) 1940 Act Matters. Unless a higher percentage is provided for in the
Articles, (A) the affirmative vote of the Holders of at least a majority of the
shares of Preferred Stock, including MuniPreferred, outstanding at the time,
voting as a separate class, shall be required to approve any conversion of the
Fund from a closed-end to an open-end investment company and (B) the affirmative
vote of the Holders of a "majority of the outstanding shares of Preferred
Stock," including MuniPreferred, voting as a separate class, shall be required
to approve any plan of reorganization (as such term is used in the 1940 Act)
adversely affecting such shares. The affirmative vote of the Holders of a
"majority of the outstanding shares of Preferred Stock," including
MuniPreferred, voting as a separate class, shall be required to approve any
action not described in the first sentence of this Section 5(c)(ii) requiring a
vote of security holders of the Fund under Section 13(a) of the 1940 Act. For
purpose of the foregoing, "majority of the outstanding shares of Preferred
Stock" means (i) 67% or more of such shares present at a meeting, if the Holders
of more than 50% of such shares are present or represented by proxy, or (ii)
more than 50% of such shares, whichever is less. In the event a vote of Holders
of MuniPreferred is required pursuant to the provisions of Section 13(a) of the
1940 Act, the Fund shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify Moody's (if Moody's is then rating the
shares of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred) that such vote is to be taken and the nature of the action with
respect to which such vote is to be taken. The Fund shall, not later than ten
Business Days after the date on which such vote is taken, notify Moody's (if
Moody's is then rating the shares of MuniPreferred) of the results of such vote.
(d) Board May Take Certain Actions Without Shareholder Approval. The Board
of Directors, without the vote or consent of the shareholders of the Fund, may
from time to time amend, alter or repeal any or all of the definitions of the
terms listed below, or any provision of this Statement viewed by Moody's or S&P
as a predicate for any such definition, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights or powers of shares
of MuniPreferred or the Holders thereof; provided, however, that the Board of
Directors receives written confirmation from Moody's (such confirmation being
required to be obtained only in the event Moody's is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Deposit Securities, Discounted Value, Receivables for
Municipal Obligations Sold, Issue Type Category and Other Issues as such terms
apply to S&P Eligible Assets and (y) S&P Discount Factor, S&P Eligible Asset,
S&P Exposure Period and S&P Volatility Factor) and S&P (such confirmation being
required to be obtained only in the event S&P is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Discounted Value, Receivables for Municipal Obligations Sold,
Issue Type Category and Other Issues as such terms apply to Moody's Eligible
Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's
Exposure Period and Moody's Volatility Factor) that any such amendment,
alteration or repeal would not impair the ratings then assigned by Moody's or
S&P, as the case may be, to shares of MuniPreferred:
Deposit Securities Other Issues
Discounted Value Quarterly Valuation Date
Escrowed Bonds Receivables for Municipal
Issue Type Category Obligations Sold
Market Value S&P Discount Factor
Maximum Potential Gross-up
Payment Liability
MuniPreferred Basic Maintenance Amount
MuniPreferred Basic Maintenance Cure Date
MuniPreferred Basic Maintenance Report
Moody's Discount Factor
Moody's Eligible Asset
Moody's Exposure Period
Moody's Volatility Factor
1940 Act Cure Date
1940 Act MuniPreferred Asset Coverage
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S&P Eligible Asset
S&P Exposure Period
S&P Volatility Factor
Valuation Date
Volatility Factor
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(e) Voting Rights Set Forth Herein Are Sole Voting Rights. Unless otherwise
required by law, the Holders of shares of MuniPreferred shall not have any
relative rights or preferences or other special rights other than those
specifically set forth herein.
(f) No Preemptive Rights or Cumulative Voting. The Holders of shares of
MuniPreferred shall have no preemptive rights or rights to cumulative voting.
(g) Voting for Directors Sole Remedy for Fund's Failure to Pay Dividends.
In the event that the Fund fails to pay any dividends on the shares of
MuniPreferred, the exclusive remedy of the Holders shall be the right to vote
for directors pursuant to the provisions of this Section 5.
(h) Holders Entitled to Vote. For purposes of determining any rights of the
Holders to vote on any matter, whether such right is created by this Statement,
by the other provisions of the Articles, by statute or otherwise, no Holder
shall be entitled to vote any share of MuniPreferred and no share of
MuniPreferred shall be deemed to be "outstanding" for the purpose of voting or
determining the number of shares required to constitute a quorum if, prior to or
concurrently with the time of determination of shares entitled to vote or shares
deemed outstanding for quorum purposes, as the case may be, the requisite Notice
of Redemption with respect to such shares shall have been mailed as provided in
paragraph (c) of Section 11 of this Part I and the Redemption Price for the
redemption of such shares shall have been deposited in trust with the Auction
Agent for that purpose. No share of MuniPreferred held by the Fund or any
affiliate of the Fund (except for shares held by a Broker-Dealer that is an
affiliate of the Fund for the account of its customers) shall have any voting
rights or be deemed to be outstanding for voting or other purposes.
6. 1940 Act MuniPreferred Asset Coverage.
The Fund shall maintain, as of the last Business Day of each month in
which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred
Asset Coverage.
7. MuniPreferred Basic Maintenance Amount.
(a) So long as shares of MuniPreferred are outstanding, the Fund shall
maintain, on each Valuation Date, and shall verify to its satisfaction that it
is maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the MuniPreferred Basic
Maintenance Amount (if S&P is then rating the shares of MuniPreferred) and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the MuniPreferred Basic Maintenance Amount (if Moody's is then rating the
shares of MuniPreferred).
(b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Fund fails to satisfy the MuniPreferred
Basic Maintenance Amount, and on the third Business Day after the MuniPreferred
Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred),
Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction
Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) a
MuniPreferred Basic Maintenance Report as of the date of such failure or such
MuniPreferred Basic Maintenance Cure Date, as the case may be, which will be
deemed to have been delivered to the Auction Agent if the Auction Agent receives
a copy or telecopy, telex or other electronic transcription thereof and on the
same day the Fund mails to the Auction Agent for delivery on the next Business
Day the full MuniPreferred Basic Maintenance Report. The Fund shall also deliver
a MuniPreferred Basic Maintenance Report to (i) the Auction Agent (if either
Moody's or S&P is then rating the shares of MuniPreferred) as of (A) the
fifteenth day of each month (or, if such day is not a Business Day, the next
succeeding Business Day) and (B) the last Business Day of each month, (ii)
Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P
is then rating the shares of MuniPreferred) as of any Quarterly Valuation Date,
in each case on or before the third Business Day after such day, and (iii) S&P,
if and when requested for any Valuation Date, on or before the third Business
Day
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after such request. A failure by the Fund to deliver a MuniPreferred Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be
delivery of a MuniPreferred Basic Maintenance Report indicating the Discounted
Value for all assets of the Fund is less than the MuniPreferred Basic
Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a MuniPreferred
Basic Maintenance Report in accordance with paragraph (b) of this Section 7
relating to a Quarterly Valuation Date, the Fund shall cause the Independent
Accountant to confirm in writing to S&P (if S&P is then rating the shares of
MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred)
and the Auction Agent (if either S&P or Moody's is then rating the shares of
MuniPreferred) (i) the mathematical accuracy of the calculations reflected in
such Report (and in any other MuniPreferred Basic Maintenance Report, randomly
selected by the Independent Accountant, that was delivered by the Fund during
the quarter ending on such Quarterly Valuation Date) and (ii) that, in such
Report (and in such randomly selected Report), the Fund determined in accordance
with this Statement whether the Fund had, at such Quarterly Valuation Date (and
at the Valuation Date addressed in such randomly-selected Report), S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) of an aggregate
Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount
and Moody's Eligible Assets (if Moody's is then rating the shares of
MuniPreferred) of an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount (such confirmation being herein called
the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery of a MuniPreferred
Basic Maintenance Report in accordance with paragraph (b) of this Section 7
relating to any Valuation Date on which the Fund failed to satisfy the
MuniPreferred Basic Maintenance Amount, and relating to the MuniPreferred Basic
Maintenance Cure Date with respect to such failure to satisfy the MuniPreferred
Basic Maintenance Amount, the Fund shall cause the Independent Accountant to
provide to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if
Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if
either S&P or Moody's is then rating the shares of MuniPreferred) an
Accountant's Confirmation as to such MuniPreferred Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to paragraph (c) or
(d) of this Section 7 shows that an error was made in the MuniPreferred Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation was required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets (if S&P is then
rating the shares of MuniPreferred) or Moody's Eligible Assets (if Moody's is
then rating the shares of MuniPreferred), as the case may be, of the Fund was
determined by the Independent Accountant, the calculation or determination made
by such Independent Accountant shall be final and conclusive and shall be
binding on the Fund, and the Fund shall accordingly amend and deliver the
MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating the shares
of MuniPreferred), Moody's (if Moody's is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating
the shares of MuniPreferred) promptly following receipt by the Fund of such
Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of any shares of MuniPreferred, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred)
and Moody's (if Moody's is then rating the shares of MuniPreferred) a
MuniPreferred Basic Maintenance Report as of the close of business on such Date
of Original Issue. Within five Business Days of such Date of Original Issue, the
Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P
is then rating the shares of MuniPreferred) (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the Discounted Value of S&P
Eligible Assets reflected thereon equals or exceeds the MuniPreferred Basic
Maintenance Amount reflected thereon.
(g) On or before 5:00 p.m., New York City time, on the third Business Day
after either (i) the Fund shall have redeemed Common Stock or (ii) the ratio of
the Discounted Value of S&P Eligible Assets or the Discounted Value of Moody's
Eligible Assets to the MuniPreferred Basic Maintenance Amount is
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<PAGE> 114
less than or equal to 105%, the Fund shall complete and deliver to S&P (if S&P
is then rating the shares of MuniPreferred) or Moody's (if Moody's is then
rating the shares of MuniPreferred), as the case may be, a MuniPreferred Basic
Maintenance Report as of the date of either such event.
8. [Reserved]
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Preferred Stock Other Than MuniPreferred. Except as set
forth in the next sentence, no dividends shall be declared or paid or set apart
for payment on the shares of any class or series of stock ranking, as to the
payment of dividends, on a parity with shares of MuniPreferred for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid on the shares of each series of MuniPreferred through its most recent
Dividend Payment Date. When dividends are not paid in full upon the shares of
each series of MuniPreferred through its most recent Dividend Payment Date or
upon the shares of any other class or series of stock ranking on a parity as to
the payment of dividends with shares of MuniPreferred through their most recent
respective dividend payment dates, all dividends declared upon shares of
MuniPreferred and any other such class or series of stock ranking on a parity as
to the payment of dividends with shares of MuniPreferred shall be declared pro
rata so that the amount of dividends declared per share on shares of
MuniPreferred and such other class or series of stock shall in all cases bear to
each other the same ratio that accumulated dividends per share on the shares of
MuniPreferred and such other class or series of stock bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
MuniPreferred shall be based on the Applicable Rate for such share for the
Dividend Periods during which dividends were not paid in full).
(b) Dividends and Other Distributions With Respect to Common Stock Under
the 1940 Act. The Board of Directors shall not declare any dividend (except a
dividend payable in shares of Common Stock), or declare any other distribution,
upon shares of Common Stock, or purchase shares of Common Stock, unless in every
such case the shares of Preferred Stock have, at the time of any such
declaration or purchase, an asset coverage (as defined in and determined
pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may
in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common stock) after
deducting the amount of such dividend, distribution or purchase price, as the
case may be.
(c) Other Restrictions On Dividends and Other Distributions. For so long as
any share of MuniPreferred is outstanding, and except as set forth in paragraph
(a) of this Section 9 and paragraph (c) of Section 12 of this Part I, (A) the
Fund shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, Common Stock or other
stock, if any, ranking junior to the shares of MuniPreferred as to the payment
of dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of the Common Stock or any other stock of the Fund
ranking junior to or on a parity with the shares of MuniPreferred as to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up, or call for redemption, redeem, purchase or otherwise acquire for
consideration any shares of Common Stock or any other such junior stock (except
by conversion into or exchange for stock of the Fund ranking junior to the
shares of MuniPreferred as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), or any such parity stock
(except by conversion into or exchange for stock of the Fund ranking junior to
or on a parity with MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless (i)
full cumulative dividends on shares of each series of MuniPreferred through its
most recently ended Dividend Period shall have been paid or shall have been
declared and sufficient funds for the payment thereof deposited with the Auction
Agent and (ii) the Fund has redeemed the full number of shares of MuniPreferred
required to be redeemed by any provision for mandatory redemption pertaining
thereto, and (B) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to shares of MuniPreferred
as to the
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<PAGE> 115
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of Common Stock or any other stock of the
Fund ranking junior to shares of MuniPreferred as to the payment of dividends or
the distribution of assets upon dissolution, liquidation or winding up, or call
for redemption, redeem, purchase or otherwise acquire for consideration any
shares of Common Stock or any other such junior stock (except by conversion into
or exchange for stock of the Fund ranking junior to shares of MuniPreferred as
to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless immediately after such transaction the
Discounted Value of Moody's Eligible Assets (if Moody's is then rating the
shares of MuniPreferred) and S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) would each at least equal the MuniPreferred Basic
Maintenance Amount.
10. Rating Agency Restrictions.
For so long as any shares of MuniPreferred are outstanding and Moody's or
S&P, or both, are rating such shares, the Fund will not, unless it has received
written confirmation from Moody's or S&P, or both, as appropriate, that any such
action would not impair the ratings then assigned by such rating agency to such
shares, engage in any one or more of the following transactions:
(a) buy or sell futures or write put or call options;
(b) borrow money, except that the Fund may, without obtaining the
written confirmation described above, borrow money for the purpose of
clearing securities transactions if (i) the MuniPreferred Basic Maintenance
Amount would continue to be satisfied after giving effect to such borrowing
and (ii) such borrowing (A) is privately arranged with a bank or other
person and is evidenced by a promissory note or other evidence of
indebtedness that is not intended to be publicly distributed or (B) is for
"temporary purposes," is evidenced by a promissory note or other evidence
of indebtedness and is in an amount not exceeding 5 per centum of the value
of the total assets of the Fund at the time of the borrowing; for purposes
of the foregoing, "temporary purpose" means that the borrowing is to be
repaid within sixty days and is not to be extended or renewed;
(c) issue additional shares of any series of MuniPreferred or any
class or series of stock ranking prior to or on a parity with shares of
MuniPreferred with respect to the payment of dividends or the distribution
of assets upon dissolution, liquidation or winding up of the Fund, or
reissue any shares of MuniPreferred previously purchased or redeemed by the
Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred to in
the definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. Redemption.
(a) Optional Redemption. (i) Subject to the provisions of subparagraph (v)
of this paragraph (a), shares of MuniPreferred of any series may be redeemed, at
the option of the Fund, as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for shares of such series, out
of funds legally available therefor, at a redemption price per share equal to
the sum of $25,000 plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the date
fixed for redemption; provided, however, that (1) shares of a series
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<PAGE> 116
of MuniPreferred may not be redeemed in part if after such partial
redemption fewer than 500 shares of such series remain outstanding; (2) unless
otherwise provided in Section 11 of Appendix A hereto, shares of a series of
MuniPreferred are redeemable by the Fund during the Initial Rate Period thereof
only on the second Business Day next preceding the last Dividend Payment Date
for such Initial Rate Period; and (3) subject to subparagraph (ii) of this
paragraph (a), the Notice of Special Rate Period relating to a Special Rate
Period of shares of a series of MuniPreferred, as delivered to the Auction Agent
and filed with the Secretary of the Fund, may provide that shares of such series
shall not be redeemable during the whole or any part of such Special Rate Period
(except as provided in subparagraph (iv) of this paragraph (a)) or shall be
redeemable during the whole or any part of such Special Rate Period only upon
payment of such redemption premium or premiums as shall be specified therein
("Special Redemption Provisions").
(ii) A Notice of Special Rate Period relating to shares of a series of
MuniPreferred for a Special Rate Period thereof may contain Special Redemption
Provisions only if the Fund's Board of Directors, after consultation with the
Broker-Dealer or Broker-Dealers for such Special Rate Period of shares of such
series, determines that such Special Redemption Provisions are in the best
interest of the Fund.
(iii) If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to subparagraph (i) of this paragraph
(a), the number of shares of such series to be redeemed shall be determined by
the Board of Directors, and such shares shall be redeemed pro rata from the
Holders of shares of such series in proportion to the number of shares of such
series held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of this paragraph (a),
shares of any series of MuniPreferred may be redeemed, at the option of the
Fund, as a whole but not in part, out of funds legally available therefor, on
the first day following any Dividend Period thereof included in a Rate Period
consisting of more than 364 Rate Period Days if, on the date of determination of
the Applicable Rate for shares of such series for such Rate Period, such
Applicable Rate equalled or exceeded on such date of determination the Treasury
Note Rate for such Rate Period, at a redemption price per share equal to the sum
of $25,000 plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed for
redemption.
(v) The Fund may not on any date mail a Notice of Redemption pursuant to
paragraph (c) of this Section 11 in respect of a redemption contemplated to be
effected pursuant to this paragraph (a) unless on such date (a) the Fund has
available Deposit Securities with maturity or tender dates not later than the
day preceding the applicable redemption date and having a value not less than
the amount (including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such redemption date
and (b) the Discounted Value of Moody's Eligible Assets (if Moody's is then
rating the shares of MuniPreferred) and the Discounted Value of S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) each at least equal
the MuniPreferred Basic Maintenance Amount, and would at least equal the
MuniPreferred Basic Maintenance Amount immediately subsequent to such redemption
if such redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of Moody's
Eligible Assets at least equals the MuniPreferred Basic Maintenance Amount, the
Moody's Discount Factors applicable to Moody's Eligible Assets shall be
determined by reference to the first Exposure Period longer than the Exposure
Period then applicable to the Fund, as described in the definition of Moody's
Discount Factor herein.
(b) Mandatory Redemption. The Fund shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Directors for redemption, certain of the shares of MuniPreferred, if
the Fund fails to have either Moody's Eligible Assets with a Discounted Value or
S&P Eligible Assets with a Discounted Value greater than or equal to the
MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act
MuniPreferred Asset Coverage, in accordance with the requirements of the rating
agency or agencies then rating the shares of MuniPreferred, and such failure is
not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be. The number of shares of MuniPreferred to be
redeemed shall be equal to the lesser of (i) the minimum number of shares
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of MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, would have
resulted in the Fund's having both Moody's Eligible Assets with a Discounted
Value and S&P Eligible Assets with a Discounted Value greater than or equal to
the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro
rata among shares of MuniPreferred and other Preferred Stock (and, then, pro
rata among each series of MuniPreferred) subject to redemption or retirement.
The Fund shall effect such redemption on the date fixed by the Fund therefor,
which date shall not be earlier than 20 days nor later than 40 days after such
Cure Date, except that if the Fund does not have funds legally available for the
redemption of all of the required number of shares of MuniPreferred and shares
of other Preferred Stock which are subject to redemption or retirement or the
Fund otherwise is unable to effect such redemption on or prior to 40 days after
such Cure Date, the Fund shall redeem those shares of MuniPreferred and shares
of other Preferred Stock which it was unable to redeem on the earliest
practicable date on which it is able to effect such redemption. If fewer than
all of the outstanding shares of a series of MuniPreferred are to be redeemed
pursuant to this paragraph (b), the number of shares of such series to be
redeemed shall be redeemed pro rata from the Holders of shares of such series in
proportion to the number of shares of such series held by such Holders.
(c) Notice of Redemption. If the Fund shall determine or be required to
redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of
this Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first class mail, postage prepaid, to each Holder of the shares of
such series to be redeemed, at such Holder's address as the same appears on the
stock books of the Fund on the record date established by the Board of
Directors. Such Notice of Redemption shall be so mailed not less than 20 nor
more than 45 days prior to the date fixed for redemption. Each such Notice of
Redemption shall state: (i) the redemption date; (ii) the number of shares of
MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for
shares of such series; (iv) the Redemption Price; (v) the place or places where
the certificate(s) for such shares (properly endorsed or assigned for transfer,
if the Board of Directors shall so require and the Notice of Redemption shall so
state) are to be surrendered for payment of the Redemption Price; (vi) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date; and (vii) the provisions of this Section 11 under which such
redemption is made. If fewer than all shares of a series of MuniPreferred held
by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder
shall also specify the number of shares of such series to be redeemed from such
Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section
11 that such redemption is subject to one or more conditions precedent and that
the Fund shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) No Redemption Under Certain Circumstances. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
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(e) Absence of Funds Available for Redemption. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor, such redemption shall be
made as soon as practicable to the extent such funds become available. Failure
to redeem shares of MuniPreferred shall be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the Fund shall have
failed, for any reason whatsoever, to deposit in trust with the Auction Agent
the Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed; provided, however, that the foregoing shall not
apply in the case of the Fund's failure to deposit in trust with the Auction
Agent the Redemption Price with respect to any shares where (1) the Notice of
Redemption relating to such redemption provided that such redemption was subject
to one or more conditions precedent and (2) any such condition precedent shall
not have been satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding the fact that the Fund may not have
redeemed shares of MuniPreferred for which a Notice of Redemption has been
mailed, dividends may be declared and paid on shares of MuniPreferred and shall
include those shares of MuniPreferred for which a Notice of Redemption has been
mailed.
(f) Auction Agent as Trustee of Redemption Payments by Fund. All moneys
paid to the Auction Agent for payment of the Redemption Price of shares of
MuniPreferred called for redemption shall be held in trust by the Auction Agent
for the benefit of Holders of shares so to be redeemed.
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer
Outstanding. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares shall
no longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance with the Notice of Redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of
MuniPreferred subject to redemption. In the case that fewer than all of the
shares represented by any such certificate are redeemed, a new certificate shall
be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Fund shall be entitled to receive from the Auction Agent, promptly
after the date fixed for redemption, any cash deposited with the Auction Agent
in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred
called for redemption on such date and (ii) all other amounts to which Holders
of shares of MuniPreferred called for redemption may be entitled. Any funds so
deposited that are unclaimed at the end of 90 days from such redemption date
shall, to the extent permitted by law, be repaid to the Fund, after which time
the Holders of shares of MuniPreferred so called for redemption may look only to
the Fund for payment of the Redemption Price and all other amounts to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest on the funds so deposited.
(h) Compliance With Applicable Law. In effecting any redemption pursuant to
this Section 11, the Fund shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the 1940 Act
and Minnesota law, but shall effect no redemption except in accordance with the
1940 Act and Minnesota law.
(i) Only Whole Shares of MuniPreferred May Be Redeemed. In the case of any
redemption pursuant to this Section 11, only whole shares of MuniPreferred shall
be redeemed, and in the event that any provision of the Articles would require
redemption of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.
12. Liquidation Rights.
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(a) Ranking. The shares of a series of MuniPreferred shall rank on a parity
with each other, with shares of any other series of MuniPreferred and with
shares of any other series of Preferred Stock as to the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Fund.
(b) Distributions Upon Liquidation. Upon the dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of shares of MuniPreferred then outstanding shall be entitled to receive
and to be paid out of the assets of the Fund available for distribution to its
shareholders, before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Fund ranking junior to the
MuniPreferred upon dissolution, liquidation or winding up, an amount equal to
the Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same-day funds,
together with any payments required to be made pursuant to Section 3 of this
Part I in connection with the liquidation of the Fund. After the payment to the
Holders of the shares of MuniPreferred of the full preferential amounts provided
for in this paragraph (b), the Holders of MuniPreferred as such shall have no
right or claim to any of the remaining assets of the Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund available
for distribution to the Holders of shares of MuniPreferred upon any dissolution,
liquidation, or winding up of the affairs of the Fund, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled pursuant to paragraph (b) of this Section 12, no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the shares of MuniPreferred with
respect to the distribution of assets upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) Rights of Junior Stock. Subject to the rights of the holders of shares
of any series or class or classes of stock ranking on a parity with the shares
of MuniPreferred with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund, after payment shall have
been made in full to the Holders of the shares of MuniPreferred as provided in
paragraph (b) of this Section 12, but not prior thereto, any other series or
class or classes of stock ranking junior to the shares of MuniPreferred with
respect to the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Fund shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the Holders of the shares of
MuniPreferred shall not be entitled to share therein.
(e) Certain Events Not Constituting Liquidation. Neither the sale of all or
substantially all the property or business of the Fund, nor the merger or
consolidation of the Fund into or with any other corporation nor the merger or
consolidation of any other corporation into or with the Fund shall be a
dissolution, liquidation or winding up, whether voluntary or involuntary, for
the purposes of this Section 12.
13. Miscellaneous.
(a) Amendment of Appendix A to Add Additional Series. Subject to the
provisions of paragraph (c) of Section 10 of this Part I, the Board of Directors
may, by resolution duly adopted, without shareholder approval (except as
otherwise provided by this Statement or required by applicable law), amend
Appendix A hereto to (1) reflect any amendments hereto which the Board of
Directors is entitled to adopt pursuant to the terms of this Statement without
shareholder approval and (2) add additional series of MuniPreferred or
additional shares of a series of MuniPreferred (and terms relating thereto) to
the series and shares of MuniPreferred theretofore described thereon. Each such
additional series and all such additional shares shall be governed by the terms
of this Statement.
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(b) Appendix A Incorporated By Reference. Appendix A hereto is incorporated
in and made a part of this Statement by reference thereto.
(c) No Fractional Shares. No fractional shares of MuniPreferred shall be
issued.
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or Otherwise
Acquired by the Fund. Shares of MuniPreferred which are redeemed, exchanged or
otherwise acquired by the Fund shall return to the status of authorized and
unissued shares of Preferred Stock without designation as to series. Upon the
redemption, exchange or other acquisition by the Fund of all outstanding shares
of a series of MuniPreferred, all provisions of the Articles relating to such
series (including, without limitation, all provisions of this Statement relating
to such series) shall cease to be of further effect and shall cease to be part
of the Articles. Upon the occurrence of any such event, the Board of Directors
shall have the power, pursuant to Minnesota Statutes Section 302A.135,
Subdivision 5 or any successor provision and without shareholder action, to
cause restated articles of incorporation of the Fund or other appropriate
documents to be prepared and filed with the Secretary of State of the State of
Minnesota which reflect such removal from the Articles of all such provisions
relating to such series or, if appropriate, the cancellation of this Statement,
or both.
(e) Board May Resolve Ambiguities. To the extent permitted by applicable
law, the Board of Directors may interpret or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Statement with respect to any series of MuniPreferred
prior to the issuance of shares of such series.
(f) Headings Not Determinative. The headings contained in this Statement
are for convenience of reference only and shall not affect the meaning or
interpretation of this Statement.
(g) Notices. All notices or communications, unless otherwise specified in
the By-Laws of the Fund or this Statement, shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid.
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PART II
1. Orders. (a) Prior to the Submission Deadline on each Auction Date for
shares of a series of MuniPreferred:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for shares of
such series for the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell if
the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be less than the rate per
annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for shares of such series for
the next succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive
Auction in a commercially reasonable manner, contact Potential Beneficial
Owners (by telephone or otherwise), including Persons that are not
Beneficial Owners, on such lists to determine the number of shares, if any,
of such series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall not be less than the
rate per annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
paragraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively
as "Hold Orders"; an Order containing the information referred to in clause
(i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information referred to in
clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order"
and collectively as "Sell Orders."
(b)(i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such
Bid if the Applicable Rate for shares of such series determined on such
Auction Date shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such
series to be determined as set forth in clause (iv) of paragraph (a) of
Section 4 of this Part II if the Applicable
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Rate for shares of such series determined on such Auction Date shall be
equal to the rate specified therein; or
(C) the number of Outstanding shares of such series specified in such
Bid if the rate specified therein shall be higher than the Maximum Rate for
shares of such series, or such number or a lesser number of Outstanding
shares of such series to be determined as set forth in clause (iii) of
paragraph (b) of Section 4 of this Part II if the rate specified therein
shall be higher than the Maximum Rate for shares of such series and
Sufficient Clearing Bids for shares of such series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares of
a series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such
Sell Order; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (iii) of paragraph (b) of Section 4 of this
Part II if Sufficient Clearing Bids for shares of such series do not exist;
provided, however, that a Broker-Dealer that is an Existing Holder with respect
to shares of a series of MuniPreferred shall not be liable to any Person for
failing to sell such shares pursuant to a Sell Order described in the proviso to
paragraph (c) of Section 2 of this Part II if (1) such shares were transferred
by the Beneficial Owner thereof without compliance by such Beneficial Owner or
its transferee Broker-Dealer (or other transferee person, if permitted by the
Fund) with the provisions of Section 7 of this Part II or (2) such Broker-Dealer
has informed the Auction Agent pursuant to the terms of its Broker-Dealer
Agreement that, according to such Broker-Dealer's records, such Broker-Dealer
believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
shares of a series of MuniPreferred subject to an Auction on any Auction Date
shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in such
Bid if the Applicable Rate for shares of such series determined on such
Auction Date shall be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (v) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred other than
whole shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each
Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of MuniPreferred
of a series subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Fund) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares
of such series:
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(A) the number of shares, if any, of such series subject to any
Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to any
Bid of such Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any
Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of such
series, the rate and number of shares of such series specified in such
Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of
MuniPreferred of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding shares of
MuniPreferred of a series subject to an Auction held by such Existing Holder,
such Orders shall be considered valid in the following order of priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by such Existing Holder, and if the
number of shares of such series subject to such Hold Orders exceeds the
number of Outstanding shares of such series held by such Existing Holder,
the number of shares subject to each such Hold Order shall be reduced pro
rata to cover the number of Outstanding shares of such series held by such
Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent
with the same rate and the number of Outstanding shares of such series
subject to such Bids is greater than such excess, such Bids shall be
considered valid up to and including the amount of such excess, and
the number of shares of such series subject to each Bid with the same
rate shall be reduced pro rata to cover the number of shares of such
series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of such series is submitted to the Auction
Agent with different rates, such Bids shall be considered valid in the
ascending order of their respective rates up to and including the
amount of such excess; and
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(D) in any such event, the number, if any, of such Outstanding
shares of such series subject to any portion of Bids considered not
valid in whole or in part under this clause (ii) shall be treated as
the subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of such series shall be considered
valid up to and including the excess of the number of Outstanding shares of
such series held by such Existing Holder over the sum of shares of such
series subject to valid Hold Orders referred to in clause (i) above and
valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction
Date for shares of a series of MuniPreferred, the Auction Agent shall assemble
all valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over
the number of Outstanding shares of such series subject to Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
MuniPreferred" of such series);
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to
Submitted Bids of Potential Holders specifying one or more rates equal
to or lower than the Maximum Rate for shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to
Submitted Bids of Existing Holders specifying one or more rates higher
than the Maximum Rate for shares of such series; and
(C) the number of Outstanding shares of such series subject to
Submitted Sell Orders
(in the event such excess or such equality exists (other than because the
number of shares of such series in subclauses (B) and (C) above is zero
because all of the Outstanding shares of such series are subject to
Submitted Hold Orders), such Submitted Bids in subclause (A) above being
hereinafter referred to collectively as "Sufficient Clearing Bids" for
shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
shares of such series) which if:
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(A)(I) each such Submitted Bid of Existing Holders specifying
such lowest rate and (II) all other such Submitted Bids of Existing
Holders specifying lower rates were rejected, thus entitling such
Existing Holders to continue to hold the shares of such series that
are subject to such Submitted Bids; and
(B)(I) each such Submitted Bid of Potential Holders specifying
such lowest rate and (II) all other such Submitted Bids of Potential
Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of
the Maximum Rate for shares of the series of MuniPreferred for which an Auction
is being held on the Auction Date and, based on such determination, the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that
the Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Winning Bid Rate for shares of
such series so determined;
(ii) if Sufficient Clearing Bids for shares of such series do not
exist (other than because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), that the Applicable Rate for all shares
of such series for the next succeeding Rate Period thereof shall be equal
to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to
Submitted Hold Orders, that the Applicable Rate for all shares of such
series for the next succeeding Rate Period thereof shall be as set forth in
Section 12 of Appendix A hereto.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Existing Holders shall continue to hold the shares of
MuniPreferred that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph (a) of Section 3 of this Part II, the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected by the
Auction Agent and the Auction Agent shall take such other action as set forth
below:
(a) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have been made, all Submitted Sell Orders with respect to shares of such series
shall be accepted and, subject to the provisions of paragraphs (d) and (e) of
this Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of MuniPreferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
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(iv) each Existing Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the shares of MuniPreferred subject to such Submitted Bid, unless
the number of Outstanding shares of MuniPreferred subject to all such
Submitted Bids shall be greater than the number of shares of MuniPreferred
("remaining shares") in the excess of the Available MuniPreferred of such
series over the number of shares of MuniPreferred subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in which event
such Submitted Bid of such Existing Holder shall be rejected in part, and
such Existing Holder shall be entitled to continue to hold shares of
MuniPreferred subject to such Submitted Bid, but only in an amount equal to
the number of shares of MuniPreferred of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred held by
such Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such series;
and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available MuniPreferred of such series over the number of
shares of MuniPreferred subject to Submitted Bids described in clauses
(ii) through (iv) of this paragraph (a) by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred subject to
such Submitted Bid and the denominator of which shall be the aggregate
number of Outstanding shares of MuniPreferred subject to such Submitted
Bids made by all such Potential Holders that specified a rate equal to the
Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have not been made (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), subject to the provisions of
paragraph (d) of this Section 4, Submitted Orders for shares of such series
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids for shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of MuniPreferred subject to such
Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each
Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or
Submitted Sell Order to sell the shares of such series subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by multiplying the
number of shares of such series subject to Submitted Bids described in
clause (ii) of this paragraph (b) by a fraction, the numerator of which
shall be the number of Outstanding shares of such series held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted Sell
Orders.
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(c) If all of the Outstanding shares of a series of MuniPreferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of
MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as
it shall determine in its sole discretion, round up or down the number of shares
of MuniPreferred of such series to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date as a result of such procedures so that
the number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of
paragraph (a) of this Section 4, any Potential Holder would be entitled or
required to purchase less than a whole share of a series of MuniPreferred on any
Auction Date, the Auction Agent shall, in such manner as it shall determine in
its sole discretion, allocate shares of MuniPreferred of such series for
purchase among Potential Holders so that only whole shares of MuniPreferred of
such series are purchased on such Auction Date as a result of such procedures by
any Potential Holder, even if such allocation results in one or more Potential
Holders not purchasing shares of MuniPreferred of such series on such Auction
Date.
(f) Based on the results of each Auction for shares of a series of
MuniPreferred, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such series
to be sold by Potential Holders and Existing Holders and, with respect to each
Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, shares of MuniPreferred of such series.
Notwithstanding any provision of the Auction Procedures or the Settlement
Procedures to the contrary, in the event an Existing Holder or Beneficial Owner
of shares of a series of MuniPreferred with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in whole
or in part, or submitted or is deemed to have submitted a Sell Order for such
shares that was accepted in whole or in part, fails to instruct its Agent Member
to deliver such shares against payment therefor, partial deliveries of shares of
MuniPreferred that have been made in respect of Potential Holders' or Potential
Beneficial Owners' Submitted Bids for shares of such series that have been
accepted in whole or in part shall constitute good delivery to such Potential
Holders and Potential Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver shares of MuniPreferred of any
series or to pay for shares of MuniPreferred of any series sold or purchased
pursuant to the Auction Procedures or otherwise.
5. Notification of Allocations. Whenever the Fund intends to include any
net capital gains or other income taxable for Federal income tax purposes in
any dividend on shares of MuniPreferred, the Fund shall, in the case of a
Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer,
and may, in the case of any other Special Rate Period, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date next
preceding the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the Fund,
it will be required in turn to notify each Broker-Dealer, who, on or prior to
such Auction Date, in accordance with its Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of MuniPreferred believed by it to be interested in submitting an Order
in the Auction to be held on such Auction Date.
6. Auction Agent. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or
B-41
<PAGE> 128
other financial institution independent of the Fund and its affiliates
(which however, may engage or have engaged in business transactions with the
Fund or its affiliates) and at no time shall the Fund or any of its affiliates
act as the Auction Agent in connection with the Auction Procedures. If the
Auction Agent resigns or for any reason its appointment is terminated during any
period that any shares of MuniPreferred are outstanding, the Board of Directors
shall use its best efforts promptly thereafter to appoint another qualified
commercial bank, trust company or financial institution to act as the Auction
Agent. The Auction Agent's registry of Existing Holders of shares of a series of
MuniPreferred shall be conclusive and binding on the Broker-Dealers. A
Broker-Dealer may inquire of the Auction Agent between 3:00 p.m. on the Business
Day preceding an Auction for shares of a series of MuniPreferred and 9:30 a.m.
on the Auction Date for such Auction to ascertain the number of shares of such
series in respect of which the Auction Agent has determined such Broker-Dealer
to be an Existing Holder. If such Broker-Dealer believes it is the Existing
Holder of fewer shares of such series than specified by the Auction Agent in
response to such Broker-Dealer's inquiry, such Broker-Dealer may so inform the
Auction Agent of that belief. Such Broker-Dealer shall not, in its capacity as
Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the number
of shares of such series specified by the Auction Agent in response to such
Broker-Dealer's inquiry.
7. Transfer of Shares of MuniPreferred. Unless otherwise permitted by the
Fund, a Beneficial Owner or an Existing Holder may sell, transfer or otherwise
dispose of shares of MuniPreferred only in whole shares and only pursuant to a
Bid or Sell Order placed with the Auction Agent in accordance with the
procedures described in this Part II or to a Broker-Dealer; provided, however,
that (a) a sale, transfer or other disposition of shares of MuniPreferred from a
customer of a Broker-Dealer who is listed on the records of that Broker-Dealer
as the holder of such shares to that Broker-Dealer or another customer of that
Broker-Dealer shall not be deemed to be a sale, transfer or other disposition
for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder
of the shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers other than pursuant
to Auctions, the Broker-Dealer (or other Person, if permitted by the Fund) to
whom such transfer is made shall advise the Auction Agent of such transfer.
8. Global Certificate. Prior to the commencement of a Voting Period,
(i) all of the shares of a series of MuniPreferred outstanding from time to time
shall be represented by one global certificate registered in the name of the
Securities Depository or its nominee and (ii) no registration of transfer of
shares of a series of MuniPreferred shall be made on the books of the Fund to
any Person other than the Securities Depository or its nominee. The foregoing
restriction on registration of transfer shall be conspicuously noted on the face
or back of the certificates of MuniPreferred in such a manner as to comply with
the requirements of Minnesota Statute Section 302A.429, Subd. 2, and Section
8-204 of the Uniform Commercial Code as in effect in the State of Minnesota, or
any successor provisions.
IN WITNESS WHEREOF, NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC., has
caused these presents to be signed in its name and on its behalf by its Vice
President and attested by its Assistant Secretary, and the said officers of the
Fund further acknowledged said instrument to be the corporate act of the Fund,
and stated under penalty of perjury that to the best of their knowledge,
information and belief the matters and facts therein set forth with respect to
approval are true in all material respects, all on October 1, 1996.
NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
By
James J. Wesolowski
Vice President and Secretary
B-42
<PAGE> 129
ATTEST:
Gifford R. Zimmerman
Vice President and Assistant Secretary
B-43
<PAGE> 130
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
Appendix A
Section 1. Designation As To Series.
Series M: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series M." Each share of Series M
MuniPreferred shall be issued on December 20, 1991; have an Applicable Rate for
its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 7, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Articles applicable to Preferred Stock of the Fund, as set
forth in Part I and Part II of this Statement. The Series M MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series M MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Series T: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series T." Each share of Series T
MuniPreferred shall be issued on December 20, 1991; have an Applicable Rate for
its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 8, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Articles applicable to Preferred Stock of the Fund, as set
forth in Part I and Part II of this Statement. The Series T MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series T MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Series W: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series W." Each share of Series W
MuniPreferred shall be issued on February 28, 1992; have an Applicable Rate for
its Initial Rate Period equal to 3.25% per annum; have an initial Dividend
Payment Date of March 5, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Articles applicable to Preferred Stock of the Fund, as set forth in
Part I and Part II of this Statement. The Series W MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series W MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Series TH1: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series TH1." Each share of Series TH1
MuniPreferred shall be issued on December 20, 1991; have an Applicable Rate for
its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 10, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Articles applicable to Preferred Stock of the Fund, as set
forth in Part I and Part II of this Statement. The Series TH1 MuniPreferred
shall constitute a separate series of Preferred Stock of the Fund, and each
share of Series TH1 MuniPreferred shall be identical except as provided in
Section 11 of Part I of this Statement.
Series TH2: A series of 4,000 shares of Preferred Stock, par value of $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series TH2." Each share of
Series TH2 MuniPreferred shall be issued on February 28, 1992; have an
Applicable Rate for its Initial Rate Period equal to 3.25% per annum; have an
initial Dividend Payment Date of March 9, 1992; and have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Articles applicable to Preferred Stock of the
Fund, as set forth in Part I and Part II of this Statement. The Series TH2
MuniPreferred shall constitute a separate
B-A-1
<PAGE> 131
series of Preferred Stock of the Fund, and each share of Series TH2
MuniPreferred shall be identical except as provided in Section 11 of Part I of
this Statement.
Series F: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series F." Each share of Series F
MuniPreferred shall be issued on February 28, 1992; have an Applicable Rate for
its Initial Rate Period equal to 3.25% per annum; have an initial Dividend
Payment Date of March 9, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Articles applicable to Preferred Stock of the Fund, as set forth in
Part I and Part II of this Statement. The Series F MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series F MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Section 2. Number of Authorized Shares Per Series.
The number of authorized shares constituting Series M MuniPreferred is
4,000; Series T MuniPreferred is 4,000; Series W MuniPreferred is 4,000; Series
TH1 MuniPreferred is 4,000; Series TH2 MuniPreferred is 4,000; and Series F
MuniPreferred is 4,000.
Section 3. Exceptions to Certain Definitions.
Notwithstanding the definitions contained under the heading "Definitions"
in this Statement, the following terms shall have the following meanings for
purposes of this Statement:
Not applicable.
Section 4. Certain Definitions.
For purposes of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"Gross-up Payment" means payment to a Holder of shares of
MuniPreferred of an amount which, when taken together with the aggregate
amount of Taxable Allocations made to such Holder to which such Gross-up
Payment relates, would cause such Holder's dividends in dollars (after
Federal income tax consequences) from the aggregate of such Taxable
Allocations and the related Gross-up Payment to be equal to the dollar
amount of the dividends which would have been received by such Holder if
the amount of such aggregate Taxable Allocations would have been excludable
from the gross income of such Holder. Such Gross-up Payment shall be
calculated (i) without consideration being given to the time value of
money; (ii) assuming that no Holder of shares of MuniPreferred is subject
to the Federal alternative minimum tax with respect to dividends received
from the Fund; and (iii) assuming that each Taxable Allocation and each
Gross-up Payment (except to the extent such Gross-up Payment is designated
as an exempt-interest dividend under Section 852(b)(5) of the Code or
successor provisions) would be taxable in the hands of each Holder of
shares of MuniPreferred at the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or net capital gains, as
applicable, or the maximum marginal regular Federal corporate income tax
rate applicable to ordinary income or net capital gains, as applicable,
whichever is greater, in effect at the time such Gross-up Payment is made.
"Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined
by reference to (i) (A) in the event such Municipal Obligation is covered
by an Original Issue Insurance policy or a Portfolio Insurance policy which
does not provide the Fund with the option to obtain Permanent Insurance
B-A-2
<PAGE> 132
with respect to such Municipal Obligation, or is not covered by bond
insurance, the Moody's or S&P rating on such Municipal Obligation, (B) in
the event such Municipal Obligation is covered by a Secondary Market
Insurance Policy, the Moody's insurance claims-paying ability rating of the
issuer of the policy, or (C) in the event such Municipal Obligation is
covered by a Portfolio Insurance policy which provides the Fund with the
option to obtain Permanent Insurance with respect to such Municipal
Obligation, at the Fund's option, the Moody's or S&P rating on such
Municipal Obligation or the Moody's insurance claims-paying ability rating
of the issuer of the Portfolio Insurance policy and (ii) the shortest
Exposure Period set forth opposite such rating that is the same length as
or is longer than the Moody's Exposure Period, in accordance with the table
set forth below:
<TABLE>
<CAPTION>
Rating Category
(V)MIG SP-1
Exposure Period Aaa* Aa* A* Baa* Other** -1*** +***
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but
greater than
seven weeks 154 164 173 205 235 137 149
9 weeks or less but
greater than
eight weeks 158 169 179 209 242 138 150
</TABLE>
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
If the Moody's Discount Factor used to discount a particular Municipal
Obligation is determined by reference to the insurance claims-paying
ability rating of the insurer of such Municipal Obligation, such Moody's
Discount Factor will be increased by an amount equal to 50% of the
difference between (i) the percentage set forth in the above table under
the applicable rating category, and (ii) the percentage set forth in the
above table under the rating category that is one rating category below the
applicable rating category. Notwithstanding the foregoing, (i) the Moody's
Discount Factor for short-term Municipal Obligations will be 115%, so long
as such Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by
Moody's and mature or have a demand feature at par exercisable in 30 days
or less or 125% as long as such Municipal Obligations are rated at least
A-1+/AA or SP-1+/AA by S&P and mature or have a demand feature at par
exercisable in 30 days or less and (ii) no Moody's Discount Factor will be
applied to cash or to Receivables for Municipal Obligations Sold.
"Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash,
(ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's
but rated by S&P, is rated at least BBB by S&P (provided, however, that for
purposes of determining the Moody's Discount Factor applicable to any such
S&P-rated Municipal Obligation, such Municipal Obligation (excluding any
short-term Municipal Obligation) shall be deemed to have a Moody's rating
which is one full rating category lower than its S&P rating), (iii) does
not have its Moody's rating suspended by Moody's, and (iv) is part of an
issue of Municipal Obligations of at least $10,000,000. Municipal
Obligations issued by any one issuer and rated BBB by S&P may comprise no
more than 4% of total Moody's Eligible Assets; such BBB-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated Baa by Moody's or A by S&P, may comprise no more than
6% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated A by Moody's or AA by S&P, may
B-A-3
<PAGE> 133
comprise no more than 10% of total Moody's Eligible Assets; and such BBB,
Baa, A and AA-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Aa by Moody's or
AAA by S&P, may comprise no more than 20% of total Moody's Eligible Assets.
For purposes of the foregoing sentence, any Municipal Obligation backed by
the guaranty, letter of credit or insurance issued by a third party shall
be deemed to be issued by such third party if the issuance of such third
party credit is the sole determinant of the rating on such Municipal
Obligation. Municipal Obligations issued by issuers located within a single
state or territory and rated BBB by S&P may comprise no more than 12% of
total Moody's Eligible Assets; such BBB-rated Municipal Obligations, if
any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Baa by Moody's or A by S&P,
may comprise no more than 20% of total Moody's Eligible Assets; such BBB,
Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory
and rated A by Moody's or AA by S&P, may comprise no more than 40% of total
Moody's Eligible Assets; and such BBB, Baa, A and AA-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by
issuers located within the same state or territory and rated Aa by Moody's
or AAA by S&P, may comprise no more than 60% of total Moody's Eligible
Assets. For purposes of applying the foregoing requirements, a Municipal
Obligation shall be deemed to be rated BBB by S&P if rated BBB-, BBB or
BBB+ by S&P, Moody's Eligible Assets shall be calculated without including
cash, and Municipal Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated
by Moody's, rated A-1+/AA or SP-1+/AA by S&P, shall be considered to have a
long-term rating of A. When the Fund sells a Municipal Obligation and
agrees to repurchase such Municipal Obligation at a future date, such
Municipal Obligation shall be valued at its Discounted Value for purposes
of determining Moody's Eligible Assets, and the amount of the repurchase
price of such Municipal Obligation shall be included as a liability for
purposes of calculating the MuniPreferred Basic Maintenance Amount. When
the Fund purchases a Moody's Eligible Asset and agrees to sell it at a
future date, such Eligible Asset shall be valued at the amount of cash to
be received by the Fund upon such future date, provided that the
counterparty to the transaction has a long-term debt rating of at least A2
from Moody's and the transaction has a term of no more than 30 days,
otherwise such Eligible Asset shall be valued at the Discounted Value of
such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset to the extent it is (i) subject to any material
lien, mortgage, pledge, security interest or security agreement of any kind
(collectively, "Liens"), except for (a) Liens which are being contested in
good faith by appropriate proceedings and which Moody's has indicated to
the Fund will not affect the status of such asset as a Moody's Eligible
Asset, (b) Liens for taxes that are not then due and payable or that can be
paid thereafter without penalty, (c) Liens to secure payment for services
rendered or cash advanced to the Fund by Nuveen Advisory Corp., The Chase
Manhattan Bank, N.A. or the Auction Agent and (d) Liens by virtue of any
repurchase agreement; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the MuniPreferred Basic Maintenance
Amount.
For purposes of determining as of any Valuation Date whether the Fund
has Moody's Eligible Assets with an aggregate Discounted Value at least
equal to the MuniPreferred Basic Maintenance Amount, the Fund shall include
as a liability in the calculation of the MuniPreferred Basic Maintenance
Amount an amount calculated semi-annually equal to 150% of the estimated
cost of obtaining Permanent Insurance with respect to Moody's Eligible
Assets that are (i) covered by Portfolio Insurance policies which provide
the Fund with the option to obtain such Permanent Insurance and (ii)
discounted by a Moody's Discount Factor determined by reference to the
insurance claims-paying ability rating of the issuer of such Portfolio
Insurance policy.
"Original Issue Insurance" shall mean "Original Issue Insurance" as
defined in the Fund's Registration Statement.
B-A-4
<PAGE> 134
"Permanent Insurance" shall mean "Permanent Insurance" as defined in
the Fund's Registration Statement.
"Portfolio Insurance" shall mean "Portfolio Insurance" as defined in
the Fund's Registration Statement.
"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- 150%
</TABLE>
provided, however, that in the event the Fund has notified the Auction
Agent of its intent to allocate income taxable for Federal income tax
purposes to shares of such series prior to the Auction establishing the
Applicable Rate for shares of such series, the applicable percentage in the
foregoing table shall be divided by the quantity 1 minus the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income, whichever is greater.
For purposes of this definition, the "prevailing rating" of shares of
a series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares
have a rating of "aa3" or better by Moody's and AA- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency
or substitute rating agencies selected as provided below, (ii) if not
"aa3"/AA- or higher, then "a3"/A- if such shares have a rating of "a3" or
better by Moody's and A- or better by S&P or the equivalent of such ratings
by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, (iii) if not "aa3"/AA- or higher or
"a3"/A-, then "baa3"/BBB- if such shares have a rating of "baa3" or better
by Moody's and BBB- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, (iv) if not "aa3"/AA- or higher, "a3"/A- or
"baa3"/BBB-, then "ba3"/BB- if such shares have a rating of "ba3" or better
by Moody's and BB- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-,
"baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; provided, however, that if
such shares are rated by only one rating agency, the prevailing rating will
be determined without reference to the rating of any other rating agency.
The Fund shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor
Moody's shall make such a rating available, the party set forth in Section
7 of Appendix A or its successor shall select at least one nationally
recognized statistical rating organization (as that term is used in the
rules and regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended from time to time) to act as a
substitute rating agency in respect of shares of the series of
MuniPreferred set forth opposite such party's name in Section 7 of Appendix
A and the Fund shall take all reasonable action to enable such rating
agency to provide a rating for such shares.
"S&P Discount Factor" shall mean, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to (i) (A) in the event such Municipal Obligation is covered by
an Original Issue Insurance policy or a Portfolio Insurance policy which
does not provide the Fund with the option to obtain Permanent Insurance
with respect to such
B-A-5
<PAGE> 135
Municipal Obligation, or is not covered by bond insurance, the S&P or Moody's
rating on such Municipal Obligation, (B) in the event such Municipal Obligation
is covered by a Secondary Market Insurance policy, the S&P insurance
claims-paying ability rating of the issuer of the policy, or (C) in the event
such Municipal Obligation is covered by a Portfolio Insurance policy which
provides the Fund with the option to obtain Permanent Insurance with respect to
such Municipal Obligation, at the Fund's option, the S&P or Moody's rating on
such Municipal Obligation or the S&P insurance claims-paying ability rating of
the issuer of the Portfolio Insurance policy and (ii) the shortest Exposure
Period set forth opposite such rating that is the same length as or is longer
than the S&P Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
- -----------------------------------------------------------------------
Exposure Period AAA* AA* A* BBB*
- -------------------------------------------------------------------------------
<S> <S> <S> <S> <S>
40 Business Days 190% 195% 210% 250%
22 Business Days 170 175 190 230
10 Business Days 155 160 175 215
7 Business Days 150 155 170 210
3 Business Days 130 135 150 190
*S&P rating.
</TABLE>
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 125% if such Municipal Obligations are not rated by
S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any
such Moody's-rated short-term Municipal Obligations which have demand features
exercisable within 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution with
a short-term rating of at least A-1+ from S&P; and further provided that such
Moody's-rated short-term Municipal Obligations may comprise no more than 50% of
short-term Municipal Obligations that qualify as S&P Eligible Assets; (ii) no
S&P Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold. 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 (provided, however, that such
Moody's-rated Municipal Obligations will be included in S&P Eligible Assets only
to the extent the Market Value of such Municipal Obligations does not exceed 50%
of the aggregate Market Value of such S&P Eligible Assets; and further provided
that, for purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated Municipal Obligation, such Municipal Obligation will be deemed to
have an S&P rating which is one full rating category lower than it's Moody's
rating); (iii) is publicly rated BBB or higher by S&P or, if not rated by S&P
but rated by Moody's, is rated at least A by Moody's; (iv) is not part of a
private placement of Municipal Obligations; and (v) is part of an issue of
Municipal Obligations with an original issue size of at least $20 million or, if
of an issue with an original issue size below $20 million (but in no event below
$10 million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Solely for purposes of this definition, the term
"Municipal Obligation" means any obligation the interest on which is exempt from
regular Federal income taxation and which is issued by any of the fifty United
States, the District of Columbia or any of the territories of the United States,
their
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subdivisions, counties, cities, towns, villages, school districts and
agencies (including authorities and special districts created by the
states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations of any one issuer or guarantor
(excluding bond insurers) shall be considered S&P Eligible Assets
only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible
Assets, provided that 2% is added to the applicable S&P Discount
Factor for every 1% by which the Market Value of such Municipal
Obligations exceeds 5% of the aggregate Market Value of S&P
Eligible Assets;
(2) Long-Term Municipal Obligations issued by issuers in any one
state or territory shall be considered S&P Eligible Assets only to
the extent the Market Value of such Municipal Obligations does not
exceed 20% of the aggregate Market Value of S&P Eligible Assets.
For purposes of determining as of any Valuation Date whether the Fund
has S&P Eligible Assets with an aggregate Discounted Value at least equal
to the MuniPreferred Basic Maintenance Amount, the Fund shall include as a
liability in the calculation of the MuniPreferred Basic Maintenance Amount
an amount calculated semi-annually equal to 150% of the estimated cost of
obtaining Permanent Insurance with respect to S&P Eligible Assets that are
(i) covered by Portfolio Insurance policies which provide the Fund with the
option to obtain such Permanent Insurance and (ii) discounted by an S&P
Discount Factor determined by reference to the insurance claims-paying
ability rating of the issuer of such Portfolio Insurance policy.
"Secondary Market Insurance" shall mean "Secondary Market Insurance"
as defined in the Fund's Registration Statement.
Section 5. Initial Rate Periods.
The Initial Rate Period for shares of Series M MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
January 7, 1992.
The Initial Rate Period for shares of Series T MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
January 8, 1992.
The Initial Rate Period for shares of Series W MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
March 5, 1992.
The Initial Rate Period for shares of Series TH1 MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
January 10, 1992.
The Initial Rate Period for shares of Series TH2 MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
March 6, 1992.
The Initial Rate Period for shares of Series F MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
March 9, 1992.
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading
"Definitions" in this Statement.
February 29, 1992 for Series M MuniPreferred, Series T MuniPreferred and
Series TH1 MuniPreferred and May 31, 1992 for Series W MuniPreferred, Series
TH2 MuniPreferred and Series F MuniPreferred.
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Section 7. Party Named for Purposes of the Definition of "Rate Multiple" in
this Statement.
Party: Series of MuniPreferred:
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated Series M
Smith Barney Shearson Inc. Series T
Merrill Lynch, Pierce, Fenner & Smith Incorporated Series W
Lehman Brothers, Inc. Series TH1
Merrill Lynch, Pierce, Fenner & Smith Incorporated Series TH2
Lehman Brothers, Inc. Series F
</TABLE>
Section 8. Additional Definitions.
Not applicable.
Section 9. Dividend Payment Dates.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of:
Series M MuniPreferred on Tuesday, January 7, 1992, and on each Tuesday
thereafter;
Series T MuniPreferred on Wednesday, January 8, 1992, and on each Wednesday
thereafter;
Series W MuniPreferred on Thursday, March 5, 1992, and on each Thursday
thereafter;
Series TH1 MuniPreferred on Friday, January 10, 1992, and on each Friday
thereafter;
Series TH2 MuniPreferred on Friday, March 6, 1992, and on each Friday
thereafter;
Series F MuniPreferred on Monday, March 9, 1992, and on each Monday
thereafter.
Section 10. Amount for Purposes of Subparagraph (c)(i) of Section 5 of Part I of
this Statement.
$600,000,000
Section 11. Redemption Provisions Applicable to Initial Rate Periods.
Not applicable.
Section 12. Applicable Rate for Purposes of Subparagraph(b)(iii) of Section 3 of
Part II of this Statement.
For purpose of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be equal to the lesser of the Kenny
Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the
product of (A) (I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal
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corporate income tax rate applicable to ordinary income, whichever is greater;
provided, however, that if the Fund has notified the Auction Agent of its intent
to allocate to shares of such series in such Rate Period any net capital gains
or other income taxable for Federal income tax purposes ("Taxable Income"), the
Applicable Rate for shares of such series for such Rate Period will be (i) if
the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate,
then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal
to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the
Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or
the product of the Benchmark Rate multiplied by the factor set forth in the
preceding clause (B) and (y) the product of the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax applicable to ordinary income, whichever is
greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing,
Taxable Yield Rate means the rate determined by (a) dividing the amount of
Taxable Income available for distribution per such share of MuniPreferred by the
number of days in the Dividend Period in respect of which such Taxable Income is
contemplated to be distributed, (b) multiplying the amount determined in (a)
above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or 360 (in
the case of any other Dividend Period), and (c) dividing the amount determined
in (b) above by $25,000.
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APPENDIX C:
DESCRIPTION OF INSURERS
Set forth below is information about the various municipal bond insurers with
whom the Nuveen Insured Municipal Opportunity Fund, Inc. currently maintains
specific insurance policies for particular municipal bonds or policies of
portfolio insurance.
AMBAC ASSURANCE CORPORATION ("AMBAC ASSURANCE")
Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin-domiciled stock
insurance corporation regulated by the Office of the Commissioner of Insurance
of the State of Wisconsin and licensed to do business in 50 states, the District
of Columbia, the Territory of Guam and the Commonwealth of Puerto Rico, with
admitted assets of approximately $2,968,000,000 (unaudited) and statutory
capital of approximately $1,715,000,000 (unaudited) as of March 31, 1998.
Statutory capital consists of Ambac Assurance's policyholders' surplus and
statutory contingency reserve. Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., Moody's Investors Service and Fitch IBCA, Inc.
have assigned a triple-A financial strength rating to Ambac Assurance.
Ambac Assurance has obtained a ruling from the Internal Revenue Service to the
effect that the insuring of an obligation by Ambac Assurance will not affect the
treatment for federal income tax purposes of interest on such obligation and
that insurance proceeds representing maturing interest paid by Ambac Assurance
under policy provisions substantially identical to those contained in its
municipal bond insurance policy shall be treated for federal income tax purposes
in the same manner as if such payments were made by the issuer of the bonds.
Ambac Assurance makes no representation regarding the bonds or the advisability
of investing in the bonds and makes no representation regarding, nor has it
participated in the preparation of, the Official Statement other than the
information supplied by Ambac Assurance and presented under the heading "AMBAC
Assurance Corporation."
FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY")
Financial Security is a monoline insurance company incorporated under the laws
of the State of New York. Financial Security is licensed to engage in the
financial guaranty insurance business in all 50 states, the District of Columbia
and Puerto Rico.
Financial Security is a wholly owned subsidiary of Financial Security Assurance
Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company. Major
shareholders of Holdings include Fund American Enterprise Holdings, Inc., U S
WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd. No
shareholder is obligated to pay any debts of or any claims against Financial
Security. Financial Security is domiciled in the State of New York and is
subject to regulation by the State of New York Insurance Department. As of March
31, 1998, the total policyholders' surplus and contingency reserves and the
total unearned premium
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reserve, respectively, of Financial Security and its consolidated subsidiaries
were, in accordance with statutory accounting principles, approximately
$503,683,000 (unaudited) and $808,603,000 (unaudited), the total shareholders'
equity and the total unearned premium reserve, respectively, of Financial
Security and its consolidated subsidiaries were, in accordance with generally
accepted accounting principles, approximately $923,047,000 (unaudited) and
$428,157,000 (unaudited). Copies of Financial Security's financial statements
may be obtained by writing to Financial Security at 350 Park Avenue, New York,
New York 10022, Attention: Communications Department. Financial Security's
telephone number is (212) 826-0100. Financial Security's financial statements
are included as exhibits to the Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q filed with the Securities and Exchange Commission by
Holdings and may be reviewed at Holdings' website:www.fsa.com.
MBIA INSURANCE CORPORATION ("MBIA")
The Insurer is the principal operating subsidiary of MBIA Inc., a New York Stock
Exchange listed company. MBIA Inc. is not obligated to pay the debts of or
claims against the Insurer. The Insurer is domiciled in the State of New York
and licensed to do business in and subject to regulation under the laws of all
50 states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United
States and the Territory of Guam. The Insurer has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the Insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
As of December 31, 1996 the Insurer had admitted assets of $4.4 billion
(audited), total liabilities of $3.0 billion (audited), and total capital and
surplus of $1.4 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of March 31, 1997, the Insurer had admitted assets of $4.5
billion (unaudited), total liabilities of $3.0 billion (unaudited), and total
capital and surplus of $1.5 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.
Furthermore, copies of the Insurer's year end financial statements prepared in
accordance with statutory accounting practices are available without charge from
the Insurer. A copy of the Annual Report on Form 10-K of MBIA Inc. is available
from the Insurer or the Securities and Exchange Commission. The address of the
Insurer is 113 King Street, Armonk, New York 10504. The telephone number of the
Insurer is (914) 273-4545.
The Insurer's policy of portfolio insurance unconditionally and irrevocably
guarantees to Nuveen Insured Municipal Opportunity Fund, Inc. the full and
complete payment required to be made
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by or on behalf of the issuer to the applicable paying agent or its successor of
an amount equal to (i) the principal of (either at the stated maturity or by
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on, the Municipal Obligations as such payments shall become due but
shall not be so paid (except that in the event of any acceleration of the due
date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of
maturity pursuant to a mandatory sinking fund payment, the payments guaranteed
by the Insurer's policy shall be made in such amounts and at such times as such
payments of principal would have been due had there not been any such
acceleration) and (ii) the reimbursement of any such payment which is
subsequently recovered from the Fund pursuant to a final judgment by a court of
competent jurisdiction that such payment constitutes an avoidable preference to
the Fund within the meaning of any applicable bankruptcy law (a "Preference").
The Insurer's policy does not insure against loss of any prepayment premium
which may at any time be payable with respect to any Municipal Obligation. The
Insurer's policy does not, under any circumstance, insure against loss relating
to: (i) optional or mandatory redemptions (other than mandatory sinking fund
redemptions); (ii) any payments to be made on an accelerated basis; (iii)
payments of the purchase price of Municipal Obligations upon tender thereof; or
(iv) any Preference relating to (i) through (iii) above. The Insurer's policy
also does not insure against nonpayment of principal of or interest on the
Municipal Obligations resulting from the insolvency, negligence or any other act
or omission of any paying agent for the Municipal Obligations.
With respect to small issue industrial development bonds and pollution control
revenue bonds covered by the policy, the Insurer guarantees the full and
complete payments required to be made by or on behalf of an issuer of such bonds
if there occurs pursuant to the terms of the bonds an event which results in the
loss of the tax-exempt status of interest on such bonds, including principal,
interest or premium payments payable thereon, if any, as and when required to be
made by or on behalf of the issuer pursuant to the terms of such bonds.
When the Insurer receives from the paying agent or the Fund, (1) telephonic or
telegraphic notice (subsequently confirmed in writing by registered or certified
mail), or (2) written notice by registered or certified mail, that a required
payment of any insured amount which is then due has not been made, the Insurer
on the due date of such payment or within one business day after receipt of
notice of such nonpayment, whichever is later, will make a deposit of funds, in
an account with State Street Bank and Trust Company, N.A., in New York, New
York, or its successor, sufficient for the payment of any such insured amounts
which are then due. Upon presentment and surrender of such Municipal Obligations
or presentment of such other proof of ownership of the Municipal Obligations,
together with any appropriate instruments of assignment to evidence the
assignment of the insured amounts due on the Municipal Obligations as are paid
by the Insurer, and appropriate instruments to effect the appointment of the
Insurer as agent for the Fund in any legal proceeding related to payment of
insured amounts on Municipal Obligations, such instruments being in a form
satisfactory to State Street Bank and Trust
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Company, N.A., State Street Bank and Trust Company, N.A. shall disburse to the
Fund or the paying agent payment of the insured amounts due on such Municipal
Obligations, less any amount held by the paying agent for the payment of such
insured amounts and legally available therefor.
FINANCIAL GUARANTY INSURANCE COMPANY ("FINANCIAL GUARANTY")
The Portfolio Insurance Policy is non-cancellable except for failure to pay the
premium. The premium rate for each purchase of a security covered by the
Portfolio Insurance Policy is fixed for the life of the Insured Bond. The
insurance premiums are payable monthly by the Fund and are adjusted for
purchases, sales and payments prior to maturity of Insured Bonds during the
month. In the event of a sale of any Insured Bond by the Fund or payment thereof
prior to maturity, the Portfolio Insurance policy terminates as to such Insured
Bond.
Under the provisions of the Portfolio Insurance Policy, Financial Guaranty
unconditionally and irrevocably agrees to pay to State Street Bank and Trust
Company, or its successor, as its agent (the "Fiscal Agent"), that portion of
the principal of and interest on the Insured Bonds which shall become due for
payment but shall be unpaid by reason of nonpayment by the issuer of the Insured
Bonds. The term "due for payment" means, when referring to the principal of an
Insured Bond, its stated maturity date or the date on which it shall have been
called for mandatory sinking fund redemption and does not refer to any earlier
date on which payment is due by reason of call for redemption (other than by
mandatory sinking fund redemption), acceleration or other advancement of
maturity and means, when referring to interest on an Insured Bond, the stated
date for payment of interest. In addition, the Portfolio Insurance Policy covers
nonpayment by the issuer that results from any payment of principal or interest
made by such issuer on the Insured Bond to the Fund which has been recovered
from the Fund or its shareholders pursuant to the United States Bankruptcy Code
by a trustee in bankruptcy in accordance with a final, nonappealable order of a
court having competent jurisdiction.
Financial Guaranty will make such payments to the Fiscal Agent on the date such
principal or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse the Trustee the
face amount of principal and interest which is then due for payment but is
unpaid by reason of nonpayment by the issuer, but only upon receipt by the
Fiscal Agent of (i) evidence of the Trustee's right to receive payment of the
principal or interest due for payment and (ii) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of such
principal or interest due for payment thereupon shall vest in Financial
Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of
the Insured Bond, appurtenant coupon or right to payment of principal or
interest on such Insured Bond and shall be fully subrogated to all of the
Trustee's rights thereunder, including the right to payment, thereof.
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In determining whether to insure municipal securities held in the Fund,
Financial Guaranty will apply its own standards which are not necessarily the
same as the criteria used in regard to the selection of securities by the Fund.
Certain of the municipal securities insured under the Portfolio Insurance Policy
may also be insured under an insurance policy obtained by the issuer of such
municipal securities. The premium for any insurance policy or policies obtained
by an issuer or Insured Bonds has been paid in advance by such issuer and any
such policy or policies are non-cancellable and will continue in force so long
as the Insured Bonds so insured are outstanding. Financial Guaranty has also
agreed, if requested by the Funds on or before the fifth day preceding the 1st
day of any month, to insure to maturity Insured Bonds sold by the Trustee during
the month immediately following such request of the Funds. The premium for any
such insurance to maturity provided by Financial Guaranty is paid by the Fund
and any such insurance is non-cancellable and will continue in force so long as
the Bonds so insured are outstanding.
Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a subsidiary of
General Electric Capital Corporation. Financial Guaranty is a monoline financial
guaranty insurer domiciled in the State of New York and subject to regulation by
the State of New York Insurance Department. As of March 31, 1998, the total
capital and surplus of Financial Guaranty was $1,267,900,134. Financial Guaranty
prepares financial statements on the basis of both statutory accounting
principles and generally accepted accounting principles. Copies of such
financial statements may be obtained by writing to Financial Guaranty at 115
Broadway, New York, New York 10006, Attention: Communications Department
(telephone number: (212) 312-3000) or to the New York State Insurance Department
at 25 Beaver Street, New York, New York 10004-2319, Attention: Financial
Condition Property/Casualty Bureau (telephone number: (212) 480- 5187).
The policies of insurance obtained by the Fund from Financial Guaranty and the
negotiations in respect thereof represent the only relationship between
Financial Guaranty and the Fund. Otherwise neither Financial Guaranty nor its
parent, FGIC Corporation, or any affiliate thereof has any significant
relationship, direct or indirect, with the Fund or the Board of Trustees of the
Fund.
The above municipal bond insurers have insurance claims-paying ability ratings
of AAA from S&P and Aaa from Moody's. Financial Guaranty also has an insurance
claims-paying ability rating of AAA from Fitch. An S&P insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet obligations under an insurance policy in accordance with its
terms. An insurer with an insurance claims-paying ability rating of AAA has the
highest rating assigned by S&P. Capacity to honor insurance contracts is
adjudged by S&P to be extremely strong and highly likely to remain so over a
long period of time. A Moody's insurance claims-paying ability rating is an
opinion of the ability of an insurance company to repay punctually senior
policyholder obligations and claims. An insurer with an insurance claims-paying
ability rating of Aaa is adjudged by Moody's to be of the best quality. In the
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opinion of Moody's, the policy obligations of an insurance company with an
insurance claims-paying ability rating of Aaa carry the smallest degree of
credit risk and, while the financial strength of these companies is likely to
change, such changes as can be visualized are most unlikely to impair the
company's fundamentally strong position.
An insurance claims-paying ability rating by S&P or Moody's does not constitute
an opinion on any specific contract in that such an opinion can only be rendered
upon the review of the specific insurance contract. Furthermore, an insurance
claims-paying ability rating does not take into account deductibles, surrender
or cancellation penalties or the timeliness of payment, nor does it address the
ability of a company to meet nonpolicy obligations (i.e., debt contracts).
The assignment of ratings by S&P or Moody's to debt issues that are fully or
partially supported by insurance policies, contracts or guarantees is a separate
process form the determination of claims-paying ability ratings. The likelihood
of a timely flow of funds from the insurer to the trustee for the bondholders is
a key element in the rating determination for such debt issues.
S&P's and Moody's ratings are not recommendations to buy, sell or hold the
Municipal Obligations insured by policies issued by AMBAC Assurance, Financial
Security, MBIA or Financial Guaranty and such ratings may be subject to revision
or withdrawal at any time by the rating agencies. Any downward revision or
withdrawal of either or both ratings may have an adverse effect on the market
price of the Municipal Obligations insured by policies issued by AMBAC
Assurance, Financial Security, MBIA or Financial Guaranty.
S&P's ratings of AMBAC Assurance, Financial Security, MBIA and Financial
Guaranty should be evaluated independent of Moody's ratings. Any further
explanation as to the significance of the ratings may be obtained only from the
applicable rating agency. See Appendix A for more information about ratings by
Moody's and S&P.
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NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
__________________, 1999
<PAGE> 146
PART C -- OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
PART I
Portfolio of Investments, April 30, 1998 (unaudited)
Statement of Net Assets, April 30, 1998 (unaudited)
Statement of Operations for the six months ended April 30, 1998
(unaudited)
Statement of Changes in Net Assets for the six months ended April 30,
1998 (unaudited) and for the year ended October 31, 1998 (audited)
Portfolio of Investments, October 31, 1998 (audited)
Statement of Net Assets, October 31, 1998 (audited)
Statement of Operations for the year ended October 31, 1998 (audited)
Statement of Changes in Net Assets for the two years ended October 31,
1998 (audited)
(2) EXHIBITS
The exhibits to this Registration Statement are listed in the Exhibit Index
located elsewhere herein.
ITEM 25: MARKETING ARRANGEMENTS
See Sections 2(a) and 3(i) of the Purchase Agreement filed as an Exhibit
herein.
ITEM 26: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission fees $0
Printing and engraving expenses 0
Legal fees 0
Accounting expenses 0
Rating Agency fees 0
Blue Sky filing fees and expenses 0
Miscellaneous expenses 0
--------
Total* $0
========
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[*Estimated]
ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 28: NUMBER OF HOLDERS OF SECURITIES
At ____________, 1998:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
<S> <C>
Common Stock, $.01 par value................................ _________
Preferred Stock, $.01 par value............................. _________
</TABLE>
ITEM 29: INDEMNIFICATION
Article EIGHTH of the Registrant's Articles of Incorporation provides as
follows:
EIGHTH: To the maximum extent permitted by the Minnesota Business
Corporation Act, as from time to time amended, the Corporation shall indemnify
its currently acting and its former directors, officers, employees and agents,
and those persons who, at the request of the Corporation, serve or have served
another corporation, partnership, joint venture, trust or other enterprise in
one or more such capacities. The indemnification provided for herein shall not
be deemed exclusive of any other rights to which those seeking indemnification
may otherwise be entitled.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding (including costs connected with the
preparation of a settlement) may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if authorized by the Board
of Directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay that amount of the
advance which exceeds the amount which it is ultimately determined that he is
entitled to receive from the Corporation by reason of indemnification as
authorized herein; provided, however, that prior to making any such advance at
least one of the following conditions shall have been met: (1) the indemnitee
shall provide a security for his undertaking, (2) the Corporation shall be
insured against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of the disinterested, non-party directors of the
Corporation, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that there is reason to
believe that the indemnitee ultimately will be found entitled to
indemnification.
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Nothing in these Articles of Incorporation or in the By-Laws shall be
deemed to protect or provide indemnification to any director or officer of the
Corporation against any liability to the Corporation or to its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct"), and the Corporation shall not
indemnify any of its officers or directors against any liability to the
Corporation or to its security holders unless a determination shall have been
made in the manner provided hereafter that such liability has not arisen from
such officer's or director's disabling conduct. A determination that an officer
or director is entitled to indemnification shall have been properly made if it
is based upon (1) a final decision on the merits by a court or other body before
whom the proceeding was brought that the indemnitee was not liable by reason of
disabling conduct or, (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority of a quorum
of directors who are neither "interested persons" of the Corporation as defined
in the Investment Company Act of 1940 nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion.
The directors and officers of the Registrant are covered by Investment
Trust Errors and Omission policies in the aggregate amount of $40,000,000 (with
a maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of the
Registrant or where he or she had reasonable cause to believe this conduct was
unlawful).
Section 7 of the Purchase Agreement filed as Exhibit h to this Registration
Statement provides for each of the parties thereto, including the Registrant and
the Underwriters, to indemnify the others, their directors, certain of their
officers and directors and persons who control them against certain liabilities
in connection with the offering described herein, including liabilities under
the Federal securities laws.
ITEM 30: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Nuveen Advisory Corp. serves as investment adviser to the following
open-end management type investment companies: Nuveen Flagship Multistate Trust
I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III,
Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen
Taxable Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money
Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen
Tax-Free Reserves, Inc. It also serves as investment adviser to the following
closed-end management type investment companies: Nuveen Municipal Value Fund,
Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal
Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund, Inc.,
C-III
<PAGE> 149
Nuveen Performance Plus Municipal Fund, Inc., Nuveen California Performance Plus
Municipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc.,
Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund,
Inc., Nuveen California Municipal Market Opportunity Fund, Inc., Nuveen
Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality
Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc.,
Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Investment Quality
Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc.,
Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Select Quality
Municipal Fund, Inc., Nuveen California Select Quality Municipal Fund, Inc.,
Nuveen New York Select Quality Municipal Fund, Inc., Nuveen Quality Income
Municipal Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen
Florida Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal
Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas
Quality Income Municipal Fund, Nuveen California Quality Income Municipal Fund,
Inc., Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier
Municipal Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund, Inc.,
Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California Premium
Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal
Fund, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium
Income Municipal Fund, Inc., Nuveen Insured Florida Premium Income Municipal
Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey
Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4,
Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen
Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income
Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen
Virginia Premium Income Municipal Fund, Nuveen Washington Premium Income
Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia
Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal Fund,
Nuveen North Carolina Premium Income Municipal Fund, Nuveen California Premium
Income Municipal Fund, and Nuveen Insured Premium Income Municipal Fund 2.
Nuveen Advisory Corp. has no other clients or business at the present time. The
principal business address for all of these investment companies is 333 West
Wacker Drive, Chicago, Illinois 60606.
ITEM 31: LOCATION OF ACCOUNTS AND RECORDS
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains Articles of Incorporation, By-Laws, minutes of directors and
shareholders meetings, and contracts of the Registrant and all advisory material
of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004,
maintains all general and subsidiary ledgers, journals, trial balances, records
of all portfolio purchases and sales, and all other required records not
maintained by Nuveen Advisory Corp. It also maintains all the required records
in its capacity as transfer, dividend paying, and shareholder service agent for
shares of the Registrant's Common Stock. Bankers Trust Company, 4 Albany Street,
New
C-IV
<PAGE> 150
York, New York 10006, maintains all required records in its capacity as transfer
agent, registrar, dividend disbursing agent and redemption agent for the
Registrant's MuniPreferred shares.
ITEM 32: MANAGEMENT SERVICES
Not applicable.
ITEM 33: UNDERTAKINGS
(1) Registrant undertakes to suspend the offering of its shares until it amends
its prospectus if (1) subsequent to the effective date of its Registration
Statement, the net asset value declines more than 10 percent from its net asset
value as of the effective date of the Registration Statement, or (2) the net
asset value increases to an amount greater than its net proceeds as stated in
the prospectus.
(2) Not applicable
(3) Not applicable
(4) Not applicable
(5) Registrant undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as a part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 497(h) under the Securities Act of
1933 shall be deemed to be a part of this Registration Statement as of the time
it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of the securities at that time shall be deemed to be
the initial bona fide offering thereof.
(6) Registrant undertakes to send by first class mail or other means designed to
ensure equally prompt delivery, within two business days of receipt of a written
or oral request, any Statement of Additional Information.
(7) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding (is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
C-V
<PAGE> 151
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chicago, and State of Illinois, on the __ day of
_____________, 1999.
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
/s/ GIFFORD R. ZIMMERMAN
--------------------------------------
Gifford R. Zimmerman, Vice President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ STEVEN D. FOY Vice President and _____, 1999
- ----------------------------------------- Controller (Principal
Steven D. Foy Financial and Accounting
Officer)
Timothy R. Schwertfeger* Chairman of the Board and
Director (Principal
Executive Officer)
Robert P. Bremner* Director
Lawrence H. Brown* Director
Anne E. Impellizzeri* Director
Peter R. Sawers* Director
William J. Schneider* Director
Judith M. Stockdale Director
</TABLE>
By
/s/ GIFFORD R. ZIMMERMAN
-----------------------
Gifford R. Zimmerman
Attorney-in-Fact
_____________, 1999
- ----------------
* An original power of attorney authorizing, among others, Timothy R.
Schwertfeger, Gifford R. Zimmerman, Larry W. Martin, and each of them, to
execute this Registration Statement, and Amendments thereto, for each of the
officers and directors of Registrant on whose behalf this Registration Statement
is filed, have been executed and are filed herewith.
C-VI
<PAGE> 152
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- ------- ------------
a. Restated Articles of Incorporation of Registrant, as amended, including the
Amendment and Restatement of Statement Establishing and Fixing the Rights
and Preferences of Registrant's Municipal Auction Rate Cumulative Preferred
Stock....
b. By-Laws of Registrant..........................
c. Not applicable..............................................
d.1 Basic Terms of Auction Agency Agreement, including form of request and
acceptance letter related thereto ................................
d.2 Basic Terms of Broker-Dealer Agreement, including form of request and
acceptance letter related thereto...............................
d.3 Form of Letter of Representation to The Depository Trust Company relating
to each Series of MuniPreferred ......*
e. Dividend Reinvestment Plan.....
f. Not applicable..............................................
g.1 Investment Management Agreement....................................
g.2 Renewal of Investment Management Agreement..............
h. Form of Purchase Agreement..................................*
i. Deferred Compensation Plan for Non-Employee Directors
j.1 Exchange-Traded Fund Custody Agreement...................
j.2 Fund Accounting Agreement.................................
k. Not applicable..............................................
l.1 Opinion and consent of Morgan, Lewis & Bockius LLP........*
1.2 Opinion and consent of Dorsey & Whitney.........................*
m. Not applicable..............................................
n. Consent of Ernst & Young....................................*
o. Not applicable..............................................
p. Not applicable..............................................
q. Not applicable..............................................
r. Financial Data Schedule.....................................*
s. Powers of Attorney............................................
*to be filed by amendment
C-VII
<PAGE> 1
EXHIBIT 99.a
ARTICLES OF INCORPORATION
OF
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
* * *
FIRST: The name and address of the incorporator are as follows:
Name Address
---- -------
Larry W. Martin 333 West Wacker Drive
Chicago, Illinois 60606
SECOND: The name of the Corporation is: Nuveen Insured Municipal
Opportunity Fund, Inc. (the "Corporation").
THIRD: The purposes for which the Corporation is formed and the business
to be carried on and promoted by it are as follows:
To hold, invest, and reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise sell,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to
account or realize upon securities and other negotiable or non-negotiable
instruments, obligations and evidences of indebtedness created or issued by any
persons, associations, corporations, syndicates, combinations, organizations,
governments or subdivisions thereof, and generally deal in any such securities
and other negotiable or non-negotiable instruments, obligations and evidences
of indebtedness; and to exercise, as owner or holder of any, securities or
other instruments, all rights, powers, and privileges in respect thereof and to
do any and all acts and things for the preservation, protection and improvement
of any and all such securities or other instruments and, in general, to conduct
the business of a closed-end investment company as that term is defined in the
Act of Congress entitled the Investment Company Act of 1940, as amended;
To issue and sell shares or its own capital stock from time to time on
such terms and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the State of Minnesota and by these Articles
of Incorporation as its Board of Directors may determine; and
To engage in any lawful act or activity for which corporations may be
organized under the Minnesota Business Corporation Act.
The enumeration herewith or the objects and purposes of the Corporation
shall be construed as powers as well as objects and purposes and shall not be
deemed to exclude by inference any powers, objects or purposes which the
Corporation is empowered to exercise, whether expressly by
<PAGE> 2
force of the laws or the State of Minnesota now or hereafter in effect, or
implied by the reasonable construction of such laws.
FOURTH: The address of the registered office of the Corporation in the
state of Minnesota is 33 South Sixth Street, Multifoods Tower, Minneapolis,
Minnesota 55402. The name of its resident agent at such address is The
Prentice-Hall Corporation System, Inc.
FIFTH: The total number of shares of stock which the Corporation is
authorized to issue is Two Hundred and One Million (201,000,000), consisting of
One Million (1,000,000) shares of preferred stock, par value $.01 per share and
of the aggregate par value of Ten Thousand Dollars ($10,000) (the "Preferred
Stock") and Two Hundred Million (200,000,000) shares of common stock, par value
$.01 per share and of the aggregate par value of Two Million Dollars
($2,000,000) (the "Common Stock"). There shall be no cumulative voting. The
designations and powers, preferences and rights, and the qualifications,
limitations and restrictions thereof, of each of the classes of stock of the
Corporation are as follows:
(a) Preferred Stock. The Preferred Stock shall be issued from time to
time in one or more series with such distinctive serial designations and
(i) may have such voting powers, full or limited; (ii) may be subject to
redemption at such time or times and at such price or prices; (iii) may be
entitled to receive dividends (which may be cumulative or noncumulative)
at such rate or rates, on such conditions, and at such times, and payable
in preference to, or in such relation to, the dividends payable on any
other class or classes of stock; (iv) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the
Corporation; (v) may be made convertible into, or exchangeable for, shares
of any other class or classes or of any other series of the same or any
other class or classes of stock of the Corporation, at such price or
prices or at such rates of exchange and with such adjustments; and (vi)
shall have such other relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, all as shall
hereafter be stated and expressed in the resolution or resolutions
providing for the issue of such Preferred Stock from time to time adopted
by the Board of Directors pursuant to authority so to do which is hereby
expressly vested in the Board.
(b) Common Stock.
<PAGE> 3
(i) Subject to the rights of the holders of the Preferred Stock of
the corporation, in the event or the liquidation or dissolution of the
Corporation, the holders of the Common Stock shall be entitled to receive
pro rata the net distributable assets of the Corporation.
(ii) The holders of shares of the Common Stock shall not, as such
holders, have any right to acquire, purchase or subscribe for any shares
of Common Stock or securities of the Corporation which it may hereafter
issue or sell (whether out of the number of shares authorized by these
Articles of Incorporation, or out of any shares acquired by it after the
issuance thereof, or otherwise), other than such right, if any, as the
board of Directors of the Corporation in its discretion may determine.
(iii) Subject to the rights of the holders of the Preferred Stock of
the Corporation, dividends, when, as and if declared by the Board of
Directors, shall be shared equally by the holders of Common Stock on a
share for share basis. The Board of Directors may direct that any
dividends so declared and distributed shall be paid in cash to the
holder, or, alternatively, may direct that any such dividends be
reinvested in full and fractional shares of the Corporation if such
holder elects to have them reinvested.
(iv) If any shares of Common Stock shall have been purchased or
otherwise reacquired by the Corporation in accordance with law, all
shares so purchased or otherwise reacquired shall be retired
automatically, and such retired shares shall have the status of
authorized but unissued shares of Common Stock and the number of
authorized shares of Common Stock of the Corporation shall not be reduced
by the number of any shares retired.
(v) Shares of Common Stock shall be issued from time to time either
for cash or for such other considerations (which may be in any one or
more instances a certain specified consideration or certain specified
considerations) as the Board of Directors, from time to time, may deem
advisable, in the manner and to the extent now or hereafter permitted by
the laws of the State of Minnesota and the Investment Company Act.
(vi) The Corporation may issue shares of its Common Stock in
fractional denominations to the same extent as its whole shares, and
shares in fractional denominations shall be shares of Common Stock having
proportionately to the respective fractions represented thereby all the
rights of whole shares, including, without limitation, the right to
-3-
<PAGE> 4
vote, the right to receive dividends and distributions and the right to
participate upon liquidation of the Corporation, but excluding the right
to receive a certificate representing fractional shares.
SIXTH: (a) The initial number of directors of the Corporation shall be
seven. The By-Laws of the Corporation may fix the number of directors at a
number greater or less than seven and may authorize the Board of Directors, by
the vote of the majority of the entire Board of Directors, to increase or
decrease the number of directors fixed by these Articles of Incorporation or by
the By-Laws within limits specified in the By-laws.
(b) The names of the persons who will serve as the initial directors
of the Corporation are as follows: Royce A. Hoyle, Jr., Donald E. Sveen,
Richard J. Franke, Robert G. Sether, Margaret K. Rosenheim, Frank P.
Wendt and John E. O'Toole.
(c) Any vacancy occurring in the Board of Directors may be filled by
a majority of the directors in office. A new directorship resulting from
an increase in the number of directors shall be construed to be a
vacancy. Any director elected to fill a vacancy shall have the same
remaining term as that of his predecessor, if any, or such term as the
Board may determine.
(d) A director may be removed from office only for "Cause" (as
hereinafter defined) and only by action of at least sixty-six and
two-thirds percent (66 2/3%) of the outstanding shares of the class or
classes of capital stock that elected such director. "Cause" shall
require willful misconduct, dishonesty, fraud or a felony conviction.
(e) In addition to the voting requirements imposed by law or by any
other provision of these Articles of Incorporation, the provisions set
forth in this Article SIXTH may not be amended, altered or repealed in
any respect, nor may any provision inconsistent with this Article SIXTH
be adopted, unless such action is approved by the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of Common Stock and outstanding shares of Preferred
Stock. In the event the holders of shares of Common Stock or the holders
of shares of Preferred Stock, as the case may be, are required by law to
approve such an action by a class vote of such holders, such action must
-4-
<PAGE> 5
be approved by the holders of at least sixty-six and two-thirds percent
(66-2/3%) of such holders or such lower percentage as may be required by
law.
SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and shareholders.
(a) All corporate powers of the Corporation shall be exercised by
the Board of Directors except as otherwise provided by law; provided,
subject to the provisions of paragraph (c) of this Article SEVENTH, the
Board of Directors may delegate the management of the assets of the
Corporation and such other functions as it may deem reasonable and proper
to an Investment Adviser, as such term is hereinbelow defined, pursuant
to a written contract. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or
more committees, each committee to consist of two or more of the
directors of the Corporation, which, to the extent provided in said
resolution or resolutions or in the By-Laws of the Corporation, shall
have and may exercise the powers of the Board or Directors in the
management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to all
papers which may require it.
(b) A contract or other transaction between the Corporation and any
of its directors or between the Corporation and an organization in which
any of its directors is a director, officer, or legal representative or
has a material financial interest is not void or voidable because the
director or directors or other organizations are parties or because the
director or directors am present at the meeting of shareholders or the
board or a committee at which the contract or transaction is authorized,
approved or ratified; if: (i) the contract or transaction was, and the
person asserting the validity of the contract or transaction sustains the
burden of establishing that the contract or transaction was, fair and
reasonable as to the Corporation at the time it was authorized, approved,
or ratified; (ii) the material facts as to the contract or transaction
and as to the directors or directors' interest are fully disclosed or
known to the shareholders and the contract or transaction is approved in
good faith by the holders of a majority of the outstanding shares, but
shares owned by the interested director
-5-
<PAGE> 6
or directors shall not be counted in determining the presence of a
quorum and shall not be voted; or (iii) the material facts as to the
contract or transaction and as to the director's or, directors' interest
are fully disclosed or known to the board or a committee, and the board or
committee authorizes, approves, or ratifies the contract or transaction in
good faith by a majority of the board or committee, but the interested
director or directors shall not be counted in determining the presence of
a quorum and shall not vote.
(c) The Corporation may enter into a written contract with one or more
persons (which term shall include any firm, corporation, trust or
association), hereinafter referred to as the "Investment Adviser", to act
as investment adviser to the Corporation and as such to perform such
functions as the Board of Directors may deem reasonable and proper,
including, without limitation, investment advisory, management, research,
valuation of assets, clerical and administrative functions. Any such
contract shall be subject to the approval of those persons required by the
Investment Company Act of 1940 to approve such contract, and shall be
terminable at any time upon not more than 60 days' notice by resolution of
the Board of Directors or by vote of a majority of the outstanding shares
of Common Stock.
Subject to the provisions or paragraph (b) of this Article SEVENTH,
any such contract may be made with any firm or corporation in which any
director or directors of the Corporation may be interested. The
compensation of the Investment Adviser may be based upon a percentage of
the value of the net assets of the Corporation, a percentage of the
income or gross realized or unrealized gain of the Corporation, or a
combination thereof, or otherwise, as may be provided in such contract.
Upon the termination of any contract with Nuveen Advisory Corp., or
any corporation affiliated with John Nuveen & Co. Incorporated, acting as
Investment Adviser, the Board of Directors is hereby authorized to
promptly change the name of the Corporation to a name which does not
include "Nuveen" or any approximation or abbreviation thereof.
(d) The Board of Directors shall have authority to appoint and enter
into a written contract or contracts with an underwriter or distributor
or distributors as agent or agents for the sale of shares of the
Corporation and to pay such underwriter, distributor or distributors
-6-
<PAGE> 7
and agent or agents such amounts as the Board of Directors may in its
discretion deem reasonable and proper. Subject to the provisions of
paragraph (b) of this Article SEVENTH, any such contract may be made with
any firm or corporation, including, without limitation, the Investment
Adviser, or any firm or corporation in which any director or directors of
the Corporation or the Investment Adviser may be interested.
(e) The Board of Directors is hereby empowered to authorize the
issuance from time to time of any class or series of class of shares of
Common Stock or Preferred Stock, whether now or hereafter authorized, for
such consideration as the Board of Directors may deem advisable, subject
to such limitations and restrictions as may be set forth in these
Articles of Incorporation or in the By-Laws of the Corporation, or in the
laws of the State of Minnesota.
(f) The Board of Directors shall have the power to make, alter,
amend or repeal the By-Laws of the Corporation, and to adopt any new
By-Laws, except to the extent that the By-Laws may otherwise provide;
provided, however, that any such By-laws may be altered, amended or
repealed, or new By-Laws may be adopted, by the shareholders of the
corporation.
(g) The Board of Directors shall have power from time to time to set
apart out of any funds of the Corporation available for dividends a
reserve or reserves for any proper purpose, and to abolish any such
reserve.
(h) Any determination made by or pursuant to the direction of the
Board of Directors in good faith and consistent with the provisions of
these Articles of Incorporation as to any of the following matters shall
be final and conclusive and shall be binding upon the Corporation and
every holder at any time of shares of its capital stock, namely: the
amount of the assets, obligations, liabilities and expense of the
Corporation; the amount of the net income of the Corporation from
dividends and interest for any period and the amount of assets at any
time legally available for the payment of dividends or distributions; the
amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or
charges were created shall have been paid or discharged); the market
-7-
<PAGE> 8
value, or any quoted price to be applied in determining the market value,
of any security owned or held by the Corporation; the fair value of any
security for which quoted prices are not readily available, or of any
other asset owned or held by the Corporation; the number of shares of the
Corporation issued or issuable; the net asset value per share; any matter
relating to the acquisition, holding and depositing of securities and
other assets by the Corporation; any question as to whether any
transaction constitutes a purchase of securities on margin, a short sale
of securities, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution
of, any securities, and any matter relating to the issue, sale,
repurchase, and/or other acquisition or disposition of shares of capital
stock of the Corporation. No provision of these Articles of
Incorporation shall be effective to (i) require a waiver of compliance
with any provision of the Securities Act of 1933, as amended, or the
Investment Company Act of 1940, as amended, or of any valid rule,
regulation or order of the Commission thereunder, or (ii) protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or to its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his office.
EIGHTH: To the maximum extent permitted by the Minnesota Business
Corporation Act, as from time to time amended, the Corporation shall indemnify
its currently acting and its former directors, officers, employees and agents,
and those persons who, at the request of the Corporation serve or have served
another corporation, partnership, joint venture, trust or other enterprise in
one or more such capacities. The indemnification provided for herein shall not
be deemed exclusive of any other rights to which those seeking indemnification
may otherwise be entitled.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding (including costs connected with the
preparation of a settlement) may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if authorized by the
Board of Directors in the specific case, upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay that amount of
the advance which exceeds the amount which it is ultimately determined that he
is entitled to receive from the Corporation by reason of
-8-
<PAGE> 9
indemnification as authorized herein; provided, however, that prior to making
any such advance at least one of the following conditions shall have been
met: (1) the indemnitee shall provide a security for his undertaking, (2) the
Corporation shall be insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the disinterested, non-party
directors of the Corporation, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts, that
there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be
deemed to protect or provide indemnification to any director or officer of the
Corporation against any liability to the Corporation or to its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct"), and the Corporation shall not
indemnify any of its officers or directors against any liability to the
Corporation or to its security holders unless a determination shall have been
made in the manner provided hereafter that such liability has not arisen from
such officer's or director's disabling conduct. A determination that an
officer or director is entitled to indemnification shall have been properly
made if it is based upon (1) a final decision on the merits by a court or other
body before whom the proceeding was brought that the indemnitee was not liable
by reason of disabling conduct or, (2) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the indemnitee
was not liable by reason of disabling conduct, by (a) the vote of a majority of
a quorum of directors who are neither "interested persons" of the Corporation
as defined in the Investment Company Act of 1940 nor parties to the proceeding,
or (b) an independent legal counsel in a written opinion.
NINTH: The existence of the Corporation shall be perpetual.
TENTH: Any action which requires shareholder approval and which is
required or permitted to be taken by the board of directors may be taken by
written action signed by all of the directors. Any action, other than an
action requiring shareholder approval, required or permitted to be taken by the
board of directors may be taken by written action signed by that number of
directors that would be required to take the same action at a meeting of the
board at which all directors were present.
-9-
<PAGE> 10
ELEVENTH: (a) Notwithstanding any other provision of these Articles of
Incorporation, an affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding Common Stock and outstanding
Preferred Stock, voting as a single class, shall be required to approve, adopt
or authorize (i) a conversion of the Corporation from a closed-end investment
company to an open-end investment company, (ii) a merger or consolidation of
the corporation with any other corporation or a reorganization or
recapitalization, (iii) a sale, lease or transfer of all or substantially all
of the assets of the Corporation (other than in the regular course of the
corporation's investment activities), or (iv) a liquidation or dissolution of
the corporation, unless such action has previously been approved, adopted or
authorized by the affirmative vote of two-thirds of the total number of
directors fixed in accordance with the By-Laws, in which case the affirmative
vote of the holders of at least a majority of the outstanding Common Stock and
outstanding Preferred Stock, voting as a single class, shall be required.
Except as may otherwise be required by law, in the case of the conversion of
the Corporation from a closed-end investment company to an open-end investment
company, or in the case of any of the foregoing transactions constituting a
plan of reorganization (as such term is used in the Investment Company Act of
1940, as amended) which adversely affects the holders of shares of Preferred
Stock, approval, adoption or authorization of the action in question will also
require the affirmative vote of the holders of sixty-six and two-thirds percent
(66-2/3%) of the shares of Preferred Stock voting as a separate class;
provided, however, that such separate class vote shall be a majority vote if
the action in question has previously been approved, adopted or authorized by
the affirmative vote of two-thirds of the total number of directors fixed in
accordance with the By-Laws.
(b) In addition to the voting requirements imposed by law or by any other
provision of these Articles of Incorporation, the provisions set forth in this
Article ELEVENTH may not be amended; altered or repealed in any respect, nor
may any provision inconsistent with this Article ELEVENTH be adopted, unless
such action is approved by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of Common
Stock and outstanding shares of Preferred Stock. In the event the holders of
shares of Common Stock or the holders of shares of Preferred Stock, as the case
may be, are required by law to approve such an action by a class vote of such
holders, such action must be approved by the holders of at least sixty-
-10-
<PAGE> 11
six and two-thirds percent (66-2/3%) of such holders or such lower percentage
as may be required by law.
TWELFTH: No person who was or is a director of the Corporation shall be
personally liable to the Corporation or its shareholders for monetary damages
for any breach of fiduciary duty as a director except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its
shareholders, (b) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (c) under Section
302A.559 or 80A.23 of the Minnesota Business Corporation Act or (d) for any
transaction for which the director derived an improper personal benefit.
THIRTEENTH: (a) The Corporation reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation, in
the manner now or hereafter prescribed by statute, and any contract rights
conferred upon the shareholders are granted subject to this reservation.
(b) Not withstanding the foregoing, the provisions set forth in Articles
SIXTH and ELEVENTH may not be amended, altered or repealed in any respect, nor
may any provision inconsistent with any of such Articles be adopted unless such
amendment, alteration, repeal or inconsistent provision is approved as
specified in each such respective Article.
IN WITNESS WHEREOF, I have signed these Articles this 25th day of July,
1991.
/s/ Larry W. Martin
------------------------
Incorporator
Larry W. Martin
/s/ Gifford R. Zimmerman
------------------------
Witness
Gifford R. Zimmerman
-11-
<PAGE> 12
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
AMENDMENT AND RESTATEMENT OF
STATEMENT ESTABLISHING AND FIXING THE RIGHTS
AND PREFERENCES OF
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED(R)")
<PAGE> 13
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
TABLE OF CONTENTS
Page
DEFINITIONS 1
"AA" Composite Commercial Paper Rate 1
Accountant's Confirmation 2
Affiliate 2
Agent Member 2
Anticipation Notes 2
Applicable Rate 2
Articles 2
Auction 2
Auction Agency Agreement 2
Auction Agent 2
Auction Date 2
Auction Procedures 3
Available MuniPreferred 3
Benchmark Rate 3
Beneficial Owner 3
Bid and Bids 3
Bidder and Bidders 3
Board of Directors 3
Broker-Dealer 3
Broker-Dealer Agreement 3
Business Day 3
Code 3
Commercial Paper Dealers 3
Common Stock 3
Cure Date 3
Date of Original Issue 3
Deposit Securities 4
Discounted Value 4
Dividend Payment Date 4
Dividend Period 4
Existing Holder 4
Failure to Deposit 4
Federal Tax Rate Increase 4
Fund 5
Gross-up Payment 5
Holder 5
Hold Order and Hold Orders 5
Independent Accountant 5
Initial Rate Period 5
Interest Equivalent 5
Issue Type Category 5
Kenny Index 5
Late Charge 5
Liquidation Preference 5
Market Value 5
Maximum Potential Gross-up Payment Liability 5
Maximum Rate 6
<PAGE> 14
Page
Moody's 6
Moody's Discount Factor 6
Moody's Eligible Asset 7
Moody's Exposure Period 7
Moody's Volatility Factor 7
MuniPreferred 7
MuniPreferred Basic Maintenance Amount 7
MuniPreferred Basic Maintenance Cure Date 8
MuniPreferred Basic Maintenance Report 9
Municipal Obligations 9
1940 Act 9
1940 Act Cure Date 9
1940 Act MuniPreferred Asset Coverage 9
Notice of Redemption 9
Notice of Special Rate Period 9
Order and Orders 9
Original Issue Insurance 9
Other Issues 9
Outstanding 9
Permanent Insurance 9
Person 9
Portfolio Insurance 10
Potential Beneficial Owner 10
Potential Holder 10
Preferred Stock 10
Quarterly Valuation Date 10
Rate Multiple 10
Rate Period 10
Rate Period Days 10
Receivables for Municipal Obligations Sold 10
Redemption Price 10
Reference Rate 11
Registration Statement 11
S&P 11
S&P Discount Factor 11
S&P Eligible Asset 11
S&P Exposure Period 11
S&P Volatility Factor 11
Secondary Market Insurance 11
Securities Depository 11
Sell Order and Sell Orders 11
Special Rate Period 11
Special Redemption Provisions 11
Submission Deadline 11
Submitted Bid and Submitted Bids 12
Submitted Hold Order and Submitted Hold Orders 12
Submitted Order and Submitted Orders 12
Submitted Sell Order and Submitted Sell Orders 12
Subsequent Rate Period 12
Substitute Commercial Paper Dealer 12
Substitute U.S. Government Securities Dealer 12
Sufficient Clearing Bids 12
Taxable Allocation 12
Taxable Income 12
<PAGE> 15
Page
Taxable Equivalent of the Short-Term Municipal Bond Rate 12
Treasury Bill 13
Treasury Bill Rate 13
Treasury Note 13
Treasury Note Rate 13
U.S. Government Securities Dealer 14
Valuation Date 14
Volatility Factor 14
Voting Period 14
Winning Bid Rate 14
PART I 15
1. Number of Authorized Shares. 15
2. Dividends. 15
(a) Ranking. 15
(b) Cumulative Cash Dividends. 15
(c) Dividends Cumulative From Date of Original Issue. 15
(d) Dividend Payment Dates and Adjustment Thereof. 15
(e) Dividend Rates and Calculation of Dividends. 16
(i) Dividend Rates. 16
(ii) Calculation of Dividends. 17
(f) Curing a Failure to Deposit. 18
(g) Dividend Payments by Fund to Auction Agent. 18
(h) Auction Agent as Trustee of Dividend Payments by Fund. 18
(i) Dividends Paid to Holders. 18
(j) Dividends Credited Against Earliest Accumulated But
Unpaid Dividends. 18
(k) Dividends Designated as Exempt-Interest Dividends. 18
3. Gross-up Payments. 19
(a) Minimum Rate Periods and Special Rate Periods of
28 Rate Period Days or Fewer. 19
(b) Special Rate Periods of More Than 28 Rate Period Days. 19
(c) No Gross-up Payments In the Event of a Reallocation. 19
4. Designation of Special Rate Periods. 19
(a) Length of and Preconditions for Special Rate Period. 19
(b) Adjustment of Length of Special Rate Period. 20
(c) Notice of Proposed Special Rate Period. 20
(d) Notice of Special Rate Period. 20
(e) Failure to Deliver Notice of Special Rate Period. 21
5. Voting Rights. 21
(a) One Vote Per Share of MuniPreferred. 21
(b) Voting For Additional Directors. 22
(i) Voting Period. 22
(ii) Notice of Special Meeting. 22
(iii) Terms of Office of Existing Directors. 22
(iv) Terms of Office of Certain Directors to
Terminate Upon Termination of Voting
Period. 23
(c) Holders of MuniPreferred To Vote On Certain Other
Matters. 23
(i) Increases in Capitalization. 23
(ii) 1940 Act Matters. 24
(d) Board May Take Certain Actions Without Shareholder
Approval. 24
(e) Voting Rights Set Forth Herein Are Sole Voting Rights. 25
(f) No Preemptive Rights or Cumulative Voting. 25
<PAGE> 16
Page
(g) Voting for Directors Sole Remedy for Fund's Failure
to Pay Dividends. 25
(h) Holders Entitled to Vote. 25
6. 1940 Act MuniPreferred Asset Coverage. 25
7. MuniPreferred Basic Maintenance Amount. 25
8. [Reserved] 27
9. Restrictions on Dividends and Other Distributions. 27
(a) Dividends on Preferred Stock Other Than MuniPreferred. 27
(b) Dividends and Other Distributions With Respect to
Common Stock Under the 1940 Act. 27
(c) Other Restrictions On Dividends and Other Distributions. 27
10. Rating Agency Restrictions. 28
11. Redemption. 29
(a) Optional Redemption. 29
(b) Mandatory Redemption. 30
(c) Notice of Redemption. 31
(d) No Redemption Under Certain Circumstances. 31
(e) Absence of Funds Available for Redemption. 31
(f) Auction Agent as Trustee of Redemption Payments by Fund. 32
(g) Shares for Which Notice of Redemption Has Been Given Are
No Longer Outstanding. 32
(h) Compliance With Applicable Law. 32
(i) Only Whole Shares of MuniPreferred May Be Redeemed. 32
12. Liquidation Rights. 32
(a) Ranking. 32
(b) Distributions Upon Liquidation. 32
(c) Pro Rata Distributions. 33
(d) Rights of Junior Stock. 33
(e) Certain Events Not Constituting Liquidation. 33
13. Miscellaneous. 33
(a) Amendment of Appendix A to Add Additional Series. 33
(b) Appendix A Incorporated By Reference. 33
(c) No Fractional Shares. 34
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or
Otherwise Acquired by the Fund. 34
(e) Board May Resolve Ambiguities. 34
(f) Headings Not Determinative. 34
(g) Notices. 34
PART II 35
1. Orders. 35
2. Submission of Orders by Broker-Dealers to Auction Agent. 36
3. Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate. 38
4. Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocation of Shares. 39
5. Notification of Allocations. 42
6. Auction Agent. 42
7. Transfer of Shares of MuniPreferred. 42
8. Global Certificate. 43
Appendix A A-1
Section 1. Designation As To Series. A-1
Section 2. Number of Authorized Shares Per Series. A-2
<PAGE> 17
Page
Section 3. Exceptions to Certain Definitions. A-2
Section 4. Certain Definitions. A-2
S&P Discount Factor A-6
S&P Eligible Asset A-7
Secondary Market Insurance A-8
Section 5. Initial Rate Periods. A-8
Section 6. Date for Purposes of Paragraph (yyy) Contained Under
the Heading "Definitions" in this Statement. A-8
Section 7. Party Named for Purposes of the Definition of
"Rate Multiple" in this Statement. A-8
Section 8. Additional Definitions. A-8
Section 9. Dividend Payment Dates. A-8
Section 10. Amount for Purposes of Subparagraph (c)(i) of
Section 5 of Part I of this Statement. A-9
Section 11. Redemption Provisions Applicable to Initial
Rate Periods. A-9
Section 12. Applicable Rate for Purposes of Subparagraph(b)
(iii) of Section 3 of Part II of this Statement.
<PAGE> 18
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC., a Minnesota corporation
(the "Fund"), certifies to the Secretary of State of the State of Minnesota
that:
First: Pursuant to authority expressly vested in the Board of Directors of
the Fund by Article FIFTH of the Fund's Articles of Incorporation, as amended
(which, as hereafter restated or amended from time to time are, together with
this Statement, herein called the "Articles"), the Board of Directors has, by
resolution, authorized the issuance of shares of the Fund's authorized Preferred
Stock, par value $.01 per share, liquidation preference $25,000 per share,
having such designation or designations as to series as is set forth in Section
1 of Appendix A hereto and such number of shares per such series as is set forth
in Section 2 of Appendix A hereto.
Second: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of each series of MuniPreferred described in Section 1 of Appendix A hereto are
as follows (each such series being referred to herein as a series of
MuniPreferred, and shares of all such series being referred to herein
individually as a share of MuniPreferred and collectively as shares of
MuniPreferred):
DEFINITIONS
Except as otherwise specifically provided in Section 3 of Appendix A
hereto, as used in Parts I and II of this Statement, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) ""AA" Composite Commercial Paper Rate," on any date for any Rate
Period of shares of a series of MuniPreferred, shall mean (i) (A) in the
case of any Minimum Rate Period or any Special Rate Period of fewer than 49
Rate Period Days, the interest equivalent of the 30-day rate; provided,
however, that if such Rate Period is a Minimum Rate Period and the "AA"
Composite Commercial Paper Rate is being used to determine the Applicable
Rate for shares of such series when all of the Outstanding shares of such
series are subject to Submitted Hold Orders, then the interest equivalent
of the seven-day rate, and (B) in the case of any Special Rate Period of
(1) 49 or more but fewer than 70 Rate Period Days, the interest equivalent
of the 60-day rate; (2) 70 or more but fewer than 85 Rate Period Days, the
arithmetic average of the interest
1
<PAGE> 19
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99
Rate Period Days, the interest equivalent of the 90-day rate; (4) 99 or
more but fewer than 120 Rate Period Days, the arithmetic average of the
interest equivalent of the 90-day and 120-day rates; (5) 120 or more but
fewer than 141 Rate Period Days, the interest equivalent of the 120-day
rate; (6) 141 or more but fewer than 162 Rate Period Days, the arithmetic
average of the 120-day and 180-day rates; and (7) 162 or more but fewer
than 183 Rate Period Days, the interest equivalent of the 180-day rate, in
each case on commercial paper placed on behalf of issuers whose corporate
bonds are rated "AA" by S&P or the equivalent of such rating by S&P or
another rating agency, as made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day next preceding
such date; or (ii) in the event that the Federal Reserve Bank of New York
does not make available any such rate, then the arithmetic average of such
rates, as quoted on a discount basis or otherwise, by the Commercial Paper
Dealers to the Auction Agent for the close of business on the Business Day
next preceding such date. If any Commercial Paper Dealer does not quote a
rate required to determine the "AA" Composite Commercial Paper Rate, the
"AA" Composite Commercial Paper Rate shall be determined on the basis of
the quotation or quotations furnished by the remaining Commercial Paper
Dealer or Commercial Paper Dealers and any Substitute Commercial Paper
Dealer or Substitute Commercial Paper Dealers selected by the Fund to
provide such rate or rates not being supplied by any Commercial Paper
Dealer or Commercial Paper Dealers, as the case may be, or, if the Fund
does not select any such Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers, by the remaining Commercial Paper Dealer or
Commercial Paper Dealers. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for
commercial paper of a given days' maturity shall be equal to the quotient
(rounded upwards to the next higher one-thousandth (.001) of 1%)of (A) the
discount rate divided by (B) the difference between (x) 1.00 and (y) a
fraction the numerator of which shall be the product of the discount rate
times the number of days in which such commercial paper matures and the
denominator of which shall be 360.
(b) "Accountant's Confirmation" shall have the meaning specified in
paragraph (c) of Section 7 of Part I of this Statement.
(c) "Affiliate" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by,
in control of or under common control with the Fund; provided, however,
that no Broker-Dealer controlled by, in control of or under common control
with the Fund shall be deemed to be an Affiliate nor shall any corporation
or any Person controlled by, in control of or under common control with
such corporation one of the directors, trustees or executive officers of
which is a director of the Fund be deemed to be an Affiliate solely because
such director, trustee or executive officer is also a director of the Fund.
(d) "Agent Member" shall mean a member of or participant in the
Securities Depository that will act on behalf of a Bidder.
(e) "Anticipation Notes" shall mean Tax Anticipation Notes (TANs),
Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation Notes
(TRANs), Grant Anticipation Notes (GANs) that are rated by S&P and Bond
Anticipation Notes (BANs) that are rated by S&P.
(f) "Applicable Rate" shall have the meaning specified in
subparagraph (e)(i) of Section 2 of Part I of this Statement.
(g) "Articles" shall have the meaning specified on the first page of
this Statement.
(h) "Auction" shall mean each periodic implementation of the Auction
Procedures.
(i) "Auction Agency Agreement" shall mean the agreement between the
Fund and the Auction Agent which provides, among other things, that the
Auction Agent will follow the
2
<PAGE> 20
Auction Procedures for purposes of determining the Applicable Rate for
shares of a series of MuniPreferred so long as the Applicable Rate for
shares of such series is to be based on the results of an Auction.
(j) "Auction Agent" shall mean the entity appointed as such by a
resolution of the Board of Directors in accordance with Section 6 of Part
II of this Statement.
(k) "Auction Date," with respect to any Rate Period, shall mean the
Business Day next preceding the first day of such Rate Period.
(l) "Auction Procedures" shall mean the procedures for conducting
Auctions set forth in Part II of this Statement.
(m) "Available MuniPreferred" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(n) "Benchmark Rate" shall have the meaning specified in Section 12 of
Appendix A hereto.
(o) "Beneficial Owner," with respect to shares of a series of
MuniPreferred, means a customer of a Broker-Dealer who is listed on the
records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of such series.
(p) "Bid" and "Bids" shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(q) "Bidder" and "Bidders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement;
provided, however, that neither the Fund nor any affiliate thereof shall be
permitted to be a Bidder in an Auction, except that any Broker-Dealer that
is an affiliate of the Fund may be a Bidder in an Auction, but only if the
Orders placed by such Broker-Dealer are not for its own account.
(r) "Board of Directors" shall mean the Board of Directors of the Fund
or any duly authorized committee thereof.
(s) "Broker-Dealer" shall mean any broker-dealer, commercial bank or
other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member
or participant, has been selected by the Fund and has entered into a
Broker-Dealer Agreement that remains effective.
(t) "Broker-Dealer Agreement" shall mean an agreement among the Fund,
the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer
agrees to follow the procedures specified in Part II of this Statement.
(u) "Business Day" shall mean a day on which the New York Stock
Exchange is open for trading and which is neither a Saturday, Sunday nor
any other day on which banks in The City of New York, New York, are
authorized by law to close.
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Commercial Paper Dealers" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates
or successors, if such entity is a commercial paper dealer.
3
<PAGE> 21
(x) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Fund.
(y) "Cure Date" shall mean the MuniPreferred Basic Maintenance Cure
Date or the 1940 Act Cure Date, as the case may be.
(z) "Date of Original Issue," with respect to shares of a series of
MuniPreferred, shall mean the date on which the Fund initially issued such
shares.
(aa) "Deposit Securities" shall mean cash and Municipal Obligations
rated at least A-1+ or SP-1+ by S&P, except that, for purposes of
subparagraph (a)(v) of Section 11 of Part I of this Statement, such
Municipal Obligations shall be considered "Deposit Securities" only if they
are also rated P-1, MIG-1 or VMIG-1 by Moody's.
(bb) "Discounted Value," as of any Valuation Date, shall mean, (i)
with respect to an S&P Eligible Asset, the quotient of the Market Value
thereof divided by the applicable S&P Discount Factor and (ii) (a) with
respect to a Moody's Eligible Asset that is not currently callable as of
such Valuation Date at the option of the issuer thereof, the quotient of
the Market Value thereof divided by the applicable Moody's Discount Factor,
or (b) with respect to a Moody's Eligible Asset that is currently callable
as of such Valuation Date at the option of the issuer thereof, the quotient
of (1) the lesser of the Market Value or call price thereof, including any
call premium, divided by (2) the applicable Moody's Discount Factor.
(cc) [Reserved]
(dd) [Reserved]
(ee) "Dividend Payment Date," with respect to shares of a series of
MuniPreferred, shall mean any date on which dividends are payable on shares
of such series pursuant to the provisions of paragraph (d) of Section 2 of
Part I of this Statement.
(ff) "Dividend Period," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the Date of
Original Issue of shares of such series to but excluding the initial
Dividend Payment Date for shares of such series and any period thereafter
from and including one Dividend Payment Date for shares of such series to
but excluding the next succeeding Dividend Payment Date for shares of such
series.
(gg) "Existing Holder," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may
be permitted by the Fund) that is listed on the records of the Auction
Agent as a holder of shares of such series.
(hh) "Failure to Deposit," with respect to shares of a series of
MuniPreferred, shall mean a failure by the Fund to pay to the Auction
Agent, not later than 12:00 noon, New York City time, (A) on the Business
Day next preceding any Dividend Payment Date for shares of such series, in
funds available on such Dividend Payment Date in The City of New York, New
York, the full amount of any dividend (whether or not earned or declared)
to be paid on such Dividend Payment Date on any share of such series or (B)
on the Business Day next preceding any redemption date in funds available
on such redemption date for shares of such series in The City of New York,
New York, the Redemption Price to be paid on such redemption date for any
share of such series after notice of redemption is mailed pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided, however,
that the foregoing clause (B) shall not apply to the Fund's failure to pay
the Redemption Price in respect of shares of MuniPreferred when the related
Notice of Redemption provides that redemption of such shares is subject to
one or more conditions
4
<PAGE> 22
precedent and any such condition precedent shall not have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
(ii) "Federal Tax Rate Increase" shall have the meaning specified in
the definition of "Moody's Volatility Factor."
(jj) "Fund" shall mean the entity named on the first page of this
Statement, which is the issuer of the shares of MuniPreferred.
(kk) "Gross-up Payment" shall have the meaning specified in Section 4
of Appendix A hereto.
(ll) "Holder," with respect to shares of a series of MuniPreferred,
shall mean the registered holder of such shares as the same appears on the
stock books of the Fund.
(mm) "Hold Order" and "Hold Orders" shall have the respective
meanings specified in paragraph (a) of Section 1 of Part II of this
Statement.
(nn) "Independent Accountant" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants
under the Securities Act of 1933, as amended from time to time.
(oo) "Initial Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of
such series in Section 5 of Appendix A hereto.
(pp) "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
(qq) "Issue Type Category," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(rr) "Kenny Index" shall have the meaning specified in the definition
of "Taxable Equivalent of the Short-Term Municipal Bond Rate."
(ss) "Late Charge" shall have the meaning specified in subparagraph
(e)(1)(B) of Section 2 of Part I of this Statement.
(tt) "Liquidation Preference," with respect to a given number of
shares of MuniPreferred, means $25,000 times that number.
(uu) "Market Value" of any asset of the Fund shall mean the market
value thereof determined by the pricing service designated from time to
time by the Board of Directors. Market Value of any asset shall include any
interest accrued thereon. The pricing service values portfolio securities
at the mean between the quoted bid and asked price or the yield equivalent
when quotations are readily available. Securities for which quotations are
not readily available are valued at fair value as determined by the pricing
service using methods which include consideration of: yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market
conditions. The pricing service may employ electronic data processing
techniques or a matrix system, or both, to determine valuations.
(vv) "Maximum Potential Gross-up Payment Liability," as of any
Valuation Date, shall mean the aggregate amount of Gross-up Payments that
would be due if the Fund were to
5
<PAGE> 23
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.
(ww) "Maximum Rate," for shares of a series of MuniPreferred on any
Auction Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the Reference Rate on such Auction Date
for the next Rate Period of shares of such series and (B) the Rate
Multiple on such Auction Date, unless shares of such series have or
had a Special Rate Period (other than a Special Rate Period of 28 Rate
Period Days or fewer) and an Auction at which Sufficient Clearing Bids
existed has not yet occurred for a Minimum Rate Period of shares of
such series after such Special Rate Period, in which case the higher
of:
(A) the dividend rate on shares of such series for the
then-ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate
on such Auction Date for a Rate Period equal in length to the
then-ending Rate Period of shares of such series, if such
then-ending Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal
in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was more than 364 Rate
Period Days, and (y) the Reference Rate on such Auction Date for
a Rate Period equal in length to such Special Rate Period of
shares of such series, if such Special Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate
Period, if such Special Rate Period was more than 364 Rate Period
Days and (2) the Rate Multiple on such Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the highest of (1) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, (2) the Reference Rate on such Auction
Date for the Special Rate Period for which the Auction is being held
if such Special Rate Period is 364 Rate Period Days or fewer or the
Treasury Note Rate on such Auction Date for the Special Rate Period
for which the Auction is being held if such Special Rate Period is
more than 364 Rate Period Days, and (3) the Reference Rate on such
Auction Date for Minimum Rate Periods and (B) the Rate Multiple on
such Auction Date.
(xx) [Reserved]
(yy) "Minimum Rate Period" shall mean any Rate Period consisting of 7
Rate Period Days.
(zz) "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
6
<PAGE> 24
(aaa) "Moody's Discount Factor" shall have the meaning specified in
Section 4 of Appendix A hereto.
(bbb) "Moody's Eligible Asset" shall have the meaning specified in
Section 4 of Appendix A hereto.
(ccc) "Moody's Exposure Period" shall mean the period commencing on a
given Valuation Date and ending 56 days thereafter.
(ddd) "Moody's Volatility Factor" shall mean, as of any Valuation
Date, (i) in the case of any Minimum Rate Period, any Special Rate Period
of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate
Period Days or more, a multiplicative factor equal to 275%, except as
otherwise provided in the last sentence of this definition; (ii) in the
case of any Special Rate Period of more than 28 but fewer than 36 Rate
Period Days, a multiplicative factor equal to 203%; (iii) in the case of
any Special Rate Period of more than 35 but fewer than 43 Rate Period Days,
a multiplicative factor equal to 217%; (iv) in the case of any Special Rate
Period of more than 42 but fewer than 50 Rate Period Days, a multiplicative
factor equal to 226%; and (v) in the case of any Special Rate Period of
more than 49 but fewer than 57 Rate Period Days, a multiplicative factor
equal to 235%. If, as a result of the enactment of changes to the Code, the
greater of the 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 Volatility
Tax Rate Increase Factor
----------------- ----------
<S> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
(eee) "MuniPreferred" shall have the meaning set forth on the first
page of this Statement.
(fff) "MuniPreferred Basic Maintenance Amount," as of any Valuation
Date, shall mean the dollar amount equal to the sum of (i)(A) the product
of the number of shares of MuniPreferred outstanding on such date
multiplied by $25,000 (plus the product of the number of shares of any
other series of Preferred Stock outstanding on such date multiplied by the
liquidation preference of such shares), plus any redemption premium
applicable to shares of MuniPreferred (or other Preferred Stock) then
subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment
Dates for shares of MuniPreferred outstanding that follow such Valuation
Date (plus the aggregate amount of dividends, whether or not earned or
declared, that will have accumulated in respect of other outstanding shares
of Preferred Stock to, but not including, the first respective dividend
payment dates for such other shares that follow such Valuation Date);
(C) the aggregate amount of
7
<PAGE> 25
dividends that would accumulate on shares of each series of MuniPreferred
outstanding from such first respective Dividend Payment Date therefor
through the 56th day after such Valuation Date, at the Maximum Rate
(calculated as if such Valuation Date were the Auction Date for the Rate
Period commencing on such Dividend Payment Date) for a Minimum Rate Period
of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation
Date the Fund shall have delivered a Notice of Special Rate Period to the
Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to
shares of such series, such Maximum Rate shall be the higher of (a) the
Maximum Rate for the Special Rate Period of shares of such series to
commence on such Dividend Payment Date and (b) the Maximum Rate for a
Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, multiplied by the Volatility Factor applicable to a Minimum
Rate Period, or, in the event the Fund shall have delivered a Notice of
Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of
this Part I with respect to shares of such series designating a Special
Rate Period consisting of 56 Rate Period Days or more, the Volatility
Factor applicable to a Special Rate Period of that length (plus the
aggregate amount of dividends that would accumulate at the maximum dividend
rate or rates on any other shares of Preferred Stock outstanding from such
respective dividend payment dates through the 56th day after such Valuation
Date, as established by or pursuant to the respective statements
establishing and fixing the rights and preferences of such other shares of
Preferred Stock) (except that (1) if such Valuation Date occurs at a time
when a Failure to Deposit (or, in the case of shares of Preferred Stock
other than MuniPreferred, a failure similar to a Failure to Deposit) has
occurred that has not been cured, the dividend for purposes of calculation
would accumulate at the current dividend rate then applicable to the shares
in respect of which such failure has occurred and (2) for those days during
the period described in this subparagraph (C) in respect of which the
Applicable Rate in effect immediately prior to such Dividend Payment Date
will remain in effect (or, in the case of shares of Preferred Stock other
than MuniPreferred, in respect of which the dividend rate or rates in
effect immediately prior to such respective dividend payment dates will
remain in effect), the dividend for purposes of calculation would
accumulate at such Applicable Rate (or other rate or rates, as the case may
be) in respect of those days); (D) the amount of anticipated expenses of
the Fund for the 90 days subsequent to such Valuation Date; (E) the amount
of the Fund's Maximum Potential Gross-up Payment Liability in respect of
shares of MuniPreferred (and similar amounts payable in respect of other
shares of Preferred Stock pursuant to provisions similar to those contained
in Section 3 of Part I of this Statement) as of such Valuation Date; and
(F) any current liabilities as of such Valuation Date to the extent not
reflected in any of (i)(A) through (i)(E) (including, without limitation,
any payables for Municipal Obligations purchased as of such Valuation Date
and any liabilities incurred for the purpose of clearing securities
transactions) less (ii) the value (i.e., for purposes of current Moody's
guidelines, the face value of cash, short-term Municipal Obligations rated
MIG-1, VMIG-1 or P-1, and short-term securities that are the direct
obligation of the U.S. government, provided in each case that such
securities mature on or prior to the date upon which any of (i)(A) through
(i)(F) become payable, otherwise the Moody's Discounted Value) of any of
the Fund's assets irrevocably deposited by the Fund for the payment of any
of (i)(A) through (i)(F).
(ggg) "MuniPreferred Basic Maintenance Cure Date," with respect to the
failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount
(as required by paragraph (a) of Section 7 of Part I of this Statement) as
of a given Valuation Date, shall mean the seventh Business Day following
such Valuation Date.
8
<PAGE> 26
(hhh) "MuniPreferred Basic Maintenance Report" shall mean a report
signed by the President, Treasurer or any Senior Vice President or Vice
President of the Fund which sets forth, as of the related Valuation Date,
the assets of the Fund, the Market Value and the Discounted Value thereof
(seriatim and in aggregate), and the MuniPreferred Basic Maintenance
Amount.
(iii) "Municipal Obligations" shall mean "Municipal Obligations"
as defined in the Fund's registration statement on Form N-2 on file with
the Securities and Exchange Commission, as such registration statement may
be amended from time to time (the "Registration Statement").
(jjj) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time.
(kkk) "1940 Act Cure Date," with respect to the failure by the
Fund to maintain the 1940 Act MuniPreferred Asset Coverage (as required by
Section 6 of Part I of this Statement) as of the last Business Day of each
month, shall mean the last Business Day of the following month.
(lll) "1940 Act MuniPreferred Asset Coverage" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Fund which are
stock, including all outstanding shares of MuniPreferred (or such other
asset coverage as may in the future be specified in or under the 1940 Act
as the minimum asset coverage for senior securities which are stock of a
closed-end investment company as a condition of declaring dividends on its
common stock).
(mmm) "Notice of Redemption" shall mean any notice with respect to
the redemption of shares of MuniPreferred pursuant to paragraph (c) of
Section 11 of Part I of this Statement.
(nnn) "Notice of Special Rate Period" shall mean any notice with
respect to a Special Rate Period of shares of MuniPreferred pursuant to
subparagraph (d)(i) of Section 4 of Part I of this Statement.
(ooo) "Order" and "Orders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "Original Issue Insurance," if defined in Section 4 of
Appendix A hereto, shall have the meaning specified in that section.
(qqq) "Other Issues," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(rrr) "Outstanding" shall mean, as of any Auction Date with
respect to shares of a series of MuniPreferred, the number of shares of
such series theretofore issued by the Fund except, without duplication, (i)
any shares of such series theretofore cancelled or delivered to the Auction
Agent for cancellation or redeemed by the Fund, (ii) any shares of such
series as to which the Fund or any Affiliate thereof shall be an Existing
Holder and (iii) any shares of such series represented by any certificate
in lieu of which a new certificate has been executed and delivered by the
Fund.
(sss) "Permanent Insurance," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(ttt) "Person" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a joint
venture or other entity or a government or any agency or political
subdivision thereof.
9
<PAGE> 27
(uuu) "Portfolio Insurance," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(vvv) "Potential Beneficial Owner," with respect to shares of a series
of MuniPreferred, shall mean a customer of a Broker-Dealer that is not a
Beneficial Owner of shares of such series but that wishes to purchase
shares of such series, or that is a Beneficial Owner of shares of such
series that wishes to purchase additional shares of such series.
(www) "Potential Holder," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other person as may
be permitted by the Fund) that is not an Existing Holder of shares of such
series or that is an Existing Holder of shares of such series that wishes
to become the Existing Holder of additional shares of such series.
(xxx) "Preferred Stock" shall mean the preferred stock of the Fund,
and includes the shares of MuniPreferred.
(yyy) "Quarterly Valuation Date" shall mean the last Business Day of
each February, May, August and November of each year, commencing on the
date set forth in Section 6 of Appendix A hereto.
(zzz) "Rate Multiple" shall have the meaning specified in Section 4 of
Appendix A hereto.
(aaaa) "Rate Period," with respect to shares of a series of
MuniPreferred, shall mean the Initial Rate Period of shares of such series
and any Subsequent Rate Period, including any Special Rate Period, of
shares of such series.
(bbbb) "Rate Period Days," for any Rate Period or Dividend Period,
means the number of days that would constitute such Rate Period or Dividend
Period but for the application of paragraph (d) of Section 2 of Part I of
this Statement or paragraph (b) of Section 4 of Part I of this Statement.
(cccc) "Receivables for Municipal Obligations Sold" shall mean (A) for
purposes of calculation of Moody's Eligible Assets as of any Valuation
Date, no more than the aggregate of the following: (i) the book value of
receivables for Municipal Obligations sold as of or prior to such Valuation
Date if such receivables are due within five business days of such
Valuation Date, and if the trades which generated such receivables are (x)
settled through clearing house firms with respect to which the Fund has
received prior written authorization from Moody's or (y) with
counterparties having a Moody's long-term debt rating of at least Baa3; and
(ii) the Moody's Discounted Value of Municipal Obligations sold as of or
prior to such Valuation Date which generated receivables, if such
receivables are due within five business days of such Valuation Date but do
not comply with either of the conditions specified in (i) above, and (B)
for purposes of calculation of S&P Eligible Assets as of any Valuation
Date, the book value of receivables for Municipal Obligations sold as of or
prior to such Valuation Date if such receivables are due within five
business days of such Valuation Date.
(dddd) "Redemption Price" shall mean the applicable redemption
price specified in paragraph (a) or (b) of Section 11 of Part I of this
Statement.
(eeee) "Reference Rate" shall mean (i) the higher of the Taxable
Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial
Paper Rate in the case of Special Rate Periods of more than 28 Rate
10
<PAGE> 28
Period Days but fewer than 183 Rate Period Days; and (iii) the Treasury
Bill Rate in the case of Special Rate Periods of more than 182 Rate Period
Days but fewer than 365 Rate Period Days.
(ffff) "Registration Statement" has the meaning specified in the
definition of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.
(hhhh) "S&P Discount Factor" shall have the meaning specified in
Section 4 of Appendix A hereto.
(iiii) "S&P Eligible Asset" shall have the meaning specified in
Section 4 of Appendix A hereto.
(jjjj) "S&P Exposure Period" shall mean the maximum period of time
following a Valuation Date that the Fund has under this Statement to cure
any failure to maintain, as of such Valuation Date, the Discounted Value
for its portfolio at least equal to the MuniPreferred Basic Maintenance
Amount (as described in paragraph (a) of Section 7 of Part I of this
Statement).
(kkkk) "S&P Volatility Factor" shall mean, as of any Valuation Date,
a multiplicative factor equal to (i) 305% in the case of any Minimum Rate
Period or any Special Rate Period of 28 Rate Period Days or fewer; (ii)
268% in the case of any Special Rate Period of more than 28 Rate Period
Days but fewer than 183 Rate Period Days; and (iii) 204% in the case of any
Special Rate Period of more than 182 Rate Period Days.
(llll) "Secondary Market Insurance," if defined in Section 4 of
Appendix A hereto, shall have the meaning specified in that section.
(mmmm) "Securities Depository" shall mean The Depository Trust
Company and its successors and assigns or any other securities depository
selected by the Fund which agrees to follow the procedures required to be
followed by such securities depository in connection with shares of
MuniPreferred.
(nnnn) "Sell Order" and "Sell Orders" shall have the respective
meanings specified in paragraph (a) of Section 1 of Part II of this
Statement.
(oooo) "Special Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified in paragraph (a) of
Section 4 of Part I of this Statement.
(pppp) "Special Redemption Provisions" shall have the meaning
specified in subparagraph (a)(i) of Section 11 of Part I of this
Statement.
(qqqq) "Submission Deadline" shall mean 1:30 P.M., New York City
time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as
specified by the Auction Agent from time to time.
(rrrr) "Submitted Bid" and "Submitted Bids" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of
this Statement.
(ssss) "Submitted Hold Order" and "Submitted Hold Orders" shall have
the respective meanings specified in paragraph (a) of Section 3 of Part
II of this Statement.
11
<PAGE> 29
(tttt) "Submitted Order" and "Submitted Orders" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of
this Statement.
(uuuu) "Submitted Sell Order" and "Submitted Sell Orders" shall have
the respective meanings specified in paragraph (a) of Section 3 of Part
II of this Statement.
(vvvv) "Subsequent Rate Period," with respect to shares of a series
of MuniPreferred, shall mean the period from and including the first day
following the Initial Rate Period of shares of such series to but excluding
the next Dividend Payment Date for shares of such series and any period
thereafter from and including one Dividend Payment Date for shares of such
series to but excluding the next succeeding Dividend Payment Date for
shares of such series; provided, however, that if any Subsequent Rate
Period is also a Special Rate Period, such term shall mean the period
commencing on the first day of such Special Rate Period and ending on the
last day of the last Dividend Period thereof.
(wwww) "Substitute Commercial Paper Dealer" shall mean The First
Boston Company or Morgan Stanley & Co. Incorporated or their respective
affiliates or successors, if such entity is a commercial paper dealer;
provided, however, that none of such entities shall be a Commercial Paper
Dealer.
(xxxx) "Substitute U.S. Government Securities Dealer" shall mean The
First Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated
or their respective affiliates or successors, if such entity is a U.S.
Government securities dealer; provided, however, that none of such entities
shall be a U.S. Government Securities Dealer.
(yyyy) "Sufficient Clearing Bids" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
(zzzz) "Taxable Allocation" shall have the meaning specified in
Section 3 of Part I of this Statement.
(aaaaa) "Taxable Income" shall have the meaning specified in Section
12 of Appendix A hereto.
(bbbbb) "Taxable Equivalent of the Short-Term Municipal Bond Rate," on
any date for any Minimum Rate Period or Special Rate Period of 28 Rate
Period Days or fewer, shall mean 90% of the quotient of (A) the per annum
rate expressed on an interest equivalent basis equal to the Kenny S&P 30
day High Grade Index or any successor index (the "Kenny Index") (provided,
however, that any such successor index must be approved by Moody's (if
Moody's is then rating the shares of MuniPreferred) and S&P (if S&P is then
rating the shares of MuniPreferred)), made available for the Business Day
immediately preceding such date but in any event not later than 8:30 A.M.,
New York City time, on such date by Kenny S&P Evaluation Services or any
successor thereto, based upon 30-day yield evaluations at par of short-term
bonds the interest on which is excludable for regular Federal income tax
purposes under the Code of "high grade" component issuers selected by Kenny
S&P Evaluation Services or any such successor from time to time in its
discretion, which component issuers shall include, without limitation,
issuers of general obligation bonds, but shall exclude any bonds the
interest on which constitutes an item of tax preference under Section
57(a)(5) of the Code, or successor provisions, for purposes of the
"alternative minimum tax," divided by (B) 1.00 minus the maximum marginal
regular Federal individual income tax rate applicable to ordinary income or
the maximum marginal regular Federal corporate income tax rate applicable
to ordinary income (in each case expressed as a decimal), whichever is
greater; provided, however, that if the Kenny Index is not made so
available by 8:30 A.M., New York City time, on such date by Kenny S&P
Evaluation Services or any successor, the Taxable Equivalent of the
Short-Term Municipal Bond Rate shall mean the quotient of (A) the per annum
rate expressed on an interest equivalent basis equal to the most
12
<PAGE> 30
recent Kenny Index so made available for any preceding Business Day,
divided by (B) 1.00 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary income (in
each case expressed as a decimal), whichever is greater.
(ccccc) "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.
(ddddd) "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.
(eeeee) "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.
(fffff) "Treasury Note Rate," on any date for any Rate Period, shall
mean (i) the yield on the most recently auctioned Treasury Note with a
remaining maturity closest to the length of such Rate Period, as quoted in
The Wall Street Journal on such date for the Business Day next preceding
such date; or (ii) in the event that any such rate is not published in The
Wall Street Journal, then the yield as calculated by reference to the
arithmetic average of the bid price quotations of the most recently
auctioned Treasury Note with a remaining maturity closest to the length of
such Rate Period, as determined by bid price quotations as of the close of
business on the Business Day immediately preceding such date obtained from
the U.S. Government Securities Dealers to the Auction Agent. If any U.S.
Government Securities Dealer does not quote a rate required to determine
the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill Rate or
the Treasury Note Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining U.S. Government Securities Dealer or
U.S. Government Securities Dealers and any Substitute U.S. Government
Securities Dealers selected by the Fund to provide such rate or rates not
being supplied by any U.S. Government Securities Dealer or U.S. Government
Securities Dealers, as the case may be, or, if the Fund does not select any
such Substitute U.S. Government Securities Dealer or Substitute U.S.
Government Securities Dealers, by the remaining U.S. Government Securities
Dealer or U.S. Government Securities Dealers.
(ggggg) "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.
(hhhhh) "Valuation Date" shall mean, for purposes of determining
whether the Fund is maintaining the MuniPreferred Basic Maintenance Amount,
each Business Day.
(iiiii) "Volatility Factor" shall mean, as of any Valuation Date, the
greater of the Moody's Volatility Factor and the S&P Volatility Factor.
(jjjjj) "Voting Period" shall have the meaning specified in paragraph
(b) of Section 5 of Part I of this Statement.
13
<PAGE> 31
(kkkkk) "Winning Bid Rate" shall have the meaning specified in
paragraph (a) of Section 3 of Part II of this Statement.
Any additional definitions specifically set forth in Section 8 of
Appendix A hereto shall be incorporated herein and made part hereof by reference
thereto.
14
<PAGE> 32
PART I
1. Number of Authorized Shares.
The number of authorized shares constituting a series of MuniPreferred
shall be as set forth with respect to such series in Section 2 of Appendix A
hereto.
2. Dividends.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a parity
with each other, with shares of any other series of MuniPreferred and with
shares of any other series of Preferred Stock as to the payment of dividends by
the Fund.
(b) Cumulative Cash Dividends. The Holders of shares of MuniPreferred of
any series shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, cumulative cash dividends
at the Applicable Rate for shares of such series, determined as set forth in
paragraph (e) of this Section 2, and no more (except to the extent set forth in
Section 3 of this Part I), payable on the Dividend Payment Dates with respect to
shares of such series determined pursuant to paragraph (d) of this Section 2.
Holders of shares of MuniPreferred shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on shares of MuniPreferred. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on shares of MuniPreferred which may be in arrears, and,
except to the extent set forth in subparagraph (e)(i) of this Section 2, no
additional sum of money shall be payable in respect of any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on shares
of MuniPreferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend Payment
Dates with respect to shares of a series of MuniPreferred shall be as set forth
with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as "Series
F MuniPreferred" or "Series M MuniPreferred" in Section 1 of Appendix A
hereto, if the Monday or Tuesday, as the case may be, on which dividends
would otherwise be payable on shares of such series is not a Business Day,
then such dividends shall be payable on such shares on the first Business
Day that falls after such Monday or Tuesday, as the case may be, and (B) in
the case of a series of MuniPreferred designated as "Series T
MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in
Section 1 of Appendix A hereto, if the Wednesday, Thursday or Friday, as
the case may be, on which dividends would otherwise be payable on shares of
such series is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such Wednesday,
Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto, the Fund in its
discretion may establish the Dividend Payment Dates in respect of any
Special Rate Period of shares of a series of MuniPreferred consisting of
more than 28 Rate Period Days; provided, however, that such dates shall be
set forth in the Notice of Special Rate Period relating to such Special
Rate Period, as delivered to the Auction Agent, which Notice of Special
Rate Period shall be filed with the Secretary of the Fund; and further
provided that (1) any such Dividend Payment Date shall be a Business Day
and (2) the last Dividend Payment Date in respect of such Special Rate
Period shall be the Business Day immediately following the last day
thereof, as such last day is determined in accordance with paragraph (b) of
Section 4 of this Part I.
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<PAGE> 33
(e) Dividend Rates and Calculation of Dividends. (i) Dividend Rates. The
dividend rate on shares of MuniPreferred of any series during the period from
and after the Date of Original Issue of shares of such series to and including
the last day of the Initial Rate Period of shares of such series shall be equal
to the rate per annum set forth with respect to shares of such series under
"Designation" in Section 1 of Appendix A hereto. For each Subsequent Rate Period
of shares of such series thereafter, the dividend rate on shares of such series
shall be equal to the rate per annum that results from an Auction for shares of
such series on the Auction Date next preceding such Subsequent Rate Period;
provided, however, that if:
(A) an Auction for any such Subsequent Rate Period is not held for any
reason other than as described below, the dividend rate on shares of such
series for such Subsequent Rate Period will be the Maximum Rate for shares
of such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect to shares
of such series during any Rate Period thereof (other than any Special Rate
Period consisting of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period consisting of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not been cured),
but, prior to 12:00 Noon, New York City time, on the third Business Day
next succeeding the date on which such Failure to Deposit occurred, such
Failure to Deposit shall have been cured in accordance with paragraph
(f) of this Section 2 and the Fund shall have paid to the Auction Agent a
late charge ("Late Charge") equal to the sum of (1) if such Failure to
Deposit consisted of the failure timely to pay to the Auction Agent the
full amount of dividends with respect to any Dividend Period of the shares
of such series, an amount computed by multiplying (x) 200% of the Reference
Rate for the Rate Period during which such Failure to Deposit occurs on the
Dividend Payment Date for such Dividend Period by (y) a fraction, the
numerator of which shall be the number of days for which such Failure to
Deposit has not been cured in accordance with paragraph (f) of this Section
2 (including the day such Failure to Deposit occurs and excluding the day
such Failure to Deposit is cured) and the denominator of which shall be
360, and applying the rate obtained against the aggregate Liquidation
Preference of the outstanding shares of such series and (2) if such Failure
to Deposit consisted of the failure timely to pay to the Auction Agent the
Redemption Price of the shares, if any, of such series for which Notice of
Redemption has been mailed by the Fund pursuant to paragraph (c) of Section
11 of this Part I, an amount computed by multiplying (x) 200% of the
Reference Rate for the Rate Period during which such Failure to Deposit
occurs on the redemption date by (y) a fraction, the numerator of which
shall be the number of days for which such Failure to Deposit is not cured
in accordance with paragraph (f) of this Section 2 (including the day such
Failure to Deposit occurs and excluding the day such Failure to Deposit is
cured) and the denominator of which shall be 360, and applying the rate
obtained against the aggregate Liquidation Preference of the outstanding
shares of such series to be redeemed, no Auction will be held in respect of
shares of such series for the Subsequent Rate Period thereof and the
dividend rate for shares of such series for such Subsequent Rate Period
will be the Maximum Rate for shares of such series on the Auction Date for
such Subsequent Rate Period;
16
<PAGE> 34
(C) any Failure to Deposit shall have occurred with respect to shares
of such series during any Rate Period thereof (other than any Special Rate
Period consisting of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period consisting of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not been cured),
and, prior to 12:00 Noon, New York City time, on the third Business Day
next succeeding the date on which such Failure to Deposit occurred, such
Failure to Deposit shall not have been cured in accordance with paragraph
(f) of this Section 2 or the Fund shall not have paid the applicable Late
Charge to the Auction Agent, no Auction will be held in respect of shares
of such series for the first Subsequent Rate Period thereof thereafter (or
for any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the Fund
cures such Failure to Deposit), in each case no later than 12:00 Noon, New
York City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate
Period (but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be "Below
"ba3'/BB-"); or
(D) any Failure to Deposit shall have occurred with respect to shares
of such series during a Special Rate Period thereof consisting of more than
364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period consisting of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured, and, prior to
12:00 Noon, New York City time, on the fourth Business Day preceding the
Auction Date for the Rate Period subsequent to such Rate Period, such
Failure to Deposit shall not have been cured in accordance with paragraph
(f) of this Section 2 or, in the event Moody's is then rating such shares,
the Fund shall not have paid the applicable Late Charge to the Auction
Agent (such Late Charge, for purposes of this subparagraph (D), to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days but fewer
than 365 Rate Period Days and (y) commencing on the date on which the Rate
Period during which Failure to Deposit occurs commenced), no Auction will
be held in respect of shares of such series for such Subsequent Rate Period
(or for any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the Fund
cures such Failure to Deposit), in each case no later than 12:00 Noon, New
York City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate
Period (but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be "Below
"ba3'/BB-") (the rate per annum at which dividends are payable on shares of
a series of MuniPreferred for any Rate Period thereof being herein referred
to as the "Applicable Rate" for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share payable on
shares of a series of MuniPreferred on any date on which dividends shall be
payable on shares of such series shall be computed by multiplying the Applicable
Rate for shares of such series in effect for such Dividend Period or Dividend
Periods or part thereof for which dividends have not been paid by a fraction,
the numerator of which shall be the number of days in such Dividend Period or
Dividend Periods or part thereof and the denominator of which shall be 365 if
such Dividend Period consists of 7 Rate Period Days and 360 for all other
Dividend Periods, and applying the rate obtained against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect to
shares of a series of MuniPreferred shall have been cured (if such Failure to
Deposit is not solely due to the willful failure of
17
<PAGE> 35
the Fund to make the required payment to the Auction Agent) with respect to any
Rate Period of shares of such series if, within the respective time periods
described in subparagraph (e)(i) of this Section 2, the Fund shall have paid to
the Auction Agent (A) all accumulated and unpaid dividends on shares of such
series and (B) without duplication, the Redemption Price for shares, if any, of
such series for which Notice of Redemption has been mailed by the Fund pursuant
to paragraph (c) of Section 11 of Part I of this Statement; provided, however,
that the foregoing clause (B) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(g) Dividend Payments by Fund to Auction Agent. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of
MuniPreferred, an aggregate amount of funds available on the next Business Day
in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Fund. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(i) Dividends Paid to Holders. Each dividend on shares of MuniPreferred
shall be paid on the Dividend Payment Date therefor to the Holders thereof as
their names appear on the stock books of the Fund on the Business Day next
preceding such Dividend Payment Date.
(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends.
Any dividend payment made on shares of MuniPreferred shall first be credited
against the earliest accumulated but unpaid dividends due with respect to such
shares. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to the
Holders as their names appear on the stock books of the Fund on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the
Board of Directors.
(k) Dividends Designated as Exempt-Interest Dividends. Dividends on shares
of MuniPreferred shall be designated as exempt-interest dividends up to the
amount of tax-exempt income of the Fund, to the extent permitted by, and for
purposes of, Section 852 of the Code.
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<PAGE> 36
3. Gross-up Payments.
Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period
Days or Fewer. If, in the case of any Minimum Rate Period or any Special
Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net
capital gains or other income taxable for Federal income tax purposes to a
dividend paid on shares of MuniPreferred without having given advance
notice thereof to the Auction Agent as provided in Section 5 of Part II of
this Statement (such allocation being referred to herein as a "Taxable
Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding shares of MuniPreferred or the liquidation of the Fund, the
Fund shall, prior to the end of the calendar year in which such dividend
was paid, provide notice thereof to the Auction Agent and direct the Fund's
dividend disbursing agent to send such notice with a Gross-up Payment to
each Holder of such shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(b) Special Rate Periods of More Than 28 Rate Period Days. If, in the
case of any Special Rate Period of more than 28 Rate Period Days, the Fund
makes a Taxable Allocation to a dividend paid on shares of MuniPreferred,
the Fund shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent and direct
the Fund's dividend disbursing agent to send such notice with a Gross-up
Payment to each Holder of shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(c) No Gross-up Payments In the Event of a Reallocation. The Fund
shall not be required to make Gross-up Payments with respect to any net
capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the
Fund.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Fund, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred as a Special Rate Period consisting of more
than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Fund wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) Adjustment of Length of Special Rate Period. In the event the Fund
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last
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<PAGE> 37
day of such Special Rate Period is not (a) a Tuesday that is a Business Day in
the case of a series of MuniPreferred designated as "Series M MuniPreferred" in
Section 1 of Appendix A hereto, (b) a Wednesday that is a Business Day in the
case of a series of MuniPreferred designated as "Series T MuniPreferred" in
Section 1 of Appendix A hereto, (c) a Thursday that is a Business Day in the
case of a series of MuniPreferred designated as "Series W MuniPreferred" in
Section 1 of Appendix A hereto, (d) a Friday that is a Business Day in the case
of a series of MuniPreferred designated as "Series TH MuniPreferred" in Section
1 of Appendix A hereto, (e) a Monday that is a Business Day in the case of a
series of MuniPreferred designated as "Series F MuniPreferred" in Section 1 of
Appendix A hereto, then the Fund shall designate such Subsequent Rate Period as
a Special Rate Period consisting of the period commencing on the first day
following the end of the immediately preceding Rate Period and ending (a) on the
first Monday that is followed by a Tuesday that is a Business Day preceding what
would otherwise be such last day, in the case of Series M MuniPreferred, (b) on
the first Tuesday that is followed by a Wednesday that is a Business Day
preceding what would otherwise be such last day, in the case of Series T
MuniPreferred, (c) on the first Wednesday that is followed by a Thursday that is
a Business Day preceding what would otherwise be such last day, in the case of
Series W MuniPreferred, (d) on the first Thursday that is followed by a Friday
that is a Business Day preceding what would otherwise be such last day, in the
case of Series TH MuniPreferred, and (e) on the first Sunday that is followed by
a Monday that is a Business Day preceding what would otherwise be such last day,
in the case of Series F MuniPreferred.
(c) Notice of Proposed Special Rate Period. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section
4, not less than 20 (or such lesser number of days as may be agreed to from time
to time by the Auction Agent) nor more than 30 days prior to the date the Fund
proposes to designate as the first day of such Special Rate Period (which shall
be such day that would otherwise be the first day of a Minimum Rate Period),
notice shall be (i) published or caused to be published by the Fund in a
newspaper of general circulation to the financial community in The City of New
York, New York, which carries financial news, and (ii) mailed by the Fund by
first-class mail, postage prepaid, to the Holders of shares of such series. Each
such notice shall state (A) that the Fund may exercise its option to designate a
succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Fund will, by 11:00
A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Fund shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of MuniPreferred as to which notice
has been given as set forth in paragraph (c) of this Section 4 (or such later
time or date, or both, as may be agreed to by the Auction Agent), the Fund shall
deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Fund has determined to designate the next succeeding Rate Period of shares
of such series as a Special Rate Period, specifying the same and the first
day thereof, (B) the Auction Date immediately prior to the first day of
such Special Rate Period, (C) that such Special Rate Period shall not
commence if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate
Period, Moody's Eligible Assets (if Moody's is then rating such series) and
S&P Eligible Assets (if S&P is then rating such series) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance
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<PAGE> 38
Amount as of such Business Day (assuming for purposes of the foregoing
calculation that (a) the Maximum Rate is the Maximum Rate on such Business
Day as if such Business Day were the Auction Date for the proposed Special
Rate Period, and (b) the Moody's Discount Factors applicable to Moody's
Eligible Assets are determined by reference to the first Exposure Period
longer than the Exposure Period then applicable to the Fund, as described
in the definition of Moody's Discount Factor herein); or
(ii) a notice stating that the Fund has determined not to exercise its
option to designate a Special Rate Period of shares of such series and that
the next succeeding Rate Period of shares of such series shall be a Minimum
Rate Period.
(e) Failure to Deliver Notice of Special Rate Period. If the Fund fails to
deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of
this Section 4 (and, in the case of the notice described in subparagraph (d)(i)
of this Section 4, a MuniPreferred Basic Maintenance Report to the effect set
forth in such subparagraph (if either Moody's or S&P is then rating the series
in question)) with respect to any designation of any proposed Special Rate
Period to the Auction Agent by 11:00 A.M., New York City time, on the second
Business Day next preceding the first day of such proposed Special Rate Period
(or by such later time or date, or both, as may be agreed to by the Auction
Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent
with respect to such Special Rate Period to the effect set forth in subparagraph
(d)(ii) of this Section 4. In the event the Fund delivers to the Auction Agent a
notice described in subparagraph (d)(i) of this Section 4, it shall file a copy
of such notice with the Secretary of the Fund, and the contents of such notice
shall be binding on the Fund. In the event the Fund delivers to the Auction
Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund
will provide Moody's (if Moody's is then rating the series in question) and S&P
(if S&P is then rating the series in question) a copy of such notice.
5. Voting Rights.
(a) One Vote Per Share of MuniPreferred. Except as otherwise provided in
the Articles or as otherwise required by law, (i) each Holder of shares of
MuniPreferred shall be entitled to one vote for each share of MuniPreferred held
by such Holder on each matter submitted to a vote of shareholders of the Fund,
and (ii) the holders of outstanding shares of Preferred Stock, including each
share of MuniPreferred, and of shares of Common Stock shall vote together as a
single class; provided, however, that, at any meeting of the shareholders of the
Fund held for the election of directors, the holders of outstanding shares of
Preferred Stock, including MuniPreferred, represented in person or by proxy at
said meeting, shall be entitled, as a class, to the exclusion of the holders of
all other securities and classes of capital stock of the Fund, to elect two
directors of the Fund, each share of Preferred Stock, including each share of
MuniPreferred, entitling the holder thereof to one vote. Subject to paragraph
(b) of this Section 5, the holders of outstanding shares of Common Stock and
Preferred Stock, including MuniPreferred, voting together as a single class,
shall elect the balance of the directors.
(b) Voting For Additional Directors. (i) Voting Period. During any period
in which any one or more of the conditions described in subparagraphs (A) or (B)
of this subparagraph (b)(i) shall exist (such period being referred to herein as
a "Voting Period"), the number of directors constituting the Board of Directors
shall be automatically increased by the smallest number that, when added to the
two directors elected exclusively by the holders of shares of Preferred Stock,
including shares of MuniPreferred, would constitute a majority of the Board of
Directors as so increased by such smallest number; and the holders of shares of
Preferred Stock, including MuniPreferred, shall be entitled, voting as a class
on a one-vote-per-share basis (to the exclusion of the holders of all other
securities and classes of capital stock of the Fund), to elect such smallest
number of additional directors, together with the two directors that such
holders are in any event entitled to elect. A Voting Period shall commence:
(A) if at the close of business on any dividend payment date
accumulated dividends (whether or not earned or declared) on any
outstanding share of Preferred Stock, including
21
<PAGE> 39
MuniPreferred, equal to at least two full years' dividends shall be due and
unpaid and sufficient cash or specified securities shall not have been
deposited with the Auction Agent for the payment of such accumulated
dividends; or
(B) if at any time holders of shares of Preferred Stock are entitled
under the 1940 Act to elect a majority of the directors of the Fund.
Upon the termination of a Voting Period, the voting rights described in this
subparagraph (b)(i) shall cease, subject always, however, to the revesting of
such voting rights in the Holders upon the further occurrence of any of the
events described in this subparagraph (b)(i).
(ii) Notice of Special Meeting. As soon as practicable after the accrual
of any right of the holders of shares of Preferred Stock to elect additional
directors as described in subparagraph (b)(i) of this Section 5, the Fund shall
notify the Auction Agent and the Auction Agent shall call a special meeting of
such holders, by mailing a notice of such special meeting to such holders, such
meeting to be held not less than 10 nor more than 20 days after the date of
mailing of such notice. If the Fund fails to send such notice to the Auction
Agent or if the Auction Agent does not call such a special meeting, it may be
called by any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting shall be the
close of business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting of holders of
shares of Preferred Stock held during a Voting Period at which directors are to
be elected, such holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of capital stock of the Fund), shall
be entitled to elect the number of directors prescribed in subparagraph (b)(i)
of this Section 5 on a one-vote-per-share basis.
(iii) Terms of Office of Existing Directors. The terms of office of all
persons who are directors of the Fund at the time of a special meeting of
Holders and holders of other Preferred Stock to elect directors shall continue,
notwithstanding the election at such meeting by the Holders and such other
holders of the number of directors that they are entitled to elect, and the
persons so elected by the Holders and such other holders, together with the two
incumbent directors elected by the Holders and such other holders of Preferred
Stock and the remaining incumbent directors elected by the holders of the Common
Stock and Preferred Stock, shall constitute the duly elected directors of the
Fund.
(iv) Terms of Office of Certain Directors to Terminate Upon Termination of
Voting Period. Simultaneously with the termination of a Voting Period, the terms
of office of the additional directors elected by the Holders and holders of
other Preferred Stock pursuant to subparagraph (b)(i) of this Section 5 shall
terminate, the remaining directors shall constitute the directors of the Fund
and the voting rights of the Holders and such other holders to elect additional
directors pursuant to subparagraph (b)(i) of this Section 5 shall cease, subject
to the provisions of the last sentence of subparagraph (b)(i) of this Section 5.
(c) Holders of MuniPreferred To Vote On Certain Other Matters.
(i) Increases in Capitalization. So long as any shares of MuniPreferred are
outstanding, the Fund shall not, without the affirmative vote or consent of the
Holders of at least a majority of the shares of MuniPreferred outstanding at the
time, in person or by proxy, either in writing or at a meeting, voting as a
separate class: (a) authorize, create or issue any class or series of stock
ranking prior to or on a parity with shares of MuniPreferred with respect to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up of the affairs of the Fund, or authorize, create or issue
additional shares of any series of MuniPreferred (except that, notwithstanding
the foregoing, but subject to the provisions of paragraph (c) of Section 10 of
this Part I, the Board of Directors, without the vote or consent of the Holders
of MuniPreferred, may from time to time authorize and create, and the Fund may
from time to time issue, additional shares of any series of MuniPreferred or
classes or series of Preferred Stock ranking on a parity with shares of
MuniPreferred with respect to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund;
provided, however, that if Moody's or S&P is not then rating the shares of
MuniPreferred, the aggregate liquidation preference of all Preferred Stock of
the Fund
22
<PAGE> 40
outstanding after any such issuance, exclusive of accumulated and unpaid
dividends, may not exceed the amount set forth in Section 10 of Appendix A
hereto) or (b) amend, alter or repeal the provisions of the Articles, including
this Statement, whether by merger, consolidation or otherwise, so as to affect
any preference, right or power of such shares of MuniPreferred or the Holders
thereof; provided, however, that (i) none of the actions permitted by the
exception to (a) above will be deemed to affect such preferences, rights or
powers, (ii) a division of a share of MuniPreferred will be deemed to affect
such preferences, rights or powers only if the terms of such division adversely
affect the Holders of shares of MuniPreferred and (iii) the authorization,
creation and issuance of classes or series of stock ranking junior to shares of
MuniPreferred with respect to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund,
will be deemed to affect such preferences, rights or powers only if Moody's or
S&P is then rating shares of MuniPreferred and such issuance would, at the time
thereof, cause the Fund not to satisfy the 1940 Act MuniPreferred Asset Coverage
or the MuniPreferred Basic Maintenance Amount. So long as any shares of
MuniPreferred are outstanding, the Fund shall not, without the affirmative vote
or consent of the Holders of at least 66 2/3% of the shares of MuniPreferred
outstanding at the time, in person or by proxy, either in writing or at a
meeting, voting as a separate class, file a voluntary application for relief
under Federal bankruptcy law or any similar application under state law for so
long as the Fund is solvent and does not foresee becoming insolvent. To the
extent that shares of MuniPreferred constitute a series of stock under Minnesota
law and to the extent the Holders of such shares are empowered under the
Minnesota Business Corporation Act to vote as a class on the actions set forth
above in this subparagraph (c)(i), the Fund shall not approve any such action
without the affirmative vote or consent of the Holders of at least a majority of
the shares of MuniPreferred of such series outstanding at the time, in person or
by proxy, either in writing or at a meeting (voting as a separate class).
23
<PAGE> 41
(ii) 1940 Act Matters. Unless a higher percentage is provided for in the
Articles, (A) the affirmative vote of the Holders of at least a majority of the
shares of Preferred Stock, including MuniPreferred, outstanding at the time,
voting as a separate class, shall be required to approve any conversion of the
Fund from a closed-end to an open-end investment company and (B) the affirmative
vote of the Holders of a "majority of the outstanding shares of Preferred
Stock," including MuniPreferred, voting as a separate class, shall be required
to approve any plan of reorganization (as such term is used in the 1940 Act)
adversely affecting such shares. The affirmative vote of the Holders of a
"majority of the outstanding shares of Preferred Stock," including
MuniPreferred, voting as a separate class, shall be required to approve any
action not described in the first sentence of this Section 5(c)(ii) requiring a
vote of security holders of the Fund under Section 13(a) of the 1940 Act. For
purpose of the foregoing, "majority of the outstanding shares of Preferred
Stock" means (i) 67% or more of such shares present at a meeting, if the Holders
of more than 50% of such shares are present or represented by proxy, or (ii)
more than 50% of such shares, whichever is less. In the event a vote of Holders
of MuniPreferred is required pursuant to the provisions of Section 13(a) of the
1940 Act, the Fund shall, not later than ten Business Days prior to the date on
which such vote is to be taken, notify Moody's (if Moody's is then rating the
shares of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred) that such vote is to be taken and the nature of the action with
respect to which such vote is to be taken. The Fund shall, not later than ten
Business Days after the date on which such vote is taken, notify Moody's (if
Moody's is then rating the shares of MuniPreferred) of the results of such vote.
(d) Board May Take Certain Actions Without Shareholder Approval. The Board
of Directors, without the vote or consent of the shareholders of the Fund, may
from time to time amend, alter or repeal any or all of the definitions of the
terms listed below, or any provision of this Statement viewed by Moody's or S&P
as a predicate for any such definition, and any such amendment, alteration or
repeal will not be deemed to affect the preferences, rights or powers of shares
of MuniPreferred or the Holders thereof; provided, however, that the Board of
Directors receives written confirmation from Moody's (such confirmation being
required to be obtained only in the event Moody's is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Deposit Securities, Discounted Value, Receivables for
Municipal Obligations Sold, Issue Type Category and Other Issues as such terms
apply to S&P Eligible Assets and (y) S&P Discount Factor, S&P Eligible Asset,
S&P Exposure Period and S&P Volatility Factor) and S&P (such confirmation being
required to be obtained only in the event S&P is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Discounted Value, Receivables for Municipal Obligations Sold,
Issue Type Category and Other Issues as such terms apply to Moody's Eligible
Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's
Exposure Period and Moody's Volatility Factor) that any such amendment,
alteration or repeal would not impair the ratings then assigned by Moody's or
S&P, as the case may be, to shares of MuniPreferred:
Deposit Securities Other Issues
Discounted Value Quarterly Valuation Date
Escrowed Bonds Receivables for Municipal
Issue Type Category Obligations Sold
Market Value S&P Discount Factor
Maximum Potential Gross-up
Payment Liability
MuniPreferred Basic Maintenance Amount
MuniPreferred Basic Maintenance Cure Date
MuniPreferred Basic Maintenance Report
Moody's Discount Factor
Moody's Eligible Asset
Moody's Exposure Period
Moody's Volatility Factor
1940 Act Cure Date
1940 Act MuniPreferred Asset Coverage
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<PAGE> 42
S&P Eligible Asset
S&P Exposure Period
S&P Volatility Factor
Valuation Date
Volatility Factor
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<PAGE> 43
(e) Voting Rights Set Forth Herein Are Sole Voting Rights. Unless otherwise
required by law, the Holders of shares of MuniPreferred shall not have any
relative rights or preferences or other special rights other than those
specifically set forth herein.
(f) No Preemptive Rights or Cumulative Voting. The Holders of shares of
MuniPreferred shall have no preemptive rights or rights to cumulative voting.
(g) Voting for Directors Sole Remedy for Fund's Failure to Pay Dividends.
In the event that the Fund fails to pay any dividends on the shares of
MuniPreferred, the exclusive remedy of the Holders shall be the right to vote
for directors pursuant to the provisions of this Section 5.
(h) Holders Entitled to Vote. For purposes of determining any rights of the
Holders to vote on any matter, whether such right is created by this Statement,
by the other provisions of the Articles, by statute or otherwise, no Holder
shall be entitled to vote any share of MuniPreferred and no share of
MuniPreferred shall be deemed to be "outstanding" for the purpose of voting or
determining the number of shares required to constitute a quorum if, prior to or
concurrently with the time of determination of shares entitled to vote or shares
deemed outstanding for quorum purposes, as the case may be, the requisite Notice
of Redemption with respect to such shares shall have been mailed as provided in
paragraph (c) of Section 11 of this Part I and the Redemption Price for the
redemption of such shares shall have been deposited in trust with the Auction
Agent for that purpose. No share of MuniPreferred held by the Fund or any
affiliate of the Fund (except for shares held by a Broker-Dealer that is an
affiliate of the Fund for the account of its customers) shall have any voting
rights or be deemed to be outstanding for voting or other purposes.
6. 1940 Act MuniPreferred Asset Coverage.
The Fund shall maintain, as of the last Business Day of each month in
which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred
Asset Coverage.
7. MuniPreferred Basic Maintenance Amount.
(a) So long as shares of MuniPreferred are outstanding, the Fund shall
maintain, on each Valuation Date, and shall verify to its satisfaction that it
is maintaining on such Valuation Date, (i) S&P Eligible Assets having an
aggregate Discounted Value equal to or greater than the MuniPreferred Basic
Maintenance Amount (if S&P is then rating the shares of MuniPreferred) and (ii)
Moody's Eligible Assets having an aggregate Discounted Value equal to or greater
than the MuniPreferred Basic Maintenance Amount (if Moody's is then rating the
shares of MuniPreferred).
(b) On or before 5:00 P.M., New York City time, on the third Business Day
after a Valuation Date on which the Fund fails to satisfy the MuniPreferred
Basic Maintenance Amount, and on the third Business Day after the MuniPreferred
Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred),
Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction
Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) a
MuniPreferred Basic Maintenance Report as of the date of such failure or such
MuniPreferred Basic Maintenance Cure Date, as the case may be, which will be
deemed to have been delivered to the Auction Agent if the Auction Agent receives
a copy or telecopy, telex or other electronic transcription thereof and on the
same day the Fund mails to the Auction Agent for delivery on the next Business
Day the full MuniPreferred Basic Maintenance Report. The Fund shall also deliver
a MuniPreferred Basic Maintenance Report to (i) the Auction Agent (if either
Moody's or S&P is then rating the shares of MuniPreferred) as of (A) the
fifteenth day of each month (or, if such day is not a Business Day, the next
succeeding Business Day) and (B) the last Business Day of each month, (ii)
Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P
is then rating the shares of MuniPreferred) as of any Quarterly Valuation Date,
in each case on or before the third Business Day after such day, and (iii) S&P,
if and when requested for any Valuation Date, on or before the third Business
Day
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<PAGE> 44
after such request. A failure by the Fund to deliver a MuniPreferred Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be
delivery of a MuniPreferred Basic Maintenance Report indicating the Discounted
Value for all assets of the Fund is less than the MuniPreferred Basic
Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a MuniPreferred
Basic Maintenance Report in accordance with paragraph (b) of this Section 7
relating to a Quarterly Valuation Date, the Fund shall cause the Independent
Accountant to confirm in writing to S&P (if S&P is then rating the shares of
MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred)
and the Auction Agent (if either S&P or Moody's is then rating the shares of
MuniPreferred) (i) the mathematical accuracy of the calculations reflected in
such Report (and in any other MuniPreferred Basic Maintenance Report, randomly
selected by the Independent Accountant, that was delivered by the Fund during
the quarter ending on such Quarterly Valuation Date) and (ii) that, in such
Report (and in such randomly selected Report), the Fund determined in accordance
with this Statement whether the Fund had, at such Quarterly Valuation Date (and
at the Valuation Date addressed in such randomly-selected Report), S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) of an aggregate
Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount
and Moody's Eligible Assets (if Moody's is then rating the shares of
MuniPreferred) of an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount (such confirmation being herein called
the "Accountant's Confirmation").
(d) Within ten Business Days after the date of delivery of a MuniPreferred
Basic Maintenance Report in accordance with paragraph (b) of this Section 7
relating to any Valuation Date on which the Fund failed to satisfy the
MuniPreferred Basic Maintenance Amount, and relating to the MuniPreferred Basic
Maintenance Cure Date with respect to such failure to satisfy the MuniPreferred
Basic Maintenance Amount, the Fund shall cause the Independent Accountant to
provide to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if
Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if
either S&P or Moody's is then rating the shares of MuniPreferred) an
Accountant's Confirmation as to such MuniPreferred Basic Maintenance Report.
(e) If any Accountant's Confirmation delivered pursuant to paragraph (c) or
(d) of this Section 7 shows that an error was made in the MuniPreferred Basic
Maintenance Report for a particular Valuation Date for which such Accountant's
Confirmation was required to be delivered, or shows that a lower aggregate
Discounted Value for the aggregate of all S&P Eligible Assets (if S&P is then
rating the shares of MuniPreferred) or Moody's Eligible Assets (if Moody's is
then rating the shares of MuniPreferred), as the case may be, of the Fund was
determined by the Independent Accountant, the calculation or determination made
by such Independent Accountant shall be final and conclusive and shall be
binding on the Fund, and the Fund shall accordingly amend and deliver the
MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating the shares
of MuniPreferred), Moody's (if Moody's is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating
the shares of MuniPreferred) promptly following receipt by the Fund of such
Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day
after the Date of Original Issue of any shares of MuniPreferred, the Fund shall
complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred)
and Moody's (if Moody's is then rating the shares of MuniPreferred) a
MuniPreferred Basic Maintenance Report as of the close of business on such Date
of Original Issue. Within five Business Days of such Date of Original Issue, the
Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P
is then rating the shares of MuniPreferred) (i) the mathematical accuracy of the
calculations reflected in such Report and (ii) that the Discounted Value of S&P
Eligible Assets reflected thereon equals or exceeds the MuniPreferred Basic
Maintenance Amount reflected thereon.
(g) On or before 5:00 p.m., New York City time, on the third Business Day
after either (i) the Fund shall have redeemed Common Stock or (ii) the ratio of
the Discounted Value of S&P Eligible Assets or the Discounted Value of Moody's
Eligible Assets to the MuniPreferred Basic Maintenance Amount is
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<PAGE> 45
less than or equal to 105%, the Fund shall complete and deliver to S&P (if S&P
is then rating the shares of MuniPreferred) or Moody's (if Moody's is then
rating the shares of MuniPreferred), as the case may be, a MuniPreferred Basic
Maintenance Report as of the date of either such event.
8. [Reserved]
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Preferred Stock Other Than MuniPreferred. Except as set
forth in the next sentence, no dividends shall be declared or paid or set apart
for payment on the shares of any class or series of stock ranking, as to the
payment of dividends, on a parity with shares of MuniPreferred for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid on the shares of each series of MuniPreferred through its most recent
Dividend Payment Date. When dividends are not paid in full upon the shares of
each series of MuniPreferred through its most recent Dividend Payment Date or
upon the shares of any other class or series of stock ranking on a parity as to
the payment of dividends with shares of MuniPreferred through their most recent
respective dividend payment dates, all dividends declared upon shares of
MuniPreferred and any other such class or series of stock ranking on a parity as
to the payment of dividends with shares of MuniPreferred shall be declared pro
rata so that the amount of dividends declared per share on shares of
MuniPreferred and such other class or series of stock shall in all cases bear to
each other the same ratio that accumulated dividends per share on the shares of
MuniPreferred and such other class or series of stock bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
MuniPreferred shall be based on the Applicable Rate for such share for the
Dividend Periods during which dividends were not paid in full).
(b) Dividends and Other Distributions With Respect to Common Stock Under
the 1940 Act. The Board of Directors shall not declare any dividend (except a
dividend payable in shares of Common Stock), or declare any other distribution,
upon shares of Common Stock, or purchase shares of Common Stock, unless in every
such case the shares of Preferred Stock have, at the time of any such
declaration or purchase, an asset coverage (as defined in and determined
pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may
in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common stock) after
deducting the amount of such dividend, distribution or purchase price, as the
case may be.
(c) Other Restrictions On Dividends and Other Distributions. For so long as
any share of MuniPreferred is outstanding, and except as set forth in paragraph
(a) of this Section 9 and paragraph (c) of Section 12 of this Part I, (A) the
Fund shall not declare, pay or set apart for payment any dividend or other
distribution (other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, Common Stock or other
stock, if any, ranking junior to the shares of MuniPreferred as to the payment
of dividends and the distribution of assets upon dissolution, liquidation or
winding up) in respect of the Common Stock or any other stock of the Fund
ranking junior to or on a parity with the shares of MuniPreferred as to the
payment of dividends or the distribution of assets upon dissolution, liquidation
or winding up, or call for redemption, redeem, purchase or otherwise acquire for
consideration any shares of Common Stock or any other such junior stock (except
by conversion into or exchange for stock of the Fund ranking junior to the
shares of MuniPreferred as to the payment of dividends and the distribution of
assets upon dissolution, liquidation or winding up), or any such parity stock
(except by conversion into or exchange for stock of the Fund ranking junior to
or on a parity with MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless (i)
full cumulative dividends on shares of each series of MuniPreferred through its
most recently ended Dividend Period shall have been paid or shall have been
declared and sufficient funds for the payment thereof deposited with the Auction
Agent and (ii) the Fund has redeemed the full number of shares of MuniPreferred
required to be redeemed by any provision for mandatory redemption pertaining
thereto, and (B) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to shares of MuniPreferred
as to the
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<PAGE> 46
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of Common Stock or any other stock of the
Fund ranking junior to shares of MuniPreferred as to the payment of dividends or
the distribution of assets upon dissolution, liquidation or winding up, or call
for redemption, redeem, purchase or otherwise acquire for consideration any
shares of Common Stock or any other such junior stock (except by conversion into
or exchange for stock of the Fund ranking junior to shares of MuniPreferred as
to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless immediately after such transaction the
Discounted Value of Moody's Eligible Assets (if Moody's is then rating the
shares of MuniPreferred) and S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) would each at least equal the MuniPreferred Basic
Maintenance Amount.
10. Rating Agency Restrictions.
For so long as any shares of MuniPreferred are outstanding and Moody's or
S&P, or both, are rating such shares, the Fund will not, unless it has received
written confirmation from Moody's or S&P, or both, as appropriate, that any such
action would not impair the ratings then assigned by such rating agency to such
shares, engage in any one or more of the following transactions:
(a) buy or sell futures or write put or call options;
(b) borrow money, except that the Fund may, without obtaining the
written confirmation described above, borrow money for the purpose of
clearing securities transactions if (i) the MuniPreferred Basic Maintenance
Amount would continue to be satisfied after giving effect to such borrowing
and (ii) such borrowing (A) is privately arranged with a bank or other
person and is evidenced by a promissory note or other evidence of
indebtedness that is not intended to be publicly distributed or (B) is for
"temporary purposes," is evidenced by a promissory note or other evidence
of indebtedness and is in an amount not exceeding 5 per centum of the value
of the total assets of the Fund at the time of the borrowing; for purposes
of the foregoing, "temporary purpose" means that the borrowing is to be
repaid within sixty days and is not to be extended or renewed;
(c) issue additional shares of any series of MuniPreferred or any
class or series of stock ranking prior to or on a parity with shares of
MuniPreferred with respect to the payment of dividends or the distribution
of assets upon dissolution, liquidation or winding up of the Fund, or
reissue any shares of MuniPreferred previously purchased or redeemed by the
Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred to in
the definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. Redemption.
(a) Optional Redemption. (i) Subject to the provisions of subparagraph (v)
of this paragraph (a), shares of MuniPreferred of any series may be redeemed, at
the option of the Fund, as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for shares of such series, out
of funds legally available therefor, at a redemption price per share equal to
the sum of $25,000 plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the date
fixed for redemption; provided, however, that (1) shares of a series
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<PAGE> 47
of MuniPreferred may not be redeemed in part if after such partial
redemption fewer than 500 shares of such series remain outstanding; (2) unless
otherwise provided in Section 11 of Appendix A hereto, shares of a series of
MuniPreferred are redeemable by the Fund during the Initial Rate Period thereof
only on the second Business Day next preceding the last Dividend Payment Date
for such Initial Rate Period; and (3) subject to subparagraph (ii) of this
paragraph (a), the Notice of Special Rate Period relating to a Special Rate
Period of shares of a series of MuniPreferred, as delivered to the Auction Agent
and filed with the Secretary of the Fund, may provide that shares of such series
shall not be redeemable during the whole or any part of such Special Rate Period
(except as provided in subparagraph (iv) of this paragraph (a)) or shall be
redeemable during the whole or any part of such Special Rate Period only upon
payment of such redemption premium or premiums as shall be specified therein
("Special Redemption Provisions").
(ii) A Notice of Special Rate Period relating to shares of a series of
MuniPreferred for a Special Rate Period thereof may contain Special Redemption
Provisions only if the Fund's Board of Directors, after consultation with the
Broker-Dealer or Broker-Dealers for such Special Rate Period of shares of such
series, determines that such Special Redemption Provisions are in the best
interest of the Fund.
(iii) If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to subparagraph (i) of this paragraph
(a), the number of shares of such series to be redeemed shall be determined by
the Board of Directors, and such shares shall be redeemed pro rata from the
Holders of shares of such series in proportion to the number of shares of such
series held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of this paragraph (a),
shares of any series of MuniPreferred may be redeemed, at the option of the
Fund, as a whole but not in part, out of funds legally available therefor, on
the first day following any Dividend Period thereof included in a Rate Period
consisting of more than 364 Rate Period Days if, on the date of determination of
the Applicable Rate for shares of such series for such Rate Period, such
Applicable Rate equalled or exceeded on such date of determination the Treasury
Note Rate for such Rate Period, at a redemption price per share equal to the sum
of $25,000 plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed for
redemption.
(v) The Fund may not on any date mail a Notice of Redemption pursuant to
paragraph (c) of this Section 11 in respect of a redemption contemplated to be
effected pursuant to this paragraph (a) unless on such date (a) the Fund has
available Deposit Securities with maturity or tender dates not later than the
day preceding the applicable redemption date and having a value not less than
the amount (including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such redemption date
and (b) the Discounted Value of Moody's Eligible Assets (if Moody's is then
rating the shares of MuniPreferred) and the Discounted Value of S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) each at least equal
the MuniPreferred Basic Maintenance Amount, and would at least equal the
MuniPreferred Basic Maintenance Amount immediately subsequent to such redemption
if such redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of Moody's
Eligible Assets at least equals the MuniPreferred Basic Maintenance Amount, the
Moody's Discount Factors applicable to Moody's Eligible Assets shall be
determined by reference to the first Exposure Period longer than the Exposure
Period then applicable to the Fund, as described in the definition of Moody's
Discount Factor herein.
(b) Mandatory Redemption. The Fund shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Directors for redemption, certain of the shares of MuniPreferred, if
the Fund fails to have either Moody's Eligible Assets with a Discounted Value or
S&P Eligible Assets with a Discounted Value greater than or equal to the
MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act
MuniPreferred Asset Coverage, in accordance with the requirements of the rating
agency or agencies then rating the shares of MuniPreferred, and such failure is
not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be. The number of shares of MuniPreferred to be
redeemed shall be equal to the lesser of (i) the minimum number of shares
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<PAGE> 48
of MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, would have
resulted in the Fund's having both Moody's Eligible Assets with a Discounted
Value and S&P Eligible Assets with a Discounted Value greater than or equal to
the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro
rata among shares of MuniPreferred and other Preferred Stock (and, then, pro
rata among each series of MuniPreferred) subject to redemption or retirement.
The Fund shall effect such redemption on the date fixed by the Fund therefor,
which date shall not be earlier than 20 days nor later than 40 days after such
Cure Date, except that if the Fund does not have funds legally available for the
redemption of all of the required number of shares of MuniPreferred and shares
of other Preferred Stock which are subject to redemption or retirement or the
Fund otherwise is unable to effect such redemption on or prior to 40 days after
such Cure Date, the Fund shall redeem those shares of MuniPreferred and shares
of other Preferred Stock which it was unable to redeem on the earliest
practicable date on which it is able to effect such redemption. If fewer than
all of the outstanding shares of a series of MuniPreferred are to be redeemed
pursuant to this paragraph (b), the number of shares of such series to be
redeemed shall be redeemed pro rata from the Holders of shares of such series in
proportion to the number of shares of such series held by such Holders.
(c) Notice of Redemption. If the Fund shall determine or be required to
redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of
this Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first class mail, postage prepaid, to each Holder of the shares of
such series to be redeemed, at such Holder's address as the same appears on the
stock books of the Fund on the record date established by the Board of
Directors. Such Notice of Redemption shall be so mailed not less than 20 nor
more than 45 days prior to the date fixed for redemption. Each such Notice of
Redemption shall state: (i) the redemption date; (ii) the number of shares of
MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for
shares of such series; (iv) the Redemption Price; (v) the place or places where
the certificate(s) for such shares (properly endorsed or assigned for transfer,
if the Board of Directors shall so require and the Notice of Redemption shall so
state) are to be surrendered for payment of the Redemption Price; (vi) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date; and (vii) the provisions of this Section 11 under which such
redemption is made. If fewer than all shares of a series of MuniPreferred held
by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder
shall also specify the number of shares of such series to be redeemed from such
Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section
11 that such redemption is subject to one or more conditions precedent and that
the Fund shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) No Redemption Under Certain Circumstances. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
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<PAGE> 49
(e) Absence of Funds Available for Redemption. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor, such redemption shall be
made as soon as practicable to the extent such funds become available. Failure
to redeem shares of MuniPreferred shall be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the Fund shall have
failed, for any reason whatsoever, to deposit in trust with the Auction Agent
the Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed; provided, however, that the foregoing shall not
apply in the case of the Fund's failure to deposit in trust with the Auction
Agent the Redemption Price with respect to any shares where (1) the Notice of
Redemption relating to such redemption provided that such redemption was subject
to one or more conditions precedent and (2) any such condition precedent shall
not have been satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding the fact that the Fund may not have
redeemed shares of MuniPreferred for which a Notice of Redemption has been
mailed, dividends may be declared and paid on shares of MuniPreferred and shall
include those shares of MuniPreferred for which a Notice of Redemption has been
mailed.
(f) Auction Agent as Trustee of Redemption Payments by Fund. All moneys
paid to the Auction Agent for payment of the Redemption Price of shares of
MuniPreferred called for redemption shall be held in trust by the Auction Agent
for the benefit of Holders of shares so to be redeemed.
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer
Outstanding. Provided a Notice of Redemption has been mailed pursuant to
paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares shall
no longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance with the Notice of Redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of
MuniPreferred subject to redemption. In the case that fewer than all of the
shares represented by any such certificate are redeemed, a new certificate shall
be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Fund shall be entitled to receive from the Auction Agent, promptly
after the date fixed for redemption, any cash deposited with the Auction Agent
in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred
called for redemption on such date and (ii) all other amounts to which Holders
of shares of MuniPreferred called for redemption may be entitled. Any funds so
deposited that are unclaimed at the end of 90 days from such redemption date
shall, to the extent permitted by law, be repaid to the Fund, after which time
the Holders of shares of MuniPreferred so called for redemption may look only to
the Fund for payment of the Redemption Price and all other amounts to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest on the funds so deposited.
(h) Compliance With Applicable Law. In effecting any redemption pursuant to
this Section 11, the Fund shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the 1940 Act
and Minnesota law, but shall effect no redemption except in accordance with the
1940 Act and Minnesota law.
(i) Only Whole Shares of MuniPreferred May Be Redeemed. In the case of any
redemption pursuant to this Section 11, only whole shares of MuniPreferred shall
be redeemed, and in the event that any provision of the Articles would require
redemption of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.
12. Liquidation Rights.
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(a) Ranking. The shares of a series of MuniPreferred shall rank on a parity
with each other, with shares of any other series of MuniPreferred and with
shares of any other series of Preferred Stock as to the distribution of assets
upon dissolution, liquidation or winding up of the affairs of the Fund.
(b) Distributions Upon Liquidation. Upon the dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of shares of MuniPreferred then outstanding shall be entitled to receive
and to be paid out of the assets of the Fund available for distribution to its
shareholders, before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Fund ranking junior to the
MuniPreferred upon dissolution, liquidation or winding up, an amount equal to
the Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same-day funds,
together with any payments required to be made pursuant to Section 3 of this
Part I in connection with the liquidation of the Fund. After the payment to the
Holders of the shares of MuniPreferred of the full preferential amounts provided
for in this paragraph (b), the Holders of MuniPreferred as such shall have no
right or claim to any of the remaining assets of the Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund available
for distribution to the Holders of shares of MuniPreferred upon any dissolution,
liquidation, or winding up of the affairs of the Fund, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled pursuant to paragraph (b) of this Section 12, no such
distribution shall be made on account of any shares of any other class or series
of Preferred Stock ranking on a parity with the shares of MuniPreferred with
respect to the distribution of assets upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) Rights of Junior Stock. Subject to the rights of the holders of shares
of any series or class or classes of stock ranking on a parity with the shares
of MuniPreferred with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund, after payment shall have
been made in full to the Holders of the shares of MuniPreferred as provided in
paragraph (b) of this Section 12, but not prior thereto, any other series or
class or classes of stock ranking junior to the shares of MuniPreferred with
respect to the distribution of assets upon dissolution, liquidation or winding
up of the affairs of the Fund shall, subject to the respective terms and
provisions (if any) applying thereto, be entitled to receive any and all assets
remaining to be paid or distributed, and the Holders of the shares of
MuniPreferred shall not be entitled to share therein.
(e) Certain Events Not Constituting Liquidation. Neither the sale of all or
substantially all the property or business of the Fund, nor the merger or
consolidation of the Fund into or with any other corporation nor the merger or
consolidation of any other corporation into or with the Fund shall be a
dissolution, liquidation or winding up, whether voluntary or involuntary, for
the purposes of this Section 12.
13. Miscellaneous.
(a) Amendment of Appendix A to Add Additional Series. Subject to the
provisions of paragraph (c) of Section 10 of this Part I, the Board of Directors
may, by resolution duly adopted, without shareholder approval (except as
otherwise provided by this Statement or required by applicable law), amend
Appendix A hereto to (1) reflect any amendments hereto which the Board of
Directors is entitled to adopt pursuant to the terms of this Statement without
shareholder approval and (2) add additional series of MuniPreferred or
additional shares of a series of MuniPreferred (and terms relating thereto) to
the series and shares of MuniPreferred theretofore described thereon. Each such
additional series and all such additional shares shall be governed by the terms
of this Statement.
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<PAGE> 51
(b) Appendix A Incorporated By Reference. Appendix A hereto is incorporated
in and made a part of this Statement by reference thereto.
(c) No Fractional Shares. No fractional shares of MuniPreferred shall be
issued.
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or Otherwise
Acquired by the Fund. Shares of MuniPreferred which are redeemed, exchanged or
otherwise acquired by the Fund shall return to the status of authorized and
unissued shares of Preferred Stock without designation as to series. Upon the
redemption, exchange or other acquisition by the Fund of all outstanding shares
of a series of MuniPreferred, all provisions of the Articles relating to such
series (including, without limitation, all provisions of this Statement relating
to such series) shall cease to be of further effect and shall cease to be part
of the Articles. Upon the occurrence of any such event, the Board of Directors
shall have the power, pursuant to Minnesota Statutes Section 302A.135,
Subdivision 5 or any successor provision and without shareholder action, to
cause restated articles of incorporation of the Fund or other appropriate
documents to be prepared and filed with the Secretary of State of the State of
Minnesota which reflect such removal from the Articles of all such provisions
relating to such series or, if appropriate, the cancellation of this Statement,
or both.
(e) Board May Resolve Ambiguities. To the extent permitted by applicable
law, the Board of Directors may interpret or adjust the provisions of this
Statement to resolve any inconsistency or ambiguity or to remedy any formal
defect, and may amend this Statement with respect to any series of MuniPreferred
prior to the issuance of shares of such series.
(f) Headings Not Determinative. The headings contained in this Statement
are for convenience of reference only and shall not affect the meaning or
interpretation of this Statement.
(g) Notices. All notices or communications, unless otherwise specified in
the By-Laws of the Fund or this Statement, shall be sufficiently given if in
writing and delivered in person or mailed by first-class mail, postage prepaid.
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<PAGE> 52
PART II
1. Orders. (a) Prior to the Submission Deadline on each Auction Date for
shares of a series of MuniPreferred:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner desires to
continue to hold without regard to the Applicable Rate for shares of
such series for the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell if
the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be less than the rate per
annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held
by such Beneficial Owner which such Beneficial Owner offers to sell
without regard to the Applicable Rate for shares of such series for
the next succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive
Auction in a commercially reasonable manner, contact Potential Beneficial
Owners (by telephone or otherwise), including Persons that are not
Beneficial Owners, on such lists to determine the number of shares, if any,
of such series which each such Potential Beneficial Owner offers to
purchase if the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series shall not be less than the
rate per annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
paragraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively
as "Hold Orders"; an Order containing the information referred to in clause
(i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information referred to in
clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order"
and collectively as "Sell Orders."
(b)(i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such
Bid if the Applicable Rate for shares of such series determined on such
Auction Date shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such
series to be determined as set forth in clause (iv) of paragraph (a) of
Section 4 of this Part II if the Applicable
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<PAGE> 53
Rate for shares of such series determined on such Auction Date shall be
equal to the rate specified therein; or
(C) the number of Outstanding shares of such series specified in such
Bid if the rate specified therein shall be higher than the Maximum Rate for
shares of such series, or such number or a lesser number of Outstanding
shares of such series to be determined as set forth in clause (iii) of
paragraph (b) of Section 4 of this Part II if the rate specified therein
shall be higher than the Maximum Rate for shares of such series and
Sufficient Clearing Bids for shares of such series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares of
a series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such
Sell Order; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (iii) of paragraph (b) of Section 4 of this
Part II if Sufficient Clearing Bids for shares of such series do not exist;
provided, however, that a Broker-Dealer that is an Existing Holder with respect
to shares of a series of MuniPreferred shall not be liable to any Person for
failing to sell such shares pursuant to a Sell Order described in the proviso to
paragraph (c) of Section 2 of this Part II if (1) such shares were transferred
by the Beneficial Owner thereof without compliance by such Beneficial Owner or
its transferee Broker-Dealer (or other transferee person, if permitted by the
Fund) with the provisions of Section 7 of this Part II or (2) such Broker-Dealer
has informed the Auction Agent pursuant to the terms of its Broker-Dealer
Agreement that, according to such Broker-Dealer's records, such Broker-Dealer
believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder of
shares of a series of MuniPreferred subject to an Auction on any Auction Date
shall constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in such
Bid if the Applicable Rate for shares of such series determined on such
Auction Date shall be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (v) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred other than
whole shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each
Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of MuniPreferred
of a series subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Fund) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares
of such series:
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<PAGE> 54
(A) the number of shares, if any, of such series subject to any
Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to any
Bid of such Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any
Sell Order of such Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of such
series, the rate and number of shares of such series specified in such
Potential Holder's Bid.
(b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth (.001) of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of
MuniPreferred of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding shares of
MuniPreferred of a series subject to an Auction held by such Existing Holder,
such Orders shall be considered valid in the following order of priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by such Existing Holder, and if the
number of shares of such series subject to such Hold Orders exceeds the
number of Outstanding shares of such series held by such Existing Holder,
the number of shares subject to each such Hold Order shall be reduced pro
rata to cover the number of Outstanding shares of such series held by such
Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid
up to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent
with the same rate and the number of Outstanding shares of such series
subject to such Bids is greater than such excess, such Bids shall be
considered valid up to and including the amount of such excess, and
the number of shares of such series subject to each Bid with the same
rate shall be reduced pro rata to cover the number of shares of such
series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of such series is submitted to the Auction
Agent with different rates, such Bids shall be considered valid in the
ascending order of their respective rates up to and including the
amount of such excess; and
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<PAGE> 55
(D) in any such event, the number, if any, of such Outstanding
shares of such series subject to any portion of Bids considered not
valid in whole or in part under this clause (ii) shall be treated as
the subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of such series shall be considered
valid up to and including the excess of the number of Outstanding shares of
such series held by such Existing Holder over the sum of shares of such
series subject to valid Hold Orders referred to in clause (i) above and
valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential Beneficial
Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to
the Submission Deadline on any Auction Date, shall be irrevocable.
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate. (a) Not earlier than the Submission Deadline on each Auction
Date for shares of a series of MuniPreferred, the Auction Agent shall assemble
all valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over
the number of Outstanding shares of such series subject to Submitted Hold
Orders (such excess being hereinafter referred to as the "Available
MuniPreferred" of such series);
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to
Submitted Bids of Potential Holders specifying one or more rates equal
to or lower than the Maximum Rate for shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to
Submitted Bids of Existing Holders specifying one or more rates higher
than the Maximum Rate for shares of such series; and
(C) the number of Outstanding shares of such series subject to
Submitted Sell Orders
(in the event such excess or such equality exists (other than because the
number of shares of such series in subclauses (B) and (C) above is zero
because all of the Outstanding shares of such series are subject to
Submitted Hold Orders), such Submitted Bids in subclause (A) above being
hereinafter referred to collectively as "Sufficient Clearing Bids" for
shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
shares of such series) which if:
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<PAGE> 56
(A)(I) each such Submitted Bid of Existing Holders specifying
such lowest rate and (II) all other such Submitted Bids of Existing
Holders specifying lower rates were rejected, thus entitling such
Existing Holders to continue to hold the shares of such series that
are subject to such Submitted Bids; and
(B)(I) each such Submitted Bid of Potential Holders specifying
such lowest rate and (II) all other such Submitted Bids of Potential
Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of
the Maximum Rate for shares of the series of MuniPreferred for which an Auction
is being held on the Auction Date and, based on such determination, the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that
the Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Winning Bid Rate for shares of
such series so determined;
(ii) if Sufficient Clearing Bids for shares of such series do not
exist (other than because all of the Outstanding shares of such series are
subject to Submitted Hold Orders), that the Applicable Rate for all shares
of such series for the next succeeding Rate Period thereof shall be equal
to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to
Submitted Hold Orders, that the Applicable Rate for all shares of such
series for the next succeeding Rate Period thereof shall be as set forth in
Section 12 of Appendix A hereto.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares. Existing Holders shall continue to hold the shares of
MuniPreferred that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph (a) of Section 3 of this Part II, the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected by the
Auction Agent and the Auction Agent shall take such other action as set forth
below:
(a) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have been made, all Submitted Sell Orders with respect to shares of such series
shall be accepted and, subject to the provisions of paragraphs (d) and (e) of
this Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of MuniPreferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
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<PAGE> 57
(iv) each Existing Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the shares of MuniPreferred subject to such Submitted Bid, unless
the number of Outstanding shares of MuniPreferred subject to all such
Submitted Bids shall be greater than the number of shares of MuniPreferred
("remaining shares") in the excess of the Available MuniPreferred of such
series over the number of shares of MuniPreferred subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in which event
such Submitted Bid of such Existing Holder shall be rejected in part, and
such Existing Holder shall be entitled to continue to hold shares of
MuniPreferred subject to such Submitted Bid, but only in an amount equal to
the number of shares of MuniPreferred of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred held by
such Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such series;
and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available MuniPreferred of such series over the number of
shares of MuniPreferred subject to Submitted Bids described in clauses
(ii) through (iv) of this paragraph (a) by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred subject to
such Submitted Bid and the denominator of which shall be the aggregate
number of Outstanding shares of MuniPreferred subject to such Submitted
Bids made by all such Potential Holders that specified a rate equal to the
Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of MuniPreferred
have not been made (other than because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), subject to the provisions of
paragraph (d) of this Section 4, Submitted Orders for shares of such series
shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids for shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of MuniPreferred subject to such
Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each
Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or
Submitted Sell Order to sell the shares of such series subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by multiplying the
number of shares of such series subject to Submitted Bids described in
clause (ii) of this paragraph (b) by a fraction, the numerator of which
shall be the number of Outstanding shares of such series held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted Sell
Orders.
B-40
<PAGE> 58
(c) If all of the Outstanding shares of a series of MuniPreferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of
MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as
it shall determine in its sole discretion, round up or down the number of shares
of MuniPreferred of such series to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date as a result of such procedures so that
the number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of
paragraph (a) of this Section 4, any Potential Holder would be entitled or
required to purchase less than a whole share of a series of MuniPreferred on any
Auction Date, the Auction Agent shall, in such manner as it shall determine in
its sole discretion, allocate shares of MuniPreferred of such series for
purchase among Potential Holders so that only whole shares of MuniPreferred of
such series are purchased on such Auction Date as a result of such procedures by
any Potential Holder, even if such allocation results in one or more Potential
Holders not purchasing shares of MuniPreferred of such series on such Auction
Date.
(f) Based on the results of each Auction for shares of a series of
MuniPreferred, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such series
to be sold by Potential Holders and Existing Holders and, with respect to each
Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, shares of MuniPreferred of such series.
Notwithstanding any provision of the Auction Procedures or the Settlement
Procedures to the contrary, in the event an Existing Holder or Beneficial Owner
of shares of a series of MuniPreferred with respect to whom a Broker-Dealer
submitted a Bid to the Auction Agent for such shares that was accepted in whole
or in part, or submitted or is deemed to have submitted a Sell Order for such
shares that was accepted in whole or in part, fails to instruct its Agent Member
to deliver such shares against payment therefor, partial deliveries of shares of
MuniPreferred that have been made in respect of Potential Holders' or Potential
Beneficial Owners' Submitted Bids for shares of such series that have been
accepted in whole or in part shall constitute good delivery to such Potential
Holders and Potential Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate of either
shall have any responsibility or liability with respect to the failure of an
Existing Holder, a Potential Holder, a Beneficial Owner, a Potential Beneficial
Owner or its respective Agent Member to deliver shares of MuniPreferred of any
series or to pay for shares of MuniPreferred of any series sold or purchased
pursuant to the Auction Procedures or otherwise.
5. Notification of Allocations. Whenever the Fund intends to include any
net capital gains or other income taxable for Federal income tax purposes in
any dividend on shares of MuniPreferred, the Fund shall, in the case of a
Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer,
and may, in the case of any other Special Rate Period, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date next
preceding the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the Fund,
it will be required in turn to notify each Broker-Dealer, who, on or prior to
such Auction Date, in accordance with its Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of MuniPreferred believed by it to be interested in submitting an Order
in the Auction to be held on such Auction Date.
6. Auction Agent. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or
41
<PAGE> 59
other financial institution independent of the Fund and its affiliates
(which however, may engage or have engaged in business transactions with the
Fund or its affiliates) and at no time shall the Fund or any of its affiliates
act as the Auction Agent in connection with the Auction Procedures. If the
Auction Agent resigns or for any reason its appointment is terminated during any
period that any shares of MuniPreferred are outstanding, the Board of Directors
shall use its best efforts promptly thereafter to appoint another qualified
commercial bank, trust company or financial institution to act as the Auction
Agent. The Auction Agent's registry of Existing Holders of shares of a series of
MuniPreferred shall be conclusive and binding on the Broker-Dealers. A
Broker-Dealer may inquire of the Auction Agent between 3:00 p.m. on the Business
Day preceding an Auction for shares of a series of MuniPreferred and 9:30 a.m.
on the Auction Date for such Auction to ascertain the number of shares of such
series in respect of which the Auction Agent has determined such Broker-Dealer
to be an Existing Holder. If such Broker-Dealer believes it is the Existing
Holder of fewer shares of such series than specified by the Auction Agent in
response to such Broker-Dealer's inquiry, such Broker-Dealer may so inform the
Auction Agent of that belief. Such Broker-Dealer shall not, in its capacity as
Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the number
of shares of such series specified by the Auction Agent in response to such
Broker-Dealer's inquiry.
7. Transfer of Shares of MuniPreferred. Unless otherwise permitted by the
Fund, a Beneficial Owner or an Existing Holder may sell, transfer or otherwise
dispose of shares of MuniPreferred only in whole shares and only pursuant to a
Bid or Sell Order placed with the Auction Agent in accordance with the
procedures described in this Part II or to a Broker-Dealer; provided, however,
that (a) a sale, transfer or other disposition of shares of MuniPreferred from a
customer of a Broker-Dealer who is listed on the records of that Broker-Dealer
as the holder of such shares to that Broker-Dealer or another customer of that
Broker-Dealer shall not be deemed to be a sale, transfer or other disposition
for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder
of the shares so sold, transferred or disposed of immediately after such sale,
transfer or disposition and (b) in the case of all transfers other than pursuant
to Auctions, the Broker-Dealer (or other Person, if permitted by the Fund) to
whom such transfer is made shall advise the Auction Agent of such transfer.
8. Global Certificate. Prior to the commencement of a Voting Period,
(i) all of the shares of a series of MuniPreferred outstanding from time to time
shall be represented by one global certificate registered in the name of the
Securities Depository or its nominee and (ii) no registration of transfer of
shares of a series of MuniPreferred shall be made on the books of the Fund to
any Person other than the Securities Depository or its nominee. The foregoing
restriction on registration of transfer shall be conspicuously noted on the face
or back of the certificates of MuniPreferred in such a manner as to comply with
the requirements of Minnesota Statute Section 302A.429, Subd. 2, and Section
8-204 of the Uniform Commercial Code as in effect in the State of Minnesota, or
any successor provisions.
IN WITNESS WHEREOF, NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC., has
caused these presents to be signed in its name and on its behalf by its Vice
President and attested by its Assistant Secretary, and the said officers of the
Fund further acknowledged said instrument to be the corporate act of the Fund,
and stated under penalty of perjury that to the best of their knowledge,
information and belief the matters and facts therein set forth with respect to
approval are true in all material respects, all on October 1, 1996.
NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
By
James J. Wesolowski
Vice President and Secretary
42
<PAGE> 60
ATTEST:
Gifford R. Zimmerman
Vice President and Assistant Secretary
43
<PAGE> 61
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
Appendix A
Section 1. Designation As To Series.
Series M: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series M." Each share of Series M
MuniPreferred shall be issued on December 20, 1991; have an Applicable Rate for
its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 7, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Articles applicable to Preferred Stock of the Fund, as set
forth in Part I and Part II of this Statement. The Series M MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series M MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Series T: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series T." Each share of Series T
MuniPreferred shall be issued on December 20, 1991; have an Applicable Rate for
its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 8, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Articles applicable to Preferred Stock of the Fund, as set
forth in Part I and Part II of this Statement. The Series T MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series T MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Series W: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series W." Each share of Series W
MuniPreferred shall be issued on February 28, 1992; have an Applicable Rate for
its Initial Rate Period equal to 3.25% per annum; have an initial Dividend
Payment Date of March 5, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Articles applicable to Preferred Stock of the Fund, as set forth in
Part I and Part II of this Statement. The Series W MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series W MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Series TH1: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series TH1." Each share of Series TH1
MuniPreferred shall be issued on December 20, 1991; have an Applicable Rate for
its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 10, 1992; and have such other preferences, limitations
and relative voting rights, in addition to those required by applicable law or
set forth in the Articles applicable to Preferred Stock of the Fund, as set
forth in Part I and Part II of this Statement. The Series TH1 MuniPreferred
shall constitute a separate series of Preferred Stock of the Fund, and each
share of Series TH1 MuniPreferred shall be identical except as provided in
Section 11 of Part I of this Statement.
Series TH2: A series of 4,000 shares of Preferred Stock, par value of $.01
per share, liquidation preference $25,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series TH2." Each share of
Series TH2 MuniPreferred shall be issued on February 28, 1992; have an
Applicable Rate for its Initial Rate Period equal to 3.25% per annum; have an
initial Dividend Payment Date of March 9, 1992; and have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Articles applicable to Preferred Stock of the
Fund, as set forth in Part I and Part II of this Statement. The Series TH2
MuniPreferred shall constitute a separate
A-1
<PAGE> 62
series of Preferred Stock of the Fund, and each share of Series TH2
MuniPreferred shall be identical except as provided in Section 11 of Part I of
this Statement.
Series F: A series of 4,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series F." Each share of Series F
MuniPreferred shall be issued on February 28, 1992; have an Applicable Rate for
its Initial Rate Period equal to 3.25% per annum; have an initial Dividend
Payment Date of March 9, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Articles applicable to Preferred Stock of the Fund, as set forth in
Part I and Part II of this Statement. The Series F MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series F MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
Section 2. Number of Authorized Shares Per Series.
The number of authorized shares constituting Series M MuniPreferred is
4,000; Series T MuniPreferred is 4,000; Series W MuniPreferred is 4,000; Series
TH1 MuniPreferred is 4,000; Series TH2 MuniPreferred is 4,000; and Series F
MuniPreferred is 4,000.
Section 3. Exceptions to Certain Definitions.
Notwithstanding the definitions contained under the heading "Definitions"
in this Statement, the following terms shall have the following meanings for
purposes of this Statement:
Not applicable.
Section 4. Certain Definitions.
For purposes of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"Gross-up Payment" means payment to a Holder of shares of
MuniPreferred of an amount which, when taken together with the aggregate
amount of Taxable Allocations made to such Holder to which such Gross-up
Payment relates, would cause such Holder's dividends in dollars (after
Federal income tax consequences) from the aggregate of such Taxable
Allocations and the related Gross-up Payment to be equal to the dollar
amount of the dividends which would have been received by such Holder if
the amount of such aggregate Taxable Allocations would have been excludable
from the gross income of such Holder. Such Gross-up Payment shall be
calculated (i) without consideration being given to the time value of
money; (ii) assuming that no Holder of shares of MuniPreferred is subject
to the Federal alternative minimum tax with respect to dividends received
from the Fund; and (iii) assuming that each Taxable Allocation and each
Gross-up Payment (except to the extent such Gross-up Payment is designated
as an exempt-interest dividend under Section 852(b)(5) of the Code or
successor provisions) would be taxable in the hands of each Holder of
shares of MuniPreferred at the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or net capital gains, as
applicable, or the maximum marginal regular Federal corporate income tax
rate applicable to ordinary income or net capital gains, as applicable,
whichever is greater, in effect at the time such Gross-up Payment is made.
"Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined
by reference to (i) (A) in the event such Municipal Obligation is covered
by an Original Issue Insurance policy or a Portfolio Insurance policy which
does not provide the Fund with the option to obtain Permanent Insurance
A-2
<PAGE> 63
with respect to such Municipal Obligation, or is not covered by bond
insurance, the Moody's or S&P rating on such Municipal Obligation, (B) in
the event such Municipal Obligation is covered by a Secondary Market
Insurance Policy, the Moody's insurance claims-paying ability rating of the
issuer of the policy, or (C) in the event such Municipal Obligation is
covered by a Portfolio Insurance policy which provides the Fund with the
option to obtain Permanent Insurance with respect to such Municipal
Obligation, at the Fund's option, the Moody's or S&P rating on such
Municipal Obligation or the Moody's insurance claims-paying ability rating
of the issuer of the Portfolio Insurance policy and (ii) the shortest
Exposure Period set forth opposite such rating that is the same length as
or is longer than the Moody's Exposure Period, in accordance with the table
set forth below:
<TABLE>
<CAPTION>
Rating Category
(V)MIG SP-1
Exposure Period Aaa* Aa* A* Baa* Other** -1*** +***
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but
greater than
seven weeks 154 164 173 205 235 137 149
9 weeks or less but
greater than
eight weeks 158 169 179 209 242 138 150
</TABLE>
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
If the Moody's Discount Factor used to discount a particular Municipal
Obligation is determined by reference to the insurance claims-paying
ability rating of the insurer of such Municipal Obligation, such Moody's
Discount Factor will be increased by an amount equal to 50% of the
difference between (i) the percentage set forth in the above table under
the applicable rating category, and (ii) the percentage set forth in the
above table under the rating category that is one rating category below the
applicable rating category. Notwithstanding the foregoing, (i) the Moody's
Discount Factor for short-term Municipal Obligations will be 115%, so long
as such Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by
Moody's and mature or have a demand feature at par exercisable in 30 days
or less or 125% as long as such Municipal Obligations are rated at least
A-1+/AA or SP-1+/AA by S&P and mature or have a demand feature at par
exercisable in 30 days or less and (ii) no Moody's Discount Factor will be
applied to cash or to Receivables for Municipal Obligations Sold.
"Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash,
(ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's
but rated by S&P, is rated at least BBB by S&P (provided, however, that for
purposes of determining the Moody's Discount Factor applicable to any such
S&P-rated Municipal Obligation, such Municipal Obligation (excluding any
short-term Municipal Obligation) shall be deemed to have a Moody's rating
which is one full rating category lower than its S&P rating), (iii) does
not have its Moody's rating suspended by Moody's, and (iv) is part of an
issue of Municipal Obligations of at least $10,000,000. Municipal
Obligations issued by any one issuer and rated BBB by S&P may comprise no
more than 4% of total Moody's Eligible Assets; such BBB-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated Baa by Moody's or A by S&P, may comprise no more than
6% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by the
same issuer and rated A by Moody's or AA by S&P, may
A-3
<PAGE> 64
comprise no more than 10% of total Moody's Eligible Assets; and such BBB,
Baa, A and AA-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Aa by Moody's or
AAA by S&P, may comprise no more than 20% of total Moody's Eligible Assets.
For purposes of the foregoing sentence, any Municipal Obligation backed by
the guaranty, letter of credit or insurance issued by a third party shall
be deemed to be issued by such third party if the issuance of such third
party credit is the sole determinant of the rating on such Municipal
Obligation. Municipal Obligations issued by issuers located within a single
state or territory and rated BBB by S&P may comprise no more than 12% of
total Moody's Eligible Assets; such BBB-rated Municipal Obligations, if
any, together with any Municipal Obligations issued by issuers located
within the same state or territory and rated Baa by Moody's or A by S&P,
may comprise no more than 20% of total Moody's Eligible Assets; such BBB,
Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory
and rated A by Moody's or AA by S&P, may comprise no more than 40% of total
Moody's Eligible Assets; and such BBB, Baa, A and AA-rated Municipal
Obligations, if any, together with any Municipal Obligations issued by
issuers located within the same state or territory and rated Aa by Moody's
or AAA by S&P, may comprise no more than 60% of total Moody's Eligible
Assets. For purposes of applying the foregoing requirements, a Municipal
Obligation shall be deemed to be rated BBB by S&P if rated BBB-, BBB or
BBB+ by S&P, Moody's Eligible Assets shall be calculated without including
cash, and Municipal Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated
by Moody's, rated A-1+/AA or SP-1+/AA by S&P, shall be considered to have a
long-term rating of A. When the Fund sells a Municipal Obligation and
agrees to repurchase such Municipal Obligation at a future date, such
Municipal Obligation shall be valued at its Discounted Value for purposes
of determining Moody's Eligible Assets, and the amount of the repurchase
price of such Municipal Obligation shall be included as a liability for
purposes of calculating the MuniPreferred Basic Maintenance Amount. When
the Fund purchases a Moody's Eligible Asset and agrees to sell it at a
future date, such Eligible Asset shall be valued at the amount of cash to
be received by the Fund upon such future date, provided that the
counterparty to the transaction has a long-term debt rating of at least A2
from Moody's and the transaction has a term of no more than 30 days,
otherwise such Eligible Asset shall be valued at the Discounted Value of
such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset to the extent it is (i) subject to any material
lien, mortgage, pledge, security interest or security agreement of any kind
(collectively, "Liens"), except for (a) Liens which are being contested in
good faith by appropriate proceedings and which Moody's has indicated to
the Fund will not affect the status of such asset as a Moody's Eligible
Asset, (b) Liens for taxes that are not then due and payable or that can be
paid thereafter without penalty, (c) Liens to secure payment for services
rendered or cash advanced to the Fund by Nuveen Advisory Corp., The Chase
Manhattan Bank, N.A. or the Auction Agent and (d) Liens by virtue of any
repurchase agreement; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the MuniPreferred Basic Maintenance
Amount.
For purposes of determining as of any Valuation Date whether the Fund
has Moody's Eligible Assets with an aggregate Discounted Value at least
equal to the MuniPreferred Basic Maintenance Amount, the Fund shall include
as a liability in the calculation of the MuniPreferred Basic Maintenance
Amount an amount calculated semi-annually equal to 150% of the estimated
cost of obtaining Permanent Insurance with respect to Moody's Eligible
Assets that are (i) covered by Portfolio Insurance policies which provide
the Fund with the option to obtain such Permanent Insurance and (ii)
discounted by a Moody's Discount Factor determined by reference to the
insurance claims-paying ability rating of the issuer of such Portfolio
Insurance policy.
"Original Issue Insurance" shall mean "Original Issue Insurance" as
defined in the Fund's Registration Statement.
A-4
<PAGE> 65
"Permanent Insurance" shall mean "Permanent Insurance" as defined in
the Fund's Registration Statement.
"Portfolio Insurance" shall mean "Portfolio Insurance" as defined in
the Fund's Registration Statement.
"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- 150%
</TABLE>
provided, however, that in the event the Fund has notified the Auction
Agent of its intent to allocate income taxable for Federal income tax
purposes to shares of such series prior to the Auction establishing the
Applicable Rate for shares of such series, the applicable percentage in the
foregoing table shall be divided by the quantity 1 minus the maximum
marginal regular Federal individual income tax rate applicable to ordinary
income or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income, whichever is greater.
For purposes of this definition, the "prevailing rating" of shares of
a series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares
have a rating of "aa3" or better by Moody's and AA- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency
or substitute rating agencies selected as provided below, (ii) if not
"aa3"/AA- or higher, then "a3"/A- if such shares have a rating of "a3" or
better by Moody's and A- or better by S&P or the equivalent of such ratings
by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, (iii) if not "aa3"/AA- or higher or
"a3"/A-, then "baa3"/BBB- if such shares have a rating of "baa3" or better
by Moody's and BBB- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, (iv) if not "aa3"/AA- or higher, "a3"/A- or
"baa3"/BBB-, then "ba3"/BB- if such shares have a rating of "ba3" or better
by Moody's and BB- or better by S&P or the equivalent of such ratings by
such agencies or a substitute rating agency or substitute rating agencies
selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-,
"baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; provided, however, that if
such shares are rated by only one rating agency, the prevailing rating will
be determined without reference to the rating of any other rating agency.
The Fund shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor
Moody's shall make such a rating available, the party set forth in Section
7 of Appendix A or its successor shall select at least one nationally
recognized statistical rating organization (as that term is used in the
rules and regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended from time to time) to act as a
substitute rating agency in respect of shares of the series of
MuniPreferred set forth opposite such party's name in Section 7 of Appendix
A and the Fund shall take all reasonable action to enable such rating
agency to provide a rating for such shares.
"S&P Discount Factor" shall mean, for purposes of determining the
Discounted Value of any S&P Eligible Asset, the percentage determined by
reference to (i) (A) in the event such Municipal Obligation is covered by
an Original Issue Insurance policy or a Portfolio Insurance policy which
does not provide the Fund with the option to obtain Permanent Insurance
with respect to such
A-5
<PAGE> 66
Municipal Obligation, or is not covered by bond insurance, the S&P or Moody's
rating on such Municipal Obligation, (B) in the event such Municipal Obligation
is covered by a Secondary Market Insurance policy, the S&P insurance
claims-paying ability rating of the issuer of the policy, or (C) in the event
such Municipal Obligation is covered by a Portfolio Insurance policy which
provides the Fund with the option to obtain Permanent Insurance with respect to
such Municipal Obligation, at the Fund's option, the S&P or Moody's rating on
such Municipal Obligation or the S&P insurance claims-paying ability rating of
the issuer of the Portfolio Insurance policy and (ii) the shortest Exposure
Period set forth opposite such rating that is the same length as or is longer
than the S&P Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
- -----------------------------------------------------------------------
Exposure Period AAA* AA* A* BBB*
- -------------------------------------------------------------------------------
<S> <S> <S> <S> <S>
40 Business Days 190% 195% 210% 250%
22 Business Days 170 175 190 230
10 Business Days 155 160 175 215
7 Business Days 150 155 170 210
3 Business Days 130 135 150 190
*S&P rating.
</TABLE>
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated A-1+ or SP-1+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 125% if such Municipal Obligations are not rated by
S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that any
such Moody's-rated short-term Municipal Obligations which have demand features
exercisable within 30 days or less must be backed by a letter of credit,
liquidity facility or guarantee from a bank or other financial institution with
a short-term rating of at least A-1+ from S&P; and further provided that such
Moody's-rated short-term Municipal Obligations may comprise no more than 50% of
short-term Municipal Obligations that qualify as S&P Eligible Assets; (ii) no
S&P Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold. 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 (provided, however, that such
Moody's-rated Municipal Obligations will be included in S&P Eligible Assets only
to the extent the Market Value of such Municipal Obligations does not exceed 50%
of the aggregate Market Value of such S&P Eligible Assets; and further provided
that, for purposes of determining the S&P Discount Factor applicable to any such
Moody's-rated Municipal Obligation, such Municipal Obligation will be deemed to
have an S&P rating which is one full rating category lower than it's Moody's
rating); (iii) is publicly rated BBB or higher by S&P or, if not rated by S&P
but rated by Moody's, is rated at least A by Moody's; (iv) is not part of a
private placement of Municipal Obligations; and (v) is part of an issue of
Municipal Obligations with an original issue size of at least $20 million or, if
of an issue with an original issue size below $20 million (but in no event below
$10 million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Solely for purposes of this definition, the term
"Municipal Obligation" means any obligation the interest on which is exempt from
regular Federal income taxation and which is issued by any of the fifty United
States, the District of Columbia or any of the territories of the United States,
their
A-6
<PAGE> 67
subdivisions, counties, cities, towns, villages, school districts and
agencies (including authorities and special districts created by the
states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations of any one issuer or guarantor
(excluding bond insurers) shall be considered S&P Eligible Assets
only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible
Assets, provided that 2% is added to the applicable S&P Discount
Factor for every 1% by which the Market Value of such Municipal
Obligations exceeds 5% of the aggregate Market Value of S&P
Eligible Assets;
(2) Long-Term Municipal Obligations issued by issuers in any one
state or territory shall be considered S&P Eligible Assets only to
the extent the Market Value of such Municipal Obligations does not
exceed 20% of the aggregate Market Value of S&P Eligible Assets.
For purposes of determining as of any Valuation Date whether the Fund
has S&P Eligible Assets with an aggregate Discounted Value at least equal
to the MuniPreferred Basic Maintenance Amount, the Fund shall include as a
liability in the calculation of the MuniPreferred Basic Maintenance Amount
an amount calculated semi-annually equal to 150% of the estimated cost of
obtaining Permanent Insurance with respect to S&P Eligible Assets that are
(i) covered by Portfolio Insurance policies which provide the Fund with the
option to obtain such Permanent Insurance and (ii) discounted by an S&P
Discount Factor determined by reference to the insurance claims-paying
ability rating of the issuer of such Portfolio Insurance policy.
"Secondary Market Insurance" shall mean "Secondary Market Insurance"
as defined in the Fund's Registration Statement.
Section 5. Initial Rate Periods.
The Initial Rate Period for shares of Series M MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
January 7, 1992.
The Initial Rate Period for shares of Series T MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
January 8, 1992.
The Initial Rate Period for shares of Series W MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
March 5, 1992.
The Initial Rate Period for shares of Series TH1 MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
January 10, 1992.
The Initial Rate Period for shares of Series TH2 MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
March 6, 1992.
The Initial Rate Period for shares of Series F MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
March 9, 1992.
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading
"Definitions" in this Statement.
February 29, 1992 for Series M MuniPreferred, Series T MuniPreferred and
Series TH1 MuniPreferred and May 31, 1992 for Series W MuniPreferred, Series
TH2 MuniPreferred and Series F MuniPreferred.
A-7
<PAGE> 68
Section 7. Party Named for Purposes of the Definition of "Rate Multiple" in
this Statement.
Party: Series of MuniPreferred:
<TABLE>
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated Series M
Smith Barney Shearson Inc. Series T
Merrill Lynch, Pierce, Fenner & Smith Incorporated Series W
Lehman Brothers, Inc. Series TH1
Merrill Lynch, Pierce, Fenner & Smith Incorporated Series TH2
Lehman Brothers, Inc. Series F
</TABLE>
Section 8. Additional Definitions.
Not applicable.
Section 9. Dividend Payment Dates.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of:
Series M MuniPreferred on Tuesday, January 7, 1992, and on each Tuesday
thereafter;
Series T MuniPreferred on Wednesday, January 8, 1992, and on each Wednesday
thereafter;
Series W MuniPreferred on Thursday, March 5, 1992, and on each Thursday
thereafter;
Series TH1 MuniPreferred on Friday, January 10, 1992, and on each Friday
thereafter;
Series TH2 MuniPreferred on Friday, March 6, 1992, and on each Friday
thereafter;
Series F MuniPreferred on Monday, March 9, 1992, and on each Monday
thereafter.
Section 10. Amount for Purposes of Subparagraph (c)(i) of Section 5 of Part I of
this Statement.
$600,000,000
Section 11. Redemption Provisions Applicable to Initial Rate Periods.
Not applicable.
Section 12. Applicable Rate for Purposes of Subparagraph(b)(iii) of Section 3 of
Part II of this Statement.
For purpose of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be equal to the lesser of the Kenny
Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the
product of (A) (I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal
A-8
<PAGE> 69
corporate income tax rate applicable to ordinary income, whichever is greater;
provided, however, that if the Fund has notified the Auction Agent of its intent
to allocate to shares of such series in such Rate Period any net capital gains
or other income taxable for Federal income tax purposes ("Taxable Income"), the
Applicable Rate for shares of such series for such Rate Period will be (i) if
the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate,
then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal
to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the
Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or
the product of the Benchmark Rate multiplied by the factor set forth in the
preceding clause (B) and (y) the product of the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax applicable to ordinary income, whichever is
greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing,
Taxable Yield Rate means the rate determined by (a) dividing the amount of
Taxable Income available for distribution per such share of MuniPreferred by the
number of days in the Dividend Period in respect of which such Taxable Income is
contemplated to be distributed, (b) multiplying the amount determined in (a)
above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or 360 (in
the case of any other Dividend Period), and (c) dividing the amount determined
in (b) above by $25,000.
A-9
<PAGE> 1
EXHIBIT 99.b
AMENDMENT TO BY-LAWS
of
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
The By-Laws of Nuveen Insured Municipal Opportunity Fund, Inc. (the "Fund"), a
Minnesota corporation, having been amended, by unanimous vote of the Board of
Directors at a meeting duly called, convened and held on November 19, 1997, to
read as follows:
RESOLVED, that to eliminate the inconsistency between the Fund's Articles of
incorporation and By-Laws with respect to eligibility requirements for Board
committees, Section 3.7 be amended in its entirety to read as follows:
"Section 3.7 Committees. The Board of Directors, by resolution
adopted by the affirmative vote of a majority of the Board, may designate
from its members an Executive Committee, an Audit Committee (whose
function shall be to advise the Board as to the selection of and review of
the work of the independent public accountants of the Corporation) and any
other committee, each such committee to consist of two or more directors
and to have such powers and authority (to the extent permitted by law) as
may be provided in such resolution."
FURTHER RESOLVED, that the third sentence of Section 5.1 of the By-Laws
of the Fund be amended to delete reference to a seal, and that said
sentence, as amended, read as follows:
"The certificates representing shares of Common Stock shall be signed in
the name of the Corporation by the Chairman of the Board, the President,
the Executive Vice President or a Vice President and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer (which
signatures may be either manual or facsimile, engraved or printed)."
<PAGE> 2
AMENDMENT TO BY-LAWS
OF
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
The By-Laws of Nuveen Insured Municipal Opportunity Fund, Inc., a Minnesota
corporation, have been amended, by unanimous vote of the Board of Directors at
a meeting duly called, convened and held on February 2, 1994, to read as
follows:
WHEREAS, the Board of Directors (Trustees) desires to amend the By-laws of the
Fund by adding SECTION 5.6(b) AND revising what becomes Section 5.6(c) in order
to clarify certain provisions regarding the Board's ability to declare a record
date for the payment of dividends or other distributions or allocations.
NOW, THEREFORE, BE IT RESOLVED, that Section 5.6 of the By-Laws of the fund is
amended and restated in its entirety to read as follows:
Section 5.6 Record Date: Certification of Beneficial Owner.
(a) The directors may fix a date not more than sixty (60) days
before the date of a meeting of shareholders as the date for the
determination of the holders of shares entitled to notice of and
entitled to vote, at the meeting.
(b) The directors (trustees) may fix a date for determining
shareholders entitled to receive payment of any dividend or
distribution or an allotment of any rights or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock (shares).
(c) In the absence of any such fixed record date, (i) the date for
the determination of holders of shares entitled to notice of and
entitled to vote at a meeting of shareholders shall be the later of
the close of business on the day on which notice of the meeting is
mailed or the thirtieth day before the meeting, and (ii) the date
for determining shareholders entitled to receive payment of any
dividend or distribution or an allotment of any rights or entitled
to exercise any rights in respect of any change, conversion or
exchange of stock (shares) shall be the close of business on the
day on which the resolution of the Board of Directors (Trustees) is
adopted.
(d) A resolution approved by the affirmative vote of a majority
of the directors (trustees) present may establish a procedure
whereby a shareholder may certify in writing to the Corporation
(Trust) that all or a portion of the shares registered in the
name of the shareholder are held for the account of one or more
beneficial owners. Upon receipt by the Corporation (Trust) of
the writing, the persons specified as beneficial owners, rather
than the actual shareholders, are deemed the shareholders for the
purposes specified in the writing.
<PAGE> 3
AMENDMENT TO BY-LAWS
OF
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
The By-Laws of Nuveen Insured Municipal Opportunity Fund, Inc., a Minnesota
corporation, have been amended, by unanimous vote of the Board of Directors at
a meeting duly called, convened and held on October 19, 1993, to read as
follows:
RESOLVED, that Section 3.1 of the By-Laws is hereby amended by
striking the sentences that read: "The Board of Directors shall
consist of six persons.", "The Board of Directors shall never be
less than one.", and by inserting in their place the following
sentence: "The number of Directors shall be no greater than twelve
and no less than three, and the Board of Directors, by a vote of a
majority of the entire Board, may increase or decrease the number
of Directors fixed by these By-Laws within the limits specified
herein.".
<PAGE> 4
AMENDED
BY-LAWS
OF
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
OFFICES
Section 1.1 Registered Office. The registered office of the Corporation
in the State of Minnesota shall be at The Prentice-Hall Corporation System,
Inc., 33 South Sixth Street, Multifoods Tower, Minneapolis, Minnesota 55402, or
at such other address as may be fixed by the Board of Directors.
Section 1.2 Other Offices. The Corporation may have such other offices
and places of business within or without the State of Minnesota as the Board of
Directors shall determine.
SHAREHOLDERS
Section 2.1 Place of Meetings. Meetings of the shareholders may be held
at such place or places within or without the State of Minnesota as shall be
fixed by the Board of Directors and stated in the notice of the meeting.
Section 2.2 Regular Meeting. Regular meetings of the shareholders for
the election of directors and the transaction of such other business as may
properly come before the meeting shall be held on an annual or other less
frequent periodic basis at such date and time as the Board of Directors by
resolution shall designate, except as otherwise required by the Minnesota
Business Corporation Act or by other applicable law.
Section 2.3 Special Meeting. Special meetings of the shareholders for
any purpose or purposes may be called by the Chairman of the Board, the
President or two or more directors, and must be called at the written request,
stating the purpose or purposes of the meeting, of shareholders entitled to
cast at least 10 percent of all the votes entitled to be cast at the meeting.
Section 2.4 Notice of Meetings. Notice stating the time and place of the
meeting, and in the case of a special meeting the purpose or purposes thereof
and by whom called, shall be delivered to each shareholder entitled to vote,
and each other shareholder entitled to notice of the meeting, not less than ten
nor more than sixty days prior to the meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.
Section 2.5 Quorum and Action.
(a) The holders of a majority of the voting power of the shares entitled
to vote at a meeting are a quorum for the transaction of business. If a quorum
is present when a duly called or held meeting is convened, the shareholders
present may continue to transact
<PAGE> 5
business until adjournment, even though the withdrawal of a number of
shareholders originally present leaves less than the proportion or number
otherwise required for a quorum. Notwithstanding the foregoing, when holders of
shares of Preferred Stock are entitled to elect any of the Corporation's
directors by class vote of such holders, the holders of 33 1/3% of such shares
entitled to vote at a meeting shall constitute a quorum for the purpose of such
an election.
(b) The shareholders shall take action by the affirmative vote of the
holders of a majority of the voting power of the shares present and entitled to
vote at a meeting of shareholders at which a quorum is present, except as may
be otherwise required by the Investment Company Act of 1940, as amended (the
"1940 Act"), the Minnesota Business Corporation Act or the Corporation's
Articles of Incorporation.
(c) On each matter submitted to vote of the shareholders, each holder of a
share shall be entitled to one vote for each such share standing in his name on
the books of the Corporation, except as may be otherwise required by the 1940
Act, the Minnesota Business Corporation Act or the Corporation's Articles of
Incorporation.
Section 2.6 Voting. At each meeting of the shareholders, every holder of
stock then entitled to vote may vote in person or by proxy and, except as may
be otherwise provided by the Articles of Incorporation, shall have one vote for
each share of stock registered in his name.
Section 2.7 Proxy Representation. A shareholder may cast or authorize
the casting of a vote by filing a written appointment of a proxy with an
officer of the Corporation at or before the meeting at which the appointment is
to be effective. The appointment of a proxy is valid for eleven months, unless
a longer period is expressly provided in the appointment. No appointment is
irrevocable unless the appointment is coupled with an interest in the shares or
in the Corporation.
Section 2.8 Adjourned Meetings. Any meeting of shareholders may, by
announcement thereat, be adjourned to a designated time and place by the vote
of the holders of a majority of the shares present and entitled to vote thereat
even though less than a quorum is so present. An adjourned meeting may
reconvene as designated, and when a quorum is present any business may be
transacted which might have been transacted at the meeting as originally
called.
Section 2.9 Action by Written Consent in Lieu of Meeting of Stockholders.
- -- See Section 6.4 of these By-Laws.
DIRECTORS
Section 3.1 Qualifications and Number; Vacancies. Each director shall be
a natural person. A director need not be a shareholder, a citizen of, the
United States, or a resident of the State of Minnesota..(1)* The number of
directors may be increased or,
___________________
(1) *The Board of Directors shall consist of six persons. (Amended by resolution
of the Board of Directors adopted on October 23, 1991.)
2
<PAGE> 6
subject to the provisions of the Minnesota Business Corporation Act, decreased
at any time by amendment to these By-laws by action of the directors or the
shareholders. The number of directors shall never be less than one. The
first Board of Directors shall be as set forth in the Articles of Incorporation
and shall hold office until the first regular meeting of the shareholders, and
until their successors are elected and qualified. Thereafter directors who are
elected at a regular meeting of shareholders shall hold office until the next
regular meeting of shareholders and until their successors are elected and
qualified, and directors who are elected in the interim to fill vacancies and
newly created directorships shall hold office until qualified successors are
elected at the next regular or special meeting of the shareholders. Vacancies
on the Board of Directors resulting from the death, resignation, removal, or
disqualification of a director may be filled by the affirmative vote of a
majority of the remaining directors, even though less than a quorum. Vacancies
on the Board of Directors resulting from newly created directorships may be
filled by the affirmative vote of a majority of the directors serving at the
time of the increase.
Section 3.2 Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under the authority of the Board of
Directors, except those conferred on or reserved to the shareholders by
statute, the Articles of Incorporation or these By-Laws.
Section 3.3 Investment Policies. It shall be the duty of the Board of
Directors to ensure that the purchase, sale, retention and disposal of
portfolio securities and the other investment practices of the Corporation are
at all times consistent with the investment objective, policies and
restrictions with respect to securities investments and otherwise of the
Corporation filed from time to time with the Securities and Exchange Commission
and as required by the 1940 Act, unless such duty is delegated to an investment
adviser pursuant to a written contract, as provided in the Articles of
Incorporation. The Board, however, may delegate the duty of management of the
assets of the Corporation, and may delegate such other of its powers and duties
as are permitted by the Articles of Incorporation, to the Executive Committee
or any other committee, or to an individual or corporate investment adviser to
act as investment adviser pursuant to a written contract to be approved or
ratified initially by the vote of a majority of the outstanding voting
securities of the Corporation at the first annual meeting of shareholders and
to be renewable annually by the affirmative vote of a majority of the entire
Board of Directors, including a majority of the directors of the Corporation
who are not parties to such contract or affiliated persons (other than as
directors) of the Corporation or the investment adviser.
Section 3.4 Meetings. Regular meetings of the Board of Directors may be
held without notice at such times as the Board shall fix. Special meetings of
the Board may be called by the Chairman of the Board or the President, and
shall be called at the written request of two or more directors. Three days'
notice of special meetings shall be given to each director in person, by mail,
by telephone, or by telegram or cable, or by any other means that reasonably
may be expected to provide similar notice. Notice of special meetings need not
state the purpose or purposes thereof, except as provided by these By-Laws or
by statute. Meetings of the Board may be held at any place within or outside
the State of Minnesota. A conference among directors by any means of
communication through which the directors may simultaneously hear each other
during the conference
3
<PAGE> 7
constitutes a meeting of the Board or of a Committee of the Board, if the
notice requirements have been met and if the number of directors participating
in the conference would be sufficient to constitute a quorum at such meeting.
Participation in such meeting by that means constitutes presence in person at
the meeting.
Section 3.5 Quorum and Action. A majority of the directors currently
holding office, or in the case of a meeting of a Committee of the Board, a
majority of the members of such Committee, shall constitute a quorum for the
transaction of business at any meeting. If a quorum is present when a duly
called or held meeting is convened, the directors present may continue to
transact business until adjournment, even though the withdrawal of a number of
directors originally present leaves less than the proportion or number
otherwise required for a quorum. At any duly held meeting at which a quorum is
present, the affirmative vote of the majority of the directors present shall be
the act of the Board of Directors or the Committee, as the case may be, on any
question, except where the act of a greater number is required by these
By-Laws, by the Articles of Incorporation or by statute.
Section 3.6 Action by Written Consent in Lieu of Meetings of Directors
- -- See Section 6.4 of these By-Laws.
Section 3.7 Committees. The Board of Directors, by resolution adopted by
the affirmative vote of a majority of the Board, may designate from its members
an Executive Committee, an Audit Committee (whose function shall be to advise
the Board as to the selection of and review of the work of the independent
public accountants of the Corporation) and any other Committee, each such
Committee to consist of two or more persons who need not be directors and to
have such powers and authority (to the extent permitted by law) as may be
provided in such resolution.
OFFICERS
Section 4.1 Number and Qualifications. The officers of the Corporation
shall include a Chairman of the Board, a President, a Controller, one or more
Vice Presidents (one of whom may be designated an Executive Vice President), a
Treasurer, and a Secretary. Any two or more offices may be held by the same
person. Unless otherwise determined by the Board, each officer shall be
appointed by the Board of Directors for a term which shall continue until the
meeting of the Board of Directors following the next regular meeting of
shareholders and until his successor shall have been duly elected and
qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these By-Laws. The Board may from time to
time elect, or delegate to the Chairman of the Board or the President, or both,
the power to appoint, such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and such agents as may be necessary or desirable for the business
of the Corporation. Such other officers shall hold office for such terms as may
be prescribed by the Board or by the appointing authority.
Section 4.2 Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors,
the Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time
4
<PAGE> 8
specified therein or, if the time when it shall become effective shall not be
specified therein, immediately upon its receipt, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.3 Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority
of the directors present at a duly convened meeting of the Board of Directors.
Section 4.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled for
the unexpired portion of the term by the Board of Directors, or in the manner
determined by the Board, or pursuant to the provisions of the Minnesota
Business Corporation Act.
Section 4.5 The Chairman of the Board. The Chairman of the Board shall
be elected from among the directors. He shall be the chief executive officer of
the Corporation and shall:
(a) have general active management of the business of the Corporation;
(b) when present, preside at all meetings of the Board and of the
shareholders;
(c) see that all orders and resolutions of the Board are carried
into effect;
(d) sign and deliver in the name of the corporation any deeds, mortgages,
bonds, contracts or other instruments pertaining to the business of the
Corporation, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated by
the Articles or By-Laws or by the Board to some other officer or agent of the
Corporation; and
(e) maintain records of and, whenever necessary, certify all proceedings
of the Board and the shareholders.
The Chairman shall be authorized to do or cause to be done all things
necessary or appropriate, including preparation, execution and filing of any
documents, to effectuate the registration from time to time of shares of the
Common Stock or Preferred Stock of the Corporation with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended. He
shall perform all duties incident to the office of Chairman and such other
duties as from time to time may be assigned to him by the Board or by these
By-Laws.
Section 4.6 The President. The President shall be the chief operating
officer of the Corporation and, subject to the Chairman of the Board, he shall
have general authority over and general management and control of the business
and affairs of the Corporation. In general, he shall discharge all duties
incident to the office of the chief operating officer of the Corporation and
such other duties as may be prescribed by the Board of Directors and the
Chairman of the Board from time to time. In the absence of the Chairman of the
Board or in the event of his disability, or inability to act, or to continue to
act, the President shall perform the duties of the Chairman of the Board and
when so
5
<PAGE> 9
acting shall have all the powers of, and be subject to all the restrictions
upon, the Chairman of the Board.
Section 4.7 Executive Vice-President. In the case of the absence or
inability to act of the President and the Chairman of the Board, the Executive
Vice-President shall perform the duties of the President and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Executive Vice-President shall perform all duties incident to
the office of Executive Vice-President and such other duties as from time to
time may be assigned to him by the Board, the President or these By-Laws.
Section 4.8 Vice-Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board, the Chairman
or the President.
Section 4.9 Controller. The Controller shall:
(a) keep accurate financial records for the Corporation;
(b) render to the Chairman, the President and the Board, whenever
requested, an account of all transactions by and of the financial condition of
the Corporation; and
(c) in general, perform all the duties incident to the office of
Controller and such other duties as from time to time may be assigned to him by
the Board, the Chairman or the President.
Section 4.10 Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds and
securities of the Corporation, except those which the Corporation has placed in
the custody of a bank or trust company pursuant to a written agreement
designating such bank or trust company as custodian of the property of the
Corporation, as required by Section 6.7 of these By-Laws;
(b) deposit all money, drafts, and checks in the name of and to the credit
of the Corporation in the banks and depositories designated by the Board;
(c) endorse for deposit all notes, checks, and drafts received by the
Corporation making proper vouchers therefor;
(d) disburse corporate funds and issue checks and drafts in the name of
the Corporation, as ordered by the Board;
(e) in general, perform all the duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the Board,
the Chairman or the President.
Section 4.11 The Secretary. The Secretary shall:
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(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the Board
and the shareholders;
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws and as required by statute;
(c) be custodian of the records and the seal of the Corporation and affix
and attest the seal to all stock certificates of the Corporation (unless the
seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by statute to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board,
the Chairman or the President.
Section 4.12 Salaries. The salaries of all officers shall be fixed by
the Board of Directors, and the Board has the authority by majority vote to
reimburse expenses and to establish reasonable compensation of all directors
for services to the Corporation as directors, officers, or otherwise.
CAPITAL STOCK
Section 5.1 Stock Certificates. Each owner of shares of Common Stock of
the Corporation shall be entitled upon request to have a certificate, in such
form required by the laws of the State of Minnesota as shall be approved by the
Board of Directors, representing the number of shares of Common Stock of the
Corporation owned by him. No certificates shall be issued for fractional shares
of Common Stock. The certificates representing shares of Common Stock shall be
signed in the name of the Corporation by the Chairman of the Board, the
President, the Executive Vice President or a Vice President and by the
Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer
(which signatures may be either manual or facsimile, engraved or printed) and
sealed with the seal of the Corporation (which seal may be a facsimile,
engraved or printed). In case any officer who shall have signed such
certificate shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Corporation with the same
effect as if such officer were still in office at the date of their issue. No
certificates representing shares of Preferred Stock shall be issued except as
the Board of Directors may otherwise authorize.
Section 5.2 Books and Records; Inspection. The Corporation shall keep at
its principal executive office, or at another place or places within the United
States determined by the Board, a share register not more than one year old,
containing the names and addresses of the shareholders and the number and
classes of shares held by each shareholder. The Corporation shall also keep, at
its principal executive office, or at
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<PAGE> 11
another place or places within the United States determined by the Board,
a record of the dates on which certificates representing shares were issued.
The Corporation shall keep at its principal executive office, or, if its
principal executive office is outside of the State of Minnesota, shall make
available at its registered office within ten days after receipt by an officer
of the Corporation of a written demand for them made by a person described in
subdivision 4 of Section 302A.461 of the Minnesota Business Corporation Act,
originals or copies of:
(a) records of all proceedings of shareholders for the last three years;
(b) records of all proceedings of the Board for the last three years;
(c) the Corporation's Articles of Incorporation and all amendments
currently in effect;
(d) the Corporation's By-Laws and all amendments currently in effect;
(e) financial statements required by Section 302A.463 of the Minnesota
Business Corporation Act, and the financial statement for the most recent
interim period prepared in the course of the operation of the Corporation for
distribution to the shareholders or to a governmental agency as a matter of
public record;
(f) reports made to shareholders generally within the last three years;
(g) a statement of the names and usual business addresses of its directors
and principal officers;
(h) voting trust agreements described in Section 302A.453 of the Minnesota
Business Corporation Act; and
(i) shareholder control agreements described in Section 302A.455 of the
Minnesota Business Corporation Act.
Section 5.3 Share Transfers. Upon compliance with any provisions
restricting the transferability of shares that may be set forth in the Articles
of Incorporation, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of shares of the Corporation shall be made only on
the books of the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
an officer of the Corporation, or with a transfer agent or a registrar and on
surrender of any certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. Except as may be otherwise provided by
law or these By-Laws, the person in whose name shares stand on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards the
Corporation; provided that whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact, if known to an officer of
the Corporation, shall be so expressed in the entry of transfer.
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Section 5.4 Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, certification, transfer and registration of
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
Section 5.5 Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of such certificate, and the
Corporation may issue a new certificate of stock in the place of any
certificate theretofore issued by it which the owner thereof shall allege to
have been lost or destroyed or which shall have been mutilated, and the Board
may, in its discretion, require such owner or his legal representatives to give
to the Corporation, a bond in such sum, limited or unlimited, and in such form
and with such surety or sureties as the Board in its absolute discretion shall
determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such
certificate, or the issuance of a new certificate. Anything herein to the
contrary notwithstanding, the Board, in its absolute discretion, may refuse to
issue any such new certificate, except pursuant to legal proceedings under the
laws of the State of Minnesota.
Section 5.6 Record Date; Certification of Beneficial Owner.
(a) The directors may fix a date not more than sixty days before the date
of a meeting of shareholders as the date for the determination of the holders
of shares entitled to notice of and entitled to vote at the meeting.
(b) In the absence of such fixed record date, (i) the date for
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be the later of the close of business on the day on which
notice of the meeting is mailed or the thirtieth day before the meeting, and
(ii) the date for determining shareholders entitled to receive payment of a
dividend or an allotment of any rights shall be the close of business on the
day on which the resolution of the Board of Directors is adopted, but the
payment or allotment shall not be made more than sixty days after the date on
which the resolution is adopted.
(c) A resolution approved by the affirmative vote of a majority of the
directors present may establish a procedure whereby a shareholder may certify
in writing to the Corporation that all or a portion of the shares registered in
the name of the shareholder are held for the account of one or more beneficial
owners. Upon receipt by the Corporation of the writing, the persons specified
as beneficial owners, rather than the actual shareholders, are deemed the
shareholders for the purposes specified in the writing.
MISCELLANEOUS
Section 6.1 Seal. The Board of Directors shall provide a suitable
corporate seal stating the corporate name, and state and year of incorporation,
which shall be in the charge of the Secretary and shall be used as authorized
by these By-Laws.
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Section 6.2 Fiscal Year. The fiscal year of the Corporation shall begin
on November 1 of each year and end on October 31 of the succeeding year.
Section 6.3 Notice and Waiver of Notice.
(a) Any notice of a meeting required to be given under these By-Laws to
shareholders and/or directors may be waived by any such person (i) orally or in
writing signed by such person before, at or after the meeting or (ii) by
attendance at the meeting in person or, in the case of a shareholder, by proxy.
(b) Except as otherwise specifically provided herein, all notices required
by these By-Laws shall be printed or written, and shall be delivered either
personally, by telegraph or cable or by mail and, if mailed, shall be deemed to
be delivered when deposited in the United States mail, postage prepaid,
addressed to the shareholder or director at his address as it appears on the
records of the Corporation.
Section 6.4 Action by Written Consent in Lieu of Meetings.
(a) An action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting by written action signed by all of
the shareholders entitled to vote on that action. The written action is
effective when it has been signed by all of those shareholders, unless a
different effective time is provided in the written action.
(b) An action which requires shareholder approval and which is required or
permitted to be taken at a Board meeting may be taken by written action signed
by all of the directors. An action which does not require shareholder approval
and which is required or permitted to be taken at a meeting of the Board or a
Committee of the Board may be taken by written action signed by the number of
director's that would be required to take the same action at a meeting of the
Board or Committee, as the case may be, at which all directors were present.
The written action is effective when signed by the required number of
directors, unless a different effective time is provided in the written action.
When written action is taken by less than all directors, all directors shall be
notified immediately of its text and effective date.
Section 6.5 Reports to Shareholders. The books of account of the
Corporation shall be examined by an independent firm of public accountants at
the close of each annual period of the Corporation and at such other times, if
any, as may be directed by the Board of Directors. A report to the shareholders
based upon such examination shall be mailed to each shareholder of the
Corporation of record at his address as the same appears on the books of the
Corporation. Each such report shall show the assets and liabilities of the
Corporation as of the Annual or other period covered by the report and the
securities in which the funds of the Corporation were then invested; such
report shall also show the Corporation's income and expenses for the period
from the end of the Corporation's preceding fiscal year to the close of the
annual or other period covered by the report and any other information required
by the 1940 Act, and shall set forth such other matters as the Board or such
independent firm of public accountants shall determine.
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Section 6.6 Approval of Firm of Independent Public Accountants. At any
regular meeting of the shareholders of the Corporation there may be submitted,
for ratification or rejection, the name of the firm of independent public
accountants which has been selected for the fiscal year in which such meeting
is held by a majority of those members of the Board of Directors who are not
investment advisers of, or affiliated persons of an investment adviser of, or
officers or employees of, the Corporation, as such terms are defined in the
1940 Act.
Section 6.7 Custodian. All securities and cash of the Corporation shall
be held by a custodian meeting the requirements for a custodian contained in
the 1940 Act and the rules and regulations thereunder and in any applicable
state securities or blue sky laws. The Corporation shall enter into a written
contract with the custodian regarding the powers, duties and compensation of
the custodian with respect to the cash and securities of the Corporation held
by the custodian. Said contract and all amendments thereto shall be approved by
the Board of Directors of the Corporation. The Corporation shall upon the
resignation or inability to serve of the custodian obtain a successor custodian
and require that the cash and securities owned by the Corporation be delivered
directly to the successor custodian.
Section 6.8 Prohibited Transactions. No officer or director of the
Corporation or of its investment adviser shall deal for or on behalf of the
Corporation with himself, as principal or agent, or with any corporation or
partnership in which he has a financial interest. This prohibition shall not
prevent: (a) officers or directors of the Corporation from having a financial
interest in the Corporation, its principal underwriter or its investment
adviser; (b) the purchase of securities for the portfolio of the Corporation or
the sale of securities owned by the Corporation through a securities dealer,
one or more of whose partners, officers or directors is an officer or director
of the Corporation, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed customary brokerage
charges for such service; (c) the purchase or sale of securities for the
portfolio of the Corporation pursuant to a rule under the 1940 Act or pursuant
to an exemptive order of the Securities and Exchange Commission; or (d) the
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent, or custodian having a partner, officer or director who is an officer or
director of the Corporation, provided only customary fees are charged for
services rendered to or for the benefit of the Corporation.
Section 6.9 Bonds. The Board of Directors may require any officer, agent
or employee of the Corporation to give a bond to the Corporation, conditioned
upon the faithful discharge of his duties, with one or more sureties and in
such amount as may be satisfactory to the Board of Directors. The Board of
Directors shall, in any event, require the Corporation to provide and maintain
a bond issued by a reputable fidelity insurance company, authorized to do
business in the place where the bond is issued, against larceny and
embezzlement, covering each officer and employee of the Corporation, who may
singly, or jointly with others, have access to securities or funds of the
Corporation, either directly or through authority to draw upon such funds or to
direct generally the disposition of such securities, such bond or bonds to be
in such reasonable form and amount as a majority of the Board of Directors who
are not "interested persons" of the Corporation as
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<PAGE> 15
defined in the 1940 Act shall approve not less than once every twelve months,
with due consideration to all relevant factors including, but not limited to,
the value of the aggregate assets of the Corporation to which any such officer
or employee may have access, the type and terms of the arrangements made for
the custody and safekeeping of such assets, and the nature of the securities in
the corporation's portfolio, and as meet all requirements which the Securities
and Exchange Commission may prescribe by order, rule or regulation.
AMENDMENTS
Section 7. These By-Laws may be amended or repealed, or new By-Laws may
be adopted, by the Board of Directors at any meeting thereof, provided that
notice of such meeting shall have been given if required by these By-Laws,
which notice, if required, shall state that amendment or repeal of the By-Laws
or adoption of new By-Laws, is one of the purposes of such meeting, or by
action of the Board of Directors by written consent in lieu of a meeting. Any
such By-Laws adopted by the Board may be amended or repealed, or new By-Laws
may be adopted, by the vote of the shareholders of the Corporation, at any
regular or special meeting thereof, provided that the notice of such meeting
shall have been given as provided in these By-Laws, which notice shall state
that amendment or repeal of these By-Laws, or the adoption of new By-Laws, is
one of the purposes of such meeting, or by action of the shareholders by
written consent in lieu of a meeting.
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EXHIBIT 99.d.1
NUVEEN AUCTION AGENCY AGREEMENT
Basic Terms for Acting as Auction Agent
---------------------------------------
November 1, 1993
These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a bank or trust company identified in a Request and
Acceptance Letter will act as auction agent (an "Auction Agent") for Municipal
Auction Rate Cumulative Preferred Stock or Shares issued by an investment
company registered under the Investment Company Act of 1940, as amended, as
further identified by such Request and Acceptance Letter (a "Fund"), for which
Nuveen Advisory Corp. is the investment adviser.
- --------------------------------------------------------------------------------
The Fund proposes to issue shares of MuniPreferred(R) pursuant to its
Articles of Incorporation or Declaration of Trust, as amended or supplemented by
the Statement. The Fund desires that the Auction Agent perform certain duties
in connection with the MuniPreferred upon the terms and subject to the
conditions of the Agreement.
1. Definitions and Rules of Construction.
-------------------------------------
1.1 Terms Defined By Reference to Statement.
---------------------------------------
Capitalized terms not defined herein shall have the respective
meanings specified in the Statement.
1.2 Terms Defined Herein.
--------------------
As used herein and in the Settlement Procedures, the following terms
shall have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository that will act on behalf of a
Bidder.
(b) "Agreement" shall mean the Basic Terms, together with the Request
and Acceptance Letter relating to one or more series of MuniPreferred.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the auction procedures
constituting Part II of the form of Statement as of the filing thereof.
(e) "Authorized Officer" of the Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant
Treasurer and Assistant Secretary of the Auction Agent assigned to its
Corporate Trust and Agency Group and
<PAGE> 2
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a communication to the Fund.
(f) "Broker-Dealer Agreement" shall mean each agreement among the
Fund, the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(g) "Fund Officer" shall mean the Chairman of the Board of Directors
or Board of Trustees, as the case may be, each Vice Chairman of the Board
of Directors or Board of Trustees (whether or not designated by a number or
word or words added before or after the title "Vice Chairman"), the
President, each Vice President (whether or not designated by a number or
word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Fund and every other officer
or employee of the Fund designated as a "Fund Officer" for purposes hereof
in a notice to the Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par
value $.01 per share, of the Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of the Fund or any
committee thereof shall specify; as set forth in the Request and Acceptance
Letter.
(i) "Request and Acceptance Letter" shall mean the letter from the
Fund to the Auction Agent pursuant to which the Fund appoints the Auction
Agent and the Auction Agent accepts its appointment as auction agent for
the MuniPreferred.
(j) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.
(k) "Statement" shall mean the Statement Establishing and Fixing the
Rights and Preferences of, and authorizing the issuance of, one or more
series of Municipal Auction Rate Cumulative Preferred Stock or Municipal
Auction Rate Cumulative Preferred Shares, as filed by the Fund with the
office of the Secretary of State or other officer of the state where the
Fund was incorporated or organized, a copy of which is attached to the
Request and Acceptance Letter, as the same may be amended, supplemented or
modified from time to time.
1.3 Rules of Construction.
---------------------
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of the Agreement:
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<PAGE> 3
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of the Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto" and other words of similar
import refer to the Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
-----------
2.1 Purpose; Incorporation by Reference of
Auction Procedures and Settlement Procedures.
--------------------------------------------
(a) The Statement for each series of MuniPreferred will provide that
the Applicable Rate for such series for each Subsequent Rate Period thereof
shall, except under certain conditions, be the rate per annum that a bank or
trust company appointed by the Fund advises results from implementation of the
Auction Procedures for such series. The Board of Directors or Board of
Trustees, as the case may be, of the Fund has adopted a resolution appointing
the Auction Agent as auction agent for purposes of the Auction Procedures for
each series of MuniPreferred. The Auction Agent accepts such appointment and
agrees to follow the procedures set forth in this Section 2 and the Auction
Procedures for the purpose of determining the Applicable Rate for each series of
MuniPreferred for each Subsequent Rate Period thereof for which the Applicable
Rate is to be determined by an Auction. Each periodic implementation of such
procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance
of Registry of Beneficial Owners.
--------------------------------
(a) Not later than seven days prior to the first Auction Date for the
first series of MuniPreferred subject to an Auction, the Fund shall provide the
Auction Agent with a list of the Broker-Dealers. Not later than seven days
prior to any Auction Date for any series of MuniPreferred for which any change
in such list of Broker-Dealers is to be effective, the Fund will notify the
Auction Agent in writing of such change and, if any such change involves the
addition of a Broker-Dealer to such list, shall cause to be delivered to the
Auction Agent for
3
<PAGE> 4
execution by the Auction Agent a Broker-Dealer Agreement signed by such Broker-
Dealer; provided, however, that if the Fund proposes to designate any Special
Rate Period of any series of MuniPreferred pursuant to Section 4 of Part I of
the Statement, not later than 11:00 A.M. on the Business Day next preceding the
Auction next preceding the first day of such Rate Period or by such later time
or date, or both, as may be agreed to by the Auction Agent, the Fund shall
provide the Auction Agent with a list of the Broker-Dealers for such series and
a manually signed copy of each Broker-Dealer Agreement or a new Schedule A to a
Broker-Dealer Agreement (which Schedule A shall replace and supersede any
previous Schedule A to such Broker-Dealer Agreement) with each Broker-Dealer for
such series. The Auction Agent and the Fund shall have entered into a Broker-
Dealer Agreement with each Broker-Dealer prior to the participation of any such
Broker-Dealer in any Auction.
(b) In the event that any Auction Date for any series of MuniPreferred
shall be changed after the Auction Agent shall have given the notice referred to
in clause (vi) of paragraph (a) of the Settlement Procedures, or after the
notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent,
by such means as the Auction Agent deems practicable, shall give notice of such
change to the Broker-Dealers for such series not later than the earlier of 9:15
A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date.
(c) (i) The Auction Agent shall maintain a registry of the
beneficial owners of the shares of MuniPreferred of each series who shall
constitute Existing Holders of shares of MuniPreferred of such series for
purposes of Auctions and shall indicate thereon the identity of the respective
Broker-Dealer of each Existing Holder, if any, on whose behalf such Broker-
Dealer submitted the most recent Order in any Auction which resulted in such
Existing Holder continuing to hold or purchasing shares of MuniPreferred of such
series. The Auction Agent shall keep such registry current and accurate. The
Fund shall provide or cause to be provided to the Auction Agent at or prior to
the Date of Original Issue of the shares of MuniPreferred of each series a list
of the initial Existing Holders of the shares of each such series of
MuniPreferred, the number of shares purchased by each such Existing Holder and
the respective Broker-Dealer of each such Existing Holder or the affiliate
thereof through which each such Existing Holder purchased such shares. The
Auction Agent shall advise the Fund in writing whenever the number of Existing
Holders is 500 or more. The Auction Agent may rely upon, as conclusive evidence
of the identities of the Existing Holders of shares of MuniPreferred of any
series (A) such list, (B) the results of Auctions, (C) notices from any Broker-
Dealer as described in the first sentence of Section 2.2(c)(iii) hereof and (D)
the results of any procedures approved by the Fund that have been devised for
the purpose of determining the identities of Existing Holders in situations
where shares of MuniPreferred may have been transferred without compliance with
any restriction on the transfer thereof set forth in the Auction Procedures.
(ii) In the event of any partial redemption of any series of
MuniPreferred, the Auction Agent shall, at least two Business Days prior to the
next Auction for such series, request each Broker-Dealer to provide the Auction
Agent with a list of Persons who such Broker-Dealer believes should remain
Existing Holders after such redemption based upon inquiries of those Persons
such Broker-Dealer believes are Beneficial Owners as a result
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<PAGE> 5
of the most recent Auction and with respect to each such Person, the number of
shares of MuniPreferred of such series such Broker-Dealer believes are owned by
such Person after such redemption. In the absence of receiving any such
information from any Broker-Dealer, the Auction Agent may continue to treat the
Persons listed in its registry of Existing Holders as the beneficial owner of
the number of shares of MuniPreferred of such series shown in such registry.
(iii) The Auction Agent shall be required to register a
transfer of shares of MuniPreferred of any series from an Existing Holder of
such shares of MuniPreferred only if such transfer is to another Existing
Holder, or other Person if permitted by the Fund, and only if such transfer is
made (A) pursuant to an Auction, (B) the Auction Agent has been notified in
writing (I) in a notice substantially in the form of Exhibit C to the
Broker-Dealer Agreements by a Broker-Dealer of such transfer or (II) in a notice
substantially in the form of Exhibit D to the Broker-Dealer Agreements by the
Broker-Dealer of any Existing Holder, or other Person if permitted by the Fund,
that purchased or sold such shares of MuniPreferred in an Auction of the failure
of such shares of MuniPreferred to be transferred as a result of such Auction or
(C) pursuant to procedures approved by the Fund that have been devised for the
purpose of determining the identities of Existing Holders in situations where
shares of MuniPreferred may have been transferred without compliance with any
restriction on the transfer thereof set forth in the Auction Procedures. The
Auction Agent is not required to accept any such notice for an Auction unless it
is received by the Auction Agent by 3:00 P.M. on the Business Day preceding such
Auction.
(d) The Auction Agent may request the Broker-Dealers, as set forth in
the Broker-Dealer Agreements, to provide the Auction Agent with a list of
Persons who such Broker-Dealer believes should be Existing Holders based upon
inquiries of those Persons such Broker-Dealer believes are Beneficial Owners as
a result of the most recent Auction and with respect to each such Person, the
number of shares of such series of MuniPreferred such Broker-Dealer believes to
be owned by such Person. The Auction Agent shall keep confidential such
registry of Existing Holders and shall not disclose the identities of the
Existing Holders of such shares of MuniPreferred to any Person other than the
Fund and the Broker-Dealer that provided such information.
2.3 Information Concerning Rates.
----------------------------
(a) The Rate Multiple on the date of the Agreement is set forth in the
Request and Acceptance Letter. If there is any change in the credit rating of
MuniPreferred by either of the rating agencies (or substitute or successor
rating agencies) referred to in the definition of "Rate Multiple" resulting in
any change in the Rate Multiple for MuniPreferred after the date of the Request
and Acceptance Letter, the Fund shall notify the Auction Agent in writing of
such change in the Rate Multiple prior to 12:00 Noon on the Business Day prior
to the next Auction Date for any series of MuniPreferred succeeding such change.
If the Fund designates all or a portion of any dividend on shares of any series
of MuniPreferred to consist of net capital gains or other income taxable for
Federal income tax purposes, it will indicate, in its notice in the
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<PAGE> 6
form of Exhibit I hereto to the Auction Agent pursuant to Section 2.6 hereof,
the Rate Multiple for such series to be in effect for the Auction Date on which
the dividend rate for such dividend is to be fixed. In determining the Maximum
Rate for any series of MuniPreferred on any Auction Date as set forth in Section
2.3(b)(i) hereof, the Auction Agent shall be entitled to rely on the last Rate
Multiple for MuniPreferred of which it has most recently received notice from
the Fund (or, in the absence of such notice, the percentage set forth in the
Request and Acceptance Letter), except that if the Fund shall have notified the
Auction Agent of a Rate Multiple to be in effect for an Auction Date in
accordance with the preceding sentence, the Rate Multiple in effect for the next
succeeding Auction Date of any series of MuniPreferred shall be, unless the Fund
notifies the Auction Agent of a change in the Rate Multiple for such succeeding
Auction Date pursuant to this Section 2.3(a), the Rate Multiple that was in
effect on the first preceding Auction Date for MuniPreferred with respect to
which the dividend, the rate for which was fixed on such Auction Date, did not
include any net capital gains or other income taxable for Federal income tax
purposes.
(b) (i) On each Auction Date for any series of MuniPreferred, the
Auction Agent shall determine the Maximum Rate for such series. The Maximum
Rate for any series of MuniPreferred on any Auction Date shall be:
(A) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement,
the product of (1) the Reference Rate on such Auction Date for the next
Rate Period of such series and (2) the Rate Multiple on such Auction Date,
unless such series has or had a Special Rate Period (other than a Special
Rate Period of 28 Rate Period Days or fewer) and an Auction at which
Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate
Period of such series after such Special Rate Period, in which case the
higher of:
(1) the dividend rate on shares of such series for the then-
ending Rate Period; and
(2) the product of (x) the higher of (I) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of such series, if such then ending Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period
of such series, if such then ending Rate Period was more than 364 Rate
Period Days, and (II) the Reference Rate on such Auction Date for a
Rate Period equal in length to such Special Rate Period of such
series, if such Special Rate Period was 364 Rate Period Days or fewer,
or the Treasury Note Rate on such Auction Date for a Rate Period equal
in length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (y) the Rate Multiple on such
Auction Date; or
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<PAGE> 7
(B) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement,
the product of (1) the highest of (x) the Reference Rate on such Auction
Date for a Rate-Period equal in length to the then-ending Rate Period of
such series, if such then-ending Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate Period
equal in length to the then-ending Rate Period of such Rate Period, if such
then-ending Rate Period was more than 364 Rate Period Days, (y) the
Reference Rate on such Auction Date for the Special Rate Period for which
the Auction is being held if such Special Rate Period is 364 Rate Period
Days or fewer or the Treasury Note Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special
Rate Period is more than 364 Rate Period Days, and (z) the Reference Rate
on such Auction Date for Minimum Rate Periods and (2) the Rate Multiple on
such Auction Date.
Not later than 9:30 A.M. on each Auction Date the Auction Agent shall notify the
Fund and the Broker-Dealers of the Maximum Rate so determined and the "AA"
Composite Commercial Paper Rate(s), the Taxable Equivalent of the Short-Term
Municipal Bond Rate(s), Treasury Note Rate(s) and Treasury Bill Rate(s), as the
case may be, used to make such determination.
(ii) From and after a Failure to Deposit by the Fund during any Rate
Period of any series of MuniPreferred, until such failure is cured and a Late
Charge (as defined in paragraph (a) of Section 2.7), is paid, in accordance with
subparagraph (e)(i) of Section 2 of Part I of the Statement, on the first day of
each Rate Period of such series the Auction Agent shall determine the Treasury
Note Rate for such Rate Period of more than 364 Rate Period Days and the
Reference Rate for Rate Periods of 364 Rate Period Days or fewer. Not later
than 9:30 A.M. on each such first day, the Auction Agent shall notify the Fund
of the applicable Reference Rate and Treasury Note Rate.
(iii) If any "AA" Composite Commercial Paper Rate, Taxable
Equivalent of the Short-Term Municipal Bond Rate, Treasury Note Rate or Treasury
Bill Rate, as the case may be, is not quoted on an interest or bond equivalent,
as the case may be, basis, the Auction Agent shall convert the quoted rate to
the interest or bond equivalent thereof as set forth in the definition of such
rate in the Statement if the rate obtained by the Auction Agent is quoted on a
discount basis, or if such rate is quoted on a basis other than an interest or
bond equivalent or discount basis the Auction Agent shall convert the quoted
rate to an interest or bond equivalent rate after consultation with the Fund as
to the method of such conversion.
(iv) If any "AA" Composite Commercial Paper Rate is to be based on
rates supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such "AA"
Composite Commercial Paper Rate, the Auction Agent shall immediately notify the
Fund so that the Fund can determine whether to select a Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or
7
<PAGE> 8
Commercial Paper Dealers. The Fund shall promptly advise the Auction Agent of
any such selection.
(v) If any Treasury Note Rate or Treasury Bill Rate is to be
based on rates supplied by U.S. Government Securities Dealers and one or more of
the U.S. Government Securities Dealers shall not provide a quotation for the
determination of such Treasury Rate, the Auction Agent shall immediately notify
the Fund so that the Fund can determine whether to select a Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers. The Fund shall
promptly advise the Auction Agent of any such selection.
(c) The maximum marginal tax rate referred to in the definition of
"Rate Multiple" in the Statement is referred to in this Agreement as the
"Highest Marginal Rate." The Highest Marginal Rate on the date of the Agreement
is set forth in the Request and Acceptance Letter. If there is any change in
the Highest Marginal Rate, the Fund shall notify the Auction Agent in writing of
such change prior to 12:00 Noon on the Business Day prior to the next Auction
Date for MuniPreferred succeeding such change. In determining the Maximum Rate
for any series of MuniPreferred on any Auction Date, the Auction Agent shall be
entitled to rely on the Highest Marginal Rate of which it has most recently
received notice from the Fund (or, in the absence of such notice, the percentage
set forth in the Request and Acceptance Letter).
2.4 Auction Schedule.
----------------
The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent
with the consent of the Fund, which consent shall not be unreasonably withheld.
The Auction Agent shall give written notice of any such change to each Broker-
Dealer. Such notice shall be given prior to the close of business on the
Business Day next preceding the first Auction Date on which any such change
shall be effective.
Time Event
- ---- -----
By 9:30 A.M. Auction Agent advises the Fund and Broker-Dealers
of the applicable Maximum Rate and the Reference
Rate(s) and Treasury Note Rate(s), as the case may
be, used in determining such Maximum Rate as set
forth in Section 2.3(b)(i) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as provided
in Section 2(a) of the Auction Procedures.
Submission Deadline is 1:30 P.M.
8
<PAGE> 9
Time Event
- ---- -----
Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to
Section 3(a) of the Auction Procedures.
By approximately 3:00 P.M. Auction Agent advises Fund of results of Auction
as provided in Section 3(b) of the Auction
Procedures.
Submitted Bids and Submitted Sell Orders are
accepted and rejected and shares of MuniPreferred
allocated as provided in Section 4 of the Auction
Procedures. Auction Agent gives notice of Auction
results as set forth in paragraph(a) of the
Settlement Procedures.
The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.5 Designation of Special Rate Period.
----------------------------------
(a) The Statement will provide that, subject to the Fund's option to
designate a Special Rate Period as referred to in paragraph (b) of this Section
2.5, (i) each Rate Period of any series of MuniPreferred will be a Minimum Rate
Period (a duration of seven days, subject to certain exceptions) and (ii) each
Rate Period following a Rate Period of any series of MuniPreferred that is other
than a Minimum Rate Period will be a Minimum Rate Period. Not less than 10 nor
more than 20 days prior to the last day of any such Rate Period that is not a
Minimum Rate Period, (i) the Fund shall deliver to the Auction Agent a notice of
the Auction Date of the next succeeding Auction for such series in the form of
Exhibit C hereto and (ii) the Auction Agent shall deliver such notice by first-
class mail, postage prepaid, to each Existing Holder of shares of such series at
the address set forth for such Existing Holder in the records of the Auction
Agent and to the Broker-Dealers for such series as promptly as practicable after
its receipt of such notice from the Fund.
(b) Pursuant to the Statement, the Fund may, at its option, designate
a Special Rate Period for any series of MuniPreferred in the manner described in
Section 4 of Part I of the Statement.
(i) If the Board of Directors or Board of Trustees, as the case
may be, proposes to designate any succeeding Subsequent Rate Period of any
series of MuniPreferred as a Special Rate Period, (A) the Fund shall
deliver to the Auction Agent a notice of such proposed Special Rate Period
in the form of Exhibit D hereto not less than 20 (or such lesser number of
days as may be agreed to from time to time by the Auction Agent) nor more
than 30 days prior to the first day of such proposed Special Rate Period
and (B) the Auction Agent on behalf of the Fund shall deliver such notice
9
<PAGE> 10
by first-class mail, postage prepaid, to each Existing Holder of shares of
such series of MuniPreferred at the address set forth for such Existing
Holder in the records of the Auction Agent and to the Broker-Dealers for
such series as promptly as practicable after its receipt of such notice
from the Fund.
(ii) If the Board of Directors or Board of Trustees, as the case
may be, determines to designate such succeeding Subsequent Rate Period as a
Special Rate Period, (A) the Fund shall deliver to the Auction Agent a
notice of such determination in the form of Exhibit E hereto not later than
11:00 A.M. on the second Business Day next preceding the first day of such
proposed Special Rate Period (or such later time or date, or both, as may
be agreed to by the Auction Agent) and (B) the Auction Agent shall deliver
such notice to the Broker-Dealers for such series not later than 3:00 P.M.
on such second Business Day (or, if the Auction Agent has agreed to a later
time or date, as promptly as practicable thereafter).
(iii) If the Fund shall deliver to the Auction Agent a notice
not later than 11:00 A.M. on the second Business Day next preceding the
first day of such proposed Special Rate Period (or such later time or date,
or both, as may be agreed to by the Auction Agent) stating that the Fund
has determined not to exercise its option to designate such succeeding
Subsequent Rate Period as a Special Rate Period, in the form of Exhibit F
hereto, or shall fail to timely deliver either such notice or a notice in
the form of Exhibit E hereto, the Auction Agent shall deliver a notice in
the form of Exhibit F hereto to the Broker-Dealers for such series not
later than 3:00 P.M. on such second Business Day (or, if the Auction Agent
has agreed to a later time or date, as promptly as practicable thereafter).
Such change in the length of any Rate Period shall not occur if (1) an Auction
for shares of such series shall not be held on such Auction Date for any reason
or (2) an Auction for shares of such series shall be held on such Auction Date
but Sufficient Clearing Bids for shares of such series shall not exist in such
Auction.
2.6 Allocation of Taxable Income.
----------------------------
The Fund shall, in the case of a Minimum Rate Period or a Special Rate
Period of 28 Rate Period Days or fewer, and may, in the case of any other
Special Rate Period, designate all or a portion of any dividend on shares of any
series of MuniPreferred to consist of net capital gains or other income taxable
for Federal income tax purposes by delivering to the Auction Agent a notice in
the form of Exhibit I hereto of such designation not later than the Dividend
Payment Date for such series next preceding the Auction Date on which the
dividend rate for such dividend is to be fixed. The Auction Agent will deliver
such notice to the Broker-Dealers for such series on the Business Day following
its receipt of such notice from the Fund. Within two Business Days after any
Auction Date involving the allocation of income taxable for Federal income tax
purposes, the Auction Agent shall notify each Broker-Dealer for
10
<PAGE> 11
the related series as to the dollar amount per share of such taxable income and
income exempt from Federal income taxation included in the related dividend.
2.7 Failure to Deposit.
------------------
(a) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured), but, prior to
12:00 Noon, New York City time, on the third Business Day next succeeding
the date on which such Failure to Deposit occurred, such Failure to Deposit
shall have been cured in accordance with Section 2.7(c) hereof and the Fund
shall have paid to the Auction Agent a late charge (a "Late Charge") equal
to the sum of (1) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the full amount of dividends with
respect to any Dividend Period on such shares, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period during which
such Failure to Deposit occurs on the Dividend Payment Date for such
Dividend Period by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit has not been cured in
accordance with Section 2.7(c) hereof (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the rate obtained
against the aggregate liquidation preference of the outstanding shares of
MuniPreferred and (2) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the Redemption Price of the shares of
MuniPreferred, if any, for which Notice of Redemption has been given by the
Fund, an amount computed by multiplying (x) 200% of the Reference Rate for
the Rate Period during which such Failure to Deposit occurs on the
redemption date by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit is not cured in accordance
with Section 2.7(c) hereof (including the day such Failure to Deposit
occurs and excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate obtained against
the aggregate liquidation preference of the outstanding shares of
MuniPreferred to the redeemed,
then the Auction Agent shall deliver a notice in the form of Exhibit G hereto by
first-class mail, postage prepaid, to the Broker-Dealers for such series not
later than one Business Day after its receipt of the payment from the Fund
curing such Failure to Deposit and such Late Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period
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<PAGE> 12
of more than 364 Rate Period Days during which a Failure to Deposit
occurred but has not been cured), and, prior to 12:00 Noon, New York City
time, on the third Business Day next succeeding the date on which such
Failure to Deposit occurred, such Failure to Deposit shall not have been
cured in accordance with Section 2.7(c) hereof or the Fund shall not have
paid the applicable Late Charge to the Auction Agent; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during a Special Rate Period thereof of more than
364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured, and, prior to 12:00
noon, New York City time, on the fourth Business Day preceding the Auction
Date for the Rate Period subsequent to such Rate Period, such Failure to
Deposit shall not have been cured in accordance with Section 2.7(c) hereof
or the Fund shall not have paid the applicable Late Charge to the Auction
Agent in accordance with Section 2(e)(i)(D) of the Statement (such Late
Charge, for purposes of this clause (b)(iii) of this Section 2.7, to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days and (y)
commencing on the date on which the Rate Period during which Failure to
Deposit occurs commenced);
then the Auction Agent shall deliver a notice in the form of Exhibit H hereto to
the Broker-Dealers for such series not later than one Business Day after the
receipt of the payment from the Fund curing such Failure to Deposit and such
Late Charge.
(c) A Failure to Deposit with respect to shares of MuniPreferred shall
have been cured (if such Failure to Deposit is not solely due to the willful
failure to the Fund to make the required payment to the Auction Agent) with
respect to any Rate Period if, within the respective time periods described
immediately above, the Fund shall have paid to the Auction Agent (i) all
accumulated and unpaid dividends on the shares of MuniPreferred and (ii) without
duplication, the Redemption Price for the shares of MuniPreferred, if any, for
which Notice of Redemption has been mailed; provided, however, that the
foregoing clause (ii) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and each such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
2.8 Broker-Dealers.
--------------
(a) Not later than 12:00 Noon on each Auction Date for any series of
MuniPreferred, the Fund shall pay to the Auction Agent an amount in cash equal
to the aggregate fees payable to the Broker-Dealers for such series pursuant to
Section 2.8 of the Broker-Dealer Agreements for such series. The Auction Agent
shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer
Agreement.
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<PAGE> 13
(b) The Fund shall obtain the consent of the Auction Agent prior to
selecting any Person to act as a Broker-Dealer, which consent shall not be
unreasonably withheld.
(c) The Auction Agent shall terminate any Broker-Dealer Agreement as
set forth therein if so directed by the Fund, provided that at least one Broker-
Dealer Agreement would be in effect for each series of MuniPreferred after such
termination.
(d) Subject to the Auction Agent's having consented to the selection
of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the Auction
Agent shall from time to time enter into such Broker-Dealer Agreements with one
or more Broker-Dealers as the Fund shall request, and shall enter into such
schedules to any such Broker-Dealer Agreements as the Fund shall request, which
schedules, among other things, shall set forth the series of MuniPreferred to
which such Broker-Dealer Agreement relates.
2.9 Ownership of Shares of MuniPreferred.
------------------------------------
The Fund shall notify the Auction Agent if the Fund or any affiliate
of the Fund acquires any shares of MuniPreferred of any series. Neither the
Fund nor any affiliate of the Fund shall submit any Order in any Auction for
MuniPreferred, except as set forth in the next sentence. Any Broker-Dealer that
is an affiliate of the Fund may submit Orders in Auctions, but only if such
Orders are not for its own account. For purposes of this Section 2.9, a Broker-
Dealer shall not be deemed to be an affiliate of the Fund solely because one or
more of the directors or executive officers of such Broker-Dealer or of any
Person controlled by, in control of or under common control with such Broker-
Dealer is also a director of the Fund. The Auction Agent shall have no duty or
liability with respect to enforcement of this Section 2.9.
2.10 Access to and Maintenance of Auction Records.
--------------------------------------------
The Auction Agent shall, upon the receipt of prior written notice from
the Fund, afford to the Fund access at reasonable times during normal business
hours to all books, records, documents and other information concerning the
conduct and results of Auctions. The Auction Agent shall maintain records
relating to any Auction for a period of six years after such Auction, and such
records shall, in reasonable detail, accurately and fairly reflect the actions
taken by the Auction Agent hereunder.
3. The Auction Agent as Dividend and
Redemption Price Disbursing Agent.
---------------------------------
The Auction Agent, as dividend and redemption price disbursing agent,
shall pay to the Holders of shares of MuniPreferred of any series (i) on each
Dividend Payment Date for such series, dividends on the shares of MuniPreferred
of such series, (ii) on any date fixed for redemption of shares of MuniPreferred
of any series, the Redemption Price of any shares of such series called for
redemption and (iii) any Late Charge related to any payment of dividends
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<PAGE> 14
or Redemption Price, in each case after receipt of the necessary funds from the
Fund with which to pay such dividends, Redemption Price or Late Charge. The
amount of dividends for any Rate Period for any series of MuniPreferred to be
paid by the Auction Agent to the Holders of such shares of such series will be
determined by the Fund as set forth in Section 2 of Part I of the Statement with
respect to such series. The Redemption Price of any shares to be paid by the
Auction Agent to the Holders will be determined by the Fund as set forth in
Section 11 of Part I of the Statement with respect to such series. The Fund
shall notify the Auction Agent in writing of a decision to redeem shares of any
series of MuniPreferred at least five days prior to the date a notice of
redemption is required to be mailed to the Holders of the shares to be redeemed
by paragraph (c) of Section 11 of Part I of the Statement. Such notice by the
Fund to the Auction Agent shall contain the information required by paragraph
(c) of Section 11 of Part I of the Statement to be stated in the notice of
redemption required to be mailed by the Fund to such Holders.
4. The Auction Agent as Transfer Agent and Registrar.
-------------------------------------------------
4.1 Issue of Stock or Shares Certificates.
-------------------------------------
Upon the Date of Original Issue of each series of MuniPreferred, one
or more certificates representing all of the shares of such series issued on
such date shall be issued by the Fund and, at the request of the Fund,
registered in the name of Cede & Co. and countersigned by the Auction Agent.
4.2 Registration of Transfer of Shares.
----------------------------------
Shares of each series of MuniPreferred shall be registered solely in
the name of the Securities Depository or its nominee.
4.3 Removal of Legend on Restricted Shares.
--------------------------------------
All requests for removal of legends on shares of MuniPreferred of any
series indicating restrictions on transfer shall be accompanied by an opinion of
counsel stating that such legends may be removed and such shares freely
transferred, such opinion to be delivered under cover of a letter from a Fund
Officer authorizing the Auction Agent to remove the legend on the basis of said
opinion.
4.4 Lost Stock or Share Certificates.
--------------------------------
The Auction Agent shall issue and register replacement certificates
for certificates represented to have been lost, stolen or destroyed upon the
fulfillment of such requirements as shall be deemed appropriate by the Fund and
the Auction Agent, subject at all times to provisions of law, the By-Laws of the
Fund governing such matters and resolutions adopted by the Fund with respect to
lost securities. The Auction Agent may issue new certificates in
14
<PAGE> 15
exchange for and upon the cancellation of mutilated certificates. Any request
by the Fund to the Auction Agent to issue a replacement or new certificate
pursuant to this Section 4.4 shall be deemed to be a representation and warranty
by the Fund to the Auction Agent that such issuance will comply with such
provisions of law and the By-Laws and resolutions of the Fund.
4.5 Disposition of Cancelled
Certificates; Record Retention.
------------------------------
The Auction Agent shall retain all stock or share certificates which
have been cancelled in transfer or exchange and all accompanying documentation
in accordance with applicable rules and regulations of the Securities and
Exchange Commission for two calendar years. Upon the expiration of this two-
year period, the Auction Agent shall deliver to the Fund the cancelled
certificates and accompanying documentation. The Fund shall also undertake to
furnish to the Securities and Exchange Commission and to the Board of Governors
of the Federal Reserve System, upon demand, at either the principal office or at
any regional office, complete, correct and current hard copies of any and all
such records. Thereafter such records shall not be destroyed by the Fund
without the concurrence of the Auction Agent.
4.6 Stock or Record Books.
---------------------
For so long as the Auction Agent is acting as the transfer agent for
any series of MuniPreferred pursuant to the Agreement, it shall maintain a stock
or record book containing a list of the Holders of the shares of MuniPreferred
of each such series. In case of any request or demand for the inspection of the
stock or record books of the Fund or any other books in the possession of the
Auction Agent, the Auction Agent will notify the Fund and secure instructions as
to permitting or refusing such inspection. The Auction Agent reserves the
right, however, to exhibit the stock or record books or other books to any
Person in case it is advised by its counsel that its failure to do so would be
unlawful.
4.7 Return of Funds.
---------------
Any funds deposited with the Auction Agent hereunder by the Fund for
any reason, including but not limited to redemption of shares of MuniPreferred
of any series, that remain unpaid after ninety days shall be repaid to the Fund
upon the written request of the Fund, together with interest, if any, earned
thereon.
5. Representations and Warranties of the Fund.
------------------------------------------
The Fund represents and warrants to the Auction Agent that:
(a) the Fund is a duly incorporated and existing corporation or a duly
organized and existing business trust in good standing under the laws of
the State of its incorporation or organization and has full corporate power
or all requisite power to
15
<PAGE> 16
execute and deliver the Agreement and to authorize, create and issue the
shares of MuniPreferred of each series and the shares of MuniPreferred of
each series when issued, will be duly authorized, validly issued, fully
paid and nonassessable;
(b) the Agreement has been duly and validly authorized, executed and
delivered by the Fund and constitutes the legal, valid and binding
obligation of the Fund;
(c) the form of the certificate evidencing the shares of MuniPreferred
of each series complies or will comply with all applicable laws of the
State of its incorporation or organization;
(d) when issued, the shares of MuniPreferred of each series will have
been duly registered under the Securities Act of 1933, as amended, and no
further action by or before any governmental body or authority of the
United States or of any state thereof is required in connection with the
execution and delivery of the Agreement or will have been required in
connection with the issuance of the shares of MuniPreferred of each series;
(e) the execution and delivery of the Agreement and the issuance and
delivery of the shares of MuniPreferred of each series do not and will not
conflict with, violate or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation
or Declaration of Trust (as amended by one or more Statements) or the By-
Laws of the Fund, any law or regulation, any order or decree of any court
or public authority having jurisdiction, or any mortgage, indenture,
contract, agreement or undertaking to which the Fund is a party or by which
it is bound the effect of which conflict, violation, default or breach
would be material to the Fund or the Fund and its subsidiaries taken as a
whole; and
(f) no taxes are payable upon or in respect of the execution of the
Agreement or the issuance of the shares of MuniPreferred of any series.
6. The Auction Agent.
-----------------
6.1 Duties and Responsibilities.
---------------------------
(a) The Auction Agent is acting solely as agent for the Fund hereunder
and owes no fiduciary duties to any Person, other than the Fund, by reason of
the Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreement, and no implied covenants
or obligations shall be read into the Agreement against the Auction Agent.
16
<PAGE> 17
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
the pertinent facts.
6.2 Rights of the Auction Agent.
---------------------------
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document believed in good faith
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Auction Agent believes in
good faith to have been given by the Fund or by a Broker-Dealer. The Auction
Agent may record telephone communications with the Fund or with the Broker-
Dealers or both.
(b) The Auction Agent may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
6.3 Auction Agent's Disclaimer.
--------------------------
The Auction Agent makes no representation as to the validity or
adequacy of the Agreement, the Broker-Dealer Agreements or the shares of
MuniPreferred of any series except that the Auction Agent hereby represents that
the Agreement has been duly authorized, executed and delivered by the Auction
Agent and constitutes a legal and binding obligation of the Auction Agent.
6.4 Compensation, Expenses and Indemnification.
------------------------------------------
(a) The Fund shall pay the Auction Agent from time to time reasonable
compensation for all services rendered by it under the Agreement and the Broker-
Dealer Agreements.
17
<PAGE> 18
(b) The Fund shall reimburse the Auction Agent upon its request for
all reasonable out-of-pocket expenses, disbursements and advances incurred or
made by the Auction Agent in accordance with any provision of the Agreement and
the Broker-Dealer Agreements (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any expense or
disbursement attributable to its negligence or bad faith.
(c) The Fund shall indemnify the Auction Agent for and hold it
harmless against any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with its agency under the
Agreement and the Broker-Dealer Agreements, including the costs and expenses of
defending itself against any such claim or liability in connection with its
exercise or performance of any of its duties hereunder and thereunder.
7. Miscellaneous.
-------------
7.1 Term of Agreement.
-----------------
(a) The term of the Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Fund may terminate the
Agreement at any time by so notifying the Auction Agent, provided that the Fund
has entered into an agreement in substantially the form of the Agreement with a
successor Auction Agent. The Auction Agent may terminate the Agreement upon
written notice to the Fund on the date specified in such notice, which date
shall be no earlier than 45 days after the date of delivery of such notice.
(b) Except as otherwise provided in this paragraph (b), the respective
rights and duties of the Fund and the Auction Agent under the Agreement with
respect to any series of MuniPreferred shall cease upon termination of the
Agreement with respect to such series. The Fund's representations, warranties,
covenants and obligations to the Auction Agent under Sections 5 and 6.4 hereof
shall survive the termination of the Agreement with respect to any series of
MuniPreferred. Upon termination of the Agreement with respect to any series of
MuniPreferred, the Auction Agent shall, at the Fund's request, promptly deliver
to the Fund copies of all books and records maintained by it with respect to
MuniPreferred in connection with its duties hereunder.
18
<PAGE> 19
7.2 Communications.
--------------
Except for (i) communications authorized to be by telephone pursuant
to the Agreement or the Auction Procedures and (ii) communications in connection
with Auctions (other than those expressly required to be in writing), all
notices, requests and other communications to any party hereunder shall be in
writing (including telecopy or similar writing) and shall be given to such
party, addressed to it, at its address or telecopy number set forth below:
If to the Fund, [Name of Fund]
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
Telecopier No.: (312) 917-7942
Telephone No.: (312) 917-7700
If to the Auction Agent, to the
address or telecopy number set
forth in the Request and
Acceptance Letter,
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Fund by a Fund Officer and on
behalf of the Auction Agent by telephone (confirmed by telecopy or in writing)
by an Authorized Officer.
7.3 Entire Agreement.
----------------
The Agreement contains the entire agreement between the parties
relating to, and superseding any prior agreement between the parties relating
to, the subject matter hereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
between the parties relating to the subject matter hereof except for agreements
relating to the compensation of the Auction Agent.
7.4 Benefits.
--------
Nothing herein, express or implied, shall give to any Person, other
than the Fund, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.
19
<PAGE> 20
7.5 Amendment; Waiver.
-----------------
(a) The Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
7.6 Successors and Assigns.
----------------------
The Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of each of the Fund and
the Auction Agent.
7.7 Severability.
------------
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Governing Law.
-------------
The Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
If the Fund is a Massachusetts business trust, the following provision
is deemed to be included in the Basic Terms:
7.9 Declaration of Trust.
--------------------
The Fund's Declaration is on file with the Secretary of State of the
Commonwealth of Massachusetts. This Agreement has been executed on behalf of
the Fund by the Vice President and Treasurer of the Fund acting in such capacity
and not individually, and the obligations of the Fund set forth in this
Agreement are not binding upon any of the Fund's trustees, officers or
shareholders individually, but are binding only upon the assets and property of
the Fund.
20
<PAGE> 21
EXHIBIT A
---------
FORM OF
BROKER-DEALER AGREEMENT
-----------------------
<PAGE> 22
EXHIBIT B
---------
SETTLEMENT PROCEDURES
---------------------
<PAGE> 23
EXHIBIT C
---------
[NAME OF FUND]
NOTICE OF AUCTION DATE FOR
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for
Series ___ of the Fund's MuniPreferred is scheduled to be _______________, 19___
and the next Dividend Payment Date for Series ___ of the Fund's MuniPreferred
will be __________________, 19___.
[A Failure to Deposit in respect of the Series ___ MuniPreferred currently
exists. If, prior to 12:00 noon, New York City time, on the fourth Business Day
preceding the next scheduled Auction Date of the Series ____ MuniPreferred, such
Failure to Deposit is not cured or the applicable Late Charge is not paid, the
next Auction will not be held. Notice of the next Auction for the Series ___
MuniPreferred will be delivered when such Failure to Deposit is cured and the
applicable Late Charge is paid./1/]
[NAME OF FUND]
- ----------
/1/Include this language if a Failure to Deposit exists.
<PAGE> 24
EXHIBIT D
---------
[NAME OF FUND]
NOTICE OF PROPOSED CHANGE OF
LENGTH OF RATE PERIOD OF
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
[Name of Fund] (the "Fund") may exercise its option to designate the Rate
Period of its Series ____ MuniPreferred commencing [the first day of the Special
Rate Period] as a Special Rate Period.
By 11:00 A.M. on the second Business Day preceding the first day of such
proposed Special Rate Period, the Fund will notify ___________________ of either
(a) its determination to exercise such option, designating the length of such
Special Rate Period for such series or (b) its determination not to exercise
such option.
[NAME OF FUND]
Dated: ___________________, 19___
<PAGE> 25
EXHIBIT E
---------
[NAME OF FUND]
NOTICE OF CHANGE OF LENGTH OF RATE PERIOD
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined to
designate the Rate Period of its Series ____ MuniPreferred commencing on [the
first day of the Special Rate Period] as a Special Rate Period.
The Special Rate Period will be __________ [Rate Period Days].
The Auction Date for the Special Rate Period is [the Business Day next
preceding the first day of such Special Rate Period].
As a result of the Special Rate Period designation, the amount of
dividends payable on Series ____ MuniPreferred during the Special Rate Period
will be based on a 360-day year.
The Special Rate Period shall not commence if (a) an Auction for shares of
MuniPreferred shall not be held on such Auction Date for any reason or (b) an
Auction for shares of MuniPreferred shall be held on such Auction Date but
Sufficient Clearing Bids for such shares shall not exist in such Auction.
The scheduled Dividend Payment Dates for such series of MuniPreferred
during such Special Rate Period will be _________________________.
[Special Redemption Provisions, if any]
Attached hereto is a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate Period,
Moody's Eligible Assets (if Moody's is rating such shares of MuniPreferred) and
S&P Eligible Assets (if S&P is rating such shares of MuniPreferred) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance
Amount as of such Business Day (assuming for purposes of the foregoing
calculation that (i) the Maximum Rate is the Maximum Rate on such Business Day
as if such Business Day were the Auction Date for the proposed Special Rate
Period, and (ii) the Moody's Discount Factors applicable to Moody's Eligible
Assets are determined by
<PAGE> 26
reference to the first Moody's Exposure Period longer than the Moody's Exposure
Period then applicable to the Fund.)
[NAME OF FUND]
Dated: _____________, 19____
E-2
<PAGE> 27
EXHIBIT F
---------
[NAME OF FUND]
NOTICE OF DETERMINATION NOT TO CHANGE
LENGTH OF RATE PERIOD OF
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined not
to exercise its option to designate a Special Rate Period of its Series ___
MuniPreferred and the next succeeding Rate Period of such series will be a
Minimum Rate Period of ____ Rate Period Days.
[NAME OF FUND]
Dated: _______________, 19____
<PAGE> 28
EXHIBIT G
---------
[NAME OF FUND]
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its
Failure to Deposit and paid the applicable Late Charge with respect to its
Series ___ MuniPreferred. The dividend rate on the shares of Series ___
MuniPreferred for the current Dividend Period is _____________% per annum, the
Dividend Payment Date for the current Dividend Period is scheduled to be
_______________, 19___ and the next Auction Date is scheduled to be
_______________, 19___.
[NAME OF FUND]
Dated: ________________, 19___
<PAGE> 29
EXHIBIT H
---------
[NAME OF FUND]
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its
Failure to Deposit and paid the applicable Late Charge with respect to its
Series ____ MuniPreferred. The next Auction Date for the Series ____
MuniPreferred is scheduled to be on _________________, 19___.
[NAME OF FUND]
Dated: _________________, 19____
<PAGE> 30
EXHIBIT I
---------
[NAME OF FUND]
NOTICE OF
[CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME]/1/
DIVIDEND FOR
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that the amount of the dividend payable on
________________, 19____ for Series ____ of the Fund's MuniPreferred will be
determined by the Auction to be held on _______________, 19___. Up to [$ A ]/2/
[$ B ]/3/ per share of the dividend payable on such date as determined by such
Auction will consist of [capital gains]/2/ [ordinary income taxable for Federal
income tax purposes]/3/. If the dividend amount payable on such date as
determined by such Auction is less than [$ A ]/2/ [$ B ]/3/ per share, the
entire amount of the dividend will consist of [capital gains]/2/ [ordinary
income taxable for Federal income tax purposes]/3/. [To the extent such
dividend amount exceeds [$ A ] per share, any excess up to [$ B ] per share
will consist of ordinary income taxable for Federal income tax purposes.]/4/
Accordingly, the aforementioned composition of the dividend payable on
_______________, 19___ should be considered in determining Orders to be
submitted with respect to the Auction to be held on ________________, 19__. The
Rate Multiple in effect for such Auction will be ____%.
[NAME OF FUND]
- ----------
/1/Include language with respect to capital gains, taxable ordinary income
or both, depending on the character of the designation to be made with respect
to the dividend(s).
/2/Include bracketed material if a portion of the dividend will be
designated capital gains.
/3/Include bracketed material if a portion of the dividend will be
designated ordinary income taxable for Federal income tax purposes and no
portion of the dividend will be designated capital gains.
/4/Include bracketed material if a portion of the dividend will be
designated capital gains and a portion will be designated ordinary income
taxable for Federal income tax purposes.
<PAGE> 31
(Footnotes continued)
- ---------------------
A = the maximum amount of capital gains allocated to such series of
MuniPreferred to be included in such dividend, divided by the number of
shares of MuniPreferred.
B = the maximum amount of ordinary income taxable for Federal income tax
purposes allocated to such series of MuniPreferred to be included in such
dividend, divided by the number of shares in such series.
I-2
<PAGE> 1
EXHIBIT 99.d.2
NUVEEN BROKER-DEALER AGREEMENT
Basic Terms for Acting as a Broker-Dealer
-----------------------------------------
December 14, 1993
These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a broker-dealer identified in an Acceptance Letter
(together with its successors and assigns, a "BD") will act as a broker-dealer
for Municipal Auction Rate Cumulative Preferred Stock or Shares issued by
investment companies, now or hereafter organized, registered under the
Investment Company Act of 1940, as amended, as further identified by the Request
Letters (the "Funds"), for which Nuveen Advisory Corp. (the "Adviser") is the
investment adviser.
- --------------------------------------------------------------------------------
Each Fund has issued or may issue shares of MuniPreferred, pursuant to
its Articles of Incorporation or Declaration of Trust, as amended or
supplemented by the Statement of such Fund. A bank or trust company specified
in the Request Letter will act as the auction agent (the "Auction Agent") of
such Fund pursuant to authority granted it in the Auction Agency Agreement.
The Statement of each Fund will provide that, for each Subsequent Rate
Period of any series of MuniPreferred of such Fund then outstanding, the
Applicable Rate for such series for such Subsequent Rate Period shall, except
under certain conditions, be the rate per annum that the Auction Agent of such
Fund advises results from implementation of the Auction Procedures for such
series. The Board of Directors or Board of Trustees, as the case may be, of
each Fund will adopt a resolution appointing the Auction Agent as auction agent
for purposes of the Auction Procedures for each series of MuniPreferred of such
Fund.
The Auction Procedures of each Fund will require the participation of
one or more Broker-Dealers for each series of MuniPreferred of such Fund. BD
will act as a Broker-Dealer for each series of MuniPreferred of each Fund
identified in a Request Letter.
1. Definitions and Rules of Construction.
-------------------------------------
1.1. Terms Defined by Reference to Statement.
---------------------------------------
Capitalized terms not defined herein shall have the respective
meanings specified in the Statement of the relevant Fund.
1.2. Terms Defined Herein.
--------------------
As used herein and in the Settlement Procedures, the following terms
shall have the following meanings, unless the context otherwise requires:
<PAGE> 2
(a) "Acceptance Letter" shall mean the letter from Adviser to BD
pursuant to which the Adviser appoints BD as a Broker Dealer for each
series of MuniPreferred issued by any Fund that has executed a Request
Letter.
(b) "Agreement", with respect to any Fund, shall mean the Basic Terms,
together with the Acceptance Letter and the Request Letter relating to one
or more series of MuniPreferred of such Fund and any other substantially
similar agreement among such Fund, the Adviser, any Auction Agent for such
Fund and/or BD.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Agency Agreement", with respect to any Fund, shall mean
the Auction Agency Agreement between such Fund and the Auction Agent
relating to one or more series of MuniPreferred of such Fund.
(e) "Auction Procedures", with respect to any Fund, shall mean the
auction procedures constituting Part II of the form of Statement of such
Fund as of the filing thereof.
(f) "Authorized Officer" of an Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant
Treasurer and Assistant Secretary of such Auction Agent assigned to its
Corporate Trust and Agency Group and every other officer or employee of
such Auction Agent designated as an "Authorized Officer" for purposes of
the Agreement in a communication to BD.
(g) "BD Officer" shall mean each officer or employee of BD designated
as a "BD Officer" for purposes of the Agreement in a communication to any
Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par
value $.01 per share, of any Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of such Fund or any
committee thereof shall specify, as set forth in a Request Letter.
(i) "Request Letter", with respect to any Fund, shall mean the letter
from such Fund to the Adviser and the Auction Agent for such Fund pursuant
to which such Fund appoints BD as a Broker-Dealer for each series of
MuniPreferred of such Fund.
2
<PAGE> 3
(j) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
(k) "Statement", with respect to any Fund, shall mean the Statement
Establishing and Fixing the Rights and Preferences of, and authorizing the
issuance of, one or more series of Municipal Auction Rate Cumulative
Preferred Stock or Municipal Auction Rate Cumulative Preferred Shares, as
filed by such Fund with the office of the Secretary of State or other
officer of the state where such Fund was incorporated or organized, a copy
of which will be attached to the Request Letter of such Fund.
1.3. Rules of Construction.
---------------------
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of each Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of such Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto", and other words of similar
import refer to such Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
-----------
2.1. Purpose; Incorporation by Reference of Auction Procedures and
-------------------------------------------------------------
Settlement Procedures.
- ---------------------
(a) The provisions of the Auction Procedures of any Fund will be
followed by the Auction Agent of such Fund for the purpose of determining the
Applicable Rate for any Subsequent Rate Period of any series of MuniPreferred of
such Fund for which the Applicable Rate is to be determined by an Auction. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
3
<PAGE> 4
(c) BD agrees to act as, and assumes the obligations of, and
limitations and restrictions placed upon, a Broker-Dealer under each Agreement
for each series of MuniPreferred. BD understands that other Persons meeting the
requirements specified in the definition of "Broker-Dealer" contained in the
Auction Procedures may execute Agreements and participate as Broker-Dealers in
Auctions.
2.2. Preparation for Each Auction.
----------------------------
(a) Not later than 9:30 A.M. on each Auction Date for any series of
MuniPreferred, the Auction Agent for such series shall advise the Broker-Dealers
for such series by telephone of the Maximum Rate therefor and the Reference
Rate(s) and Treasury Note Rate(s), as the case may be, used in determining such
Maximum Rate.
(b) In the event that any Auction Date for any series of MuniPreferred
shall be changed after the Auction Agent for such series has given the notice
referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or
after the notice referred to in Section 2.5(a) hereof, if applicable, such
Auction Agent, by such means as such Auction Agent deems practicable, shall give
notice of such change to BD, if it is a Broker-Dealer for such series, not later
than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old
Auction Date.
(c) For purposes of maintaining its list of Existing Holders, the
Auction Agent for any series of MuniPreferred from time to time may request any
Broker-Dealer to provide such Auction Agent with a list of Persons who such
Broker-Dealer believes should be Existing Holders based upon inquiries of those
Persons such Broker-Dealer believes are Beneficial Owners as a result of the
most recent Auction and with respect to each such Person, the number of shares
of such series of MuniPreferred such Broker-Dealer believes are owned by such
Person. BD shall comply with any such request relating to a series of
MuniPreferred in respect of which BD was named a Broker-Dealer, and the Auction
Agent shall keep confidential any such information so provided by BD and shall
not disclose any information so provided by BD to any Person other than the Fund
and BD.
(d) BD agrees to maintain a list of customers relating to a series of
MuniPreferred and to use its best efforts, subject to existing laws and
regulations, to contact the customers on such list whom BD believes may be
interested in participating in the Auction on each Auction Date, as a Potential
Holder or a Potential Beneficial Owner, for the purposes set forth in the
Auction Procedures. Nothing herein shall require BD to submit an Order for any
customer in any Auction.
(e) The Auction Agent's registry of Existing Holders of shares of a
series of MuniPreferred shall be conclusive and binding on BD. BD may inquire
of the Auction Agent between 3:00 P.M. on the Business Day preceding an Auction
for shares of a series of MuniPreferred and 9:30 A.M. on the Auction Date for
such Auction to ascertain the number of shares of such series in respect of
which the Auction Agent has determined BD to be an
4
<PAGE> 5
Existing Holder. If BD believes it is the Existing Holder of fewer shares of
such series than specified by the Auction Agent in response to BD's inquiry, BD
may so inform the Auction Agent of that belief. BD shall not, in its capacity
as Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the number
of shares of such series specified by the Auction Agent in response to BD's
inquiry.
2.3. Auction Schedule; Method of Submission of Orders.
------------------------------------------------
(a) Each Fund and the Auction Agent for such Fund shall conduct
Auctions for MuniPreferred in accordance with the schedule set forth below.
Such schedule with respect to any series of MuniPreferred of any Fund may be
changed by the Auction Agent for such series with the consent of such Fund,
which consent shall not be unreasonably withheld. Such Auction Agent shall give
written notice of any such change to each Broker-Dealer of such series. Such
notice shall be given prior to the close of business on the Business Day next
preceding the first Auction Date on which such change shall be effective.
Time Event
---- -----
By 9:30 A.M. Auction Agent for such series advises such
Fund and the Broker-Dealers for such series
of the applicable Maximum Rate and the
Reference Rate(s) and Treasury Note
Rate(s), as the case may be, used in
determining such Maximum Rate as set
forth in Section 2.2(a) hereof.
9:30 A.M. - 1:30 P.M. Auction Agent assembles information
communicated to it by Broker-Dealers as
provided in Section 2(a) of the Auction
Procedures of such Fund. Submission
Deadline is 1:30 P.M.
Not earlier than 1:30 P.M. Auction Agent makes determinations
pursuant to Section 3(a) of the Auction
Procedures of such Fund.
5
<PAGE> 6
Time Event
---- -----
By approximately 3:00 P.M. Auction Agent advises Fund of results of
Auction as provided in Section 3(b) of the
Auction Procedures of such Fund.
Submitted Bids and Submitted Sell Orders
are accepted and rejected and shares of such
series of MuniPreferred allocated as
provided in Section 4 of the Auction
Procedures of such Fund.
Auction Agent gives notice of Auction
results as set forth in Section 2.4(a) hereof.
(b) BD shall submit Orders to the appropriate Auction Agent in writing
substantially in the form attached hereto as Exhibit B. BD shall submit a
separate Order to such Auction Agent for each Potential Holder or Existing
Holder with respect to whom BD is submitting an Order and shall not otherwise
net or aggregate such Orders prior to their submission to such Auction Agent.
(c) BD shall deliver to the appropriate Auction Agent (i) a written
notice in substantially the form attached hereto as Exhibit C of transfers of
shares of MuniPreferred to BD from another Person other than pursuant to an
Auction and (ii) a written notice substantially in the form attached hereto as
Exhibit D, of the failure of any shares of MuniPreferred to be transferred to or
by any Person that purchased or sold shares of MuniPreferred through BD pursuant
to an Auction. Such Auction Agent is not required to accept any such notice
described in clause (i) for an Auction unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day preceding such Auction.
(d) BD and other Broker-Dealers may submit Orders in Auctions for
their own accounts (including Orders for their own accounts where the Order is
placed beneficially for a customer) unless the relevant Fund shall have notified
BD and all other Broker-Dealers that they may no longer do so, in which case
Broker-Dealers may continue to submit Hold Orders and Sell Orders for their own
accounts.
(e) BD agrees to handle its customers' orders in accordance with its
duties under applicable securities laws and rules.
(f) To the extent that pursuant to Section 4 of the Auction Procedures
of any Fund, BD continues to hold, sells, or purchases a number of shares that
is fewer than the number of shares in an Order submitted by BD to the Auction
Agent in which BD designated itself as an Existing Holder or Potential Holder in
respect of customer Orders, BD shall make
6
<PAGE> 7
appropriate pro rata allocations among its customers for which it submitted
Orders of similar tenor. If as a result of such allocations, any Beneficial
Owner would be entitled or required to sell, or any Potential Beneficial Owner
would be entitled or required to purchase, a fraction of a share of
MuniPreferred on any Auction Date, BD shall, in such manner as it shall
determine in its sole discretion, round up or down the number of shares of
MuniPreferred to be purchased or sold on such Auction Date by any Beneficial
Owner or Potential Beneficial Owner on whose behalf BD submitted an Order so
that the number of shares so purchased or sold by each such Beneficial Owner or
Potential Beneficial Owner on such Auction Date shall be whole shares of
MuniPreferred.
2.4. Notices.
-------
(a) On each Auction Date for any series of MuniPreferred, the Auction
Agent for such series shall notify BD, if BD is a Broker-Dealer of such series,
by telephone of the results of the Auction as set forth in paragraph (a) of the
Settlement Procedures. By approximately 11:30 A.M. on the Business Day next
succeeding such Auction Date, the relevant Auction Agent shall confirm to BD in
writing the disposition of all Orders submitted by BD in such Auction.
(b) BD shall notify each Existing Holder, Potential Holder, Beneficial
Owner or Potential Beneficial Owner of shares of MuniPreferred with respect to
whom BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
2.5. Designation of Special Rate Period.
----------------------------------
(a) If any Fund delivers to its Auction Agent a notice of the Auction
Date for any series of MuniPreferred of such Fund for a Rate Period thereof that
next succeeds a Rate Period that is not a Minimum Rate Period in the form of
Exhibit C to the Auction Agency Agreement, and BD is a Broker-Dealer of such
series, the Auction Agent shall deliver such notice to BD as promptly as
practicable after its receipt of such notice from such Fund.
(b) If the Board of Directors or Board of Trustees, as the case may
be, of any Fund proposes to designate any succeeding Subsequent Rate Period of
any series of MuniPreferred of such Fund as a Special Rate Period and such Fund
delivers to its Auction Agent a notice of such proposed Special Rate Period in
the form of Exhibit D to the Auction Agency Agreement, and BD is a Broker-Dealer
for such series, such Auction Agent shall deliver such notice to BD as promptly
as practicable after its receipt of such notice from the Fund.
(c) If the Board of Directors or Board of Trustees, as the case may
be, of any Fund determines to designate such succeeding Subsequent Rate Period
as a Special Rate Period, and such Fund delivers to its Auction Agent a notice
of such Special Rate Period in the form of Exhibit E to the Auction Agency
Agreement not later than 11:00 A.M. on the second Business Day next preceding
the first day of such Rate Period (or by such later time or date, or both, as
7
<PAGE> 8
may be agreed to by such Auction Agent), and BD is a Broker-Dealer for such
series, such Auction Agent shall deliver such notice to BD not later than 3:00
P.M. on such second Business Day (or, if such Auction Agent has agreed to a
later time or date, as promptly as practicable thereafter).
(d) If any Fund shall deliver to its Auction Agent a notice not later
than 11:00 A.M. on the second Business Day next preceding the first day of any
Rate Period (or by such later time or date, or both, as may be agreed to by such
Auction Agent) stating that such Fund has determined not to exercise its option
to designate such succeeding Subsequent Rate Period as a Special Rate Period, in
the form of Exhibit F to the Auction Agency Agreement, or shall fail to timely
deliver either such notice or a notice in the form of Exhibit E to the Auction
Agency Agreement, and BD is a Broker-Dealer for such series, such Auction Agent
shall deliver a notice in the form of Exhibit F to the Auction Agency Agreement
to BD not later than 3:00 P.M. on such second Business Day (or, if such Auction
Agent has agreed to a later time or date, as promptly as practicable
thereafter).
2.6. Allocation of Taxable Income.
----------------------------
If any Fund delivers to its Auction Agent a notice in the form of
Exhibit I to the Auction Agency Agreement designating all or a portion of any
dividend on shares of any series of MuniPreferred of such Fund to consist of net
capital gains or other income taxable for Federal income tax purposes, and BD is
a Broker-Dealer for such series, such Auction Agent shall deliver such notice to
BD on the Business Day following its receipt of such notice from such Fund. On
or prior to the Auction Date referred to in such notice, BD will contact each of
its customers that is a Beneficial Owner of shares of such series of
MuniPreferred or a Potential Beneficial Owner of shares of such series of
MuniPreferred interested in submitting an Order in the Auction to be held on
such Auction Date, and BD will notify such Beneficial Owners and Potential
Beneficial Owners of the contents of such notice. BD will be deemed to have
notified such Beneficial Owners and Potential Beneficial Owners if, for each of
them, (i) BD makes a reasonable effort to contact such Beneficial Owner or
Potential Beneficial Owner by telephone, and (ii) upon failing to contact such
Beneficial Owner or Potential Beneficial Owner by telephone BD mails written
notification to such Beneficial Owner or Potential Beneficial Owner at the
mailing address indicated in the account records of BD.
The Auction Agent for any series of MuniPreferred shall be required to
notify BD if it is a Broker-Dealer for such series within two Business Days
after each Auction of such series that involves an allocation of income taxable
for Federal income tax purposes as to the dollar amount per share of such
taxable income and income exempt from Federal income taxation included in the
related dividend.
2.7. Failure to Deposit.
------------------
(a) If:
8
<PAGE> 9
(i) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period
Days or any Rate Period succeeding any Special Rate Period of more than 364
Rate Period Days during which a Failure to Deposit occurred that has not
been cured), but, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall have been cured in accordance with
Section 2.7 of the Auction Agency Agreement and such Fund shall have paid
to the Auction Agent for such series the applicable Late Charge as
described in Section 2.7 of the Auction Agency Agreement,
then, if BD is a Broker-Dealer for such series, such Auction Agent shall deliver
a notice in the form of Exhibit G to the Auction Agency Agreement by first-class
mail, postage prepaid, to BD not later than one Business Day after its receipt
of the payment from such Fund curing such Failure to Deposit and such Late
Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period
Days or any Rate Period succeeding any Special Rate Period of more than 364
Rate Period Days during which a Failure to Deposit occurred but has not
been cured), and, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall not have been cured as described in
Section 2.7 of the Auction Agency Agreement or such Fund shall not have
paid to the Auction Agent for such series the applicable Late Charge
described in Section 2.7 of the Auction Agency Agreement; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during a Special Rate
Period thereof of more than 364 Rate Period Days, or during any Rate Period
thereof succeeding any Special Rate Period of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not been cured,
and, prior to 12:00 noon, New York City time, on the fourth Business Day
preceding the Auction Date for the Rate Period subsequent to such Rate
Period, such Failure to Deposit shall not have been cured as described in
Section 2.7 of the Auction Agency Agreement or such Fund shall not have
paid to the Auction Agent for such series the applicable Late Charge
described in Section 2.7 of the Auction Agency Agreement;
9
<PAGE> 10
then such Auction Agent shall deliver a notice in the form of Exhibit H to the
Auction Agency Agreement to the Broker-Dealers for such series not later than
one Business Day after the receipt of the payment from such Fund curing such
Failure to Deposit and such Late Charge.
2.8. Service Charge to be Paid to BD.
-------------------------------
On the Business Day next succeeding each Auction Date for any series
of MuniPreferred specified in, or on Schedule A to, the Request Letter of any
Fund, the Auction Agent for such series shall pay to BD from moneys received
from such Fund an amount equal to the product of (a) (i) in the case of any
Auction Date immediately preceding a Rate Period of such series consisting of
364 Rate Period Days or fewer, 1/4 of 1%, or (ii) in the case of any Auction
Date immediately preceding a Rate Period of such series consisting of more than
364 Rate Period Days, such percentage as may be agreed upon by such Fund and BD
with respect to such Rate Period, times (b) a fraction, the numerator of which
is the number of Rate Period Days in the Rate Period therefor beginning on such
Business Day and the denominator of which is 365 if such Rate Period consists of
7 Rate Period Days and 360 for all other Rate Periods, times (c) $25,000 times
(d) the sum of (i) the aggregate number of shares of such series placed by BD in
such Auction that were (A) the subject of Submitted Bids of Existing Holders
submitted by BD and continued to be held as a result of such submission and (B)
the subject of Submitted Bids of Potential Holders submitted by BD and purchased
as a result of such submission plus (ii) the aggregate number of shares of such
series subject to valid Hold Orders (determined in accordance with paragraph (d)
of Section 2 of the Auction Procedures) submitted to the Auction Agent by BD
plus (iii) the number of shares of MuniPreferred deemed to be subject to Hold
Orders of Existing Holders pursuant to paragraph (c) of Section 2 of the Auction
Procedures of such Fund that were acquired by BD for its own account or were
acquired by BD for its customers who are Beneficial Owners.
For purposes of subclause (d)(iii) of the foregoing paragraph, if any
Existing Holder or Beneficial Owner who acquired shares of any series of
MuniPreferred through BD transfers those shares to another Person other than
pursuant to an Auction, then the Broker-Dealer for the shares so transferred
shall continue to be BD; provided, however, that if the transfer was effected
by, or if the transferee is, a Broker-Dealer other than BD, then such Broker-
Dealer shall be the Broker-Dealer for such shares.
2.9. Settlement.
----------
(a) If any Existing Holder or Beneficial Owner with respect to whom BD
has submitted a Bid or Sell Order for shares of MuniPreferred of any series that
was accepted in whole or in part fails to instruct its Agent Member to deliver
the shares of MuniPreferred subject to such Bid or Sell Order against payment
therefor, BD, if it knows the identity of such Agent Member, shall instruct such
Agent Member to deliver such shares against payment therefor and, if such Agent
Member fails to comply with such instructions, BD may deliver to the Potential
Holder or Potential Beneficial Owner with respect to whom BD submitted a Bid for
shares of MuniPreferred of such series that was accepted in whole or in part a
number of
10
<PAGE> 11
shares of MuniPreferred of such series that is less than the number of shares of
MuniPreferred of such series specified in such Bid to be purchased by such
Potential Holder or Potential Beneficial Owner.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility or liability with respect to the failure of an Existing Holder,
Beneficial Owner, Potential Holder or Potential Beneficial Owner or its
respective Agent Member to deliver shares of MuniPreferred of any series or to
pay for shares of MuniPreferred of any series sold or purchased pursuant to the
Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing Holder
with respect to shares of a series of MuniPreferred and the Auction Procedures
provide that BD shall be deemed to have submitted a Sell Order in an Auction
with respect to such shares if BD fails to submit an Order in that Auction with
respect to such shares, BD shall have no liability to any Person for failing to
sell such shares pursuant to such a deemed Sell Order if (i) such shares were
transferred by the beneficial owner thereof without notification of such
transfer in compliance with the Auction Procedures or (ii) BD has indicated to
the Auction Agent pursuant to Section 2.2(e) of this Agreement that, according
BD's records, BD is not the Existing Holder of such shares.
(d) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of shares of a series of MuniPreferred with respect to whom a
Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a Sell
Order for such shares that was accepted in whole or in part, fails to instruct
its Agent Member to deliver such shares against payment therefor, partial
deliveries of shares of MuniPreferred that have been made in respect of
Potential Holders, or Potential Beneficial Owners' Submitted Bids for shares of
such series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.
(e) Notwithstanding the foregoing terms of this Section, any delivery
or non-delivery of shares of MuniPreferred of any series which represents any
departure from the results of an Auction for shares of such series, as
determined by the Auction Agent, shall be of no effect for purposes of the
registry of Existing Holders maintained by the Auction Agent pursuant to the
Auction Agency Agreement unless and until the Auction Agent shall have been
notified of such delivery or non-delivery.
(f) The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.9.
11
<PAGE> 12
3. The Auction Agent.
-----------------
3.1. Duties and Responsibilities.
---------------------------
(a) Each Auction Agent is acting solely as agent for the Funds with
whom such Auction Agent has entered into Request Letters and owes no fiduciary
duties to any other Person, other than such Funds, by reason of the Agreements
to which such Auction Agent is a party.
(b) Each Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreements to which it is a party,
and no implied covenants or obligations shall be read into such Agreements
against such Auction Agent.
(c) In the absence of bad faith or negligence on its part, each
Auction Agent shall not be liable for any action taken, suffered, or omitted or
for any error of judgment made by it in the performance of its duties under the
Agreements to which it is a party. Each Auction Agent shall not be liable for
any error of judgment made in good faith unless such Auction Agent shall have
been negligent in ascertaining the pertinent facts.
3.2. Rights of the Auction Agents.
----------------------------
(a) Each Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document believed in good faith
by it to be genuine. Each Auction Agent shall not be liable for acting upon any
telephone communication authorized by the Agreements to which it is a party that
such Auction Agent believes in good faith to have been given by the appropriate
Fund, by the Adviser or by a Broker-Dealer. Each Auction Agent may record
telephone communications with the Broker-Dealers.
(b) Each Auction Agent may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) Each Auction Agent shall not be required to advance, expend or
risk its own funds or otherwise incur or become exposed to financial liability
in the performance of its duties hereunder.
3.3. Auction Agents' Disclaimers.
---------------------------
Each Auction Agent makes no representation as to the validity or
adequacy of the Agreements to which it is a party, the Auction Agency Agreements
to which it is a party or the shares of MuniPreferred of any series.
12
<PAGE> 13
4. Miscellaneous.
-------------
4.1. Termination.
-----------
Any party to any Agreement may terminate such Agreement at any time on
five days' notice to the other parties to such Agreement, provided that the Fund
party to such Agreement shall not terminate the Agreement unless at least one
Broker-Dealer Agreement would be in effect for each series of MuniPreferred of
such Fund after such termination. Each Agreement shall automatically terminate
with respect to any series of MuniPreferred with respect to which the relevant
Auction Agency Agreement has terminated.
4.2. Participant in Securities Depository; Payment of Dividends in
-------------------------------------------------------------
Same-Day Funds.
- --------------
(a) BD is, and shall remain for the term of the Agreements, a member
of, or participant in, the Securities Depository (or an affiliate of such a
member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the MuniPreferred
available in same-day funds on each Dividend Payment Date to customers that use
BD or affiliate as Agent Member.
4.3. Communications.
--------------
Except for (i) communications authorized to be by telephone by the
Agreement of any Fund or the Auction Procedures of such Fund and (ii)
communications in connection with Auctions (other than those expressly required
to be in writing), all notices, requests and other communications to any party
under such Agreement shall be in writing (including telecopy or similar writing)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to a Fund, [Name of Fund]
addressed: 333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
Telecopier No.: (312) 917-7942
Telephone No.: (312) 917-7700
If to the Adviser, Nuveen Advisory Corp.
addressed: 333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
13
<PAGE> 14
If to BD, to the
address or telecopy number
as set forth in the Acceptance
Letter,
If to an Action
Agent, to the address
or telecopy number as set
forth in the Request Letter,
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
an Auction Agent by an Authorized Officer of such Auction Agent. BD may record
telephone communications with any Auction Agent.
4.4. Entire Agreement.
----------------
Each Agreement contains the entire agreement among the parties thereto
relating to the subject matter thereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
among the parties thereto relating to the subject matter thereof. Each
Agreement supersedes any prior agreement to which BD was a party in respect of
any Fund.
4.5. Benefits.
--------
Nothing in any Agreement, express or implied, shall give to any
person, other than the Fund party to such Agreement, the Adviser, the Auction
Agent party to such Agreement and BD and their respective successors and
assigns, any benefit or any legal or equitable right, remedy or claim under such
Agreement.
4.6. Amendment; Waiver.
-----------------
(a) Each Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of any party to any Agreement to exercise any right or
remedy thereunder in the event of a breach thereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
14
<PAGE> 15
4.7. Successors and Assigns.
----------------------
Each Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of the Fund party to such
Agreement, the Adviser, the Auction Agent party to such Agreement and BD.
4.8. Severability.
------------
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
4.9. GOVERNING LAW.
-------------
EACH AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
4.10. Declaration of Trust.
--------------------
The Declaration of each Fund that is a Massachusetts business trust is
on file with the Secretary of State of the Commonwealth of Massachusetts. Each
Agreement to which a Fund that is a Massachusetts business trust is a party has
been executed on behalf of such Fund by the Vice President and Treasurer of such
Fund acting in such capacity and not individually, and the obligations of such
Fund set forth in such Agreement are not binding upon any of such Fund's
trustees, officers or shareholders individually, but are binding only upon the
assets and property of such Fund.
15
<PAGE> 16
EXHIBIT A
---------
SETTLEMENT PROCEDURES
---------------------
<PAGE> 17
<TABLE>
================================================================================================================================
<S> <C>
[AUCTION AGENT] AUCTION BID FORM NAME OF Broker-Dealer:
------------------------
AUTHORIZED
Submit to: SIGNATURE:
------------------------------------
TOTAL NUMBER OF ORDERS ON THIS BID FORM:
------
================================================================================================================================
</TABLE>
<PAGE> 18
EXHIBIT B
---------
[Name of Fund]
$_____ Municipal Auction Rate Cumulative Preferred
Stock [Shares], Series ____
$_____ Municipal Auction Rate Cumulative Preferred
Stock [Shares], Series ____
AUCTION DATE: _____________
ISSUE: ___________________ SERIES: _________
THE UNDERSIGNED Broker-Dealer SUBMITS THE FOLLOWING ORDERS ON BEHALF OF THE
BIDDER(S) LISTED BELOW:
<TABLE>
<CAPTION>
================================================================================================================================
ORDERS BY EXISTING HOLDERS- NUMBER OF SHARES OF MUNIPREFERRED ORDERS BY POTENTIAL NUMBER OF SHARES OF
HOLDERS- MUNIPREFERRED
POTENTIAL HOLDER BID/RATE
<S> <C> <C>
EXISTING HOLDER HOLD BID/RATE SELL 1. /
----------------- ------------------------
1. / 2. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
2. / 3. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
3. / 4. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
4. / 5. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
5. / 6. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
6. / 7. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
7. / 8. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
8. / 9. /
--------------------------- ------ -------------------- -------- ----------------- ------------------------
9. / 10. 1 /
--------------------------- ------ -------------------- -------- ---------------- ------------------------
10. / 11. 1 /
--------------------------- ------ -------------------- -------- ---------------- ------------------------
12. 1 /
- -------------------------------------------------------------------------------- ---------------- ------------------------
NOTES: 13. 1 /
- ------ ---------------- ------------------------
14. 1 /
---------------- ------------------------
1. If one or more Orders covering in the aggregate more than the number of 15. 1 /
outstanding shares of MuniPreferred held by any Existing holder are submitted, ---------------- ------------------------
such Orders shall be considered valid in the order of priority set forth in
the Auction Procedures.
2. A Hold Order or Sell Order may be placed only by an Existing Holder covering a
number of shares of MuniPreferred not greater than the number of shares of
MuniPreferred currently held by such Existing Holder.
3. Potential Holders may make Bids only, each of which must specify a rate. If
more than one Bid is submitted on behalf of any Potential Holder, each Bid
submitted shall be a separate Bid with the rate specified.
4. Bids may contain no more than three figures to the right of the decimal point
(.001 of 1%).
====================================================================================================================================
</TABLE>
<PAGE> 19
EXHIBIT C
---------
(To be used only for transfers made to a
Broker-Dealer other than pursuant to an Auction)
[NAME OF FUND]
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES],
SERIES ___
TRANSFER FORM
We are the Broker-Dealer to whom the Existing Holder or Beneficial Owner named
below transferred shares of the above series of MuniPreferred other than
pursuant to an Auction. We hereby notify you that such Existing Holder or
Beneficial Owner has transferred _______ shares of the above series of
MuniPreferred to us.
-------------------------------------------------
(Name of Existing Holder or
Beneficial Owner)
-------------------------------------------------
(Name of Broker-Dealer)
By:
----------------------------------------------
Printed Name:
Title:
<PAGE> 20
EXHIBIT D
---------
(To be used only for failures to deliver shares of
MuniPreferred sold pursuant to an Auction)
[NAME OF FUND]
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES],
SERIES ____
NOTICE OF A FAILURE TO DELIVER
Complete either I or II
- -----------------------
I. We are a Broker-Dealer for ________________ (the "Purchaser"), which
purchased _______ shares of the above series of MuniPreferred in the
Auction held on _____ from the seller of such shares.
II. We are a Broker-Dealer for ____________ (the "Seller"), which sold ________
shares of the above series of MuniPreferred in the Auction held on ______
to the purchaser of such shares.
We hereby notify you that (check one) --
[_] the Seller failed to deliver such shares of MuniPreferred to the
Purchaser
[_] the Purchaser failed to make payment to the Seller upon delivery of
such shares of MuniPreferred
Name:
--------------------------------------------
(Name of Broker-Dealer)
By:
----------------------------------------------
Printed Name:
Title:
<PAGE> 21
[Form of Broker-Dealer Acceptance Letter]
Nuveen Advisory Corp.
December ___, 1993
[Broker-Dealer]
[Address]
Ladies and Gentlemen:
Reference is made to (a) the Broker-Dealer Agreements executed by the
Funds (as hereinafter defined) listed on Exhibit A hereto, Bankers Trust Company
and various broker-dealers, copies of which will be made available to you upon
request by Bankers Trust Company (the "Broker-Dealer Agreements") and (b) the
Nuveen Broker-Dealer Agreement-Basic Terms for Acting as a Broker-Dealer dated
December 14, 1993, receipt of which is hereby acknowledged by you (the "Basic
Terms"). For purposes of this letter ("Acceptance Letter") (a) "Fund" shall
mean any closed-end investment company registered under the Investment Company
Act of 1940, as amended, for which Nuveen Advisory Corp. acts as investment
adviser; (b) except as otherwise provided below, the terms of each Broker-Dealer
Agreement shall be incorporated herein by reference, and you shall be considered
BD for all purposes thereof, as if you were the Broker-Dealer signatory thereto
in the place of the actual Broker-Dealer signatory thereto; and (c) the Basic
Terms are incorporated herein by reference, you shall be considered BD for all
purposes thereof, Bankers Trust Company shall be considered the Auction Agent
for all purposes thereof, and each Fund not listed on Exhibit A hereto shall be
considered a Fund for all purposes thereof.
We hereby request that you act as a Broker-Dealer for the Money Market
Cumulative Preferred Stock ("MMP") of each series, and the Municipal Auction
Rate Cumulative Preferred Stock or Shares ("MPS" or "MuniPreferred") of each
series, of each Fund that executes a letter, substantially in the form attached
hereto as Exhibit B or Exhibit C, as appropriate, appointing you as a Broker-
Dealer ("Request Letter"). You hereby (a) accept such appointment as a Broker-
Dealer for each series of MMP, MPS or MuniPreferred of each Fund identified in a
Request Letter and (b) agree to act as BD in accordance with (1) the terms of
the Broker-Dealer Agreement relating to such Fund, in the case of any Fund
listed on Exhibit A hereto or (2) the Basic Terms, in the case of any other
Fund; provided, however, that:
2
<PAGE> 22
(1) for purposes of any such Broker-Dealer Agreement or the Basic
Terms, and notwithstanding any provision of any Broker-Dealer Agreement to the
contrary, your address, telecopy number and telephone number for communications
pursuant to such Broker-Dealer Agreement or the Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
and the address, telecopy number and telephone number of the Auction Agent for
communications pursuant to such Broker-Dealer or the Basic Terms shall be as
follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
(2) notwithstanding any provision of a Broker-Dealer Agreement to the
contrary, except as otherwise set forth herein, your appointment as Broker-
Dealer extends to each series of MMP, MPS or MuniPreferred issued by the Fund to
which such Broker-Dealer Agreement relates.
(3) the text of Section 2.9 of each Broker-Dealer Agreement shall be
deleted and the following shall be deemed to be inserted in its place:
(a) If any Existing Holder with respect to whom BD has submitted a Bid
or Sell Order for shares of MMP, MPS or MuniPreferred of any series that
was accepted in whole or in part fails to instruct its Agent Member to
deliver the shares of MMP, MPS or MuniPreferred subject to such Bid or Sell
Order against payment therefor, BD, if it knows the identity of such Agent
Member, shall instruct such Agent Member to deliver such shares against
payment therefor and, if such Agent Member fails to comply with such
instructions, BD may deliver to the Potential Holder with respect to whom
BD submitted a Bid for shares of MMP, MPS or MuniPreferred of such series
that was accepted in whole or in part a number of shares of MMP, MPS or
MuniPreferred of such
3
<PAGE> 23
series that is less than the number of shares of MMP, MPS, or MuniPreferred
of such series specified in such Bid to be purchased by such Potential
Holder.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility or liability with respect to the failure of an Existing
Holder or a Potential Holder or its respective Agent Member to deliver
shares of MMP, MPS or MuniPreferred of any series or to pay for shares of
MMP, MPS or MuniPreferred of any series sold or purchased pursuant to the
Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing
Holder with respect to shares of a series of MMP, MPS or MuniPreferred and
the Auction Procedures provide that BD shall be deemed to have submitted a
Sell Order in an Auction with respect to such shares if BD fails to submit
in Order in that Auction with respect to such shares, BD shall have no
liability to any Person for failing to sell such shares pursuant to such a
deemed Sell Order if (i) such shares were transferred by the beneficial
owner thereof without notification of such transfer in compliance with the
Auction Procedures or (ii) BD has informed the Auction Agent pursuant to
Section 2.2(g) of this Agreement that, according to BD's records, BD
believes it is not the Existing Holder of such shares.
(d) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder of
shares of a series of MMP, MPS or MuniPreferred with respect to whom a
Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a
Sell Order for such shares that was accepted in whole or in part, fails to
instruct its Agent Member to deliver such shares against payment therefor,
partial deliveries of shares of MMP, MPS or MuniPreferred that have been
made in respect of Potential Holders' Submitted Bids for shares of such
series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders.
(e) Notwithstanding the foregoing terms of this Section, any delivery
or non-delivery of shares of MMP, MPS or MuniPreferred of any series which
represents any departure from the results of an Auction for shares of such
series, as determined by the Auction Agent, shall be of no effect for
purposes of the registry of Existing Holders maintained by the Auction
Agent pursuant to the Auction Agency Agreement unless and until the Auction
Agent shall have been notified of such delivery or non-delivery.
(f) The Auction Agent shall have no duty or liability with respect to
enforcement of this Section 2.9.
(4) a new Section 2.2(g) shall be added to each Broker-Dealer
Agreement, to read as follows:
4
<PAGE> 24
(g) The Auction Agent's registry of Existing Holders of shares of a
series of MMP, MPS or MuniPreferred shall be conclusive and binding on BD.
BD may inquire of the Auction Agent between 3:00 P.M. on the Business Day
preceding an Auction for shares of a series of MMP, MPS or MuniPreferred
and 9:30 A.M. on the Auction Date for such Auction to ascertain the number
of shares of such series in respect of which the Auction Agent has
determined BD to be an Existing Holder. If BD believes it is the Existing
Holder of fewer shares of such series than specified by the Auction Agent
in response to BD's inquiry, BD may so inform the Auction Agent of that
belief. BD shall not, in its capacity as Existing Holder of shares of such
series, submit Orders in such Auction in respect of shares of such series
covering in the aggregate more than the number of shares of such series
specified by the Auction Agent in response to BDs inquiry.
(5) a new sentence shall be added to the end of Section 2.2(d) of each
Broker-Dealer Agreement, to read as follows:
Nothing contained herein shall require BD to submit an Order for any
customer in any Auction.
You hereby acknowledge that, notwithstanding any provision of any
Broker-Dealer Agreement or the Basic Terms to the contrary, the Fund may (a)
upon five business days' notice to the Auction Agent and you, amend, alter or
repeal any of the provisions contained in any Broker-Dealer Agreement or the
Basic Terms, it being understood and agreed that you shall be deemed to have
accepted any such amendment, alteration or repeal if, after the expiration of
such five business day period, you submit an Order to the Auction Agent in
respect of the shares of MMP, MPS, MuniPreferred of the Fund or Funds to which
such amendment, alteration or repeal relates, and (b) upon two business days'
notice to the Auction Agent and you, exclude you from participating as a Broker-
Dealer in any particular Auction for any particular series of MMP, MPS or
MuniPreferred.
This Acceptance Letter shall be deemed to form part of each Broker-
Dealer Agreement and the Basic Terms.
Capitalized terms not defined in this Acceptance Letter shall have the
meanings ascribed to them in the relevant Broker-Dealer Agreement or the Basic
Terms, as the case may be.
5
<PAGE> 25
If the foregoing terms are acceptable to you, please so indicate in
the space provided below. This Acceptance Letter may be executed in any number
of counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
NUVEEN ADVISORY CORP.
By:
-------------------------------------------
Name: H. William Stabenow
Title: Vice President and Treasurer
Accepted by and Agreed to as of
the date first written above:
[Broker-Dealer]
By:
------------------
Name:
Title:
6
<PAGE> 26
EXHIBIT A TO ACCEPTANCE LETTER
------------------------------
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen New Jersey Quality Income Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Municipal Market Opportunity Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Ohio Quality Income Municipal Fund, Inc.
<PAGE> 27
EXHIBIT B TO ACCEPTANCE LETTER
------------------------------
[Form of Request Letter]
_____________________, 1993
FROM: All investment companies registered under the Investment Company Act
of 1940, as amended, for which Nuveen Advisor Corp. acts as investment
adviser and whose registration statements relating to shares of Money
Market Cumulative Preferred Stock or Municipal Auction Rate Cumulative
Preferred Stock or Shares have been declared effective by the
Securities and Exchange Commission on or prior to the date hereof.
TO: Nuveen Advisory Corp.
Bankers Trust Company
Ladies and Gentlemen:
Reference is made to (a) the respective Broker-Dealer Agreements,
previously executed by the Funds (as hereinafter defined) listed on Exhibit A
hereto, various Broker-Dealers and Bankers Trust Company (the "Broker-Dealer
Agreements"); (b) the respective Auction Agency Agreements previously executed
by the Funds listed on Exhibit A hereto and Bankers Trust Company (the "Auction
Agency Agreements"); (c) the Nuveen Broker-Dealer Agreement -- Basic Terms for
Acting as a Broker-Dealer dated December 14, 1993, receipt of which is hereby
acknowledged by you (the "Broker-Dealer Basic Terms"); and (d) the Nuveen
Auction Agency Agreement -- Basic Terms for Acting as Auction Agent dated
November 1, 1993, receipt of which is hereby acknowledged by you (the "Auction
Agency Basic Terms"). For purposes of this letter ("Request Letter"), (a)
"Fund" shall mean any closed-end investment company registered under the
Investment Company Act of 1940, as amended, for which Nuveen Advisory Corp. acts
as investment adviser; (b) except as otherwise provided below, the terms of each
Broker-Dealer Agreement shall be incorporated herein by reference, and each
Broker-Dealer listed on Exhibit B hereto shall be considered BD for all purposes
thereof, as if such Broker-Dealer were the Broker-Dealer signatory thereto in
the place of the actual Broker-Dealer signatory thereto; (c) the Broker-Dealer
Basic Terms are incorporated herein by reference, each Broker-Dealer listed on
Exhibit B hereto shall be considered BD for all purposes thereof, Bankers Trust
Company shall be considered the Auction Agent for all purposes thereof, and each
Fund referred to on Exhibit C hereto shall be considered a Fund for all purposes
thereof; (d) except as otherwise provided below, the terms of each Auction
Agency Agreement shall be incorporated herein by reference, and each Broker-
Dealer listed on Exhibit B shall be considered a Broker-Dealer for all purposes
thereof; and (e) the Auction Agency Basic Terms are incorporated herein by
reference, Bankers Trust Company shall be considered the
<PAGE> 28
Auction Agent for all purposes thereof, and each Fund referred to on Exhibit C
hereto shall be considered a Fund for all purposes thereof.
We hereby appoint the Broker-Dealers listed on Exhibit B hereto as
Broker-Dealers for the Money Market Cumulative Preferred Stock ("MMP") or
Municipal Auction Rate Cumulative Preferred Stock or Shares ("MPS" or
"MuniPreferred") of each series of each Fund listed on Exhibit A hereto or
referred to on Exhibit C hereto. Each such Broker-Dealer will act as BD in
respect of such series in accordance with (1) the terms of the Broker-Dealer
Agreement relating to such Fund, in the case of any Fund listed on Exhibit A
hereto, except as otherwise set forth in an Acceptance Letter relating to such
Broker-Dealer from Nuveen Advisory Corp, to such Broker-Dealer or (2) the
Broker-Dealer Basic Terms, in the case of any Fund referred to on Exhibit C
hereto; provided, however, that for purposes of any such Broker-Dealer Agreement
or the Broker-Dealer Basic Terms, and notwithstanding any provision of any
Broker-Dealer Agreement to the contrary, Bankers Trust Company's address,
telecopy number and telephone number for communications pursuant to such Broker-
Dealer Agreement or the Broker-Dealer Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
Bankers Trust Company agrees to act as Auction Agent with respect to
shares of each series of MMP, MPS or MuniPreferred of each Fund listed on
Exhibit A or referred to on Exhibit C hereto in accordance with (1) the terms of
the Auction Agency Agreement relating to the MMP, MPS or MuniPreferred of such
Fund, in the case of any Fund listed on Exhibit A hereto or (2) the Auction
Agency Basic Terms, in the case of any Fund referred to on Exhibit C hereto;
provided, however, that Section 2.2(c)(i) of each Auction Agency Agreement shall
be amended to read as follows:
(c)(i) The Auction Agent shall maintain a registry of the beneficial
owners of the shares of MMP, MPS or MuniPreferred who shall constitute
Existing Holders of shares of MMP, MPS or MuniPreferred for purposes of
Auctions and shall indicate thereon the identity of the respective Broker-
Dealer of each Existing Holder, if any, on whose behalf such Broker-Dealer
submitted the most recent Order in any Auction which resulted in such
Existing Holder continuing to hold or purchasing shares of MMP, MPS or
MuniPreferred. The Auction Agent shall keep such registry current and
accurate. The Fund shall provide or cause to be provided to the Auction
Agent at or prior to the Date of Original Issue of the shares of MMP, MPS
or MuniPreferred a list of the initial Existing Holders of the shares of
MMP, MPS or MuniPreferred, the number of shares purchased by each such
Existing Holder and the respective Broker-Dealer of each such
2
<PAGE> 29
Existing Holder or the affiliate thereof through which each such Existing
Holer purchased such shares. The Auction Agent shall advise the Fund in
writing whenever the number of Existing Holders is 500 or more. The
Auction Agent may rely upon, as conclusive evidence of the identities of
the Existing Holders of shares of MMP, MPS or MuniPreferred (A) such list,
(B) the results of Auctions, (C) notices from any Existing Holder, the
Agent Member of any Existing Holder or the Broker-Dealer of any Existing
Holder as described in the first sentence of Section 2.2(c)(iii) hereof and
(D) the results of any procedures approved by the Fund that have been
devised for the purpose of determining the identities of Existing Holders
in situations where shares of MMP, MPS or MuniPreferred may have been
transferred without compliance with any restrictions on the transfer
thereof set forth in the Auction Procedures.
This Request Letter shall be deemed to form part of each Auction
Agency Agreement and the Auction Agency Basic Terms.
Capitalized terms not defined in this Request Letter shall have the
meanings ascribed to them in the relevant Broker-Dealer Agreement, Broker-Dealer
Basic Terms, Auction Agency Agreement or Auction Agency Basic Terms, as the case
may be.
3
<PAGE> 30
If the foregoing terms are acceptable to you, please so indicate in
the space provided below. This Request Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
All investment companies registered under the
Investment Company Act of 1940, as amended, for
which Nuveen Advisory Corp. acts as investment
adviser and whose registration statements
relating to shares of Money Market Cumulative
Preferred Stock or Municipal Auction Rate
Cumulative Preferred Stock or Shares have been
declared effective by the Securities and
Exchange Commission on or prior to the date
hereof.
By:
-------------------------------------------
Name: H. William Stabenow
Title: Vice President and
Treasurer of each Fund
Accepted and Agreed to as of
the date first written above:
NUVEEN ADVISORY CORP. BANKERS TRUST COMPANY
By By:
------------------------- -------------------------------------------
Name: H. William Stabenow Name: Sandra Becker Whalen
Title: Vice President and Title: Assistant Treasurer
Treasurer
cc: [Broker-Dealers]
4
<PAGE> 31
EXHIBIT A TO REQUEST LETTER
---------------------------
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen New Jersey Quality Income Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Municipal Market Opportunity Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Ohio Quality Income Municipal Fund, Inc.
<PAGE> 32
EXHIBIT B TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE> 33
EXHIBIT C TO REQUEST LETTER
---------------------------
Each Fund not listed on Exhibit A whose registration statement
relating to shares of MMP, MPS or MuniPreferred has been declared effective by
the Securities and Exchange Commission on or prior to the date of the Request
Letter to which this Exhibit C is attached.
<PAGE> 34
EXHIBIT C TO ACCEPTANCE LETTER
------------------------------
[Form of Request Letter]
[Name(s) of Fund(s)]
__________________, 1993
Ladies and Gentlemen:
Reference is made to (a) the Nuveen Broker-Dealer Agreement -- Basic
Terms for Acting as a Broker-Dealer dated December 14, 1993, receipt of which is
hereby acknowledged by you (the "Broker-Dealer Basic Terms") and (b) the Nuveen
Auction Agency Agreement -- Basic Terms for Acting as Auction Agent dated
November 1, 1993, receipt of which is hereby acknowledged by you (the "Auction
Agency Basic Terms"). For purposes of this letter ("Request Letter"), (a)
"Fund" shall mean each undersigned closed-end investment company registered
under the Investment Company Act of 1940, as amended, for which Nuveen Advisory
Corp. acts as investment adviser; (b) the Broker-Dealer Basic Terms are
incorporated herein by reference, each Broker-Dealer listed on Exhibit A hereto
shall be considered BD for all purposes thereof, Bankers Trust Company shall be
considered the Auction Agent for all purposes thereof, and each Fund shall be
considered a Fund for all purposes thereof; and (c) the Auction Agency Basic
Terms are incorporated herein by reference, Bankers Trust Company shall be
considered the Auction Agent for all purposes thereof, and each Fund shall be
considered a Fund for all purposes thereof.
Each Fund hereby appoints the Broker-Dealers listed on Exhibit A
hereto as Broker-Dealers for each series of Money Market Cumulative Preferred
Stock ("MMP") or Municipal Auction Rate Cumulative Preferred Stock or Shares
("MPS" or "MuniPreferred") of such Fund. Each such Broker-Dealer will act as BD
in respect of each such series in accordance with the Broker-Dealer Basic Terms;
provided, however, that for purposes of the Broker-Dealer Basic Terms, Bankers
Trust Company's address, telecopy number and telephone number for communications
pursuant to the Broker-Dealer Basic Terms shall be as follows:
-------------------------------------
-------------------------------------
-------------------------------------
-------------------------------------
<PAGE> 35
Bankers Trust Company agrees to act as Auction Agent with respect to
shares of each series of MMP, MPS or MuniPreferred of each Fund in accordance
with the Auction Agency Basic Terms.
This Request Letter shall be deemed to form
part of the Auction Agency Basic Terms.
Capitalized terms not defined in this Request Letter shall have the
meanings ascribed to them in the Broker-Dealer Basic Terms or Auction Agency
Basic Terms, as the case may be.
If the foregoing terms are acceptable to you, please so indicate in
the space provided below. This Request Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.
[NAME(S) OF FUND(S)]
By:
----------------------------------
Name: H. William Stabenow
Title: Vice President and
Treasurer of each Fund
Accepted and Agreed to as of
the date first written above:
NUVEEN ADVISORY CORP. BANKERS TRUST COMPANY
By: By:
------------------------------ ----------------------------------
Name: H. William Stabenow Name: Sandra Becker Whalen
Title: Vice President and Title: Assistant Treasurer
Treasurer
cc: [Broker-Dealers listed on Exhibit A]
2
<PAGE> 36
EXHIBIT A TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE> 1
Exhibit 99.e
NUVEEN EXCHANGE-TRADED FUNDS
(except Nuveen Municipal Value Fund, Inc.)
Terms and Conditions of the Dividend Reinvestment Plan
This Dividend Reinvestment Plan for the Nuveen Exchange-Traded Funds advised by
Nuveen Advisory Corp. set forth on Exhibit A attached hereto (each, a "Fund")
provides for reinvestment of Fund distributions, consisting of income dividends,
returns of capital and capital gain distributions paid by the Fund, on behalf of
Fund shareholders electing to participate in the Plan ("Participants") by United
States Trust Company of New York ("U.S. Trust"), the Plan Agent, in accordance
with the following terms:
1. U.S. Trust will act as Agent for Participants and will open an account for
each Participant under the Dividend Reinvestment Plan in the same name as the
Participant's shares are registered, and will put into effect for each
Participant the distribution reinvestment option of the Plan as of the first
record date for a distribution to shareholders after U.S. Trust receives the
Participant's authorization so to do, either in writing duly executed by the
Participant or by telephone notice satisfying such reasonable requirements as
U.S. Trust and the Fund may agree. In the case of shareholders who hold shares
for others who are the beneficial owners, U.S. Trust will administer the Plan on
the basis of the number of Shares certified from time to time by the record
shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are
Participants.
2. Whenever the Fund declares a distribution payable in shares or cash at the
option of the shareholders, each Participant shall take such distribution
entirely in shares and U.S. Trust shall automatically receive such shares,
including fractions, for the Participant's account, except in circumstances
described in Paragraph 3 below. Except in such circumstances, the number of
additional shares to be credited to each Participant's account shall be
determined by dividing the dollar amount of the distribution payable on the
Participant's shares by the current market price per share on the payable date
for such distribution.
3. Should the net asset value per Fund share exceed the market price per share
on the day for which trades will settle on the payment date for such
distribution (the "Valuation Date") for a distribution payable in shares or in
cash at the option of the shareholder, or should the Fund declare a distribution
payable only in cash, each Participant shall take such distribution in cash and
U.S. Trust shall apply the amount of such distribution to the purchase on the
open market of shares of the Fund for the Participant's account. Such Plan
purchases shall be made as early as the Valuation Date, under the supervision of
the investment adviser. U.S. Trust shall complete such Plan purchases no more
than 30 days after the Valuation Date, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of
federal securities law.
<PAGE> 2
4. For the purpose of this Plan, the market price of the Fund's shares on a
particular date shall be the last sale price on the Exchange where it is traded
on that date, or if there is no sale on such Exchange on that date, then the
mean between the closing bid and asked quotations for such shares on such
Exchange on such date.
5. Open-market purchases provided for above may be made on any securities
exchange where the Fund's shares are traded, in the over-the-counter market or
in negotiated transactions and may be on such terms as to price, delivery and
otherwise as U.S. Trust shall determine. Participants' funds held uninvested by
U.S. Trust will not bear interest, and it is understood that, in any event, U.S.
Trust shall have no liability in connection with any inability to purchase
shares within 30 days after the Valuation Date as herein provided, or with the
timing of any purchases affected. U.S. Trust shall have no responsibility as to
the value of the Fund's shares acquired for Participants' accounts. U.S. Trust
may commingle all Participants' amounts to be used for open-market purchases of
Fund shares and the price per share allocable to each Participant in connection
with such purchases shall be the average price (including brokerage commissions
and other related costs) of all Fund shares purchased by U.S. Trust as Agent.
6. U.S. Trust may hold each Participant's shares acquired pursuant to this
Plan, together with the shares of other Participants, in non-certificated form
in U.S. Trust's name or that of its nominee. U.S. Trust will forward to each
Participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund.
7. U.S. Trust will confirm to each Participant each acquisition made for the
Participant's account as soon as practicable but not later than 60 days after
the date thereof. U.S. Trust will deliver to any Participant upon request,
without charge, a certificate or certificates for his full shares. Although a
Participant may from time to time have an undivided fractional interest
(computed to three decimal places) in a share of the Fund, and distributions on
fractional shares will be credited to the Participant's account, no certificates
for a fractional share will be issued. In the event of termination of a
Participant's account under the Plan, U.S. Trust will adjust for any such
undivided fractional interest at the market value of the Fund's shares at the
time of termination.
8. Any stock dividends or split shares distributed by the Fund on full and
fractional shares held by U.S. Trust for a Participant will be credited to the
Participant's account. In the event that the Fund makes available to its
shareholders rights to purchase additional shares or other securities, the
shares held for each Participant under the Plan will be added to other shares
held by the Participant in calculating the number of rights to be issued to that
Participant.
9. U.S. Trust's service fee for handling reinvestment of distributions
pursuant hereto will be paid by the Fund. Participants will be charged their pro
rated shares of brokerage commissions on all open market purchases.
2
<PAGE> 3
10. Each Participant may terminate his account under the Plan by
notifying U.S. Trust of his intent so to do, such notice to be provided either
in writing duly executed by the Participant or by telephone in accordance with
such reasonable requirements as U.S. Trust and the Fund may agree. Such
termination will be effective immediately if notice is received by U.S. Trust
not less than ten days prior to any distribution record date for the next
succeeding distribution; otherwise such termination will be effective shortly
after the investment of such distribution with respect to all subsequent
distributions. The Plan may be terminated by the Fund or U.S. Trust upon at
least 90 days prior notice. Upon any termination, U.S. Trust will cause a
certificate or certificates for the full shares held for each Participant under
the Plan and cash adjustment for any fraction to be delivered to the Participant
without charge. If any Participant elects in advance of such termination to have
U.S. Trust sell part or all of his shares, U.S. Trust is authorized to deduct
from the proceeds a $2.50 fee plus the brokerage commissions incurred for the
transaction.
11. These terms and conditions may be amended or supplemented by U.S.
Trust or the Fund at any time or times but, except when necessary or appropriate
to comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, U.S. Trust receives
notice of the termination of such Participant's account under the Plan in
accordance with the terms hereof. Any such amendment may include an appointment
by U.S. Trust in its place and stead of a successor Agent under these terms and
conditions. Upon any such appointment of any Agent for the purpose of receiving
distributions, the Fund will be authorized to pay to such successor Agent, for
each Participant's account, all dividends and distributions payable on shares of
the Fund held in the Participant's name or under the Plan for retention or
application by such successor Agent as provided in these terms and conditions.
12. U.S. Trust shall at all times act in good faith and agree to use its
best efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its negligence, bad faith or willful misconduct or that
of its employees.
13. These terms and conditions shall be governed by the laws of the
State of New York.
3
<PAGE> 4
Exhibit A
Nuveen Municipal Income Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Opportunity Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Premium Income Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Select Maturities Fund
Nuveen California Municipal Value Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen California Premium Income Municipal Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
4
<PAGE> 1
Exhibit 99.g.1
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 12th day of September, 1991, by and between NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC., a Minnesota corporation (the "Fund"), and
NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser").
WITNESSETH
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser for,
and to manage the investment and reinvestment of the assets of the Fund in
accordance with the Fund's investment objective and policies and
limitations, and to administer the Fund's affairs to the extent requested
by and subject to the supervision of the Board of Directors of the Fund for
the period and upon the terms herein set forth. The investment of the
Fund's assets shall be subject to the Fund's policies, restrictions and
limitations with respect to securities investments as set forth in the
Fund's then current registration statement under the Investment Company Act
of 1940, and all applicable laws and the regulations of the Securities and
Exchange Commission relating to the management of registered closed-end,
diversified management investment companies.
<PAGE> 2
The Adviser accepts such employment and agrees during such period to render
such services, to furnish office facilities and equipment and clerical,
bookkeeping and administrative services (other than such services, if any,
provided by the Fund's transfer agent) for the Fund, to permit any of its
officers or employees to serve without compensation as directors or officers of
the Fund if elected to such positions, and to assume the obligations herein set
forth for the compensation herein provided. The Adviser shall, for all purposes
herein provided, be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to act for
nor represent the Fund in any way, nor otherwise be deemed an agent of the Fund.
2. For the services and facilities described in Section 1, the Fund will pay
to the Adviser, at the end of each calendar month, an investment management fee
computed at an annual rate of .65 of 1% of the average daily net assets for the
first $500 million in net assets of the Fund, .625 of 1% of average daily net
assets in excess of $500 million but not more than $1 billion, and .60 of 1% of
average daily net assets in excess of $1 billion. For the month and year in
which this Agreement becomes effective, or terminates, there shall be an
appropriate proration on the basis of the number of days that the Agreement
shall have been in effect during the month and year, respectively. The services
of the Adviser to the Fund under this Agreement are not to be deemed exclusive,
and the Adviser shall be free to render similar services or other services to
others so long as its services hereunder are not impaired thereby.
2
<PAGE> 3
3. The Adviser shall arrange for officers or employees of the Adviser to
serve, without compensation from the Fund, as directors, officers or agents of
the Fund, if duly elected or appointed to such positions, and subject to their
individual consent and to any limitations imposed by law.
4. Subject to applicable statutes and regulations, it is understood that
officers, directors, or agents of the Fund are, or may be, interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as directors, officers or agents.
5. The Adviser shall not be liable for any loss sustained by reason of
the purchase, sale or retention of any security, whether or not such purchase,
sale or retention shall have been based upon the investigation and research made
by any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6. The Adviser currently manages other investment accounts and funds,
including those with investment objectives similar to the Fund, and reserves the
right to manage other such accounts and funds in the future. Securities
considered as investments for the Fund may also be appropriate for other
investment accounts and funds that may be managed by the Adviser.
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subject to applicable laws and regulations, the Adviser will attempt to
allocate equitably portfolio transactions among the portfolios of its other
investment accounts and funds purchasing securities whenever decisions are made
to purchase or sell securities by the Fund and one or more of such other
accounts or funds simultaneously. In making such allocations, the main factors
to be considered by the Adviser will be the respective investment objectives of
the Fund and such other accounts and funds, the relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment by the Fund and such other accounts and funds, the size of
investment commitments generally held by the Fund and such accounts and funds,
and the opinions of the persons responsible for recommending investments to the
Fund and such other accounts and funds.
7. This Agreement shall continue in effect until August 1, 1992, unless and
until terminated by either party as hereinafter provided, and shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved, at least annually, in the manner required by the
Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any
penalty by the Fund or by the Adviser upon sixty (60) days' written notice to
the other party. The Fund may effect termination by action of the Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund, accompanied by appropriate notice.
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This Agreement may be terminated, at any time, without the payment of any
penalty, by the Board of Directors of the Fund, or by vote of a majority of the
outstanding voting securities of the Fund, in the event that it shall have
been established by a court of competent jurisdiction that the Adviser, or any
officer or director of the Adviser, has taken any action which results in a
breach of the covenants of the Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation, described in
Section 2, earned prior to such termination.
8. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
9. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may designate for receipt of such notice.
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IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
by:
-----------------------
Vice President
Attest:
-------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
by:
-----------------------
Vice President
Attest:
-------------------------
Assistant Secretary
6
<PAGE> 1
Exhibit 99.g.2
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 5th day of May, 1998 by and between Nuveen Insured
Municipal Opportunity Fund, Inc., a Minnesota corporation (the "Fund"), and
Nuveen Advisory Corp., a Delaware corporation (the "Adviser");
WHEREAS, the parties hereto are the contracting parties under that certain
Investment Management Agreement (the "Agreement") pursuant to which the Adviser
furnishes investment management and other services to the Fund; and
WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner
required by the Investment Company Act of 1940; and
WHEREAS, the Board of Directors, at a meeting called for the purpose of
reviewing the Agreement, have approved the Agreement and its continuance until
August 1, 1999 in the manner required by the Investment Company Act of 1940.
NOW THEREFORE, in consideration of the mutual covenants contained in the
Agreement the parties hereto do hereby continue the Agreement in effect until
August 1, 1999 and ratify and confirm the Agreement in all respects.
NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
By:
---------------------------------
Vice President
ATTEST:
- ---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By:
---------------------------------
Vice President
ATTEST:
- ---------------------------
Assistant Secretary
<PAGE> 1
Exhibit 99.i
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR
INDEPENDENT DIRECTORS AND TRUSTEES
PREAMBLE
The Board of each Participating Fund hereby establishes this Deferred
Compensation Plan for Independent Directors and Trustees. The purpose of the
Plan is to allow the independent directors and trustees of the Participating
Funds to defer receipt of all, or a portion, of the compensation they earn for
their service to the Participating Funds in lieu of receiving current payments
of such compensation, and to treat any deferred amount as though an equivalent
dollar amount had been invested in shares of one or more Eligible Funds. Each
Board intends that the Plan shall be maintained at all times on an unfunded
basis for federal income tax purposes under the Internal Revenue Code of 1986,
as amended. The Plan is not covered by the Employee Retirement Income Security
Act of 1974, as amended.
SECTION 1 DEFINITIONS OF TERMS AND CONSTRUCTION
1.1 Definitions. The following terms as used in this Plan shall have
the following meanings:
(a) "Administrator" shall mean Nuveen or such other person or
persons as the Boards may from time to time designate, provided that no Eligible
Participant may serve as Administrator.
(b) "Beneficiary" shall mean such person or persons designated
pursuant to Section 4.4 hereof to receive benefits after the death of an
Eligible Participant.
(c) "Board" shall mean the Board of Directors or the Board of
Trustees of the respective Participating Funds.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute.
(e) "Compensation" shall mean the retainer and fees paid by
Participating Funds to an Eligible Participant for a Deferral Period prior to
reduction for Deferrals made under this Plan.
(f) "Deferral" shall mean the amount or amounts of an Eligible
Participant's Compensation deferred under the provisions of Section 3 of this
Plan.
(g) "Deferral Account" shall mean the account maintained to
reflect an Eligible Participant's Deferrals made pursuant to Section 3 herein
and any other credits or debits thereto.
(h) "Deferral Election" shall mean the Eligible Participant's
election to defer his or her compensation under Plan Section 3.1(a).
<PAGE> 2
(i) "Deferral Period" shall mean each calendar quarter during which
an Eligible Participant makes, or is entitled to make, Deferrals under Section 3
hereof.
(j) "Eligible Fund" means an open-end fund managed by Nuveen and
designated by the Boards as a fund that may be chosen by an Eligible Participant
as a fund in which the Eligible Participant's Deferral Account may be deemed to
be invested.
(k) "Eligible Participant" shall mean a member of a Board who is not
an "interested person" of a Participating Fund or of Nuveen, as such term is
defined under Section 2(a)(19) of the Investment Company Act of 1940, as amended
("1940 Act").
(l) "Hardship and Unforeseeable Emergency" shall mean a severe
financial hardship to an Eligible Participant resulting from a sudden and
unexpected illness or accident of the Eligible Participant or a dependent
(within the meaning of Section 152(a) of the Code), of the Eligible Participant,
loss of the Eligible Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances, arising from events beyond the
Eligible Participant's control. Whether circumstances constitute a Hardship and
Unforeseeable Emergency depends on the facts of each case, as determined by the
Administrator, but in any case does not include a hardship that may be relieved:
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by liquidation of the Eligible Participant's assets to the
extent that liquidation itself would not cause such a
severe financial hardship; or
(iii) by ceasing to defer receipt of any Compensation not yet
earned.
The term "Hardship and Unforeseeable Emergency" shall have the same meaning as
the term "unforeseeable emergency" as used in regulations issued under Section
457 of the Code, and shall be applied accordingly. The need to send an Eligible
Participant's child to college and the desire to purchase a home shall not
constitute a Hardship and Unforeseeable Emergency.
(n) "Net Asset Value" shall mean the per share value of an open-end
fund, as determined as set forth in such fund's registration statement under the
1940 Act, governing instruments and otherwise in accordance with law.
(o) "Nuveen" shall mean The John Nuveen Company and its affiliates.
(p) "Participating Fund" shall mean an open-end or closed-end fund
managed by Nuveen, whether existing at the time of adoption of the Plan or
established at a later date, designated by its Board as a fund compensation from
which may be deferred by an Eligible Participant. Participating Funds shall be
listed on Exhibit A to the Plan, which shall be revised from time to time by the
Administrator, provided that failure to list a Participating Fund on Exhibit A
shall not affect its status as a Participating Fund.
(q) "Plan" shall mean this Deferred Compensation Plan for Independent
Directors and Trustees, as amended from time to time.
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<PAGE> 3
(r) "Separation from Service" shall mean the date on which an
Eligible Participant ceases to be a member of a Board.
(s) "Valuation Date" shall mean the last business day of each
calendar quarter and any other day upon which Nuveen makes a valuation of the
Deferral Account.
1.2 Plurals and Gender. Where appearing in this Plan the singular shall
include the plural and the masculine shall include the feminine, and vice versa,
unless the context clearly indicates a different meaning.
1.3 Headings. The headings and subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
1.4 Separate Agreement. This Plan shall be construed as a separate
agreement between each Eligible Participant and each of the Participating Funds.
SECTION 2 PERIOD DURING WHICH DEFERRALS ARE PERMITTED
2.1 Commencement of Deferrals. An Eligible Participant may elect, on a
form provided by, and submitted to, the Administrator, to commence Deferrals
under Section 3 hereof for the period beginning on the first day of the first
quarter beginning on or after the date such form is submitted to the
Administrator.
2.2 Termination of Deferrals. An Eligible Participant shall not be
eligible for Deferral of additional Compensation after the earlier of the
following dates:
(a) The date he cancels his election pursuant to Section 3.3(b);
(b) his Separation from Service; or
(c) the effective date of the termination of this Plan.
SECTION 3 DEFERRALS
3.1 Deferral Elections.
(a) Subject to Section 3.1(d), an Eligible Participant participating
in the Plan may elect to defer receipt of all, or a specified dollar amount or
percentage of the Compensation (including fees for attending meetings) earned
per quarter by such Eligible Participant for serving as a member of the Board of
each Participating Fund or as a member of any committee (or subcommittee of such
committee) of the Board of a Participating Fund of which such Eligible
Participant from time to time may be a member. Reimbursement of expenses of
attending meetings of the Board, committees of the Board or subcommittees of
such committees may not be deferred.
(b) Deferrals described in Section 3.1(a) above shall be withheld,
based upon the percentage or dollar amount elected, from each payment of
Compensation which the Eligible
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<PAGE> 4
Participant would otherwise have been entitled but for his election in
Section 3.1(a) below. If a dollar amount per quarter is elected, 100% of each
payment of Compensation in each quarter will be deferred until such amount is
reached.
(c) Each Participating Fund shall establish a book entry account
("Deferral Account") to which will be credited an amount equal to the Eligible
Participant's Deferrals under this Plan. Any Compensation earned by an Eligible
Participant which he has elected to defer pursuant to the Plan will be credited
to such Eligible Participant's Deferral Account on the date such Compensation
otherwise would have been payable to such Eligible Participant. The Deferral
Account shall be debited to reflect any distributions from such Account. Such
debits shall be allocated to the Deferral Account as of the date such
distributions are made.
(d) Each amount that an Eligible Participant elects to defer shall be
allocated among all Participating Funds for which the Eligible Participant
serves as a director or trustee in the same proportion that the Eligible
Participant's Compensation would have been allocated if it had not been
deferred, and all subsequent earnings credited, and all distributions, losses
and expenses charged, to the Eligible Participant's Deferral Account, shall be
allocated among the Participating Funds in the same manner. The obligations of
the Participating Funds to pay their respective allocated shares of an Eligible
Participant's Deferral Account shall be several and not joint.
3.2 Valuation of Deferral Account.
(a) Each Board shall from time to time designate one or more open-end
funds managed by Nuveen as Eligible Funds. An Eligible Participant, on his
deferral election form, shall have the right to select from the then-current
list of Eligible Funds one or more, but not more than three, funds in which his
Deferral Account shall be deemed invested as set forth in this Section 3
("Designated Funds"). An Eligible Participant may designate an Eligible Fund
even if he is not a member of the Board of that Eligible Fund. Except as
provided below, amounts credited to an Eligible Participant's Deferral Account
shall be treated as though such amounts had been invested and reinvested in
shares of the Eligible Participant's Designated Funds, initially calculated
as follows:
(i) the product of
(x) the amount of such Deferrals and
(y) the percentage of such Deferrals to be deemed invested in
that Designated Fund, divided by
(ii) the Designated Fund's Net Asset Value per share as of the date
such amount is so credited.
(b) As of the last day of each calendar year, by written election
delivered to the Administrator not less than 10 business days prior to the end
of such year, each Eligible Participant may direct that the Designated Funds in
which his or her Deferral Account is deemed invested be changed. Any election to
change such investment direction shall indicate the dollar
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<PAGE> 5
amount or percentage of the balance in such Deferral Account (determined based
on the then current Net Asset Value of each Designated Fund in which the
Deferral Account is deemed invested immediately prior to giving effect to such
investment change) to be invested in each such Designated Fund. The number of
shares of each Designated Fund to be deemed held in the Eligible Participant's
Deferral Account following such investment change shall be calculated as
follows:
(i) the product of
(x) the balance in such Deferral Account and
(y) the percentage of such balance to be deemed invested in that
Designated Fund divided by
(ii) the Designated Fund's Net Asset Value per share as of the last
day of such calendar year.
(c) If a Designated Fund shall pay a stock dividend on, or split,
combine, reclassify or substitute other securities by merger, consolidation or
otherwise for its outstanding shares, the Eligible Participant's Deferral
Account shall be adjusted as though shares of such Designated Fund were actually
held by the Deferral Account in order to preserve rights substantially
proportionate to the rights deemed held immediately prior to such event.
(d) On each payment date of dividends or capital gains distributions
declared on shares of any Designated Fund in which an Eligible Participant's
Deferral Account is deemed invested, the Deferral Account will be credited with
book adjustments representing all dividends or capital gains distributions which
would have been realized had such account been invested in shares of such
Designated Fund and such dividend or capital gains distribution had been
received and reinvested.
(e) The value of a Deferral Account on any Valuation Date shall
be the sum of (i) the number of shares of each Designated Fund deemed to be held
in the Deferral Account by the preceding paragraphs, multiplied by (ii) the Net
Asset Value per share of such Designated Fund on the Valuation Date.
(f) On each date upon which a distribution of less than the entire
balance is to be charged to an Eligible Participant's Deferral Account, the
amount of such distribution shall, unless the Eligible Participant otherwise
specifies in accordance with rules established by the Administrator, be
allocated among all of the Designated Funds in which the Deferral Account is
deemed to be invested in proportion to the aggregate value of the number of
deemed shares of each such Designated Fund, and the number of deemed shares of
each such Designated Fund shall then be reduced by the portion of the
distribution allocated to such Designated Fund divided by the Net Asset Value
per share of such Designated Fund on the date on which the distribution is
charged.
(g) Unless and until each Board otherwise determines, the Eligible
Funds shall include only one or more open-end funds managed by Nuveen. Open-end
funds that cease to be
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<PAGE> 6
managed by Nuveen shall automatically cease to be Eligible Funds, unless one of
the Boards otherwise determines with respect to Eligible Participants that are
members of such Board. Either Board may at any time remove any open-end fund
from the list of Eligible Funds, or may add any open-end fund (whether or not
managed by Nuveen), for Eligible Participants who are members of that Board. If
an Eligible Fund is removed from the list of Eligible Funds for any reason then
no further deferrals shall be deemed invested in such Fund and, unless the Board
otherwise determines, the Administrator shall give each Eligible Participant
whose Deferral Account is deemed to be invested in such Eligible Fund a
reasonable period to submit a new designation, and any Eligible Participant who
fails to submit a new designation shall be subject to the provisions of Section
3.2(h)(iii) below.
(h) As of each Valuation Date, income, gain and loss equivalents
(determined as if the Deferral Account is invested in the manner set forth under
Section 3.2(a), above) attributable to the period following the next preceding
Valuation Date shall be credited to and/or deducted from the Eligible
Participant's Deferral Account. Except as provided below, the Eligible
Participant's Deferral Account shall receive a return in accordance with his
investment designations, provided such designations conform to the provisions of
this Section. If:
(i) the Eligible Participant does not furnish the Administrator
with a written designation,
(ii) the written designation from the Eligible Participant is
unclear, or
(iii) less than all of the Eligible Participant's Deferral Account
is covered by such written designation,
then the Eligible Participant's Deferral Account shall receive no return until
such time as the Eligible Participant shall provide the Administrator with
instructions.
3.3 Manner of Electing Deferral.
(a) An Eligible Participant shall elect to participate in this
Plan and defer his Compensation by completing, signing and filing with the
Administrator a Notice of Election to Defer Compensation (the "Notice") in the
form attached to this Plan. The Notice shall include:
(i) the amount of Compensation to be deferred;
(ii) the time at which the distribution of such amount will
commence, which may be:
(A) a specified date selected by the Participant not prior
to the third anniversary of such election,
(B) the first day of the month, quarter or year following
the Eligible Participant's Separation from Service, or
(C) the earlier of (A) or (B);
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<PAGE> 7
provided that the distribution of an Eligible Participant's
Deferral Account shall in any event commence no later than
the fifth anniversary of that Eligible Participant's
Separation from Service.
(iii) the manner of distribution of such deferred compensation
(i.e., in a lump sum or the number of annual or quarterly
installments);
(iv) the Designated Fund or Designated Funds in which such
deferrals are to be deemed invested and in what amounts or
percentages; and
(v) any beneficiary designated pursuant to Section 4.4 of this
Plan.
(b) All Deferral Elections shall remain in effect until the
earliest of: (i) the date on which the Deferral Election is canceled or
modified, (ii) the date of the Eligible Participant's Separation from Service,
or (iii) the date on which the Eligible Participant begins to receive
distributions from his or her Deferral Account. An Eligible Participant may
modify the amount of his Deferral Election and/or the Designated Fund(s)
specified in the Deferral Election, on a prospective basis by submitting an
amended Notice to the Administrator. Such change will be effective as of the
first day of the year following the date such revision is submitted to the
Administrator. An Eligible Participant may cancel his Deferral Election on a
prospective basis by submitting an amended Notice to the Administrator, which
cancellation of the Deferral Election shall be effective for all Compensation
for calendar quarters beginning or for meetings held after such notice is
received, subject to any delay necessary for administrative processing. An
Eligible Participant who cancels his Deferral Election may thereafter make a new
Deferral Election as of the first day of any subsequent year pursuant to Section
3.3(a), but all new deferrals shall be credited to the same Deferral Account,
and the time and manner of distribution of the Deferral Account, the manner in
which the Deferral Election is deemed invested, and the identity of the Eligible
Participant's Beneficiary, shall remain the same unless changed for the entire
Deferral Account as otherwise provided herein.
3.4 Time of Electing Deferral. An Eligible Participant's initial Notice
under Section 3.3(a) shall be filed with the Administrator no later than 10
business days prior to the last business day of the calendar quarter preceding
the quarter for which the Deferral Election is made. An Eligible Participant's
Notice under Section 3.3(b) modifying the amount of his Deferral Election, or a
Notice under Section 3.3(a) making a Deferral Election after a prior Deferral
Election has been cancelled, shall be filed with the Administrator no later than
10 business days prior to the last business day of the year preceding the year
for which the modified or new Deferral Election is effective.
SECTION 4 DISTRIBUTIONS FROM DEFERRAL ACCOUNT
4.1 Eligible Participant's Election. An Eligible Participant shall elect
at the time of his Deferral Election the time at which his distribution is to
commence, and the form of distribution, which may be either:
(a) lump sum; or
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(b) annual or quarterly installments over a period of five (5)
years, with each installment being equal to the balance in the Deferral Account
immediately prior to payment of the installment divided by the number of
installments remaining to be paid (including the installment the amount of which
is being determined).
(c) If an Eligible Participant fails to designate the manner of
distribution to apply to his Deferral Account, such Deferral Account shall be
distributed in a lump sum on the first day of the month following the Eligible
Participant's Separation from Service.
(d) An Eligible Participant may elect to change his distribution
election with respect to his Deferral Account by filing an amended Notice with
the Administrator not less than six months prior to the earlier of the date on
which distribution was scheduled to begin under the original Notice or the date
on which it is scheduled to begin under the amended Notice. The Eligible
Participant's new distribution election shall be void and the Eligible
Participant's original election shall be reinstated if the date on which
distribution was originally scheduled to begin occurs (by reason of Separation
from Service or otherwise) within six months after the date on which the changed
distribution election was filed with the Administrator.
4.2 Death Prior to Complete Distribution of Deferral Account. If an
Eligible Participant dies prior to the commencement of the distribution of the
amounts credited to his Deferral Account, the balance of such Account shall be
distributed to his Beneficiary in a lump sum as soon as practicable after the
Eligible Participant's death. If an Eligible Participant dies after the
commencement of such distributions, but prior to the complete distribution of
his Deferral Account, the balance of the amounts credited to his Deferral
Account shall be distributed to his Beneficiary over the remaining period during
which such amounts were otherwise distributable to the Eligible Participant
under Section 4.1 hereof. Notwithstanding the above, the Administrator, in its
sole discretion, may accelerate the distribution of the Deferral Account.
4.3 Hardship and Unforeseeable Emergency. An Eligible Participant may
request at any time a withdrawal of part or all of the amount then credited to
his Deferral Account on account of Hardship and Unforeseeable Emergency by
submitting a written request to the Administrator accompanied by evidence that
his financial condition constitutes a Hardship and Unforeseeable Emergency. The
Administrator shall review the Eligible Participant's request and determine the
extent, if any, to which such request is justified. Any such withdrawal shall be
limited to an amount reasonably necessary to meet the Hardship and Unforeseeable
Emergency, but not more than the amount of the Eligible Participant's Deferral
Account.
4.4 Designation of Beneficiary. For the purposes of Section 4.2 hereof,
the Eligible Participant's Beneficiary shall be the person or persons so
designated by the Eligible Participant in a written instrument submitted to the
Administrator. Subject to rules established by the Administrator, an Eligible
Participant may designate multiple or alternative Beneficiaries, and may change
his Beneficiary at any time without the consent of any prior Beneficiary;
provided that no change of a Beneficiary shall be effective unless and until
actually received, in proper form, by the Administrator during the Eligible
Participant's life. The Administrator's determination of the person eligible to
receive the Deferral Account of a deceased Eligible Participant, if made in good
faith, shall be final and binding on all parties. If an Eligible Participant
fails to properly designate
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<PAGE> 9
a Beneficiary or if his Beneficiary predeceases him, his beneficiary shall be
his estate.
4.5 Domestic Relations Orders. If any judgment, decree or order (including
approval of a property settlement agreement) which (i) relates to the provision
of child support, alimony payments, or marital property rights to a spouse,
former spouse, child, or other dependent of an Eligible Participant, and
(ii) is made pursuant to a state or foreign domestic relations law (including a
community property law) directs assignment of a portion of an Eligible
Participant's Deferral Account to a spouse, former spouse, child, or other
dependent of an Eligible Participant, such amount may be paid in a lump-sum cash
payment at the request of the person to whom assignment is directed to be made
as soon as administratively possible after the Administrator's receipt of the
signed order, as long as the order (or a written direction to the Administrator
of how to interpret the order, signed by the Eligible Participant and the person
to whom the order directs assignment) clearly specifies the amount of the
Deferral Account assigned and the timing of payment to the person to whom the
assignment is made.
SECTION 5 AMENDMENTS AND TERMINATION
5.1 Amendments. The Boards reserve the right to amend, in whole or in
part, and in any manner, any or all of the provisions of this Plan by action of
both Boards, except that no amendment shall reduce the balance in any Eligible
Participant's Deferral Account, or (unless necessary to comply with the 1940 Act
or other applicable law) significantly delay the time at which such balance is
payable without the consent of the Eligible Participant affected.
5.2 Termination. Each Board may terminate this Plan at any time by
action of the Board and the Eligible Participants' Deferral Accounts shall
become payable as of the Valuation Date next following the effective date of the
termination of this Plan. If one Board elects to terminate the Plan with respect
to the Eligible Participants who are members of such Board, the Plan shall
remain in effect with respect to Eligible Participants who are members of the
other Board.
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SECTION 6 MISCELLANEOUS
6.1 Rights of Creditors.
(a) This Plan is unfunded. Neither an Eligible Participant
nor any other person shall have any interest in any specific asset or
assets of a Participating Fund by reason of any Deferral Account hereunder, nor
any rights to receive distribution of his Deferral Account except and to the
extent expressly provided hereunder. Except for money market funds complying
with rule 2a-7 under the 1940 Act, a Participating Fund shall not be required to
purchase, hold or dispose of any investments pursuant to this Plan. If in order
to cover its obligations hereunder a Participating Fund purchases any
investments, the same shall continue for all purposes to be a part of the
general assets and property of that Participating Fund subject to the claims of
its general creditors and no person other than the Participating Fund shall by
virtue of the provisions of this Plan have any interest in such assets other
than an interest as a general creditor of the Participating Fund.
(b) The rights of an Eligible Participant and the
Beneficiaries to the amounts held in the Deferral Account are unsecured and such
amounts shall be subject to the claims of the creditors of a Participating Fund.
With respect to the payment of amounts held under the Deferral Account, the
Eligible Participant and his Beneficiaries have the status of unsecured
creditors of that Participating Fund. This Plan is executed on behalf of each
Participating Fund by an officer of that Participating Fund as such and not
individually. Any obligation of a Participating Fund hereunder shall be an
unsecured obligation of that Participating Fund and not of any other person.
6.2 Agents. Each Participating Fund may employ agents and provide for
such clerical, legal, actuarial, accounting, advisory or other services as it
deems necessary to perform its duties under this Plan. Each Participating Fund
shall bear the cost of such services and all other expenses it incurs in
connection with the administration of this Plan.
6.3 Incapacity. If the Administrator shall receive evidence
satisfactory to it that an Eligible Participant or any Beneficiary entitled to
receive any benefit under the Plan is, at the time when such benefit becomes
payable, a minor, or is physically or mentally incompetent to receive such
benefit and to give a valid release therefor, and that another person or an
institution is then maintaining or has custody of the Eligible Participant or
Beneficiary and that no guardian, committee or other representative of the
estate of the Eligible Participant or Beneficiary shall have been duly
appointed, a Participating Fund may make payment of such benefit otherwise
payable to the Eligible Participant or Beneficiary to such other person or
institution, including a custodian under a Uniform Transfers to Minors Act or
corresponding legislation (who shall be an adult, a guardian of the minor or a
trust company), and the release of such other person or institution shall be a
valid and complete discharge for the payment of such benefit.
6.4 Statement of Deferral Account. The Administrator will furnish each
Eligible Participant with a statement setting forth the value of such Eligible
Participant's Deferral Account as of the end of each calendar year and all
credits to and payments from such Deferral Account during such year. Such
statements will be furnished no later than 60 days after the end of each
calendar year.
10
<PAGE> 11
6.5 Governing Law. This Plan shall be governed by the laws of
the State of Illinois.
6.6 Non-guarantee of Status. Nothing contained in this Plan shall
be construed as a contract or guarantee of the right of an Eligible Participant
to be, or remain as, a director or a trustee of a fund, or to receive any, or
any particular rate of, Compensation.
6.7 Counsel. Each Board may consult with legal counsel with respect
to the meaning or construction of this Plan, its obligations or duties hereunder
or with respect to any action or proceeding or any question of law, and it shall
be fully protected with respect to any action taken or omitted by it in good
faith pursuant to the advice of legal counsel.
6.8 Interests Not Transferable. An Eligible Participant's and
Beneficiaries' interests in the Deferral Account may not be anticipated, sold,
encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor
become subject to execution, garnishment or attachment and any attempt to do so
by any person shall be deemed null and void; no Participating Fund shall
recognize the rights of any party under this Plan except those of the Eligible
Participant or his Beneficiary; provided that this Section 6.8 shall not
preclude a Participating Fund from offsetting any amount payable to an Eligible
Participant hereunder by any amount owed by such Eligible Participant to that
Participating Fund or to Nuveen.
6.9 Entire Agreement. This Plan contains the entire understanding
between each Participating Fund and the Eligible Participants with respect to
the payment of non-qualified deferred compensation by a Participating Fund to
the Eligible Participants.
6.10 Powers of Administrator. In addition to other powers
specifically set forth herein, the Administrator shall have all power and
authority necessary or convenient for the administration of this Plan, including
without limitation the authority to:
(i) construe and interpret the Plan, and resolve any inconsistency
or ambiguity with respect to any of its terms;
(ii) decide all questions of eligibility and determine the amount,
manner and time of payment of any benefits hereunder;
(iii) prescribe rules and procedures to be followed by Eligible
Participants or Beneficiaries in making any election or taking
any action provided for herein, which rules and procedures may
alter any provision of the Plan that is administrative or
ministerial in nature without the necessity for an amendment;
(iv) allocate Deferral Accounts among the Eligible Funds;
(v) maintain all the necessary records for the administration of
the Plan;
(vi) delegate any of it duties or powers under the Plan to any other
person acting under its supervision; and
(vi) do all other acts which the Administrator deems necessary or
proper to accomplish
11
<PAGE> 12
and implement its responsibilities under the Plan.
Any rule or procedure adopted by the Administrator, or any decision, ruling or
determination made by the Administrator, in good faith shall be final, binding
and conclusive on all Participating Funds, Eligible Participants, Beneficiaries
and all persons claiming through them. The authority of the Administrator may be
exercised by such person as the Chief Executive Officer of the Administrator may
designate or, in the absence of a specific designation, by those officers and
employees of the Administrator whose normal duties include payment of
compensation to independent directors and trustees.
6.11 Participant Litigation. In any action or proceeding regarding the
Plan Eligible Participants or their Beneficiaries or any other persons having or
claiming to have an interest in this Plan shall not be necessary parties and
shall not be entitled to any notice or process. Any final judgment which is not
appealed or appealable and may be entered in any such action or proceeding shall
be binding and conclusive on the parties hereto and all persons having or
claiming to have any interest in this Plan. To the extent permitted by law, if a
legal action is begun against either Board, any Participating Fund, the
Administrator, or any of their respective officers, directors, trustees,
employees or agents (an "indemnified party"), by or on behalf of any person and
such action results adversely to such person or if a legal action arises because
of conflicting claims to an Eligible Participant's or other person's benefits,
the costs to the indemnified party of defending the action will be charged to
the amounts, if any, which were involved in the action or were payable to the
Eligible Participant or other person concerned. To the extent permitted by
applicable law, acceptance of participation in this Plan shall constitute a
release of each of the indemnified parties from any and all liability and
obligation not involving willful misconduct or gross neglect.
6.12 Successors and Assigns. This Plan shall be binding upon, and
shall inure to the benefit of, the Participating Funds and their successors and
assigns and to the Eligible Participants and their heirs, executors,
administrators and personal representatives.
6.13 Severability. In the event any one or more provisions of this
Plan are held to be invalid or unenforceable, such illegality or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof and such other provisions shall remain in full force and
effect unaffected by such invalidity or unenforceability.
12
<PAGE> 13
IN WITNESS WHEREOF, each Participating Fund has caused this Plan to be executed
by one of its duly authorized officers, this 30th day of October, 1998.
By: -------------------------
Name: Alan G. Berkshire
Title: Vice President
<TABLE>
<S> <C>
Nuveen Municipal Bond Fund Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Municipal Value Fund, Inc. Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Insured Municipal Opportunity Fund, Inc. Nuveen Florida Quality Income Municipal Fund
Nuveen Premium Income Municipal Fund, Inc. Nuveen Tax-Exempt Money Market Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc. Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen Quality Income Municipal Fund, Inc. Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc. Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc. Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 2, Inc. Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 4, Inc. Nuveen Select Tax-Free Income Portfolio
Nuveen Insured Quality Municipal Fund, Inc. Nuveen Select Tax-Free Income Portfolio 2
Nuveen Insured Municipal Bond Fund Nuveen Select Tax-Free Income Portfolio 3
Nuveen Investment Quality Municipal Fund, Inc. Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured Premium Income Municipal Fund 2 Nuveen Insured New York Select Tax-Free Income Portfolio
Nuveen Select Quality Municipal Fund, Inc. Nuveen Growth and Income Stock Fund
Nuveen Flagship Ohio Municipal Bond Fund Nuveen Balanced Stock and Bond Fund
Nuveen New York Quality Income Municipal Fund, Inc. Nuveen Balanced Municipal and Stock Fund
Nuveen New York Select Quality Municipal Fund, Inc. Nuveen Rittenhouse Growth Fund
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen New Jersey Investment Quality Municipal
Fund, Inc.
Nuveen New York Investment Quality Municipal Fund,
Inc.
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Pennsylvania Investment Quality Municipal
Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Pennsylvania Premium Income Fund 2
Nuveen Flagship Michigan Municipal Bond Fund
</TABLE>
- ----------------------------------
Witness
13
<PAGE> 14
Exhibit A
NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN
FOR INDEPENDENT DIRECTORS AND TRUSTEES
PARTICIPATING FUNDS
(For Directors and Trustees of Funds managed by Nuveen Advisory Corp.)
Nuveen Municipal Bond Fund
Nuveen Municipal Value Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Insured Municipal Bond Fund
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Pennsylvania Premium Income Fund 2
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Tax-Exempt Money Market Fund, Inc.
<PAGE> 15
Exhibit A
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen Insured California Premium Income Fund 2, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
(For Trustees of Funds managed by Nuveen Institutional Advisory Corp.)
Nuveen Select Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 2
Nuveen Select Tax-Free Income Portfolio 3
Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured New York Select Tax-Free Income Portfolio
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen Rittenhouse Growth Fund
As of January 1, 1999
15
<PAGE> 16
Exhibit B
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
ELIGIBLE FUNDS
You may choose from the following Eligible Funds:
Nuveen Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Flagship Utility Income Fund
Nuveen Balanced Stock and Bond Fund
Nuveen European Value Fund
Nuveen Growth and Income Stock Fund
Nuveen Rittenhouse Growth Fund
As of January 1, 1999
<PAGE> 17
Exhibit C
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
DEFERRAL ELECTION FORM
I. Deferral of Compensation
You may elect to defer up to 100 percent of your compensation from Participating
Funds, in fixed dollar or whole percentage amounts, to be credited to your
Deferral Account under the Plan. The Deferral Account will be further credited
with a return on the Deferral Account balance as provided under the Plan.
Starting _____________, ____ and for each quarter thereafter (unless
subsequently amended by completion of a new election form), I hereby elect that
the following amount of my compensation from Participating Funds be deferred
under the Plan:
$_______ or _______%
II. Election of Deferral Period
You are required under the Plan to elect the date to which Deferrals (plus
applicable investment return) are to be deferred. Your election shall specify
that distribution be deferred to (a) a specific date (which must be at least
three years after the date of this election), (b) the beginning of the month,
quarter or year following your Separation from Service, or (c) the earlier of a
specific date or the beginning of the month, quarter or year following your
Separation from Service; provided that distribution from your Deferral Account
must in any event begin no later than the fifth anniversary of your Separation
from Service
I hereby make the following elections regarding my Deferrals under the Plan
(choose one):
[ ] The compensation I elect to defer under the Plan is to be
deferred until ___________________________ (specify a date).
[ ] The compensation I elect to defer under the Plan is to be
deferred until the [ ] first day of the month [ ] first day of the calendar
year [ ] fifth anniversary (choose one) following my Separation from
Service.
[ ] The compensation I elect to defer under the Plan is to be
deferred until the
[ ] earlier of (i) ____________________ (specify a date) or (ii) the
beginning of the first [ ] month [ ] quarter [ ] year (choose one) following my
Separation from Service.
<PAGE> 18
III. Form of Distribution
You are required to elect the form of distribution, which may be either (a) a
lump sum or (b) equal annual installments over five years (may be paid to you
quarterly).
My distributions from the Plan are to be in the form of
(choose one):
[ ] a lump sum; or
[ ] annual installments over five (5)
years; or
[ ] quarterly installments over five (5)
years.
I understand that the amounts held in the Deferral Account shall remain the
general assets of the Fund in which those amounts are held and that, with
respect to the payment of such amounts, I am merely a general unsecured creditor
of that Fund. I may not sell, encumber, pledge, assign or otherwise alienate the
amounts held under the Deferral Account.
I hereby agree that the terms of the Plan are incorporated herein and are made a
part hereof.
IV. Decline or Terminate Participation
[ ] I do not wish to participate in the Plan, or if currently participating, I
wish to terminate my participation at this time.
PARTICIPANT
Date
Accepted by Administrator:
- -----------------------------
Administrator Date
18
<PAGE> 19
Exhibit D
NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN
FOR INDEPENDENT DIRECTORS AND TRUSTEES
RETURN DESIGNATION FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the
"Plan"), I hereby elect that the return on my Deferral Account under the Plan be
computed as if the Deferral Account was invested in the following Eligible
Fund(s) (selected from the list of Eligible Funds attached):
TRANSFER ATTRIBUTION OF MY EXISTING DEFERRAL ACCOUNT BALANCE:
Percentage or Dollar Amount of Deferral
Name of Eligible Fund Account Balance to be Transferred to Fund
$------ -----%
$------ -----%
$------ -----%
Total $------ -----%
ATTRIBUTE MY NEW DEFERRALS:
Percentage or Dollar Amount of New
Name of Eligible Fund Deferrals to be Attributed to Fund
$------ -----%
$------ -----%
$------ -----%
Total $------ -----%
total must equal 100%
I realize that the designation included on this Form shall be effective until I
have filed another valid Return Designation Form with the Administrator. If
(a) I make no written designation, (b) the written designation is unclear or
(c) less than 100% of my Deferral Account is covered by this election, then my
Deferral Account shall not be credited with any returns until I provide the
<PAGE> 20
Administrator with appropriate instructions. This form must be delivered to the
Administrator at least 5 business days before the end of the calendar quarter to
be effective the following quarter.
PARTICIPANT
Date
Accepted by Administrator:
- -------------------------------------------
Administrator Date
20
<PAGE> 21
Exhibit E
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
BENEFICIARY DESIGNATION FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the
"Plan"), I hereby make the following beneficiary designations:
I. PRIMARY BENEFICIARY
I hereby select the following as my primary Beneficiary(ies) to receive at my
death, in accordance with the Plan, the amounts held in my Deferral Account
under the Plan. In the event I am survived by more than one primary Beneficiary,
such primary Beneficiaries shall share equally in the distribution of my
Deferral Account unless I indicate otherwise on an attachment to this form:
[ ] My estate.
The trustee or trustees of
(provide name and date of trust)
-----------------------------------------------
The following individuals:
a.
Name (Relationship)
Address
/
City State Zip SSN
b.
Name (Relationship)
<PAGE> 22
Address
City State Zip SSN
Please include an attachment to this form if you wish to select additional
primary Beneficiaries.
<PAGE> 23
II. SECONDARY BENEFICIARY
In the event I am not survived by any primary Beneficiary, I hereby appoint the
following as secondary Beneficiary(ies) to receive at my death, in accordance
with the Plan, the amounts held in my deferral account under the Plan. In the
event I am survived by more than one secondary Beneficiary, such secondary
Beneficiaries shall share equally in the distribution of my Deferral Account
unless I indicate otherwise on an attachment to this form:
[ ] My estate.
The trustee or trustees of _____________________________________________________
(provide name and date of trust)
The following individuals:
a.
Name (Relationship)
Address
/
City State Zip SSN
b.
Name (Relationship)
Address
/
City State Zip SSN
Please include an attachment to this form if you wish to select additional
secondary Beneficiaries.
I understand that if I am not survived by any primary or secondary Beneficiary,
my Beneficiary shall be as set forth under the Plan.
Date:
--------------------- PARTICIPANT
Accepted by Administrator:
- ------------------------------------
Administrator Date
<PAGE> 24
Exhibit F
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
HARDSHIP WITHDRAWAL FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the
"Plan"), I may request at any time a Hardship and Unforeseeable Emergency
withdrawal (an "Emergency Withdrawal") of part or all of the amount then
credited to my Deferral Account. The amount of the Emergency Withdrawal shall be
limited to the amount necessary to meet the Emergency.
I request a hardship withdrawal of $__________________ for the following
reason:
[ ] My own or a dependent's sudden and unexpected illness.
[ ] The loss of my property due to casualty.
[ ] Other (explain):
In addition, I certify that the Emergency may not be relieved through
(a) reimbursement or compensation by insurance or otherwise; (b) liquidation of
my assets to the extent that liquidation itself would not cause an Emergency, or
(c) ceasing to defer receipt of any compensation that I have not yet earned. In
addition, I realize that the Administrator may require additional information
from me before deciding whether to grant this request for an Emergency
withdrawal.
PARTICIPANT
Date
[Administrator]: Approved: Denied:
----------- --------------
- ------------------------------------ ---------------------
[Administrator] Date
<PAGE> 1
EXHIBIT 99.j.1
EXCHANGE TRADED FUND CUSTODY AGREEMENT
THIS AGREEMENT is made this 1st day of January, 1991 by and between
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND Inc., (the "Fund"), and UNITED STATES
TRUST COMPANY OF NEW YORK, a New York State chartered bank and trust company
("U.S. Trust").
W I T N E S S E T H
WHEREAS, the Fund is registered as a closed-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("the
1940 Act"); and
WHEREAS, the Fund desires to retain U.S. Trust to serve as the Fund's
custodian and U.S. Trust is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints U.S. Trust to act as
custodian of its portfolio securities, cash and other property on the terms set
forth in this Agreement. U.S. Trust accepts such appointment and agrees to
furnish the services herein set forth in return for the compensation as
provided in Section 23 of this Agreement.
2. DELIVERY OF DOCUMENTS. The Fund has furnished U.S. Trust with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of U.S. Trust as Custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing
the signatures of the Fund's officers and/or the persons authorized to sign
Proper Instructions, as hereinafter defined, on behalf of the Fund;
1
<PAGE> 2
(c) The Fund's Articles of Incorporation filed with the State of
Minnesota and all amendments thereto (such Articles of Incorporation as
currently in effect and as amended from time to time be amended, are herein
called the ("Articles");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Directors appointing the
investment advisor of the Fund and resolutions of the Fund's Board of Directors
and the Fund's Shareholders approving the proposed Investment Advisory
Agreement between the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Notification of Registration filed pursuant to Section
8(a) of the 1940 Act, as filed with the SEC; and
(h) The Fund's Registration Statement on Form N-2 under the 1940 Act
and the Securities Act of 1933, as amended ("the 1933 Act") as filed with the
SEC; and
(i) The Fund's most recent prospectus including all amendments and
supplements thereto (the "Prospectus").
Upon request the Fund will furnish U.S. Trust with copies of all
amendments of or supplements to the foregoing, if any. The Fund will also
furnish U.S. Trust upon request with a copy of the opinion of counsel for the
Fund with respect to the validity of the Shares and the status of such Shares
under the 1933 Act filed with the SEC, and any other applicable federal law or
regulation.
3. DEFINITIONS.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means the Fund's President, Treasurer and any other person,
whether or not any such person is an officer or employee of the Fund, duly
authorized by the Board of Directors of the Fund to give Proper Instructions on
behalf of the Fund as set forth in resolutions of the Fund's Board of Directors.
2
<PAGE> 3
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means a book-entry system authorized by the U.S. Department
of Treasury, its successor or successors and its nominee or nominees.
(c) Proper Instructions. Proper Instructions as used herein means a
writing signed or initialled by two or more persons as the Board of Directors
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if U.S. Trust reasonably believes them
to have been given by a person authorized to give such instructions with
respect to the transaction involved. The Fund shall cause all oral instructions
to be confirmed in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of Directors of the
Fund accompanied by a detailed description of procedures approved by the Board
of Directors, Proper Instructions may include communications effected directly
between electromechanical or electronic devices provided that the Board of
Directors and U.S. Trust are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by U.S. Trust pursuant to any
three-party agreement which requires a segregated asset account in accordance
with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Fund
which the Fund may from time to time deposit, or cause to be
deposited, with U.S. Trust or which U.S. Trust may from time
to time hold for the Fund;
(ii) all income in respect of any such securities or other
property;
(iii) all proceeds of the sales of any of such securities or
other property; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by U.S. Trust from time to time from
or on behalf of the Fund.
3
<PAGE> 4
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee
or nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by U.S. Trust
therein.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver
or cause to be delivered to U.S. Trust all securities and all monies owned by
it, including payments of interest, principal and capital distributions and
cash received for the issuance of its Shares, at any time during the period of
this Agreement, except for securities and monies to be delivered to any
subcustodian appointed pursuant to Section 7 hereof. U.S. Trust will not be
responsible for such securities and such monies until actually received by it.
All securities delivered to U.S. Trust or to any such subcustodian (other than
in bearer form) shall be registered in the name of the Fund or in the name of a
nominee of the Fund or in the name of U.S. Trust or any nominee of U.S. Trust
(with or without indication of fiduciary status) or in the name of any
subcustodian or any nominee of such subcustodian appointed pursuant to
Paragraph 7 hereof or shall be properly endorsed and in form for transfer
satisfactory to U.S. Trust.
5. VOTING RIGHTS. With respect to all securities, however registered,
it is understood that the voting and other rights and powers shall be exercised
by the Fund. U.S. Trust's only duty shall be to mail for delivery on the next
business day to the Fund any documents received, including proxy statements and
offering circulars, with any proxies for securities registered in a nominee
name executed by such nominee. Where warrants, options, tenders or other
securities have fixed expiration dates, the Fund understands that in order for
U.S. Trust to act, U.S. Trust must receive the Fund's instructions at its
offices in New York, addressed as U.S. Trust may from time to time request, by
no later than noon (NY City time) at least one business day prior to the last
scheduled date to act with respect
4
<PAGE> 5
thereto (or such earlier date or time as U.S. Trust may reasonably notify the
Fund). Absent U.S. Trust's timely receipt of such instructions, such
instruments will expire without liability to U.S. Trust.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) U.S. Trust shall open and maintain a custody account for the Fund,
subject only to draft or order by U.S. Trust acting pursuant to the terms of
this Agreement, and shall hold in such account, subject to the provisions
hereof, all cash received by it from or for the Fund other than cash maintained
by the Fund in a bank account established and used in accordance with Rule
17f-3 under the 1940 Act. Funds held by U.S. Trust for the Fund may be
deposited by it to its credit at U.S. Trust in the Banking Department of U.S.
Trust or in such other banks or trust companies as it may in its discretion
deem necessary or desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the 1940 Act, and that
each such bank or trust company shall be approved by vote of a majority of the
Board of Directors of the Fund. Such funds shall be deposited by U.S. Trust in
its capacity as Custodian and shall be withdrawable by U.S. Trust only in that
capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) U.S. Trust shall make
payments of cash to, or for the account of, the Fund from such cash only (i)
for the purchase of securities, options, futures contracts or options on
futures contracts for the Fund as provided in Section 13 hereof; (ii) in the
case of a purchase of securities effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth in Section 8
hereof; (iii) in the case of repurchase agreements entered into between the
Fund and U.S. Trust, or another bank, or a broker-dealer which is a member of
The National Association of Securities Dealers, Inc. ("NASD"), either (a)
against delivery of the securities either in certificate form or through an
entry crediting U.S. Trust's account at the Federal Reserve Bank with such
securities or (b) against delivery of the receipt evidencing purchase by the
Fund of securities owned by
5
<PAGE> 6
U.S. Trust along with written evidence of the agreement by U.S. Trust to
repurchase such securities from the Fund, (iv) for transfer to a time deposit
account of the Fund in any bank, whether domestic or foreign; such transfer may
be effected prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund; (v) for the
payment of dividends or other distributions on shares declared pursuant to the
governing documents of the Fund, or for the payment of interest, taxes,
administration, distribution or advisory fees or expenses which are to be borne
by the Fund under the terms of this Agreement, any Advisory Agreement, or any
administration agreement; (vi) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by the Fund and held
by or to be delivered to U.S. Trust; (vii) to a subcustodian pursuant to
Section 7 hereof; (viii) for such common expenses incurred by the Fund in the
ordinary course of its business, including but not limited to printing and
mailing expenses, legal fees, accountants fees, exchange fees. Or (ix) for any
other proper purpose, but only upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of Directors or of
the Executive Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary, specifying the amount of
such payment, setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the person or persons
to whom such payment is to be made.
(c) U.S. Trust is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
Fund.
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7. RECEIPT AND DELIVERY OF SECURITIES.
(a) Except as provided by Section 8 hereof, U.S. Trust shall hold and
physically segregate all securities and noncash Property received by it for the
Fund. All such securities and non-cash Property are to be held or disposed of
by U.S. Trust for the Fund pursuant to the terms of this Agreement. In the
absence of Proper Instructions accompanied by a certified resolution
authorizing the specific transaction by the Fund's Board, U.S. Trust shall have
no power or authority to withdraw, deliver, assign, hypothecate, pledge or
otherwise dispose of any such securities and investments, except in accordance
with the express terms provided for in this Agreement. In no case may any
director, officer, employee or agent of the Fund withdraw any securities. In
connection with its duties under this Section 7, U.S. Trust may, at its own
expense, enter into subcustodian agreements with other banks or trust companies
for the receipt of certain securities and cash to be held by U.S. Trust for the
account of the Fund pursuant to this Agreement; provided that each such bank or
trust company has an aggregate capital, surplus and undivided profits, as shown
by its last published report, of not less than twenty million dollars
($20,000,000) and that such bank or trust company agrees with U.S. Trust to
comply with all relevant provisions of the 1940 Act and applicable rules and
regulations
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<PAGE> 8
thereunder. U.S. Trust will be liable for acts or omissions of any
subcustodian. U.S. Trust shall employ sub-custodians upon receipt of Proper
Instructions, but only in accordance with an applicable vote by the Board of
Directors of the Fund.
(b) Promptly after the close of business on each day U.S. Trust shall
furnish the Fund with confirmations and a summary of all transfers to or from
the account of the Fund during said day. Where securities are transferred to
the account of the Fund established at a Securities Depository or Book Entry
System pursuant to Section 8 hereof, U.S. Trust shall also by book-entry or
otherwise identify as belonging to such Fund the quantity of securities in a
fungible bulk of securities registered in the name of U.S. Trust (or its
nominee) or shown in U.S. Trust's account on the books of a Securities
Depository or Book-Entry System. At least monthly and from time to time, U.S.
Trust shall furnish the Fund with a detailed statement of the Property held for
the Fund under this Agreement.
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to U.S. Trust a certified resolution of the Board of Directors of the
Fund approving, authorizing and instructing U.S. Trust on a continuous and
ongoing basis until instructed to the contrary by Proper Instructions actually
received by U.S. Trust (i) to deposit in a Securities Depository or Book-Entry
System all securities of the Fund eligible for deposit therein and (ii) to
utilize a Securities Depository or Book-Entry System to the extent possible in
connection with the performance of its duties hereunder, including without
limitation settlements of purchases and sales of securities by the Fund, and
deliveries and returns of securities collateral in connection with borrowings.
Without limiting the generality of such use, it is agreed that the following
provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of U.S. Trust in the Securities Depository or Book Entry System (the
"Account") and (2) be segregated from any assets and cash controlled by
U.S. Trust in other than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities. U.S. Trust will effect
8
<PAGE> 9
payment for securities and receive and deliver securities in accordance with
accepted industry practices as set forth in (b) below, unless the Fund has
given U.S. Trust Proper Instructions to the contrary. The records of U.S. Trust
with respect to securities of the Fund maintained in a Securities Depository or
Book Entry System shall identify by book-entry those securities belonging to the
Fund.
(b) U.S. Trust shall pay for securities purchased for the account of
the Fund upon (i) receipt of advice from the Securities Depository or Book
Entry System that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of U.S. Trust to reflect such
payment and transfer for the account of the Fund. Upon receipt of Proper
Instructions, U.S. Trust shall transfer securities sold for the account of the
Fund upon (i) receipt of advice from the Securities Depository or Book Entry
System that payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of U.S. Trust to reflect such
transfer and payment for the account of the Fund. Copies of all advices from
the Securities Depository or Book Entry System of transfers of securities for
the account of the Fund shall identify the Fund, be maintained for the Fund by
U.S. Trust and be provided to the Fund at its request. Upon request, U.S. Trust
shall furnish the Fund confirmation of each transfer to or from the account of
the Fund in the form of a written advice or notice and shall furnish to the
Fund copies of daily transaction sheets reflecting each day's transactions in a
Securities Depository or Book Entry System for the account of the Fund.
(c) U.S. Trust shall provide the Fund with any report obtained by U.S.
Trust on the Securities Depository or Book Entry System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities Depository or Book Entry System;
(d) All Books and records maintained by U.S. Trust which relate to
the Fund participation in a Securities Depository or Book-Entry System will at
all times during U.S. Trust's regular business hours be open to the inspection
of the Fund's duly authorized
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<PAGE> 10
employees or agents, and the Fund will be furnished with all information in
respect of the services rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, U.S.
Trust shall be liable to the Fund for any loss or damage to the Fund resulting
from any negligence, misfeasance or misconduct of U.S. Trust or any of its
agents or of any of its or their employees in connection with its or their use
of the Securities Depository or Book Entry Systems or from failure of U.S.
Trust or any such agent to enforce effectively such rights as it may have
against such Securities Depository or Book Entry System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of U.S. Trust with
respect to any claim against the Securities Depository or Book Entry System or
any other person which U.S. Trust may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made whole for any such
loss or damage.
9. SEGREGATED ACCOUNT. U.S. Trust shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts for and on
behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by U.S. Trust
pursuant to Section 8 hereof, (i) in accordance with the provisions of any
agreement among the Fund, U.S. Trust and a brokerdealer registered under the
Securities and Exchange Act of 1934 and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Fund, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures required
by Investment Company Act Release No. 10666, or any subsequent release or
releases of the
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<PAGE> 11
Securities and Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Directors
or of the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be proper corporate
purposes.
10. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC.
(a) Unless otherwise provided in this Agreement, U.S. Trust shall act
only upon Proper Instructions. U.S. Trust may assume that any Proper
Instruction received hereunder are not in any way inconsistent with any
provision of the Declaration or By-Laws or any vote or resolution of the Fund's
Board of Directors or any committee thereof. U.S. Trust shall be entitled to
rely upon any Proper Instructions actually received by U.S. Trust pursuant to
this Agreement. The Fund agrees that U.S. Trust shall incur no liability in
acting in good faith upon Proper Instructions given to U.S. Trust, except to
the extent such liability was incurred as a result of U.S. Trust's negligence
or willful misconduct. In accord with instructions from the Fund, as required
by accepted industry practice or as U.S. Trust may elect in effecting the
execution of Fund instructions, advances of cash or other Property made by U.S.
Trust, arising from the purchase, sale, redemption, transfer or other
disposition of Property of the Fund, or in connection with the disbursement of
funds to any party, or in payment of fees, expenses, claims or liabilities owed
to U.S. Trust by the Fund, or to any other party which has secured judgment in
a court of law against the Fund which creates an overdraft in the accounts or
overdelivery of Property, shall be deemed a loan by U.S. Trust to the Fund,
payable on demand, bearing interest at such rate customarily charged by U.S.
Trust for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or
other security devices to be used with respect to instructions which the Fund
may give by
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<PAGE> 12
telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess,
or through an electronic instruction system, shall be processed in accordance
with terms and conditions for the use of such arrangements, methods or devices
as U.S. Trust may put into effect and modify from time to time. The Fund shall
safeguard any test keys, identification codes or other security devices which
U.S. Trust makes available to the Fund and agrees that the Fund shall be
responsible for any loss, liability or damage incurred by U.S. Trust or by the
Fund as a result of U.S. Trust's acting in accordance with instructions from
any unauthorized person using the proper security device except to the extent
such loss, liability or damage was incurred as a result of U.S. Trust's
negligence or willful misconduct. U.S. Trust may electronically record, but
shall not be obligated to so record, any instructions given by telephone and
any other telephone discussions with respect to the Fund. In the event that the
Fund uses U.S. Trust's Asset Management system or any successor electronic
communications or information system, the Fund agrees that U.S. Trust is not
responsible for the consequences of the failure of that system to perform for
any reason, beyond the reasonable control of U.S. Trust, or the failure of any
communications carrier, utility, or communications network. In the event that
system is inoperable, the Fund agrees that it will accept the communication of
transaction instructions by telephone, facsimile transmission on equipment
compatible to U.S. Trust's facsimile receiving equipment or by letter, at no
additional charge to the Fund.
(c) U.S. Trust shall transmit promptly to the Fund all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by U.S. Trust from
issuers of the securities being held for the Fund. With respect to tender or
exchange offers, U.S. Trust shall transmit promptly by facsimile to the Fund
all written information received by U.S. Trust from issuers of the securities
whose tender or exchange is sought and from the party (or his agents) making
the tender or exchange offer. If the Fund desires to
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<PAGE> 13
take action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify U.S. Trust at least three business
days prior to the date on which U.S. Trust is to take such action or upon the
date such notification is first received by the Fund, if later. If any Property
registered in the name of a nominee of U.S. Trust is called for partial
redemption by the issuer of such property, U.S. Trust is authorized to allot
the called portion to the respective beneficial holders of the Property in such
manner deemed to be fair and equitable by U.S. Trust in its sole discretion.
11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. U.S. Trust is authorized
to take the following action without Proper Instructions:
(a) COLLECTION OF INCOME AND OTHER PAYMENTS. U.S. Trust shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property of the Fund, and
promptly advise the Fund of such receipt and shall credit such
income, as collected, to the Fund. From time to time, U.S. Trust
may elect, but shall not be obligated, to credit the account with
interest, dividends or principal payments on payable or
contractual settlement date, in anticipation of receiving same
from a payor, central depository, broker or other agent employed
by the Fund or U.S. Trust. Any such crediting and posting shall be
at the Fund's sole risk, and U.S. Trust shall be authorized to
reverse any such advance posting in the event it does not receive
good funds from any such payor, central depository, broker or
agent of the Customer. U.S. Trust agrees to promptly notify the
Fund of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the
same day as received;
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(iii) receive and hold for the account of the Fund all securities
received by the Fund as a result of a stock dividend, share
split-up or reorganization, merger, recapitalization, readjustment
or other rearrangement or distribution of rights or similar
securities issued with respect to any portfolio securities of the
Fund held by U.S. Trust hereunder;
(iv) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed or
retired, or otherwise become payable on the date such securities
become payable;
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and
other payments and the endorsement for collection of checks,
drafts and other negotiable instruments; (vi) to effect an
exchange of the securities where the par value is changed, and to
surrender securities at maturity or upon an earlier call for
redemption, or when securities otherwise become payable, against
payment therefore in accordance with accepted industry practice.
If any Property registered in the name of a nominee of U.S. Trust
is called for partial redemption by the issuer of such property,
U.S. Trust is authorized to allot the called portion to the
respective beneficial holders of the Property in such manner
deemed to be fair and equitable by U.S. Trust in its sole
discretion.
(b) Miscellaneous Transactions. U.S. Trust is authorized to deliver or
cause to be delivered Property against payment or other consideration or
written receipt therefore for examination by a dealer selling for the account
of the Fund in accordance with street delivery custom.
12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, U.S. Trust, directly or through the use of a
Securities Depository or Book-Entry System, shall:
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<PAGE> 15
(a) Execute and deliver to such persons as may be designated in such
Proper Instructions, proxies, consents, authorizations, and any other
instruments whereby the authority of the Fund as owner of any securities may be
exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any issuer of securities or corporation, against receipt of such
certificates of deposit, interim receipts or other instruments or documents,
and cash, if any, as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to U.S. Trust of the monies borrowed, or upon receipt of adequate
collateral as agreed upon by the Fund and U.S. Trust which may be in the
form of cash or obligations issued by the U.S. government, its agencies or
instrumentalities, except that in cases where additional collateral is required
to secure a borrowing already made, subject to proper prior authorization,
further securities may be released for that purpose; and pay such loan upon
redelivery to it of the securities pledged or hypothecated therefore and upon
surrender of the note or notes evidencing the loan; and
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<PAGE> 16
(f) Deliver securities in accordance with the provisions of
any agreement among the Fund, U.S. Trust and a brokerdealer registered under
the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any
agreement among the Fund, U.S. Trust and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund; and
(h) Deliver securities against payment of other consideration or
written receipt therefor for transfer of securities into the name of the Fund
or U.S. Trust or a nominee of either, or for exchange or securities for a
different number of bonds, certificates, or other evidence, representing the
same aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to U.S. Trust;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to U.S. Trust;
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose,
but only upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board of Directors or of the Executive Committee signed
by an officer of the Funds and certified by the Secretary or an Assistant
Secretary, specifying the securities to be delivered, setting
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<PAGE> 17
forth the purpose for which such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of
securities, options, futures contracts or options on futures contracts by the
investment advisor, the Fund shall deliver to U.S. Trust (as Custodian) Proper
Instructions specifying with respect to each such purchase: (a) the name of the
issuer and the title of the securities, (b) the number of shares of the
principal amount purchased and accrued interest, if any, (c) the dates of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, (f) the name of the person from whom or the broker
through whom the purchase was made and (g) the Fund name. U.S. Trust shall upon
receipt of securities purchased by or for the Fund registered in the name of
the Fund or in the name of a nominee of U.S. Trust or of the Fund or in proper
form for transfer or upon receipt of evidence of title to options, futures
contracts or options on futures contracts purchased by the Fund, pay out of the
monies held for the account of the Fund the total amount payable to the person
from whom or the broker through whom the purchase was made, provided that the
same conforms to the total amount payable as set forth in such Proper
Instructions. Except as specifically stated otherwise in this Agreement, in any
and every case where payment for purchase of securities for the account of the
Fund is made by U.S. Trust in advance of receipt of the securities purchased in
the absence of specific written instructions from the Fund to so pay in
advance, U.S. Trust shall be absolutely liable to the Fund for such securities
to the same extent as if the securities had been received by U.S. Trust.
14. SALE OF SECURITIES. Promptly after each sale of securities by the
Fund at the instruction of the investment advisor, the Fund shall deliver to
U.S. Trust (as Custodian) Proper Instructions, specifying with respect to each
such sale; (a) the name of the issuer and the title of the security, (b) the
number of shares or principal amount sold, and accrued interest, if any, (c)
the date of sale, (d) the sale price per unit, (e) the total amount payable to
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<PAGE> 18
the Fund upon such sale, (f) the name of the broker through whom or the person
to whom the sale was made and (g) the Fund name. U.S. Trust shall deliver the
securities upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in
such Proper Instructions. Subject to the foregoing, U.S. Trust may accept
payment in such form as shall be satisfactory to it, and may deliver securities
and arrange for payment in accordance with the customs prevailing among dealers
in securities.
15. AUTHORIZED SHARES. The Fund has an unlimited number of authorized
shares.
16. RECORDS. The books and records pertaining to the Fund which are in
the possession of U.S. Trust shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representative, shall have access to such books
and records at all times during U.S. Trust's normal business hours, and such
books and records shall be surrendered to the Fund promptly upon request. Upon
reasonable request of the Fund, copies of any such books and records shall be
provided by U.S. Trust to the Fund or the Fund's authorized representative at
the Fund's expense.
17. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the
Fund's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to assure
that the necessary information is made available to such accountants for the
expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's Form N-2, Form N-SAR and other reports to the
Securities and Exchange Commission and with respect to any other requirement of
such Commission.
18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. U.S. Trust
shall provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system, internal
accounting control and
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procedures for safeguarding securities, futures contracts and options on
futures contracts, including securities deposited and/or maintained in a
Securities Depository or Book Entry System, relating to the services provided
by U.S. Trust under this Contract; such reports, shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
19. CONFIDENTIALITY. U.S. Trust agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the
Fund all records and other information relative to the Fund and its prior,
present or potential Shareholders and relative to the advisors and its prior,
present or potential customers, and not to use such records and information for
any purpose other than performance of its responsibilities and duties
hereunder, except after prior notification to and approval in writing by the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where U.S. Trust may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund. Nothing contained
herein, however, shall prohibit U.S. Trust from advertising or soliciting the
public generally with respect to other products or services, regardless of
whether such advertisement or solicitation may include prior, present or
potential Shareholders of the Fund.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond U.S.
Trust's control, U.S. Trust shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall not have
liability with respect thereto. U.S. Trust shall enter into and shall maintain
in effect with appropriate parties one or more agreements making reasonable
provisions for back up emergency use of electronic data processing equipment to
the extent appropriate equipment is available.
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<PAGE> 20
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If U.S. Trust shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the Fund
clarification or advice.
(b) Advice of Counsel. If U.S. Trust shall be in doubt as to any
question of law involved in any action to be taken or omitted by U.S. Trust, it
may request advice at its own cost from counsel of its own choosing (who may be
counsel for the Fund or U.S. Trust, at the option of U.S. Trust).
(c) Conflicting Advice. In case of conflict between directions or
advice received by U.S. Trust pursuant to subparagraph (a) of this paragraph
and advice received by U.S. Trust pursuant to subparagraph (b) of this
paragraph, U.S. Trust shall be entitled to rely on and follow the advice
received pursuant to the latter provision alone.
(d) Protection of U.S. Trust. U.S. Trust shall be protected in any
action or inaction which it takes or omits to take in reliance on any
directions or advice received pursuant to subparagraphs (a) or (b) of this
section which U.S. Trust, after receipt of any such directions or advice, in
good faith believes to be consistent with such directions or advice. However,
nothing in this paragraph shall be construed as imposing upon U.S. Trust any
obligation (i) to seek such directions or advice, or (ii) to act in accordance
with such directions or advice when received, unless, under the terms of
another provision of this Agreement, the same is a condition to U.S. Trust's
properly taking or omitting to take such action. Nothing in this subsection
shall excuse U.S. Trust when an action or omission on the part of U.S. Trust
constitutes willful misfeasance, bad faith, negligence or reckless disregard by
U.S. Trust of its duties under this Agreement.
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund
assumes full responsibility for insuring that the contents of each Prospectus
of the Fund complies with all applicable requirements of the 1933 Act, the 1940
Act, and any laws, rules and regulations of governmental authorities having
jurisdiction.
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<PAGE> 21
23. COMPENSATION. As compensation for the services rendered by U.S.
Trust during the term of this Agreement, the Fund will pay to U.S. Trust, in
addition to reimbursement of its out-of-pocket expenses, monthly fees as
outlined in Exhibit A.
24. INDEMNIFICATION. The Fund, as sole owner of the Property, agrees
to indemnify and hold harmless U.S. Trust and its nominees from all taxes,
charges, expenses, assessments, claims, and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the Securities Exchange Act
of 1934, the 1940 Act, and any state and foreign securities and blue sky laws,
all as or to be amended from time to time) and expenses, including (without
limitation) attorney's fees and disbursements (hereafter "liabilities and
expenses"), arising directly or indirectly from any action or thing which U.S.
Trust takes or does or omits to take or do (i) at the request or on the
direction of or in reliance on the advice of the Fund, or (ii) upon Proper
Instructions, provided, that neither U.S. Trust nor any of its nominees or
sub-custodians shall be indemnified against any liability to the Fund or to its
Shareholders (or any expenses incident to such liability) arising out of (x)
U.S. Trust's or such nominee's or sub-custodian's own willful misfeasance, bad
faith, negligence or reckless disregard of its duties under this Agreement or
any agreement between U.S. Trust and any nominee or subcustodian or (y) U.S.
Trust's own negligent failure to perform its duties under this Agreement. U.S.
Trust similarly agrees to indemnify and hold harmless the fund from all
liabilities and expenses arising directly or indirectly from U.S. Trust's or
such nominee's or sub-custodian's willful misfeasance, bad faith, negligence or
reckless disregard in performing its duties under this agreement. In the event
of any advance of cash for any purpose made by U.S. Trust resulting from orders
or Proper Instructions of the Fund, or in the event that U.S. Trust or its
nominee or subcustodian shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of this Agreement, except such as may arise from its or its nominee's or
sub-custodian's own negligent action, negligent failure to act, willful
21
<PAGE> 22
misconduct, or reckless disregard, the Fund shall promptly reimburse U.S. Trust
for such advance of cash or such taxes, charges, expenses, assessments claims
or liabilities.
25. RESPONSIBILITY OF U.S. TRUST. In the performance of its duties
hereunder, U.S. Trust shall be obligated to exercise care and diligence and to
act in good faith to insure the accuracy and completeness of all services
performed under this Agreement. U.S. Trust shall be responsible for its own
negligent failure or that of any subcustodian it shall appoint to perform its
duties under this Agreement but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, U.S. Trust
shall not be liable for any act or omission which does not constitute willful
misfeasance, bad faith, or negligence on the part of U.S. Trust or such
subcustodian or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, U.S. Trust in connection with its duties
under this Agreement shall, so long as and to the extent it is in the exercise
of reasonable care, not be under any duty or obligation to inquire into and
shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any advice, direction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which U.S. Trust believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the Fund, the legality of the purchase or sale
thereof or the propriety of the amount paid or received therefor, (c) the
legality of the issue or sale of any Shares, or the sufficiency of the amount
to be received therefor, (d) the legality of the redemption of any Shares, or
the propriety of the amount to be paid therefor, (e) the legality of the
declaration or payment of any dividend or distribution on Shares, of (f) delays
or errors or loss of data occurring by reason of circumstances beyond U.S.
Trust's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown (except as provided
in Section 20), flood or catastrophe, acts of God, insurrection, war, riots, or
failure of the mail, transportation, communication or power supply.
22
<PAGE> 23
26. COLLECTION OF INCOME. U.S. Trust shall collect on a timely basis
all income and other payments with respect to registered securities held
hereunder to which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis all
income and other payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held by U.S. Trust or its agent
thereof and shall credit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, U.S. Trust shall
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest when due on
securities held hereunder. Income due the Fund on securities loaned pursuant
to the provisions of Section 9 shall be the responsibility of the Fund. U.S.
Trust will have no duty or responsibility in connection therewith, other than
to provide the Fund with such information or data as may be necessary to assist
the Fund in arranging for the timely delivery to the Custodian of the income to
which the Fund is properly entitled.
27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. U.S. Trust shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
28. EFFECTIVE PERIOD: TERMINATION AND AMENDMENT.
This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that U.S. Trust shall not act under Section 8 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Directors of the Fund has approved the initial use of a
particular Securities Depository or Book Entry
23
<PAGE> 24
System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by the Fund
of such Securities Depository and/or Book Entry System, as required in each
case by Rule 17f-4 under the Investment Company Act of 1940, as amended;
provided further, however, that the Fund shall not amend or terminate this
Agreement in contravention of any applicable federal or state regulations, or
any provision of the Articles of Incorporation, and further provided, that the
Fund may at any time by action of its Board of Directors (i) substitute another
bank or trust company for U.S. Trust by giving notice as described above to
U.S. Trust, or (ii) immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for U.S. Trust by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to U.S. Trust
such compensation as may be due as of the date of such termination and shall
likewise reimburse U.S. Trust for its costs, expenses and disbursements.
29. SUCCESSOR CUSTODIAN.
If a successor custodian shall be appointed by the Board of Directors of
the Fund, U.S. Trust shall, upon termination, deliver to such successor
custodian at the office of the custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, U.S. Trust shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
U.S. Trust on or before the date when such termination shall be come effective,
then U.S. Trust shall have the right to
24
<PAGE> 25
deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, doing business in New York, New York, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by U.S. Trust and all instruments held by U.S. Trust relative
thereto and all other property held by it under this Agreement and to transfer
to an account of such successor custodian all of the Fund's securities held in
any Securities Depository or Book Entry System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of U.S. Trust after the date of termination hereof owing to failure
of the Fund to procure the certified copy of the vote referred to or of the
Board of Directors to appoint a successor custodian, U.S. Trust shall be
entitled to fair compensation for its services during such period as U.S. Trust
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of U.S.
Trust shall remain in full force and effect.
30. NOTICES. All notices and other communications (collectively
referred to as "Notice" or "Notices") in this section hereunder shall be in
writing and shall be first sent by telegram, cable, telex, or facsimile sending
device and thereafter by overnight mail for delivery on the next business day.
Notices shall be addressed (a) if to U.S. Trust, at U.S. Trust's address, 114
West 47th Street, New York, New York, 10036-1532, facsimile number (212)
852-1488; (b) if to the Fund, at the address of the Fund Attention: Portfolio
Manager, facsimile number (312) 917-8211; or (c) if to neither of the
foregoing, at such other address as shall have been notified to the sender of
any such Notice or other communication. Notices sent by overnight mail shall
be deemed to have been given the next business day. Notices sent by messenger
shall be deemed to have been given on the day delivered, and notices sent by
confirming telegram, cable, telex or facsimile sending device shall be deemed
to
25
<PAGE> 26
have been given immediately. All postage, cable, telegram, telex and facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
31. FURTHER ACTIONS. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
33. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall insure to the benefit of the parties hereto and their respective
successors.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year second above
written.
UNITED STATES TRUST
COMPANY OF NEW YORK
Attest: Jacqueline Binder By: Peter C. Arrighetti
---------------------------- -------------------------------
JACQUELINE BINDER PETER C. ARRIGHETTI
VICE PRESIDENT SENIOR VICE PRESIDENT
NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC.
Attest: Gifford R. Zimmermen By: O. Walter Renfftlen
---------------------------- -------------------------------
GIFFORD R. ZIMMERMEN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT &
CONTROLLER
27
<PAGE> 28
EXHIBIT A
CUSTODY SERVICE FEE
Administration and Maintenance Fee
.03% (3-Basis Points) on first $50 million
.02% (2-Basis Points) on next $50 million
.01% (1-Basis Point) on remainder
Transaction Fees
$15.00 Per Book Entry Transaction
$25.00 Per Physical Transaction
$35.00 Per Future Contract or Option Wire
$8.00 Per Wire Transfer
Earnings on Balances
An earning credit, adjusted on a monthly basis, will be applied against the
Custody Service Fee and Fund Accounting Fee equal to 75% of the latest
available three month average of the 91 day treasury bill coupon equivalent
rate times the average collected balance in the custodian account (or accounts)
for the month billed. If the credit exceeds the fees for the month, this
excess is carried forward to subsequent months. However, this carry forward is
only available as a credit against fees incurred through December 31 of each
calendar year and expires effective January 1 of the following year.
NOTES:
1. Schedule should be applied separately to each fund;
All fees are billed monthly.
2. Add $5.00 per book entry transaction and physical transaction
if U.S. Trust inputs trades.
3. Minimum charge of $1,000 per month.
NUVEEN INSURED MUNICIPAL UNITED STATES TRUST COMPANY
OPPORTUNITY FUND, INC. OF NEW YORK
By /s/ O. Walter Rensstlen By [SIG]
------------------------------ ---------------------------
Title V.P. & Controller Title Vice President
--------------------------- ------------------------
Date 12-12-90 Date 12-11-90
---------------------------- ------------------------
<PAGE> 29
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
AMENDMENT TO
MUTUAL FUND CUSTODY AGREEMENT
AGREEMENT made this 25th day of February, 1991 by and between UNITED
STATES TRUST COMPANY OF NEW YORK ("Custodian") and NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC. (the "Fund").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a Mutual Fund
Custody Agreement dated January 1, 1991 (the "Agreement") that governs the
terms and conditions under which the Custodian maintains custody of the
securities and other assets of the Fund; and
WHEREAS, the Fund and the Custodian wish to clarify the circumstances
under which the Custodian may advance cash to the Fund and provide to the
Custodian a security interest in Fund securities in connection with any such
advances;
NOW THEREFORE, in consideration of the mutual agreements contained
herein and in the Agreement as hereby amended, the Custodian and the Fund
hereby agree to amend the Agreement by adding thereto a new Section 6A, said
new Section to read as follows:
"6A. Advances by Custodian. The Fund may from time to time
purchase securities for settlement payable in "next day" funds
and provide for payment for such transactions by selling
securities for settlement in "same day" funds settling on the
day after settlement of the Fund's purchase transaction. Under
these circumstances the Fund may require the Custodian to
advance funds in amounts not exceeding 20% of the value of the
Fund's assets at the time of the advance for payment of the
securities purchase transaction, and the Custodian shall recover
an amount equal to its advance, without interest, from the
proceeds of the securities sale. In addition to the foregoing,
the Custodian may from time to time agree to advance cash to the
Fund, without interest, for the Fund's other proper corporate
purposes. If the Custodian advances cash for any purpose, the
Fund shall and hereby does
<PAGE> 30
-2-
grant to the Custodian a security interest in Fund securities
equal in value to the amount of the cash advance but in no event shall
the value of securities in which a security interest has been granted
exceed 20% of the value of the Fund's total assets at the time of the
pledge; should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to
reasonably dispose of any securities in which it has a security
interest to the extent necessary to obtain reimbursement."
IN WITNESS WHEREOF, each of the parties has caused this Amendment to
be executed in its name and on its behalf by a duly authorized officer as of
the day and year first above written.
ATTEST: NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC.
/s/ Katherine A. Erwin [SIG]
- --------------------------------- ---------------------------------------
Assistant Secretary Vice President
ATTEST: UNITED STATES TRUST COMPANY OF NEW YORK
/s/ Jacqueline Binder [SIG]
- --------------------------------- ---------------------------------------
Assistant Secretary Vice President
<PAGE> 1
EXHIBIT 99.j.2
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made this 1st day of January, 1991, by and between,
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC. a Minnesota Corporation (the
"Fund"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York State
chartered bank and trust company ("U.S. Trust").
W I T N E S S E T H:
WHEREAS, the Fund is a registered closed-end diversified management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Fund desires to hire U.S. Trust to provide the Fund
with certain accounting services, and U.S. Trust is willing to provide
such services upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. APPOINTMENT. The Fund hereby appoints U.S. Trust to provide the
accounting services hereinafter set forth to the Fund, and U.S. Trust
accepts such appointment and agrees to provide such services, under the
terms and conditions set forth herein.
2. CALCULATION OF NET ASSET VALUE. U.S. Trust will calculate the
Fund's daily net asset value and the daily per-share net asset value in
accordance with the Fund's effective Registration Statement on Form N-2
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), including its current prospectus. If so directed,
U.S. Trust shall also calculate daily the net income of the Fund
<PAGE> 2
and shall advise the Fund daily of the total amounts of such net income and,
if instructed in writing by an officer of the Fund to do so, of the division
of such net income among its various components.
3. BOOKS AND RECORDS. U.S. Trust will (a) maintain such books and
records as are necessary to enable it to perform its duties under this
Agreement; (b) prepare and maintain complete, accurate and current all
records with respect to the Fund required to be maintained by the Fund under
the Internal Revenue Code of 1986, as amended (the "Code"), and under the
1940 Act and the applicable rules and regulations thereunder; (c) at the
Fund's expense, retain and preserve said records in the manner and for the
periods prescribed in the Code and such rules and regulations; and (d) assist
to the extent requested by the Fund in the preparation of reports to the
Fund's shareholders, the Fund's Registration Statement and reports and
filings required pursuant to the Code or the 1940 Act and the rules and
regulations thereunder.
U.S. Trust hereby acknowledges and agrees that all records prepared and
maintained by U.S. Trust pursuant to this paragraph 3 which are required to be
maintained by the Fund under the Code and the 1940 Act ("Required Records")
are the property of the Fund. If this agreement is terminated, all Required
Records shall be delivered, at the Fund's expense, to the Fund or any such
person designated by the Fund, and U.S. Trust shall be relieved of
responsibility for the preparation and maintenance of any Required Records
delivered to the Fund or any such person.
4. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the
Fund's independent public accountants and shall take all reasonable action
in the performance of its
-2-
<PAGE> 3
obligation under this Agreement to assure that the necessary
information is made available to such accountants for the expression of their
unqualified opinion where required for any document for the Fund.
5. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
U.S. Trust shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants relating to
the services provided by U.S. Trust under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would
be disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
6. FEES AND CHARGES. In consideration of services rendered pursuant to
this Agreement, the Fund shall pay to U.S. Trust a fee in accordance with the
schedule attached hereto (Exhibit A) and shall promptly reimburse U.S. Trust
for any out-of-pocket expenses and advances payable by the Fund in accordance
with Paragraph 6.
7. EXPENSES. The expenses connected with the performance of this
Agreement shall be allocated between the Fund and U.S. Trust as follows:
(a) U.S. Trust shall furnish, at its expense and without cost to the
Fund, (i) the services of its personnel to the extent required to carry out its
obligations under this Agreement, and (ii) use of data processing equipment.
(b) All costs and expenses not expressly assumed by U.S. Trust under
Paragraph 6 (a) of this Agreement shall be paid by the Fund, including but not
limited to costs and expenses for pricing service fees; necessary outside
record storage; media for storage or records (e.g., microfilm, microfiche); and
any and all assessments, taxes or levies assessed on U.S. Trust for services
provided under this Agreement.
-3-
<PAGE> 4
8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as
otherwise provided in this Agreement and except for the accuracy of information
furnished to it by U.S. Trust, the Fund assumes full responsibility of the
preparation, contents and distribution of each prospectus of the Fund, and for
compliance with all applicable requirements of the 1940 Act, the Securities Act
and any laws, rules and regulations of governmental authorities having
jurisdiction over the Fund.
9. CONFIDENTIALITY. U.S. Trust agrees to treat all records and other
information relative to the Fund as proprietary information of the Fund and, on
behalf of itself and its employees, to keep confidential all such information,
except after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where U.S.
Trust may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities or when so requested by the Fund.
10. REFERENCES TO U.S. TRUST. The Fund shall not circulate any printed
matter which contains any reference to U.S. Trust without the prior written
approval of U.S. Trust, except solely such printed matter as merely identifies
U.S. Trust as Accounting and Pricing Services Agent. The Fund will submit
printed matter requiring approval to U.S. Trust in draft form, allowing
sufficient time for review by U.S. Trust and its counsel prior to any deadline
for printing.
11. FORCE MAJEURE: EQUIPMENT FAILURES. (a) If U.S. Trust shall be
delayed in its performance of services or prevented entirely or in part from
performing services because of causes or events beyond its control, including
and without limitation, acts of God, interruption of power or other utility,
transportation or communication services, acts of civil or military authority,
sabotages, national emergencies, explosion, flood, accident earthquake or other
catastrophe, fire, strike or other labor
-4-
<PAGE> 5
problems, legal action, present or future law, governmental order, rule
or regulation, or shortage of suitable parts, materials, labor or
transportation, then such delay or nonperformance shall be excused and a
reasonable time for performance in connection with this Agreement shall be
extended to include the period of such delay or nonperformance.
(b) In the event of equipment failures beyond U.S. Trust's control,
U.S. Trust shall take all steps necessary to minimize service interruptions but
shall have no liability with respect thereto. U.S. Trust shall endeavor to
enter into one or more agreements making provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
12. INDEMNIFICATION OF U.S. TRUST.
(a) U.S. Trust, its directors, officers, employees, shareholders, and
agents shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith or negligence on the part of U.S.
Trust in the performance of its obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless U.S. Trust, its directors, officers,
employees, shareholders, and agents from and against any and all claims,
demands, expenses and liabilities (whether with or without basis in fact or
law) of any and every nature which U.S. Trust may sustain or incur or which be
asserted against U.S. Trust by any person by reason of, or as a result of any
action taken or omitted to be taken by U.S. Trust in connection with its
appointment, in good faith, in reliance upon any law, act, regulation or
official interpretation of same even though the same may have been altered,
changed, amended or repealed subsequent to
-5-
<PAGE> 6
the date of U.S. Trust's actions in reliance there on. However,
indemnification under this subparagraph shall not apply to actions or
omissions of U.S. Trust or its directors, officers, employees, shareholders,
agents, or subcontractors in cases of its or their own negligence, willful
misconduct, bad faith, or reckless disregard of its or their own duties
hereunder.
13. TERM; TERMINATION. (a) The provisions of this Agreement shall be
effective as of January 1, 1991, shall continue in force from year to year
thereafter, but only so long as such continuance is approved by U.S. Trust and
the Fund.
(b) Either party may terminate this Agreement on any date by
giving the other party at least ninety (90) days prior written notice
of such termination specifying the date fixed therefore.
(c) In the event that in connection with termination of
this Agreement a successor to any of U.S. Trust's duties or
responsibilities under this Agreement is designated by the Fund by written
notice to U.S. Trust, U.S. Trust shall, promptly upon such termination and at
the expense of the Fund, transfer all Required Records and shall cooperate in
the transfer of such duties and responsibilities, including provision for
assistance from the U.S. Trust's cognizant personnel in the establishment of
books, records, and other data by such successor.
14. ASSIGNMENT. Except as hereinafter provided, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective permitted
successors and assignees. U.S. Trust may, without further consent on the part
of the Fund, subcontract for the performance hereof with third parties who are
subsidiaries or other affiliates of U.S. Trust; provided, however, that U.S.
-6-
<PAGE> 7
Trust shall be as fully responsible to the Fund for the acts and
omissions of any subcontractor as it is for its own acts and omissions and
shall be responsible for its choice of subcontractors.
15. SERVICES FOR OTHERS. Nothing in this Agreement shall prevent U.S.
Trust or any affiliated person (as defined in the Act) of U.S. Trust from
providing services for any other person, firm or corporation (including other
investment companies).
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
17. SEVERABILITY. In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
18. GOVERNING LAWS. This Agreement shall be deemed to be a contract
made under, and shall be construed in accordance with, the laws (other than the
laws governing conflict-of-law matters) of The State of New York.
19. NOTICES. Any notice or demand given in connection with any
agreement, document or instrument executed pursuant hereto shall be deemed to
have been sufficiently given or served for all purposes if sent by certified or
registered mail, postage and charges prepaid, to the following addresses: if to
the Fund, at 333 West Wacker Drive, Chicago, IL 60606, Attention: O.W.
Renfftlen, Vice President, or at any other address or addresses designated by
the Fund to U.S. Trust in writing; and if to U.S. Trust, to it at 114 West 47th
Street, New York, NY 10036, or at any other address or addresses designated by
U.S. Trust to the Fund in writing.
-7-
<PAGE> 8
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year second above written.
U.S. Trust Co. of New York
Attest: /s/Jacqueline Binder By: /s/Peter C. Arrighetti
----------------------- -------------------------
Jacqueline Binder Peter C. Arrighetti
Assistant Vice President Vice President
NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC.
Attest: /s/Gifford R. Zimmerman By: /s/ O. Walter Renfftlen
------------------------- ------------------------
Gifford R. Zimmerman O. Walter Renfftlen
Assistant General Counsel Vice President
-8-
<PAGE> 9
EXHIBIT A
FUND ACCOUNTING FEE
$18,000 PER ANNUM
<PAGE> 1
EXHIBIT 99.s
NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS
POWER OF ATTORNEY
RE
PREFERRED STOCK
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each
of the closed-end investment companies listed on Attachment A, hereby
constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R.
ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full
power to each of them to act alone) his true and lawful attorney-in-fact and
agent, for him on his behalf and in his name, place and stead, in any and all
capacities, to sign and file one or more Registration Statements relating to
shares of preferred stock on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of preferred shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations
has hereunto set his hand this 11th day of March, 1999.
/s/ Robert P. Bremner
-----------------------------------
Robert P. Bremner
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 11th day of March , 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran
Notary Public, State of Illinois -----------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 2
NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS
POWER OF ATTORNEY
RE
PREFERRED STOCK
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each
of the closed-end investment companies listed on Attachment A, hereby
constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R.
ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full
power to each of them to act alone) his true and lawful attorney-in-fact and
agent, for him on his behalf and in his name, place and stead, in any and all
capacities, to sign and file one or more Registration Statements relating to
shares of preferred stock on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of preferred shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations
has hereunto set his hand this 11th day of March, 1999.
/s/ Lawrence H. Brown
-------------------------------
Lawrence H. Brown
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 11th day of March , 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran
Notary Public, State of Illinois -------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 3
NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS
POWER OF ATTORNEY
RE
PREFERRED STOCK
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each
of the closed-end investment companies listed on Attachment A, hereby
constitutes and appoints TIMOTHY R. SCHWWERTFEGER, ANTHONY T. DEAN, GIFFORD R.
ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full
power to each of them to act alone) his true and lawful attorney-in-fact and
agent, for him on his behalf and in his name, place and stead, in any and all
capacities, to sign and file one or more Registration Statements relating to
shares of preferred stock on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of preferred shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations
has hereunto set his hand this 11th day of March, 1999.
/s/ Peter R. Sawers
-------------------------------
Peter R. Sawers
STATE OF ILLINOIS
)
) SS
COUNTY OF COOK )
On this 11th day of March , 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran
Notary Public, State of Illinois -------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 4
NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS
POWER OF ATTORNEY
RE
PREFERRED STOCK
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of
each of the closed-end investment companies listed on Attachment A, hereby
constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R.
ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full
power to each of them to act alone) his true and lawful attorney-in-fact and
agent, for him on his behalf and in his name, place and stead, in any and all
capacities, to sign and file one or more Registration Statements relating to
shares of preferred stock on Form N-2 under the Securities Act of 1933 and the
Investment Company Act of 1940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with
any regulatory authority, federal or state, relating to the registration
thereof, or the issuance of preferred shares thereof, without limitation,
granting unto said attorneys, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed
organizations has hereunto set his hand this 8th day of March, 1999.
/s/ William J. Schneider
-----------------------------
William J. Schneider
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 8th day of March, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 5
NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS
POWER OF ATTORNEY
RE
PREFERRED STOCK
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each
of the closed-end investment companies listed on Attachment A, hereby
constitutes and appoints ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G.
BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them
to act alone) his true and lawful attorney-in-fact and agent, for him on his
behalf and in his name, place and stead, in any and all capacities, to sign and
file one or more Registration Statements relating to shares of preferred stock
on Form N-2 under the Securities Act of l933 and the Investment Company Act of
l940, including any amendment or amendments thereto, with all exhibits, and any
and all other documents required to be filed with any regulatory authority,
federal or state, relating to the registration thereof, or the issuance of
preferred shares thereof, without limitation, granting unto said attorneys, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could do
if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations
has hereunto set his hand this 11th day of March, 1999.
/s/ Timothy R. Schwertfeger
-------------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 11th day of March , 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran
Notary Public, State of Illinois -------------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE> 6
ATTACHMENT A
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Florida Investment Quality Municipal Fund
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Florida Quality Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Premium Income Municipal Fund 2
