<PAGE>
As filed with the Securities and Exchange Commission on June 10, 1999
1933 Act File No.
333-
1940 Act File No.
811-07432
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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. 10
Nuveen Premium
Income Municipal
Fund 4, 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 Gary S. Schpero
Morgan, Lewis & Bockius LLP Simpson Thacher & Bartlett
1800 M Street, N.W. 425 Lexington Avenue
Washington, DC 20036 New York, NY 10017
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, other than securities offered in connection with a dividend
reinvestment plan, check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount Being Offering Price Aggregate Registration
Being Registered Registered Per Unit Offering Price Fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Municipal Auction Rate Cumulative
Preferred Stock Series W2.......... 520 shares $25,000 $13,000,000 $3,614
- ---------------------------------------------------------------------------------------------
</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.
The undersigned registrant hereby 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 part of this registration
statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be 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 such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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 Inapplicable
Back Cover Page
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 Cover Page; Prospectus Summary; The
Registrant Fund; Investment Objectives 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 Capitalization; Investment Objectives
Debt, and Other Securities and Policies; Description of
MuniPreferred; The Auction; Common
Stock; Control of the Fund; Tax Matters
Item 11. Defaults and Arrears on Inapplicable
Senior Securities
Item 12. Legal Proceedings Legal Proceedings
Item 13. Table of Contents of the Table of Contents for the Statement of
Statement of Additional Additional Information
Information
Pan B--Statement of Additional Information
<CAPTION>
Items In Part B of Form N- Location in Statement of
2 Additional Information
-------------------------- ------------------------
<C> <S> <C>
Item 14. Cover Page Cover Page
Item 15. Table of Contents Cover Page
Item 16. General Information and Inapplicable
History
Item 17. Investment Objective and Investment Objectives and Policies;
Policies Certain Trading Strategies of the Fund;
Portfolio Transactions
Item 18. Management Management of the Fund; Portfolio
Transactions
Item 19. Control Persons and Management of the Fund; Certain Owners
Principal Holders of of Record
Securities
Item 20. Investment Advisory and Management of the Fund; Experts
Other Services
Item 21. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 22. Tax Status Tax Matters
Item 23. Financial Statements Financial Statements
</TABLE>
Part C--Other Information
Items 24-33 have been answered in Part C of this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the +
+Securities and Exchange Commission is effective. This Prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 10, 1999
PROSPECTUS
Nuveen Premium Income Municipal Fund 4, Inc.
Municipal Auction Rate Cumulative Preferred Stock ("MuniPreferred(R)")
520 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, to which any
reference in this Part A applies. This Prospectus sets 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. Investing in
MuniPreferred shares involves certain risks, which are described in the "Risk
Factors" section beginning on page B-5 of this Prospectus.
Nuveen Premium Income Municipal Fund 4, 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
(more than 80%) in a diversified portfolio of tax-exempt municipal bonds rated
within the four highest grades (Baa or BBB or better) by Moody's or Standard &
Poor's, except that the Fund may invest up to 20% of its assets in unrated
municipal bonds that, in the opinion of the Fund's adviser, are of comparable
quality to those so rated. 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. Under certain circumstances the Fund will be required to
make shareholders whole for taxes owing on dividends paid to shareholders that
include taxable income and gain. The amount of taxable income and gain
allocated to MuniPreferred shares will depend on the amount of taxable income
and gain 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 , 1999 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-28 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 (the period from the date of issue
through , 1999) will be %. For subsequent rate periods, MuniPreferred
shares pay dividends based on a rate set at auction, usually held weekly.
Prospective purchasers should carefully review the auction procedures described
beginning at Page B-18 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.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
(R)Registered Trademark of John Nuveen & Co. Incorporated
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Public Offering Price.................................... $25,000 $13,000,000
------- -----------
Sales Load............................................... $ $
------- -----------
Proceeds to Fund (before expenses)....................... $ $
======= ===========
</TABLE>
The public offering price per share will be increased by the amount of
dividends, if any, that have accumulated from the date the New MuniPreferred
shares are first issued.
----------
The underwriters are offering the shares of the New MuniPreferred subject to
various conditions. It is expected that the shares of New MuniPreferred will be
delivered to the underwriters through the facilities of The Depository Trust
Company on or about , 1999.
----------
Salomon Smith Barney
A.G. Edwards & Sons, Inc.
BT Alex. Brown
Goldman, Sachs & Co.
John Nuveen & Co. Incorporated
Legg Mason Wood Walker
Incorporated
PaineWebber Incorporated
Prudential Securities
Raymond James & Associates, Inc.
<PAGE>
You should rely only on the information contained in this Prospectus.
Neither the Fund nor the underwriters have authorized anyone to provide you
with different information. The Fund is not making an offer of these
securities in any state where the offer is not permitted. You should not
assume that the information provided by this Prospectus is accurate as of any
date other than the date on the front of this Prospectus.
2
<PAGE>
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 Premium Income Municipal Fund 4, 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
March 31, 1999 the Fund had 40,884,796 shares of common stock outstanding, and
12,336 MuniPreferred shares outstanding.
The Offering
The Fund is offering 520 shares of New MuniPreferred. The purchase price for
this series is $25,000 per share.
Investment Objectives
The Fund's primary investment objective is current income exempt from
regular Federal income tax, consistent with the Fund's investment policies. 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 (more than 80%) in a diversified portfolio of tax-exempt municipal bonds
rated at the time of purchase within the four highest grades (Baa or BBB or
better) by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's
Corporation ("Standard & Poor's"), except that the Fund may invest up to 20% of
its assets in unrated municipal bonds that, in Nuveen Advisory's opinion, have
credit characteristics equivalent to, and are of comparable quality to,
municipal bonds rated Baa or BBB or better. There is no assurance that the Fund
will achieve its investment objective. 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 or may voluntarily redeem your shares
under certain circumstances; 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-25 of this Prospectus.
New MuniPreferred will trade at auction starting in the week following this
offering.
A-1
<PAGE>
The first auction date for New MuniPreferred will be Wednesday, ,
1999, the business day before the dividend payment date for the initial rate
period for New MuniPreferred. The auction date for New 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 %. 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-12 of this Prospectus.
Dividends on New MuniPreferred shares will accumulate at the initial rate
beginning on Friday, , 1999. Dividends will be paid on shares of New
MuniPreferred on Thursday, , 1999 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 six days. Subsequent rate periods generally
will be seven days. 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-11 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. Taxable
income or gain earned by the Fund 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 and gain to be paid for the period relating to that auction. For
longer rate periods, the Fund may notify shareholders. Under certain
circumstances, the Fund will make shareholders whole for taxes owing on
dividends paid to shareholders that include taxable income and gain. See "Tax
Matters" at Page B-25 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 "AAA" 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 and Rating
Agency Guidelines--Rating Agencies" at Page B-15 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 and Rating Agency
Guidelines--Rating Agencies" at Pages B-14 and B-15 of this Prospectus.
A-2
<PAGE>
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 1993+
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value
beginning of period.... $ 14.64 $ 14.07 $ 13.87 $ 12.09 $ 14.87 $ 14.05
-------- -------- -------- -------- -------- --------
Operating performance:
Net investment income.. 1.07 1.08 1.10 1.10 1.07 0.51
Net realized &
unrealized gain (loss)
from investments...... .42 .58 .19 1.81 (2.76) .97
-------- -------- -------- -------- -------- --------
Total from investment
operations............. 1.49 1.66 1.29 2.91 (1.69) 1.48
-------- -------- -------- -------- -------- --------
Dividends from net
investment income:
To Common shareholders. (.82) (.82) (.82) (.84) (.84) (.42)
To Preferred
shareholders#......... (.26) (.27) (.27) (.29) (.20) (.07)
Distributions from
capital gains:
To Common shareholders. -- -- -- -- (.03) --
To Preferred
shareholders#......... -- -- -- -- (.01) --
-------- -------- -------- -------- -------- --------
Total distributions..... (1.08) (1.09) (1.09) (1.13) (1.08) (.49)
-------- -------- -------- -------- -------- --------
Organization and
offering costs and
Preferred share
underwriting discounts. -- -- -- -- (.01) (.17)
-------- -------- -------- -------- -------- --------
Net asset value end of
period................. $ 15.05 $ 14.64 $ 14.07 $ 13.87 $ 12.09 $ 14.87
======== ======== ======== ======== ======== ========
Per Common share market
value end of period.... $14.8125 $13.6875 $12.6880 $12.1250 $10.7500 $14.2500
Total investment return
on market value**...... 14.54% 14.70% 11.57% 21.32% (19.12)% (2.13)%
Total return on net
asset value**.......... 8.58% 10.20% 7.53% 22.41% (13.29)% 8.94%
Ratios/Supplemental
data:
Net assets end of
period (in thousands). $923,004 $905,764 $882,563 $874,337 $801,617 $431,437
Ratio of expenses to
average net assets##.. .79% .79% .79% .80% .88% .82%*
Ratio of net investment
income to average net
assets##.............. 4.79% 4.98% 5.11% 5.35% 5.15% 4.04%*
Portfolio turnover
rate.................. 21% 26% 20% 32% 47% 10%
</TABLE>
- --------
*Annualized.
**Total investment return on market value is the combination of reinvested
dividend income, reinvested capital gains distributions, if any, and changes
in stock price per share. Total return on net asset value is the combination
of reinvested dividend income, reinvested capital gains distributions, if
any, and changes in net asset value per share. Total returns are not
annualized.
#The amounts shown are based on Common share equivalents.
##Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
+For the period February 19, 1993 to October 31, 1993.
A-3
<PAGE>
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 January 13, 1993, and may issue up
to 1 million shares of MuniPreferred and up to 200 million shares of common
stock. In February, March and April, 1993, the Fund issued 19,250,000 shares
of common stock. In June 1993, the Fund issued 2,900 shares of MuniPreferred
stock in three offerings (1,000 shares each of Series T and TH, and 900 shares
of Series 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 5,800 MuniPreferred shares. On September 8, 1994, the Fund
acquired all of the assets and liabilities of Nuveen Premium Income Municipal
Fund 3, Inc. (which had outstanding 2,200 shares of Series M MuniPreferred),
Nuveen Premium Income Municipal Fund 5, Inc. (which had outstanding 1,328
shares each of Series T and Series F MuniPreferred, which were redesignated as
Series T2 and Series F2 MuniPreferred, respectively); and Nuveen Premium
Income Municipal Fund 6, Inc. (which had outstanding 1,680 shares of Series W
MuniPreferred). After these mergers the Fund had a total of 12,336
MuniPreferred shares outstanding. The Fund had 40,884,796 shares of common
stock outstanding as of March 31, 1999. The common stock trades on the New
York Stock Exchange under the symbol "NPT." The Fund's principal office is
located at 333 West Wacker Drive, Chicago, Illinois 60606, and its telephone
number is (800) 257-8787.
The table below provides information on MuniPreferred shares since their
issuance.
<TABLE>
<CAPTION>
Amount Outstanding
Exclusive of Treasury Asset Coverage Involuntary Liquidating
As of Securities Per Share* Preference Per Share
----- --------------------- -------------- -----------------------
<S> <C> <C> <C>
10/31/1993..... 2,900 $148,771 $50,000
10/31/1994..... 12,336 $ 64,982 $25,000
10/31/1995..... 12,336 $ 70,877 $25,000
10/31/1996..... 12,336 $ 71,544 $25,000
10/31/1997..... 12,336 $ 73,424 $25,000
10/31/1998..... 12,336 $ 74,822 $25,000
</TABLE>
- --------
*Calculated by dividing net assets by the number of MuniPreferred shares
outstanding.
The following provides information about the Fund's outstanding shares as
of March 31, 1999:
<TABLE>
<CAPTION>
Amount Held by the
Fund or for its
Title of Class Amount Authorized Account Amount Outstanding
-------------- ----------------- ------------------ ------------------
<S> <C> <C> <C>
Common.............. 200,000,000 0 40,884,796
MuniPreferred....... 1,000,000 0 12,336
</TABLE>
USE OF PROCEEDS
The Fund will use the net proceeds of the offering, about $ after
payment of the sales load and offering costs, to buy municipal bonds (see
"Investment Objectives and Policies--Portfolio Investments"). 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>
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 authorized (12,336 shares issued
and 12,856 shares issued, as adjusted,
respectively)................................... $308,400,000 $321,400,000
Common Stock, $.01 per value per share;
200,000,000 shares authorized, 40,847,681 shares
outstanding*..................................... 408,477 408,477
Paid-in surplus................................... 564,371,822 564,126,208
Balance of undistributed net investment income.... 1,228,635 1,228,635
Accumulated net realized gain (loss) from
investment transactions.......................... (13,261,796) (13,261,796)
Net unrealized appreciation of investments........ 61,856,537 61,856,537
------------ ------------
Net Assets..................................... $923,003,675 $935,758,061
============ ============
</TABLE>
- --------
*None of these outstanding shares are held by or for the account of the Fund.
A-5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
The Fund's primary investment objective is current income exempt from
regular Federal income tax, consistent with the Fund's investment policies.
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
substantially all of its assets (more than 80%) in a diversified portfolio of
tax-exempt municipal bonds rated at the time of purchase within the four
highest grades (Baa or BBB or better) by Moody's or Standard and Poor's,
except that the Fund may invest up to 20% of its assets in unrated municipal
bonds which, in Nuveen Advisory's opinion, have credit characteristics
equivalent to, and are of comparable quality to, municipal bonds rated Baa or
BBB or better. The Fund will not invest in any rated municipal bonds that are
rated lower than Baa by Moody's or BBB by Standard & Poor's at the time of
purchase. Municipal bonds rated Baa or BBB or better are considered
"investment grade" securities. Bonds rated Baa are considered medium grade
obligations that lack outstanding investment characteristics and in fact have
speculative characteristics as well, while municipal bonds rated BBB are
regarded as having an adequate capacity to pay principal and interest. See
Appendix A to the Statement of Additional Information for a description of
securities ratings.
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
in Part B, the Fund will, as a fundamental policy, invest substantially all of
its assets (more than 80%) in tax-exempt municipal bonds that are rated at the
time of purchase within the four highest grades (Baa or BBB or better) by
Moody's or Standard and Poor's, except that the Fund may invest up to 20% of
its assets in unrated municipal bonds which, in Nuveen Advisory's opinion,
have credit characteristics equivalent to, and are of comparable quality to,
municipal bonds so rated. 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. For this purpose, "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.
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.
A-6
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement dated the
date hereof, each underwriter named below has severally agreed to purchase,
and the Fund has agreed to sell to such underwriter, the number of New
MuniPreferred shares set forth opposite the name of such underwriter.
<TABLE>
<CAPTION>
Number
Name of Shares
---- ---------
<S> <C>
Salomon Smith Barney Inc........................................
A.G. Edwards & Sons, Inc........................................
BT Alex. Brown Incorporated.....................................
Goldman, Sachs & Co.............................................
John Nuveen & Co. Incorporated..................................
Legg Mason Wood Walker, Incorporated............................
PaineWebber Incorporated........................................
Prudential Securities Incorporated..............................
Raymond James & Associates, Inc.................................
---
Total......................................................... 520
===
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters to purchase the shares included in this offering are subject to
the approval of certain legal matters by counsel and to certain other
conditions. The underwriters are obligated to purchase all the New
MuniPreferred shares if they purchase any of the shares.
The underwriters, for whom Salomon Smith Barney Inc. is acting as
representative, propose to offer some of the shares directly to the public at
the public offering price set forth on the cover page of this Prospectus and
some of the shares to certain dealers at the public offering price less a
concession not in excess of $ per share. The sales load the Fund will
pay of $ per share is equal to % of the initial offering price. The
underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share on sales to certain other dealers. After the initial
public offering, the underwriters may change the public offering price and the
concession. Investors must pay for any New MuniPreferred shares purchased in
the initial public offering on or before , 1999.
The Fund anticipates that the underwriters may from time to time act as
brokers or dealers in executing the Fund's portfolio transactions after they
have ceased to be underwriters. The underwriters are active underwriters of,
and dealers in, securities and act as market makers in a number of such
securities, and therefore can be expected to engage in portfolio transactions
with the Fund. John Nuveen & Co. Incorporated may engage in these transactions
only in compliance with the 1940 Act.
The Fund anticipates that the underwriters or one of their respective
affiliates may, from time to time, act in auctions as Broker-Dealers as set
forth under "The Auction."
John Nuveen & Co. Incorporated, one of the underwriters, is the parent
company of Nuveen Advisory.
The Fund and Nuveen Advisory have agreed to indemnify the underwriters
against certain liabilities, including liabilities arising under the 1933 Act,
or to contribute payments the underwriters may be required to make for any of
those liabilities.
LEGAL OPINIONS
Morgan, Lewis & Bockius LLP, Washington, D.C., will pass on certain legal
matters for the Fund, and Simpson Thacher & Bartlett will pass on certain
legal matters for the underwriters. Morgan, Lewis & Bockius LLP and Simpson
Thacher & Bartlett will rely as to certain matters under Minnesota law on the
opinion of Dorsey & Whitney LLP, Minneapolis, Minnesota.
A-7
<PAGE>
EXPERTS
The financial statements of the Fund at October 31, 1998 and the selected
per share data and ratios set forth under the caption "Financial Highlights"
for the period 1993 to October 31, 1998, appearing in Part A of this
Prospectus, have been audited by Ernst & Young LLP, Sears Tower, 223 South
Wacker Drive, Chicago, Illinois 60606, independent auditors, 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. 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.
A-8
<PAGE>
NUVEEN
EXCHANGE-TRADED FUNDS
MuniPreferred(R) Shares
Prospectus Part B
The Prospectus offering MuniPreferred shares for a Nuveen closed-end fund
(each, a "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, and financial highlights.
Part B of the Prospectus provides a more general description of the municipal
bonds in which each Fund invests and related risks, and more general
information about MuniPreferred shares, including 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.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
Prospectus is truthful or complete. 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 "nonappropriation" clause.
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, intend 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 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.
B-1
<PAGE>
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 Appendix A to 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.; Nuveen Insured
Premium Income Municipal Fund 2; Nuveen New York Select Quality Municipal
Fund, Inc.; Nuveen New York Investment Quality Municipal Fund, Inc., and
Nuveen New York Quality Income Municipal Fund, Inc.
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 Appendix C to 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>
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>
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>
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, tend 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 gain 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 Orders and Allocation of Shares."
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 and Asset Coverage 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 Aal and AAA), 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
B-5
<PAGE>
resulting dividend rates. If a rating agency downgrades MuniPreferred shares,
the Fund will alter its portfolio or redeem MuniPreferred shares. The Fund may
voluntarily redeem MuniPreferred shares under certain circumstances. See
"Description of MuniPreferred--Asset Maintenance and Rating Agency Guidelines"
for a description of the asset maintenance tests the Fund must meet.
Interest Rate Risk. The Fund issues MuniPreferred shares, which pay
dividends based on short-term interest 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 interest rates. 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. Dividends paid to MuniPreferred
shareholders could, however, exceed the income from the portfolio securities
purchased with the proceeds from the sale of MuniPreferred. Short-term
interest rates may fluctuate. If short-term rates 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. If rating agencies lower their ratings of municipal bonds in a
Fund's portfolio, the value of those bonds could decline, which could
jeopardize the rating agencies' ratings of MuniPreferred shares. In that case,
the Fund may be forced to sell downgraded portfolio securities (possibly at a
loss) and buy higher-rated securities to replace them. 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. Municipal issuers may have greater Year 2000 risks
than other issuers. 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 issuers in
that state and therefore the value of the Fund's investment portfolio. See
Part A of the Prospectus for a discussion of the specific risks for each
state.
B-6
<PAGE>
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 each 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 a Fund from an underwriting syndicate of which
Nuveen or its affiliates is a member under conditions set out in Rule l0f-3
under the 1940 Act. A Fund also may buy or sell municipal bonds or other
portfolio investments from or to another Fund or account managed by Nuveen
Advisory or an affiliate, under conditions set out in Rule 17a-7 under the
1940 Act.
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 1997), and prior thereto Vice President and Portfolio Manager of
Flagship Financial Inc., manages Nuveen Michigan Quality Income Municipal
Fund, Inc. (since 1993), and Nuveen Texas Quality Income Municipal Fund (since
1998). Mr. Davern manages eight Nuveen-sponsored open-end and seven other
Nuveen-sponsored closed-end investment companies.
William Fitzgerald, a Vice President (since 1995) and Portfolio Manager
(since 1998) of Nuveen Advisory, manages Nuveen Municipal Market Opportunity
Fund, Inc. (since 1990), Nuveen Quality Income Municipal Fund, Inc. (since
1991), Nuveen California Performance Plus Municipal Fund, Inc. (since 1991),
Nuveen California Municipal Market Opportunity Fund, Inc. (since 1991), Nuveen
California Investment Quality Municipal Fund, Inc. (since 1990), Nuveen
California Select Quality Municipal Fund, Inc. (since 1998), and Nuveen
California Quality Income Municipal Fund, Inc. (since 1991). Mr. Fitzgerald
manages three Nuveen-sponsored open-end and three other Nuveen-sponsored
closed-end investment companies.
J. Thomas Futrell, a Vice President (since 1991) and Portfolio Manager of
Nuveen Advisory (since 1986), manages Nuveen Premium Income Municipal Fund,
Inc. (since 1988), Nuveen Investment Quality Municipal Fund, Inc. (since
1990), and Nuveen New Jersey Investment Quality Municipal Fund, Inc. (since
1998). Mr. Futrell manages five Nuveen-sponsored open-end and four other
Nuveen-sponsored closed-end investment companies.
Richard Huber, a Vice President and Portfolio Manager of Nuveen Advisory
(since 1997), and prior thereto Vice President and Portfolio Manager of
Flagship Financial Inc., manages Nuveen Municipal Advantage Fund, Inc. (since
1998) and Nuveen Select Quality Municipal Fund, Inc. (since 1998). Mr. Huber
manages three Nuveen-sponsored open-end investment companies.
Steven Krupa, a Vice President and Portfolio Manager of Nuveen Advisory
(since 1990), manages Nuveen Insured Municipal Opportunity Fund, Inc. (since
1991), Nuveen Insured Quality Municipal Fund, Inc. (since 1991), Nuveen
Premier Insured Municipal Income Fund, Inc. (since 1998), and Nuveen Insured
Premium Income Municipal Fund 2 (since 1998). Mr. Krupa manages one Nuveen-
sponsored open-end investment company.
Edward Neild, a Vice President (since 1996), and prior thereto Assistant
Vice President (since 1993) of Nuveen Advisory, manages Nuveen Premium Income
Municipal Fund 4, Inc. (since 1993). Mr. Neild manages
B-7
<PAGE>
one other Nuveen-sponsored closed-end investment company. He is Managing
Director of Nuveen Investment Advisory Services, and has overall supervisory
responsibility for Nuveen's investment and management activity.
Thomas O'Shaughnessy, an Assistant Vice President (since 1998) and
Portfolio Manager of Nuveen Advisory since 1991, manages Nuveen Pennsylvania
Investment Quality Municipal Fund (since 1991), Nuveen Florida Investment
Quality Municipal Fund (since 1991), and Nuveen Florida Quality Income
Municipal Fund (since 1991). Mr. O'Shaughnessy manages seven Nuveen-sponsored
open-end and three other Nuveen-sponsored closed-end investment companies.
Stephen Peterson, a Vice President (since 1997) and Portfolio Manager of
Nuveen Advisory (since 1991), manages Nuveen Premier Municipal Income Fund,
Inc. (since 1992), Nuveen Premium Income Municipal Fund 2, Inc. (since 1994),
Nuveen Performance Plus Municipal Fund, Inc. (since 1998), Nuveen New York
Select Quality Municipal Fund, Inc. (since 1999), Nuveen New York Quality
Income Municipal Fund, Inc. (since 1999), Nuveen New York Performance Plus
Municipal Fund, Inc. (since 1999), and Nuveen New York Investment Quality
Municipal Fund, Inc. (since 1999). Mr. Peterson manages one Nuveen-sponsored
open-end and two other Nuveen-sponsored closed-end investment companies.
For its services, Nuveen Advisory is paid an annual management fee for each
Fund, as a percentage of average daily net asset value of each Fund, 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.................................. .6375%
For the next $250 million.................................. .6250%
For the next $500 million.................................. .6125%
For the next $1 billion.................................... .6000%
For assets over $2 billion................................. .5875%
</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
On June 21, 1996, a lawsuit was filed against Nuveen, Nuveen Advisory, six
Nuveen-sponsored closed-end funds (Nuveen Massachusetts Premium Income
Municipal Fund (ticker symbol NMT), Nuveen Insured Municipal Opportunity Fund,
Inc. (NIO), Nuveen Insured Premium Income Municipal Fund, Inc. (NPE), Nuveen
Premium Income Municipal Fund 2, Inc. (NPM), Nuveen Insured Premium Income
Municipal Fund 2 (NPX), and Nuveen Premium Income Municipal Fund 4, Inc.
(NPT)), and two of the funds' former directors (the "Defendants"). The suit,
which is pending in federal district court in the Northern District of
Illinois, seeks unspecified damages, an injunction, and other relief. The
plaintiffs allege that the funds' directors and Nuveen Advisory breached their
fiduciary duty in connection with alleged undisclosed conflicts of interest
relating to the maintenance of leverage in the funds and the alleged financial
interest of the Defendants. The plaintiffs also allege various
misrepresentations and omissions in prospectuses and share holder reports
about the use of leverage through the issuance and auctioning of MuniPreferred
and the Defendants' alleged financial interest in maintaining leverage, and
relating to expense ratios. The plaintiffs filed a motion to certify a
plaintiff class (which would include current and former shareholders of all
Nuveen leveraged closed-end funds) and a motion to certify a defendant class
(which would include the same leveraged closed-end funds). On March 30, 1999,
the court entered a memorandum opinion and order granting the Defendants'
motion to dismiss four of the plaintiffs' counts; denying the Defendants'
motion to dismiss the remaining count (breach of fiduciary duty under Section
36(b) of the 1940 Act) as to Nuveen Advisory, and granting the same motion as
to the remaining Defendants; and denying the plaintiffs' motion to certify a
plaintiff class and a defendant class.
B-8
<PAGE>
CERTAIN TRADING STRATEGIES OF THE FUNDS
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 than transactions in which a
Fund pays for and takes delivery of bonds within several days of the trade
date, because the value of the bond to be purchased 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 objective(s) 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 the Statement of Preferences
(the "Statement") also is Appendix B to the Fund's Statement of Additional
Information. 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 at 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 (l) 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.
B-9
<PAGE>
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 Appendix B to the Statement of Additional Information
for a description of the terms used in this section and a more detailed
discussion of this topic.
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. Except as provided below, 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 the 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."
B-10
<PAGE>
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 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
(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 before 12:00 Noon on the fourth business day
preceding the auction date for the rate period subsequent to such rate period,
no auction will be held for New MuniPreferred shares for the 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 if, within the respective time periods described in the
Statement, the Fund pays 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
B-11
<PAGE>
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.
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 dividend rate
resulting from the auction 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 dividend rate resulting from the auction; 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 weekly on the same day of the week on which dividends
are paid in a seven day 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 shares 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 Reference 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 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 Reference 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 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
days, and (II) the Reference 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 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 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 Reference 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 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 days, (y) the Reference Rate on that auction date
for the special rate period for which the auction
B-12
<PAGE>
is being held if that special rate period is 364 days or fewer or the
Treasury Note Rate on that auction date for the special rate period for
which the auction is being held if that special rate period is more than
364 days, and (z) the Reference Rate on that auction date for minimum rate
periods and (ii) the Rate Multiple on that auction date.
The "Reference Rate" is, for a seven-day rate period or a special rate
period of 28 days or less, the higher of the taxable equivalent of the short-
term municipal bond rate and the "AA" Composite Commercial Paper Rate; for a
special rate period of more than 28 but less than 183 days, the "AA."
Composite Commercial Paper Rate; and for a special rate period of more than
182 but less than 365 days, the Treasury Bill Rate.
The "AA" Composite Commercial Paper Rate, Treasury Note Rate, and Treasury
Bill Rate will be the rates announced on the auction date for the business day
immediately before the auction date. See Appendix B to the Statement of
Additional Information for a definition of these rates and the taxable
equivalent of the short-term municipal bond rate. 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 Page A-5 of Appendix B
to the Statement of Additional Information for a description of "prevailing
rating."
<TABLE>
<CAPTION>
Prevailing MuniPreferred Rating Percentage
------------------------------- ----------
<S> <C>
aa3/AA- or higher.............................................. 110%
a3/A-.......................................................... 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 dividend 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 (or if the Fund is a state Fund, the maximum marginal combined
Federal, State and local individual or corporate income tax rate (taking into
account the Federal income tax deductibility of state and local taxes paid or
incurred)). 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 AAA, in the case of the Nuveen Michigan Quality
Income Municipal Fund, Inc.) and 1940 Act asset coverage requirements.
Gross-Up Payments. If a Fund allocates net capital gain 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 gain or other taxable income before the next auction,
and the allocation is made retroactively solely as a result of the redemption
of some or all of the MuniPreferred shares or the liquidation of the Fund, 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, giving effect to the taxable portion of a dividend,
would cause a shareholder's Federal after-tax
B-13
<PAGE>
return (taking into account both the taxable portion of the dividend and the
gross-up payment) to be equal to the after-tax return the shareholder would
have received if no such taxable allocation had occurred. For state funds, the
gross-up payment will take into account what the shareholder's Federal, state
and local after-tax return would have been (taking into account the Federal
income tax deductibility of state and local taxes paid or incurred). 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,
state and local tax bracket and that you are not subject to the federal
alternative minimum tax. See "Tax Matters" in the Statement of Additional
Information for additional details.
The Funds have received an opinion of counsel to the effect that the manner
in which the Funds intend to allocate items of tax-exempt income, net capital
gain 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 gain or other taxable income the
Internal Revenue Service ("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 (200%
asset coverage). 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 its asset coverage will be
approximately 285%. 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 and Rating Agency
Guidelines--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, 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 dividend
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.
B-14
<PAGE>
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 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 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 requires each Fund to maintain, immediately after
the issuance of New MuniPreferred, asset coverage of at least 200% for senior
securities that are stock, including MuniPreferred shares. Each Fund must
maintain, as of the last business day of each month in which any MuniPreferred
shares are outstanding, asset coverage of at least 200% for 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 into account the
deduction of offering costs and sales loads, the asset coverage for each
Fund's MuniPreferred shares would have been approximately 285%.
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
B-15
<PAGE>
AAA, 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 shares will be sufficiently
varied, and of sufficient quality and amount, to justify the assigned ratings.
While the guidelines do not have the force of law, each Fund has adopted them
to obtain the rating agencies' ratings on MuniPreferred shares. 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. In any event, the rating agencies may at any time change or withdraw
their ratings. Because each Fund must maintain "Aaa" (from Moody's) or "AAA"
(from Standard & Poor's) ratings on MuniPreferred shares (Aa1 or AAA, 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 shares.
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 an 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 Appendix A to the Statement of
Additional Information for a detailed description of the Moody's and Standard
& Poor's rating guidelines. These requirements are discussed below.
B-16
<PAGE>
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.
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.
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, a majority of MuniPreferred shareholders, 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, a majority of MuniPreferred shareholders, voting as a separate class,
must approve changes to a Fund's fundamental investment policies.
For those Funds organized as Minnesota corporations, 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 the 1940 Act require a different percentage. For
those Funds organized as Massachusetts business trusts, when MuniPreferred
shareholders vote as a class, the Declaration of Trust generally requires a
vote of holders of a majority of the MuniPreferred shares to approve the
action, unless the 1940 Act requires a different 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 shares of 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
B-17
<PAGE>
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 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
Appendix B to 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 shares, 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
B-18
<PAGE>
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 a 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
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 (other than an affiliate of a Fund) 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 from a
potential shareholder, and will treat such a bid from an existing shareholder
as a sell order. 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 Appendix B to 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.
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<PAGE>
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 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 1,000 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 Bid order of 3.5% rate for all
sell all 500 shares if 500 shares
auction rate is less than
3.5%
Current Shareholder B... Owns 300 shares, wants to Hold order--will take the
hold auction rate
Current Shareholder C... Owns 200 shares, wants to Bid order of 3.3% rate for all
sell all 200 shares if 200 shares
auction rate is less than
3.3%
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 1,000 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 shares
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 for the preceding rate period) must
be business days but need not be consecutive days. See "Description of
MuniPreferred--Dividends and Rate Periods--Designation of Special 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
B-20
<PAGE>
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 to Auction Agent." Broker-Dealers may contact prospective
purchasers of MuniPreferred shares 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 or 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 and including the amount of that excess; and
B-21
<PAGE>
(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 hold 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 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 and gain. See "The Auction--Auction
Dates; Advance Notice of Allocation of Taxable Income" and "--Acceptance or
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 lesser of the
Kenny Index (if the rate period is less than 183 days) or 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 183 days; (b) the Treasury
Bill Rate on that auction date for that rate period if the rate period is
more than 182 days but less than 365 days; or (c) the Treasury Note Rate on
that auction date for that rate period if the rate period is more than 364
days (the rate in clauses a, b or c is the "benchmark rate"); 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:
(1) if the "taxable yield rate" is greater than the benchmark rate, then
the benchmark rate; or
B-22
<PAGE>
(2) if the taxable yield rate is less than or equal to the benchmark
rate, then the rate equal to the sum of (a) the lesser of the Kenny Index
(if the rate period is less than 183 days) or the product of the benchmark
rate multiplied by the factor in clause (2) above, and (b) 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.
The "taxable yield rate" is the rate determined by (a) dividing the amount
of taxable income available for distribution per share of MuniPreferred by the
number of days in the dividend period in which the Fund intends to distribute
taxable income, (b) multiplying the amount in (a) by 365 (if the dividend
period is seven days) or by 360 (for any other dividend period), and (c)
dividing the amount determined in (b) by $25,000.
See Appendix B to the Statement of Additional Information for the
definitions of "Kenny Index," "AA Composite Commercial Paper Rate," "Treasury
Bill Rate" and "Treasury Note 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, orders will be accepted or rejected in
the following order.
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 have its bid order accepted
(although it may not be able to buy all the shares specified in its order).
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.
B-23
<PAGE>
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 shares,
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 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.
B-24
<PAGE>
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 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
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "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. Each
Fund will allocate distributions to shareholders that are treated as tax-
exempt interest and as long-term capital gain and ordinary income, if any,
proportionately among the common and MuniPreferred shares. Each 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 a
Fund will make payments to MuniPreferred shareholders to offset the tax
effects
B-25
<PAGE>
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 each 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.
State Funds: State and Local Matters
See "Tax Matters" in the Statement of Additional Information for state and
local tax information.
COMMON STOCK
Common shares have equal voting rights and equal rights as to dividends,
assets, and liquidation with respect to one another. 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 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
B-26
<PAGE>
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 fail
to qualify as a regulated investment company under the Code; 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.
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 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-27
<PAGE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
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
Report of Independent Auditors............................................. S-29
Financial Statements....................................................... S-30
Appendix A--Ratings of Investments......................................... A-1
Appendix B--Statement of Preferences....................................... B-1
</TABLE>
B-28
<PAGE>
APPENDIX A
TAXABLE EQUIVALENT YIELD TABLE
The taxable equivalent yield is the current yield you would need to earn on
a taxable investment in order to equal a stated Federal tax-free yield on a
municipal investment. To assist you to more easily compare municipal
investments like MuniPreferred shares with taxable alternative investments,
the table below presents the taxable equivalent yields for a range of
hypothetical Federal tax-free yields and tax rates:
Taxable Equivalent of Tax-Free Yields
Tax Free Yield
<TABLE>
<CAPTION>
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
- -------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
28.0%............................................. 5.56% 6.25% 6.94% 7.64% 8.33%
31.0%............................................. 5.80% 6.52% 7.25% 7.97% 8.70%
36.0%............................................. 6.25% 7.03% 7.81% 8.59% 9.38%
39.6%............................................. 6.62% 7.45% 8.28% 9.11% 9.93%
</TABLE>
B-A-1
<PAGE>
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representation not contained in this Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Fund or any underwriter. This Prospectus
is not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary........................................................ A-1
Financial Highlights...................................................... A-3
The Fund.................................................................. A-4
Use of Proceeds........................................................... A-4
Capitalization............................................................ A-5
Investment Objectives and Policies........................................ A-6
Underwriting.............................................................. A-7
Legal Opinions............................................................ A-7
Experts................................................................... A-8
Municipal Bonds........................................................... B-1
Portfolio Investments..................................................... B-2
Insured Funds: Municipal Bond Insurance................................... B-2
Investment Restrictions................................................... B-4
Risk Factors.............................................................. B-5
Management of the Fund.................................................... B-7
Certain Trading Strategies of the Funds................................... B-9
Description of MuniPreferred.............................................. B-9
The Auction............................................................... B-18
Tax Matters............................................................... B-25
Common Stock.............................................................. B-26
Control of the Fund....................................................... B-26
Repurchase of Shares or Conversion to an Open-End Fund.................... B-26
Net Asset Value........................................................... B-27
Other Service Providers................................................... B-27
Available Information..................................................... B-27
Table of Contents of the Statement of Additional Information.............. B-28
Taxable Equivalent Yield Table............................................ B-A-1
</TABLE>
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$13,000,000
Nuveen Premium
Income
Municipal Fund 4, Inc.
Municipal Auction
Rate Cumulative
Preferred Stock
MuniPreferred(R)
520 Shares Series W2
--------
PROSPECTUS
, 1999
--------
Salomon Smith Barney
A.G. Edwards & Sons, Inc.
BT Alex. Brown
Goldman, Sachs & Co.
John Nuveen & Co. Incorporated
Legg Mason Wood Walker
Incorporated
PaineWebber Incorporated
Prudential Securities
Raymond James & Associates, Inc.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the Registration
Statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
STATEMENT OF ADDITIONAL INFORMATION
DATED , 1999
NUVEEN PREMIUM INCOME MUNICIPAL
FUND 4, INC.
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
Report of Independent Auditors...................... S-29
Financial Statements................................ S-30
Ratings of Investments.............................. A-1
Statement of Preferences............................ B-1
</TABLE>
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 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 stocks
that are undervalued.
The Fund seeks to achieve its investment objective by investing
substantially all of its assets (more than 80%) in a diversified portfolio of
tax-exempt municipal bonds rated at the time of purchase within the four highest
grades (Baa or BBB or better) by Moody's or Standard and Poor's, except that the
Fund may invest up to 20% of its assets in unrated municipal bonds which, in
Nuveen Advisory , s opinion, have credit characteristics equivalent to, and are
of comparable quality to, municipal bonds rated Baa or BBB or better. The Fund
will not invest in any rated municipal bonds that are rated lower than Baa by
Moody's or BBB by Standard & Poor's at the time of purchase. Municipal bonds
rated Baa or BBB or better are considered "investment grade" securities. Bonds
rated Baa are considered medium grade obligations that lack outstanding
investment characteristics and in fact have speculative characteristics as well,
while municipal bonds rated BBB are regarded as having an adequate capacity to
pay principal and interest. See Appendix A to the Statement of Additional
Information for a description of securities ratings.
S-1
<PAGE>
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 (more than 80%) in tax-exempt municipal bonds that are rated at the time
of purchase within the four highest grades (Baa or BBB or better) by Moody's or
Standard and Poor's, except that the Fund may invest up to 20% of its assets in
unrated municipal bonds which, in Nuveen Advisory's opinion, have credit
characteristics equivalent to, and are of comparable quality to, municipal bonds
so rated. 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.
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. For this purpose, 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.
S-2
<PAGE>
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 bonds 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 BONDS
Included within the general category of municipal bonds 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>
appropriated for such purpose on a yearly basis. In the case of a "non-
appropriationn 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 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 bonds 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 bonds 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 bonds with long-term maturities.
Obligations of issuers of municipal bonds 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>
(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
~evenues 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" bellow;
(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>
(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, (other than a bond
insurer) 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. When a municipal bond is insured by bond insurance, it shall not be
~onsidered a security that is issued or guaranteed by the insurer; instead, the
issuer of the municipal bond will be determined in accordance with the
principles set out above. The foregoing restrictions do not limit the percentage
of the Fund's assets that may be invested in municipal bonds insured by any
given insurer.
In addition to the limitations set forth above, the Fund will not, as a
matter of operating policy, (1) invest for the purpose of exercising control or
management, or (2) 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>
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 rules promulgated by the Securities and
Exchange Commission ("SEC") 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>
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>
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 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>
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 agreement's 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" in the Prospectus. 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>
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,* 50 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;
Chairman and Director of Rittenhouse
Financial Services Inc. (since 1999).
- ------------------------------ ------------------------------------- -------------------------------------
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>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter R. Sawers, 66 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
Certified Management
Consultant.
- -------------------------------------------------------------------------------------------------------------
William J. Schneider, 54 Director Senior Partner and Chief Operating
4000 Miller-Valentine Ct Officer, Miller-Valentine Partners;
P.O. Box 744 Vice President, Miller-Valentine Group,
Dayton, OH 45401 a development and contract company;
Member Community Advisory Board,
National City Bank, Dayton, Ohio.
- -------------------------------------------------------------------------------------------------------------
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>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<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, 35 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>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Richard A. Huber, 36 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 President 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>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<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>
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 quarter by
the execution of a Participation Agreement before the beginning of the calendar
quarter 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 42 open-
end funds and 52 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
paid to each director during the calendar year 1998. 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 PAID TO
NAME OF DIRECTOR FROM THE FUND DIRECTORS(l)
- ---------------- ------------- -----------------
<S> <C> <C>
Robert P. Bremner..... $1,161 $71,500
Lawrence H. Brown..... 1,270 79,000
Anne E. Impellizzeri.. 1,161 71,500
Peter R. Sawers....... 1,161 72,000
William J. Schneider.. 1,161 71,500
Judith M. Stockdale... 1,161 72,000
</TABLE>
- ------------
(1) Includes compensation for service on the boards of 37 Nuveen open-end funds
and 52 Nuveen closed-end funds managed by Nuveen Advisory ("NAC Funds").
At March 31, 1999, 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>
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 $5,712,194, $5,551,306 and
$5,475,423 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
333 West Wacker Drive (Principal Executive Officer),
John Nuveen & Co. Incorporated
</TABLE>
S-17
<PAGE>
<TABLE>
<S> <C>
Chicago, Illinois 60606
John P. Amboian....................President, John Nuveen & Co. Incorporated
333 West Wacker Drive
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>
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>
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
Note: Capitalized terms used in the following section have the meaning
assigned to them in the Statement of Preferences, which is included as Appendix
B to this Statement of Additional Information.
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 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>
DTC, a New York-chattered 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" in the
Prospectus and notices from the Fund. TheAuction 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.
S-21
<PAGE>
TAX MATTERS
The following is based upon the advice of Morgan, Lewis & Bockius LLP,
counsel to the Fund.
The Fund intends to qualify under Subchapter M of the Code as a
regulated investment company and satisfy 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) net investment income (i.e., 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, or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses). 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
S-22
<PAGE>
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
Tach 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 gain (i.e., the excess of the Fund's net
long-term capital gain over net short-term capital loss), 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 gain 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.
S-23
<PAGE>
The Fund intends each year to allocate, to the fullest extent practicable, net
tax-exempt interest, net capital gain 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 or fewer, and may, in the case of any other Special Rate Period,
notify the Auction Agent of the amount of any net capital gain 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
gain 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 gain or other taxable income for
Federal income tax purposes to its MuniPreferred shares, 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 has received an opinion of counsel to the effect that the
manner in which the Fund intends to allocate items of tax-exempt income, net
capital gain 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 gain 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
S-24
<PAGE>
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
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 net investment 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 an income 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.
S-25
<PAGE>
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 (which term includes net short-
term capital gain). To the extent received by foreign investors, exempt-interest
dividends, distributions of net capital gain 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 gain of corporations at the rates applicable to
ordinary income. For non-corporate taxpayers, however,
S-26
<PAGE>
under current law, short-term capital gain and ordinary income will be taxed at
a maximum rate of 39.6% while long-term capital gain 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 net 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 $25,750 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.
S-27
<PAGE>
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 May 21, 1999, Cede & Co., Bowling Green Station, P.O. Box 20, New
York, NY, 10274-0020, was the record owner of 83% of the Fund's common shares.
EXPERTS
The Fund's financial statements as of October 31, 1998 appearing in this
Registration Statement have 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.
S-28
<PAGE>
Report of Independent Auditors
The Boards of Directors and Shareholders
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Premium Income Municipal Fund, Inc., Nuveen
Premium Income Municipal Fund 2, Inc. and Nuveen Premium Income Municipal Fund
4, Inc. as of October 31, 1998, and the related statements of operations,
changes in net assets and the financial highlights for the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the-financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
October 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Nuveen Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund
2, Inc. and Nuveen Premium Income Municipal Fund 4, Inc. at October 31, 1998,
and the results of their operations, changes in their net assets and financial
highlights for the periods indicated therein in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Chicago, Illinois
December 11, 1998
S-29
<PAGE>
Portfolio of Investments
Nuveen Premium Income Municipal Fund 4, Inc. (NPT)
October 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alabama - 4.6%
$ 8,000,000 Alabama Higher Education Loan Corporation, Student Loan No Opt. Call AAA $ 8,610,400
Revenue Refunding Bonds, Series 1994-D
5.850%, 9/01/04 (Alternative Minimum Tax)
20,745,000 Alabama Special Care Facilities Financing Authority 11/05 at 101 AA+ 20,249,402
of Birmingham, Hospital Revenue Bonds (Daughters of
Charity National Health System-Providence Hospital and St.
Vincents Hospital), Series 1995, 5.000%, 11.01/25
2,000,000 The Government Utility Services Corporation of the City 6/08 at 102 AAA 2,033,800
of Bessemer (Alabama), Water Supply Revenue Bonds, Series 1998,
5.250%, 6/01/32
11,000,000 The DCH Health Care Authority, Health Care Facilities Revenue 12/02 at 102 A+ 11,600,050
Bonds, Series 1993-B, 5.750%, 6/01/23
- ------------------------------------------------------------------------------------------------------------------------
Arkansas - 0.2%
565,000 Arkansas Development Finance Authority, Single Family 8/01 at 103 AA 600,770
Mortgage Revenue Refunding Bonds, 1991 Series A (FHA Insured
or VA Guaranteed Mortgage Loans), 8.000%, 8/15/11
445,463 City of Jacksonville, Arkansas, Residential Housing Facilities 7/03 at 103 Aaa 487,973
Board, Single Family Mortgage Revenue Refunding Bonds, Series
1993A, 7.900%, 1/01/11
752,362 Residential Housing Facilities Board of Lonoke County, Arkansas, 4/05 at 103 Aaa 827,471
Single Family Mortgage Revenue Refunding Bonds, Series 1993A,
7.900%, 4/01/11
- ------------------------------------------------------------------------------------------------------------------------
California - 3.6%
5,000,000 California Health Facilities Financing Authority, 12/00 at 102 A 5,337,250
Kaiser Permanent Revenue Bonds, 1990 Series A,
6.500%, 12/01/20
4,780,000 Foothill/Eastern Transportation Corridor Agency No Opt Call Baa 2,190,722
(California), Toll Road Revenue Bonds, Series
1995A, 0.000%, 1/01/14
Community Redevelopment Financing Authority of the
Community Redevelopment Agency of the City of Los
Angeles, California, Grand Central Square Multifamily
Housing Bonds, 1993 Series A:
500,000 5.750%, 12/01/13 (Alternative Minimum Tax) 6/03 at 102 BB 503,780
3,900,000 5.900%, 12/01/26 (Alternative Minimum Tax) 12/98 at 102 A 3,901,794
4,500,000 Los Angeles County Transportation Commission (California), 7/02 at 102 Aaa 5,079,330
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series, 1992-A, 6.750%, 7/01/19 (Pre-refunded to 7/01/02)
1,715,000 Housing Authority of the County of Merced (California), 1/04 at 102 Aaa 1,779,244
Multifamily Housing Refunding Bonds, Series 1993A (Belmont
Park Apartments Project), 5.875%, 1/01/19
2,500,000 Transmission Agency of Northern California, California-Oregon 5/02 at 102 AAA 2,750,675
Transmission Project Revenue Bonds, 1992 Series A, 6.500%,
5/01/16
5,000,000 Airports Commission, City and County of San Francisco, 5/04 at 101 AAA 5,479,950
California, San Francisco International Airport, Second
Series Revenue Bonds, Issue 8, 6.300%, 5/01/25
(Alternative Minimum Tax)
3,545,000 Redevelopment Agency of the City of San Leandro, Plaza 1 6/03 at 102 A- 3,771,277
and 2 Redevelopment Projects, 1993 Tax Allocation Bonds,
Series A, 6.125%, 6/01/23
1,945,000 South Gate Public Financing Authority (Los Angeles County, No Opt. Call AAA 2,276,272
California), Water Revenue Refunding Bonds, 1996 Series A,
6.000%, 10/01/12
- ------------------------------------------------------------------------------------------------------------------------
Colorado - 3.2%
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1992C:
1,100,000 6.750%, 11/15/22 (Pre-refunded to 11/15/02) (Alternative 11/02 at 102 Aaa 1,242,846
Minimum Tax)
4,140,000 6.750%, 11/15/22 (Alternative Minimum Tax) 11/02 at 102 Baa1 4,532,886
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1990A:
405,000 8.500%, 11/15/23 (Pre-refunded to 11/15/00) (Alternative 11/00 at 102 Aaa 452,276
Minimum Tax)
3,695,000 8.500%, 11/15/23 (Alternative Minimum Tax) 11/00 at 102 Baa1 4,062,505
115,000 8.000%, 11/15/25 (Pre-refunded to 11/15/00) 11/00 at 102 Aaa 127,300
1,190,000 8.000%, 11/15/25 (Alternative Minimum Tax) 11/00 at 102 Baa1 1,294,399
</TABLE>
S-30
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Colorado (continued)
City and County of Denver, Colorado, Airport System
Revenue Bonds, Series 1991A:
$ 315,000 8.750%, 11/15/23 (Pre-refunded to 11/15/01) 11/01 at 102 Aaa $ 366,389
(Alternative Minimum Tax)
885,000 8.750%, 11/15/23 (Alternative Minimum Tax) 11/01 at 102 Baa1 1,009,095
City and County of Denver, Colorado, Airport
System Revenue Bonds, Series 1991D:
6,000,000 7.500%, 11/15/02 (Alternative Minimum Tax) 11/01 at 102 Baa1 6,650,880
3,040,000 7.750%, 11/15/13 (Alternative Minimum Tax) No Opt. Call Baa1 3,889,376
865,000 7.750%, 11/15/21 (Pre-refunded to 11/15/01) (Alternative Minimum Tax) 11/01 at 102 Aaa 981,438
3,280,000 7.750%, 11/15/21 (Alternative Minimum Tax) 11/01 at 102 Baa1 3,646,507
210,000 7.000% 11/15/25 (Pre-refunded to 11/15/01) 11/01 at 100 Aaa 230,076
790,000 7.000%, 11/15/25 (Alternative Minimum Tax) 11/01 at 100 Baa1 847,741
- ------------------------------------------------------------------------------------------------------------------------------------
Connecticut - 1.4%
6,500,000 State of Connecticut Health and Educational Facilities
Authority, Revenue Bonds, Yale-New Haven Hospital Issue,
Series F, 7.1100%, 7/01/25 (Pre-refunded to 7/01/00) 7/00 at 102 AAA 7,010,120
3,000,000 Connecticut Housing Finance Authority, Housing Mortgage 5/06 at 102 AA 3,236,850
Finance Program Bonds, 1996 Series C-2, 6.250%, 11/15/18
2,400,000 Connecticut Development Authority, Water Facilities Revenue 12/03 at 102 AAA 2,720,952
Refunding Bonds (The Connecticut Water Company Project-1993
Series), 6.650%, 12/15/20
- ------------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 5.1%
5,000,000 District of Columbia, (Washington, D.C.), General Obligation 6/03 at 102 AAA 5,480,750
Bonds, 6.000%, 6/01/09
6,000,000 District of Columbia (Washington, D.C.) General Obligation No Opt. Call AAA 6,522,720
Refunding Bonds, Series 1993 B, 5.500%, 6/01/10
3,240,000 District of Columbia, Hospital Revenue Refunding Bonds 8/02 at 102 A3 3,495,247
(Medlantic Healthcare Group, Inc. Issue),
Series 1992B, 6.750%, 8/15/07
4,250,000 District of Columbia, Hospital Revenue Refunding Bonds 8/06 at 102 AAA 4,610,273
(Medlantic Healthcare Group, Inc. Issue), Series 1993A,
5.750%, 8/15/14
3,890,000 District of Columbia (Washington, D.C.), General Obligation No Opt. Call AAA 4,223,341
Refunding Bonds, Series 1993-A3, 5.500%, 6/01/06
9,500,000 District of Columbia (Washington, D.C.), General Obligation No Opt. Call AAA 10,675,051
Refunding Bonds, Series 1993A, 6.000%, 6/01/07
5,000,000 District of Columbia Housing Finance Agency, Collateralized 12/04 at 103 AAA 5,171,600
Single Family Mortgage Revenue Bonds, Series 1988F-1, 5.850%,
12/01/14 (Alternative Minumum Tax)
2,000,000 District of Columbia, Revenue Bonds (The American College of 8/01 at 102 AAA 2,173,440
Obstetricians and Gynecologists Issue), Series 1991, 6.500%, 8/15/18
4,500,000 District of Columbia, University Revenue Refunding Bonds (The Howard 10/02 at 102 AAA 5,068,980
University Issue), Series 1992A, 6.750%, 10/01/12 (Pre-refunded to 10/01/02)
- ------------------------------------------------------------------------------------------------------------------------------------
Florida - 0.9%
8,000,000 City of Sunrise, Florida, Utility System Revenue Refunding Bonds, 10/18 at 100 AAA 8,085,440
Series 1998, 5.000%, 10/01/28
- ------------------------------------------------------------------------------------------------------------------------------------
Georgia - 2.0%
2,930,000 Development Authority of Burke County Georgia, No Opt. Call AAA 3,166,568
Pollution Control Revenue Bonds
(Oglethorpe Power Company Vogtle Project),
Series 1992, 7.500%, 1/01/03
2,880,000 Municipal Electric Authority of Georgia, General Power No Opt. Call A 3,807,965
Revenue Bonds, 1992B Series, 8.250%, 1/01/11
4,185,000 Municipal Electirc Authority of Georgia, General Power No Opt. Call AAA 5,572,244
Revenue Bonds, Series EE, 7.250%, 1/01/24
5,500,000 Municipal Electirc Authority of Georgia, General Power No Opt. Call AAA 6,025,800
Revenue Bonds, 1993B Series, 5.700%, 1/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Hawaii - 0.7%
1,500,0000 State of Hawaii, Airports System Revenue Bonds, Series of 1990 7/00 at 102 AAA 1,609,545
(Payable Solely from the Receipts of the Aviation Fuel Tax and
the Revenues of the State of Hawaii Airports System), 7.300%, 7/01/20
(Alternative Minimum Tax)
5,000,000 Honolulu, Hawaii, City and County Refunding and Improvement Bonds, No Opt. Call AA 5,178,400
Series 1993B, 5.000%, 10/01/13
</TABLE>
S-31
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Illinois - 12.7%
$ 4,000,000 Board of Education of the City of Chicago, General Obligation Lease No Opt. Call AAA $ 4,669,080
Certificates, 1992 Series A, 6.250%, 1/01/15
5,000,000 City of Chicago, Illinois, Sales Tax Revenue Bonds, Series 1998, 5.250%,
1/01/28 7/08 at 102 AAA 5,076,000
Cook County School District 99 (Cicero), General Obligation School Bonds,
Series 1997: 7/08 at 102 AAA 5,076,000
1,345,000 8.500%, 12/01/12 No Opt. Call Aaa 1,882,597
1,455,000 8.500%, 12/01/13 No Opt. Call Aaa 2,051,521
1,685,000 8.500%, 12/01/15 No Opt. Call Aaa 2,401,209
3,140,000 Illinois Development Finance Authority, Child Care Facility Revenue 9/02 at 102 N/R 3,356,629
Bonds, Series 1992 (Illinois Facilities Fund Project), 7.400%,
9/01/04
2,240,000 Illinois Educational Facilities Authority, Revenue Bonds, Chicago College No Opt. Call AAA 2,659,933
of Osteopathic Medicine, Series A, 8.750%, 7/01/05
10,360,000 Illinois Educational Facilities Authority, Revenue Refunding Bonds, 7/01 at 102 A1*** 11,452,358
Loyola University of Chicago, Series 1991-A, 7.125%, 7/01/21
(Pre-refunded to 7/01/01)
3,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds, Series 10/03 at 102 A- 3,077,010
1993 (Illinois Masonic Medical Center), 5.500%, 10/01/19
2,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1992
(Trinity Medical Center), 7.000%, 7/01/12 7/02 at 102 BBB 2,165,080
Illinois Health Facilities Authority, Revenue Refunding Bonds,
Series 1993C (Lutheran General Healthsystem):
5,705,000 7.000%, 4/01/08 No Opt. Call A+ 6,788,037
4,075,000 7.000%, 4/01/14 No Opt. Call A+ 5,040,612
8,190,000 Illinois Housing Development Authority, Multi-Family Program Bonds, 9/04 at 102 A+ 8,897,534
Series 5, 6.650%, 9/01/14
3,410,000 Illinois Housing Development Authority, Section 8 Elderly Housing 11/02 at 102 A 3,607,337
Revenue Bonds (Skyline Towers Apartments), Series 1992B, 6.875%,
11/01/17
3,400,000 Illinois Housing Development Authority, Section 8 Elderly Housing 1/03 at 102 A*** 3,801,472
Revenue Bonds (Morningside North Development), Series 1992D, 6.600%,
1/01/07 (Pre-refunded to 1/01/03)
5,000,000 Illinois Health Facilities Authority, Revenue Bonds, Series 1990 11/00 at 102 A3*** 5,471,950
(Riverside Senior Living Center Project), 7.500%, 11/01/00
(Pre-refunded to 11/01/00)
11,690,000 Illinois Health Facilities Authority, Refunding Revenue bonds, Series 11/00 at 102 AAA 13,175,448
1990-B (Hinsdale Hospital), 9.000%, 11/15/15
2,025,000 Long Creek Township, Macon County, Illinois, Waterworks Refunding 5/03 at 100 N/R 2,126,108
Revenue Bonds, Series 1993, 7.250%, 5/01/23
3,050,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake, McHenry No Opt. Call AAA 3,980,769
and Will Counties, Illinois, General Obligation Bonds, Series 1990A,
7.200%, 11/01/20
14,375,000 Village of Wheeling, Illinois, Multifamily Housing Revenue Bonds, 2/03 at 100 AAA 14,952,013
Series 1993A (FHA Insured Mortgage Loan-Arlington Club Project),
6.400%, 2/01/40
4,685,000 Town of Wood River, Wood River Township Hospital, Madison County, 2/03 at 102 BBB 5,144,692
Illinois, General Obligation Bonds (Alternate Revenue Source), Series
1993, 6.625%, 2/01/14
4,460,000 Town of Wood River, Wood River Township Hospital, Madison County, Illinois, 2/04 at 102 BBB 4,858,992
General Obligation Tort Immunity Bonds, Series 1993, 6.500%, 2/01/14
- -----------------------------------------------------------------------------------------------------------------------------------
Indiana - 3.4%
2,250,000 Indiana Bond Bank, Special Program Bonds, Series 1992B, 6.750%, 8/01/12 2/03 at 102 A+ 2,511,180
3,200,000 Indiana Health Facility Financing Authority, Hospital Revenue Refunding 9/02 at 102 A 3,537,952
Bonds, Series 1992 (The Methodist Hospitals, Inc.), 6.750%, 9/15/09
2,100,000 City of Indianapolis, Indiana, Economic Development Revenue Bonds, Series 7/03 at 103 N/R 2,115,180
1993A (The Meadows-Section 8 Assisted Project), 6.000%, 7/01/23
(Alternative Minimum Tax)
2,000,000 Hospital Authority of the City of Kokomo (Indiana), Hospital Revenue No Opt. Call N/R 2,208,020
Refunding Bonds, Series 1993 (Saint Joseph Hospital and Health Center
of Kokomo), 6.250%, 8/15/05
3,615,000 Mooresville Consolidated School Building Corporation, First Mortgage 1/04 at 101 A*** 4,021,037
Bonds, Series 1994A (Morgan County, Indiana), 6.200%, 7/15/15 (Pre-
refunded to 1/15/04)
5,900,000 Muncie School Building Corporation, First Mortgage Bonds, Series 1992, 7/01 at 102 N/R*** 6,447,756
6.625%, 7/15/14 (Pre-refunded to 7/15/01)
</TABLE>
S-32
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Indiana (continued)
$ 9,500,000 City of Petersburg, Indiana, Pollution Control Refunding Revenue 1/03 at 102 Aa2 $10,212,215
Bonds, Series 1993A (Indianapolis Power and Light Company Project),
6.100%, 1/01/16
- -----------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.6%
780,000 City of Davenport, Iowa, Home Ownership Mortgage Revenue Refunding Bonds, 9/04 at 102 A1 838,399
Series 1994, 7.900%, 3/01/10
3,810,000 Iowa Finance Authority, Hospital Revenue Bonds (Trinity Regional Hospital 7/02 at 102 N/R*** 4,285,107
Project Series 1993, 7.000%, 7/01/12 (Pre-refunded to 7/01/02)
- -----------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.3%
1,475,000 Johnson County, Kansas, Single Family Mortgage Revenue Refunding Bonds, 5/04 at 103 A 1,614,889
Series 1994, 7.100%, 5/01/12
1,200,000 Labette County, Kansas, Single Family Mortgage Revenue Refunding Bonds, 6/03 at 103 Aa2 1,292,352
1993 Series A, 8.400%, 12/01/11
- -----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 0.8%
7,000,000 Kentucky Housing Corporation, Housing Revenue Bonds, 1996 Series 7/06 at 102 AAA 7,519,120
A, 6.375%, 7/0128 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 1.2%
3,415,000 Clover Dale Housing Corporation, 1995 Multifamily Mortgage Revenue 4/01 at 100 AA- 3,491,325
Refunding Bonds (Clover Dale Plaza-FHA Insured Mortgage, Section 8
Assisted Project), Series A, 6.550%, 2/01/22
6,555,000 Orleans Levee District (A Political Subdivision of the State of Louisiana), 12/05 at 102 AAA 7,280,049
Public Improvement Bonds, Series 1986, 5.950%, 11/01/04
- -----------------------------------------------------------------------------------------------------------------------------------
Maine - 0.9%
8,000,000 Corporation, Subordinate Student Loan Revenue Bonds, Series 1994-2, No Opt. Call A 8,413,280
6.250%, 11/01/06 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.8%
5,000,000 Community Development Administration, Maryland Department of Housing 1/07 at 102 Aa2 5,336,850
and Community Development, Housing Revenue bonds, Series 1996A, 5.875%,
7/01/16
2,000,000 Maryland health and Higher Educational Facilities Authority, Project and 7/03 at 102 Baa1 2,049,280
Refunding Revenue Bonds, Doctors Community Hospital Issue, Series 1993,
5.750%, 7/01/13
1,790,000 Maryland Transportation Authority, Special Obligation Revenue Bonds, 7/04 at 102 AAA 1,908,194
Baltimore/Washington International Airport Projects, Series 1994-A
(Qualified Airport Bonds), 6.400%, 7/01/19 (Alternative Minimum Tax)
6,800,000 Housing Opportunities Commission of Montgomery County (Montgomery 7/06 at 102 Aa 7,317,004
County, Maryland), Multifamily Housing Revenue Bonds, 1996 Series B,
6.40%, 7/01/28 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 1.8%
4,500,000 Massachusetts Health and Educational Facilities Authority, Revenue 4/01 at 102 AAA 4,953,105
Bonds, Series 1991-C (New England Deaconess Hospital), 7.200%,
4/01/22 (Pre-refunded to 4/01/01)
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue 7/03 at 102 Baa1 2,089,040
Bonds, Faulkner Hospital Issue, Series C, 6.000%, 7/01/13
2,000,000 Massachusetts Housing Finance Agency, Housing Project Revenue Bonds, 4/03 at 102 A+ 2,126,640
6.300%, 10/01/13
4,195,000 Massachusetts Health and Educational Facilities Authority, Revenue 2/04 at 102 Aa 4,381,132
Refunding Bonds, Youville Hospital Issue (FHA Insured Project),
Series B, 6.000%, 2/15/34
3,300,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue 7/01 at 103 N/R 3,672,801
Bonds, SEMASS Project Series 1991B, 9.250%, 7/01/15 (Alternative
Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Michigan - 5.6%
5,000,000 City of Detroit, Michigan, Convention Facility Limited Tax Revenue 9/03 at 102 AAA 5,219,050
Refunding Bonds (Cobo Hall Expansion Project), Series 1993, 5.250%,
9/30/12
10,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue Bonds, 7/07 at 101 AAA 9,871,800
Series 1997-A, 5.000%, 7/01/27
10,225,000 City of Detroit, Michigan, Water Supply System Revenue Bonds (Senior 7/07 at 101 AAA 10,078,680
Lien), Series 1997-A, 5.000%, 7/01/27
</TABLE>
S-33
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Michigan (continued)
$ 2,545,000 City of Hancock Hospital Finance Authority, FHA-Insured Mortgage Hospital 8/08 at 100 AAA $ 2,509,166
Revenue Bonds (Portage Health System, Inc.), Series 1998, 4.625%, 8/01/18
1,000,000 City of Kalamazoo Hospital Finance Authority, Hospital Revenue Refunding 5/06 at 102 AAA 1,067,680
and Improvement Bonds (Bronson Methodist Hospital), Series 1996,
5.750%, 5/15/16
2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue and Refunding No. Opt. Call A- 2,096,520
Bonds (The Detroit Medical Center Obligated Group), Series 1993B,
5.000%, 8/15/03
3,200,000 Michigan State Hospital Finance Authority, Hospital Revenue and Refunding 8/02 at 102 AAA 3,373,664
Bonds, Series 1992 (Bon Secours Health System Project), 6.100%, 8/15/22
7,000,000 Michigan State Hospital Finance Authority, Hospital Revenue Bonds 8/08 at 101 A- 6,842,850
(The Detroit Medical Center), Series 1998A, 5.250%, 8/15/23
3,750,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue Bonds 6/03 at 102 AAA 4,073,100
(Consumers Power Company Project), Collateralized Series 1993B,
5.800%, 6/15/10
6,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds (The 9/03 at 103 AAA 6,674,100
Detroit Edison Company Project), Series CC-1992, 6.550%,
9/01/24 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Minnesota -- 1.4%
5,000,000 Minneapolis/St. Paul, Minnesota, Housing Finance Board, Single Family 11/07 at 102 AAA 5,168,500
Mortgage Revenue Bonds, FNMA/GNMA Backed Program, Phase XI-AB,
5.800%, 11/01/30 (Alternative Minimum Tax)
4,000,000 Minneapolis Community Development Agency, Limited Tax Supported 12/02 at 102 A- 4,458,760
Development Revenue Bonds, Common Bond Fund, Series 1992G-3,
7.375%, 12/01/12
2,720,000 City of Minnetonka, Minnesota, Multifamily Housing Revenue Refunding 6/04 at 102 AAA 2,924,299
Bonds, Series 1994A (GNMA Collateralized Mortgage Loan-Brier Creek
Project), 6.450%, 6/20/24
- -----------------------------------------------------------------------------------------------------------------------------------
Mississippi -- 1.1%
2,000,000 Mississippi Higher Education Assistance Corporation, Student Loan 9/02 at 102 Aaa 2,067,200
Revenue Bonds, Senior Series 1993-B, 5.800%, 9/01/06
(Alternative Minimum Tax)
1,415,000 Mississippi Housing Finance Corporation, Single Family Mortgage 10/99 at 102 AAA 1,477,119
Purchase Revenue Bonds, Series 1989 (GNMA Mortgage-Backed Securities
Program), 8.250%, 10/15/18 (Alternative Minimum Tax)
3,000,000 Mississippi Home Corporation, Single Family Mortgage Revenue Bonds, 4/05 at 102 Aaa 3,207,750
Series 1995B, 6.550%, 4/01/21 (Alternative Minimum Tax)
1,695,000 Mississippi Regional Housing Authority No. V, Multifamily Housing 4/05 at 102 AAA 1,808,209
Revenue Refunding Bonds, Series 1993A (FHA Insured Mortgage
Loan--Deville Apartments Section 8 Assisted Project), 7.050%, 7/01/21
1,830,000 Mississippi Educational Facilities Authority, For Private, Nonprofit 6/03 at 102 N/R 1,912,917
Institutions of Higher Learning, Educational Facilities Revenue Bonds
(Tougaloo College Project), Series 1993A, 6.500%, 6/01/18
- -----------------------------------------------------------------------------------------------------------------------------------
Nebraska -- 3.0%
10,000,000 Energy America (Nebraska), Natural Gas Revenue Note (Metropolitan No Opt. Call N/R 10,164,800
Utility District Project), Series 1997B, 5.700%, 7/01/08
9,000,000 Nebraska Higher Education Loan Program Inc., Senior Subordinate Bonds No Opt. Call AAA 9,667,620
Series A-5A, 6.250%, 6/01/18, (Alternative Minimum Tax)
Airport Authority of the City of Omaha (Nebraska), Airport Facilities
Revenue Refunding Bonds, Series 1991:
1,665,000 8.375%, 1/01/14 (Prefunded to 1/01/02) 1/02 at 102 A1*** 1,922.842
5,075,000 8.375%, 1/01/14 1/02 at 102 A1 5,790,220
- -----------------------------------------------------------------------------------------------------------------------------------
Nevada -- 0.8%
4,500,000 Clark County School District, Nevada, General Obligation (Limited Tax), No Opt. Call AAA 5,573,745
School Improvement Bonds (Current Coupon Bonds), Series 1991A,
7.000%, 6/01/10
1,725,000 Nevada Housing Division, Single Family Program Senior Bonds, 1993 4/04 at 102 A1 1,824,550
Issue B, 6.200%, 10/01/15
- -----------------------------------------------------------------------------------------------------------------------------------
New Hampshire -- 0.5%
2,700,000 New Hampshire Housing Finance Authority, Single Family Residential 7/00 at 102 Aa 2,830,410
Mortgage Bonds, 1990 Series A, 7.950%, 7/01/22 (Alternative Minimum Tax)
</TABLE>
S-34
<PAGE>
Portfolio of Investments
Nuveen Premium Income Municipal Fund 4, Inc. (NPT) (continued)
October 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Hampshire (continued)
$ 1,815,000 New Hampshire Housing Finance Authority, Single Family Mortgage Acquisition 1/07 at 102 Aa3 $ 1,930,234
Revenue Bonds, 1996 Series C, 6.200%, 7/01/16 (Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.3%
455,000 New Mexico Educational Assistance Foundation, Student Loan Revenue Bonds, 12/02 at 101 A 481,781
1992 Series One, Student Loan Revenue Bonds, Subordinate
1992 Series One B, 6.850%, 12/01/05 (Alternative Minimum Tax)
2,400,000 New Mexico Mortgage Finance Authority, Single Family Mortgage Purchase 7/02 at 102 Aa1 2,552,664
Refunding Senior Bonds, 1992 Series A, 6.900%, 7/01/24
- ------------------------------------------------------------------------------------------------------------------------------------
New York - 13.1%
14,000,000 Long Island Power Authority (New York), Electric System General Revenue 6/03 at 101 A- 14,467,320
Bonds, Series 1998A, 5.500%, 12/01/29
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1995 Series A, No Opt. Call A- 1,146,370
7.000%, 8/01/04
3,500,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series B, No Opt. Call A- 3,916,780
6.750%, 8/15/03
14,310,000 The City of New York, General Obligation Bonds, Fiscal 1996 Series F, No Opt. Call A- 16,098,178
6.500%, 2/01/05
The City of New York, General Obligation Bonds, Fiscal 1991 Series D:
4,240,000 9.500%, 8/01/02 (Pre-refunded to 8/01/01) 8/01 at 101 1/2 Aaa 4,946,893
160,000 9.500%, 8/01/02 8/01 at 101 1/2 A- 185,018
16,915,000 New York Transitional Finance Authority, Future Tax Secured Bonds, 5/08 at 101 AA 16,629,475
Fiscal 1998 Series C, 5.000%, 5/01/26
Dormitory Authority of the State of New York, The New York and Presbyterian
Hospital, FHA-Insured Mortgage Hospital Revenue Bonds, Series 1998:
5,000,000 5.500%, 2/01/09 No Opt. Call AAA 5,473,350
6,450,000 5.500%, 8/01/09 No Opt. Call AAA 7,084,100
4,350,000 5.500%, 8/01/10 No Opt. Call AAA 4,774,647
5,000,000 5.500%, 8/01/11 No Opt. Call AAA 5,483,350
10,500,000 New York State Medical Care Facilities Finance Agency, Hospital and 8/02 at 102 AAA 11,214,525
Nursing Home FHA-Insured Mortgage Revenue Bonds, 1992 Series B,
6.200%, 8/15/22
4,200,000 New York State Medical Care Facilities Agency, FHA-Insured Mortgage 2/05 at 102 AA 4,565,526
Project Revenue Bonds, 1995 Series B, 6.150%, 2/15/35
New York State Medical Care Facilities Finance Agency, Hospital and Nursing
Home FHA-Insured Mortgage Revenue Bonds, 1994 Series A:
4,875,000 6.200%, 2/15/21 (Pre-refunded to 2/15/04) 2/04 at 102 AAA 5,491,834
3,365,000 6.200%, 2/15/21 2/04 at 102 AAA 3,729,194
7,500,000 New York State Thruway Authority, General Revenue Bonds, Series C, 1/05 at 102 AAA 8,454,075
6.000%, 1/01/15 (Pre-refunded to 1/01/05)
6,500,000 New York State Thruway Authority, General Revenue Refunding Bonds, 1/08 at 101 AA- 6,883,110
Series E, 5.250%, 1/01/12
- ------------------------------------------------------------------------------------------------------------------------------------
North Carolina - 0.6%
3,000,000 North Carolina Medical Care Commission, Health Care Revenue Bonds 6/08 at 101 AA 2,934,120
(Duke University Health System), Series 1998B, 5.000%, 6/01/28
2,000,000 North Carolina Municipal Power Agency, Number 1 Catawba Electric No Opt. Call AAA 2,291,780
Revenue Bonds, Series 1992, 6.000%, 1/01/11
- ------------------------------------------------------------------------------------------------------------------------------------
North Dakota - 1.0%
8,150,000 Mercer County, North Dakota, Pollution Control Revenue Bonds (Basin 1/99 at 103 Aa 8,426,122
Electric Power Cooperative-Antelope Valley Station), 1984
Series B, 7.000%, 1/01/19
995,000 City of Minot, North Dakota, Single Family Mortgage Revenue 8/03 at 102 Aa 1,074,988
Refunding Bonds, Series 1993, 7.700%, 8/01/10
- ------------------------------------------------------------------------------------------------------------------------------------
Ohio - 3.4%
4,500,000 Akron, Bath and Copley Joint Township Hospital District, Ohio, Hospital 11/02 at 102 A3 4,881,420
Facilities Revenue Bonds, Series 1992 (Summa Health System Project),
6.250%, 11/15/07
1,995,000 County of Franklin, Ohio, Multifamily Housing Mortgage Revenue Bonds, 1/05 at 103 Aa 2,017,683
Series 1994A (FHA Insured Mortgage Loan Hamilton Creek Apartments
Project), 5.550%, 7/01/24 (Alternative Minimum Tax)
</TABLE>
S-35
<PAGE>
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ohio (continued)
$ 3,800,000 Ohio Housing Finance Agency, Residential Mortgage Revenue Bonds (GNMA 3/05 at 102 AAA $ 4,101,302
Mortgage-backed Securities Programs), 1995 Series A-1, 6.300%, 9/01/17
11,215,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue Bonds (GNMA 9/99 at 102 AAA 11,537,880
Mortgage-Backed Securities Program), 1989 Series A, 7.650%, 3/01/29
(Alternative Minimum Tax)
4,215,000 The Student Loan Funding Corporation, Cincinnati, Ohio, Student Loan No Opt. Call A1 4,364,464
Revenue Bonds, Series 1986A, 5.500%, 12/01/01 (Alternative Minimum Tax)
4,370,000 City of Toledo, Ohio, General Obligation (Limited Tax), Various Purpose 12/04 at 102 AAA 4,813,031
Improvement Bonds, Series 1994, 5.750%, 12/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 1.5%
Oklahoma County Finance Authority, Multifamily Housing First Mortgage
Revenue Bonds, Series 1998A (Multiple Apartments Project):
3,000,000 7.000%, 4/01/18 4/06 at 102 N/R 3,043,080
7,000,000 7.125%, 4/01/28 4/06 at 102 N/R 7,102,340
3,340,000 Tulsa Industrial Authority, Hospital Revenue and Refunding Bonds No Opt. Call AAA 3,920,592
(Hillcrest Medical Center Project), Series 1996, 6.500%, 6/01/09
- -----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 1.6%
12,390,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997 No Opt. Call AAA 15,066,488
(General Obligation Bonds), 6.500%, 7/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.3%
2,460,000 Piedmont Municipal Power Agency (South Carolina), Electric Revenue Bonds, No Opt. Call AAA 2,692,495
1998A Refunding Series, 5.500%, 1/01/13
- -----------------------------------------------------------------------------------------------------------------------------------
South Dakota - 0.7%
5,845,000 South Dakota Student Loan Assistance Corporation, 7.625%, 8/01/06 8/99 at 102 AAA 6,153,090
(Pre-refunded to 8/01/99) (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 0.8%
5,000,000 The Metropolitan Government of Nashville and Davidson County (Tennessee), 5/08 at 102 AA 5,080,200
Electric System Revenue Bonds, 1998 Series A, 5.200%, 5/15/23
2,400,000 Tennessee Housing Development Agency, Mortgage Finance Program Bonds, 7/04 at 102 A+ 2,590,704
1994 Series A, 6.900%, 7/01/25 (Alternative Minimum Tax)
- -----------------------------------------------------------------------------------------------------------------------------------
Texas - 5.7%
1,000,000 Alliance Airport Authority, Inc., Special Facilities Revenue Bonds, 12/00 at 102 Baa2 1,072,290
Series 1990 (American Airlines, Inc. Project), 7.500%, 12/01/29
(Alternative Minimum Tax)
6,000,000 Dallas-Fort Worth International Airport Facility Improvement Corporation, 11/00 at 102 Baa2 6,424,500
American Airlines, Inc. Revenue Bonds, Series 1990, 7.500% 11/01/25
(Alternative Minimum Tax)
2,500,000 City of Houston, Texas, Airport System Subordinate Lien Revenue Bonds, 7/01 at 102 AAA 2,710,575
Series 1991A, 6.750%, 7/01/21 (Alternative Minimum Tax)
5,000,000 City of Houston, Texas, Water and Sewer System, Junior Lien Revenue 12/07 at 102 AAA 4,930,400
Refunding Bonds, Series 1997D, 5.000%, 12/01/25
5,000,000 Lower Neches Valley Authority Industrial Development Corporation (Texas), 3/08 at 101 AA 5,189,350
Refunding Revenue Bonds, Series 1998 (Mobil Oil Refining Corporation
Project), 5.550%, 3/01/33
1,450,850 The Midland Housing Finance Corporation (Midland, Texas), Single Family 11/05 at 103 Aaa 1,591,002
Mortgage Revenue Refunding, Series 1992A, 8.450%, 12/01/11
2,215,000 North Texas Higher Education Authority, Inc., Student Loan Revenue 4/03 at 102 A 2,352,064
Bonds, Series 1993D, 6.300%, 4/01/09 (Alternative Minimum Tax)
3,410,000 Ratama Development Corporation, Special Facilities Revenue Bonds (Retama No Opt. Call AAA 4,881,176
Park Racetrack Project), Series 1993, 8.750%, 12/15/12
4,694,827 General Services Commission (an Agency of the State of Texas), as 9/99 at 101 1/2 A 5,332,056
Lessee, Participation Interests, 7.500%, 9/01/22
</TABLE>
S-36
<PAGE>
Portfolio of Investments
Nuveen Premium Income Municipal Fund 4, Inc. (NPT) (continued)
October 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Texas (continued)
$ 8,500,000 Texas Turnpike Authority, Dallas North Tollway Revenue Bonds, 1/99 at 102 AAA $ 8,728,480
Series 1990, 7.250%, 1/01/10
8,500,000 Travis County Health Facilities Development Corporation, Hospital 11/03 to 102 Aa 9,155,860
Revenue Bonds (Daughters of Charity National Health System -
Daughters of Charity Health Services of Austin), Series 1993B,
6.000%, 11/15/22
- ------------------------------------------------------------------------------------------------------------------------------------
Utah - 2.1%
3,595,000 City of Bountiful, Davis County, Utah, Hospital Revenue Refunding 12/08 to 101 N/R 3,571,417
Bonds (South Davis Community Hospital Project), Series 1998,
5.750%, 12/15/18
8,000,000 Intermountain Power Agency (Utah), Power Supply Revenue Bonds, 7/06 at 102 A+ 8,864,880
Series 1996A, 6.150%, 7/01/14
6,000,000 Intermountain Power Agency (Utah), Power Supply Revenue Refunding 7/07 at 102 AAA 6,505,080
Bonds, 1997 Series B, 5.750%, 7/01/19
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.8%
2,645,000 Suffolk Redevelopment and Housing Authority, Multifamily Housing 7/02 at 104 Baa2 2,942,589
Revenue Refunding Bonds, Series 1994 (Chase Heritage at Dulles
Project), 7.000%, 7/01/24
14,405,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage 7/06 at 100 AAA 13,744,531
System Revenue Bonds, Series of 1995A, 4.750%, 7/01/29
- ------------------------------------------------------------------------------------------------------------------------------------
Washington - 7.7%
4,705,000 City of Tacoma, Washington, Sewer Revenue Refunding Bonds, No Opt. Call AAA 6,133,062
1994 Series B, 8.000%, 12/01/08
4,500,000 Washington Public Power Supply System, Nuclear Project No. 1, 7/03 at 102 Aa 4,839,930
Refunding Revenue Bonds, Series 1993A, 5.750%, 7/01/13
4,845,000 Washington Public Power Supply System, Nuclear Project No. 1, 7/99 at 102 AAA 5,086,620
Refunding Revenue Bonds, Series 1989A, 7.500%, 7/01/15
(Pre-refunded to 7/01/99)
23,000,000 Washington Public Power Supply System (Bonneville), Nuclear Project 7/03 at 102 Aa1 23,633,190
No. 1, Refunding Revenue Bonds, Series 1993C, 5.375%, 7/01/15
Washington Public Power Supply System, Nuclear Project No. 2,
Refunding Revenue Bonds, Series 1992A:
5,710,000 6.250%, 7/01/12 (Pre-refunded to 7/01/02) 7/02/at 102 Aa1*** 6,297,502
1,540,000 6.250%, 7/01/12 7/02 at 102 Aa1 1,673,486
6,475,000 Washington Public Power Supply System, Nuclear Project No. 2, No Opt. Call Aa1 7,715,803
Refunding Revenue, Series 1990A, 7.250%, 7/01/06
10,000,000 Washington Public Power Supply System, Nuclear Project No. 3, No Opt. Call Aa1 12,075,499
Refunding Revenue Bonds, Series 1993B, 7.000%, 7/01/09
3,700,000 Washington Public Power Supply System, Nuclear Project No. 3, 7/08 at 102 Aa1 3,672,545
Refunding Revenue Bonds, Series 1998A, 5.125%, 7/01/18
- ------------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.1%
635,000 Wisconsin Housing and Economic Development Authority, Home 5/02 at 102 A1 672,140
Improvement Revenue Bonds, 1992 Series A, 7.000%, 5/0/10
(Alternative Minimum Tax)
- ------------------------------------------------------------------------------------------------------------------------------------
$842,153,502 Total Investments - (cost $845,052,695) - 98.3% 906,909,232
============------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.2%
$ 2,000,000 Geisinger Authority Health System, Variable Rate Demand Revenue Bonds, VMIG-1 2,000,000
Series 1998B, 3.700%, 8/15/28+
===========-------------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 14,094,443
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% 923,003,675
=====================================================================================================================
</TABLE>
* Optional Call Provisions (not covered by the report of independent
auditors): Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings (not covered by the report of independent auditors): Using
the higher of Standard & Poor's Moody's rating.
*** Securities are backed by an escrow or trust containing sufficient
U.S. government or U.S. government agency securities which ensures
the timely payment of principal and interest. Securities are
normally considered to be equivalent to AAA rated securities.
+ The security has a maturity of more than one year, but has variable
rate and demand features which qualify it is a short-term security.
The rate disclosed is that currently in effect. This rate changes
periodically based on market conditions or a specified market index.
N/R Investment is not rated.
S-37
<PAGE>
Statement of Net Assets
October 31, 1998
<TABLE>
<CAPTION>
Premium Income Premium Income 2 Premium Income 4
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in municipal securities, at market value (note 1) $1,448,475,312 $945,367,447 $906,909,232
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) 2,000,000 800,000 2,000,000
Cash 82,256 -- 82,347
Receivables:
Interest 28,864,254 17,112,680 17,102,193
Investments sold 14,837,228 559,737 580,000
Other assets 715,561 18,422 53,732
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 1,494,974,611 963,858,286 926,727,504
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Cash overdraft -- 614 --
Payable for investments purchased 15,434,819 -- --
Accrued expenses:
Management fees (note 6) 774,443 510,147 491,486
Other 306,363 239,347 342,260
Preferred share dividends payable 174,804 100,994 112,440
Common share dividends payable 4,528,765 3,167,289 2,777,643
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 21,219,194 4,018,391 3,723,829
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $1,473,755,417 $959,839,895 $923,003,675
====================================================================================================================================
Preferred shares, at liquidation value $ 475,000,000 $300,000,000 $308,400,000
====================================================================================================================================
Preferred shares outstanding 19,000 12,000 12,336
====================================================================================================================================
Common shares outstanding 63,785,431 40,868,247 40,847,681
====================================================================================================================================
Net asset value per Common share outstanding (net assets less Preferred shares
at liquidation value,
divided by Common shares outstanding) $ 15.66 $ 16.15 $ 15.05
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
S-38
<PAGE>
Statement of Operations
Year Ended October 31, 1998
<TABLE>
<CAPTION>
Premium Income Premium Income 2 Premium Income 4
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income (note 1) $ 84,351,074 $55,123,603 $51,010,547
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 9,000,100 5,931,563 5,712,194
Preferred shares - auction fees 1,187,498 749,998 771,000
Preferred shares - dividend disbursing agent fees 50,001 46,383 70,000
Shareholders' servicing agent fees and expenses 231,194 76,753 114,505
Custodian's fees and expenses 165,221 121,193 120,757
Directors' fees and expenses (note 6) 13,966 8,792 8,445
Professional fees 26,586 21,160 21,225
Shareholders' reports - printing and mailing expenses 312,275 214,315 215,337
Stock exchange listing fees 54,582 35,449 35,511
Investor relations expense 123,848 74,399 76,291
Other expenses 72,035 51,037 45,741
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 11,237,306 7,331,042 7,191,006
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 73,113,768 47,792,561 43,819,541
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions (notes 1 and 4) 5,695,107 2,300,084 4,094,161
Net change in unrealized appreciation or depreciation of investments 22,102,303 16,299,650 12,806,701
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 27,797,410 18,599,734 16,900,862
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $100,911,178 $66,392,295 $60,720,403
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
S-39
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Premium Income Premium Income 2 Premium Income 4
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97 10/31/98 10/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment income $ 73,113,768 $ 72,579,397 $ 47,792,561 $ 48,365,729 $ 43,819,541 $ 44,221,844
Net realized gain from investment
transactions (notes 1 and 4) 5,695,107 4,421,843 2,300,084 4,884,470 4,094,161 3,879,483
Net change in unrealized
appreciation or depreciation of
investments 22,102,303 19,245,861 16,299,650 21,383,160 12,806,701 19,479,315
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
operations 100,911,178 96,247,101 66,392,295 74,633,359 60,720,403 67,580,642
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders
(note 1) From undistributed
net investment income:
Common shareholders (56,136,763) (59,703,177) (37,981,891) (38,015,000) (33,322,374) (33,488,322)
Preferred shareholders (16,253,788) (12,807,342) (9,776,494) (10,633,759) (10,741,953) (10,890,755)
From accumulated net realized gains
from investment transactions:
Common shareholders (3,623,618) (1,862,537) (3,704,032) -- -- --
Preferred shareholders (801,154) -- (896,110) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (76,815,323) (74,373,056) (52,358,527) (48,648,759) (44,064,327) (44,379,077)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital share Transactions (note 2)
Common shares - net proceeds
from shares issued to shareholders
due to reinvestment of distributions -- -- 2,218,879 -- 583,436 --
Preferred shares - net proceeds from
sale of shares -- 123,593,750 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from
capital share transactions -- 123,593,750 2,218,879 -- 583,436 --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 24,095,855 145,467,795 16,252,647 25,984,600 17,239,512 23,201,565
Net assets at beginning of year 1,449,659,562 1,304,191,767 943,587,248 917,602,648 905,764,163 882,562,598
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $1,473,755,417 $1,449,659,562 $959,839,895 $943,587,248 $923,003,675 $905,764,163
- -----------------------------------------------------------------------------------------------------------------------------------
Balance of undistributed net
investment income at end of year $ 1,479,619 $ 756,402 $ 2,110,492 $ 2,076,316 $ 1,228,635 $ 1,473,421
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
S-40
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The National Funds (the "Funds") covered in this report and their corresponding
New York Stock Exchange symbols are Nuveen Premium Income Municipal Fund, Inc.
(NPI), Nuveen Premium Income Municipal Fund 2, Inc. (NPM) and Nuveen Premium
Income Municipal Fund 4, Inc. (NPT).
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities. The Funds are registered under
the Investment Company Act of 1940 as closed-end, diversified management
investment companies.
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements in accordance with
generally accepted accounting principles.
Securities Valuation
The prices of municipal bonds in each Fund's investment portfolio are provided
by a pricing service approved by the Fund's Board of Directors. When price
quotes are not readily available (which is usually the case for municipal
securities), the pricing service establishes fair market value based on yields
or prices of municipal bonds of comparable quality, type of issue, coupon,
maturity and rating, indications of value from securities dealers and general
market conditions. Temporary investments in securities that have variable rate
and demand features qualifying them as short-term securities are valued at
amortized cost, which approximates market value.
Securities Transactions
Securities transactions are recorded on a trade date basis. Realized gains and
losses from such transactions are determined on the specific identification
method. Securities purchased or sold on a when-issued or delayed delivery basis
may have extended settlement periods. The securities so purchased are subject to
market fluctuation during this period. The Funds have instructed the custodian
to segregate assets in a separate account with a current value at least equal to
the amount of the when-issued and delayed delivery purchase commitments. At
October 31, 1998, Premium Income had outstanding delayed delivery purchase
commitments of $15,434,819. There were no such outstanding purchase commitments
in either of the other two funds.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts on long-term debt securities
when required for federal income tax purposes.
Federal Income Taxes
Each Fund is a separate taxpayer for federal income tax purposes. Each Fund
intends to comply with the requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of its tax-exempt net
investment income, in addition to any significant amounts of net realized
capital gains and/or market discount realized from investment transactions. The
Funds currently consider significant net realized capital gains and/or market
discount as amounts in excess of $.01 per Comm6n share. Furthermore, each Fund
intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal income tax, to retain such tax-
exempt status when distributed to shareholders of the Funds. All monthly tax-
exempt income dividends paid during the fiscal year ended October 31, 1998, have
been designated Exempt Interest Dividends. Net realized capital gain and market
discount distributions are subject to federal taxation.
Dividends and Distributions to Shareholders
Tax-exempt net investment income is declared as a dividend monthly and payment
is made or reinvestment is credited to shareholder accounts on the first
business day after month-end. Net realized capital gains and/or market discount
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
Distributions to shareholders of tax-exempt net investment income, net realized
capital gains and/or market discount are recorded on the ex-dividend date. The
amount and timing of distributions are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. Accordingly, temporary over-distributions as a result of these
differences may occur and will be classified as either distributions in excess
of net investment income, distributions in excess of net realized gains and/or
distributions in excess of net ordinary taxable income from investment
transactions, where applicable.
S-41
<PAGE>
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in more than one Series. The dividend
rate on each Series may change every seven days, as set by the auction agent.
The number of shares outstanding, by Series and in total, for each of the Funds
is as follows:
<TABLE>
<CAPTION>
Premium Premium Premium
Income Income 2 Income 4
- -------------------------------------------------------
<S> <C> <C> <C>
Number of Shares:
Series M 3,800 2,000 2,200
Series T 3,800 3,000 2,000
Series T2 -- -- 1,328
Series W 3,800 2,000 1,680
Series Th 3,800 3,000 2,000
Series F 3,800 2,000 1,800
Series F2 -- -- 1,328
- -------------------------------------------------------
Total 19,000 12,000 12,336
=======================================================
</TABLE>
Effective August 12, 1997, the terms of Premium Income's preferred stock were
amended, whereby the Fund's preferred shares were converted from Remarketed
Preferred (dividend rates established primarily every 28 days by a remarketing
process) to MuniPreferred (dividend rates established every seven days by a
"Dutch auction" process), as approved by shareholders on August 6, 1997. In
addition, the Fund issued an additional 5,000 preferred shares, comprising 1,000
shares each of Series M, T, W, Th and F between September 30, 1997 and October
6, 1997.
Derivative Financial Instruments
The Funds may invest in transactions in certain derivative financial instruments
including futures, forward, swap and option contracts, and other financial
instruments with similar characteristics. Although the Funds are authorized to
invest in such financial instruments, and may do so in the future, they did not
make any such investments during the fiscal year ended October 31, 1998.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in Common and Preferred shares were as follows:
<TABLE>
<CAPTION>
Premium Income Premium Income 2
- ---------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common shares issued to shareholders
due to reinvestment of distributions -- -- 137,128 --
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Premium Income 4
- ---------------------------------------------------------------------------------------------------
Year Ended Year Ended
10/31/98 10/31/97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Common shares issued to shareholders
due to reinvestment of distributions 39,216 --
- ---------------------------------------------------------------------------------------------------
</TABLE>
Premium Income issued 5,000 additional preferred shares, comprising 1,000 shares
of each M, T, W, Th and F, during the fiscal year ended October 31, 1997.
3. Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on December 1, 1998, to shareholders of record
on November 15, 1998, as follows:
<TABLE>
<CAPTION>
Premium Premium Premium
Income Income 2 Income 4
- ---------------------------------------------------------
<S> <C> <C> <C>
Dividend per share $.0710 $.0775 $.0680
=========================================================
</TABLE>
S-42
<PAGE>
Notes to Financial Statements (continued)
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the fiscal year ended
October 31, 1998, were as follows:
<TABLE>
<CAPTION>
Premium Premium Premium
Income Income 2 Income 4
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases:
Investments in municipal securities $290,272,414 $80,762,778 $211,191,134
Temporary municipal investments 216,380,000 39,500,000 133,450,000
Sales and Maturities:
Investments in municipal securities 274,000,685 64,982,754 188,925,826
Temporary municipal investments 242,380,000 54,500,000 131,450,000
================================================================================
</TABLE>
At October 31, 1998, the identified cost of investments owned for federal income
tax purposes was the same as the cost for financial reporting purposes for each
Fund.
At October 31, 1998, Premium Income 4 had unused capital loss carryforwards of
$13,256,518 available for federal income tax purposes to be applied against
future capital gains, if any. If not applied, $8,044,841 of the carryforwards
will expire in the year 2002 and $5,211,677 will expire in the year 2003.
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at October 31, 1998, were as follows:
<TABLE>
<CAPTION>
Premium Premium Premium
Income Income 2 Income 4
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross unrealized:
appreciation $89,049,157 $87,820,980 $61,908,128
depreciation (47,099) (58,439) (51,591)
- -------------------------------------------------------------------------------
Net unrealized appreciation $89,002,058 $87,762,541 $61,856,537
===============================================================================
</TABLE>
6. Management Fee and Other Transactions with Affiliates
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund
pays an annual management fee, payable monthly, at the rates set forth below,
which are based upon the average daily net asset value of each Fund as follows:
<TABLE>
<CAPTION>
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
For the first $125 million .6500 of 1%
For the next $125 million .6375 of 1
For the next $250 million .6250 of 1
For the next $500 million .6125 of 1
For the next $1 billion .6000 of 1
For net assets over $2 billion .5875 of 1
================================================================================
</TABLE>
The fee compensates the Adviser for overall investment advisory and
administrative services and general office facilities. The Funds pay no
compensation directly to those of its Directors who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
S-43
<PAGE>
7. Composition of Net Assets At October 31, 1998, net assets consisted of:
<TABLE>
<CAPTION>
Premium Premium Premium
Income Income 2 Income 4
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred shares, $25,000 stated value per share, at liquidation value $ 475,000,000 $300,000,000 $308,400,000
Common shares, $.01 par value per share 637,854 408,682 408,477
Paid-in surplus 901,946,522 567,631,874 564,371,822
Balance of undistributed net investment income 1,479,619 2,110,492 1,228,635
Accumulated net realized gain (loss) from investment transactions 5,689,364 1,926,306 (13,261,796)
Net unrealized appreciation of investments 89,002,058 87,762,541 61,856,537
- ------------------------------------------------------------------------------------------------------------------------
Net assets $1,473,755,417 $959,839,895 $923,003,675
========================================================================================================================
Authorized shares:
Common 200,000,000 200,000,000 200,000,000
Preferred 1,000,000 1,000,000 1,000,000
========================================================================================================================
</TABLE>
8. Investment Composition
At October 31, 1998, the revenue sources by municipal purpose, expressed as a
percent of total investments, were as follows:
<TABLE>
<CAPTION>
Premium Premium Premium
Income Income 2 Income 4
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Education and Civic Organizations 5% 2% 4%
Financials 3 -- --
Health Care 8 7 17
Housing/Multifamily -- 8 8
Housing/Single Family 12 12 7
Tax Obligation/General 13 16 10
Tax Obligation/Limited 13 9 7
Transportation 8 8 7
U.S. Guaranteed 12 26 15
Utilities 21 8 17
Water and Sewer 4 3 7
Other 1 1 1
- --------------------------------------------------------------------------------
100% 100% 100%
================================================================================
</TABLE>
Certain long-term and intermediate-term investments owned by the Funds are
either covered by insurance issued by several private insurers or are backed by
an escrow or trust containing U.S. government or U.S. government agency
securities, both of which ensure the timely payment of principal and interest in
the event of default (53% for Premium Income, 46% for Premium Income 2 and 43%
for Premium Income 4). Such insurance or escrow, however, does not guarantee the
market value of the municipal securities or the value of any of the Funds'
shares.
All temporary investments in short-term municipal securities have credit
enhancements (letters of credit, guarantees or insurance) issued by third party
domestic or foreign banks or other institutions.
For additional information regarding each investment security, refer to the
Portfolio of Investments of each Fund.
S-44
<PAGE>
Financial Highlights
Selected data for a Common share outstanding
throughout each period is as follows:
<TABLE>
<CAPTION>
Investment Operations
- -------------------------------------------------------------------------------------------------------
Net Realized/
Beginning Net Unrealized
Net Asset Investment Investment
Value Income Gain (Loss) Total
- -------------------------------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
<S> <C> <C> <C> <C>
1998 $15.28 $1.15 $ .43 $ 1.58
1997 14.96 1.14 .37 1.51
1996 15.11 1.16 (.09) 1.07
1995 14.14 1.24 1.01 2.25
1994 16.30 1.26 (2.02)** (.76)
Premium Income 2
Year Ended 10/31:
1998 15.80 1.17 .46 1.63
1997 15.16 1.18 .65 1.83
1996 14.89 1.19 .27 1.46
1995 13.03 1.20 1.88 3.08
1994 15.60 1.18 (2.53) (1.35)
Premium Income 4
Year Ended 10/31:
1998 14.64 1.07 .42 1.49
1997 14.07 1.08 .58 1.66
1996 13.87 1.10 .19 1.29
1995 12.09 1.10 1.81 2.91
1994 14.87 1.07 (2.76) (1.69)
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Less Distributions
- -------------------------------------------------------------------------------------------------------
Net Net
Investment Investment Capital Capital
Income Income Gains Gains
To Common To Preferred To Common To Preferred
Shareholders Shareholders+ Shareholders Shareholders+ Total
- -------------------------------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
<S> <C> <C> <C> <C> <C>
1998 $ (.88) $(.25) $(.06) $(.01) $(1.20)
1997 (.94) (.20) (.03) -- (1.17)
1996 (.97) (.20) (.05) -- (1.22)
1995 (1.06) (.22) -- -- (1.28)
1994 (1.17) (.16) (.07) -- (1.40)
Premium Income 2
Year Ended 10/31:
1998 (.93) (.24) (.09) (.02) (1.28)
1997 (.93) (.26) -- -- (1.19)
1996 (.93) (.26) -- -- (1.19)
1995 (.92) (.30) -- -- (1.22)
1994 (.94) (.24) (.03) (.01) (1.22)
Premium Income 4
Year Ended 10/31:
1998 (.82) (.26) -- -- (1.08)
1997 (.82) (.27) -- -- (1.09)
1996 (.82) (.27) -- -- (1.09)
1995 (.84) (.29) -- -- (1.13)
1994 (.84) (.20) (.03) (.01) (1.08)
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Total Returns
Organization and
Offering Costs and
Preferred Share Ending
Underwriting Net Asset Ending Based on Based on Net
Discounts Value Market Value Market Value* Asset Value*
- -------------------------------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
<S> <C> <C> <C> <C> <C>
1998 $ -- $15.66 $15.1875 10.60% 8.86%
1997 (.02) 15.28 14.6250 7.81 8.89
1996 -- 14.96 14.5000 8.24 5.92
1995 -- 15.11 14.3750 16.88 14.84
1994 -- 14.14 13.2500 (19.13) (5.88)
Premium Income 2
Year Ended 10/31:
1998 -- 16.15 16.8750 15.98 8.93
1997 -- 15.80 15.5000 16.76 10.72
1996 -- 15.16 14.1250 14.94 8.28
1995 -- 14.89 13.1250 24.22 22.06
1994 -- 13.03 11.3750 (17.76) (10.64)
Premium Income 4
Year Ended 10/31:
1998 -- 15.05 14.8125 14.54 8.58
1997 -- 14.64 13.6875 14.70 10.20
1996 -- 14.07 12.6880 11.57 7.53
1995 -- 13.87 12.1250 21.32 22.41
1994 (.01) 12.09 10.7500 (19.12) (13.29)
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
Ratio of Net
Ratio of Investment
Ending Expenses to Income to Portfolio
Net Assets Average Average Turnover
(000) Net Assets++ Net Assets++ Rate
- -----------------------------------------------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
<S> <C> <C> <C> <C>
1998 $1,473,755 .77% 5.00% 19%
1997 1,449,660 .76 5.51 10
1996 1,304,192 .75 5.67 16
1995 1,313,673 .76 6.13 12
1994 1,252,208 .77 6.08 15
Premium Income 2
Year Ended 10/31:
1998 959,840 .77 5.03 7
1997 943,587 .77 5.23 19
1996 917,603 .77 5.34 24
1995 906,547 .77 5.60 27
1994 830,600 .76 5.41 26
Premium Income 4
Year Ended 10/31:
1998 923,004 .79 4.79 21
1997 905,764 .79 4.98 26
1996 882,563 .79 5.11 20
1995 874,337 .80 5.35 32
1994 801,617 .88 5.15 47
</TABLE>
* Total Return on Market Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in
stock price per share.
Total Return on Net Asset Value is the combination of reinvested dividend
income, reinvested capital gains distributions, if any, and changes in net
asset value per share.
Total returns are not annualized.
** Includes $(.19) effect of the Fund's Rights Offering of shares at a price
below NAV and costs of the offering.
+ The amounts shown are based on Common share equivalents.
++ Ratios do not reflect the effect of dividend payments to Preferred
shareholders.
S-45
<PAGE>
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.
A-1
<PAGE>
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
A-2
<PAGE>
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:
A-3
<PAGE>
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designation.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
A-4
<PAGE>
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.
A-5
<PAGE>
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>
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>
APPENDIX B
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
Statement Establishing and Fixing
the Rights and Preferences of
Municipal Auction Rate
Cumulative Preferred Stock ("MuniPreferred/(R)/"),
Series W2
Nuveen Premium Income Municipal Fund 4, Inc., a Minnesota corporation (the
"Corporation"), hereby certifies to the Secretary of State of Minnesota as
follows:
First: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by its amended and restated articles of incorporation, the Board
of Directors has, by resolution duly adopted on December 18, 1998, authorized
the issuance of a series of its authorized Preferred Stock designated as its
Municipal Auction Rate Cumulative Preferred Stock, Series W2.
Second: The rights and preferences of the shares of such series of stock
are as follows:
<PAGE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
DEFINITIONS
"AA" Composite Commercial Paper Rate...................................... 1
Accountant's Confirmation................................................. 2
Affiliate................................................................. 2
Agent Member.............................................................. 2
Anticipation Notes........................................................ 2
Applicable Rate........................................................... 2
Articles.................................................................. 2
Auction................................................................... 2
Auction Agency Agreement.................................................. 2
Auction Agent............................................................. 2
Auction Date.............................................................. 2
Auction Procedures........................................................ 2
Available MuniPreferred................................................... 2
Benchmark Rate............................................................ 2
Beneficial Owner.......................................................... 2
Bid and Bids.............................................................. 2
Bidder and Bidders........................................................ 2
Board of Directors........................................................ 2
Broker-Dealer............................................................. 3
Broker-Dealer Agreement................................................... 3
Business Day.............................................................. 3
Code...................................................................... 3
Commercial Paper Dealers.................................................. 3
Common Stock.............................................................. 3
Cure Date................................................................. 3
Date of Original Issue.................................................... 3
Deposit Securities........................................................ 3
Discounted Value.......................................................... 3
Dividend Payment Date..................................................... 3
Dividend Period........................................................... 3
Existing Holder........................................................... 3
Failure to Deposit........................................................ 3
Federal Tax Rate Increase................................................. 4
Fund...................................................................... 4
Gross-Up Payment.......................................................... 4
Holder.................................................................... 4
Hold Order and Hold Orders................................................ 4
Independent Accountant.................................................... 4
Initial Rate Period....................................................... 4
Interest Equivalent....................................................... 4
Issue Type Category....................................................... 4
Kenny Index............................................................... 4
Late Charge............................................................... 4
Liquidation Preference.................................................... 4
Market Value.............................................................. 4
Maximum Potential Gross-Up Payment Liability.............................. 4
Maximum Rate.............................................................. 5
Minimum Rate Period....................................................... 5
Moody's................................................................... 5
Moody's Discount Factor................................................... 5
Moody's Eligible Asset.................................................... 5
Moody's Exposure Period................................................... 5
Moody's Volatility Factor................................................. 5
MuniPreferred............................................................. 6
MuniPreferred Basic Maintenance Amount.................................... 6
MuniPreferred Basic Maintenance Cure Date................................. 7
MuniPreferred Basic Maintenance Report.................................... 7
</TABLE>
i
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Page
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Municipal Obligations............................................. 7
1940 Act.......................................................... 7
1940 Act Cure Date................................................ 7
1940 Act MuniPreferred Asset Coverage............................. 7
Notice of Redemption.............................................. 7
Notice of Special Rate Period..................................... 7
Order and Orders.................................................. 7
Original Issue Insurance.......................................... 7
Other Issues...................................................... 8
Outstanding....................................................... 8
Permanent Insurance............................................... 8
Person............................................................ 8
Portfolio Insurance............................................... 8
Potential Beneficial Owner........................................ 8
Potential Holder.................................................. 8
Preferred Stock................................................... 8
Quarterly Valuation Date.......................................... 8
Rate Multiple..................................................... 8
Rate Period....................................................... 8
Rate Period Days.................................................. 8
Receivables for Municipal Obligations Sold........................ 8
Redemption Price.................................................. 9
Reference Rate.................................................... 9
Registration Statement............................................ 9
S&P............................................................... 9
S&P Discount Factor............................................... 9
S&P Eligible Asset................................................ 9
S&P Exposure Period............................................... 9
S&P Volatility Factor............................................. 9
Secondary Market Insurance........................................ 9
Securities Depository............................................. 9
Sell Order and Sell Orders........................................ 9
Special Rate Period............................................... 9
Special Redemption Provisions..................................... 9
Submission Deadline............................................... 9
Submitted Bid and Submitted Bids.................................. 9
Submitted Hold Order and Submitted Hold Orders.................... 9
Submitted Order and Submitted Orders.............................. 9
Submitted Sell Order and Submitted Sell Orders.................... 10
Subsequent Rate Period............................................ 10
Substitute Commercial Paper Dealer................................ 10
Substitute U.S. Government Securities Dealer...................... 10
Sufficient Clearing Bids.......................................... 10
Taxable Allocation................................................ 10
Taxable Income.................................................... 10
Taxable Equivalent of the Short-Term Municipal Bond Rate.......... 10
Treasury Bill..................................................... 10
Treasury Bill Rate................................................ 10
Treasury Note..................................................... 11
Treasury Note Rate................................................ 11
U.S. Government Securities Dealer................................. 11
Valuation Date.................................................... 11
Volatility Factor................................................. 11
Voting Period..................................................... 11
Winning Bid Rate.................................................. 11
PART I
1. Number of Authorized Shares................................... 12
2. Dividends..................................................... 12
(a) Ranking................................................... 12
(b) Cumulative Cash Dividends................................. 12
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Page
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(c) Dividends Cumulative From Date of Original Issue......... 12
(d) Dividend Payment Dates and Adjustment Thereof............ 12
(e) Dividend Rates and Calculation of Dividends.............. 12
(e) (i) Dividend Rates........................................... 12
(e) (ii) Calculation of Dividends................................. 14
(f) Curing a Failure to Deposit.............................. 14
(g) Dividend Payments by Fund to Auction Agent............... 14
(h) Auction Agent as Trustee of Dividend Payments by Fund.... 14
(i) Dividends Paid to Holders................................ 14
(j) Dividends Credited Against Earliest Accumulated
But Unpaid Dividends.................................... 15
(k) Dividends Designated as Exempt-Interest Dividends........ 15
3. Gross-Up Payments................................................... 15
(a) Minimum Rate Periods and Special Rate Periods
of 28 Rate Period Days or Fewer......................... 15
(b) Special Rate Periods of More Than 28 Rate Period Days.... 15
(c) No Gross-Up Payments In the Event of a Reallocation...... 15
4. Designation of Special Rate Periods................................. 15
(a) Length of and Preconditions for Special Rate Period...... 15
(b) Adjustment of Length of Special Rate Period.............. 16
(c) Notice of Proposed Special Rate Period................... 16
(d) Notice of Special Rate Period............................ 16
(e) Failure to Deliver Notice of Special Rate Period......... 17
5. Voting Rights....................................................... 17
(a) One Vote Per Share of MuniPreferred...................... 17
(b) Voting For Additional Directors.......................... 17
(b) (i) Voting Period............................................ 17
(b) (ii) Notice of Special Meeting................................ 18
(b) (iii) Terms of Office of Existing Directors.................... 18
(b) (iv) Terms of Office of Certain Directors to
Terminate Upon Termination of Voting Period............. 18
(c) Holders of MuniPreferred to Vote on Certain Matters...... 18
(c) (i) Increases in Capitalization.............................. 18
(c) (ii) 1940 Act Matters......................................... 19
(d) Board May Take Certain Actions Without
Shareholder Approval.................................... 19
(e) Voting Rights Set Forth Herein Are Sole Voting Rights.... 20
(f) No Preemptive Rights or Cumulative Voting................ 20
(g) Voting for Directors Sole Remedy for Fund's
Failure to Pay Dividends............................... 20
(h) Holders Entitled to Vote................................. 20
6. 1940 Act MuniPreferred Asset Coverage............................... 20
7. MuniPreferred Basic Maintenance Amount.............................. 20
8. [ Reserved ]........................................................ 21
9. Restrictions on Dividends and Other Distributions................... 22
(a) Dividends on Preferred Stock Other Than MuniPreferred.... 22
(b) Dividends and Other Distributions With Respect
to Common Stock Under the 1940 Act..................... 22
(c) Other Restrictions on Dividends and Other Distributions.. 22
10. Rating Agency Restrictions.......................................... 23
11. Redemption.......................................................... 23
(a) Optional Redemption...................................... 23
(b) Mandatory Redemption..................................... 24
(c) Notice of Redemption..................................... 25
(d) No Redemption Under Certain Circumstances................ 25
(e) Absence of Funds Available for Redemption................ 25
(f) Auction Agent as Trustee of Redemption Payments by Fund.. 26
(g) Shares for Which Notice of Redemption Has
Been Given Are No Longer Outstanding................... 26
(h) Compliance With Applicable Law........................... 26
(i) Only Whole Shares of MuniPreferred May Be Redeemed....... 26
iii
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12. Liquidation Rights.................................................. 26
(a) Ranking...................................................... 26
(b) Distributions Upon Liquidation............................... 26
(c) Pro Rata Distributions....................................... 26
(d) Rights of Junior Stock....................................... 27
(e) Certain Events Not Constituting Liquidation.................. 27
13. Miscellaneous....................................................... 27
(a) Amendment of Appendix A to Add Additional Series............. 27
(b) Appendix A Incorporated by Reference......................... 27
(c) No Fractional Shares......................................... 27
(d) Status of Shares of MuniPreferred Redeemed, Exchanged
or Otherwise Acquired by the Fund........................... 27
(e) Board May Resolve Ambiguities................................ 27
(f) Headings Not Determinative................................... 27
(g) Notices...................................................... 28
PART II
1. Orders.............................................................. 28
2. Submission of Orders by Broker-Dealers to Auction Agent............. 29
3. Determination of Sufficient Clearing Bids, Winning
Bid Rate and Applicable Rate....................................... 30
4. Acceptance and Rejection of Submitted Bids and
Submitted Sell Orders and Allocation of Shares..................... 32
5. Notification of Allocations......................................... 33
6. Auction Agent....................................................... 33
7. Transfer of Shares of MuniPreferred................................. 34
8. Global Certificate.................................................. 34
APPENDIX A
1. Designation As To Series............................................ A-1
2. Number of Authorized Shares Per Series.............................. A-2
3. Exceptions to Certain Definitions................................... A-2
4. Certain Definitions................................................. A-2
5. Initial Rate Periods................................................ A-5
6. Date for Purposes of Paragraph (yyy) Contained
Under the Heading "Definitions" in this Statement.................. A-6
7. Party Named for Purposes of the Definition of "Rate
Multiple" in this Statement........................................ A-6
8. Additional Definitions.............................................. A-6
9. Dividend Payment Dates.............................................. A-6
10. Amount for Purposes of Subparagraph (c) (i) of Section 5
of Part I of this Statement....................................... A-6
11. Redemption Provisions Applicable to Initial Rate Periods............ A-6
12. Applicable Rate for Purposes of Subparagraph (b) (iii)
of Section 3 of Part II of this Statement.......................... A-6
iv
<PAGE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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 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
<PAGE>
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 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.
(1) "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 I of Part II of this Statement.
(q) "Bidder" and "Bidders" shall have the respective meanings
specified in paragraph (a) of Section I of Part II of this Statement;
provided, however, that neither the Fund nor any affiliate thereof shall be
permitted to be a Bidder in an Auction, except that any Broker-Dealer that
is an affiliate of the Fund may be a Bidder in an Auction, but only if the
Orders placed by such Broker-Dealer are not for its own account.
(r) "Board of Directors" shall mean the Board of Directors of the Fund
or any duly authorized committee thereof.
2
<PAGE>
(s) "Broker-Dealer" shall mean any broker-dealer, commercial bank or
other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member
or participant, has been selected by the Fund and has entered into a
Broker-Dealer Agreement that remains effective.
(t) "Broker-Dealer Agreement" shall mean an agreement among the Fund,
the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer
agrees to follow the procedures specified in Part II of this Statement.
(u) "Business Day" shall mean a day on which the New York Stock
Exchange is open for trading and which is neither a Saturday, Sunday nor
any other day on which banks in The City of New York, New York, are
authorized by law to close.
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Commercial Paper Dealers" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates
or successors, if such entity is a commercial paper dealer.
(x) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Fund.
(y) "Cure Date" shall mean the MuniPreferred Basic Maintenance Cure
Date or the 1940 Act Cure Date, as the case may be.
(z) "Date of Original Issue," with respect to shares of a series of
MuniPreferred, shall mean the date on which the Fund initially issued such
shares.
(aa) "Deposit Securities" shall mean cash and Municipal Obligations
rated (1) at least A-1+ or SP-1+ by S&P and (2) 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
3
<PAGE>
redemption date for shares of such series in The City of New York, New
York, the Redemption Price to be paid on such redemption date for any
share of such series after notice of redemption is mailed pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided,
however, that the foregoing clause (B) shall not apply to the Fund's
failure to pay the Redemption Price in respect of shares of MuniPreferred
when the related Notice of Redemption provides that redemption of such
shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times and
in the manner specified in such Notice of Redemption.
(ii) "Federal Tax Rate Increase" shall have the meaning specified in
the definition of "Moody's Volatility Factor."
(jj) "Fund" shall mean the entity named on the first page of this
Statement, which is the issuer of the shares of MuniPreferred.
(kk) "Gross-up Payment" shall have the meaning specified in Section 4
of Appendix A hereto.
(ll) "Holder," with respect to shares of a series of MuniPreferred,
shall mean the registered holder of such shares as the same appears on the
stock books of the Fund.
(mm) "Hold Order" and "Hold Orders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(nn) "Independent Accountant" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants
under the Securities Act of 1933, as amended from time to time.
(oo) "Initial Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of
such series in Section 5 of Appendix A hereto.
(pp) "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
(qq) "Issue Type Category," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(rr) "Kenny Index" shall have the meaning specified in the definition
of "Taxable Equivalent of the Short-Term Municipal Bond Rate."
(ss) "Late Charge" shall have the meaning specified in subparagraph
(e)(1)(B) of Section 2 of Part I of this statement.
(tt) "Liquidation Preference," with respect to a given number of
shares of MuniPreferred, means $25,000 times that number.
(uu) "Market Value" of any asset of the Fund shall mean the market
value thereof determined by the pricing service designated from time to
time by the Board of Directors. Market Value of any asset shall include any
interest accrued thereon. The pricing service values portfolio securities
at the mean between the quoted bid and asked price or the yield equivalent
when quotations are readily available. Securities for which quotations are
not readily available are valued at fair value as determined by the pricing
service using methods which include consideration of: yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market
conditions. The pricing service may employ electronic data processing
techniques or a matrix system, or both, to determine valuations.
(vv) "Maximum Potential Gross-up Payment Liability," as of any
Valuation Date, shall mean the aggregate amount of Gross-up Payments that
would be due if the Fund were to make Taxable Allocations, with respect to
any taxable year, estimated based upon dividends paid and the amount of
undistributed realized net capital gains and other taxable income earned by
the Fund, as of the end of the calendar month immediately preceding such
Valuation Date, and assuming such Gross-up Payments are fully taxable.
4
<PAGE>
(ww) "Maximum Rate," for shares of a series of MuniPreferred on any
Auction Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the Reference Rate on such Auction Date
for the next Rate Period of shares of such series and (B) the Rate
Multiple on such Auction Date, unless shares of such series have or
had a Special Rate Period (other than a Special Rate Period of 28 Rate
Period Days or fewer) and an Auction at which Sufficient Clearing Bids
existed has not yet occurred for a Minimum Rate Period of shares of
such series after such Special Rate Period, in which case the higher
of:
(A) the dividend rate on shares of such series for the then-
ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate
on such Auction Date for a Rate Period equal in length to the
then-ending Rate Period of shares of such series, if such then-
ending Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal
in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was more than 364 Rate
Period Days, and (y) the Reference Rate on such Auction Date for
a Rate Period equal in length to such Special Rate Period of
shares of such series, if such Special Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate
Period, if such Special Rate Period was more than 364 Rate Period
Days and (2) the Rate Multiple on such Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the highest of (1) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, (2) the Reference Rate on such Auction
Date for the Special Rate Period for which the Auction is being held
if such Special Rate Period is 364 Rate Period Days or fewer or the
Treasury Note Rate on such Auction Date for the Special Rate Period
for which the Auction is being held if such Special Rate Period is
more than 364 Rate Period Days, and (3) the Reference Rate on such
Auction Date for Minimum Rate Periods and (B) the Rate Multiple on
such Auction Date.
(xx) [Reserved]
(yy) "Minimum Rate Period" shall mean any Rate Period consisting of 7
Rate Period Days.
(zz) "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
(aaa) "Moody's Discount Factor" shall have the meaning specified in
Section 4 of Appendix A hereto.
(bbb) "Moody's Eligible Asset" shall have the meaning specified in
Section 4 of Appendix A hereto.
(ccc) "Moody's Exposure Period" shall mean the period commencing on a
given Valuation Date and ending 56 days thereafter.
(ddd) "Moody's Volatility Factor" shall mean, as of any Valuation
Date, (i) in the case of any Minimum Rate Period, any Special Rate Period
of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate
Period Days or more, a multiplicative factor equal to 275%, except as
otherwise provided in the last sentence of this definition; (ii) in the
case of any Special Rate Period of more than 28 but fewer than 36 Rate
Period Days, a multiplicative factor equal to 203%; (iii) in the case of
any Special
5
<PAGE>
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> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
(eee) "MuniPreferred" shall have the meaning set forth on the first
page of this Statement.
(fff) "MuniPreferred Basic Maintenance Amount," as of any Valuation
Date, shall mean the dollar amount equal to the sum of (i) (A) the product
of the number of shares of MuniPreferred outstanding on such date
multiplied by $25,000 (plus the product of the number of shares of any
other series of Preferred Stock outstanding on such date multiplied by the
liquidation preference of such shares), plus any redemption premium
applicable to shares of MuniPreferred (or other Preferred Stock) then
subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment
Dates for shares of MuniPreferred outstanding that follow such Valuation
Date (plus the aggregate amount of dividends, whether or not earned or
declared, that will have accumulated in respect of other outstanding shares
of Preferred Stock to, but not including, the first respective dividend
payment dates for such other shares that follow such Valuation Date); (C)
the aggregate amount of dividends that would accumulate on shares of each
series of MuniPreferred outstanding from such first respective Dividend
Payment Date therefor through the 56th day after such Valuation Date, at
the Maximum Rate (calculated as if such Valuation Date were the Auction
Date for the Rate Period commencing on such Dividend Payment Date) for a
Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, assuming, solely for purposes of the foregoing, that if on
such Valuation Date the Fund shall have delivered a Notice of Special Rate
Period to the Auction Agent pursuant to Section 4(d) (i) of this Part I
with respect to shares of such series, such Maximum Rate shall be the
higher of (a) the Maximum Rate for the Special Rate Period of shares of
such series to commence on such Dividend Payment Date and (b) the Maximum
Rate for a Minimum Rate Period of shares of such series to commence on such
Dividend Payment Date, multiplied by the Volatility Factor applicable to a
Minimum Rate Period, or, in the event the Fund shall have delivered a
Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)
(i) of this Part I with respect to shares of such series designating a
Special Rate Period consisting of 56 Rate Period Days or more, the
Volatility Factor applicable to a Special Rate Period of that length (plus
the aggregate amount of dividends that would accumulate at the maximum
dividend rate or rates on any other shares of Preferred Stock outstanding
from such respective dividend payment dates through the 56th day after such
Valuation Date, as established by or pursuant to the respective statements
establishing and fixing the rights and preferences of such other shares of
Preferred Stock) (except that (1) if such Valuation Date occurs at a time
when a Failure to Deposit (or, in the case of shares of Preferred Stock
other than MuniPreferred, a failure similar to a Failure to Deposit) has
occurred that has not been cured, the dividend for purposes of calculation
would accumulate at the current dividend rate then applicable to the shares
in respect of which such
6
<PAGE>
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-l or P-1, and
short-term securities that are the direct obligation of the U.S.
government, provided in each case that such securities mature on or prior
to the date upon which any of (i)(A) through (i)(F) become payable,
otherwise the Moody's Discounted Value) of any of the Fund's assets
irrevocably deposited by the Fund for the payment of any of (i)(A) through
(i)(F).
(ggg) "MuniPreferred Basic Maintenance Cure Date," with respect to the
failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount
(as required by paragraph (a) of Section 7 of Part I of this Statement) as
of a given Valuation Date, shall mean the seventh Business Day following
such Valuation Date.
(hhh) "MuniPreferred Basic Maintenance Report" shall mean a report
signed by the President, Treasurer or any Senior Vice President or Vice
President of the Fund which sets forth, as of the related Valuation Date,
the assets of the Fund, the Market Value and the Discounted Value thereof
(seriatim and in aggregate), and the MuniPreferred Basic Maintenance
Amount.
(iii) "Municipal Obligations" shall mean "Municipal Obligations" as
defined in the Fund's registration statement on Form N-2 on file with the
Securities and Exchange Commission, as such registration statement may be
amended from time to time (the "Registration Statement").
(jjj) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time.
(kkk) "1940 Act Cure Date," with respect to the failure by the Fund to
maintain the 1940 Act MuniPreferred Asset Coverage (as required by Section
6 of Part I of this Statement) as of the last Business Day of each month,
shall mean the last Business Day of the following month.
(lll) "1940 Act MuniPreferred Asset Coverage" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Fund which are
stock, including all outstanding shares of MuniPreferred (or such other
asset coverage as may in the future be specified in or under the 1940 Act
as the minimum asset coverage for senior securities which are stock of a
closed-end investment company as a condition of declaring dividends on its
common stock).
(mmm) "Notice of Redemption" shall mean any notice with respect to the
redemption of shares of MuniPreferred pursuant to paragraph (c) of Section
11 of Part I of this Statement.
(nnn) "Notice of Special Rate Period" shall mean any notice with
respect to a Special Rate Period of shares of MuniPreferred pursuant to
subparagraph (d)(i) of Section 4 of Part I of this Statement.
(ooo) "Order" and "Orders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "Original Issue Insurance," if defined in Section 4 of Appendix
A hereto, shall have the meaning specified in that section.
7
<PAGE>
(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.
(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.
8
<PAGE>
(dddd) "Redemption Price" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this
Statement.
(eeee) "Reference Rate" shall mean (i) the higher of the Taxable
Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite
Commercial Paper Rate in the case of Special Rate Periods of more than 28
Rate Period Days but fewer than 183 Rate Period Days; and (iii) the
Treasury Bill Rate in the case of Special Rate Periods of more than 182
Rate Period Days but fewer than 365 Rate Period Days.
(ffff) "Registration Statement" has the meaning specified in the
definition of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.
(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 11 of this
Statement.
(oooo) "Special Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified in paragraph (a) of Section
4 of Part I of this Statement.
(pppp) "Special Redemption Provisions" shall have the meaning
specified in subparagraph (a)(i) of Section 11 of Part I of this
Statement.
(qqqq) "Submission Deadline" shall mean 1:30 P.M., New York City time,
on any Auction Date or such other time on any Auction Date by which Broker-
Dealers are required to submit Orders to the Auction Agent as specified by
the Auction Agent from time to time.
(rrrr) "Submitted Bid" and "Submitted Bids" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(ssss) "Submitted Hold Order" and "Submitted Hold Orders" shall have
the respective meanings specified in paragraph (a) of Section 3 of Part II
of this Statement.
(tttt) "Submitted Order" and "Submitted Orders" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part ii of
this Statement.
9
<PAGE>
(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 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
10
<PAGE>
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.
(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.
11
<PAGE>
PART I
1. Number of Authorized Shares.
The number of authorized shares constituting a series of MuniPreferred
shall be as set forth with respect to such series in Section 2 of Appendix A
hereto.
2. Dividends.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a
parity with each other, with shares of any other series of MuniPreferred and
with shares of any other series of Preferred Stock as to the payment of
dividends by the Fund.
(b) Cumulative Cash Dividends. The Holders of shares of MuniPreferred of
any series shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, cumulative cash dividends
at the Applicable Rate for shares of such series, determined as set forth in
paragraph (e) of this Section 2, and no more (except to the extent set forth in
Section 3 of this Part I), payable on the Dividend Payment Dates with respect to
shares of such series determined pursuant to paragraph (d) of this Section 2.
Holders of shares of MuniPreferred shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on shares of MuniPreferred. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on shares of MuniPreferred which may be in arrears, and,
except to the extent set forth in subparagraph (e)(i) of this Section 2, no
additional sum of money shall be payable in respect of any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on shares
of MuniPreferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend Payment
Dates with respect to shares of a series of MuniPreferred shall be as set forth
with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as
"Series F MuniPreferred" or "Series M MuniPreferred" in Section 1 of
Appendix A hereto, if the Monday or Tuesday, as the case may be, on which
dividends would otherwise be payable on shares of such series is not a
Business Day, then such dividends shall be payable on such shares on the
first Business Day that falls after such Monday or Tuesday, as the case may
be, and (B) in the case of a series of MuniPreferred designated as "Series
T MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in
Section 1 of Appendix A hereto, if the Wednesday, Thursday or Friday, as
the case may be, on which dividends would otherwise be payable on shares of
such series is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such Wednesday,
Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto the Fund in its
discretion may establish the Dividend Payment Dates in respect of any
Special Rate Period of shares of a series of MuniPreferred consisting of
more than 28 Rate Period Days; provided, however, that such dates shall be
set forth in the Notice of Special Rate Period relating to such Special
Rate Period, as delivered to the Auction Agent, which Notice of Special
Rate Period shall be filed with the Secretary of the Fund; and further
provided that (1) any such Dividend Payment Date shall be a Business Day
and (2) the last Dividend Payment Date in respect of such Special Rate
Period shall be the Business Day immediately following the last day
thereof, as such last day is determined in accordance with paragraph (b) of
Section 4 of this Part I.
(e) Dividend Rates and Calculation of Dividends. (i) Dividend Rates. The
dividend rate on shares of MuniPreferred of any series during the period from
and after the Date of Original Issue of shares of such series to and including
the last day of the Initial Rate Period of shares of such series shall be equal
to the rate per annum set forth with respect to 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
12
<PAGE>
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;
(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
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Failure to Deposit shall not have been cured in accordance with paragraph
(f) of this Section 2 or, in the event Moody's is then rating such shares,
the Fund shall not have paid the applicable Late Charge to the Auction
Agent (such Late Charge, for purposes of this subparagraph (D), to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days but fewer
than 365 Rate Period Days and (y) commencing on the date on which the Rate
Period during which Failure to Deposit occurs commenced), no Auction will
be held in respect of shares of such series for such Subsequent Rate Period
(or for any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the Fund
cures such Failure to Deposit), in each case no later than 12:00 Noon, New
York City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate
Period (but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be "Below
"ba3"/BB-") (the rate per annum at which dividends are payable on shares of
a series of MuniPreferred for any Rate Period thereof being herein referred
to as the "Applicable Rate" for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share payable
on shares of a series of MuniPreferred on any date on which dividends shall be
payable on shares of such series shall be computed by multiplying the Applicable
Rate for shares of such series in effect for such Dividend Period or Dividend
Periods or part thereof for which dividends have not been paid by a fraction,
the numerator of which shall be the number of days in such Dividend Period or
Dividend Periods or part thereof and the denominator of which shall be 365 if
such Dividend Period consists of 7 Rate Period Days and 360 for all other
Dividend Periods, and applying the rate obtained against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect to
shares of a series of MuniPreferred shall have been cured (if such Failure to
Deposit is not solely due to the willful failure of the Fund to make the
required payment to the Auction Agent) with respect to any Rate Period of shares
of such series if, within the respective time periods described in subparagraph
(e)(i) of this Section 2, the Fund shall have paid to the Auction Agent (A) all
accumulated and unpaid dividends on shares of such series and (B) without
duplication, the Redemption Price for shares, if any, of such series for which
Notice of Redemption has been mailed by the Fund pursuant to paragraph (c) of
Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Fund's failure to pay the Redemption Price in
respect of shares of MuniPreferred when the related Redemption Notice provides
that redemption of such shares is subject to one or more conditions precedent
and any such condition precedent shall not have been satisfied at the time or
times and in the manner specified in such Notice of Redemption.
(g) Dividend Payments by Fund to Auction Agent. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of
MuniPreferred, an aggregate amount of funds available on the next Business Day
in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Fund. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(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.
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(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends.
Any dividend payment made on shares of MuniPreferred shall first be credited
against the earliest accumulated but unpaid dividends due with respect to such
shares. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to the
Holders as their names appear on the stock books of the Fund on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the
Board of Directors.
(k) Dividends Designated as Exempt-Interest Dividends. Dividends on shares
of MuniPreferred shall be designated as exempt-interest dividends up to the
amount of tax-exempt income of the Fund, to the extent permitted by, and for
purposes of, Section 852 of the Code.
3. Gross-up Payments.
Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period
Days or Fewer. If, in the case of any Minimum Rate Period or any Special
Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net
capital gains or other income taxable for Federal income tax purposes to a
dividend paid on shares of MuniPreferred without having given advance
notice thereof to the Auction Agent as provided in Section 5 of Part II of
this Statement (such allocation being referred to herein as a "Taxable
Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding shares of MuniPreferred or the liquidation of the Fund, the
Fund shall, prior to the end of the calendar year in which such dividend
was paid, provide notice thereof to the Auction Agent and direct the Fund's
dividend disbursing agent to send such notice with a Gross-up Payment to
each Holder of such shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(b) Special Rate Periods of More Than 28 Rate Period Days. If, in the
case of any Special Rate Period of more than 28 Rate Period Days, the Fund
makes a Taxable Allocation to a dividend paid on shares of MuniPreferred,
the Fund shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent and direct
the Fund's dividend disbursing agent to send such notice with a Gross-up
Payment to each Holder of shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(c) No Gross-Up Payments In the Event of a Reallocation. The Fund
shall not be required to make Gross-up Payments with respect to any net
capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the
Fund.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Fund, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred is 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.
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(b) Adjustment of Length of Special Rate Period. In the event the Fund
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last day of such Special Rate Period
is not (a) a Tuesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series M MuniPreferred" in Section 1 of Appendix A
hereto, (b) a Wednesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series T MuniPreferred" in Section 1 of Appendix A
hereto, (c) a Thursday that is a Business Day in the case of a series of
MuniPreferred designated as "Series W MuniPreferred" in Section 1 of Appendix A
hereto, (d) a Friday that is a Business Day in the case of a series of
MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of Appendix A
hereto, (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 Friday that is a
Business Day preceding what would otherwise be such last day in the case of
Series TH MuniPreferred, and (e) on the first Sunday that is followed by a
Monday that is a Business Day preceding what would otherwise be such last day,
in the case of Series F MuniPreferred.
(c) Notice of Proposed Special Rate Period. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section
4, not less than 20 (or such lesser number of days as may be agreed to from time
to time by the Auction Agent) nor more than 30 days prior to the date the Fund
proposes to designate as the first day of such Special Rate Period (which shall
be such day that would otherwise be the first day of a Minimum Rate Period),
notice shall be (i) published or caused to be published by the Fund in a
newspaper of general circulation to the financial community in The City of New
York, New York, which carries financial news, and (ii) mailed by the Fund by
first-class mail, postage prepaid, to the Holders of shares of such series. Each
such notice shall state (A) that the Fund may exercise its option to designate a
succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Fund will, by 11:00
A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Fund shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of MuniPreferred as to which notice
has been given as set forth in paragraph (c) of this Section 4 (or such later
time or date, or both, as may be agreed to by the Auction Agent), the Fund shall
deliver to the Auction Agent either.
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Fund has determined to designate the next succeeding Rate Period of shares
of such series as a Special Rate Period, specifying the same and the first
day thereof, (B) the Auction Date immediately prior to the first day of
such Special Rate Period, (C) that such Special Rate Period shall not
commence if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate
Period, Moody's Eligible Assets (if Moody's is then rating such series) and
S&P Eligible Assets (if S&P is then rating such series) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount as of such Business Day (assuming for purposes of the
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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 MuniPreferred, equal
to at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of shares of Preferred Stock are
entitled under the 1940 Act to elect a majority of the directors of
the Fund.
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Upon the termination of a Voting Period, the voting rights described in
this subparagraph (b)(i) shall cease9 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 separately as one class): (a) authorize, create or issue
any class or series of stock ranking prior to or on a parity with shares of
MuniPreferred with respect to the payment of dividends or the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Fund, or increase the authorized amount 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,
classes or series of Preferred Stock ranking on a parity with shares of
MuniPreferred with respect to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Fund; provided, however, that if Moody's or S&P is not then rating the
shares of MuniPreferred, the aggregate liquidation preference of all
Preferred Stock of the Fund outstanding after any such issuance, exclusive
of accumulated and unpaid dividends, may not exceed the amount set forth in
Section 10 of Appendix A hereto) or (b) amend, alter or repeal the
provisions of the Articles, including this Statement, whether by merger,
consolidation or otherwise, so as to affect any preference, right or power
of such shares of MuniPreferred or the Holders thereof; provided, however,
that (i) none of the actions permitted by the exception to (a) above will
be deemed to affect such preferences, rights or powers and (ii) 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
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<PAGE>
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 separately as one 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
separately as a class).
(ii) 1940 Act Matters. Unless a higher percentage is provided for in the
Articles, 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 or any action requiring a vote of
security holders of the Fund under Section 13 (a) of the 1940 Act. 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) 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 Moody's Volatility Factor
Discounted Value 1940 Act Cure Date
Escrowed Bonds 1940 Act MuniPreferred Asset Coverage
Issue Type Category Other Issues
Market Value Quarterly Valuation Date
Maximum Potential Gross-up Receivables for Municipal
Payment Liability Obligations Sold
MuniPreferred Basic Maintenance Amount S&P Discount Factor
MuniPreferred Basic Maintenance Cure Date S&P Eligible Asset
MuniPreferred Basic Maintenance Report S&P Exposure Period
Moody's Discount Factor S&P Volatility Factor
Moody's Eligible Asset Valuation Date
Moody's Exposure Period Volatility Factor
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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 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.
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<PAGE>
(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 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]
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<PAGE>
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Neferred 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 (d) of Section 12 of this Part 1,
(A) the Fund shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares of, or
in options, warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the shares of MuniPreferred as to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of the Common Stock or any other stock of
the Fund ranking junior to or on a parity with the shares of MuniPreferred as to
the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other such junior
stock (except by conversion into or exchange for stock of the Fund ranking
junior to the shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), or any such
parity stock (except by conversion into or exchange for stock of the Fund
ranking junior to or on a parity with MuniPreferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), unless (i) full cumulative dividends on shares of each series of
MuniPreferred through its most recently ended Dividend Period shall have been
paid or shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent and (ii) the Fund has redeemed the full number
of shares of MuniPreferred required to be redeemed by any provision for
mandatory redemption pertaining thereto, and (B) the Fund shall not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or in options, warrants or rights to
subscribe for or purchase, Common Stock or other stock, if any, ranking junior
to shares of MuniPreferred as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up) in respect of Common
Stock or any other stock of the Fund ranking junior to shares of MuniPreferred
as to the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other such junior
stock (except by conversion into or exchange for stock of the Fund ranking
junior to shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon
22
<PAGE>
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 any class or series of stock ranking prior to or on a
parity with shares of MuniPreferred with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or
winding up of the Fund, or reissue any shares of MuniPreferred previously
purchased or redeemed by the Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred to in
the definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. Redemption.
(a) Optional Redemption. (i) Subject to the provisions of subparagraph (v)
of this paragraph (a), shares of MuniPreferred of any series may be redeemed, at
the option of the Fund, as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for shares of such series, out
of funds legally available therefor, at a redemption price per share equal to
the sum of $25,000 plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the date
fixed for redemption; provided, however, that (1) shares of a series of
MuniPreferred may not be redeemed in part if after such partial redemption fewer
than 500 shares of such series remain outstanding; (2) unless otherwise provided
in Section I 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").
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<PAGE>
(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 o?? any date mail a Notice of Redemption pursuant to
paragraph (c) of this Section 11 in respect of a redemption contemplated to be
effected pursuant to this paragraph (a) unless on such date (a) the Fund has
available Deposit Securities with maturity or tender dates not later than the
day preceding the applicable redemption date and having a value not less than
the amount (including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such redemption date
and (b) the Discounted Value of Moody's Eligible Assets (if Moody's is then
rating the shares of MuniPreferred) and the Discounted Value of S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) each at least equal
the MuniPreferred Basic Maintenance Amount, and would at least equal the
MuniPreferred Basic Maintenance Amount immediately subsequent to such redemption
if such redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of Moody's
Eligible Assets at least equals the MuniPreferred Basic Maintenance Amount, the
Moody's Discount Factors applicable to Moody's Eligible Assets shall be
determined by reference to the first Exposure Period longer than the Exposure
Period then applicable to the Fund, as described in the definition of Moody's
Discount Factor herein.
(b) Mandatory Redemption. The Fund shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Directors for redemption, certain of the shares of MuniPreferred, if
the Fund fails to have either Moody's Eligible Assets with a Discounted Value or
S&P Eligible Assets with a Discounted Value greater than or equal to the
MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act
MuniPreferred Asset Coverage, in accordance with the requirements of the rating
agency or agencies then rating the shares of MuniPreferred, and such failure is
not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be. The number of shares of MuniPreferred to be
redeemed shall be equal to the lesser of (i) the minimum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, would have
resulted in the Fund's having both Moody's Eligible Assets with a Discounted
Value and S&P Eligible Assets with a Discounted Value greater than or equal to
the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset
24
<PAGE>
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 clays nor
later than 40 days after such Cure Date, except that if the Fund does not have
funds legally available for the redemption of all of the required number of
shares of MuniPreferred and shares of other Preferred Stock which are subject to
redemption or retirement or the Fund otherwise is unable to effect such
redemption on or prior to 40 days after such Cure Date, the Fund shall redeem
those shares of MuniPreferred and shares of other Preferred Stock which it was
unable to redeem on the earliest practicable date on which it is able to effect
such redemption. If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to this paragraph (b), the number of
shares of such series to be redeemed shall be redeemed pro rata from the Holders
of shares of such series in proportion to the number of shares of such series
held by such Holders.
(c) Notice of Redemption. If the Fund shall determine or be required to
redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of
this Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first class mail, postage prepaid, to each Holder of the shares of
such series to be redeemed, at such Holder's address as the same appears on the
stock books of the Fund on the record date established by the Board of
Directors. Such Notice of Redemption shall be so mailed not less than 20 nor
more than 45 days prior to the date fixed for redemption. Each such Notice of
Redemption shall state: (i) the redemption date; (ii) the number of shares of
MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for
shares of such series; (iv) the Redemption Price; (v) the place or places where
the certificate(s) for such shares (properly endorsed or assigned for transfer,
if the Board of Directors shall so require and the Notice of Redemption shall so
state) are to be surrendered for payment of the Redemption Price; (vi) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date; and (vii) the provisions of this Section 11 under which such
redemption is made. If fewer than all shares of a series of MuniPreferred held
by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder
shall also specify the number of shares of such series to be redeemed from such
Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section
11 that such redemption is subject to one or more conditions precedent and that
the Fund shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) No Redemption Under Certain Circumstances. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
(e) Absence of Funds Available for Redemption. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor, such redemption shall be
made as soon as practicable to the extent such funds become available. Failure
to redeem shares of MuniPreferred shall be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the Fund shall have
failed, for any reason whatsoever, to deposit in trust with the Auction Agent
the Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed; provided, however, that the foregoing shall not
apply in the case of the Fund's failure to deposit in trust with the Auction
Agent the Redemption Price with respect to any shares where (1) the Notice of
Redemption relating to such redemption provided that such redemption was subject
to one or more conditions precedent and (2) any such condition precedent shall
not have been satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding the fact that the Fund may not have
redeemed shares of MuniPreferred for which a Notice of Redemption has been
mailed, dividends may be declared and paid on shares of MuniPreferred and shall
include those shares of MuniPreferred for which a Notice of Redemption has been
mailed.
25
<PAGE>
(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 bt 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 a rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e) (i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance with the Notice of Redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of
MuniPreferred subject to redemption. In the case that fewer than all of the
shares represented by any such certificate are redeemed, a new certificate shall
be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Fund shall be entitled to receive from the Auction Agent, promptly
after the date fixed for redemption, any cash deposited with the Auction Agent
in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred
called for redemption on such date and (ii) all other amounts to which Holders
of shares of MuniPreferred called for redemption may be entitled. Any funds so
deposited that are unclaimed at the end of 90 days from such redemption date
shall, to the extent permitted by law, be repaid to the Fund, after which time
the Holders of shares of MuniPreferred so called for redemption may look only to
the Fund for payment of the Redemption Price and all other amounts to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest on the funds so deposited.
(h) Compliance With Applicable Law. In effecting any redemption pursuant
to this Section 11, the Fund shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the 1940 Act
and Minnesota law, but shall effect no redemption except in accordance with the
1940 Act and Minnesota law.
(i) Only Whole Shares of MuniPreferred May Be Redeemed. In the case of any
redemption pursuant to this Section 11, only whole shares of MuniPreferred shall
be redeemed, and in the event that any provision of the Articles would require
redemption of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.
12. Liquidation Rights.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a
parity with each other, with shares of any other series of MuniPreferred and
with shares of any other series of Preferred Stock as to the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund.
(b) Distributions Upon Liquidation. Upon the dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of shares of MuniPreferred then outstanding shall be entitled to receive
and to be paid out of the assets of the Fund available for distribution to its
shareholders, before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Fund ranking junior to the
MuniPreferred upon dissolution, liquidation or winding up, an amount equal to
the Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same-day funds,
together with any payments required to be made pursuant to Section 3 of this
Part I in connection with the liquidation of the Fund. After the payment to the
Holders of the shares of MuniPreferred of the full preferential amounts provided
for in this paragraph (b), the Holders of MuniPreferred as such shall have no
right or claim to any of the remaining assets of the Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund available
for distribution to the Holders of shares of MuniPreferred upon any dissolution,
liquidation, or winding up of the affairs of the Fund, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled
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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 add additional series of MuniPreferred (and terms relating
thereto) to the series of MuniPreferred theretofore described thereon, and each
such additional series shall be governed by the terms of this Statement as if
such series had been described on Appendix A hereto on the date hereof.
(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.
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(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.
PART II
1. Orders. (a) Prior to the Submission Deadline on each Auction Date for
shares of a series of MuniPreferred:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held by
such Beneficial Owner which such Beneficial Owner desires to continue to
hold without regard to the Applicable Rate for shares of such series for
the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held by
such Beneficial Owner which such Beneficial Owner offers to sell if the
Applicable Rate for shares of such series for the next succeeding Rate
Period of shares of such series shall be less than the rate per annum
specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held by
such Beneficial Owner which such Beneficial Owner offers to sell without
regard to the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive
Auction in a commercially reasonable manner, contact Potential Beneficial
Owners (by telephone or otherwise), including Persons that are not Beneficial
Owners, on such lists to determine the number of shares, if any, of such
series which each such Potential Beneficial Owner offers to purchase if the
Applicable Rate for shares of such series for the next succeeding Rate Period
of shares of such series shall not be less than the rate per annum specified
by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
paragraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively
as "Hold Orders"; an Order containing the information referred to in clause
(i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information referred to in
clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell
Order" and collectively as "Sell Orders."
(b)(i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such Bid
if the Applicable Rate for shares of such series determined on such Auction
Date shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such series to
be determined as set forth in clause (iv) of paragraph (a) of Section 4 of
this Part II if the Applicable Rate for shares of such series determined on
such Auction Date shall be equal to the rate specified therein; or
(C) the number of Outstanding shares of such series specified in such Bid
if the rate specified therein shall be higher than the Maximum Rate for
shares of such series, or such number or a lesser
28
<PAGE>
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 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.
(iii) A Bid by a Potential Beneficial Owner or a Potential Holder of shares
of a series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in such
Bid if the Applicable Rate for shares of such series determined on such
Auction Date shall be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (v) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein.
(C) No Order for any number of shares of MuniPreferred other than
whole shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each
Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of MuniPreferred
of a series subject to an Auction on such Auction Date obtained by such Broker-
Dealer, designating itself (unless otherwise permitted by the Fund) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares
of such series:
(A) the number of shares, if any, of such series subject to any
Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to any
Bid of such Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any
Sell Order of such Existing Holder; and
(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%.
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<PAGE>
(c) If an Order or Orders covering all of the Outstanding shares of
MuniPreferred of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding shares of
MuniPreferred of a series subject to an Auction held by such Existing Holder,
such Orders shall be considered valid in the following order of priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by such Existing Holder, and if the
number of shares of such series subject to such Hold Orders exceeds the
number of Outstanding shares of such series held by such Existing Holder,
the number of shares subject to each such Hold Order shall be reduced pro
rata to cover the number of Outstanding shares of such series held by such
Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid up
to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent with the
same rate and the number of Outstanding shares of such series subject to
such Bids is greater than such excess, such Bids shall be considered valid
up to and including the amount of such excess, and the number of shares of
such series subject to each Bid with the same rate shall be reduced pro
rata to cover the number of shares of such series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of such series is submitted to the Auction Agent
with different rates, such Bids shall be considered valid in the ascending
order of their respective rates up to and including the amount of such
excess; and
(D) in any such event, the number, if any, of such Outstanding shares
of such series subject to any portion of Bids considered not valid in whole
or in part under this clause (ii) shall be treated as the subject of a Bid
for shares of such series by or on behalf of a Potential Holder at the rate
therein specified; and
(iii) all Sell Orders for shares of such series shall be considered
valid up to and including the excess of the number of Outstanding shares of
such series held by such Existing Holder over the sum of shares of such
series subject to valid Hold Orders referred to in clause (i) above and
valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(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
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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 subc1ause (A) above being
hereinafter referred to collectively as "Sufficient Clearing Bids" for
shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
shares of such series) which if:
(A)(I) each such Submitted Bid of Existing Holders specifying
such lowest rate and (II) all other such Submitted Bids of Existing
Holders specifying lower rates were rejected, thus entitling such
Existing Holders to continue to hold the shares of such series that
are subject to such Submitted Bids; and
(B)(I) each such Submitted Bid of Potential Holders specifying
such lowest rate and (II) all other such Submitted Bids of Potential
Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of
the Maximum Rate for shares of the series of MuniPreferred for which an Auction
is being held on the Auction Date and, based on such determination, the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that
the Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Winning Bid Rate for shares of
such series so determined;
(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
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(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 MuniPreferred have
been made, all Submitted Sell Orders with respect to shares of such series shall
be accepted and, subject to the provisions of paragraphs (d) and (e) of this
Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of MuniPreferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the shares of MuniPreferred subject to such Submitted Bid, unless
the number of Outstanding shares of MuniPreferred subject to all such
Submitted Bids shall be greater than the number of shares of MuniPreferred
("remaining shares") in the excess of the Available MuniPreferred of such
series over the number of shares of MuniPreferred subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in which event
such Submitted Bid of such Existing Holder shall be rejected in part, and
such Existing Holder shall be entitled to continue to hold shares of
MuniPreferred subject to such Submitted Bid, but only in an amount equal to
the number of shares of MuniPreferred of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred held by
such Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such series;
and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available MuniPreferred of such series over the number of
shares of MuniPreferred subject to Submitted Bids described in clauses (ii)
through (iv) of this paragraph (a) by a fraction, the numerator of which
shall be the number of Outstanding shares of MuniPreferred subject to such
Submitted Bid and the denominator of which shall be the aggregate number of
Outstanding shares of MuniPreferred subject to such Submitted Bids made by
all such Potential Holders that specified a rate equal to the Winning Bid
Rate for shares of such series.
(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:
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(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of MuniPreferred subject to such
Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each
Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or
Submitted Sell Order to sell the shares of such series subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by multiplying the
number of shares of such series subject to Submitted Bids described in
clause (ii) of this paragraph (b) by a fraction, the numerator of which
shall be the number of Outstanding shares of such series held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted Sell
Orders.
(c) If all of the Outstanding shares of a series of MuniPreferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of
MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it
shall determine in its sole discretion, round up or down the number of shares of
MuniPreferred of such series to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date as a result of such procedures so that the
number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of paragraph
(a) of this Section 4, any Potential Holder would be entitled or required to
purchase less than a whole share of a series of MuniPreferred on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate shares of MuniPreferred of such series for purchase among
Potential Holders so that only whole shares of MuniPreferred of such series are
purchased on such Auction Date as a result of such procedures by any Potential
Holder, even if such allocation results in one or more Potential Holders not
purchasing shares of MuniPreferred of such series on such Auction Date.
(f) Based on the results of each Auction for shares of a series of
MuniPreferred, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such series
to be sold by Potential Holders and Existing Holders and, with respect to each
Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, shares of MuniPreferred of such series.
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 BrokerDealer Agreement, will be required to
notify its Beneficial Owners and Potential Beneficial Owners of shares of
MuniPreferred believed by it to be interested in submitting an Order in the
Auction to be held on such Auction Date.
6. Auction Agent. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its affiliates (which however, may engage or have
engaged in business
33
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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.
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 PREMIUM INCOME MUNICIPAL FUND 4, INC., has
caused these presents to be signed in its name and on its behalf by its Vice
President on , 1999.
NUVEEN PREMIUM INCOME MUNICIPAL
FUND 4, INC.
By /s/ Gifford R. Zimmerman
-------------------------------
Gifford R. Zimmerman
Vice President and Secretary
34
<PAGE>
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
APPENDIX A
Section 1. Designation As To Series.
Series W2: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series W2." shares of Series W2
MuniPreferred shall be issued on , 1999 (the "Effective Time"); have
an Applicable Rate for its Initial Rate Period equal to % per annum; have
an initial Dividend Payment Date Business Day of each month, commencing with the
month following the month in of , 1999; 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 W2
Munipreferred shall constitute a separate series of Preferred Stock of the Fund,
and each share of Series W2 MuniPreferred shall be identical except as provided
in Section 11 of Part I of this Statement. All references to "Series W
MuniPreferred" in Part I of this Statement shall include Series W2
MuniPreferred.
A-1
<PAGE>
Section 2. Number of Authorized Shares Per Series.
The number of authorized shares constituting Series W2 MuniPreferred is
10,000.
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:
"Escrowed Bond" shall mean Municipal Obligations that (i) have been
determined to be legally defeased in accordance with S&P's legal defeasance
criteria, (ii) have been determined to be economically defeased in accordance
with S&P's economic defeasance criteria and assigned a rating of AAA by S&P,
(iii) are not rated bv S&P but have been determined to be legally defeased by
Moody's or (iv) have been determined to be economically defeased by Moody's
and assigned a rating no lower than the rating that is Moody's equivalent of
S&P's AAA rating.
"Gross-up Payment" means payment to a Holder of shares of MuniPreferred of
an amount which, when taken together with the aggregate amount of Taxable
Allocations made to such Holder to which such Gross-up Payment relates, would
cause such Holder's dividends in dollars (after Federal income tax
consequences) from the aggregate of such Taxable Allocations and the related
Gross-up Payment to be equal to the dollar amount of the dividends which
would have been received by such Holder if the amount of such aggregate
Taxable Allocations would have been excludable from the gross income of such
Holder. Such Gross-up Payment shall be calculated (i) without consideration
being given to the time value of money; (ii) assuming that no Holder of
shares of MuniPreferred is subject to the Federal alternative minimum tax
with respect to dividends received from the Fund; and (iii) assuming that
each Taxable Allocation and each Gross-up Payment (except to the extent such
Gross-up Payment is designated as an exempt-interest dividend under Section
852(b)(5) of the Code or successor provisions) would be taxable in the hands
of each Holder of shares of MuniPreferred at the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or net
capital gains, as applicable, or the maximum marginal regular Federal
corporate income tax rate applicable to ordinary income or net capital gains,
as applicable, whichever is greater, in effect at the time such Gross-up
Payment is made.
"Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set
forth opposite such rating that is the same length as or is longer than the
Moody's Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------------------
Exposure Period Aaa* Aa* A* Baa* Other** (V)MIG-1*** SP-1+***
--------------- ---- --- -- ---- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks................................. 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but greater than seven
weeks................................. 154 164 173 205 235 137 149
9 weeks or less but greater than eight
weeks................................. 158 169 179 209 242 138 150
</TABLE>
--------------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-l or, if not rated by Moody's,
rated SP-l+ 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.
A-2
<PAGE>
Notwithstanding the foregoing, (i) the Moody's Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand
feature at par exercisable in 30 days or less or 125% as long as such Municipal
Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and mature or have a
demand feature at par exercisable in 30 days or less and (ii) no Moody's
Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold.
"Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii)
is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated
by S&P, is rated at least BBB by S&P (provided, however, that for purposes of
determining the Moody's Discount Factor applicable to any such S&P-rated
Municipal Obligation, such Municipal Obligation (excluding any short-term
Municipal Obligation) shall be deemed to have a Moody's rating which is one full
rating category lower than its S&P rating), (iii) does not have its Moody's
rating suspended by Moody's, and (iv) is part of an issue of Municipal
Obligations of at least $10,000,000. Municipal Obligations issued by any one
issuer and rated BBB by S&P may comprise no more than 4% of total Moody's
Eligible Assets; such BBB-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Baa by Moody's or A by
S&P, may comprise no more than 6% of total Moody's Eligible Assets; such BBB,
Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated A by Moody's or AA by S&P, may
comprise no more than 10% of total Moody's Eligible Assets; and such BBB, Baa, A
and AA-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P, may
comprise no more than 20% of total Moody's Eligible Assets. For purposes of the
foregoing sentence, any Municipal Obligation backed by the guaranty, letter of
credit or insurance issued by a third party shall be deemed to be issued by such
third party if the issuance of such third party credit is the sole determinant
of the rating on such Municipal Obligation. Municipal Obligations issued by
issuers located within a single state or territory and rated BBB by S&P may
comprise no more than 12% of total Moody's Eligible Assets; such BBB-rated
Municipal Obligations, if any, together with any Municipal Obligations issued by
issuers located within the same state or territory and rated Baa by Moody's or A
by S&P, may comprise no more than 20% of total Moody's Eligible Assets; such
BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory and
rated A by Moody's or AA by S&P, may comprise no more than 40% of total Moody's
Eligible Assets; and such BBB, Baa, A and AA-rated Municipal Obligations, if
any, together with any Municipal Obligations issued by issuers located within
the same state or territory and rated Aa by Moody's or AAA by S&P, may comprise
no more than 60% of total Moody's Eligible Assets. For purposes of applying
the foregoing requirements, a Municipal Obligation shall be deemed to be rated
BBB by S&P if rated BBB-, BBB or BBB+ by S&P, Moody's Eligible Assets shall be
calculated without including cash, and Municipal Obligations rated M1G-1, VMIG-l
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
A-3
<PAGE>
thereafter without penalty, (c) Liens to secure payment for services rendered
or cash advanced to the Fund by Nuveen Advisory Corp., United States Trust
Company of New York or the Auction Agent and (d) Liens by virtue of any
repurchase agreement; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the MuniPreferred Basic Maintenance
Amount.
"Rate Multiple," for shares of a series of MuniPreferred on any Auction Date
for shares of such series, shall mean the percentage, determined as set forth
below, based on the prevailing rating of shares of such series in effect at the
close of business on the Business Day next preceding such Auction Date:
Prevailing Rating Percentage
----------------- ----------
"aa3"/AA- or higher............... 110%
"a3"/A-........................... 125%
"baa3"/BBB-....................... 150%
"ba3"/BB-......................... 200%
Below "ba3"/BB-................... 25O%
provided, however, that in the event the Fund has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is
greater.
For purposes of this definition, the "prevailing rating" of shares of a
series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a
rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent
of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher,
then "a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or
better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below, (iii) if
not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such shares have a
rating of "baa3" or better by Moody's and BBB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or
higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of
"ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "aa3"/AA- or higher,
"a3"/A-, "baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; provided, however,
that if such shares are rated by only one rating agency, the prevailing rating
will be determined without reference to the rating of any other rating agency.
The Fund shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor
Moody's shall make such a rating available, the party set forth in Section 7 of
Appendix A or its successor shall select at least one nationally recognized
statistical rating organization (as that term is used in the rules and
regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended from time to time) to act as a substitute
rating agency in respect of shares of the series of MuniPreferred set forth
opposite such party's name in Section 7 of Appendix A and the Fund shall take
all reasonable action to enable such rating agency to provide a rating for such
shares.
"S&P Discount Factor" shall mean, for purposes of determining the Discounted
Value of any S&P Eligible Asset, the percentage determined by reference to the
rating on such asset and the shortest Exposure Period set forth opposite such
rating that is the same length as or is longer than the S&P Exposure Period, in
accordance with the table set forth below:
Rating Category
-----------------------
Exposure Period AAA* AA* A* BBB*
- --------------- ---- --- --- ----
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.
A-4
<PAGE>
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-l+ or SP-l+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 125% if such Municipal Obligations are not rated
by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that
any such Moody's-rated short-term Municipal Obligations which have demand
features exercisable within 30 days or less must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other financial
institution with a short-term rating of at least A-1+ from S&P; and further
provided that such Moody's rated short-term Municipal Obligations may
comprise no more than 50% of short-term Municipal Obligations that qualify as
S&P Eligible Assets; (ii) no S&P Discount Factor will be applied to cash or
to Receivables for Municipal Obligations Sold; and (iii) except as set forth
in clause (i) above, in the case of any Municipal Obligation that is not
rated by S&P but qualifies as an S&P Eligible Asset pursuant to clause (iii)
of that definition, such Municipal Obligation will be deemed to have an S&P
rating one full rating category lower than the S&P rating category that is
the equivalent of the rating category in which such Municipal Obligation is
placed by Moody's. For purposes of the foregoing, Anticipation Notes rated
SP-l+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not
mature or have a demand feature at par exercisable in 30 days and which do
not have a long-term rating, shall be considered to be short-term Municipal
Obligations.
"S&P Eligible Asset" shall mean cash (excluding any cash irrevocably
deposited by the Fund for the payment of any liabilities within the meaning
of MuniPreferred Basic Maintenance Amount), Receivables for Municipal
Obligations Sold or a Municipal Obligation owned by the Fund that (i) is
interest bearing and pays interest at least semi-annually; (ii) is payable
with respect to principal and interest in U.S. Dollars; (iii) is publicly
rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is
rated at least A by Moody's; (iv) is not part of a private placement of
Municipal Obligations; and (v) is part of an issue of Municipal Obligations
with an original issue size of at least $20 million or, if of an issue with
an original issue size below $20 million (but in no event below $10
million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Solely for purposes of this definition, the term
"Municipal Obligation" means any obligation the interest on which is exempt
from regular Federal income taxation and which is issued by any of the fifty
United States, the District of Columbia or any of the territories of the
United States, their subdivisions, counties, cities, towns, villages, school
districts and agencies (including authorities and special districts created
by the states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer
or guarantor (excluding bond insurers) shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Municipal Obligations exceeds 5% of
the aggregate Market Value of S&P Eligible Assets;
(2) Municipal Obligations rated by Moody's but not rated by S&P shall
be considered S&P Eligible Assets only to the extent the Market Value of
such Municipal Obligations does not exceed 50% of the aggregate Market
Value of S&P Eligible Assets; and
(3) Long-term Municipal Obligations (excluding Escrowed Bonds) issued
by issuers in any one state or territory shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 20% of the aggregate Market Value of S&P Eligible Assets.
Section 5. Initial Rate Period.
The Initial Rate Period for shares of Series W2 MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
, 1999.
A-5
<PAGE>
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading
"Definitions" in this Statement.
August 31, 1999.
Section 7. Party Named for Purposes of the Definition of "Rate Multiple" in this
Statement.
Party: Series of MuniPreferred:
Salomon Smith Barney Inc.............Series W2
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 W2 MuniPreferred on Thursday, _______, 1999, and on each Thursday
thereafter;
Section 10. Amount for Purposes of Subparagraph (c) (i) of Section 5 of Part I
of this Statement.
$163,400,000.
Section 11. Redemption Provisions Applicable to Initial Rate Periods.
Shares of Series W2 MuniPreferred are redeemable during the Initial Rate
Period thereof only on the second Business Day next preceding the last Dividend
Payment Date for such Initial Rate Period.
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) (1) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate
A-6
<PAGE>
Period consists of fewer than 183 Rate Period Days; (11) the Treasury Bill Rate
on such Auction Date for such Rate Period, if such Rate Period consists of more
than 182 but fewer than 365 Rate Period Days; or (III) the Treasury Note Rate on
such Auction Date for such Rate Period, if such Rate Period is more than 364
Rate Period Days (the rate described in the foregoing clause (A) (I), (II) or
(III), as applicable, being referred to herein as the "Benchmark Rate") and (B)
1 minus the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income, whichever is greater, provided,
however, that if the Fund has notified the Auction Agent of its intent to
allocate to shares of such series in such Rate Period any net capital gains or
other income taxable for Federal income tax purposes ("Taxable Income"), the
Applicable Rate for shares of such series for such Rate Period will be (i) if
the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate,
then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal
to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the
Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or
the product of the Benchmark Rate multiplied by the factor set forth in the
preceding clause (B) and (y) the product of the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax applicable to ordinary income, whichever is
greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing,
Taxable Yield Rate means the rate determined by (a) dividing the amount of
Taxable Income available for distribution per such share of MuniPreferred by the
number of days in the Dividend Period in respect of which such Taxable Income is
contemplated to be distributed, (b) multiplying the amount determined in (a)
above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or 360 (in
the case of any other Dividend Period), and (c) dividing the amount determined
in (b) above by $25,000.
A-7
<PAGE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
STATEMENT OF ADDITIONAL INFORMATION
, 1999
<PAGE>
PART C -- OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(1) FINANCIAL STATEMENTS:
Included in Part A of the Registration Statement
Financial Highlights for each of the six years ended October 31, 1998
PART I
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
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission fees $ 3,614
Printing and engraving expenses 60,000
Legal fees 30,000
Accounting expenses 5,000
Rating Agency fees 15,000
Blue Sky filing fees and expenses 10,000
Miscellaneous expenses 5,000
--------
Total* $128,614
========
</TABLE>
C-I
<PAGE>
[*Estimated]
ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 28: NUMBER OF HOLDERS OF SECURITIES
At April 30, 1999:
<TABLE>
<CAPTION>
NUMBER OF
TITLE OF CLASS RECORD HOLDERS
-------------- --------------
<S> <C>
Common Stock, $.01 par value............................ 26,075
------
Preferred Stock, $.01 par value......................... 25
------
</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.
C-II
<PAGE>
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 Underwriting 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>
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>
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>
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 9th day of
June, 1999.
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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/ STEPHEN D. FOY Vice President and June 9, 1999
- ---------------------------------- Controller (Principal
Stephen D. Foy Financial and Accounting
Officer)
Timothy R. Schwertfeger* 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
June 9, 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>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER PAGE
- ------- ------------
a. Articles of Incorporation of Registrant, as amended, including the
Statement Establishing and Fixing the Rights and Preferences of
Registrant's Municipal Auction Rate Cumulative Preferred Stock
Form N-2 (Registration Nos. 333-78323 and 811-05570), which was filed May
12, 1999).........................................................
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 the 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 Underwriting Agreement....................................
i. Deferred Compensation Plan for Non-Employee Directors.............
j.1 Exchange-Traded Fund Custody Agreement............................
j.2 Fund Accounting Agreement.........................................
j.3 Letter of Succession to Agreements................................
k. Not applicable....................................................
l. Opinion and consent of Morgan, Lewis & Bockius LLP................
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................................................
C-VII
<PAGE>
EXHIBIT 99.a
ARTICLES OF INCORPORATION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
* * *
FIRST: The name and address of the incorporator are as follows:
Name Address
---- -------
Gifford R. Zimmerman 333 West Wacker Drive
Chicago, Illinois 60606
SECOND: The name of the Corporation is: Nuveen Premium Income Municipal
Fund 4, 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>
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>
(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
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<PAGE>
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: Richard J. Franke, and Donald E. Sveen.
(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>
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 of Directors in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the Corporation to
be affixed to all papers which may require it.
(b) A contract or other transaction between the Corporation and any of
its directors or between the Corporation and 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 are present at the meeting of shareholders or the board or a
committee at which the contract or transaction is authorized, approved or
ratified; if: (i) the contract or transaction was, and the person asserting
the validity of the contract or transaction sustains the burden of
establishing that the contract or transaction was, fair and reasonable as
to the Corporation at the time it was authorized, approved, or ratified;
(ii) the material facts as to the contract or transaction and as to the
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>
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 of paragraph (b) of this Article SEVENTH,
any such contract may be made with any firm or corporation in which any
director or directors of the Corporation may be interested. The
compensation of the Investment Adviser may be based upon a percentage of
the value of the net assets of the Corporation, a percentage of the income
or gross realized or unrealized gain of the Corporation, or a combination
thereof, or otherwise, as may be provided in such contract.
Upon the termination of any contract with Nuveen Advisory Corp., or
any corporation affiliated with John Nuveen & Co. Incorporated, acting as
Investment Adviser, the Board of Directors is hereby authorized to promptly
change the name of the Corporation to a name which does not include
"Nuveen" or any approximation or abbreviation thereof.
(d) The Board of Directors shall have authority to appoint and enter
into a written contract or contracts with an underwriter or distributor or
distributors as agent or agents for the sale of shares of the Corporation
and to pay such underwriter, distributor or distributors
-6-
<PAGE>
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 expenses of the Corporation; the
amount of the net income of the Corporation from dividends and interest for
any period and the amount of assets at any time legally available for the
payment of dividends or distributions; the amount, purpose, time of
creation, increase or decrease, alteration or cancellation of any reserves
or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been
paid or discharged); the market
-7-
<PAGE>
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>
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>
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>
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 12th day of January,
1993.
/s/ Gifford R. Zimmerman
------------------------
Incorporator
Gifford R. Zimmerman
/s/ Katherine A. Erwin
----------------------
Witness
Katherine A. Erwin
-11-
<PAGE>
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
STATEMENT ESTABLISHING AND FIXING THE RIGHTS
AND PREFERENCES OF
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED STOCK ("MUNIPREFERRED(R)")
SERIES W2
Nuveen Premium Income Municipal Fund 4, Inc., a Minnesota corporation
(the "Corporation"), hereby certifies to the Secretary of State of Minnesota as
follows:
First: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by its amended and restated articles of
incorporation, the Board of Directors has, by resolution duly adopted on
December 18, 1998, authorized the issuance of a series of its authorized
Preferred Stock designated as its Municipal Auction Rate Cumulative Preferred
Stock, Series W2.
Second: The rights and preferences of the shares of such series of
stock are as follows:
<PAGE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
DEFINITIONS
"AA" Composite Commercial Paper Rate...................................... 1
Accountant's Confirmation................................................. 2
Affiliate................................................................. 2
Agent Member.............................................................. 2
Anticipation Notes........................................................ 2
Applicable Rate........................................................... 2
Articles.................................................................. 2
Auction................................................................... 2
Auction Agency Agreement.................................................. 2
Auction Agent............................................................. 2
Auction Date.............................................................. 2
Auction Procedures........................................................ 2
Available MuniPreferred................................................... 2
Benchmark Rate............................................................ 2
Beneficial Owner.......................................................... 2
Bid and Bids.............................................................. 2
Bidder and Bidders........................................................ 2
Board of Directors........................................................ 2
Broker-Dealer............................................................. 3
Broker-Dealer Agreement................................................... 3
Business Day.............................................................. 3
Code...................................................................... 3
Commercial Paper Dealers.................................................. 3
Common Stock.............................................................. 3
Cure Date................................................................. 3
Date of Original Issue.................................................... 3
Deposit Securities........................................................ 3
Discounted Value.......................................................... 3
Dividend Payment Date..................................................... 3
Dividend Period........................................................... 3
Existing Holder........................................................... 3
Failure to Deposit........................................................ 3
Federal Tax Rate Increase................................................. 4
Fund...................................................................... 4
Gross-Up Payment.......................................................... 4
Holder.................................................................... 4
Hold Order and Hold Orders................................................ 4
Independent Accountant.................................................... 4
Initial Rate Period....................................................... 4
Interest Equivalent....................................................... 4
Issue Type Category....................................................... 4
Kenny Index............................................................... 4
Late Charge............................................................... 4
Liquidation Preference.................................................... 4
Market Value.............................................................. 4
Maximum Potential Gross-Up Payment Liability.............................. 4
Maximum Rate.............................................................. 5
Minimum Rate Period....................................................... 5
Moody's................................................................... 5
Moody's Discount Factor................................................... 5
Moody's Eligible Asset.................................................... 5
Moody's Exposure Period................................................... 5
Moody's Volatility Factor................................................. 5
MuniPreferred............................................................. 6
MuniPreferred Basic Maintenance Amount.................................... 6
MuniPreferred Basic Maintenance Cure Date................................. 7
MuniPreferred Basic Maintenance Report.................................... 7
</TABLE>
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Municipal Obligations............................................. 7
1940 Act.......................................................... 7
1940 Act Cure Date................................................ 7
1940 Act MuniPreferred Asset Coverage............................. 7
Notice of Redemption.............................................. 7
Notice of Special Rate Period..................................... 7
Order and Orders.................................................. 7
Original Issue Insurance.......................................... 7
Other Issues...................................................... 8
Outstanding....................................................... 8
Permanent Insurance............................................... 8
Person............................................................ 8
Portfolio Insurance............................................... 8
Potential Beneficial Owner........................................ 8
Potential Holder.................................................. 8
Preferred Stock................................................... 8
Quarterly Valuation Date.......................................... 8
Rate Multiple..................................................... 8
Rate Period....................................................... 8
Rate Period Days.................................................. 8
Receivables for Municipal Obligations Sold........................ 8
Redemption Price.................................................. 9
Reference Rate.................................................... 9
Registration Statement............................................ 9
S&P............................................................... 9
S&P Discount Factor............................................... 9
S&P Eligible Asset................................................ 9
S&P Exposure Period............................................... 9
S&P Volatility Factor............................................. 9
Secondary Market Insurance........................................ 9
Securities Depository............................................. 9
Sell Order and Sell Orders........................................ 9
Special Rate Period............................................... 9
Special Redemption Provisions..................................... 9
Submission Deadline............................................... 9
Submitted Bid and Submitted Bids.................................. 9
Submitted Hold Order and Submitted Hold Orders.................... 9
Submitted Order and Submitted Orders.............................. 9
Submitted Sell Order and Submitted Sell Orders.................... 10
Subsequent Rate Period............................................ 10
Substitute Commercial Paper Dealer................................ 10
Substitute U.S. Government Securities Dealer...................... 10
Sufficient Clearing Bids.......................................... 10
Taxable Allocation................................................ 10
Taxable Income.................................................... 10
Taxable Equivalent of the Short-Term Municipal Bond Rate.......... 10
Treasury Bill..................................................... 10
Treasury Bill Rate................................................ 10
Treasury Note..................................................... 11
Treasury Note Rate................................................ 11
U.S. Government Securities Dealer................................. 11
Valuation Date.................................................... 11
Volatility Factor................................................. 11
Voting Period..................................................... 11
Winning Bid Rate.................................................. 11
PART I
1. Number of Authorized Shares................................... 12
2. Dividends..................................................... 12
(a) Ranking................................................... 12
(b) Cumulative Cash Dividends................................. 12
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(c) Dividends Cumulative From Date of Original Issue......... 12
(d) Dividend Payment Dates and Adjustment Thereof............ 12
(e) Dividend Rates and Calculation of Dividends.............. 12
(e) (i) Dividend Rates........................................... 12
(e) (ii) Calculation of Dividends................................. 14
(f) Curing a Failure to Deposit.............................. 14
(g) Dividend Payments by Fund to Auction Agent............... 14
(h) Auction Agent as Trustee of Dividend Payments by Fund.... 14
(i) Dividends Paid to Holders................................ 14
(j) Dividends Credited Against Earliest Accumulated
But Unpaid Dividends.................................... 15
(k) Dividends Designated as Exempt-Interest Dividends........ 15
3. Gross-Up Payments................................................... 15
(a) Minimum Rate Periods and Special Rate Periods
of 28 Rate Period Days or Fewer......................... 15
(b) Special Rate Periods of More Than 28 Rate Period Days.... 15
(c) No Gross-Up Payments In the Event of a Reallocation...... 15
4. Designation of Special Rate Periods................................. 15
(a) Length of and Preconditions for Special Rate Period...... 15
(b) Adjustment of Length of Special Rate Period.............. 16
(c) Notice of Proposed Special Rate Period................... 16
(d) Notice of Special Rate Period............................ 16
(e) Failure to Deliver Notice of Special Rate Period......... 17
5. Voting Rights....................................................... 17
(a) One Vote Per Share of MuniPreferred...................... 17
(b) Voting For Additional Directors.......................... 17
(b) (i) Voting Period............................................ 17
(b) (ii) Notice of Special Meeting................................ 18
(b) (iii) Terms of Office of Existing Directors.................... 18
(b) (iv) Terms of Office of Certain Directors to
Terminate Upon Termination of Voting Period............. 18
(c) Holders of MuniPreferred to Vote on Certain Matters...... 18
(c) (i) Increases in Capitalization.............................. 18
(c) (ii) 1940 Act Matters......................................... 19
(d) Board May Take Certain Actions Without
Shareholder Approval.................................... 19
(e) Voting Rights Set Forth Herein Are Sole Voting Rights.... 20
(f) No Preemptive Rights or Cumulative Voting................ 20
(g) Voting for Directors Sole Remedy for Fund's
Failure to Pay Dividends............................... 20
(h) Holders Entitled to Vote................................. 20
6. 1940 Act MuniPreferred Asset Coverage............................... 20
7. MuniPreferred Basic Maintenance Amount.............................. 20
8. [ Reserved ]........................................................ 21
9. Restrictions on Dividends and Other Distributions................... 22
(a) Dividends on Preferred Stock Other Than MuniPreferred.... 22
(b) Dividends and Other Distributions With Respect
to Common Stock Under the 1940 Act..................... 22
(c) Other Restrictions on Dividends and Other Distributions.. 22
10. Rating Agency Restrictions.......................................... 23
11. Redemption.......................................................... 23
(a) Optional Redemption...................................... 23
(b) Mandatory Redemption..................................... 24
(c) Notice of Redemption..................................... 25
(d) No Redemption Under Certain Circumstances................ 25
(e) Absence of Funds Available for Redemption................ 25
(f) Auction Agent as Trustee of Redemption Payments by Fund.. 26
(g) Shares for Which Notice of Redemption Has
Been Given Are No Longer Outstanding................... 26
(h) Compliance With Applicable Law........................... 26
(i) Only Whole Shares of MuniPreferred May Be Redeemed....... 26
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Page
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12. Liquidation Rights.................................................. 26
(a) Ranking...................................................... 26
(b) Distributions Upon Liquidation............................... 26
(c) Pro Rata Distributions....................................... 26
(d) Rights of Junior Stock....................................... 27
(e) Certain Events Not Constituting Liquidation.................. 27
13. Miscellaneous....................................................... 27
(a) Amendment of Appendix A to Add Additional Series............. 27
(b) Appendix A Incorporated by Reference......................... 27
(c) No Fractional Shares......................................... 27
(d) Status of Shares of MuniPreferred Redeemed, Exchanged
or Otherwise Acquired by the Fund........................... 27
(e) Board May Resolve Ambiguities................................ 27
(f) Headings Not Determinative................................... 27
(g) Notices...................................................... 28
PART II
1. Orders.............................................................. 28
2. Submission of Orders by Broker-Dealers to Auction Agent............. 29
3. Determination of Sufficient Clearing Bids, Winning
Bid Rate and Applicable Rate....................................... 30
4. Acceptance and Rejection of Submitted Bids and
Submitted Sell Orders and Allocation of Shares..................... 32
5. Notification of Allocations......................................... 33
6. Auction Agent....................................................... 33
7. Transfer of Shares of MuniPreferred................................. 34
8. Global Certificate.................................................. 34
APPENDIX A
1. Designation As To Series............................................ A-1
2. Number of Authorized Shares Per Series.............................. A-2
3. Exceptions to Certain Definitions................................... A-2
4. Certain Definitions................................................. A-2
5. Initial Rate Periods................................................ A-5
6. Date for Purposes of Paragraph (yyy) Contained
Under the Heading "Definitions" in this Statement.................. A-6
7. Party Named for Purposes of the Definition of "Rate
Multiple" in this Statement........................................ A-6
8. Additional Definitions.............................................. A-6
9. Dividend Payment Dates.............................................. A-6
10. Amount for Purposes of Subparagraph (c) (i) of Section 5
of Part I of this Statement....................................... A-6
11. Redemption Provisions Applicable to Initial Rate Periods............ A-6
12. Applicable Rate for Purposes of Subparagraph (b) (iii)
of Section 3 of Part II of this Statement.......................... A-6
iv
<PAGE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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 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
<PAGE>
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 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.
(1) "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 I of Part II of this Statement.
(q) "Bidder" and "Bidders" shall have the respective meanings
specified in paragraph (a) of Section I of Part II of this Statement;
provided, however, that neither the Fund nor any affiliate thereof shall be
permitted to be a Bidder in an Auction, except that any Broker-Dealer that
is an affiliate of the Fund may be a Bidder in an Auction, but only if the
Orders placed by such Broker-Dealer are not for its own account.
(r) "Board of Directors" shall mean the Board of Directors of the Fund
or any duly authorized committee thereof.
2
<PAGE>
(s) "Broker-Dealer" shall mean any broker-dealer, commercial bank or
other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member
or participant, has been selected by the Fund and has entered into a
Broker-Dealer Agreement that remains effective.
(t) "Broker-Dealer Agreement" shall mean an agreement among the Fund,
the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer
agrees to follow the procedures specified in Part II of this Statement.
(u) "Business Day" shall mean a day on which the New York Stock
Exchange is open for trading and which is neither a Saturday, Sunday nor
any other day on which banks in The City of New York, New York, are
authorized by law to close.
(v) "Code" means the Internal Revenue Code of 1986, as amended.
(w) "Commercial Paper Dealers" shall mean Lehman Commercial Paper
Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates
or successors, if such entity is a commercial paper dealer.
(x) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Fund.
(y) "Cure Date" shall mean the MuniPreferred Basic Maintenance Cure
Date or the 1940 Act Cure Date, as the case may be.
(z) "Date of Original Issue," with respect to shares of a series of
MuniPreferred, shall mean the date on which the Fund initially issued such
shares.
(aa) "Deposit Securities" shall mean cash and Municipal Obligations
rated (1) at least A-1+ or SP-1+ by S&P and (2) 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
3
<PAGE>
redemption date for shares of such series in The City of New York, New
York, the Redemption Price to be paid on such redemption date for any
share of such series after notice of redemption is mailed pursuant to
paragraph (c) of Section 11 of Part I of this Statement; provided,
however, that the foregoing clause (B) shall not apply to the Fund's
failure to pay the Redemption Price in respect of shares of MuniPreferred
when the related Notice of Redemption provides that redemption of such
shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times and
in the manner specified in such Notice of Redemption.
(ii) "Federal Tax Rate Increase" shall have the meaning specified in
the definition of "Moody's Volatility Factor."
(jj) "Fund" shall mean the entity named on the first page of this
Statement, which is the issuer of the shares of MuniPreferred.
(kk) "Gross-up Payment" shall have the meaning specified in Section 4
of Appendix A hereto.
(ll) "Holder," with respect to shares of a series of MuniPreferred,
shall mean the registered holder of such shares as the same appears on the
stock books of the Fund.
(mm) "Hold Order" and "Hold Orders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(nn) "Independent Accountant" shall mean a nationally recognized
accountant, or firm of accountants, that is with respect to the Fund an
independent public accountant or firm of independent public accountants
under the Securities Act of 1933, as amended from time to time.
(oo) "Initial Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified with respect to shares of
such series in Section 5 of Appendix A hereto.
(pp) "Interest Equivalent" means a yield on a 360-day basis of a
discount basis security which is equal to the yield on an equivalent
interest-bearing security.
(qq) "Issue Type Category," if defined in Section 4 of Appendix A
hereto, shall have the meaning specified in that section.
(rr) "Kenny Index" shall have the meaning specified in the definition
of "Taxable Equivalent of the Short-Term Municipal Bond Rate."
(ss) "Late Charge" shall have the meaning specified in subparagraph
(e)(1)(B) of Section 2 of Part I of this statement.
(tt) "Liquidation Preference," with respect to a given number of
shares of MuniPreferred, means $25,000 times that number.
(uu) "Market Value" of any asset of the Fund shall mean the market
value thereof determined by the pricing service designated from time to
time by the Board of Directors. Market Value of any asset shall include any
interest accrued thereon. The pricing service values portfolio securities
at the mean between the quoted bid and asked price or the yield equivalent
when quotations are readily available. Securities for which quotations are
not readily available are valued at fair value as determined by the pricing
service using methods which include consideration of: yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market
conditions. The pricing service may employ electronic data processing
techniques or a matrix system, or both, to determine valuations.
(vv) "Maximum Potential Gross-up Payment Liability," as of any
Valuation Date, shall mean the aggregate amount of Gross-up Payments that
would be due if the Fund were to make Taxable Allocations, with respect to
any taxable year, estimated based upon dividends paid and the amount of
undistributed realized net capital gains and other taxable income earned by
the Fund, as of the end of the calendar month immediately preceding such
Valuation Date, and assuming such Gross-up Payments are fully taxable.
4
<PAGE>
(ww) "Maximum Rate," for shares of a series of MuniPreferred on any
Auction Date for shares of such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the Reference Rate on such Auction Date
for the next Rate Period of shares of such series and (B) the Rate
Multiple on such Auction Date, unless shares of such series have or
had a Special Rate Period (other than a Special Rate Period of 28 Rate
Period Days or fewer) and an Auction at which Sufficient Clearing Bids
existed has not yet occurred for a Minimum Rate Period of shares of
such series after such Special Rate Period, in which case the higher
of:
(A) the dividend rate on shares of such series for the then-
ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate
on such Auction Date for a Rate Period equal in length to the
then-ending Rate Period of shares of such series, if such then-
ending Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal
in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was more than 364 Rate
Period Days, and (y) the Reference Rate on such Auction Date for
a Rate Period equal in length to such Special Rate Period of
shares of such series, if such Special Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate
Period, if such Special Rate Period was more than 364 Rate Period
Days and (2) the Rate Multiple on such Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of this
Statement, the product of (A) the highest of (1) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, (2) the Reference Rate on such Auction
Date for the Special Rate Period for which the Auction is being held
if such Special Rate Period is 364 Rate Period Days or fewer or the
Treasury Note Rate on such Auction Date for the Special Rate Period
for which the Auction is being held if such Special Rate Period is
more than 364 Rate Period Days, and (3) the Reference Rate on such
Auction Date for Minimum Rate Periods and (B) the Rate Multiple on
such Auction Date.
(xx) [Reserved]
(yy) "Minimum Rate Period" shall mean any Rate Period consisting of 7
Rate Period Days.
(zz) "Moody's" shall mean Moody's Investors Service, Inc., a Delaware
corporation, and its successors.
(aaa) "Moody's Discount Factor" shall have the meaning specified in
Section 4 of Appendix A hereto.
(bbb) "Moody's Eligible Asset" shall have the meaning specified in
Section 4 of Appendix A hereto.
(ccc) "Moody's Exposure Period" shall mean the period commencing on a
given Valuation Date and ending 56 days thereafter.
(ddd) "Moody's Volatility Factor" shall mean, as of any Valuation
Date, (i) in the case of any Minimum Rate Period, any Special Rate Period
of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate
Period Days or more, a multiplicative factor equal to 275%, except as
otherwise provided in the last sentence of this definition; (ii) in the
case of any Special Rate Period of more than 28 but fewer than 36 Rate
Period Days, a multiplicative factor equal to 203%; (iii) in the case of
any Special
5
<PAGE>
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> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
(eee) "MuniPreferred" shall have the meaning set forth on the first
page of this Statement.
(fff) "MuniPreferred Basic Maintenance Amount," as of any Valuation
Date, shall mean the dollar amount equal to the sum of (i) (A) the product
of the number of shares of MuniPreferred outstanding on such date
multiplied by $25,000 (plus the product of the number of shares of any
other series of Preferred Stock outstanding on such date multiplied by the
liquidation preference of such shares), plus any redemption premium
applicable to shares of MuniPreferred (or other Preferred Stock) then
subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment
Dates for shares of MuniPreferred outstanding that follow such Valuation
Date (plus the aggregate amount of dividends, whether or not earned or
declared, that will have accumulated in respect of other outstanding shares
of Preferred Stock to, but not including, the first respective dividend
payment dates for such other shares that follow such Valuation Date); (C)
the aggregate amount of dividends that would accumulate on shares of each
series of MuniPreferred outstanding from such first respective Dividend
Payment Date therefor through the 56th day after such Valuation Date, at
the Maximum Rate (calculated as if such Valuation Date were the Auction
Date for the Rate Period commencing on such Dividend Payment Date) for a
Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, assuming, solely for purposes of the foregoing, that if on
such Valuation Date the Fund shall have delivered a Notice of Special Rate
Period to the Auction Agent pursuant to Section 4(d) (i) of this Part I
with respect to shares of such series, such Maximum Rate shall be the
higher of (a) the Maximum Rate for the Special Rate Period of shares of
such series to commence on such Dividend Payment Date and (b) the Maximum
Rate for a Minimum Rate Period of shares of such series to commence on such
Dividend Payment Date, multiplied by the Volatility Factor applicable to a
Minimum Rate Period, or, in the event the Fund shall have delivered a
Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)
(i) of this Part I with respect to shares of such series designating a
Special Rate Period consisting of 56 Rate Period Days or more, the
Volatility Factor applicable to a Special Rate Period of that length (plus
the aggregate amount of dividends that would accumulate at the maximum
dividend rate or rates on any other shares of Preferred Stock outstanding
from such respective dividend payment dates through the 56th day after such
Valuation Date, as established by or pursuant to the respective statements
establishing and fixing the rights and preferences of such other shares of
Preferred Stock) (except that (1) if such Valuation Date occurs at a time
when a Failure to Deposit (or, in the case of shares of Preferred Stock
other than MuniPreferred, a failure similar to a Failure to Deposit) has
occurred that has not been cured, the dividend for purposes of calculation
would accumulate at the current dividend rate then applicable to the shares
in respect of which such
6
<PAGE>
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-l or P-1, and
short-term securities that are the direct obligation of the U.S.
government, provided in each case that such securities mature on or prior
to the date upon which any of (i)(A) through (i)(F) become payable,
otherwise the Moody's Discounted Value) of any of the Fund's assets
irrevocably deposited by the Fund for the payment of any of (i)(A) through
(i)(F).
(ggg) "MuniPreferred Basic Maintenance Cure Date," with respect to the
failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount
(as required by paragraph (a) of Section 7 of Part I of this Statement) as
of a given Valuation Date, shall mean the seventh Business Day following
such Valuation Date.
(hhh) "MuniPreferred Basic Maintenance Report" shall mean a report
signed by the President, Treasurer or any Senior Vice President or Vice
President of the Fund which sets forth, as of the related Valuation Date,
the assets of the Fund, the Market Value and the Discounted Value thereof
(seriatim and in aggregate), and the MuniPreferred Basic Maintenance
Amount.
(iii) "Municipal Obligations" shall mean "Municipal Obligations" as
defined in the Fund's registration statement on Form N-2 on file with the
Securities and Exchange Commission, as such registration statement may be
amended from time to time (the "Registration Statement").
(jjj) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time.
(kkk) "1940 Act Cure Date," with respect to the failure by the Fund to
maintain the 1940 Act MuniPreferred Asset Coverage (as required by Section
6 of Part I of this Statement) as of the last Business Day of each month,
shall mean the last Business Day of the following month.
(lll) "1940 Act MuniPreferred Asset Coverage" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Fund which are
stock, including all outstanding shares of MuniPreferred (or such other
asset coverage as may in the future be specified in or under the 1940 Act
as the minimum asset coverage for senior securities which are stock of a
closed-end investment company as a condition of declaring dividends on its
common stock).
(mmm) "Notice of Redemption" shall mean any notice with respect to the
redemption of shares of MuniPreferred pursuant to paragraph (c) of Section
11 of Part I of this Statement.
(nnn) "Notice of Special Rate Period" shall mean any notice with
respect to a Special Rate Period of shares of MuniPreferred pursuant to
subparagraph (d)(i) of Section 4 of Part I of this Statement.
(ooo) "Order" and "Orders" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "Original Issue Insurance," if defined in Section 4 of Appendix
A hereto, shall have the meaning specified in that section.
7
<PAGE>
(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.
(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.
8
<PAGE>
(dddd) "Redemption Price" shall mean the applicable redemption price
specified in paragraph (a) or (b) of Section 11 of Part I of this
Statement.
(eeee) "Reference Rate" shall mean (i) the higher of the Taxable
Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite
Commercial Paper Rate in the case of Special Rate Periods of more than 28
Rate Period Days but fewer than 183 Rate Period Days; and (iii) the
Treasury Bill Rate in the case of Special Rate Periods of more than 182
Rate Period Days but fewer than 365 Rate Period Days.
(ffff) "Registration Statement" has the meaning specified in the
definition of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New York
corporation, and its successors.
(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 11 of this
Statement.
(oooo) "Special Rate Period," with respect to shares of a series of
MuniPreferred, shall have the meaning specified in paragraph (a) of Section
4 of Part I of this Statement.
(pppp) "Special Redemption Provisions" shall have the meaning
specified in subparagraph (a)(i) of Section 11 of Part I of this
Statement.
(qqqq) "Submission Deadline" shall mean 1:30 P.M., New York City time,
on any Auction Date or such other time on any Auction Date by which Broker-
Dealers are required to submit Orders to the Auction Agent as specified by
the Auction Agent from time to time.
(rrrr) "Submitted Bid" and "Submitted Bids" shall have the respective
meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(ssss) "Submitted Hold Order" and "Submitted Hold Orders" shall have
the respective meanings specified in paragraph (a) of Section 3 of Part II
of this Statement.
(tttt) "Submitted Order" and "Submitted Orders" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part ii of
this Statement.
9
<PAGE>
(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 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
10
<PAGE>
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.
(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.
11
<PAGE>
PART I
1. Number of Authorized Shares.
The number of authorized shares constituting a series of MuniPreferred
shall be as set forth with respect to such series in Section 2 of Appendix A
hereto.
2. Dividends.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a
parity with each other, with shares of any other series of MuniPreferred and
with shares of any other series of Preferred Stock as to the payment of
dividends by the Fund.
(b) Cumulative Cash Dividends. The Holders of shares of MuniPreferred of
any series shall be entitled to receive, when, as and if declared by the Board
of Directors, out of funds legally available therefor, cumulative cash dividends
at the Applicable Rate for shares of such series, determined as set forth in
paragraph (e) of this Section 2, and no more (except to the extent set forth in
Section 3 of this Part I), payable on the Dividend Payment Dates with respect to
shares of such series determined pursuant to paragraph (d) of this Section 2.
Holders of shares of MuniPreferred shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided, on shares of MuniPreferred. No interest, or sum
of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on shares of MuniPreferred which may be in arrears, and,
except to the extent set forth in subparagraph (e)(i) of this Section 2, no
additional sum of money shall be payable in respect of any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on shares
of MuniPreferred of any series shall accumulate at the Applicable Rate for
shares of such series from the Date of Original Issue thereof.
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend Payment
Dates with respect to shares of a series of MuniPreferred shall be as set forth
with respect to shares of such series in Section 9 of Appendix A hereto;
provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as
"Series F MuniPreferred" or "Series M MuniPreferred" in Section 1 of
Appendix A hereto, if the Monday or Tuesday, as the case may be, on which
dividends would otherwise be payable on shares of such series is not a
Business Day, then such dividends shall be payable on such shares on the
first Business Day that falls after such Monday or Tuesday, as the case may
be, and (B) in the case of a series of MuniPreferred designated as "Series
T MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in
Section 1 of Appendix A hereto, if the Wednesday, Thursday or Friday, as
the case may be, on which dividends would otherwise be payable on shares of
such series is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such Wednesday,
Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto the Fund in its
discretion may establish the Dividend Payment Dates in respect of any
Special Rate Period of shares of a series of MuniPreferred consisting of
more than 28 Rate Period Days; provided, however, that such dates shall be
set forth in the Notice of Special Rate Period relating to such Special
Rate Period, as delivered to the Auction Agent, which Notice of Special
Rate Period shall be filed with the Secretary of the Fund; and further
provided that (1) any such Dividend Payment Date shall be a Business Day
and (2) the last Dividend Payment Date in respect of such Special Rate
Period shall be the Business Day immediately following the last day
thereof, as such last day is determined in accordance with paragraph (b) of
Section 4 of this Part I.
(e) Dividend Rates and Calculation of Dividends. (i) Dividend Rates. The
dividend rate on shares of MuniPreferred of any series during the period from
and after the Date of Original Issue of shares of such series to and including
the last day of the Initial Rate Period of shares of such series shall be equal
to the rate per annum set forth with respect to 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
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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;
(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
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Failure to Deposit shall not have been cured in accordance with paragraph
(f) of this Section 2 or, in the event Moody's is then rating such shares,
the Fund shall not have paid the applicable Late Charge to the Auction
Agent (such Late Charge, for purposes of this subparagraph (D), to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days but fewer
than 365 Rate Period Days and (y) commencing on the date on which the Rate
Period during which Failure to Deposit occurs commenced), no Auction will
be held in respect of shares of such series for such Subsequent Rate Period
(or for any Rate Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in accordance with
paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late
Charge to the Auction Agent (the condition set forth in this clause (2) to
apply only in the event Moody's is rating such shares at the time the Fund
cures such Failure to Deposit), in each case no later than 12:00 Noon, New
York City time, on the fourth Business Day prior to the end of such Rate
Period), and the dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate
for shares of such series on the Auction Date for such Subsequent Rate
Period (but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be "Below
"ba3"/BB-") (the rate per annum at which dividends are payable on shares of
a series of MuniPreferred for any Rate Period thereof being herein referred
to as the "Applicable Rate" for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share payable
on shares of a series of MuniPreferred on any date on which dividends shall be
payable on shares of such series shall be computed by multiplying the Applicable
Rate for shares of such series in effect for such Dividend Period or Dividend
Periods or part thereof for which dividends have not been paid by a fraction,
the numerator of which shall be the number of days in such Dividend Period or
Dividend Periods or part thereof and the denominator of which shall be 365 if
such Dividend Period consists of 7 Rate Period Days and 360 for all other
Dividend Periods, and applying the rate obtained against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect to
shares of a series of MuniPreferred shall have been cured (if such Failure to
Deposit is not solely due to the willful failure of the Fund to make the
required payment to the Auction Agent) with respect to any Rate Period of shares
of such series if, within the respective time periods described in subparagraph
(e)(i) of this Section 2, the Fund shall have paid to the Auction Agent (A) all
accumulated and unpaid dividends on shares of such series and (B) without
duplication, the Redemption Price for shares, if any, of such series for which
Notice of Redemption has been mailed by the Fund pursuant to paragraph (c) of
Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Fund's failure to pay the Redemption Price in
respect of shares of MuniPreferred when the related Redemption Notice provides
that redemption of such shares is subject to one or more conditions precedent
and any such condition precedent shall not have been satisfied at the time or
times and in the manner specified in such Notice of Redemption.
(g) Dividend Payments by Fund to Auction Agent. The Fund shall pay to the
Auction Agent, not later than 12:00 Noon, New York City time, on the Business
Day next preceding each Dividend Payment Date for shares of a series of
MuniPreferred, an aggregate amount of funds available on the next Business Day
in The City of New York, New York, equal to the dividends to be paid to all
Holders of shares of such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Fund. All moneys paid
to the Auction Agent for the payment of dividends (or for the payment of any
Late Charge) shall be held in trust for the payment of such dividends (and any
such Late Charge) by the Auction Agent for the benefit of the Holders specified
in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in
accordance with the foregoing but not applied by the Auction Agent to the
payment of dividends (and any such Late Charge) will, to the extent permitted by
law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(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.
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(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends.
Any dividend payment made on shares of MuniPreferred shall first be credited
against the earliest accumulated but unpaid dividends due with respect to such
shares. Dividends in arrears for any past Dividend Period may be declared and
paid at any time, without reference to any regular Dividend Payment Date, to the
Holders as their names appear on the stock books of the Fund on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the
Board of Directors.
(k) Dividends Designated as Exempt-Interest Dividends. Dividends on shares
of MuniPreferred shall be designated as exempt-interest dividends up to the
amount of tax-exempt income of the Fund, to the extent permitted by, and for
purposes of, Section 852 of the Code.
3. Gross-up Payments.
Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period
Days or Fewer. If, in the case of any Minimum Rate Period or any Special
Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net
capital gains or other income taxable for Federal income tax purposes to a
dividend paid on shares of MuniPreferred without having given advance
notice thereof to the Auction Agent as provided in Section 5 of Part II of
this Statement (such allocation being referred to herein as a "Taxable
Allocation") solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the
outstanding shares of MuniPreferred or the liquidation of the Fund, the
Fund shall, prior to the end of the calendar year in which such dividend
was paid, provide notice thereof to the Auction Agent and direct the Fund's
dividend disbursing agent to send such notice with a Gross-up Payment to
each Holder of such shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(b) Special Rate Periods of More Than 28 Rate Period Days. If, in the
case of any Special Rate Period of more than 28 Rate Period Days, the Fund
makes a Taxable Allocation to a dividend paid on shares of MuniPreferred,
the Fund shall, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent and direct
the Fund's dividend disbursing agent to send such notice with a Gross-up
Payment to each Holder of shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or
last appeared on the stock books of the Fund.
(c) No Gross-Up Payments In the Event of a Reallocation. The Fund
shall not be required to make Gross-up Payments with respect to any net
capital gains or other taxable income determined by the Internal Revenue
Service to be allocable in a manner different from that allocated by the
Fund.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Fund, at its
option, may designate any succeeding Subsequent Rate Period of shares of a
series of MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820,
subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred is 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.
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<PAGE>
(b) Adjustment of Length of Special Rate Period. In the event the Fund
wishes to designate a Subsequent Rate Period as a Special Rate Period, but the
day following what would otherwise be the last day of such Special Rate Period
is not (a) a Tuesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series M MuniPreferred" in Section 1 of Appendix A
hereto, (b) a Wednesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series T MuniPreferred" in Section 1 of Appendix A
hereto, (c) a Thursday that is a Business Day in the case of a series of
MuniPreferred designated as "Series W MuniPreferred" in Section 1 of Appendix A
hereto, (d) a Friday that is a Business Day in the case of a series of
MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of Appendix A
hereto, (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 Friday that is a
Business Day preceding what would otherwise be such last day in the case of
Series TH MuniPreferred, and (e) on the first Sunday that is followed by a
Monday that is a Business Day preceding what would otherwise be such last day,
in the case of Series F MuniPreferred.
(c) Notice of Proposed Special Rate Period. If the Fund proposes to
designate any succeeding Subsequent Rate Period of shares of a series of
MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section
4, not less than 20 (or such lesser number of days as may be agreed to from time
to time by the Auction Agent) nor more than 30 days prior to the date the Fund
proposes to designate as the first day of such Special Rate Period (which shall
be such day that would otherwise be the first day of a Minimum Rate Period),
notice shall be (i) published or caused to be published by the Fund in a
newspaper of general circulation to the financial community in The City of New
York, New York, which carries financial news, and (ii) mailed by the Fund by
first-class mail, postage prepaid, to the Holders of shares of such series. Each
such notice shall state (A) that the Fund may exercise its option to designate a
succeeding Subsequent Rate Period of shares of such series as a Special Rate
Period, specifying the first day thereof and (B) that the Fund will, by 11:00
A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction
Agent) notify the Auction Agent of either (x) its determination, subject to
certain conditions, to exercise such option, in which case the Fund shall
specify the Special Rate Period designated, or (y) its determination not to
exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York City
time, on the second Business Day next preceding the first day of any proposed
Special Rate Period of shares of a series of MuniPreferred as to which notice
has been given as set forth in paragraph (c) of this Section 4 (or such later
time or date, or both, as may be agreed to by the Auction Agent), the Fund shall
deliver to the Auction Agent either.
(i) a notice ("Notice of Special Rate Period") stating (A) that the
Fund has determined to designate the next succeeding Rate Period of shares
of such series as a Special Rate Period, specifying the same and the first
day thereof, (B) the Auction Date immediately prior to the first day of
such Special Rate Period, (C) that such Special Rate Period shall not
commence if (1) an Auction for shares of such series shall not be held on
such Auction Date for any reason or (2) an Auction for shares of such
series shall be held on such Auction Date but Sufficient Clearing Bids for
shares of such series shall not exist in such Auction, (D) the scheduled
Dividend Payment Dates for shares of such series during such Special Rate
Period and (E) the Special Redemption Provisions, if any, applicable to
shares of such series in respect of such Special Rate Period; such notice
to be accompanied by a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate
Period, Moody's Eligible Assets (if Moody's is then rating such series) and
S&P Eligible Assets (if S&P is then rating such series) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount as of such Business Day (assuming for purposes of the
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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 MuniPreferred, equal
to at least two full years' dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited
with the Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of shares of Preferred Stock are
entitled under the 1940 Act to elect a majority of the directors of
the Fund.
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Upon the termination of a Voting Period, the voting rights described in
this subparagraph (b)(i) shall cease9 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 separately as one class): (a) authorize, create or issue
any class or series of stock ranking prior to or on a parity with shares of
MuniPreferred with respect to the payment of dividends or the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Fund, or increase the authorized amount 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,
classes or series of Preferred Stock ranking on a parity with shares of
MuniPreferred with respect to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up of the affairs of the
Fund; provided, however, that if Moody's or S&P is not then rating the
shares of MuniPreferred, the aggregate liquidation preference of all
Preferred Stock of the Fund outstanding after any such issuance, exclusive
of accumulated and unpaid dividends, may not exceed the amount set forth in
Section 10 of Appendix A hereto) or (b) amend, alter or repeal the
provisions of the Articles, including this Statement, whether by merger,
consolidation or otherwise, so as to affect any preference, right or power
of such shares of MuniPreferred or the Holders thereof; provided, however,
that (i) none of the actions permitted by the exception to (a) above will
be deemed to affect such preferences, rights or powers and (ii) 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
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<PAGE>
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 separately as one 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
separately as a class).
(ii) 1940 Act Matters. Unless a higher percentage is provided for in the
Articles, 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 or any action requiring a vote of
security holders of the Fund under Section 13 (a) of the 1940 Act. 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) 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 Moody's Volatility Factor
Discounted Value 1940 Act Cure Date
Escrowed Bonds 1940 Act MuniPreferred Asset Coverage
Issue Type Category Other Issues
Market Value Quarterly Valuation Date
Maximum Potential Gross-up Receivables for Municipal
Payment Liability Obligations Sold
MuniPreferred Basic Maintenance Amount S&P Discount Factor
MuniPreferred Basic Maintenance Cure Date S&P Eligible Asset
MuniPreferred Basic Maintenance Report S&P Exposure Period
Moody's Discount Factor S&P Volatility Factor
Moody's Eligible Asset Valuation Date
Moody's Exposure Period Volatility Factor
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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 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.
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<PAGE>
(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 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]
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<PAGE>
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Neferred 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 (d) of Section 12 of this Part 1,
(A) the Fund shall not declare, pay or set apart for payment any dividend or
other distribution (other than a dividend or distribution paid in shares of, or
in options, warrants or rights to subscribe for or purchase, Common Stock or
other stock, if any, ranking junior to the shares of MuniPreferred as to the
payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of the Common Stock or any other stock of
the Fund ranking junior to or on a parity with the shares of MuniPreferred as to
the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other such junior
stock (except by conversion into or exchange for stock of the Fund ranking
junior to the shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), or any such
parity stock (except by conversion into or exchange for stock of the Fund
ranking junior to or on a parity with MuniPreferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), unless (i) full cumulative dividends on shares of each series of
MuniPreferred through its most recently ended Dividend Period shall have been
paid or shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent and (ii) the Fund has redeemed the full number
of shares of MuniPreferred required to be redeemed by any provision for
mandatory redemption pertaining thereto, and (B) the Fund shall not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or in options, warrants or rights to
subscribe for or purchase, Common Stock or other stock, if any, ranking junior
to shares of MuniPreferred as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up) in respect of Common
Stock or any other stock of the Fund ranking junior to shares of MuniPreferred
as to the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other such junior
stock (except by conversion into or exchange for stock of the Fund ranking
junior to shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon
22
<PAGE>
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 any class or series of stock ranking prior to or on a
parity with shares of MuniPreferred with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or
winding up of the Fund, or reissue any shares of MuniPreferred previously
purchased or redeemed by the Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred to in
the definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. Redemption.
(a) Optional Redemption. (i) Subject to the provisions of subparagraph (v)
of this paragraph (a), shares of MuniPreferred of any series may be redeemed, at
the option of the Fund, as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for shares of such series, out
of funds legally available therefor, at a redemption price per share equal to
the sum of $25,000 plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the date
fixed for redemption; provided, however, that (1) shares of a series of
MuniPreferred may not be redeemed in part if after such partial redemption fewer
than 500 shares of such series remain outstanding; (2) unless otherwise provided
in Section I 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").
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<PAGE>
(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 o?? any date mail a Notice of Redemption pursuant to
paragraph (c) of this Section 11 in respect of a redemption contemplated to be
effected pursuant to this paragraph (a) unless on such date (a) the Fund has
available Deposit Securities with maturity or tender dates not later than the
day preceding the applicable redemption date and having a value not less than
the amount (including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such redemption date
and (b) the Discounted Value of Moody's Eligible Assets (if Moody's is then
rating the shares of MuniPreferred) and the Discounted Value of S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) each at least equal
the MuniPreferred Basic Maintenance Amount, and would at least equal the
MuniPreferred Basic Maintenance Amount immediately subsequent to such redemption
if such redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of Moody's
Eligible Assets at least equals the MuniPreferred Basic Maintenance Amount, the
Moody's Discount Factors applicable to Moody's Eligible Assets shall be
determined by reference to the first Exposure Period longer than the Exposure
Period then applicable to the Fund, as described in the definition of Moody's
Discount Factor herein.
(b) Mandatory Redemption. The Fund shall redeem, at a redemption price
equal to $25,000 per share plus accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed by the
Board of Directors for redemption, certain of the shares of MuniPreferred, if
the Fund fails to have either Moody's Eligible Assets with a Discounted Value or
S&P Eligible Assets with a Discounted Value greater than or equal to the
MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act
MuniPreferred Asset Coverage, in accordance with the requirements of the rating
agency or agencies then rating the shares of MuniPreferred, and such failure is
not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be. The number of shares of MuniPreferred to be
redeemed shall be equal to the lesser of (i) the minimum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, the redemption of which, if deemed to have occurred
immediately prior to the opening of business on the Cure Date, would have
resulted in the Fund's having both Moody's Eligible Assets with a Discounted
Value and S&P Eligible Assets with a Discounted Value greater than or equal to
the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (provided,
however, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset
24
<PAGE>
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 clays nor
later than 40 days after such Cure Date, except that if the Fund does not have
funds legally available for the redemption of all of the required number of
shares of MuniPreferred and shares of other Preferred Stock which are subject to
redemption or retirement or the Fund otherwise is unable to effect such
redemption on or prior to 40 days after such Cure Date, the Fund shall redeem
those shares of MuniPreferred and shares of other Preferred Stock which it was
unable to redeem on the earliest practicable date on which it is able to effect
such redemption. If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to this paragraph (b), the number of
shares of such series to be redeemed shall be redeemed pro rata from the Holders
of shares of such series in proportion to the number of shares of such series
held by such Holders.
(c) Notice of Redemption. If the Fund shall determine or be required to
redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of
this Section 11, it shall mail a Notice of Redemption with respect to such
redemption by first class mail, postage prepaid, to each Holder of the shares of
such series to be redeemed, at such Holder's address as the same appears on the
stock books of the Fund on the record date established by the Board of
Directors. Such Notice of Redemption shall be so mailed not less than 20 nor
more than 45 days prior to the date fixed for redemption. Each such Notice of
Redemption shall state: (i) the redemption date; (ii) the number of shares of
MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for
shares of such series; (iv) the Redemption Price; (v) the place or places where
the certificate(s) for such shares (properly endorsed or assigned for transfer,
if the Board of Directors shall so require and the Notice of Redemption shall so
state) are to be surrendered for payment of the Redemption Price; (vi) that
dividends on the shares to be redeemed will cease to accumulate on such
redemption date; and (vii) the provisions of this Section 11 under which such
redemption is made. If fewer than all shares of a series of MuniPreferred held
by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder
shall also specify the number of shares of such series to be redeemed from such
Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section
11 that such redemption is subject to one or more conditions precedent and that
the Fund shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) No Redemption Under Certain Circumstances. Notwithstanding the
provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; provided, however, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
(e) Absence of Funds Available for Redemption. To the extent that any
redemption for which Notice of Redemption has been mailed is not made by reason
of the absence of legally available funds therefor, such redemption shall be
made as soon as practicable to the extent such funds become available. Failure
to redeem shares of MuniPreferred shall be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the Fund shall have
failed, for any reason whatsoever, to deposit in trust with the Auction Agent
the Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed; provided, however, that the foregoing shall not
apply in the case of the Fund's failure to deposit in trust with the Auction
Agent the Redemption Price with respect to any shares where (1) the Notice of
Redemption relating to such redemption provided that such redemption was subject
to one or more conditions precedent and (2) any such condition precedent shall
not have been satisfied at the time or times and in the manner specified in such
Notice of Redemption. Notwithstanding the fact that the Fund may not have
redeemed shares of MuniPreferred for which a Notice of Redemption has been
mailed, dividends may be declared and paid on shares of MuniPreferred and shall
include those shares of MuniPreferred for which a Notice of Redemption has been
mailed.
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(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 bt 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 a rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e) (i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance with the Notice of Redemption of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board of Directors
shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of
MuniPreferred subject to redemption. In the case that fewer than all of the
shares represented by any such certificate are redeemed, a new certificate shall
be issued, representing the unredeemed shares, without cost to the Holder
thereof. The Fund shall be entitled to receive from the Auction Agent, promptly
after the date fixed for redemption, any cash deposited with the Auction Agent
in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred
called for redemption on such date and (ii) all other amounts to which Holders
of shares of MuniPreferred called for redemption may be entitled. Any funds so
deposited that are unclaimed at the end of 90 days from such redemption date
shall, to the extent permitted by law, be repaid to the Fund, after which time
the Holders of shares of MuniPreferred so called for redemption may look only to
the Fund for payment of the Redemption Price and all other amounts to which they
may be entitled. The Fund shall be entitled to receive, from time to time after
the date fixed for redemption, any interest on the funds so deposited.
(h) Compliance With Applicable Law. In effecting any redemption pursuant
to this Section 11, the Fund shall use its best efforts to comply with all
applicable conditions precedent to effecting such redemption under the 1940 Act
and Minnesota law, but shall effect no redemption except in accordance with the
1940 Act and Minnesota law.
(i) Only Whole Shares of MuniPreferred May Be Redeemed. In the case of any
redemption pursuant to this Section 11, only whole shares of MuniPreferred shall
be redeemed, and in the event that any provision of the Articles would require
redemption of a fractional share, the Auction Agent shall be authorized to round
up so that only whole shares are redeemed.
12. Liquidation Rights.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a
parity with each other, with shares of any other series of MuniPreferred and
with shares of any other series of Preferred Stock as to the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund.
(b) Distributions Upon Liquidation. Upon the dissolution, liquidation or
winding up of the affairs of the Fund, whether voluntary or involuntary, the
Holders of shares of MuniPreferred then outstanding shall be entitled to receive
and to be paid out of the assets of the Fund available for distribution to its
shareholders, before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Fund ranking junior to the
MuniPreferred upon dissolution, liquidation or winding up, an amount equal to
the Liquidation Preference with respect to such shares plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same-day funds,
together with any payments required to be made pursuant to Section 3 of this
Part I in connection with the liquidation of the Fund. After the payment to the
Holders of the shares of MuniPreferred of the full preferential amounts provided
for in this paragraph (b), the Holders of MuniPreferred as such shall have no
right or claim to any of the remaining assets of the Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund available
for distribution to the Holders of shares of MuniPreferred upon any dissolution,
liquidation, or winding up of the affairs of the Fund, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled
26
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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 add additional series of MuniPreferred (and terms relating
thereto) to the series of MuniPreferred theretofore described thereon, and each
such additional series shall be governed by the terms of this Statement as if
such series had been described on Appendix A hereto on the date hereof.
(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.
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<PAGE>
(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.
PART II
1. Orders. (a) Prior to the Submission Deadline on each Auction Date for
shares of a series of MuniPreferred:
(i) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held by
such Beneficial Owner which such Beneficial Owner desires to continue to
hold without regard to the Applicable Rate for shares of such series for
the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held by
such Beneficial Owner which such Beneficial Owner offers to sell if the
Applicable Rate for shares of such series for the next succeeding Rate
Period of shares of such series shall be less than the rate per annum
specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held by
such Beneficial Owner which such Beneficial Owner offers to sell without
regard to the Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of Potential Beneficial
Owners, shall in good faith for the purpose of conducting a competitive
Auction in a commercially reasonable manner, contact Potential Beneficial
Owners (by telephone or otherwise), including Persons that are not Beneficial
Owners, on such lists to determine the number of shares, if any, of such
series which each such Potential Beneficial Owner offers to purchase if the
Applicable Rate for shares of such series for the next succeeding Rate Period
of shares of such series shall not be less than the rate per annum specified
by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
paragraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively
as "Hold Orders"; an Order containing the information referred to in clause
(i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information referred to in
clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell
Order" and collectively as "Sell Orders."
(b)(i) A Bid by a Beneficial Owner or an Existing Holder of shares of a
series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such series specified in such Bid
if the Applicable Rate for shares of such series determined on such Auction
Date shall be less than the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such series to
be determined as set forth in clause (iv) of paragraph (a) of Section 4 of
this Part II if the Applicable Rate for shares of such series determined on
such Auction Date shall be equal to the rate specified therein; or
(C) the number of Outstanding shares of such series specified in such Bid
if the rate specified therein shall be higher than the Maximum Rate for
shares of such series, or such number or a lesser
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<PAGE>
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 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.
(iii) A Bid by a Potential Beneficial Owner or a Potential Holder of shares
of a series of MuniPreferred subject to an Auction on any Auction Date shall
constitute an irrevocable offer to purchase:
(A) the number of Outstanding shares of such series specified in such
Bid if the Applicable Rate for shares of such series determined on such
Auction Date shall be higher than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such
series as set forth in clause (v) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein.
(C) No Order for any number of shares of MuniPreferred other than
whole shares shall be valid.
2. Submission of Orders by Broker-Dealers to Auction Agent. (a) Each
Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of MuniPreferred
of a series subject to an Auction on such Auction Date obtained by such Broker-
Dealer, designating itself (unless otherwise permitted by the Fund) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the
Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the
subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares
of such series:
(A) the number of shares, if any, of such series subject to any
Hold Order of such Existing Holder;
(B) the number of shares, if any, of such series subject to any
Bid of such Existing Holder and the rate specified in such Bid; and
(C) the number of shares, if any, of such series subject to any
Sell Order of such Existing Holder; and
(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%.
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<PAGE>
(c) If an Order or Orders covering all of the Outstanding shares of
MuniPreferred of a series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction
Agent covering in the aggregate more than the number of Outstanding shares of
MuniPreferred of a series subject to an Auction held by such Existing Holder,
such Orders shall be considered valid in the following order of priority:
(i) all Hold Orders for shares of such series shall be considered
valid, but only up to and including in the aggregate the number of
Outstanding shares of such series held by such Existing Holder, and if the
number of shares of such series subject to such Hold Orders exceeds the
number of Outstanding shares of such series held by such Existing Holder,
the number of shares subject to each such Hold Order shall be reduced pro
rata to cover the number of Outstanding shares of such series held by such
Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid up
to and including the excess of the number of Outstanding shares of such
series held by such Existing Holder over the number of shares of such
series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing
Holder for shares of such series is submitted to the Auction Agent with the
same rate and the number of Outstanding shares of such series subject to
such Bids is greater than such excess, such Bids shall be considered valid
up to and including the amount of such excess, and the number of shares of
such series subject to each Bid with the same rate shall be reduced pro
rata to cover the number of shares of such series equal to such excess;
(C) subject to subclauses (A) and (B), if more than one Bid of an
Existing Holder for shares of such series is submitted to the Auction Agent
with different rates, such Bids shall be considered valid in the ascending
order of their respective rates up to and including the amount of such
excess; and
(D) in any such event, the number, if any, of such Outstanding shares
of such series subject to any portion of Bids considered not valid in whole
or in part under this clause (ii) shall be treated as the subject of a Bid
for shares of such series by or on behalf of a Potential Holder at the rate
therein specified; and
(iii) all Sell Orders for shares of such series shall be considered
valid up to and including the excess of the number of Outstanding shares of
such series held by such Existing Holder over the sum of shares of such
series subject to valid Hold Orders referred to in clause (i) above and
valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(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
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<PAGE>
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 subc1ause (A) above being
hereinafter referred to collectively as "Sufficient Clearing Bids" for
shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the
lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for
shares of such series) which if:
(A)(I) each such Submitted Bid of Existing Holders specifying
such lowest rate and (II) all other such Submitted Bids of Existing
Holders specifying lower rates were rejected, thus entitling such
Existing Holders to continue to hold the shares of such series that
are subject to such Submitted Bids; and
(B)(I) each such Submitted Bid of Potential Holders specifying
such lowest rate and (II) all other such Submitted Bids of Potential
Holders specifying lower rates were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant
to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of
the Maximum Rate for shares of the series of MuniPreferred for which an Auction
is being held on the Auction Date and, based on such determination, the
Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that
the Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Winning Bid Rate for shares of
such series so determined;
(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
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<PAGE>
(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 MuniPreferred have
been made, all Submitted Sell Orders with respect to shares of such series shall
be accepted and, subject to the provisions of paragraphs (d) and (e) of this
Section 4, Submitted Bids with respect to shares of such series shall be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is higher than the Winning Bid Rate for shares of
such series shall be accepted, thus requiring each such Existing Holder to
sell the shares of MuniPreferred subject to such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be rejected, thus entitling each such Existing Holder to
continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(iii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is lower than the Winning Bid Rate for shares of
such series shall be accepted;
(iv) each Existing Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be rejected, thus entitling such Existing Holder to continue
to hold the shares of MuniPreferred subject to such Submitted Bid, unless
the number of Outstanding shares of MuniPreferred subject to all such
Submitted Bids shall be greater than the number of shares of MuniPreferred
("remaining shares") in the excess of the Available MuniPreferred of such
series over the number of shares of MuniPreferred subject to Submitted Bids
described in clauses (ii) and (iii) of this paragraph (a), in which event
such Submitted Bid of such Existing Holder shall be rejected in part, and
such Existing Holder shall be entitled to continue to hold shares of
MuniPreferred subject to such Submitted Bid, but only in an amount equal to
the number of shares of MuniPreferred of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator of
which shall be the number of Outstanding shares of MuniPreferred held by
such Existing Holder subject to such Submitted Bid and the denominator of
which shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such series;
and
(v) each Potential Holder's Submitted Bid for shares of such series
specifying a rate that is equal to the Winning Bid Rate for shares of such
series shall be accepted but only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares in the
excess of the Available MuniPreferred of such series over the number of
shares of MuniPreferred subject to Submitted Bids described in clauses (ii)
through (iv) of this paragraph (a) by a fraction, the numerator of which
shall be the number of Outstanding shares of MuniPreferred subject to such
Submitted Bid and the denominator of which shall be the aggregate number of
Outstanding shares of MuniPreferred subject to such Submitted Bids made by
all such Potential Holders that specified a rate equal to the Winning Bid
Rate for shares of such series.
(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:
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(i) Existing Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be rejected, thus entitling such Existing
Holders to continue to hold the shares of MuniPreferred subject to such
Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of such series
specifying any rate that is equal to or lower than the Maximum Rate for
shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares of such series
specifying any rate that is higher than the Maximum Rate for shares of such
series and the Submitted Sell Orders for shares of such series of each
Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or
Submitted Sell Order to sell the shares of such series subject to such
Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the number of shares of such series obtained by multiplying the
number of shares of such series subject to Submitted Bids described in
clause (ii) of this paragraph (b) by a fraction, the numerator of which
shall be the number of Outstanding shares of such series held by such
Existing Holder subject to such Submitted Bid or Submitted Sell Order and
the denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted Sell
Orders.
(c) If all of the Outstanding shares of a series of MuniPreferred are
subject to Submitted Hold Orders, all Submitted Bids for shares of such series
shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of
paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing
Holder would be entitled or required to sell, or any Potential Holder would be
entitled or required to purchase, a fraction of a share of a series of
MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it
shall determine in its sole discretion, round up or down the number of shares of
MuniPreferred of such series to be purchased or sold by any Existing Holder or
Potential Holder on such Auction Date as a result of such procedures so that the
number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of paragraph
(a) of this Section 4, any Potential Holder would be entitled or required to
purchase less than a whole share of a series of MuniPreferred on any Auction
Date, the Auction Agent shall, in such manner as it shall determine in its sole
discretion, allocate shares of MuniPreferred of such series for purchase among
Potential Holders so that only whole shares of MuniPreferred of such series are
purchased on such Auction Date as a result of such procedures by any Potential
Holder, even if such allocation results in one or more Potential Holders not
purchasing shares of MuniPreferred of such series on such Auction Date.
(f) Based on the results of each Auction for shares of a series of
MuniPreferred, the Auction Agent shall determine the aggregate number of shares
of such series to be purchased and the aggregate number of shares of such series
to be sold by Potential Holders and Existing Holders and, with respect to each
Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ,
determine to which other Potential Holder(s) or Existing Holder(s) they shall
deliver, or from which other Potential Holder(s) or Existing Holder(s) they
shall receive, as the case may be, shares of MuniPreferred of such series.
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 BrokerDealer Agreement, will be required to
notify its Beneficial Owners and Potential Beneficial Owners of shares of
MuniPreferred believed by it to be interested in submitting an Order in the
Auction to be held on such Auction Date.
6. Auction Agent. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its affiliates (which however, may engage or have
engaged in business
33
<PAGE>
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.
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 PREMIUM INCOME MUNICIPAL FUND 4, INC., has
caused these presents to be signed in its name and on its behalf by its Vice
President on , 1999.
NUVEEN PREMIUM INCOME MUNICIPAL
FUND 4, INC.
By /s/ Gifford R. Zimmerman
-------------------------------
Gifford R. Zimmerman
Vice President and Secretary
34
<PAGE>
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
APPENDIX A
Section 1. Designation As To Series.
Series W2: A series of 10,000 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series W2." shares of Series W2
MuniPreferred shall be issued on , 1999 (the "Effective Time"); have
an Applicable Rate for its Initial Rate Period equal to % per annum; have
an initial Dividend Payment Date Business Day of each month, commencing with the
month following the month in of , 1999; 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 W2
Munipreferred shall constitute a separate series of Preferred Stock of the Fund,
and each share of Series W2 MuniPreferred shall be identical except as provided
in Section 11 of Part I of this Statement. All references to "Series W
MuniPreferred" in Part I of this Statement shall include Series W2
MuniPreferred.
A-1
<PAGE>
Section 2. Number of Authorized Shares Per Series.
The number of authorized shares constituting Series W2 MuniPreferred is
10,000.
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:
"Escrowed Bond" shall mean Municipal Obligations that (i) have been
determined to be legally defeased in accordance with S&P's legal defeasance
criteria, (ii) have been determined to be economically defeased in accordance
with S&P's economic defeasance criteria and assigned a rating of AAA by S&P,
(iii) are not rated bv S&P but have been determined to be legally defeased by
Moody's or (iv) have been determined to be economically defeased by Moody's
and assigned a rating no lower than the rating that is Moody's equivalent of
S&P's AAA rating.
"Gross-up Payment" means payment to a Holder of shares of MuniPreferred of
an amount which, when taken together with the aggregate amount of Taxable
Allocations made to such Holder to which such Gross-up Payment relates, would
cause such Holder's dividends in dollars (after Federal income tax
consequences) from the aggregate of such Taxable Allocations and the related
Gross-up Payment to be equal to the dollar amount of the dividends which
would have been received by such Holder if the amount of such aggregate
Taxable Allocations would have been excludable from the gross income of such
Holder. Such Gross-up Payment shall be calculated (i) without consideration
being given to the time value of money; (ii) assuming that no Holder of
shares of MuniPreferred is subject to the Federal alternative minimum tax
with respect to dividends received from the Fund; and (iii) assuming that
each Taxable Allocation and each Gross-up Payment (except to the extent such
Gross-up Payment is designated as an exempt-interest dividend under Section
852(b)(5) of the Code or successor provisions) would be taxable in the hands
of each Holder of shares of MuniPreferred at the maximum marginal regular
Federal individual income tax rate applicable to ordinary income or net
capital gains, as applicable, or the maximum marginal regular Federal
corporate income tax rate applicable to ordinary income or net capital gains,
as applicable, whichever is greater, in effect at the time such Gross-up
Payment is made.
"Moody's Discount Factor" shall mean, for purposes of determining the
Discounted Value of any Moody's Eligible Asset, the percentage determined by
reference to the rating on such asset and the shortest Exposure Period set
forth opposite such rating that is the same length as or is longer than the
Moody's Exposure Period, in accordance with the table set forth below:
<TABLE>
<CAPTION>
Rating Category
---------------------------------------------------------
Exposure Period Aaa* Aa* A* Baa* Other** (V)MIG-1*** SP-1+***
--------------- ---- --- -- ---- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks................................. 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but greater than seven
weeks................................. 154 164 173 205 235 137 149
9 weeks or less but greater than eight
weeks................................. 158 169 179 209 242 138 150
</TABLE>
--------------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-l or, if not rated by Moody's,
rated SP-l+ 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.
A-2
<PAGE>
Notwithstanding the foregoing, (i) the Moody's Discount Factor for short-term
Municipal Obligations will be 115%, so long as such Municipal Obligations are
rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or have a demand
feature at par exercisable in 30 days or less or 125% as long as such Municipal
Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and mature or have a
demand feature at par exercisable in 30 days or less and (ii) no Moody's
Discount Factor will be applied to cash or to Receivables for Municipal
Obligations Sold.
"Moody's Eligible Asset" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii)
is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated
by S&P, is rated at least BBB by S&P (provided, however, that for purposes of
determining the Moody's Discount Factor applicable to any such S&P-rated
Municipal Obligation, such Municipal Obligation (excluding any short-term
Municipal Obligation) shall be deemed to have a Moody's rating which is one full
rating category lower than its S&P rating), (iii) does not have its Moody's
rating suspended by Moody's, and (iv) is part of an issue of Municipal
Obligations of at least $10,000,000. Municipal Obligations issued by any one
issuer and rated BBB by S&P may comprise no more than 4% of total Moody's
Eligible Assets; such BBB-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Baa by Moody's or A by
S&P, may comprise no more than 6% of total Moody's Eligible Assets; such BBB,
Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated A by Moody's or AA by S&P, may
comprise no more than 10% of total Moody's Eligible Assets; and such BBB, Baa, A
and AA-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P, may
comprise no more than 20% of total Moody's Eligible Assets. For purposes of the
foregoing sentence, any Municipal Obligation backed by the guaranty, letter of
credit or insurance issued by a third party shall be deemed to be issued by such
third party if the issuance of such third party credit is the sole determinant
of the rating on such Municipal Obligation. Municipal Obligations issued by
issuers located within a single state or territory and rated BBB by S&P may
comprise no more than 12% of total Moody's Eligible Assets; such BBB-rated
Municipal Obligations, if any, together with any Municipal Obligations issued by
issuers located within the same state or territory and rated Baa by Moody's or A
by S&P, may comprise no more than 20% of total Moody's Eligible Assets; such
BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or territory and
rated A by Moody's or AA by S&P, may comprise no more than 40% of total Moody's
Eligible Assets; and such BBB, Baa, A and AA-rated Municipal Obligations, if
any, together with any Municipal Obligations issued by issuers located within
the same state or territory and rated Aa by Moody's or AAA by S&P, may comprise
no more than 60% of total Moody's Eligible Assets. For purposes of applying
the foregoing requirements, a Municipal Obligation shall be deemed to be rated
BBB by S&P if rated BBB-, BBB or BBB+ by S&P, Moody's Eligible Assets shall be
calculated without including cash, and Municipal Obligations rated M1G-1, VMIG-l
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
A-3
<PAGE>
thereafter without penalty, (c) Liens to secure payment for services rendered
or cash advanced to the Fund by Nuveen Advisory Corp., United States Trust
Company of New York or the Auction Agent and (d) Liens by virtue of any
repurchase agreement; or (ii) deposited irrevocably for the payment of any
liabilities for purposes of determining the MuniPreferred Basic Maintenance
Amount.
"Rate Multiple," for shares of a series of MuniPreferred on any Auction Date
for shares of such series, shall mean the percentage, determined as set forth
below, based on the prevailing rating of shares of such series in effect at the
close of business on the Business Day next preceding such Auction Date:
Prevailing Rating Percentage
----------------- ----------
"aa3"/AA- or higher............... 110%
"a3"/A-........................... 125%
"baa3"/BBB-....................... 150%
"ba3"/BB-......................... 200%
Below "ba3"/BB-................... 25O%
provided, however, that in the event the Fund has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is
greater.
For purposes of this definition, the "prevailing rating" of shares of a
series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a
rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent
of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher,
then "a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or
better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below, (iii) if
not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such shares have a
rating of "baa3" or better by Moody's and BBB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or
higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of
"ba3" or better by Moody's and BB- or better by S&P or the equivalent of such
ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "aa3"/AA- or higher,
"a3"/A-, "baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; provided, however,
that if such shares are rated by only one rating agency, the prevailing rating
will be determined without reference to the rating of any other rating agency.
The Fund shall take all reasonable action necessary to enable either S&P or
Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor
Moody's shall make such a rating available, the party set forth in Section 7 of
Appendix A or its successor shall select at least one nationally recognized
statistical rating organization (as that term is used in the rules and
regulations of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended from time to time) to act as a substitute
rating agency in respect of shares of the series of MuniPreferred set forth
opposite such party's name in Section 7 of Appendix A and the Fund shall take
all reasonable action to enable such rating agency to provide a rating for such
shares.
"S&P Discount Factor" shall mean, for purposes of determining the Discounted
Value of any S&P Eligible Asset, the percentage determined by reference to the
rating on such asset and the shortest Exposure Period set forth opposite such
rating that is the same length as or is longer than the S&P Exposure Period, in
accordance with the table set forth below:
Rating Category
-----------------------
Exposure Period AAA* AA* A* BBB*
- --------------- ---- --- --- ----
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.
A-4
<PAGE>
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-l+ or SP-l+ by S&P and mature or have a demand feature exercisable
within 30 days or less, or 125% if such Municipal Obligations are not rated
by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; provided, however, that
any such Moody's-rated short-term Municipal Obligations which have demand
features exercisable within 30 days or less must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other financial
institution with a short-term rating of at least A-1+ from S&P; and further
provided that such Moody's rated short-term Municipal Obligations may
comprise no more than 50% of short-term Municipal Obligations that qualify as
S&P Eligible Assets; (ii) no S&P Discount Factor will be applied to cash or
to Receivables for Municipal Obligations Sold; and (iii) except as set forth
in clause (i) above, in the case of any Municipal Obligation that is not
rated by S&P but qualifies as an S&P Eligible Asset pursuant to clause (iii)
of that definition, such Municipal Obligation will be deemed to have an S&P
rating one full rating category lower than the S&P rating category that is
the equivalent of the rating category in which such Municipal Obligation is
placed by Moody's. For purposes of the foregoing, Anticipation Notes rated
SP-l+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not
mature or have a demand feature at par exercisable in 30 days and which do
not have a long-term rating, shall be considered to be short-term Municipal
Obligations.
"S&P Eligible Asset" shall mean cash (excluding any cash irrevocably
deposited by the Fund for the payment of any liabilities within the meaning
of MuniPreferred Basic Maintenance Amount), Receivables for Municipal
Obligations Sold or a Municipal Obligation owned by the Fund that (i) is
interest bearing and pays interest at least semi-annually; (ii) is payable
with respect to principal and interest in U.S. Dollars; (iii) is publicly
rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is
rated at least A by Moody's; (iv) is not part of a private placement of
Municipal Obligations; and (v) is part of an issue of Municipal Obligations
with an original issue size of at least $20 million or, if of an issue with
an original issue size below $20 million (but in no event below $10
million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Solely for purposes of this definition, the term
"Municipal Obligation" means any obligation the interest on which is exempt
from regular Federal income taxation and which is issued by any of the fifty
United States, the District of Columbia or any of the territories of the
United States, their subdivisions, counties, cities, towns, villages, school
districts and agencies (including authorities and special districts created
by the states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations (excluding Escrowed Bonds) of any one issuer
or guarantor (excluding bond insurers) shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible Assets,
provided that 2% is added to the applicable S&P Discount Factor for every
1% by which the Market Value of such Municipal Obligations exceeds 5% of
the aggregate Market Value of S&P Eligible Assets;
(2) Municipal Obligations rated by Moody's but not rated by S&P shall
be considered S&P Eligible Assets only to the extent the Market Value of
such Municipal Obligations does not exceed 50% of the aggregate Market
Value of S&P Eligible Assets; and
(3) Long-term Municipal Obligations (excluding Escrowed Bonds) issued
by issuers in any one state or territory shall be considered S&P Eligible
Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 20% of the aggregate Market Value of S&P Eligible Assets.
Section 5. Initial Rate Period.
The Initial Rate Period for shares of Series W2 MuniPreferred shall be the
period from and including the Date of Original Issue thereof to but excluding
, 1999.
A-5
<PAGE>
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading
"Definitions" in this Statement.
August 31, 1999.
Section 7. Party Named for Purposes of the Definition of "Rate Multiple" in this
Statement.
Party: Series of MuniPreferred:
Salomon Smith Barney Inc.............Series W2
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 W2 MuniPreferred on Thursday, _______, 1999, and on each Thursday
thereafter;
Section 10. Amount for Purposes of Subparagraph (c) (i) of Section 5 of Part I
of this Statement.
$163,400,000.
Section 11. Redemption Provisions Applicable to Initial Rate Periods.
Shares of Series W2 MuniPreferred are redeemable during the Initial Rate
Period thereof only on the second Business Day next preceding the last Dividend
Payment Date for such Initial Rate Period.
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) (1) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate
A-6
<PAGE>
Period consists of fewer than 183 Rate Period Days; (11) the Treasury Bill Rate
on such Auction Date for such Rate Period, if such Rate Period consists of more
than 182 but fewer than 365 Rate Period Days; or (III) the Treasury Note Rate on
such Auction Date for such Rate Period, if such Rate Period is more than 364
Rate Period Days (the rate described in the foregoing clause (A) (I), (II) or
(III), as applicable, being referred to herein as the "Benchmark Rate") and (B)
1 minus the maximum marginal regular Federal individual income tax rate
applicable to ordinary income or the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income, whichever is greater, provided,
however, that if the Fund has notified the Auction Agent of its intent to
allocate to shares of such series in such Rate Period any net capital gains or
other income taxable for Federal income tax purposes ("Taxable Income"), the
Applicable Rate for shares of such series for such Rate Period will be (i) if
the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate,
then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal
to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the
Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or
the product of the Benchmark Rate multiplied by the factor set forth in the
preceding clause (B) and (y) the product of the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax applicable to ordinary income, whichever is
greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing,
Taxable Yield Rate means the rate determined by (a) dividing the amount of
Taxable Income available for distribution per such share of MuniPreferred by the
number of days in the Dividend Period in respect of which such Taxable Income is
contemplated to be distributed, (b) multiplying the amount determined in (a)
above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or 360 (in
the case of any other Dividend Period), and (c) dividing the amount determined
in (b) above by $25,000.
A-7
<PAGE>
Exhibit 99.b
Amendment to By-Laws
of
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
The By-Laws of Nuveen Premium Income Municipal Fund 4, Inc., a Minnesota
corporation (the "Fund"), have been amended by unanimous vote of the Board of
Directors at a meeting duly called, convened and held on October 30, 1998, to
read as follows:
WHEREAS, the Fund's By-Laws permit shareholders to cast a vote at any
regular or special meeting of shareholders either in person or by proxy;
and
WHEREAS, such proxies are currently returned to the Fund by means of the
United States Postal Service or by overnight courier; and
WHEREAS, the Board now deems it beneficial to include the submission of
proxies by telephonic and electronic means.
NOW, THEREFORE, BE IT RESOLVED, that Section 2.7 of the Fund's By-Laws be
amended to include the following at the end of such section:
The placing of a Shareholder's name on a proxy pursuant to telephonic
or electronically transmitted instructions (including, without
limitation, instructions transmitted over the Internet) obtained
pursuant to procedures which are reasonably designed to verify that
such instructions have been authorized by such Shareholder, shall
constitute execution of such proxy by or on behalf of such
Shareholder.
<PAGE>
AMENDMENT TO BY-LAWS
of
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
The By-Laws of Nuveen Premium Income Municipal FUND 4, 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 Investment Committee (whose function
shall be to advise the Board as to the investment policies of the
Corporation) and any other committee, each such committee to consist of two
or more directors and to have such powers and authority (to the extent
permitted by law) as may be provided in such resolution."
<PAGE>
AMENDMENT TO BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
The By-Laws of Nuveen Premium Income Municipal Fund 4, 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>
AMENDMENT TO BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
The By-Laws of Nuveen Premium Income Municipal Fund 4, 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 ByLaws 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>
BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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 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
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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 6.3 of these By-Laws.
DIRECTORS
Section 3.1 Qualifications and Number; Vacancies. The property,
affairs and business of the Corporation shall be managed by the Board of
Directors, which shall consist of not less than two nor more than twelve
persons, as shall be fixed from time to time by the Board of Directors pursuant
to a resolution adopted by a majority of the Board of Directors. Each director
shall be a natural person. A director need not be a shareholder, a citizen of
the United States, or a resident of the State of Minnesota. The number of
directors may be increased or, subject to the provisions of the Minnesota
Business Corporation Act, decreased at any time, in either case by amendment to
these By-Laws or by the Board of Directors pursuant to a resolution adopted by a
majority of the Board of Directors then in office. 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
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<PAGE>
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 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
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<PAGE>
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 6.3 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 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:
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(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 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
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(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 6.6 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; and
(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:
(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 of the Corporation;
(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.
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<PAGE>
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). 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 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
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(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.
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
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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 Fiscal Year. The fiscal year of the Corporation shall be
as fixed by the Board of Directors of the Corporation.
Section 6.2 Notice and Waiver of Notice. (a) Any notice of a meeting
required to be given under these By-Laws to shareholders and/or directors may be
waived by any such person (1) orally or in writing signed by such person before,
at or after the meeting or (ii) by attendance at the meeting in person or, in
the case of a shareholder, by proxy.
(b) 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 6.3 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 directors 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 6.4 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 6.5 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 6.6 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 6.7 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 6.8 Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors. The Board
of Directors shall, in any event, require the Corporation to provide and
maintain a bond issued by a reputable fidelity insurance company, authorized to
do business in the place where the bond is issued, against larceny and
embezzlement, covering each officer and employee of the Corporation, who may
singly, or jointly with others, have access to securities or funds of the
Corporation, either directly or through authority to draw upon such funds or to
direct generally the disposition of such securities, such bond or bonds to be in
such reasonable form and amount as a majority of the Board of Directors who are
not "interested persons" of the Corporation as defined in the 1940 Act shall
approve not less than once every twelve months, with due consideration to all
relevant factors including, but not limited to, the value of the aggregate
assets of the Corporation to which any such officer or employee may have access,
the type and terms of the arrangements made for the custody and safekeeping of
such assets, and the nature of the securities in the Corporation's portfolio,
and as meet all requirements which the Securities and Exchange Commission may
prescribe by order, rule or regulation.
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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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AMENDED
BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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>
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 April 20, 1993.)
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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
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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
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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
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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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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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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>
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a communication to the Fund.
(f) "Broker-Dealer Agreement" shall mean each agreement among the
Fund, the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(g) "Fund Officer" shall mean the Chairman of the Board of Directors
or Board of Trustees, as the case may be, each Vice Chairman of the Board
of Directors or Board of Trustees (whether or not designated by a number or
word or words added before or after the title "Vice Chairman"), the
President, each Vice President (whether or not designated by a number or
word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Fund and every other officer
or employee of the Fund designated as a "Fund Officer" for purposes hereof
in a notice to the Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par
value $.01 per share, of the Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of the Fund or any
committee thereof shall specify; as set forth in the Request and Acceptance
Letter.
(i) "Request and Acceptance Letter" shall mean the letter from the
Fund to the Auction Agent pursuant to which the Fund appoints the Auction
Agent and the Auction Agent accepts its appointment as auction agent for
the MuniPreferred.
(J) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.
(k) "Statement" shall mean the Statement Establishing and Fixing the
Rights and Preferences of, and authorizing the issuance of, one or more
series of Municipal Auction Rate Cumulative Preferred Stock or Municipal
Auction Rate Cumulative Preferred Shares, as filed by the Fund with the
office of the Secretary of State or other officer of the state where the
Fund was incorporated or organized, a copy of which is attached to the
Request and Acceptance Letter, as the same may be amended, supplemented or
modified from time to time.
1.3 Rules of Construction.
----------------------
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of the Agreement:
2
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(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>
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
BrokerDealer 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 BrokerDealer as described in
the first sentence of Section 2.2(c)(iii) hereof and (D) the results of any
procedures approved by the Fund that have been devised for the purpose of
determining the identities of Existing Holders in situations where shares of
MuniPreferred may have been transferred without compliance with any restriction
on the transfer thereof set forth in the Auction Procedures.
(ii) In the event of any partial redemption of any series of
MuniPreferred, the Auction Agent shall, at least two Business Days prior to the
next Auction for such series, request each Broker-Dealer to provide the Auction
Agent with a list of Persons who such Broker-Dealer believes should remain
Existing Holders after such redemption based upon inquiries of those Persons
such Broker-Dealer believes are Beneficial Owners as a result
4
<PAGE>
of the most recent Auction and with respect to each such Person, the number of
shares of MuniPreferred of such series such Broker-Dealer believes are owned by
such Person after such redemption. In the absence of receiving any such
information from any Broker-Dealer, the Auction Agent may continue to treat the
Persons listed in its registry of Existing Holders as the beneficial owner of
the number of shares of MuniPreferred of such series shown in such registry.
(iii) The Auction Agent shall be required to register a transfer of
shares of MuniPreferred of any series from an Existing Holder of such shares of
MuniPreferred only if such transfer is to another Existing Holder, or other
Person if permitted by the Fund, and only if such transfer is made (A) pursuant
to an Auction, (B) the Auction Agent has been notified in writing (I) in a
notice substantially in the form of Exhibit C to the Broker-Dealer Agreements by
a Broker-Dealer of such transfer or (II) in a notice substantially in the form
of Exhibit D to the Broker-Dealer Agreements by the Broker-Dealer of any
Existing Holder, or other Person if permitted by the Fund, that purchased or
sold such shares of MuniPreferred in an Auction of the failure of such shares of
MuniPreferred to be transferred as a result of such Auction or (C) pursuant to
procedures approved by the Fund that have been devised for the purpose of
determining the identities of Existing Holders in situations where shares of
MuniPreferred may have been transferred without compliance with any restriction
on the transfer thereof set forth in the Auction Procedures. The Auction Agent
is not required to accept any such notice for an Auction unless it is received
by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction.
(d) The Auction Agent may request the Broker-Dealers, as set forth in
the Broker-Dealer Agreements, to provide the Auction Agent with a list of
Persons who such Broker-Dealer believes should be Existing Holders based upon
inquiries of those Persons such Broker-Dealer believes are Beneficial owners as
a result of the most recent Auction and with respect to each such Person, the
number of shares of such series of MuniPreferred such Broker-Dealer believes to
be owned by such Person. The Auction Agent shall keep confidential such registry
of Existing Holders and shall not disclose the identities of the Existing
Holders of such shares of MuniPreferred to any Person other than the Fund and
the Broker-Dealer that provided such information.
2.3 Information Concerning Rates.
----------------------------
(a) The Rate Multiple on the date of the Agreement is set forth in the
Request and Acceptance Letter. If there is any change in the credit rating of
MuniPreferred by either of the rating agencies (or substitute or successor
rating agencies) referred to in the definition of "Rate Multiple" resulting in
any change in the Rate Multiple for MuniPreferred after the date of the Request
and Acceptance Letter, the Fund shall notify the Auction Agent in writing of
such change in the Rate Multiple prior to 12:00 Noon on the Business Day prior
to the next Auction Date for any series of MuniPreferred succeeding such change.
If the Fund designates all or a portion of any dividend on shares of any series
of MuniPreferred to consist of net capital gains or other income taxable for
Federal income tax purposes, it will indicate, in its notice in the
5
<PAGE>
form of Exhibit I hereto to the Auction Agent pursuant to Section 2.6 hereof,
the Rate Multiple for such series to be in effect for the Auction Date on which
the dividend rate for such dividend is to be fixed. In determining the Maximum
Rate for any series of MuniPreferred on any Auction Date as set forth in Section
2.3(b)(i) hereof, the Auction Agent shall be entitled to rely on the last Rate
Multiple for MuniPreferred of which it has most recently received notice from
the Fund (or, in the absence of such notice, the percentage set forth in the
Request and Acceptance Letter), except that if the Fund shall have notified the
Auction Agent of a Rate Multiple to be in effect for an Auction Date in
accordance with the preceding sentence, the Rate Multiple in effect for the next
succeeding Auction Date of any series of MuniPreferred shall be, unless the Fund
notifies the Auction Agent of a change in the Rate Multiple for such succeeding
Auction Date pursuant to this Section 2.3(a), the Rate Multiple that was in
effect on the first preceding Auction Date for MuniPreferred with respect to
which the dividend, the rate for which was fixed on such Auction Date, did not
include any net capital gains or other income taxable for Federal income tax
purposes.
(b) (i) On each Auction Date for any series of MuniPreferred, the
Auction Agent shall determine the Maximum Rate for such series. The Maximum Rate
for any series of MuniPreferred on any Auction Date shall be:
(A) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement,
the product of (1) the Reference Rate on such Auction Date for the next
Rate Period of such series and (2) the Rate Multiple on such Auction Date,
unless such series has or had a Special Rate Period (other than a Special
Rate Period of 28 Rate Period Days or fewer) and an Auction at which
Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate
Period of such series after such Special Rate Period, in which case the
higher of:
(1) the dividend rate on shares of such series for the then-ending
Rate Period; and
(2) the product of (x) the higher of (I) the Reference Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of such series, if such then-ending Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction Date
for a Rate Period equal in length to the then-ending Rate Period of
such series, if such then-ending Rate Period was more than 364 Rate
Period Days, and (II) the Reference Rate on such Auction Date for a
Rate Period equal in length to such Special Rate Period of such series,
if such Special Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (y) the Rate Multiple on such
Auction Date; or
6
<PAGE>
(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>
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>
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>
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>
the related series as to the dollar amount per share of such taxable income and
income exempt from Federal income taxation included in the related dividend.
2.7 Failure to Deposit.
------------------
(a) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured), but, prior to
12:00 Noon, New York City time, on the third Business Day next succeeding
the date on which such Failure to Deposit occurred, such Failure to Deposit
shall have been cured in accordance with Section 2.7(c) hereof and the Fund
shall have paid to the Auction Agent a late charge (a "Late Charge") equal
to the sum of (1) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the full amount of dividends with
respect to any Dividend Period on such shares, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period during which
such Failure to Deposit occurs on the Dividend Payment Date for such
Dividend Period by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit has not been cured in
accordance with Section 2.7(c) hereof (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the rate obtained
against the aggregate liquidation preference of the outstanding shares of
MuniPreferred and (2) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the Redemption Price of the shares of
MuniPreferred, if any, for which Notice of Redemption has been given by the
Fund, an amount computed by multiplying (x) 200% of the Reference Rate for
the Rate Period during which such Failure to Deposit occurs on the
redemption date by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit is not cured in accordance
with Section 2.7(c) hereof (including the day such Failure to Deposit
occurs and excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate obtained against
the aggregate liquidation preference of the outstanding shares of
MuniPreferred to the redeemed,
then the Auction Agent shall deliver a notice in the form of Exhibit G hereto by
first-class mail, postage prepaid, to the Broker-Dealers for such series not
later than one Business Day after its receipt of the payment from the Fund
curing such Failure to Deposit and such Late Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period
11
<PAGE>
of more than 364 Rate Period Days during which a Failure to Deposit
occurred but has not been cured), and, prior to 12:00 Noon, New York City
time, on the third Business Day next succeeding the date on which such
Failure to Deposit occurred, such Failure to Deposit shall not have been
cured in accordance with Section 2.7(c) hereof or the Fund shall not have
paid the applicable Late Charge to the Auction Agent; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during a Special Rate Period thereof of more than
364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured, and, prior to 12:00
noon, New York City time, on the fourth Business Day preceding the Auction
Date for the Rate Period subsequent to such Rate Period, such Failure to
Deposit shall not have been cured in accordance with Section 2.7(c) hereof
or the Fund shall not have paid the applicable Late Charge to the Auction
Agent in accordance with Section 2(e)(i)(D) of the Statement (such Late
charge, for purposes of this clause (b)(iii) of this Section 2.7, to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days and (y)
commencing on the date on which the Rate Period during which Failure to
Deposit occurs commenced);
then the Auction Agent shall deliver a notice in the form of Exhibit H hereto to
the Broker-Dealers for such series not later than one Business Day after the
receipt of the payment from the Fund curing such Failure to Deposit and such
Late Charge.
(c) A Failure to Deposit with respect to shares of MuniPreferred shall
have been cured (if such Failure to Deposit is not solely due to the willful
failure to the Fund to make the required payment to the Auction Agent) with
respect to any Rate Period if, within the respective time periods described
immediately above, the Fund shall have paid to the Auction Agent (i) all
accumulated and unpaid dividends on the shares of MuniPreferred and (ii) without
duplication, the Redemption Price for the shares of MuniPreferred, if any, for
which Notice of Redemption has been mailed; provided, however, that the
foregoing clause (ii) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and each such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
2.8 Broker-Dealers.
--------------
(a) Not later than 12:00 Noon on each Auction Date for any series of
MuniPreferred, the Fund shall pay to the Auction Agent an amount in cash equal
to the aggregate fees payable to the Broker-Dealers for such series pursuant to
Section 2.8 of the Broker-Dealer Agreements for such series. The Auction Agent
shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer
Agreement.
12
<PAGE>
(b) The Fund shall obtain the consent of the Auction Agent prior to
selecting any Person to act as a Broker-Dealer, which consent shall not be
unreasonably withheld.
(c) The Auction Agent shall terminate any Broker-Dealer-Agreement as
set forth therein if so directed by the Fund, provided that at least one Broker-
Dealer Agreement would be in effect for each series of MuniPreferred after such
termination.
(d) Subject to the Auction Agent's having consented to the selection
of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the Auction
Agent shall from time to time enter into such Broker-Dealer Agreements with one
or more Broker-Dealers as the Fund shall request, and shall enter into such
schedules to any such Broker-Dealer Agreements as the Fund shall request, which
schedules, among other things, shall set forth the series of MuniPreferred to
which such Broker-Dealer Agreement relates.
2.9 Ownership of Shares of MuniPreferred.
------------------------------------
The Fund shall notify the Auction Agent if the Fund or any affiliate
of the Fund acquires any shares of MuniPreferred of any series. Neither the Fund
nor any affiliate of the Fund shall submit any Order in any Auction for
MuniPreferred, except as set forth in the next sentence. Any Broker-Dealer that
is an affiliate of the Fund may submit Orders in Auctions, but only if such
Orders are not for its own account. For purposes of this Section 2.9, a
Broker-Dealer shall not be deemed to be an affiliate of the Fund solely because
one or more of the directors or executive officers of such Broker-Dealer or of
any Person controlled by, in control of or under common control with such
Broker-Dealer is also a director of the Fund. The Auction Agent shall have no
duty or liability with respect to enforcement of this Section 2.9.
2.10 Access to and Maintenance of Auction Records.
--------------------------------------------
The Auction Agent shall, upon the receipt of prior written notice from
the Fund, afford to the Fund access at reasonable times during normal business
hours to all books, records, documents and other information concerning the
conduct and results of Auctions. The Auction Agent shall maintain records
relating to any Auction for a period of six years after such Auction, and such
records shall, in reasonable detail, accurately and fairly reflect the actions
taken by the Auction Agent hereunder.
3. The Auction Agent as Dividend and
Redemption Price Disbursing Agent.
---------------------------------
The Auction Agent, as dividend and redemption price disbursing agent,
shall pay to the Holders of shares of MuniPreferred of any series (i) on each
Dividend Payment Date for such series, dividends on the shares of MuniPreferred
of such series, (ii) on any date fixed for redemption of shares of MuniPreferred
of any series, the Redemption Price of any shares of such series called for
redemption and (iii) any Late Charge related to any payment of dividends
13
<PAGE>
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>
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>
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>
(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>
(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>
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>
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>
EXHIBIT A
---------
FORM OF
BROKER-DEALER AGREEMENT
-----------------------
<PAGE>
EXHIBIT B
---------
SETTLEMENT PROCEDURES
---------------------
<PAGE>
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./l/]
[NAME OF FUND]
- ---------
/l/Include this language if a Failure to Deposit exists.
<PAGE>
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>
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>
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>
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>
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>
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>
EXHIBIT I
[NAME OF FUND]
NOTICE OF
[CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME]/l/
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]
- ----------
/l/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>
(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>
EXHIBIT 99.d.2
NUVEEN BROKER-DEALER AGREEMENT
Basic Terms for Acting as a Broker-Dealer
-----------------------------------------
November 1, 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>
(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>
(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>
(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>
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>
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>
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>
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>
(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>
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>
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
to 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>
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>
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>
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>
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>
EXHIBIT A
SETTLEMENT PROCEDURES
---------------------
<PAGE>
<TABLE>
<CAPTION>
================================================================================================
<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>
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
EXISTING HOLDER HOLD BID/RATE SELL POTENTIAL HOLDER BID/RATE
<S> <C> <C> <C> <C> <C>
1. / 1. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
2. / 2. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
3. / 3. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
4. / 4. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
5. / 5. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
6. / 6. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
7. / 7. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
8. / 8. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
9. / 9. /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
10. / 10. 1 /
--------------------------- ------ --------------------------- -------- ----------------- -----------------------
11. 1 /
- ----------------------------------------------------------------------------------- ----------------- -----------------------
NOTES: 12. 1 /
- ------ ----------------- -----------------------
13. 1 /
1. If one or more Orders covering in the aggregate more than the number of ----------------- -----------------------
outstanding shares of MuniPreferred held by any Existing Holder are 14. 1 /
submitted, such Orders shall be considered valid in the order of priority set ----------------- -----------------------
forth in the Auction Procedures. 15. 1 /
----------------- -----------------------
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>
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>
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>
(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>
(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>
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>
(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>
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>
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>
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>
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>
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 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>
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>
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>
EXHIBIT B TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE>
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>
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>
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>
EXHIBIT A TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE>
EXHIBIT.99.d.3
[DTC LOGO]
BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED/AND
REMARKETED PREFERRED SECURITIES
LETTER OF REPRESENTATIONS
[TO BE COMPLETED BY ISSUER AND TRUST COMPANY]
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
--------------------------------------------
[NAME OF ISSUER]
BANKERS TRUST COMPANY
---------------------
[NAME OF TRUST COMPANY]
Attention: General Counsel's Office June , 1999
THE DEPOSITORY TRUST COMPANY [DATE]
55 Water Street, 49th Floor
New York, NY 10041-0099
Re: 520 Shares of Municipal Auction Rate Cumulative Preferred Stock,
Series W2, par value $.01 per share of Nuveen Premium Income Municipal
Fund 4, Inc., CUSIP No. _____
[ISSUE DESCRIPTION, INCLUDING CUSIP NUMBER]
Ladies and Gentlemen:
This letter sets forth our understanding with respect to certain matters
relating to the above-referenced issue (the "Securities"). Trust Company will
act as transfer agent, registrar, dividend disbursing agent, and redemption
agent with respect to the Securities. The Securities will be issued pursuant to
a prospectus, private placement memorandum, or other such document authorizing
the issuance of the Securities dated June __, 1999 (the "Document"). Salomon
Smith Barney Inc. ("underwriter") is distributing the Securities through The
Depository Trust Company ("DTC").
To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trust Company make the following representations to DTC:
1. Prior to closing on the Securities on June __, 1999 there shall be
deposited with DTC one Security certificate registered in the name of DTC's
nominee, Cede & Co., which represents the total number of Securities issued.
Said certificate shall remain in DTC's custody as provided in the Document. If,
however, the aggregate principal amount of the Securities exceeds $200 million,
one certificate will be issued with respect to each $200 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount. Each Security certificate shall bear the following
legend:
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to Issuer or its
agent for registration of transfer,
<PAGE>
exchange, or payment, and any certificate issued is registered in the name
of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such
other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof; Cede & Co.; has
an interest herein.
2. Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its Participants or to any person having an interest in the
Securities any information contained in the Security certificate(s); and (b)
acknowledges that neither DTC, Participants nor any person having an interest in
the Securities shall be deemed to have notice of the provisions of the Security
certificate(s) by virtue of submission of such certificate(s) to DTC.
3. In the event of any solicitation of consents from or voting by holders
of the Securities, Issuer shall establish a record date for such purposes (with
no provision for revocation of consents or votes by subsequent holders) and
shall send notice of such record date to DTC not less than 15 calendar days in
advance of such record date. Notices to DTC pursuant to this Paragraph by
telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896 or
(212) 709-6897, and receipt of such notices shall be confirmed by telephoning
(212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any
other means shall be sent to DTC's Reorganization Department as indicated in
Paragraph 5.
4. In the event of a full or partial redemption of the outstanding
Securities, Issuer or Trust Company shall send a notice to DTC specifying: (a)
the number of Securities to be redeemed; and (b) the date such notice is to be
distributed to Security holders or published (the "Publication Date"). Such
notice shall be sent to DTC by a secure means (e.g., legible telecopy,
registered or certified mail, overnight delivery) in a timely manner designed to
assure that such notice is in DTC's possession no later than the close of
business on the business day before or, if possible, two business days before
the Publication Date. Issuer or Trust Company shall forward such notice either
in a separate secure transmission for each CUSIP number or in a secure
transmission for multiple CUSIP numbers (if applicable) which includes a
manifest or list of each CUSIP number submitted in that transmission. (The party
sending such notice shall have a method to verify subsequently the use of such
means and the timeliness of such notice.) The Publication Date shall be not less
than 30 days nor more than 60 days prior to the redemption date. Notices to DTC
pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification
Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice
does not receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to
this Paragraph by mail or by any other means shall be sent to:
Manager; Call Notification Department
The Depository Trust Company
711 Stewart Avenue
Garden City, NY 11530-4719
5. In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be sent to
DTC's Reorganization Department at (212)709-1093 or (212) 709-1094, and receipt
of
<PAGE>
such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC
pursuant to the above by mail or by any other means shall be sent to:
Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
7 Hanover Square; 23rd Floor
New York, NY 10004-2695
6. All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities (listed on Schedule A hereto) and the accompanying
description of such Security, which, as of the date of this letter is
"_____________________________".
7. The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate, on
the same day that the new rate is determined, by telephoning the Supervisor of
DTC's Dividend Announcement Section at (212) 709-1270, or by telecopy sent to
(212) 709-1723. Such verbal or telecopy notice shall be followed by prompt
written confirmation sent by a secure means in the manner set forth in Paragraph
4 to:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
8. The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust Company acknowledge that as long as Cede
& Co. is the sole record owner of the Securities, Cede & Co. shall be entitled
to all voting rights applicable to the Securities and to receive the full amount
of all dividends, liquidation proceeds, and redemption proceeds payable with
respect to the Securities, even if the credits of Securities to the DTC accounts
of any DTC Participant ("Participant") result from transfers or failures to
transfer in violation of the provisions of the purchaser's letter. Issuer and
Trust Company acknowledge that DTC shall treat any Participant having Securities
credited to its DTC accounts as entitled to the full benefits of ownership of
such Securities. Without limiting the generality of the preceding sentence,
Issuer and Trust Company acknowledge that DTC shall treat any Participant having
Securities credited to its DTC accounts as entitled to receive dividends,
distributions, and voting rights, if any, in respect of Securities and, subject
to Paragraphs 12 and 13, to receive certificates evidencing Securities if such
certificates are to be issued in accordance with Issuer's certificate of
incorporation. (The treatment by DTC of the effects of the crediting by it of
Securities to the accounts of Participants described in the preceding two
sentences shall not affect the rights of issuer, participants in auctions
relating to the Securities, purchasers, sellers, or holders of Securities
against any Participant.) DTC shall not have any responsibility to ascertain
whether any transfer of Securities is made in accordance with the provisions of
the purchaser's letter.
9. Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to a standard announcement service
subscribed to by DTC as soon as the information is available.
<PAGE>
In the unlikely event that no such service exists, Issuer or Trust Company shall
provide this information directly to DTC electronically, as previously arranged
by Issuer or Trust Company and DTC, as soon as the information is available. If
electronic transmission has not been arranged, absent any other arrangements
between Issuer or Trust Company and DTC, such information should be sent by
telecopy to DTC's Dividend Department at (212) 709-1723 or (212) 709-1686, and
receipt of such notices shall be confirmed by telephoning (212) 709-1270.
Notices to DTC pursuant to the above by mail or by any other means shall be
addressed as follows:
Manager; Announcements
Dividend Department
The Depository Trust Company
7 Hanover Square; 22nd Floor
New York, NY 10004-2695
10. Issuer or Trust Company shall provide CUSIP-level detail for dividend
payments and distributions to DTC no later than noon (Eastern Time) on the
payment date.
11. Dividend payments and distributions shall be received by Cede & Co., as
nominee of DTC, or its registered assigns in same-day funds no later than 2:30
p.m. (Eastern Time) on each payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Dividend Deposit Account #066-026776
12. Redemption payments shall be received by Cede & Co., as nominee of DTC,
or its registered assigns in same-day funds no later than 2:30 p.m. (Eastern
Time) on the payment date. Absent any other arrangements between Issuer or Trust
Company and DTC, such funds shall be wired as follows:
The Chase Manhattan Bank
ABA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Redemption Deposit Account #066-027306
13. Reorganization payments and CUSIP-level detail resulting from corporate
actions (such as tender offers, remarketing, or mergers) shall be received by
Cede & Co., as nominee of DTC, or its registered assigns in same-day funds no
later than 2:30 p.m. (Eastern Time) on the first payment date. Absent any other
arrangements between Issuer or Trust Company and DTC, such funds shall be wired
as follows:
The Chase Manhattan Bank
ABA #021 000 021
For credit to a/c Cede & Co.
c/o The Depository Trust Company
Reorganization Deposit Account #066-027608
<PAGE>
14. DTC may direct Issuer or Trust Company to use any other number or
address as the number or address to which notices, payments of dividends,
distributions, or redemption proceeds may be sent.
15. In the event of a redemption acceleration, or any similar transaction
(e.g., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate a
new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final redemption, in
which case the certificate will be presented to Issuer or Trust Company prior to
payment, if required.
16. In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the availability of certificates. In such event,
Issuer or Trust Company shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.
17. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company (at which time DTC will confirm with Issuer or Trust Company
the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request Issuer and Trust Company shall cooperate fully
with DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.
18. Issuer hereby authorizes DTC to provide to Trust Company security
position listings of Participants with respect to the Securities from time to
time at the request of Trust Company. Issuer also authorizes DTC, in the event
of a partial redemption of Securities, to provide Trust Company, upon request,
with the names of those Participants whose positions in Securities have been
selected for redemption by DTC. DTC will use its best efforts to notify Trust
Company of those Participants whose positions in Securities have been selected
for redemption by DTC. Issuer authorizes and instructs Trust Company to provide
DTC with such signatures, examples of signatures, and authorizations to act as
may be deemed necessary or appropriate by DTC to permit DTC to discharge its
obligations to its Participants and appropriate regulatory authorities. Such
requests for security position listings shall be sent to DTC's Reorganization
Department in the manner set forth in Paragraph 5.
This authorization, unless revoked by Issuer, shall continue with respect
to the Securities while any Securities are on deposit at DTC, until and unless
Trust Company shall no longer be acting. In such event, Issuer shall provide DTC
with similar evidence, satisfactory to DTC, of the authorization of any
successor thereto so to act.
19. Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.
20. This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together constitute but one and the same instrument.
21. This Letter of Representations is governed by, and shall be construed
in accordance with, the laws of
<PAGE>
the State of New York.
22. The following riders, attached hereto, are hereby incorporated into
this Letter of Representations:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NOTES:
A. IF THERE IS A TRUST COMPANY (AS DEFINED IN THIS LETTER OF REPRESENTATIONS),
TRUST COMPANY AS WELL AS ISSUER MUST SIGN THIS LETTER. IF THERE IS NOT
TRUST COMPANY, IN SIGNING THIS LETTER ISSUER ITSELF UNDERTAKES TO PERFORM
ALL OF THE OBLIGATIONS SET FORTH HEREIN.
B. SCHEDULE B CONTAINS STATEMENTS THAT DTC BELIEVES ACCURATELY DESCRIBE DTC,
THE METHOD OF EFFECTING BOOK-ENTRY TRANSFERS OF SECURITIES DISTRIBUTED
THROUGH DTC, AND CERTAIN RELATED MATTERS.
Very truly yours,
Nuveen Premium Income Municipal
Fund 4, Inc.
(Issuer)
By:
--------------------------------------
(Authorized Officer's Signature)
Bankers Trust Company
(Trust Company)
By:
--------------------------------------
(Authorized Officer's Signature)
Received and Accepted:
THE DEPOSITORY TRUST COMPANY
By:
------------------------
cc: Underwriter
Underwriter's Counsel
<PAGE>
SCHEDULE A
Municipal Auction Rate Cumulative Preferred Stock, Series W2, par value
$.01 per share of Nuveen Premium Income Municipal Fund 4, Inc.
--------------------------
(Describe Issue)
CUSIP Number Share Total Value ($ Amount)
- ------------ ----------- ----------------
520 13,000,000
<PAGE>
SCHEDULE B
SAMPLE OFFERING DOCUMENT LANGUAGE
DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
-----------------------------------
(PREPARED BY DTC-BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN ISSUES)
1. The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities will
be issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully-registered Security certificate will be
issued for [each issue of] the Securities, [each] in the aggregate principal
amount of such issue, and will be deposited with DTC. [If, however, the
aggregate principal amount of [any] issue exceeds $200 million, one certificate
will be issued with respect to each $200 million of principal amount and an
additional certificate will be issued with respect to any remaining principal
amount of such issue.]
2. DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable to DTC and its
Participants are on file with the Securities and Exchange Commission.
3. Purchases of Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Securities on DTC's
records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in Securities,
except in the event that use of the book-entry system for the Securities is
discontinued.
4. To facilitate subsequent transfers, all Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Securities; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Securities are
credited, which may or may not be the Beneficial owners. The Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
<PAGE>
5. Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
<PAGE>
[6. Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.]
7. Neither DTC nor Cede & Co. will consent or vote with respect to
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Securities are credited on the record date (identified in a listing attached to
the Omnibus Proxy).
8. Redemption proceeds, distributions and dividend payments on the
Securities will be made to Cede & Co., as nominee of DTC. DTC's practice is to
credit Direct Participants' accounts, upon DTC's receipt of payment and
corresponding detail information from Issuer or Trust Company on payable date in
accordance with their respective holdings shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, Trust Company, or Issuer,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of redemption proceeds, distributions and dividends to
Cede & Co. is the responsibility of Issuer or Trust Company, disbursement of
such payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
[9. A Beneficial Owner shall give notice to elect to have its Securities
purchased or tendered, through its Participant, to Trust Company [or
Tender/Remarketing Agent], and shall effect delivery of such Securities by
causing the Direct Participant to transfer the Participant's interest in the
Securities, on DTC's records, to Trust Company (or Tender/Remarketing Agent].
The requirement for physical delivery of Securities in connection with an
optional tender or a mandatory purchase will be deemed satisfied when the
ownership rights in the Securities are transferred by Direct Participants on
DTC's records and followed by a book-entry credit of tendered Securities to
Trustee's [or Tender/Remarketing Agent's] DTC account.]
10. DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to Issuer
or Trust Company. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to be
printed and delivered.
11. Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
12. The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.
<PAGE>
RIDER AMENDING DTC LETTER OF REPRESENTATIONS -
BEO AUCTION-RATE/MONEY MARKET PREFERRED/AND REMARKETED PREFERRED SECURITIES
DTC's Reorganization and Dividend Departments have relocated to 55 Water Street.
Following are revisions to the Letter of Representations including current
addresses, telephone numbers, and telecopy numbers.
Paragraph 3 of the Letter of Representations:
- --------------------------------------------
Old Telecopier Numbers: Current Telecopier Numbers:
(212) 709-6896 and (212) 709-6897 (212) 855-5181 and (212) 855-5182
The confirmation number (formerly (212) 709-6870) is now (212) 855-5202.
Old Telecopier Numbers: Current Telecopier Number:
(212) 709-1093 and (212) 709-1094 (212) 855-5278
The confirmation number (formerly (212) 709-6884) is now (212) 855-5280.
The current address is: Manager; Reorganization Department
Reorganization Window
The Depository Trust Company
55 WATER STREET 50TH FLOOR
NEW YORK, NY 10041-0099.
Paragraph 7 of the Letter of Representations:
- --------------------------------------------
Old Telecopier Number: Current Telecopier Number:
(212) 709-1723 (212) 855-4555
The confirmation number (formerly (212) 709-1270) is now (212) 855-4550.
The current address is: Manager; Announcements
Dividend Department
The Depository Trust Company
55 WATER STREET 25TH FLOOR
NEW YORK, NY 10041-0099
Paragraph 9 of the Letter of Representations:
- --------------------------------------------
Old Telecopier Numbers: Current Telecopier Numbers:
(212) 709-1723 and (212) 709-1686 (212) 855-4555 and (212) 855-4556
The confirmation number (formerly (212) 709-1270) is now (212) 855-4550.
<PAGE>
The current address for Paragraph 9 is the same as that listed above, for
Paragraph 7.
The following additional text relates to Paragraph 10 of the Letter of
Representations:
Such information shall be conveyed by automated notification. If the
circumstances prevent the funds being paid to Cede & Co., as nominee of DTC, by
2:30 p.m. ET from equaling the dollar amount associated with detail payments by
12:00 noon ET, Issuer or Agent must provide CUSIP-level reconciliation to DTC no
later than 2:30 p.m. ET. Reconciliation may be provided by automated means or in
written format.
The following additional text relates to Paragraph 11 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Dividend Deposit Account of Cede & Co.
The following additional text relates to Paragraph 12 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Redemption Deposit Account of Cede & Co. Issuer or Agent shall deliver CUSIP-
level detail regarding such payments to DTC no later than 2:30 p.m. ET on each
payment date.
The following additional text relates to Paragraph 13 of the Letter of
Representations:
Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or
at such earlier time as required by Agent to guarantee timely credit to the
Reorganization Deposit Account of Cede & Co. Issuer or Agent shall deliver
CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on
each payment date.
<PAGE>
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>
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>
10. Each Participant may terminate his account under the Plan by notifying
U.S. Trust of his intent so to do, such notice to be provided either in writing
duly executed by the Participant or by telephone in accordance with such
reasonable requirements as U.S. Trust and the Fund may agree. Such termination
will be effective immediately if notice is received by U.S. Trust not less than
ten days prior to any distribution record date for the next succeeding
distribution; otherwise such termination will be effective shortly after the
investment of such distribution with respect to all subsequent distributions.
The Plan may be terminated by the Fund or U.S. Trust upon at least 90 days prior
notice. Upon any termination, U.S. Trust will cause a certificate or
certificates for the full shares held for each Participant under the Plan and
cash adjustment for any fraction to be delivered to the Participant without
charge. If any Participant elects in advance of such termination to have U.S.
Trust sell part or all of his shares, U.S. Trust is authorized to deduct from
the proceeds a $2.50 fee plus the brokerage commissions incurred for the
transaction.
11. These terms and conditions may be amended or supplemented by U.S. Trust or
the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, U.S. Trust receives
notice of the termination of such Participant's account under the Plan in
accordance with the terms hereof. Any such amendment may include an appointment
by U.S. Trust in its place and stead of a successor Agent under these terms and
conditions. Upon any such appointment of any Agent for the purpose of receiving
distributions, the Fund will be authorized to pay to such successor Agent, for
each Participant's account, all dividends and distributions payable on shares of
the Fund held in the Participant's name or under the Plan for retention or
application by such successor Agent as provided in these terms and conditions.
12. U.S. Trust shall at all times act in good faith and agree to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its negligence, bad faith or willful misconduct or that
of its employees.
13. These terms and conditions shall be governed by the laws of the State of
New York.
3
<PAGE>
Exhibit A
Nuveen Municipal Income Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Opportunity Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Premium Income Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Select Maturities Fund
Nuveen California Municipal Value Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen California Premium Income Municipal Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
4
<PAGE>
Exhibit 99.g.1
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 16th day of February, 1993, by and between NUVEEN PREMIUM
INCOME MUNICIPAL FUND 4, 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>
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% for the first $125 million, .6375% for the
next $125 million, .6250% for the next $250 million, .6125% for the next $500
million, .6000% for the next $1 billion, and .5875% on assets of $2 billion and
over. 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. 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.
3
<PAGE>
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, 1993, unless and
until terminated by either party as hereinafter provided, and shall continue in
force from year to year thereafter, but only as long as such continuance is
specifically approved, at least annually, in the manner required by the
Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser upon sixty (60) days' written notice to the other
party. The Fund may effect termination by action of the Board of Directors or by
vote of a majority of the outstanding voting securities of the Fund, accompanied
by appropriate notice.
4
<PAGE>
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.
5
<PAGE>
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
NUVEEN PREMIUM INCOME MUNICIPAL
FUND 4, INC.
by: [SIG]
----------------------
Vice President
Attest: /s/ G.R. ZIMMERMAN
------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
by: /s/ THOMAS C. SPALDING
----------------------
Vice President
Attest: /s/ LARRY MARTIN
------------------------
Assistant Secretary
6
<PAGE>
Exhibit 99.g.2
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT
This Agreement made this 5th day of May, 1998 by and between Nuveen Premium
Income Municipal Fund 4, 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 PREMIUM INCOME MUNICIPAL FUND 4, INC.
By: /s/ G.R. ZIMMERMAN
---------------------------------
Vice President
ATTEST:
/s/ KAREN HEALY
- ---------------------------
Assistant Secretary
NUVEEN ADVISORY CORP.
By: /s/ J. THOMAS SPALDING
---------------------------------
Vice President
ATTEST:
/s/ L. MARTIN
- ---------------------------
Assistant Secretary
<PAGE>
EXHIBIT 99.h
Municipal Auction Rate Cumulative Preferred Shares
NUVEEN PREMIUM INCOME MUNICIPAL OPPORTUNITY FUND 4, INC.
520 Shares, Series W2
Liquidation Preference $25,000 Per Share
UNDERWRITING AGREEMENT
_______________ __, 1999
SALOMON SMITH BARNEY INC.
A.G. EDWARDS & SONS, INC.
BT ALEX. BROWN
GOLDMAN, SACHS & CO.
JOHN NUVEEN & CO. INCORPORATED
LEGG MASON WOOD WALKER INCORPORATED
PAINE WEBBER INCORPORATED
PRUDENTIAL SECURITIES
RAYMOND JAMES & ASSOCIATES, INC.
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Nuveen Premium Income Municipal Fund 4, Inc., a Minnesota corporation
(the "Fund"), proposes, upon the terms and conditions set forth herein, to issue
and sell an aggregate of 520 shares of its Municipal Auction Rate Cumulative
Preferred Shares, Series W2, (the "MuniPreferred"), par value .01 per share,
with a liquidation preference of $25,000 per share (the shares of MuniPreferred
to be sold hereby are referred to herein, collectively, as the "Shares"). The
Shares will be authorized by, and subject to the terms and conditions of, the
Statement Establishing and Fixing the Rights and Preferences of Municipal
Auction Rate Cumulative Preferred Stock (the "Statement") in the form filed as
an exhibit to the registration statement referred to in Section 1 of this
agreement. Nuveen Advisory Corp., a Delaware corporation (the "Adviser"), is the
Fund's investment adviser. This is to confirm the agreement concerning the
purchase of the Shares from the Fund by Salomon Smith Barney Inc. (the
"Representative") and A.G. Edwards & Sons, Inc., BT Alex. Brown, Goldman, Sachs
& Co., John Nuveen & Co., Incorporated, Legg Mason Wood Walker Incorporated,
Paine Webber Incorporated, Prudential Securities, and Raymond James &
Associates, Inc. (each an "Underwriter", and together with the Representative,
the "Underwriters"). The Representative has been duly authorized by each of the
Underwriters to execute this Underwriting Agreement (the "Agreement") on behalf
of such Underwriters and has been duly authorized to act hereunder on behalf of
each of the Underwriters.
The Fund has entered into an investment management agreement with the
Adviser, an exchange traded fund custody agreement with United States Trust
Company of New York, a fund accounting agreement with United States Trust
Company of New York and an auction agency agreement, including the Basic Terms
in respect thereof, with Bankers Trust Company.
<PAGE>
2
Such agreements are hereinafter referred to as the "Investment Management
Agreement", the "Custodian Agreement", the "Fund Accounting Agreement" and the
"Auction Agency Agreement", respectively. Collectively, the Investment
Management Agreement, the Custodian Agreement, the Fund Accounting Agreement and
the Auction Agency Agreement are hereinafter referred to as the "Fund
Agreements".
1. Registration Statement and Prospectus. The Fund has prepared, in
conformity with the provisions of the Securities Act of 1933, as amended (the
"1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"),
and the rules and regulations of the Securities and Exchange Commission (the
"Commission"), promulgated under the 1933 Act (the "1933 Act Rules and
Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and,
together with the 1933 Act Rules and Regulations, the "Rules and Regulations"),
a registration statement on Form N-2 under the 1933 Act and the 1940 Act (the
"registration statement"), including a prospectus relating to the Shares, and
has filed the registration statement and prospectus in accordance with the 1933
Act and the 1940 Act. The Fund also has filed a notification of registration of
the Fund as an investment company under the 1940 Act on Form N-8A (the "1940 Act
Notification"). The term "Registration Statement" as used in this Agreement
means the registration statement (including all financial schedules and
exhibits), as amended at the time it becomes effective under the 1933 Act, or,
if the registration statement became effective under the 1933 Act prior to the
execution of this Agreement, as amended or supplemented at the time it became
effective, prior to the execution of this Agreement. If it is contemplated, at
the time this Agreement is executed, that a post-effective amendment to the
registration statement will be filed under the 1933 Act and must be declared
effective before the offering of the Shares may commence, the term "Registration
Statement" as used in this Agreement means the registration statement as amended
by said post-effective amendment. If the Fund has filed an abbreviated
registration statement to register an additional amount of Shares pursuant to
Rule 462(b) under the 1933 Act (the "Rule 462 Registration Statement"), then any
reference herein to the term "Registration Statement" shall include such Rule
462 Registration Statement. The term "Prospectus" as used in this Agreement
means the prospectus and statement of additional information in the forms
included in the Registration Statement or, if the prospectus and statement of
additional information included in the Registration Statement omit information
in reliance on Rule 430A under the 1933 Act Rules and Regulations and such
information is included in a prospectus and statement of additional information
filed with the Commission pursuant to Rule 497 under the 1933 Act, the term
"Prospectus" as used in this Agreement means the prospectus and statement of
additional information in the forms included in the Registration Statement as
supplemented by the addition of the information contained in the prospectus
filed with the Commission pursuant to Rule 497. The term "Prepricing Prospectus"
as used in this Agreement means the prospectus and statement of additional
information subject to completion in the forms included in the registration
statement at the time of filing of pre-effective amendment no. 1 to the
registration statement under the 1933 Act with the Commission on April __, 1999,
and as such prospectus and statement of additional information shall have been
amended from time to time prior to the date of the Prospectus, together with any
other prospectus and statement of additional information relating to the Fund
other than the Prospectus approved in writing by or directly or indirectly
prepared by the Fund or the Adviser; it being understood that the definition of
Prepricing Prospectus above shall not include any Prepricing Prospectus prepared
by the
<PAGE>
3
Underwriters unless approved in writing by the Fund or Adviser. The terms
"Registration Statement", "Prospectus" and "Prepricing Prospectus" shall also
include any financial statements incorporated by reference therein.
The Fund has furnished the Underwriters with copies of such
Registration Statement, each amendment to such Registration Statement filed with
the Commission and each Prepricing Prospectus.
2. Agreements to Sell and Purchase. The Fund hereby agrees, subject to
all the terms and conditions set forth herein, to issue and sell to the
Underwriters, and, upon the basis of the representations, warranties and
agreements of the Fund and the Adviser herein contained and subject to all the
terms and conditions set forth herein, the Underwriters agree to purchase from
the Fund, at a purchase price of $_____ per Share, the number of shares of
MuniPreferred set forth opposite the names of the Underwriters in Schedule I
hereto.
3. Terms of Public Offering. The Fund and the Adviser have been
advised by the Underwriters that the Underwriters propose to make a public
offering of the Shares as soon after the Registration Statement and this
Agreement have become effective as in the Underwriters' judgment is advisable
and initially to offer the Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Shares shall be made at the office of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY 10017, at 9:30
A.M., New York City time, on __________ __, 1999 (the "Closing Date"). The place
of closing for the Shares and the Closing Date may be varied by agreement
between the Representative and the Fund.
Certificates for the Shares shall be registered in such names and in
such denominations as the Underwriters shall request prior to 9:30 A.M., New
York City time, on the second business day preceding the Closing Date. Such
certificates shall be made available to the Underwriters in New York City for
inspection not later than 9:30 A.M., New York City time, on the business day
next preceding the Closing Date. The certificates evidencing the Shares shall be
delivered to the Underwriters on the Closing Date, through the facilities of The
Depository Trust Company, against payment of the purchase price therefor in
immediately available funds.
5. Agreements of the Fund and the Adviser. The Fund and the Adviser,
jointly and severally, agree with the Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective under the 1933 Act before the offering of the Shares
may commence, the Fund will endeavor to cause the Registration Statement or such
post-effective amendment to become effective under the 1933 Act as soon as
possible and will advise the Underwriters promptly and, if requested by the
Underwriters, will confirm such advice in writing when the Registration
Statement or such post-effective amendment has become effective.
<PAGE>
4
(b) The Fund will advise the Underwriters promptly and, if requested
by the Underwriters, will confirm such advice in writing: (i) of any request
made by the Commission for amendment of or a supplement to the Registration
Statement, any Prepricing Prospectus or the Prospectus (or any amendment or
supplement to any of the foregoing) or for additional information, (ii) of the
issuance by the Commission, the National Association of Securities Dealers, Inc.
(the "NASD"), any state securities commission, any national securities exchange,
any arbitrator, any court or any other governmental, regulatory, self-regulatory
or administrative agency or any official of any order suspending the
effectiveness of the Registration Statement, prohibiting or suspending the use
of the Prospectus or any Prepricing Prospectus, or any sales material (as
hereinafter defined), of any notice pursuant to Section 8(e) of the 1940 Act, of
the suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation of any proceeding for any such purposes, (iii)
of receipt by the Fund, the Adviser, any affiliate of the Fund or the Adviser or
any representative or attorney of the Fund or the Adviser of any other material
communication from the Commission, the NASD, any state securities commission,
any national securities exchange, any arbitrator, any court or any other
governmental, regulatory, self-regulatory or administrative agency or any
official relating to the Fund (if such communication relating to the Fund is
received by such person within three years after the date of this Agreement),
the Registration Statement, the 1940 Act Notification, the Prospectus, any
Prepricing Prospectus, any sales material (as herein defined) (or any amendment
or supplement to any of the foregoing) or this Agreement or any of the Fund
Agreements and (iv) within the period of time referred to in paragraph (f)
below, of any material adverse change in the condition (financial or other),
business, prospects, properties, net assets or results of operations of the Fund
or the Adviser or of the happening of any other event which makes any statement
of a material fact made in the Registration Statement or the Prospectus or any
sales material (as herein defined) (or any amendment or supplement to any of the
foregoing) untrue or which requires the making of any additions to or changes in
the Registration Statement or the Prospectus, or any Prepricing Prospectus or
any sales material (as herein defined) (or any amendment or supplement to any of
the foregoing) in order to state a material fact required by the 1933 Act, the
1940 Act or the Rules and Regulations to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading or of the necessity to amend or supplement the
Registration Statement, the Prospectus, or any Prepricing Prospectus or any
sales material (as herein defined) (or any amendment or supplement to any of the
foregoing) to comply with the 1933 Act, the 1940 Act, the Rules and Regulations
or any other law or order of any court or regulatory body. If at any time the
Commission, the NASD, any state securities commission, any national securities
exchange, any arbitrator, any court or any other governmental, regulatory,
self-regulatory or administrative agency or any official shall issue any order
suspending the effectiveness of the Registration Statement, prohibiting or
suspending the use of the Prospectus or any sales material (as herein defined)
(or any amendment or supplement to any of the foregoing) or suspending the
qualification of the Shares for offering or sale in any jurisdiction, the Fund
will make every reasonable effort to obtain the withdrawal of such order at the
earliest possible time.
(c) The Fund will furnish to the Underwriters, without charge, three
signed copies of the Registration Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits thereto, and will also furnish to the
<PAGE>
5
Underwriters, without charge, such number of conformed copies of the
Registration Statement as originally filed and of each amendment thereto, but
without exhibits, as the Underwriters may request.
(d) The Fund will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus, or any sales
material (as herein defined), of which the Underwriters shall not previously
have been advised or to which the Underwriters shall reasonably object after
being so advised or (ii) so long as, in the opinion of counsel for the
Underwriters, a Prospectus is required by the 1933 Act to be delivered in
connection with sales by the Underwriters or any dealer, file any information,
documents or reports pursuant to the Securities Exchange Act of 1934, as amended
(the "1934 Act") or the 1940 Act, without delivering a copy of such information,
documents or reports to the Underwriters prior to or concurrently with such
filing.
(e) Prior to the execution and delivery of this Agreement, the Fund
has delivered to the Underwriters, without charge, in such quantities as the
Underwriters have requested, copies of each form of the Prepricing Prospectus.
The Fund consents to the use, in accordance with the provisions of the 1933 Act
and with the state securities or blue sky laws of the jurisdictions in which the
Shares are offered by the Underwriters and by dealers, prior to the date of the
Prospectus, of each Prepricing Prospectus so furnished by the Fund.
(f) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion of
counsel for the Underwriters a prospectus is required by the 1933 Act to be
delivered in connection with sales by the Underwriters or any dealer, the Fund
will expeditiously deliver to the Underwriters and each dealer, without charge,
as many copies of the Prospectus (and of any amendment or supplement thereto) as
the Underwriters may request. The Fund consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the 1933 Act and with the state securities or blue sky laws of the
jurisdictions in which the Shares are offered by the Underwriters and by all
dealers to whom Shares may be sold, both in connection with the offering and
sale of the Shares and for such period of time thereafter as the Prospectus is
required by the 1933 Act to be delivered in connection with sales by the
Underwriters or any dealer. If during such period of time any event shall occur
that in the judgment of the Fund or in the opinion of counsel for the
Underwriters is required to be set forth in the Registration Statement or the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary to supplement or
amend the Registration Statement or the Prospectus to comply with the 1933 Act,
the 1940 Act, the Rules and Regulations or any other federal law, rule or
regulation, or any state securities or blue sky disclosure laws, rules or
regulations, the Fund will forthwith prepare and, subject to the provisions of
paragraph (d) above, promptly file with the Commission an appropriate supplement
or amendment thereto, and will expeditiously furnish to the Underwriters and
dealers, without charge, a reasonable number of copies thereof. In the event
that the Fund and the Representative agree that the Registration Statement or
the Prospectus should be amended or supplemented, the Fund, if requested by the
Representative, will promptly
<PAGE>
6
issue a press release announcing or disclosing the matters to be covered by the
proposed amendment or supplement.
(g) The Fund will make generally available to its security holders an
earnings statement, which need not be audited, covering a twelve-month period
ending not later than 15 months after the effective date of the Registration
Statement as soon as practicable after the end of such period, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule
158 of the 1933 Act Rules and Regulations.
(h) During the period of five years hereafter, the Fund will furnish
to the Underwriters (i) as soon as available, a copy of each report of the Fund
mailed to stockholders or filed with the Commission or furnished to the New York
Stock Exchange (the "NYSE") other than reports on Form N-SAR, and (ii) from time
to time such other information concerning the Fund as the Underwriters may
reasonably request.
(i) The Fund will apply the net proceeds from the sale of the Shares
substantially in accordance with the description set forth in the Prospectus and
in such a manner as to comply with the investment objectives, policies and
restrictions of the Fund as described in the Prospectus.
(j) The Fund will timely file the requisite copies of the Prospectus
with the Commission pursuant to Rule 497(c) or Rule 497(h) of the 1933 Act Rules
and Regulations, whichever is applicable or, if applicable, will timely file the
certification permitted by Rule 497(j) of the 1933 Act Rules and Regulations and
will advise the Representative of the time and manner of such filing.
(k) Except as provided in this Agreement, the Fund will not sell,
contract to sell, or otherwise dispose of any senior securities (as defined in
the 1940 Act) of the Fund, or grant any options or warrants to purchase senior
securities of the Fund, for a period of 120 days after the date of the
Prospectus, without the prior written consent of the Representative.
(l) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, neither the Fund nor the Adviser has taken, nor will
it take, directly or indirectly, any action designed to or that might reasonably
be expected to cause or result in stabilization or manipulation of the price of
any securities issued by the Fund to facilitate the sale or resale of the
Shares.
(m) The Fund will use its best efforts to cause the MuniPreferred,
prior to the Closing Date, to be assigned a rating of 'aaa' by Moody's Investors
Service, Inc. ("Moody's) and AAA by Standard & Poor's Rating Group ("S&P" and,
together with Moody's, the "Rating Agencies").
(n) The Fund and the Adviser will use their best efforts to perform
all of the agreements required of them and discharge all conditions to closing
as set forth in this Agreement.
<PAGE>
7
6. Representations and Warranties of the Fund and the Adviser. The
Fund and the Adviser, jointly and severally, represent and warrant to the
Underwriters that:
(a) Each Prepricing Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or supplement thereto,
or filed pursuant to Rule 497 of the 1933 Act Rules and Regulations, complied
when so filed in all material respects with the provisions of the 1933 Act, the
1940 Act and the Rules and Regulations. The Commission has not issued any order
preventing or suspending the use of any Prepricing Prospectus.
(b) The Registration Statement in the form in which it became or
becomes effective and also in such form as it may be when any post-effective
amendment thereto shall become effective and the Prospectus and any supplement
or amendment thereto when filed with the Commission under Rule 497 of the 1933
Act Rules and Regulations and the 1940 Act Notification when originally filed
with the Commission and any amendment or supplement thereto when filed with the
Commission, complied or will comply in all material respects with the provisions
of the 1933 Act, the 1940 Act and the Rules and Regulations and did not or will
not at any such times contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, except that this representation and warranty
does not apply to statements in or omissions from the Registration Statement or
the Prospectus made in reliance upon and in conformity with information relating
to the Underwriters furnished to the Fund in writing by or on behalf of the
Underwriters expressly for use therein.
(c) All the outstanding shares of capital stock of the Fund have been
duly authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares have been duly authorized
and, when issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights and will conform to
the description thereof in the Registration Statement and the Prospectus (and
any amendment or supplement to either of them); and the capital stock of the
Fund conforms to the description thereof in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them).
(d) The Fund is a corporation duly organized and validly existing in
good standing under the laws of the State of Minnesota, with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus (and any
amendment or supplement to either of them), and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification; and the Fund has no subsidiaries.
(e) There are no legal or governmental proceedings pending or, to the
knowledge of the Fund, threatened, against the Fund, or to which the Fund or any
of its properties is subject, that are required to be described in the
Registration Statement or the Prospectus (and any amendment or supplement to
either of them), but are not described as required, and there are no
<PAGE>
8
agreements, contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus (and any
amendment or supplement to either of them), or to be filed as an exhibit to the
Registration Statement that are not described or filed as required by the 1933
Act, the 1940 Act or the Rules and Regulations.
(f) The Fund is not in violation of its Articles of Incorporation (the
"Articles"), the Statement or by-laws (the "By-Laws"), or other organizational
documents (together, the "Organizational Documents") of the Fund or of any law,
ordinance, administrative or governmental rule or regulation of any decree of
the Commission, the NASD, any state securities commission, any national
securities exchange, any arbitrator, any court or governmental agency, body or
official having jurisdiction over the Fund, or in default in any material
respect in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in any
material agreement, indenture, lease or other instrument to which the Fund is a
party or by which it or any of its properties may be bound.
(g) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement or any of the Fund Agreements by the
Fund, nor the consummation by the Fund of the transactions contemplated hereby
or thereby (A) requires any consent, approval, authorization or other order of
or registration or filing with, the Commission, the NASD, any state securities
commission, any national securities exchange, any arbitrator, any court,
regulatory body, administrative agency or other governmental body, agency or
official (except such as may have been obtained prior to the date hereof and
such as may be required for compliance with the state securities or blue sky
laws of various jurisdictions which have been or will be effected in accordance
with this Agreement) or conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, the Organizational Documents of the
Fund or (B) conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, any agreement, indenture, lease or other
instrument to which the Fund is a party or by which it or any of its properties
may be bound, or violates or will violate any statute, law, regulation or
judgment, injunction, order or decree applicable to the Fund or any of its
properties, or will result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Fund pursuant to the terms of any
agreement or instrument to which it is a party or by which it may be bound or to
which any of its property or assets is subject. The Fund is not subject to any
order of any court or of any arbitrator, governmental authority or
administrative agency.
(h) The accountants, Ernst & Young, who have certified or shall
certify the financial statements included or incorporated by reference in the
Registration Statement and the Prospectus (or any amendment or supplement to
either of them), are independent public accountants as required by the 1933 Act,
the 1940 Act and the Rules and Regulations.
(i) The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement to either of them), present
fairly the financial position, results of operations and changes in financial
position of the Fund on the basis stated or incorporated by reference in the
Registration Statement at the respective dates or for the respective periods to
which they apply; such statements and related schedules and notes have been
prepared in accordance with generally
<PAGE>
9
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data included in the Registration Statement and the Prospectus
(and any amendment or supplement to either of them), are accurately presented
and prepared on a basis consistent with such financial statements and the books
and records of the Fund.
(j) The execution and delivery of, and the performance by the Fund of
its obligations under, this Agreement and the Fund Agreements have been duly and
validly authorized by the Fund, and this Agreement and the Fund Agreements have
been duly executed and delivered by the Fund and constitute the valid and
legally binding agreements of the Fund, enforceable against the Fund in
accordance with their terms, except as rights to indemnity and contribution
hereunder and thereunder may be limited by federal or state securities laws.
(k) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement to either of them),
the Fund has not incurred any liability or obligation, direct or contingent, or
entered into any transaction, not in the ordinary course of business, that is
material to the Fund, and there has not been any change in the capital stock, or
material increase in the short-term debt or long-term debt, of the Fund, or any
material adverse change, or any development involving or which may reasonably be
expected to involve, a prospective material adverse change, in the condition
(financial or other), business, prospects, properties, net assets or results of
operations of the Fund, whether or not arising in the ordinary course of
business.
(l) The Fund has filed all tax returns required to be filed, which
returns are complete and correct in all material respects, and the Fund is not
in material default in the payment of any taxes which were payable pursuant to
said returns or any assessments with respect thereto.
(m) The Fund is registered under the 1940 Act as a closed-end
diversified management investment company, and the 1940 Act Notification has
been duly filed with the Commission and, at the time of filing thereof and any
amendment or supplement thereto, conformed in all material respects with all
applicable provisions of the 1940 Act and the Rules and Regulations. The Fund
is, and at all times through the completion of the transactions contemplated
hereby, will be, in compliance in all material respects with the terms and
conditions of the 1933 Act and the 1940 Act. No person is serving or acting as
an officer, director or investment adviser of the Fund except in accordance with
the provisions of the 1940 Act and the Rules and Regulations and the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and
regulations of the Commission promulgated under the Advisers Act (the "Advisers
Act Rules and Regulations").
(n) As required by Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"), the Fund is currently in compliance with the
requirements to qualify as a regulated investment company under the Code.
(o) The Fund's common shares are duly listed on the New York Stock
Exchange.
<PAGE>
10
(p) The Fund has not distributed and, prior to the later to occur of
(i) the Closing Date and (ii) completion of the distribution of the Shares, will
not distribute any offering material in connection with the offering and sale of
the Shares other than the Registration Statement, the Prepricing Prospectus, the
Prospectus or other materials, if any, permitted by the 1933 Act, the 1940 Act
or the Rules and Regulations.
(q) No holder of any security of the Fund has any right to require
registration of shares of common stock, shares of MuniPreferred or any other
security of the Fund because of the filing of the Registration Statement or
consummation of the transactions contemplated by this Agreement.
(r) The conduct by the Fund of its business (as described in the
Prospectus) does not require it to be the owner, possessor or licensee of any
patents, patent licenses, trademarks, service marks or trade names which it does
not own, possess or license.
(s) Except as stated in this Agreement and in the Prospectus (and any
amendment or supplement thereto), the Fund has not taken, nor will it take,
directly or indirectly, any action designed to or which might reasonably be
expected to cause or result in stabilization or manipulation of the price of any
securities issued by the Fund to facilitate the sale or resale of the Shares,
and the Fund is not aware of any such action taken or to be taken by any
affiliates of the Fund.
(t) The Fund has filed in a timely manner each document or report
required to be filed by it pursuant to the 1940 Act, the 1940 Act Rules and
Regulations, the 1934 Act and the rules and regulations of the Commission
promulgated thereunder (the "1934 Act Rules and Regulations"); each such
document or report at the time it was filed conformed to the requirements of the
1934 Act and the 1934 Act Rules and Regulations; and none of such documents or
reports contained an untrue statement of any material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(u) All advertising, sales literature or other promotional material
(including "prospectus wrappers," "broker kits," "road show slides" and "road
show scripts") authorized in writing by or prepared by the Fund or the Adviser
for use in connection with the offering and sale of the Shares (collectively,
"sales material") complied and comply in all material respects with the
applicable requirements of the 1933 Act, the 1940 Act, the Rules and Regulations
and the rules and interpretations of the NASD and no such sales material
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(v) The Fund has implemented a comprehensive, detailed program to
analyze and address the risk that its computer hardware and software may be
unable to recognize and properly execute date-sensitive functions involving
certain dates prior to and any dates after December 31,
<PAGE>
11
1999 (the "Year 2000 Problem") and has determined that its computer hardware and
software are and will be able to process all date information prior to and after
December 31, 1999 without any errors, aborts, delays or other interruptions in
operations associated with the Year 2000 Problem; and the Fund believes, after
due inquiry, that each supplier, vendor, customer or financial service
organization used by the Fund has remedied or will remedy on a timely basis the
Year 2000 Problem, except to the extent that a failure to remedy by any such
supplier, vendor, customer or financial service organization would not have a
material adverse effect on the Fund. The Fund is in compliance with the
Commission's staff legal bulletin No. 5 dated January 12, 1998 related to Year
2000 compliance, as amended to date.
7. Representations and Warranties of the Adviser. The Adviser
represents and warrants to the Underwriters as follows:
(a) The Adviser is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware, with full
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement to either of them), and is duly
registered and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification.
(b) The Adviser is duly registered with the Commission as an
investment adviser under the Advisers Act and is not prohibited by the Advisers
Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules
and Regulations from acting under the Investment Management Agreement for the
Fund as contemplated by the Prospectus (or any amendment or supplement thereto).
There does not exist any proceeding or any facts or circumstances the existence
of which could lead to any proceeding which might adversely affect the
registration of the Adviser with the Commission.
(c) There are no legal or governmental proceedings pending or, to the
knowledge of the Adviser, threatened against the Adviser, or to which the
Adviser or any of its properties is subject, that are required to be described
in the Registration Statement or the Prospectus (or any amendment or supplement
to either of them), but are not described as required or that may reasonably be
expected to involve a prospective material adverse change, in the condition
(financial or other), business, prospects, properties, assets or results of
operations of the Adviser or on the ability of the Adviser to perform its
obligations under this Agreement and the Investment Management Agreement.
(d) The Adviser is not in violation of its corporate charter or by-
laws, or other organizational documents, in default under any agreement,
indenture or instrument or in breach or violation of any judgment, decree,
order, rule or regulation of any court or governmental or self-regulatory agency
or body.
(e) Neither the execution, delivery or performance of this Agreement
or the Investment Management Agreement by the Adviser, nor the consummation by
the Adviser of the
<PAGE>
12
transactions contemplated hereby or thereby (A) requires the Adviser to obtain
any consent, approval, authorization or other order of or registration or filing
with, the Commission, the NASD, any state securities commission, any national
securities exchange, any arbitrator, any court, regulatory body, administrative
agency or other governmental body, agency or official or conflicts or will
conflict with or constitutes or will constitute a breach of or a default under,
the corporate charter or by-laws, or other organizational documents, of the
Adviser or (B) conflicts or will conflict with or constitutes or will constitute
a breach of or a default under, any agreement, indenture, lease or other
instrument to which the Adviser is a party or by which it or any of its
properties may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable to the
Adviser or any of its properties or will result in the creation or imposition of
any lien, charge or encumbrance upon any property or assets of the Adviser
pursuant to the terms of any agreement or instrument to which it is a party or
by which it may be bound or to which any of the property or assets of the
Adviser is subject. The Adviser is not subject to any order of any court or of
any arbitrator, governmental authority or administrative agency.
(f) The execution and delivery of, and the performance by the Adviser
of its obligations under, this Agreement and the Investment Management Agreement
have been duly and validly authorized by the Adviser, and this Agreement and the
Investment Management Agreement have been duly executed and delivered by the
Adviser and each constitutes the valid and legally binding agreement of the
Adviser, enforceable against the Adviser in accordance with its terms.
(g) The Adviser has the financial resources available to it necessary
for the performance of its services and obligations as contemplated in the
Prospectus (or any amendment or supplement thereto) and under this Agreement and
the Investment Management Agreement.
(h) The description of the Adviser in the Registration Statement and
the Prospectus (and any amendment or supplement thereto) complied and comply in
all material respects with the provisions the 1933 Act, the 1940 Act, the
Advisers Act, the Rules and Regulations and the Advisers Act Rules and
Regulations and did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(i) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement to either of them),
the Adviser has not incurred any liability or obligation, direct or contingent,
or entered into any transaction, not in the ordinary course of business, that is
material to the Adviser or the Fund and that is required to be disclosed in the
Registration Statement or the Prospectus and there has not been any material
adverse change, or any development involving or which may reasonably be expected
to involve, a prospective material adverse change, in the condition (financial
or other), business, prospects, properties, assets or results of operations of
the Adviser, whether or not arising in the ordinary course of business, or
which, in each case, could
<PAGE>
13
have a material adverse effect on the ability of the Adviser to perform its
obligations under this Agreement and the Investment Management Agreement.
8. Indemnification and Contribution. (a) The Fund and the Adviser,
jointly and severally, agree to indemnify and hold harmless each of the
Underwriters and each person, if any, who controls the Underwriters within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation), joint or several, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Prepricing Prospectus or in the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to the
Underwriters furnished in writing to the Fund by or on behalf of the
Underwriters expressly for use in connection therewith; provided, however, that
the indemnification contained in this paragraph (a) with respect to any
Prepricing Prospectus shall not inure to the benefit of the Underwriters (or to
the benefit of any person controlling the Underwriters) on account of any such
loss, claim, damage, liability or expense arising from the sale of the Shares by
the Underwriters to any person if a copy of the Prospectus shall not have been
delivered or sent to such person within the time required by the 1933 Act and
the 1933 Act Rules and Regulations, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained in such
Prepricing Prospectus was corrected in the Prospectus, provided that the Fund
has delivered the Prospectus to the Underwriters in requisite quantity on a
timely basis to permit such delivery or sending. The foregoing indemnity
agreement shall be in addition to any liability which the Fund or the Adviser
may otherwise have.
(b) If any action, suit or proceeding shall be brought against the
Underwriters or any person controlling any Underwriter in respect of which
indemnity may be sought against the Fund or the Adviser, the Underwriters or
such controlling person shall promptly notify the Fund or the Adviser, and the
Fund or the Adviser shall assume the defense thereof, including the employment
of counsel and payment of all fees and expenses. The Underwriters or any such
controlling person shall have the right to employ separate counsel in any such
action, suit or proceeding and to participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the Underwriters or
such controlling person unless (i) the Fund or the Adviser has agreed in writing
to pay such fees and expenses, (ii) the Fund and the Adviser have failed to
assume the defense and employ counsel, or (iii) the named parties to any such
action, suit or proceeding (including any impleaded parties) include both the
Underwriters or such controlling person and the Fund or the Adviser and the
Underwriters or such controlling person shall have been advised by its counsel
that representation of such indemnified party and the Fund or the Adviser by the
same counsel would be inappropriate under applicable standards of professional
conduct (whether or not such representation by the same counsel has been
proposed) due to actual or potential differing interests between them (in which
case the Fund and the Adviser shall not have the right to assume the defense of
such action, suit or proceeding on behalf of the
<PAGE>
14
Underwriters or such controlling person). It is understood, however, that the
Fund and the Adviser shall, in connection with any one such action, suit or
proceeding or separate but substantially similar or related actions, suits or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of only one
separate firm of attorneys (in addition to any local counsel) at any time for
the Underwriters and controlling persons not having actual or potential
differing interests with you or among themselves, which firm shall be designated
in writing by the Representative, and that all such fees and expenses shall be
reimbursed as they are incurred. The Fund and the Adviser shall not be liable
for any settlement of any such action, suit or proceeding effected without its
written consent, but if settled with such written consent, or if there be a
final judgment for the plaintiff in any such action, suit or proceeding, the
Fund and the Adviser agree to indemnify and hold harmless the Underwriters, to
the extent provided in the preceding paragraph, and any such controlling person
from and against any loss, claim, damage, liability or expense by reason of such
settlement or judgment.
(c) The Underwriters agree, severally and not jointly, to indemnify
and hold harmless the Fund and the Adviser, their directors, any officers who
sign the Registration Statement, and any person who controls the Fund or the
Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act, to the same extent as the foregoing indemnity from the Fund and the
Adviser to the Underwriters, but only with respect to information relating to
the Underwriters furnished in writing by or on behalf of the Underwriters
expressly for use in the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto. If any action,
suit or proceeding shall be brought against the Fund or the Adviser, any of
their directors, any such officer, or any such controlling person based on the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto, and in respect of which indemnity may be sought
against the Underwriters pursuant to this paragraph (c), the Underwriters shall
have the rights and duties given to the Fund and the Adviser by paragraph (b)
above (except that if the Fund or the Adviser shall have assumed the defense
thereof the Underwriters shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the Underwriters' expense), and the Fund
and the Adviser, their directors, any such officer, and any such controlling
person shall have the rights and duties given to the Underwriters by paragraph
(b) above. The foregoing indemnity agreement shall be in addition to any
liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Fund and the Adviser on the one hand (treated jointly for this purpose as one
person) and the Underwriters on the other hand from the offering of the Shares,
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Fund and the Adviser on the one hand
<PAGE>
15
(treated jointly for this purpose as one person) and the Underwriters on the
other in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Fund and the
Adviser on the one hand (treated jointly for this purpose as one person) and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Fund bear to the total sales load received by the Underwriters, in each case as
set forth in the table on the cover page of the Prospectus. The relative fault
of the Fund and the Adviser on the one hand (treated jointly for this purpose as
one person) and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Fund and the Adviser on the one hand
(treated jointly for this purpose as one person) or by the Underwriters on the
other hand and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(e) The Fund, the Adviser and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 8 were determined
by a pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 8, the Underwriters
shall not be required to contribute any amount in excess of the amount by which
the total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which the Underwriters have otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
(f) No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Fund and the Adviser set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of the Underwriters or any person
controlling the Underwriters, the Fund, the Adviser, their directors or
officers, or any person controlling the Fund or the Adviser, (ii) acceptance of
<PAGE>
16
any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to the Underwriters or any person controlling any
Underwriter, or to the Fund, the Adviser, their directors or officers, or any
person controlling the Fund or the Adviser, shall be entitled to the benefits of
the indemnity, contribution, and reimbursement agreements contained in this
Section 8.
9. Conditions of Underwriters' Obligations. The obligation of the
Underwriters to purchase the Shares hereunder are subject to the following
conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Registration Statement or such post-effective amendment shall have become
effective not later than 5:30 P.M., New York City time, on the date hereof, or
at such later date and time as shall be consented to in writing by the
Underwriters, and all filings, if any, required by Rules 497 and 430A under the
1933 Act and the 1933 Act Rules and Regulations shall have been timely made; no
stop order suspending the effectiveness of the Registration Statement or order
pursuant to Section 8(e) of the 1940 Act shall have been issued and no
proceeding for those purposes shall have been instituted or, to the knowledge of
the Fund, the Adviser or the Underwriters, threatened by the Commission, and any
request of the Commission for additional information (to be included in the
registration statement or the prospectus or otherwise) shall have been complied
with to the Underwriters' satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change or any development involving a prospective
change in or affecting the condition (financial or other), business, prospects,
properties, net assets, or results of operations of the Fund or the Adviser not
contemplated by the Prospectus, which in the Underwriters' opinion would
materially, adversely affect the market for the Shares, or (ii) any event or
development relating to or involving the Fund or the Adviser or any officer or
director of the Fund or the Adviser which makes any statement made in the
Prospectus untrue or which, in the opinion of the Fund and its counsel or the
Underwriters and their counsel, requires the making of any addition to or change
in the Prospectus in order to state a material fact required by the 1933 Act,
the 1940 Act or the Rules and Regulations or any other law to be stated therein
or necessary in order to make the statements therein not misleading, if amending
or supplementing the Prospectus to reflect such event or development would, in
the Underwriters' opinion, materially adversely affect the market for the
Shares.
(c) The Fund shall have furnished to the Representative a report
showing compliance with the asset coverage requirements of the 1940 Act and a
Basic Maintenance Report (as defined in the Statement), each dated the Closing
Date and in form and substance satisfactory to the Representative. Each such
report may use portfolio holdings and valuations as of the close of business of
any day not more than six business days preceding the Closing Date, provided,
however, that the Fund represents in such report that its total net assets as of
the Closing Date have not declined by 5% or more from such valuation date.
<PAGE>
17
(d) Morgan, Lewis & Bockius LLP, counsel to the Fund, shall have
furnished to the Representative on the Closing Date their opinion addressed to
the Underwriters and dated the Closing Date, to the effect that:
(i) The Fund has been duly organized and is validly existing and
in good standing as a corporation under the laws of the State of
Minnesota, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement to either of them), and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its
business requires such registration or qualification;
(ii) The Fund has no subsidiaries;
(iii) All of the outstanding shares of capital stock of the Fund
have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights;
(iv) The Shares have been duly authorized and, when issued and
delivered to the Underwriters against payment therefor in accordance
with the terms of the Underwriting Agreement, will be validly issued,
fully paid and nonassessable and free of any preemptive or similar
rights. Except as set forth in the Articles and the Statement, there
are no restrictions upon the transfer of any Shares pursuant to the
Articles or By-Laws of the Fund or any agreement or other outstanding
instrument known to such counsel; and the certificate evidencing the
Shares complies with all formal requirements of Minnesota law;
(v) The Shares conform in all material respects to the
description thereof in the Registration Statement and the Prospectus
(and any amendment or supplement to either of them) and the capital
stock of the Fund (including the MuniPreferred and any other
outstanding series of preferred stock) conforms in all material
respects to the description thereof in the Registration Statement and
the Prospectus (and any amendment or supplement to either of them);
and the authorized and outstanding capital stock of the Fund is as set
forth in the Prospectus;
(vi) The Registration Statement is effective under the 1933 Act
and the 1940 Act; any required filing of the Prospectus pursuant to
Rule 497 of the Rules and Regulations has been made within the time
periods required by Rule 497; to the best of such counsel's knowledge,
no stop-order suspending the effectiveness of the Registration
Statement or order pursuant to Section 8(e) of the 1940 Act has been
issued and no proceeding for any such purpose has been instituted or
is pending or threatened by the Commission;
<PAGE>
18
(vii) The 1940 Act Notification, the Registration Statement and
the Prospectus and each amendment or supplement to the Registration
Statement and the Prospectus as of their respective or issue dates
(except that no opinion need be expressed as to the financial
statements or other financial data contained therein) complied as to
form in all material respects with the requirements of the 1933 Act,
the 1940 Act and the Rules and Regulations;
(viii) The statements made in the Prospectus under the captions
"The Auction" and "Description of MuniPreferred", insofar as they
purport to summarize the provisions of the Statement or other
documents or agreements specifically referred to therein, constitute
accurate summaries of the terms of any such documents;
(ix) The statements made in the Prospectus under the caption
"Prospectus Summary-Taxation" and both captions entitled "Tax
Matters", insofar as they constitute matters of law or legal
conclusions, have been reviewed by such counsel and constitute
accurate statements of any such matters of law or legal conclusions,
and fairly present the information called for with respect thereto by
Form N-2;
(x) To the best of such counsel's knowledge, there are no legal
or governmental proceedings pending or threatened against the Fund, or
to which the Fund or any of its properties is subject, that are
required to be described in the Registration Statement or the
Prospectus (and any amendment or supplement to either of them), but
are not described as required;
(xi) To the best of such counsel's knowledge, there are no
agreements, contracts, indentures, leases or other instruments that
are required to be described in the Registration Statement or the
Prospectus (and any amendment or supplement to either of them), or to
be filed as an exhibit to the Registration Statement that are not
described or filed as required by the 1933 Act, the 1940 Act or the
Rules and Regulations;
(xii) To the best of such counsel's knowledge, the Fund is not in
violation of its Articles, the Statement or its By-Laws, or other
organizational documents of the Fund or of any law, ordinance,
administrative or governmental rule or regulation, of any decree of
the Commission, the NASD, any state securities commission, any
national securities exchange, any arbitrator, any court or
governmental agency, body or official having jurisdiction over the
Fund, or in default in any material respect in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any material
agreement, indenture, lease or other instrument to which the Fund is a
party or by which it or any of its properties may be bound;
<PAGE>
19
(xiii) The Underwriting Agreement and the Fund Agreements have
each been duly and validly authorized, executed and delivered by the
Fund, each complies with all applicable provisions of the 1940 Act and
each constitutes the valid and legally binding agreement of the Fund,
enforceable against the Fund in accordance with its terms, except as
rights to indemnity and contribution under the Underwriting Agreement
and the Fund Agreements may be limited by federal or state securities
laws, subject as to enforcement to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(xiv) The Fund is registered under the 1940 Act as a closed-end
diversified management investment company; the provisions of the
Articles, Statement and By-Laws of the Fund and the investment
policies and restrictions described in the Prospectus under the
caption "Prospectus Summary-Investment Objectives", "The Fund" and
"Risk Factors", both captions entitled "Investment Objectives and
Policies", and the captions entitled "Municipal Bonds", "Portfolio
Investments", "Insured Funds: Municipal Bond Insurance", "Investment
Restrictions" and "Certain Trading Strategies of the Funds" comply
with the requirements of the 1940 Act;
(xv) To the best of such counsel's knowledge, no person is
serving or acting as an officer, director or investment adviser of the
Fund except in accordance with the provisions of the 1940 Act and the
1940 Act Rules and Regulations and the Investment Advisers Act and the
Advisers Act Rules and Regulations.
(xvi) Neither the issuance and sale of the Shares, the execution,
delivery or performance of the Underwriting Agreement or any of the
Fund Agreements by the Fund, nor the consummation by the Fund of the
transactions contemplated in the Underwriting Agreement or any of the
Fund Agreements (A) requires any consent, approval, authorization, or
other order of or registration or filing with, the Commission, the
NASD, any state securities commission, any national securities
exchange, any arbitrator, any court, regulatory body, administrative
agency or governmental body, agency or official (except such as may
have been obtained prior to the date hereof and such as may be
required for compliance with the state securities or blue sky laws of
various jurisdictions in accordance with the Underwriting Agreement)
or conflicts or will conflict with or constitutes or will constitute a
breach of, or a default under, the Organizational Documents of the
Fund or (B) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture,
lease or other instrument to which the Fund is a party or by which it
or any of its properties may be bound, or violates or will violate any
statute, law, regulation or judgment, injunction, order or decree
applicable to the Fund or any of its properties, or will result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Fund pursuant to the terms of any agreement
or instrument to which it is a party or
<PAGE>
20
by which it may be bound or to which any of its property or assets is
subject. The Fund is not subject to any order of any court or of any
arbitrator, governmental authority or administrative agency;
(xvii) No holder of any security of the Fund has any right to
require registration of shares of common stock, shares of
MuniPreferred or any other security of the Fund because of the filing
of the Registration Statement or consummation of the transactions
contemplated by the Underwriting Agreement; and
(xviii) Such counsel shall also state that they have participated
in conferences with officers and employees of the Fund,
representatives of the independent accountants for the Fund, Minnesota
counsel to the Fund, the Underwriters and counsel for the Underwriters
at which the contents of the Registration Statement and the Prospectus
and related matters were discussed and, although they are not passing
upon, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the
Registration Statement or the Prospectus, except to the limited extent
otherwise covered by paragraphs (v), (vii), (viii), (ix) and (xiv),
and have made no independent check or verification thereof, and on the
basis of the foregoing, no facts have come to their attention that
would have led them to believe that the Registration Statement or any
amendment or supplement thereto, at the time it became effective,
contained an untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements contained therein not misleading or that the Prospectus
or any amendment or supplement thereto, as of its issue date and as of
the Closing Date, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact required to
be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading, except that they express no belief with respect to the
financial statements, schedules and other financial information and
statistical data included therein or excluded therefrom or the
exhibits to the Registration Statement, including the information
under the caption "Taxable Equivalent Yield Table" in Appendix A to
the Prospectus.
Such opinion shall also contain a statement that such counsel has no
reason to believe that the 1940 Act Notification contains any untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
In giving such opinion, Morgan, Lewis & Bockius LLP may rely on the
opinion of Dorsey & Whitney as to matters of Minnesota law, provided that
Morgan, Lewis & Bockius LLP furnish a copy thereof to the Underwriters and state
that such opinion is satisfactory in substance and form and that the
Underwriters and counsel for the Underwriters are entitled to rely thereon.
<PAGE>
21
(e) Gifford Zimmerman, Esq., Vice President and Secretary of the
Adviser, shall have furnished to the Representative on the Closing Date his
opinion addressed to the Underwriters and dated the Closing Date, to the effect
that:
(i) The Adviser has been duly organized and is validly existing and
in good standing as a corporation under the laws of the State of
Delaware, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or
supplement to either of them), and is duly registered and qualified to
conduct its business and is in good standing in each jurisdiction or
place where the nature of its properties or the conduct of its business
requires such registration or qualification;
(ii) The Adviser is duly registered and in good standing with the
Commission as an investment adviser under the Advisers Act and is not
prohibited by the Advisers Act, the Advisers Act Rules and Regulations,
the 1940 Act or the 1940 Act Rules and Regulations from acting under the
Investment Management Agreement for the Fund as contemplated by the
Prospectus (or any amendment or supplement thereto); there does not
exist any proceeding or any facts or circumstances the existence of
which could lead to any proceeding which might adversely affect the
registration of the Adviser with the Commission;
(iii) To the best of such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Adviser, or
to which the Adviser or any of its properties is subject, that are
required to be described in the Registration Statement or the Prospectus
(or any amendment or supplement to either of them), but are not
described as required or that may reasonably be expected to involve a
prospective material adverse change, in the condition (financial or
other), business, prospects, properties, assets or results of operations
of the Adviser or on the ability of the Adviser to perform its
obligations under the Underwriting Agreement and the Investment
Management Agreement;
(iv) To the best of such counsel's knowledge, the Adviser is not in
violation of its corporate charter or by-laws, or other organizational
documents, nor is the Adviser in default under any agreement, indenture
or instrument or in breach or violation of any judgment, decree, order,
rule or regulation of any court or governmental or self-regulatory
agency or body;
(v) The Underwriting Agreement and the Investment Management
Agreement have each been duly and validly authorized, executed and
delivered by the Adviser, each complies with all applicable provisions
of the 1940 Act and the Advisers Act and the 1940 Act Rules and
Regulations and the Advisers Act Rules and Regulations and each
constitutes the valid and legally binding agreement of the Adviser,
enforceable against the Adviser in accordance with its terms, subject as
to
<PAGE>
22
enforcement to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles;
(vi) The description of the Adviser in the Registration Statement
and the Prospectus (and any amendment or supplement thereto) complied
and comply in all material respects with the provisions of the 1933 Act,
the 1940 Act, the Advisers Act, the Rules and Regulations and the
Advisers Act Rules and Regulations and did not and will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(vii) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement to either of them),
subsequent to the respective dates as of which such information is given
in the Registration Statement and the Prospectus (or any amendment or
supplement to either of them), the Adviser has not incurred any
liability or obligation, direct or contingent, or entered into any
transaction, not in the ordinary course of business, that is material to
the Adviser or the Fund and that is required to be disclosed in the
Registration Statement or the Prospectus and there has not been any
material adverse change, or any development involving or which may
reasonably be expected to involve, a prospective material adverse
change, in the condition (financial or other), business, prospects,
properties, assets or results of operations of the Adviser, whether or
not arising in the ordinary course of business, or which, in each case,
could have a material adverse effect on the ability of the Adviser to
perform its obligations under the Underwriting Agreement and the
Investment Management Agreement; and
(viii) Neither the execution, delivery or performance of the
Underwriting Agreement or the Investment Management Agreement by the
Adviser, nor the consummation by the Adviser of the transactions
contemplated in the Underwriting Agreement or the Investment Management
Agreement (A) requires the Adviser to obtain any consent, approval,
authorization or other order of or registration or filing with, the
Commission, the NASD, any state securities commission, any national
securities exchange, any arbitrator, any court, regulatory body,
administrative agency or other governmental body, agency or official or
conflicts or will conflict with or constitutes or will constitute a
breach of or a default under, the corporate charter or by-laws, or other
organizational documents, of the Adviser or (B) conflicts or will
conflict with or constitutes or will constitute a breach of or a default
under, any agreement, indenture, lease or other instrument to which the
Adviser is a party or by which it or any of its properties may be bound,
or violates or will violate any statute, law, regulation or filing or
judgment, injunction, order or decree applicable to the Adviser or any
of its properties or will result in the creation or imposition of any
lien, charge or encumbrance upon any
<PAGE>
property or assets of the Adviser pursuant to the terms of any agreement
or instrument to which it is a party or by which it may be bound or to
which any of the property or assets of the Adviser is subject. The
Adviser is not subject to any order of any court or of any arbitrator,
governmental authority or administrative agency.
(f) The Representative shall have received on the Closing Date an
opinion of Simpson Thacher & Bartlett, counsel for the Underwriters, dated the
Closing Date and addressed to the Underwriters, with respect to such matters as
the Underwriters may reasonably request.
(g) The Fund shall have furnished to the Representative on the Closing
Date a certificate, dated the Closing Date, of its President or a Vice President
and its Controller or Treasurer stating that:
(i) The representations, warranties and agreements of the Fund in
Section 6 hereof are true and correct as of the Closing Date; the Fund
has complied with all its agreements contained herein; and the
conditions set forth in Section 9(a) have been fulfilled; and
(ii) They have carefully examined the Registration Statement and the
Prospectus and, in their opinion, (A) as of the date of its
effectiveness (or the most recent post-effective amendment thereto), the
Registration Statement did not include any untrue statement of a
material fact and did not omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading and on such Closing Date, the Prospectus did not include any
untrue statement of a material fact and did not omit to state any
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (B) since the date of effectiveness of the
Registration Statement (or the most recent post-effective amendment
thereto), no event has occurred which should have been set forth in a
supplement to or amendment of the Prospectus which has not been set
forth in such a supplement or amendment.
(h) The Adviser shall have furnished to the Representative on the
Closing Date a certificate, dated the Closing Date, of its Chairman of the
Board, President or a Vice President and its Controller or Treasurer stating
that:
(i) The representations, warranties and agreements of the Adviser in
Sections 6 and 7 hereof are true and correct as of such Closing Date and
the Adviser has complied with all its agreements contained herein; and
(ii) They have carefully examined the Registration Statement and the
Prospectus and, in their opinion, (A) as of the date of its
effectiveness (or the most recent post-effective amendment thereto), the
Registration Statement did not include any untrue statement of a
material fact and did not omit to state any material fact
<PAGE>
required to be stated therein or necessary to make the statements
therein not misleading and on such Closing Date, the Prospectus did not
include any untrue statement of a material fact and did not omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, and (B) since the date of its effectiveness
(or the most recent post-effective amendment thereto), the Registration
Statement, no event has occurred which should have been set forth in a
supplement to or amendment of the Prospectus which has not been set
forth in such a supplement or amendment.
(i) The Representative shall have received letters addressed to the
Underwriters, and dated the date hereof and the Closing Date from Ernst &
Young, independent certified public accountants, substantially in the forms
heretofore approved by the Representative.
(j) Subsequent to the date of effectiveness of the Registration
Statement (or the most recent post-effective amendment thereto), there shall
not have occurred any change, or any development involving a prospective
change, in or affecting particularly the business or financial affairs of
the Fund or the Adviser which, in the opinion of the Underwriters, would
materially and adversely affect the market for the Shares.
(k) (i) No order suspending the effectiveness of the Registration
Statement or prohibiting or suspending the use of the Prospectus (or any
amendment or supplement thereto) or any Prepricing Prospectus or any sales
material shall have been issued and no proceedings for such purpose or for the
purpose of commencing an enforcement action against the Fund, the Adviser or,
with respect to the transactions contemplated by the Prospectus (or any
amendment or supplement thereto) and this Agreement, the Underwriters, may be
pending before or, to the knowledge of the Fund, the Adviser or the Underwriters
or in the reasonable view of counsel to the Underwriters, shall be threatened or
contemplated by the Commission at or prior to the Closing Date and that any
request for additional information on the part of the Commission (to be
included in the Registration Statement, the Prospectus or otherwise) be complied
with to the satisfaction of the Underwriters; (ii) there shall not have been any
change in the capital stock of the Fund nor any material increase in the short-
term or long-term debt of the Fund (other than in the ordinary course of
business) from that set forth or contemplated in the Registration Statement or
the Prospectus (or any amendment or supplement thereto); (iii) there shall not
have been, subsequent to the respective dates as of which information is given
in the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse change
in the condition (financial or other), business, prospects, properties, net
assets or results of operations of the Fund or the Adviser; (iv) the Fund shall
not have any liabilities or obligations, direct or contingent (whether or not in
the ordinary course of business), that are material to the Fund, other than
those reflected in the Registration Statement or the Prospectus (or any
amendment or supplement to either of them); and (v) all the representations and
warranties of the Fund and the Adviser contained in this Agreement shall be true
and correct
<PAGE>
on and as of the date hereof and on and as of the Closing Date as if made on and
as of the Closing Date.
(1) Neither the Fund nor the Adviser shall have failed at or prior to
the Closing Date to have performed or complied in all material respects with any
of its agreements herein contained and required to be performed or complied with
by it hereunder at or prior to the Closing Date.
(m) The Fund shall have delivered and the Underwriters shall have
received evidence satisfactory to the Representative that the shares of
MuniPreferred are rated "aaa" by Moody's and AAA by S&P as of the Closing Date,
and there shall not have been given any notice of any intended or potential
downgrading, or of any review for a potential downgrading, in the rating
accorded to any outstanding shares of capital stock of the Fund by any Rating
Agency.
(n) The Fund and the Adviser shall have furnished or caused to be
furnished to the Underwriters such further certificates and documents as the
Representative shall have reasonably requested.
(o) The issuance of the Shares will not impair the rating for any
outstanding shares of capital stock of the Fund.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to the Representative and the Underwriters' counsel.
Any certificate or document signed by any officer of the Fund or the
Adviser and delivered to the Underwriters, or to counsel for the Underwriters,
shall be deemed a representation and warranty by the Fund or the Adviser to the
Underwriters as to the statements made therein.
10. Expenses. The Fund agrees to pay the costs incident to the
authorization, issuance, sale and delivery of the Shares to be sold by the Fund
to the Underwriters and any taxes payable in that connection; the costs incident
to the preparation, printing and filing under the 1933 Act and 1940 Act of the
Registration Statement and any amendments and exhibits thereto; the costs of
preparing, printing and distributing the Registration Statement as originally
filed and each amendment and any post-effective amendment thereto (including
exhibits), any Prepricing Prospectus, the Prospectus and any amendment or
supplement to the Prospectus; the costs of printing this Agreement and
distributing the terms of agreements relating to the organization of any
underwriting syndicate by mail, telex or other means of communication; the fees
paid to Rating Agencies in connection with the rating of the Shares; the fees
and expenses of qualifying the Shares under the securities laws of the several
jurisdictions as provided in this Section and of preparing and printing a blue
sky survey (including related fees and expenses of counsel to the Underwriters);
the fees and expenses of the Auction Agent as set forth in the Auction Agency
Agreement; and all other costs and expenses incident to the performance of the
obligations of the Fund under this Agreement; provided that (i) the Fund, the
Adviser and each Underwriter shall
<PAGE>
pay its own costs and expenses in attending any information meeting relating to
the Fund, (ii) each Underwriter shall pay the costs and expenses of any sales
material prepared by it in connection with the public offering of the Shares,
(iii) the Underwriters shall pay the costs and expenses of any "tombstone"
advertisements, and (iv) except as provided in this Section and in Section 5
hereof, the underwriters shall pay their own costs and expenses, including the
fees and expenses of their counsel and any transfer taxes on the Shares which
they may sell.
If notice shall have been given pursuant to Paragraph 12 terminating the
Underwriters' obligations hereunder, or if the sale of the Shares provided for
herein is not consummated because of any failure, refusal or inability on the
part of the Fund or Adviser to perform any agreement on its part to be performed
or if the Underwriters shall decline to purchase the Shares for any reason
permitted under this Agreement, the Fund shall reimburse the Underwriters for
the fees and expenses of their counsel and for such other out-of-pocket expenses
as shall have been incurred by them in connection with this Agreement and the
proposed purchase of the Shares, and upon demand the Fund shall pay the full
amount thereof to the Underwriters; it being understood that the Fund shall not
in any event be liable to any of the Underwriters for damages on account of loss
of anticipated profits from the sale by them of the Shares. If the Fund fails to
reimburse the Underwriters for such fees and expenses, the Adviser shall upon
demand, pay the full amount thereof to the Underwriters.
11. Effective Date of Agreement. This Agreement shall become effective:
(i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at
the time this Agreement is executed and delivered, it is necessary for the
Registration Statement or a post-effective amendment thereto to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of the Registration Statement or such post-effective amendment
has been released by the Commission. Until such time as this Agreement shall
have become effective, it may be terminated by the Fund, by notifying the
Underwriters, or by the Underwriters, by notifying the Fund.
If either of the Underwriters shall fail or refuse to purchase Shares
which it is obligated to purchase hereunder on the Closing Date, and the
aggregate number of Shares which such defaulting Underwriter is obligated but
fails or refuses to purchase is not more than one-tenth of the aggregate number
of Shares which the Underwriters are obligated to purchase on the Closing Date,
the non-defaulting Underwriter shall be obligated to purchase the Shares which
such defaulting Underwriter is obligated, but fails or refuses, to purchase. If
either of the Underwriters shall fail or refuse to purchase Shares which it is
obligated to purchase on the Closing Date and the number of Shares with respect
to which such default occurs is more than one-tenth of the aggregate number of
Shares which the Underwriters are obligated to purchase on the Closing Date and
arrangements satisfactory to the Representative and the Fund for the purchase of
such Shares by the non-defaulting Underwriter or other party or parties approved
by you and the Fund are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of the non-defaulting
Underwriter or the Fund. In any such case which does not result in termination
of this Agreement, either the Representative or the Fund shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and the
Prospectus or any other
<PAGE>
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve the defaulting Underwriter from liability in respect of any
such default of any such Underwriter under this Agreement. The term
"Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule I hereto who, with your approval and
the approval of the Fund, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.
Any notice under this Section 11 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
12. Termination of Agreement. This Agreement shall be subject to
termination in the Representative's absolute discretion, without liability on
the part of the Underwriters to the Fund or the Adviser, by notice to the Fund
or the Adviser, if prior to the Closing Date (i) trading in securities generally
on the New York Stock Exchange, the American Stock Exchange or the Nasdaq
National Market shall have been suspended or materially limited, (ii) a general
moratorium on commercial banking activities in New York shall have been declared
by either federal or state authorities, or (iii) there shall have occurred any
outbreak or escalation of hostilities or other international or domestic
calamity, crisis or change in political, financial or economic conditions, the
effect of which on the financial markets of the United States is to make it, in
the Representative's judgment, impracticable or inadvisable to commence or
continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Shares by the Underwriters. Notice of such termination may be given to
the Fund by telegram, telecopy or telephone and shall be subsequently confirmed
by letter.
13. Information Furnished by the Underwriters. The statements set forth
in the first and third paragraphs under the caption "Underwriting" in any
Prepricing Prospectus and in the Prospectus, constitute the only information
furnished by or on behalf of the Underwriters as such information is referred to
in Sections 6(b) and 8 hereof.
14. Miscellaneous. Except as otherwise provided in Sections 5, 11 and 12
hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Fund or the Adviser, at the office
of the Fund at 333 West Wacker Drive, Chicago, IL 60606, Attention: Gifford R.
Zimmerman, Vice President and Secretary; or (ii) if to the Underwriters, to
Salomon Smith Barney Inc, 388 Greenwich Street, New York, New York 10013,
Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Fund, the Adviser, their directors and officers, and the other
controlling persons referred to in Section 8 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the term
"successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from the Underwriters of any of the Shares in his
status as such purchaser.
<PAGE>
15. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
[End of Text]
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Fund, the Adviser and the Underwriters.
Very truly yours,
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
By:
---------------------------------------------
Name:
Title:
NUVEEN ADVISORY CORP.
By:
---------------------------------------------
Name:
Title:
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
SALOMON SMITH BARNEY INC.
By:
-------------------------------
Name:
Title:
For itself and the other Underwriters
named in Schedule I to the foregoing
Agreement
<PAGE>
SCHEDULE I
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
----------- ------
<S> <C>
Salomon Smith Barney Inc.................................
A.G. Edwards & Sons, Inc.................................
BT Alex. Brown...........................................
Goldman, Sachs & Co......................................
John Nuveen and Co.......................................
Legg Mason Wood Walker Incorporated......................
PaineWebber Incorporated.................................
Prudential Securities....................................
Raymond James & Associates, Inc..........................
Total....................................................
</TABLE>
<PAGE>
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>
(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.
2
<PAGE>
(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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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);
6
<PAGE>
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
7
<PAGE>
(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
8
<PAGE>
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.
9
<PAGE>
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>
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>
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>
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>
<CAPTION>
<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>
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>
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>
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>
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>
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>
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:
<TABLE>
<CAPTION>
Percentage or Dollar Amount of Deferral
Name of Eligible Fund Account Balance to be Transferred to Fund
<S> <C>
$ ---------- --------- %
$ ---------- --------- %
$ ---------- --------- %
Total $ ---------- --------- %
</TABLE>
ATTRIBUTE MY NEW-DEFERRALS:
<TABLE>
<CAPTION>
Percentage or Dollar Amount of New
Name of Eligible Fund Deferrals to be Attributed to Fund
<S> <C>
$ ---------- --------- %
$ ---------- --------- %
$ ---------- --------- %
$ ---------- --------- %
Total $ ---------- --------- %
total must equal 100%
</TABLE>
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>
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>
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>
Address
City State Zip SSN
Please include an attachment to this form if you wish to select additional
primary Beneficiaries.
<PAGE>
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>
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>
EXHIBIT 99.j.1
EXCHANGE TRADED FUND CUSTODY AGREEMENT
THIS AGREEMENT is made this 19th day of February 1993 by and between
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4 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>
(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>
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means a book-entry system authorized by the U.S. Department of Treasury,
its successor or successors and its nominee or nominees.
(c) Proper Instructions. Proper Instructions as used herein means a writing
signed or initialled by two or more persons as the Board of Directors shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if U.S. Trust reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures approved by the Board of
Directors, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Directors and U.S. Trust are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by U.S. Trust pursuant to 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>
(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
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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
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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.
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 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.
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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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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
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<PAGE>
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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employees or agents, and the Fund will be furnished with all information in
respect of the services rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, U.S. Trust
shall be liable to the Fund for any loss or damage to the Fund resulting from
any negligence, misfeasance or misconduct of U.S. Trust or any of its agents or
of any of its or their employees in connection with its or their use of the
Securities Depository or Book Entry Systems or from failure of U.S. Trust or any
such agent to enforce effectively such rights as it may have against such
Securities Depository or Book Entry System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of U.S. Trust with respect to
any claim against the Securities Depository or Book Entry System or any other
person which U.S. Trust may have as a consequence of any such loss or damage if
and to the extent that the Fund has not been made whole for any such loss or
damage.
9. SEGREGATED ACCOUNT. U.S. Trust shall upon receipt of Proper Instructions
establish and maintain a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by U.S. Trust pursuant to Section
8 hereof, (i) in accordance with the provisions of any agreement among the Fund,
U.S. Trust and a broker-dealer registered under the Securities and Exchange Act
of 1934 and a member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract market),
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the
10
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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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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>
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>
(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>
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, U.S. Trust and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and 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>
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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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.
19
<PAGE>
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If U.S. Trust shall be in doubt as to any action to be
taken or omitted by it, it may request, and shall receive, from the Fund
clarification or advice.
(b) Advice of Counsel. If U.S. Trust shall be in doubt as to any question
of law involved in any action to be taken or omitted by U.S. Trust, it may
request advice at its own cost from counsel of its own choosing (who may be
counsel for the Fund or U.S. Trust, at the option of U.S. Trust).
(c) Conflicting Advice. In case of conflict between directions or advice
received by U.S. Trust pursuant to subparagraph (a) of this paragraph and advice
received by U.S. Trust pursuant to subparagraph (b) of this paragraph, U.S.
Trust shall be entitled to rely on and follow the advice received pursuant to
the latter provision alone.
(d) Protection of U.S. Trust. U.S. Trust shall be protected in any action
or inaction which it takes or omits to take in reliance on any directions or
advice received pursuant to subparagraphs (a) or (b) of this section which U.S.
Trust, after receipt of any such directions or advice, in good faith believes to
be consistent with such directions or advice. However, nothing in this paragraph
shall be construed as imposing upon U.S. Trust any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to U.S. Trust's properly taking or omitting
to take such action. Nothing in this subsection shall excuse U.S. Trust when an
action or omission on the part of U.S. Trust constitutes willful misfeasance,
bad faith, negligence or reckless disregard by U.S. Trust of its duties under
this Agreement.
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund assumes
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
20
<PAGE>
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 subcustodians shall be
indemnified against any liability to the Fund or to its Shareholders (or any
expenses incident to such liability) arising out of (x) U.S. Trust's or such
nominee's or subcustodian's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties under this Agreement or any agreement between
U.S. Trust and any nominee or subcustodian or (y) U.S. Trust's own negligent
failure to perform its duties under this Agreement. U.S. Trust similarly agrees
to indemnify and hold harmless the Fund from all liabilities and expenses
arising directly or 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 subcustodian's own negligent action,
negligent failure to act, willful
21
<PAGE>
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>
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>
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 become effective,
then U.S. Trust shall have the right to
24
<PAGE>
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>
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 inure to the benefit of the parties hereto and their respective
successors.
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year second above
written.
UNITED STATES TRUST
COMPANY OF NEW YORK
Attest: /s/ Jacqueline Binder By: /s/ Peter C. Arrighetti
------------------------- -------------------------------------
JACQUELINE BINDER PETER C. ARRIGHETTI
VICE PRESIDENT SENIOR VICE PRESIDENT
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
Attest: /s/ Larry Martin By: /s/ O. Walter Renfftlen
------------------------- -------------------------------------
LARRY MARTIN O. WALTER RENFFTLEN
ASSISTANT GENERAL COUNSEL VICE PRESIDENT & CONTROLLER
27
<PAGE>
EXHIBIT A
CUSTODY SERVICE FEE
Administration and Maintenance Fee
.01375% (1 3/8 Basis Points) on first $10 billion
.00875% (7/8 Basis Point) on second $10 billion
.0075% (3/4 Basis Point) on third $10 billion
.00625% (5/8 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
NOTES:
1. Schedule should be applied to total assets for all Exchange Traded
Funds.
2. Add $5.00 per book entry transaction and physical transaction if U.S.
Trust inputs trades.
3. Contract expires on 12/31/95.
BALANCES
1. During each month, daily net overdrafts are offset by daily net cash
balances dollar for dollar with no penalty or charge for daily net
overdrafts.
2. At the end of each month, the net overdraft for the month incurs an
overdraft charge computed as follows:
Net monthly overdraft - days in month x 1.10 x average
fed funds rate x days in month = overdraft charge
-------------
365
3. Net credit balance at month end carries forward and is eligible for offset
with overdrafts in the next month. The carryforward net credit balance
incurs a 10% reduction. Carryforward balances expire at the end of each
calendar quarter for "fully invested funds"; for new funds not fully
invested, the credit balance carries forward until the fund becomes fully
invested.
4. Nuveen Institutional Advisory Corp. or Nuveen Advisory Corp. will be
responsible for promptly advising U.S. Trust of the date a new fund becomes
fully invested.
5. FDIC charges will be applied to any positive balance which remains in a
portfolio at quarter end.
Quarter end positive balance / 100 x .23 / 4
6. Overdrafts are permissible only as a means of compensating for positive
balances.
7. Due to FDIC capitalization requirements, overdrafts are not permissible on
June 30th and December 31st.
<PAGE>
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 PREMIUM INCOME MUNICIPAL
FUND, INC. (the "Fund").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a Mutual Fund Custody
Agreement dated January 1, 1991 (the "Agreement") that governs the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Fund and the Custodian wish to clarify the circumstances under
which the Custodian may advance cash to the Fund and provide to the Custodian a
security interest in Fund securities in connection with any such advances;
NOW THEREFORE, in consideration of the mutual agreements contained herein
and in the Agreement as hereby amended, the Custodian and the Fund hereby agree
to amend the Agreement by adding thereto a new Section 6A, said new Section to
read as follows:
"6A. Advances by Custodian. The Fund may from time to time purchase
securities for settlement payable in "next day" funds and provide for
payment for such transactions by selling securities for settlement in
"same day" funds settling on the day after settlement of the Fund's
purchase transaction. Under these circumstances the Fund may require
the Custodian to advance funds in amounts not exceeding 20% of the
value of the Fund's assets at the time of the advance for payment of
the securities purchase transaction, and the Custodian shall recover
an amount equal to its advance, without interest, from the proceeds of
the securities sale. In addition to the foregoing, the Custodian may
from time to time agree to advance cash to the Fund, without interest,
for the Fund's other proper corporate purposes. If the Custodian
advances cash for any purpose, the Fund shall and hereby does
<PAGE>
-2-
grant to the Custodian a security interest in Fund securities equal in
value to the amount of the cash advance but in no event shall the
value of securities in which a security interest has been granted
exceed 20% of the value of the Fund's total assets at the time of the
pledge; should the Fund fail to repay the Custodian promptly, the
Custodian shall be entitled to utilize available cash and to
reasonably dispose of any securities in which it has a security
interest to the extent necessary to obtain reimbursement."
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed in its name and on its behalf by a duly authorized officer as of the
day and year first above written.
ATTEST: NUVEEN PREMIUM INCOME
MUNICIPAL FUND, INC.
/s/ Katherine A. Erwin [SIG]
- --------------------------------- -----------------------------------------
Assistant Secretary Vice President
ATTEST: UNITED STATES TRUST COMPANY OF NEW YORK
/s/ Jacqueline Binder [SIG]
- --------------------------------- -----------------------------------------
Assistant Secretary Vice President
<PAGE>
EXHIBIT 99.j.2
FUND ACCOUNTING AGREEMENT
THIS AGREEMENT, made this 19th day of February, 1993, by and between,
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, 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>
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>
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 7 (a) of this Agreement shall be paid by the Fund, including but not
limited to costs and expenses for pricing service fees; necessary outside record
storage; media for storage or records (e.g., microfilm, microfiche); and any and
all assessments, taxes or levies assessed on U.S. Trust for services provided
under this Agreement.
-3-
<PAGE>
8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as
otherwise provided in this Agreement and except for the accuracy of information
furnished to it by U.S. Trust, the Fund assumes full responsibility of the
preparation, contents and distribution of each prospectus of the Fund, and for
compliance with all applicable requirements of the 1940 Act, the Securities Act
and any laws, rules and regulations of governmental authorities having
jurisdiction over the Fund.
9. CONFIDENTIALITY. U.S. Trust agrees to treat all records and other
information relative to the Fund as proprietary information of the Fund and, on
behalf of itself and its employees, to keep confidential all such information,
except after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where U.S.
Trust may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities or when so requested by the Fund.
10. REFERENCES TO U.S. TRUST. The Fund shall not circulate any printed
matter which contains any reference to U.S. Trust without the prior written
approval of U.S. Trust, except solely such printed matter as merely identifies
U.S. Trust as Accounting and Pricing Services Agent. The Fund will submit
printed matter requiring approval to U.S. Trust in draft form, allowing
sufficient time for review by U.S. Trust and its counsel prior to any deadline
for printing.
11. FORCE MAJEURE: EQUIPMENT FAILURES. (a) If U.S. Trust shall be delayed
in its performance of services or prevented entirely or in part from performing
services because of causes or events beyond its control, including and without
limitation, acts of God, interruption of power or other utility, transportation
or communication services, acts of civil or military authority, sabotages,
national emergencies, explosion, flood, accident, earthquake or other
catastrophe, fire, strike or other labor
-4-
<PAGE>
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>
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>
Trust shall be as fully responsible to the Fund for the acts and omissions of
any subcontractor as it is for its own acts and omissions and shall be
responsible for its choice of subcontractors.
15. SERVICES FOR OTHERS. Nothing in this Agreement shall prevent U.S.
Trust or any affiliated person (as defined in the Act) of U.S. Trust from
providing services for any other person, firm or corporation (including other
investment companies).
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
17. SEVERABILITY. In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
18. GOVERNING LAWS. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws (other than the laws
governing conflict-of-law matters) of The State of New York.
19. NOTICES. Any notice or demand given in connection with any agreement,
document or instrument executed pursuant hereto shall be deemed to have been
sufficiently given or served for all purposes if sent by certified or registered
mail, postage and charges prepaid, to the following addresses: if to the Fund,
at 333 West Wacker Drive, Chicago, IL 60606, Attention: O.W. Renfftlen, Vice
President, or at any other address or addresses designated by the Fund to U.S.
Trust in writing; and if to U.S. Trust, to it at 114 West 47th Street, New York,
NY 10036, or at any other address or addresses designated by U.S. Trust to the
Fund in writing.
-7-
<PAGE>
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year second above written.
U.S. Trust Co. of New York
Attest: /s/ Jacqueline Binder By: /s/ Peter C. Arrighetti
-------------------------- ---------------------------
Jacqueline Binder Peter C. Arrighetti
Vice President Senior Vice President
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
Attest: /s/ Larry Martin By: /s/ O. Walter Renfftlen
-------------------------- ---------------------------
Larry Martin O. Walter Renfftlen
Assistant General Counsel Vice President & Controller
-8-
<PAGE>
EXHIBIT A
FUND ACCOUNTING FEE
$18,000 PER ANNUM
<PAGE>
EXHIBIT 99.j.3
[THE CHASE MANHATTAN BANK, N.A. LETTERHEAD]
April 16, 1996
Mr. Giff Zimmerman
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606
Dear Giff:
On September 2, 1995, The United States Trust Company of New York (UST) was
merged into Chase Manhattan Bank, N.A. (Chase). As a result of this transaction,
Chase succeeded by operation of law, all rights and responsibilities of UST
under all Transfer Agency, Custodian and Fund Accounting agreements between US
Trust and John Nuveen & Co.'s managed investment companies.
Sincerely,
/s/ ANDREW M. MASSA
Andrew M. Massa
Vice President
<PAGE>
EXHIBIT 99.l
[MLB LETTERHEAD]
Nuveen Premium Income Municipal Fund 4, Inc.
333 West Wacker Drive
Chicago, IL 60606
RE: NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
REGISTRATION STATEMENT ON FORM N-2
(REGISTRATION NOS. 333- AND 811-07432)
Ladies and Gentlemen:
We are acting as counsel for Nuveen Premium Income Municipal Fund 4, Inc.
(the "Fund"), in connection with the Fund's filing of a registration statement
on Form N-2 (the "Registration Statement") with the Securities and Exchange
Commission covering the registration of 520 authorized but unissued shares of
Municipal Auction Rate Cumulative Preferred Stock, of Series W2, $.01 par value
per share, with a liquidation preference of $25,000 per share, of the Fund (the
"MuniPreferred"). In that capacity, we have examined such corporate records,
certificates and other documents, and have made such other factual and legal
investigations as we have deemed necessary and appropriate for the purposes of
this opinion.
Based upon the foregoing, it is our opinion that:
(1) The Fund is validly existing as a corporation in good standing under
the laws of the State of Minnesota.
(2) The MuniPreferred, when issued and delivered by the Fund pursuant to
and upon satisfaction of the conditions in, the Purchase Agreement against
payment of the consideration set forth therein, will be legally issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 1 to the
Registration Statement and to the reference to us under the caption "Legal
Opinions" in the prospectus contained in the Registration Statement.
Very truly yours,
MORGAN LEWIS & BOCKIUS LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from
the Form N-SAR and the Finincial Statements and is qualified in its entirety by
references to such documents.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 847053
<INVESTMENTS-AT-VALUE> 908909
<RECEIVABLES> 17682
<ASSETS-OTHER> 137
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 926728
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3724
<TOTAL-LIABILITIES> 3724
<SENIOR-EQUITY> 308400
<PAID-IN-CAPITAL-COMMON> 564780
<SHARES-COMMON-STOCK> 40848
<SHARES-COMMON-PRIOR> 40808
<ACCUMULATED-NII-CURRENT> 1229
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13262)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 61857
<NET-ASSETS> 923004
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 51011
<OTHER-INCOME> 0
<EXPENSES-NET> 7191
<NET-INVESTMENT-INCOME> 43820
<REALIZED-GAINS-CURRENT> 4094
<APPREC-INCREASE-CURRENT> 12807
<NET-CHANGE-FROM-OPS> 60720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33322
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> 17240
<ACCUMULATED-NII-PRIOR> 1473
<ACCUMULATED-GAINS-PRIOR> (17366)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5712
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7191
<AVERAGE-NET-ASSETS> 914832
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
</TABLE>
<PAGE>
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 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 llth day of March, 1999.
/s/ Timothy R.Schwertfeger
----------------------
Timothy R.Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this llth 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>
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 llth day of March, 1999.
/s/ Robert P. Bremner
-----------------------------------
Robert P. Bremner
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this llth 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>
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 llth day of March, 1999.
/s/ Lawrence H. Brown
----------------------------
Lawrence H. Brown
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this llth 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>
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) her true and lawful attorney-in-fact and
agent, for her on her behalf and in her name, place and stead, in any and all
capacities, to sign 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 she
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations
has hereunto set her hand this 12th day of March, 1999.
/s/ Anne E. Impellizzeri
------------------------------
Anne E. Impellizzeri
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 12th 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 her 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>
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 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 11th day of March, 1999
/s/ Peter R. Sawers
---------------------------
Peter R. Sawers
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this llth 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>
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>
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) her true and lawful attorney-in-fact and
agent, for her on her behalf and in her name, place and stead, in any and all
capacities, to sign 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 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 she
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, may lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations
has hereunto set her hand this 10th day of March, 1999.
/s/ Judith M. Stockdale
----------------------------
Judith M. Stockdale
STATE OF ILLINOIS )
) SS
COUNTY OF COOK )
On this 10th day of March, 1999, personally in and for said County and State,
the person be appeared before me, a Notary Public named above who is known to me
to the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be her voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois ----------------------------
My Commission Expires: 10/27/01 Notary Public
<PAGE>
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
<PAGE>
Assistant Secretary's Certificate
The undersigned, Karen L. Healy, hereby certifies that she is a duly elected and
acting Assistant Secretary of the Nuveen Exchange-Traded Funds and that the
following resolution was duly adopted by the Board of Directors at a meeting
duly called and held on December 18, 1998, at which meeting a quorum was present
and acting throughout, and that such resolution has not been amended, modified
or rescinded and remains in full force and effect:
RESOLVED, that each director or officer of the Fund who may be
required to execute any registration statement on Form N-2, or
any amendment or amendments thereto, be, and each of them hereby
is, authorized to execute a power of attorney appointing Timothy
R. Schwertfeger, Anthony T. Dean, Alan G. Berkshire, Larry W.
Martin, Gifford R. Zimmerman, and Thomas S. Harman, and each of
them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign the
registration statement, and any and all amendments thereto, and
to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he
might or could do in person, and ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be
done by virtue thereof.
/s/ Karen L. Healy
-----------------------------------
Karen L. Healy, Assistant Secretary
Dated: April 20, 1999
