<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT JUNE 15, 1999
REGISTRATION NOS. 333-77717
811-7432
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-14
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1 X
POST-EFFECTIVE AMENDMENT NO. [ ]
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
333 WEST WACKER DRIVE
CHICAGO, ILLINOIS 60606
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (312) 917-7700
COPY TO:
<TABLE>
<S> <C>
GIFFORD R. ZIMMERMAN DAVID A. STURMS
JOHN NUVEEN & CO. INCORPORATED VEDDER, PRICE, KAUFMAN & KAMMHOLZ
333 WEST WACKER DRIVE 222 NORTH LASALLE STREET
CHICAGO, ILLINOIS 60606 CHICAGO, ILLINOIS 60601
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
NUVEEN LOGO
IMPORTANT INFORMATION FOR
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC. AND
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND SHAREHOLDERS
The Nuveen Premium Income Municipal Fund 4, Inc. ("Premium Income 4") will host
its Annual Meeting of Shareholders jointly with the Nuveen Washington Premium
Income Municipal Fund ("Washington Premium" and together with Premium Income 4,
the "Funds"), which will host a Special Meeting of Shareholders, on Wednesday,
July 28, 1999, at 10:30 a.m., Chicago time in the Grand Ballroom of the Hotel
Inter-Continental, 505 North Michigan Avenue, Chicago, Illinois (the "Joint
Meeting"). The purpose of the Joint Meeting is for both Funds to vote on a
reorganization of the Funds. The shareholders of Premium Income 4 will also vote
on an amendment to its charter and to elect directors and ratify the selection
of independent auditors.
The first few pages of this booklet summarize Nuveen's proposal and explain the
proxy process -- including how to cast your votes. Before you vote, please read
the full text of the proxy statement for a complete understanding of each
proposal.
Q. WHAT ARE SHAREHOLDERS OF THE FUNDS BEING ASKED TO VOTE ON AT THE UPCOMING
JOINT MEETING ON JULY 28, 1999?
A. The Board of Directors of Premium Income 4 and the Board of Trustees of
Washington Premium (collectively, the "Board") have called a Joint Meeting of
Shareholders for July 28, 1999 at which common and preferred shareholders of
Washington Premium and preferred shareholders of Premium Income 4 will be
asked to vote on a reorganization (the "Reorganization") of Washington
Premium into Premium Income 4.
Q. WHAT ELSE ARE SHAREHOLDERS OF PREMIUM INCOME 4 BEING ASKED TO VOTE ON AT THE
JOINT MEETING?
A. Common and preferred shareholders of Premium Income 4 will be asked to
approve an amendment to the Fund's Statement Establishing and Fixing the
Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock
("MuniPreferred") so that 10,000 shares of each series of Premium Income 4
MuniPreferred shares are authorized. If the amendment is approved, additional
shares of Premium Income 4, Series TH will be issued to holders of Series TH
MuniPreferred of Washington Premium in connection with the Reorganization. If
the amendment is not approved, shares of a newly created Series TH2 will be
issued in connection with the Reorganization. We believe that the amendment
would give the Fund the flexibility to issue additional shares of
MuniPreferred to adjust the Fund's leverage structure in response to market
conditions without the further need of amending the Fund's charter.
Q. ARE THERE ANY DIFFERENCES BETWEEN THE FUNDS?
A. Premium Income 4 is substantially the same as Washington Premium in its
philosophy, investment objectives and policies and day-to-day portfolio
management. The primary difference between the Funds is that Premium Income 4
invests in municipal bonds issued nationwide and Washington Premium invests
substantially all of its assets in municipal bonds issued by issuers from the
State of Washington.
Q. WHAT ADVANTAGES WILL THIS PRODUCE FOR FUND SHAREHOLDERS?
A. We expect the proposed Reorganization to (i) reduce management fees per
share, (ii) lower administrative expenses, (iii) increase efficiency and
flexibility in portfolio management and (iv) create a more liquid trading
market for common shares of the combined Fund. Given the relative sizes of
the Funds, Washington Premium would significantly benefit from the
Reorganization. The larger combined Fund would have a significantly larger
asset base than Washington Premium has currently. Based on data presented by
management of the Funds, the Board believes that administrative expenses of a
larger combined Fund comprised of the assets of both Funds would be less than
the aggregate expenses of Washington Premium, resulting in a lower expense
ratio for the combined Fund and corresponding higher earnings for its common
shareholders.
<PAGE> 3
Q. HAS THE BOARD APPROVED THE PROPOSAL?
A. The Board has agreed unanimously that this Reorganization is in your best
interests and recommends that you vote in favor of it.
Q. WHAT IS THE TIMETABLE FOR THE REORGANIZATION?
A. If approved by shareholders on July 28, 1999, the Reorganization is expected
to take effect on August 12, 1999.
Q. WILL WASHINGTON PREMIUM SHAREHOLDERS RECEIVE NEW SHARES IN EXCHANGE FOR THEIR
CURRENT SHARES?
A. Yes. Upon approval and completion of the Reorganization, Washington Premium
common shareholders will receive shares (together with cash in lieu of
fractional share interests) equal to the same net asset value of their
current shares. Common shareholders of Washington Premium will exchange their
shares for shares of Premium Income 4 based upon a specified exchange ratio
determined by the ratio of the respective net asset values of the Funds.
Washington Premium shareholders will receive Premium Income 4 shares whose
aggregate net asset value at the time of issuance will equal the aggregate
value of their Washington Premium shares on that date. MuniPreferred
shareholders will receive one MuniPreferred share of Premium Income 4, Series
TH or Series TH2, for every MuniPreferred share of Washington Premium.
Q. IF WASHINGTON PREMIUM SHAREHOLDERS OWN SHARES IN CERTIFICATE FORM, WILL THEY
NEED TO EXCHANGE THEM FOR CERTIFICATES OF PREMIUM INCOME 4?
A. Each holder of an outstanding certificate or certificates formerly
representing common shares or shares of MuniPreferred of Washington Premium
will be entitled to receive, upon surrender of his or her certificates, a
certificate or certificates representing the number of shares of Premium
Income 4 distributable with respect to such holder's shares of Washington
Premium, together with cash in lieu of any fractional Premium Income 4 common
shares. Promptly after approval and completion of the Reorganization, the
transfer agent will mail to each holder of certificates formerly representing
shares of Washington Premium a letter of transmittal for use in surrendering
his or her certificates for certificates representing shares of Premium
Income 4 and cash in lieu of any fractional Washington Premium common shares.
PLEASE DO NOT SEND IN ANY SHARE CERTIFICATES AT THIS TIME. UPON CONSUMMATION
OF THE REORGANIZATION, HOLDERS OF SHARES OF WASHINGTON PREMIUM WILL BE
FURNISHED INSTRUCTIONS FOR EXCHANGING THEIR CERTIFICATES FOR CERTIFICATES OF
PREMIUM INCOME 4 AND, IF APPLICABLE, CASH IN LIEU OF FRACTIONAL WASHINGTON
PREMIUM COMMON SHARES.
Q. WILL I HAVE TO PAY ANY FEES OR EXPENSES IN CONNECTION WITH THE
REORGANIZATION?
A. No, shareholders will not directly bear any fees or expenses in connection
with the Reorganization. All of the Funds' expenses associated with the
Reorganization will be borne by Washington Premium and indirectly by
Washington Premium shareholders in as much as the benefits from the
Reorganization will accrue primarily to the holders of Washington Premium.
Q. HOW DO MANAGEMENT FEES AND OTHER FUND OPERATING EXPENSES COMPARE BETWEEN THE
TWO FUNDS?
A. The management fee schedule is the same for both Funds. Because of its larger
assets, however, the effective management fee as a percentage of net assets
is lower for Premium Income 4. Upon approval and completion of the proposed
Reorganization, Washington Premium shareholders will pay lower management
fees as a percentage of net assets and will also benefit from lower gross
fund operating expenses as a percentage of net assets, reflecting the larger
net assets and greater economies of scale of Premium Income 4.
Q. WILL THIS REORGANIZATION CREATE A TAXABLE EVENT FOR ME?
A. The Reorganization is intended to qualify as a tax-free reorganization. As a
result, you will recognize no gain or loss for federal income tax purposes as
a result of the Reorganization except with regard to any cash received in
lieu of any fractional Premium Income 4 common shares. In addition, the tax
basis and holding period of Premium Income 4 shares
<PAGE> 4
you receive (including any fractional share interest to which you will be
entitled) will be the same as the tax basis and holding period of your
Washington Premium shares.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy
card(s), and mailing them in the enclosed postage-paid envelope. In addition,
you may vote by telephone by calling its toll free number on the proxy
card(s) or by computer over the Internet (www.proxyvote.com) and using the
control number on the proxy card(s). If you need any assistance, or have any
questions regarding the proposals or how to vote your shares, please call
your financial adviser or Nuveen at (800) 257-8787 weekdays form 7:00 a.m. to
7:00 p.m. Central time.
Q. WILL NUVEEN CONTACT ME?
A. You may receive a call to verify that you received your proxy materials and
to answer any questions you may have about the Reorganization.
<PAGE> 5
NUVEEN LOGO
TWO NEW WAYS TO VOTE . . . IT'S EASIER THAN EVER!
In addition to the option of mailing your proxy card, there are now two other
ways to vote your proxy -- by telephone and by computer over the Internet.
Either way will save you time and helps reduce your fund's expenses. It's fast,
convenient, and your vote is immediately confirmed and posted. So after you read
the enclosed proxy statement, have your proxy cards handy and vote by telephone
or over the Internet!
BY TELEPHONE
Call the toll-free number listed on your proxy card.
Enter your 12-digit control number located on the right portion of your proxy
card.
Follow the simple recorded instructions.
OVER THE INTERNET
Go to www.proxyvote.com.
Enter your 12-digit control number located on the right portion of your proxy
card.
Follow the simple instructions.
If you vote by telephone or over the Internet, you do not need to mail the proxy
card.
<PAGE> 6
NUVEEN LOGO
June 21, 1999
DEAR SHAREHOLDERS:
We are pleased to invite you to the Annual Meeting of Shareholders of Nuveen
Premium Income Municipal Fund 4, Inc. and a Special Meeting of Shareholders of
Nuveen Washington Premium Income Municipal Fund (the "Joint Meeting"). The Joint
Meeting is scheduled for Wednesday, July 28, 1999, at 10:30 a.m., Chicago time,
in the Grand Ballroom of the Hotel Inter-Continental, 505 North Michigan Avenue,
Chicago, Illinois.
At the Joint Meeting, you will be asked to consider and approve a very important
proposal. Subject to shareholder approval, Nuveen Premium Income Municipal Fund
4, Inc. (the "Acquiring Fund") will acquire substantially all of the assets and
assume substantially all of the liabilities of Nuveen Washington Premium Income
Municipal Fund (the "Acquired Fund") in exchange for newly issued shares of the
Acquiring Fund, which will be distributed to the shareholders of the Acquired
Fund.
The reorganization should allow the Acquired Fund shareholders to benefit from a
larger, more diversified portfolio with a lower management fee and total expense
ratio. Acquired Fund shareholders should also benefit from a significant
reduction in administrative expenses due to the economies of scale reached
through the reorganization. While the Acquiring Fund does not invest primarily
in municipal obligations issued by Washington (unlike the Acquired Fund),
Acquired Fund shareholders (except for financial businesses subject to the
Washington business and occupation tax) should not suffer any adverse tax
consequences from the reorganization since the State of Washington has no state
income tax, nor is the State proposing the imposition of an income tax.
Because the two portfolios have similar characteristics, the reorganization
would benefit Acquiring Fund shareholders, however, to a much smaller degree due
to the Acquiring Fund's size relative to the Acquired Fund. Acquiring Fund
shareholders would benefit through a nominally reduced total expense ratio, a
slight increase in credit quality and slightly improved call protection.
Because the benefits of the reorganization flow primarily to the Acquired Fund,
the Acquired Fund will pay all costs associated with the reorganization.
Acquiring Fund Shareholders will also be asked to approve an amendment to the
Fund's Articles of Incorporation to increase the number of preferred shares
outstanding, elect board members and ratify the selection of independent
auditors.
The attached Joint Proxy Statement -- Prospectus has been prepared to give you
information about these proposals.
YOU ARE, OF COURSE, WELCOME TO JOIN US AT THE MEETING, BUT MOST SHAREHOLDERS
CAST THEIR VOTES BY MARKING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD(S).
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE NEED YOUR VOTE. BY VOTING
IMMEDIATELY, YOU CAN HELP YOUR FUND AVOID THE CONSIDERABLE EXPENSE OF A SECOND
PROXY SOLICITATION. PLEASE PROMPTLY MARK, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT THE MAXIMUM NUMBER
OF SHARES ARE VOTED. AS AN ALTERNATIVE TO USING THE ENCLOSED PAPER PROXY CARD TO
VOTE, YOU MAY VOTE EITHER BY TELEPHONE OR OVER THE INTERNET.
We appreciate your continued support and confidence in Nuveen and our family of
investments.
Very truly yours,
/s/ TIMOTHY R. SCHWERTFEGER
Timothy R. Schwertfeger
President
<PAGE> 7
NOTICE OF JOINT MEETING
OF SHAREHOLDERS
JULY 28, 1999
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND
June 21, 1999
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of Nuveen Premium
Income Municipal Fund 4, Inc. (the "Acquiring Fund") and a Special Meeting of
Shareholders of Nuveen Washington Premium Income Municipal Fund (the "Acquired
Fund" and, together with the Acquiring Fund, the "Funds"), will be held in the
Grand Ballroom of the Hotel Inter-Continental, 505 North Michigan Avenue,
Chicago, Illinois, on Wednesday, July 28, 1999, at 10:30 a.m., Chicago time (the
"Joint Meeting"), for the following purposes:
1. To approve an Agreement and Plan of Reorganization and Liquidation (the
"Agreement") between the Acquiring Fund and the Acquired Fund, whereby
the Acquiring Fund would acquire substantially all of the assets of the
Acquired Fund in exchange for up to 2,500,000 common shares and 680
Municipal Auction Rate Cumulative Preferred Shares ("MuniPreferred"),
Series TH or Series TH2, of the Acquiring Fund and the Acquiring Fund's
assumption of substantially all of the liabilities of the Acquired
Fund.
2. To approve the amendment of the Acquiring Fund's Statement Establishing
and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock (the "Acquiring Fund Statement") so that
10,000 shares of each of MuniPreferred, Series M; MuniPreferred, Series
T; MuniPreferred, Series T2; MuniPreferred, Series W; MuniPreferred,
Series TH; MuniPreferred, Series F; and MuniPreferred, Series F2 are
authorized (Acquiring Fund only).
3. To elect seven (7) board members, with five (5) board members to be
elected by the holders of Preferred and Common Shares voting together
and two (2) board members to be elected by holders of Preferred Shares
only (Acquiring Fund only).
4. To ratify the selection of Ernst & Young LLP as independent auditors
for the current fiscal year (Acquiring Fund only).
5. To transact such other business as may properly come before the Joint
Meeting.
Shareholders of record at the close of business on June 1, 1999 are entitled to
notice of and to vote at the Joint Meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IN ORDER TO AVOID
DELAY AND ADDITIONAL EXPENSE FOR YOUR FUND, AND TO ASSURE THAT YOUR SHARES ARE
REPRESENTED, PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. YOU MAY VOTE BY MAIL, TELEPHONE OR OVER THE INTERNET. TO
VOTE BY MAIL, PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. TO VOTE BY TELEPHONE, PLEASE
CALL THE TOLL-FREE NUMBER LOCATED ON YOUR PROXY CARD, ENTER THE 12-DIGIT CONTROL
NUMBER PROVIDED ON THE PROXY CARD, AND FOLLOW THE RECORDED INSTRUCTIONS, USING
YOUR PROXY CARD AS A GUIDE. TO VOTE OVER THE INTERNET, GO TO WWW.PROXYVOTE.COM,
ENTER THE 12-DIGIT CONTROL NUMBER PROVIDED ON THE PROXY CARD, AND FOLLOW THE
INSTRUCTIONS, USING YOUR PROXY CARD AS A GUIDE.
Gifford R. Zimmerman
Vice President and Secretary
<PAGE> 8
<TABLE>
<S> <C>
JOINT PROXY STATEMENT -- PROSPECTUS
MEETINGS OF SHAREHOLDERS TO BE HELD JULY 28, 1999 333 West Wacker
Drive
Chicago, Illinois
60606
(800) 257-8787
</TABLE>
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND
PROSPECTUS
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
This Joint Proxy Statement -- Prospectus is being furnished to the shareholders
of Nuveen Premium Income Municipal Fund 4, Inc. (the "Acquiring Fund") and
Nuveen Washington Premium Income Municipal Fund (the "Acquired Fund" and,
together with the Acquiring Fund, the "Funds") in connection with the
solicitation of proxies by the Acquiring Fund's Board of Directors and the
Acquired Fund's Board of Trustees (each a "Board" and each Director or Trustee a
"Board Member") for use at the Annual Meeting of Shareholders of the Acquiring
Fund and a Special Meeting of Shareholders of the Acquired Fund to be held on
Wednesday, July 28, 1999, at 10:30 a.m., Chicago time (the "Joint Meeting"), and
at any and all adjournments thereof. At the Joint Meeting, the preferred
shareholders of the Acquiring Fund and the common and preferred shareholders of
the Acquired Fund will be asked to approve an Agreement and Plan of
Reorganization and Liquidation dated as of June 1, 1999.
The Agreement provides for (a) the Acquiring Fund's acquisition of substantially
all of the assets of the Acquired Fund in exchange for newly issued common
shares and Municipal Auction Rate Cumulative Preferred Shares
("MuniPreferred(R)") (collectively, "Acquiring Fund Shares") and the Acquiring
Fund's assumption of substantially all of the liabilities of the Acquired Fund
and (b) the liquidation of the Acquired Fund and the distribution of the
Acquiring Fund common shares and shares of Acquiring Fund MuniPreferred held by
the Acquired Fund to its common and preferred shareholders, respectively. The
transactions contemplated by the Agreement are referred to herein as the
"Reorganization." The number of Acquiring Fund common shares to be issued to the
Acquired Fund would be that number having an aggregate per share net asset value
equal to the aggregate value of the net assets of the Acquired Fund transferred
to the Acquiring Fund. If Acquiring Fund shareholders approve an amendment to
the Acquiring Fund's Articles of Incorporation to authorize additional shares of
each series of MuniPreferred, shares of Acquiring Fund MuniPreferred would be
issued to the Acquired Fund on the basis of one newly issued share of Acquiring
Fund MuniPreferred, Series TH, for each share of Acquired Fund MuniPreferred,
Series TH, outstanding. The Acquiring Fund's Board of Directors has approved,
contingent upon Acquiring Fund shareholders not approving the amendment to the
Acquiring Fund's Articles of Incorporation to authorize additional shares of
MuniPreferred, Series TH, the creation of a new MuniPreferred, Series TH2, in
connection with the Reorganization. If Acquiring Fund shareholders do not
approve the authorization of additional shares of MuniPreferred, Series TH,
shares of Acquiring Fund MuniPreferred would be issued to the Acquired Fund on
the basis of one newly issued share of Acquiring Fund MuniPreferred, Series TH2,
for each share of Acquired Fund MuniPreferred, Series TH outstanding. The value
of the Acquired Fund's net assets shall be calculated net of the liquidation
preference (including accumulated and unpaid dividends) of all outstanding
shares of Acquired Fund MuniPreferred.
Common and preferred shareholders of the Acquiring Fund will also be asked to
approve the amendment of the Acquiring Fund Statement to authorize an additional
number of shares so that each series of MuniPreferred of the Acquiring Fund has
10,000 shares authorized.
In addition, at the Joint Meeting, (a) common and preferred shareholders of the
Acquiring Fund will be asked to consider and vote upon the election of five (5)
directors ("Board Members") and the ratification of the selection of independent
auditors for their Fund and (b) preferred shareholders of the Acquiring Fund
will be asked to consider and vote upon the election of two (2) Board Members.
The Funds are both closed-end, diversified management investment companies, with
substantially similar objectives and policies; primarily to provide current
interest income exempt from regular Federal income taxes and secondarily to
enhance portfolio value relative to the municipal bond market, in the case of
the Acquiring Fund, and to enhance portfolio value relative to the Washington
municipal bond market, in the case of the Acquired Fund. The principal executive
office of each Fund is located at 333 West Wacker Drive, Chicago, Illinois
60606, and the telephone number of each Fund is (312) 917-7700. The shares of
the Acquiring Fund are listed on the New York Stock Exchange ("NYSE"); reports,
proxy statements and other information concerning the Acquiring Fund can be
inspected at the offices of the NYSE. The shares of
<PAGE> 9
the Acquired Fund are listed on the American Stock Exchange ("AMEX"); reports,
proxy statements and other information concerning the Acquired Fund can be
inspected at the offices of the AMEX. See "Available Information."
This Joint Proxy Statement -- Prospectus sets forth concisely the information
that shareholders of the Funds should know before voting on the proposals
described above. It should be read and retained for future reference. A
Statement of Additional Information dated June , 1999 containing additional
information about the Funds has been filed with the Securities and Exchange
Commission (the "Commission") and is hereby incorporated by reference in its
entirety into this Joint Proxy Statement -- Prospectus. A copy of the Statement
of Additional Information may be obtained without charge by mailing a written
request to either of the Funds, Attention: Administration, 333 West Wacker
Drive, Chicago, Illinois 60606, or by calling (800) 257-8787.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT -- PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT -- PROSPECTUS IS JUNE , 1999.
<PAGE> 10
JOINT PROXY STATEMENT-PROSPECTUS
JUNE , 1999
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND
TABLE OF CONTENTS
<TABLE>
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PAGE
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SUMMARY......................................... 1
The Joint Meeting........................... 1
The Reorganization.......................... 1
Reasons for the Reorganization.............. 2
Certain Federal Income Tax Consequences of
the Reorganization........................ 2
Comparison of the Acquiring Fund and the
Acquired Fund............................. 2
General................................ 2
Investment Objectives and Policies..... 3
Management of the Funds................ 3
Dividends and Distributions............ 3
Credit Quality......................... 4
Maturity and Duration.................. 4
Capitalization.............................. 4
Comparative Performance Information......... 5
Comparative Fee Table.................. 5
RISK FACTORS.................................... 6
Similarity of Risks......................... 6
Differences in Risks........................ 6
THE JOINT MEETING............................... 6
General..................................... 6
Voting; Proxies............................. 7
AVAILABLE INFORMATION........................... 8
PROPOSAL NO. 1 -- THE REORGANIZATION............ 8
General..................................... 8
Terms of the Reorganization................. 8
Reasons for the Reorganization.............. 10
Votes Required.............................. 12
Votes of Preferred Shareholders as a
Separate Class (Both Funds).......... 12
Combined Vote of Common and Preferred
Shareholders (Acquired Fund)......... 12
Rating Agency Considerations................ 12
Description of Common Shares Issued by the
Acquiring Fund............................ 12
General................................ 12
Distributions.......................... 13
Dividend Reinvestment Plan............. 13
Odd Lot Holdings....................... 14
Comparison of Rights of Holders of Common
Shares of the Acquiring Fund and the
Acquired Fund............................. 14
Description of MuniPreferred Issued by the
Acquiring Fund............................ 14
General................................ 14
Dividends and Dividend Periods......... 15
Designation of Special Rate Periods.... 18
Voting Rights.......................... 18
Redemption............................. 19
Liquidation............................ 20
Rating Agency Guidelines............... 20
</TABLE>
<TABLE>
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PAGE
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<S> <C>
The Auction................................. 21
General................................ 21
Auction Procedures..................... 21
Secondary Market Trading and Transfer
of Acquiring Fund MuniPreferred...... 22
Comparison of Rights of Holders of
MuniPreferred of the Acquiring Fund and
the Acquired Fund......................... 23
Comparison of the Investment Objectives and
Policies of the Acquiring Fund and the
Acquired Fund............................. 23
General................................ 23
Portfolio Investments.................. 23
Municipal Obligations.................. 24
Investment Restrictions................ 25
Certain Provisions in the Acquiring Fund's
Articles of Incorporation................. 26
Surrender and Exchange of Acquired Fund
Share Certificates........................ 26
Expenses Associated with the
Reorganization............................ 27
Dissenting Shareholders' Rights of
Appraisal................................. 27
Certain Federal Income Tax Consequences of
the Reorganization........................ 27
Exchange of Acquired Fund Shares Solely
for Acquiring Fund Shares............ 27
Fractional Common Share Interests...... 28
PROPOSAL NO. 2 -- AMENDMENT OF THE ACQUIRING
FUND STATEMENT (ACQUIRING FUND SHAREHOLDERS
ONLY)......................................... 28
Vote Required............................... 28
PROPOSAL NO. 3 -- ELECTION OF BOARD MEMBERS OF
THE ACQUIRING FUND (ACQUIRING FUND
SHAREHOLDERS ONLY)............................ 29
PROPOSAL NO. 4 -- SELECTION OF INDEPENDENT
AUDITORS FOR THE ACQUIRING FUND............... 32
MANAGEMENT OF THE FUNDS......................... 33
Board Members and Officers.................. 33
Investment Adviser.......................... 33
Portfolio Management........................ 33
ADDITIONAL INFORMATION ABOUT THE FUNDS.......... 34
Financial Highlights........................ 34
Repurchase of Common Shares; Conversion to
Open-End Fund............................. 36
Custodian, Transfer Agent, Dividend
Disbursing Agent and Redemption Agent..... 38
Federal Income Tax Matters Associated with
Investment in the Funds................... 38
LEGAL OPINIONS.................................. 38
EXPERTS......................................... 38
SHAREHOLDER PROPOSALS........................... 39
GENERAL......................................... 39
Annex A -- Agreement and Plan of Reorganization
and Liquidation............................... A-1
</TABLE>
<PAGE> 11
SUMMARY
The following is a summary of certain information contained in this Joint Proxy
Statement -- Prospectus. This summary is qualified in its entirety by the more
detailed information contained herein and in the attached Annexes. Shareholders
should read the entire Joint Proxy Statement -- Prospectus. Certain capitalized
terms used but not defined in this summary are defined elsewhere in the text of
this Joint Proxy Statement -- Prospectus or in the Acquiring Fund's Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock (the "Acquiring Fund Statement") attached as Annex B
to the Statement of Additional Information.
THE JOINT MEETING
This Joint Proxy Statement -- Prospectus is being furnished to the shareholders
of each of the Funds in connection with the solicitation by the Boards of the
Funds of proxies to be voted at the Joint Meeting. Holders of record of shares
of each Fund as of the close of business on June 1, 1999 will be entitled to
notice of and to vote at the Joint Meeting, as described elsewhere in this Joint
Proxy Statement -- Prospectus. Holders of the outstanding common and preferred
shares of the Acquired Fund and holders of the preferred shares of the Acquiring
Fund will be asked to approve the Agreement. Holders of the outstanding common
and preferred shares of the Acquiring Fund will be asked to approve the
amendment of the Acquiring Fund Statement to authorize additional shares of each
existing series of Acquiring Fund MuniPreferred. Common and preferred
shareholders of the Acquiring Fund also will be asked to consider and vote upon
the election of five (5) Board Members, and the ratification of the selection of
independent auditors for their Fund. In addition, preferred shareholders of the
Acquiring Fund will be asked to consider and vote upon the election of two (2)
Board Members. The details of each proposal to be voted on by the shareholders
of each Fund and the vote required for approval of each proposal are set forth
under the description of each proposal in this Joint Proxy
Statement -- Prospectus.
THE REORGANIZATION
The Agreement provides that, subject to the satisfaction of certain conditions,
including shareholder approval and confirmation of the ratings assigned by
Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's, a division of
the McGraw Hill Companies ("S&P") to the shares of Acquiring Fund MuniPreferred,
(a) the Acquiring Fund would acquire substantially all of the assets of the
Acquired Fund in exchange for newly issued common shares and newly issued shares
of MuniPreferred of the Acquiring Fund and the Acquiring Fund's assumption of
substantially all of the liabilities of the Acquired Fund, and (b) the Acquired
Fund would liquidate and distribute to its shareholders pro rata by class the
Acquiring Fund Shares received. The number of Acquiring Fund common shares to be
issued to the Acquired Fund would be that number having an aggregate per share
net asset value equal to the aggregate value of the assets of the Acquired Fund
transferred to, net of the Acquired Fund's liabilities assumed by, the Acquiring
Fund as of the time such assets and liabilities are transferred and assumed (the
"Effective Time"). The value of the Acquired Fund's net assets shall be
calculated net of the liquidation preference (including accumulated and unpaid
dividends) of all outstanding shares of Acquired Fund MuniPreferred. If
Acquiring Fund shareholders approve an amendment to the Acquiring Fund's
Articles of Incorporation to authorize additional shares of MuniPreferred,
Series TH, shares of Acquiring Fund MuniPreferred would be issued to the
Acquired Fund on the basis of one newly issued share of Acquiring Fund
MuniPreferred, Series TH, for each share of Acquired Fund MuniPreferred, Series
TH, outstanding as of the Effective Time. In the event that Acquiring Fund
shareholders do not approve the amendment to the Acquiring Fund's Articles of
Incorporation to authorize additional shares of MuniPreferred, Series TH, the
Acquiring Fund's Board of Directors has approved the creation of a new
MuniPreferred, Series TH2 in connection with the Reorganization and shares of
Acquiring Fund MuniPreferred TH2 would be issued to the Acquired Fund on the
basis of one newly issued share of Acquiring Fund MuniPreferred, Series TH2, for
each share of Acquired Fund MuniPreferred, Series TH outstanding. Shareholder
approval is not required for the creation of the new Acquiring Fund
MuniPreferred Series TH2.
If additional shares of the existing Acquiring Fund's MuniPreferred, Series TH
are issued in connection with the Reorganization, the dividend rate for shares
of MuniPreferred, Series TH, issued in connection with the Reorganization will
be equal to the dividend rate for shares of the Acquiring Fund's existing
MuniPreferred, Series TH established in the first Auction for shares of Series
TH preceding the date of issuance of additional shares of Series TH to Acquired
Fund shareholders in connection with the Reorganization. If shares of a new
Acquiring Fund MuniPreferred, Series TH2 are issued in connection with the
Reorganization, the Initial Rate Period of the shares of Acquiring Fund
MuniPreferred, Series TH2, will be a period consisting of the number of days
following the day on which the Effective Time occurs that would have remained in
the rate period of the shares of Acquired Fund MuniPreferred, Series TH, in
effect immediately prior to the Effective Time. The dividend rate for the shares
of Acquiring Fund MuniPreferred, Series TH2, for the Initial Rate Period thereof
will be the dividend rate in effect immediately prior to the Effective Time for
the shares of Acquired Fund MuniPreferred, Series TH. The initial Auction for
the shares of Acquiring Fund MuniPreferred, Series TH2, will be held on the day
on which the auction next succeeding the Effective Time would have been held for
the shares of Acquired Fund MuniPreferred, Series TH. The shares of Acquiring
Fund MuniPreferred issued in connection with the Reorganization (either Series
TH or Series TH2) are subject to mandatory and optional redemption under certain
circumstances. See "Proposal No. 1 -- The Reorganization -- Description of
MuniPreferred Issued by the Acquiring Fund -- Redemption."
1
<PAGE> 12
As a result of the Reorganization, the net assets of the Acquiring Fund and the
Acquired Fund would be combined and the shareholders of the Acquired Fund would
become shareholders of the Acquiring Fund. The investment objectives and
policies of the Funds are substantially similar except that the Acquired Fund
invests primarily in tax-exempt Washington Municipal Obligations. The Board
Members and officers of the larger combined entity would be identical to those
of the Funds. The general portfolio characteristics of the larger combined
entity would be similar to both Funds except that the combined entity would not
be as heavily invested in Washington Municipal Obligations as the Acquired Fund.
The Agreement may be terminated and the Reorganization abandoned, whether before
or after approval by the Funds' shareholders, at any time prior to the Effective
Time (a) by the written consent of the Boards of both Funds, (b) by either Fund
if any condition to that Fund's obligations under the Agreement has not been
satisfied or waived and it reasonably appears that such condition will not be
satisfied or (c) by either Fund if the Reorganization has not occurred by
October 13, 1999. If the proposals relating to the Agreement are approved, the
Effective Time is expected to be the close of business on August 12, 1999.
The Board of each Fund, including the Board Members of that Fund who are not
"interested persons," as that term is defined by the 1940 Act, has approved the
Reorganization based on its conclusion that the Reorganization is in the best
interests of that Fund and that the interests of shareholders would not be
diluted as a result of the Reorganization. ACCORDINGLY, THE BOARD OF EACH FUND
RECOMMENDS THAT THE SHAREHOLDERS OF THAT FUND VOTE FOR THE APPROVAL OF THE
PROPOSAL RELATING TO THE AGREEMENT. See "Proposal No. 1 -- The Reorganization."
REASONS FOR THE REORGANIZATION
In approving the Reorganization, the respective Boards of the Funds, which
consist of the same individuals, identified certain benefits that are likely to
result from the Reorganization, including reduced management fees per share,
lower administrative expenses, greater efficiency and flexibility in portfolio
management and a more liquid trading market for common shares of the combined
Fund. Given the relative sizes of the Funds, the Acquired Fund would
significantly benefit from the Reorganization. The larger combined Fund that
would result from the Reorganization would have a significantly larger asset
base than the Acquired Fund has currently. Based on data presented by management
of the Funds, the Board believes that administrative expenses of a larger
combined Fund comprised of the assets of both Funds would be less than the
aggregate expenses of the Acquired Fund, resulting in a lower expense ratio for
the combined Fund and corresponding higher earnings for its common shareholders.
The same is true, to a much lesser extent, for the Acquiring Fund. Based upon
the fiscal years ended October 31, 1998 and May 31, 1998, respectively, the
expense ratio for the Acquiring Fund and the Acquired Fund was .79% and .91%.
The pro-forma expense ratio for the combined Fund for the 12-month period ended
October 31, 1998 would have been .79%.
The Board considered whether there would be any adverse tax consequences of the
Reorganization on Acquired Fund shareholders from losing the exemption from
Washington state taxes. The Board believed that most Acquired Fund shareholders,
would not suffer any adverse tax consequences from the Reorganization from
losing the exemption from Washington state taxes since the State of Washington
has no state income tax, nor is the State proposing the imposition of an income
tax. Acquired Fund shareholders that are financial businesses, as defined under
Washington law, will continue to be subject to the Washington business and
occupation tax (a gross receipts tax) on dividends and any gain from the
Acquiring Fund to the extent those amounts are not derived from interest paid on
obligations of the State of Washington, its political subdivisions and its
municipal corporations. While most of the investments of the Acquired Fund
qualified for that deduction for Washington governmental obligations, most of
the investments of the Acquiring Fund will not so qualify.
The Boards also considered the possible adverse effects and estimated costs of
combining the Funds and determined that the Reorganization is likely to provide
benefits to the shareholders of each Fund that outweigh such possible adverse
effects and the costs presented by the Reorganization, all of which will be
borne by the Acquired Fund. See "Proposal No. 1 -- The Reorganization -- Reasons
for the Reorganization."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to closing, the Funds will receive an opinion of Vedder, Price,
Kaufman & Kammholz to the effect that the proposed Reorganization will qualify
as a tax-free reorganization under Section 368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended (the "Code"). Accordingly, neither Fund will recognize
gain or loss for Federal income tax purposes as a result of the Reorganization.
In addition, shareholders of the Acquired Fund who receive Acquiring Fund Shares
pursuant to the Reorganization will recognize no gain or loss, except with
respect to the cash received for a fractional Acquiring Fund common share
interest, if any. See "Proposal No. 1 -- The Reorganization -- Certain Federal
Income Tax Consequences of the Reorganization."
COMPARISON OF THE ACQUIRING FUND AND THE ACQUIRED FUND
General. The Acquiring Fund and the Acquired Fund are both closed-end,
diversified management investment companies. The Acquiring Fund common shares
are listed and trade on the NYSE under the symbol NPT and the Acquired Fund
common
2
<PAGE> 13
shares are listed and trade on the AMEX under the symbol NPW. The Acquiring Fund
is organized as a corporation under the laws of the State of Minnesota. The
Acquired Fund is organized as a business trust under the laws of the
Commonwealth of Massachusetts. The common shares of each Fund have equal voting
rights and equal rights with respect to the payment of dividends and
distribution of assets upon liquidation and have no preemptive, conversion or
exchange rights or rights to cumulative voting. All outstanding shares of
Acquiring Fund MuniPreferred and Acquired Fund MuniPreferred are rated AAA by
S&P and are rated "aaa" and "aa1", respectively, by Moody's. The shares of
Acquiring Fund MuniPreferred issued to the Acquired Fund pursuant to the
Reorganization will have rights and preferences, including liquidation
preferences, that are substantially similar to those of the outstanding shares
of Acquired Fund MuniPreferred. See "Proposal No. 1 -- The Reorganization."
Investment Objectives and Policies. The Acquiring Fund and the Acquired Fund
have similar investment objectives. Both Funds' primary investment objective is
to provide, through investment in a professionally managed portfolio of
tax-exempt Municipal Obligations, current income exempt from regular Federal
income tax, consistent with the Fund's investment policies. The secondary
investment objective of the Acquiring Fund is the enhancement of portfolio value
relative to the municipal bond market through investments in tax-exempt
Municipal Obligations. The secondary investment objective of the Acquired Fund
is the enhancement of portfolio value relative to the Washington municipal bond
market through investments in tax-exempt Washington Municipal Obligations. The
primary difference between the Funds is that the Acquired Fund invests
substantially all of its assets in Washington Municipal Obligations and the
Acquiring Fund invests in Municipal Obligations of various issuers.
The Acquiring Fund and the Acquired Fund have similar investment policies. The
Acquiring Fund, as a fundamental policy, invests substantially all (in excess of
80%) of its assets in tax-exempt Municipal Obligations. The Acquired Fund, as a
fundamental policy, invests substantially all (in excess of 80%) of its assets
in tax-exempt Washington Municipal Obligations. Both Funds purchase only quality
municipal bonds that at the time of purchase are either rated within the four
highest grades by Moody's or S&P, or unrated but in the opinion of the Adviser,
have credit characteristics equivalent to, and are of comparable quality to,
Municipal Obligations rated within the four highest grades by Moody's or S&P,
provided that neither Fund invests more than 20% of its assets in such unrated
Municipal Obligations.
Management of the Funds. The Acquiring Fund and the Acquired Fund have the same
Board Members and officers. In addition, Nuveen Advisory Corp. (the "Adviser")
acts as the investment adviser for, and manages the investment and reinvestment
of the assets of, each Fund. Pursuant to an Investment Management Agreement
between the Adviser and each Fund, each Fund pays an annual management fee for
the services and facilities furnished by the Adviser on a monthly basis at the
following annual rates:
<TABLE>
<CAPTION>
MANAGEMENT FEE SCHEDULE
- --------------------------------------------------------------
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 Acquiring Fund paid aggregate management fees of $5,712,194 for the fiscal
year ended October 31, 1998, for an effective management fee rate of .62%. The
Acquired Fund paid aggregate management fees of $333,129 for the fiscal year
ended May 31, 1998, for an effective management fee rate of .65%.
Dividends and Distributions. The Funds have identical dividend policies with
respect to the payment of dividends on their common shares. Each Fund's present
policy, which may be changed by its Board, is to make regular monthly cash
distributions to holders of its common shares at a level rate that reflects the
past and projected performance of such Fund, which over time will result in the
distribution of all net investment income of such Fund. While the Adviser
expects the level of monthly distributions to remain relatively stable due to
the similar composition of each Fund's portfolio, the level of distributions
over the life of each Fund may be affected to the extent adjustments are made to
such portfolio. Holders of common shares of each Fund may elect to have all
distributions automatically reinvested in common shares of that Fund at the
prevailing market price, plus customary brokerage charges, pursuant to that
Fund's Dividend Reinvestment Plan. See "Proposal No. 1 -- The
Reorganization -- Description of Common Shares Issued by the Acquiring
Fund -- Distributions" and "-- Dividend Reinvestment Plan" and "Additional
Information About the Funds -- Tax Matters Associated with Investment in the
Funds."
The dividend rates on shares of each Fund's MuniPreferred, including the shares
of Acquiring Fund MuniPreferred, Series TH or Series TH2, issued pursuant to the
Reorganization, are determined on the basis of auctions, which typically are
held weekly. See "Proposal No. 1 -- The Reorganization -- Description of
MuniPreferred Issued by the Acquiring Fund" and "-- The Auction" and the
Statement of Additional Information.
3
<PAGE> 14
Credit Quality. A comparison of the credit quality of the respective portfolios
of the Acquiring Fund and the Acquired Fund, as of March 31, 1999, is set forth
in the table below.
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
<CAPTION>
ACQUIRING ACQUIRED
CREDIT RATING FUND FUND PRO-FORMA(1)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aaa/AAA* 49.87% 66.63% 50.78%
Aa/AA 17.21 27.28 17.75
A/A 16.40 2.86 15.68
Baa/BBB 7.68 3.23 7.44
Unrated 8.84 -- 8.35
------ ------ ------
TOTAL 100.00% 100.00% 100.00%
- ---------------------------------------------------------------------------------------------
</TABLE>
* Includes securities that are backed by an escrow or trust containing
sufficient U.S. Government Securities to ensure the timely payment of
principal and interest.
(1) Reflects the effect of the Reorganization.
Maturity and Duration. A comparison of the maturity and duration of the
respective portfolios of the Acquiring Fund and the Acquired Fund, as of March
31, 1999, is set forth in the table below.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
FUND MATURITY EFFECTIVE MATURITY MODIFIED DURATION
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Acquiring 19.22 (yrs.) 17.58 (yrs.) 6.20 (yrs.)
Acquired 18.97 17.59 6.38
Pro-forma(1) 19.21 17.58 6.21
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects the effect of the Reorganization.
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Funds as of
October 31, 1998 and the pro forma combined capitalization of the combined Fund
as if the Reorganization had occurred on that date. The table reflects a pro
forma exchange ratio of approximately 1.019564 shares of the Acquiring Fund
issued for each share of the Acquired Fund. If the Reorganization is
consummated, the actual exchange ratio may vary from the ratio indicated below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ACQUIRING FUND ACQUIRED FUND ACQUIRING FUND
(ACTUAL) (ACTUAL) (AS ADJUSTED)(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDERS' EQUITY:
Common Shares, $.01 par value per share; 40,847,681 shares
outstanding for Acquiring Fund (Actual)
2,320,051 shares outstanding for Acquired Fund (Actual)
43,213,121 shares outstanding for Acquiring Fund
(Adjusted) $ 408,477 $ 23,201 $ 432,131 (2)
Preferred shares $25,000 stated value per share, at
liquidation value 308,400,000 17,000,000 325,400,000 (3)
Paid-in surplus 564,371,822 31,971,262 596,342,631 (4)
Undistributed net investment income 1,228,635 93,503 1,228,635 (5)
Net realized gain (loss) from investment transactions (13,261,796) (451,047) (13,712,843)(6)
Net unrealized appreciation of investments 61,856,537 3,954,046 65,810,583
------------ ----------- ------------
Net Assets $923,003,675 $52,590,965 $975,501,137
============ =========== ============
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The adjusted balances are presented as if the Reorganization were effective
as of October 31, 1998 for information purposes only. The actual Effective
Time of the Reorganization is expected to be August 12, 1999, at which time
the results would be reflective of the actual composition of shareholders'
equity at that date.
(2) Assumes the issuance of 45,389 Acquiring Fund Common shares in exchange for
the net assets of the Acquired Fund, which number is based on the net asset
value of the Acquiring Fund Common shares, and the net asset value of the
Acquired Fund, as of October 31, 1998, after adjustment for the
distributions referred to in (4) below. The issuance of such number of
Acquiring Fund Common shares would result in the distribution of 1.019564
Acquiring Fund Common shares for each Common share of the Acquired Fund upon
liquidation of the Acquired Fund.
(3) Does not include the effect of the offering of 520 series W2 preferred
shares which is expected to close in June 1999.
(4) Includes the impact of estimated Reorganization costs of $149,950.
(5) Assumes the Acquired Fund distributes all of its undistributed net
investment income ($93,503) to its shareholders.
(6) Assumes the Acquired Fund carries forward all of its net realized losses
from investment transactions ($451,047) to the Acquiring Fund, as permitted
under applicable tax regulations.
4
<PAGE> 15
COMPARATIVE PERFORMANCE INFORMATION
Comparative investment performance for the Funds for certain periods ended March
31, 1999:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN ON MARKET VALUE TOTAL RETURN ON NET ASSET VALUE
---------------------------------------- -------------------------------------
ONE THREE FIVE LIFE OF ONE THREE FIVE LIFE OF
YEAR YEARS YEARS FUND YEAR YEARS YEARS Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Acquiring Fund 9.02% 11.62% 11.42% 5.97% 5.98% 8.45% 9.10% 6.89%
Acquired Fund 10.36% 11.66% 10.03% 5.14% 6.25% 8.82% 9.18% 6.72%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Total Investment Return on Market Value is the average annual combination of
reinvested dividend income, reinvested capital gains distributions, if any, and
changes in price per share. Total Return on Net Asset Value is the average
annual combination of reinvested dividend income, reinvested capital gains
distributions, if any, and changes in net asset value per share. Life of Fund is
calculated from February 19, 1993 for the Acquiring Fund and March 18, 1993 for
the Acquired Fund. Past performance information is not necessarily indicative of
future results.
COMPARATIVE FEE TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
10/31/98
10/31/98 5/31/98 PRO-FORMA
ACQUIRING FUND ACQUIRED FUND ACQUIRING FUND
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ANNUAL EXPENSES
(as a percentage of net assets)
Management Fees .62 .65 .62
Other Expenses .17 .26 .17
Total Annual Expenses .79 .91 .79
- --------------------------------------------------------------------------------------------------------------
</TABLE>
Example: The following table illustrates the expenses on a $1,000 investment
based upon the fees and expenses shown above and assuming a 5% annual return.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquiring Fund $8 $25 $44 $ 98
Acquired Fund $9 $29 $50 $112
Pro-Forma Acquiring Fund $8 $25 $44 $ 98
- ------------------------------------------------------------------------------------------------------
</TABLE>
The purpose of the comparative fee table is to assist you in understanding the
various costs and expenses of investing in shares of the Funds. The information
in the table is based upon annualized expenses for the fiscal year ended October
31, 1998 for the Acquiring Fund and the fiscal year ended May 31, 1998 for the
Acquired Fund. The figures in the Example are not necessarily indicative of past
or future expenses, and actual expenses may be greater or less than those shown.
The Funds' actual rate of return may be greater or less than the hypothetical 5%
annual return shown in the Example.
5
<PAGE> 16
RISK FACTORS
The Boards of each of the Acquiring Fund and the Acquired Fund have identified
certain benefits to the respective shareholders of each Fund as a result of the
Reorganization. The portfolio characteristics of the Acquiring Fund, after
Reorganization, would reflect the blended characteristics of both Funds.
Compared to the Acquiring Fund, the combined portfolio would have a marginally
lower gross portfolio yield, marginally longer duration and slightly higher
credit quality. Compared to the Acquired Fund, the combined portfolio would have
a higher yield and slightly lower credit quality. The following risks and
special considerations should be considered by shareholders of each Fund in
their evaluation of the Reorganization:
SIMILARITY OF RISKS
The Acquiring Fund and the Acquired Fund have similar investment objectives.
Both Funds' primary investment objective is to provide, through investment in a
professionally managed portfolio of tax-exempt Municipal Obligations, current
income exempt from regular Federal income tax. The Acquiring Fund and the
Acquired Fund have similar investment policies. The Acquiring Fund will, as a
fundamental policy, invest substantially all (in excess of 80%) of its assets in
tax-exempt Municipal Obligations. The Acquired Fund, as a fundamental policy,
invests substantially all (in excess of 80%) of its assets in tax-exempt
Washington Municipal Obligations. Both Funds purchase only quality municipal
bonds that at the time of purchase are either rated within the four highest
grades by Moody's or S&P, or unrated but in the opinion of the Adviser have
credit characteristics equivalent to, and will be of comparable quality to,
Municipal Obligations rated within the four highest grades by Moody's or S&P,
provided that neither Fund may invest more than 20% of its assets in such
unrated Municipal Obligations. To the extent that the investment objectives and
investment policies are the same, the risks associated with an investment in the
Funds are substantially the same.
Both Funds emphasize investments in Municipal Obligations with long-term
maturities in order to maintain an average portfolio maturity of 20-30 years.
Funds with longer average maturities and durations will generally be subject to
greater interest rate risk.
Investment in either Fund may not be appropriate for all investors. The Funds
are not intended to be a complete investment program, and investors should
consider their long-term investment goals and financial needs when making an
investment decision with respect to the Funds. An investment in either Fund is
intended to be a long-term investment and should not be used as a trading
vehicle.
DIFFERENCES IN RISKS
The Acquiring Fund and the Acquired Fund engage in some dissimilar investment
practices. To the extent that the investment practices of the Funds differ, the
risks associated with an investment in the Acquiring Fund are different from the
risks associated with an investment in the Acquired Fund.
The secondary investment objective of the Acquiring Fund is the enhancement of
portfolio value relative to the municipal bond market through investments in
tax-exempt Municipal Obligations. The secondary investment objective of the
Acquired Fund is the enhancement of portfolio value relative to the Washington
municipal bond market through investments in tax-exempt Washington Municipal
Obligations. The primary difference between the Funds is that the Acquired Fund
invests substantially all of its assets in Washington Municipal Obligations and
the Acquiring Fund invests in Municipal Obligations of various issuers. The
Acquired Fund is therefore more susceptible to political, economic and
regulatory factors affecting issuers of Washington Municipal Obligations. The
Acquired Fund shareholders (except for financial businesses subject to the
Washington business and occupation tax), however, should not suffer any adverse
tax consequences from the Reorganization from the loss of the exemption from
Washington state taxes since the State of Washington has no state income tax,
nor is the State proposing the imposition of an income tax. Acquired Fund
shareholders that are financial businesses, as defined under Washington law,
will continue to be subject to the Washington business and occupation tax (a
gross receipts tax) on dividends and any gain from the Acquiring Fund to the
extent those amounts are not derived from interest paid on obligations of the
State of Washington, its political subdivisions and its municipal corporations.
While most of the investments of the Acquired Fund qualified for that deduction
for Washington governmental obligations, most of the investments of the
Acquiring Fund will not so qualify. The Acquiring Fund, however, is less likely
to benefit from political, economic or regulatory events that beneficially
affect issues in which it invests because it generally invests a smaller
percentage of its assets in each issuer in which it invests.
THE JOINT MEETING
GENERAL
This Joint Proxy Statement -- Prospectus is furnished in connection with the
solicitation by the Boards of the Funds of proxies to be voted at the Joint
Meeting to be held in the Grand Ballroom of the Hotel Inter-Continental, 505
North Michigan
6
<PAGE> 17
Avenue, Chicago, Illinois, on Wednesday, July 28, 1999 at 10:30 a.m., Chicago
time, and at any and all adjournments of such Joint Meeting. The cost of
preparing, printing and mailing the enclosed proxy, accompanying notice and
Joint Proxy Statement -- Prospectus, and all other costs in connection with the
solicitation of proxies, to the extent they are not incremental costs related to
the Reorganization, will be paid by the Acquiring Fund. Incremental costs
related to the Reorganization will be paid by the Acquired Fund. Additional
solicitation may be made by letter, telephone or telegraph by officers of the
Funds, by officers or employees of the Adviser or Nuveen, or by dealers and
their representatives. The Funds have engaged D.F. King to assist in the
solicitation of proxies at an estimated cost of $9,000 plus reasonable expenses.
The Board of each Fund has fixed the close of business on June 1, 1999 as the
record date (the "Record Date") for determining holders of such Fund's common
shares and shares of MuniPreferred entitled to notice of and to vote at the
Joint Meeting. Each shareholder will be entitled to one vote for each common
share or share of MuniPreferred held. At the close of business on the Record
Date, (a) the Acquiring Fund had outstanding 40,884,796 common shares and shares
of MuniPreferred as follows: Series M-2,200 shares; Series T-2,000 shares;
Series T2-1,328 shares; Series W-1,680 shares; Series TH-2,000 shares; Series
F-1,800 shares; Series F2-1,328 shares, and (b) the Acquired Fund had
outstanding 2,320,051 common shares and 680 shares of MuniPreferred Series TH.
This Joint Proxy Statement -- Prospectus is first being mailed to shareholders
of the Funds on or about June 21, 1999. THE ACQUIRING FUND WILL FURNISH, WITHOUT
CHARGE, A COPY OF ITS OCTOBER 31, 1998 ANNUAL REPORT AND APRIL 30, 1999
SEMI-ANNUAL REPORT (WHICH WILL BE AVAILABLE ON OR BEFORE JUNE 30, 1999) UPON
REQUEST. THE ACQUIRED FUND WILL FURNISH WITHOUT CHARGE, A COPY OF ITS MAY 31,
1998 ANNUAL REPORT AND NOVEMBER 31, 1998 SEMI-ANNUAL REPORT UPON REQUEST. SUCH
WRITTEN OR ORAL REQUEST SHOULD BE DIRECTED TO SUCH FUND AT 333 WEST WACKER
DRIVE, CHICAGO, ILLINOIS 60606 OR BY CALLING 1-800-257-8787.
VOTING; PROXIES
Common shares and shares of MuniPreferred of the Acquiring Fund entitled to vote
at the Joint Meeting that are represented by properly executed proxies will,
unless such proxies have been revoked, be voted in accordance with the
shareholder's instructions indicated on such proxies. If no contrary
instructions are indicated, all such shares will be voted FOR approval of the
Agreement, FOR approval of amendment of the Acquiring Fund Statement, FOR the
election of Board Member nominees and FOR ratification of the selection of
independent auditors.
Common shares and shares of MuniPreferred of the Acquired Fund entitled to vote
at the Joint Meeting that are represented by properly executed proxies will,
unless such proxies have been revoked, be voted in accordance with the
shareholder's instructions indicated on such proxies. If no contrary
instructions are indicated, all such shares will be voted FOR approval of the
Agreement.
A quorum of shareholders is required to take action at the Joint Meeting. A
majority of the shares of each Fund entitled to vote at the Joint Meeting,
represented in person or by proxy, will constitute a quorum of shareholders at
the Joint Meeting, except that for the election of the two (2) nominees to be
elected by holders of Acquiring Fund MuniPreferred, 33 1/3% of the MuniPreferred
shares entitled to vote and represented in person or by proxy will constitute a
quorum. Votes cast by proxy or in person at the Joint Meeting will be tabulated
by the inspectors of election appointed for the Joint Meeting. The inspectors of
election will determine whether or not a quorum is present at the Joint Meeting.
The inspectors of election will treat abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees, typically in "street name," as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) as present for purposes of determining a
quorum.
For purposes of determining the approval of the matters submitted to
shareholders for a vote, in the case of the Acquiring Fund, (i) abstentions and
broker non-votes will have the same effect as a vote against the Agreement, (ii)
abstention and broker non-votes will have the same effect as a vote against the
amendment of the Acquiring Fund Statement, (iii) abstentions and broker
non-votes will have the same effect as a vote against the election of Board
Members, and (iv) abstentions and broker non-votes will have the same effect as
a vote against the ratification of the selection of independent auditors. In the
case of the Acquired Fund, abstentions and broker non-votes will have the same
effect as a vote against the Agreement.
Shares of a series of MuniPreferred of a fund held in "street name" for which
voting instructions have not been received as of one business day before the
meeting, or, if adjourned, one business day before the day to which the meeting
is adjourned, and that would otherwise be treated as "broker non-votes" may,
pursuant to Rule 452 of the NYSE, be voted by the broker on each item in the
same proportion as the votes cast by all MuniPreferred shareholders of that
series of the fund who have voted on the item. Brokers may proportionately vote
shares of MuniPreferred of the Funds if permitted by Rule 452. Rule 452 permits
proportionate voting for a series of MuniPreferred with respect to a particular
item if, among other things, (i) a minimum of 30% of the shares of MuniPreferred
of that series outstanding has been voted by the holders of such shares with
respect to such item and (ii) less than 10% of the shares of MuniPreferred of
that series outstanding has been voted by the holders of such shares against
such item. For the purpose of meeting the 30% test, abstentions will be treated
as shares "voted" and, for the purpose of meeting the 10% test, abstentions will
not be treated as shares "voted" against the item.
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<PAGE> 18
The details of each proposal to be voted on by the shareholders of each Fund and
the vote required for approval of each proposal are set forth under the
description of each proposal below. Shareholders of either Fund who execute
proxies may revoke them at any time before they are voted by filing with their
Fund a written notice of revocation, by delivering a duly executed proxy bearing
a later date or by attending the meeting and voting in person.
AVAILABLE INFORMATION
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act"), and in accordance therewith is
required to file reports, proxy statements and other information with the
Commission. Any such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549-6009, and
at the Commission's Northeast Regional Office, Suite 1300, Seven World Trade
Center, New York, New York 10048 and Midwest Regional Office, Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies
of such materials can be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. In addition, the SEC
maintains a web site (http://www.sec.gov) that contains reports, other
information and proxy statements filed by the Funds. The shares of the Acquiring
Fund are listed on the NYSE, and such reports, proxy statements and other
information concerning the Acquiring Fund can also be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005. The shares of the
Acquired Fund are listed on the AMEX and such reports, proxy statements and
other information concerning the Acquired Fund can also be inspected at the
offices of the AMEX, 86 Trinity Place, New York, New York 10006 .
The Acquiring Fund has filed with the Commission a registration statement on
Form N-14 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), relating to the Acquiring Fund shares to be issued pursuant
to the Reorganization. This Joint Proxy Statement -- Prospectus and the related
Statement of Additional Information does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Acquiring Fund shares to be issued pursuant to
the Reorganization, reference is hereby made to the Registration Statement.
Statements contained in the Joint Proxy Statement -- Prospectus and the related
Statement of Additional Information as to the content of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document included as an
Annex hereto or filed as an exhibit to the Registration Statement.
The information in this Joint Proxy Statement -- Prospectus concerning the
Acquiring Fund has been furnished by the Acquiring Fund, and the information
concerning the Acquired Fund has been furnished by the Acquired Fund. This Joint
Proxy Statement -- Prospectus constitutes a prospectus of the Acquiring Fund
with respect to the Acquiring Fund Shares issued pursuant to the Reorganization.
PROPOSAL NO. 1 -- THE REORGANIZATION
The terms and conditions of the Reorganization are set forth in the Agreement
and Plan of Reorganization and Liquidation. Significant provisions of the
Agreement are summarized below; however, this summary is qualified in its
entirety by reference to the Agreement, a copy of which is attached as Annex A
to this Joint Proxy Statement -- Prospectus.
GENERAL
The Agreement sets forth the terms of the Reorganization, under which (a) the
Acquiring Fund would acquire substantially all of the assets of the Acquired
Fund in exchange for newly issued common shares and newly issued shares of
MuniPreferred, Series TH or Series TH2, of the Acquiring Fund and the Acquiring
Fund's assumption of substantially all of the liabilities of the Acquired Fund;
and (b) the Acquired Fund would liquidate and distribute to its shareholders pro
rata by class the Acquiring Fund Shares received. As a result of the
Reorganization, the assets of the Acquiring Fund and the Acquired Fund would be
combined and the shareholders of the Acquired Fund would become shareholders of
the Acquiring Fund. The Board Members and officers of the Acquiring Fund are
identical to those of the Acquired Fund. The investment objectives and policies
of the Acquiring Fund are substantially similar to the Acquired Fund except that
the Acquired Fund primarily invests in Washington Municipal Obligation. Other
than the Acquired Fund's concentration in Washington Municipal Obligations, the
general portfolio characteristics of the Acquiring Fund, after the
Reorganization, would be substantially similar to, the Acquired Fund. If the
proposals relating to the Agreement are approved, the Effective Time is expected
to be the close of business on August 12, 1999. Following the Reorganization,
the Acquired Fund would terminate its registration as an investment company
under the 1940 Act by filing a Form N-8F with the Commission.
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<PAGE> 19
TERMS OF THE REORGANIZATION
If the Reorganization is approved and the other conditions are satisfied or
waived, at the Effective Time the Acquiring Fund will acquire substantially all
of the assets of the Acquired Fund, including cash (other than cash used to pay
certain Reorganization expenses of the Acquired Fund and to make a final
distribution of net tax-exempt income, net ordinary taxable income and net
capital gains to the shareholders of the Acquired Fund accrued as of the
Effective Time), cash equivalents, Municipal Obligations and other securities,
receivables and other property owned by the Acquired Fund. In exchange, the
Acquiring Fund would assume from the Acquired Fund all debts, liabilities,
obligations and duties of the Acquired Fund (other than certain expenses
incurred by the Acquired Fund in connection with the Reorganization and the
Acquired Fund's obligation to distribute any net tax-exempt income, net ordinary
taxable income and net capital gains accrued as of the Effective Time), and the
Acquiring Fund would issue to the Acquired Fund common shares and shares of
MuniPreferred, Series TH or Series TH2, of the Acquiring Fund. The number of
Acquiring Fund common shares to be issued to the Acquired Fund would be that
number having an aggregate per share net asset value equal to the aggregate
value of the Acquired Fund's assets transferred to, net of the Acquired Fund's
liabilities assumed by, the Acquiring Fund as of the Effective Time. The value
of the Acquired Fund's net assets shall be calculated net of the liquidation
preference (including accumulated and unpaid dividends) of all outstanding
shares of Acquired Fund MuniPreferred. If Acquiring Fund shareholders approve an
amendment to the Acquiring Fund's Articles of Incorporation to authorize
additional shares of MuniPreferred, Series TH, shares of Acquiring Fund
MuniPreferred would be issued to the Acquired Fund on the basis of one newly
issued share of Acquiring Fund MuniPreferred, Series TH, for each share of
Acquired Fund MuniPreferred, Series TH, outstanding as of the Effective Time.
The Acquiring Fund's Board of Directors has approved, contingent upon Acquiring
Fund shareholders not approving the amendment to the Acquiring Fund's Articles
of Incorporation to authorize additional shares of MuniPreferred, Series TH, the
creation of a new MuniPreferred, Series TH2, to be issued in connection with the
Reorganization. If Acquiring Fund shareholders do not approve the authorization
of additional shares of MuniPreferred, Series TH, shares of Acquiring Fund
MuniPreferred would be issued to the Acquired Fund on the basis of one newly
issued share of Acquiring Fund MuniPreferred, Series TH2, for each share of
Acquired Fund MuniPreferred, Series TH outstanding.
The value of the Acquired Fund's assets to be acquired and liabilities to be
assumed by the Acquiring Fund, and the net asset value per common share to be
issued by the Acquiring Fund, will be determined by The Chase Manhattan Bank
("Chase"), the custodian for each Fund, as of the Effective Time. Net asset
value per Acquiring Fund common share shall be computed by dividing the value of
the Acquiring Fund's total assets, less liabilities and less the aggregate
liquidation preference of all outstanding shares of Acquiring Fund MuniPreferred
and any accumulated and unpaid dividends thereon, by the number of Acquiring
Fund common shares outstanding. In determining net asset value per Acquiring
Fund common share and the value of the Acquired Fund's assets, Chase utilizes
the valuations of portfolio securities furnished by a pricing service approved
by the Boards of the respective Funds. 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 constitute a majority of the
securities held by the Funds) are valued at fair value as determined by the
pricing service using methods which include consideration of yields or prices of
municipal bonds of comparable quality, type of issue, coupon, maturity and
rating; indications as to value from dealers; and general market conditions. The
pricing service may employ electronic data processing techniques or a matrix
system, or both, to determine valuations. The procedures of the pricing service
and its valuations are reviewed periodically by the officers of each Fund under
the general supervision of that Fund's Board. The number of Acquiring Fund
common shares to be issued to the Acquired Fund pursuant to the Reorganization
will be calculated based upon the determinations of Chase.
In the event the Reorganization is consummated, as soon as practicable after the
Effective Time, the Acquired Fund will liquidate and distribute pro rata to its
common shareholders of record the Acquiring Fund common shares it receives, and
pro rata by class to its preferred shareholders of record the shares of
Acquiring Fund MuniPreferred it receives. Such liquidation and distribution will
be accomplished by opening accounts on the books of the Acquiring Fund in the
names of the shareholders of the Acquired Fund and transferring to those
shareholder accounts the Acquiring Fund Shares previously credited on those
books to the account of the Acquired Fund. Each common shareholder account will
receive the respective pro rata number of Acquiring Fund common shares (rounded
down, in the case of fractional Acquiring Fund common shares, to the next
largest number of whole Acquiring Fund common shares) due such Acquired Fund
common shareholder, and each preferred shareholder account will receive one
newly issued share of Acquiring Fund MuniPreferred, Series TH or Series TH2, for
each share of Acquired Fund MuniPreferred, Series TH, held by such preferred
shareholder.
No fractional Acquiring Fund common shares will be issued. In lieu thereof, the
Acquired Fund's transfer agent, Chase, will aggregate all fractional Acquiring
Fund common shares and sell the resulting whole Acquiring Fund common shares on
the NYSE on behalf of and for the account of all shareholders entitled to
receive fractional interests, and each such shareholder will receive his or her
pro rata share of the proceeds of such sale upon surrender of his or her
Acquired Fund common share certificates.
Dividends will accumulate on shares of Acquired Fund MuniPreferred, Series TH,
up to and including the day on which the Effective Time occurs and will be paid,
together with the dividends then payable in respect of the shares of Acquiring
Fund MuniPreferred, Series TH, to the holders thereof on the Dividend Payment
Date in respect of the Initial Rate Period of such shares. If additional shares
of the existing Acquiring Fund's MuniPreferred, Series TH are issued in
connection with the
9
<PAGE> 20
Reorganization, the dividend rate for such shares of MuniPreferred, Series TH
for the Initial Rate Period will be equal to the dividend rate for shares of the
Acquiring Fund's existing MuniPreferred, Series TH established in the first
Auction for shares of Series TH preceding the date of issuance of such
additional shares of Series TH issued in connection with the Reorganization. If
shares of a new Acquiring Fund MuniPreferred, Series TH2 is issued in connection
with the Reorganization, the Initial Rate Period of the shares of Acquiring Fund
MuniPreferred, Series TH2, will be a period consisting of the number of days
following the day on which the Effective Time occurs that would have remained in
the rate period of the shares of Acquired Fund MuniPreferred, Series TH, in
effect immediately prior to the Effective Time. The dividend rate for the shares
of Acquiring Fund MuniPreferred, Series TH2, for such Initial Rate Period
thereof will be the dividend rate in effect immediately prior to the Effective
Time for the shares of Acquired Fund MuniPreferred, Series TH. The initial
auction for the shares of Acquiring Fund MuniPreferred, Series TH2, issued
pursuant to the Reorganization will be held on the day on which the auction next
succeeding the Effective Time would have been held for the shares of Acquired
Fund MuniPreferred, Series TH, but for the Reorganization.
Following the Reorganization, every common shareholder of the Acquired Fund
would own common shares of the Acquiring Fund that, except for cash payments
received in lieu of fractional Acquiring Fund common shares, will have an
aggregate per share net asset value immediately after the Effective Time equal
to the aggregate per share net asset value of that shareholder's Acquired Fund
common shares immediately prior to the Effective Time. See "Description of
Common Shares Issued by the Acquiring Fund" for a description of the rights of
such shareholders. Since the Acquiring Fund common shares issued to the common
shareholders of the Acquired Fund would be issued at net asset value in exchange
for net assets of the Acquired Fund having a value equal to the aggregate per
share net asset value of those Acquiring Fund common shares so issued, the net
asset value of the Acquiring Fund common shares should remain virtually
unchanged by the Reorganization. Thus, the Reorganization should result in no
dilution of net asset value of any common shareholder's holdings. However, as a
result of the Reorganization, common shareholders of both Funds would hold
reduced percentages of ownership in the larger combined entity than they held in
the Acquiring Fund or the Acquired Fund, as the case may be.
Following the Reorganization, every preferred shareholder of the Acquired Fund
would own the same number of shares of Acquiring Fund MuniPreferred, Series TH
or Series TH2, as he or she held of Acquired Fund MuniPreferred, Series TH, and
the shares of Acquiring Fund MuniPreferred, Series TH or Series TH2, would have
rights and preferences substantially similar to those of the shares of Acquired
Fund MuniPreferred, Series TH. If shares of Acquiring Fund MuniPreferred, Series
TH2 are issued in connection with this Reorganization, holders of shares of
Acquiring Fund MuniPreferred, Series TH2, would be entitled to receive, on the
date that, but for the Reorganization, would have been the next dividend payment
date in respect of the shares of Acquired Fund MuniPreferred, Series TH,
dividends accumulated in respect of the shares of Acquired Fund MuniPreferred,
Series TH, (up to and including the day on which the Effective Time occurs), and
in respect of such shares of Acquiring Fund MuniPreferred, Series TH2 (for an
Initial Rate Period beginning the day after the day on which the Effective Time
occurs), which together equal the amount of dividends that would have been paid
on such date with respect to the shares of Acquired Fund MuniPreferred, Series
TH, but for the Reorganization. See "-- Description of MuniPreferred Issued by
the Acquiring Fund" and "-- Comparison of Rights of Holders of MuniPreferred of
the Acquiring Fund and the Acquired Fund."
See "Surrender and Exchange of Acquired Fund Share Certificates" for a
description of the procedures to be followed by Acquired Fund shareholders to
obtain certificates representing their Acquiring Fund Shares (and cash in lieu
of fractional Acquiring Fund common shares, if any).
Under the terms of the Agreement, the Reorganization is conditioned upon (a)
approval by the shareholders of the Acquiring Fund and the Acquired Fund, as
described under "Votes Required" below, (b) the Funds' receipt of written advice
from Moody's and S&P (i) confirming that consummation of the Reorganization will
not impair the "aaa" and AAA ratings assigned to the outstanding shares of
Acquiring Fund MuniPreferred, Series M, Series T, Series T2, Series W, Series
TH, Series F or Series F2, and (ii) assigning "aaa" or AAA ratings to the shares
of Acquiring Fund MuniPreferred, Series TH2, if issued pursuant to the
Reorganization, (c) the Funds' receipt of an opinion to the effect that the
Reorganization will qualify as a tax-free reorganization under the Code (d) the
absence of legal proceedings challenging the Reorganization and (e) the Funds'
receipt of certain routine certificates and legal opinions. See "--Rating Agency
Considerations" and "-- Certain Federal Income Tax Consequences of the
Reorganization."
The Agreement may be terminated and the Reorganization abandoned, whether before
or after approval by the Funds' shareholders, at any time prior to the Effective
Time (a) by the written consent of the Boards of both Funds, (b) by either Fund
if any condition to that Fund's obligations under the Agreement has not been
satisfied or waived and it reasonably appears that such condition will not be
satisfied or (c) by either Fund if the Reorganization has not occurred by
October 13, 1999.
REASONS FOR THE REORGANIZATION
The respective Boards of the Acquiring Fund and the Acquired Fund, which consist
of the same individuals, have concluded that the Reorganization is in the best
interests of their respective Funds and unanimously recommend that the
shareholders of their respective Funds vote FOR approval of the proposals
relating to the Agreement. The Reorganization should allow the
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<PAGE> 21
Acquired Fund shareholders to benefit from a larger, more diversified portfolio
with a lower management fee and total expense ratio. Acquired Fund shareholders
should also benefit from a significant reduction in administrative expenses due
to the economies of scale reached through the Reorganization. The Reorganization
would benefit Acquiring Fund shareholders to a much smaller degree due to the
Acquiring Fund's size relative to the Acquired Fund. Acquiring Fund shareholders
would benefit through a nominally reduced total expense ratio, a slight increase
in credit quality and slightly improved call protection. Because the benefits of
the Reorganization flow primarily to the Acquired Fund, the Acquired Fund will
pay for all of the costs associated with the Reorganization. See "-- Expenses
Associated with the Reorganization."
Common shareholders of the Acquired Fund should benefit from a lower investment
management rate as a result of the Reorganization. Acquired Fund Shareholders
will realize a management fee breakpoint. Under the Acquiring Fund's Investment
Management Agreement, the management fees payable by the Acquiring Fund are
.6500% of average daily net assets for net assets of up to $125 million, .6375%
for net assets in excess of $125 million (but less than $250 million), .6250%
for net assets in excess of $250 million, (but less than $500 million), .6125%
for net assets in excess of $500 million (but less than $1 billion), .6000% for
net assets in excess of $1 billion (but less than $2 billion) and .5875% for net
assets in excess of $2 billion. As of April 15, 1999, the Acquiring Fund had net
assets of approximately $916 million and the Acquired Fund had net assets of
approximately $52 million. Management projections estimate that the Acquiring
Fund will have net assets in excess of $975 million upon completion of the
Reorganization. At this level, management fees for Acquired Fund shareholders
will fall to .63% from .65%.
Based upon data presented by management of the Funds, the Boards believe that
administrative expenses of a larger combined Fund comprised of the assets of
both Funds will be less than the aggregate expenses of the Acquired Fund,
resulting in a lower expense ratio and corresponding higher earnings for its
common shareholders. For the fiscal years ended October 31, 1998 and May 31,
1998, the expense ratios for the Acquiring Fund and the Acquired Fund were .79%
and .91%, respectively. The pro-forma expense ratio for the combined Fund the 12
month period ended October 31, 1998 would have been .79%.
Data prepared by management of the Funds indicates that market prices of common
shares of smaller funds are likely to experience greater spreads between the bid
and the offer than market prices of common shares of larger funds, and that the
Reorganization would result in a higher average daily trading volume, a narrower
average spread between the bid and the offer and reduced price volatility for
Acquired Fund common shareholders. There can be no assurance that the
Reorganization will produce these anticipated benefits. However, the Boards
believe that these results, if obtained, would benefit holders of Acquired Fund
common shares by affording them a more liquid trading market for their shares
and the opportunity for more favorable price execution in trading the common
shares.
The Board considered whether there would be any adverse tax consequences of the
Reorganization on Acquired Fund shareholders from losing the exemption from
Washington state taxes. The Board believed that most Acquired Fund shareholders,
however, would not suffer any adverse tax consequences from the Reorganization
from losing the exemption from Washington state taxes since the State of
Washington currently has no state income tax and the state is not proposing the
imposition of an income tax. Acquired Fund shareholders that are financial
businesses, as defined under Washington law, will continue to be subject to the
Washington business and occupation tax (a gross receipts tax) on dividends and
any gain from the Acquiring Fund to the extent those amounts are not derived
from interest paid on obligations of the State of Washington, its political
subdivisions and its municipal corporations. While most of the investments of
the Acquired Fund qualified for that deduction for Washington governmental
obligations, most of the investments of the Acquiring Fund will not so qualify.
In addition, Acquired Fund shareholders will experience a slight reduction in
portfolio credit quality and slightly reduced call protection. However, the
Board believes that the advantages of the Reorganization for Acquired Fund
shareholders greatly outweigh these portfolio factors.
Acquiring Fund shareholders will also benefit from the Reorganization, although
to a smaller degree than Acquired Fund shareholders. Acquiring Fund shareholders
will benefit from a nominally reduced total expense ratio, a slight increase in
average credit quality and a slightly improved call protection over the next
four years.
In approving the Reorganization, the respective Boards determined that the
Reorganization should result in no dilution to the value of the interests of the
respective Funds' existing shareholders. Although the Reorganization is expected
to result in a reduction in net asset value per Acquiring Fund common share (and
per Acquired Fund common share equivalent) of approximately $0.01 as a result of
the estimated costs of the Reorganization, management of the Funds has advised
the Boards that it expects such costs to be approximately $150,000. The Acquired
Fund will pay for all of the costs associated with the Reorganization. See
"Expenses Associated with the Reorganization."
In approving the Reorganization, the Boards considered a report of the Funds'
management indicating that the Reorganization should not have a materially
adverse overall effect on the financial status and ongoing performance of either
Fund, and considered such measures as gross portfolio yield, net portfolio
earnings rate as a percentage of net asset value, monthly net earnings, monthly
dividends, dividend rates as a percentage of the initial offering and market
price, management fees, expense ratios and undistributed net investment income
balances. The Boards also examined the relative
11
<PAGE> 22
credit strength, maturity characteristics, preferred share asset coverages, mix
of type and purpose, and yield of the Funds' portfolios of Municipal Obligations
and the costs involved in the Reorganization. The Boards noted the many
similarities between the Funds, including their similar investment objectives
and policies, common management and similar portfolios of Municipal Obligations.
Based on these factors, the Boards determined that the Reorganization is likely
to provide benefits to the shareholders of each Fund, as discussed above, that
outweigh the possible adverse effects and the costs presented by the
Reorganization.
VOTES REQUIRED
VOTES OF PREFERRED SHAREHOLDERS AS A SEPARATE CLASS (BOTH FUNDS)
Preferred shareholders of both Funds are being asked to approve the Agreement as
a "plan of reorganization" under the 1940 Act. Section 18(a)(2)(D) of the 1940
Act provides that the terms of preferred shares issued by a registered
closed-end investment company must contain provisions requiring approval by the
vote of a majority of such shares, voting as a class, of any plan of
reorganization adversely affecting such shares. The 1940 Act makes no
distinction between a plan of reorganization that has an adverse effect as
opposed to a materially adverse effect. While the respective Boards do not
believe that the holders of shares of MuniPreferred of either Fund would be
materially adversely affected by the Reorganization, it is possible that there
may be insignificant adverse effects (such as where the asset coverage with
respect to the shares of Acquiring Fund MuniPreferred issued pursuant to the
Reorganization is slightly more or less than the asset coverage with respect to
the shares of Acquired Fund MuniPreferred for which they are exchanged). Each
Fund is seeking approval of the Agreement by the holders of shares of each
series of that Fund's MuniPreferred, each such series voting separately as a
class. Such approval requires the affirmative vote of the holders of at least a
majority of the outstanding shares of that Fund's MuniPreferred entitled to vote
on the proposal, each such series voting separately as a class.
COMBINED VOTE OF COMMON AND PREFERRED SHAREHOLDERS (ACQUIRED FUND)
Consummation of the Reorganization is also subject to approval of the Agreement
by the common and preferred shareholders of the Acquired Fund. Adoption of this
proposal requires the affirmative vote of the holders of at least a majority of
the outstanding common shares and shares of MuniPreferred of the Acquired Fund
entitled to vote on the proposal, voting together as a single class.
RATING AGENCY CONSIDERATIONS
Under the terms of the Agreement, the Reorganization is conditioned upon (a)
approval by the shareholders of the Acquiring Fund and the Acquired Fund, as
described under "Votes Required" above, (b) the Funds' receipt of written advice
from Moody's and S&P (i) confirming that consummation of the Reorganization will
not impair the "aaa" and AAA ratings assigned to the outstanding shares of
Acquiring Fund MuniPreferred, Series M, Series T, Series T2, Series W, Series
TH, Series F or Series F2 and (ii) assigning "aaa" or AAA ratings to the shares
of Acquiring Fund MuniPreferred, Series TH2, if issued pursuant to the
Reorganization, (c) the Funds' receipt of an opinion to the effect that the
Reorganization will qualify as a tax-free reorganization under the Code, (d) the
absence of legal proceedings challenging the Reorganization and (e) the Funds'
receipt of certain routine certificates and legal opinions. See "-- Rating
Agency Considerations" and "-- Certain Federal Income Tax Consequences of the
Reorganization."
DESCRIPTION OF COMMON SHARES ISSUED BY THE ACQUIRING FUND
GENERAL
The Articles of Incorporation (the "Articles") of the Acquiring Fund authorizes
the issuance of 200,000,000 common shares in a single class, par value $.01 per
share. As of April 15, 1999, there were issued and outstanding 40,884,796 common
shares of the Acquiring Fund. If the Reorganization is approved, at the
Effective Time the Acquiring Fund will issue additional common shares. The
number of such additional Acquiring Fund common shares will be based on the
relative aggregate per share net asset values of the Acquiring Fund and the
Acquired Fund, in each case as of the Effective Time. Based on the relative per
share net asset values as of March 31, 1999 the Acquiring Fund would have issued
approximately 2,360,860 additional common shares if the Reorganization had
occurred as of that date.
The terms of the Acquiring Fund common shares to be issued pursuant to the
Reorganization will be identical to the terms of the Acquiring Fund common
shares that are then outstanding. All of the Acquiring Fund common shares have
equal rights with respect to the payment of dividends and the distribution of
assets upon liquidation. The Acquiring Fund common shares are, when issued,
fully paid and non-assessable and have no preemptive, conversion or exchange
rights or right to cumulative voting. The Acquiring Fund will not be permitted
to declare, pay or set apart for payment any cash dividend or distribution on
the Acquiring Fund common shares, unless (a) cumulative dividends on all
outstanding shares of Acquiring
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<PAGE> 23
Fund MuniPreferred have been paid in full and (b) the Acquiring Fund meets the
asset coverage test described in the Statement of Additional Information under
"Description of MuniPreferred Issued by the Acquiring Fund -- Dividends --
Restrictions on Dividends and Other Payments." This latter limitation on the
Acquiring Fund's ability to make distributions on common shares could under
certain circumstances impair the ability of the Acquiring Fund to maintain its
qualification for taxation as a regulated investment company under the Code. See
"Tax Matters Associated with Investment in the Funds" under "Additional
Information About the Funds" below and in the Statement of Additional
Information.
DISTRIBUTIONS
It is each Fund's present policy, which may be changed by its Board, to make
regular monthly cash distributions to the holders of its common shares of net
investment income at a level rate that reflects past and projected performance
of the Fund, which over time will result in the distribution of all net
investment income of the Fund (net investment income remaining after the payment
of dividends on shares of MuniPreferred, when such shares are outstanding), and
to distribute at least annually net capital gains, if any, to the extent such
net capital gains are not necessary to satisfy the dividend, redemption or
liquidation preferences of shares of MuniPreferred. Each Fund's distribution
level is determined by the Board of the Fund after giving consideration to a
number of factors, including the Fund's undistributed net investment income and
historical and projected investment income, expenses and dividend payments on
shares of MuniPreferred. Net income for each Fund consists of all interest
income accrued on portfolio assets less all expenses of the Fund. Expenses of
each Fund are accrued each day.
To permit each Fund to maintain a more stable monthly distribution, the Fund may
from time to time distribute less than the entire amount of net investment
income earned in a particular period. Such undistributed net investment income
would be available to supplement future distributions, including distributions
which might otherwise have been reduced by a decrease in such Fund's monthly net
income due to fluctuations in investment income or expenses, or due to an
increase in the dividend rate on the outstanding shares of MuniPreferred. As a
result, the distributions paid by each Fund for any particular monthly period
may be more or less than the amount of net investment income actually earned by
the Fund during such period. Undistributed net investment income is added to
each Fund's net asset value, and, correspondingly, distributions from
undistributed net investment income are deducted from the Fund's net asset
value.
For tax purposes, each Fund is currently required to allocate net capital gains
and other taxable income, if any, between common shares and shares of
MuniPreferred of the Fund in proportion to total distributions paid to each
class for the year in which such net capital gains or other taxable income is
realized. See "Tax Matters Associated with Investment in the Funds" under
"Additional Information About the Funds" below and in the Statement of
Additional Information.
Fund management does not expect the level of monthly distributions to the common
shareholders of the Acquiring Fund and the Acquired Fund to be affected by the
Reorganization. There can be no assurance, however, that a stable level of
distributions may be maintained over the life of a Fund.
DIVIDEND REINVESTMENT PLAN
Under each Fund's Dividend Reinvestment Plan (the "Plan"), each common
shareholder of the Fund may elect to have all dividends or capital gains
distributions, or both, automatically reinvested by Chase, as agent for the
common shareholders of the Fund (the "Plan Agent"), in additional common shares.
A Fund common shareholder may make this election by completing a Dividend
Reinvestment Plan Application Form. Common shareholders of the Acquired Fund who
participate in the Acquired Fund's Dividend Reinvestment Plan will automatically
be enrolled in the Plan upon consummation of the Reorganization and any unpaid
dividends at the time of the Reorganization will be reinvested in shares of the
Acquiring Fund as if subject to the Plan. Other common shareholders of the
Acquired Fund will be given the opportunity to enroll in the Plan following the
Effective Time. An Acquired Fund common shareholder who does not elect to
participate in the Plan will receive all dividends and capital gains
distributions in cash paid by check mailed directly to the record shareholder by
Chase, as dividend paying agent.
Under the Plan, the number of shares equivalent to the cash distribution is
determined as follows:
(a) If the Fund common shares are trading at net asset value or at a
premium above net asset value at the time of valuation, the Fund will
issue new common shares at the then current market price; or
(b) If the Fund common shares are trading at a discount from net asset
value at the time of valuation, the Plan Agent will receive the
dividend or distribution in cash and apply it to the purchase of Fund
common shares in the open market, on the NYSE or AMEX or elsewhere,
for the participants' accounts. As a result of increases in the market
price prior to the time the Plan Agent has completed its purchases,
the average purchase price per share paid by the Plan Agent may exceed
the market price at the time of valuation, resulting in the
acquisition of fewer Fund common shares than if the dividend or
distribution had been paid in common shares issued by the Fund. The
Plan Agent will use all dividends and distributions received in cash
to purchase Fund common shares in the open market within 30 days of
the dividend payment date. Interest will not be paid on any uninvested
cash payments.
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<PAGE> 24
Participants in the Plan may withdraw from the Plan upon written or telephone
notice to the Plan Agent. When a participant withdraws from the Plan or upon
termination of the Plan, certificates for whole Fund common shares credited to
his or her account under the Plan will be issued and a cash payment will be made
for any fraction of a Fund common share credited to such account; or, if a
participant so desires, the Plan Agent will sell his or her Fund common shares
in the Plan and send the proceeds to the participant, less brokerage commissions
and a $2.50 service fee.
The Plan Agent maintains all Fund common shareholder accounts in the Plan and
furnishes written confirmation of all transactions in the accounts, including
information needed by such common shareholders for tax records. The Fund common
shares in the account of each Plan participant are held by the Plan Agent in
non-certificated form in the name of the participant, and each such common
shareholder's proxy includes those Fund common shares received pursuant to the
Plan.
In the case of Fund common shareholders such as banks, brokers or nominees that
hold Fund common shares for others who are the beneficial owners, the Plan Agent
administers the Plan on the basis of the number of Fund common shares certified
from time to time by the record shareholders as representing the total amount
registered in the record common shareholder's name and held for the account of
beneficial owners who participate in the Plan.
There will be no brokerage charges with respect to shares issued directly by the
Fund as a result of dividends or capital gains distributions payable either in
shares or in cash. However, each participant pays a pro rata share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of dividends or capital gains distributions.
The automatic reinvestment of dividends and distributions does not relieve
participants of any income taxes that may be payable on dividends or
distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly,
each Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable by the participants.
Additional information about the Plan may be obtained from Chase, c/o Nuveen
Investor Services, P.O. Box 5186, Bowling Green Station, New York, New York
10274.
ODD LOT HOLDINGS
In connection with the Reorganization, a common shareholder of the Acquired Fund
might receive a number of Acquiring Fund common shares in the Reorganization
which consists of or includes an "odd lot" (i.e., less than 100 shares). Such
odd lot holders may participate in the Acquiring Fund's Dividend Reinvestment
Plan for the limited purpose of purchasing a sufficient number of Acquiring Fund
common shares to bring their odd lot shares up to a 100-share "round lot." Each
such odd lot holder would send in the certificates representing his or her odd
lot shares and direct the Plan Agent to reinvest dividends only until a
sufficient number of Acquiring Fund common shares have been acquired to form a
round lot. When this is accomplished, (a) certificates representing the round
lot of Acquiring Fund common shares would be issued to the holder, (b) any
excess Acquiring Fund common shares or fractional Acquiring Fund common shares
would be sold and a check for the sale issued to the holder, and (c) dividend
reinvestment on behalf of such holder would be discontinued.
COMPARISON OF RIGHTS OF HOLDERS OF COMMON SHARES OF THE ACQUIRING FUND
AND THE ACQUIRED FUND
Notwithstanding that the Acquiring Fund is organized as a corporation under the
laws of the State of Minnesota and the Acquired Fund is organized as a business
trust under the laws of the Commonwealth of Massachusetts, the common shares of
each Fund have equal voting rights and equal rights with respect to the payment
of dividends and distribution of assets upon liquidation and have no preemptive,
conversion or exchange rights or rights to cumulative voting. The provisions of
the Articles of the Acquiring Fund are substantially similar to the provisions
of the Declaration of the Acquired Fund, and both contain, among other things,
identical super-majority voting provisions, as described under "-- Certain
Provisions in the Acquiring Fund's Articles of Incorporation" below. The full
text of each Fund's Articles or Declaration, as the case may be, is on file with
the Commission and may be obtained as described under "Available Information."
The terms of the Acquiring Fund's Dividend Reinvestment Plan are identical to
the terms of the Acquired Fund's Dividend Reinvestment Plan.
DESCRIPTION OF MUNIPREFERRED ISSUED BY THE ACQUIRING FUND
The following is a brief description of the terms of the shares of the Acquiring
Fund MuniPreferred, including the shares of Acquiring Fund MuniPreferred, Series
TH or Series TH2, to be issued pursuant to the Reorganization. This description
assumes that the Reorganization will be consummated and that the Acquiring Fund
will issue shares of its MuniPreferred pursuant to the Reorganization. This
description does not purport to be complete and is subject to and qualified in
its entirety by reference to the more detailed description of the shares of
Acquiring Fund MuniPreferred in the Statement of Additional Information and in
the Acquiring Fund Statement attached as Annex B to the Statement of Additional
Information. Capitalized terms used but not defined herein have the meanings
given them above or in the Acquiring Fund Statement.
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<PAGE> 25
GENERAL
The Acquiring Fund's Articles authorize the issuance of 1,000,000 preferred
shares, par value $.01 per share, which may be issued from time to time in such
series and with such designations, preferences and other rights, qualifications,
limitations and restrictions as are determined in a resolution of the Acquiring
Fund's Board. The Acquiring Fund currently has outstanding shares of
MuniPreferred as follows: Series M-2,200; Series T-2,000; Series T2-1,328;
Series W-1,680; Series TH-2,000; Series F-1,800; and Series F2-1,328. The Fund
currently expects to issue 520 shares of a newly created Series W2 in June 1999.
If the Reorganization and the amendment to the Acquiring Fund's Articles of
Incorporation to authorize additional shares of MuniPreferred is approved, at
the Effective Time, the Acquiring Fund will issue to the Acquired Fund 680
shares of MuniPreferred, Series TH, which the Acquired Fund will then distribute
to the holders of shares of Acquired Fund MuniPreferred, Series TH. If the
amendment to the Acquiring Fund's Articles of Incorporation is not approved with
respect to MuniPreferred, Series TH and the Reorganization is approved, at the
Effective Time, the Acquiring Fund will issue to the Acquired Fund 680 shares of
MuniPreferred, Series TH2, which the Acquired Fund would then distribute to the
holders of shares of Acquired Fund MuniPreferred, Series TH. All shares of
Acquiring Fund MuniPreferred issued pursuant to the Reorganization will have a
liquidation preference of $25,000 per share plus an amount equal to accumulated
but unpaid dividends (whether or not earned or declared).
The shares of Acquiring Fund MuniPreferred, Series TH or Series TH2, issued
pursuant to the Reorganization will rank on parity with shares of any other
series of Acquiring Fund MuniPreferred, and with any other series of preferred
shares of the Acquiring Fund as to the payment of dividends and the distribution
of assets upon liquidation. All shares of Acquiring Fund MuniPreferred carry one
vote per share on all matters on which such shares are entitled to be voted.
Shares of Acquiring Fund MuniPreferred are, when issued, fully paid and
non-assessable and have no preemptive, conversion or exchange rights or rights
to cumulative voting.
DIVIDENDS AND DIVIDEND PERIODS
General. If additional shares of the existing Acquiring Fund's MuniPreferred,
Series TH are issued in connection with the Reorganization, the dividend rate
for shares of MuniPreferred, Series TH, issued in connection with the
Reorganization for the Initial Rate Period will be equal to the dividend rate
for shares of the Acquiring Fund's existing MuniPreferred, Series TH established
in the first Auction for shares of Series TH preceding the date of issuance of
additional shares of Series TH to Acquired Fund shareholders in connection with
the Reorganization.
If shares of a new Acquiring Fund MuniPreferred, Series TH2 are issued in
connection with the Reorganization, the Initial Rate Period of the shares of
Acquiring Fund MuniPreferred, Series TH2, issued pursuant to the Reorganization
will be a period consisting of the number of days following the day on which the
Effective Time occurs that would have remained in the rate period of the shares
of Acquired Fund MuniPreferred, Series TH, in effect immediately prior to the
Effective Time. Any Subsequent Rate Period of shares of Acquiring Fund
MuniPreferred, Series TH2, as well as any Subsequent Rate Period of shares of
outstanding Acquiring Fund MuniPreferred, Series M, Series T, Series T2, Series
W, Series TH, Series F and Series F2 will be a Minimum Rate Period (7 Rate
Period Days), unless the Acquiring Fund, subject to certain conditions,
designates such Subsequent Rate Period as a Special Rate Period. See
"-- Designation of Special Rate Periods" below.
Dividends on shares of Acquiring Fund MuniPreferred issued pursuant to the
Reorganization will be payable, when, as and if declared by the Acquiring Fund's
Board out of funds legally available therefor in accordance with the Acquiring
Fund's Articles, including the Acquiring Fund Statement, and applicable law.
Providing that the Effective Time is August 12, 1999, if MuniPreferred, Series
TH is issued in connection with the Reorganization, dividends will be payable on
Friday, August 20, 1999, and thereafter on each Friday. If MuniPreferred, Series
TH2 is issued in connection with the Reorganization, dividends will be payable
on the first Friday following the end of the Initial Rate Period and thereafter
on each Friday. However, in either case, (i) if the Friday on which dividends
would otherwise be payable as set forth above is not a Business Day, then
dividends shall be payable on the first Business Day that falls prior to such
Friday, and (ii) the Acquiring Fund may specify different Dividend Payment Dates
in respect of any Special Rate Period of any series of Acquiring Fund
MuniPreferred of more than 28 Rate Period Days.
The amount of dividends per share payable on shares of each series of Acquiring
Fund MuniPreferred on any date on which dividends shall be payable on shares of
such series shall be computed by multiplying the Applicable Rate for shares of
such series in effect for such Dividend Period or Dividend Periods or part
thereof for which dividends have not been paid by a fraction, the numerator of
which shall be the number of days in such Dividend Period or Dividend Periods or
part thereof and the denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other Dividend Periods, and
applying the rate obtained against $25,000.
Dividends will be paid through the Securities Depository on each Dividend
Payment Date in accordance with its normal procedures, which currently provide
for it to distribute dividends in next-day funds to Agent Members, who in turn
are expected to distribute such dividend payments to the persons for whom they
are acting as agents. Each of the current Broker-Dealers, however, has indicated
to the Acquiring Fund that such Broker-Dealer or the Agent Member designated by
such Broker-Dealer will make such dividend payments available in same-day funds
on each Dividend Payment Date to customers that use such Broker-Dealer or its
designee as Agent Member.
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<PAGE> 26
Dividends on the shares of Acquiring Fund MuniPreferred issued pursuant to the
Reorganization shall accumulate from the day following the day on which the
Effective Time occurs. If MuniPreferred, Series TH2 is issued in connection with
the Reorganization, the dividend rate for such shares for the Initial Rate
Period thereof will be the dividend rate in effect immediately prior to the
Effective Time for the shares of Acquired Fund MuniPreferred, Series TH. For
each Subsequent Rate Period of shares of any series of Acquiring Fund
MuniPreferred, the dividend rate will be the Applicable Rate for shares of such
series that the Auction Agent advises the Acquiring Fund results from an
Auction, except as provided below. The Applicable Rate that results from an
Auction for shares of any series of Acquiring Fund MuniPreferred will not be
greater than the Maximum Rate, which is:
(a) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate
Period, the product of (i) the Reference Rate on such Auction Date for
the next Rate Period of shares of such series and (ii) the Rate
Multiple on such Auction Date, unless shares of such series have or
had a Special Rate Period (other than a Special Rate Period of 28 Rate
Period Days or fewer) and an Auction at which Sufficient Clearing Bids
existed has not yet occurred for a Minimum Rate Period of shares of
such series after such Special Rate Period, in which case the higher
of:
(A) the dividend rate on shares of such series for the then-ending Rate
Period; and
(B) the product of (x) the higher of (I) the Reference Rate on such
Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate
Period was 364 Rate Period Days or fewer, or the Treasury Note Rate
on such Auction Date for a Rate Period equal in length to the then
ending Rate Period of shares of such series, if such then-ending
Rate Period was more than 364 Rate Period Days, and (II) the
Reference Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period of shares of such series, if
such Special Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (y) the Rate Multiple on such
Auction Date; or
(b) in the case of any Auction Date which is the Auction Date immediately
prior to the first day of any proposed Special Rate Period, the
product of (i) the highest of (x) the Reference Rate on such Auction
Date for a Rate Period equal in length to the then-ending Rate Period
of shares of such series, if such then-ending Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction Date
for a Rate Period equal in length to the then-ending Rate Period of
shares of such series, if such then-ending Rate Period was more than
364 Rate Period Days, (y) the Reference Rate on such Auction Date for
the Special Rate Period for which the Auction is being held if such
Special Rate Period is 364 Rate Period Days or fewer or the Treasury
Note Rate on such Auction Date for the Special Rate Period for which
the Auction is being held if such Special Rate Period is more than 364
Rate Period Days, and (z) the Reference Rate on such Auction Date for
Minimum Rate Periods and (ii) the Rate Multiple on such Auction Date.
If an Auction for any Subsequent Rate Period of shares of any series of
Acquiring Fund MuniPreferred is not held for any reason other than as described
below, the dividend rate on shares of such series for such Subsequent Rate
Period will be the Maximum Rate for shares of such series on the Auction Date
for such Subsequent Rate Period.
If the Acquiring Fund fails to pay in a timely manner to the Auction Agent the
full amount of any dividend on, or the redemption price of, any shares of any
series of Acquiring Fund MuniPreferred during any Rate Period thereof (other
than any Special Rate Period of more than 364 Rate Period Days or any Rate
Period succeeding any Special Rate Period of more than 364 Rate Period Days
during which such a failure occurred that has not been cured), and, prior to
12:00 Noon on the third Business Day next succeeding the date such failure
occurred, such failure shall have been cured and the Acquiring Fund shall have
paid a late charge, as described more fully under "Description of MuniPreferred
Issued by the Acquiring Fund -- Dividends -- Determination of Dividend Rate" in
the Statement of Additional Information, no Auction will be held in respect of
shares of such series for the first Subsequent Rate Period thereof thereafter
and the dividend rate for shares of such series for such Subsequent Rate Period
will be the Maximum Rate for shares of such series on the Auction Date for such
Subsequent Rate Period.
If the Acquiring Fund fails to pay in a timely manner to the Auction Agent the
full amount of any dividend on, or the redemption price of, any shares of any
series of Acquiring Fund MuniPreferred during any Rate Period thereof (other
than any Special Rate Period of more than 364 Rate Period Days or any Rate
Period succeeding any Special Rate Period of more than 364 Rate Period Days
during which such a failure occurred that has not been cured), and, prior to
12:00 Noon on the third Business Day next succeeding the date on which such
failure occurred, such failure shall not have been cured or the Acquiring Fund
shall not have paid a late charge, as described more fully under "Description of
MuniPreferred Issued by the Acquiring Fund -- Dividends -- Determination of
Dividend Rate" in the Statement of Additional Information, no Auction will be
held in respect of shares of such series for the first Subsequent Rate Period
thereof thereafter (or for any Rate Period thereof thereafter to and including
the Rate Period during which such failure is so cured and such late charge so
paid), and the dividend rate for shares of such series for each such Subsequent
Rate Period shall be a rate per annum equal to the Maximum Rate on the Auction
Date for shares of such series for each such Subsequent Rate Period (but with
the prevailing rating for shares of such series, for purposes of determining
such Maximum Rate, being deemed to be "Below, ba3'/ BB --").
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<PAGE> 27
If the Acquiring Fund fails to pay in a timely manner to the Auction Agent the
full amount of any dividend on, or the redemption price of, any shares of any
series of Acquiring Fund MuniPreferred during a Special Rate Period thereof of
more than 364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period of more than 364 Rate Period Days during which such a
failure occurred that has not been cured, and such failure shall not have been
cured or the Acquiring Fund shall not have paid a late charge, as described more
fully under "Description of MuniPreferred Issued by the Acquiring
Fund -- Dividends -- Determination of Dividend Rate" in the Statement of
Additional Information, no Auction will be held in respect of shares of such
series for such Subsequent Rate Period thereof (or for any Rate Period thereof
thereafter to and including the Rate Period during which such failure is so
cured and such late charge so paid), 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 each such
Subsequent Rate Period (but with the prevailing rating for shares of such
series, for purposes of determining such Maximum Rate, being deemed to be "Below
ba3'/BB --").
A failure to pay dividends on or the redemption price of shares of any series of
Acquiring Fund MuniPreferred shall have been cured with respect to any Rate
Period thereof if, within the respective time periods described under
"Description of MuniPreferred Issued by the Acquiring
Fund -- Dividends -- Determination of Dividend Rate" in the Statement of
Additional Information, the Acquiring Fund shall have paid to the Auction Agent
(a) all accumulated and unpaid dividends on the shares of such series and (b)
without duplication, the redemption price for shares, if any, of such series for
which notice of redemption has been mailed by the Acquiring Fund; provided,
however, that the foregoing clause (b) shall not apply to the Acquiring Fund's
failure to pay the redemption price in respect of shares of Acquiring Fund
MuniPreferred when the related notice of redemption provides that redemption of
such shares is subject to one or more conditions precedent and any such
condition precedent shall not have been satisfied at the time or times and in
the manner specified in such notice of redemption.
Gross-up Payments. Holders of shares of Acquiring Fund MuniPreferred are
entitled to receive, when, as and if declared by the Acquiring Fund's Board, out
of funds legally available therefor in accordance with the Acquiring Fund's
Declaration, including the Acquiring Fund Statement and applicable law,
dividends in an amount equal to the aggregate Gross-up Payments in accordance
with the following:
If, in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate
Period Days or fewer, the Acquiring Fund allocates any net capital gains or
other income taxable for Federal income tax purposes to a dividend paid on
shares of Acquiring Fund MuniPreferred without having given advance notice
thereof to the Auction Agent as described under "-- The Auction -- Auction
Procedures" (a "Taxable Allocation") below solely by reason of the fact that
such allocation is made retroactively as a result of the redemption of all or a
portion of the outstanding shares of Acquiring Fund MuniPreferred or the
liquidation of the Acquiring Fund, the Acquiring Fund will, prior to the end of
the calendar year in which such dividend was paid, provide notice thereof to the
Auction Agent and direct the Acquiring Fund's dividend disbursing agent to send
such notice with a Gross-up Payment to each holder of shares (initially Cede &
Co., as nominee of the Securities Depository) that was entitled to such dividend
payment during such calendar year at such holder's address as the same appears
or last appeared on the record books of the Acquiring Fund.
If, in the case of any Special Rate Period of more than 28 Rate Period Days, the
Acquiring Fund makes a Taxable Allocation to a dividend paid on shares of
Acquiring Fund MuniPreferred, the Acquiring 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 Acquiring 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 record books of the Acquiring Fund.
The Acquiring 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
Acquiring Fund.
A "Gross-up Payment" means payment to a holder of shares of Acquiring Fund
MuniPreferred of an amount which, when taken together with the aggregate amount
of Taxable Allocations made to such holder to which such Gross-up Payment
relates, would cause such holder's dividends in dollars (after Federal income
tax consequences) from the aggregate of such Taxable Allocations and the related
Gross-up Payment to be equal to the dollar amount of the dividends which would
have been received by such holder if the amount of the aggregate Taxable
Allocations had been excludable from the gross income of such holder. Such
Gross-up Payment shall be calculated: (a) without consideration being given to
the time value of money; assuming that no holder of shares of Acquiring Fund
MuniPreferred is subject to the Federal alternative minimum tax with respect to
dividends received from the Acquiring Fund; and (c) assuming that each Taxable
Allocation and each Gross-up Payment (except to the extent such Gross-up Payment
is designated as an exempt-interest dividend under Section 852(b)(5) of the Code
or successor provisions) would be taxable in the hands of each holder of shares
of Acquiring Fund MuniPreferred at the maximum marginal regular Federal income
tax rate, if any, applicable to ordinary income (taking into account the Federal
income tax deductibility of state taxes paid or incurred) or net capital gains,
as applicable, or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income or net capital gains, as applicable, whichever is
greater, in effect during the calendar year in question.
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<PAGE> 28
Restrictions on Dividends and Other Distributions. Except as otherwise
described herein, for so long as any shares of Acquiring Fund MuniPreferred are
outstanding, the Acquiring Fund may not declare, pay or set apart for payment
any dividend or other distribution (other than a dividend or distribution paid
in, or in options, warrants or rights to subscribe for or purchase, its common
shares) in respect of its common shares or call for redemption, redeem, purchase
or otherwise acquire for consideration any of its common shares (except by
conversion into or exchange for shares of the Acquiring Fund ranking junior to
the shares of Acquiring Fund MuniPreferred as to the payment of dividends and
the distribution of assets upon liquidation), unless (a) full cumulative
dividends on shares of each series of Acquiring Fund MuniPreferred through its
most recently ended Dividend Period shall have been paid or shall have been
declared and sufficient funds for the payment thereof deposited with the Auction
Agent; (b) the Acquiring Fund shall have redeemed the full number of shares of
Acquiring Fund MuniPreferred required to be redeemed by any provision for
mandatory redemption pertaining thereto; and (c) immediately after such
transaction the Discounted Value of the Acquiring Fund's portfolio would at
least equal the MuniPreferred Basic Maintenance Amount in accordance with
guidelines of the rating agency or agencies then rating the shares of Acquiring
Fund 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 Acquiring Fund
shares ranking, as to the payment of dividends, on a parity with shares of
Acquiring Fund MuniPreferred for any period unless full cumulative dividends
have been or contemporaneously are declared and paid on the shares of each
series of Acquiring Fund MuniPreferred through its most recent Dividend Payment
Date. When dividends are not paid in full upon the shares of each series of
Acquiring Fund MuniPreferred through its most recent Dividend Payment Date or
upon the shares of any other class or series of shares ranking on a parity as to
the payment of dividends with shares of Acquiring Fund MuniPreferred through
their most recent respective dividend payment dates, all dividends declared upon
shares of Acquiring Fund MuniPreferred and any such other class or series of
shares ranking on a parity as to the payment of dividends with shares of
Acquiring Fund MuniPreferred shall be declared pro rata so that the amount of
dividends declared per share on shares of Acquiring Fund MuniPreferred and such
other class or series of shares shall in all cases bear to each other the same
ratio that accumulated dividends per share on the shares of Acquiring Fund
MuniPreferred and such class or series of shares bear to each other.
DESIGNATION OF SPECIAL RATE PERIODS
The Acquiring Fund, at its option, may designate any succeeding Subsequent Rate
Period of shares of either series of Acquiring Fund MuniPreferred as a Special
Rate Period consisting of a specified number of Rate Period Days evenly
divisible by seven and not more than 1,820 (approximately 5 years), subject to
certain adjustments. A designation of a Special Rate Period shall be effective
only if, among other things, (a) the Acquiring Fund shall have given certain
notices to the Auction Agent, (b) an Auction for shares of such series shall
have been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction and (c) if the Acquiring Fund shall
have mailed a notice of redemption with respect to any shares of such series,
the redemption price with respect to such shares shall have been deposited with
the Auction Agent.
VOTING RIGHTS
In addition to voting rights described under "-- Certain Provisions in the
Acquiring Fund's Articles of Incorporation" and in the Statement of Additional
Information under "Investment Objectives and Policies -- Investment
Restrictions," holders of Acquiring Fund preferred shares, including shares of
Acquiring Fund MuniPreferred, voting as a separate class, are entitled to elect
(a) two directors of the Acquiring Fund at all times and (b) a majority of the
directors if at any time dividends on Acquiring Fund preferred shares shall be
unpaid in an amount equal to two years dividends thereon, and to continue to be
so represented until all dividends in arrears shall have been paid or otherwise
provided for. In all other cases, directors shall be elected by holders of
Acquiring Fund common shares and preferred shares (including shares of Acquiring
Fund MuniPreferred), voting together as a single class. Except as otherwise
specified under "-- Certain Provisions in the Acquiring Fund's Articles of
Incorporation" below, the Acquiring Fund may not, among other things, without
the approval of the holders of a "majority of the outstanding" shares of
Acquiring Fund MuniPreferred, voting as a separate class, approve any plan of
reorganization adversely affecting shares of Acquiring Fund MuniPreferred.
The Acquiring Fund may not, without the affirmative vote of the holders of at
least a majority of the shares of Acquiring Fund MuniPreferred outstanding at
the time (voting separately as one class): (a) authorize, create or issue any
class or series of shares ranking prior to or on a parity with the Acquiring
Fund MuniPreferred with respect to the payment of dividends or the distribution
of assets upon liquidation or increase the authorized amount of any series of
Acquiring Fund MuniPreferred or (b) amend, alter or repeal the provisions of the
Acquiring Fund's Articles, including the Acquiring Fund Statement, whether by
merger, consolidation or otherwise, so as to affect any preference, right or
power of shares of Acquiring Fund MuniPreferred or the holders thereof. The
Acquiring Fund may not, without the affirmative vote of the holders of at least
66 2/3% of the shares of Acquiring Fund MuniPreferred outstanding at the time
(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 Acquiring Fund is solvent and does not foresee becoming insolvent.
Notwithstanding clause (a) of the first sentence of this paragraph, but subject
to the written confirmation from Moody's or S&P, or both, as appropriate, that
any such action would
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<PAGE> 29
not impair the ratings then assigned to outstanding Acquiring Fund
MuniPreferred, the Acquiring Fund, without the vote or consent of the holders of
Acquiring Fund MuniPreferred, may from time to time authorize and create, and
the Acquiring Fund may from time to time issue additional shares of any series
of MuniPreferred or, classes or series of preferred stock ranking on a parity
with shares of Acquiring Fund MuniPreferred with respect to the payment of
dividends and the distribution of assets upon liquidation of the Acquiring 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 Acquiring Fund outstanding after any such issuance, exclusive of accumulated
and unpaid dividends, may not exceed $308,400,000 (after giving effect to the
Reorganization). For purposes of clause (b) of the first sentence of this
paragraph, (i) none of the actions permitted by the exception to clause (a) of
the first sentence of this paragraph 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 Acquiring Fund MuniPreferred with
respect to the payment of dividends and the distribution of assets upon
liquidation of the Acquiring Fund, will be deemed to affect such preferences,
rights or powers only if Moody's or S&P is then rating shares of Acquiring Fund
MuniPreferred and such issuance would, at the time thereof, cause the Acquiring
Fund not to satisfy the 1940 Act MuniPreferred Asset Coverage or the
MuniPreferred Basic Maintenance Amount. If any action set forth above would
adversely affect the rights of one or more series of Acquiring Fund
MuniPreferred in a manner different from any other series of Acquiring Fund
MuniPreferred, the Acquiring Fund will not approve any such action without the
affirmative vote of the holders of at least a majority of the shares of each
such series of Acquiring Fund MuniPreferred (voting separately as a class).
REDEMPTION
Mandatory Redemption. In the event the Acquiring Fund does not timely cure a
failure to maintain (a) a Discounted Value of its portfolio equal to the
MuniPreferred Basic Maintenance Amount or (b) the 1940 Act MuniPreferred Asset
Coverage, in each case in accordance with the requirements of the rating agency
or agencies then rating the shares of Acquiring Fund MuniPreferred, shares of
Acquiring Fund MuniPreferred will be subject to mandatory redemption on a date
specified by the Acquiring Fund's Board, out of funds legally available therefor
in accordance with the Acquiring Fund's Articles, including the Acquiring Fund
Statement and applicable law, at the redemption price of $25,000 per share plus
an amount equal to accumulated but unpaid dividends thereon (whether or not
earned or declared) to (but not including) the date fixed for redemption. Any
such redemption will be limited to the number of shares of Acquiring Fund
MuniPreferred necessary to restore the required Discounted Value or the 1940 Act
MuniPreferred Asset Coverage, as the case may be.
Optional Redemption. Shares of Acquiring Fund MuniPreferred of each series are
redeemable, at the option of the Acquiring Fund:
(a) as a whole or from time to time in part, on the second Business Day
preceding any Dividend Payment Date for shares of such series, out of
funds legally available therefor in accordance with the Acquiring
Fund's Articles, including the Acquiring Fund Statement and applicable
law, at the redemption price of $25,000 per share plus an amount equal
to accumulated but unpaid dividends thereon (whether or not earned or
declared) to (but not including) the date fixed for redemption;
provided, however, that (i) shares of such series may not be redeemed
in part if after such partial redemption fewer than 500 shares of such
series would remain outstanding and (ii) the notice establishing a
Special Rate Period of shares of such series, as delivered to the
Auction Agent and filed with the Secretary of the Acquiring Fund, may
provide that shares of such series shall not be redeemable during the
whole or any part of such Special Rate Period (except as provided in
clause (b) below) or shall be redeemable during the whole or any part
of such Special Rate Period only upon payment of such redemption
premium or premiums as shall be specified therein; and
(b) as a whole but not in part, out of funds legally available therefor in
accordance with the Acquiring Fund's Articles, including the Acquiring
Fund Statement and applicable law, on the first day following any
Dividend Period thereof included in a Rate Period of more than 364
Rate Period Days if, on the date of determination of the Applicable
Rate for shares of such series for such Rate Period, such Applicable
Rate equaled or exceeded on such date of determination the Treasury
Note Rate for such Rate Period, at a redemption price of $25,000 per
share plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date
fixed for redemption.
Notwithstanding the foregoing, if any dividends on shares of any series of
Acquiring Fund 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 Acquiring Fund shall not purchase or
otherwise acquire any shares of such series provided, however, that the
foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series; pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
holders of all outstanding shares of such series.
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<PAGE> 30
LIQUIDATION
Subject to the rights of holders of any series or class or classes of shares
ranking on a parity with shares of Acquiring Fund MuniPreferred with respect to
the distribution of assets upon liquidation of the Acquiring Fund, upon a
liquidation of the Acquiring Fund, whether voluntary or involuntary, the holders
of shares of Acquiring Fund MuniPreferred then outstanding will be entitled to
receive and to be paid out of the assets of the Acquiring Fund available for
distribution to its shareholders, before any payment or distribution shall be
made on the Acquiring Fund common shares, an amount equal to the liquidation
preference with respect to such shares ($25,000 per share), plus an amount equal
to all dividends thereon (whether or not earned or declared) accumulated but
unpaid to (but not including) the date of final distribution in same-day funds,
together with any applicable Gross-up Payments in connection with the
liquidation of the Acquiring Fund. After the payment to the holders of shares of
Acquiring Fund MuniPreferred of the full preferential amounts provided for as
described herein, the holders of shares of Acquiring Fund MuniPreferred as such
shall have no right or claim to any of the remaining assets of the Acquiring
Fund.
Neither the sale of all or substantially all the property or business of the
Acquiring Fund, nor the merger or consolidation of the Acquiring Fund into or
with any other corporation nor the merger or consolidation of any corporation
into or with the Acquiring Fund, shall be a liquidation, whether voluntary or
involuntary, for the purposes of the foregoing paragraph.
RATING AGENCY GUIDELINES
The Acquiring Fund is required under Moody's and S&P guidelines to maintain
assets having in the aggregate a Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount. Moody's and S&P have each established
separate guidelines for determining Discounted Value as described in the
Statement of Additional Information under "Description of MuniPreferred Issued
by the Acquiring Fund -- Rating Agency Guidelines." To the extent any particular
portfolio holding does not satisfy the applicable rating agency's guidelines,
all or a portion of such holding's value will not be included in the calculation
of Discounted Value (as defined by such rating agency). The Moody's and S&P
guidelines do not impose any limitations on the percentage of the Acquiring
Fund's assets that may be invested in holdings not eligible for inclusion in the
calculation of the Discounted Value of the Acquiring Fund's portfolio. The
amount of such assets included in the portfolio at any time may vary depending
upon the rating, diversification and other characteristics of the eligible
assets included in the portfolio, although it is not anticipated that in the
normal course of business the value of such assets would exceed 20% of the
Acquiring Fund's total assets. The MuniPreferred Basic Maintenance Amount
includes the sum of (a) the aggregate liquidation preference of shares of
Acquiring Fund MuniPreferred then outstanding and (b) certain accrued and
projected payment obligations of the Acquiring Fund.
The Acquiring Fund is also required under rating agency guidelines to maintain,
with respect to shares of Acquiring Fund MuniPreferred, as of the last Business
Day of each month in which any such shares are outstanding, asset coverage of at
least 200% with respect to senior securities which are shares, including
Acquiring Fund MuniPreferred (or such other asset coverage as may in the future
be specified in or under the 1940 Act as the minimum asset coverage for senior
securities which are shares of a closed-end investment company as a condition of
declaring dividends on its common shares) ("1940 Act MuniPreferred Asset
Coverage"). Based on the composition of the respective portfolios of the
Acquiring Fund and the Acquired Fund and market conditions as of April 15, 1999,
1940 Act MuniPreferred Asset Coverage with respect to shares of Acquiring Fund
MuniPreferred, assuming the issuance on the date thereof of all shares of
Acquiring Fund MuniPreferred contemplated to be issued pursuant to the
Reorganization, would have been computed as follows:
<TABLE>
<S> <C> <C> <C> <C>
Value of Acquiring Fund assets less liabilities
not constituting senior securities = $916,144,171 = 297%
Senior securities representing indebtedness plus liquidation $308,400,000
value of the shares of Acquiring Fund MuniPreferred
</TABLE>
In the event the Acquiring Fund does not timely cure a failure to maintain (a) a
Discounted Value of its portfolio equal to the MuniPreferred Basic Maintenance
Amount or (b) the 1940 Act MuniPreferred Asset Coverage, in each case in
accordance with the requirements of the rating agency or agencies then rating
the shares of Acquiring Fund MuniPreferred, the Acquiring Fund will be required
to redeem shares of Acquiring Fund MuniPreferred as described under
"-- Redemption -- Mandatory Redemption" above.
The Acquiring Fund may, but is not required to, adopt any modifications to the
guidelines that may hereafter be established by Moody's or S&P. Failure to adopt
any such modifications, however, may result in a change in the ratings described
under "Rating Agency Considerations" above or a withdrawal of ratings
altogether. In addition, any rating agency providing a rating for the shares of
Acquiring Fund MuniPreferred may, at any time, change or withdraw any such
rating. The Acquiring Fund's Board may, without shareholder approval, amend,
alter or repeal any or all of the definitions and related provisions which have
been adopted by the Acquiring Fund pursuant to the rating agency guidelines in
the event the Acquiring Fund receives written confirmation from Moody's or S&P,
or both, as appropriate, that any such amendment, alteration or repeal would not
impair the ratings then assigned by Moody's and S&P to shares of Acquiring Fund
MuniPreferred.
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<PAGE> 31
As recently described by Moody's and S&P, a preferred share rating is an
assessment of the capacity and willingness of an issuer to pay preferred share
obligations. The ratings on the shares of Acquiring Fund MuniPreferred are not
recommendations to purchase, hold or sell those shares, inasmuch as the ratings
do not comment as to market price or suitability for a particular investor. The
rating agency guidelines described above also do not address the likelihood that
an owner of shares of Acquiring Fund MuniPreferred will be able to sell such
shares in an Auction or otherwise. The ratings are based on current information
furnished to Moody's and S&P by the Acquiring Fund and the Adviser and
information obtained from other sources. The ratings may be changed, suspended
or withdrawn as a result of changes in, or the unavailability of, such
information.
A rating agency's guidelines will apply to shares of Acquiring Fund
MuniPreferred only so long as such rating agency is rating such shares. The
Acquiring Fund will pay certain fees to Moody's or S&P, or both, for rating
shares of Acquiring Fund MuniPreferred.
THE AUCTION
GENERAL
The Acquiring Fund Statement provides that, except as otherwise described
herein, the Applicable Rate for the shares of each series of Acquiring Fund
MuniPreferred, including the shares of Acquiring Fund MuniPreferred, Series TH,
to be issued pursuant to the Reorganization, for each Rate Period after the
Initial Rate Period thereof shall be equal to the rate per annum that the
Auction Agent advises has resulted on the Business Day preceding the first day
of such Subsequent Rate Period (an "Auction Date") from implementation of the
auction procedures (the "Auction Procedures") set forth in the Acquiring Fund
Statement and summarized below, in which persons determine to hold or offer to
sell or, based on dividend rates bid by them, offer to purchase or sell shares
of such series. Each periodic implementation of the Auction Procedures is
referred to herein as an "Auction." See the Acquiring Fund Statement attached as
Annex B to the Statement of Additional Information for a more complete
description of the Auction process.
AUCTION PROCEDURES
Prior to the Submission Deadline on each Auction Date for shares of a series of
Acquiring Fund MuniPreferred, each customer of a Broker-Dealer who is listed on
the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a
holder of shares of such series (a "Beneficial Owner") may submit orders
("Orders") with respect to shares of such series to that Broker-Dealer as
follows:
- Hold Order -- indicating its desire to hold shares of such series
without regard to the Applicable Rate for shares of such series for the
next Rate Period thereof.
- Bid -- indicating its desire to sell shares of such series at $25,000
per share if the Applicable Rate for shares of such series for the next
Rate Period thereof is less than the rate specified in such Bid (also
known as a hold-at-a-rate order).
- Sell Order -- indicating its desire to sell shares of such series at
$25,000 per share without regard to the Applicable Rate for shares of
such series for the next Rate Period thereof.
A Beneficial Owner may submit different types of Orders to its Broker-Dealer
with respect to shares of a series of Acquiring Fund MuniPreferred then held by
such Beneficial Owner. A Beneficial Owner of shares of such series that submits
a Bid with respect to shares of such series to its Broker-Dealer having a rate
higher than the Maximum Rate for such shares on the Auction Date therefor will
be treated as having submitted a Sell Order with respect to shares of such
series to its Broker dealer. A Beneficial Owner of shares of such series that
fails to submit an Order with respect to such shares of such series to its
Broker-Dealer will be deemed to have submitted a Hold Order for shares of such
series to its Broker-Dealer; provided, however, that if a Beneficial Owner of
shares of such series fails to submit an Order with respect to shares of such
series to its Broker-Dealer for an Auction relating to a Rate Period of more
than 28 Rate Period Days, such Beneficial Owner will be deemed to have submitted
a Sell Order with respect to such shares to its Broker-Dealer. A Sell Order
shall constitute an irrevocable offer to sell the shares of Acquiring Fund
MuniPreferred subject thereto. A Beneficial Owner that offers to become the
Beneficial Owner of additional shares of Acquiring Fund MuniPreferred is, for
purposes of such offer, a Potential Beneficial Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of shares of a
series of Acquiring Fund MuniPreferred but that wishes to purchase shares of
such series, or that is a Beneficial Owner of shares of such series that wishes
to purchase additional shares of such series (in each case, a "Potential
Beneficial Owner"), may submit Bids to its Broker-Dealer in which it offers to
purchase shares of such series at $25,000 per share if the Applicable Rate for
shares of such series for the next Rate Period thereof is not less than the rate
specified in such Bid. A Bid placed by a Potential Beneficial Owner of shares of
such series specifying a rate higher than the Maximum Rate for shares of such
series on the Auction Date therefor will not be accepted.
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<PAGE> 32
The Broker-Dealers in turn will submit the Orders of their respective customers
who are Beneficial Owners and Potential Beneficial Owners to the Auction Agent,
designating themselves (unless otherwise permitted by the Acquiring Fund) as
Existing Holders in respect of shares subject to Orders submitted or deemed
submitted to them by Beneficial Owners and as Potential Holders in respect of
shares subject to Orders submitted to them by Potential Beneficial Owners.
However, neither the Acquiring Fund nor the Auction Agent will be responsible
for a Broker-Dealer's failure to comply with the foregoing. Any Order placed
with the Auction Agent by a Broker-Dealer as or on behalf of an Existing Holder
or a Potential Holder will be treated in the same manner as an Order placed with
a Broker-Dealer by a Beneficial Owner or Potential Beneficial Owner. Similarly,
any failure by a Broker-Dealer to submit to the Auction Agent an Order in
respect of any shares of Acquiring Fund MuniPreferred held by it or customers
who are Beneficial Owners will be treated in the same manner as a Beneficial
Owner's failure to submit to its Broker-Dealer an Order in respect of shares of
Acquiring Fund MuniPreferred held by it. A Broker-Dealer may also submit Orders
to the Auction Agent for its own account as an Existing Holder or Potential
Holder, provided it is not an affiliate of the Acquiring Fund.
If Sufficient Clearing Bids for shares of a series of Acquiring Fund
MuniPreferred exist (that is, the number of shares of such series subject to
Bids submitted or deemed submitted to the Auction Agent by Broker-Dealers as or
on behalf of Potential Holders with rates equal to or lower than the Maximum
Rate for shares of such series is at least equal to the number of shares of such
series subject to Sell Orders submitted or deemed submitted to the Auction Agent
by Broker-Dealers as or on behalf of Existing Holders), the Applicable Rate for
shares of such series for the next succeeding Rate Period thereof will be the
lowest rate specified in the Submitted Bids which, taking into account such rate
and all lower rates bid by Broker dealers as or on behalf of Existing Holders
and Potential Holders, would result in Existing Holders and Potential Holders
owning all the shares of such series available for purchase in the Auction. If
Sufficient Clearing Bids for shares of a series of Acquiring Fund MuniPreferred
do not exist, the Applicable Rate for shares of such series for the next
succeeding Rate Period thereof will be the Maximum Rate for shares of such
series on the Auction Date therefor. In such event, Beneficial Owners of shares
of such series that have submitted or are deemed to have submitted Sell Orders
may not be able to sell in such Auction all shares of such series subject to
such Sell Orders. If Broker-Dealers submit or are deemed to have submitted to
the Auction Agent Hold Orders with respect to all Existing Holders of shares of
a series of Acquiring Fund MuniPreferred, the Applicable Rate for shares of such
series for the next succeeding Rate Period thereof will be the All Hold Order
Rate.
The Auction Procedures include a pro rata allocation of shares for purchase and
sale, which may result in an Existing Holder continuing to hold or selling, or a
Potential Holder purchasing, a number of shares of a series of Acquiring Fund
MuniPreferred that is fewer than the number of shares of such series specified
in its Order. To the extent the allocation procedures have that result,
Broker-Dealers that have designated themselves as Existing Holders or Potential
Holders in respect of customer Orders will be required to make appropriate pro
rata allocations among their respective customers.
Settlement of purchases and sales will be made on the next Business Day (also a
Dividend Payment Date) after the Auction Date through the Securities Depository.
Purchasers will make payment through their Agent Members in same-day funds to
the Securities Depository against delivery to their respective Agent Members.
The Securities Depository will make payment to the sellers' Agent Members in
accordance with the Securities Depository's normal procedures, which now provide
for payment against delivery by their Agent Members in same-day funds. The
settlement procedures to be used with respect to Auctions for shares of
Acquiring Fund MuniPreferred are set forth in the Acquiring Fund Statement
attached as Annex to the Statement of Additional Information.
The first Auction for shares of Acquiring Fund MuniPreferred, Series TH, will be
held on the Business Day first preceding the Dividend Payment Date for the
Initial Rate Period of such series. See "-- Description of MuniPreferred Issued
by the Acquiring Fund -- Dividends and Dividend Periods." Thereafter, Auctions
for shares of such series will normally be held every Thursday and each
Subsequent Rate Period of shares of such series will normally begin on the
following Friday.
Whenever the Acquiring Fund intends to include any net capital gains or other
income taxable for Federal income tax purposes in any dividend on shares of
Acquiring Fund MuniPreferred, the Acquiring Fund shall, in the case of Minimum
Rate Periods or Special Rate Periods of 28 Rate Period Days or fewer, and may,
in the case of any other Special Rate Period, notify the Auction Agent of the
amount to be so included not later than the Dividend Payment Date next preceding
the Auction Date on which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice from the Acquiring
Fund, it will be required in turn to notify each Broker-Dealer, who, on or prior
to such Auction Date, in accordance with its Broker-Dealer Agreement, will be
required to notify its customers who are Beneficial Owners and Potential
Beneficial Owners believed by it to be interested in submitting an Order in the
Auction to be held on such Auction Date.
SECONDARY MARKET TRADING AND TRANSFER OF ACQUIRING FUND MUNIPREFERRED
The Broker-Dealers maintain a secondary trading market in shares of Acquiring
Fund MuniPreferred outside of Auctions, but are not obligated to do so, and may
discontinue such activity at any time. There can be no assurance that such
secondary trading market in shares of Acquiring Fund MuniPreferred will provide
owners with liquidity of investment. The shares of Acquiring Fund MuniPreferred
are not registered on any stock exchange or on the National Association of
Securities Dealers Automated Quotations System. Investors who purchase shares in
an Auction for a Special Rate Period should note that
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<PAGE> 33
because the dividend rate on such shares will be fixed for the length of such
Rate Period, the value of the shares may fluctuate in response to changes in
interest rates, and may be more or less than their original cost if sold on the
open market in advance of the next Auction therefor, depending upon market
conditions.
Unless otherwise permitted by the Acquiring Fund, a Beneficial Owner or an
Existing Holder may sell, transfer or otherwise dispose of shares of a series of
Acquiring Fund MuniPreferred only in whole shares and only pursuant to a Bid or
Sell Order placed with the Auction Agent in accordance with the Auction
Procedures or to a Broker-Dealer; provided, however, that in the case of all
transfers other than pursuant to Auctions, (i) any such Beneficial Owner or any
such Existing Holder that is not a Broker-Dealer shall advise its Broker-Dealer
of such transfer, who in turn shall advise the Auction Agent of such transfer
and (ii) any such Existing Holder that is a Broker-Dealer shall advise the
Auction Agent of such transfer.
COMPARISON OF RIGHTS OF HOLDERS OF MUNIPREFERRED OF THE
ACQUIRING FUND AND THE ACQUIRED FUND
The terms of the shares of Acquiring Fund MuniPreferred, Series TH or Series
TH2, issued pursuant to the Reorganization will be substantially similar to the
outstanding shares of Acquired Fund MuniPreferred, Series TH.
COMPARISON OF THE INVESTMENT OBJECTIVES AND POLICIES OF
THE ACQUIRING FUND AND THE ACQUIRED FUND
GENERAL
Each Fund's primary investment objective is to provide, through investment in a
professionally managed portfolio of tax-exempt Municipal Obligations, current
income exempt from regular Federal income tax, consistent with the Fund's
investment policies. The secondary investment objective of the Acquiring Fund is
the enhancement of portfolio value relative to the municipal bond market through
investments in tax-exempt Municipal Obligations that, in the opinion of the
Adviser, are underrated or undervalued or that represent municipal market
sectors that are undervalued. The secondary investment objective of the Acquired
Fund is the enhancement of portfolio value relative to the Washington municipal
bond market through investments in tax-exempt Washington Municipal Obligations
that, in the opinion of the Adviser, are underrated or undervalued or that
represent municipal market sectors that are undervalued. See "-- Portfolio
Investments." Underrated Municipal Obligations are those whose ratings do not,
in the Adviser's opinion, reflect their true value. Municipal Obligations may be
underrated because of the time that has elapsed since their most recent rating,
or because of positive factors that may not have been fully taken into account
by rating agencies, or for other similar reasons. Municipal Obligations that are
undervalued or that represent undervalued municipal market sectors are Municipal
Obligations that, in the Adviser's opinion, are worth more than the value
assigned to them in the marketplace. Municipal Obligations of particular types
or purposes (e.g., hospital bonds, industrial revenue bonds or bonds issued by a
particular municipal issuer) may be undervalued because there is a temporary
excess of supply in that market sector, or because of a general decline in the
market price of Municipal Obligations of the market sector for reasons that do
not apply to the particular Municipal Obligations that are considered
undervalued. Each Fund's investment in underrated or undervalued Municipal
Obligations will be based on the Adviser's belief that the prices of such
Municipal Obligations should ultimately reflect their true value. Accordingly,
"enhancement of portfolio value relative to the municipal bond market" refers to
each 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. Thus, each Fund's secondary investment objective
is not intended to suggest that capital appreciation is itself an objective of
each Fund. Instead, each Fund will seek enhancement of portfolio value relative
to the municipal bond market by prudent selection of Municipal Obligations,
regardless of which direction the market may move. Any capital appreciation
realized by a Fund will generally result in the distribution of taxable capital
gains to Fund shareholders. Each Fund is currently required to allocate net
capital gains and other income taxable for Federal income tax purposes, if any,
proportionately between its common shares and shares of MuniPreferred. See
"-- Tax Matters Associated with Investment in the Funds" and " -- The
Auction -- Auction Procedures."
PORTFOLIO INVESTMENTS
Except to the extent either Fund invests in temporary investments as described
below and more fully in the Statement of Additional Information, the Acquiring
Fund will, as a fundamental policy, invest substantially all (in excess of 80%)
of its assets in tax-exempt Municipal Obligations rated at the time of purchase
within the four highest grades (Baa or BBB or better) by Moody's or S&P or in
unrated Municipal Obligations which, in the opinion of the Adviser, have
characteristics equivalent to, and will be of comparable quality to, Municipal
Obligations rated within the four highest grades by Moody's or S&P, provided
that the Acquiring Fund may not invest more than 20% of its assets in such
unrated Municipal Obligations. The Acquired Fund, as a fundamental policy,
invests substantially all (in excess of 80%) of its assets in tax-exempt
Washington Municipal Obligations rated at the time of purchase within the four
highest grades by Moody's or S&P, or in unrated Washington Municipal Obligations
which, in the opinion of the Adviser, have credit characteristics equivalent to,
23
<PAGE> 34
and will be of comparable quality to, Washington Municipal Obligations rated
within the four highest grades by Moody's or S&P, provided that the Acquired
Fund may not invest more than 20% of its assets in such unrated Washington
Municipal Obligations.
Each Fund will not invest in any rated Municipal Obligations that are rated
lower than Baa by Moody's or BBB by S&P at the time of purchase. Municipal
Obligations rated Baa or BBB are considered "investment grade" securities;
Municipal Obligations rated Baa are considered medium grade obligations which
lack outstanding investment characteristics and in fact have speculative
characteristics as well, while Municipal Obligations rated BBB are regarded as
having an adequate capacity to pay principal and interest. Municipal Obligations
rated AAA in which each Fund may invest may have been so rated on the basis of
the existence of insurance guaranteeing the timely payment, when due, of all
principal and interest. A general description of Moody's and S&P's ratings of
Municipal Obligations is set forth in Annex A.
The foregoing investment objectives and policies are fundamental policies of
each Fund and may not be changed without the approval of the holders of a
"majority of the outstanding" common shares and preferred shares of that Fund,
including shares of that Fund's MuniPreferred, voting together as a single
class, and of the holders of a "majority of the outstanding" preferred shares of
the Fund, including shares of that Fund's MuniPreferred, voting as a separate
class. For purposes of the foregoing, "-- Investment Restrictions" below, and
the first paragraph under " -- Description of MuniPreferred Issued by the
Acquiring Fund -- Voting Rights" above, "majority of the outstanding," when used
with respect to particular shares of a Fund, means (a) 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 (b) more than 50% of the shares, whichever is less.
Both Funds emphasize investments in Municipal Obligations with long-term
maturities in order to maintain an average portfolio maturity of 20-30 years,
but the average maturity may be shortened from time to time depending on market
conditions. Moreover, during temporary defensive periods, and in order to keep
cash on hand fully invested, both Funds may invest any percentage of its assets
in temporary investments, the income on which may be either tax-exempt or
taxable. Both Funds intend to invest in taxable temporary investments only in
the event that suitable tax-exempt temporary investments are not available at
reasonable prices and yields. Both Funds will invest only in taxable temporary
investments which are U.S. Government securities or securities rated within the
highest grade by Moody's or S&P, and which mature within one year from the date
of purchase or carry a variable or floating rate of interest.
MUNICIPAL OBLIGATIONS
"Municipal Obligations" are debt obligations issued by states, cities and local
authorities, and certain possessions and territories of the United States, to
obtain funds for various public purposes, including the construction and
maintenance of such public facilities as airports, bridges, highways, housing,
hospitals, mass transportation, schools, streets and water and sewer works.
Other public purposes for which Municipal Obligations may be issued include the
refinancing of outstanding obligations and the obtaining of funds for general
operating expenses and for loans to other public institutions and facilities. In
addition, certain industrial development, private activity and pollution control
bonds may be included within the term Municipal Obligations if the interest paid
thereon qualifies as exempt from regular Federal income tax. The two principal
classifications of Municipal Obligations are "general obligation" and "revenue"
bonds. General obligation bonds are secured by the issuer's pledge of its full
faith, credit and taxing power for the payment of principal and interest.
Revenue bonds (e.g., industrial development bonds) are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or other specific revenue source.
Also included within the general category of Municipal Obligations are
participations in lease obligations or installment purchase contract obligations
of municipal authorities or entities.
The yields on Municipal Obligations are dependent on a variety of factors,
including the condition of the general money market and the Municipal Obligation
market, the size of a particular offering, the maturity of the obligation and
the rating of the issue. The market value of Municipal Obligations will vary
with changes in prevailing interest rate levels and as a result of changing
evaluations of the ability of their issuers to meet interest and principal
payments.
Each Fund may purchase and sell Municipal Obligations on a when-issued or
delayed delivery basis. When-issued and delayed delivery transactions arise when
securities are purchased or sold with payment and delivery beyond the regular
settlement date. On such transactions the payment obligation is fixed at the
time the buyer enters into the commitment. This involves an element of risk to a
Fund when it is the buyer because at the time of delivery the market value of
the Municipal Obligations may be less than such Fund's payment obligation. Each
Fund is required under the rules of the Commission to maintain in a segregated
account liquid assets, consisting of cash, U.S. government securities or other
high grade debt obligations, equal in value to the purchase price due on the
settlement date. Income generated by assets in such a segregated account of a
Fund may be taxable to shareholders of that Fund.
24
<PAGE> 35
INVESTMENT RESTRICTIONS
Except as described below, neither Fund, as a fundamental policy, may, without
the approval of the holders of a "majority of the outstanding" common shares and
preferred shares of such Fund, including shares of its MuniPreferred, voting
together as a single class, and of the holders of a "majority of the
outstanding" preferred shares of such Fund, including shares of its
MuniPreferred, voting as a separate class:
(1) Issue senior securities, as defined in the 1940 Act, other than
Preferred Shares, 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 in the Statement
of Additional Information under Certain Trading Strategies of each
Fund -- Financial Futures and Options Transactions.
(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 that represent no more than 10% of such Fund's
total assets and are otherwise within the limits described in the
Statement of Additional Information under Certain Trading Strategies
of each Fund -- Financial Futures and Options Transactions.
(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 such Fund's total assets
including the amount borrowed; while any such borrowings exceed 5% of
such Fund's 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
be applicable to Municipal Obligations other than those Municipal
Obligations backed only by the assets and revenues of
non-governmental users, nor shall it apply to Municipal Obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities;
(6) Purchase or sell real estate, but this shall not prevent such Fund
from investing in Municipal Obligations secured by real estate or
interests therein or foreclosing upon and selling such security;
(7) Purchase or sell commodities or commodities contracts, except for
transactions involving futures contracts that represent no more than
10% of such Fund's total assets and are otherwise within the limits
described in the Statement of Additional Information under Certain
Trading Strategies of each Fund -- Financial Futures and Options
Transactions.
(8) Make loans, other than by entering into repurchase agreements and
through the purchase of Municipal Obligations or temporary
investments in accordance with its investment objectives, policies
and limitations;
(9) Invest in securities other than Municipal Obligations and temporary
investments as described in "Additional Information about the
Funds -- Investment Objectives and Policies -- Portfolio
Investments," and purchase financial futures and options except for
futures and options that represent no more than 10% of a Fund's total
assets and are otherwise within the limits described in the Statement
of Additional Information Under Certain Trading Strategies of each
Fund -- Financial Futures and Options Transactions.
(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 such Fund's total assets;
(11) Pledge, mortgage or hypothecate its assets, except that, to secure
borrowing 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 such Fund's 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 the
securities of such Fund if, to such Fund's knowledge, those directors
or trustees of such Fund, or those officers and directors of the
Adviser, 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
25
<PAGE> 36
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, such a guarantee or letter of credit would be
considered a separate security and would be treated as an issue of such
government, other entity or bank. When a Municipal Obligation is insured by bond
insurance, it shall not be considered a security that is issued or guaranteed by
the insurer; instead, the issuer of such security will be determined in
accordance with the principles set forth above. The foregoing restrictions do
not limit the percentage of a Fund's assets that may be invested in Municipal
Obligations insured by any given insurer.
Notwithstanding the foregoing, certain restrictions imposed by Moody's or S&P,
or both, on borrowing money, engaging in short sales of securities, lending
securities, buying and selling futures contracts and writing put or call options
at any time a Fund's shares of MuniPreferred are outstanding, as described in
the Statement of Additional Information under Certain Trading Strategies of each
Fund -- Financial Futures and Options Transactions are not fundamental policies
and may be changed by a Fund from time to time without shareholder approval, but
only in the event such Fund receives written confirmation from Moody's or S&P,
as appropriate, that such change would not impair the ratings then assigned by
Moody's or S&P, or both, to shares of such Fund's MuniPreferred.
The foregoing restrictions and limitations 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.
CERTAIN PROVISIONS IN THE ACQUIRING FUND'S ARTICLES OF INCORPORATION
The Acquiring Fund's Articles include provisions that could have the effect of
limiting the ability of other entities or persons to acquire control of the
Acquiring Fund. Specifically, the Acquiring Fund's Articles require the
affirmative vote of the holders of at least 66 2/3% of the Acquiring Fund Common
Shares and Acquiring Fund Preferred Shares (including shares of Acquiring Fund
MuniPreferred) then entitled to be voted, voting together as a single class,
except as described below, to authorize any of the following transactions:
(a) conversion of the Acquiring Fund from a closed-end to an open-end
investment company,
(b) a merger or consolidation of the Acquiring Fund with another
corporation or a reorganization or recapitalization,
(c) a sale, lease or transfer of all or substantially all of the Acquiring
Fund's assets (other than in the regular course of the Acquiring
Fund's investment activities), or
(d) a liquidation or dissolution of the Acquiring Fund,
unless such transaction has been authorized by the affirmative vote of 66 2/3%
of the total number of directors fixed in accordance with the By-Laws, in which
case the affirmative vote of the holders of a majority of the Acquiring Fund
Common Shares and Acquiring Fund Preferred Shares (including shares of Acquiring
Fund MuniPreferred), voting together as a single class, is required. In the case
of the conversion of the Acquiring Fund to an open-end investment company, or in
the case of any of the foregoing transactions constituting a plan of
reorganization which adversely affects the holders of Acquiring Fund Preferred
Shares (including shares of Acquiring Fund MuniPreferred), the action in
question will also require the approval of the holders of 66 2/3% of the
Acquiring Fund Preferred Shares (including shares of Acquiring Fund
MuniPreferred) voting as a separate class; provided, however, that such separate
class vote shall be a majority vote if the transaction has been authorized by
the affirmative vote of 66 2/3% of the total number of directors fixed in
accordance with the By-Laws. The 66 2/3% vote required under certain
circumstances to approve the conversion of the Acquiring Fund from a closed-end
to an open-end investment company or to approve the other transactions described
above are higher than those required by the 1940 Act. The Acquiring Fund's Board
believes that the provisions of the Acquiring Fund's Articles relating to such
higher votes are in the best interest of the Acquiring Fund and its
shareholders.
Reference should be made to the Acquiring Fund's Articles on file with the
Commission for the full text of these provisions, which could have the effect of
depriving shareholders of the Acquiring Fund of an opportunity to sell their
shares at a premium over prevailing market prices by discouraging a third party
from seeking to obtain control of the Acquiring Fund.
SURRENDER AND EXCHANGE OF ACQUIRED FUND SHARE CERTIFICATES
After the Effective Time, each holder of an outstanding certificate or
certificates formerly representing common shares or shares of MuniPreferred of
the Acquired Fund ("Acquired Fund Shares") will be entitled to receive, upon
surrender of his or her certificates, a certificate or certificates representing
the number of Acquiring Fund Shares distributable with respect to such holder's
Acquired Fund Shares, together with cash in lieu of any fractional Acquiring
Fund common share. Promptly after the Effective Time, the Transfer Agent will
mail to each holder of certificates formerly representing Acquired Fund
26
<PAGE> 37
Shares a letter of transmittal for use in surrendering his or her certificates
for certificates representing Acquiring Fund Shares and cash in lieu of any
fractional Acquiring Fund common share.
PLEASE DO NOT SEND IN ANY SHARE CERTIFICATES AT THIS TIME. UPON CONSUMMATION OF
THE REORGANIZATION, HOLDERS OF ACQUIRED FUND SHARES WILL BE FURNISHED
INSTRUCTIONS FOR EXCHANGING THEIR ACQUIRED FUND SHARE CERTIFICATES FOR ACQUIRING
FUND SHARE CERTIFICATES AND, IF APPLICABLE, CASH IN LIEU OF FRACTIONAL ACQUIRING
FUND COMMON SHARES.
From and after the Effective Time, certificates formerly representing Acquired
Fund Shares will be deemed for all purposes to evidence ownership of the number
of full Acquiring Fund common shares or shares of Acquiring Fund MuniPreferred,
Series TH or Series TH2, as the case may be, distributable with respect to such
Acquired Fund Shares in the Reorganization, provided that until such Acquired
Fund Share certificates have been so surrendered, no dividends payable to the
holders of record of Acquiring Fund Shares as of any date subsequent to the
liquidation of the Acquired Fund are required to be paid to the holders of such
outstanding Acquired Fund Share certificates. Unpaid dividends on Acquiring Fund
Shares to holders of record as of any date after the liquidation of the Acquired
Fund and prior to the exchange of certificates by any Acquired Fund shareholder
will be paid to such shareholder, without interest, at the time such shareholder
surrenders his or her Acquired Fund Share certificates for exchange.
From and after the Effective Time, there will be no transfers on the record
transfer books of the Acquired Fund. If, after the Effective Time, certificates
representing Acquired Fund Shares are presented to the Acquired Fund, they will
be cancelled and exchanged for certificates representing the Acquiring Fund
Shares and, if applicable, the cash in lieu of fractional Acquiring Fund common
shares distributable with respect to such Acquired Fund Shares in the
Reorganization.
EXPENSES ASSOCIATED WITH THE REORGANIZATION
In evaluating the Reorganization, management of the Funds estimated the amount
of expenses the Funds would incur to be approximately $150,000, which includes
additional stock exchange listing fees, Commission registration fees, legal and
accounting fees and proxy and distribution costs. These expenses are to be paid
by the Acquired Fund.
Reorganization expenses have been or will be expensed prior to the Effective
Time. Management of the Acquired Fund expects that reduced operating expenses
resulting from the Reorganization should allow the recovery of the projected
costs of the Reorganization within approximately 25 months after the Effective
Time.
DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL
Under Minnesota law and the Articles of the Acquiring Fund, shareholders of the
Acquiring Fund do not have dissenters' rights of appraisal with respect to the
Reorganization. Under Massachusetts law and the Declaration of the Acquired
Fund, shareholders of the Acquired Fund do not have dissenters' rights of
appraisal with respect to the Reorganization.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
As a condition to closing, the Funds will receive the opinion of Vedder, Price,
Kaufman & Kammholz, counsel to the Funds, to the effect that the Reorganization
will qualify as a tax-free reorganization under Section 368(a)(1) of the Code.
Accordingly, neither Fund will recognize gain or loss for Federal income tax
purposes as a result of the Reorganization. The following discussion summarizes
the anticipated Federal income tax treatment to shareholders of the Acquired
Fund.
EXCHANGE OF ACQUIRED FUND SHARES SOLELY FOR ACQUIRING FUND SHARES
A common shareholder of the Acquired Fund who receives common shares of the
Acquiring Fund pursuant to the Reorganization will recognize no gain or loss for
Federal income tax purposes, except with respect to the cash received for a
fractional Acquiring Fund common share interest, if any. See "-- Fractional
Common Share Interests" below. Likewise, a holder of shares of Acquired Fund
MuniPreferred who receives shares of Acquiring Fund MuniPreferred pursuant to
the Reorganization will recognize no gain or loss for Federal income tax
purposes.
The aggregate basis of the Acquiring Fund Shares received by a shareholder of
the Acquired Fund (including any fractional Acquiring Fund common share interest
to which he or she may be entitled) will be the same as the shareholder's
aggregate basis in the Acquired Fund Shares surrendered in exchange therefor.
The holding period of the Acquiring Fund Shares received by a shareholder of the
Acquired Fund (including any fractional Acquiring Fund common share interest to
which he or she may be entitled) will include the period during which the
shareholder's Acquired Fund Shares were held, provided such Acquired Fund Shares
were held as a capital asset at the Effective Time.
27
<PAGE> 38
For Federal income tax reasons, the Acquired Fund must declare a distribution to
its shareholders of all net tax-exempt income, net ordinary taxable income and
net capital gains, if any, prior to the end of its fiscal year, which
declaration will occur at or prior to the Effective Time.
FRACTIONAL COMMON SHARE INTERESTS
No fractional Acquiring Fund common shares will be issued pursuant to the
Reorganization. Cash payments received by an Acquired Fund shareholder in lieu
of a fractional Acquiring Fund common share will be treated as received by such
shareholder as a distribution in redemption by the Acquiring Fund of that
fractional common share interest and will be treated as a distribution in full
payment in exchange for the fractional Acquiring Fund common share interest,
resulting in a capital gain or loss for Federal income tax purposes (provided
the redemption is not substantially equivalent to a dividend), assuming the
Acquired Fund common shares exchanged for cash in lieu of the fractional
Acquiring Fund common share were held as a capital asset at the Effective Time.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL FEDERAL INCOME
TAX CONSEQUENCES OF THE REORGANIZATION AND SHOULD NOT BE CONSIDERED TO BE TAX
ADVICE. THERE CAN BE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL CONCUR
ON ALL OR ANY OF THE ISSUES DISCUSSED ABOVE. ACQUIRED FUND SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISERS REGARDING THE FEDERAL, STATE AND LOCAL
TAX CONSEQUENCES WITH RESPECT TO THE FOREGOING MATTERS AND ANY OTHER
CONSIDERATIONS WHICH MAY BE APPLICABLE TO THEM.
THE ACQUIRING FUND AND ACQUIRED FUND'S BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR APPROVAL OF THE REORGANIZATION.
PROPOSAL NO. 2 -- AMENDMENT OF THE
ACQUIRING FUND STATEMENT (ACQUIRING
FUND SHAREHOLDERS ONLY)
The Board of Directors of the Acquiring Fund has proposed that the Acquiring
Fund Statements dated June 1, 1993 relating to Series T, TH and F MuniPreferred
and September 8, 1994 relating to Series M, T2 W and F2 MuniPreferred be amended
so that 10,000 shares of each existing series of Acquiring Fund MuniPreferred
(the"Amendment") are authorized.
The Amendment would give the Acquiring Fund the flexibility to issue additional
shares of MuniPreferred to adjust the Acquiring Fund's leverage structure in
response to market conditions. Additional shares could be issued without
amending the Acquired Fund's Statement. Therefore, the Acquiring Fund could
issue additional shares of MuniPreferred without the added cost of seeking
shareholder approval subject to the requirement of obtaining rating agency
approval prior to issuance. Additional leverage would increase the Acquiring
Fund's volatility and the risks of loss in a declining market. However, the
Acquiring Fund would still be required under rating agency guidelines to
maintain asset coverage of at least 200% and the asset coverage requirements of
the 1940 Act. See, "Rating Agency Guidelines." Currently, the Board of Directors
of the Acquiring Fund has no intention to issue additional shares of Acquiring
Fund MuniPreferred except for shares of Series TH or Series TH2 to be issued in
connection with the Reorganization.
The Acquiring Fund currently has authorized and outstanding shares of
MuniPreferred as follows: Series M-2,200; Series T-2,000; Series T2-1,328;
Series W-1,680; Series TH-2,000; Series F-1,800; and Series F2-1,328. The
Acquiring Fund expects to file another Statement authorizing 10,000 shares of a
newly created Series W2 and issue 520 shares of Series W2 in June 1999. If the
Amendment is approved, the Acquiring Fund will have authorized 10,000 shares of
each Series of MuniPreferred but will have the same number of shares of
MuniPreferred of each Series outstanding, except if the Reorganization and the
Amendment are approved, the Acquiring Fund will issue an additional 680
MuniPreferred, Series TH shares to Acquired Fund shareholders and the
outstanding shares of MuniPreferred, Series TH would be 2,680. If the Amendment
is not approved and the Reorganization is approved, the Acquired Fund would have
10,000 shares of MuniPreferred, Series TH2 authorized and 680 shares of
MuniPreferred, Series TH2 outstanding.
THE ACQUIRING FUND'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE APPROVAL OF THE AMENDMENT.
VOTE REQUIRED
Approval of the proposed amendment requires (a) the affirmative vote of the
holders of Acquiring Fund common shares of the greater of (1) a majority of the
voting power of the shares present and entitled to vote on the proposal or (2) a
majority of the voting power of the minimum number of the shares entitled to
vote that would constitute a quorum for the transaction of business at the
meeting and (b) the affirmative vote of the holders of each series of Acquiring
Fund MuniPreferred, voting separately by series, of the greater of (1) a
majority of the voting power of the shares of such series present and entitled
to vote on the proposal or (2) a majority of the voting power of the minimum
number of the shares of such series entitled to vote that would constitute a
quorum for the transaction of business at the meeting.
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<PAGE> 39
PROPOSAL NO. 3 -- ELECTION OF BOARD MEMBERS OF THE
ACQUIRING FUND (ACQUIRING FUND SHAREHOLDERS ONLY)
Shareholders of the Acquiring Fund are being asked to vote for the election of
seven (7) Board Members of the Fund to serve until the next Annual Meeting and
until their successors have been duly elected and qualified. Under the terms of
the Acquiring Fund's Articles, under normal circumstances holders of shares of
the Fund's MuniPreferred are entitled to elect two Fund Board Members, and the
remaining Board Members are to be elected by holders of the Fund's common shares
and shares of MuniPreferred, voting together as a single class.
It is the intention of the persons named in the enclosed proxy to vote the
shares represented thereby for the election of the nominees listed below unless
the proxy is marked otherwise. (See, however, "The Annual Meetings -- Voting;
Proxies" above.) Each of the nominees listed below has agreed to serve as a
Board Member of the Fund if elected; however, should any nominee become unable
or unwilling to accept nomination or election, the proxies for the Fund will be
voted for one or more substitute nominees designated by the Fund's present
Board.
Shareholders of the Fund will be entitled to one vote for each share held for
the election of Board Members. The affirmative vote of a majority of the shares
present and entitled to vote at the Annual Meeting of the Acquiring Fund will be
required to elect the Board Members for the Fund.
Tables I and II below show each nominee's age, principal occupations and other
business affiliations, the year in which each nominee was first elected or
appointed a Board Member of the Fund and the number of common shares of the Fund
and of all Nuveen funds (excluding money market funds) which each nominee
beneficially owned as of April 30, 1999. All of the nominees were last elected
to each Board at the 1998 annual meeting of shareholders. Currently there is a
vacancy on the Board. No candidate has been selected to fill this vacancy.
Except for Mr. Schwertfeger, none of the Board Members have ever been a director
of, employee of or a consultant to John Nuveen & Co. or any affiliate.
THE FUND'S BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES NAMED BELOW.
TABLE I
NOMINEES FOR THE ACQUIRING FUND TO BE ELECTED BY ALL SHAREHOLDERS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FULL COMMON SHARES
BENEFICIALLY OWNED
YEAR FIRST ELECTED OR -----------------------
APPOINTED A ACQUIRING ALL NUVEEN
NAME, AGE AND PRINCIPAL OCCUPATIONS OF NOMINEES AS OF APRIL 30, 1999(1) BOARD MEMBER FUND(2) FUNDS(3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert P. Bremner, 58 1997 0 12,429
Board Member; private
investor and management consultant
Lawrence H. Brown, 64 1993 0 7,265
Board Member; retired in August 1989 as Senior Vice President of The
Northern Trust Company (banking and trust industry)
Anne E. Impellizzeri, 66 1994 0 3,648
Board Member; Executive Director (since 1998) of Manitoga (center for
Russel Wright's design/home and landscape), formerly President and
Chief Executive Officer of Blanton-Peale Institute (a training and
counseling organization)
Peter R. Sawers, 66 1993 0 12,768
Board Member; Adjunct Professor of Business and Economics, University
of Dubuque, Iowa; Adjunct Professor, Lake Forest Graduate School of
Management, Lake Forest, Illinois; Chartered Financial Analyst;
Certified Management Consultant
Judith M. Stockdale, 51 1997 0 429
Board Member; Executive Director (since 1994) of the Gaylord and
Dorothy Donnelley Foundation a private family foundation; prior
thereto, Executive Director (from 1990 to 1994) of the Great Lakes
Protection Fund
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE> 40
TABLE II
NOMINEES FOR THE ACQUIRING FUND TO BE ELECTED BY HOLDERS OF MUNIPREFERRED
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FULL COMMON SHARES
BENEFICIALLY OWNED
YEAR FIRST ELECTED OR -----------------------
APPOINTED A ACQUIRING ALL NUVEEN
NAME, AGE AND PRINCIPAL OCCUPATIONS OF NOMINEES AS OF APRIL 30, 1999(1) BOARD MEMBER FUND(2) FUNDS(3)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William J. Schneider, 54 1997 12,000(4) 39,790
Board Member, Senior partner and Chief Operating Officer, Miller-
Valentine Partners; Vice President, Miller-Valentine Group (commercial
real estate); Member Community Advisory Board, National City Bank,
Dayton, Ohio
*Timothy R. Schwertfeger, 50 1994 0 228,440
Chairman of the Board (since July 1996); Trustee and President of the
Funds advised by Nuveen Institutional Advisory Corp. (since July 1996);
Chairman (since July 1996), Director, previously Executive Vice
President, of The John Nuveen Company, John Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Director
(since 1996) of Institutional Capital Corporation; Chairman and
Director of Nuveen Asset Management, Inc.; Chairman and Director of
Rittenhouse Financial Services, Inc. (since 1999)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) "Interested person" as defined in the Investment Company Act of 1940, as
amended, by reason of being an officer or director of the Funds' investment
adviser, Nuveen Advisory Corp.
(1) As of June 1, 1999, the Board Members and nominees were board members of 36
Nuveen open-end funds and 55 closed-end funds managed by Nuveen Advisory
Corp. ("NAC funds"). In addition, Mr. Schwertfeger is a board member nominee
of six open-end and five closed-end funds managed by Nuveen Institutional
Advisory Corp. ("NIAC Funds").
(2) No nominee beneficially owned any shares of MuniPreferred of the Funds.
(3) The number shown reflects the aggregate number of common shares beneficially
owned in all of the NAC and NIAC Funds referred to in note (1) above
(excluding money market funds). Includes share equivalents of certain Nuveen
Funds in which the Board Member is deemed to be invested pursuant to the
Funds' Deferred Compensation Plan ("Deferred Units"), as more fully
described below. Also includes shares held by Mr. Schwertfeger in Nuveen's
401(k)/profit sharing plan.
(4) Represents shares held by Mr. Schneider's spouse.
The Board Members affiliated with John Nuveen & Co. Incorporated ("Nuveen") or
Nuveen Advisory Corp. (the "Adviser") serve without any compensation from the
Funds. Board Members who are not affiliated with Nuveen or the Adviser receive a
$15,000 quarterly retainer ($60,000 annually) for serving as a board member of
all funds sponsored by Nuveen and managed by the Adviser and a $1,000 fee per
day plus expenses for attendance at all meetings held on a day on which a
regularly scheduled Board meeting is held, a $1,000 fee per day plus expenses
for attendance in person or a $500 fee per day plus expenses for attendance by
telephone at a meeting held on a day on which no regular Board meeting is held,
and a $250 fee per day plus expenses for attendance in person or by telephone at
a meeting of the executive committee or the dividend committee. The annual
retainer, fees and expenses are allocated among the funds managed by the Adviser
on the basis of relative net asset sizes. Effective January 1, 1999, the Board
of Directors/Trustees of certain Nuveen Funds (the "Participating Funds")
established a Deferred Compensation Plan for Independent Directors and Trustees.
Under the plan, Independent Board Members of the Participating Funds may defer
receipt of all, or a portion, of the compensation they earn for their services
to the Participating Funds in lieu of receiving current payments of such
compensation. Any deferred amount is treated as though an equivalent dollar
amount had been invested in shares of one or more Eligible Funds. The Acquiring
Fund is a Participating Fund.
The tables below show, for each Board Member who is not affiliated with Nuveen
or the Adviser, the aggregate compensation (i) paid by the Fund to each Board
Member for its fiscal year ended October 31, 1998 and (ii) during the calendar
year 1998.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
AGGREGATE TOTAL
COMPENSATION COMPENSATION
FROM THE NUVEEN FUNDS
ACQUIRING ACCRUED FOR
NAME OF BOARD MEMBER FUND BOARD MEMBERS(1)
- ------------------------------------------------------------------------------------------------
<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>
30
<PAGE> 41
(1) Includes compensation for service on the boards of the NAC Funds.
Peter R. Sawers and Timothy R. Schwertfeger currently serve as members of the
executive committee of the Acquiring Fund's Board. The executive committee,
which meets between regular meetings of the Board, is authorized to exercise all
of the powers of the Board; provided that the scope of the powers of the
executive committee, unless otherwise specifically authorized by the full Board,
are limited to: (i) emergency matters where assembly of the full Board is
impracticable (in which case management will take all reasonable steps to
quickly notify each individual Board Member of the actions taken by the
executive committee) or (ii) matters of an administrative or ministerial nature.
The executive committee of the Fund did not hold any meetings for the fiscal
year ended October 31, 1998.
Lawrence H. Brown and Timothy R. Schwertfeger are the current members of the
dividend committee for the Acquiring Fund. The dividend committee is authorized
to declare distributions on the Fund's shares including, but not limited to,
regular and special dividends, capital gains and ordinary income distributions.
The dividend committee of the Acquiring Fund held fourteen meetings during the
fiscal year ended October 31, 1998.
The Acquiring Fund's Board has an audit committee composed of Robert P. Bremner,
Lawrence H. Brown, Anne E. Impellizzeri, Peter R. Sawers, William J. Schneider
and Judith M. Stockdale, Board Members who are not "interested persons." The
audit committee reviews the work and any recommendations of each Fund's
independent public auditors. Based on such review, it is authorized to make
recommendations to the Board. The audit committee of the Fund held two meetings
for the fiscal year ended October 31, 1998.
Nomination of those Board Members who are not "interested persons" of the Fund
is committed to a nominating committee composed of the Board Members who are not
"interested persons" of the Fund. It identifies and recommends individuals to be
nominated for election as non-interested Board Members. The nominating committee
of the Fund held one meeting for the fiscal year ended October 31, 1998. No
policy or procedure has been established as to the recommendation of Board
Member nominees by shareholders.
The Board of the Fund held five meetings for the fiscal year ended October 31,
1998. During the last fiscal year, each Board Member attended 75% or more of
each Fund's Board meetings and the committee meetings (if a member thereof).
The following table sets forth information as of April 30, 1999 with respect to
each executive officer of the Fund, other than executive officers who are Board
Members and included in the table relating to nominees for the Board. Officers
of the Fund receive no compensation from the Fund. With respect to the Fund, the
term of office of all officers will expire in July 2000.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH FUNDS BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alan G. Berkshire 38 Vice President and Vice President and General Counsel (since September
Assistant Secretary 1997) and Secretary (since May 1998) of The John Nuveen
(since 1998) Company, John Nuveen & Co. Incorporated, Nuveen
Advisory Corp. and Nuveen Institutional Advisory Corp.;
prior thereto, partner in the law firm of Kirkland &
Ellis.
Peter H. D'Arrigo 31 Vice President and Vice President of John Nuveen & Co. Incorporated (since
Treasurer (since 1999) January 1999), prior thereto, Assistant Vice President
(from January 1997); formerly, Associate of John Nuveen
& Co. Incorporated; Chartered Financial Analyst.
Michael S. Davern 41 Vice President (since Vice President of Nuveen Advisory Corp. (since January
1997) 1997); prior thereto, Vice President and Portfolio
Manager of Flagship Financial Inc. (from September 1991
to January 1997).
Lorna C. Ferguson 53 Vice President (since Vice President of John Nuveen & Co. Incorporated; Vice
1998) President of Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp. (since January 1998).
William M. Fitzgerald 35 Vice President (since Vice President of Nuveen Advisory Corp. (since December
1996) 1995); prior thereto, Assistant Vice President of
Nuveen Advisory Corp. (from September 1992 to December
1995); Chartered Financial Analyst.
Stephen D. Foy 44 Vice President and Vice President of John Nuveen & Co. Incorporated and
Controller (since (since May 1998) The John Nuveen Company; Certified
1998) Public Accountant.
J. Thomas Futrell 43 Vice President (since Vice President of Nuveen Advisory Corp.; Chartered
1993) Financial Analyst.
Richard A. Huber 36 Vice President (since Vice President of Nuveen Institutional Advisory Corp.
1997) (since March 1998) and Nuveen Advisory Corp. (since
January 1997); prior thereto, Vice President and
Portfolio Manager of Flagship Financial Inc.
Steven J. Krupa 41 Vice President (since Vice President of Nuveen Advisory Corp.
1993)
</TABLE>
31
<PAGE> 42
<TABLE>
<CAPTION>
NAME AGE POSITION WITH FUNDS BUSINESS EXPERIENCE AND PRINCIPAL OCCUPATION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Larry W. Martin 47 Vice President and Vice President, Assistant Secretary and Assistant
Assistant Secretary General Counsel of John Nuveen & Co. Incorporated; Vice
(since 1993) President and Assistant Secretary of Nuveen Advisory
Corp. and Nuveen Institutional Advisory Corp.;
Assistant Secretary of The John Nuveen Company and
(since January 1997) Nuveen Asset Management Inc.
Edward F. Neild, IV 33 Vice President (since Vice President of Nuveen Advisory Corp. and Nuveen
1996) Institutional 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.
Stephen S. Peterson 41 Vice President (since Vice President (since September 1997), Assistant Vice
1997) President (from September 1996 to September 1997) and
Portfolio Manager prior thereto, of Nuveen Advisory
Corp.; Chartered Financial Analyst.
Stuart W. Rogers 42 Vice President (since Vice President of John Nuveen & Co. Incorporated.
1997)
Thomas C. Spalding, Jr. 47 Vice President (since Vice President of Nuveen Advisory Corp. and Nuveen
1993) Institutional Advisory Corp.; Chartered Financial
Analyst.
William S. Swanson 33 Vice President (since Vice President of John Nuveen & Co. Incorporated (since
1998) October 1997); Assistant Vice President (from September
1996 to October 1997) and, formerly, Associate;
Chartered Financial Analyst.
Gifford R. Zimmerman 42 Vice President (since Vice President, Assistant Secretary and Associate
1993) and Secretary General Counsel, formerly Assistant General Counsel
(since 1998) (since September 1997) of 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;
Chartered Financial Analyst.
</TABLE>
On April 30, 1999, Board Members and executive officers of the Fund as a group
beneficially owned 12,000 common shares of the Acquiring Fund and did not own
any shares of MuniPreferred. On April 30, 1999, Board Members, nominees and
executive officers of the Fund as a group beneficially owned 378,547 common
shares of all funds managed by the Adviser or Nuveen Institutional Advisory
Corp. (includes Deferred Units and shares held by the executive officers in
Nuveen's 401(k)/profit sharing plan, but excludes shares of money market funds).
As of June 1, 1999, no shareholder owned more than 5% of any class of shares of
the Fund.
Section 30(h) of the 1940 Act and Section 16(a) of the Exchange Act require the
Fund's Board Members and officers, investment adviser, affiliated persons of the
investment adviser and persons who own more than ten percent of a registered
class of the Fund's equity securities to file forms reporting their affiliation
with the Fund and reports of ownership and changes in ownership of the Fund's
shares with the Commission and the NYSE. These persons and entities are required
by Commission regulation to furnish the Fund with copies of all Section 16(a)
forms they file. Based on a review of these forms furnished to the Fund, the
Fund believes that for the fiscal year ended October 31, 1998, all Section 16(a)
filing requirements applicable to the Acquiring Fund's Board Members and
officers, investment adviser and affiliated persons of the investment adviser
were complied with.
PROPOSAL NO. 4 -- SELECTION OF INDEPENDENT
AUDITORS FOR THE ACQUIRING FUND
The members of the Acquiring Fund's Board who are not "interested persons" of
the Fund have unanimously selected Ernst & Young LLP, independent auditors, to
audit the books and records of the Fund for the fiscal year ending October 31,
1999. Ernst & Young LLP has served each Fund in this capacity since each Fund
was organized and has no direct or indirect financial interest in any Fund
except as independent auditors. The selection of Ernst & Young LLP as
independent auditors of the Fund is being submitted to the shareholders of the
Fund for ratification, which requires the affirmative vote of a majority of the
shares of the Fund present and entitled to vote on the matter. A representative
of Ernst & Young LLP is expected to be present at the Joint Meeting and will be
available to respond to any appropriate questions raised at the Joint Meeting
and to make a statement if he or she wishes.
THE FUND'S BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITORS.
32
<PAGE> 43
MANAGEMENT OF THE FUNDS
BOARD MEMBERS AND OFFICERS
The same individuals constitute the Boards of both Funds, and the Funds have the
same officers. The management of each Fund, including general supervision of the
duties performed by the Adviser under the Investment Management Agreement for
each Fund, is the responsibility of its Board. There are currently seven (7)
Board Members of each Fund, one (1) of whom is an "interested person" (as
defined in the 1940 Act) and six (6) of whom are disinterested persons. There is
currently a vacancy on each Fund's Board. The nominees of the Acquiring Fund
elected at the Acquiring Fund's Annual Meeting will serve as Board Members of
the Acquiring Fund whether or not the Reorganization is approved.
INVESTMENT ADVISER
The Adviser, located at 333 West Wacker Drive, Chicago, Illinois, serves as
investment adviser and manager for each Fund. The Adviser is a wholly-owned
subsidiary of Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen is
a subsidiary of The John Nuveen Company which in turn is approximately 78% owned
by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is located at 385
Washington Street, St. Paul, Minnesota 55102, and is principally engaged in
providing property-liability insurance through subsidiaries.
PORTFOLIO MANAGEMENT
The Adviser places orders for the purchase and sale of portfolio securities for
the accounts of the Funds. Consistent with Rule 10f-3 under the 1940 Act,
portfolio securities may be purchased from Nuveen or its affiliates.
Edward Neild, Vice President of Nuveen Advisory Corp. since 1996, manages the
Acquiring Fund and 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.
Prior to being named Vice President, Mr. Neild was an Assistant Vice President
of Nuveen Advisory Corp. from 1993 to 1996.
The day to day management of the Acquired Fund is currently the responsibility
of Michael Davern, a Vice President and Portfolio Manager of Nuveen Advisory
since 1997. He currently manages eight Nuveen-sponsored open-end and nine
Nuveen-sponsored closed-end investment companies. Prior to joining Nuveen
Advisory Corp., Mr. Davern was a Vice President and Portfolio Manager of
Flagship Financial Inc.
33
<PAGE> 44
ADDITIONAL INFORMATION ABOUT THE FUNDS
FINANCIAL HIGHLIGHTS
Selected data for a Common share outstanding throughout each period is as
follows:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------ -------------------------------------------
NET NET NET
REALIZED/ INVESTMENT INVESTMENT CAPITAL
BEGINNING NET UNREALIZED INCOME INCOME GAINS
NET ASSET INVESTMENT INVESTMENT TO COMMON TO PREFERRED TO COMMON
VALUE INCOME GAIN (LOSS) TOTAL SHAREHOLDERS SHAREHOLDERS+ SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ACQUIRING FUND Year Ended 10/31,
1998 $14.64 $1.07 $ .42 $ 1.49 $(.82) $(.26) $ --
1997 14.07 1.08 .58 1.66 (.82) (.27) --
1996 13.87 1.10 .19 1.29 (.82) (.27) --
1995 12.09 1.10 1.81 2.91 (.84) (.29) --
1994 14.87 1.07 (2.76) (1.69) (.84) (.20) (.03)
2/19/93 to 10/31/93 14.05 .51 .97 1.48 (.42) (.07) --
ACQUIRED FUND Year Ended 5/31,
1999(a) 15.06 .51 .27 .78 (.39) (.13) --
1998 14.07 1.02 .99 2.01 (.76) (.26) --
1997 13.48 1.02 .58 1.60 (.75) (.26) --
1996 13.71 1.02 (.23) .79 (.74) (.28) --
1995 12.97 1.01 .77 1.78 (.77) (.27) --
1994 14.09 .91 (.93) (.02) (.76) (.16) (.01)
3/18/93 to 5/31/93 14.05 .07 .08 .15 -- -- --
<CAPTION>
LESS DISTRIBUTIONS
----------------------
ORGANIZATION AND
CAPITAL OFFERING COSTS AND
GAINS PREFERRED SHARE
TO PREFERRED UNDERWRITING
SHAREHOLDERS+ TOTAL DISCOUNTS
- ---------------------------------- -------------------------------------------
<S> <C> <C> <C>
ACQUIRING FUND Year Ended 10/31,
1998 $ -- $(1.08) $ --
1997 -- (1.09) --
1996 -- (1.09) --
1995 -- (1.13) --
1994 (.01) (1.08) (.01)
2/19/93 to 10/31/93 -- (.49) (.17)
ACQUIRED FUND Year Ended 5/31,
1999(a) -- (.52) --
1998 -- (1.02) --
1997 -- (1.01) --
1996 -- (1.02) --
1995 -- (1.04) --
1994 -- (.93) (.17)
3/18/93 to 5/31/93 -- -- (.11)
</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 gain 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; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the six months ended November 30, 1998 (Unaudited).
NR Calculation was not required.
34
<PAGE> 45
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS RATIO/SUPPLEMENTAL DATA
------------------------------ ----------------------------
RATIO OF
EXPENSES TO
AVERAGE
NET ASSETS
ENDING ENDING APPLICABLE TO
NET ASSET ENDING BASED ON BASED ON NET NET ASSETS COMMON SHARES++
VALUE MARKET VALUE MARKET VALUE** ASSET VALUE** (000) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACQUIRING FUND Year Ended 10/31,
1998 $15.05 $14.8125 14.54% 8.58% $923,004 NR%
1997 14.64 13.6875 14.70 10.20 905,764 NR
1996 14.07 12.6880 11.57 7.53 882,563 NR
1995 13.87 12.1250 21.32 22.41 874,337 NR
1994 12.09 10.7500 (19.12) (13.29) 801,617 NR
2/19/93 to 10/31/93 14.87 14.2500 (2.13) 8.94 431,437 NR
ACQUIRED FUND Year Ended 5/31,
1999(a) 15.32 14.8750 12.15 4.33 52,547 1.36*
1998 15.06 13.6250 15.26 12.64 51,948 1.36
1997 14.07 12.5000 12.94 10.16 49,640 1.43
1996 13.48 11.7500 7.44 3.75 48,266 1.44
1995 13.71 11.6250 .41 12.36 48,812 1.64
1994 12.97 12.3750 (16.88) (2.73) 47,095 1.58
3/18/93 to 5/31/93 14.09 15.7500 5.00 .28 32,653 NR
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO/SUPPLEMENTAL DATA
-----------------------------------------------------------
RATIO OF NET
INVESTMENT RATIO OF NET
INCOME TO RATIO OF INVESTMENT
AVERAGE EXPENSES TO INCOME TO
NET ASSETS AVERAGE TOTAL AVERAGE TOTAL
APPLICABLE TO NET ASSETS NET ASSETS PORTFOLIO
COMMON SHARES++ INCLUDING INCLUDING TURNOVER
(UNAUDITED) PREFERRED++ PREFERRED++ Rate
- -------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C>
ACQUIRING FUND Year Ended 10/31,
1998 NR% .79% 4.79% 21%
1997 NR .79 4.98 26
1996 NR .79 5.11 20
1995 NR .80 5.35 32
1994 NR .88 5.15 47
2/19/93 to 10/31/93 NR .82* 4.04* 10
ACQUIRED FUND Year Ended 5/31,
1999(a) 6.65* .92* 4.48* 5
1998 6.92 .91 4.62 10
1997 7.38 .94 4.83 11
1996 7.37 .94 4.81 20
1995 7.97 1.04 5.04 16
1994 6.45 1.08 4.42 29
3/18/93 to 5/31/93 NR 1.02* 2.63* --
- ---------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 46
GENERAL HISTORY
The following table sets forth the number of outstanding Common Shares and
shares of MuniPreferred and certain other share information, of each Fund as of
March 31, 1999.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
(4)
AMOUNT
(3) OUTSTANDING
(1) (2) AMOUNT HELD BY FUND EXCLUSIVE OF AMOUNT
TITLE OF CLASS AMOUNT AUTHORIZED FOR ITS OWN ACCOUNT SHOWN UNDER (3)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Acquiring Fund
Common shares 200,000,000 0 40,884,796
Preferred shares 1,000,000 0 12,336
Acquired Fund
Common shares of beneficial interest Unlimited 0 2,320,051
Preferred shares of beneficial interest Unlimited 0 680
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The Acquiring Fund Common Shares are listed and trade on the NYSE under the
symbol NPT. The Common Shares of the Acquired Fund is listed and trade on the
AMEX under the symbol NPW.
The following table sets forth the high and low sales prices for each Fund's
Common Shares as reported on the consolidated transaction reporting system for
the periods indicated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
ACQUIRING FUND ACQUIRED FUND
--------------------- --------------------
HIGH LOW HIGH LOW
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Fourth Quarter $ 13.2500 $12.5000 $12.8750 $12.5000
1997 First Quarter 13.2500 12.5000 13.1250 12.0000
Second Quarter 13.3750 12.5000 13.1250 12.3750
Third Quarter 13.9375 13.2500 13.5000 12.5000
Fourth Quarter 14.0625 13.5000 13.9375 12.8750
1998 First Quarter 14.9375 14.0625 14.7500 13.5625
Second Quarter 14.5625 13.5625 13.8125 13.0625
Third Quarter 14.7500 14.0625 14.6250 13.6250
Fourth Quarter 15.1250 14.5625 15.2500 14.2500
1999 First Quarter 15.0000 14.5000 14.8125 14.2500
- ------------------------------------------------------------------------------------------------------------
</TABLE>
On March 31, 1999, the closing sale prices of the Acquiring Fund and Acquired
Fund Common Shares were $14.6875 and 14.3750, respectively. These prices
represent a discount to net asset value of the Acquiring Fund of 1.16% and a
discount to net asset value of the Acquired Fund of 4.93%.
During the period since the inception of the Funds, Common Shares of both the
Funds have generally traded at prices close to net asset value, with varying
premiums or discounts to net asset value being reflected in the market value of
the Common Shares from time to time. Since the termination of Common Share price
stabilization following both Fund's initial public offering, prices for
Acquiring Fund Common Shares have fluctuated between a maximum premium of 6.76%
and a maximum discount of 14.73% and for the Acquired Fund have fluctuated
between a maximum premium of 11.78% and a maximum discount of 15.68%. It is not
possible to state whether Acquiring Fund Common Shares will trade at a premium
or discount to net asset value following the Reorganization, or what the extent
of any such premium or discount might be.
REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND
Each Fund is a closed-end investment company and as such holders of its common
shares will not have the right to cause such Fund to redeem their shares. Each
Fund's common shares trade in the open market at a price that is a function of
several factors, including net asset value and yield. The shares of each Fund
have traded at both premiums and discounts to net asset value. The Board of each
Fund has currently determined that, at least annually, it will consider actions
that might be taken to reduce or eliminate any material discount from net asset
value in respect of such Fund's common shares, which may include the repurchase
of such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value or the conversion of such Fund
to an open-end investment company. There can be no assurance, however, that
either Fund's Board will decide to take any of these actions, or that share
repurchases or tender offers, if undertaken, will reduce market discount. In
addition, see "Proposal No. 1 -- The Reorganization -- Description of
MuniPreferred Issued by the Acquiring Fund -- Dividends and Dividend Periods"
for a discussion of the limitations on each Fund's ability to engage in certain
transactions. The staff of the Commission currently requires that any tender
offer made by a closed-end investment company for its shares must be at a price
equal to the net asset value of such shares on the close
36
<PAGE> 47
of business on the last day of the tender offer. Any service fees incurred in
connection with any tender offer made by a Fund would be borne by that Fund and
would not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment limitations, either Fund may borrow to finance the
repurchase of its shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by either
Fund in anticipation of share repurchases or tenders will reduce that Fund's net
income. Any share repurchase, tender offer or borrowing that might be approved
by a Fund's Board would have to comply with the Exchange Act and the 1940 Act
and the rules and regulations thereunder.
Although the decision to take action in response to a discount from net asset
value will be made by a Fund's Board at the time it considers such issue, it is
each Board's present policy, which may be changed by such Board, not to
authorize repurchases of such Fund's common shares or a tender offer for such
shares if (a) such transactions, if consummated, would (i) result in the
delisting of such shares from the NYSE or AMEX, or (ii) impair such Fund's
status as a regulated investment company under the Code (which would make such
Fund a taxable entity, causing its income to be taxed at the corporate level in
addition to the taxation of shareholders who receive dividends from such Fund)
or as a regulated closed-end investment company under the 1940 Act; (b) such
Fund would not be able to liquidate portfolio securities in an orderly manner
and consistent with its investment objectives and policies in order to
repurchase shares; or (c) there is, in such Board's judgment, any (i) material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting such Fund, (ii) general
suspension of or limitation on prices for trading securities on the NYSE or
AMEX, (iii) declaration of a banking moratorium by Federal or state authorities
or any suspension of payment by United States or New York State banks in which
such Fund invests, (iv) material limitation affecting such Fund or the issuers
of its portfolio securities by Federal or State authorities on the extension of
credit by lending institutions or on the exchange of foreign currency, (v)
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, or (vi) other event
or condition which would have a materially adverse effect (including any adverse
tax effect) on such Fund or its shareholders if shares of such Fund were
repurchased. The Board of each Fund may in the future modify these conditions in
light of experience.
For each Fund, conversion to an open-end company would require the approval of
the holders of such Fund's outstanding common shares and shares of
MuniPreferred, voting together as a single class, and holders of such Fund's
shares of MuniPreferred voting as a separate class. See "Proposal No. 1 -- The
Reorganization -- Certain Provisions in the Acquiring Fund's Articles of
Incorporation" for a discussion of voting requirements applicable to conversion
of a Fund to an open-end company. If a Fund converted to an open-end investment
company, it would be required to redeem all shares of its MuniPreferred then
outstanding for cash at the redemption price specified under "Proposal No.
1 -- The Reorganization -- Description of MuniPreferred Issued by the Acquiring
Fund -- Redemption." In addition, such Fund would be required to liquidate
portfolio securities to meet required and requested redemptions, and its common
shares would no longer be listed on the NYSE or AMEX. Shareholders of an
open-end investment company may require the company to redeem their shares at
any time (except in certain circumstances as authorized by or under the 1940
Act) at their net asset value, less such redemption charge, if any, as might be
in effect at the time of redemption. In order to avoid maintaining large cash
positions or liquidating favorable investments to meet redemptions, open-end
companies typically engage in a continuous offering of their shares. Open-end
companies are thus subject to periodic asset in-flows and out-flows that can
complicate portfolio management. The Board of either Fund may at any time
propose conversion of such Fund to an open-end company depending upon its
judgment as to the advisability of such action in light of circumstances then
prevailing.
The repurchase by a Fund of its common shares at prices below net asset value
would result in an increase in the net asset value of those common shares that
remain outstanding. However, there can be no assurance that common share
repurchases or tenders at or below net asset value would result in a Fund's
common shares trading at a price equal to their net asset value. Nevertheless,
the fact that a Fund's common shares may be the subject of repurchase or tender
offers at net asset value from time to time, or that a Fund may be converted to
an open-end company, may reduce any spread between market price and net asset
value that might otherwise exist. Common shares that have been repurchased by a
Fund will be retired automatically and shall have the status of authorized but
unissued shares.
In addition, a purchase by a Fund of its common shares will decrease that Fund's
total assets, which would likely have the effect of increasing such Fund's
expense ratio. Any purchase by a Fund of its common shares at a time when
MuniPreferred shares of such Fund are outstanding will increase the leverage
applicable to the outstanding common shares then remaining.
Before deciding whether to take any action in response to a discount from net
asset value, a Fund's Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of such Fund's portfolio, the
impact of any action that might be taken on such Fund or its shareholders and
market considerations. Based on these considerations, even if a Fund's common
shares should trade at a discount, such Fund's Board may determine that, in the
interest of such Fund and its shareholders, no action should be taken.
37
<PAGE> 48
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REDEMPTION AGENT
The Custodian of the assets of each Fund and the transfer agent and dividend
disbursing agent with respect to each Fund's common shares is The Chase
Manhattan Bank, with its principal place of business at 4 New York Plaza, New
York, New York 10004 and its corporate transfer office at P.O. Box 5186, Bowling
Green Station, New York, New York 10275. Bankers Trust Company, 4 Albany Street,
New York, New York 10006, a banking corporation organized under the laws of New
York, is the Auction Agent with respect to shares of each Fund's MuniPreferred
and acts as transfer agent, registrar, dividend disbursing agent and redemption
agent with respect to such shares.
FEDERAL INCOME TAX MATTERS ASSOCIATED WITH INVESTMENT IN THE FUNDS
The following is based on the advice of Vedder, Price, Kaufman & Kammholz,
special counsel to the Funds.
The Federal income tax implications for Acquired Fund shareholders who will own
Acquiring Fund Shares as a result of the Reorganization will be substantially
the same as the Federal income tax implications currently applicable to such
shareholders with respect to their ownership of Acquired Fund Shares. Each Fund
qualifies under Subchapter M of the Code as a regulated investment company and
satisfies conditions which enable dividends on common shares or shares of
MuniPreferred which are attributable to interest on Municipal Obligations to be
exempt from Federal income tax in the hands of owners of such shares, subject to
the possible application of the alternative minimum tax. Each Fund, which
intends to distribute substantially all of its net income and gains to its
shareholders, is required to allocate net capital gains (i.e., the excess of net
long-term capital gain over net short-term capital loss) and other taxable
income, if any, proportionately between common shares and shares of
MuniPreferred in accordance with the position of the Internal Revenue Service.
The amount of taxable income allocable to shares of a Fund's MuniPreferred will
depend upon the amount of such income realized by the Fund, including any net
income received from taxable temporary investments, but is not generally
expected to be significant. Annually, each Fund will inform each owner of shares
of MuniPreferred of the amount and nature of the income and gains allocated to
the owner by the Fund. If a Fund allocates net capital gains or other taxable
income without first notifying owners of shares of MuniPreferred, in certain
circumstances payments will be made to such owners to offset the tax effect
thereof as described under "Proposal No. 1 -- The Reorganization -- Description
of MuniPreferred Issued by the Acquiring Fund -- Dividends and Dividend
Periods -- Gross-up Payments" above.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals based on certain items of tax preference. Interest
on certain Municipal Obligations is included as an item of tax preference in
determining the amount of a taxpayer's alternative minimum taxable income. To
the extent that a Fund receives income from Municipal Obligations treated as tax
preference items for purposes of the alternative minimum tax, a portion of the
dividends paid by it, although otherwise exempt from Federal income tax, will be
taxable to owners of shares to the extent that their tax liability is determined
under the alternative minimum tax. In addition, for certain corporations,
alternative minimum taxable income is increased by 75% of the difference between
an alternative measure of income ("adjusted current earnings") and the amount
otherwise determined to be the alternative minimum taxable income. Interest on
all Municipal Obligations, and therefore all exempt-interest dividends received
from each Fund, are included in calculating adjusted current earnings.
A more detailed summary of the provisions of the Code and regulations thereunder
presently in effect as they directly govern the Federal income taxation of each
Fund and their respective shareholders appears in the Statement of Additional
Information. These provisions and interpretations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Shareholders are advised to consult with
their own tax advisers for more detailed information concerning Federal income
tax matters as well as state and local tax matters.
LEGAL OPINIONS
Certain legal matters in connection with the common shares and shares of
MuniPreferred of the Acquiring Fund to be issued pursuant to the Reorganization
will be passed upon by Vedder, Price, Kaufman & Kammholz, Chicago, Illinois.
Vedder, Price, Kaufman & Kammholz will rely as to certain matters of
Massachusetts law on the opinion of Bingham Dana, LLP, Boston, Massachusetts
and, as to certain matters of Minnesota law, the opinion of Dorsey & Whitney
LLP, Minneapolis, Minnesota.
EXPERTS
The financial highlights of the Acquiring and the Acquired Funds as of October
31, 1998 and as of May 31, 1998, respectively, appearing in this Joint Proxy
Statement -- Prospectus, and the financial statements of the Acquiring and the
Acquired Funds as of October 31, 1998 and as of May 31, 1998, respectively,
appearing in the Statement of Additional Information, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing. Ernst &
Young LLP audits and reports on the Funds' annual financial statements, reviews
certain
38
<PAGE> 49
regulatory reports and the Funds' Federal income tax returns, and performs other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds.
SHAREHOLDER PROPOSALS
To be considered for presentation at the Annual Meeting of Shareholders of the
Acquiring Fund to be held in 2000, a shareholder proposal submitted pursuant to
Rule 14a-8 of the Exchange Act must be received at the offices of the Acquiring
Fund, 333 West Wacker Drive, Chicago, Illinois 60605, not later than February
22, 2000. A Shareholder wishing to provide notice in the manner prescribed by
Rule 14a-4(c)(1) to the Acquiring Fund of a proposal submitted outside of the
process of Rule 14a-8 must submit such written notice to the Acquiring Fund not
later than May 8, 2000. Timely submission of a proposal does not mean that such
proposal will be included and the Fund reserves the right to object under Rule
14a-8 to the inclusion of any shareholder proposal.
If the Reorganization is approved and consummated, the Acquired Fund will cease
to exist and will not hold its 1999 Annual Meeting. If the Reorganization is not
approved or is not consummated, the Acquired Fund will hold its 1999 Annual
Meeting of Shareholders, expected to be held in November, 1999. Based upon last
years proxy statement for the Acquired Fund, a shareholder proposal submitted
pursuant to Rule 14a-8 of the Exchange Act must be received at the offices of
the Acquired Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not later
than June 17, 1999. A shareholder wishing to provide notice in the manner
prescribed by Rule 14a-4(c)(1) to the Acquired Fund of a proposal submitted
outside the process of Rule 14a-8 must submit such written notice to the Fund
not later than August 31, 1999. Timely submission of a proposal does not
necessarily mean that such proposal will be included and the Fund reserves the
right to object under Rule 14a-8 to the inclusion of any shareholder proposal.
GENERAL
Management of the Funds does not intend to present and does not have reason to
believe that others will present any items of business at the Joint Meeting,
except as described in this Joint Proxy Statement -- Prospectus. However, if
other matters are properly presented at the meetings for a vote, the proxies
will be voted upon such matters in accordance with the judgment of the persons
acting under the proxies.
A list of shareholders of each Fund entitled to be present and to vote at the
Joint Meeting will be available at the offices of the Funds, 333 West Wacker
Drive, Chicago, Illinois, for inspection by any shareholder of the Funds during
regular business hours for ten days prior to the date of the Joint Meeting.
Failure of a quorum of either Fund to be present at the Joint Meeting will
necessitate adjournment and will subject such Fund to additional expense. The
persons named in the enclosed proxy may also move for an adjournment of the
meeting to permit further solicitation of proxies with respect to any of the
proposals if they determine that adjournment and further solicitation is
reasonable and in the best interests of the shareholders. Under each Fund's
By-Laws, an adjournment of a meeting requires the affirmative vote of a majority
of the shares present in person or represented by proxy at such meeting.
IF YOU CANNOT BE PRESENT IN PERSON, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
Gifford R. Zimmerman
Vice President and Secretary
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<PAGE> 50
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION ("Agreement") is made as of
the 1st day of June, 1999 by and between Nuveen Premium Income Municipal Fund 4,
Inc. (the "Acquiring Fund"), a Minnesota corporation, and Nuveen Washington
Premium Income Municipal Fund, a business trust formed under the laws of the
Commonwealth of Massachusetts (the "Acquired Fund" and, together with the
Acquiring Fund, the "Funds"). Each of the Funds maintains its principal place of
business at 333 West Wacker Drive, Chicago, Illinois 60606.
This Agreement is intended to be, and is adopted as, a plan of reorganization
(the "Reorganization") pursuant to Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"). The Reorganization will
consist of (a) the acquisition by the Acquiring Fund of substantially all of the
assets of the Acquired Fund in exchange solely for common shares, par value $.01
per share, of the Acquiring Fund ("Acquiring Fund Common Shares"), shares of
Municipal Auction Rate Cumulative Preferred Shares, par value $.01 per share
("Muni Preferred(R)"), of the Acquiring Fund ("Acquiring Fund MuniPreferred"
and, collectively with the Acquiring Fund Common Shares, "Acquiring Fund
Shares") and the assumption by the Acquiring Fund of substantially all of the
liabilities of the Acquired Fund, and (b) the pro rata distribution, after the
Closing Date hereinafter referred to, of such Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement.
In consideration of the premises and of the covenants and agreements set forth
herein, the parties covenant and agree as follows:
1 TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR SHARES OF THE
ACQUIRING FUND AND ASSUMPTION OF LIABILITIES, IF ANY; LIQUIDATION OF THE
ACQUIRED FUND.
1.1 Subject to the terms and conditions herein set forth and on the basis of
the representations and warranties contained herein, the Acquired Fund agrees to
sell, assign, transfer and deliver, as of the close of business on the Closing
Date (the "Effective Time"), substantially all of its assets as set forth in
paragraph 1.2 to the Acquiring Fund, free and clear of all liens and
encumbrances, except as otherwise provided herein, and in exchange therefor the
Acquiring Fund agrees (a) to assume substantially all of the liabilities, if
any, of the Acquired Fund, as set forth in paragraph 1.3 and (b) to issue and
deliver to the Acquired Fund, for distribution in accordance with paragraph 1.5
to the Acquired Fund's shareholders, (i) the number of Acquiring Fund Common
Shares having an aggregate net asset value equal to the value of the assets,
less the liabilities, of the Acquired Fund so transferred, assigned and
delivered, all determined in the manner and as of the date and time provided in
paragraph 2, and (ii) 680 shares of Acquiring Fund MuniPreferred, Series TH or
Series TH2. If shareholders of the Acquiring Fund approve an amendment to its
charter authorizing additional shares of its MuniPreferred, Series TH, the
Acquiring Fund will issue and deliver shares of its MuniPreferred, Series TH in
connection with the Reorganization. If such an amendment is not approved, the
Acquiring Fund will issue and deliver shares of MuniPreferred, Series TH2 in
connection with the Reorganization. The preferences, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption of the Acquiring Fund MuniPreferred, Series TH or
Series TH2, shall be identical in all material respects to those of the existing
series of Acquiring Fund MuniPreferred. Dividends on shares of Acquired Fund
MuniPreferred, Series TH, shall accumulate to and including the Closing Date and
then cease to accumulate, and dividends on shares of Acquiring Fund
MuniPreferred, Series TH or Series TH2, issued pursuant to the Reorganization
shall accumulate in respect of their "Initial Rate Period" from and including
the day after the Closing Date at the same rate borne on the Closing Date by the
shares of Acquiring Fund or Acquired Fund MuniPreferred, Series TH,
respectively. The "Subsequent Rate Periods," "Dividend Payment Dates" in respect
of such "Subsequent Rate Periods" and initial and subsequent "Auctions" for the
shares of Acquiring Fund MuniPreferred, Series TH or Series TH2, issued pursuant
to this paragraph 1.1 shall be fixed to be identical to the dividend and auction
provisions applicable to the outstanding shares of Acquiring Fund or Acquired
Fund MuniPreferred, Series TH, as of immediately prior to the Effective Time.
The "Initial Rate Period" and "Dividend Payment Rate" in respect of such Initial
Rate Period, for shares of Acquiring Fund MuniPreferred, Series TH or Series
TH2, issued pursuant to the Reorganization, shall be as set forth in the Joint
Proxy Statement-Prospectus, as hereinafter defined. Such transactions shall take
place at the closing provided for in paragraph 3.1 (the "Closing").
1.2 Except as otherwise provided herein, as of the Effective Time, the
Acquiring Fund shall acquire the assets of the Acquired Fund (consisting without
limitation of all cash, cash equivalents, municipal obligations and other
portfolio securities, receivables (including interest and dividends receivable)
and any deferred or prepaid expenses shown as assets) as set forth in the
respective Statement of Net Assets referred to in paragraph 7.3 as of the
Closing Date. Notwithstanding the foregoing, the assets to be acquired will not
include cash in the amount necessary to pay expenses of the Acquired Fund in
connection with the transactions contemplated by this Agreement, to pay the
dividends and/or other distributions contemplated by paragraph 1.4. The Acquired
Fund has no plan or intent to sell or otherwise dispose of any of its assets,
other than in the ordinary course of business.
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\ 1.3 Except as otherwise provided herein, as of the Effective Time, the
Acquiring Fund will assume from the Acquired Fund all debts, liabilities,
obligations and duties of the Acquired Fund of whatever kind or nature, whether
absolute, accrued, contingent or otherwise, arising in the ordinary course of
business, whether or not determinable as of the Effective Time and whether or
not specifically referred to in this Agreement. Notwithstanding the foregoing,
the Acquiring Fund will not assume the Acquired Fund's obligation to pay certain
expenses incurred by the Acquired Fund in connection with the transactions
contemplated by this Agreement or assume the Acquired Fund's obligation to pay
the dividends and/or other distributions contemplated by paragraph 1.4; and
further provided that the Acquired Fund agrees to utilize its best efforts to
discharge all of its known debts, liabilities, obligations and duties (other
than pursuant to paragraph 1.4) prior to the Effective Time.
1.4 At or prior to the Effective Time, the Acquired Fund (a) will declare all
accumulated but unpaid dividends on the shares of Acquired Fund MuniPreferred,
Series TH, up to and including the day on which the Effective Time occurs, such
dividends to be paid to the holders thereof on the Dividend Payment Date in
respect of the Initial Rate Period of shares of Acquiring Fund MuniPreferred,
Series TH or Series TH2, for which such 680 shares of Acquired Fund
MuniPreferred, Series TH, were exchanged, and (b) will declare a dividend and/or
other distribution to be paid within 30 days after the Closing Date to its
shareholders of record so that, upon such payment, it will have distributed all
of its investment company taxable income (computed without regard to any
deduction for dividends paid), net tax-exempt income and realized net capital
gains, if any, through and including the Closing Date.
1.5 On a date as soon after the Closing Date as is conveniently practicable
(the "Liquidation Date"), the Acquired Fund will liquidate and distribute (a)
pro rata to its common shareholders of record, determined as of the Effective
Time, the Acquiring Fund Common Shares received by the Acquired Fund pursuant to
paragraph 1.1 (together with any dividends declared with respect thereto to
holders of record as of a time after the Effective Time and prior to the
Liquidation Date ("Interim Dividends")), in exchange for common shares of the
Acquired Fund held by the common shareholders of such Fund and (b) to its
preferred shareholders of record, determined as of the Effective Time, one share
of Acquiring Fund MuniPreferred, Series TH or Series TH2 (together with any
Interim Dividends), in exchange for each share of Acquired Fund MuniPreferred,
Series TH, held by the preferred shareholders of the Acquired Fund. Such
liquidation and distribution will be accomplished by opening accounts on the
books of the Acquiring Fund in the names of the shareholders of the Acquired
Fund and transferring to each account (x) in the case of a common shareholder,
such shareholder's pro rata share of the Acquiring Fund Common Shares received
by the Acquired Fund (rounded down to the nearest whole Share) and (y) in the
case of a preferred shareholder, a number of the shares of Acquiring Fund
MuniPreferred, Series TH or Series TH2, received by the Acquired Fund equal to
the number of shares of Acquired Fund MuniPreferred, Series TH, held by such
shareholder, and by paying to the shareholders of the Acquired Fund any Interim
Dividends on such transferred shares.
1.6 After the Liquidation Date, each holder of an outstanding certificate or
certificates representing shares of the Acquired Fund will be entitled to
receive, upon surrender of his or her certificates, a certificate or
certificates representing the number of Acquiring Fund Common Shares and/or
shares of Acquiring Fund MuniPreferred, Series TH or Series TH2, and a check for
cash in lieu of any fractional Acquiring Fund Common Share as provided by
paragraph 1.7, distributable with respect to the shares of the Acquired Fund
that are surrendered. No dividends or other distributions payable to the holders
of record of the Acquiring Fund Shares as of a date on or after the Liquidation
Date are required to be paid to any shareholder holding certificates
representing shares of the Acquired Fund ("Acquired Fund Share Certificates") as
of the Closing Date until the Acquiring Fund is notified by the Acquired Fund's
transfer agent that such shareholder has surrendered his or her outstanding
Acquired Fund Share Certificates or, in the event of lost, stolen or destroyed
Acquired Fund Share Certificates, posted adequate bond or submitted an affidavit
of lost certificate, or both. The Acquired Fund will, at its expense, request
its shareholders to surrender their outstanding Acquired Fund Share
Certificates, post adequate bond and/or submit an affidavit of lost certificate,
as the case may be. Upon the surrender of Acquired Fund Share Certificates (or,
if applicable, after the posting of a bond and/or submission of an affidavit of
lost certificate), there shall be paid to the shareholder in whose name the
Acquiring Fund Shares shall be registered all dividends or other distributions
that shall have become payable with respect to such Acquiring Fund Shares
between the Liquidation Date and the time of such surrender. In no event shall
the shareholder entitled to receive such dividends and distributions be entitled
to receive interest thereon.
1.7 No certificates or scrip representing fractional Acquiring Fund Common
Shares shall be distributed to the Acquired Fund shareholders upon the surrender
for exchange of Acquired Fund Share Certificates. In lieu of distributing any
such fractional Acquiring Fund Common Shares directly to the Acquired Fund
shareholders, the Acquired Fund shall distribute such interests to the Acquired
Fund's transfer agent, as representative of the shareholders who would otherwise
be entitled to receive such fractional shares, and the Acquired Fund's transfer
agent shall, on behalf of such shareholders, on or before the tenth business day
following the Liquidation Date, aggregate all such fractional Acquiring Fund
Common Shares and sell the resulting whole Acquiring Fund Common Shares on the
New York Stock Exchange (the "NYSE") for the accounts of such holders, and each
such holder shall be entitled to receive his or her respective pro rata share of
the net proceeds of such sale upon surrender of his or her Acquired Fund Share
Certificates in accordance with paragraph 1.6.
1.8 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a name
other than the registered holder of the Acquired Fund shares surrendered in
exchange therefor on the books of the Acquired Fund as of that time shall be
paid by the person to whom such Acquiring Fund Shares are to be issued as a
condition to the registration of such transfer.
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1.9 Any reporting responsibility of the Acquired Fund with the Securities and
Exchange Commission (the "SEC"), the NYSE, or any state securities commission is
and shall remain the responsibility of the Acquired Fund up to and including the
Liquidation Date.
1.10 All books and records of the Acquired Fund, including all books and
records required to be maintained under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
thereunder, shall be available to the Acquiring Fund from and after the Closing
Date and shall be turned over to the Acquiring Fund on or prior to the
Liquidation Date.
1.11 The Acquired Fund will apply to terminate its registration under the
Investment Company Act promptly following the Liquidation Date and thereafter
shall be dissolved.
2 VALUATION
2.1 The value of the Acquired Fund's assets and liabilities to be acquired and
assumed, respectively, by the Acquiring Fund shall be computed as of the
Effective Time, using the valuation procedures set forth in the Funds' Joint
Proxy Statement -- Prospectus (the "Joint Proxy Statement -- Prospectus") to be
used in connection with the Reorganization. The value of the Acquired Fund's net
assets shall be calculated net of the liquidation preference (including
accumulated and unpaid dividends) of all outstanding shares of Acquired Fund
MuniPreferred.
2.2 The net asset value of an Acquiring Fund Common Share shall be computed as
of the Effective Time by dividing the value of the Acquiring Fund's total
assets, less liabilities and less the liquidation preference (including
accumulated and unpaid dividends) of all outstanding shares of Acquiring Fund
MuniPreferred, by the number of Acquiring Fund Common Shares outstanding
(excluding shares issuable pursuant to the Reorganization), using the valuation
procedures set forth in the Joint Proxy Statement -- Prospectus.
2.3 The number of Acquiring Fund Common Shares to be issued in exchange for the
Acquired Fund's net assets shall be calculated by dividing the net asset value
of the Acquired Fund (determined in accordance with paragraph 2.1) by the net
asset value of an Acquiring Fund Common Share (determined in accordance with
paragraph 2.2).
2.4 All computations of net asset value shall be made by or under the direction
of The Chase Manhattan Bank, N.A. ("Chase") in accordance with its regular
practice as custodian of the Funds.
3 CLOSING AND CLOSING DATE
3.1 The Closing Date shall be August 12, 1999 or such later date as the parties
may agree in writing, provided that the Closing Date shall be a date on which an
"Auction" would ordinarily occur with respect to shares of the Acquired Fund,
MuniPreferred Series TH if shares of MuniPreferred Series TH are issued in
connection with the Reorganization. If shares of MuniPreferred Series TH2 are
issued in connection with the Reorganization, the Closing Date shall be August
12, 1999 or such later date as the parties may agree in writing, provided that
the Closing Date shall not be a date on which an "Auction" would ordinarily
occur with respect to shares of Acquired Fund's MuniPreferred, Series TH. All
acts taking place at the Closing shall be deemed to take place simultaneously as
of the Effective Time unless otherwise provided. The Closing shall be at the
office of the Acquiring Fund or at such other place as the parties may agree.
3.2 Chase as custodian for the Acquired Fund, shall deliver to the Acquiring
Fund at the Closing a certificate of an authorized officer stating that (a) the
Acquired Fund's portfolio securities, cash and any other assets have been
transferred in proper form to the Acquiring Fund on the Closing Date and (b) all
necessary taxes, if any, have been paid, or provision for payment has been made,
in conjunction with the delivery of portfolio securities.
3.3 In the event that on the proposed Closing Date (a) the NYSE or AMEX is
closed to trading or trading thereon is restricted or (b) trading or the
reporting of trading on the NYSE or AMEX or elsewhere is disrupted so that
accurate appraisal of the value of the net assets of the Acquired Fund or of the
net asset value per Acquiring Fund Common Share is impracticable, the Closing
Date shall be postponed until the first business day after the date when such
trading shall have been fully resumed and such reporting shall have been
restored, provided that if shares of Acquiring Fund MuniPreferred Series TH are
issued in connection with the Reorganization, that such day is a Thursday on
which an Auction would ordinarily occur with respect to shares of the Acquired
Fund MuniPreferred, Series TH and provided that if shares of Acquired Fund's
MuniPreferred, Series TH2 are issued in connection with the Reorganization such
day is not a day on which an Auction would ordinarily occur with respect to
shares of the Acquired Fund's MuniPreferred, Series TH.
3.4 The Acquired Fund shall deliver to the Acquiring Fund on or prior to the
Liquidation Date a list of the names and addresses of its shareholders and the
number of outstanding shares of the Acquired Fund owned by each such shareholder
(the "Shareholder Lists"), all as of the Effective Time, certified by the
Secretary or Assistant Secretary of the Acquired Fund. The Acquiring Fund shall
issue and deliver to the Acquired Fund at the Closing a confirmation or other
evidence satisfactory to the Acquired Fund that Acquiring Fund Shares have been
or will be credited to the Acquired Fund's account on the books of the Acquiring
Fund. At the Closing each party shall deliver to the other such bills of sale,
checks, assignments, stock
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certificates, receipts and other documents as such other party or its counsel
may reasonably request to effect the transactions contemplated by this
Agreement.
4 REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants as follows:
4.1.1 The Acquired Fund is duly organized and existing under the laws of
the Commonwealth of Massachusetts as a voluntary association with
transferable shares commonly referred to as a "Massachusetts business trust"
and has the power to own all of its properties and assets and, subject to
approval of the shareholders of the Acquired Fund, to carry out the
Agreement.
4.1.2 The Acquired Fund is a closed-end diversified management investment
company duly registered under the Investment Company Act, and such
registration is in full force and effect.
4.1.3 The Acquired Fund is not, and the execution, delivery and performance
of this Agreement will not result, in violation of any provision of the
Declaration of Trust or By-Laws of the Acquired Fund or of any material
agreement, indenture, instrument, contract, lease or other undertaking to
which the Acquired Fund is a party or by which the Acquired Fund is bound.
4.1.4 The Acquired Fund has no material contracts or other commitments
(except this Agreement and the obligations to pay the dividends and/or
distributions contemplated by paragraph 1.4) that will not be terminated on
or prior to the Closing Date without any liability or penalty to the
Acquired Fund or the Acquiring Fund.
4.1.5 No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to the
knowledge of the Acquired Fund, threatened against the Acquired Fund or any
of its properties or assets. The Acquired Fund knows of no facts that might
form the basis for the institution of such proceedings, and the Acquired
Fund is not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body that materially and adversely
affects its business or its ability to consummate the transactions herein
contemplated.
4.1.6 The audited Annual Statement of Net Assets, Statement of Operations,
Statement of Changes in Net Assets, Financial Highlights and Portfolio of
Investments of the Acquired Fund dated May 31, 1999, respectively and for
the period then ended (copies of which have been furnished to the Acquiring
Fund) have been prepared in accordance with generally accepted accounting
principles consistently applied and present fairly, in all material
respects, the financial condition of the Acquired Fund as of such date, and
there are no known material liabilities of the Acquired Fund (contingent or
otherwise) not disclosed therein.
4.1.7 Since May 31, 1999, there has not been any materially adverse change
in the Acquired Fund's financial condition, assets, liabilities or business,
other than changes occurring in the ordinary course of business, or any
incurrence by the Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as otherwise disclosed
to and accepted by the Acquiring Fund. For the purposes of this paragraph
4.1.7, a decline in net asset value or net asset value per common share of
the Acquired Fund as a result of changes in the value of investments held by
the Acquired Fund or a distribution or payment of dividends shall not
constitute a materially adverse change.
4.1.8 All federal, state and other tax returns and reports of the Acquired
Fund required by law to have been filed or furnished by the date hereof have
been filed or furnished, and all federal, state and other taxes, interest
and penalties shown as due on said returns and reports have been paid
insofar as due, or provision has been made for the payment thereof, and, to
the best of the Acquired Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such returns or
reports.
4.1.9 Since it commenced operations, the Acquired Fund has met the
requirements of Subchapter M of the Internal Revenue Code for qualification
and treatment as a regulated investment company and intends to meet those
requirements for the current taxable year.
4.1.10 The authorized capital of the Acquired Fund consists of an unlimited
number of common and preferred shares, par value $.01 per share. All issued
and outstanding shares of the Acquired Fund are duly and validly issued and
outstanding, fully paid and non-assessable, except that shareholders of the
Acquired Fund may under certain circumstances be held personally liable for
its obligations. All issued and outstanding shares of the Acquired Fund
will, at the time of the Closing, be held by the persons and in the amounts
set forth in the applicable Shareholder List submitted to the Acquiring Fund
in accordance with the provisions of paragraph 3.4. The Acquired Fund does
not have outstanding any options, warrants or other rights to subscribe for
or purchase any shares of the Acquired Fund, nor is there outstanding any
security convertible into shares of the Acquired Fund.
4.1.11 At the Closing Date, the Acquired Fund will have good and marketable
title to the assets to be transferred to the Acquiring Fund pursuant to
paragraph 1.1 and full right, power and authority to sell, assign, transfer
and deliver
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such assets hereunder free of any liens or other encumbrances, and, upon
delivery and payment for such assets, the Acquiring Fund will acquire good
and marketable title thereto.
4.1.12 The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Trustees of the Acquired Fund (including the
determinations required by Rule 17a-8(a) under the Investment Company Act)
and by all necessary action, other than shareholder approval, on the part of
the Acquired Fund, and, subject to shareholder approval, this Agreement
constitutes a valid and binding obligation of the Acquired Fund.
4.1.13 The information furnished and to be furnished by the Acquired Fund
for use in applications for orders, registration statements, proxy materials
and other documents which may be necessary in connection with the
transactions contemplated hereby is, and shall be, accurate and complete in
all material respects and is in compliance, and shall comply, in all
material respects with applicable federal securities and other laws and
regulations.
4.1.14 On the effective date of the Registration Statement referred to in
paragraph 5.5, at the time of the Annual Meeting of the Acquired Fund's
shareholders and on the Closing Date, the Joint Proxy
Statement -- Prospectus (a) will comply in all material respects with the
provisions and regulations of the Securities Act of 1933, as amended (the
"1933 Act"), the Securities Exchange Act of 1934, as amended (the "1934
Act"), and the Investment Company Act and the rules and regulations
thereunder and (b) will not contain any 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; provided, however, that the representations
and warranties in this paragraph 4.1.14 shall not apply to statements in or
omissions from the Joint Proxy Statement -- Prospectus made in reliance upon
and in conformity with information furnished by the Acquiring Fund for use
therein.
4.1.15 No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquired Fund
of the transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act and the Investment Company Act,
and such as may be required under state securities laws.
4.1.16 There are no brokers or finder's fees payable on behalf of the
Acquired Fund in connection with the transactions provided for herein.
4.2 The Acquiring Fund represents and warrants as follows:
4.2.1 The Acquiring Fund is a State of Minnesota duly organized, validly
existing and in good standing under the laws of the State of Minnesota and
has the power to own all of its properties and assets and, subject to
approval of the shareholders of the Acquiring Fund, to carry out the
Agreement.
4.2.2 The Acquiring Fund is a closed-end diversified management investment
company duly registered under the Investment Company Act, and such
registration is in full force and effect.
4.2.3 The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any provision
of the Articles of Incorporation or By-Laws of the Acquiring Fund or of any
material agreement, indenture, instrument, contract, lease or other
undertaking to which the Acquiring Fund is a party or by which the Acquiring
Fund is bound.
4.2.4 No material litigation or administrative proceeding or investigation
of or before any court or governmental body is presently pending or, to the
knowledge of the Acquiring Fund, threatened against the Acquiring Fund or
any of its properties or assets. The Acquiring Fund knows of no facts that
might form the basis for the institution of such proceedings, and the
Acquiring Fund is not a party to or subject to the provisions of any order,
decree or judgment of any court or governmental body that materially and
adversely affects its business or its ability to consummate the transactions
herein contemplated.
4.2.5 The audited Annual and unaudited Semiannual Statement of Net Assets,
Statement of Operations, Statement of Changes in Net Assets, Financial
Highlights and Portfolio of Investments of the Acquiring Fund dated October
31, 1998 and April 30, 1999, respectively and for the period then ended
(copies of which have been furnished to the Acquired Fund) have been
prepared in accordance with generally accepted accounting principles and
present fairly, in all material respects, the financial condition of the
Acquiring Fund as of such date, and there are no known material liabilities
of the Acquiring Fund (contingent or otherwise) not disclosed therein.
4.2.6 Since April 30, 1999 there has not been any materially adverse change
in the Acquiring Fund's financial condition, assets, liabilities or
business, other than changes occurring in the ordinary course of business,
or any incurrence by the Acquiring Fund of indebtedness maturing more than
one year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquired Fund. For the purposes of this
paragraph 4.2.6, a decline in net asset value or net asset value per
Acquiring Fund Common Share as a result of changes in the value of
investments held by the Acquiring Fund or a distribution or payment of
dividends shall not constitute a materially adverse change.
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4.2.7 All federal, state and other tax returns and reports of the Acquiring
Fund required by law to have been filed or furnished by the date hereof have
been filed or furnished, and all federal, state and other taxes, interest
and penalties shown as due on said returns and reports have been paid
insofar as due, or provision has been made for the payment thereof, and, to
the best of the Acquiring Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns
or reports.
4.2.8 Since it commenced operations, the Acquiring Fund has met the
requirements of Subchapter M of the Internal Revenue Code for qualification
and treatment as a regulated investment company and intends to meet those
requirements for the current taxable year.
4.2.9 The authorized capital of the Acquiring Fund consists of 201,000,000
shares consisting of 1,000,000 preferred shares and 200,000,000 common
shares. All issued and outstanding Acquiring Fund Common Shares and shares
of Acquiring Fund MuniPreferred are, and all Acquiring Fund Common Shares
and shares of Acquiring Fund MuniPreferred to be issued in exchange for the
net assets of the Acquired Funds pursuant to this Agreement will be when so
issued, duly and validly issued and outstanding, fully paid and
non-assessable. Except as contemplated by this Agreement, the Acquiring Fund
does not have outstanding any options, warrants or other rights to subscribe
for or purchase any Acquiring Fund Shares, nor is there outstanding any
security convertible into any Acquiring Fund Shares.
4.2.10 The execution, delivery and performance of this Agreement has been
duly authorized by the Board of Directors of the Acquiring Fund (including
the determinations required by Rule 17a-8(a) under the Investment Company
Act) and by all necessary action, other than shareholder approval, on the
part of the Acquiring Fund, and, subject to approval of preferred
shareholders, this Agreement constitutes a valid and binding obligation of
the Acquiring Fund.
4.2.11 The information furnished and to be furnished by the Acquiring Fund
for use in applications for orders, registration statements, proxy materials
and other documents which may be necessary in connection with the
transactions contemplated hereby is, and shall be, accurate and complete in
all material respects and is in compliance, and shall comply, in all
material respects with applicable federal securities and other laws and
regulations.
4.2.12 On the effective date of the Registration Statement, at the time of
the Annual Meeting of the Acquiring Fund shareholders and on the Closing
Date, the Registration Statement and the Joint Proxy Statement -- Prospectus
(a) will comply in all material respects with the provisions of the 1933
Act, the 1934 Act and the Investment Company Act and the rules and
regulations thereunder and (b) will not contain any 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; provided, however, that the
representations and warranties in this paragraph 4.2.12 shall not apply to
statements in or omissions from the Joint Proxy Statement -- Prospectus and
the Registration Statement made in reliance upon and in conformity with
information furnished by the Acquired Fund for use therein.
4.2.13 No consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the Acquiring
Fund of the transactions contemplated by this Agreement, except such as have
been obtained under the 1933 Act, the 1934 Act and the Investment Company
Act, and such as may be required under state securities laws.
4.2.14 There are no brokers' or finders' fees payable on behalf of the
Acquiring Fund in connection with the transactions provided for herein.
5 COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 Except as may otherwise be required by paragraph 1.4, each Fund will
operate its respective business in the ordinary course between the date hereof
and the Closing Date, it being understood that the ordinary course of business
will include declaring and paying customary dividends and other distributions.
5.2 Each Fund will call a shareholders' meeting to consider and act upon this
Agreement and the transactions contemplated herein and to take all other action
necessary to obtain approval of the transactions contemplated hereby.
5.3 The Acquired Fund will assist the Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Fund's shares.
5.4 Subject to the provisions of this Agreement, each Fund will take or cause
to be taken all action, and will do or cause to be done all things, reasonably
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement.
5.5 Each Fund will prepare and file with the SEC the Joint Proxy
Statement -- Prospectus, and the Acquiring Fund will prepare and file with the
SEC a registration statement on Form N-14 relating to the Acquiring Fund Shares
to be issued hereunder (together with any amendments thereof and supplements
thereto, the "Registration Statement"), in compliance with the 1933 Act, the
1934 Act and the Investment Company Act and the rules and regulations
thereunder.
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5.6 Each Fund will, from time to time, as and when requested by the other Fund,
execute and deliver or cause to be executed and delivered all such assignments
and other instruments, and will take or cause to be taken such further action,
as the other Fund may deem necessary or desirable in order to (a) vest in and
confirm to the Acquiring Fund title to and possession of all the assets of the
Acquired Fund to be sold, assigned, transferred and delivered to the Acquiring
Fund pursuant to this Agreement, (b) vest in and confirm to the Acquired Fund
title to and possession of all the Acquiring Fund Shares to be transferred to
the Acquired Fund pursuant to this Agreement, (c) assume all of the Acquired
Fund's liabilities in accordance with this Agreement, and (d) otherwise to carry
out the intent and purpose of this Agreement.
5.7 The Acquiring Fund will use all reasonable efforts to obtain the approvals
and authorizations required by the 1933 Act, the Investment Company Act and such
of the state Blue Sky or securities laws as it may deem appropriate in order to
continue its operations after the Closing Date.
5.8 The expenses incurred by the Funds in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Acquired Fund, whether
or not the transactions contemplated hereby are consummated.
6 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions provided for
herein shall, at its election, be subject to the performance by the Acquiring
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and the following further conditions.
6.1 All representations and warranties of the Acquiring Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
6.2 The Acquiring Fund shall have delivered to the Acquired Fund a certificate
executed in its name by the President or a Vice President of the Acquiring Fund,
in form and substance satisfactory to the Acquired Fund and dated as of the
Closing Date, to the effect that the representations and warranties of the
Acquiring Fund in this Agreement are true and correct at and as of the Closing
Date except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Acquired Fund shall reasonably
request.
6.3 The Acquired Fund shall have received the opinion of Vedder, Price, Kaufman
& Kammholz, counsel for the Acquiring Fund, dated as of the closing Date,
addressed to the Acquired Fund substantially in the form and to the effect that:
6.3.1 The Acquiring Fund is duly organized and existing under the laws of
the State of Minnesota as a corporation;
6.3.2 The Acquiring Fund is registered as an closed-end management company
under the 1940 Act;
6.3.3 This Agreement and the reorganization provided for herein and the
execution of this Agreement have been duly authorized and approved by all
requisite action of the Acquiring Fund and this Agreement has been duly
executed and delivered by the Acquiring Fund and (assuming the Agreement is
a valid and binding obligation of the other parties thereto) is a valid and
binding obligation of the Acquiring Fund, except as such enforceability may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar law affecting creditors' rights generally, or by
general principals of equity (regardless of whether enforcement is sought in
a proceeding at equity at law);
6.3.4 Neither the execution or delivery by the Acquiring Fund of this
Agreement nor the consummation by the Acquiring Fund of the transactions
contemplated thereby contravene the Acquiring Fund's Articles of
Incorporation, or, to the best of their knowledge, violate any provision of
any statute or any published regulation or any judgment or order disclosed
to it by the Acquiring Fund as being applicable to the Acquiring Fund;
6.3.5 To the best of their knowledge based solely on the certificate of an
appropriate officer of the Acquiring Fund, there is no pending or threatened
litigation which would have the effect of prohibiting any material business
practice or the acquisition of any material property or the conduct of any
material business of the Acquiring Fund or might have a material adverse
effect on the value of any assets of the Acquiring Fund;
6.3.6 The Acquiring Fund's Shares have been duly authorized and upon
issuance thereof in accordance with this Agreement will, be validly issued,
fully paid and nonassessable;
6.3.7 Except as to financial statements and schedules and other financial
and statistical data included or, incorporated by reference therein and
subject to usual and customary qualifications with respect to Rule 10b-5
type opinions, as of the effective date of the Registration Statement filed
pursuant to the Agreement, the portions thereof pertaining to the Acquiring
Fund comply as to form in all material respects with the requirements of the
Securities Act, the Securities Exchange Act and the 1940 Act and the rules
and regulations of the SEC thereunder and no facts have come to counsel's
attention which would cause them to believe that as of the effectiveness of
the portions of the Registration Statement applicable to the Acquiring Fund,
the Registration Statement contained any untrue statement of
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a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; and
6.3.8 To the best of their knowledge and information and subject to the
qualifications set forth below, the execution and delivery by the Acquiring
Fund of the Agreement and the consummation of the transactions therein
contemplated do not require, under the laws of the States of Minnesota and
Illinois or the federal laws of the United States, the consent, approval,
authorization, registration, qualification or order of, or filing with, any
court or governmental agency or body (except such as have been obtained).
Counsel need express no opinion, however, as to any such consent, approval,
authorization, registration, qualification, order or filing (a) which may be
required as a result of the involvement of other parties to the Agreement in
the transactions contemplated by the Agreement because of their legal or
regulatory status or because of any other facts specifically pertaining to
them; (b) the absence of which does not deprive the Acquired Fund of any
material benefit under the Agreement; or (c) which can be readily obtained
without significant delay or expense to the Acquired Fund, without loss to
the Acquired Fund of any material benefit under the Agreement and without
any material adverse effect on the Acquired Fund during the period such
consent, approval, authorization, registration, qualification or order was
obtained. The foregoing opinion relates only to consents, approvals,
authorizations, registrations, qualifications, orders or filings under (a)
laws which are specifically referred to in this opinion, (b) laws of the
States of Minnesota and Illinois and the federal laws of the United States
which, in counsel's experience, are normally applicable to transactions of
the type provided for in the Agreement and (c) court orders and judgments
disclosed to counsel by the Acquiring Fund in connection with the opinion.
In addition, although counsel need not specifically have considered the
possible applicability to the Acquiring Fund of any other laws, orders, or
judgments, nothing has come to their attention in connection with their
representation of the Acquiring Fund in this transaction that has caused
them to conclude that any other consent, approval, authorization,
registration, qualification, order or filing is required.
6.3.9 In giving the opinions set forth above, counsel may state that it is
relying on certificates of officers of the Acquiring Fund with regard to
matters of fact and certain certificates and written statements of
government officers with respect to the good standing of the Acquiring Fund
and on the opinion of Dorsey & Whitney as to matters of Minnesota law.
7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions provided
for herein with respect to the Acquired Fund shall, at its election, be subject
to the performance by the Acquired Fund of all the obligations to be performed
by it hereunder on or before the Closing Date and the following further
conditions:
7.1 All representations and warranties of the Acquired Fund contained in this
Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated by
this Agreement, as of the Closing Date with the same force and effect as if made
on and as of the Closing Date.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a certificate
executed in its name by the President or Vice President of the Acquired Fund, in
form and substance satisfactory to the Acquiring Fund and dated as of the
Closing Date, to the effect that the representations and warranties of the
Acquired Fund in this Agreement are true and correct at and as of the Closing
Date except as they may be affected by the transactions contemplated by this
Agreement, and as to such other matters as the Acquiring Fund shall reasonably
request.
7.3 The Acquired Fund shall have delivered to the Acquiring Fund on the Closing
Date a Statement of Net Assets, which Statement shall be prepared in accordance
with generally accepted accounting principles consistently applied, together
with a list of its portfolio securities showing the adjusted tax bases and
holding periods of such securities as of the Closing Date, certified by the
Treasurer of the Acquired Fund.
7.4 On or immediately prior to the Closing Date, the Acquired Fund shall have
declared the dividends and/or distributions contemplated by paragraph 1.4.
7.5 The Acquiring Fund shall have received the opinion of Vedder, Price,
Kaufman & Kammholz, counsel for the Acquired Fund, dated as of the closing
Date, addressed to the Acquiring Fund substantially in the form and to the
effect that:
7.5.1 The Acquired Fund is duly organized and existing under the laws of
the Commonwealth of Massachusetts as a voluntary association with
transferable shares of beneficial interest commonly referred to as a
"Massachusetts business trust;"
7.5.2 The Acquired Fund is registered as an closed-end management company
under the 1940 Act;
7.5.3 This Agreement and the reorganization provided for herein and the
execution of this Agreement have been duly authorized and approved by all
requisite action of the Acquired Fund and this Agreement has been duly
executed and delivered by the Acquired Fund and (assuming the Agreement is a
valid and binding obligation of the other parties thereto) is a valid and
binding obligation of the Acquired Fund, except as such enforceability may
be limited by
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bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar law affecting creditors' rights generally, or by general principals
of equity (regardless of whether enforcement is sought in a proceeding at
equity at law);
7.5.4 Neither the execution or delivery by the Acquired Fund of this
Agreement nor the consummation by the Acquired Fund of the transactions
contemplated thereby contravene the Acquired Fund's Declaration of Trust,
or, to their knowledge, violate any provision of any statute or any
published regulation or any judgment or order disclosed to it by the
Acquired Fund as being applicable to the Acquired Fund;
7.5.5 To their knowledge based solely on the certificate of an appropriate
officer of the Acquired Fund, there is no pending or threatened litigation
involving the Acquired Fund except as disclosed therein;
7.5.6 Except as to financial statements and schedules and other financial
and statistical data included or, incorporated by reference therein and
subject to usual and customary qualifications with respect to Rule 10b-5
type opinions, as of the effective date of the Registration Statement filed
pursuant to the Agreement, the portions thereof pertaining to the Acquired
Fund comply as to form in all material respects with the requirements of the
Securities Act, the Securities Exchange Act and the 1940 Act and the rules
and regulations of the SEC thereunder and no facts have come to counsel's
attention which would cause them to believe that as of the effectiveness of
the portions of the Registration Statement applicable to the Acquired Fund,
the Registration Statement contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading; and
7.5.7 To their knowledge and subject to the qualifications set forth below,
the execution and delivery by the Acquired Fund of the Agreement and the
consummation of the transactions therein contemplated do not require, under
the laws of the States of Massachusetts and Illinois or the federal laws of
the United States, the consent, approval, authorization, registration,
qualification or order of, or filing with, any court or governmental agency
or body (except such as have been obtained under the Securities Act, the
1940 Act or the rules and regulations thereunder and any filing in
connection with the termination of the Acquired Fund). Counsel need express
no opinion, however, as to any such consent, approval, authorization,
registration, qualification, order or filing (a) which may be required as a
result of the involvement of other parties to the Agreement in the
transactions contemplated by the Agreement because of their legal or
regulatory status or because of any other facts specifically pertaining to
them; (b) the absence of which does not deprive the Acquiring Fund of any
material benefit under the Agreement; or (c) which can be readily obtained
without significant delay or expense to the Acquiring Fund, without loss to
the Acquiring Fund of any material benefit under the Agreement and without
any material adverse effect on the Acquiring Fund during the period such
consent, approval, authorization, registration, qualification or order was
obtained. The foregoing opinion relates only to consents, approvals,
authorizations, registrations, qualifications, orders or filings under (a)
laws which are specifically referred to in this opinion, (b) laws of the
States of Massachusetts and Illinois and the federal laws of the United
States which, in counsel's experience, are normally applicable to
transactions of the type provided for in the Agreement and (c) court orders
and judgments disclosed to counsel by the Acquired Fund in connection with
the opinion. In addition, although counsel need not specifically have
considered the possible applicability to the Acquired Fund of any other
laws, orders, or judgments, nothing has come to their attention in
connection with their representation of the Acquired Fund in this
transaction that has caused them to conclude that any other consent,
approval, authorization, registration, qualification, order or filing is
required.
7.5.8 In giving the opinions set forth above, counsel may state that it is
relying on certificates of officers of the Acquired Fund with regard to
matters of fact and certain certificates and written statements of
government officers with respect to the legal existence of the Acquired Fund
and on the opinion of Bingham Dana LLP as to matters of Massachusetts law.
8 FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND AND THE
ACQUIRED FUND
The obligations of each Fund hereunder are subject to the further conditions
that on or before the Closing Date:
8.1 This Agreement and the transactions contemplated herein shall have been
approved by the requisite votes of (a) the Board of Directors of the Acquiring
Fund and the Board of Trustees of the Acquired Fund, including as to the
determinations required by Rule 17a-8(a) under the Investment Company Act and
(b) the holders of the outstanding shares of the Acquiring Fund and the Acquired
Fund in accordance with the provisions of the Acquiring Fund's Articles of
Incorporation and By-Laws and the Acquired Fund's Declaration of Trust and
By-Laws and the requirements of the NYSE and AMEX; each Fund shall have
delivered certified copies of the resolutions evidencing such approvals to the
other Fund; and the Acquiring Fund shall have given Bankers Trust Company or its
successor, and the Depository Trust Company or its successor, at least five
business days notice of such approval.
8.2 On the Closing Date no action, suit or other proceeding shall be pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein.
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8.3 All consents of other parties and all consents, orders and permits of
federal, state and local regulatory authorities (including those of the SEC and
of state Blue Sky or securities authorities, including "no-action" positions of
such federal or state authorities) deemed necessary by the Acquiring Fund or the
Acquired Fund to permit consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained, except where failure
to obtain any such consent, order or permit would not involve a risk of a
materially adverse effect on the assets or properties of the Acquiring Fund or
the Acquired Fund, provided that either party hereto may waive any part of this
condition as to itself.
8.4 The Registration Statement shall have become effective under the 1933 Act,
and no stop order suspending the effectiveness thereof shall have been issued,
and, to the best knowledge of the Funds no investigation or proceeding under the
1933 Act for that purpose shall have been instituted or be pending, threatened
or contemplated.
8.5 The Funds shall have received an opinion of Vedder, Price, Kaufman &
Kammholz satisfactory to the Funds and based upon such reasonably requested
representations and warranties as requested by counsel, substantially to the
effect that, for federal income tax purposes:
8.5.1 The acquisition by the Acquiring Fund of substantially all the assets
of the Acquired Fund in exchange solely for Acquiring Fund Shares and the
assumption by the Acquiring Fund of the Acquired Fund's liabilities, if any,
followed by the distribution by the Acquired Fund of the Acquiring Fund
Shares to the shareholders of the Acquired Fund in exchange for their
Acquired Fund shares in complete liquidation of the Acquired Fund, will
constitute a "reorganization" within the meaning of Section 368(a)(1) of the
Internal Revenue Code, and the Acquiring Fund and the Acquired Fund each
will be "a party to a reorganization" within the meaning of Section 368(b)
of the Internal Revenue Code;
8.5.2 The Acquired Fund's shareholders will recognize no gain or loss upon
the exchange of all of their Acquired Fund shares for Acquiring Fund Shares
in complete liquidation of the Acquired Fund, except with respect to cash
received for a fractional Acquiring Fund Common Share, if any;
8.5.3 No gain or loss will be recognized by the Acquired Fund upon the
transfer of substantially all its assets to the Acquiring Fund in exchange
solely for Acquiring Fund Shares and the assumption by the Acquiring Fund of
the Acquired Fund's liabilities, if any, and with respect to the subsequent
distribution of those Acquiring Fund Shares to the Acquired Fund
shareholders in complete liquidation of the Acquired Fund;
8.5.4 No gain or loss will be recognized by the Acquiring Fund upon the
acquisition of substantially all the Acquired Fund's assets in exchange
solely for Acquiring Fund Shares and the assumption of the Acquired Fund's
liabilities, if any;
8.5.5 The basis of the assets acquired by the Acquiring Fund will be, in
each instance, the same as the basis of those assets when held by the
Acquired Fund immediately before the transfer, and the holding period of
such assets acquired by the Acquiring Fund will include the holding period
thereof when held by the Acquired Fund;
8.5.6 The basis of the Acquiring Fund Shares to be received by the Acquired
Fund's shareholders upon liquidation of the Acquired Fund will be, in each
instance, the same as the basis of the Acquired Fund shares surrendered in
exchange therefor, (including any fractional Acquiring Fund Common Share
interests to which the shareholder is entitled); and
8.5.7 The holding period of the Acquiring Fund Shares to be received by the
Acquired Fund's shareholders will include the period during which the
Acquired Fund shares to be surrendered in exchange therefor were held,
provided such Acquired Fund shares were held as capital assets by those
shareholders on the date of the exchange.
8.6 The Acquiring Fund shall have obtained written confirmation from both
Moody's Investors Service, Inc. and Standard & Poor's Corporation that (a)
consummation of the transactions contemplated by this Agreement will not impair
the "aaa" and AAA ratings, respectively, assigned by such rating agencies to the
existing shares of Acquiring Fund MuniPreferred, Series M, Series T, Series T2,
Series W, Series TH, Series F and Series F2, and (b) if Acquiring Fund
shareholders do not approve an amendment to the Acquiring Fund's Articles of
Incorporation to authorize additional shares of Acquiring Fund MuniPreferred,
Series TH, the shares of Acquiring Fund MuniPreferred, Series TH2, to be issued
pursuant to paragraph 1.1 will be rated "aaa" or AAA, respectively, by such
rating agencies.
9 ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
9.1 This Agreement constitutes the entire agreement between the Funds.
9.2 The representations, warranties and covenants contained in this Agreement
or in any document delivered pursuant hereto or in connection herewith shall
survive the consummation of the transactions contemplated hereby.
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10 TERMINATION
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the shareholders of the Funds:
10.1 By mutual agreement of the Funds;
10.2 By either Fund, if a condition to the obligations of such Fund shall not
have been met and it reasonably appears that it will not or cannot be met; or
10.3 By either Fund, if the Closing shall not have occurred on or before
October 13, 1999;
In the event of any such termination, there shall be no liability for damages on
the part of either Fund (other than the liability of the Funds to pay expenses
pursuant to paragraph 5.8) or any Director, Trustee or officer of any Fund.
11 AMENDMENT
This Agreement may be amended, modified or supplemented only in writing by the
parties; provided, however, that following the shareholders' meetings called by
the Funds pursuant to paragraph 5.2, no such amendment may have the effect of
changing the provisions for determining the number of Acquiring Fund Common
Shares or shares of Acquiring Fund MuniPreferred to be distributed to the
Acquired Fund's shareholders under this Agreement without their further approval
and the further approval of the Funds' Boards of Directors or Trustees
(including the determination required by Rule 17a-8(a) under the Investment
Company Act), and provided further that nothing contained in this paragraph 11
shall be construed as requiring additional approval to amend this Agreement to
change the Closing Date or the Effective Time.
12 NOTICES
Any notice, report, demand or other communication required or permitted by any
provision of this Agreement shall be in writing and shall be given by hand
delivery, prepaid certified mail or overnight delivery service addressed to John
Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois 60606,
Attention: Gifford R. Zimmerman.
13 HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
13.1 The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
13.2 This Agreement may be executed in any number of counterparts, each of
which will be deemed an original.
13.3 This Agreement shall be governed by and construed in accordance with the
laws of the State of Illinois, except for paragraph 13.6 which shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
13.4 This Agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns, and no assignment or transfer hereof or
of any rights or obligations hereunder shall be made by either party without the
written consent of the other party. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person, firm or
corporation other than the parties and their respective successors and assigns
any rights or remedies under or by reason of this Agreement.
13.5 All persons dealing with the Acquiring Fund must look solely to the
property of the Acquiring Fund for the enforcement of any claims against the
Acquiring Fund as neither the Directors, officers, agents or shareholders of the
Acquiring Fund assume any personal liability for obligations entered into on
behalf of the Acquiring Fund.
13.6 Consistent with the Acquired Fund's Declaration of Trust, notice is hereby
given and the parties hereto acknowledge and agree that this instrument is
executed on behalf of the Trustees of the Acquired Fund as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees or shareholders of the Acquired Fund individually but
binding only upon the assets and property of the Acquired Fund.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
by the President or Vice President of each Fund.
<TABLE>
<S> <C>
NUVEEN PREMIUM INCOME NUVEEN WASHINGTON PREMIUM
MUNICIPAL FUND 4, INC INCOME MUNICIPAL FUND
By: By:
--------------------------------------------------- ---------------------------------------------------
Gifford R. Zimmerman Gifford R. Zimmerman
Vice President Vice President
</TABLE>
A-12
<PAGE> 62
NPT599
<PAGE> 63
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the common shares
and shares of MuniPreferred(R) (collectively, the "Acquiring Fund Shares") to be
issued by Nuveen Premium Income Municipal Fund 4, Inc. (the "Acquiring Fund")
pursuant to an Agreement and Plan of Reorganization and Liquidation dated as of
June 1, 1999 (the "Agreement") by and between the Acquiring Fund and Nuveen
Washington Premium Income Municipal Fund (the "Acquired Fund" and, together with
the Acquiring Fund, the "Funds"), providing for a reorganization (the
"Reorganization") in which, among other things, the Acquiring Fund would (a)
acquire substantially all of the assets of the Acquired Fund in exchange for
newly issued Acquiring Fund Shares and (b) assume substantially all of the
liabilities of the Acquired Fund. This Statement of Additional Information does
not constitute a prospectus, but should be read in conjunction with the Joint
Proxy Statement--Prospectus relating to the Acquiring Fund Shares dated June __,
1999. This Statement of Additional Information does not include all information
that a shareholder should consider before voting on the proposals contained in
the Joint Proxy Statement--Prospectus, and shareholders should obtain and read
the Joint Proxy Statement--Prospectus prior to voting. A copy of the Joint Proxy
Statement--Prospectus may be obtained without charge by mailing a written
request to either of the Funds, Attention: Administration, 333 West Wacker
Drive, Chicago, Illinois 60606 or by calling (800) 257-8787. Capitalized terms
used but not defined in the text of this Statement of Additional Information
have the meanings given them in Annex B hereto.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investment Objectives and Policies of the Funds................................................................ S-2
Certain Trading Strategies of the Funds........................................................................ S-6
Management of the Funds........................................................................................ S-8
Portfolio Transactions of the Funds............................................................................S-10
Description of MuniPreferred Issued by the Acquiring Fund......................................................S-11
Description of the Auctions For MuniPreferred Issued by the Acquiring Fund.....................................S-29
Federal Income Tax Matters Associated with Investment in the Funds.............................................S-41
Financial Statements........................................................................................... F-1
Ratings of Investments (ANNEX A)............................................................................... A-1
Statement Fixing and Establishing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock (ANNEX B)......................................................................... B-1
</TABLE>
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS June , 1999.
<PAGE> 64
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
GENERAL
Each Fund's primary investment objective is to provide, through
investment in a professionally managed portfolio of tax-exempt Municipal
Obligations, current income exempt from regular Federal income tax, consistent
with the Fund's investment policies. The secondary investment objective of the
Acquiring Fund is the enhancement of portfolio value relative to the municipal
bond market through investments in tax-exempt Municipal Obligations that, in the
opinion of the Adviser, are underrated or undervalued or that represent
municipal market sectors that are undervalued. The secondary investment
objective of the Acquired Fund is the enhancement of portfolio value relative to
the Washington municipal bond market through investments in tax-exempt
Washington Municipal Obligations that, in the opinion of the Adviser, are
underrated or undervalued or that represent municipal market sectors that are
undervalued. See "Portfolio Investments," below. Underrated Municipal
Obligations are those whose ratings do not, in the Adviser's opinion, reflect
their true value. Municipal Obligations may be underrated because of the time
that has elapsed since their most recent rating, or because of positive factors
that may not have been fully taken into account by rating agencies, or for other
similar reasons. Municipal Obligations that are undervalued or that represent
undervalued municipal market sectors are Municipal Obligations that, in the
Adviser's opinion, are worth more than the value assigned to them in the
marketplace. Municipal Obligations of particular types or purposes (e.g.,
hospital bonds, industrial revenue bonds or bonds issued by a particular
municipal issuer) may be undervalued because there is a temporary excess of
supply in that market sector, or because of a general decline in the market
price of Municipal Obligations of the market sector for reasons that do not
apply to the particular Municipal Obligations that are considered undervalued.
Each Fund's investment in underrated or undervalued Municipal Obligations will
be based on the Adviser's belief that the prices of such Municipal Obligations
should ultimately reflect their true value. Accordingly, "enhancement of
portfolio value relative to the municipal bond market" refers to each 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. Thus, each Fund's secondary investment objective is not intended to
suggest that capital appreciation is itself an objective of each Fund. Instead,
each Fund will seek enhancement of portfolio value relative to the municipal
bond market by prudent selection of Municipal Obligations, regardless of which
direction the market may move. Each Fund's policy of investing in insured
Municipal Obligations may limit the extent to which it will be able to achieve
its secondary investment objective. Any capital appreciation realized by a Fund
will generally result in the distribution of taxable capital gains to Fund
shareholders. Each Fund is currently required to allocate net capital gains and
other income taxable for Federal income tax purposes, if any, proportionately
between its common shares and shares of MuniPreferred. See "Tax Matters
Associated with Investment in the Funds" and "Proposal No. 1--The
Reorganization--The Auction--Auction Procedures" in the Proxy
Statement--Prospectus.
PORTFOLIO INVESTMENTS
Except to the extent either Fund invests in temporary investments as
described below and more fully in the Statement of Additional Information, the
Acquiring Fund, as a fundamental policy, invests substantially all (in excess of
80%) of its assets in tax-exempt Municipal Obligations rated at the time of
purchase within the four highest grades (Baa or BBB or better) by Moody's or S&P
or in unrated Municipal Obligations which, in the opinion of the Adviser, have
characteristics equivalent to, and will be of comparable quality to, Municipal
Obligations rated within the four highest grades by Moody's or S&P, provided
that the Acquiring Fund may not invest more than 20% of its assets in such
unrated Municipal Obligations. The Acquired Fund, as a fundamental policy,
invests substantially all (in excess of 80%) of its assets in tax-exempt
Washington Municipal Obligations rated at the time of purchase within the four
highest grades by Moody's or S&P, or in unrated Washington Municipal Obligations
which, in the opinion of the Adviser, have credit characteristics equivalent to,
and will be of comparable quality to, Washington Municipal Obligations rated
within the four highest grades by Moody's or S&P, provided that the Acquired
Fund may not invest more than 20% of its assets in such unrated Washington
Municipal Obligations.
Each Fund will not invest in any rated Municipal Obligations that are
rated lower than Baa by Moody's or BBB by S&P at the time of purchase. Municipal
Obligations rated Baa or BBB are considered "investment grade" securities;
Municipal Obligations rated Baa are considered medium grade obligations which
lack outstanding investment characteristics and in fact have speculative
characteristics as well, while Municipal Obligations rated BBB are regarded
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as having an adequate capacity to pay principal and interest. Municipal
Obligations rated AAA in which each Fund may invest may have been so rated on
the Basis of the existence of insurance guaranteeing the timely payment, when
due, of all principal and interest. A general description of Moody's and S&P's
ratings of Municipal Obligations is set forth in Annex A.
The foregoing investment objectives and policies are fundamental
policies of each Fund and may not be changed without the approval of the holders
of a "majority of the outstanding" common shares and preferred shares of that
Fund, including shares of that Fund's MuniPreferred, voting together as a single
class, and of the holders of a "majority of the outstanding" preferred shares of
the Fund, including shares of that Fund's MuniPreferred, voting as a separate
class. For purposes of the foregoing, "Investment Restrictions" below, and the
first paragraph under "Proposal No. 1--The Reorganization--Description of
MuniPreferred Issued by the Acquiring Fund--Voting Rights" in the Proxy
Statement--Prospectus, "majority of the outstanding," when used with respect to
particular shares of a Fund, means (a) 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 (b) more than 50% of the shares, whichever is less.
Both Funds emphasize investments in Municipal Obligations with
long-term maturities in order to maintain an average portfolio maturity of 20-30
years, but the average maturity may be shortened from time to time depending on
market conditions. Moreover, during temporary defensive periods, and in order to
keep cash on hand fully invested, both Funds may invest any percentage of its
assets in temporary investments, the income on which may be either tax-exempt or
taxable. Both Funds intend to invest in taxable temporary investments only in
the event that suitable tax-exempt temporary investments are not available at
reasonable prices and yields. Both Funds will invest only in taxable temporary
investments which are U.S. Government securities or securities rated within the
highest grade by Moody's or S&P, and which mature within one year form the date
of purchase or carry a variable or floating rate of interest.
MUNICIPAL OBLIGATIONS
"Municipal Obligations" are debt obligations issued by states, cities
and local authorities, and certain possessions and territories of the United
States, to obtain funds for various public purposes, including the construction
and maintenance of such public facilities as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets and water and sewer
works. Other public purposes for which Municipal Obligations may be issued
include the refinancing of outstanding obligations and the obtaining of funds
for general operating expenses and for loans to other public institutions and
facilities. In addition, certain industrial development, private activity and
pollution control bonds may be included within the term Municipal Obligations if
the interest paid thereon qualifies as exempt from regular Federal income tax.
The two principal classifications of Municipal Obligations are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds (e.g., industrial development bonds) are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Also included within the general category of Municipal
Obligations are participations in lease obligations or installment purchase
contract obligations of municipal authorities or entities.
The yields on Municipal Obligations are dependent on a variety of
factors, including the condition of the general money market and the Municipal
Obligation market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The market value of Municipal
Obligations will vary with changes in prevailing interest rate levels and as a
result of changing evaluations of the ability of their issuers to meet interest
and principal payments.
Each Fund may purchase and sell Municipal Obligations on a when-issued
or delayed delivery basis. When-issued and delayed delivery transactions arise
when securities are purchased or sold with payment and delivery beyond the
regular settlement date. On such transactions the payment obligation is fixed at
the time the buyer enters into the commitment. This involves an element of risk
to a Fund when it is the buyer because at the time of delivery the market value
of the Municipal Obligations may be less than such Fund's payment obligation.
Each Fund is required under the rules of the Commission to maintain in a
segregated account liquid assets, consisting of cash, U.S. government
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<PAGE> 66
securities or other high grade debt obligations, equal in value to the purchase
price due on the settlement date. Income generated by assets in such a
segregated account of a Fund may be taxable to shareholders of that Fund.
INVESTMENT RESTRICTIONS
Except as described below, neither Fund, as a fundamental policy, may,
without the approval of the holders of a "majority of the outstanding" common
shares and preferred shares of such Fund, including shares of its MuniPreferred,
voting together as a single class, and of the holders of a "majority of the
outstanding" preferred shares of such Fund, including shares of its
MuniPreferred, voting as a separate class:
(1) Issue senior securities, as defined in the 1940 Act, other
than Preferred Shares, 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 in the Statement of Additional
Information under "Certain Trading Strategies of each
Fund--Financial Futures and Options Transactions".
(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 that represent
no more than 10% of such Fund's total assets and are otherwise
within the limits described in the Statement of Additional
Information under "Certain Trading Strategies of each
Fund--Financial Futures and Options Transactions."
(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 such Fund's
total assets including the amount borrowed; while any such
borrowings exceed 5% of such Fund's 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 be applicable to Municipal Obligations
other than those Municipal Obligations backed only by the
assets and revenues of non-governmental users, nor shall it
apply to Municipal Obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
(6) Purchase or sell real estate, but this shall not prevent such
Fund from investing in Municipal Obligations secured by real
estate or interests therein or foreclosing upon and selling
such security;
(7) Purchase or sell commodities or commodities contracts, except
for transactions involving futures contracts that represent no
more than 10% of such Fund's total assets and are otherwise
within the limits described in the Statement of Additional
Information under "Certain Trading Strategies of each
Fund--Financial Futures and Options Transactions."
(8) Make loans, other than by entering into repurchase agreements
and through the purchase of Municipal Obligations or temporary
investments in accordance with its investment objectives,
policies and limitations;
(9) Invest in securities other than Municipal Obligations and
temporary investments as described in "Additional Information
about the Funds--Investment Objectives and Policies--Portfolio
Investments," and purchase financial futures and options
except for futures and options that represent no more than 10%
of a Fund's total assets and are otherwise within the limits
described in the
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Statement of Additional Information under "Certain Trading
Strategies of each Fund--Financial Futures and Options
Transactions."
(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 such Fund's
total assets;
(11) Pledge, mortgage or hypothecate its assets, except that, to
secure borrowing 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 such Fund's 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 the
securities of such Fund if, to such Fund's knowledge, those
directors or trustees of such Fund, or those officers and
directors of the Adviser, 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, such a guarantee or letter of credit would be
considered a separate security and would be treated as an issue of such
government, other entity or bank. When a Municipal Obligation is insured by bond
insurance, it shall not be considered a security that is issued or guaranteed by
the insurer; instead, the issuer of such security will be determined in
accordance with the principles set forth above. The foregoing restrictions do
not limit the percentage of a Fund's assets that may be invested in Municipal
Obligations insured by any given insurer.
Notwithstanding the foregoing, certain restrictions imposed by Moody's
or S&P, or both, on borrowing money, engaging in short sales of securities,
lending securities, buying and selling futures contracts and writing put or call
options at any time a Fund's shares of MuniPreferred are outstanding, as
described in the Statement of Additional Information under "Certain Trading
Strategies of each Fund--Financial Futures and Options Transactions" are not
fundamental policies and may be changed by a Fund from time to time without
shareholder approval, but only in the event such Fund receives written
confirmation from Moody's or S&P, as appropriate, that such change would not
impair the ratings then assigned by Moody's or S&P, or both, to shares of such
Fund's MuniPreferred.
The foregoing restrictions and limitations 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.
No Fund has any intention to file a voluntary application for relief
under Federal bankruptcy law or any similar application under state law for so
long as such Fund is solvent and does not foresee becoming insolvent.
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CERTAIN TRADING STRATEGIES OF THE FUNDS
PORTFOLIO TRADING AND TURNOVER RATE
Portfolio trading may be undertaken to accomplish the investment
objectives of each Fund in relation to actual and anticipated movements in
interest rates. In addition, a security may be sold and another of comparable
quality purchased at approximately the same time to take advantage of what the
Adviser believes to be a temporary price disparity between the two securities.
Temporary price disparities between two comparable securities may result from
supply and demand imbalances where, for example, a temporary oversupply of
certain bonds may cause a temporarily low price for such bonds, as compared with
other bonds of like quality and characteristics. A Fund may also engage to a
limited extent in short-term trading consistent with its investment objectives.
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 a Fund will not engage in trading solely to recognize
a gain.
Subject to the foregoing, each Fund will attempt to achieve its
investment objectives by prudent selection of Municipal Obligations with a view
to holding them for investment. While there can be no assurance thereof, each
Fund anticipates that its annual portfolio turnover rate generally will not
exceed 100%. However, the rate of turnover will not be a limiting factor when a
Fund deems it desirable to sell or purchase securities. Therefore, depending
upon market conditions, a Fund's annual portfolio turnover rate may exceed 100%
in particular years.
WHEN-ISSUED AND DELAYED DELIVERY
Each 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 a
Fund enters into a commitment to purchase securities on a when-issued or delayed
delivery basis, it is required under the rules of the Securities and Exchange
Commission (the "Commission") to maintain in a segregated account liquid assets,
consisting of cash, U.S. government securities or other high grade debt
obligations, equal in value to the purchase price due on the settlement date.
Income generated by assets in such a segregated account of a Fund may be taxable
to shareholders of that Fund. Each Fund currently is required to allocate net
capital gains and other income taxable for Federal income tax purposes, if any,
proportionately between its common shares and shares of its MuniPreferred, and
dividends paid on shares of its MuniPreferred during specified periods will
include an allocated portion of any such net capital gains and other taxable
income. See "Tax Matters Associated with Investment in the Funds" and
"Description of the Auctions for MuniPreferred Issued by the Acquiring
Fund--Auction Dates; Advance Notice of Allocation of Taxable Income" below. 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
Each Fund may attempt to hedge its investment portfolio against market
risk by engaging in transactions in financial futures contracts, options on
financial futures or options that either are based on an index of long-term
Municipal Obligations (i.e., those with remaining maturities averaging 20-30
years) or relate to debt securities whose prices are anticipated by the Adviser
to correlate with the prices of the Municipal Obligations owned by such Fund.
Neither Fund has any 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, a Fund may take an investment position
in a futures contract or in an option which is expected to move in the opposite
direction from the position being hedged. Hedging may be utilized to reduce the
risk that the value of securities owned by a Fund may decline on account of an
increase in interest rates and to hedge against increases in the cost of the
securities such Fund intends to purchase as a result of a decline in interest
rates. A Fund's use of futures and options for hedging purposes can be expected
to result in taxable income or gain to its shareholders. Each Fund is currently
required to allocate any taxable income or gain proportionately between its
common shares and shares of its MuniPreferred. See "Tax Matters Associated with
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Investment in the Funds" and "Description of Auctions for MuniPreferred Issued
by the Acquiring Fund--Auction Dates; Advance Notice of Allocation of Taxable
Income" below.
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 a 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 a 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 a Fund
intends to acquire. The writing of such options provides a hedge to the extent
of the premium received in the writing transaction.
Although certain risks are involved in futures and options transactions
(as discussed under "Risks of Futures and Options Transactions" below), because
these transactions will be engaged in by a Fund only for hedging purposes, these
futures and options portfolio strategies should not subject such Fund to those
risks frequently associated with speculation in futures or options transactions.
Regulations of the Commodity Futures Trading Commission (the "CFTC") applicable
to each Fund require that transactions in futures and options on futures be
engaged in only for bonafide hedging purposes or if the aggregate initial margin
deposits and premiums paid by such Fund do not exceed 5% of the market value of
its assets. Neither Fund will purchase futures unless it has segregated cash,
government securities or high grade liquid debt equal to the contract price of
the futures less any margin on deposit, or unless the long futures position is
covered by the purchase of a put option. Neither Fund will sell futures unless
such 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.
With respect to its engaging in transactions involving the purchase or writing
of put and call options on debt securities or indexes, neither Fund will
purchase such options if more than 5% of its assets would be invested in the
premiums for such options, and it will only write "covered" or "secured"
options, wherein the securities or cash required to be delivered upon exercise
are held by such Fund, with such cash being maintained in a segregated account.
These requirements and limitations may limit a Fund's ability to engage in
hedging transactions. So long as Moody's or S&P, or both, are rating a Fund's
shares of MuniPreferred, that Fund will only engage in futures or options
transactions in accordance with the then-current guidelines of such rating
agencies, and only after it has received written confirmation from Moody's and
S&P, as appropriate, that such transactions would not impair the ratings then
assigned by Moody's and S&P to such shares.
DESCRIPTION OF FINANCIAL FUTURES AND OPTIONS. A futures contract is a
contract between a seller and a buyer for the sale and purchase of specified
property at a specified future date for a specified price. An option is a
contract that gives the holder of the option the right, but not the obligation,
to buy (in the case of a call option) specified property from, or to sell (in
the case of a put option) specified property to, the writer of the option for a
specified price during a specified period prior to the option's expiration.
Financial futures contracts and options cover specified debt securities (such as
U.S. Treasury securities) or indexes designed to correlate with price movements
in certain categories of debt securities. At least one exchange trades futures
contracts on an index designed to correlate with the long-term municipal bond
market. Financial futures contracts and options on financial futures contracts
are traded on exchanges regulated by the CFTC. Options on certain financial
instruments and financial indexes are traded on securities markets regulated by
the Commission. Although futures contracts and options on specified financial
instruments call for settlement by delivery of the financial instruments covered
by the contracts, in most cases positions in these contracts are closed out in
cash by entering into offsetting liquidating or closing transactions. Index
futures and options are designed for cash settlement only.
RISKS OF FUTURES AND OPTIONS TRANSACTIONS. There are certain risks
associated with the use of financial futures and options to hedge investment
portfolios. There may be an imperfect correlation between price movements of the
futures and options and price movements of the portfolio securities being
hedged. Losses may be incurred in hedging transactions, which could reduce the
portfolio gains that might have been realized if the hedging transactions had
not been entered into. The ability to close out positions in futures and options
depends upon the existence of a liquid secondary market, which may not exist for
all futures and options at all times. If a Fund engages in futures transactions
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or in the writing of options on futures, it will be required to maintain initial
margin and maintenance margin and may be required to make daily variation margin
payments in accordance with applicable rules of the exchanges and the CFTC. If a
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 such Fund fails to complete the anticipated purchase transaction, such Fund
may experience a loss or a gain on the futures or options transaction that will
not be offset by price movements in the Municipal Obligations that were the
subject of the anticipatory hedge. The cost of put options on debt securities or
indexes effectively increases the cost of the securities subject to them,
thereby reducing the yield otherwise available from such securities. If a Fund
decides to use futures contracts or options on futures contracts for hedging
purposes, such 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 a Fund that are greater than those which would otherwise be applicable to
such Fund under applicable rules of the exchanges and the CFTC.
REPURCHASE AGREEMENTS
As temporary investments, a Fund may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of securities
(U.S. government securities or Municipal Obligations) agrees to repurchase the
same security at a specified price on a future date agreed upon by the parties.
The agreed-upon repurchase price determines the yield during such Fund's holding
period. Repurchase agreements are considered to be loans collateralized by the
underlying security that is the subject of the repurchase contract. Income
generated from transactions in repurchase agreements by a Fund is taxable to
shareholders of that Fund and, therefore, is required to be allocated
proportionately by that Fund between its common shares and shares of its
MuniPreferred. See "Tax Matters Associated with Investment in the Funds" and
"Description of the Auctions for MuniPreferred Issued by the Acquiring
Fund--Auction Dates; Advance Notice of Allocation of Taxable Income" below. A
Fund will enter into repurchase agreements only with registered securities
dealers or domestic banks that, in the opinion of the Adviser, present minimal
credit risk. The risk to a Fund is limited to the ability of the issuer to pay
the agreed-upon repurchase price on the delivery date; however, although the
value of the underlying collateral at the time the transaction is entered into
always equals or exceeds the agreed-upon repurchase price, if the value of the
collateral declines, there is a risk of loss of both principal and interest. In
the event of default, the collateral may be sold but a Fund might incur a loss
if the value of the collateral declines, and might incur disposition costs or
experience delays in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization upon the collateral by a Fund may be delayed or limited. The Adviser
will monitor the value of the collateral at the time the transaction is entered
into and at all times subsequent during the term of the repurchase agreement in
an effort to determine that such value always equals or exceeds the agreed-upon
repurchase price. In the event the value of the collateral declines below the
repurchase price, the Adviser will demand additional collateral from the issuer
to increase the value of the collateral to at least that of the repurchase
price, including interest.
MANAGEMENT OF THE FUNDS
The Management Agreements provide that the Adviser shall act as
investment adviser for each Fund, manage the Funds' respective investments,
administer their business affairs, provide office facilities and equipment and
certain clerical, bookkeeping and administrative services, and permit any of its
officers and employees to serve without compensation as directors or trustees
and officers of the Funds if elected to such positions. Under its respective
Management Agreement, each Fund has agreed to pay all other costs and expenses
of its operations, including the compensation of its directors or trustees
(other than those affiliated with the investment adviser), custodian, transfer,
dividend disbursing and service agent expenses, legal fees, expenses of
independent auditors, costs of acquiring and disposing of portfolio securities,
expenses of preparing, printing and distributing reports to shareholders and
governmental agencies, and taxes, if any.
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<PAGE> 71
Nuveen Advisory is a wholly-owned subsidiary of John Nuveen & Co.
Incorporated ("Nuveen"). Nuveen is the sponsor of the Nuveen Defined Portfolios,
registered unit investment trusts, is the principal underwriter for the Nuveen
Mutual Funds, and has served as co-managing underwriter for the shares of the
Nuveen Exchange-Traded Funds. Over 1,300,000 individuals have invested to date
in Nuveen's funds and trusts. Founded in 1898, Nuveen brings over a century of
expertise to the municipal bond market. According to Strategic Insight, Nuveen
is the leading sponsor of exchange-traded municipal bond funds as measured by
number of funds (60) and fund assets under management ($26 billion). Overall,
Nuveen and its affiliates manage more than $55 billion in assets in a variety of
products. Nuveen is a subsidiary of The John Nuveen Company which, in turn, is
approximately 78% owned by The St. Paul Companies, Inc. ("St. Paul"). St. Paul
is located in St. Paul Minnesota, and is principally engaged in providing
property-liability insurance through subsidiaries.
Under the Management Agreements each Fund has agreed to pay an annual
management fee as follows:
<TABLE>
<CAPTION>
MANAGEMENT FEE SCHEDULE
- ----------------------------------------------------------------
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 Acquiring Fund paid aggregate management fees of $5,712,194,
$5,551,306 and $5,475,423 for the fiscal years ended October 31, 1998, October
31, 1997 and October 31, 1996 for an effective management fee rate of .62%, .62%
and .62%, respectively. The Acquired Fund paid aggregate management fees of
$333,129, $319,233 and $318,581, respectively for the fiscal years ended May 31,
1998, May 31, 1997, and May 31, 1996 for an effective management fee rate of
.65%, .65% and .65%, respectively.
The names, addresses and principal occupations of the principal
executive officers and the directors of the Adviser are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATIONS
- -------------------- ------------------------
<S> <C>
Timothy R. Schwertfeger Chairman and Director of
333 W. Wacker Drive The John Nuveen Company,
Chicago, IL 60606 John Nuveen & Co. Incorporated,
Nuveen Advisory Corp., and
Nuveen Institutional Advisory Corp.
John P. Amboian President of The John Nuveen Company,
333 W. Wacker Drive John Nuveen & Co. Incorporated,
Chicago, IL 60606 Nuveen Advisory Corp., and
Nuveen Institutional Advisory Corp.
</TABLE>
Timothy R. Schwertfeger, a current Board Member and nominee of the
Acquiring Fund, is an "interested person" of the Adviser. The remaining Board
Members and nominees to the Board of the Acquiring Fund are not "interested
persons" of the Adviser. The other officers of the Fund are officers or
employees of the Adviser. See also "Proposal No. 3 -- Election of Board Members
of the Acquiring Fund" in the Joint Proxy Statement--Prospectus.
S-9
<PAGE> 72
PORTFOLIO TRANSACTIONS OF THE FUNDS
The Adviser, in effecting purchases and sales of portfolio securities
for the account of each Fund, places orders in such manner as, in the opinion of
the Adviser's management, offers the best price and market for the execution of
each transaction. Portfolio securities are normally purchased directly from an
underwriter or in the over-the-counter market from the principal dealers in such
securities, unless it appears that a better price or execution may be obtained
elsewhere. Portfolio securities are not purchased from Nuveen or its affiliates
except in compliance with the 1940 Act.
Generally, all portfolio transactions are effected on a principal (as
opposed to an agency) basis and, accordingly, the Funds have not paid and do not
expect to pay any brokerage commissions. Purchases from underwriters include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers include the spread between the bid and asked price. Given the best
price and execution obtainable, it is the practice of each Fund to select
dealers which, in addition, furnish research information (primarily credit
analyses of issuers) and statistical and other services to the Adviser. It is
not possible to place a dollar value on information, statistical and other
services received from dealers. Since it is only supplementary to the Adviser's
own research efforts, the receipt of research information is not believed to
reduce significantly the Adviser's expenses. Any research benefits obtained are
available to all of the Adviser's other clients. While the Adviser is primarily
responsible for the placement of the business of each Fund, the policies and
practices of the Adviser in this regard must be consistent with the foregoing
and are at all times subject to review by the Board of each Fund.
The Adviser reserves the right to, and does, manage other investment
accounts and investment companies for other clients which may have investment
objectives similar or identical to those of the Funds. Subject to applicable
laws and regulations, the Adviser will attempt to allocate equitably portfolio
transactions among each Fund and the portfolios of its other clients purchasing
or selling securities whenever decisions are made to purchase or sell securities
by a Fund or Funds and one or more of such other clients simultaneously. In
making such allocations, the main factors to be considered will be the
respective investment objectives of the Funds and such other clients, the
relative size of the portfolio holdings of the same or comparable securities,
the availability of cash for investment by a Fund and such other clients, the
size of investment commitments generally held by such Fund and such other
clients and opinions of the persons responsible for recommending investments to
such Fund and such other clients. While this procedure could have a detrimental
effect on the price or amount of the securities available to a Fund from time to
time, it is the opinion of the Board of each Fund that the benefits available
from the Adviser's organization will outweigh any disadvantage that may arise
from exposure to simultaneous transactions. Notwithstanding the similarity of
the investment objectives of the Funds with those of other funds managed by the
Adviser, each of these funds will be separately managed and the composition of
their investment portfolios will differ. Accordingly, the investment performance
of each of these funds will likely not be the same.
Under the 1940 Act, a Fund may not purchase portfolio securities from
any underwriting syndicate of which Nuveen is a member except under certain
limited conditions set forth in Rule 10f-3. The Rule sets forth requirements
relating to, among other things, the terms of an issue of Municipal Obligations
purchased by a Fund, the amount of Municipal Obligations which may be purchased
in any one issue and the assets of such Fund which may be invested in a
particular issue. In addition, purchases of securities made pursuant to the
terms of the Rule must be approved at least quarterly by the Board of a Fund,
including a majority of the members thereof who are not interested persons of
such Fund.
For the fiscal years ended October 31, 1998, October 31, 1997 and
October 31, 1996, in the case of the Acquiring Fund, and May 31, 1998, May 31,
1997 and May 31, 1996, in the case of the Acquired Fund, neither Fund paid any
brokerage commissions.
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<PAGE> 73
DESCRIPTION OF MUNIPREFERRED ISSUED
BY THE ACQUIRING FUND
This description of the shares of Acquiring Fund MuniPreferred,
including Acquiring Fund MuniPreferred, Series TH or Series TH2, issued pursuant
to the Reorganization, does not purport to be complete and is subject to and
qualified in its entirety by reference to the Articles of Incorporation of the
Acquiring Fund (the "Articles") and the Acquiring Fund's Statement Establishing
and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative
Preferred Shares (the "Acquiring Fund Statement"). Copies of the Articles and
the Acquiring Fund Statement are filed as exhibits to the Registration Statement
of which this Statement of Additional Information is a part and may be
inspected, and copies thereof may be obtained, as described under "Available
Information" in the Joint Proxy Statement--Prospectus.
GENERAL
The shares of Acquiring Fund MuniPreferred, Series TH or Series TH2,
issued pursuant to the Reorganization will rank on a parity with each other,
with outstanding shares of Acquiring Fund MuniPreferred, Series M, Series T,
Series T2, Series W, Series TH, Series F and Series F2, and with shares of any
other series of preferred shares of the Acquiring Fund as to the payment of
dividends and the distribution of assets upon liquidation.
DIVIDENDS
GENERAL. The holders of shares of each series of Acquiring Fund
MuniPreferred, including Acquiring Fund MuniPreferred, Series TH or Series TH2,
issued pursuant to the Reorganization, will be entitled to receive, when, as and
if declared by the Board of the Acquiring Fund, out of funds legally available
therefor in accordance with the Articles, including, the Acquiring Fund
Statement and applicable law, cumulative cash dividends at the Applicable Rate
for shares of such series, determined as set forth under "Determination of
Dividend Rate" below, and no more (except as otherwise provided below under
"Gross-up Payments"), payable on the respective dates determined as set forth
below. No interest, or sum of money in lieu of interest, will be payable in
respect of any dividend payment or payments on shares of Acquiring Fund
MuniPreferred which may be in arrears, and, except as otherwise provided herein,
no additional sum of money will be payable in respect of any such arrearage.
Dividends on shares of each series of Acquiring Fund MuniPreferred
shall accumulate at the Applicable Rate for shares of such series from the day
following the day on which the Effective Time occurs (in the case of Acquiring
Fund MuniPreferred, Series TH or Series TH2) or from the day on which the
Acquiring Fund issued such shares (in the case of Acquiring Fund MuniPreferred,
Series M, Series T, Series T2, Series W, Series F and Series F2). Dividends on
shares of each series of Acquiring Fund MuniPreferred shall be payable, when, as
and if declared by the Acquiring Fund's Board out of funds legally available
therefor in accordance with the Acquiring Fund's Articles, including the
Acquiring Fund's Statement and applicable law, on shares of (a) Acquiring Fund
MuniPreferred, Series M, on each Tuesday; (b) Acquiring Fund MuniPreferred
Series T and Series W and Series T2, on the first Wednesday following the end of
the Initial Rate Period thereof, and thereafter on each Wednesday; (c) Acquiring
Fund MuniPreferred, Series W, on each Thursday; (d) Acquiring Fund
MuniPreferred, Series TH, on the first Friday following the end of the Initial
Rate Period thereof, and thereafter on each Friday; and (e) Acquiring Fund
MuniPreferred, Series F and Series F2, on each Monday; provided, however, that
(i) if the Monday or the Tuesday on which dividends would otherwise be payable
as set forth above is not a Business Day, then such Dividends shall be payable
on such shares on the first Business Day that falls after such Monday or
Tuesday, as the case may be; (ii) if the Wednesday, Thursday or Friday on which
dividends would otherwise be payable as set forth above is not a Business Day,
then such dividends shall be payable on such shares on the first Business Day
that falls prior to such Wednesday, Thursday or Friday, as the case may be; and
(iii) the Acquiring Fund in its discretion may establish Dividend Payment Dates
in respect of any Special Rate Period of shares of either series of Acquiring
Fund MuniPreferred consisting of more than 28 Rate Period Days that differ from
those set forth above; 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 and filed with the Secretary of the Acquiring
Fund; and further provided that (i) any such Dividend Payment Date shall be a
Business Day and (ii) 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 as set forth below under "Designation of
Special Rate Periods" below.
S-11
<PAGE> 74
The amount of dividends per share payable on shares of a series of
Acquiring Fund 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. Any dividend payment made on
shares of Acquiring Fund MuniPreferred shall first be credited against the
earliest accumulated but unpaid dividends due with respect to such shares.
Each dividend on shares of Acquiring Fund MuniPreferred will be paid on
the Dividend Payment Date therefor to the holders of record as their names
appear on the record books of the Acquiring Fund on the Business Day next
preceding such Dividend Payment Date. 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 of record as their names appear on the
record books of the Acquiring Fund on such date, not exceeding 15 days preceding
the payment date thereof, as may be fixed by the Board of the Acquiring Fund.
The Securities Depository, in accordance with its current procedures,
is expected to credit on each Dividend Payment Date dividends received from the
Acquiring Fund to the accounts of the respective Agent Members in next-day
funds. Each of the current Broker-Dealers, however, has represented to the
Acquiring Fund that such Broker-Dealer (or if such Broker-Dealer does not act as
Agent Member, the Agent Member designated by such Broker-Dealer) will make such
dividend payments available in same-day funds on each Dividend Payment Date to
Beneficial Owners that use such Broker-Dealer or its designee as Agent Member. A
Beneficial Owner of shares of Acquiring Fund MuniPreferred that does not use one
of the current Broker-Dealers or a designee thereof as its Agent Member should
contact the Agent Member used by such Beneficial Owner to determine whether such
Agent Member will make dividend payments available to such Beneficial Owner in
next-day or same-day funds. If any Agent Member does not make such dividends
available in same-day funds to a Beneficial Owner, such Beneficial Owner who
uses such Agent Member would not have same-day funds available to it until the
next Business Day, which in the case of a Dividend Payment Date that is a
Monday, Tuesday, Wednesday, Thursday or Friday, would be the following Tuesday,
Wednesday, Thursday, Friday or Monday, respectively, if it is a Business Day.
DETERMINATION OF DIVIDEND RATE. The dividend rate on shares of
Acquiring Fund MuniPreferred, Series TH or Series TH2, during the period from
and after the day following the date on which the Effective Time occurs to and
including the last day of the Initial Rate Period of shares of such series will
be the dividend rate in effect immediately prior to the Effective Time for the
shares of Acquiring Fund or Acquired Fund MuniPreferred, Series TH,
respectively. For each Subsequent Rate Period of shares of such series
thereafter, and for each Subsequent Rate Period of shares of outstanding
Acquiring Fund MuniPreferred, Series M, Series T, Series T2, Series W, Series
W2, Series F and Series F2, the dividend rate on shares of such series will 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, 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 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 the next succeeding paragraph and the Acquiring 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 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 the next succeeding paragraph (including the day such Failure
to Deposit occurs
S-12
<PAGE> 75
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 Acquiring 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 the next succeeding paragraph (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 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), 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 the next succeeding paragraph or the Acquiring 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 the next succeeding paragraph and (2) the Acquiring Fund pays the
applicable Late Charge to the Auction Agent, 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 will 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 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 the next succeeding paragraph or the Acquiring 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 the
next succeeding paragraph and (2) the Acquiring Fund pays the applicable Late
Charge to the Auction Agent, 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 Acquiring Fund MuniPreferred for any Rate
Period thereof being herein referred to as the "Applicable Rate" for shares of
such series).
A Failure to Deposit with respect to shares of a series of Acquiring
Fund MuniPreferred shall have been cured (if such Failure to Deposit is not
solely due to the willful failure of the Acquiring 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 immediately above, the
Acquiring Fund shall have paid to the Auction Agent (a) all accumulated and
unpaid dividends on the shares of such series and (b) without duplication, the
Redemption Price for the shares, if any, of such series for which Notice of
Redemption has been mailed; provided, however, that the foregoing clause (b)
shall not apply to the Acquiring Fund's failure to pay the Redemption Price in
respect of shares of Acquiring Fund MuniPreferred when
S-13
<PAGE> 76
the related Notice of Redemption provides that redemption of such shares is
subject to one or more conditions precedent and any such condition precedent
shall not have been satisfied at the time or times and in the manner specified
in such Notice of Redemption.
GROSS-UP PAYMENTS. Holders of shares of Acquiring Fund MuniPreferred
shall be entitled to receive, when, as and if declared by the Board of the
Acquiring Fund, out of funds legally available therefor in accordance with the
Articles, the Acquiring Fund Statement and applicable law, dividends in an
amount equal to the aggregate Gross-up Payment in accordance with the following:
If, in the case of any Minimum Rate Period or any Special Rate Period
of 28 Rate Period Days or fewer, the Acquiring Fund allocates any net capital
gains or other income taxable for Federal income tax purposes to a dividend paid
on Acquiring Fund MuniPreferred without having given advance notice thereof to
the Auction Agent as described under "Description of the Auctions for
MuniPreferred Issued by the Acquiring Fund--Auction Dates; Advance Notice of
Allocation of Taxable Income" below (such allocation is 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 Acquiring Fund MuniPreferred or the liquidation of the
Acquiring Fund, the Acquiring Fund will, prior to the end of the calendar year
in which such dividend was paid, provide notice thereof to the Auction Agent and
direct the Acquiring Fund's dividend disbursing agent to send such notice with a
Gross-up Payment to each holder of shares (initially Cede, as nominee of the
Securities Depository) that was entitled to such dividend payment during such
calendar year at such holder's address as the same appears or last appeared on
the stock books of the Acquiring Fund.
If, in the case of any Special Rate Period of more than 28 Rate Period
Days, the Acquiring Fund makes a Taxable Allocation to a dividend paid on shares
of Acquiring Fund MuniPreferred, the Acquiring 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 Acquiring 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 Acquiring Fund.
The Acquiring Fund shall not be required to make Gross-up Payments with
respect to any net capital gains or other taxable income determined by the IRS
to be allocable in a manner different from that allocated by the Acquiring Fund.
A "Gross-up Payment" means payment to a holder of shares of Acquiring
Fund MuniPreferred of an amount which, when taken together with the aggregate
amount of Taxable Allocations made to such holder to which such Gross-up Payment
relates, would cause such holder's dividends in dollars (after Federal income
tax consequences) from the aggregate of such Taxable Allocations and the related
Gross-up Payment to be equal to the dollar amount of the dividends which would
have been received by such holder if the amount of the aggregate Taxable
Allocations would have been excludable from the gross income of such holder. A
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 Acquiring
Fund MuniPreferred is subject to the Federal alternative minimum tax with
respect to dividends received from the Acquiring 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 Acquiring Fund MuniPreferred at the maximum marginal
regular Federal income tax rate, if any, 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 during the calendar year in
question.
RESTRICTIONS ON DIVIDENDS AND OTHER PAYMENTS. Under the 1940 Act, the
Board of the Acquiring Fund may not declare any dividend (except a dividend
payable in Acquiring Fund common shares), or declare any other distribution,
upon Acquiring Fund common shares, or purchase Acquiring Fund common shares,
unless in every such case the Acquiring Fund preferred shares, including
Acquiring Fund MuniPreferred, Series TH or Series TH2, have, at the time of any
such declaration or purchase (and after giving effect thereto), an asset
coverage (as defined in and determined pursuant to the 1940 Act) of at least
200% (or such other percentage as may in the future be required by law).
S-14
<PAGE> 77
In addition, for so long as any shares of Acquiring Fund MuniPreferred,
including Acquiring Fund MuniPreferred, Series TH or Series TH2, are
outstanding, except as set forth in the following paragraph or otherwise
described herein, (a) the Acquiring Fund may not declare, pay or set apart for
payment any dividend or other distribution (other than a dividend or
distribution paid in, or in options, warrants or rights to subscribe for or
purchase, Acquiring Fund common shares or other shares, if any, ranking junior
to the shares of Acquiring Fund MuniPreferred as to the payment of dividends and
the distribution of assets upon liquidation) in respect of Acquiring Fund common
shares or any other shares of the Acquiring Fund ranking junior to or on a
parity with shares of Acquiring Fund MuniPreferred as to the payment of
dividends or the distribution of assets upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for consideration any
Acquiring Fund common shares or any other such junior shares (except by
conversion into or exchange for shares of the Acquiring Fund ranking junior to
the shares of Acquiring Fund MuniPreferred as to the payment of dividends and
the distribution of assets upon liquidation), or any such parity shares (except
by conversion into or exchange for shares of the Acquiring Fund ranking junior
to or on a parity with shares of Acquiring Fund MuniPreferred as to payment of
dividends and the distribution of assets upon liquidation), unless (i) full
cumulative dividends on shares of each series of Acquiring Fund 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 Acquiring Fund has redeemed the full number of
shares of Acquiring Fund MuniPreferred required to be redeemed by any provision
for mandatory redemption pertaining thereto, and (b) if either Moody's or S&P is
rating the shares of Acquiring Fund MuniPreferred, the Acquiring Fund may not
declare, pay or set apart for payment any dividend or other distribution (other
than a dividend or distribution paid in, or in options, warrants or rights to
subscribe for or purchase, Acquiring Fund common shares or other shares, if any,
ranking junior to shares of Acquiring Fund MuniPreferred as to the payment of
dividends and the distribution of assets upon liquidation) in respect of
Acquiring Fund common shares or any other shares of the Acquiring Fund ranking
junior to shares of Acquiring Fund MuniPreferred as to the payment of dividends
or the distribution of assets upon liquidation, or call for redemption, redeem,
purchase or otherwise acquire for consideration any Acquiring Fund common shares
or any other such junior shares (except by conversion into or exchange for
shares of the Acquiring Fund ranking junior to shares of Acquiring Fund
MuniPreferred as to the payment of dividends or the distribution of assets upon
liquidation), unless immediately after such transaction the Discounted Value of
Moody's Eligible Assets or S&P Eligible Assets, or both, as the case may be,
would at least equal the MuniPreferred Basic Maintenance Amount (see "Rating
Agency Guidelines" and "Redemption" below).
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 shares ranking, as to the payment of dividends, on a parity with shares of
Acquiring Fund MuniPreferred for any period unless full cumulative dividends
have been or contemporaneously are declared and paid on the shares of each
series of Acquiring Fund MuniPreferred through its most recent Dividend Payment
Date. When dividends are not paid in full upon the shares of each series of
Acquiring Fund MuniPreferred through its most recent Dividend Payment Date or
upon the shares of any other class or series of shares ranking on a parity as to
the payment of dividends with shares of Acquiring Fund MuniPreferred through
their most recent respective dividend payment dates, all dividends declared upon
shares of Acquiring Fund MuniPreferred and any other such class or series of
shares ranking on a parity as to the payment of dividends with shares of
Acquiring Fund MuniPreferred shall be declared pro rata so that the amount of
dividends declared per share on shares of Acquiring Fund MuniPreferred and such
other class or series of shares shall in all cases bear to each other the same
ratio that accumulated dividends per share on the shares of Acquiring Fund
MuniPreferred and such other class or series of shares bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
Acquiring Fund MuniPreferred shall be based on the Applicable Rate for such
share for the Dividend Periods during which dividends were not paid in full).
Under the Code, the Acquiring Fund must, among other things, distribute
at least 90% of its investment company taxable income and 90% of its net
tax-exempt income each year in order to maintain its qualification for tax
treatment as a regulated investment company. The foregoing limitations on
dividends, distributions and purchases may under certain circumstances impair
the Acquiring Fund's ability to maintain such qualification. See "Tax Matters
Associated with Investment in the Funds" below.
DESIGNATION OF SPECIAL RATE PERIODS. The Acquiring Fund, at its option,
may designate any succeeding Subsequent Rate Period of shares of a series of
Acquiring Fund MuniPreferred as a Special Rate Period consisting of a specified
number of Rate Period Days evenly divisible by seven and not more than 1,820
(approximately 5 years),
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subject to adjustment as described below. A designation of a Special Rate Period
shall be effective only if (i) notice thereof shall have been given as provided
herein, (ii) 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 (iii) if the Acquiring Fund shall have mailed a Notice of
Redemption with respect to any shares of such series, as described under
"Redemption--Notice of Redemption" below, the Redemption Price with respect to
such shares shall have been deposited with the Auction Agent. In the event the
Acquiring Fund wishes to designate any succeeding Subsequent Rate Period of
shares of a series of Acquiring Fund MuniPreferred as a Special Rate Period
consisting of more than 28 Rate Period Days, the Acquiring 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
Acquiring 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.
In the event the Acquiring Fund wishes to designate a Subsequent Rate
Period of shares of a series of Acquiring Fund MuniPreferred 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
Acquiring Fund MuniPreferred, Series M, (b) a Wednesday that is a Business Day
in the case of Acquiring Fund MuniPreferred, Series T, (c) a Thursday that is a
Business Day in the case of Acquiring Fund MuniPreferred, Series W,
(d) a Friday that is a Business Day in the cases of Acquiring Fund
MuniPreferred, Series TH or (e) a Monday that is a Business Day in the case of
Acquiring Fund MuniPreferred Series F and Series F2, then the Acquiring 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 Acquiring Fund MuniPreferred, Series M, (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 Acquiring Fund MuniPreferred, Series
T, (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 Acquiring
Fund MuniPreferred, Series W, (d) on the first Thursday that is followed by a
Friday that is a Business Day preceding what would otherwise be such last day,
in the case of Acquiring Fund MuniPreferred, Series TH, 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 Acquiring Fund MuniPreferred, Series
F.
If the Acquiring Fund proposes to designate any succeeding Subsequent
Rate Period of shares of a series of Acquiring Fund MuniPreferred as a Special
Rate Period, not less than 20 nor more than 30 days prior to the date the
Acquiring 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 of shares of such series), notice shall be (a) published or
caused to be published by the Acquiring Fund in a newspaper of general
circulation to the financial community in The City of New York, New York, which
carries financial news, and (b) mailed by the Acquiring Fund by first-class
mail, postage prepaid, to the holders of shares of such series. Each such notice
shall state (i) that the Acquiring 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 (ii) that the Acquiring 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 (A) its determination,
subject to certain conditions, to exercise such option, in which case the
Acquiring Fund shall specify the Special Rate Period designated, or (B) its
determination not to exercise such option.
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 Acquiring Fund MuniPreferred as to which notice has been given as
set forth in the preceding paragraph (or such later time or date, or both, as
may be agreed to by the Auction Agent), the Acquiring Fund shall deliver to the
Auction Agent either:
(a) a notice ("Notice of Special Rate Period") stating (i) that the
Acquiring 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, (ii) the Auction Date immediately prior to the first day of
such Special Rate Period, (iii) that such Special Rate Period shall not commence
if (A) an Auction for shares of such series shall not be held on such Auction
Date for any reason or (B) 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, (iv) the scheduled Dividend Payment Dates for
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shares of such series during such Special Rate Period and (v) the Special
Redemption Provisions, if any, applicable to shares of such series in respect of
such Special Rate Period; such notice to be accompanied by a MuniPreferred Basic
Maintenance Report showing that, as of the third Business Day next preceding
such proposed Special Rate Period, Moody's Eligible Assets (if Moody's is then
rating such series) and S&P Eligible Assets (if S&P is then rating such series)
each have an aggregate Discounted Value at least equal to the MuniPreferred
Basic Maintenance Amount as of such Business Day (assuming for purposes of the
foregoing calculation that (1) 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 (2) the Moody's Discount Factors applicable to Moody's
Eligible Assets will be determined by reference to the first Moody's Exposure
Period longer than the Moody's Exposure Period then applicable to the Acquiring
Fund); or
(b) a notice stating that the Acquiring 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.
If the Acquiring Fund fails to deliver either such notice (and, in the
case of the notice described in clause (a) above, a MuniPreferred Basic
Maintenance Report to the effect set forth in clause (a) 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 Acquiring 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 clause (b) above.
VOTING RIGHTS
Holders of shares of Acquiring Fund MuniPreferred, including Acquiring
Fund MuniPreferred, Series TH or Series TH2, are entitled to vote on certain
matters as described under "Investment Objectives and Policies--Investment
Restrictions" above and in the Joint Proxy Statement--Prospectus under "Proposal
No. 1--The Reorganization--Description of MuniPreferred Issued by the Acquiring
Fund--Voting Rights" and "--Certain Provisions in the Acquiring Fund's Articles
of Incorporation" and "Proposal No. 1--The Reorganization--Comparison of
the--Investment Objectives and Policies of the Acquiring Fund and the Acquired
Fund--General."
In connection with the election of the Acquiring Fund's directors,
holders of outstanding Acquiring Fund preferred shares, including Acquiring Fund
MuniPreferred, voting as a separate class, shall be entitled to elect two of the
Acquiring Fund's trustees, and the remaining trustees will be elected by holders
of Acquiring Fund common shares and Acquiring Fund preferred shares, including
Acquiring Fund MuniPreferred, voting together as a single class. In addition, if
at any time dividends (whether or not earned or declared) on outstanding
Acquiring Fund preferred shares, including Acquiring Fund MuniPreferred, shall
be due and unpaid in an amount equal to two full years' dividends thereon, and
sufficient cash or specified securities shall not have been deposited with the
Auction Agent for the payment of such dividends, then, as the sole remedy of
holders of outstanding Acquiring Fund preferred shares, including Acquiring Fund
MuniPreferred, the number of trustees constituting the Acquiring Fund's Board
shall be automatically increased by the smallest number that, when added to the
two trustees elected exclusively by the holders of Acquiring Fund preferred
shares, including Acquiring Fund MuniPreferred, as described above, would
constitute a majority of the Acquiring Fund's Board as so increased by such
smallest number; and at a special meeting of shareholders which will be called
and held as soon as practicable, and at all subsequent meetings at which
trustees are to be elected, the holders of Acquiring Fund preferred shares,
including Acquiring Fund MuniPreferred, voting as a separate class, will be
entitled to elect the smallest number of additional trustees that, together with
the two trustees which such holders will be in any event entitled to elect,
constitutes a majority of the total number of trustees of the Acquiring Fund as
so increased. The terms of office of the persons who are trustees at the time of
that election will continue. If the Acquiring Fund thereafter shall pay, or
declare and set apart for payment, in full all dividends payable on all
outstanding Acquiring Fund preferred shares, including Acquiring Fund
MuniPreferred, the voting rights stated in the preceding sentence shall cease,
and the terms of office of all of the additional trustees elected by the holders
of Acquiring Fund preferred shares, including Acquiring Fund MuniPreferred (but
not of the trustees with respect to whose election the holders of Acquiring Fund
common shares were entitled to vote or the two trustees the holders of Acquiring
Fund preferred shares have the right to elect in any event), will terminate
automatically.
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The Acquiring Fund may not, without the affirmative vote of the holders
of at least a majority of the shares of Acquiring Fund MuniPreferred outstanding
at the time (voting separately as one class):
(a) authorize, create or issue any class or series of shares ranking
prior to or on a parity with the shares of Acquiring Fund MuniPreferred with
respect to the payment of dividends or the distribution of assets upon
liquidation or authorize, create or issue additional shares of any series of
Acquiring Fund MuniPreferred (except that the Acquiring Fund may, without the
vote of the holders of Acquiring Fund MuniPreferred, authorize, create or issue
additional shares of any series of preferred shares ranking on a parity with
shares of Acquiring Fund MuniPreferred with respect to the payment of dividends
and the distribution of assets upon liquidation if, after giving effect thereto,
the aggregate liquidation preference of all Acquiring Fund preferred shares then
outstanding, exclusive of accumulated and unpaid dividends, would not exceed
$308,400,000 (after giving effect to the Reorganization); provided, however, if
the Acquiring Fund obtains written confirmation from Moody's (if Moody's is then
rating the shares of Acquiring Fund MuniPreferred) and S&P (if S&P is then
rating the shares of Acquiring Fund MuniPreferred) that the issuance of any such
additional class or series would not impair the rating then assigned by such
rating agency to the Acquiring Fund MuniPreferred, the Acquiring Fund may,
without the vote of the holders of Acquiring Fund MuniPreferred, authorize,
create or issue classes or series of Acquiring Fund preferred shares ranking on
a parity with shares of Acquiring Fund MuniPreferred with respect to the payment
of dividends and the distribution of assets upon liquidation notwithstanding
that, after giving effect thereto, the aggregate liquidation preference of all
Acquiring Fund preferred shares then outstanding would exceed $268,900,000
(after giving effect to the Reorganization); or
(b) amend, alter or repeal the provisions of the Declaration or the
Acquiring Fund Statement, whether by merger, consolidation or otherwise, so as
to affect any preference, right or power of such shares of Acquiring Fund
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 shares ranking junior to shares of Acquiring Fund
MuniPreferred with respect to the payment of dividends and the distribution of
assets upon liquidation will be deemed to affect such preferences, rights or
powers only if Moody's or S&P is then rating the Acquiring Fund MuniPreferred
and such issuance would, at the time thereof, cause the Acquiring Fund not to
satisfy the 1940 Act MuniPreferred Asset Coverage or the MuniPreferred Basic
Maintenance Amount.
So long as any shares of Acquiring Fund MuniPreferred are outstanding,
the Acquiring Fund shall not, without the affirmative vote of the holders of at
least 66 2/3% of the shares of Acquiring Fund MuniPreferred outstanding at the
time (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 Acquiring Fund is solvent and does not foresee becoming insolvent.
If any action set forth above would adversely affect the rights of one or more
series of Acquiring fund MuniPreferred in a manner different from any other
series of Acquiring Fund MuniPreferred, the Acquiring Fund will not approve any
such action without the affirmative vote of the holders of at least a majority
of the shares of each such series of Acquiring Fund MuniPreferred (voting
separately as a class).
Voting provisions will not apply with respect to shares of Acquiring
Fund MuniPreferred if, at or prior to the time when a vote is required, such
shares shall have been (a) redeemed or (b) called for redemption and sufficient
funds shall have been deposited in trust to effect such redemption.
RATING AGENCY GUIDELINES
The Acquiring Fund intends that, so long as shares of Acquiring Fund
MuniPreferred are outstanding, the composition of its portfolio will reflect
guidelines established by at least one of Moody's or S&P in connection with the
Acquiring Fund's receipt at the Effective Time of ratings of "aaa" from Moody's
or AAA from S&P in respect of shares of Acquiring Fund MuniPreferred, Series T
and Series TH. Moody's and S&P, nationally recognized independent rating
agencies, issue ratings for various securities reflecting their perceived
creditworthiness of such securities. The Acquiring Fund pays certain fees to
Moody's or S&P, or both, for rating shares of Acquiring Fund MuniPreferred. The
guidelines described below have been developed by Moody's and S&P in connection
with other issuances of asset-backed and similar securities, including debt
obligations and adjustable rate preferred shares, generally on a case-by-case
basis through discussions with the issuers of those securities. The guidelines
are designed
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to ensure that assets underlying outstanding debt or preferred shares will be
sufficiently varied and will be of sufficient quality and amount to justify
investment grade ratings. The guidelines do not have the force of law, but have
been adopted by the Acquiring Fund in order to satisfy current requirements
necessary for Moody's or S&P, or both, to issue the above-described ratings for
shares of Acquiring Fund MuniPreferred, Series T and Series TH, which ratings
are generally relied upon by institutional investors in purchasing such
securities. In the context of a closed-end investment company such as the
Acquiring Fund, therefore, the guidelines provide a set of tests for portfolio
composition and asset coverage that supplement (and in some cases are more
restrictive than) the applicable requirements under the 1940 Act. A rating
agency's guidelines will apply to shares of Acquiring Fund MuniPreferred only so
long as such rating agency is rating such shares. The Acquiring Fund's Board
may, without shareholder approval, amend, alter or repeal any or all of the
definitions and related provisions which have been adopted by the Acquiring Fund
pursuant to the rating agency guidelines in the event the Acquiring Fund
receives written confirmation from Moody's or S&P, or both, as appropriate, that
any such change would not impair the ratings then assigned by Moody's and S&P to
shares of Acquiring Fund MuniPreferred.
So long as either Moody's or S&P, or both, are rating the Acquiring
Fund MuniPreferred, the Acquiring Fund may not, among other things, (a) engage
in futures or options transactions, except in accordance with the then current
guidelines of such rating agencies, (b) borrow money, except that the Acquiring
Fund may, without obtaining the written confirmation described below, borrow
money for the purpose of clearing securities transactions if the MuniPreferred
Basic Maintenance Amount would continue to be satisfied after giving effect to
such borrowing and certain other conditions are met, (c) issue any class or
series of shares ranking on a parity with shares of Acquiring Fund MuniPreferred
with respect to the payment of dividends or the distribution of assets upon
liquidation of the Acquiring Fund, (d) engage in any short sales of securities,
(e) lend any securities, (f) merge or consolidate into or with any corporation,
(g) change the pricing service utilized in determining the market value of any
asset of the Acquiring Fund, or (h) enter into reverse repurchase agreements,
unless in each case (except as described above) it has received written
confirmation from S&P or Moody's, or both, as appropriate, that any such action
would not impair the rating then assigned by such rating agency to shares of
Acquiring Fund MuniPreferred. While the Acquiring Fund does not intend to
borrow, and while the Acquiring Fund is restricted as a matter of operating
policy from borrowing in excess of 5% of its total assets so long as the shares
of Acquiring Fund MuniPreferred are outstanding and is otherwise restricted from
borrowing pursuant to rating agency guidelines, under certain circumstances and
notwithstanding adverse interest rate or market conditions, the Acquiring Fund
is permitted to borrow under its investment restrictions for temporary or
emergency purposes (e.g., to make required distributions or pay dividends) or to
repurchase shares when such borrowing is deemed to be in the best interest of
its common shareholders. See "Additional Information About the Funds--Repurchase
of Common Shares; Conversion to Open-End Fund" in the Joint Proxy
Statement--Prospectus for the circumstances under which the Acquiring Fund may
purchase its common shares and incur indebtedness in connection therewith.
Should the Acquiring Fund borrow, the Acquiring Fund would be required to pay
when due the interest obligation on any debt incurred by the Acquiring Fund
before it would be able to pay dividends on shares of Acquiring Fund
MuniPreferred, and it is likely that the Acquiring Fund would be required to pay
the principal amount of any such debt prior to meeting the liquidation
preference of the shares of Acquiring Fund MuniPreferred. Because the interest
expense on borrowings by the Acquiring Fund will reduce the Acquiring Fund's net
investment earnings available to pay dividends on shares of Acquiring Fund
MuniPreferred, borrowing may impair the Acquiring Fund's ability to pay such
dividends on shares of Acquiring Fund MuniPreferred. The risk is heightened in
the event the Acquiring Fund incurs variable rate debt, the interest rate on
which may increase with increases in prevailing market rates.
ASSET MAINTENANCE
1940 Act MuniPreferred Asset Coverage. The Acquiring Fund is required
under rating agency guidelines to maintain, as of the last Business Day of each
month in which any shares of Acquiring Fund MuniPreferred are outstanding, asset
coverage of at least 200% with respect to such shares (or such other asset
coverage as may in the future be specified in or under the 1940 Act as the
minimum asset coverage for senior securities which are shares of a closed-end
investment company as a condition of declaring dividends on its common shares).
If the Acquiring Fund fails to maintain such asset coverage in accordance with
the requirements of the rating agency or agencies then rating the shares of
Acquiring Fund MuniPreferred ("1940 Act MuniPreferred Asset Coverage") and such
failure is not cured as of the last Business Day of the following month (the
"1940 Act Cure Date"), the Acquiring Fund will be required
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under certain circumstances to redeem certain of the shares of Acquiring Fund
MuniPreferred. See "Redemption" below.
MUNIPREFERRED BASIC MAINTENANCE AMOUNT. The Acquiring Fund is required
under rating agency guidelines to maintain, as of each Business Day ( a
"Valuation Date") on which shares of Acquiring Fund MuniPreferred are
outstanding, assets having in the aggregate a Discounted Value at least equal to
the MuniPreferred Basic Maintenance Amount established by the rating agency or
agencies then rating the shares of Acquiring Fund MuniPreferred. If the
Acquiring Fund fails to meet such requirement on any Valuation Date and such
failure is not cured on or before the seventh Business Day after such Valuation
Date (the "MuniPreferred Basic Maintenance Cure Date"), the Acquiring Fund will
be required under certain circumstances to redeem certain of the shares of
Acquiring Fund MuniPreferred.
See "Redemption" below.
The "MuniPreferred Basic Maintenance Amount" as of any Valuation Date
is defined as the dollar amount equal to the sum of:
(a) (i) the product of the number of shares of Acquiring Fund
MuniPreferred outstanding on such date multiplied by $25,000, plus any
redemption premium applicable to shares of Acquiring Fund MuniPreferred then
subject to redemption;
(ii) 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 Acquiring Fund MuniPreferred outstanding
that follow such Valuation Date;
(iii) subject to certain exceptions, the aggregate amount of
dividends that would accumulate on shares of each series of Acquiring
Fund 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 Acquiring Fund shall have
delivered a Notice of Special Rate Period to the Auction Agent 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 Acquiring
Fund shall have delivered a Notice of Special Rate Period to the
Auction Agent 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;
(iv) the amount of anticipated Acquiring Fund expenses for the
90 days subsequent to such Valuation Date;
(v) the amount of the Acquiring Fund's Maximum Potential
Gross-up Payment Liability as of such Valuation Date; and
(vi) any current liabilities as of such Valuation Date to the
extent not reflected in any of (a)(i) through (a)(v) (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
(b) the value of any Acquiring Fund assets irrevocably deposited by the
Acquiring Fund for the payment of any of (a)(i) through (a)(vi), all as
calculated in accordance with the requirements of the rating agency or agencies
then rating the shares of Acquiring Fund MuniPreferred.
For purposes of the foregoing, "Maximum Potential Gross-up Payment
Liability," as of any Valuation Date, means the aggregate amount of Gross-up
Payments that would be due if the Acquiring Fund were to make Taxable
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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 Acquiring Fund, as of the end of the calendar month
immediately preceding such Valuation Date, and assuming such Gross-up Payments
are fully taxable.
In managing the Acquiring Fund's portfolio, the Adviser will not alter
the composition of the Acquiring Fund's portfolio if, in the reasonable belief
of the Adviser, the effect of such alteration would be to cause the Acquiring
Fund to have Moody's Eligible Assets or S&P Eligible Assets with an aggregate
Discounted Value, as of the immediately preceding Valuation Date, less than the
MuniPreferred Basic Maintenance Amount as of such Valuation Date; provided,
however, that in the event that, as of the immediately preceding Valuation Date,
the aggregate Discounted Value of each of Moody's Eligible Assets and S&P
Eligible Assets exceeded the MuniPreferred Basic Maintenance Amount by 5% or
less, the Adviser will not alter the composition of the Acquiring Fund's
portfolio in a manner reasonably expected to reduce the aggregate Discounted
Value of such assets unless the Acquiring Fund shall have confirmed that, after
giving effect to such alteration, the aggregate Discounted Value of such assets
would exceed the MuniPreferred Basic Maintenance Amount.
Upon any failure to maintain the required Discounted Value, the
Acquiring Fund will seek to alter the composition of its portfolio to reattain
the MuniPreferred Basic Maintenance Amount on or prior to the MuniPreferred
Basic Maintenance Cure Date, thereby incurring additional transaction costs and
possible losses and/or gains on dispositions of portfolio securities.
On or before the third Business Day after a Valuation Date on which the
Acquiring Fund fails to meet 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 Acquiring Fund is required to deliver to the
Auction Agent (so long as either Moody's or S&P is rating the shares of
Acquiring Fund MuniPreferred) a report with respect to the calculation of the
MuniPreferred Basic Maintenance Amount and the value of its portfolio holdings
as of the date of such failure or such cure date, as the case may be (a
"MuniPreferred Basic Maintenance Report"). The Acquiring Fund will also deliver,
as required, a MuniPreferred Basic Maintenance Report 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, in each case on or
before the third Business Day after such day. Within ten Business Days after
delivery of such report relating to the last Business Day of each of February,
May, August and November of each year, the Acquiring Fund will deliver a letter
prepared by its independent accountants regarding the accuracy of the
calculations made by the Acquiring Fund in its most recent MuniPreferred Basic
Maintenance Report. If any such letter prepared by the Acquiring Fund's
independent auditors shows that an error was made in the most recent
MuniPreferred Basic Maintenance Report, the calculation or determination made by
the Acquiring Fund's independent accountants will be conclusive and binding on
such Fund.
The Discount Factors and guidelines for determining the market value of
the Acquiring Fund's portfolio holdings, described below, have been based by the
rating agencies on criteria such as the sensitivity of the market value of the
relevant asset to changes in interest rates, the liquidity and depth of the
market for the relevant asset, the credit quality of the relevant asset (for
example, the lower the rating of a debt obligation, the higher the related
discount factor) and the frequency with which the relevant asset is marked to
market.
S&P AAA RATING GUIDELINES. For purposes of calculating the Discounted
Value of the Acquiring Fund's portfolio under current S&P guidelines, the fair
market value of Municipal Obligations eligible for consideration under such
guidelines ("S&P Eligible Assets") must be discounted by certain discount
factors set forth in the table below ("S&P Discount Factors"). The Discounted
Value of a Municipal Obligation under S&P guidelines is the fair market value
thereof divided by the S&P Discount Factor. The S&P Discount Factor used to
discount a particular Municipal Obligation will be determined by reference to
(i)(A) in the event such Municipal Obligation is covered by an Original Issuance
Insurance policy or a Portfolio Insurance policy which does not provide the
Acquiring Fund with the option to obtain Permanent Insurance with respect to
such Municipal Obligation, or is not covered by bond insurance, the S&P or
Moody's rating on such Municipal Obligation, (B) in the event such Municipal
Obligation is covered by a Secondary Market Insurance policy, the S&P insurance
claims-paying ability rating of the issuer of the policy or (C) in the event
such Municipal Obligation is covered by a Portfolio Insurance policy which
provides the Acquiring Fund with the option to obtain Permanent Insurance with
respect to such Municipal Obligation, at the Acquiring Fund's option, the S&P or
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<PAGE> 84
Moody's rating on such Municipal Obligation or the S&P insurance claims-paying
ability rating of the issuer of the Portfolio Insurance policy, and (ii) the
"S&P Exposure Period" (currently, seven Business Days) and the S&P rating on
such Municipal Obligation. S&P Discount Factors for a range of exposure periods
are set forth below:
<TABLE>
<CAPTION>
S&P DISCOUNT FACTORS
RATING CATEGORY
-----------------------------------------------
EXPOSURE PERIOD AAA AA A BBB
- --------------- ------ ---- -- -----
<S> <C> <C> <C> <C>
40 Business Days........................... 190% 195% 210% 250%
22 Business Days........................... 170 175 190 230
10 Business Days........................... 155 160 175 215
7 Business Days............................ 150 155 170 210
3 Business Days............................ 130 135 150 190
</TABLE>
Since the S&P Exposure Period currently applicable to the Acquiring
Fund is seven Business Days, the S&P Discount Factors currently applicable to
S&P Eligible Assets will be determined by reference to the factors set forth
opposite the line entitled "7 Business Days." Notwithstanding the foregoing, (a)
the S&P Discount Factor for short-term Municipal Obligations will be 115%, so
long as such Municipal Obligations are rated A-1+ or SP-1+ by S&P and mature or
have a demand feature exercisable within 30 days or less, or 125% if such
Municipal Obligations are not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by
Moody's; provided, however, that any such Moody's-rated short-term Municipal
Obligations which have demand features exercisable within 30 days or less must
be backed by a letter of credit, liquidity facility or guarantee from a bank or
other financial institution with a short-term rating of at least A-1+ from S&P;
and further provided that such Moody's-rated short-term Municipal Obligations
may comprise no more than 50% of short-term Municipal Obligations that qualify
as S&P Eligible Assets, (b) no S&P Discount Factor will be applied to cash or to
Receivables for Municipal Obligations Sold; and (c) except as set forth in
clause (a) 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 (a)(iii) of the
following paragraph, such Municipal Obligation will be deemed to have an S&P
rating one full rating category lower than the S&P rating category that is the
equivalent of the rating category in which such Municipal Obligation is placed
by Moody's. For purposes of the foregoing, Anticipation Notes rated SP-1+ or, if
not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have
a demand feature at par exercisable in 30 days and which do not have a long-term
rating, will be considered to be short-term Municipal Obligations. "Receivables
for Municipal Obligations Sold," for purposes of calculating S&P Eligible Assets
as of any Valuation Date, means 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.
The S&P guidelines impose certain minimum issue size, issuer,
geographical diversification and other requirements for purposes of determining
S&P Eligible Assets:
(a) In order to be considered S&P Eligible Assets, Municipal
Obligations owned by the Acquiring Fund must:
(i) Be interest bearing and pay interest at least
semi-annually;
(ii) Be payable in U.S. dollars;
(iii) Be publicly rated BBB or higher by S&P or, if not rated
by S&P but rated by Moody's, be rated at least A by Moody's;
(iv) Not be private placements; and
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<PAGE> 85
(v) Be part of an issue 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 lower than $10 million), be issued by an
issuer with a total of at least $50 million of securities outstanding.
(b) Municipal Obligations of any one issuer or guarantor (excluding
bond insurers) shall be considered S&P Eligible Assets only to the extent the
fair market value of such Municipal Obligations does not exceed 10% of the
aggregate fair 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 fair market value
of such Municipal Obligations exceeds 5% of the aggregate fair market value of
S&P Eligible Assets.
(c) Long-term Municipal Obligations issued by issuers in any one state
or territory will be considered S&P Eligible Assets only to the extent the fair
market value of such Municipal Obligations does not exceed 20% of the aggregate
fair market value of S&P Eligible Assets.
(d) Municipal Obligations rated by Moody's but not rated by S&P shall
be considered S&P Eligible Assets only to the extent the fair market value of
such Municipal Obligations does not exceed 50% of the aggregate fair market
value of S&P Eligible Assets.
For purposes of determining as of any Valuation Date whether the
Acquiring Fund has S&P Eligible Assets with an aggregate Discounted Value at
least equal to the MuniPreferred Basic Maintenance Amount, the Acquiring Fund
will include as a liability in the calculation of the MuniPreferred Basic
Maintenance Amount an amount calculated semi-annually equal to 150% of the
estimated cost of obtaining Permanent Insurance with respect to S&P Eligible
Assets that (i) are covered by Portfolio Insurance policies which provide the
Acquiring Fund with the option to obtain such Permanent Insurance and (ii) are
discounted by an S&P Discount Factor determined by reference to the insurance
claims-paying ability rating of the issuer of such Portfolio Insurance policy.
MOODY'S "AAA" RATING GUIDELINES. For purposes of calculating the
Discounted Value of the Acquiring Fund's portfolio under current Moody's
guidelines, Municipal Obligations eligible for consideration under such
guidelines ("Moody's Eligible Assets") must be discounted by certain discount
factors set forth in the table below ("Moody's Discount Factors"). The
Discounted Value of a Municipal Obligation under Moody's guidelines is, as of
any Valuation Date, (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 (i) the lesser of the market value or call price
thereof, including any call premium, divided by (ii) the applicable Moody's
Discount Factor. The Moody's Discount Factor used to discount a particular
Municipal Obligation will be determined by reference to the "Moody's Exposure
Period" (currently, the period commencing on a given Valuation Date and ending
56 days thereafter) and the Moody's rating on such Municipal Obligation. Moody's
Discount Factors for a range of exposure periods are set forth below:
<TABLE>
<CAPTION>
MOODY'S DISCOUNT FACTORS
RATING CATEGORY
-----------------------------------------------------------------
EXPOSURE PERIOD AAA AA A BBB 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 7 weeks... 154 164 173 205 235 137 149
9 weeks or less but greater than 8 weeks... 158 169 179 209 242 138 150
</TABLE>
- ------------------
* Municipal Obligations not rated by Moody's but rated BBB or BBB+ by S&P.
** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
Since the Moody's Exposure Period currently applicable to the Acquiring
Fund is 56 days, the Moody's Discount Factors currently applicable to Moody's
Eligible Assets will be determined by reference to the factors set forth
opposite the line entitled "8 weeks or less but greater than 7 weeks." However,
if the Moody's Discount Factor used to discount a particular Municipal
Obligation is determined by reference to the insurance claims-paying ability of
the
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<PAGE> 86
insurer of such Municipal Obligation, such Moody's Discount Factor will be
increased by an amount equal to 50% of the difference between (i) the percentage
set forth in the above table under the applicable rating category, and (ii) the
percentage set forth in the above table under the rating category that is one
rating category below the applicable rating category. Notwithstanding the
foregoing, (a) 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% so 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 (b) no Moody's Discount Factor will be
applied to cash or to Receivables for Municipal Obligations Sold. "Receivables
for Municipal Obligations Sold," for purposes of calculating Moody's Eligible
Assets as of any Valuation Date, means 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 (A) settled through clearing house firms with respect to which
the Acquiring Fund has received prior written authorization from Moody's or (B)
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 conditions (A) or (B).
The Moody's guidelines impose certain minimum issue size, issuer, issue
type concentration, county concentration and other requirements for purposes of
determining Moody's Eligible Assets, as set forth in the table below:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM MAXIMUM
ISSUE SIZE UNDERLYING STATE OR TERRITORY
RATING ($ MILLIONS) OBLIGOR (%) CONCENTRATION (%)
- ------- ----------- ------------ ------------------
<S> <C> <C> <C>
Aaa............................................................. 10 100 100
Aa.............................................................. 10 20 60
A............................................................... 10 10 40
Baa............................................................. 10 6 20
Other*.......................................................... 10 4 12
</TABLE>
- ------------------
* Municipal Obligations not rated by Moody's but rated BBB or BBB+ by S&P.
The percentages set forth in the preceding table are based upon Moody's
Eligible Assets calculated excluding cash. For purposes of the maximum
underlying obligor requirement described above, which requirement will apply
except with respect to general obligation Municipal Obligations, any Municipal
Obligation backed by the guaranty, letter of credit or insurance issued by a
third party will 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. For purposes of the issue type concentration requirement described
above, Municipal Obligations will be classified within one of the following
categories: health care issues, housing issues, educational facilities issues,
student loan issues, resource recovery issues, transportation issues, industrial
development bond issues, utility issues, general obligation issues, lease
obligations, escrowed bonds and other issues ("Other Issues") not falling within
one of the aforementioned categories. In no event shall (a) more than 10% of
Moody's Eligible Assets consist of student loan issues, (b) more than 10% of
Moody's Eligible Assets consist of resource recovery issues or (c) more than 10%
of Moody's Eligible Assets consist of Other Issues. For purposes of applying the
foregoing requirements, Municipal Obligations rated MIG-1 or VMIG-1 or, if not
rated by Moody's, rated SP-1 + by S&P, which either do not mature or have a
demand feature at par exercisable in 30 days and which do not have a long-term
rating, will be considered to have a long-term rating of A.
Current Moody's guidelines also require that Municipal Obligations
constituting Moody's Eligible Assets pay interest in cash, be publicly rated Baa
or higher by Moody's or, if not rated by Moody's but rated by S&P, that they be
rated at least BBB by S&P, and that they not have suspended ratings. For
purposes of determining the Moody's Discount Factors applicable to such
S&P-rated Municipal Obligations, any such Municipal Obligation (excluding
short-term Municipal Obligations) will be deemed to have a Moody's rating which
is one full rating category lower than its S&P rating. For purposes of applying
the foregoing requirements, Municipal Obligations rated MIG-1, VMIG-1 or
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<PAGE> 87
P-1, or, if not rated by Moody's, rated A-1+/AA or SP-1+/AA by S&P, will be
considered to have a long-term rating of A.
For purposes of determining as of any Valuation Date whether the Fund
has Moody's Eligible Assets with an aggregate Discounted Value at least equal to
the MuniPreferred Basic Maintenance Amount, the Fund shall include as a
liability in the calculation of the MuniPreferred Basic Maintenance Amount an
amount calculated semi-annually equal to 150% of the estimated cost of obtaining
Permanent Insurance with respect to Moody's Eligible Assets that (i) are covered
by Portfolio Insurance policies which provide the Fund with the option to obtain
such Permanent Insurance and (ii) are discounted by a Moody's Discount Factor
determined by reference to the insurance claims-paying ability of the issuers of
such Portfolio Insurance policy.
The Acquiring Fund may enter into futures and options transactions only
for bona fide hedging purposes and not for leveraging or speculative purposes.
So long as either S&P or Moody's is rating the Acquiring Fund MuniPreferred, the
Acquiring Fund will only engage in futures or options transactions in accordance
with the then current guidelines of such ratings agencies, and only after it has
received written confirmation from S&P or Moody's, as appropriate, that such
transactions would not impair the ratings then assigned by such rating agency to
shares of Acquiring Fund MuniPreferred.
REDEMPTION
OPTIONAL REDEMPTION. Except as described below,
(a) shares of Acquiring Fund MuniPreferred of each series are
redeemable, at the option of the Acquiring 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 in accordance
with the Declaration, including the Acquiring Fund Statement and applicable law,
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
(i) shares of a series of Acquiring Fund MuniPreferred may not be redeemed in
part if after such partial redemption fewer than 500 shares of such series
remain outstanding and (ii) subject to the next succeeding sentence, the Notice
of Special Rate Period relating to a Special Rate Period of shares of a series
of Acquiring Fund MuniPreferred, as delivered to the Auction Agent and filed
with the Secretary of the Acquiring Fund, may provide that shares of such series
shall not be redeemable during the whole or any part of such Special Rate Period
(except as provided in clause (b) below) or shall be redeemable during the whole
or any part of such Special Rate Period only upon payment of such redemption
premium or premiums as shall be specified therein ("Special Redemption
Provisions"); and
(b) shares of each series of Acquiring Fund MuniPreferred are
redeemable, at the option of the Acquiring Fund, as a whole but not in part, out
of funds legally available therefor in accordance with the Declaration,
including the Acquiring Fund Statement and applicable law, on the first day
following any Dividend Period thereof included in a Rate Period of more than 364
Rate Period Days if, on the date of determination of the Applicable Rate for
shares of such series for such Rate Period, such Applicable Rate equaled or
exceeded on such date of determination the Treasury Note Rate for such Rate
Period, at a redemption price of $25,000 per share plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned or declared) to
(but not including) the date fixed for redemption.
A Notice of Special Rate Period relating to shares of a series of
Acquiring Fund MuniPreferred for a Special Rate Period may contain Special
Redemption Provisions only if the Acquiring Fund's Board, 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 Acquiring Fund.
If fewer than all of the outstanding shares of a series of Acquiring
Fund MuniPreferred are to be redeemed as set forth above, the number of shares
of such series to be redeemed shall be determined by the Acquiring Fund's Board,
and such shares shall be redeemed pro rata from the holders of record of shares
of such series (initially Cede, as nominee of the Securities Depository) in
proportion to the number of shares of such series held by such holders. Since
the nominee of the Securities Depository is the only record holder of each
series of Acquiring Fund MuniPreferred, it
S-25
<PAGE> 88
will determine the number of shares to be redeemed from the accounts of the
Agent Members. The Agent Members, in turn, may determine to redeem shares from
some persons listed on their records as beneficial owners (which may include an
Agent Member holding shares for its own account) without redeeming shares from
the accounts of other persons listed on their records as beneficial owners.
The Acquiring Fund may not mail a Notice of Redemption relating to an
optional redemption as described above on any date unless on such date (a) the
Acquiring Fund has available Deposit Securities (i.e., cash and Municipal
Obligations rated at least A-1+ or SP-1+ by S&P and P-1, MIG-1 or VMIG-1 by
Moody's) 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 Acquiring Fund
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 Acquiring Fund MuniPreferred) and the Discounted Value of
S&P Eligible Assets (if S&P is then rating the shares of Acquiring Fund
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 will be determined by reference to the first Moody's Exposure
Period longer than the Moody's Exposure Period then applicable to the Acquiring
Fund.
MANDATORY REDEMPTION. The Acquiring Fund will be required to 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 Acquiring Fund's Board for redemption (such amount, together
with the redemption prices described under "Optional Redemption" above, being
herein referred to as the "Redemption Price"), certain of the shares of
Acquiring Fund MuniPreferred to the extent permitted under the 1940 Act, the
Declaration, the Acquiring Fund Statement and any applicable law, if the
Acquiring Fund fails to maintain the MuniPreferred Basic Maintenance Amount or
the 1940 Act MuniPreferred Asset Coverage in accordance with the requirements of
the rating agency or rating agencies then rating the shares of Acquiring Fund
MuniPreferred and such failure is not cured on or before the MuniPreferred Basic
Maintenance Cure Date or the 1940 Act Cure Date (herein respectively referred to
as a "Cure Date"), as the case may be. The number of shares of Acquiring Fund
MuniPreferred to be redeemed will be equal to the lesser of (a) the minimum
number of shares of Acquiring Fund MuniPreferred, together with all other
Acquiring Fund preferred shares 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 satisfaction of the
MuniPreferred Basic Maintenance Amount or 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 Acquiring Fund MuniPreferred and
other Acquiring Fund preferred shares the redemption or retirement of which
would have had such result, all shares of Acquiring Fund MuniPreferred and
Acquiring Fund preferred shares then outstanding will be redeemed), and (b) the
maximum number of shares of Acquiring Fund MuniPreferred, together with all
other Acquiring Fund preferred shares subject to redemption or retirement, that
can be redeemed out of funds expected to be legally available therefor. In
determining the shares of Acquiring Fund MuniPreferred required to be redeemed
in accordance with the foregoing, the Acquiring Fund will allocate the number
required to be redeemed to satisfy the MuniPreferred Basic Maintenance Amount or
the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro rata among
shares of Acquiring Fund MuniPreferred and other Acquiring Fund preferred shares
(and, then, pro rata among each series of Acquired Fund MuniPreferred) subject
to redemption.
The Acquiring Fund is required to effect such a mandatory redemption
not earlier than 20 days and not later than 40 days after such Cure Date, except
that if the Acquiring Fund does not have funds legally available for the
redemption of all of the required number of shares of Acquiring Fund
MuniPreferred and other Acquiring Fund preferred shares which are subject to
redemption or retirement or the Acquiring Fund otherwise is unable to effect
such redemption on or prior to 40 days after such Cure Date, the Acquiring Fund
will redeem those shares of Acquiring Fund MuniPreferred or other Acquiring Fund
preferred shares 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 Acquiring Fund MuniPreferred are to be
redeemed pursuant to a mandatory redemption, 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
S-26
<PAGE> 89
of such series held by such holders, in the same manner as described above in
respect of optional redemptions of fewer than all outstanding shares of a series
of Acquiring Fund MuniPreferred.
NOTICE OF REDEMPTION. Notice of redemption shall be given by mailing
the same to each holder of the shares to be redeemed (initially Cede, as nominee
of the Securities Depository), not less than 20 nor more than 45 days prior to
the date fixed for redemption thereof, to the respective addresses of such
holders as the same shall appear on the record books of the Acquiring Fund
("Notice of Redemption"). Each such notice shall state (a) the redemption date;
(b) the number of shares of Acquiring Fund MuniPreferred to be redeemed and the
series thereof; (c) the CUSIP number for shares of such series; (d) the
Redemption Price; (e) the place or places where certificate(s) for such shares
(properly endorsed or assigned for transfer, if the Acquiring Fund's Board shall
so require and the notice shall so state) are to be surrendered for payment of
the Redemption Price; (f) that dividends on the shares to be redeemed will cease
to accumulate on such redemption date; and (g) the provisions of the Acquiring
Fund Statement under which such redemption is made. If fewer than all shares of
a series of Acquiring Fund MuniPreferred held by any holder are to be redeemed,
the notice mailed to such holder shall also specify the number of shares of such
series to be redeemed from such holder. The Acquiring Fund may provide in any
Notice of Redemption relating to an optional redemption that such redemption is
subject to one or more conditions precedent and that the Acquiring 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.
OTHER REDEMPTION PROCEDURES. 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 will be made as soon as
practicable to the extent such funds become available. Failure to redeem shares
of Acquiring Fund MuniPreferred will be deemed to exist at any time after the
date specified for redemption in a Notice of Redemption when the Acquiring Fund
shall have failed, for any reason whatsoever, to deposit with the Auction Agent
the Redemption Price with respect to any shares for which such Notice of
Redemption has been mailed. Notwithstanding the fact that the Acquiring Fund may
not have redeemed shares of Acquiring Fund MuniPreferred for which a Notice of
Redemption has been mailed, dividends may be declared and paid on shares of
Acquiring Fund MuniPreferred and will include those shares of Acquiring Fund
MuniPreferred for which Notice of Redemption has been mailed. The first two
sentences of this paragraph shall not apply in the event the Acquiring Fund
provides in any Notice of Redemption relating to an optional redemption that
such redemption 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.
Provided a Notice of Redemption has been mailed as described above,
upon the deposit with the Auction Agent (on the next Business Day 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
Acquiring Fund MuniPreferred that are the subject of such notice, dividends on
such shares will cease to accumulate and such shares will no longer be deemed
outstanding for any purpose, and all rights of the holders of the shares so
called for redemption will cease and terminate, except the right of the holders
thereof to receive the Redemption Price, but without any interest or other
additional amount, except as otherwise provided under "Dividends--Determination
of Dividend Rate" and "Gross-up Payments" above. 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 Acquiring Fund's Board shall
so require and the notice shall so state), the Redemption Price shall be paid by
the Auction Agent to the holders of shares of Acquiring Fund 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
Acquiring Fund will 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 (a) the aggregate Redemption Price of the shares of Acquiring Fund
MuniPreferred called for redemption on such date and (b) all other amounts to
which holders of shares of Acquiring Fund MuniPreferred called for redemption
may be entitled. Any funds so deposited that are unclaimed at the end of 90 days
from such redemption date will, to the extent permitted by law, be repaid to the
Acquiring Fund, after which time the holders of shares of Acquiring Fund
MuniPreferred so called for redemption may look only to the Acquiring Fund for
payment of the Redemption Price and all other amounts to which they may be
entitled. The Acquiring Fund will be entitled to receive, from time to time
after the date fixed for redemption, any interest on the funds so deposited.
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Notwithstanding the foregoing, if any dividends on shares of a series
of Acquiring Fund 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 Acquiring 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.
Except as described above with respect to redemptions and under
"Description of the Auctions for MuniPreferred Issued by the Acquiring
Fund--Orders by Existing Holders and Potential Holders," the Declaration
including the Acquiring Fund Statement do not prohibit the Acquiring Fund or any
affiliate of the Acquiring Fund from purchasing or otherwise acquiring any
shares of Acquiring Fund MuniPreferred.
The Acquiring Fund has the right to arrange for third parties to
purchase from the holders thereof shares of Acquiring Fund MuniPreferred which
are to be redeemed as described above.
LIQUIDATION
Upon a liquidation of the Acquiring Fund, whether voluntary or
involuntary, the holders of shares of Acquiring Fund MuniPreferred then
outstanding will be entitled to receive and to be paid out of the assets of the
Acquiring Fund available for distribution to its shareholders, before any
payment or distribution shall be made on the Acquiring Fund common shares or on
any other class of shares of the Acquiring Fund ranking junior to the Acquiring
Fund MuniPreferred upon liquidation, an amount equal to the liquidation
preference with respect to such shares. The liquidation preference for shares of
Acquiring Fund MuniPreferred shall be $25,000 per share, plus an amount equal to
all dividends thereon (whether or not earned or declared) accumulated but unpaid
to (but not including) the date of final distribution in same-day funds,
together with any applicable Gross-up Payments in connection with the
liquidation of the Acquiring Fund. After the payment to the holders of the
shares of Acquiring Fund MuniPreferred of the full preferential amounts provided
for as described herein, the holders of shares of Acquiring Fund MuniPreferred
as such shall have no fight or claim to any of the remaining assets of the
Acquiring Fund. In the event the assets of the Acquiring Fund available for
distribution to the holders of shares of Acquiring Fund MuniPreferred upon any
liquidation of the Acquiring Fund, whether voluntary or involuntary, shall be
insufficient to pay in full all amounts to which such holders are entitled, no
such distribution shall be made on account of any other class or series of
Acquiring Fund preferred shares ranking on a parity with the shares of Acquiring
Fund MuniPreferred upon such liquidation unless proportionate distributive
amounts shall be paid on account of the shares of Acquiring Fund MuniPreferred,
ratably, in proportion to the full distributable amounts for which holders of
all such parity shares are respectively entitled upon such liquidation. Subject
to the rights of the holders of any series or class or classes of shares ranking
on a parity with the shares of Acquiring Fund MuniPreferred with respect to the
distribution of assets upon liquidation of the Acquiring Fund, after payment
shall have been made in full to the holders of the shares of Acquiring Fund
MuniPreferred as described herein, but not prior thereto, any other series or
class or classes of shares ranking junior to the shares of Acquiring Fund
MuniPreferred with respect to the distribution of assets upon liquidation 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 shares of Acquiring Fund MuniPreferred shall not be entitled to
share therein.
Neither the sale of all or substantially all the property or business
of the Acquiring Fund, nor the merger or consolidation of the Acquiring Fund
into or with any Massachusetts business trust or corporation nor the merger or
consolidation of any Massachusetts business trust or corporation into or with
the Acquiring Fund shall be a liquidation, whether voluntary or involuntary, for
the purposes of the foregoing paragraph.
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DESCRIPTION OF THE AUCTIONS FOR
MUNIPREFERRED ISSUED BY THE ACQUIRING FUND
GENERAL
The Acquiring Fund Statement provides that, except as otherwise
described herein, the Applicable Rate for shares of each series of Acquiring
Fund MuniPreferred, including Acquiring Fund MuniPreferred, Series T, and Series
TH, issued pursuant to the Reorganization, for each Rate Period after the
Initial Rate Period thereof shall be equal to the rate per annum that the
Auction Agent advises has resulted on the Business Day preceding the first day
of such Subsequent Rate Period (an "Auction Date") from implementation of the
auction procedures (the "Auction Procedures") set forth in the Acquiring Fund
Statement and summarized below, in which persons determine to hold or offer to
sell or, based on dividend rates bid by them, offer to purchase or sell shares
of such series. Each periodic implementation of the Auction Procedures, which
are attached as Annex B to this Statement of Additional Information, is referred
to herein as an "Auction." The following summary does not purport to be complete
and is subject to and qualified in its entirety by reference to the Auction
Procedures set forth in the Acquiring Fund Statement.
As used herein with respect to shares of a series of Acquiring Fund
MuniPreferred, (a) "Applicable Rate" means the rate per annum at which dividends
are payable on shares of such series for any Rate Period thereof, (b)
"Beneficial Owner" 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, (c) "Business Day" means a day on which the NYSE is
open for trading and is not a Saturday, Sunday or other day on which banks in
New York City are authorized by law to close, (d) "Date of Original Issue" means
the day on which the Acquiring Fund initially issued shares of such series (in
the case of Acquiring Fund MuniPreferred, Series M, Series T, Series T2, Series
W, Series W2, Series TH, Series F and Series F2 respectively) or the day on
which the Effective Time occurs (in the case of Acquiring Fund MuniPreferred,
Series TH2, if issued in connection with the Reorganization), (e) "Dividend
Payment Date" means any date on which dividends on shares of such series are
payable as provided under "Description of MuniPreferred Issued by the Acquiring
Fund--Dividends--General" above, (f) "Dividend Period" means the period from and
including the Date of Original Issue (in the case of Acquiring Fund
MuniPreferred, Series M, Series W and Series F) or the day following the Date of
Original Issue (in the case of Acquiring Fund MuniPreferred, Series T and Series
TH) 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, (g) "Existing Holder" means a Broker-Dealer (or any
such other person as may be permitted by the Acquiring Fund) that is listed on
the records of the Auction Agent as a holder of shares of such series, (h)
"Initial Rate Period" means the period from and including the Date of Original
Issue to but excluding, June 16, 1993, June 11, 1993 and June 14, 1993 (in the
case of Acquiring Fund MuniPreferred, Series T, Series TH and Series F,
respectively), the period from and including September 9, 1994 to but excluding
February 28, 1995, September 14, 1994, September 15, 1994 and September 12, 1994
(in the case of Acquiring Fund MuniPreferred, Series M, Series T2, Series W
and Series F2, respectively, and the period consisting of the number of days
following the Date of Original Issue that would have remained in the rate period
of Acquiring Fund and Acquired Fund MuniPreferred, Series TH or Series TH2, in
effect immediately prior to the Date of Original Issue but for the
Reorganization (in the case of Acquiring Fund MuniPreferred, Series TH2), (i)
"Potential Beneficial Owner" means 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, (j) "Potential Holder" means a
Broker-Dealer (or any such other Person as may be permitted by the Acquiring
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, (k) "Rate Period" means the Initial
Rate Period of shares of such series and any Subsequent Rate Period of shares of
such series, (l) "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 either (i) the shortening or lengthening, as the case may be, of
such Rate Period or Dividend Period as set forth under "Description of
MuniPreferred Issued by the Acquiring Fund--Dividends--General" above, because
the day on which dividends would otherwise be payable is not a Business Day or
(ii) the shortening of such Rate Period pursuant to the provisions relating to
the designation of Special Rate Periods as set forth under "Description of
MuniPreferred Issued by the Acquiring Fund--Dividends--Designation of Special
Rate Periods" above, (m) "Subsequent Rate Period" means any 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
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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, (n) "Minimum Rate Period" means any Rate Period
consisting of 7 Rate Period Days and (o) "Special Rate Period" means any
Subsequent Rate Period commencing on the date designated by the Acquiring Fund,
as set forth under "Description of MuniPreferred Issued by the Acquiring
Fund--Dividends--Designation of Special Rate Periods" above, and ending on the
last day of the last Dividend Period thereof.
AUCTION AGENCY AGREEMENT. The Acquiring 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 Acquiring Fund MuniPreferred so
long as the Applicable Rate for shares of such series is to be based on the
results of an Auction.
BROKER-DEALER AGREEMENTS. Each Auction requires the participation of
one or more Broker-Dealers. The Auction Agent has entered into agreements
(collectively, the "Broker-Dealer Agreements") with several Broker-Dealers
selected by the Acquiring Fund, which provide for the participation of those
Broker-Dealers in Auctions for shares of Acquiring Fund MuniPreferred. See
"Broker-Dealers" below.
SECURITIES DEPOSITORY. The Depository Trust Company ("DTC") will act as
the Securities Depository for the Agent Members with respect to shares of each
series of Acquiring Fund MuniPreferred. One certificate for all of the shares of
each series of Acquiring Fund MuniPreferred will be registered in the name of
Cede, as nominee of the Securities Depository. Such certificate will bear a
legend to the effect that such certificate is issued subject to the provisions
restricting transfers of shares of Acquiring Fund MuniPreferred contained in the
Acquiring Fund Statement. The Acquiring Fund will also issue stop-transfer
instructions to the transfer agent for shares of each series of Acquiring Fund
MuniPreferred. Prior to the commencement of the right of holders of preferred
shares to elect a majority of the Acquiring Fund's trustees, as described under
"Description of MuniPreferred Issued by the Acquiring Fund--Voting Rights"
above, Cede will be the holder of record of all shares of each series of
Acquiring Fund MuniPreferred and owners of such shares will not be entitled to
receive certificates representing their ownership interest in such shares.
DTC, a New York-chartered limited purpose trust company, performs
services for its participants (including the Agent Members), some of whom
(and/or their representatives) own DTC. DTC maintains lists of its participants
and will maintain the positions (ownership interests) held by each such
participant (the "Agent Member") in shares of Acquiring Fund MuniPreferred,
whether for its own account or as a nominee for another person.
AUCTION DATES; ADVANCE NOTICE OF ALLOCATION OF TAXABLE INCOME
The first Auction for shares of Acquiring Fund MuniPreferred, Series TH
or Series TH2, as the case may be, issued pursuant to the Reorganization will be
the first Tuesday and Thursday, respectively, that is a Business Day preceding
the initial Dividend Payment Date for shares of such series. See "Description of
MuniPreferred Issued by the Acquiring Fund--Dividends--General." Thereafter,
Auctions for shares of such series will normally be held every Tuesday and
Thursday (in the case of Acquiring Fund MuniPreferred, Series TH) and Monday,
Tuesday, Wednesday, Thursday and Friday (in the case of Acquiring Fund
MuniPreferred, Series M, Series T, Series T2, Series W, Series W2, Series F and
Series F2), and each Subsequent Rate Period of shares of such series will
normally begin on the following Friday (in the case of Acquiring Fund
MuniPreferred, Series TH,) and Tuesday, Wednesday, Thursday, Friday and Monday
(in the case of Acquiring Fund MuniPreferred, Series M), unless the then-current
Rate Period of shares of such series is a Special Rate Period or, in certain
circumstances, the day that would normally be the Auction Date or the first day
of such Subsequent Rate Period is not a Business Day. The Auction Date and the
first day of the related Rate Period (also a Dividend Payment Date) must be
Business Days but need not be consecutive days. See "Description of
MuniPreferred Issued by the Acquiring Fund--Dividends--General" for information
concerning the circumstances under which the first day of a Rate Period or the
Auction Date, or both, may be moved to a date other than such specified days.
Whenever the Acquiring Fund intends to include any net capital gains or
other income taxable for Federal income tax purposes in any dividend on shares
of Acquiring Fund MuniPreferred, the Acquiring Fund shall, in the case
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of Minimum Rate Periods or Special Rate Periods of 28 Rate Period Days or fewer,
and may, in the case of any other Special Rate Period, notify the Auction Agent
of the amount to be so included not later than the Dividend Payment Date next
preceding the Auction Date on which the Applicable Rate for such dividend is to
be established. Whenever the Auction Agent receives such notice from the
Acquiring Fund, it will be required in turn to notify each Broker-Dealer, who,
on or prior to such Auction Date, in accordance with its Broker-Dealer
Agreement, will be required to notify its customers who are Beneficial Owners
and Potential Beneficial Owners believed by it to be interested in submitting an
Order in the Auction to be held on such Auction Date. See also "Description of
MuniPreferred Issued by the Acquiring Fund--Dividends--Gross-Up Payments" above.
ORDERS BY EXISTING HOLDERS AND POTENTIAL HOLDERS
Prior to the Submission Deadline on each Auction Date for shares of a
series of Acquiring Fund MuniPreferred:
(a) each Beneficial Owner of shares of such series may submit to its
Broker-Dealer by telephone or otherwise a:
(i) "Hold Order"--indicating the number of outstanding shares,
if any, of such series that such Beneficial Owner desires to continue
to hold without regard to the Applicable Rate for shares of such series
for the next Rate Period thereof;
(ii) "Bid"--indicating the number of outstanding shares, if
any, of such series that such Beneficial Owner offers to sell if the
Applicable Rate for shares of such series for the next Rate Period
thereof shall be less than the rate per annum specified by such
Beneficial Owner; and/or
(iii) "Sell Order"--indicating the number of outstanding
shares, if any, of such series that such Beneficial Owner offers to
sell without regard to the Applicable Rate for shares of such series
for the next Rate Period thereof; and
(b) Broker-Dealers shall contact customers who are Potential Beneficial
Owners by telephone or otherwise to determine whether such customers desire to
submit Bids, in which they will indicate the number of shares of such series
that they offer to purchase if the Applicable Rate for shares of such series for
the next Rate Period thereof is not less than the rate per annum specified in
such Bids.
The communication to a Broker-Dealer of the foregoing information is
herein referred to as an "Order" and collectively as "Orders." A Beneficial
Owner or a Potential Beneficial Owner placing an Order with its Broker-Dealer is
herein referred to as a "Bidder" and collectively as "Bidders." The submission
by a Broker-Dealer of an Order to the Auction Agent shall likewise be referred
to herein as an "Order" and collectively as "Orders," and an Existing Holder or
Potential Holder who places an Order with the Auction Agent or on whose behalf
an Order is placed with the Auction Agent shall likewise be referred to herein
as a "Bidder" and collectively as "Bidders."
A Beneficial Owner may submit different types of Orders to its
Broker-Dealer with respect to shares of a series of Acquiring Fund MuniPreferred
then held by such Beneficial Owner. A Bid placed by a Beneficial Owner with
respect to shares of such series specifying a rate higher than the Applicable
Rate for shares of such series determined in the Auction therefor shall
constitute an irrevocable offer to sell the shares subject thereto. A Beneficial
Owner of shares of such series that submits a Bid with respect to shares of such
series to its Broker-Dealer having a rate higher than the Maximum Rate for
shares of such series on the Auction Date therefor will be treated as having
submitted a Sell Order with respect to such shares to its Broker-Dealer. A
Beneficial Owner of shares of such series that fails to submit to its
Broker-Dealer prior to the Submission Deadline an Order or Orders covering all
the outstanding shares of such series held by such Beneficial Owner will be
deemed to have submitted a Hold Order to its Broker-Dealer covering the number
of outstanding shares of such series held by such Beneficial Owner and not
subject to Orders with respect to shares of such series submitted to its
Broker-Dealer; provided, however, that if a Beneficial Owner of shares of such
series fails to submit to its Broker-Dealer prior to the Submission Deadline an
Order or Orders covering all of the outstanding shares of such series held by
such Beneficial Owner for an Auction relating to a Special Rate Period
consisting of more than 28 Rate Period Days, such Beneficial Owner will be
deemed to have submitted a Sell Order to
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its Broker-Dealer covering the number of outstanding shares of such series held
by such Beneficial Owner and not subject to Orders submitted to its
Broker-Dealer. A Sell Order shall constitute an irrevocable offer to sell the
shares of Acquiring Fund MuniPreferred subject thereto. A Beneficial Owner that
offers to become the Beneficial Owner of additional shares of Acquiring Fund
MuniPreferred is, for purposes of such offer, a Potential Beneficial Owner.
A Potential Beneficial Owner may submit to its Broker-Dealer Bids in
which it offers to purchase shares of a series of Acquiring Fund MuniPreferred
if the Applicable Rate for shares of such series for the next Rate Period
thereof is not less than the rate specified in such Bid. A Bid placed by a
Potential Beneficial Owner of shares of such series specifying a rate not higher
than the Maximum Rate for shares of such series shall constitute an irrevocable
offer to purchase the number of shares of such series specified in such Bid if
the rate determined in the Auction for shares of such series is equal to or
greater than the rate specified in such Bid.
As described more fully under "Submission of Orders by Broker-Dealers
to Auction Agent" below, the Broker-Dealers will submit the Orders of their
respective customers who are Beneficial Owners and Potential Beneficial Owners
to the Auction Agent, designating themselves (unless otherwise permitted by the
Acquiring Fund) as Existing Holders in respect of shares subject to Orders
submitted or deemed submitted to them by Beneficial Owners and as Potential
Holders in respect of shares subject to Orders submitted to them by Potential
Beneficial Owners. However, neither the Acquiring Fund nor the Auction Agent
will be responsible for a Broker-Dealer's failure to comply with the foregoing.
Any Order placed with the Auction Agent by a Broker-Dealer as or on behalf of an
Existing Holder or a Potential Holder will be treated in the same manner as an
Order placed with a Broker-Dealer by a Beneficial Owner or a Potential
Beneficial Owner, as described in the preceding paragraph. Similarly, any
failure by a Broker-Dealer to submit to the Auction Agent an Order in respect of
any shares of Acquiring Fund MuniPreferred held by it or its customers who are
Beneficial Owners will be treated in the same manner as a Beneficial Owner's
failure to submit to its Broker-Dealer an Order in respect of shares of
Acquiring Fund MuniPreferred held by it, as described in the second preceding
paragraph. For information concerning the priority given to different types of
Orders placed by Existing Holders, see "Submission of Orders by Broker-Dealers
to Auction Agent," below.
Neither the Acquiring Fund nor an affiliate may submit an Order in any
Auction, except that any Broker-Dealer that is an affiliate of the Acquiring
Fund may submit Orders in an Auction, but only if such Orders are not for its
own account.
The Auction Procedures include a pro rata allocation of shares for
purchase and sale, which may result in an Existing Holder continuing to hold or
selling, or a Potential Holder purchasing, a number of shares of Acquiring Fund
MuniPreferred that is fewer than the number of shares of Acquiring Fund
MuniPreferred specified in its Order. See "Acceptance and Rejection of Submitted
Bids and Submitted Sell Orders and Allocation of Shares," below. To the extent
the allocation procedures have that result, Broker-Dealers that have designated
themselves as Existing Holders or Potential Holders in respect of customer
Orders will be required to make appropriate pro rata allocations among their
respective customers. Each purchase or sale shall be made for settlement on the
Business Day next succeeding the Auction Date at a price per share equal to
$25,000. See "Notification of Results; Settlement," below.
As described above, any Bid specifying a rate higher than the Maximum
Rate will (a) be treated as a Sell Order if submitted by Beneficial Owner or an
Existing Holder and (b) not be accepted if submitted by a Potential Beneficial
Owner or a Potential Holder. Accordingly, the Auction Procedures establish the
Maximum Rate as a maximum rate per annum that can result from an Auction. See
"Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable
Rate" and "Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares" below.
As used herein, "Maximum Rate," for shares of a series of Acquiring
Fund MuniPreferred on any Auction Date for shares of such series, means:
(a) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period, the
product of (i) the Reference Rate on such Auction Date for the next Rate Period
of shares of such series and (ii) the Rate Multiple on such Auction Date, unless
shares of such series have or had a Special Rate Period (other than a Special
Rate Period of 28 Rate Period Days or fewer) and an Auction at which
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Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate Period
of shares of such series after such Special Rate Period, in which case the
higher of
(A) the dividend rate on shares of such series for the
then-ending Rate Period; and
(B) the product of (x) the higher of (I) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, and (II) the Reference Rate on such
Auction Date for a Rate Period equal in length to such Special Rate
Period of shares of such series, if such Special Rate Period was 364
Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate Period, if
such Special Rate Period was more than 364 Rate Period Days and (y) the
Rate Multiple on such Auction Date; or
(b) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period, the
product of (i) the highest of (x) the Reference Rate on such Auction Date for a
Rate Period equal in length to the then-ending Rate Period of shares of such
series, if such then-ending Rate Period was 364 Rate Period Days or fewer, or
the Treasury Note Rate on such Auction Date for a Rate Period equal in length to
the then-ending Rate Period of shares of such series, if such then-ending Rate
Period was more than 364 Rate Period Days, (y) the Reference Rate on such
Auction Date for the Special Rate Period for which the Auction is being held if
such Special Rate Period is 364 Rate Period Days or fewer or the Treasury Note
Rate on such Auction Date for the Special Rate Period for which the Auction is
being held if such Special Rate Period is more than 364 Rate Period Days, and
(z) the Reference Rate on such Auction Date for Minimum Rate Periods and (ii)
the Rate Multiple on such Auction Date.
As used herein, "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.
As used herein, "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 Acquiring Fund MuniPreferred) and S&P (if S&P is then rating the
shares of Acquiring Fund 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 (i) 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 (ii) 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.
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As used herein, "AA" Composite Commercial Paper Rate," on any date for
any Rate Period of shares of a series of Acquiring Fund MuniPreferred, means:
(a) (i) 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 (ii) in the case of any Special Rate Period of (A) 49
or more but fewer than 70 Rate Period Days, the interest equivalent of the
60-day rate; (B) 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; (C) 85 or
more but fewer than 99 Rate Period Days, the interest equivalent of the 90-day
rate; (D) 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; (E) 120 or more but
fewer than 141 Rate Period Days, the interest equivalent of the 120-day rate;
(F) 141 or more but fewer than 162 Rate Period Days, the arithmetic average of
the 120-day and 180-day rates; and (G) 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 immediately preceding such date; or
(b) 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 Acquiring 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 Acquiring 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 (i)
1.00 and (ii) 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. As used herein, "Commercial Paper
Dealers" means 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. As used herein, "Substitute Commercial Paper Dealer" means The First
Boston Company and Morgan Stanley & Co. Incorporated or their respective
affiliates or successors, if such entity is a commercial paper dealer, provided
that none of such entities shall be a Commercial Paper Dealer.
As used herein, "Treasury Bill Rate," on any date for any Rate Period
of shares of a series of Acquiring Fund MuniPreferred, means:
(a) the bond equivalent yield, calculated in accordance with prevailing
industry convention, of the rate on the most recent 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
(b) 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.
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As used herein, "Treasury Note Rate," on any date for any Rate Period
of shares of a series of Acquiring Fund MuniPreferred, means:
(a) 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
(b) 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.
For purposes of the foregoing, "Treasury Bill" means a direct
obligation of the U.S. government having a maturity at the time of issuance of
364 days or less, and "Treasury Note" means 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. If any U.S. Government Securities Dealer does not quote a
rate required to determine the Treasury Bill Rate or the Treasury Note Rate,
such 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 Dealer or
Substitute U.S. Government Securities Dealers selected by the Acquiring 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
Acquiring 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. As used
herein, "U.S. Government Securities Dealer" means 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. As used herein, "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 that
none of such entities shall be a U.S. Government Securities Dealer.
The applicable "AA" Composite Commercial Paper Rates, Taxable
Equivalent of the Short-Term Municipal Bond Rates, Treasury Bill Rates and
Treasury Note Rates will be the rates announced on such Auction Date for the
Business Day immediately prior to such Auction Date.
The "Rate Multiple," for shares of a series of Acquiring Fund
MuniPreferred on any Auction Date for shares of such series, will be a
percentage, determined as set forth below, based on the prevailing rating of
shares of such series in effect at the close of business on the Business Day
next preceding such Auction Date;
<TABLE>
<CAPTION>
PREVAILING RATING PERCENTAGE
- ------------------- ------------
<S> <C>
"aa3"/AA- or higher.............................. 110%
"a3"/A-.......................................... 125%
"baa3"/BBB-...................................... 150%
"ba3"/BB-........................................ 200%
Below "ba3"/BB-.................................. 250%
</TABLE>
provided, however, that in the event the Acquiring 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
income tax rate, if any, applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary income,
whichever is greater. If the shares of Acquiring Fund MuniPreferred are rated by
only one rating agency, such rating will be the prevailing rating.
For purposes of this determination, the "prevailing rating" of shares
of a series of Acquiring Fund MuniPreferred shall be (a) "aa3"/AA- or higher if
shares of such series have a rating of "aa3" or better by Moody's and
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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, (b) if not "aa3"/AA- or higher, then "a3"/A- if shares of such series
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, (c) if not "aa3"/AA- or
higher or "a3"/A-, then "baa3"/BBB- if shares of such series 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, (d) if not "aa3"/AA- or higher, "a3"/A- or
"baa3"/BBB-, then "ba3"/BB- if shares of such series 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 (e) if not "aa3"/AA-, "baa3"/BBB-, or
"ba3"/BB-, then Below "ba3"/BB-; provided, however, that if shares of
such series are rated by only one rating agency, the prevailing rating shall be
determined without reference to the rating of any other rating agency. The
Acquiring Fund will take all reasonable action necessary to enable either
Moody's or S&P to provide a rating for shares of each series of Acquiring Fund
MuniPreferred. If neither Moody's nor S&P shall make such a rating available,
Merrill Lynch, Pierce, Fenner & Smith Incorporated or its successor (in the case
of Series T and Series F MuniPreferred), Kidder, Peabody & Co. Incorporated or
its successor (in the case of Series M MuniPreferred) and Smith Barney Shearson
or its successor (in the case of Series W and Series TH MuniPreferred) shall
select at least one nationally recognized statistical rating organization (as
that term is used in the rules and regulations of the Commission under the
Exchange Act) to act as a substitute rating agency in respect of the shares of
such series of Acquiring Fund MuniPreferred, and the Acquiring Fund shall take
all reasonable action to enable such rating agency to provide a rating for such
shares.
SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT
Prior to 1:30 p.m., New York City time, on each Auction Date, or such
other time on the Auction Date specified by the Auction Agent (the "Submission
Deadline"), each Broker-Dealer will submit to the Auction Agent in writing all
Orders obtained by it for the Auction to be conducted on such Auction Date,
designating itself (unless otherwise permitted by the Acquiring Fund) as the
Existing Holder or Potential Holder in respect of the shares of Acquiring Fund
MuniPreferred subject to such Orders. 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.
If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent will round such rate to the
next highest one thousandth (.001) of 1%.
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
Acquiring Fund MuniPreferred of a series subject to an Auction held by such
Existing Holder, such Orders will be considered valid in the following order of
priority:
(a) all Hold Orders for shares of such series will be considered valid,
but only up to and including in the aggregate the number of shares of such
series held by such Existing Holder;
(b) (i) any Bid for shares of such series will be considered valid up
to and including the excess of the number of 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 (a) above;
(ii) subject to subclause (i), 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 shares of such series subject to such
Bids is greater than such excess, such Bids will 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 will be reduced pro
rata to cover the number of shares of such series equal to such excess;
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<PAGE> 99
(iii) subject to subclauses (i) and (ii), 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
(iv) in any such event, the number, if any, of shares of such
series subject to Bids not valid under this clause (b) will be treated
as the subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate specified therein; and
(c) all Sell Orders for shares of such series will 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 (a) above and valid Bids
referred to in clause (b) above.
If more than one Bid for a Potential Holder is submitted to the Auction
Agent, each Bid submitted will be a separate Bid with the rate and number of
shares therein specified.
DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND APPLICABLE RATE
Not earlier than the Submission Deadline on each Auction Date for
shares of a series of Acquiring Fund MuniPreferred, the Auction Agent will
assemble all valid Orders submitted or deemed submitted to it by the
Broker-Dealers in respect of shares of such series (each such Hold Order, Bid or
Sell Order as submitted or deemed submitted by a Broker-Dealer being herein
referred to as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell
Order," as the case may be, or as a "Submitted Order") and will determine 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 referred to as the "Available MuniPreferred" of such series) and whether
Sufficient Clearing Bids for shares of such series have been made in the
Auction. "Sufficient Clearing Bids" for shares of such series will have been
made if the number of outstanding shares of such series that are the subject of
Submitted Bids of Potential Holders specifying rates not higher than the Maximum
Rate for shares of such series equals or exceeds the number of outstanding
shares of such series that are the subject of Submitted Sell Orders (including
the number of shares of such series subject to Bids of Existing Holders
specifying rates higher than the Maximum Rate for shares of such series).
If Sufficient Clearing Bids for shares of such series have been made,
the Auction Agent will determine the lowest rate specified in the Submitted Bids
(the "Winning Bid Rate") which, taking into account the rates in the Submitted
Bids of Existing Holders, would result in Existing Holders 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 Potential
Holders, based on the rates in their Submitted Bids, would equal not less than
the Available MuniPreferred of such series. In such event, the Winning Bid Rate
will be the Applicable Rate for the next Rate Period for all shares of such
series.
If Sufficient Clearing Bids for shares of such series have not been
made (other than because all of the outstanding shares of such series are
subject to Submitted Hold Orders), the Applicable Rate for all shares of such
series for the next Rate Period thereof will be equal to the Maximum Rate for
shares of such series. If Sufficient Clearing Bids for shares of such series
have not been made, Beneficial Owners that have submitted or that are deemed to
have submitted Sell Orders may not be able to sell in the Auction all shares of
such series subject to such Sell Orders but will continue to own shares of such
series for the next Rate Period, dividends for which may include income taxable
to such Beneficial Owners. See "Auction Dates; Advance Notice of Allocation of
Taxable Income" above and "Acceptance and Rejection of Submitted Bids and
Submitted Sell Orders and Allocation of Shares" below.
If all of the outstanding shares of Acquiring Fund MuniPreferred of
such series are subject to Submitted Hold Orders, the Applicable Rate for all
shares of such series for the next Rate Period thereof will be the All Hold
Order Rate--i.e., the lesser of the Kenny Index (if such Rate Period consists of
fewer than 183 Rate Period Days) or the product of (a)(i) the "AA" Composite
Commercial Paper Rate on the Auction Date for such Rate Period, if such Rate
Period consists of fewer than 183 Rate Period Days; (ii) the Treasury Bill Rate
on such Auction Date for such Rate Period, if such Rate Period consists of more
than 182 but fewer than 365 Rate Period Days; or (iii) the Treasury Note Rate on
such Auction Date for such Rate Period, if such Rate Period is more than 364
Rate Period Days (the rate
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<PAGE> 100
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 income tax rate, if any, 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 Acquiring
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 (A) if the Taxable Yield Rate (as
defined below) is greater than the Benchmark Rate, then the Benchmark Rate, or
(B) 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 income tax rate, if
any, applicable to ordinary income or the maximum marginal regular Federal
corporate income tax rate 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 (1) dividing the amount of Taxable
Income available for distribution per such share of Acquiring Fund MuniPreferred
by the number of days in the Dividend Period in respect of which such Taxable
Income is contemplated to be distributed, (2) multiplying the amount determined
in (1) above by 365 (in the case of the Dividend Period of 7 Rate Period Days)
or 360 (in the case of any other Dividend Period), and (3) dividing the amount
determined in (2) above by $25,000. In calculating the "AA" Composite Commercial
Paper Rate, the Treasury Bill Rate and the Treasury Note Rate for such purpose,
the rates used will be the rates or yields specified in the applicable
definitions of "AA" Composite Commercial Paper Rate, Treasury Bill Rate and
Treasury Note Rate.
ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF SHARES
Based on the determinations made under "Determination of Sufficient
Clearing Bids, Winning Bid Rate and Applicable Rate" above and, subject to the
discretion of the Auction Agent to round and allocate certain shares as
described below, Submitted Bids and Submitted Sell Orders in respect of shares
of a series of Acquiring Fund MuniPreferred will be accepted or rejected in the
order of priority set forth in the Auction Procedures, with the result that
Existing Holders and Potential Holders of shares of such series will sell,
continue to hold and/or purchase shares of such series as set forth below.
Existing Holders of shares of such series that submitted or were deemed to have
submitted Hold Orders (or on whose behalf Hold Orders were submitted or deemed
to have been submitted) will continue to hold the shares of such series subject
to such Hold Orders.
If Sufficient Clearing Bids for shares of a series of Acquiring Fund
MuniPreferred have been made:
(a) Each Existing Holder that placed or on whose behalf was placed a
Submitted Sell Order or Submitted Bid specifying any rate higher than the
Winning Bid Rate for shares of such series will sell the outstanding shares of
such series subject to such Submitted Sell Order or Submitted Bid;
(b) Each Existing Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate lower than the Winning Bid Rate for shares of
such series will continue to hold the outstanding shares of such series subject
to such Submitted Bid;
(c) Each Potential Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate lower than the Winning Bid Rate for shares of
such series will purchase the number of outstanding shares of such series
subject to such Submitted Bid;
(d) Each Existing Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate equal to the Winning Bid Rate for shares of such
series will continue to hold the shares of such series subject to such Submitted
Bid, unless the number of outstanding shares of such series subject to all such
Submitted Bids is greater than the number of shares of such series in excess of
the Available MuniPreferred of such series over the number of shares of such
series accounted for in clauses (b) and (c) above, in which event each Existing
Holder with such a Submitted Bid will continue to hold a number of outstanding
shares of such series subject to such Submitted Bid determined on a pro rata
basis based on the number of outstanding shares of such series subject to all
such Submitted Bids of such Existing Holders; and
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(e) Each Potential Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate equal to the Winning Bid Rate for shares of such
series will purchase any shares of Available MuniPreferred of such series not
accounted for in clauses (b) through (d) above on a pro rata basis based on the
outstanding shares of such series subject to all such Submitted Bids.
If Sufficient Clearing Bids for shares of a series of Acquiring Fund
MuniPreferred have not been made (unless this results because all outstanding
shares of such series are subject to Submitted Hold Orders):
(a) Each Existing Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate equal to or lower than the Maximum Rate for
shares of such series will continue to hold the outstanding shares of such
series subject to such Submitted Bid;
(b) Each Potential Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate equal to or lower than the Maximum Rate for
shares of such series will purchase the number of outstanding shares of such
series subject to such Submitted Bid; and
(c) Each Existing Holder that placed or on whose behalf was placed a
Submitted Bid specifying a rate higher than the Maximum Rate for shares of such
series or a Submitted Sell Order will sell a number of shares of such series
determined on a pro rata basis based on the number of outstanding shares of such
series subject to all such Submitted Bids and Submitted Sell Orders.
If, as a result of the pro rata allocation described in clauses (d) or
(e) of the second preceding paragraph or clause (c) of the next preceding
paragraph, 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 Acquiring Fund MuniPreferred, the Auction Agent will, in such manner
as, in its sole discretion, it will determine, round up or down to the nearest
whole share the number of shares of Acquiring Fund MuniPreferred being sold or
purchased on such Auction Date so that the number of shares sold or purchased by
each Existing Holder or Potential Holder will be whole shares of Acquiring Fund
MuniPreferred. If as a result of the pro rata allocation described in clause (e)
of the second preceding paragraph, any Potential Holder would be entitled or
required to purchase less than a whole share of Acquiring Fund MuniPreferred,
the Auction Agent will, in such manner as, in its sole discretion, it will
determine, allocate shares of Acquiring Fund MuniPreferred for purchase among
Potential Holders so that only whole shares of Acquiring Fund MuniPreferred are
purchased by any such Potential Holder, even if such allocation results in one
or more of such Potential Holders not purchasing shares of Acquiring Fund
MuniPreferred.
NOTIFICATION OF RESULTS; SETTLEMENT
The Auction Agent will be required to advise 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 such Bid or Sell Order was accepted or
rejected, in whole or in part, by telephone by approximately 3:00 p.m., New York
City time, on each Auction Date. Each Broker-Dealer that submitted an Order for
the account of a customer will then be required to advise such customer of the
Applicable Rate for the next Rate Period and, if such Order was a Bid or Sell
Order, whether such Bid or Sell Order was accepted or rejected, in whole or in
part, will be required to confirm purchases and sales with each customer
purchasing or selling shares of Acquiring Fund MuniPreferred as a result of the
Auction and will be required to advise each customer purchasing or selling
shares of Acquiring Fund MuniPreferred as a result of the Auction to give
instructions to its Agent Member of the Securities Depository to pay the
purchase price against delivery of such shares or to deliver such shares against
payment therefor, as appropriate. The Auction Agent will be required to record
each transfer of shares of Acquiring Fund MuniPreferred on the registry of
Existing Holders to be maintained by the Auction Agent.
In accordance with the Security Depository's normal procedures, on the
Business Day after the Auction Date, the transactions described above will be
executed through the Securities Depository and the accounts of the respective
Agent Members at the Security Depository will be debited and credited and shares
delivered as necessary to effect the purchases and sales of shares of Acquiring
Fund MuniPreferred as determined in the Auction. Purchasers will make payment
through their Agent Members in same-day funds to the Securities Depository
against delivery through their
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Agent Members; the Securities Depository will make payment in accordance with
its normal procedures, which now provide for payment against delivery by their
Agent Members in same-day funds. The settlement procedures to be used with
respect to Auctions for shares of Acquiring Fund MuniPreferred are set forth in
Annex C to this Statement of Additional Information.
If any Existing Holder selling shares of Acquiring Fund MuniPreferred
in an Auction fails to deliver such shares, the Broker-Dealer of any person that
was to have purchased shares of Acquiring Fund MuniPreferred in such Auction may
deliver to such person a number of whole shares of Acquiring Fund MuniPreferred
that is less than the number of shares that otherwise was to be purchased by
such person. In such event, the number of shares of Acquiring Fund MuniPreferred
to be so delivered shall be determined by such Broker-Dealer. Delivery of such
lesser number of shares shall constitute good delivery.
CONCERNING THE AUCTION AGENT
The Auction Agent is acting as agent for the Acquiring Fund in
connection with Auctions. In the absence of bad faith or negligence on its part,
the Auction Agent will not be liable for any action taken, suffered, or omitted
or for any error of judgment made by it in the performance of its duties under
the Auction Agency Agreement and will not be liable for any error of judgment
made in good faith unless the Auction Agent will have been negligent in
ascertaining the pertinent facts.
The Auction Agent may rely upon, as evidence of the identities of the
Existing Holders of shares of Acquiring Fund MuniPreferred, the Auction Agent's
registry of Existing Holders, the results of Auctions and notices from any
Broker-Dealer (or other Person, if permitted by the Acquiring Fund) with respect
to transfers described in the Joint Proxy Statement--Prospectus under "Proposal
No.1--The Reorganization--Description of MuniPreferred Issued by the Acquiring
Fund--The Auction--Secondary Market Trading and Transfer of Acquiring Fund
MuniPreferred." The Auction Agent is not required to accept any such notice for
an Auction unless it is received by the Auction Agent by 3:00 p.m., New York
City time, on the Business Day preceding such Auction.
The Auction Agent may terminate the Auction Agency Agreement upon
notice to the Acquiring Fund on a date no earlier than 45 days after such
notice. If the Auction Agent should resign, the Acquiring 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
Acquiring Fund may remove the Auction Agent provided that prior to such removal
the Acquiring Fund shall have entered into such an agreement with a successor
Auction Agent.
BROKER-DEALERS
The Auction Agent after each Auction for shares of Acquiring Fund
MuniPreferred will pay to each Broker-Dealer, from funds provided by the
Acquiring Fund, a service charge at the annual rate of 1/4 of 1% in the case of
any Auction immediately preceding a Rate Period of less than one year, or a
percentage agreed to by the Acquiring Fund and the Broker-Dealers in the case of
any Auction immediately preceding a Rate Period of one year or longer, of the
purchase price of shares of Acquiring Fund MuniPreferred placed by such
Broker-Dealer at such Auction. For the purposes of the preceding sentence,
shares of Acquiring Fund MuniPreferred will be placed by a Broker-Dealer if such
shares were (a) the subject of Hold Orders deemed to have been submitted to the
Auction Agent by the Broker-Dealer and were acquired by such Broker-Dealer for
its own account or were acquired by such Broker-Dealer for its customers who are
Beneficial Owners or (b) the subject of an Order submitted by such Broker-Dealer
that is (i) a Submitted Bid of an Existing Holder that resulted in such Existing
Holder continuing to hold such shares as a result of the Auction or (ii) a
Submitted Bid of a Potential Holder that resulted in such Potential Holder
purchasing such shares as a result of the Auction or (iii) a valid Hold Order.
The Acquiring Fund may request the Auction Agent to terminate one or
more Broker-Dealer Agreements at any time, provided that at least one
Broker-Dealer Agreement is in effect after such termination.
The Broker-Dealer Agreements provides that a Broker-Dealer (other than
an affiliate of the Acquiring Fund) may submit Orders in Auctions for its own
account, unless the Acquiring Fund notifies all Broker-Dealers that they may
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no longer do so, in which case Broker-Dealers may continue to submit Hold Orders
and Sell Orders for their own accounts. Any Broker-Dealer that is an affiliate
of the Acquiring Fund may submit Orders in Auctions, but only if such Orders are
not for its own account. If a Broker-Dealer submits an Order for its own account
in any Auction, it might have an advantage over other Bidders because it would
have knowledge of all Orders submitted by it in that Auction; such
Broker-Dealer, however, would not have knowledge of Orders submitted by other
Broker-Dealers in that Auction.
FEDERAL INCOME TAX MATTERS ASSOCIATED WITH
INVESTMENT IN THE FUNDS
The following is based upon the advice of Vedder, Price, Kaufman &
Kammholz, counsel to the Funds.
The Federal income tax implications for Acquired Fund shareholders who
will own Acquiring Fund Shares after the Reorganization will be substantially
the same as the Federal income tax implications currently applicable to such
shareholders with respect to their ownership of Acquired Fund Shares. The
Acquiring Fund and the Acquired Fund qualify under Subchapter M of the Code as
regulated investment companies and satisfy conditions which enable dividends on
common shares or shares of MuniPreferred which are attributable to interest on
Municipal Obligations to be exempt from Federal income tax in the hands of
owners of such shares, subject to the possible application of the alternative
minimum tax.
To qualify under Subchapter M for tax treatment as a regulated
investment company, each Fund must, among other things: (a) distribute to its
shareholders at least 90% of the sum of (i) its investment company taxable
income (as that term is defined in the Code determined without regard to the
deduction for dividends paid) and (ii) its net tax-exempt income; and (b)
diversify its holdings so that, at the end of each fiscal quarter of such Fund
(i) at least 50% of the market value of such 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
such 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
such Fund's assets is invested in the securities of any one issuer (other than
U.S. government securities or securities of other regulated investment
companies). In meeting these requirements of Subchapter M of the Code, each Fund
may be restricted in the utilization of certain of the investment techniques
described under "Investment Objectives and Policies of the Funds--Investment
Restrictions" above. If in any year a Fund should fail to qualify under
Subchapter M for tax treatment as a regulated investment company, that Fund
would incur a regular Federal corporate income tax upon its taxable income for
that year, and distributions to its shareholders would be taxable to such
holders as ordinary income to the extent of the earnings and profits of such
Fund. A regulated investment company that fails to distribute, by the close of
each calendar year, an amount equal to the sum of 98% of its ordinary taxable
income for such year and 98% of its capital gain net income for the one year
period ending October 31 in such year, plus any shortfalls from the prior year's
required distribution, is liable for a 4% excise tax on the portion of the
undistributed amount of such income that is less than the required amount for
such distributions. To avoid the imposition of this excise tax, each 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.
Each Fund intends to qualify to pay "exempt-interest" dividends on its
common shares and shares of MuniPreferred as defined under the Code. Under the
Code, at the close of each quarter of its taxable year, if at least 50% of the
value of its total assets consists of Municipal Obligations, each Fund shall be
qualified to pay exempt interest dividends to its shareholders. Exempt-interest
dividends are dividends or any part thereof (other than a capital gain dividend)
paid by each Fund which are attributable to interest on Municipal Obligations
and are so designated by the Fund. Exempt-interest dividends will be exempt from
Federal income tax, subject to the possible application of the Federal
alternative minimum tax. Insurance proceeds received by each Fund under any
insurance policies in respect of scheduled interest payments on defaulted
Municipal Obligations, as described herein, will be excludable from Federal
gross income under Section 103(a) of the Code. In the case of non-appropriation
by a political subdivision, however, there can be no assurance that payments
made by the issuer representing interest on such "non-appropriation" Municipal
Lease Obligations will be excludable from gross income for Federal income tax
purposes. See "Investment Objectives and Policies of the Funds--Municipal
Obligations" above. Gains of a Fund that are attributable to market discount on
certain Municipal Obligations acquired after April 30, 1993 are treated as
ordinary income. Distributions to
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shareholders by each Fund of net income received, if any, from taxable temporary
investments and net short-term capital gains, if any, realized by such Fund will
be taxable to its shareholders as ordinary income. Distributions by each Fund of
net capital gains, if any, are taxable as long-term capital gains, regardless of
the length of time the shareholder has owned common shares or shares of
MuniPreferred of such Fund and regardless of whether the distribution is
received in additional common shares or shares of MuniPreferred or in cash. As
long as a 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 allocate 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. Accordingly, so long
as the IRS maintains this position, each Fund intends each year to allocate, to
the fullest extent practicable, net tax-exempt interest, net capital gains
(i.e., the excess of net long-term capital gain over net short-term capital
loss) and other taxable income, if any, between its common shares and shares of
MuniPreferred in proportion to the total dividends paid to each class with
respect to such year. To the extent permitted under applicable law, each Fund
reserves the right to make special allocations of income within a class,
consistent with the objectives of such Fund. If, (a) in the case of any Minimum
Rate Period or any Special Rate Period of 28 Rate Period Days or fewer, such
Fund retroactively allocates any net capital gains or other income taxable for
Federal income tax purposes to shares of its MuniPreferred as a result of the
redemption of all or a portion of the outstanding shares of its MuniPreferred or
the liquidation of the Fund without having given advance notice thereof as
required by such Fund's preferred share designation statement or (b) in the case
of any Special Rate Period of more than 28 Rate Period Days, such Fund allocates
any net capital gains or other income taxable for Federal income tax purposes to
shares of its MuniPreferred without having given advance notice thereof as
described above, such Fund will arrange to make certain payments to owners of
shares of its MuniPreferred to which such allocation was made to offset the tax
effect thereof as described under "Description of MuniPreferred Issued by the
Acquiring Fund--Dividends--Gross-up Payments" above.
In general, dividends on a Fund's shares of MuniPreferred will be
exempt from Federal income tax in the hands of owners of such shares subject to
the possible application of the alternative minimum tax. Each Fund is required
to allocate net capital gains and other taxable income, if any, proportionately
between its common shares and shares of MuniPreferred in accordance with the
position of the IRS. Each Fund shall, in the case of a Minimum Rate Period or a
Special Rate Period of 28 Rate Period Days, and may, in the case of any other
Special Rate Period, notify the Auction Agent of the amount of any net capital
gains or other income taxable for Federal income tax purposes to be included in
any dividend on shares of its MuniPreferred prior to the Auction establishing
the Applicable Rate for such dividend. The amount of taxable income allocable to
a Fund's shares of MuniPreferred will depend upon the amount of such income
realized by such Fund, but is not generally expected to be significant. Except
for dividends paid on shares of a Fund's MuniPreferred which include an
allocated portion of any net capital gains or other taxable income, each Fund
anticipates that all other dividends paid on shares of its MuniPreferred will
constitute exempt-interest dividends for Federal income tax purposes.
The Funds have received an opinion of counsel to the effect that the
manner in which each Fund intends to allocate items of tax-exempt income, net
capital gains and other taxable income, if any, between its common shares and
shares of MuniPreferred will be respected for Federal income tax purposes. This
opinion of counsel represents only counsel's best legal judgment, and is not
binding on the IRS or the courts. Currently there is no guidance from the IRS or
other sources specifically addressing whether a 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 a Fund's allocation, it either could assert the need to reallocate
that Fund's net capital gains or other taxable income or it could disallow a
portion of that Fund's dividends paid deduction. In the event of a reallocation,
some of the dividends identified by that Fund as tax-exempt to owners of its
shares of MuniPreferred may be recharacterized as additional capital gain or
other taxable income. Under these circumstances, that Fund would not be required
to make payments to such owners to offset the tax effect of such reallocation.
In addition, a reallocation or a disallowance of part of that Fund's dividends
paid deduction would likely cause that Fund to be liable for income tax on any
reallocated taxable income and possibly an excise tax. Counsel has advised the
Funds that, in its opinion, if the IRS were to challenge in court a Fund's
allocations of income and gain, the IRS should not prevail.
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Allocations to a Fund's shares of MuniPreferred of any net income
received from taxable temporary investments and any net short-term capital gains
realized by such Fund will be taxable to owners of such shares as ordinary
income. Allocations of any net capital gains realized by each Fund will be
taxable to owners of that Fund's shares of MuniPreferred as long-term capital
gains regardless of the length of time such owners have owned such shares. As
long as a Fund qualifies as a regulated investment company under the Code, no
part of the distributions to owners of its shares of MuniPreferred will qualify
for the dividends-received deduction for corporations.
In order for any distributions to owners of a Fund's shares of
MuniPreferred to be eligible to be treated as exempt-interest dividends, such
shares of MuniPreferred must be treated as stock for Federal income tax
purposes. Each Fund has received an opinion of counsel to the effect that its
shares of MuniPreferred will constitute stock of such Fund for Federal income
tax purposes and, therefore, distributions declared and paid at the Applicable
Rate as dividends with respect to such Fund's shares of MuniPreferred, to the
extent paid out of current or accumulated earnings and profits of such Fund,
will constitute dividends for Federal income tax purposes. This opinion of
counsel is based, among other things, on (a) a revenue ruling published by the
IRS in 1990, which holds that a preferred stock that has its dividend rate
periodically set pursuant to an auction process substantially similar to the
auction process to be established for each Fund's shares of MuniPreferred is
treated as stock for Federal income tax purposes and (b) each Fund's
representation to counsel that there is no express or implied agreement between
or among a Broker-Dealer or any other party and such Fund, Nuveen or any owner
of such 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 a Fund's shares of MuniPreferred are outstanding
such Fund fails to meet the MuniPreferred Basic Maintenance Amount or the 1940
Act MuniPreferred Asset Coverage, such Fund will be required to suspend
distributions to holders of its common shares until such maintenance amount or
asset coverage, as the case may be, is restored. See "Description of
MuniPreferred Issued by the Acquiring Fund--Dividends--Restrictions on Dividends
and Other Payments" above. This may prevent such Fund from distributing at least
90% of its investment company taxable income and net tax-exempt income, and may
therefore jeopardize such Fund's qualification for taxation as a regulated
investment company or cause such Fund to incur a tax liability or a
nondeductible 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, a Fund will be required to redeem
its shares of MuniPreferred in order to maintain or restore such maintenance
amount or asset coverage and avoid the adverse consequences to such 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. See "Description of MuniPreferred Issued by the Acquiring
Fund--Redemption--Mandatory Redemption" above.
The Code provides that interest on indebtedness incurred or continued
to purchase or carry a Fund's shares to which exempt-interest dividends are
allocated is not deductible. Under rules used by the IRS for determining when
borrowed funds are considered used for the purpose of purchasing or carrying
particular assets, the purchase or ownership of shares may be considered to have
been made with borrowed funds even though such funds are not directly used for
the purchase or ownership of such shares.
The interest on private activity bonds in most instances is not
Federally tax-exempt to a person who is a "substantial user" of a facility
financed by such bonds or a "related person" of such "substantial user." As a
result, a 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
"nonexempt person who regularly uses a part of such facility in his trade or
business." "Related persons" are in general defined to include persons among
whom there exists a relationship, either by family or business, which would
result in a disallowance of losses in transactions among them under various
provisions of the Code (or if they are members of the same controlled group of
corporations under the Code), including a partnership and each of its partners
(and their spouses and minor children), an S corporation and each of its
shareholders (and their spouses and minor children) and various combinations of
these relationships. The foregoing is not a complete statement of all of the
provisions of the Code covering the definitions of "substantial user" and
"related person."
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Each Fund may, at its option, redeem shares of its MuniPreferred in
whole or in part, and is required to redeem shares of its MuniPreferred to the
extent required to maintain the MuniPreferred Basic Maintenance Amount and the
1940 Act MuniPreferred Asset Coverage. Gain or loss, if any, resulting from a
redemption of the shares of MuniPreferred will be taxed as gain or loss from the
sale or exchange of the shares of MuniPreferred under Section 302 of the Code
rather than as a dividend, but only if the redemption distribution (a) is deemed
not to be essentially equivalent to a dividend, (b) is in complete redemption of
an owner's interest in such Fund, (c) is substantially disproportionate with
respect to the owner, or (d) with respect to non-corporate owners, is in partial
liquidation of such Fund. For purposes of (a), (b) and (c) above, an owner's
common shares ownership of such Fund will be taken into account.
Nonresident alien individuals and certain foreign corporations and
other entities ("foreign investors") generally are subject to U.S. withholding
tax at the rate of 30% (or possibly a lower rate provided by an applicable tax
treaty) on distributions of taxable net investment income and net short-term
capital gains. To the extent received by foreign investors, exempt-interest
dividends, distributions of net long-term capital gains and any gain from the
sale or other disposition of a Fund's shares of MuniPreferred generally are
exempt from U.S. taxation. Different tax consequences may result if the owner is
engaged in a trade or business in the United States or is present in the United
States for more than 182 days during a taxable year.
A Fund's futures and options transactions are subject to special tax
provisions that may accelerate or defer recognition of certain gains or losses,
change the character of certain gains or losses, or alter the holding periods of
certain of a Fund's investments.
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 each Fund (and received by
the shareholders) on December 31 of the year declared.
The sale or other disposition of common shares or shares of
MuniPreferred of a Fund will normally result in capital gain or loss to
shareholders. Generally, a shareholder's gain or loss will be a long-term gain
or loss if the shares have been held for more than one year. Present law taxes
both long-term and short-term capital gains of corporations at the rates
applicable to ordinary income. For non-corporate taxpayers, however, under
current law net capital gains will be taxed at a maximum rate of 20%, while
short-term capital gains and other ordinary income will be taxed at a maximum
rate of 39.6%. However, because of the limitations on itemized deductions and
the deduction for personal exemptions applicable to higher income taxpayers, the
effective rate of tax may be higher in certain circumstances. Losses realized by
a shareholder on the sale or exchange of shares of a Fund held for six months or
less are disallowed to the extent of any distribution of exempt-interest
dividends received with respect to such shares, and, if not disallowed, such
losses are treated as long-term capital losses to the extent of any distribution
of long-term capital gain received with respect to such shares.
Federal tax law imposes an alternative minimum tax with respect to both
corporations and individuals. Interest on certain Municipal Obligations, such as
bonds issued to make loans for housing purposes or to private entities (but not
to certain tax-exempt organizations such as universities and non-profit
hospitals) is included as an item of tax preference in determining the amount of
a taxpayer's alternative minimum taxable income. To the extent that a Fund
receives income from Municipal Obligations subject to the Federal alternative
minimum tax, a portion of the dividends paid by it, although otherwise exempt
from Federal income tax, will be taxable to its shareholders to the extent that
their tax liability is determined under the alternative minimum tax. Each Fund
will annually supply a report indicating the percentage of that 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 by each Fund that would otherwise be tax-exempt,
is included in calculating a corporation's adjusted current earnings.
Tax-exempt income, including exempt-interest dividends paid by each
Fund, is taken into account in calculating the amount of social security and
railroad retirement benefits that may be subject to Federal income tax.
Each Fund is required in certain circumstances to withhold 31% of
taxable dividends and certain other payments paid to non-corporate holders of
that Fund's shares who do not furnish to that Fund their correct taxpayer
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identification number (in the case of individuals, their social security number)
and certain certifications, or who are otherwise subject to backup withholding.
The Code provides that every shareholder required to file a tax return
must include for information purposes on such return the amount of tax-exempt
interest received during the taxable year, including any exempt-interest
dividends received from each Fund.
The value of common shares acquired pursuant to a Fund's Dividend
Reinvestment Plan will generally be excluded from gross income to the extent
that the cash amount reinvested would be excluded from gross income.
The foregoing is a general, abbreviated summary of the provisions of
the Code and regulations thereunder presently in effect as they directly govern
the taxation of each Fund and its shareholders. These provisions are subject to
change by legislative or administrative action, and any such change may be
retroactive with respect to each 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 as well as state and local tax matters.
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<PAGE> 108
NUVEEN
Exchange-Traded Funds
October 31, 1998
Dependable, tax-free income
to help you keep more of
what you earn.
NPI
Premium Income
NPM
Premium Income 2
NPT
Premium Income 4
F-1
<PAGE> 109
Highlights
As of October 31, 1998
Contents
1 Dear Shareholder
3 Portfolio Manager Roundtable
5 NPI's Performance Overview
6 NPM's Performance Overview
7 NPT's Performance Overview
8 Shareholder Meeting Report
11 Report of Independent Auditors
12 Portfolio of Investments
35 Statement of Net Assets
36 Statement of Operations
37 Statement of Changes in Net Assets
38 Notes to Financial Statements
42 Financial Highlights
44 Building Better Portfolios
45 Fund Information
===============================================================================
Credit Quality Performance Highlights
Nuveen Premium Income Municipal Fund, Inc. (NPI)
o Competitive taxable-equivalent yield of
8.13% for investors in the 31% federal income
tax bracket
o One-year taxable-equivalent total return on
shareprice of 13.38% for investors in the 31%
federal income tax bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and Lipper's peer group average*
pie chart
AAA/U.S. Guaranteed 61%
AA 22%
A 10%
BBB/NR 7%
Nuveen Premium Income Municipal Fund 2, Inc. (NPM)
o Competitive taxable-equivalent yield of
7.99% for investors in the 31% federal income
tax bracket
o One-year taxable-equivalent total return on
share price of 18.76% for investors in the 31%
federal income tax bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and Lipper's peer group average*
pie chart
AAA/U.S. Guaranteed 57%
AA 12%
A 21%
BBB/NR 10%
Nuveen Premium Income Municipal Fund 4, Inc. (NPT)
o Competitive taxable-equivalent yield of
7.99% for investors in the 31% federal income
tax bracket
o One-year taxable-equivalent total return on
share price of 17.29% for investors in the 31%
federal income tax bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and Lipper's peer group average*
pie chart
AAA/U.S. Guaranteed 51%
AA 19%
A 19%
BBB/NR 11%
* The Lehman Brothers Municipal Bond Index is an unleveraged index comprised of
a broad range of investment-grade municipal bonds and does not reflect any
initial or ongoing expenses.
The Lipper Peer Group returns represent the average annualized returns of the
funds in the Lipper National Leveraged Municipal Debt category. Returns assume
reinvestment of dividends and do not reflect any applicable sales charge.
F-2
<PAGE> 110
Dear Shareholder
Photo of: Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
Wealth takes a lifetime to build. Once achieved, it should be preserved.
I'm pleased to report that over the past 12 months, the Nuveen Premium Income
Funds, Inc. (NPI, NPM, and NPT) have continued to perform well, meeting their
primary objective of providing you with attractive levels of tax-free income and
after-tax total returns. The strong market for fixed-income securities,
bolstered by investor demand for quality investments, benefited these three
funds and led to higher share prices than those posted a year ago. Attractive
tax-free income, enhanced by strong share price performance, illustrates once
again that Nuveen's Exchange-Traded Funds can provide an excellent investment
option for income-oriented investors.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from the uncertainty in
more conservative investments, such as municipal bond funds. As interest rates
continued to trend downward, the competitive yields offered by our
exchange-traded funds stimulated additional investor interest and demand, which
led to improved share prices overall.
In this environment, the market for exchange-traded municipal bond funds has
been exceptionally strong. These funds continue to represent a bright spot among
fixed-income investments, offering attractive income in a market that places a
high premium on yield. In addition, the funds have generally maintained good
levels of call protection, resulting in relatively stable income streams. In the
coming months, we will continue to watch several key factors affecting the
future of the economy, including corporate earnings reports, wage and employment
figures, U.S. consumer confidence levels, the continuing impact of foreign
financial turmoil, and any further interest rate indications from the Federal
Reserve. These factors will influence the outlook for fixed-income markets into
the coming year.
Municipals Very Attractively Priced
Over the past year, rising prices drove yields on 30-year Treasuries to their
lowest levels since 1977. The story in the municipal market, however, was quite
different. With yields on the long Treasury bond pushing below 5% at times, the
yield on the Bond Buyer 40, an unmanaged index of long-term municipal bonds,
fell just 27 basis points - from 5.40% to 5.13% - compared with the 100-basis
point drop in Treasury yields over the past 12 months. As of October 31, 1998,
the ratio of municipal yields to Treasury yields stood at 98.8%, compared with
the more typical range of 86-87%. Over the past few months, this ratio has
ranged as high as 100.6%. For investors, this means that quality municipal bonds
currently offer about the same yield as Treasury bonds with comparable
maturities - even before the tax advantages of municipal bonds are taken into
account. On an after-tax basis in today's market, municipal bonds present an
exceptionally attractive investment option relative to Treasuries.
One of the main factors in the steep decline in Treasury yields during the past
year was the strong interest in these investments by international investors. As
the financial turmoil in Asia continued to spread to economies worldwide and the
dollar strengthened against foreign currencies, the demand for U.S.
dollar-denominated Treasury securities increased. In the municipal market, where
foreign demand was limited by an inability to benefit from the tax advantages of
munis, low interest rates and a strong economy combined to generate high levels
of new issuance and a dramatic increase in the refinancing of existing bonds.
The first ten months of 1998 saw $234 billion of municipal issuance, up 32% over
the same period in 1997. In terms of total municipal issuance, this puts 1998 on
pace to be the second largest year on record.
In addition, the continued strength of the U.S. economy has brought about
improvements in the fundamental financial health of many municipalities and
boosted the overall credit quality of municipal bonds. In the third quarter of
1998, upgraded issues by the two major rating agencies outnumbered downgrades by
a margin of 7 to 2.
"The key to taking advantage of the exceptional values currently available in
the municipal market is the expertise of a proven investment manager."
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
municipal market is the expertise of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent
municipal issuance, for example, highlights the value of Nuveen's in-depth
knowledge of the municipal market, as our portfolio management teams carefully
analyze the flood of issues to select those securities best suited to help the
funds achieve their investment objectives.
As a further enhancement to our management capabilities, Nuveen has assembled a
strong core of Premier Advisers(SM), managers who are experts in their
particular area of the market who can provide time-tested experience and
insight. In addition to Nuveen Advisory Corp., our Premier Adviser for tax-free
investing, you can rely on other Nuveen Premier Advisers(SM) to share their
wisdom in the equity market, including Institutional Capital Corporation for
equity value investing and Rittenhouse Financial Services for equity growth
investing. For more information about our funds, including charges and expenses,
contact your financial adviser for a prospectus, or call Nuveen at
(800) 621-7227. Please read the prospectus carefully before you invest or
send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
For more than 100 years, investors have known they can count on Nuveen. We are
grateful for the confidence you have shown in us, and we intend to continue
earning your trust in the years ahead.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
December 15, 1998
F-3
<PAGE> 111
Nuveen Exchange-Traded Funds
Portfolio Manager Roundtable
Portfolio managers Tom Futrell, Steve Peterson, and Ted Neild discuss the
current municipal market environment, fund performance, and the outlook for the
Nuveen Premium Income Municipal Funds.
What outside factors influenced the municipal bond market the most over the past
year?
The third quarter of 1998 saw an acceleration of trends that have been apparent
in the fixed-income markets over the past 12 months: declining interest rates
and an increased ratio of municipal to Treasury yields. The cause in both cases
was heightened concern about the condition of the global financial system. While
the U.S. economy exhibited continued growth, the impact of the financial turmoil
in Southeast Asia, Russia, and other emerging markets was felt in the U.S.
equity market.
A desire to cushion this impact and avert a domestic credit crunch prompted the
Federal Reserve to ease short-term interest rates in late September, the first
rate cut in almost three years. In response to concerns that the initial
quarter-point cut might not be sufficient, the Fed reduced rates again in
October and November, bringing the federal funds rate to 4.75%. The Fed
indicated that this accommodative stance was intended to sustain U.S. economic
growth going forward, while also adding some stability to global markets.
How have these outside factors affected municipal bond issuance?
In response to an environment of low interest rates and continued economic
growth, municipal bond issuance over the past year has been among the heaviest
in years. As of the end of October, total issuance in 1998 - both new deals and
refundings - was on pace to become the second largest year on record. Another
point concerns the level of insured bonds that have been brought to market. For
the month of September, insured bonds made up 56% of all issuance. Most notable
among the flood of new bonds was the $7 billion Long Island Power Authority
(LIPA) offering. The first part of the LIPA issuance, which exceeded $3.5
billion, the largest issuance in municipal bond history, came to market in May,
and another segment was brought out in October. Increased municipal supply has
been met with strong investor demand, due in part to recent volatility in the
equity markets. Demand from institutional buyers such as insurance companies has
also increased, as these investors recognize the exceptionally attractive values
currently offered by municipal bonds.
What were the funds' total returns for the past year?
For the fiscal year ending October 31, 1998, the Nuveen Exchange-Traded Funds
covered in this report produced the following total returns on net asset value
(NAV), compared to the total return of the Lehman Brothers Municipal Bond
Index*:
Taxable- Lehman Brothers
Total Equivalent Municipal Bond
Fund Return Total ReturnIndex Total Return
- - ------------------------------------------------------------------
NPI 8.86% 11.52% 8.02%
- - ------------------------------------------------------------------
NPM 8.93% 11.66% 8.02%
- - ------------------------------------------------------------------
NPT 8.58% 11.15% 8.02%
- - ------------------------------------------------------------------
Along with outperforming the Lehman Index, all three of the funds had better
total returns than their Lipper Peer Group average **, which had a total return
of 8.43%. The funds' durations played a significant role in the solid
performance of the funds.
* The Lehman Brothers Municipal Bond Index is an unleveraged index comprised of
a broad range of investment-grade municipal bonds, and does not reflect any
initial or ongoing expenses. **The Lipper Peer Group returns represent the
average annualized returns of the funds in the Lipper National Leveraged
Municipal Debt category. Returns assume reinvestment of dividends and do not
reflect any applicable sales charge.
What were the funds' durations, and what role does duration play regarding
investment risk?
The following chart illustrates the funds' durations compared to the duration of
the Lehman Index, as of October 31, 1998.
Fund Fund Duration* Lehman Brothers Duration
- - ---------------------------------------------------------
NPI 9.47 years 7.30 years
- - ---------------------------------------------------------
NPM 7.90 years 7.30 years
- - ---------------------------------------------------------
NPT 9.30 years 7.30 years
- - ---------------------------------------------------------
* The fund duration listed in the chart takes into account the leveraging
process for each fund and therefore differs from the duration of the actual
portfolio of individual bonds that comprise the fund. Fund duration is also
known as leverage adjusted duration. Any future reference to duration, unless
otherwise noted, will be to fund duration.
Fund duration measures a bond fund's price volatility, or reaction to interest
rate movements. The longer the duration, the more sensitive the fund is to
changes in interest rates. During a period of falling interest rates, longer
duration enables a fund to participate more fully in market gains. However, when
rates rise, longer duration can make the fund more vulnerable to potential price
declines. As interest rates trended downward over the past year, funds with
durations longer than that of the index generally tended to outperform the
market.
F-4
<PAGE> 112
How have dividends been affected?
In the current low interest rate environment, good call protection helped
support the dividends of NPM and NPT and protect the income of these funds from
erosion. As of October 31, 1998, these two funds have provided shareholders with
33 and 42 consecutive months of steady income, respectively. However, the
combination of declining interest rates and a significant number of bond calls
acted to reduce the income level of NPI, the oldest fund in this report. Brought
to market in July 1998, NPI's portfolio is undergoing an anticipated
restructuring as higher-yielding bonds purchased when the fund was first
assembled reach their call dates. The high level of single-family mortgage
revenue bonds (12%) in this portfolio also contributed to the number of calls
when interest rates fell and these bonds were prepaid. As proceeds from the
called bonds were reinvested in bonds paying relatively lower current interest
rates, the change in income level earned by NPI over the past year necessitated
a dividend reduction. Despite this adjustment to NPI, all of the Nuveen Premium
Income funds continue to provide very attractive current market yields. The
following chart highlights the three funds' market yields and their taxable-
equivalent yields at the 31% federal income tax bracket, as of October 31, 1998.
Fund Market Yield Taxable-Equivalent Yield
- - -----------------------------------------------------------
NPI 5.61% 8.13%
- - -----------------------------------------------------------
NPM 5.51% 7.99%
- - -----------------------------------------------------------
NPT 5.51% 7.99%
- - -----------------------------------------------------------
What effect was there to the funds' share price performance?
Share price performance among many of the Nuveen Exchange-Traded Funds has been
strong over the past 12 months. All three funds posted higher closing share
prices as of October 31, 1998, than they did a year ago. In addition, strong
bond market performance boosted all three of the funds' net asset values. The
accompanying chart is as of October 31, 1998.
Fund Share Price Net Asset Value Premium (+)
(NAV) Discount (-)
- - ----------------------------------------------------------------
NPI $15.1875 $15.66 -3.02%
- - ----------------------------------------------------------------
NPM $16.875 $16.15 + 4.49%
- - ----------------------------------------------------------------
NPT $14.8125 $15.05 -1.58%
- - ----------------------------------------------------------------
Were there any particular sectors where Nuveen searched for undervalued
securities?
Over the past year, we found value in the healthcare and utilities sectors,
currently the two largest issuers in the municipal market, by taking advantage
of the competitive environment created by deregulation and consolidation. Within
the utilities sector, we concentrated on public power issues, where Nuveen's
excellent surveillance and research helped point out the unique aspects of these
credits. The heavy volume in these two sectors also created additional
opportunities to find value, as hospital and utility bonds often offered
above-market yields and special call provisions to attract buyers.
What key strategies were used over the course of the year?
In NPI, we continued to buy high-quality, investment-grade revenue bonds that we
believe are undervalued when analyzed from the perspective of credit quality,
yield curve position, or sector. Most of these bonds were in the 20-to 30-year
maturity range.
When reinvesting the proceeds from bonds called from NPM, we looked for bonds
with longer maturities to increase the fund's duration as well as bonds that we
anticipate will be refunded in order to realize the gain in price. The fund
continues to be well diversified across sectors and states.
Over the past year, we further enhanced the call protection of NPT by buying
noncallable bonds. Overall, the fund has very high credit quality (70% in bonds
rated AAA and AA), with 11% in the BBB-rated or non-rated categories. Even
though the difference in yield between higher quality (AAA-rated) and lower
quality bonds (at least BBB-rated) narrowed over the past year, we were still
able to find value among the lower quality, investment grade bonds. As this
difference widens and we are compensated with higher yields, we may increase our
allocation in this category.
What is Nuveen's outlook for the future?
Looking ahead for the Nuveen Premium Income funds, our focus will continue to be
on supporting the stability of the funds' income streams, especially if we
remain in a lower interest rate environment. NPI has already entered into a
period where bond calls have affected the portfolio, while NPM and NPT will
begin to face bond calls over the next two to three years. Our goal is to manage
through this call risk by improving the structure of the portfolios, that is,
investing in bonds with longer durations, high yields, and good call protection.
We also will attempt to preemptsome of these calls by selling bonds prior to
their call dates and replacing them with high-quality bonds offering attractive
yields. If credit spreads continue to widen, we will look for opportunities to
assume some additional credit risk, especially in healthcare and utility bonds,
in order to enhance the funds' yields. Nuveen's expertise as an experienced
investment manager knowledgeable about the unique aspects of the municipal bond
market is key to our ability to select the right securities for our funds and
add value for our investors.
The current market environment--influenced by declining interest rates, benign
inflation, and strong municipal supply--has helped to position municipal bonds
as one of the most compelling values in today's marketplace. We expect that the
excellent municipal-to-Treasury ratio, combined with continued volatility in the
equity markets and investors' increasing awareness of the need for asset
allocation rebalancing, will result in growing demand for these bonds. Investors
who take advantage of current opportunities in the municipal market should be
rewarded with healthy returns and attractive yields in the months ahead, as the
market recognizes the value of these quality investments.
F-5
<PAGE> 113
Nuveen Premium Income Municipal Fund, Inc.
Performance Overview
As of October 31, 1998
NPI
Portfolio Statistics
====================================================================
Inception Date 7/88
- - --------------------------------------------------------------------
Share Price $15 3/16
- - --------------------------------------------------------------------
Net Asset Value $15.66
- - --------------------------------------------------------------------
Current Market Yield Per Share 5.61%
- - --------------------------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 8.13%
- - --------------------------------------------------------------------
Fund Net Assets ($000) $1,473,755
- - --------------------------------------------------------------------
Effective Maturity (Years) 20.41
- - --------------------------------------------------------------------
Fund Duration (Years) 9.47
- - --------------------------------------------------------------------
Annualized Total Return
====================================================================
On Share Price On NAV
- - --------------------------------------------------------------------
1-Year 10.60% 8.86%
- - --------------------------------------------------------------------
5-Year 4.02% 6.30%
- - --------------------------------------------------------------------
10-Year 7.58% 8.42%
- - --------------------------------------------------------------------
Taxable-Equivalent Total Return (2)
====================================================================
On Share Price On NAV
- - --------------------------------------------------------------------
1-Year 13.38% 11.52%
- - --------------------------------------------------------------------
5-Year 7.18% 9.38%
- - --------------------------------------------------------------------
10-Year 10.92% 11.75%
- - --------------------------------------------------------------------
Top Five Sectors (as a % of total investments)
====================================================================
Utilities 21%
- - --------------------------------------------------------------------
Tax Obligation (General) 13%
- - --------------------------------------------------------------------
Tax Obligation (Limited) 13%
- - --------------------------------------------------------------------
U.S. Guaranteed 12%
- - --------------------------------------------------------------------
Housing (Single Family) 12%
- - --------------------------------------------------------------------
BarChart:
1997-1998 Monthly Tax-Free Dividends Per Share (3)
====================================================================
NOV 0.074
DEC 0.074
JAN 0.074
FEB 0.074
MAR 0.074
APR 0.074
MAY 0.074
JUN 0.074
JUL 0.074
AUG 0.071
SEP 0.071
OCT 0.071
LineChart:
Share Price Performance
====================================================================
11/7/97 14.563
14.063
14.25
14.313
14.438
14.438
14.563
14.688
14.75
15.125
15.063
15
15.188
15.125
14.75
14.813
14.875
14.813
14.75
14.75
14.5
14.813
14.75
14.688
14.563
14.438
14.438
14.438
14.563
14.813
14.813
14.813
14.813
14.875
15
14.938
15
15
14.875
14.625
14.625
14.688
14.563
14.625
14.688
14.938
15.25
15
15.25
15.13
10/31/91 15.19
Weekly Closing Price
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis.The
federal only rate is based on the current market yield and a federal income
tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
3 The Fund also paid shareholders taxable distributions in December of $0.0577
per share.
F-6
<PAGE> 114
Nuveen Premium Income Municipal Fund 2, Inc.
Performance Overview
As of October 31, 1998
NPM
Portfolio Statistics
=============================================================
Inception Date 7/92
- - -------------------------------------------------------------
Share Price $16 7/8
- - -------------------------------------------------------------
Net Asset Value $16.15
- - -------------------------------------------------------------
Current Market Yield Per Share 5.51%
- - -------------------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.99%
- - -------------------------------------------------------------
Fund Net Assets ($000) $959,840
- - -------------------------------------------------------------
Effective Maturity (Years) 17.17
- - -------------------------------------------------------------
Fund Duration (Years) 7.90
- - -------------------------------------------------------------
Annualized Total Return
=============================================================
On Share Price On NAV
- - -------------------------------------------------------------
1-Year 15.98% 8.93%
- - -------------------------------------------------------------
3-Year 15.89% 9.30%
- - -------------------------------------------------------------
5-Year 9.67% 7.32%
- - -------------------------------------------------------------
Since Inception 8.66% 8.73%
- - -------------------------------------------------------------
Taxable-Equivalent Total Return (2)
=============================================================
On Share Price On NAV
- - -------------------------------------------------------------
1-Year 18.76% 11.66%
- - -------------------------------------------------------------
3-Year 18.92% 12.12%
- - -------------------------------------------------------------
5-Year 12.84% 10.22%
- - -------------------------------------------------------------
Since Inception 11.66% 11.55%
- - -------------------------------------------------------------
Top Five Sectors (as a % of total investments)
=============================================================
U.S. Guaranteed 26%
- - -------------------------------------------------------------
Tax Obligation (General) 16%
- - -------------------------------------------------------------
Housing (Single Family) 12%
- - -------------------------------------------------------------
Tax Obligation (Limited) 9%
- - -------------------------------------------------------------
Transportation 8%
- - -------------------------------------------------------------
BarChart:
1997-1998 Monthly Tax-Free Dividends Per Share (3)
=============================================================
NOV 0.0775
DEC 0.0775
JAN 0.0775
FEB 0.0775
MAR 0.0775
APR 0.0775
MAY 0.0775
JUN 0.0775
JUL 0.0775
AUG 0.0775
SEP 0.0775
OCT 0.0775
LineChart:
Share Price Performance
=============================================================
11/7/97 15.5
15.5
15.625
15.75
15.875
15.75
15.75
15.875
16.125
16.375
16.063
16.063
16.313
16.25
16.125
16.313
16.375
16.313
15.938
15.938
15.875
15.875
15.75
15.75
15.438
15.625
15.438
15.375
15.438
15.813
15.688
15.938
15.938
15.875
16.188
16.25
16.125
16.063
15.875
15.75
15.875
16.188
16.25
16.25
16.063
16.375
17.063
16.438
16.875
16.81
10/31/98 16.88
Weekly Closing Price
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis.The
federal only rate is based on the current market yield and a federal income
tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
3 The Fund also paid shareholders taxable distributions in December of $0.0891
per share.
F-7
<PAGE> 115
Nuveen Premium Income Municipal Fund 4, Inc.
Performance Overview
As of October 31, 1998
NPT
Portfolio Statistics
====================================================================
Inception Date 2/93
- - --------------------------------------------------------------------
Share Price $14 13/16
- - --------------------------------------------------------------------
Net Asset Value Per Share $15.05
- - --------------------------------------------------------------------
Current Market Yield 5.51%
- - --------------------------------------------------------------------
Taxable-Equivalent Yield (Federal Only)1 7.99%
- - --------------------------------------------------------------------
Fund Net Assets ($000) $923,004
- - --------------------------------------------------------------------
Effective Maturity (Years) 17.24
- - --------------------------------------------------------------------
Fund Duration (Years) 9.30
- - --------------------------------------------------------------------
Annualized Total Return
====================================================================
On Share Price On NAV
- - --------------------------------------------------------------------
1-Year 14.54% 8.58%
- - --------------------------------------------------------------------
3-Year 13.59% 8.76%
- - --------------------------------------------------------------------
5-Year 7.50% 6.43%
- - --------------------------------------------------------------------
Since Inception 6.15% 7.22%
- - --------------------------------------------------------------------
Taxable-Equivalent Total Return (2)
====================================================================
On Share Price On NAV
- - --------------------------------------------------------------------
1-Year 17.29% 11.15%
- - --------------------------------------------------------------------
3-Year 16.54% 11.42%
- - --------------------------------------------------------------------
5-Year 10.54% 9.18%
- - --------------------------------------------------------------------
Since Inception 9.03% 9.89%
- - --------------------------------------------------------------------
Top Five Sectors (as a % of total investments)
====================================================================
Health Care 17%
- - --------------------------------------------------------------------
Utilities 17%
- - --------------------------------------------------------------------
U.S. Guaranteed 15%
- - --------------------------------------------------------------------
Tax Obligation (General) 10%
- - --------------------------------------------------------------------
Housing (Multifamily) 8%
- - --------------------------------------------------------------------
BarChart:
1997-1998 Monthly Tax-Free Dividends Per Share
====================================================================
NOV 0.0680
DEC 0.0680
JAN 0.0680
FEB 0.0680
MAR 0.0680
APR 0.0680
MAY 0.0680
JUN 0.0680
JUL 0.0680
AUG 0.0680
SEP 0.0680
OCT 0.0680
LineChart:
Share Price Performance
====================================================================
11/7/97 13.688
13.813
13.938
13.938
13.938
13.75
13.875
13.938
14.063
14.938
14.75
14.688
14.875
14.813
14.938
14.875
14.875
14.688
14.625
14.625
14.313
14.625
14.313
14
14
13.75
13.625
13.5
13.563
13.813
13.813
13.938
13.938
14.188
14.625
14.313
14.25
14.375
14.375
14.25
14.313
14.5
14.313
14.125
14.25
14.5
14.875
14.75
14.875
14.69
10/31/98 14.81
Weekly Closing Price
Past performance is not predictive of future results.
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis.The
federal only rate is based on the current market yield and a federal income
tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
F-8
<PAGE> 116
Shareholder Meeting Report
NPI
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Approval of the Directors was reached as follows:
Preferred Preferred Preferred Preferred Preferred
Common Shares Shares Shares Shares Shares
Shares Series-M Series-T Series-W Series-TH Series-F
<S> <C> <C> <C> <C> <C> <C>
==========================================================================================================================
Robert P. Bremner
For 53,318,929 3,272 3,248 2,982 3,379 2,557
Withhold 536,164 38 2 50 4 7
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Lawrence H. Brown
For 53,323,070 3,272 3,248 2,982 3,379 2,557
Withhold 532,023 38 2 50 4 7
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Anthony T. Dean
For 53,331,313 3,272 3,248 2,982 3,379 2,557
Withhold 523,780 38 2 50 4 7
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Anne E. Impellizzeri
For 53,297,812 3,272 3,248 2,982 3,379 2,556
Withhold 557,281 38 2 50 4 8
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Peter R. Sawers
For 53,324,045 3,272 3,228 2,982 3,379 2,556
Withhold 531,048 38 22 50 4 8
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
William J. Schneider
For -- 3,272 3,248 2,982 3,379 2,557
Withhold -- 38 2 50 4 7
- - ------------------------------------------------------------------------------------------------------------------------
Total -- 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Timothy R. Schwertfeger
For -- 3,272 3,248 2,982 3,379 2,557
Withhold -- 38 2 50 4 7
- - ------------------------------------------------------------------------------------------------------------------------
Total -- 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Judith M. Stockdale
For 53,251,659 3,272 3,228 2,982 3,379 2,557
Withhold 603,434 38 22 50 4 7
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
Ratification of auditors was reached as follows:
For 52,803,486 3,252 3,229 3,021 3,380 2,435
Against 164,742 1 6 2 3 125
Abstain 886,865 57 15 9 -- 4
- - ------------------------------------------------------------------------------------------------------------------------
Total 53,855,093 3,310 3,250 3,032 3,383 2,564
==========================================================================================================================
</TABLE>
F-9
<PAGE> 117
Shareholder Meeting Report
NPM
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Approval of the Directors was reached as follows:
Preferred Preferred Preferred Preferred Preferred
Common Shares Shares Shares Shares Shares
Shares Series-M Series-T Series-W Series-TH Series-F
<S> <C> <C> <C> <C> <C> <C>
==========================================================================================================================
Robert P. Bremner
For 37,763,321 1,546 2,718 1,684 2,692 1,749
Withhold 289,938 41 89 2 14 22
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Lawrence H. Brown
For 37,779,299 1,586 2,718 1,684 2,692 1,770
Withhold 273,960 1 89 2 14 1
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Anthony T. Dean
For 37,782,809 1,586 2,718 1,684 2,692 1,770
Withhold 270,450 1 89 2 14 1
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Anne E. Impellizzeri
For 37,754,163 1,586 2,718 1,684 2,692 1,770
Withhold 299,096 1 89 2 14 1
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Peter R. Sawers
For 37,776,559 1,586 2,718 1,684 2,692 1,770
Withhold 276,700 1 89 2 14 1
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
William J. Schneider
For -- 1,546 2,718 1,684 2,692 1,749
Withhold -- 41 89 2 14 22
- - ------------------------------------------------------------------------------------------------------------------------
Total -- 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Timothy R. Schwertfeger
For -- 1,586 2,718 1,684 2,692 1,770
Withhold -- 1 89 2 14 1
- - ------------------------------------------------------------------------------------------------------------------------
Total -- 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Judith M. Stockdale
For 37,717,898 1,541 2,718 1,684 2,692 1,749
Withhold 335,361 46 89 2 14 22
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
Ratification of auditors was reached as follows:
For 37,673,117 1,584 2,721 1,686 2,700 1,770
Against 57,461 1 80 -- 2 --
Abstain 322,681 2 6 -- 4 1
- - ------------------------------------------------------------------------------------------------------------------------
Total 38,053,259 1,587 2,807 1,686 2,706 1,771
==========================================================================================================================
</TABLE>
F-10
<PAGE> 118
Shareholder Meeting Report
NPT
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Approval of the Directors was reached as follows:
Preferred Preferred Preferred Preferred Preferred Preferred Preferred
Common Shares Shares Shares Shares Shares Shares Shares
Shares Series-M Series-T Series-T2 Series-W Series-TH Series-F Series-F2
<S> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Robert P. Bremner
For 36,677,153 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold 379,645 -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,798 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Lawrence H. Brown
For 36,689,341 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold 367,457 -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,798 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Anthony T. Dean
For 36,692,312 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold 364,486 -- 2 - 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,798 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Anne E. Impellizzeri
For 36,664,146 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold 392,652 -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,798 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Peter R. Sawers
For 36,680,367 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold 376,341 -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,708 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
William J. Schneider
For -- 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold -- -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total -- 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Timothy R. Schwertfeger
For -- 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold -- -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total -- 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Judith M. Stockdale
For 36,652,547 1,815 1,753 1,011 1,459 1,758 1,758 1,282
Withhold 404,252 -- 2 -- 1 1 2 7
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,798 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
Ratification of auditors was reached as follows:
For 36,688,052 1,815 1,755 978 1,460 1,755 1,753 1,278
Against 165,291 -- -- -- -- -- -- 1
Abstain 203,455 -- -- 33 -- 4 7 10
- - ----------------------------------------------------------------------------------------------------------------------------------
Total 37,056,798 1,815 1,755 1,011 1,460 1,759 1,760 1,289
====================================================================================================================================
</TABLE>
F-11
<PAGE> 119
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
F-12
<PAGE> 120
Portfolio of Investments
Nuveen Premium Income Municipal Fund, Inc. (NPI)
October 31, 1998
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Arizona - 1.1%
$ 11,630,000 The Industrial Development Authority of the
County of Pima (Arizona), Industrial Development
Lease Obligation Refunding Revenue Bonds,
1988 Series A (Irvington Project),
7.250%, 7/15/10 1/02 at 103 AAA $ 13,010,365
2,900,000 The Industrial Development Authority of the
County of Pima, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program),
Series 1988, 8.125%, 9/01/20 (Alternative Minimum Tax) 3/99 at 102 AAA 2,974,037
- - ----------------------------------------------------------------------------------------------------------------------------------
Arkansas - 0.4%
5,250,000 Arkansas Development Finance Authority, Driver's License
Revenue Bonds (Arkansas State Police -
Headquarters and Wireless Data Equipment),
Series 1997, 5.400%, 6/01/18 6/07 at 100 AAA 5,447,978
- - ----------------------------------------------------------------------------------------------------------------------------------
California - 14.0%
13,000,000 State of California, Various Purpose General Obligation
Refunding Bonds, 5.150%, 10/01/19 10/03 at 102 Aa3 13,138,840
State of California, Veterans General Obligation Bonds,
Series BH:
10,250,000 5.250%, 12/01/12 (Alternative Minimum Tax) 12/08 at 101 AAA 10,395,858
6,000,000 5.600%, 12/01/32 (Alternative Minimum Tax) 12/03 at 102 Aa3 6,194,220
15,975,000 State of California Department of Transportation
East Bay State Building Authority, Certificates
of Participation, Series 1991A, 6.500%, 3/01/16
(Pre-refunded to 3/01/01) 3/01 at 102 A1*** 17,361,950
23,725,000 State Public Works Board of the State of California,
Lease Revenue Refunding Bonds
(The Regents of the University of California),
1993 Series A (Various University of
California Projects), 5.500%, 6/01/21 6/03 at 102 Aa3 24,726,907
11,395,000 State Public Works Board of the State of California,
Lease Revenue Bonds (Department
of Corrections), 1993 Series E (California State Prison-
Madera County (II)), 5.500%, 6/01/15 No Opt. Call A 12,306,372
15,420,000 Los Angeles Convention and Exhibition Center Authority,
Lease Revenue Bonds, 1993 Refunding
Series A, The City of Los Angeles
(California), 5.375%, 8/15/18 8/03 at 102 AAA 15,870,881
5,000,000 Department of Water and Power of the City of Los
Angeles, California, Electric Plant
Refunding Revenue Bonds, Second Issue
of 1993, 4.750%, 11/15/19 11/03 at 102 AAA 4,822,550
12,250,000 Los Angeles County Transportation Commission
(California), Sales Tax Revenue Refunding
Bonds, Series 1991-B, 5.750%, 7/01/18 7/01 at 100 AA- 12,650,453
1,285,000 City of Martinez (California), Home Mortgage
Revenue Bonds, 1983 Issue A, 10.750%, 2/01/16 No Opt. Call AAA 2,012,143
4,125,000 Redevelopment Agency of the City of Moorpark,
Moorpark Redevelopment Project, 1993
Tax Allocation Bonds, 6.125%, 10/01/18 10/03 at 102 A- 4,403,685
20,000,000 City of Pomona, California, Single Family Mortgage
Revenue Refunding Bonds (GNMA and FNMA
Mortgage-Backed Securities), Series 1990A, 7.600%, 5/01/23 No Opt. Call AAA 26,766,800
5,000,000 Sacramento, California, Municipal Utility District,
Electric Revenue Refunding Bonds, 1993 Series D,
5.250%, 11/15/20 11/03 at 102 AAA 5,101,550
San Bernardino Joint Powers Financing Authority,
Tax Allocation Refunding Bonds, Series 1995A:
6,675,000 5.750%, 10/01/15 10/05 at 102 AAA 7,270,477
12,500,000 5.750%, 10/01/25 10/05 at 102 AAA 13,515,625
3,000,000 San Diego Public Facilities Financing Authority,
Sewer Revenue Bonds, Series 1993, 5.250%, 5/15/20 5/03 at 102 AAA 3,057,240
10,000,000 San Joaquin Hills Transportation Corridor Agency,
Toll Road Refunding Revenue Bonds,
Series 1997A, 5.250%, 1/15/30 1/07 at 102 AAA 10,249,500
17,540,000 University of California, 4.750%, 9/01/21 9/03 at 102 AAA 16,888,038
</TABLE>
F-13
<PAGE> 121
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Colorado - 3.1%
$ 3,000,000 Colorado Housing and Finance Authority, Single
Family Program, 1997 Series B-2 Senior Bonds,
7.000%, 5/01/26 (Alternative Minimum Tax) 5/07 at 105 Aa2 $ 3,372,210
4,500,000 Colorado Housing and Finance Authority, Single
Family Program, 1997 Series C-2 Senior Bonds,
6.875%, 11/01/28 (Alternative Minimum Tax) 11/07 at 105 Aa2 5,083,200
City and County of Denver, Colorado, Airport
System Revenue Bonds, Series 1991D:
9,450,000 7.750%, 11/15/13 (Alternative Minimum Tax) No Opt. Call Baa1 12,090,330
1,725,000 7.750%, 11/15/21 (Pre-refunded to 11/15/01)
(Alternative Minimum Tax) 11/01 at 102 Aaa 1,957,202
6,550,000 7.750%, 11/15/21 (Alternative Minimum Tax) 11/01 at 102 Baa1 7,281,897
City and County of Denver, Colorado, Airport
System Revenue Bonds, Series 1992B:
715,000 7.250%, 11/15/23 (Pre-refunded to 11/15/02)
(Alternative Minimum Tax) 11/02 at 102 Aaa 821,735
2,785,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 Baa1 3,105,581
City and County of Denver, Colorado, Airport
System Revenue Bonds, Series 1992C:
1,830,000 6.750%, 11/15/22 (Pre-refunded to 11/15/02)
(Alternative Minimum Tax) 11/02 at 102 Aaa 2,067,644
6,870,000 6.750%, 11/15/22 (Alternative Minimum Tax) 11/02 at 102 Baa1 7,521,963
2,050,000 Colorado Local Single Family Mortgage
Revenue Bonds (City and County of Denver,
Colorado, GNMA Mortgage-Backed Securities Program),
Series 1988A,
8.125%, 12/01/20 (Alternative Minimum Tax) 12/98 at 102 AAA 2,093,809
742,859 El Paso County, Colorado, Single Family Mortgage
Revenue Tax-Exempt Refunding Bonds,
Series 1992A Class A-2, 8.750%, 6/01/11 No Opt. Call Aaa 827,768
- - ----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 2.8%
10,470,000 District of Columbia, Hospital Revenue
Refunding Bonds (Providence Hospital Issue),
Series 1988A, 7.875%, 12/01/15 (Pre-refunded to 12/01/98) 12/98 at 102 Aa2*** 10,720,757
7,505,000 District of Columbia (Washington, D.C.),
General Obligation Bonds, Series 1998B,
6.000%, 6/01/20 No Opt. Call AAA 8,526,355
14,800,000 District of Columbia Housing Finance Agency,
Collateralized Single Family Mortgage Revenue
Bonds, Series 1988E-4, 6.375%, 6/01/26
(Alternative Minimum Tax) 12/04 at 103 AAA 15,802,700
5,750,000 District of Columbia Revenue Bonds (Association
of American Medical Colleges Issue),
Series 1997A, 5.375%, 2/15/27 8/07 at 102 AAA 5,930,148
- - ----------------------------------------------------------------------------------------------------------------------------------
Florida - 1.2%
7,465,000 Florida Housing Finance Agency, GNMA Collateralized
Home Ownership Mortgage Revenue Bonds,
1988 Series G1 Bonds, 8.300%, 6/01/20
(Alternative Minimum Tax) 12/98 at 103 Aaa 7,696,415
9,290,000 State of Florida, Full Faith and Credit Department
of Transportation, Right-of-Way Acquisition
and Bridge Construction Bonds, Series 1995, 5.800%, 7/01/21 7/05 at 101 AA+ 10,033,665
- - ----------------------------------------------------------------------------------------------------------------------------------
Georgia - 1.6%
23,420,000 Development Authority of Monroe County (Georgia),
Pollution Control Revenue Bonds
(Georgia Power Company Plant Scherer Project),
Second Series 1994, 6.750%, 10/01/24 10/99 at 102 A+ 24,316,283
- - ----------------------------------------------------------------------------------------------------------------------------------
Illinois - 7.8%
19,220,000 Chicago School Reform Board of Trustees of the
Board of Education of the City of Chicago, Illinois,
Unlimited Tax General Obligation Bonds (Dedicated
Tax Revenues), Series 1997A, 5.250%, 12/01/27 12/07 at 102 AAA 19,501,573
10,595,000 City of Chicago, Chicago- O'Hare International Airport,
Special Facility Revenue Bonds (United Air
Lines, Inc. Project), Series 1988A, 8.400%, 5/01/18
(Alternative Minimum Tax) 5/99 at 103 Baa2 11,110,023
6,280,000 City of Chicago, Chicago O'Hare International Airport,
General Airport Second Lien Revenue Refunding
Bonds, 1993 Series C, 5.000%, 1/01/18 1/04 at 102 AAA 6,268,068
4,860,000 City of Chicago, Collateralized Single Family Mortgage
Revenue Bonds, Series 1996-A,
7.000%, 9/01/27 (Alternative Minimum Tax) 3/06 at 105 Aaa 5,451,899
10,000,000 The County of Cook, Illinois, General Obligation
Bonds, Series 1993A, 5.000%, 11/15/23 11/03 at 100 AAA 9,783,100
8,740,000 Illinois Development Finance Authority, Pollution
Control Refunding Revenue Bonds,
1994 Series A (Illinois Power Company Project),
5.700%, 2/01/24 2/04 at 102 AAA 9,311,334
</TABLE>
F-14
<PAGE> 122
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Illinois (continued)
$ 8,500,000 Illinois Educational Facilities Authority, Revenue
Refunding Bonds, The University of Chicago,
Series 1993B, 5.600%, 7/01/24 7/03 at 102 Aa1 $ 8,861,420
5,000,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1992 (Highland Park Hospital),
6.200%, 10/01/22 10/02 at 102 AAA 5,455,050
2,000,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1997A (Highland Park Hospital Project),
5.750%, 10/01/26 10/07 at 102 AAA 2,141,480
17,545,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1997 (Sherman Health Systems),
5.250%, 8/01/27 8/07 at 101 AAA 17,650,972
11,900,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1988B (Evangelical Hospitals Corporation),
8.100%, 1/01/08 (Pre-refunded to 1/01/99) 1/99 at 102 Aaa 12,233,676
4,925,000 Regional Transportation Authority, Cook, DuPage,
Kane, Lake, McHenry and Will Counties, Illinois,
General Obligation Bonds, Series 1992A, 9.000%, 6/01/06 No Opt. Call AAA 6,486,373
785,000 Regional Transportation Authority, Cook, DuPage,
Kane, Lake, McHenry and Will Counties, Illinois,
General Obligation Bonds, Series 1992B, 9.000%, 6/01/06 No Opt. Call AAA 1,033,869
- - ----------------------------------------------------------------------------------------------------------------------------------
Indiana - 1.3%
4,300,000 Indiana State Office Building Commission,
Correctional Facilities Program Revenue Bonds,
Series 1995A, 5.500%, 7/01/20 7/05 at 102 AAA 4,522,009
8,000,000 Metropolitan School District of Steuben County,
Middle School Building Corporation, First Mortgage
Bonds, Series 1995, Steuben County, Indiana,
6.375%, 7/15/16 (Pre-refunded to 7/15/05) 7/05 at 102 AAA 9,243,120
5,300,000 Whitley County Middle School Building Corporation, First
Mortgage Bonds, Series 1994, Columbia City, Indiana,
6.250%, 7/15/15 (Pre-refunded to 1/15/04) 1/04 at 102 AAA 5,966,899
- - ----------------------------------------------------------------------------------------------------------------------------------
Iowa - 1.3%
3,000,000 Iowa Finance Authority, Private College Refunding
Revenue Bonds (Drake University Project),
Series 1996, 5.400%, 12/01/16 12/05 at 102 AAA 3,126,900
5,565,000 Iowa Finance Authority, Variable Rate Demand
Industrial Revenue Refunding Bonds, Series A 1989
(Urbandale Hotel Corporation Project), 8.500%,
8/01/16 (Pre-refunded to 7/15/14)
(Alternative Minimum Tax) 7/14 at 100 AAA 7,834,574
8,000,000 Iowa Finance Authority, Hospital Facilities Revenue
Bonds, Series 1998 A (Iowa Health System),
5.125%, 1/01/28 7/08 at 102 AAA 7,939,520
- - ----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 0.4%
5,890,000 Kentucky Development Finance Authority
(St. Elizabeth Medical Center), 9.000%, 11/01/00 No Opt. Call AAA 6,245,108
- - ----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.5%
9,000,000 Louisiana Public Facilities Authority, Hospital
Revenue Bonds (Franciscan Missionaries of Our
Lady Health System Project), Series 1998C, 5.000%, 7/01/28 7/08 at 101 AAA 8,828,730
4,000,000 Louisiana Public Facilities Authority, Hospital Revenue
Refunding Bonds (Louisiana Health System
Corporation Project), Series 1998, 5.000%, 10/01/22 10/08 at 102 AAA 3,931,360
11,860,000 Louisiana Stadium and Exposition District Hotel
Occupancy Tax Bonds, Series 1995-B, 6.375%, 7/01/25 7/05 at 102 AAA 13,470,114
7,660,000 Louisiana Public Facilities Authority, Extended
Care Facilities Revenue Bonds (Comm-Care
Corporation Project), Series 1994, 11.000%, 2/01/14 No Opt. Call BBB 11,027,106
- - ----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 2.2%
2,900,000 Massachusetts Industrial Finance Agency,
Resource Recovery Revenue Bonds, SEMASS Project,
Series 1991B, 9.250%, 7/01/15 (Alternative Minimum Tax) 7/01 at 103 N/R 3,227,613
15,000,000 Massachusetts Industrial Finance Agency,
General Obligation Bonds, Suffolk University,
Series 1997, 5.250%, 7/01/27 7/07 at 102 AAA 15,262,650
5,000,000 Massachusetts Turnpike Authority, Metropolitan
Highway System Revenue Bonds, 1997 Series C
(Senior), 5.000%, 1/01/37 1/07 at 102 AAA 4,887,150
8,800,000 Massachusetts Water Resources Authority,
General Revenue Bonds, 1992 Series A, 5.500%, 7/15/22
(Pre-refunded to 7/15/02) 7/02 at 100 Aaa 9,354,312
</TABLE>
F-15
<PAGE> 123
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Michigan - 2.9%
$ 4,000,000 School District of the City of Detroit, Wayne County,
Michigan, School Building and Site Improvement and
Refunding Bonds (Unlimited Tax General Obligation),
Series 1993,
5.400%, 5/01/13 5/03 at 102 AA+ $ 4,238,520
10,550,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Refunding Bonds, Series 1995-B,
5.000%, 7/01/25 7/05 at 100 AAA 10,403,988
Hudsonville Public Schools, Counties of Ottawa and Allegan,
State of Michigan, 1997 School Building and Site and
Refunding Bonds (General Obligation Unlimited Tax):
10,510,000 5.150%, 5/01/22 5/08 at 100 Aaa 10,576,739
8,145,000 5.150%, 5/01/27 5/08 at 100 Aaa 8,190,612
9,625,000 Livonia Public School District, General Obligation Bonds,
5.500%, 5/01/21 5/03 at 102 AAA 10,065,825
- - ----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 2.8%
2,910,000 The Minneapolis/Saint Paul Housing Finance Board, Single
Family Mortgage Revenue Bonds (Minneapolis/Saint Paul
Family Housing Program, Phase X, FNMA and GNMA Mortgage-
Backed Securities Program), Series 1994
(Alternative Minimum Tax) 11/04 at 102 AAA 3,136,049
21,375,000 The Housing and Redevelopment Authority of the City of Saint
Paul, Minnesota, Sales Tax Revenue Refunding Bonds (Civic
Center Project), Series 1996, 7.100%, 11/01/23 11/15 at 103 AAA 26,909,843
2,877,000 The Housing and Redevelopment Authority of the City of Saint
Paul, Minnesota, Single Family Mortgage Revenue Bonds,
Refunding Series 1991-B, 7.250%, 9/01/11 No Opt. Call Aaa 3,144,043
7,675,000 Port Authority of the City of Saint Paul, Energy Park Tax
Increment Revenue Refunding Bonds, Series 1988,
8.000%, 12/01/07 (Pre-refunded to 12/01/98) 12/98 at 102 AAA 7,860,198
- - ----------------------------------------------------------------------------------------------------------------------------------
Missouri - 1.5%
6,540,000 Missouri Housing Development Commission, Single Family
Mortgage Revenue Bonds (Homeownership Loan Program),
1996 Series C, 7.450%, 9/01/27 (Alternative Minimum Tax) 3/07 at 105 AAA 7,472,669
11,120,000 Francis Howell School District, St. Charles County, Missouri,
General Obligation Refunding Bonds,
Series 1994A, 7.800%, 3/01/08 No Opt. Call AAA 14,181,558
- - ----------------------------------------------------------------------------------------------------------------------------------
Nevada - 2.1%
29,410,000 State of Nevada, Colorado River Commission, General
Obligation (Limited Tax) Revenue Supported Bonds,
Series 1994, 5.500%, 7/01/27 7/04 at 101 AA 30,562,284
- - ----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 2.1%
11,000,000 New Hampshire Housing Finance Authority, Single Family
Mortgage Revenue Bonds, 1993 Series B,
6.050%, 7/01/25 7/03 at 102 Aa 11,520,300
10,000,000 Business Finance Authority of the State of New Hampshire,
Pollution Control Refunding Revenue Bonds (The United
Illuminating Company Project), 1993 Series A,
5.875%, 10/01/33 10/03 at 102 BBB- 10,206,500
8,560,000 New Hampshire Housing Finance Authority, Single Family
Mortgage Acquisition Revenue Bonds, 1996 Series B,
6.400%, 1/01/27 (Alternative Minimum Tax) 7/06 at 102 Aa3 9,130,952
- - ----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 1.1%
15,000,000 New Jersey Housing and Mortgage Finance Agency, Home Buyer
Revenue Bonds, 1997 Series U,
5.850%, 4/01/29 (Alternative Minimum Tax) 10/07 at 101 1/2 AAA 15,842,250
- - ----------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.3%
4,780,000 New Mexico Mortgage Finance Authority, Single Family
Mortgage Purchase Refunding Senior Bonds, 1992 Series A,
6.900%, 7/01/24 7/02 at 102 Aa1 5,084,056
- - ----------------------------------------------------------------------------------------------------------------------------------
New York - 9.7%
10,650,000 Long Island Power Authority (New York), Electric System
General Revenue Bonds, Series 1998A, 5.250%, 12/01/26 6/08 at 101 A- 10,829,985
7,500,000 The City of New York, General Obligation Bonds, Fiscal 1991
Series B, 9.500%, 6/01/03 No Opt. Call A- 9,189,450
10,000,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series G, 5.750%, 2/01/07 2/06 at 101 1/2 A- 10,979,500
</TABLE>
F-16
<PAGE> 124
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
New York (continued)
The City of New York, General Obligation Bonds, Fiscal 1997
Series G:
$ 100,000 6.000%, 10/15/26 (Pre-refunded to 10/15/07) 10/07 at 101 A-*** $ 115,021
9,900,000 6.000%, 10/15/26 10/07 at 101 A- 10,787,238
16,000,000 New York City (New York), Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Fiscal 1996 Series B,
5.750%, 6/15/26 6/06 at 101 AAA 17,216,960
New York City Transitional Finance Authority, Future Tax
Secured Bonds, Fiscal 1998 Series C:
31,625,000 4.750%, 5/01/23 5/08 at 101 AA 30,364,111
11,000,000 5.000%, 5/01/26 5/08 at 101 AA 10,814,320
12,365,000 New York State Energy Research and Development Authority,
Facilities Revenue Bonds, Series 1993 A
(Consolidated Edison Company of New York, Inc. Project),
6.000%, 3/15/28 (Alternative Minimum Tax) 3/03 at 102 A+ 13,126,808
10,000,000 New York Local Government Assistance Corporation,
Series 1993 B, Refunding Bonds, 5.000%, 4/01/23 4/04 at 100 A+ 9,785,700
18,735,000 New York State Medical Care Facilities Finance Agency,
Hospital and Nursing Home FHA-Insured Mortgage Revenue Bonds,
1993 Series B, 5.500%, 2/15/22 2/04 at 102 AAA 19,340,328
- - ----------------------------------------------------------------------------------------------------------------------------------
Ohio - 1.3%
5,095,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program),
1988 Series B, 8.250%, 12/15/19 (Alternative Minimum Tax) 12/98 at 102 AA+ 5,271,440
12,360,000 State of Ohio, Turnpike Revenue Bonds, 1994 Series A,
Issued by the Ohio Turnpike Commission, 5.750%, 2/15/24 2/04 at 102 AA 13,641,361
- - ----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 1.1%
9,560,000 Oklahoma Housing Finance Agency, GNMA Collateralized Single
Family Mortgage Revenue Bonds, Series 1988A,
8.250%, 12/01/20 (Alternative Minimum Tax) 12/98 at 102 AAA 9,769,651
6,455,000 Washington County Medical Authority (Bartlesville, Oklahoma),
Hospital Revenue Bonds (Jane Phillips Episcopal Hospital),
Series 1989A, 8.500%, 11/01/10 (Pre-refunded to 5/01/99) 5/99 at 102 N/R*** 6,756,836
- - ----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 2.0%
12,875,000 Allegheny County Hospital Development Authority
(Pennsylvania), Health Center Revenue Bonds, Series 1992A
(Presbyterian University Health System, Inc. Project),
6.250%, 11/01/23 (Pre-refunded to 11/01/02) 11/02 at 100 AAA 14,085,121
10,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage
Revenue Bonds, Series 1993 - 37A, 5.450%, 10/01/17 10/03 at 102 AA+ 10,219,000
5,295,000 The School District of Philadelphia, Pennsylvania, General
Obligation Bonds, Series B of 1995, 5.500%, 9/01/25 9/05 at 101 AAA 5,560,968
- - ----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.4%
5,250,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series X, 5.500%, 7/01/25 7/05 at 100 BBB+ 5,413,433
- - ----------------------------------------------------------------------------------------------------------------------------------
Rhode Island - 0.9%
13,200,000 Rhode Island Health and Educational Building Corporation,
Hospital Financing Revenue Bonds, Lifespan Obligated Group
Issue, Series 1996, 5.250%, 5/15/26 5/07 at 102 AAA 13,279,332
- - ----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 1.2%
17,250,000 South Carolina Jobs-Economic Development Authority, Hospital
Revenue Bonds (Anderson Area Medical Center, Inc.),
Series 1996, 5.250%, 2/01/26 2/06 at 102 AAA 17,393,175
- - ----------------------------------------------------------------------------------------------------------------------------------
Texas - 7.7%
10,305,000 Alliance Airport Authority, Inc., Special Facilities Revenue
Bonds, Series 1990 (American Airlines, Inc. Project),
7.500%, 12/01/29 (Alternative Minimum Tax) 12/00 at 102 Baa2 11,049,948
11,020,000 Brazos River Authority (Texas), Collateralized Pollution
Control Revenue Bonds (Texas Utilities Electric Company
Project), Series 1994A, 7.875%, 3/01/21
(Alternative Minimum Tax) 3/01 at 102 BBB+ 11,993,286
23,000,000 Brazos River Authority (Texas), Revenue Refunding Bonds
(Houston Industries Incorporated Project),
Series 1998C, 5.125%, 5/01/19 5/08 at 102 AAA 23,059,570
5,615,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, American Airlines, Inc. Revenue Bonds,
Series 1990, 7.500%, 11/01/25 (Alternative Minimum Tax) 11/00 at 102 Baa2 6,012,261
</TABLE>
F-17
<PAGE> 125
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Texas (continued)
$ 40,000,000 Harris County (Texas), Health Facilities Development
Corporation, Adjustable Convertible Extendable Securities
(Greater Houston Pooled Health Care Loan Program),
Series 1985B, 7.375%, 12/01/25 12/98 at 100 A1 $ 40,136,400
15,000,000 Harris County, Texas, Toll Road Senior Lien Revenue
Refunding Bonds, Series 1994, 5.300%, 8/15/13 8/04 at 102 AAA 15,900,600
4,750,000 Matagorda County Navigation District Number One (Texas),
Pollution Control Revenue Refunding Bonds (Central Power and
Light Company Project), Series 1995, 6.100%, 7/01/28 7/00 at 102 AAA 5,009,635
- - ----------------------------------------------------------------------------------------------------------------------------------
Utah - 1.9%
15,000,000 Intermountain Power Agency (Utah), Power Supply Revenue
Refunding Bonds, 1998 Series A, 5.000%, 7/01/20 7/08 at 101 AAA 14,832,600
8,000,000 Utah Housing Finance Agency, Single Family Mortgage Bonds,
1997 Series F, 5.750%, 7/01/28 (Alternative Minimum Tax) 7/07 at 101 1/2 AAA 8,296,480
4,780,000 Utah Housing Finance Agency, Single Family Mortgage Senior
Bonds, Series 1998F2, 5.100%, 7/01/28
(Alternative Minimum Tax) (DD) 7/08 at 101 1/2 AAA 4,743,529
- - ----------------------------------------------------------------------------------------------------------------------------------
Vermont - 0.9%
12,510,000 Vermont Housing Finance Agency, Single Family Housing Bonds,
Series 9, 5.900%, 5/01/29 (Alternative Minimum Tax) 6/07 at 101 1/2 AAA 13,246,714
- - ----------------------------------------------------------------------------------------------------------------------------------
Virginia - 0.7%
10,000,000 Prince William County Service Authority (Virginia), Water
and Sewer System Refunding Revenue Bonds, Series 1993,
5.000%, 7/01/21 7/03 at 102 AAA 9,872,400
1,000,000 Virginia Housing Development Authority, Commonwealth
Mortgage Bonds, 1987 Series C, Subseries C-7,
8.375%, 1/01/28 (Alternative Minimum Tax) 1/99 at 102 AA+ 1,007,940
- - ----------------------------------------------------------------------------------------------------------------------------------
Washington - 16.9%
19,820,000 Public Utility District No.1 of Chelan County, Washington,
Chelan Hydro Consolidated System Revenue Bonds, Series 1997A,
5.650%, 7/01/32 (Alternative Minimum Tax) 7/07 at 102 AA 20,748,567
8,525,000 King County, Washington, Limited Tax General Obligation
Refunding Bonds (Payable from Sewer Revenues), Series 1998B,
4.750%, 1/01/18 1/08 at 101 AA+ 8,371,891
17,050,000 Municipality of Metropolitan Seattle, Washington, Sewer
Refunding Revenue Bonds, Series Z, 5.500%, 1/01/33 1/03 at 102 AAA 17,721,088
6,360,000 Public Utility District No. 1 of Snohomish County,
Washington, Generation System Revenue Bonds, Series 1993,
5.500%, 1/01/14 1/03 at 100 AAA 6,676,537
7,000,000 City of Spokane, Washington, Regional Solid Waste Management
System Revenue Bonds, Series 1989B, 7.750%, 1/01/11
(Alternative Minimum Tax) 1/99 at 102 AAA 7,193,550
10,000,000 Washington Health Care Facilities Authority, Revenue Bonds,
Series 1998 (Swedish Health Services), 5.125%, 11/15/22 11/08 at 101 Aaa 9,877,200
11,000,000 Washington Health Care Facilities Authority, Revenue Bonds,
Series 1998 (Harrison Memorial Hospital),
5.000%, 8/15/28 (DD) 8/13 at 102 AAA 10,643,490
4,300,000 Washington Public Power Supply System, Nuclear Project
No. 1, Refunding Revenue Bonds, Series 1989B,
7.250%, 7/01/15 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 4,570,341
12,950,000 Washington Public Power Supply System, Nuclear Project
No. 1, Refunding Revenue Bonds, Series 1993A,
5.700%, 7/01/17 7/03 at 102 AAA 13,504,778
29,870,000 Washington Public Power Supply System, Nuclear Project
No. 1, Refunding Revenue Bonds, Series 1993B,
5.600%, 7/01/15 7/03 at 102 AAA 31,257,760
Washington Public Power Supply System, Nuclear Project
No. 1, Refunding Revenue Bonds, Series 1989A:
4,060,000 7.500%, 7/01/15 (Pre-refunded to 7/01/99) 7/99 at 102 AAA 4,262,472
11,900,000 7.500%, 7/01/15 (Pre-refunded to 7/01/99) 7/99 at 102 Aaa 12,491,073
7,500,000 Washington Public Power Supply System, Nuclear Project
No. 2, Refunding Revenue Bonds, Series 1991A,
6.000%, 7/01/12 (Pre-refunded to 7/01/01) 7/01 at 100 Aa1*** 7,944,975
</TABLE>
F-18
<PAGE> 126
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Washington (continued)
$ 14,440,000 Washington Public Power Supply System, Nuclear Project
No. 2, Refunding Revenue Bonds, Series 1993A,
5.750%, 7/01/12 7/03 at 102 Aa1 $ 15,530,798
6,770,000 Washington Public Power Supply System, Nuclear Project
No. 2, Refunding Revenue Bonds, Series 1993B,
5.625%, 7/01/12 7/03 at 102 Aa1 7,079,186
14,500,000 Washington Public Power Supply System, Nuclear Project
No. 2, Refunding Revenue Bonds, Series 1998A,
5.000%, 7/01/12 7/08 at 102 Aa1 14,736,349
13,500,000 Washington Public Power Supply System, Nuclear Project
No. 3, Refunding Revenue Bonds, Series 1989B,
7.250%, 7/01/15 (Pre-refunded to 1/01/00) 1/00 at 102 AAA 14,348,744
22,880,000 Washington Public Power Supply System, Nuclear Project
No. 3, Refunding Revenue Bonds, Series 1993C,
5.375%, 7/01/15 7/03 at 102 Aa1 23,379,469
9,350,000 Washington Public Power Supply System, Nuclear Project
No. 3, Refunding Revenue Bonds, Series 1997A,
5.250%, 7/01/15 7/07 at 102 Aa1 9,536,906
7,275,000 Washington Public Power Supply System, Nuclear Project
No. 3, Refunding Revenue Bonds, Series 1998A,
5.125%, 7/01/18 7/08 at 102 Aa1 7,221,019
- - ----------------------------------------------------------------------------------------------------------------------------------
West Virginia - 1.1%
15,000,000 West Virginia Housing Development Fund, Housing Finance
Bonds, 1992 Series D, 7.050%, 11/01/24 5/02 at 102 AAA 16,180,499
- - ----------------------------------------------------------------------------------------------------------------------------------
$ 1,370,784,859 Total Investments - (cost $1,359,473,254) - 98.3% 1,448,475,312
================ ---------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.1%
1,000,000 Industrial Development Authority of the City of Roanoke,
Virginia, Hospital Revenue Bonds (Carilion Health System
Obligated Group), Series 1997A, Variable Rate Demand Bonds,
3.700%, 7/01/27+ VMIG-1 1,000,000
1,000,000 Roanoke Industrial Development Authority, Hospital Revenue
Demand Bonds, Series 1995A (Carilion Health System),
Variable Rate Demand Bonds, 3.700%, 7/01/19+ VMIG-1 1,000,000
- - ----------------------------------------------------------------------------------------------------------------------------------
$ 2,000,000 Total Temporary Investments - 0.1% 2,000,000
================ ---------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.6% 23,280,105
---------------------------------------------------------------------------------------------------------------
Net Assets - 100% $1,473,755,417
===============================================================================================================
* 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 or Moody's rating.
*** Security is 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. Security is 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 as a short-term security. The rate disclosed is that
currently in effect. This rate changes periodically based on market conditions or a
specified market index.
N/R Investment is not rated.
(DD) Security purchased on a delayed delivery basis (note 1).
See accompanying notes to financial statements.
</TABLE>
F-19
<PAGE> 127
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Premium Income Municipal Fund 2, Inc. (NPM)
October 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Alaska - 0.5%
$ 3,500,000 Anchorage Parking Authority, Lease Revenue Refunding Bonds,
Series 1993 (5th Avenue Garage Project), 6.750%, 12/1/08 12/02 at 102 Baa1 $ 3,838,800
725,000 City of Valdez, Alaska, Home Mortgage Revenue Refunding
Bonds, 1992 Series, 7.900%, 2/01/10 8/02 at 102 A1 781,151
- - ----------------------------------------------------------------------------------------------------------------------------------
Arizona - 3.1%
The Industrial Development Authority of the County of Mohave,
Hospital System Revenue Refunding Bonds (Medical Environments,
Inc., Phoenix Baptist Hospital and Medical Center Inc),
Series 1993:
5,705,000 6.250%, 7/01/03 No Opt. Call Aaa 6,198,483
6.750%, 7/01/08 (Pre-refunded to 7/01/03) 7/03 at 102 Aaa 3,427,620
9,000,000 City of Phoenix (Arizona), Civic Improvement Corporation,
Wastewater System Lease Revenue Bonds, Series 1993,
6.125%, 7/01/14 (Pre-refunded to 7/01/03) 7/03 at 102 AAA 10,052,370
4,380,000 City of Phoenix Civic Improvement Corporation (Arizona),
Wastewater System Lease Revenue Refunding Bonds,
Series 1993, 4.750%, 7/01/23 7/04 at 102 Aa3 4,240,541
5,045,000 The Industrial Development Authority of the County of Pima
(Arizona), Industrial Development Lease Obligation Refunding
Revenue Bonds, 1988 Series A (Irvington Project),
7.250%, 7/15/10 1/02 at 103 AAA 5,643,791
- - ----------------------------------------------------------------------------------------------------------------------------------
California - 13.3%
7,710,000 State of California Veterans, General Obligation A Bonds,
Series BH, 5.250%, 12/01/12 (Alternative Minimum Tax) 12/08 at 101 AAA 7,819,713
State Public Works Board of the State of California, Lease
Revenue Bonds (The Trustees of California State University),
1992 Series A (Various California State University Projects):
15,480,000 6.625%, 10/01/10 (Pre-refunded to 10/01/02) 10/02 at 102 Aaa 17,507,106
10,500,000 6.700%, 10/01/17 (Pre-refunded to 10/01/02) 10/02 at 102 AAA 11,903,535
7,150,000 State Public Works Board of the State of California, Lease
Revenue Bonds (The Trustees of the California State
University), 1994 Series A (Various California State
University Projects), 6.375%, 10/01/19
(Pre-refunded to 10/01/04) 10/04 at 102 A+*** 8,258,751
17,500,000 State Public Works Board of the State of California, Lease
Revenue Bonds (Department of Corrections), 1994 Series A
(California State Prison-Monterey County (Soledad II)),
6.875%, 11/01/14 (Pre-refunded to 11/01/04) 11/04 at 102 Aaa 20,736,800
30,000,000 Foothill/Eastern Transportation Corridor Agency (California),
Toll Road Revenue Bonds, Series 1995A, 0.000%, 1/01/21 No Opt. Call Baa 9,326,700
5,000,000 City of Loma Linda, California, Hospital Revenue Bonds (Loma
Linda University Medical Center Project), Series 1993-A,
6.500%, 12/01/18 12/03 at 102 BBB 5,403,650
3,490,000 Community Redevelopment Financing Authority of the Community
Redevelopment Agency of the City of Los Angeles, California
Pooled Financing Bonds, Series D (Crenshaw Redevelopment
Project), 7.000%, 9/01/14 (Pre-refunded to 9/01/02) 9/02 at 102 N/R*** 3,747,143
7,000,000 Los Angeles State Building Authority, Lease Revenue
Refunding Bonds (State of California Department of General
Services Lease), 1993 Series A, 5.625%, 5/01/11 No Opt. Call A1 7,850,150
5,000,000 Los Angeles County Public Works Finance Authority, Revenue
Bonds, Series 1994A (Los Angeles County Regional Park and
Open Space District), 6.125%, 10/01/10
(Pre-refunded to 10/01/04) 10/04 at 102 AA*** 5,709,550
10,000,000 Los Angeles County Transportation Commission (California),
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series 1992-A , 6.750%, 7/01/19 (Pre-refunded to 7/01/02) 7/02 at 102 Aaa 11,287,400
2,035,000 Parlier Redevelopment Agency (Parlier Redevelopment Project),
1992 Tax Allocation Bonds, Series A, 6.750%, 8/01/22
(Pre-refunded to 8/01/02) 8/02 at 102 BBB*** 2,293,832
Redevelopment Agency of the City and County of San Francisco
(California), Hotel Tax Revenue Bonds, Series 1994:
2,390,000 6.750%, 7/01/15 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 2,797,734
5,905,000 6.750%, 7/01/25 (Pre-refunded to 7/01/04) 7/04 at 102 AAA 6,912,393
960,000 6.750%, 7/01/25 7/04 at 102 AAA 1,097,722
</TABLE>
F-20
<PAGE> 128
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
California (continued)
$ 5,605,000 County of San Joaquin, California, Certificates of
Participation (1994 Solid Waste System System Facilities
Project), 6.600%, 4/01/19 4/04 at 102 A $ 6,113,037
- - ----------------------------------------------------------------------------------------------------------------------------------
Colorado - 9.0%
9,870,000 Colorado Health Facilities Authority, Insured Hospital
Revenue Bonds (PSL Healthcare System Project), Series 1991A,
6.250%, 2/15/21 (Pre-refunded to 2/15/01) 2/01 at 102 AAA 10,627,325
1,335,000 Colorado Housing and Finance Authority, Single Family
Program Senior Bonds, 1994 Series E, 8.125%, 12/01/24
(Alternative Minimum Tax) 12/04 at 105 Aa2 1,479,674
Colorado Housing and Finance Authority, General Obligation
Bonds, 1994 Series A:
5,785,000 6.850%, 8/01/24 8/02 at 102 A 6,197,355
2,295,000 6.875%, 8/01/30 8/02 at 102 A 2,448,352
4,595,000 Colorado Housing and Finance Authority, Single Family
Program Senior Bonds, 1995 Series D,
7.375%, 6/01/26 12/05 at 105 Aa2 5,036,625
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1992B:
1,445,000 7.250%, 11/15/23 (Pre-refunded to 11/15/02)
(Alternative Minimum Tax) 11/02 at 102 Aaa 1,660,710
5,635,000 7.250%, 11/15/23 (Alternative Minimum Tax) 11/02 at 102 Baa1 6,283,645
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1992C:
2,125,000 6.750%, 11/15/13 (Pre-refunded to 11/15/02)
(Alternative Minimum Tax) 11/02 at 102 Aaa 2,400,953
16,120,000 6.750%, 11/15/13 (Alternative Minimum Tax) 11/02 at 102 Baa1 17,743,929
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1991A,
1,925,000 8.000%, 11/15/25 (Pre-refunded to 11/15/01)
(Alternative Minimum Tax) 11/01 at 100 Aaa 2,163,373
5,315,000 8.000%, 11/15/25 (Alternative Minimum Tax) 11/01 at 100 Baa1 5,845,278
City and County of Denver, Colorado, Airport System Revenue
Bonds, Series 1991D:
400,000 7.750%, 11/15/13 (Alternative Minimum Tax) No Opt. Call Baa1 511,760
3,155,000 7.750%, 11/15/21 (Pre-refunded to 11/15/01)
(Alternative Minimum Tax) 11/01 at 102 Aaa 3,579,695
12,115,000 7.750%, 11/15/21 (Alternative Minimum Tax) 11/01 at 102 Baa1 13,468,730
City and County of Denver (FHA Insured), Boston Lofts
Projects, Series 1997A:
1,700,000 5.750%, 10/01/27 (Alternative Minimum Tax) 10/07 at 102 AAA 1,769,887
4,795,000 5.850%, 10/01/38 (Alternative Minimum Tax) 10/07 at 102 AAA 4,991,116
- - ----------------------------------------------------------------------------------------------------------------------------------
Connecticut - 0.4%
3,170,000 Connecticut Housing Finance Authority, Housing Mortgage
Finance Program Bonds, 1996 Series C-2, 6.250%, 11/15/18 5/06 at 102 AA 3,420,272
- - ----------------------------------------------------------------------------------------------------------------------------------
Florida - 2.6%
1,750,000 Alachua County Health Facilities Authority, Health
Facilities Revenue Bonds, Series 1992 (Santa Fe Healthcare
Facilities Project), 7.600%, 11/15/13
(Pre-refunded to 11/15/00) 11/00 at 102 AAA 1,925,683
5,000,000 Dade County, Florida, Aviation Bonds, Series 1996A,
5.750%, 10/01/18 (Alternative Minimum Tax) 10/06 at 102 AAA 5,320,400
2,850,000 State of Florida, Full Faith and Credit Department of
Transportation, Right-of-Way Acquisition and Bridge
Construction Bonds, Series 1995, 5.875%, 7/01/24 7/05 at 101 AAA 3,095,813
12,500,000 City of Tampa, Florida, Revenue Bonds (The Florida Aquarium
Project), Series 1992, 7.750%, 5/01/27
(Pre-refunded to 5/01/02) 5/02 at 102 N/R*** 14,299,750
- - ----------------------------------------------------------------------------------------------------------------------------------
Georgia - 3.2%
10,000,000 City of Atlanta (Georgia), Water and Sewerage Revenue Bonds,
Series 1993, 4.500%, 1/01/18 1/04 at 100 AAA 9,452,300
7,000,000 Development Authority of Burke County, Georgia, Pollution
Control Revenue Bonds (Oglethorpe Power Corporation Vogtle
Project), Series 1992, 8.000%, 1/01/15
(Pre-refunded to 1/01/03) 1/03 at 103 AAA 8,304,240
650,000 Housing Authority of Fulton County, Georgia, Single Family
Mortgage Revenue Refunding Bonds (GNMA Mortgage-Backed
Securities Program), Series 1996A, 6.200%, 9/01/27
(Alternative Minimum Tax) 9/06 at 102 AAA 691,776
Georgia Housing and Finance Authority, Single Family
Mortgage Bonds, 1994 Series B:
5,485,000 6.650%, 12/01/20 (Alternative Minimum Tax) 9/04 at 102 AAA 5,924,239
5,500,000 6.700%, 12/01/25 (Alternative Minimum Tax) 9/04 at 102 AAA 5,939,670
</TABLE>
F-21
<PAGE> 129
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Idaho - 0.3%
$ 2,335,000 Idaho Housing and Finance Association, Single Family
Mortgage Bonds, 1996 Series G, 6.350%, 7/01/26
(Alternative MinimumTax) 7/06 at 102 Aaa $ 2,503,821
- - ----------------------------------------------------------------------------------------------------------------------------------
Illinois - 10.3%
5,000,000 City of Chicago, General Obligation Bonds (Emergency
Telephone System), Series 1993, 5.625%, 1/01/23 1/03 at 102 AAA 5,279,100
17,000,000 City of Chicago, General Obligation Bonds, Project Series A
of 1992, 6.250%, 1/01/12
(Pre-refunded to 1/01/02) 1/02 at 102 AAA 18,514,700
1,000,000 City of Chicago, General Obligation Bonds, Project and
Refunding Series 1998, 5.250%, 1/01/20 7/08 at 102 AAA 1,015,200
36,300,000 Chicago School Reform Board of Trustees of the Board of
Education of the City of Chicago, Illinois, Unlimited Tax
General Obligation Bonds (Dedicated Tax Revenues),
Series 1998A, 0.000%, 12/01/21 No Opt. Call AAA 11,092,191
8,270,000 City of Chicago, Mortgage Revenue Bonds, Series 1992
(FHA Insured Mortgage Loan-Lakeview Towers Project),
6.650%, 12/01/33 6/02 at 102 AAA 8,772,485
1,175,000 City of Chicago, Multifamily Housing Revenue Bonds,
Series 1997 (GNMA Collateralized - Bryn Mawr/Belle Shores
Project), 5.800%, 6/01/23 (Alternative Minimum Tax) 6/09 at 102 Aaa 1,249,530
5,500,000 Chicago Park District, Illinois, General Obligation Capital
Improvement Bonds and Aquarium and Museum Bonds,
Series 1991, 6.700%, 1/01/11 (Pre-refunded to 1/01/02) 1/02 at 102 AA-*** 6,089,380
10,900,000 Public Building Commission of Chicago (Illinois), Building
Revenue Bonds, Series A of 1993 (Board of Education of the
City of Chicago), 5.750%, 12/01/18 12/03 at 102 AAA 11,674,772
4,535,000 City of Chicago, Tax Increment Allocation Bonds (Dunning
Redevelopment Project), Series 1996B, 7.250%, 1/01/14 1/07 at 102 N/R 4,948,320
3,530,000 City of Chicago, Tax Increment Finance Bonds (Sanitary
Drainage and Ship Canal), Series 1997A, 7.750%, 1/01/14 1/07 at 102 N/R 3,883,353
2,850,000 City of East Louis, Illinois, Mortgage Revenue Refunding
Bonds, Series 1994A (FHA Insured Mortgage Loan-Dawson Manor
Apartments Section 8 Assisted Project), 6.500%, 7/01/24 7/03 at 102 AAA 3,042,774
6,900,000 Illinois Health Facilities Authority, Revenue Refunding
Bonds, Series 1993 (Illinois Masonic Medical Center),
5.500%, 10/01/19 10/03 at 102 A- 7,077,123
3,000,000 Illinois Health Facilities Authority, Revenue Refunding
Bonds, Series 1993C (Lutheran General Health System),
6.000%, 4/01/18 No Opt. Call A+ 3,379,920
11,510,000 The Illinois State Toll Highway Authority, Toll Highway
Priority Revenue Bonds, 1992 Series A, 6.375%, 1/01/15 1/03 at 102 A+ 12,546,936
985,000 Village of Wheeling, Cook and Lake Counties, Illinois,
Single Family Mortgage Revenue Refunding Bonds, Series 1992,
6.850%, 11/01/09 11/02 at 102 AAA 1,052,049
- - ----------------------------------------------------------------------------------------------------------------------------------
Indiana - 7.6%
8,000,000 East Chicago Elementary School Building Corporation
(Lake County, Indiana), First Mortgage Bonds, Series 1992,
7.000%, 1/15/16 (Pre-refunded to 1/15/03) 1/03 at 102 A*** 9,114,480
13,630,000 Hospital Authority of the City of Fort Wayne, Indiana,
Revenue Bonds, Series 1992 (Parkview Memorial Hospital, Inc.
Project), 6.400%, 11/15/22 11/02 at 102 A+ 14,744,116
6,031,000 City of Greenfield, Indiana, Multifamily Housing Revenue
Bonds, Series 1996 A (Pedcor Investments-1988-V, L.P.
Project), 6.200%, 12/01/28 (Alternative Minimum Tax) 12/05 at 105 Aaa 6,482,662
10,675,000 Highland School Building Corporation (Highland, Indiana),
First Mortgage Bonds, Series 1992A, 6.750%, 1/15/20
(Pre-refunded to 1/15/02) 1/02 at 102 AAA 11,848,396
8,200,000 Indiana Bond Bank, State Revolving Fund Program Bonds,
Series 1993A Guarantee Revenue Bonds, 6.250%, 2/01/09 2/03 at 102 AAA 9,042,714
2,875,000 Indiana Bond Bank, State Revolving Fund Program Bonds,
Series 1994B Guarantee Revenue Bonds, 6.750%, 2/01/17 2/05 at 102 AAA 3,273,360
6,000,000 Indiana Development Finance Authority, Environmental
Revenue Bonds, Series 1993B (PSI Energy, Inc.),
5.750%, 2/15/28 (Alternative Minimum Tax) 2/03 at 102 AAA 6,284,340
5,250,000 Indiana Transportation Finance Authority, Aviation
Technology Center Lease Revenue Bonds, Series A,
6.500%, 3/01/18 3/03 at 102 A+ 5,735,835
5,905,000 Muncie School Building Corporation, First Mortgage Bonds,
Series 1992, 6.625%, 7/15/14 (Pre-refunded to 7/15/01) 7/01 at 102 N/R*** 6,453,220
</TABLE>
F-22
<PAGE> 130
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.5%
$ 1,970,000 Johnson County, Kansas, Single Family Mortgage Revenue
Refunding Bonds, Series 1994, 7.100%, 5/01/12 5/04 at 103 A $ 2,156,835
2,310,000 Sedgwick County, Kansas and Shawnee County, Kansas,
Collateralized Single Family Mortgage Refunding Revenue
Bonds (GNMA Certificates), Series 1994A1, 7.900%, 5/01/24
(Alternative Minimum Tax) No Opt. Call Aaa 2,698,242
- - ----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 0.8%
7,000,000 Kentucky Housing Corporation, Housing Revenue Bonds,
1996 Series A, 6.375%, 7/01/28 (Alternative Minimum Tax) 7/06 at 102 AAA 7,519,120
- - ----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 2.9%
4,000,000 Bossier Public Trust Financing Authority, Single Family
Mortgage Revenue Refunding Bonds, Series 1995B,
6.125%, 8/01/28 8/05 at 102 AAA 4,199,760
12,750,000 East Baton Rouge Mortgage Finance Authority, Single Family
Mortgage Revenue Bonds (GNMA and FNMA Mortgage Backed
Securities Program), Series 1994C, 6.350%, 10/01/28
(Alternative Minimum Tax) 10/05 at 102 Aaa 13,533,615
4,980,000 New Orleans Home Mortgage Authority, Single Family Mortgage
Revenue Bonds, Series 1995A, 6.300%, 6/01/28
(Alternative Minimum Tax) 6/05 at 102 Aaa 5,390,701
4,510,000 Orleans Levee District (A Political Subdivision of the State
of Louisiana), Public Improvement Bonds, Series 1986,
5.950%, 11/01/15 12/05 at 103 AAA 4,971,012
- - ----------------------------------------------------------------------------------------------------------------------------------
Maine - 1.0%
1,250,000 Maine State Housing Authority, Mortgage Purchase Bonds,
1995 Series B-2, 6.300%, 11/15/26 (Alternative Minimum Tax) 11/05 at 102 AA 1,332,375
7,925,000 Maine State Housing Authority, Mortgage Purchase Bonds,
1990 Series A-4, 6.400%, 11/15/24 (Alternative Minimum Tax) 8/02 at 102 Aa2 8,308,412
- - ----------------------------------------------------------------------------------------------------------------------------------
Maryland - 0.3%
2,560,000 Community Development Administration, Department of Housing
and Community Development, State of Maryland, Multi-Family
Housing Revenue Bonds (Insured Mortgage Loans),
1993 Series C, 6.625%, 5/15/23 5/03 at 102 Aa2 2,749,594
- - ----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 1.1%
3,080,000 Massachusetts Industrial Finance Agency, Revenue Bonds
(College of the Holy Cross-1996 Issue), 5.625%, 3/01/26 3/06 at 102 AAA 3,277,520
6,900,000 Massachusetts Water Resources Authority, General Revenue
Bonds, 1993 Series C, 5.250%, 12/01/20 12/04 at 102 AAA 7,010,952
- - ----------------------------------------------------------------------------------------------------------------------------------
Michigan - 1.5%
8,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Oakwood Hospital Obligated Group),
Series 1993A, 5.625%, 11/01/18 11/03 at 102 AAA 8,386,160
5,470,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds, 1992 Series A, 6.650%, 4/01/23 10/02 at 102 AA- 5,883,587
- - ----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 2.4%
3,560,000 Housing and Redevelopment Authority of the City of Saint
Paul, Minnesota and the City of Minneapolis, Minnesota Health
Care Facility, Revenue Bonds, Series 1992 (Group Health Plan,
Inc. Project), 6.900%, 10/15/22 12/02 at 102 A- 3,897,737
3,460,000 Minnesota Housing Finance Agency, Rental Housing Bonds,
1995 Series D, 5.950%, 2/01/18 2/05 at 102 AAA 3,660,542
5,090,000 Minnesota Housing Finance Agency, Single Family Mortgage
Bonds, 1996 Series G, 6.250%, 7/01/26
(Alternative Minimum Tax) 1/06 at 102 AA 5,414,335
2,000,000 Southern Minnesota Municipal Power Agency, Power Supply
System Revenue Bonds, Series 1992B, 5.750%, 1/01/11 1/03 at 102 Aaa 2,130,400
2,350,000 Washington County Housing and Redevelopment Authority,
Pooled Housing and Redevelopment Limited Annual Appropriation
Tax and Revenue Bonds (Pooled Refunding Project), Series 1992,
7.200%, 1/01/22 1/03 at 10 BBB 2,492,716
5,170,000 Washington County Housing and Redevelopment Authority, Lease
Revenue Bonds (South Washington County Schools Project),
Series 1992, 7.400%, 12/01/14 (Pre-refunded to 12/01/02) 12/02 at 100 A3*** 5,875,808
</TABLE>
F-23
<PAGE> 131
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 0.5%
$ 4,000,000 Mississippi Hospital Equipment and Facilities Authority,
Revenue Bonds, Series 1992A (Wesley Health Systems),
6.050%, 4/01/12 (Pre-refunded to 10/01/02) 10/02 at 102 AAA $ 4,409,200
- - ----------------------------------------------------------------------------------------------------------------------------------
Missouri - 2.8%
9,000,000 Missouri State Health and Educational Facilities Authority,
Revenue Bonds (SSM Health Care), Series 1998A,
5.000%, 6/01/22 6/08 at 101 AAA 8,846,640
5,500,000 The Industrial Development Authority of the City of
St. Louis, Missouri, Industrial Revenue Refunding Bonds
(Kiel Center Multipurpose Arena Project), Series 1992,
7.625%, 12/01/09 (Alternative Minimum Tax) 12/02 at 102 N/R 5,984,935
11,000,000 St. Louis Municipal Finance Corporation, Leasehold Revenue
Refunding Bonds, 6.000%, 7/15/13 7/03 at 102 A1 11,809,820
- - ----------------------------------------------------------------------------------------------------------------------------------
Nevada - 0.5%
4,000,000 Clark County, Nevada, Industrial Development Revenue Bonds
(Nevada Power Company Project), Series 1992A,
6.700%, 6/01/22 (Alternative MinimumTax) 6/02 at 102 AAA 4,386,480
- - ----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.6%
5,215,000 New Hampshire Higher Educational and Health Facilities
Authority, Hospital Revenue Bonds, Catholic Medical Center
Issue, Series 1989, 8.000%, 7/01/04 7/99 at 102 A 5,442,739
- - ----------------------------------------------------------------------------------------------------------------------------------
New Jersey - 2.7%
4,500,000 New Jersey Economic Development Authority, Insured Revenue
Bonds (Educational Testing Service Issue), Series 1995A,
6.000%, 5/15/25 5/05 at 102 AAA 5,062,095
8,720,000 New Jersey Housing and Mortgage Finance Agency, Multi-Family
Housing Revenue Bonds, 1997 Series A, 5.650%, 5/01/40
(Alternative Minimum Tax) 11/07 at 101 AAA 9,045,605
4,145,000 New Jersey Housing and Mortgage Finance Agency, Housing
Revenue Refunding Bonds, 1992 Series One, 6.700%, 11/1/28 11/02 at 102 A+ 4,468,932
1,000,000 Toms River Board of Education, General Obligation Bonds,
Series 1997, 5.750%, 7/15/21 7/07 at 100 AAA 1,075,290
6,000,000 The Union County Utilities Authority (New Jersey), Solid
Waste Bonds, County Deficiency Agreement, Series 1998A,
5.350%, 6/01/23 (Alternative Minimum Tax) 6/08 at 101 AAA 6,100,800
- - ----------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.4%
3,990,000 New Mexico Mortgage Finance Authority, Single Family Mortgage
Program Bonds, 1995 Series E, 6.300%, 7/01/17
(Alternative Minimum Tax) 7/05 at 102 AAA 4,261,240
- - ----------------------------------------------------------------------------------------------------------------------------------
New York - 15.0%
10,750,000 The City of New York, General Obligation Bonds, Fiscal 1995
Series D, 6.600%, 2/01/03 No Opt. Call A- 11,834,460
7,695,000 The City of New York, General Obligation Bonds, Fiscal 1995
Series E, 6.600%, 8/01/03 No Opt. Call A- 8,554,685
17,365,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series F, 7.000%, 2/01/06 No Opt. Call A- 20,264,087
11,130,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series I, 5.875%, 3/15/18 3/06 at 101 1/2 A- 11,936,035
9,000,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series J (Subseries J-1), 5.875%, 2/15/19 2/06 at 101 1/2 A- 9,646,740
8,000,000 The City of New York, General Obligation Bonds, Fiscal 1997
Series E, 5.875%, 8/01/24 8/06 at 101 1/2 A- 8,582,560
The City of New York, General Obligation Bonds, Fiscal 1993
Series A:
2,625,000 6.375%, 8/01/08 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 Aaa 2,905,298
7,375,000 6.375%, 8/01/08 8/02 at 101 1/2 A- 8,076,731
660,000 6.500%, 8/01/11 (Pre-refunded to 8/01/02) 8/02 at 101 1/2 Aaa 733,346
1,340,000 6.500%, 8/01/11 8/02 at 101 1/2 A- 1,471,655
The City of New York, General Obligation Bonds, Fiscal 1997
Series I:
5,675,000 6.250%, 4/15/27 (Pre-refunded to 4/15/07) 4/07 at 101 A-*** 6,590,888
6,345,000 6.250%, 4/15/27 4/07 at 101 A- 6,976,645
1,370,000 New York City (New York), Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Fiscal 1997 Series B,
5.500%, 6/15/27 6/07 at 101 AAA 1,448,022
3,150,000 New York City, New York, Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Fiscal 1996 Series A,
5.875%, 6/15/25 6/05 at 101 AAA 3,420,333
</TABLE>
F-24
<PAGE> 132
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
New York (continued)
$ 4,000,000 The Trust for Cultural Resources of the City of New York,
Revenue Bonds, Series 1997A (American Museum of Natural
History), 5.650%, 4/01/27 4/07 at 101 AAA $ 4,269,880
2,500,000 Dormitory Authority of the State of New York, City University
System Consolidated Revenue Bonds, 1996 Series 2,
6.000%, 7/01/20 7/06 at 102 BBB+ 2,696,600
16,200,000 New York State Energy Research and Development Authority,
Facilities Revenue Bonds, Series 1992B (Consolidated Edison
Company of New York, Inc. Project), 6.375%, 12/01/27
(Alternative Minimum Tax) 12/01 at 101 AAA 17,393,130
3,500,000 New York State Medical Care Facilities Finance Agency,
Mental Health Services Facilities Improvement Revenue Bonds,
1994 Series A, 5.250%, 8/15/23 2/04 at 102 AAA 3,557,995
7,635,000 New York State Medical Care Facilities Finance Agency, Mercy
Medical Center Project Revenue Bonds, 1995 Series A,
5.875%, 11/01/15 5/05 at 102 AA- 8,198,768
2,500,000 New York State Urban Development Corporation, Correctional
Facilities Revenue Bonds, 1993A Refunding Series,
5.250%, 1/01/21 1/04 at 102 AAA 2,540,850
2,465,000 Empire Development Corporation, New York State Urban
Development Corporation, Correctional Capital Facilities
Revenue Bonds, Series 6, 5.375%, 1/01/25 1/06 at 102 AAA 2,545,877
- - ----------------------------------------------------------------------------------------------------------------------------------
North Carolina - 0.8%
5,185,000 City of Durham, Urban Redevelopment Mortgage Revenue Bonds
(Durham Hosiery Mill Project) (FHA Insured), Series 1987,
7.500%, 8/01/29 (Alternative Minimum Tax) 8/07 at 105 AAA 5,820,370
1,945,000 North Carolina Housing Finance Agency, Single Family Revenue
Bonds, Series JJ (1985 Resolution), 6.450%, 9/01/27
(Alternative Minimum Tax) 3/06 at 102 AA 2,095,951
- - ----------------------------------------------------------------------------------------------------------------------------------
North Dakota - 0.4%
4,150,000 Mercer County, North Dakota, Pollution Control Revenue Bonds
(Basin Electric Power Cooperative-Antelope Valley Station),
1984 Series B, 7.000%, 1/01/19 1/99 at 103 A 4,290,602
- - ----------------------------------------------------------------------------------------------------------------------------------
Ohio - 1.5%
2,000,000 Ohio Housing Finance Agency, Multifamily Housing Mortgage
Revenue Bonds, Series 1998B-1 (FHA Insured Mortgage Loan-
Courtyards of Kettering Project), 5.550%, 1/01/40
(Alternative Minimum Tax) 1/08 at 102 Aa2 2,036,520
5,250,000 State of Ohio, Ohio Air Quality Development Authority, Air
Quality Development Revenue Bonds (JMG Funding, Limited
Partnership Project), Series 1997, 5.625%, 1/01/23
(Alternative Minimum Tax) 4/07 at 102 AAA 5,485,515
6,750,000 State of Ohio, Ohio Water Development Authority, Solid Waste
Disposal Revenue Bonds (Bay Shore Power Project), Tax Exempt
Series 1998A, 5.875%, 9/01/20 (Alternative Minimum Tax) 9/08 at 102 N/R 6,826,883
- - ----------------------------------------------------------------------------------------------------------------------------------
Oklahoma - 0.5%
1,000,000 Tulsa County Industrial Authority (Tulsa, Oklahoma),
Recreational Facilities Revenue Bonds, Refunding Series 1992,
6.600%, 9/01/08 9/02 at 102 A- 1,098,090
2,990,000 Tulsa County Public Facilities Authority (Tulsa, Oklahoma),
Recreational Facility Refunding Revenue Bonds, Series 1992,
6.600%, 11/01/08 11/02 at 102 A- 3,292,379
- - ----------------------------------------------------------------------------------------------------------------------------------
Oregon - 2.8%
13,350,000 State of Oregon, General Obligation, Elderly and Disabled
Housing Bonds, 1992 Series B, 6.375%, 8/01/24 8/02 at 102 AA 14,597,825
6,160,000 State of Oregon, General Obligation, Veterans Welfare Bonds,
Series 75, 6.000%, 4/01/27 10/05 at 102 AA 6,516,849
1,750,000 State of Oregon, Housing and Community Services Department,
Mortgage Revenue Bonds (Single-Family Mortgage Program),
1997 Series H, 5.650%, 7/01/28 (Alternative Minimum Tax) 7/07 at 101 1 Aa2 1,810,830
3,380,000 City of Portland, Oregon, Limited Tax Improvement Bonds,
1996 Series A, 5.550%, 6/01/16 6/06 at 100 Aa 3,581,076
- - ----------------------------------------------------------------------------------------------------------------------------------
Pennsylvania - 0.1%
1,000,000 Delaware Valley Regional Finance Authority, Local Government
Revenue Bonds, Series 1997B, 5.700%, 7/01/27 No Opt. Call AAA 1,119,940
- - ----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 0.1%
1,375,000 Puerto Rico Electric Power Authority, Power Revenue Bonds,
Series X, 5.500%, 7/1/25 7/05 at 100 BBB+ 1,417,804
</TABLE>
F-25
<PAGE> 133
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.2%
$ 2,135,000 School District No. 4 of Lexington County, South Carolina,
Certificates of Participation, Series 1994, 7.000%, 7/1/12 7/04 at 102 Baa $ 2,379,543
- - ----------------------------------------------------------------------------------------------------------------------------------
South Dakota - 1.2%
10,370,000 South Dakota Building Authority, Revenue Bonds, Series 1992,
6.700%, 9/01/17 No Opt.Call AAA 11,963,869
- - ----------------------------------------------------------------------------------------------------------------------------------
Texas - 2.4%
1,415,000 Baytown Housing Finance Corporation, Single Family Mortgage
Revenue Refunding Bonds, Series 1992-A, 8.500%, 9/1/11 9/02 at 103 A1 1,591,267
1,435,000 Hidalgo County Housing Finance Corporation (Texas), Single
Family Mortgage Revenue Bonds (GNMA and FNMA Collateralized),
Series 1994A, 7.000%, 10/01/27 (Alternative Minimum Tax) 4/04 at 102 Aaa 1,536,455
1,385,000 Houston Independent School District Public Facility
Corporation (Harris County, Texas), Lease Revenue Bonds
(Cesar E. Chavez High School), Series 1998A,
0.000%, 9/15/13 No Opt. Call AAA 677,030
6,630,000 Houston Independent School District Public Facility
Corporation (Harris County, Texas), Lease Revenue Bonds
(West Side High School), Series 1998B, 0.000%, 9/15/13 No Opt. Call AAA 3,240,943
1,000,000 Humble Independent School District (Harris County, Texas),
Unlimited Tax Schoolhouse Bonds, Series II 1997,
3.500%, 2/15/18 2/10 at 100 AAA 821,609
1,985,000 Lufkin Health Facilities Development Corporation (Texas),
Health System Revenue and Refunding Bonds (Memorial Health
System of East Texas), Series 1995, 6.875%, 2/15/26 2/06 at 102 BBB 2,197,672
2,390,000 Port Arthur Housing Finance Corporation, Single Family
Mortgage Revenue Refunding Bonds, Series 1992,
8.700%, 3/01/12 9/02 at 103 A 2,628,880
9,465,000 State of Texas, Veterans Housing Assistance Bonds,
Series 1993, General Obligation Bonds, 6.800%, 12/01/23
(Alternative Minimum Tax) 12/03 at 102 AA 10,226,458
- - ----------------------------------------------------------------------------------------------------------------------------------
Utah - 1.6%
6,000,000 Redevelopment Agency of Salt Lake County, Utah, Central
Business District Neighborhood Redevelopment, Junior Lien
Tax Increment Bonds, Series 1992A, 5.800%, 3/01/15 3/02 at 102 A 6,286,259
2,735,000 Utah Housing Finance Agency, Single Family Mortgage Bonds,
1994 Issue B (Federally Insured or Guaranteed Mortgage Loans),
6.450%, 7/01/14 7/04 at 102 Aaa 2,922,155
1,245,000 Utah Housing Finance Agency, Single Family Mortgage Bonds,
1997 Series E2 Class I, 5.875%, 1/01/19
(Alternative Minimum Tax) 7/07 at 101 1/2 AAA 1,314,097
1,560,000 Utah Housing Finance Agency, Single Family Mortgage Bonds,
1997 Series C, 5.600%, 7/01/18 (Alternative Minimum Tax) 1/09 at 101 1/2 AAA 1,595,832
3,000,000 Municipal Building Authority of Weber County, Utah, Lease
Revenue Bonds, Series 1994, 7.500%, 12/15/19
(Pre-refunded to 12/15/04) 12/04 at 102 AAA 3,627,809
- - ----------------------------------------------------------------------------------------------------------------------------------
Vermont - 0.7%
6,620,000 Vermont Housing Finance Agency, Single Family Housing Bonds,
Series 4, 6.400%, 11/1/25 5/02 at 102 A+ 6,976,354
- - ----------------------------------------------------------------------------------------------------------------------------------
West Virginia - 0.8%
7,000,000 The County Commission of Harrison County, West Virginia,
Solid Waste Disposal Revenue Bonds (The Potomac Edison
Company Harrison Station Project), Series B, 6.250%, 5/01/23
(Alternative Minimum Tax) 5/03 at 102 AAA 7,631,329
- - ----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 2.1%
15,075,000 Wisconsin Housing and Economic Development Authority, Home
Ownership Revenue Bonds, 1995 Series B, 7.100%, 9/01/15
(Alternative Minimum Tax) 1/05 at 102 AA 16,289,441
3,215,000 Wisconsin Health and Educational Facilities Authority,
Revenue Bonds, Series 1997 (Marshfield Clinic Project),
5.625%, 2/15/17 2/07 at 102 AAA 3,410,728
- - ----------------------------------------------------------------------------------------------------------------------------------
$ 920,581,000 Total Investments - (cost $857,604,906) - 98.5% 945,367,447
================ ---------------------------------------------------------------------------------------------------------------
</TABLE>
F-26
<PAGE> 134
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Temporary Investments in Short-Term Municipal Securities - 0.1%
$ 800,000 County of Cuyahoga, Ohio, Hospital Revenue Bonds (Cleveland
================ Clinic Foundation), Series 1997D, Variable Rate Demand Bonds,
3.700%, 1/01/26+ VMGI-1 $ 800,000
---------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 13,672,448
---------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 959,839,895
===============================================================================================================
* 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 or 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 as a short-term security. The rate disclosed is that currently
in effect. This rate changes periodically based on market conditions or a specified
market index.
N/R Investment is not rated.
See accompanying notes to financial statements.
</TABLE>
F-27
<PAGE> 135
<TABLE>
<CAPTION>
Portfolio of Investments
Nuveen Premium Income Municipal Fund 4, Inc. (NPT)
October 31, 1998
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Alabama - 4.6%
$ 8,000,000 Alabama Higher Education Loan Corporation, Student Loan
Revenue Refunding Bonds, Series 1994-D, 5.850%, 9/01/04
(Alternative Minimum Tax) No Opt. Call AAA $ 8,610,400
20,745,000 Alabama Special Care Facilities Financing Authority of
Birmingham, Hospital Revenue Bonds (Daughters of Charity
National Health System - Providence Hospital and St.
Vincents Hospital), Series 1995, 5.000%, 11/01/25 11/05 at 101 AA+ 20,249,402
2,000,000 The Governmental Utility Services Corporation of the City of
Bessemer (Alabama), Water Supply Revenue Bonds, Series 1998,
5.250%, 6/01/32 6/08 at 102 AAA 2,033,800
11,000,000 The DCH Health Care Authority, Health Care Facilities Revenue
Bonds, Series 1993-B, 5.750%, 6/01/23 12/02 at 102 A+ 11,600,050
- - ----------------------------------------------------------------------------------------------------------------------------------
Arkansas - 0.2%
565,000 Arkansas Development Finance Authority, Single Family
Mortgage Revenue Refunding Bonds, 1991 Series A
(FHA Insured or VA Guaranteed Mortgage Loans),
8.000%, 8/15/11 8/01 at 103 AA 600,770
445,463 City of Jacksonville, Arkansas, Residential Housing
Facilities Board, Single Family Mortgage Revenue Refunding
Bonds, Series 1993A, 7.900%, 1/01/11 7/03 at 103 Aaa 487,973
752,362 Residential Housing Facilities Board of Lonoke County,
Arkansas, Single Family Mortgage Revenue Refunding Bonds,
Series 1993A, 7.900%, 4/01/11 4/05 at 103 Aaa 827,471
- - ----------------------------------------------------------------------------------------------------------------------------------
California - 3.6%
5,000,000 California Health Facilities Financing Authority, Kaiser
Permanente Revenue Bonds, 1990 Series A, 6.500%, 12/01/20 12/00 at 102 A 5,337,250
4,780,000 Foothill/Eastern Transportation Corridor Agency (California),
Toll Road Revenue Bonds, Series 1995A, 0.000%, 1/01/14 No Opt. Call Baa 2,190,722
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 100 A 3,901,794
4,500,000 Los Angeles County Transportation Commission (California),
Proposition C Sales Tax Revenue Bonds, Second Senior Bonds,
Series 1992-A , 6.750%, 7/01/19 (Pre-refunded to 7/01/02) 7/02 at 102 Aaa 5,079,330
1,715,000 Housing Authority of the County of Merced (California),
Multifamily Housing Refunding Revenue Bonds, Series 1993A
(Belmont Park Apartments Project), 5.875%, 1/01/19 1/04 at 102 Aaa 1,779,244
2,500,000 Transmission Agency of Northern California, California-Oregon
Transmission Project Revenue Bonds, 1992 Series A,
6.500%, 5/01/16 5/02 at 102 AAA 2,750,675
5,000,000 Airports Commission, City and County of San Francisco,
California, San Francisco International Airport, Second Series
Revenue Bonds, Issue 8, 6.300%, 5/01/25
(Alternative Minimum Tax) 5/04 at 101 AAA 5,479,950
3,545,000 Redevelopment Agency of the City of San Leandro, Plaza 1
and Plaza 2 Redevelopment Projects, 1993 Tax Allocation Bonds,
Series A, 6.125%, 6/01/23 6/03 at 102 A- 3,771,277
1,945,000 South Gate Public Financing Authority (Los Angeles County,
California), Water Revenue Refunding Bonds, 1996 Series A,
6.000%, 10/01/12 No Opt. Call AAA 2,276,272
- - ----------------------------------------------------------------------------------------------------------------------------------
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 Minimum Tax) 11/02 at 102 Aaa 1,242,846
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 Minimum Tax) 11/00 at 102 Aaa 452,276
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>
F-28
<PAGE> 136
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <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)
(Alternative Minimum Tax) 11/01 at 102 Aaa $ 366,389
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, 7.100%, 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
Finance Program Bonds, 1996 Series C-2, 6.250%, 11/15/18 5/06 at 102 AA 3,236,850
2,400,000 Connecticut Development Authority, Water Facilities Revenue
Refunding Bonds (The Connecticut Water Company Project-1993
Series), 6.650%, 12/15/20 12/03 at 102 AAA 2,720,952
- - ----------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 5.1%
5,000,000 District of Columbia, (Washington, D.C.), General Obligation
Bonds, 6.000%, 6/01/09 6/03 at 102 AAA 5,480,750
6,000,000 District of Columbia (Washington, D.C.), General Obligation
Refunding Bonds, Series 1993 B, 5.500%, 6/01/10 No Opt. Call AAA 6,522,720
3,240,000 District of Columbia, Hospital Revenue Refunding Bonds
(Medlantic Healthcare Group, Inc. Issue), Series 1992B,
6.750%, 8/15/07 8/02 at 102 A3 3,495,247
4,250,000 District of Columbia, Hospital Revenue Refunding Bonds
(Medlantic Healthcare Group, Inc. Issue), Series 1993A,
5.750%, 8/15/14 8/06 at 102 AAA 4,610,273
3,890,000 District of Columbia (Washington, D.C.), General Obligation
Bonds, Series 1993-A3, 5.500%, 6/01/06 No Opt. Call AAA 4,223,341
9,500,000 District of Columbia (Washington, D.C.), General Obligation
Refunding Bonds, Series 1993A, 6.000%, 6/01/07 No Opt. Call AAA 10,675,051
5,000,000 District of Columbia Housing Finance Agency, Collateralized
Single Family Mortgage Revenue Bonds, Series 1988F-1,
5.850%, 12/01/14 (Alternative Minimum Tax) 12/04 at 103 AAA 5,171,600
2,000,000 District of Columbia, Revenue Bonds (The American College
of Obstetricians and Gynecologists Issue), Series 1991,
6.500%, 8/15/18 8/01 at 102 AAA 2,173,440
4,500,000 District of Columbia, University Revenue Refunding Bonds
(The Howard University Issue), Series 1992A, 6.750%, 10/01/12
(Pre-refunded to 10/01/02) 10/02 at 102 AAA 5,068,980
- - ----------------------------------------------------------------------------------------------------------------------------------
Florida - 0.9%
8,000,000 City of Sunrise, Florida, Utility System Revenue Refunding
Bonds, Series 1998, 5.000%, 10/01/28 10/18 at 100 AAA 8,085,440
- - ----------------------------------------------------------------------------------------------------------------------------------
Georgia - 2.0%
2,930,000 Development Authority of Burke County, Georgia, Pollution
Control Revenue Bonds (Oglethorpe Power Corporation Vogtle
Project), Series 1992, 7.500%, 1/01/03 No Opt. Call AAA 3,166,568
2,880,000 Municipal Electric Authority of Georgia, General Power
Revenue Bonds, 1992B Series, 8.250%, 1/01/11 No Opt. Call A 3,807,965
4,185,000 Municipal Electric Authority of Georgia, General Power
Revenue Bonds, Series EE, 7.250%, 1/01/24 No Opt. Call AAA 5,572,244
5,500,000 Municipal Electric Authority of Georgia, General Power
Revenue Bonds, 1993B Series, 5.700%, 1/01/19 No Opt. Call AAA 6,025,800
- - ----------------------------------------------------------------------------------------------------------------------------------
Hawaii - 0.7%
1,500,000 State of Hawaii, Airports System Revenue Bonds, Series of
1990 (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) 7/00 at 102 AAA 1,609,545
5,000,000 Honolulu, Hawaii, City and County Refunding and Improvement
Bonds, Series 1993B, 5.000%, 10/01/13 No Opt. Call AA 5,178,400
</TABLE>
F-29
<PAGE> 137
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Illinois - 12.7%
$ 4,000,000 Board of Education of the City of Chicago, General Obligation
Lease Certificates, 1992 Series A, 6.250%, 1/01/15 No Opt. Call AAA $ 4,669,080
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:
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 Bonds, Series 1992 (Illinois Facilities Fund Project),
7.400%, 9/01/04 9/02 at 102 N/R 3,356,629
2,240,000 Illinois Educational Facilities Authority, Revenue Bonds,
Chicago College of Osteopathic Medicine, Series A,
8.750%, 7/01/05 No Opt. Call AAA 2,659,933
10,360,000 Illinois Educational Facilities Authority, Revenue
Refunding Bonds, Loyola University of Chicago, Series 1991-A,
7.125%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 A1*** 11,452,358
3,000,000 Illinois Health Facilities Authority, Revenue Refunding Bonds,
Series 1993 (Illinois Masonic Medical Center),
5.500%, 10/01/19 10/03 at 102 A- 3,077,010
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, Series 5, 6.650%, 9/01/14 9/04 at 102 A+ 8,897,534
3,410,000 Illinois Housing Development Authority, Section 8 Elderly
Housing Revenue Bonds (Skyline Tower Apartments),
Series 1992B, 6.875%, 11/01/17 11/02 at 102 A 3,607,337
3,400,000 Illinois Housing Development Authority, Section 8 Elderly
Housing Revenue Bonds (Morningside North Development),
Series 1992D, 6.600%, 1/01/07 (Pre-refunded to 1/01/03) 1/03 at 102 A*** 3,801,472
5,000,000 Illinois Health Facilities Authority, Revenue Bonds,
Series 1990 (Riverside Senior Living Center Project),
7.500%, 11/01/20 (Pre-refunded to 11/01/00) 11/00 at 102 A3*** 5,471,950
11,690,000 Illinois Health Facilities Authority, Refunding Revenue
Bonds, Series 1990-B (Hinsdale Hospital), 9.000%, 11/15/15 11/00 at 102 AAA 13,175,448
2,025,000 Long Creek Township, Macon County, Illinois, Waterworks
Refunding Revenue Bonds, Series 1993, 7.250%, 5/01/23 5/03 at 100 N/R 2,126,108
3,050,000 Regional Transportation Authority, Cook, DuPage, Kane, Lake,
McHenry and Will Counties, Illinois, General Obligation Bonds,
Series 1990A, 7.200%, 11/01/20 No Opt. Call AAA 3,980,769
14,375,000 Village of Wheeling, Illinois, Multifamily Housing Revenue
Bonds, Series 1993A (FHA Insured Mortgage Loan-Arlington
Club Project), 6.400%, 2/01/40 2/03 at 100 AAA 14,952,013
4,685,000 Town of Wood River, Wood River Township Hospital, Madison
County, Illinois, General Obligation Bonds (Alternate
Revenue Source), Series 1993, 6.625%, 2/01/14 2/04 at 102 BBB 5,144,692
4,460,000 Town of Wood River, Wood River Township Hospital, Madison
County, Illinois, General Obligation Tort Immunity Bonds,
Series 1993, 6.500%, 2/01/14 2/04 at 102 BBB 4,858,992
- - ----------------------------------------------------------------------------------------------------------------------------------
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 Bonds, Series 1992 (The Methodist
Hospitals, Inc.), 6.750%, 9/15/09 9/02 at 102 A 3,537,952
2,100,000 City of Indianapolis, Indiana, Economic Development Revenue
Bonds, Series 1993A (The Meadows-Section 8 Assisted Project),
6.000%, 7/01/23 (Alternative Minimum Tax) 7/03 at 103 N/R 2,115,183
2,000,000 Hospital Authority of the City of Kokomo (Indiana), Hospital
Revenue Refunding Bonds, Series 1993 (Saint Joseph Hospital
and Health Center of Kokomo), 6.250%, 8/15/05 No Opt. Call N/R 2,208,020
3,615,000 Mooresville Consolidated School Building Corporation, First
Mortgage Bonds, Series 1994A (Morgan County, Indiana),
6.200%, 7/15/15 (Pre-refunded to 1/15/04) 1/04 at 101 A*** 4,021,037
5,900,000 Muncie School Building Corporation, First Mortgage Bonds,
Series 1992, 6.625%, 7/15/14 (Pre-refunded to 7/15/01) 7/01 at 102 N/R*** 6,447,756
</TABLE>
F-30
<PAGE> 138
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Indiana (continued)
$ 9,500,000 City of Petersburg, Indiana, Pollution Control Refunding
Revenue Bonds, Series 1993A (Indianapolis Power and Light
Company Project), 6.100%, 1/01/16 1/03 at 102 Aa2 $ 10,212,215
- - ----------------------------------------------------------------------------------------------------------------------------------
Iowa - 0.6%
780,000 City of Davenport, Iowa, Home Ownership Mortgage Revenue
Refunding Bonds, Series 1994, 7.900%, 3/01/10 9/04 at 102 A1 838,399
3,810,000 Iowa Finance Authority, Hospital Revenue Bonds (Trinity
Regional Hospital Project), Series 1993, 7.000%, 7/01/12
(Pre-refunded to 7/01/02) 7/02 at 102 N/R*** 4,285,107
- - ----------------------------------------------------------------------------------------------------------------------------------
Kansas - 0.3%
1,475,000 Johnson County, Kansas, Single Family Mortgage Revenue
Refunding Bonds, Series 1994, 7.100%, 5/01/12 5/04 at 103 A 1,614,889
1,200,000 Labette County, Kansas, Single Family Mortgage Revenue
Refunding Bonds, 1993 Series A, 8.400%, 12/01/11 6/03 at 103 Aa2 1,292,352
- - ----------------------------------------------------------------------------------------------------------------------------------
Kentucky - 0.8%
7,000,000 Kentucky Housing Corporation, Housing Revenue Bonds,
1996 Series A, 6.375%, 7/01/28 (Alternative Minimum Tax) 7/06 at 102 AAA 7,519,120
- - ----------------------------------------------------------------------------------------------------------------------------------
Louisiana - 1.2%
3,415,000 Clover Dale Housing Corporation, 1995 Multifamily Mortgage
Revenue Refunding Bonds (Clover Dale Plaza-FHA Insured
Mortgage, Section 8 Assisted Project), Series A,
6.550%, 2/01/22 4/01 at 100 AA- 3,491,325
6,555,000 Orleans Levee District (A Political Subdivision of the State
of Louisiana), Public Improvement Bonds, Series 1986,
5.950%, 11/01/14 12/05 at 102 AAA 7,280,049
- - ----------------------------------------------------------------------------------------------------------------------------------
Maine - 0.9%
8,000,000 Corporation, Subordinate Student Loan Revenue Bonds,
Series 1994-2, 6.250%, 11/01/06 (Alternative Minimum Tax) No Opt. Call A 8,413,280
- - ----------------------------------------------------------------------------------------------------------------------------------
Maryland - 1.8%
5,000,000 Community Development Administration, Maryland Department of
Housing and Community Development, Housing Revenue Bonds,
Series 1996A, 5.875%, 7/01/16 1/07 at 102 Aa2 5,336,850
2,000,000 Maryland Health and Higher Educational Facilities Authority,
Project and Refunding Revenue Bonds, Doctors Community
Hospital Issue, Series 1993, 5.750%, 7/01/13 7/03 at 102 Baa1 2,049,280
1,790,000 Maryland Transportation Authority, Special Obligation
Revenue Bonds, Baltimore/Washington International Airport
Projects, Series 1994-A (Qualified Airport Bonds),
6.400%, 7/01/19 (Alternative Minimum Tax) 7/04 at 102 AAA 1,908,194
6,800,000 Housing Opportunities Commission of Montgomery County
(Montgomery County, Maryland), Multifamily Housing Revenue
Bonds, 1996 Series B, 6.400%, 7/01/28
(Alternative Minimum Tax) 7/06 at 102 Aa 7,317,004
- - ----------------------------------------------------------------------------------------------------------------------------------
Massachusetts - 1.8%
4,500,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Series 1991-C (New England Deaconess Hospital),
7.200%, 4/01/22 (Pre-refunded to 4/01/01) 4/01 at 102 AAA 4,953,105
2,000,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Faulkner Hospital Issue, Series C,
6.000%, 7/01/13 7/03 at 102 Baa1 2,089,040
2,000,000 Massachusetts Housing Finance Agency, Housing Project Revenue
Bonds, 6.300%, 10/01/13 4/03 at 102 A+ 2,126,640
4,195,000 Massachusetts Health and Educational Facilities Authority,
Revenue Refunding Bonds, Youville Hospital Issue (FHA Insured
Project), Series B, 6.000%, 2/15/34 2/04 at 102 Aa 4,381,132
3,300,000 Massachusetts Industrial Finance Agency, Resource Recovery
Revenue Bonds, SEMASS Project, 7/01 at 103 N/R 3,672,801
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 Refunding Bonds (Cobo Hall Expansion Project),
Series 1993, 5.250%, 9/30/12 9/03 at 102 AAA 5,219,050
10,000,000 City of Detroit, Michigan, Sewage Disposal System Revenue
Bonds, Series 1997-A, 5.000%, 7/01/27 7/07 at 101 AAA 9,871,800
10,225,000 City of Detroit, Michigan, Water Supply System Revenue Bonds
(Senior Lien), Series 1997-A, 5.000%, 7/01/27 7/07 at 101 AAA 10,078,680
</TABLE>
F-31
<PAGE> 139
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Michigan (continued)
$ 2,545,000 City of Hancock Hospital Finance Authority, FHA-Insured
Mortgage Hospital Revenue Bonds (Portage Health System, Inc.),
Series 1998, 4.625%, 8/01/18 8/08 at 100 AAA $ 2,509,166
1,000,000 City of Kalamazoo Hospital Finance Authority, Hospital Revenue
Refunding and Improvement Bonds (Bronson Methodist Hospital),
Series 1996, 5.750%, 5/15/16 5/06 at 102 AAA 1,067,680
2,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds (The Detroit Medical Center Obligated
Group), Series 1993B, 5.000%, 8/15/03 No Opt. Call A- 2,096,520
3,200,000 Michigan State Hospital Finance Authority, Hospital Revenue
and Refunding Bonds, Series 1992 (Bon Secours Health System
Project), 6.100%, 8/15/22 8/02 at 102 AAA 3,373,664
7,000,000 Michigan State Hospital Finance Authority, Hospital Revenue
Bonds (The Detroit Medical Center), Series 1998A,
5.250%, 8/15/23 8/08 at 101 A- 6,842,850
3,750,000 Michigan Strategic Fund, Limited Obligation Refunding Revenue
Bonds (Consumers Power Company Project), Collateralized Series
1993B, 5.800%, 6/15/10 6/03 at 102 AAA 4,073,100
6,000,000 County of Monroe, Michigan, Pollution Control Revenue Bonds
(The Detroit Edison Company Project), Series CC-1992, 6.550%,
9/01/24 (Alternative Minimum Tax) 9/03 at 10 AAA 6,674,100
- - ----------------------------------------------------------------------------------------------------------------------------------
Minnesota - 1.4%
5,000,000 Minneapolis/St. Paul, Minnesota, Housing Finance Board, Single
Family Mortgage Revenue Bonds, FNMA/GNMA Backed Program,
Phase XI-AB, 5.800%, 11/01/30 (Alternative Minimum Tax) 11/07 at 10 AAA 5,168,500
4,000,000 Minneapolis Community Development Agency, Limited Tax Supported
Development Revenue Bonds, Common Bond Fund, Series 1992G-3,
7.375%, 12/01/12 12/02 at 102 A- 4,458,760
2,720,000 City of Minnetonka, Minnesota, Multifamily Housing Revenue
Refunding Bonds, Series 1994A (GNMA Collateralized Mortgage
Loan-Brier Creek Project), 6.450%, 6/20/24 6/04 at 102 AAA 2,924,299
- - ----------------------------------------------------------------------------------------------------------------------------------
Mississippi - 1.1%
2,000,000 Mississippi Higher Education Assistance Corporation, Student
Loan Revenue Bonds, Senior Series 1993-B, 5.800%, 9/01/06
(Alternative Minimum Tax) 9/02 at 102 Aaa 2,067,200
1,415,000 Mississippi Housing Finance Corporation, Single Family Mortgage
Purchase Revenue Bonds, Series 1989 (GNMA Mortgage-Backed
Securities Program), 8.250%, 10/15/18
(Alternative Minimum Tax) 10/99 at 102 AAA 1,477,119
3,000,000 Mississippi Home Corporation, Single Family Mortgage Revenue
Bonds, Series 1995B, 6.550%, 4/01/21
(Alternative Minimum Tax) 4/05 at 102 Aaa 3,207,750
1,695,000 Mississippi Regional Housing Authority No. V, Multifamily
Housing Revenue Refunding Bonds, Series 1993A (FHA Insured
Mortgage Loan-Deville Apartments Section 8 Assisted Project),
7.050%, 7/01/21 7/00 at 105 AAA 1,808,209
1,830,000 Mississippi Educational Facilities Authority, For Private,
Nonprofit Institutions of Higher Learning, Educational
Facilities Revenue Bonds (Tougaloo College Project), Series
1993A, 6.500%, 6/01/18 6/03 at 102 N/R 1,912,917
- - ----------------------------------------------------------------------------------------------------------------------------------
Nebraska - 3.0%
10,000,000 Energy America (Nebraska), Natural Gas Revenue Note
(Metropolitan Utility District Project), Series 1997B,
5.700%, 7/01/08 No Opt. Call N/R 10,164,800
9,000,000 Nebraska Higher Education Loan Program Inc., Senior
Subordinate Bonds, Series A-5A, 6.250%, 6/01/18
(Alternative Minimum Tax) No Opt. Call AAA 9,667,620
Airport Authority of the City of Omaha (Nebraska), Airport
Facilities Revenue Refunding Bonds, Series 1991:
1,665,000 8.375%, 1/01/14 (Pre-refunded 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), School Improvement Bonds (Current Coupon
Bonds), Series 1991A, 7.000%, 6/01/10 No Opt. Call AAA 5,573,745
1,725,000 Nevada Housing Division, Single Family Program Senior Bonds,
1993 Issue B, 6.200%, 10/01/15 4/04 at 102 A1 1,824,550
- - ----------------------------------------------------------------------------------------------------------------------------------
New Hampshire - 0.5%
2,700,000 New Hampshire Housing Finance Authority, Single Family
Residential Mortgage Bonds, 1990 Series A, 7.950%, 7/01/22
(Alternative Minimum Tax) 7/00 at 102 Aa 2,830,410
</TABLE>
F-32
<PAGE> 140
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
New Hampshire (continued)
$ 1,815,000 New Hampshire Housing Finance Authority, Single Family Mortgage
Acquisition Revenue Bonds, 1996 Series C, 6.200%, 7/01/16
(Alternative Minimum Tax) 1/07 at 102 Aa3 $ 1,930,234
- - ----------------------------------------------------------------------------------------------------------------------------------
New Mexico - 0.3%
455,000 New Mexico Educational Assistance Foundation, Student Loan
Revenue Bonds, 1992 Series One, Student Loan Revenue Bonds,
Subordinate 1992 Series One B, 6.850%, 12/01/05 (Alternative
Minimum Tax) 12/02 at 101 A 481,781
2,400,000 New Mexico Mortgage Finance Authority, Single Family Mortgage
Purchase Refunding Senior Bonds, 1992 Series A,
6.900%, 7/01/24 7/02 at 102 Aa1 2,552,664
- - ----------------------------------------------------------------------------------------------------------------------------------
New York - 13.1%
14,000,000 Long Island Power Authority (New York), Electric System
General Revenue Bonds, Series 1998A, 5.500%, 12/01/29 6/03 at 101 A- 14,467,320
1,000,000 The City of New York, General Obligation Bonds, Fiscal 1995
Series A, 7.000%, 8/01/04 No Opt.Call A- 1,146,370
3,500,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series B, 6.750%, 8/15/03 No Opt. Call A- 3,916,780
14,310,000 The City of New York, General Obligation Bonds, Fiscal 1996
Series F, 6.500%, 2/01/05 No Opt. Call A- 16,098,178
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 City Transitional Finance Authority, Future Tax
Secured Bonds, Fiscal 1998 Series C, 5.000%, 5/01/26 5/08 at 101 AA 16,629,475
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 Nursing Home FHA-Insured Mortgage Revenue
Bonds, 1992 Series B, 6.200%, 8/15/22 8/02 at 102 AAA 11,214,525
4,200,000 New York State Medical Care Facilities Finance Agency,
FHA-Insured Mortgage Project Revenue Bonds, 1995 Series B,
6.150%, 2/15/35 2/05 at 102 AA 4,565,526
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, 6.000%, 1/01/15 (Pre-refunded to 1/01/05) 1/05 at 102 AAA 8,454,075
6,500,000 New York State Thruway Authority, General Revenue Refunding
Bonds, Series E, 5.250%, 1/01/12 1/08 at 101 AA- 6,883,110
- - ----------------------------------------------------------------------------------------------------------------------------------
North Carolina - 0.6%
3,000,000 North Carolina Medical Care Commission, Health Care Revenue
Bonds (Duke University Health System), Series 1998B,
5.000%, 6/01/28 6/08 at 101 AA 2,934,120
2,000,000 North Carolina Municipal Power Agency, Number 1 Catawba
Electric Revenue Bonds, Series 1992, 6.000%, 1/01/11 No Opt. Call AAA ,291,780
- - ----------------------------------------------------------------------------------------------------------------------------------
North Dakota - 1.0%
8,150,000 Mercer County, North Dakota, Pollution Control Revenue Bonds
(Basin Electric Power Cooperative-Antelope Valley Station),
1984 Series B, 7.000%, 1/01/19 1/99 at 103 A 8,426,122
995,000 City of Minot, North Dakota, Single Family Mortgage Revenue
Refunding Bonds, Series 1993, 7.700%, 8/01/10 8/03 at 102 Aa 1,074,988
- - ----------------------------------------------------------------------------------------------------------------------------------
Ohio - 3.4%
4,500,000 Akron, Bath and Copley Joint Township Hospital District, Ohio,
Hospital Facilities Revenue Bonds, Series 1992 (Summa Health
System Project), 6.250%, 11/15/07 11/02 at 102 A3 4,881,420
1,995,000 County of Franklin, Ohio, Multifamily Housing Mortgage Revenue
Bonds, Series 1994A (FHA Insured Mortgage Loan Hamilton
Creek Apartments Project), 5.550%, 7/01/24 (Alternative
Minimum Tax) 1/05 at 103 Aa 2,017,683
</TABLE>
F-33
<PAGE> 141
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Ohio (continued)
$ 3,800,000 Ohio Housing Finance Agency, Residential Mortgage Revenue
Bonds (GNMA Mortgage-backed Securities Programs),
1995 Series A-1, 6.300%, 9/01/17 3/05 at 102 AAA $ 4,101,302
11,215,000 Ohio Housing Finance Agency, Single Family Mortgage Revenue
Bonds (GNMA Mortgage-Backed Securities Program),
1989 Series A, 7.650%, 3/01/29 (Alternative Minimum Tax) 9/99 at 102 AAA 11,537,880
4,215,000 The Student Loan Funding Corporation, Cincinnati, Ohio,
Student Loan Revenue Bonds, Series 1986A, 5.500%, 12/01/01
(Alternative Minimum Tax) No Opt. Call A1 4,364,464
4,370,000 City of Toledo, Ohio, General Obligation (Limited Tax),
Various Purpose Improvement Bonds, Series 1994,
5.750%, 12/01/09 12/04 at 102 AAA 4,813,031
- - ----------------------------------------------------------------------------------------------------------------------------------
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 (Hillcrest Medical Center Project), Series 1996,
6.500%, 6/01/09 No Opt. Call AAA 3,920,592
- - ----------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 1.6%
12,390,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1997
(General Obligation Bonds), 6.500%, 7/01/13 No Opt. Call AAA 15,066,488
- - ----------------------------------------------------------------------------------------------------------------------------------
South Carolina - 0.3%
2,460,000 Piedmont Municipal Power Agency (South Carolina), Electric
Revenue Bonds, 1998A Refunding Series, 5.500%, 1/01/13 No Opt. Call AAA 2,692,495
- - ----------------------------------------------------------------------------------------------------------------------------------
South Dakota - 0.7%
5,845,000 South Dakota Student Loan Assistance Corporation, 7.625%,
8/01/06 (Pre-refunded to 8/01/99) (Alternative Minimum Tax) 8/99 at 102 AAA 6,153,090
- - ----------------------------------------------------------------------------------------------------------------------------------
Tennessee - 0.8%
5,000,000 The Metropolitan Government of Nashville and Davidson County (Tennessee), Electric System Revenue
Bonds, 1998 Series A, 5.200%, 5/15/23 5/08 at 102 AA 5,080,200
2,400,000 Tennessee Housing Development Agency, Mortgage Finance Program Bonds, 1994 Series A,
6.900%, 7/01/25 (Alternative Minimum Tax) 7/04 at 102 A+ 2,590,704
- - ----------------------------------------------------------------------------------------------------------------------------------
Texas - 5.7%
1,000,000 Alliance Airport Authority, Inc., Special Facilities Revenue
Bonds, Series 1990 (American Airlines, Inc. Project), 7.500%,
12/01/29 (Alternative Minimum Tax) 12/00 at 102 Baa2 1,072,290
6,000,000 Dallas-Fort Worth International Airport Facility Improvement
Corporation, American Airlines, Inc. Revenue Bonds, Serie
1990, 7.500%, 11/01/25 (Alternative Minimum Tax) 11/00 at 102 Baa2 6,424,500
2,500,000 City of Houston, Texas, Airport System Subordinate Lien
Revenue Bonds, Series 1991A, 6.750%, 7/01/21
(Alternative Minimum Tax) 7/01 at 102 AAA 2,710,575
5,000,000 City of Houston, Texas, Water and Sewer System, Junior Lien
Revenue Refunding Bonds, Series 1997D, 5.000%, 12/01/25 12/07 at 102 AAA 4,930,400
5,000,000 Lower Neches Valley Authority Industrial Development
Corporation (Texas), Refunding Revenue Bonds, Series 1998
(Mobil Oil Refining Corporation Project), 5.550%, 3/01/33 3/08 at 101 AA 5,189,350
1,450,850 The Midland Housing Finance Corporation (Midland, Texas),
Single Family Mortgage Revenue Refunding, Series 1992A,
8.450%, 12/01/11 11/05 at 103 Aaa 1,591,002
2,215,000 North Texas Higher Education Authority Inc., Student Loan
Revenue Bonds, Series 1993D, 6.300%, 4/01/09
(Alternative Minimum Tax) 4/03 at 102 A 2,352,064
3,410,000 Ratama Development Corporation, Special Facilities Revenue
Bonds (Retama Park Racetrack Project), Series 1993,
8.750%, 12/15/12 No Opt. Call AAA 4,881,176
4,694,827 General Services Commission (an Agency of the State of Texas),
as Lessee, Participation Interests, 7.500%, 9/01/22 9/99 at 101 1/2 A 5,332,056
</TABLE>
F-34
<PAGE> 142
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
<S> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
Texas (continued)
$ 8,500,000 Texas Turnpike Authority, Dallas North Tollway Revenue
Bonds, Series 1990, 7.250%, 1/01/10 (Pre-refunded
to 1/01/99) 1/99 at 102 AAA $ 8,728,480
8,500,000 Travis County Health Facilities Development Corporation,
Hospital Revenue Bonds (Daughters of Charity National Health
System - Daughters of Charity Health Services of Austin),
Series 1993B, 6.000%, 11/15/22 11/03 at 102 Aa 9,155,860
- - ----------------------------------------------------------------------------------------------------------------------------------
Utah - 2.1%
3,595,000 City of Bountiful, Davis County, Utah, Hospital Revenue
Refunding Bonds (South Davis Community Hospital Project),
Series 1998, 5.750%, 12/15/18 12/08 at 101 N/R 3,571,417
8,000,000 Intermountain Power Agency (Utah), Power Supply Revenue Bonds,
Series 1996A, 6.150%, 7/01/14 7/06 at 102 A+ 8,864,880
6,000,000 Intermountain Power Agency (Utah), Power Supply Revenue
Refunding Bonds, 1997 Series B, 5.750%, 7/01/19 7/07 at 102 AAA 6,505,080
- - ----------------------------------------------------------------------------------------------------------------------------------
Virginia - 1.8%
2,645,000 Suffolk Redevelopment and Housing Authority, Multifamily
Housing Revenue Refunding Bonds, Series 1994 (Chase
Heritage at Dulles Project), 7.000%, 7/01/24 7/02 at 104 Baa2 2,942,589
14,405,000 Upper Occoquan Sewage Authority (Virginia), Regional Sewerage
System Revenue Bonds, Series of 1995A, 4.750%, 7/01/29 7/06 at 100 AAA 13,744,531
- - ----------------------------------------------------------------------------------------------------------------------------------
Washington - 7.7%
4,705,000 City of Tacoma, Washington, Sewer Revenue Refunding Bonds,
1994 Series B, 8.000%, 12/01/08 No Opt. Call AAA 6,133,062
4,500,000 Washington Public Power Supply System, Nuclear Project No. 1,
Refunding Revenue Bonds, Series 1993A, 5.750%, 7/01/13 7/03 at 102 Aa1 4,839,930
4,845,000 Washington Public Power Supply System, Nuclear Project No. 1,
Refunding Revenue Bonds, Series 1989A, 7.500%, 7/01/15
(Pre-refunded to 7/01/99) 7/99 at 102 AAA 5,086,620
23,000,000 Washington Public Power Supply System (Bonneville), Nuclear
Project No. 1, Refunding Revenue Bonds, Series 1993C,
5.375%, 7/01/15 7/03 at 102 Aa1 23,633,190
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,
Refunding Revenue, Series 1990A, 7.250%, 7/01/06 No Opt. Call Aa1 7,715,803
10,000,000 Washington Public Power Supply System, Nuclear Project No. 3,
Refunding Revenue Bonds, Series 1993B, 7.000%, 7/01/09 No Opt. Call Aa1 12,075,499
3,700,000 Washington Public Power Supply System, Nuclear Project No. 3,
Refunding Revenue Bonds, Series 1998A, 5.125%, 7/01/18 7/08 at 102 Aa1 3,672,545
- - ----------------------------------------------------------------------------------------------------------------------------------
Wisconsin - 0.1%
635,000 Wisconsin Housing and Economic Development Authority, Home
Improvement Revenue Bonds, 1992 Series A, 7.000%, 5/01/10
(Alternative Minimum Tax) 5/02 at 102 A1 672,140
- - ----------------------------------------------------------------------------------------------------------------------------------
$ 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, Series 1998B, 3.700%, 8/15/28+ VMIG-1 2,000,000
---------------------------------------------------------------------------------------------------------------
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 or
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 as a short-term security. The rate
disclosed is that currently in effect. This rate
changes periodically based on market conditions or
a specified market index.
N/R Investment is not rated.
See accompanying notes to financial statements.
F-35
<PAGE> 143
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.
F-36
<PAGE> 144
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.
F-37
<PAGE> 145
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Premium Income Premium Income 2 Premium Income 4
<S> <C> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------------
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
- - ----------------------------------------------------------------------------------------------------------------------------------
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.
F-38
<PAGE> 146
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 Common 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.
F-39
<PAGE> 147
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:
Premium Premium Premium
Income Income 2 Income 4
- --------------------------------------------------------------------------------
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
================================================================================
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
<S> <C> <C> <C> <C>
- - -------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
10/31/98 10/31/97 10/31/98 10/31/97
- - -------------------------------------------------------------------------------------------------------------------
Common shares issued to shareholders
due to reinvestment of distributions -- -- 137,128 --
=====================================================================================================================
Premium Income 4
- - -------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
10/31/98 10/31/97
- - -------------------------------------------------------------------------------------------------------------------
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>
F-40
<PAGE> 148
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:
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
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
================================================================================
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.
F-41
<PAGE> 149
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
=============================================================================================================================
8. Investment Composition
At October 31, 1998, the revenue sources by municipal purpose, expressed as a
percent of total investments, were as follows:
Premium Premium Premium
Income Income 2 Income 4
- - ---------------------------------------------------------------------------------------------------------------------------
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.
F-42
<PAGE> 150
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
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
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
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
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*
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
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
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
Premium Income
Year Ended 10/31:
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.
F-43
<PAGE> 151
Building a Better Portfolio
Can Make You a Successful Investor
Nuveen Family
of Mutual Funds
Nuveen offers a variety of funds designed to help you reach your financial
goals.
Growth
Nuveen Rittenhouse Growth Fund
Growth and
Income
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
Tax-Free Income
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier Advisers(SM) including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
F-44
<PAGE> 152
Fund Information
Board of Directors
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian, Transfer Agent
and Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Auditors
Ernst & Young LLP
Chicago, IL
Year 2000
The concern that computer systems may have problems processing date-related
information in the year 2000 and beyond has challenged businesses and
organizations to thoroughly review all aspects of their operations. We have
undertaken just such an approach at Nuveen in preparation for the millennium.
Over the last 10 years, our trading, fund management and pricing systems at
Nuveen - the systems that directly affect our investors and their financial
advisers - have been updated or replaced to address the Year 2000 concerns.
We continue to work closely with our transfer agent, custodian and other service
partners to monitor readiness and address other remaining systems issues. Our
initial testing indicates we are on schedule, and we have targeted year-end 1998
to complete verification of vendor compliance and service partner readiness.
However, we can give no complete assurance at this time that the steps we have
taken will be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds.
Each fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the 12-month period ended October 31, 1998. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
F-45
<PAGE> 153
Serving Investors for Generations Photo of:
John Nuveen, Sr.
John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today, we offer a broad range of
investments designed for risk-sensitive individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them maintain the lifestyle they currently enjoy.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of products and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and income funds, along with our unit trusts and private asset
management, can form the foundation of a tax-efficient and risk-resistant
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you build and sustain your long-term financial
security. Or call us at (800) 257-8787 for more information, including a
prospectus where applicable. Please read that information carefully before you
invest.
1898 - 1998
NUVEEN
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime(tm)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL60606-1286
www.nuveen.com
FAN-5-10-98
F-46
<PAGE> 154
NUVEEN Exchange-Traded Funds
November 30, 1998
Semiannual Report
Dependable, tax-free income to help you keep more of what you earn.
NTC
Connecticut
NMT
Massachusetts
NOM
Missouri
NPW
Washington
Photo of: People reading
F-47
<PAGE> 155
Highlights
As of November 30, 1998
Credit Quality Performance Highlights
================================================================================
Nuveen Connecticut Premium Income Municipal Fund (NTC)
o One-year taxable-equivalent total return on
share price of 15.7% for investors in the
combined 34.1% federal and state income tax
bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and Lipper Peer Group average
for the one-year period
o Stable tax-free dividend for 16 months
PIE CHART:
AAA/U.S. Guaranteed 69%
AA 18%
A 2%
BBB/NR 11%
Nuveen Massachusetts Premium Income Municipal Fund (NMT)
o One-year taxable-equivalent total return on
share price of 14.77% for investors in the
combined 39.3% federal and state income tax
bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and Lipper Peer Group average
for the one-year period
o Stable tax-free dividend for 22 months
PIE CHART:
AAA/U.S. Guaranteed 62%
AA 16%
A 18%
BBB/NR 4%
Nuveen Missouri Premium Income Municipal Fund (NOM)
o One-year taxable-equivalent total return on
share price of 18.10% for investors in the
combined 35.1% federal and state income tax
bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and paralleled the Lipper Peer
Group average for the one-year period
o Increased its dividend in August, after
posting 12 consecutive months of stable
income
PIE CHART:
AAA/U.S. Guaranteed 78%
AA 12%
A 6%
BBB/NR 4%
Nuveen Washington Premium Income Municipal Fund (NPW)
o One-year taxable-equivalent total return
on share price of 17.86% for investors in
the 31% federal income tax bracket
o Outperformed the Lehman Brothers Municipal
Bond Index and Lipper Peer Group average
for the one-year period
o Increased its dividend in August, after
posting 21 consecutive months of stable
income
PIE CHART:
AAA/U.S. Guaranteed 67%
AA 27%
A 3%
BBB/NR 3%
Contents
1 Dear Shareholder
4 NTC Commentary and Overview
6 NMT Commentary and Overview
8 NOM Commentary and Overview
10 NPW Commentary and Overview
12 Portfolio of Investments
23 Statement of Net Assets
24 Statement of Operations
25 Statement of Changes in Net Assets
26 Notes to Financial Statements
30 Financial Highlights
32 Building Better Portfolios
33 Fund Information
F-48
<PAGE> 156
Photo of: Timothy R. Schwertfeger
Chairman of the Board
Sidebar text: Wealth takes a lifetime to build. Once achieved, it should
be preserved.
Dear Shareholder
I'm pleased to report that over the past 12 months, the Nuveen Exchange-Traded
Funds covered here have continued to perform well, meeting their primary
objective of providing you with attractive levels of tax-free income and
after-tax total returns. The strong market in fixed-income securities, bolstered
by investor demand for quality investments, benefited these funds and led to
increases in share price. Attractive tax-free income, enhanced by strong share
price performance, illustrates once again that Nuveen's Exchange-Traded Funds
can provide an excellent investment option for income-oriented investors.
The Year in Review
Over the past year, the markets endured bouts of volatility, as the Asian
financial crisis spilled over into emerging markets and affected economies
around the globe. Investors responded by seeking a haven from the uncertainty in
more conservative investments, such as municipal bond funds. To avert a
potential domestic credit crunch and bring some stability to global markets, the
Federal Reserve moved to ease short-term interest rates for the first time in
almost three years. Between the end of September and mid-November, three
successive cuts brought the federal funds rate to 4.75%. As interest rates
continued to trend downward, the competitive yields offered by our
exchange-traded funds stimulated additional investor interest and demand, which
led to improved share prices overall.
In this environment, the market for exchange-traded municipal bond funds has
been exceptionally strong. These funds continue to represent a bright spot among
fixed-income investments, offering attractive income in a market that places a
high premium on yield. In addition, the funds have generally maintained good
levels of call protection, resulting in relatively stable income streams.
In the coming months, we will continue to watch several key factors affecting
the future of the economy, including corporate earnings reports, wage and
employment statistics, U.S. consumer confidence levels, the continuing impact of
foreign financial turmoil, and any further interest rate indications from the
Federal Reserve. These factors will influence the outlook for fixed-income
markets well into 1999.
F-49
<PAGE> 157
Graphic of: Bond Buyer 40 Chart
Municipal Bonds: A Compelling Value
Over the past year, rising bond prices drove yields on 30-year Treasuries to
historic lows. With yields on the long Treasury bond pushing below 5% at times,
the yield on the Bond Buyer 40, an unmanaged index of long-term municipal bonds,
fell just 26 basis points - from 5.36% to 5.10% - compared with the 99-point
drop in Treasury yields over the past 12 months. As of November 30, 1998, the
ratio of long-term municipal yields to 30-year Treasury yields stood at more
than 100.8%, compared with the more typical range of 86-87%. Over the past few
months, this ratio has been as high as 104%. For investors, this means that
quality long-term municipal bonds currently offer about the same yield as
Treasury bonds with comparable maturities - even before the tax advantages of
municipal bonds are taken into account. On an after-tax basis in today's market,
municipal bonds present an exceptionally attractive investment option relative
to Treasuries.
The steep decline in Treasury yields during the past year was due to several
factors, including the strong interest in these investments by international
investors. As the financial turmoil in Asia spread to economies worldwide and
the dol lar strengthened against foreign currencies, the demand for U.S. dollar-
denominated Treasury securities increased. Compounding this situation was
the shortage of Treasury issues brought about by the federal budget surplus,
which reversed the multi-billion dollar deficits of the past few years and
reduced the federal government's need to issue bonds. In the municipal market,
where foreign demand was limited by an inability of foreign investors to benefit
from the tax advantages of municipals, low interest rates and a strong economy
combined to generate high levels of new issuance and a dramatic increase in the
refinancing of existing bonds. The first 11 months of 1998 saw over $255
billion of municipal issuance, up 28.4% over the same period in 1997. In terms
of total municipal issuance, this put 1998 on pace as the second largest year on
record.
In addition, the continued strength of the U.S. economy produced improvements in
the fundamental financial health of many municipalities and boosted the overall
credit quality of municipal bonds. In the third quarter of 1998, issues
upgraded by the two major rating agencies outnumbered downgrades by a margin of
7 to 2.
F-50
<PAGE> 158
Nuveen Expertise Is Key
The key to taking advantage of the exceptional values currently available in the
municipal market is the ability of a proven investment manager. At Nuveen, we
recognize the value of time-tested expertise. The high level of recent municipal
issuance, for example, highlighted the value of Nuveen's in-depth knowledge of
the municipal market, as our portfolio management teams carefully analyzed the
flood of issues to select those securities best suited to help the funds achieve
their investment objectives.
As a further enhancement to our management capabilities, Nuveen has assembled a
strong core of Premier Advisers(SM), a group of managers who are experts in
their particular areas of the market, to provide time-tested experience and
insights. In addition to Nuveen Investment Advisory Services, our Premier
Adviser for tax-free investing, you can rely on other Premier Advisers to share
their wisdom in the equity market, including Institutional Capital Corporation
for value investing and Rittenhouse Financial Services, Inc. for growth
investing. For more information about the funds managed by these Premier
Advisers, including charges and expenses, contact your finan cial adviser for a
prospectus, or call Nuveen at (800) 621-7227. Please read the prospectus
carefully before you invest or send money.
We encourage you to talk with your financial adviser about the ways Nuveen's
expanding selection of investments can assist you in establishing a diversified
portfolio designed to help you build and sustain long-term financial security.
Over the past 100 years, Nuveen has evolved from a company that dealt with only
municipal bonds into a well respected firm that handles a variety of investment
options. I look forward to continuing this exciting journey. We are grateful
for the confidence you have placed in us, and we intend to continue earning your
trust in the years ahead.
Sincerely,
Timothy R. Schwertfeger
Chairman of the Board
January 15, 1999
Sidebar text: "The key to taking advantage of the exceptional values currently
available in the municipal market is the ability of a proven investment
manager."
F-51
<PAGE> 159
Nuveen Connecticut Premium Income Municipal Fund (NTC)
Portfolio Manager's Comments
Portfolio manager Dan Solender reviews the municipal market, fund performance,
and key investment strategies for the Connecticut fund. A six-year veteran of
Nuveen, Dan has 11 years of investment experience. He has managed NTC since its
inception in May 1993.
WHERE DID CONNECTICUT RANK IN TERMS OF MUNICIPAL ISSUANCE SINCE THE BEGINNING OF
THE YEAR? WHAT ECONOMIC FACTORS AFFECTED THE STATE?
Connecticut, the wealthiest state in the country, was a relatively quiet
participant in the municipal market, ranking 22nd in issuance for the year ended
November 30, 1998. There has been a shortage of issuers, which makes it
difficult for individual investors to buy single bonds. Nuveen is one of the
largest municipal bond investors in Connecticut and is able to buy big blocks of
bonds when they are issued. This underscores the importance of our brand name in
a competitive marketplace. Connecticut generally sees flurries of trading
activity as opposed to a steady marketplace. New deals are often the catalyst
for these flurries. As investors raise funds to pay for new purchases, other
bonds may have to be sold, which then spurs interest in the secondary market.
Compared to prior years, Connecticut's economy has per formed well and been more
in line with the national economy. Though its economic performance is expected
to taper off slight ly in 1999 due to labor shortages, slower population
increases, and slower national growth, Connecticut is still expected to
experience moderate growth. The state's economy continued to diversify away from
manufacturing and defense-related industries into a more service oriented
economy, with a focus on the financial services sector, healthcare, and
pharmaceuticals. Gaming has become the state's largest growth industry.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
For the 12-month period ended November 30, 1998, the Nuveen Connecticut Premium
Income Municipal Fund (NTC) produced a total return on net asset value of 9.48%,
providing a taxable-equivalent total return of 12.46% for investors in the
combined 34.1% federal and state income tax bracket. The total return com pares
with the Lehman Brothers Municipal Bond Index's(1) annual return of 7.76%. The
fund also outperformed the relevant Lipper Peer Group(2) average return of
8.86%, ranking third among the group's 18 funds.
Much of the fund's performance over the past 12 months can be tied to its
duration. As of November 30, 1998, NTC had a leverage-adjusted duration(3) of
9.30 years, compared with the unleveraged Lehman index's duration of 7.22 years.
Fund duration measures a bond fund's price volatility, or reaction to interest
rate movements. The longer the duration, the more sensitive the fund is to
changes in interest rates. During a period of falling interest rates, longer
duration enables a fund to participate more fully in market gains. However, when
rates rise, longer duration can make the fund more vulnerable to potential price
declines. Over the past year, as interest rates trended downward, funds with
durations longer than that of the index generally tended to outperform
the market.
HOW WERE THE FUND'S DIVIDEND AND SHARE PRICE AFFECTED?
In the current low interest rate environment, good call protec tion helped
support NTC's dividend and protect the income of this fund from erosion. As of
November 30, 1998, NTC had provided shareholders with 16 consecutive months of
steady income. NTC also offered a competitive mar ket yield of 4.87%, equivalent
to a taxable yield of 7.39% for investors in the combined 34.1% federal and
state income tax bracket.
As Tim mentioned in his letter to shareholders, share price performance among
the Nuveen Exchange-Traded Funds has been strong over the past 12 months. As
interest rates fell, active demand for these funds increased share prices,
further widening the spread between NTC's share price and its net asset value.
As of November 30, 1998, NTC was trading at a premium of 11.02% to its net asset
value and also had a one-year total return on its share price of 12.93%.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND DURING THE PAST YEAR?
The largest issuers in Connecticut are the state itself (general tax obligation
bonds) and the state housing finance authority. The heavier supply of new issues
in these two sectors made it challenging to find other types of issues to keep
the fund well-diversified. One area where we did find opportunities to add value
was the education sector, which represented 22% of the fund's investments, as of
November 30, 1998. A number of small issues in the $10-50 million range enabled
us to be selective and focus on bonds offering the best characteristics, such as
those issued by Sacred Heart University and Fairfield University. We continued
to hold the healthcare issues we purchased several years ago, which made up an
additional 20% of the fund.
We believe NTC is currently well-positioned in terms of duration,
diversification by credit and sector, and call protection. Over the past year,
we worked to further improve call protection by taking advantage of a situation
where we were able to purchase bonds with 10 years of call protection for the
price of a bond with five years of protection. Given the tight credit spreads in
the current market, we continued to focus on high quality issues, with 69% of
the portfolio's holdings invested in bonds rated AAA.
WHAT IS NUVEEN'S OUTLOOK FOR THE FUTURE?
Looking ahead for NTC, we will continue to watch the new issuance market for
value, taking advantage of the buying opportunities that arise as issues come to
market. This is an area where Nuveen's exceptional access to new deals and our
expertise as an experienced investment manager knowledgeable about the unique
aspects of the Connecticut municipal market can result in added value for our
investors. Our goals for the coming year are to continue taking advantage of
opportunities to add yield, extend call protection if we can do so
inexpensively, and keep the fund well-diversified.
The current market environment - influenced by declining interest rates, benign
inflation, and strong municipal supply - has helped to position municipal bonds
as one of the most compelling values in today's marketplace. We expect that the
excellent municipal-to-Treasury ratio, combined with continued volatility in the
equity markets and investors' increasing aware ness of the need for asset
allocation rebalancing, will result in growing demand for municipal bond funds.
We believe that investors who take advantage of current opportunities in the
municipal market should be rewarded with healthy returns and attractive yields
in the months ahead.
1 The Lehman Brothers Municipal Bond Index is an unleveraged index comprising a
broad range of investment-grade municipal bonds and does not reflect any
initial or ongoing expenses.
2 The Lipper Peer Group return represents the average annualized returns of the
18 funds in the Lipper State Leveraged Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
3 Leverage-adjusted duration, also known as fund duration, takes into account
the leveraging process for each fund and therefore differs from the duration
of the actual portfolio of individual bonds that make up the fund. Unless
otherwise noted, refer ences to duration in this commentary are intended to
indicate fund duration.
F-52
<PAGE> 160
Nuveen Connecticut Premium Income Municipal Fund
Performance Overview
As of November 30, 1998
NTC
Portfolio Statistics
==================================================
Inception Date 5/93
- --------------------------------------------------
Share Price $16 3/8
- --------------------------------------------------
Net Asset Value Per Share $14.75
- --------------------------------------------------
Market Yield 4.87%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.06%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 7.39%
- --------------------------------------------------
Fund Net Assets ($000) $114,898
- --------------------------------------------------
Average Effective Maturity (Years) 18.67
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 9.30
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 12.93% 9.48%
- --------------------------------------------------
3-Year 12.83% 8.32%
- --------------------------------------------------
5-Year 7.69% 7.28%
- --------------------------------------------------
Since Inception 7.08% 6.51%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 15.70% 12.46%
- --------------------------------------------------
3-Year 15.75% 11.28%
- --------------------------------------------------
5-Year 10.66% 10.35%
- --------------------------------------------------
Since Inception 9.91% 9.43%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Education and Civic Organizations 22%
- --------------------------------------------------
Health Care 20%
- --------------------------------------------------
Utilities 12%
- --------------------------------------------------
Tax Obligation (General) 8%
- --------------------------------------------------
Transportation 8%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment nec
essary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state income taxes. It is
based on a combined federal and state income tax rate of 34.1%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 34.1%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
12/97 0.0665
1/98 0.0665
2/98 0.0665
3/98 0.0665
4/98 0.0665
5/98 0.0665
6/98 0.0665
7/98 0.0665
8/98 0.0665
9/98 0.0665
10/98 0.0665
11/98 0.0665
Line Chart:
Share Price Performance
12/5/97 15.563
14.938
14.75
14.875
15
15.5
15.625
15.875
15.875
15.938
15.938
15.688
16
16.188
16.063
16.125
15.688
15.625
15.625
15.438
15.25
15.438
15
15.375
15.5
15.875
16.125
16.125
15.688
15.938
16.313
15.625
15.875
15.875
15.813
15.875
16
15.875
15.938
15.813
15.938
16.063
16.875
16.875
16.75
16.5
16.63
16.69
16.38
16.31
11/30/98 16.375
Weekly Closing Price
Past performance is not predictive of future results.
F-53
<PAGE> 161
Nuveen Massachusetts Premium Income Municipal Fund (NMT)
Portfolio Manager's Comments
Portfolio manager Tom Futrell discusses the municipal market, fund performance,
and key investment strategies for the Massachusetts fund. Tom assumed management
responsibility for NMT on July 1, 1998, as part of Nuveen's efforts to maximize
the efficient use of staff resources and portfolio manager expertise. A 15-year
veteran of Nuveen, Tom manages a range of national and state municipal bond
funds.
WHERE DID MASSACHUSETTS RANK IN TERMS OF MUNICIPAL ISSUANCE SINCE THE BEGINNING
OF THE YEAR? WHAT ECONOMIC FACTORS AFFECTED THE STATE?
Continued growth has benefited the Massachusetts economy, and credit quality in
the state remains very strong. During the first 11 months of 1998, Massachusetts
saw an extremely good supply of new municipal issuance compared with the same
period last year. As of the end of November, the state ranked seventh in the
nation in new issue volume, and total issuance was up 23.8% com pared to
November 30, 1997. Most of this issuance was high credit quality and insured
paper from issuers in the education and health care sectors, such as the
Massachusetts Health and Educational Facilities Authority. Increased supply was
met by good demand, especially from retail investors.
Massachusetts, long known as a high tax state, is starting to lose that
reputation, with a series of tax cuts in recent years easing the tax burden of
its residents. Starting in January of 1999, the tax on investment income will be
lowered from 12% to 5.95%, and a reduction in personal income tax rates is also
being considered.
Massachusetts continues to be a knowledge-based economy, flourishing because of
the growth in high-tech and financial services sectors. This growth is expected
to taper off slightly in 1999, led by a reduction in manufacturing. However, the
state is still expected to experience moderate growth. The service sector
continued to perform well and has been the state's most important source of
recent economic growth.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
For the 12-month period ended November 30, 1998, the Nuveen Massachusetts
Premium Income Municipal Fund (NMT) produced a total return on net asset value
of 9.41%, providing a taxable-equivalent total return of 13.26% for investors in
the combined 39.3% federal and state income tax bracket. The total return
compares with the Lehman Brothers Municipal Bond Index's(1) annual return of
7.76%. The fund also outperformed the relevant Lipper Peer Group(2) average
return of 8.86%, ranking fourth among the group's 18 funds.
Much of the fund's performance over the past 12 months can be tied to its
duration. As of November 30, 1998, NMT had a leverage-adjusted duration(3) of
9.64 years, compared with the unleveraged Lehman index's duration of 7.22 years.
Fund duration measures a bond fund's price volatility, or reaction to interest
rate movements. The longer the duration, the more sensitive the fund is to
changes in interest rates. During a period of falling interest rates, longer
duration enables a fund to participate more fully in market gains. However, when
rates rise, longer duration can make the fund more vulnerable to potential price
declines. Over the past year, as interest rates trended downward, funds with
durations longer than that of the index generally tended to outperform the
market.
HOW WERE THE FUND'S DIVIDEND AND SHARE PRICE AFFECTED?
In the current low interest rate environment, good call protection helped
support NMT's dividend and protect the income of this fund from erosion. As of
November 30, 1998, NMT had provided shareholders with 22 consecutive months of
steady income and a competitive market yield of 5.11%, equivalent to a taxable
yield of 8.42% for investors in the combined 39.3% federal and state income tax
bracket.
As Tim mentioned in his letter to shareholders, share price performance among
the Nuveen Exchange-Traded Funds has been strong over the past 12 months. As
interest rates fell, active demand for these funds increased share prices. As of
November 30, 1998, NMT was trading at a premium of 9.47% to its net asset value
and also had a one-year total return on its share price of 11.19%.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND DURING THE PAST YEAR?
NMT is a well-structured portfolio offering high credit quality (78% of holdings
rated AAA and AA), good call protection, and a stable dividend. Over the past
year, heavy issuance in the Massachusetts market provided us with a number of
opportunities to purchase bonds that further enhanced the fund's structure.
Given Massachusetts' high concentration of colleges, universities, and secondary
schools and leadership in healthcare-related issues, much of the new issuance
came from the education and healthcare sectors. As of November 30, 1998, 40% of
the portfolio was invested in these two sectors.
Over the year, we focused on purchasing securities with longer durations in
order to improve the fund's total return prospects in the current market
environment. We also sold securities that were not supporting the objectives of
the fund and purchased bonds that we believe will do so, including insured and
investment-grade bonds in attractive sectors that were inexpensively priced. We
also bought a small amount of discount bonds to pick up additional yield.
With spreads between high quality bonds (AAA rated) and low rated, investment
grade bonds (at least BBB rated) remaining rela tively narrow, it was difficult
to find a boost in incremental yield that would have compensated us for buying
lower-rated bonds. Consequently, we continued to focus on higher-quality
credits. The tight credit spreads also restricted our purchase of Massachusetts
housing bonds. Since these bonds can provide attractive income, we continue to
watch new issuance for opportunities to buy in this sector. One such recent
addition to the portfolio was an FHA-insured Boston multi-family housing issue
that provided an above-market yield as well as good volatility characteristics
for a lever aged fund. The ability to find bonds such as these illustrates how
Nuveen's expertise and close relationships with regional firms help us select
the investments that reward shareholders.
WHAT IS NUVEEN'S OUTLOOK FOR THE FUTURE?
Achieving the fund's primary objective of providing current income exempt from
federal and state income taxes is our main goal. We will also focus on
accomplishing the second objective, which is to enhance the fund portfolio's
value by seeking out bonds that our investment advisers feel are undervalued by
the market. To help us accomplish this goal, we will continue monitoring the new
issuance market in Massachusetts for value, taking advantage of any attractive
buy opportunities that arise. Finding bonds such as these is an area where
Nuveen's expertise - as an experienced invest ment manager knowledgeable about
the unique aspects of the Massachusetts municipal market can result in added
value for our investors.
The current market environment - influenced by declining interest rates, benign
inflation, and strong municipal supply - has helped to position municipal bonds
as one of the most compelling values in today's marketplace. We expect that the
excellent munici pal-to-Treasury ratio Tim mentioned in his shareholder letter,
com bined with continued volatility in the equity markets and investors'
increasing awareness of the need for asset allocation rebalancing, will result
in growing demand for municipal bond funds. We believe that investors who take
advantage of current opportunities in the municipal market should be rewarded
with healthy returns and attractive yields in the months ahead.
1 The Lehman Brothers Municipal Bond Index is an unleveraged index comprising a
broad range of investment-grade municipal bonds and does not reflect any
initial or ongoing expenses.
2 The Lipper Peer Group return represents the average annualized returns of the
18 funds in the Lipper State Leveraged Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
3 Leverage-adjusted duration, also known as fund duration, takes into account
the leveraging process for each fund and therefore differs from the duration
of the actual portfolio of individual bonds that make up the fund. Unless
otherwise noted, refer ences to duration in this commentary are intended to
indicate fund duration.
F-54
<PAGE> 162
Nuveen Massachusetts Premium Income Municipal Fund
Performance Overview
As of November 30, 1998
NMT
Portfolio Statistics
==================================================
Inception Date 3/93
- --------------------------------------------------
Share Price $16 9/16
- --------------------------------------------------
Net Asset Value Per Share $15.13
- --------------------------------------------------
Market Yield 5.11%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.41%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 8.42%
- --------------------------------------------------
Fund Net Assets ($000) $104,113
- --------------------------------------------------
Average Effective Maturity (Years) 17.53
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 9.64
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 11.19% 9.41%
- --------------------------------------------------
3-Year 13.20% 8.13%
- --------------------------------------------------
5-Year 10.95% 7.66%
- --------------------------------------------------
Since Inception 7.48% 7.12%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 14.77% 13.26%
- --------------------------------------------------
3-Year 17.06% 11.99%
- --------------------------------------------------
5-Year 14.94% 11.62%
- --------------------------------------------------
Since Inception 11.21% 10.90%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Education and Civic Organizations 22%
- --------------------------------------------------
U.S. Guaranteed 20%
- --------------------------------------------------
Health Care 18%
- --------------------------------------------------
Housing (Multifamily) 14%
- --------------------------------------------------
Tax Obligation (General) 9%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment nec
essary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state income taxes. It is
based on a combined federal and state income tax rate of 39.3%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 39.3%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
12/97 0.0705
1/98 0.0705
2/98 0.0705
3/98 0.0705
4/98 0.0705
5/98 0.0705
6/98 0.0705
7/98 0.0705
8/98 0.0705
9/98 0.0705
10/98 0.0705
11/98 0.0705
Line Chart:
Share Price Performance
12/5/97 15.563
15.5
15.75
15.938
16.125
16.375
16.688
16.25
16.188
16.625
16.563
16.25
16.25
16.625
16.5
16.563
16.313
16.313
16
15.938
16.125
16.25
16.063
16.375
16.438
16.375
16.375
16.625
16.25
16.875
16.688
16.625
16.313
16.375
16.5
16.375
16.563
16.688
16.75
16.438
16.563
16.75
17.5
16.875
16.75
16.75
16.69
16.88
16.56
16.44
11/30/98 16.5625
Weekly Closing Price
Past performance is not predictive of future results.
F-55
<PAGE> 163
Nuveen Missouri Premium Income Municipal Fund (NOM)
Portfolio Manager's Comments
Portfolio manager Mike Davern discusses the municipal market, fund performance,
and key investment strategies for the Missouri fund. Mike assumed management
responsibility for the fund on July 1, 1998, as part of Nuveen's efforts to
maximize the efficient use of staff resources and portfolio manager expertise. A
six-year veteran of Nuveen, Mike has 15 years of investment experience and
manages a range of state municipal bond funds for Nuveen.
WHERE DID MISSOURI RANK IN TERMS OF MUNICIPAL ISSUANCE SINCE THE BEGINNING OF
THE YEAR? WHAT ECONOMIC FACTORS AFFECTED THE STATE?
In response to low interest rates and Missouri's continued population growth,
the state's municipal bond issuance increased almost 85% over 1997 levels, which
ranked the state 19th in the nation, as of November 30, 1998. Supply is expected
to remain strong over the next few years due to the continuing need for
infrastructure financing and increased school spending. Missouri's overall
creditworthiness is reflected in its long-standing Aaa/AAA/AAA rating by
Moody's, Standard & Poor's, and Fitch, respectively.
Missouri maintained a diversified economy, mirroring that of the nation.
Although recent industry growth has shifted to services and tourism, defense and
manufacturing are important elements of the state economy. Population in
Missouri has increased approximately 5.6% from 1990. The state's unemployment
rate has steadily declined from a high of 6.7% in 1991. It was 3.7% in November
1998, compared to the national average of 4.4%.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
For the 12-month period ended November 30, 1998, the Nuveen Missouri Premium
Income Municipal Fund (NOM) produced a total return on net asset value of 8.73%,
providing a taxable-equivalent total return of 11.65% for investors in the
combined 35.1% federal and state income tax bracket. The fund's total return
outperformed the Lehman Brothers Municipal Bond Index's(1) annual return of
7.76% and compared favorably with the relevant Lipper Peer Group(2) average
return of 8.86%.
Much of the fund's performance over the past 12 months can be tied to its
duration. As of November 30, 1998, NOM had a leverage-adjusted duration(3) of
9.55 years, compared with the unleveraged Lehman index's duration of 7.22
years. Fund duration measures a bond fund's price volatility, or reaction to
interest rate movements. The longer the duration, the more sensitive the fund is
to changes in interest rates. During a period of falling interest rates, longer
duration enables a fund to participate more fully in market gains. However, when
rates rise, longer duration can make the fund more vulnerable to potential price
declines. Over the past year, as interest rates trended downward, funds with
durations longer than that of the index generally tended to outperform the
market.
HOW WERE THE FUND'S DIVIDEND AND SHARE PRICE AFFECTED?
In the current low interest rate environment, excellent call protection helped
support NOM's dividend and protect the income of this fund from erosion. In
addition, good dividend management strategies allowed us to increase the
dividend, effective August 1998. As of November 30, 1998, the fund offered a
competitive market yield of 4.92%, equivalent to a taxable yield of 7.58% for
investors in the combined 35.1% federal and state income tax bracket.
As Tim mentioned in his letter to shareholders, share price performance among
the Nuveen Exchange-Traded Funds has been strong over the past 12 months. As
interest rates fell, active demand for these funds increased NOM's share price,
eliminating the slight discount of a year ago. As of November 30, 1998, NOM was
trading at a premium of 4.95% to its net asset value and also had a one-year
total return on its share price of 15.15%.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND DURING THE PAST YEAR?
As of November 30, 1998, one of NOM's largest sector weight ings, representing
17% of the fund's holdings, was in general tax obligation bonds, the
top-performing sector over the past six months. One of the reasons behind the
sector's excellent performance has been the recent economic environment, which
has boosted tax receipts and credit quality in general, as the budgets of
municipalities and school districts continue to improve. Over the past year,
escrowed securities - that is, bonds that were prerefunded as interest rates
fell also performed well. Among these bonds in NOM's portfolio are those issued
by the Missouri Health and Educational Facilities Authority for Barnes-Jewish
Christian Health System. Recently, some lower-rated credits became more
attractive and were added to the portfolio. An example of this is the Industrial
Development Authority of St. Charles County, Missouri, for Ashwood Apartments, a
multi-family apartment project, maturing in 2030, which provided attractive
yields for the fund.
NOM is noteworthy for its excellent call protection, with no scheduled calls
over the next 12 months and only 3% of fund scheduled to be called in the year
2000. Overall, the credit quality of the fund is high, with 78% of the portfolio
invested in bonds rated AAA.
WHAT IS NUVEEN'S OUTLOOK FOR THE FUTURE?
Going forward, we will continue to examine the call structure of the portfolio.
With a tight municipal supply relative to retail demand in Missouri, we will
look to take advantage of the most attractive new issues that do come to market.
This would allow us to sell bonds with short call provisions at good prices for
the portfolio and reinvest the proceeds in well-structured new issues. Working
with our research analysts gives us the ability to select lower-rated,
investment grade bonds at attractive prices, if they are available, as a way to
increase the incremental yield of the fund. Selecting the bonds that will help
the fund meet these goals is an area where Nuveen's expertise - as an
experienced investment manager knowledgeable about the unique aspects of the
Missouri municipal market - can result in added value for our investors.
The current market environment - influenced by declining interest rates, benign
inflation, and strong municipal supply - has helped to position municipal bonds
as one of the most compelling values in today's marketplace. We expect that the
excellent municipal-to-Treasury ratio Tim mentioned in his shareholder letter,
com bined with continued volatility in the equity markets and investors'
increasing awareness of the need for asset allocation rebalancing, will result
in growing demand for municipal bond funds. We believe that investors who take
advantage of current opportunities in the municipal market should be rewarded
with healthy returns and attractive yields in the months ahead, as the market
recognizes the value of these quality investments.
1 The Lehman Brothers Municipal Bond Index is an unleveraged index comprising a
broad range of investment-grade municipal bonds and does not reflect any
initial or ongoing expenses.
2 The Lipper Peer Group return represents the average annualized returns of the
18 funds in the Lipper State Leveraged Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
3 Leverage-adjusted duration, also known as fund duration, takes into account
the leveraging process for each fund and therefore differs from the duration
of the actual portfolio of individual bonds that make up the fund. Unless
otherwise noted, references to duration in this commentary are intended to
indicate fund duration.
F-56
<PAGE> 164
Nuveen Missouri Premium Income Municipal Fund
Performance Overview
As of November 30, 1998
NOM
Portfolio Statistics
==================================================
Inception Date 5/93
- --------------------------------------------------
Share Price $15 3/8
- --------------------------------------------------
Net Asset Value Per Share $14.65
- --------------------------------------------------
Market Yield 4.92%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.13%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 7.58%
- --------------------------------------------------
Fund Net Assets ($000) $47,456
- --------------------------------------------------
Average Effective Maturity (Years) 16.35
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 9.55
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 15.15% 8.73%
- --------------------------------------------------
3-Year 15.84% 7.44%
- --------------------------------------------------
5-Year 7.83% 6.90%
- --------------------------------------------------
Since Inception 5.87% 6.07%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 18.10% 11.65%
- --------------------------------------------------
3-Year 19.02% 10.33%
- --------------------------------------------------
5-Year 11.04% 9.91%
- --------------------------------------------------
Since Inception 8.90% 8.95%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Tax Obligation (General) 17%
- --------------------------------------------------
Tax Obligation (Limited) 17%
- --------------------------------------------------
Housing (Multifamily) 14%
- --------------------------------------------------
Water and Sewer 11%
- --------------------------------------------------
Health Care 10%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment nec
essary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state income taxes. It is
based on a combined federal and state income tax rate of 35.1%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 35.1%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
12/97 0.062
1/98 0.062
2/98 0.062
3/98 0.062
4/98 0.062
5/98 0.062
6/98 0.062
7/98 0.062
8/98 0.063
9/98 0.063
10/98 0.063
11/98 0.063
Line Chart:
Share Price Performance
12/5/97 14.063
14.125
14.063
14.188
14.063
14.5
14.563
14.25
14.25
14.938
14.875
14.875
14.938
15
14.5
14.813
14.625
14.625
14.563
14.438
14.375
14.25
14.25
14.125
14.188
14.75
14.25
14.375
14.25
14.5
14.25
14.75
14.75
14.688
14.625
14.75
14.75
14.625
14.688
15
15
15.063
15.125
15.25
15.375
15.13
15.06
15.5
15.19
15.38
11/30/98 15.375
Weekly Closing Price
Past performance is not predictive of future results.
F-57
<PAGE> 165
Nuveen Washington Premium Income Municipal Fund (NPW)
Portfolio Manager's Comments
Portfolio manager Mike Davern discusses the municipal market, fund performance,
and key investment strategies for the Washington state fund. Mike assumed
management responsibility for NPW on July 1, 1998, as part of Nuveen's efforts
to maximize the efficient use of staff resources and portfolio manager
expertise. A six-year veteran of Nuveen, Mike has 15 years of investment
experience and manages a range of state municipal bond funds for Nuveen.
WHERE DID WASHINGTON RANK IN TERMS OF MUNICIPAL ISSUANCE SINCE THE BEGINNING OF
THE YEAR? WHAT ECONOMIC FACTORS AFFECTED THE STATE?
Washington saw an increase in municipal supply of 12.9% over 1997's figure,
which ranked the state 11th in the nation in terms of total municipal issuance
for the 11 months ended November 30, 1998. Its total issuance for that period
was $5.8 billion.
Unemployment in the state, as of November 30, 1998, was 4.7%, compared to the
national level of 4.4%. The state's economic diversification has seen a shift in
its sector allocations. Boeing, a leader in aerospace technology and based in
Seattle, once accounted for nearly 10% of total state employment. As of
December 11, 1998, that number had been reduced to 3.5%. Furthermore, Boeing is
expected to cut its workforce by 48,000 people over the next two years. However,
the slack caused by these layoffs is expected to be picked up by available jobs
in other sectors, such as construction, retail trade, and services industries.
The growth in the construction industry is of particular interest, due to its
previous six year slump.
HOW DID THE FUND PERFORM OVER THE PAST YEAR?
For the 12 month period ended November 30, 1998, the Nuveen Washington Premium
Income Municipal Fund (NPW) produced a total return on net asset value of 9.01%,
providing a taxable-equivalent total return of 11.39% for investors in the 31%
federal income tax bracket. The total return compares with the Lehman Brothers
Municipal Bond Index's(1) annual return of 7.76%. The fund also outperformed the
relevant Lipper Peer Group(2) average return of 8.86%.
Much of the fund's performance over the past 12 months can be tied to its
duration. As of November 30, 1998, NPW had a leverage-adjusted duration(3) of
9.45 years, compared with the unleveraged Lehman index's duration of 7.22 years.
Fund duration measures a bond fund's price volatility, or reaction to interest
rate movements. The longer the duration, the more sensitive the fund is to
changes in interest rates. During a period of falling interest rates, longer
duration enables a fund to participate more fully in market gains. However, when
rates rise, longer duration can make the fund more vulnerable to potential price
declines. Over the past year, as interest rates trended downward, funds with
durations longer than that of the index generally tended to outperform the
market.
HOW WERE THE FUND'S DIVIDEND AND SHARE PRICE AFFECTED?
In the current low interest rate environment, good call protection helped
support NPW's dividend and protect the income of this fund from erosion. In
addition, good dividend management strategies allowed us to increase the
dividend effective August 1998. As of November 30, 1998, the fund offered a
competitive market yield of 5.24%, equivalent to a taxable yield of 7.59% for
investors in the 31% federal income tax bracket.
As Tim mentioned in his letter to shareholders, share price performance among
the Nuveen exchange-traded funds has been strong over the past 12 months. As
interest rates fell, active demand for these funds increased share prices. At
the same time, strong bond market performance boosted NPW's net asset value,
narrowing the spread between the fund's share price and net asset value by
almost 500 basis points. As of November 30, 1998, NPW was trading at a discount
of 2.90% to its net asset value and also had a one-year total return on its
share price of 15.27%.
WHAT KEY STRATEGIES WERE USED TO MANAGE THE FUND DURING THE PAST YEAR?
As of November 30, 1998, NPW's largest sector - representing 21% of its holdings
- - was general tax obligation bonds, which was also the top-performing sector
over the past six months. One of the reasons this sector has performed so well
is the strong economic environment, which has boosted tax receipts and credit
quality in general, as the budgets of municipalities and school districts
continue to improve. Overall, the credit quality of the fund is high, with 67%
invested in bonds rated AAA. With the tight credit spreads between higher-rated
(AAA) and lower-rated, investment grade bonds (at least BBB rated) of the past
year, we maintained our heavy weighting in the AAA sector, while watching for
opportunities in lower or non-rated bonds that would allow us to pick up
additional yield for the fund. One example of this was our purchase of bonds
issued by the Spokane Parking Revenue Facility Downtown Development Authority
for the River Park Square project. These BBB/non-rated bonds, which mature in
2019, enabled us to add incremental yield to the fund.
WHAT IS NUVEEN'S OUTLOOK FOR THE FUTURE?
Going forward, we will continue to examine the call structure of the portfolio.
We will also look to take advantage of the most attractive new issues that come
to market. This would allow us to sell bonds with short call provisions at good
prices for the portfolio and reinvest the proceeds in well-structured new
issues. Working with our research analysts gives us the ability to select
lower-rated, investment grade bonds at attractive prices, if they are available,
as a way to increase the incremental yield of the fund. Selecting the bonds that
will help the fund meet these goals is an area where Nuveen's expertise - as an
experienced investment manager knowledgeable about the unique aspects of the
Washington state municipal market - can result in added value for our investors.
The current market environment - influenced by declining interest rates, benign
inflation, and strong municipal supply - has helped to position municipal bonds
as one of the most compelling values in today's marketplace. We expect that the
excellent municipal-to-Treasury ratio, combined with continued volatility in the
equity markets and investors' increasing awareness of the need for asset
allocation rebalancing, will result in growing demand for municipal bond funds.
We believe that investors who take advantage of current opportunities in the
municipal market should be rewarded with healthy returns and attractive yields
in the months ahead, as the market recognizes the value of these quality
investments.
1 The Lehman Brothers Municipal Bond Index is an unleveraged index comprising a
broad range of investment-grade municipal bonds and does not reflect any
initial or ongoing expenses.
2 The Lipper Peer Group return represents the average annualized returns of the
18 funds in the Lipper State Leveraged Municipal Debt category. The return
assumes reinvestment of dividends and does not reflect any applicable sales
charges.
3 Leverage-adjusted duration, also known as fund duration, takes into account
the leveraging process for each fund and therefore differs from the duration
of the actual portfolio of individual bonds that make up the fund. Unless
otherwise noted, refer ences to duration in this commentary are intended to
indicate fund duration.
F-58
<PAGE> 166
Nuveen Washington Premium Income Municipal Fund
Performance Overview
As of November 30, 1998
NPW
Portfolio Statistics
==================================================
Inception Date 3/93
- --------------------------------------------------
Share Price $14 7/8
- --------------------------------------------------
Net Asset Value Per Share $15.32
- --------------------------------------------------
Market Yield 5.24%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.59%
- --------------------------------------------------
Fund Net Assets ($000) $52,547
- --------------------------------------------------
Average Effective Maturity (Years) 17.95
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 9.45
- --------------------------------------------------
Annualized Total Return
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 15.27% 9.01%
- --------------------------------------------------
3-Year 13.40% 8.06%
- --------------------------------------------------
5-Year 7.47% 6.97%
- --------------------------------------------------
Since Inception 5.72% 7.01%
- --------------------------------------------------
Taxable-Equivalent Total Return(2)
==================================================
On Share Price On NAV
- --------------------------------------------------
1-Year 17.86% 11.39%
- --------------------------------------------------
3-Year 16.12% 10.47%
- --------------------------------------------------
5-Year 10.26% 9.53%
- --------------------------------------------------
Since Inception 8.35% 9.47%
- --------------------------------------------------
Top Five Sectors (as a % of total investments)
==================================================
Tax Obligation (General) 21%
- --------------------------------------------------
Utilities 15%
- --------------------------------------------------
Water and Sewer 13%
- --------------------------------------------------
Health Care 12%
- --------------------------------------------------
Transportation 8%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment nec
essary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
12/97 0.063
1/98 0.063
2/98 0.063
3/98 0.063
4/98 0.063
5/98 0.063
6/98 0.063
7/98 0.063
8/98 0.065
9/98 0.065
10/98 0.065
12/98 0.065
Line Chart:
Share Price Performance
12/5/97 13.875
13.938
13.688
13.563
13.75
14.625
14.063
14
14
14.375
14.125
13.688
13.875
13.938
14.125
13.75
13.75
13.625
13.5
13.813
13.5
13.5
13.5
13.5
13.625
13.625
13.563
13.563
13.688
13.875
13.813
13.938
13.75
13.625
14.125
14.063
14
14.25
14.188
14.125
14.25
14.25
14.5
14.375
14.25
14.44
14.44
14.31
14.75
14.88
11/30/98 14.875
Weekly Closing Price
Past performance is not predictive of future results.
F-59
<PAGE> 167
Portfolio of Investments
Nuveen Connecticut Premium Income Municipal Fund (NTC)
November 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 18.0%
$ 4,450,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Quinnipiac College Issue, Series D, 6.000%, 7/01/23 7/03 at 103 BBB- $4,587,372
Connecticut Higher Education Supplemental Loan Authority,
Revenue Bonds (Family Education Loan Program), 1996 Series A:
1,570,000 5.800%, 11/15/14 (Alternative Minimum Tax) 11/06 at 102 AAA 1,691,031
995,000 5.875%, 11/15/17 (Alternative Minimum Tax) 11/06 at 102 AAA 1,030,621
2,000,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Trinity College Issue, Series E, 5.875%, 7/01/26 7/06 at 102 AAA 2,170,500
2,040,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, The Loomis Chaffee School Issue, Series C,
5.500%, 7/01/16 7/06 at 102 AAA 2,143,387
2,250,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Fairfield University Issue, Series H, 5.000%, 7/01/23 7/08 at 102 AAA 2,252,835
2,920,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Connecticut College Issue, Series C-1, 5.500%, 7/01/20 7/07 at 102 AAA 3,101,682
3,810,000 The University of Connecticut, Student Fee Revenue Bonds, 1998 Series A,
4.750%, 11/15/27 11/08 at 101 AAA 3,690,480
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 19.5%
1,000,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Newington Childrens Hospital, Series A, 6.050%, 7/01/10 7/04 at 102 AAA 1,103,910
1,500,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Lawrence and Memorial Hospital Issue, Series D,
5.000%, 7/01/22 7/03 at 102 AAA 1,476,450
2,000,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Hospital of Saint Raphael Issue, Series H,
5.200%, 7/01/08 No Opt. Call AAA 2,157,240
2,725,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Saint Francis Hospital and Medical Center Issue,
Series B, 6.200%, 7/01/22 7/02 at 102 AAA 2,967,253
2,200,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Day Kimball Hospital Issue, Series A, 5.375%, 7/01/26 7/06 at 102 AAA 2,254,538
4,160,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Yale-New Haven Hospital Issue, Series H, 5.625%, 7/01/16 7/06 at 102 AAA 4,435,850
1,000,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, The William W. Backus Hospital Issue, Series D,
5.750%, 7/01/27 7/07 at 102 AAA 1,073,360
3,000,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Middlesex Health Services Issue, Series I,
5.125%, 7/01/27 7/07 at 101 Aaa 2,986,470
2,000,000 Connecticut Development Authority, Solid Waste Disposal Facilities Revenue
Bonds, Pfizer Inc. Project, 1994 Series, 7.000%, 7/01/25
(Alternative Minimum Tax) 7/05 at 102 AAA 2,338,880
1,500,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental
Control Facilities Financing Authority, Hospital Revenue Refunding Bonds,
1995 Series A (FHA Insured Mortgage Pila-Hospital Project),
6.125%, 8/01/25 8/05 at 101 1/2 AAA 1,660,740
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.9%
3,000,000 Housing Authority of the City of Waterbury (Connecticut), Mortgage Refunding
Revenue Bonds, Series 1998C (FHA Insured Mortgage Loan - Waterbury
NSA-II Section 8 Assisted Project), 5.450%, 7/01/23 1/02 at 100 AAA 3,032,040
1,360,000 Waterbury Nonprofit Housing Corporation, Connecticut Taxable Mortgage
Revenue Refunding Bonds (FHA Insured Mortgage Loan - Fairmont Height
Section 8 Assisted Project), Series 1993A, 6.500%, 7/01/07 7/02 at 101 AAA 1,459,280
</TABLE>
F-60
<PAGE> 168
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 1,930,000 Housing Authority of the City of Willimantic, Multi-Family Housing Revenue
Bonds, Series 1995A (GNMA Collateralized Mortgage Loan - Village Heights
Apartments Project), 8.000%, 10/20/30 10/05 at 105 AAA $2,233,222
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 5.2%
3,175,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program,
Series B, 6.200%, 5/15/12 5/03 at 102 AA 3,392,234
2,445,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program
Bonds, 1996 Subseries E-2, 6.150%, 11/15/27 (Alternative Minimum Tax) 11/06 at 102 AA 2,627,642
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 6.1%
2,000,000 State of Connecticut Health and Educational Facilities Authority,
Revenue Bonds, Nursing Home Program Issue, Series 1994, AHF/Hartford,
Inc. Project, 7.125%, 11/01/24 11/04 at 102 AA- 2,316,100
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds,
Nursing Home Program Issue, Series 1993, Mansfield Center for Nursing and
Rehabilitation Project, 5.875%, 11/01/12 11/03 at 102 AAA 2,190,800
Connecticut Development Authority, Health Facility Refunding Revenue Bonds,
Alzheimers Resource Center of Connecticut, Inc. Project, Series 1994:
1,300,000 6.875%, 8/15/04 No Opt. Call N/R 1,391,533
1,000,000 7.000%, 8/15/09 8/04 at 102 N/R 1,085,560
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.2%
1,750,000 State of Connecticut, General Obligation Bonds, 1993 Series D,
5.100%, 8/01/11 8/03 at 101 1/2 AA 1,820,543
2,000,000 State of Connecticut, General Obligation Bonds, 1993 Series E,
6.000%, 3/15/12 No Opt. Call AA 2,309,460
1,650,000 State of Connecticut, General Fund Obligation Bonds, 1994 Series A, Issued By
Connecticut Development Authority, 6.375%, 10/15/14 10/04 at 102 AA- 1,859,501
3,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998
(General Obligation Bonds), 4.875%, 7/01/23 7/08 at 101 AAA 3,480,015
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 4.8%
1,900,000 Capitol Region Education Council (Connecticut), 6.700%, 10/15/10 10/05 at 102 BBB 2,073,945
1,800,000 State of Connecticut, Special Tax Obligation Bonds, Transportation
Infrastructure Purposes, 1991 Series B, 6.500%, 10/01/10 No Opt. Call AA- 2,154,006
1,250,000 City of Waterbury, Connecticut, General Obligation Tax Revenue Intercept
Refunding Bonds, 1993 Issue, 5.375%, 4/15/08 4/03 at 102 AAA 1,324,013
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.4%
3,000,000 State of Connecticut, Airport Revenue Refunding Bonds, Bradley International
Airport, Series 1992, 7.650%, 10/01/12 10/04 at 100 AAA 3,550,140
City of New Haven, Connecticut, Air Rights Parking Facility Revenue Bonds,
Series 1991:
3,000,000 6.625%, 12/01/05 12/01 at 102 AAA 3,290,340
1,500,000 6.500%, 12/01/15 12/01 at 102 AAA 1,636,890
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 8.7%
2,355,000 State of Connecticut Health and Educational Facilities Authority, Revenue
Bonds, University of Hartford Issue, Series C, 8.000%, 7/01/18
(Pre-refunded to 7/01/03) 7/03 at 100 AAA 2,710,322
State of Connecticut Health and Educational Facilities
Authority, Revenue Bonds, Sacred Heart University Issue, Series B:
2,600,000 5.700%, 7/01/16 7/03 at 102 BBB-*** 2,644,772
1,000,000 5.800%, 7/01/23 7/03 at 102 BBB-*** 1,014,400
2,020,000 State of Connecticut Health and Educational Facilities Authority, Revenue
Bonds, Trinity College Issue, Series C, 6.000%, 7/01/22
(Pre-refunded to 7/01/02) 7/02 at 102 AAA 2,212,546
1,250,000 State of Connecticut Health and Educational Facilities Authority, Revenue
Bonds, Choate Rosemary Hall Issue, Series A, 7.000%, 7/01/25
(Pre-refunded to 7/01/04) 7/04 at 101 AAA 1,455,238
</TABLE>
F-61
<PAGE> 169
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Utilities - 11.6%
$ 3,250,000 Connecticut Municipal Electric Energy Cooperative, Power Supply System
Revenue Bonds, 1993 Series A, 5.000%, 1/01/18 1/04 at 102 AAA $3,262,350
2,200,000 Connecticut Resources Recovery Authority, Bridgeport Resco Company,
L.P. Project Bonds, Series A, 7.625%, 1/01/09 1/03 at 100 A 2,282,940
3,235,000 Connecticut Resources Recovery Authority, Resource Recovery Revenue
Bonds, American Ref-Fuel Company of Southeastern Connecticut Project,
1989 Series A, 7.700%, 11/15/11 11/99 at 103 AA 3,426,253
2,795,000 Connecticut Development Authority, Water Facilities Revenue Bonds,
Bridgeport Hydraulic Company Project, 1993 A Series, 5.600%, 6/01/28
(Alternative Minimum Tax) 6/03 at 102 AAA 2,906,772
1,400,000 Connecticut Development Authority, Water Facilities Refunding Revenue
Bonds (Bridgeport Hydraulic Company Project - 1993B Series),
5.500%, 6/01/28 6/03 at 102 AAA 1,469,720
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 2.9%
1,000,000 State of Connecticut, Clean Water Fund Subordinate Revenue Refunding
Bonds, 1996 Series, 5.250%, 7/01/10 1/05 at 101 AAA 1,056,700
2,000,000 South Central, Connecticut, Regional Water Authority, Water System
Revenue Bonds, Eleventh Series, 5.750%, 8/01/12 8/03 at 102 AAA 2,173,258
- ------------------------------------------------------------------------------------------------------------------------------------
$ 105,785,000 Total Investments - (cost $105,757,983) - 98.3% 112,965,134
=============
Other Assets Less Liabilities - 1.7% 1,933,050
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $114,898,184
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or 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.
N/R Investment is not rated.
See accompanying notes to financial statements.
F-62
<PAGE> 170
Portfolio of Investments
Nuveen Massachusetts Premium Income Municipal Fund (NMT)
November 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 21.0%
$ 835,000 Massachusetts Educational Financing Authority, Education Loan Revenue
Bonds, Issue E, Series 1995, 6.150%, 7/01/10 (Alternative Minimum Tax) 7/04 at 102 AAA $ 887,279
1,970,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds,
Boston College Issue, Series K, 5.250%, 6/01/23 6/03 at 102 AAA 1,996,516
1,500,000 Massachusetts Industrial Finance Agency, Revenue Bonds (College of the
Holy Cross - 1996 Issue), 5.500%, 3/01/20 3/06 at 102 AAA 1,581,600
2,645,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Whitehead
Institute for Biomedical Research - 1993 Issue), 5.125%, 7/01/26 7/03 at 102 Aa1 2,625,559
1,175,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Brooks
School Issue), Series 1993, 5.950%, 7/01/23 7/03 at 102 A3 1,235,242
3,500,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Phillips
Academy Issue), Series 1993, 5.375%, 9/01/23 9/08 at 102 AA+ 3,651,690
3,300,000 Massachusetts Industrial Finance Agency, Education Revenue Bonds
(Belmont Hill School Issue - Series 1998), 5.250%, 9/01/28 9/08 at 101 A 3,297,261
1,765,000 The New England Education Loan Marketing Corporation, Student Loan
Revenue Bonds, 1992 Subordinated Issue C, 6.750%, 9/01/02
(Alternative Minimum Tax) No Opt. Call A3 1,912,607
4,000,000 The New England Education Loan Marketing Corporation, Student Loan
Revenue Bonds, 1992 Subordinated Issue H, 6.900%, 11/01/09
(Alternative Minimum Tax) No Opt. Call A3 4,648,000
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 17.5%
4,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds,
New England Medical Center Hospitals Issue, Series G-1, 5.375%, 7/01/24 7/04 at 102 AAA 4,084,680
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds
(Daughters of Charity National Health System - The Carney Hospital),
Series D, 6.100%, 7/01/14 7/04 at 102 AA+ 2,178,800
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue
Bonds, Massachusetts General Hospital Issue, Series G, 5.375%, 7/01/11 7/00 at 100 AAA 1,049,650
3,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds,
Lahey Clinic Medical Center Issue, Series B, 5.625%, 7/01/15 7/03 at 102 AAA 3,151,170
400,000 Massachusetts Health and Educational Facilities Authority, Revenue
Refunding Bonds (Cardinal Cushing General Hospital), Series 1989-A,
8.500%, 7/01/00 7/99 at 102 1/2 N/R 412,656
Massachusetts Health and Educational Facilities Authority,
Revenue Refunding Bonds, Youville Hospital ssue (FHA Insured
Project), Series B:
2,460,000 6.125%, 2/15/15 2/04 at 102 Aa 2,602,828
1,000,000 6.000%, 2/15/25 2/04 at 102 Aa 1,044,500
2,805,000 Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Caregroup Issue, Series A, 5.000%, 7/01/25 7/08 at 102 AAA 2,771,144
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue
Bonds, Harvard Pilgrim Health Care Issue, Series A, 4.750%, 7/01/22 7/08 at 101 AAA 958,210
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 13.2%
3,800,000 Massachusetts Housing Finance Agency, Housing Project Revenue Bonds,
6.300%, 10/01/13 4/03 at 102 A+ 4,045,328
4,000,000 Massachusetts Housing Finance Agency, Housing Development Bonds,
1998 Series A, 5.375%, 6/01/16 (Alternative Minimum Tax) 6/08 at 101 AAA 4,115,880
</TABLE>
F-63
<PAGE> 171
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Housing/Multifamily (continued)
$ 3,315,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage
Revenue Bonds, 1997 Series C, 5.625%, 7/01/40 (Alternative Minimum Tax) 7/07 at 101 AAA $3,414,815
1,935,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage
Revenue Bonds, 1995 Series A (FHA Insured Mortgage Loans),
7.350%, 1/01/35 (Alternative Minimum Tax) 1/05 at 102 AAA 2,130,919
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 2.7%
1,000,000 Massachusett Health and Educational Facilities Authority, Revenue
Refunding Bonds, Youville Hospital Issue (FHA Insured Project),
Series A, 6.250%, 2/15/41 2/07 at 102 Aa2 1,086,310
1,125,000 Massachusetts Industrial Financial Agency, Revenue Bonds, Heights
Crossing Limited Partnership Issue (FHA Insured Project), Series 1995,
6.000%, 2/01/15 (Alternative Minimum Tax) 2/06 at 102 AAA 1,191,566
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Briscoe
House Assisted Living Issue (FHA Insured Project), 6.050%, 2/01/17
(Alternative Minimum Tax) 8/07 at 105 AAA 550,715
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 8.8%
Town of Barnstable, Massachusetts, General Obligation Bonds:
1,020,000 5.750%, 9/15/10 9/04 at 102 Aa3 1,118,716
1,020,000 5.750%, 9/15/11 9/04 at 102 Aa3 1,117,879
965,000 5.750%, 9/15/12 9/04 at 102 Aa3 1,049,785
1,000,000 City of Chelsea, Massachusetts, General Obligation Bonds, School
Project Loan Act of 1948, 7.000%, 6/15/03 No Opt. Call AAA 1,125,430
4,375,000 City of Lowell, Massachusetts, General Obligation State Qualified
Bonds, 5.600%, 11/01/12 11/03 at 102 AAA 4,722,944
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.6%
4,000,000 Massachusetts Port Authority, Special Facilities Revenue Bonds
(U.S. Air Project), Series 1996-A, 5.750%, 9/01/16
(Alternative Minimum Tax) 9/06 at 102 AAA 4,317,120
2,500,000 Massachusetts Industrial Finance Agency, Parking Facility Revenue
Bonds (Avon Associates LLC Project), Series 1998A, 5.375%, 4/01/20 4/03 at 102 AAA 2,560,425
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 19.0%
2,500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds,
Malden Hospital Issue (FHA Insured Project), Series A, 5.000%, 8/01/16 No Opt. Call AAA 2,551,450
Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, New England Deaconess Hospital Issue, Series D:
3,310,000 6.625%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 3,666,851
1,000,000 6.875%, 4/01/22 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 1,115,410
1,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1982,
13.000%, 7/01/13 No Opt. Call AAA 1,717,830
2,500,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds,
College of the Holy Cross, 1992 Issue II, 6.375%, 11/01/15
(Pre-refunded to 11/01/02) 11/02 at 102 AA-*** 2,782,700
1,300,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Merrimack
College Issue, Series 1992, 7.125%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 1,470,053
3,000,000 Massachusetts Water Resources Authority, General Revenue Bonds,
1991 Series A, 5.750%, 12/01/21 (Pre-refunded to 12/01/01) 12/01 at 100 Aaa 3,180,900
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P,
7.000%, 7/01/21 (Pre-refunded to 7/01/01) 7/01 at 102 Aaa 3,311,010
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 5.5%
2,000,000 Massachusetts Municipal Wholesale Electric Company, Power Supply
System Revenue Bonds, 1992 Series A, 6.000%, 7/01/18 7/02 at 100 AAA 2,126,480
3,275,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue
Bonds, SEMASS Project, Series 1991B, 9.250%, 7/01/15
(Alternative Minimum Tax) 7/01 at 103 N/R 3,636,003
</TABLE>
F-64
<PAGE> 172
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer - 2.8%
$ 3,000,000 Massachusetts Water Resources Authority, General Revenue Refunding Bonds,
1993 Series B, 5.000%, 3/01/22 3/03 at 100 A1 $2,949,150
- ------------------------------------------------------------------------------------------------------------------------------------
$ 94,795,000 Total Investments - (cost $93,649,807) - 97.1% 101,145,061
=============
Other Assets Less Liabilities - 2.9% 2,967,494
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $104,112,555
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or 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.
N/R Investment is not rated.
See accompanying notes to financial statements.
F-65
<PAGE> 173
Portfolio of Investments
Nuveen Missouri Premium Income Municipal Fund (NOM)
November 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 5.7%
$ 500,000 The Industrial Development Authority of the City of Kansas City, Missouri,
(Ewing Marion Kauffman Foundation Project), Fixed Rate Revenue Bonds,
Series 1997B, 5.700%, 4/01/27 4/07 at 100 AAA $ 531,110
1,775,000 Northwest Missouri State University, Housing System Revenue Bonds,
Series 1998, 7.000%, 6/01/11 6/08 at 100 Aaa 2,135,627
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 10.1%
1,000,000 Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Refunding Revenue Bonds (SSM Health Care),
Series 1992AA, 6.250%, 6/01/07 6/02 at 102 AAA 1,093,720
1,000,000 Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (BJC Health System), Series 1994A,
6.750%, 5/15/12 No Opt. Call AA 1,212,240
1,000,000 Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (Lake of the Ozarks General
Hospital Inc.), Series 1996, 6.500%, 2/15/21 2/06 at 102 BBB+ 1,092,300
400,000 Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (BJC Health System), Series 1998,
5.000%, 5/15/28 5/08 at 101 AA 391,240
1,000,000 Ray County, Missouri, Hospital Revenue Bonds (Ray County
Memorial Hospital), Series 1997, 5.750%, 11/15/12 5/05 at 101 1/2 N/R 1,015,520
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 14.0%
650,000 The Industrial Development Authority of the City of Kansas City,
Missouri, Multifamily Housing Revenue Refunding Bonds (President
Gardens Apartment Project), Series 1997A, 5.550%, 8/01/25 2/08 at 102 AAA 667,934
1,550,000 Missouri Housing Development Commission, Multifamily Housing
Revenue Bonds (Brookstone Village Apartments Project),
1996 Series A, 6.100%, 12/01/21 (Alternative Minimum Tax) 12/06 at 102 AAA 1,646,550
1,250,000 The Industrial Development Authority of St. Charles County, Missouri,
Multifamily Housing Revenue Bonds (Ashwood Apartments Project),
Series 1998A, 5.600%, 4/01/30 (Alternative Minimum Tax) 4/08 at 102 AAA 1,276,200
1,045,000 The Industrial Development Authority of the County of St. Louis, Missouri,
Multifamily Housing Revenue Refunding Bonds (GNMA Collateralized -
South Summit Apartments Project), Series 1997A, 5.950%, 4/20/17 4/07 at 102 AAA 1,120,240
600,000 The Industrial Development Authority of the County of St. Louis, Missouri,
Multifamily Housing Revenue Refunding Bonds (GNMA
Collateralized - South Summit Apartments Project), Series 1997B,
6.000%, 10/20/15 (Alternative Minimum Tax) 4/07 at 102 AAA 640,104
1,250,000 The Industrial Development Authority of University City, Missouri,
Multifamily Housing Revenue Refunding Bonds (GNMA
Collateralized - Canterbury Gardens Project), Series 1995A,
5.900%, 12/20/20 12/05 at 102 AAA 1,314,350
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 8.9%
1,795,000 Missouri Housing Development Commission, Single Family Mortgage
Revenue Bonds (Homeownership Loan Program), 1995 Series C,
7.250%, 9/01/26 (Alternative Minimum Tax) 3/06 at 105 AAA 2,034,938
2,075,000 Missouri Housing Development Commission, Single Family Mortgage
Revenue Bonds (GNMA Mortgage-Backed Securities Program),
1991 Series A, 7.375%, 8/01/23 (Alternative Minimum Tax) 2/01 at 102 AAA 2,188,897
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 17.2%
2,020,000 Ritenour School District of St. Louis County, Missouri, General Obligation
School Bonds, Series 1995, 7.375%, 2/01/12 No Opt. Call AAA 2,553,623
1,500,000 Francis Howell School District, St. Charles County, Missouri, General
Obligation Refunding Bonds, Series 1994A, 7.800%, 3/01/08 No Opt. Call AAA 1,900,695
1,000,000 School District of the City of St. Charles, Missouri, General Obligation
Bonds (Missouri Direct Deposit Program), Series 1996A,
5.625%, 3/01/14 3/06 at 100 AA 1,072,590
1,395,000 The Board of Education of the City of St. Louis (Missouri), General
Obligation School Refunding Bonds, Series 1993A, 8.500%, 4/01/07 No Opt. Call AAA 1,815,383
625,000 Reorganized School District No. R-IV of Stone County, Missouri (Reeds
Spring, Missouri), General Obligation School Building, Refunding
and Improvement Bonds, Series 1995, 7.600%, 3/01/10 No Opt. Call AAA 808,194
</TABLE>
F-66
<PAGE> 174
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/Limited - 16.6%
$ 1,000,000 Fort Zumwalt School District Improvement Corporation, Leasehold
Revenue Bonds, Fort Zumwalt S.D., St Charles County, Series 1997,
5.600%, 3/01/17 3/07 at 100 Aaa $1,060,270
1,000,000 Land Clearance for Redevelopment Authority of Kansas City, Missouri,
Lease Revenue Bonds (Municipal Auditorium and Muehlebach Hotel
Redevelopment Project), Series 1995A, 5.900%, 12/01/18 12/05 at 102 AAA 1,086,290
1,000,000 Kansas City Municipal Assistance Corporation, Leasehold Revenue
Capital Improvement Bonds (Kansas City, Missouri, Lessee),
Series 1996B, 5.700%, 1/15/13 1/06 at 101 AAA 1,081,520
1,000,000 Regional Convention and Sports Complex Authority, Convention and
Sports Facility Project and Refunding Bonds, Series A 1993
(State of Missouri Sponsor), 5.500%, 8/15/13 8/03 at 102 A+ 1,041,700
1,500,000 St. Louis Municipal Finance Corporation, Leasehold Revenue Refunding
Bonds, 5.850%, 7/15/09 7/03 at 102 A1 1,608,360
1,800,000 St. Louis Municipal Finance Corporation, City Justice Center, Leasehold
Revenue Improvement Bonds, Series 1996A (City of St. Louis, Missouri,
Lessee), 5.750%, 2/15/11 2/06 at 102 AAA 1,977,822
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 6.0%
1,500,000 City of Kansas City, Missouri, General Improvement Airport Bonds,
Series 1994 A, 6.900%, 9/01/11 (Alternative Minimum Tax) 9/04 at 101 AAA 1,708,095
1,000,000 The City of St. Louis, Missouri, Airport Revenue Bonds, Series 1997
(1997 Capital Improvement Program), Lambert - St.Louis International
Airport, 6.000%, 7/01/12 (Alternative Minimum Tax) No Opt. Call AAA 1,134,260
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 9.4%
1,290,000 Health and Educational Facilities Authority of the State of Missouri,
Health Facilities Revenue Bonds (SSM Health Care Obligated
Group Projects), Series 1990B, 7.000%, 6/01/15 6/00 at 102 AAA 1,391,226
1,500,000 Certificates of Receipt, Series 1993, St. Louis County, Missouri,
GNMA Collateralized Mortgage Revenue Bonds (Escrowed with
United States Governmental Obligations), 5.650%, 7/01/20
(Alternative Minimum Tax) No Opt. Call AAA 1,651,950
1,275,000 St. Louis Municipal Finance Corporation, Leasehold Revenue Improvement
and Refunding Bonds, Series 1992 (City of St. Louis, Missouri, Lessee),
6.250%, 2/15/12 (Pre-refunded to 2/15/05) 2/05 at 100 AAA 1,433,852
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 10.3%
1,225,000 State Environmental Improvement and Energy Resources Authority
(State of Missouri), Water Pollution Control Revenue Bonds (State
Revolving Fund Program - City of Kansas City Project),
Series 1995B, 7.750%, 1/01/08 1/05 at 102 Aa1 1,473,908
1,000,000 State Environmental Improvement and Energy Resources Authority
(State of Missouri), Water Pollution Control Revenue Bonds (State
Revolving Fund Program - City of Branson Project),
Series 1995A, 6.050%, 7/01/16 7/04 at 102 AAA 1,106,810
1,000,000 State Environmental Improvement and Energy Resources Authority
(State of Missouri), Water Pollution Control Revenue Bonds (State
Revolving Fund Program - Multiple Participant Series),
Series 1996D, 5.875%, 1/01/15 1/06 at 101 Aa1 1,074,460
350,000 State Environmental Improvement and Energy Resources Authority
(State of Missouri), Water Pollution Control Revenue Bonds (State
Revolving Fund Program - City of Kansas City Project),
Series 1997C, 6.750%, 1/01/12 No Opt. Call Aa1 $ 426,642
750,000 The City of St. Louis, Missouri, Water Revenue Refunding and
Improvement Bonds, Series 1994, 6.000%, 7/01/14 7/04 at 102 AAA 829,050
- ------------------------------------------------------------------------------------------------------------------------------------
$ 41,620,000 Total Investments - (cost $43,112,428) - 98.2% 46,597,670
=============
Other Assets Less Liabilities - 1.8% 858,537
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $47,456,207
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the
earliest optional call or redemption. There may be other call provisions at
varying prices at later dates.
** Ratings: Using the higher of Standard & Poor's or Moody's rating.
N/R Investment is not rated.
See accompanying notes to financial statements.
F-67
<PAGE> 175
Portfolio of Investments
Nuveen Washington Premium Income Municipal Fund (NPW)
November 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Education and Civic Organizations - 5.1%
$ $1,000,000 University of Washington, Housing and Dining System Revenue Refunding
Bonds, Junior Lien Series 1996, 5.125%, 12/01/15 12/06 at 102 AAA $1,022,860
1,400,000 Washington State University, Housing and Dining System Revenue and
Refunding Bonds, Series 1994, 6.375%, 10/01/18 10/04 at 101 AAA 1,560,510
65,000 Western Washington University, Housing and Dining System Revenue
Bonds, Series 1992, 6.375%, 10/01/22 10/02 at 101 AAA 70,788
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care - 11.7%
1,000,000 Washington Health Care Facilities Authority, Revenue Bonds,
Series 1993A (The Heart Institute of Spokane), 5.800%, 8/15/18 8/04 at 102 AA- 1,051,550
2,000,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1992
(The Childrens Hospital and Medical Center, Seattle), 6.125%, 10/01/13 10/02 at 102 AAA 2,203,960
2,000,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1998
(Highline Community Hospital), 5.000%, 8/15/21 8/08 at 102 AA 1,930,100
1,000,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1998
(Harrison Memorial Hospital), 5.000%, 8/15/28 8/13 at 102 AAA 973,520
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Multifamily - 5.9%
2,000,000 Housing Authority of the County of King Washington, Housing Revenue Bonds,
Series 1995 (Woodridge Park Project), 6.350%, 5/01/25
(Alternative Minimum Tax) 5/05 at 100 AA+ 2,108,460
965,000 Washington State Housing Finance Commission, Multifamily Mortgage
Revenue Bonds (GNMA Mortgage Backed Securities Program),
Series 1989A, 7.700%, 7/01/32 (Alternative Minimum Tax) 1/00 at 103 AAA 1,006,360
- ------------------------------------------------------------------------------------------------------------------------------------
Housing/Single Family - 4.4%
1,610,000 Washington State Housing Finance Commission, Single-Family Mortgage
Revenue Bonds (Mortgage Backed Securities Program), Series 1992D-1,
6.150%, 1/01/26 (Alternative Minimum Tax) No Opt. Call AAA 1,796,519
475,000 Washington State Housing Finance Commission, Single Family Program
Bonds, 1997 Series 2A, 6.050%, 12/01/16 6/07 at 102 Aaa 504,987
- ------------------------------------------------------------------------------------------------------------------------------------
Long Term Care - 3.5%
1,640,000 Housing Authority of Skagit County, Low-Income Housing Assistance
Revenue Bonds, Series 1993 (GNMA Collateralized Mortgage Loan -
Sea Mar Project), 7.000%, 6/20/35 11/04 at 104 AAA 1,818,038
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/General - 20.9%
1,655,000 City of Everett, Washington, Limited Tax General Obligation Bonds,
Series 1997, 5.125%, 9/01/17 9/07 at 100 Aaa 1,681,828
1,000,000 Federal Way School District No. 210, King County, Washington,
Unlimited Tax General Obligation and Refunding Bonds,
Series 1993, 5.750%, 12/01/12 No Opt. Call AAA 1,126,040
1,360,000 Tahoma School District No. 409, King County, Washington, Unlimited
Tax General Obligation Improvement and Refunding Bonds,
Series 1997, 6.000%, 12/01/10 No Opt. Call Aaa 1,561,919
1,000,000 Peninsula School District No. 401, Pierce County, Washington, Unlimited
Tax General Obligation Refunding Bonds, Series 1993, 5.500%, 12/01/08 No Opt. Call AAA 1,099,710
1,000,000 The City of Renton, Washington, Limited Tax General Obligation Bonds,
General Purpose/Public Improvement Bonds, Series 1997B,
5.750%, 12/01/17 6/07 at 100 AAA 1,075,440
1,500,000 Mukilteo School District No. 6, Snohomish County, Washington, Unlimited
Tax General Obligation and Refunding Bonds, Series 1993,
5.700%, 12/01/12 No Opt. Call AAA 1,684,665
</TABLE>
F-68
<PAGE> 176
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax Obligation/General (continued)
$ 500,000 Edmonds School District No. 15, Snohomish County, Washington,
Unlimited Tax General Obligation Bonds, Series 1994,
6.500%, 12/01/08 No Opt. Call AA- $ 587,105
2,000,000 State of Washington, General Obligation Bonds, Series 1994B,
6.000%, 5/01/19 5/04 at 100 AA+ 2,144,260
- ------------------------------------------------------------------------------------------------------------------------------------
Tax Obligation/Limited - 3.6%
Seattle Indian Services Commission, Special Obligation Bonds, Series 1994:
1,000,000 6.000%, 11/01/16 11/04 at 100 AA+ 1,080,650
750,000 6.150%, 11/01/24 11/04 at 100 AA+ 820,905
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation - 7.9%
1,300,000 Port of Seattle, Washington, Revenue Bonds, Series 1996A,
5.500%, 9/01/21 9/06 at 101 AAA 1,366,677
1,000,000 Port of Vancouver, Clark County, Washington, Limited Tax General
Obligation Bonds, 1994 Series B, 6.000%, 12/01/04
(Alternative Minimum Tax) No Opt. Call AAA 1,107,760
1,675,000 Spokane Downtown Foundation, Parking Revenue Bonds, Series 1998
(River Park Square Project), 5.600%, 8/01/19 8/08 at 102 BBB- 1,687,713
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Guaranteed - 7.6%
1,000,000 Port of Seattle, Washington, Revenue Bonds, Series 1990A,
6.000%, 12/01/14 (Pre-refunded to 12/01/00) 12/00 at 100 AA-*** 1,048,900
1,250,000 Washington Health Care Facilities Authority, Revenue Bonds, Refunding
Series 1992 (Franciscan Health System/Saint Clare Hospital, Tacoma),
6.625%, 7/01/20 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 1,392,038
1,400,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1992,
(Swedish Hospital Medical Center, Seattle), 6.300%, 11/15/22
(Pre-refunded to 11/15/02) 11/02 at 102 AAA 1,555,162
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities - 14.3%
1,100,000 Public Utility District No. 1 of Klickitat County, Washington, Electric
Revenue Bonds, Series 1995, 5.650%, 10/01/15 10/05 at 101 AAA 1,171,995
1,000,000 Lewis County Public Utility District, Cowlitz Falls Hydroelectric Project,
Revenue Refunding Bonds, Series 1993, 5.500%, 10/01/22 10/03 at 102 Aa1 1,033,550
1,000,000 The City of Seattle, Washington, Municipal Light and Power Revenue
Bonds, 5.625%, 10/01/21 10/06 at 102 AAA 1,066,030
500,000 The City of Seattle, Washington, Municipal Light and Power Revenue
Bonds, Series 1992A, 5.750%, 8/01/12 8/02 at 102 AA 536,690
1,385,000 Public Utility District No. 1 of Snohomish County, Washington, Generation
System Revenue Bonds, Series 1993B, 5.750%, 1/01/09
(Alternative Minimum Tax) 1/04 at 102 A+ 1,479,402
1,000,000 Washington Public Power Supply System, Nuclear Project No. 1
Refunding Revenue Bonds, Series 1993A, 5.700%, 7/01/17 7/03 at 102 AAA 1,045,270
1,000,000 Washington Public Power Supply System, Nuclear Project No. 3
Refunding Revenue Bonds, Series 1993B, 7.000%, 7/01/09 No Opt. Call Aa1 1,201,630
- ------------------------------------------------------------------------------------------------------------------------------------
Water and Sewer - 13.2%
1,050,000 City of Bellevue, King County, Washington, Water and Sewer Revenue
Refunding Bonds, Series 1994, 5.875%, 7/01/09 7/04 at 100 Aa 1,139,985
1,035,000 Covington Water District, 6.050%, 3/01/20 3/05 at 100 AAA 1,120,046
800,000 Kitsap County, Washington, Sewer Revenue Bonds, Series 1996,
5.750%, 7/01/16 7/06 at 100 AAA 865,504
900,000 City of Richland, Washington, Water and Sewer Improvement Revenue
Bonds, Series 1993, 5.625%, 4/01/12 4/03 at 100 AAA 963,918
1,200,000 Sammamish Plateau Water and Sewer District, King County, Washington,
Water and Sewer Revenue Refunding Bonds, 1996, 5.500%, 12/01/16 12/06 at 100 AAA 1,250,820
</TABLE>
F-69
<PAGE> 177
<TABLE>
<CAPTION>
Principal Optional Call Market
Amount Description Provisions* Ratings** Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Water and Sewer (continued)
$ 500,000 The City of Seattle, Washington, Water System and Refunding Revenue
Bonds, 1993, 5.250%, 12/01/23 6/03 at 101 AA $ 505,345
1,000,000 Yakima - Tieton Irrigation District, Yakima County, Washington, Refunding
Revenue Bonds, 1992, 6.125%, 6/01/13 6/03 at 102 AAA 1,099,798
- ------------------------------------------------------------------------------------------------------------------------------------
$ 48,015,000 Total Investments - (cost $47,698,973) - 98.1% 51,548,407
=============
Other Assets Less Liabilities - 1.9% 999,041
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $52,547,448
====================================================================================================================
</TABLE>
* Optional Call Provisions: Dates (month and year) and prices of the earliest
optional call or redemption. There may be other call provisions at varying
prices at later dates.
** Ratings: Using the higher of Standard & Poor's or 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.
See accompanying notes to financial statements.
F-70
<PAGE> 178
Statement of Net Assets
November 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments in municipal securities, at
market value (note 1) $112,965,134 $101,145,061 $46,597,670 $51,548,407
Cash 407,976 76,500 145,573 327,998
Receivables:
Interest 1,978,935 1,881,649 859,177 895,701
Investments sold -- 1,438,100 40,725 --
Other assets 10,146 8,644 8,652 7,061
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 115,362,191 104,549,954 47,651,797 52,779,167
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities
Accrued expenses:
Management fees (note 6) 61,182 55,422 25,283 27,990
Other 47,487 44,424 30,233 46,685
Preferred share dividends payable 9,989 10,957 4,819 6,241
Common share dividends payable 345,349 326,596 135,255 150,803
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 464,007 437,399 195,590 231,719
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $114,898,184 $104,112,555 $47,456,207 $52,547,448
====================================================================================================================================
Preferred shares, at liquidation value $ 38,300,000 $ 34,000,000 $16,000,000 $17,000,000
====================================================================================================================================
Preferred shares outstanding 1,532 1,360 640 680
====================================================================================================================================
Common shares outstanding 5,193,215 4,632,575 2,146,908 2,320,051
====================================================================================================================================
Net asset value per Common share outstanding
(net assets less Preferred shares at liquidation
value, divided by Common shares outstanding) $ 14.75 $ 15.13 $ 14.65 $ 15.32
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-71
<PAGE> 179
Statement of Operations
Six Months Ended November 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment Income (note 1) $3,099,304 $2,846,455 $1,272,941 $1,415,081
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses
Management fees (note 6) 372,005 337,135 153,744 170,294
Preferred shares - auction fees 48,006 42,617 20,055 21,309
Preferred shares - dividend disbursing agent fees 5,014 5,014 5,014 5,014
Shareholders' servicing agent fees and expenses 8,106 4,152 3,616 1,498
Custodian's fees and expenses 19,380 18,803 15,930 16,344
Trustees' fees and expenses (note 6) 536 487 223 245
Professional fees 8,660 8,647 8,570 8,577
Shareholders' reports - printing and mailing expenses 19,314 18,897 10,885 10,660
Stock exchange listing fees 8,147 8,131 1,001 1,087
Investor relations expense 5,078 4,343 2,200 2,101
Other expenses 4,672 4,546 3,180 3,228
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 498,918 452,772 224,418 240,357
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 2,600,386 2,393,683 1,048,523 1,174,724
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) from Investments
Net realized gain (loss) from investment transactions
(notes 1 and 4) 63,498 28,637 (6,830) 148,001
Net change in unrealized appreciation or
depreciation of investments 1,235,664 1,054,087 482,804 461,416
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 1,299,162 1,082,724 475,974 609,417
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $3,899,548 $3,476,407 $1,524,497 $1,784,141
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-72
<PAGE> 180
Statement of Changes in Net Assets
(Unaudited)
<TABLE>
<CAPTION>
Connecticut Massachusetts
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 2,600,386 $ 5,159,370 $ 2,393,683 $ 4,891,388
Net realized gain (loss) from investment transactions
(notes 1 and 4) 63,498 422,013 28,637 671,439
Net change in unrealized appreciation or
depreciation of investments 1,235,664 4,143,106 1,054,087 3,102,632
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 3,899,548 9,724,489 3,476,407 8,665,459
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Common shareholders (2,069,968) (4,108,452) (1,964,836) (3,905,877)
Preferred shareholders (523,143) (1,169,485) (467,634) (1,096,311)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,593,111) (5,277,937) (2,432,470) (5,002,188)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from Common shares issued to shareholders due
to reinvestment of distributions 207,675 413,844 132,648 266,611
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 1,514,112 4,860,396 1,176,585 3,929,882
Net assets at beginning of period 113,384,072 108,523,676 102,935,970 99,006,088
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $114,898,184 $113,384,072 $104,112,555 $102,935,970
===================================================================================================================================
Balance of undistributed net investment
income at end of period $ 291,378 $ 284,103 $ 175,441 $ 214,228
===================================================================================================================================
<CAPTION>
Missouri Washington
- -----------------------------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operations
Net investment income $ 1,048,523 $ 2,134,126 $ 1,174,724 $ 2,368,345
Net realized gain (loss) from investment transactions
(notes 1 and 4) (6,830) 380,799 148,001 94,941
Net change in unrealized appreciation or
depreciation of investments 482,804 1,267,040 461,416 2,195,317
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 1,524,497 3,781,965 1,784,141 4,658,603
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders (note 1)
From undistributed net investment income:
Common shareholders (812,903) (1,629,870) (895,539) (1,753,958)
Preferred shareholders (257,887) (526,508) (289,249) (596,423)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,070,790) (2,156,378) (1,184,788) (2,350,381)
- -----------------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions (note 2)
Net proceeds from Common shares issued to shareholders due
to reinvestment of distributions 67,180 85,411 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 520,887 1,710,998 599,353 2,308,222
Net assets at beginning of period 46,935,320 45,224,322 51,948,095 49,639,873
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $47,456,207 $46,935,320 $52,547,448 $51,948,095
===================================================================================================================================
Balance of undistributed net investment
income at end of period $ 134,615 $ 156,882 $ 95,564 $ 105,628
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-73
<PAGE> 181
Notes to Financial Statements
(Unaudited)
1. General Information and Significant Accounting Policies
The state Funds (the "Funds") covered in this report and their corresponding
stock exchange symbols are Nuveen Connecticut Premium Income Municipal Fund
(NTC), Nuveen Massachusetts Premium Income Municipal Fund (NMT), Nuveen Missouri
Premium Income Municipal Fund (NOM) and Nuveen Washington Premium Income
Municipal Fund (NPW). Connecticut and Massachusetts are traded on the New York
Stock Exchange while Missouri and Washington are traded on the American Stock
Exchange.
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities within a single state. 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 Trustees. 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
November 30, 1998, there were no such outstanding purchase commitments in any of
the 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.
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 Common share. Furthermore, each Fund
intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal and designated state income
taxes, if any, to retain such tax-exempt status when distributed to shareholders
of the Funds. 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.
F-74
<PAGE> 182
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in one Series. The dividend rate on each
Series may change every seven days, as set by the auction agent. The number of
shares outstanding for each Fund is as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of Shares:
Series Th 1,532 1,360 640 680
================================================================================
</TABLE>
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 six months ended November 30, 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 shares were as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued to shareholders
due to reinvestment of
distributions 13,023 27,446 8,051 17,254
===============================================================================================================
<CAPTION>
Missouri Washington
- ---------------------------------------------------------------------------------------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
11/30/98 5/31/98 11/30/98 5/31/98
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued to shareholders
due to reinvestment of
distributions 4,448 5,923 -- --
===============================================================================================================
</TABLE>
3. Distributions to Common Shareholders
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on December 28, 1998, to shareholders of
record on December 15, 1998, as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share $.0665 $.0705 $.0630 $.0650
================================================================================
</TABLE>
At the same time, Massachusetts and Missouri also declared taxable
distributions, which include capital gains and/or market discount, of $.0051 and
$.0095 per share, respectively.
4. Securities Transactions
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the six months ended November
30, 1998, were as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal securities $2,205,923 $ 8,343,284 $ 389,732 $2,627,838
Temporary municipal investments 2,500,000 11,800,000 800,000 300,000
Sales and Maturities:
Investments in municipal securities 2,439,755 8,940,500 155,000 2,704,045
Temporary municipal investments 2,500,000 12,100,000 1,100,000 500,000
===========================================================================================================
</TABLE>
At November 30, 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.
F-75
<PAGE> 183
At May 31, 1998, the Funds' last fiscal year end, the Funds had unused capital
loss carryforwards available for federal income tax purposes to be applied
against future capital gains, if any. If not applied, the carryforwards will
expire as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiration year:
2003 $ 895,482 $ 615,511 $ 949,075 $469,931
2004 1,105,901 945,779 708,417 70,082
2005 847,914 195,761 -- --
- -----------------------------------------------------------------------------------------------------------
Total $2,849,297 $ 1,757,051 $1,657,492 $540,013
===========================================================================================================
</TABLE>
5. Unrealized Appreciation (Depreciation)
Gross unrealized appreciation and gross unrealized depreciation of investments
at November 30, 1998, were as follows:
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $7,207,151 $7,509,607 $3,485,242 $3,854,825
depreciation -- (14,353) -- (5,391)
- -----------------------------------------------------------------------------------------------------------
Net unrealized appreciation $7,207,151 $7,495,254 $3,485,242 $3,849,434
===========================================================================================================
</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:
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
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
================================================================================
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 Trustees who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
F-76
<PAGE> 184
7. Composition of Net Assets
At November 30, 1998, net assets consisted of:
<TABLE>
<CAPTION>
Connecticut Massachusetts Missouri Washington
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred shares, $25,000 stated value per share,
at liquidation value $ 38,300,000 $ 34,000,000 $16,000,000 $17,000,000
Common shares, $.01 par value per share 51,932 46,326 21,469 23,201
Paid-in surplus 71,832,934 64,123,948 29,479,203 31,971,262
Balance of undistributed net investment income 291,378 175,441 134,615 95,564
Accumulated net realized gain (loss)
from investment transactions (2,785,211) (1,728,414) (1,664,322) (392,013)
Net unrealized appreciation of investments 7,207,151 7,495,254 3,485,242 3,849,434
- -----------------------------------------------------------------------------------------------------------
Net assets $114,898,184 $104,112,555 $47,456,207 $52,547,448
===========================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
===========================================================================================================
</TABLE>
F-77
<PAGE> 185
Financial Highlights
(Unaudited)
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
<S> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1999 (a) $14.49 $ .50 $ .26 $ .76
1998 13.63 1.00 .89 1.89
1997 12.99 1.00 .60 1.60
1996 13.20 .98 (.21) .77
1995 12.45 .98 .74 1.72
1994 13.96 .77 (1.40) (.63)
<CAPTION>
Massachusetts
<S> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) 14.91 .52 .22 .74
1998 14.11 1.06 .83 1.89
1997 13.58 1.06 .53 1.59
1996 13.76 1.05 (.19) .86
1995 12.90 1.04 .84 1.88
1994 14.08 .87 (1.01) (.14)
<CAPTION>
Missouri
<S> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) 14.44 .49 .22 .71
1998 13.68 .99 .78 1.77
1997 13.11 1.00 .55 1.55
1996 13.37 .96 (.30) .66
1995 12.35 .95 1.02 1.97
1994 13.90 .76 (1.40) (.64)
<CAPTION>
Washington
<S> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) 15.06 .51 .27 .78
1998 14.07 1.02 .99 2.01
1997 13.48 1.02 .58 1.60
1996 13.71 1.02 (.23) .79
1995 12.97 1.01 .77 1.78
1994 14.09 .91 (.93) (.02)
</TABLE>
F-78
<PAGE> 186
<TABLE>
<CAPTION>
Less Distributions
--------------------------------------------------------------------------
Net Net
Investment Investment Capital Capital
Income Income Gain Gain
To Common To Preferred To Common To Preferred
Shareholders Shareholders+ Shareholders Shareholders+ Total
<S> <C> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1999 (a) $(.40) $(.10) $-- $-- $ (.50)
1998 (.80) (.23) -- -- (1.03)
1997 (.76) (.20) -- -- (.96)
1996 (.73) (.25) -- -- (.98)
1995 (.74) (.23) -- -- (.97)
1994 (.61) (.13) -- -- (.74)
<CAPTION>
Massachusetts
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) (.42) (.10) -- -- (.52)
1998 (.85) (.24) -- -- (1.09)
1997 (.84) (.22) -- -- (1.06)
1996 (.80) (.24) -- -- (1.04)
1995 (.78) (.24) -- -- (1.02)
1994 (.74) (.15) -- -- (.89)
<CAPTION>
Missouri
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) (.38) (.12) -- -- (.50)
1998 (.76) (.25) -- -- (1.01)
1997 (.73) (.25) -- -- (.98)
1996 (.67) (.25) -- -- (.92)
1995 (.69) (.26) -- -- (.95)
1994 (.59) (.14) -- -- (.73)
<CAPTION>
Washington
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) (.39) (.13) -- -- (.52)
1998 (.76) (.26) -- -- (1.02)
1997 (.75) (.26) -- -- (1.01)
1996 (.74) (.28) -- -- (1.02)
1995 (.77) (.27) -- -- (1.04)
1994 (.76) (.16) (.01) -- (.93)
</TABLE>
F-79
<PAGE> 187
<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**
<S> <C> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1999 (a) $-- $14.75 $16.3750 8.29% 4.59%
1998 -- 14.49 15.5000 15.61 12.39
1997 -- 13.63 14.1250 9.58 11.01
1996 -- 12.99 13.6250 14.06 3.97
1995 -- 13.20 12.6250 2.22 12.74
1994 (.14) 12.45 13.1250 (8.73) (6.74)
<CAPTION>
Massachusetts
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) -- 15.13 16.5625 2.98 4.36
1998 -- 14.91 16.5000 18.08 11.91
1997 -- 14.11 14.7500 13.76 10.28
1996 -- 13.58 13.7500 8.99 4.55
1995 -- 13.76 13.3750 14.12 13.58
1994 (.15) 12.90 12.5000 (13.64) (3.38)
<CAPTION>
Missouri
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) -- 14.65 15.3750 11.12 4.10
1998 -- 14.44 14.1875 14.53 11.31
1997 -- 13.68 13.0625 10.53 10.09
1996 -- 13.11 12.5000 10.07 3.09
1995 -- 13.37 12.0000 6.13 14.74
1994 (.18) 12.35 12.0000 (17.26) (7.16)
<CAPTION>
Washington
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) -- 15.32 14.8750 12.15 4.33
1998 -- 15.06 13.6250 15.26 12.64
1997 -- 14.07 12.5000 12.94 10.16
1996 -- 13.48 11.7500 7.44 3.75
1995 -- 13.71 11.6250 .41 12.36
1994 (.17) 12.97 12.3750 (16.88) (2.73)
</TABLE>
F-80
<PAGE> 188
<TABLE>
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------
Ratio of Net Ratio of Net
Ratio of Investment Ratio of Investment
Expenses to Income to Expenses to Income to
Average Average Average Total Average Total
Ending Net Assets Net Assets Net Assets Net Assets Portfolio
Net Assets Applicable to Applicable to Including Including Turnover
(000) Common Shares++ Common Shares++ Preferred++ Preferred++ Rate
<S> <C> <C> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1999 (a) $114,898 1.31%* 6.84%* .87%* 4.54%* 2%
1998 113,384 1.33 7.02 .88 4.61 13
1997 108,524 1.38 7.46 .89 4.79 18
1996 104,928 1.40 7.37 .89 4.71 15
1995 105,851 1.49 8.09 .92 4.99 18
1994 101,595 1.36 5.60 .95 3.95 9
<CAPTION>
Massachusetts
<S> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) 104,113 1.30* 6.87* .87* 4.61* 8
1998 102,936 1.31 7.22 .88 4.81 17
1997 99,006 1.34 7.63 .88 4.99 22
1996 96,303 1.35 7.61 .88 4.95 18
1995 97,071 1.49 8.28 .94 5.20 29
1994 93,078 1.43 6.24 .97 4.26 33
<CAPTION>
Missouri
<S> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) 47,456 1.44* 6.71* .95* 4.43* --
1998 46,935 1.47 7.03 .97 4.60 25
1997 45,224 1.54 7.38 .99 4.74 36
1996 44,014 1.57 7.13 1.01 4.57 34
1995 44,566 1.75 7.88 1.08 4.86 34
1994 42,343 1.51 5.62 1.05 3.92 39
<CAPTION>
Washington
<S> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1999 (a) 52,547 1.36* 6.65* .92* 4.48* 5
1998 51,948 1.36 6.92 .91 4.62 10
1997 49,640 1.43 7.38 .94 4.83 11
1996 48,266 1.44 7.37 .94 4.81 20
1995 48,812 1.64 7.97 1.04 5.04 16
1994 47,095 1.58 6.45 1.08 4.42 29
</TABLE>
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gain 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 gain 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; income ratios reflect income earned on assets attributable to
Preferred shares.
(a) For the six months ended November 30, 1998.
F-81
<PAGE> 189
Building a Better Portfolio Can Make You a Successful Investor
NUVEEN FAMILY OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND INCOME
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
TAX-FREE INCOME
National Funds
Long-Term
Insured
Intermediate-Term
Limited-Term
State Funds
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, while also offering
experienced, professional security selection and surveillance. In addition,
Nuveen Defined Portfolios provide daily liquidity at that day's net asset value
for quick access to your assets.
F-82
<PAGE> 190
Fund Information
Board of Trustees
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
Fund Manager
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Custodian, Transfer Agent
and Shareholder Services
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
Legal Counsel
Morgan, Lewis &
Bockius LLP
Washington, D.C.
Independent Auditors
Ernst & Young LLP
Chicago, IL
Year 2000
The concern that computer systems may have problems processing date-related
information in the year 2000 and beyond has challenged businesses and
organizations to thoroughly review all aspects of their operations. We have
undertaken just such an approach at Nuveen in preparation for the millennium.
Over the last 10 years, our trading, fund management and pricing systems at
Nuveen - the systems that directly affect our investors and their financial
advisers - have been updated or replaced to address the Year 2000 concerns.
We continue to work closely with our transfer agent, custodian and other service
partners to monitor readiness and address other remaining systems issues. Our
initial testing indicates we are on schedule, and we have targeted year-end 1998
to complete verification of vendor compliance and service partner readiness.
However, we can give no complete assurance at this time that the steps we have
taken will be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds.
Each fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the six-months ended November 30, 1998. Any future
repurchases will be reported to shareholders in the next annual or semiannual
report.
F-83
<PAGE> 191
Serving Investors for Generations
Photo of: John Nuveen, Sr.
Since our founding in 1898, John Nuveen & Co. has been synonymous with
investments that withstand the test of time. Today we offer a broad range of
quality investments designed for individuals seeking to build and sustain
wealth. In fact, more than 1.3 million investors have trusted Nuveen to help
them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable current income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. Our equity,
balanced, and tax-free income funds, along with our defined portfolios and
private asset management, can help you build a better, well-diversified
portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
FSA-3-11-98
LOGO:
NUVEEN
1898 1998
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime(TM).
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL 60606-1286
www.nuveen.com
F-84
<PAGE> 192
NUVEEN Exchange-Traded Funds
MAY 31, 1998
ANNUAL REPORT
DEPENDABLE, TAX-FREE INCOME
TO HELP YOU KEEP MORE OF
WHAT YOU EARN.
NTC
Connecticut
NMT
Massachusetts
NOM
Missouri
NPW
Washington
Photo of: People reading
F-85
<PAGE> 193
Highlights
As of May 31, 1998
CONTENTS
1 Dear Shareholder
4 NTC Commentary and Overview
6 NMT Commentary and Overview
8 NOM Commentary and Overview
10 NPW Commentary and Overview
12 Report of Independent Auditors
13 Portfolio of Investments
24 Statement of Net Assets
25 Statement of Operations
26 Statement of Changes in Net Assets
27 Notes to Financial Statements
30 Financial Highlights
32 Building Better Portfolios
33 Fund Information
================================================================================
Credit Quality Performance Highlights
Nuveen Connecticut Premium Income Municipal Fund (NTC)
o Steady dividend for 10 consecutive months
o Taxable-equivalent yield of 7.81%*
o One-year total return on net asset value
of 12.39%
Pie Chart:
AAA/Pre-refunded 68%
AA 18%
A 2%
BBB/NR 12%
Nuveen Massachusetts Premium Income Municipal Fund (NMT)
o Steady dividend for 16 consecutive months
o Taxable-equivalent yield of 8.45%*
o One-year total return on net asset value
of 11.91%
Pie Chart:
AAA/Pre-refunded 57%
AA 19%
A 20%
BBB/NR 4%
Nuveen Missouri Premium Income Municipal Fund (NOM)
o Steady dividend for 10 consecutive months
o Taxable-equivalent yield of 8.07%*
o One-year total return on net asset value
of 11.31%
Pie Chart:
AAA/Pre-refunded 78%
AA 15%
A 2%
BBB/NR 5%
Nuveen Washington Premium Income Municipal Fund (NPW)
o Steady dividend for 19 consecutive months
o Taxable-equivalent yield of 8.04%*
o One-year total return on net asset value
of 12.64%
Pie Chart:
AAA/Pre-refunded 68%
AA 29%
A 3%
*For investors in the 31% federal and applicable state income tax bracket.
See your fund's performance overview for more information.
================================================================================
A New Benefit for Nuveen Exchange-Traded Fund Shareholders
The benefits of your Nuveen Exchange-Traded Fund just got better. Now investors
with at least $50,000 in Nuveen holdings - including Exchange-Traded Funds - are
eligible for a reduction in the sales charge on purchases of Class A shares of
any Nuveen Mutual Fund.
This program is available for any of Nuveen's collection of Premier Adviser(SM)
equity and municipal bond investments. Now you can diversify your portfolio with
the quality investments you count on from Nuveen and the benefit of reduced
rates.
For more information, contact your financial adviser and ask for a prospectus.
Or call Nuveen Investor Services at (800) 257-8787. Please read it carefully
before you invest.
F-86
<PAGE> 194
PHOTO OF: TIMOTHY R. SCHWERTFEGER
CHAIRMAN OF THE BOARD
SIDEBAR TEXT: Wealth takes a lifetime to build. Once achieved, it should
be preserved.
Graphic of: Bond Buyer 40 chart
Dear Shareholder
I'm pleased to share with you this performance report for the Nuveen
Connecticut, Massachusetts, Missouri and Washington Exchange-Traded Funds. Over
the past 12 months, each of these funds continued to perform well and meet their
objectives of providing you with attractive tax-free income and strong after-tax
total returns.
THE ECONOMY IN REVIEW
Fixed-income investments enjoyed bullish performance over the past year, as
declining interest rates and low inflation spurred a bond market rally. The
equity markets also exhibited continued strength despite recent volatility
sparked by Asia's financial problems and their possible effects on U.S.
corporate earnings. Although interest rates have trended slightly upward in
recent months, a year-to-date comparison shows that today's rates are
significantly lower than they were one year ago. As shown in the accompanying
chart, between the end of May 1997 and May 1998, the yield on the Bond Buyer 40,
an unmanaged index of long-term municipal bonds, fell from 5.74% to 5.22%.
Much of the decline in interest rates resulted from expectations that the
financial problems of Asia would restrain the prices of imported goods and
reduce foreign demand for U.S. products and services, thereby keeping inflation
at moderate levels. These inflation expectations were largely fulfilled, as the
Consumer Price Index rose only 1.5% for the 12 months ended May 1998, remaining
at one of its lowest levels in years. The Asian situation also provided
additional strength to the bond market rally, as many investors made a "flight
to quality" by moving assets into high-quality U.S. bonds in the face of the
uncertainty in that region.
In coming months, we will continue to watch closely several key factors that are
likely to affect the future of the economy, including the demand for goods and
services, the availability of qualified employees, the strength of the dollar,
and indications from the Federal Reserve. With many investors still waiting for
the full impact of Asia's difficulties to show up in U.S. economic statistics,
the potential long-term effect of this crisis on American markets continues to
cause concern. We expect that the development of these factors will continue to
influence the tone of the fixed-income markets during the remainder of the year.
MUNICIPAL MARKET REVIEW
As interest rates continued to decline over the past year, bond prices rose.
This price appreciation for the bonds in our portfolios contributed to strong
total returns for the year.
Another major factor in bond performance over the last 12 months was the
continued strength of the U.S. economy, which helped boost the credit quality of
many municipal bonds. With the improvements in the fundamental financial health
of many municipalities and revenue projects financed by bonds, major credit
rating agencies upgraded the credit quality of thousands of issuers over the
past year, while downgrading relatively few. These boosts in credit quality also
contributed to the funds' performance as upgraded bonds increased in value.
The combination of low interest rates and a strong economy set new issuance on a
record pace and stimulated a dramatic increase in the refinancing of existing
bonds as issuers sought to lower their interest costs. The first quarter of 1998
saw $68 billion of new municipal issuance, up 70% from the same period in 1997.
The flood of new issues continued with May's long-awaited sale of the first
segment of Long Island (New York) Power Authority's $7 billion offering, the
largest issuance in municipal bond history. Although the nationwide supply of
municipal bonds remained heavy, the supply of bonds in each state varied
according to local economic conditions. This level of issuance high lights the
value of Nuveen's expertise in the municipal market, as our portfolio management
teams worked diligently to sift through the available issues to select those
undervalued securities that would help the funds achieve their investment
objectives.
DIVERSIFICATION: THE KEY TO A BETTER PORTFOLIO
In view of current market conditions, we believe that investors will find
diversification to be an increasingly important investment strategy in the
months ahead. An appropriately diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can help
cushion your portfolio against volatility and enhance your return potential.
Many investors select Nuveen's municipal bond funds because their emphasis on
dependable tax-free income and attractive after-tax returns makes them ideal for
building and sustaining long-term financial security. These funds also work well
with other Nuveen investments to create the foundation of a diversified,
well-balanced portfolio. In fact, recent studies by Nuveen Research have found
that portfolios combining municipal bonds and stocks generated higher after-tax
returns with lower levels of risk than similar portfolios combining stocks and
Treasury or corporate bonds.
We encourage you to talk to your financial adviser about Nuveen's range of
equity and balanced funds, including the Nuveen European Value Fund. This new
equity mutual fund offers a portfolio of quality European company stocks for
investors seeking long-term growth potential and international diversification.
The fund is just one of an ever-expanding range of Nuveen products and services
designed to help investors achieve diversification while building a
tax-efficient, risk-sensitive investment portfolio. If you'd like to learn more
about the Nuveen European Value Fund or any of our other investments, contact
your financial adviser or call Nuveen Investor Services at (800) 257-8787 for a
prospectus. Please read the information carefully before you invest.
When seeking quality investment solutions that withstand the test of time, we
hope that you continue to think of Nuveen. Today, more than ever, you can count
on Nuveen for a wide range of investments that can help you build a
well-balanced portfolio designed to achieve your financial goals. We thank you
for your continued confidence in us and our family of investments.
Sincerely,
TIMOTHY R. SCHWERTFEGER
Chairman of the Board
July 15, 1998
Sidebar text: "Another major factor in bond performance over the last 12 months
was the continued strength of the U.S. economy, which helped boost the credit
quality of many municipal bonds."
Sidebar text: "Today, more than ever, you can count on Nuveen for a wide range
of investments that can help you build a well-balanced portfolio designed to
achieve your financial goals."
F-87
<PAGE> 195
Nuveen Connecticut Premium Income Municipal Fund
Portfolio Manager's Comments
PORTFOLIO MANAGER DAN SOLENDER DISCUSSES FUND PERFORMANCE, THE MUNICIPAL MARKET,
AND KEY INVESTMENT STRATEGIES FOR THE CONNECTICUT FUND.
CONNECTICUT STATE UPDATE
The high credit ratings assigned to Connecticut's long-term general obligation
debt by Moody's and Standard & Poor's (Aa3 and AA-, respectively) recognize the
state's diverse economic base and solid financial position. Connecticut has
recovered from most of its recessionary employment loss, with small businesses
fueling growth in the services, wholesale, and retail trade industries.
The strong economy continues to generate higher-than-anticipated general fund
revenues, enabling the state to reduce its general fund deficit to its lowest
level in 10 years. The recovery is also helping to improve financial performance
at the local level, with cities and towns showing improved general fund
balances. In line with national municipal trends, Connecticut's new issue volume
has risen 85% in the first five months of 1998. Much of this new supply has been
issued at the state level in the general obligation and housing categories. It
is anticipated that the ongoing strength of the national economy will continue
to propel Connecticut's tax receipts above budget expectations and maintain
state and local government's improved financial positions.
FUND PERFORMANCE
For the year ended May 31, 1998, the Nuveen Connecticut Premium Income Municipal
Fund provided an outstanding total return on net asset value of 12.39%, which
is equivalent to a taxable return of 15.49% for investors in the combined 34.1%
federal and state income tax bracket. The total return significantly
outperformed the unleveraged Lehman Brothers Municipal Bond Index's annual
return of 9.38% - a difference of more than 300 basis points.
Much of this outperformance can be attributed to the fund's longer
leverage-adjusted duration of 10.26 years, compared with the index's 7.11 years.
In a year that saw municipal bond yields as measured by the Bond Buyer 40 fall
more than 50 basis points, longer duration proved to be beneficial to
performance. Duration measures a bond fund's price volatility, or reaction to
interest rate movements. The longer the duration, the more sensitive the fund to
changes in interest rates. During a period of falling interest rates and market
rallies, such as that of the past year, longer duration enables a fund to
participate more fully in market gains, but can make the fund more vulnerable to
potential price declines when rates rise. In addition, the fund's leveraged
structure added significantly to these strong total returns.
As a result of good call protection, the fund was able to maintain its dividend
as interest rates dropped during the year. In addition, we were able to increase
the dividend during the year because of the accumulation of income from bonds
purchased over the past several years when interest rates were higher. Since
that increase in August 1997, the fund has provided shareholders with 10
consecutive months of steady income. As of May 31, 1998, the fund offered a
competitive current market yield of 5.15%, which translates to 7.81% on a
taxable-equivalent basis for investors in the combined 34.1% federal and state
income tax bracket.
KEY STRATEGIES
In Connecticut, supply is typically dominated by two key issuers: the state
housing authority and the state's general obligation bonds. Over the past year,
we took advantage of opportunities to purchase smaller new issues in the health
care and education sectors in order to help diversify the fund and boost its
income level. As of May 31, 1998, health care and education bonds accounted for
almost 40% of the fund's allocations. In addition, a number of pre-refundings,
especially in the health care and education sectors, enhanced the portfolio's
credit quality and contributed to the fund's price appreciation. In a
pre-refunding, a bond is essentially repaid early and becomes secured by U.S.
government or agency securities until it can be called by the issuer. As a
result, its credit quality typically improves, generally leading to price
appreciation.
OUTLOOK FOR THE FUTURE
Looking ahead, we expect the U.S. economy to remain in its current growth mode,
although progress should come at a more modest pace. The Asian financial crisis
will continue to impact U.S. growth, and we expect to see a slowdown in
corporate earnings, a strengthening dollar, especially versus Asian currencies,
and the continuation of benign inflation despite tight labor markets. This
should create less impetus for the Federal Reserve, which currently remains in a
neutral position, to tighten interest rates in the second half of 1998. We view
the economic slowdown and the current direction of the dollar as positive
indicators for the fixed-income markets, including municipal bonds, and much of
our outlook is contingent upon the further development of these factors.
Given the fund's current allocation, we are looking to improve the fund's
structure through added diversification, as changes in the market make
additional sectors more attractive. We may also extend the duration slightly as
opportunities allow. The Connecticut fund currently provides good call
protection, and that should continue to provide support for the dividend in
coming months.
F-88
<PAGE> 196
Nuveen Connecticut Premium Income Municipal Fund
Performance Overview
As of May 31, 1998
NTC
PORTFOLIO STATISTICS
==================================================
Inception Date 5/93
- --------------------------------------------------
Share Price 15 1/2
- --------------------------------------------------
Net Asset Value Per Share $14.49
- --------------------------------------------------
Current Market Yield 5.15%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.46%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 7.81%
- --------------------------------------------------
Fund Net Assets ($000) $113,384
- --------------------------------------------------
Average Weighted Maturity (Years) 19.82
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 10.26
- --------------------------------------------------
ANNUALIZED TOTAL RETURN
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 15.61% 12.39%
- --------------------------------------------------
3-Year 13.06% 9.06%
- --------------------------------------------------
5-Year 6.15% 6.40%
- --------------------------------------------------
Since Inception 6.15% 6.26%
- --------------------------------------------------
TAXABLE-EQUIVALENT TOTAL RETURN(2)
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 18.60% 15.49%
- --------------------------------------------------
3-Year 16.07% 12.11%
- --------------------------------------------------
5-Year 8.96% 9.30%
- --------------------------------------------------
Since Inception 8.96% 9.16%
- --------------------------------------------------
TOP 5 SECTORS
==================================================
Health Care 20%
- --------------------------------------------------
Education and Civic Organizations 19%
- --------------------------------------------------
Utilities 12%
- --------------------------------------------------
Tax Obligation (General) 9%
- --------------------------------------------------
Transportation 8%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state taxes. It is based on a
combined federal and state income tax rate of 34.1%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 34.1%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
June 97 0.065
July 97 0.065
August 97 0.0665
September 97 0.0665
October 97 0.0665
November 97 0.0665
December 97 0.0665
January 98 0.0665
February 98 0.0665
March 98 0.0665
April 98 0.0665
May 98 0.0665
F-89
<PAGE> 197
Nuveen Massachusetts Premium Income Municipal Fund
Portfolio Manager's Comments
PORTFOLIO MANAGER STEVE PETERSON DISCUSSES FUND PERFORMANCE, THE MUNICIPAL
MARKET, AND KEY INVESTMENT STRATEGIES FOR THE MASSACHUSETTS FUND.
ON JULY 1, 1998, NUVEEN MADE SEVERAL CHANGES IN THE MANAGEMENT OF ITS FUNDS TO
MAKE MORE EFFICIENT USE OF STAFF RESOURCES AND PORTFOLIO MANAGER EXPERTISE. AS A
RESULT, TOM FUTRELL ASSUMED MANAGEMENT RESPONSIBILITIES FOR THIS FUND. TOM IS A
15-YEAR VETERAN OF NUVEEN AND AN EXPERIENCED INVESTMENT PROFES SIONAL WHO HAS
MANAGED A RANGE OF OTHER MUNICIPAL BOND FUNDS.
MASSACHUSETTS STATE UPDATE
The high credit ratings assigned to the state's long-term general obligation
debt by Moody's and Standard & Poor's (Aa3 and AA-, respectively) recognize the
commonwealth's rebounding economy and healthy financial position. Growth has
largely been driven by employment gains in health care, construction, research,
and computer and business services. In addition, the combination of
better-than-expected tax collections and under-budget expenditures has enabled
the commonwealth and many of its municipalities to strengthen cash and reserve
positions. In line with national municipal trends, new issue volume in
Massachusetts through May 1998 rose 233% over the same period last year and was
characterized by diversity across sectors. Well-known for its large debt burden,
Massachusetts is currently financing the Central Artery/Third Tunnel project in
Boston with a combination of state general obligation bonds, federal highway
grant anticipation notes, and revenues from both the Massachusetts Turnpike and
Port Authorities.
FUND PERFORMANCE
For the year ended May 31, 1998, the total return on net asset value for the
Nuveen Massachusetts Premium Income Municipal Fund was 11.91%, equivalent to a
taxable return of 15.90% for investors in the combined 39.3% federal and state
income tax bracket. The total return outperformed the unleveraged Lehman
Brothers Municipal Bond Index's annual return of 9.38% by more than 250 basis
points.
Much of this outperformance can be attributed to the fund's longer
leverage-adjusted duration of 8.91 years, compared with the index's 7.11 years.
In a year that saw municipal bond yields, as measured by the Bond Buyer 40, fall
more than 50 basis points, longer duration proved to be beneficial to
performance. Duration measures a bond fund's price volatility, or reaction to
interest rate movements. The longer the duration, the more sensitive the fund to
changes in interest rates. During a period of falling interest rates and market
rallies, such as that of the past year, longer duration enables a fund to
participate more fully in market gains, but can make the fund more vulnerable to
potential price declines when rates rise. In addition, the fund's leveraged
structure added significantly to these strong total returns.
Despite the low interest rate environment of the past year, good call protection
helped to support the dividend of the fund and prevent income from being
impacted. The fund has now provided shareholders with 16 consecutive months of
steady income. As of May 31, 1998, the fund offered a competitive current market
yield of 5.13%, which translates to 8.45% on a taxable-equivalent basis for
investors in the combined 39.3% federal and state income tax bracket.
KEY STRATEGIES
Over the past year, we focused on a number of sectors, including housing bonds,
FHA-insured bonds, health care and utilities. We also found value in zero-coupon
bonds, which are issued at a significant discount to their par value and
generally increase in value incrementally rather than paying a traditional
coupon rate. In the health care sector, hospitals offered several attractive
opportunities, as industry consolidation resulted in the issuance of new debt as
well as debt restructuring. Through fairly active trading, we were able to
purchase bonds at lower prices and then sell them as prices appreciated,
replacing them with bonds offering better call protection and more attractive
coupons. The overall credit quality of the Massachusetts fund remains high due
to a number of pre-refundings, which also con tributed to the fund's price
appreciation. In a pre-refunding, a bond is essentially repaid early and becomes
secured by U.S. government or agency securities until it can be called by the
issuer. As a result, its credit quality typically improves, generally leading to
price appreciation.
OUTLOOK FOR THE FUTURE
Looking ahead, we expect the U.S. economy to remain in its current growth mode,
although progress should come at a more modest pace. The Asian financial crisis
will continue to impact U.S. growth, and we expect to see a slowdown in
corporate earnings, a strengthening dollar, especially versus Asian currencies,
and the continuation of benign inflation despite tight labor markets. This
should create less impetus for the Federal Reserve, which currently remains in a
neutral position, to tighten interest rates in the second half of 1998. We view
the economic slowdown and the current direction of the dollar as positive
indicators for the fixed-income markets, including municipal bonds, and much of
our outlook is contingent upon the further development of these factors.
The current call protection of the Massachusetts fund averages approximately
seven years. In the months ahead, we plan to extend this average by continuing
to buy bonds with better call protection. We will also take advantage of
opportunities to further upgrade portfolio quality by buying higher-quality
bonds since they remain a good value relative to lower-rated bonds.
F-90
<PAGE> 198
Nuveen Massachusetts Premium Income Municipal Fund
Performance Overview
As of May 31, 1998
NMT
PORTFOLIO STATISTICS
==================================================
Inception Date 3/93
- --------------------------------------------------
Share Price 16 1/2
- --------------------------------------------------
Net Asset Value Per Share $14.91
- --------------------------------------------------
Current Market Yield 5.13%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.43%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 8.45%
- --------------------------------------------------
Fund Net Assets ($000) $102,936
- --------------------------------------------------
Average Weighted Maturity (Years) 20.02
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 8.91
- --------------------------------------------------
ANNUALIZED TOTAL RETURN(2)
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 18.08% 11.91%
- --------------------------------------------------
3-Year 13.55% 8.87%
- --------------------------------------------------
5-Year 7.58% 7.20%
- --------------------------------------------------
Since Inception 7.62% 6.95%
- --------------------------------------------------
TAXABLE-EQUIVALENT TOTAL RETURN(2)
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 21.89% 15.90%
- --------------------------------------------------
3-Year 17.50% 12.85%
- --------------------------------------------------
5-Year 11.41% 11.08%
- --------------------------------------------------
Since Inception 11.30% 10.67%
- --------------------------------------------------
TOP 5 SECTORS
==================================================
U.S. Guaranteed 23%
- --------------------------------------------------
Health Care 20%
- --------------------------------------------------
Education and Civic Organizations 18%
- --------------------------------------------------
Housing (Multifamily) 9%
- --------------------------------------------------
Tax Obligation (General) 9%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state taxes. It is based on a
combined federal and state income tax rate of 39.3%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 39.3%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
Bar Chart:
1997-1997 Monthly Tax-Free Dividends Per Share
June 97 0.0705
July 97 0.0705
August 97 0.0705
September 97 0.0705
October 97 0.0705
November 97 0.0705
December 97 0.0705
January 98 0.0705
February 98 0.0705
March 98 0.0705
April 98 0.0705
May 98 0.0705
F-91
<PAGE> 199
Nuveen Missouri Premium Income Municipal Fund
Portfolio Manager's Comments
PORTFOLIO MANAGER JOHN GAMBLA DISCUSSES FUND PERFORMANCE, THE MUNICIPAL MARKET,
AND KEY INVESTMENT STRATEGIES FOR THE MISSOURI FUND FOR THE PERIOD COVERED BY
THIS REPORT.
ON JULY 1, 1998, NUVEEN MADE SEVERAL CHANGES IN THE MANAGEMENT OF ITS FUNDS TO
MAKE MORE EFFICIENT USE OF STAFF RESOURCES AND PORTFOLIO MANAGER EXPERTISE. AS A
RESULT, MIKE DAVERN ASSUMED MANAGEMENT RESPONSIBILITIES FOR THIS FUND. MIKE IS A
7-YEAR VETERAN OF NUVEEN WITH 16 YEARS OF EXPERIENCE AS AN INVESTMENT
PROFESSIONAL. HE HAS MANAGED A RANGE OF OTHER STATE AND NATIONAL MUNICIPAL BOND
FUNDS.
MISSOURI STATE UPDATE
Missouri confirmed its AAA credit quality status as a municipal issuer with
another year of sound financial operations and economic growth. The state ended
fiscal year 1997 with a budget stabilization fund totaling approximately $370
million, or nearly 4% of general fund revenues. The general fund, fueled by
strong individual income tax and sales/use tax revenues, increased 18% to $1.7
billion. High levels of economic growth between 1995 and 1997 and increasing
personal incomes resulted in income tax revenues that surpassed the
constitutional state limit, and taxpayers were subsequently rewarded with a
refund totaling $695 million.
Missouri's economy remains diversified, with recent declines in manufacturing
employment replaced by job gains in the services sector. Lease revenue debt,
which constitutes nearly one-third of total bond issuance, is an important
component of financing state capital programs. Missouri debt should continue to
attract investor attention, as new issue volume - in line with national
municipal trends increased 94% during the first quarter of 1998.
FUND PERFORMANCE
For the year ended May 31, 1998, the total return on net asset value for the
Nuveen Missouri Premium Income Municipal Fund was 11.31%, which is equivalent
to a taxable return of 14.31% for investors in the combined 35.1% federal and
state income tax bracket. The total return outpaced the unleveraged Lehman
Brothers Municipal Bond Index's annual return of 9.38% by almost 200 basis
points.
Much of this outperformance can be attributed to the fund's longer
leverage-adjusted duration of 10.34 years, compared with the index's 7.11 years.
In a year that saw municipal bond yields as measured by the Bond Buyer 40 fall
more than 50 basis points, longer duration proved to be beneficial to
performance. Duration measures a bond fund's price volatility, or reaction to
interest rate movements. The longer the duration, the more sensitive the fund to
changes in interest rates. During a period of falling interest rates and market
rallies, such as that of the past year, longer duration enables a fund to
participate more fully in market gains, but can make the fund more vulnerable to
potential price declines when rates rise. In addition, the fund's leveraged
structure added significantly to these strong total returns.
Despite the low interest rate environment of the past year, good call protection
helped support the dividend of the fund and prevent income from being impacted.
In addition, the accumulation of income from higher-yielding bonds purchased
over the past several years allowed us to increase the dividend. Since that
increase in August 1997, the fund has provided shareholders with 10 consecutive
months of steady income. As of May 31, 1998, the fund offered a competitive
current market yield of 5.24%, which translates to 8.07% on a taxable-equivalent
basis for investors in the combined 35.1% federal and state income tax bracket.
KEY STRATEGIES
Over the past year, we focused on the purchase of insured bonds as well as bonds
with higher coupons. The majority of the bonds we added offer maturities in the
range of 15 to 20 years, which we felt offered the best values compared to their
historical levels of volatility.
OUTLOOK FOR THE FUTURE
Looking ahead, we expect the U.S. economy to remain in its current growth mode,
although progress should come at a more modest pace. The Asian financial crisis
will continue to impact U.S. growth, and we expect to see a slowdown in
corporate earnings, a strengthening dollar, especially versus Asian currencies,
and the continuation of benign inflation despite tight labor markets. This
should create less impetus for the Federal Reserve, which currently remains in a
neutral position, to tighten interest rates in the second half of 1998. We view
the economic slowdown and the current direction of the dollar as positive
indicators for the fixed-income markets, including municipal bonds, and much of
our outlook is contingent upon the further development of these factors.
Given the current environment of low interest rates and tight credit spreads,
our primary focus in the months ahead will be on preserving shareholder capital.
We plan to achieve this by upgrading portfolio quality and taking on additional
risk only when strong price appreciation potential or competitive yields
compensate the fund for doing so. This approach should help us reduce
above-market interest rate exposure where appropriate without eroding the income
levels of the fund.
F-92
<PAGE> 200
Nuveen Missouri Premium Income Municipal Fund
Performance Overview
As of May 31, 1998
NOM
PORTFOLIO STATISTICS
==================================================
Inception Date 5/93
- --------------------------------------------------
Share Price 14 3/16
- --------------------------------------------------
Net Asset Value Per Share $14.44
- --------------------------------------------------
Current Market Yield 5.24%
- --------------------------------------------------
Taxable-Equivalent Yield (Federal Only)(1) 7.59%
- --------------------------------------------------
Taxable-Equivalent Yield
(Federal and State)(1) 8.07%
- --------------------------------------------------
Fund Net Assets ($000) $46,935
- --------------------------------------------------
Average Weighted Maturity (Years) 17.06
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 10.34
- --------------------------------------------------
ANNUALIZED TOTAL RETURN
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 14.53% 11.31%
- --------------------------------------------------
3-Year 11.69% 8.10%
- --------------------------------------------------
5-Year 4.12% 6.11%
- --------------------------------------------------
Since Inception 4.29% 5.88%
- --------------------------------------------------
TAXABLE-EQUIVALENT TOTAL RETURN(2)
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 17.68% 14.31%
- --------------------------------------------------
3-Year 14.85% 11.06%
- --------------------------------------------------
5-Year 7.06% 8.97%
- --------------------------------------------------
Since Inception 7.24% 8.73%
- --------------------------------------------------
TOP 5 SECTORS
==================================================
Tax Obligation (General) 18%
- --------------------------------------------------
Tax Obligation (Limited) 17%
- --------------------------------------------------
Housing (Multifamily) 14%
- --------------------------------------------------
Water and Sewer 11%
- --------------------------------------------------
U.S. Guaranteed 10%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. The
federal only rate is based on the current market yield and a federal income
tax rate of 31%. The rate shown for federal and state highlights the added
value of owning shares that are also exempt from state taxes. It is based on a
combined federal and state income tax rate of 35.1%.
2 Taxable-equivalent total return is based on the annualized total return and a
combined federal and state income tax rate of 35.1%. It represents the return
on a taxable investment necessary to equal the return of the Nuveen fund on an
after-tax basis.
3 The fund also paid shareholders taxable distributions in December of $0.0151
per share.
1997-1998 Monthly Tax-Free Dividends Per Share(3)
June 97 0.061
July 97 0.061
August 97 0.062
September 97 0.062
October 97 0.062
November 97 0.062
December 97 0.062
January 98 0.062
February 98 0.062
March 98 0.062
April 98 0.062
May 98 0.062
F-93
<PAGE> 201
Nuveen Washington Premium Income Municipal Fund
Portfolio Manager's Comments
PORTFOLIO MANAGER DAN SOLENDER DISCUSSES FUND PERFORMANCE, THE MUNICIPAL MARKET,
AND KEY INVESTMENT STRATEGIES FOR THE WASHINGTON FUND FOR THE PERIOD COVERED BY
THIS REPORT.
ON JULY 1, 1998, NUVEEN MADE SEVERAL CHANGES IN THE MANAGEMENT OF ITS FUNDS TO
MAKE MORE EFFICIENT USE OF STAFF RESOURCES AND PORTFOLIO MANAGER EXPERTISE. AS A
RESULT, MIKE DAVERN ASSUMED MANAGEMENT RESPONSIBILITIES FOR THIS FUND. MIKE IS A
7-YEAR VETERAN OF NUVEEN WITH 16 YEARS OF EXPERIENCE AS AN INVESTMENT
PROFESSIONAL. HE HAS MANAGED A RANGE OF OTHER STATE AND NATIONAL MUNICIPAL BOND
FUNDS.
WASHINGTON STATE UPDATE
The state of Washington continues to benefit from a growing and increasingly
diversified economic base. Employment rose 4.1% in 1997, and the unemployment
rate as of April 1998 was 4.2%, slightly below the national rate. Boeing plays
an important but declining role in the state's economy, supplanted by Microsoft
and other high-tech companies. With the recent addition of $75 million, the
state's "rainy day" fund reserves now total almost $380 million. One of the few
clouds on the horizon is the potentially dampening effect that the state's ties
with Asian trading partners could have on economic growth going forward. In
response to the state's broadening economic base and continued solid financial
performance, Washington's general obligation debt rating was upgraded during the
year. As municipalities throughout the state also benefited from the
strengthening economy, Standard & Poor's upgraded 10 issuers, with no
downgrades, reflecting similar situations across the country. Contrary to the
national trend of heavy supply, bond issuance in the state dropped 13% for the
first four months of 1998 compared with the same period in 1997, with most of
the new supply issued by school districts. It is anticipated that Washington's
future bond supply should be healthy, given the state's heavy infrastructure
needs due to high population growth. Recently, the state treasurer announced a
new program that could double the annual number of certificate of participation
bonds. The program is intended to help local municipalities borrow for equipment
and real estate acquisitions at the state's lower interest rates.
FUND PERFORMANCE
For the year ended May 31, 1998, the Nuveen Washington Premium Income Municipal
Fund provided an outstanding total return on net asset value of 12.64%, which
is equivalent to a taxable return of 15.11% for investors in the 31% federal
income tax bracket. The total return significantly outperformed the unleveraged
Lehman Brothers Municipal Bond Index's annual return of 9.38% - a difference of
more than 300 basis points.
Much of this outperformance can be attributed to the fund's longer
leverage-adjusted duration of 9.42 years, compared with the index's 7.11 years.
In a year that saw municipal bond yields as measured by the Bond Buyer 40 fall
more than 50 basis points, longer duration proved to be beneficial to
performance. Duration measures a bond fund's price volatility, or reaction to
interest rate movements. The longer the duration, the more sensitive the fund to
changes in interest rates. During a period of falling interest rates and market
rallies, such as that of the past year, longer duration enables a fund to
participate more fully in market gains, but can make the fund more vulnerable to
potential price declines when rates rise. In addition, the fund's leveraged
structure added significantly to these strong total returns.
Despite the low interest rate environment of the past year, good call protection
helped support the dividend of the fund and prevent income from being impacted.
The fund has now provided shareholders with 19 consecutive months of steady
income. As of May 31, 1998, the fund offered a competitive current market yield
of 5.55%, which translates to 8.04% on a taxable-equivalent basis for investors
in the 31% federal income tax bracket.
KEY STRATEGIES
Given the duration, diversification, attractive coupons, and excellent level of
call protection, the fund was strategically positioned for the market
environment of the past year. So, we kept trading to a minimum and made changes
only when they would add further to performance. Washington's credit quality is
relatively high, with most of the market rated AAA or AA, so the majority of
these changes involved the purchase of insured bonds. This included insured
health care bonds, which provided the higher yields found in the health care
sector as well as AAA ratings. The state's low-cost sources of power also made
public power bonds attractive, and we continue to maintain substantial holdings
in the Washington Public Power Supply System.
OUTLOOK FOR THE FUTURE
Looking ahead, we expect the U.S. economy to remain in its current growth mode,
although progress should come at a more modest pace. The Asian financial crisis
will continue to impact U.S. growth, and we expect to see a slowdown in
corporate earnings, a strengthening dollar, especially versus Asian currencies,
and the continuation of benign inflation despite tight labor markets. This
should create less impetus for the Federal Reserve, which currently remains in a
neutral position, to tighten interest rates in the second half of 1998. We view
the economic slowdown and the current direction of the dollar as positive
indicators for the fixed-income markets, including municipal bonds, and much of
our outlook is contingent upon the further development of these factors.
Given the Washington fund's current strategic position, we do not anticipate
making substantial changes to the portfolio unless market conditions change. Our
efforts will be focused on maintaining the fund's duration while continuing to
diversify by sector and add lower coupon and discount bonds if priced
attractively.
F-94
<PAGE> 202
Nuveen Washington Premium Income Municipal Fund
Performance Overview
As of May 31, 1998
NPW
PORTFOLIO STATISTICS
==================================================
Inception Date 3/93
- --------------------------------------------------
Share Price 13 5/8
- --------------------------------------------------
Net Asset Value Per Share $15.06
- --------------------------------------------------
Current Market Yield 5.55%
- --------------------------------------------------
Taxable-Equivalent Yield(1) 8.04%
- --------------------------------------------------
Fund Net Assets ($000) $51,948
- --------------------------------------------------
Average Weighted Maturity (Years) 19.70
- --------------------------------------------------
Leverage-Adjusted Duration (Years) 9.42
- --------------------------------------------------
ANNUALIZED TOTAL RETURN
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 15.26% 12.64%
- --------------------------------------------------
3-Year 11.83% 8.78%
- --------------------------------------------------
5-Year 3.12% 7.06%
- --------------------------------------------------
Since Inception 3.97% 6.83%
- --------------------------------------------------
TAXABLE-EQUIVALENT TOTAL RETURN(2)
==================================================
ON SHARE PRICE ON NAV
- --------------------------------------------------
1-Year 18.04% 15.11%
- --------------------------------------------------
3-Year 14.73% 11.30%
- --------------------------------------------------
5-Year 5.87% 9.61%
- --------------------------------------------------
Since Inception 6.63% 9.28%
- --------------------------------------------------
TOP 5 SECTORS
==================================================
Tax Obligation (General) 21%
- --------------------------------------------------
Utilities 15%
- --------------------------------------------------
Water and Sewer 13%
- --------------------------------------------------
U.S. Guaranteed 13%
- --------------------------------------------------
Health Care 10%
- --------------------------------------------------
1 Taxable-equivalent yield represents the yield on a taxable investment
necessary to equal the yield of the Nuveen fund on an after-tax basis. It is
based on the current market yield and a federal income tax rate of 31%.
2 Taxable-equivalent total return is based on the annualized total return and a
federal income tax rate of 31%. It represents the return on a taxable
investment necessary to equal the return of the Nuveen fund on an after-tax
basis.
Bar Chart:
1997-1998 Monthly Tax-Free Dividends Per Share
June 97 0.063
July 97 0.063
August 97 0.063
September 97 0.063
October 97 0.063
November 97 0.063
December 97 0.063
January 98 0.063
February 98 0.063
March 98 0.063
April 98 0.063
May 98 0.063
F-95
<PAGE> 203
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS
NUVEEN CONNECTICUT PREMIUM INCOME MUNICIPAL FUND
NUVEEN MASSACHUSETTS PREMIUM INCOME MUNICIPAL FUND
NUVEEN MISSOURI PREMIUM INCOME MUNICIPAL FUND
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND
We have audited the accompanying statements of net assets, including the
portfolios of investments, of Nuveen Connecticut Premium Income Municipal Fund,
Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Missouri Premium
Income Municipal Fund and Nuveen Washington Premium Income Municipal Fund, as of
May 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 the 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 May
31, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Nuveen
Connecticut Premium Income Municipal Fund, Nuveen Massachusetts Premium Income
Municipal Fund, Nuveen Missouri Premium Income Municipal Fund and Nuveen
Washington Premium Income Municipal Fund, as of May 31, 1998, 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.
Chicago, Illinois
July 14, 1998
F-96
<PAGE> 204
PORTFOLIO OF INVESTMENTS
NUVEEN CONNECTICUT PREMIUM INCOME MUNICIPAL FUND (NTC)
May 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS - 19.2%
Connecticut Higher Education Supplemental Loan Authority,
Revenue Bonds (Family Education Loan Program), 1996 Series A:
$ 1,580,000 5.800%, 11/15/14 (Alternative Minimum Tax) 11/06 at 102 Aaa $ 1,678,513
1,000,000 5.875%, 11/15/17 (Alternative Minimum Tax) 11/06 at 102 Aaa 1,032,720
4,450,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Quinnipiac
College Issue, Series D, 6.000% 7/01/23 7/03 at 102 BBB- 4,555,332
State of Connecticut Health and Educational Facilities
Authority, Revenue Bonds, Sacred Heart University Issue, Series
B:
2,600,000 5.700%, 7/01/16 7/03 at 102 BBB- 2,623,972
1,000,000 5.800%, 7/01/23 7/03 at 102 BBB- 1,006,280
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Trinity College
Issue, Series C, 5.875%, 7/01/26 7/06 at 102 Aaa 2,130,700
2,040,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, The Loomis
Chaffee School Issue, Series C, 5.500%, 7/01/16 7/06 at 102 Aaa 2,106,892
2,920,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Connecticut College
Issue, Series C-1, 5.500%, 7/01/20 7/07 at 102 Aaa 3,030,376
3,810,000 The University of Connecticut, Student Fee Revenue Bonds, 1998 Series A,
4.750%, 11/15/27 11/07 at 101 Aaa 3,585,667
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 19.6%
2,000,000 Connecticut Development Authority, Solid Waste Disposal Facilities Revenue Bonds, Pfizer Inc.
Project, 1994 Series, 7.000%, 7/01/25 (Alternative Minimum Tax) 7/05 at 102 Aaa 2,323,040
1,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Newington
Children's Hospital, Series A, 6.050%, 7/01/10 7/04 at 102 Aaa 1,091,920
2,725,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Saint Francis
Hospital and Medical Center Issue, Series B, 6.200%, 7/01/22 7/02 at 102 Aaa 2,946,870
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Hospital of
Saint Raphael Issue, Series H, 5.200% 7/01/08 No Opt. Call Aaa 2,120,100
1,500,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Lawrence and
Memorial Hospital Issue, Series D, 5.000%, 7/01/22 7/03 at 102 Aaa 1,456,980
2,200,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Day Kimball
Hospital Issue, Series A, 5.375%, 7/01/26 7/06 at 102 Aaa 2,226,378
4,160,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Kent School Issue,
Series B, 5.625%, 7/01/16 7/06 at 102 Aaa 4,350,403
1,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds,
The William W. Backus Hospital Issue, Series D, 5.750%, 7/01/27 7/07 at 102 Aaa 1,059,700
3,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Middlesex
Hospital Issue, Series H, Revenue Bonds, Middlesex Health Services Issue, Series I,
5.125%, 7/01/27 7/07 at 101 Aaa 2,948,640
1,500,000 Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities
Financing Authority, Hospital Revenue Refunding Bonds, 1995 Series A, FHA Insured
Mortgage-Doctor Pila Hospital Project, 6.125%, 8/01/25 8/05 at 101 1/2 AAA 1,650,660
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 5.9%
3,000,000 Waterbury Housing Authority, Mortgage Revenue Refunding Bonds, Waterbury NSA II - Series 98C FHA/
Section 8, 5.450%, 7/01/23 1/02 at 100 Aaa 2,995,770
1,405,000 Waterbury Nonprofit Housing Corporation, Connecticut Taxable Mortgage Revenue Refunding Bonds,
FHA Insured Mortgage Loan-Fairmont Heights Section 8 Assisted Project, Series 1993A,
6.500%, 7/01/07 7/02 at 101 Aaa 1,508,001
</TABLE>
F-97
<PAGE> 205
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HOUSING/MULTIFAMILY (continued)
$ 1,930,000 Housing Authority of the City of Willimantic, Multi-Family Housing Revenue Bonds, Series 1995A,
GNMA Collateralized Mortgage Loan-Village Heights Apartments Project,
8.000%, 10/20/30 10/05 at 105 AAA $ 2,221,160
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 5.3%
3,175,000 Connecticut Housing Finance Authority, Housing Mortgage Finance Program Bonds, 1993 Series B,
6.200%, 5/15/12 5/03 at 102 Aa 3,380,073
2,490,000 Connecticut Housing FInance Authority, Housing Mortgage Finance Program Bonds, 1996 Subseries E-2,
6.150%, 11/15/27 (Alternative Minimum Tax) 11/06 at 102 AA 2,643,832
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE - 6.3%
Connecticut Development Authority, Health Facility Refunding
Revenue Bonds, Alzheimer's Resource Center of Connecticut, Inc.
Project, 1994 Series A:
1,500,000 6.875%, 8/15/04 No Opt. Call N/R 1,603,695
1,000,000 7.000%, 8/15/09 8/04 at 102 N/R 1,083,820
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Nursing Home
Program Issue, Series 1994, AHF/Hartford, Inc. Project, 7.125%, 11/01/24 11/04 at 102 AA- 2,299,380
2,000,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Nursing Home
Program Issue, Series 1993, Mansfield Center for Nursing and
Rehabilitation Project, 5.875%, 11/01/12 11/03 at 102 Aaa 2,164,360
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 9.1%
2,000,000 State of Connecticut, General Obligation Bonds, 1993 Series E,
6.000%, 3/15/12 No Opt. Call AA- 2,268,120
2,750,000 State of Connecticut, General Obligation Bonds, 1993 Series D,
5.100%, 8/01/11 8/03 at 101 1/2 AA- 2,816,138
1,650,000 State of Connecticut, General Fund Obligation Bonds, 1994 Series A, Issued By Connecticut
Development Authority, 6.375%, 10/15/14 10/04 at 102 AA- 1,843,644
3,500,000 Commonwealth of Puerto Rico, Public Improvement Bonds of 1998,
4.875%, 7/01/23 7/08 at 101 Aaa 3,403,575
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 5.8%
1,800,000 State of Connecticut, Special Tax Obligation Bonds, Transportation Infrastructure Purposes,
1991 Series B, 6.500%, 10/01/10 No Opt. Call AA- 2,117,286
1,900,000 Capitol Region Education Council, Revenue Bonds, 6.700%, 10/15/10 10/05 at 102 BBB 2,063,267
2,250,000 City of Waterbury Connecticut, General Obligation Tax Revenue Intercept Refunding Bonds,
1993 Issue, 5.375%, 4/15/08 4/03 at 102 Aaa 2,354,400
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 7.4%
3,000,000 State of Connecticut, Airport Revenue RefundingBonds, Bradley International Airport, Series 1992,
7.650%, 10/01/12 10/04 at 100 Aaa 3,524,910
City of New Haven, Connecticut, Air Rights Parking Facility Revenue Bonds, Series 1991:
3,000,000 6.625%, 12/01/05 12/01 at 102 Aaa 3,289,800
1,500,000 6.500%, 12/01/15 12/01 at 102 Aaa 1,632,165
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 5.7%
2,405,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, University of
Hartford Issue, Series C, 8.000%, 7/01/18 (Pre-refunded to 7/01/03) 7/03 at 100 Aaa 2,765,317
2,020,000 State of Connecticut Health and Educational Facilities Authority, Revenue Bonds, Trinity College Issue,
Series C, 6.000%, 7/01/22 (Pre-refunded to 7/01/02) 7/02 at 102 Aaa 2,200,062
1,250,000 State of Connecticut, Health and Educational Facilities Authority, Revenue Bonds, Choate Rosemary
Hall Issue, Series A, 7.000%, 7/01/25 (Pre-refunded to 7/01/04) 7/04 at 101 Aaa 1,447,062
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 11.7%
1,400,000 Connecticut Development Authority, Water Facilities Revenue Bonds, Bridgeport Hydraulic Company
Project, 1993 B Series, 5.500%, 6/01/28 6/03 at 102 Aaa 1,434,300
2,795,000 Connecticut Development Authority, Water Facilities Revenue Bonds, Bridgeport Hydraulic Company
Project, 1993 A Series, 5.600%, 6/01/28 (Alternative Minimum Tax) 6/03 at 102 Aaa 2,866,524
3,250,000 Connecticut Municipal Electric Energy Cooperative, Power Supply System Revenue Bonds, 1993 A Series,
5.000%, 1/01/18 1/04 at 102 Aaa 3,209,895
</TABLE>
F-98
<PAGE> 206
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
UTILITIES (continued)
$ 2,200,000 Connecticut Resources Recovery Authority, Bridgeport Resco Company, L.P. Project Bonds, Series A,
Adjustable Convertible Extendable Securities-Aces, 7.625%, 1/01/09 1/03 at 100 A $ 2,279,420
3,235,000 Connecticut Resources Recovery Authority, Resource Recovery Revenue Bonds, American Ref-Fuel,
Company of Southeastern Connecticut Project, 1989 Series A,
7.700%, 11/15/11 11/98 at 103 AA- 3,480,892
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 2.8%
1,000,000 State of Connecticut, Clean Water Fund Subordinate Revenue Refunding Bonds, 1996 Series,
5.250%, 7/01/10 1/05 at 101 Aaa 1,044,530
2,000,000 South Central Connecticut Regional Water Authority, Water System Revenue Bonds, Eleventh Series,
5.750%, 8/01/12 8/03 at 102 Aaa 2,130,540
- ------------------------------------------------------------------------------------------------------------------------------------
$ 105,890,000 Total Investments - (cost $106,025,594) - 98.8% 111,997,081
=============
Other Assets Less Liabilities - 1.2% 1,386,991
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 113,384,072
====================================================================================================================
</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 or Moody's rating.
N/R Investment is not rated.
See accompanying notes to financial statements.
F-99
<PAGE> 207
PORTFOLIO OF INVESTMENTS
NUVEEN MASSACHUSETTS PREMIUM INCOME MUNICIPAL FUND (NMT)
May 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATION AND CIVIC ORGANIZATIONS - 17.8%
$ 870,000 Massachusetts Educational Financing Authority, Education Loan Revenue Bonds, Issue E, Series 1995,
6.150%, 7/01/10 (Alternative Minimum Tax) 7/04 at 102 Aaa $ 944,951
1,970,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, Boston College Issue,
Series K, 5.250%, 6/01/23 6/03 at 102 Aaa 1,974,570
1,175,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Brooks School Issue), Series 1993,
5.950%, 7/01/23 7/03 at 102 A3 1,223,810
3,500,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Phillips Academy Issue, Series 1993,
5.375%, 9/01/23 9/08 at 102 Aa1 3,554,705
2,645,000 Massachusetts Industrial Finance Agency, Revenue Bonds (Whitehead Institute for Biomedical
Research-1993 Issue), 5.125%, 7/01/26 7/03 at 102 Aa1 2,608,049
1,500,000 Massachusetts Industrial Finance Agency, Revenue Bonds (College of the Holy Cross-1996 Issue),
5.500%, 3/01/20 3/06 at 102 Aaa 1,547,865
1,765,000 The New England Education Loan Marketing Corporation, Student Loan Revenue Bonds, 1992
Subordinated Issue C, 6.750%, 9/01/02 (Alternative Minimum Tax) No Opt. Call A1 1,915,166
4,000,000 The New England Loan Marketing Corporation, Student Loan Revenue Bonds, 1992 Subordinated
Issue H, 6.900%, 11/01/09 (Alternative Minimum Tax) No Opt. Call A1 4,509,960
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 19.7%
2,805,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, Series 1998A (Caregroup
Issue), 5.000%, 7/01/25 7/08 at 102 Aaa 2,715,913
3,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, Lahey Clinic Medical
Center Issue, Series B, 5.625%, 7/01/15 7/03 at 102 Aaa 3,106,980
1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, Massachusetts General
Hospital Issue, Series G, 5.375%, 7/01/11 7/00 at 100 Aaa 1,040,250
4,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, New England Medical
Center Hospitals, Series 1993-G1, 5.375%, 7/01/24 7/04 at 102 Aaa 4,032,400
2,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds (Daughters of Charity
National Health System-The Carney Hospital), Series D, 6.100%, 7/01/14 7/04 at 102 AA+ 2,159,120
400,000 Massachusetts Health and Educational Facilities Authority, Revenue Refunding Bonds (Cardinal
Cushing General Hospital), Series 1989-A, 8.500%, 7/01/00 7/99 at 102 1/2N/R 415,472
Massachusetts Health and Educational Facilities Authority,
Revenue Refunding Bonds, Youville Issue (FHA Insured Project),
Series B:
2,580,000 6.125%, 2/15/15 2/04 at 102 Aa 2,718,236
1,000,000 6.000%, 2/15/25 2/04 at 102 Aa 1,039,320
3,000,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Harvard Community Health Plan, Inc.,
Issue 1988 Series B (Refunding Bonds), 8.125%, 10/01/17 10/98 at 102 A- 3,098,880
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 9.2%
3,800,000 Massachusetts Housing FInance Agency, Housing Project Revenue Bonds,
6.300%, 10/01/13 4/03 at 102 A1 4,028,684
1,945,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue Bonds, 1995 Series A
(FHA Insured Mortgage Loans), 7.350%, 1/01/35 (Alternative Minimum Tax) 1/05 at 102 Aaa 2,131,331
3,315,000 Massachusetts Housing Finance Agency, Rental Housing Mortgage Revenue Bonds, 1997 Series C,
5.625%, 7/01/40 (Alternative Minimum Tax) 7/07 at 101 Aaa 3,343,410
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 2.5%
2,450,000 Massachusetts Housing Finance Agency, Single Family Housing Revenue Bonds, Series 9,
8.100%, 12/01/21 (Alternative Minimum Tax) 12/98 at 102 Aa 2,524,407
</TABLE>
F-100
<PAGE> 208
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG TERM CARE - 2.7%
$ 1,000,000 Massachusetts Health and Educational Facilities Authority, Revenue Refunding Bonds, Youville Hospital
Issue (FHA Insured Project), Series A, 6.250%, 2/15/41 2/07 at 102 Aa2 $ 1,070,030
1,125,000 Massachusetts Industrial Financial Agency, Revenue Bonds, Heights Crossing Limited Partnership
Issue (FHA Insured Project), Series 1995 6.000%, 2/01/15
(Alternative Minimum Tax) 2/06 at 102 AAA 1,176,964
500,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Briscoe House Assisted Living Issue
(FHA Insured Project), 6.050%, 2/01/17 (Alternative Minimum Tax) 8/07 at 105 AAA 543,250
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 8.7%
Town of Barnstable, Massachusetts, General Obligation Bonds:
1,020,000 5.750%, 9/15/10 9/04 at 102 Aa3 1,102,804
1,020,000 5.750%, 9/15/11 9/04 at 102 Aa3 1,099,886
965,000 5.750%, 9/15/12 9/04 at 102 Aa3 1,029,086
1,000,000 City of Chelsea, Massachusetts, General Obligation Bonds, School Project Loan, Act of 1948,
7.000%, 6/15/03 No Opt. Call Aaa 1,124,620
4,375,000 City of Lowell, Massachusetts, General Obligation Bonds, State Qualified
Bonds, 5.600%, 11/01/1 11/03 at 102 Aaa 4,638,813
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.6%
2,500,000 Massachusetts Industrial Finance Agency, Parking Facility Revenue Bonds (Avon Associates Project),
Series 1998A, 5.375%, 4/01/20 4/03 at 102 Aaa 2,520,425
4,000,000 Massachusetts Port Authority, Special Facilities Revenue Bonds (U.S. Air Project), Series 1996-A,
5.750%, 9/01/16 (Alternative Minimum Tax) 9/06 at 102 Aaa 4,234,800
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 22.3%
1,250,000 Massachusetts Health and Educational Facilities Authority, Revenue Refunding Bonds, Worcester
Polytechnic Institute Issue, Series E, 6.750%, 9/01/11
(Pre-refunded to 9/01/02) 9/02 at 102 Aaa 1,396,738
2,500,000 Massachusetts Health and Educational Facilities Authority, Revenue Bonds, Malden Hospital Issue
(FHA Insured Project), Series A, 5.000%, 8/01/16 No Opt. Call AAA 2,519,175
Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, New England Deaconess Hospital Issue, Series D:
3,310,000 6.625%, 4/01/12 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 3,658,642
1,000,000 6.875%, 4/01/22 (Pre-refunded to 4/01/02) 4/02 at 102 AAA 1,113,740
2,500,000 Massachusetts Industrial Finance Agency, Revenue Refunding Bonds, College of the Holy Cross-1992
Issue II, 6.375%, 11/01/15 (Pre-refunded to 11/01/02) 11/02 at 102 A1*** 2,764,750
1,355,000 Massachusetts Industrial Finance Agency, Revenue Bonds, Merrimack College Issue, Series 1992,
7.125%, 7/01/12 (Pre-refunded to 7/01/02) 7/02 at 102 AAA 1,530,472
1,000,000 Massachusetts Port Authority, Revenue Bonds, Series 1982, 13.000%, 7/01/13 No Opt. Call Aaa 1,715,830
3,000,000 Massachusetts Water Resources Authority, General Revenue Bonds, 1991 Series A,
5.750%, 12/01/21 (Pre-refunded to 12/01/01) 12/01 at 100 Aaa 3,170,640
1,750,000 Puerto Rico Aqueduct and Sewer Authority, Revenue Bonds, Series 1988A, 7.875%, 7/01/17
(Pre-refunded to 7/01/98) 7/98 at 102 AAA 1,791,055
3,000,000 Puerto Rico Electric Power Authority, Power Revenue Bonds, Series P, 7.000%, 7/01/21
(Pre-refunded to 7/01/01) 7/01 at 102 Aaa 3,313,410
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 5.6%
3,225,000 Massachusetts Industrial Finance Agency, Resource Recovery Revenue Bonds, Semass Project,
Series 1991B, 9.250%, 7/01/15 (Alternative Minimum Tax) 7/01 at 103 N/R 3,620,255
2,000,000 Massachusetts Municipal Wholesale Electric Company, A Public Corporation of The Commonwealth of
Massachusetts, Power Supply System Revenue Bonds, 6.000%, 7/01/18 7/02 at 100 Aaa 2,103,960
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 2.8%
3,000,000 Massachusetts Water Resources Authority, General Revenue Refunding Bonds, 1993 Series B,
5.000%, 3/01/22 3/03 at 100 A 2,902,560
- ------------------------------------------------------------------------------------------------------------------------------------
$ 95,115,000 Total Investments - (cost $94,334,218) - 97.9% 100,775,384
=============
</TABLE>
F-101
<PAGE> 209
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 0.3%
$ 300,000 Massachusetts Health and Educational Facilities Authority (Capital
============ Asset Program), Variable Rate Demand Bonds, 3.950%, 1/01/35+ VMIG-1 $ 300,000
Other Assets Less Liabilities - 1.8% 1,860,586
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 102,935,970
====================================================================================================================
</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 or 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.
N/R Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
See accompanying notes to financial statements.
F-102
<PAGE> 210
<TABLE>
PORTFOLIO OF INVESTMENTS
NUVEEN MISSOURI PREMIUM INCOME MUNICIPAL FUND (NOM)
May 31, 1998
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATIONAL AND CIVIC ORGANIZATIONS - 5.7%
$ 500,000 The Industrial Development Authority of the City of Kansas City, Missouri (Ewing Marion Kauffman
Foundation Project), Fixed Rate Revenue Bonds, Series 1997B,
5.700%, 4/01/27 4/07 at 100 AAA $ 526,545
1,775,000 Northwest Missouri State University, Housing System Revenue Bonds
Series 1998, 7.000%, 6/01/11 6/08 at 100 Aaa 2,129,343
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 9.3%
1,000,000 Health and Educational Facilities Authority of the State of Missouri, Health Facilities Revenue Bonds
(BJC Health System), Series 1994A, 6.750%, 5/15/12 No Opt. Call AA 1,188,260
1,000,000 Health and Educational Facilities Authority of the State of Missouri, Health Facilities Refunding
Revenue Bonds (SSM Health Care), Series 1992AA, 6.250% 6/01/07 6/02 at 102 Aaa 1,089,460
1,000,000 Health and Educational Facilities Authority of the State of Missouri, Health Facilities Revenue Bonds
(Lake of the Ozarks General Hospital, Inc.), Series 1996, 6.500%, 2/15/21 2/06 at 102 BBB+ 1,088,410
1,000,000 Ray County, Missouri, Hospital Revenue Bonds (Ray County Memorial Hospital), Series 1997,
5.750%, 11/15/12 5/05 at 101 1/2N/R 1,008,230
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 14.0%
1,550,000 Missouri Housing Development Commission, Multifamily Housing Revenue Bonds (Brookstone Village
Apartments Project), 1996 Series A, 6.100%, 12/01/21 (Alternative
Minimum Tax) 12/06 at 102 Aaa 1,625,981
650,000 The Industrial Development Authority of the City of Kansas City Missouri, Multifamily Housing Revenue
Refunding Bonds (President Gardens Apartment Project), Series 1997A,
5.550%, 8/01/25 2/08 at 102 AAA 657,748
1,250,000 The Industrial Development Authority of St. Charles County, Missouri, Multifamily Housing Revenue
Bonds (Ashwood Apartments Project), Series 1998A 5.600% 4/01/30
(Alternative Minimum Tax) 4/08 at 102 Aaa 1,256,350
1,045,000 The Industrial Development Authority of the County of St. Louis, Missouri, Multifamily Housing Revenue
Refunding Bonds (GNMA Collateralized-South Summit Apartments Project), Series 1997A,
5.950%, 4/20/17 4/07 at 102 AAA 1,105,924
600,000 Multifamily Housing Revenue Refunding Bonds (GNMA Collateralized-South Summit Apartments
Project), Series 1997B, 6.000%, 10/20/15 (Alternative Minimum Tax) 4/07 at 102 AAA 631,842
1,250,000 The Industrial Development Authority of The City of University City, Missouri, Multifamily Housing
Revenue Refunding Bonds (GNMA Collateralized-Canterbury Gardens Project), Series 1995A,
5.900%, 12/20/20 12/05 at 102 AAA 1,298,975
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 9.3%
2,190,000 Missouri Housing Development Commission, Single Family Mortgage Revenue Bonds, Series 1991-A
(GNMA Mortgage-Backed Securities Program), 7.375%, 8/01/23 (Alternative
Minimum Tax) 2/01 at 102 AAA 2,316,056
1,835,000 Missouri Housing Development Commission, Single Family Mortgage Revenue Bonds (Homeownership
Loan Program), 1995 Series C, 7.250%, 9/01/26 (Alternative Minimum Tax) 3/06 at 105 AAA 2,065,036
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 17.2%
2,020,000 Ritenour School District of St. Louis County, Missouri, General Obligation School Bonds, Series 1995,
7.375%, 2/01/12 No Opt. Call Aaa 2,519,546
1,500,000 Francis Howell School District, St. Charles County, Missouri, General Obligation Refunding Bonds,
Series 1994A, 7.800%, 3/01/08 No Opt. Call Aaa 1,890,480
1,000,000 School District of the City of St. Charles, Missouri, General Obligation Bonds (Missouri Direct Deposit
Program), Series 1996A, 5.625%, 3/01/14 3/06 at 100 AA 1,054,140
1,395,000 The Board of Education of the City of St. Louis (Missouri), General Obligation School Refunding Bonds,
Series 1993A, 8.500%, 4/01/07 No Opt. Call Aaa 1,805,800
625,000 Reorganized School District No. R-IV of Stone County, Missouri (Reeds Spring, Missouri), General
Obligation School Building Refunding and Improvement Bonds, Series 1995,
7.600%, 3/01/10 No Opt. Call Aaa 799,325
</TABLE>
F-103
<PAGE> 211
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TAX OBLIGATION/LIMITED - 16.5%
$ 1,000,000 Regional Convention and Sports Complex Authority, Convention and Sports Facility Project and
Refunding Bonds, Series A 1993 (State of Missouri Sponsor), 5.500%, 8/15/13 8/03 at 102 A1 $ 1,027,140
1,000,000 Fort Zumwalt School District Improvement Corporation, Leasehold Revenue Bonds, Fort Zumwalt, S.D.,
St. Charles County, Series 1997, 5.600%, 3/01/17 3/07 at 100 Aaa 1,043,480
1,000,000 Land Clearance For Redevelopment Authority of Kansas City, Missouri, Lease Revenue Bonds (Municipal
Auditorium and Muehlebach Hotel Redevelopment Projects), Series 1995A,
5.900%, 12/01/18 12/05 at 102 Aaa 1,072,810
1,000,000 Kansas City Municipal Assistance Corporation, Leasehold Revenue Capital Improvement Bonds (Kansas
City, Missouri, Lessee), Series 1996B, 5.700%, 1/15/13 1/06 at 101 Aaa 1,064,750
1,800,000 St. Louis Municipal Finance Corporation, City Justice Center, Leasehold Revenue Improvement Bonds,
Series 1996A (City of St. Louis, Missouri, Lessee), 5.750%, 2/15/11 2/06 at 102 Aaa 1,950,966
1,500,000 St. Louis Municipal Finance Corporation, Leasehold Revenue Refunding Bonds,
5.850%, 7/15/09 7/30 at 102 Aa3 1,593,105
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 6.0%
1,500,000 City of Kansas City, Missouri, General Improvement Airport Revenue Bonds, Series 1996A,
6.900%, 9/01/11 (Alternative Minimum Tax) 9/04 at 101 Aaa 1,692,480
1,000,000 The City of St. Louis, Missouri, Airport Revenue Bonds, Series 1997 (1997 Capital Improvement Program),
Lambert-St. Louis International Airport, 6.000%, 7/01/12
(Alternative Minimum Tax) No Opt. Call Aaa 1,117,440
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GUARANTEED - 9.5%
1,290,000 Health and Education Facilities Authority of the State of Missouri, Health Facilities Revenue Bonds
(SSM Health Care Obligated Group Projects), Series 1990B, 7.000%, 6/01/15 No. Opt. Call Aaa 1,394,516
1,500,000 Certificates of Receipt, Series 1993. St. Louis County, Missouri, GNMA Collateralized Mortgage Revenue
Bonds, Series 1989A, 5.650%, 7/01/20 (Alternative Minimum Tax) No Opt. Call AAA 1,643,220
1,275,000 St. Louis Municipal Finance Corporation, Leasehold Revenue Improvement and Refunding Bonds,
Series 1992 (City of St. Louis Missouri, Lessee), 6.250%, 2/15/12
(Pre-refunded to 2/15/05) 2/05 at 100 Aaa 1,424,405
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 10.4%
1,225,000 State Environmental Improvement and Energy Resources Authority (State of Missouri), Water Pollution
Control Revenue Bonds (State Revolving Fund Program-City of Kansas City Project), Series 1995B,
7.750%, 1/01/08 1/05 at 102 Aa1 1,482,127
1,000,000 State Environmental Improvement and Energy Resources Authority (State of Missouri), Water Pollution
Control Revenue Bonds (State Revolving Fund Program-City of Branson Project), Series 1995A,
6.050%, 7/01/16 7/04 at 102 Aaa 1,090,800
1,000,000 State Environmental Improvement and Energy Resources Authority (State of Missouri), Water Pollution
Control Revenue Bonds (State Revolving Fund Program-Multiple Participant Series), Series 1996D,
5.875%, 1/01/15 1/06 at 101 Aa1 1,065,430
350,000 State Environmental Improvement and Energy Resources Authority (State of Missouri),Water Pollution
Control Revenue Bonds (State Revolving Fund Program-City of Kansas City Project), Series 1997C,
6.750%, 1/01/12 No Opt. Call Aa1 421,046
750,000 The City of St. Louis, Missouri, Water Revenue Refunding and Improvement Bonds, Series 1994,
6.000%, 7/01/14 7/04 at 102 Aaa 819,900
- ------------------------------------------------------------------------------------------------------------------------------------
$ 41,375,000 Total Investments - (costs $42,958,628) - 97.9% 45,961,066
=============
</TABLE>
F-104
<PAGE> 212
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEMPORARY INVESTMENTS IN SHORT-TERM MUNICIPAL SECURITIES - 0.6%
$ 300,000 The Industrial Development Authority of the City of Independence, Missouri, Variable Rate Demand
=============
Industrial Development Revenue Bonds (The Groves and Graceland College Nursing Arts Center
Projects), Series 1997A, 4.000%, 11/01/27+ A-1+ $ 300,000
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.5% 674,254
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 46,935,320
====================================================================================================================
</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 or Moody's rating.
N/R Investment is not rated.
+ The security has a maturity of more than one year, but has variable rate
and demand features which qualify it as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
See accompanying notes to financial statements.
F-105
<PAGE> 213
PORTFOLIO OF INVESTMENTS
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND (NPW)
May 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
EDUCATIONAL AND CIVIC ORGANIZATIONS - 5.1%
$ 1,400,000 Washington State University, Housing and Dining System Revenue and Refunding Bonds,
Series 1994, 6.375%, 10/01/18 10/04 at 101 Aaa $ 1,545,684
1,000,000 University of Washington, Housing and Dining System Revenue Refunding Bonds, Junior Lien
Series 1996, 5.125%, 12/01/15 12/06 at 102 Aaa 1,007,680
65,000 Western Washington University, Housing and Dining System Revenue Bonds, Series 1992,
6.375%, 10/01/22 10/02 at 101 Aaa 70,153
- ------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE - 9.9%
2,000,000 Washington Health Care Facilities Authority, Highline Community Hospital,
Series 1998, 5.000%, 8/15/21 8/08 at 102 AA 1,915,100
2,000,000 Washington Health Care Authority, Revenue Bonds, Series 1992 (The Children's Hospital and Medical
Center, Seattle), 6.125%, 10/01/13 10/02 at 102 Aaa 2,167,900
1,000,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1993A (The Heart Institute of
Spokane), 5.800%, 8/15/18 8/04 at 102 AA- 1,038,240
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/MULTIFAMILY - 6.0%
970,000 Washington State Housing Finance Commission, Multifamily Mortgage Revenue Bonds (GNMA
Mortgage Backed Securities Program), Series 1989A, 7.700%, 7/01/32
(Alternative Minimum Tax) 1/00 at 103 AAA 1,018,558
2,000,000 Housing Authority of the County of King Washington, Housing Revenue Bonds, 1995 (Woodridge Park
Project), 6.350%, 5/01/25 (Alternative Minimum Tax) 5/05 at 100 AA+ 2,087,320
- ------------------------------------------------------------------------------------------------------------------------------------
HOUSING/SINGLE FAMILY - 4.4%
1,610,000 Washington State Housing Finance Commission, Single-Family Mortgage Revenue Bonds (Mortgage
Backed Securities Program), Series 1992D-1, 6.150%, 1/01/26
(Alternative Minimum Tax) No Opt. Call AAA 1,751,294
500,000 Washington State Housing Finance Commission, Single Family Program Bonds, 1997 Series 2A,
6.050%, 12/01/16 6/07 at 102 Aaa 524,585
- ------------------------------------------------------------------------------------------------------------------------------------
LONG TERM CARE- 3.5%
1,640,000 Housing Authority of Skagit County, Low-Income Housing Assistance Revenue Bonds, 1993
(GNMA Collateralized Mortgage Loan-Sea Mar Project), 7.000%, 6/20/35 11/04 at 104 AAA 1,839,768
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/GENERAL - 20.7%
2,000,000 State of Washington, General Obligation Bonds, Series 1994B,
6.000%, 5/01/19 5/04 at 100 Aa1 2,108,660
1,655,000 Everett, Limited Tax General Obligation Bonds, 5.125%, 9/01/17 9/07 at 100 Aaa 1,660,313
1,000,000 Federal Way School District No. 210, King County, Washington, Unlimited Tax General Obligation and
Refunding Bonds, 1993, 5.750%, 12/01/12 No Opt. Call Aaa 1,108,410
1,360,000 Tahoma School District No. 409, King County, Washington, Unlimited Tax General Obligation
Improvement and Refunding Bonds, 1997, 6.000%, 12/01/10 No Opt. Call Aaa 1,544,402
1,000,000 Peninsula School District No. 401, Pierce County, Washington, Unlimited Tax General Obligation
Refunding Bonds, 1993, 5.500%, 12/01/09 No Opt. Call Aaa 1,082,980
1,000,000 The City of Renton, Washington, Limited Tax General Obligation Bonds, General Purpose/Public
Improvement Bonds, 1997B, 5.750%, 12/01/17 6/07 at 100 Aaa 1,061,290
1,500,000 Mukilteo School District No. 6, Snohomish County, Washington, Unlimited Tax General Obligation and
Refunding Bonds, 1993, 5.700%, 12/01/12 No Opt. Call Aaa 1,656,465
500,000 Edmonds School District No. 15, Snohomish County, Washington, Unlimited Tax General Obligation
Bonds, Series 1994, 6.500%, 12/01/08 No Opt. Call AA- 579,800
- ------------------------------------------------------------------------------------------------------------------------------------
TAX OBLIGATION/LIMITED - 3.6%
Seattle Indian Services Commission, Special Obligation Bonds, 1994:
1,000,000 6.000%, 11/01/16 11/04 at 100 Aa1 1,061,070
750,000 6.150%, 11/01/24 11/04 at 100 Aa1 810,945
- ------------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION - 4.7%
1,300,000 Port of Seattle, Washington, Revenue Bonds, Series 1996A, 5.500%, 9/01/21 9/06 at 101 Aaa 1,339,806
1,000,000 Port of Vancouver, Clark County, Washington, Limited Tax General Obligation Bonds, 1994 Series B,
6.000%, 12/01/04 (Alternative Minimum Tax) No Opt. Call Aaa 1,099,750
</TABLE>
F-106
<PAGE> 214
<TABLE>
<CAPTION>
PRINCIPAL OPTIONAL CALL MARKET
AMOUNT DESCRIPTION PROVISIONS* RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GUARANTEED - 12.8%
$ 1,250,000 Washington Health Care Facilities Authority, Revenue Bonds Refunding Series 1992 (Franciscan
Health System/Saint Clare Hospital, Tacoma), 6.625%, 7/01/20
(Pre-refunded to 7/01/02) 7/02 at 102 Aaa $ 1,388,075
2,400,000 Washington Health Care Facilities Authority, Revenue Bonds, Series 1992 (Swedish Hospital Medical
Center, Seattle), 6.300%, 11/15/22 (Pre-refunded to 11/15/02) 11/02 at 102 Aaa 2,651,712
1,000,000 Port of Seattle, Washington, Revenue Bonds, Series 1990A, 6.000%, 12/01/14
(Pre-refunded to 12/01/00) 12/00 at 100 AA-*** 1,048,400
1,435,000 Western Washington University, Housing and Dining System Revenue Bonds, 6.375%, 10/01/22
(Pre-refunded to 10/01/02) 10/02 at 101 Aaa 1,576,391
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES - 14.3%
1,000,000 Washington Public Power Supply System, Nuclear Project No. 1, Refunding Revenue Bonds, Series 1993A,
5.700%, 7/01/17 7/03 at 102 Aaa 1,034,010
1,000,000 Washington Public Power Supply System, Nuclear Project No. 3, Refunding Revenue Bonds, Series 1993B,
7.000%, 7/01/09 No Opt. Call Aa1 1,187,880
1,100,000 Public Utility District No. 1 of Klickitat County, Washington, Electric Revenue Bonds, 1995,
5.650%, 10/01/15 10/05 at 101 Aaa 1,155,220
1,000,000 Lewis County Public Utility District, Cowlitz Falls Hydroelectric Project, Revenue Refunding Bonds,
Series 1993, 5.500%, 10/01/22 10/03 at 102 Aa1 1,018,640
500,000 The City of Seattle, Washington, Municipal Light and Power Revenue Bonds,
1992A, 5.750%, 8/01/12 8/02 at 102 AA 531,015
1,000,000 City of Seattle, Washington, Municipal Light and Power Revenue Bonds,
5.625%, 10/01/21 10/06 at 102 Aaa 1,046,620
1,385,000 Public Utility District No. 1 of Snohomish County, Washington, Generation System Revenue Bonds,
Series 1993B, 5.750%, 1/01/09 (Alternative Minimum Tax) 1/04 at 102 A1 1,466,438
- ------------------------------------------------------------------------------------------------------------------------------------
WATER AND SEWER - 13.2%
1,050,000 City of Bellevue, King County, Washington, Water and Sewer Revenue Refunding Bonds, 1994,
5.875%, 7/01/09 7/04 at 100 Aa 1,128,708
1,035,000 Covington Water District, Water Revenue Bonds, Refunding Series 1995,
6.050%, 3/01/20 3/05 at 100 Aaa 1,102,844
800,000 Kitsap County, Washington, Sewer Revenue Bonds, 1996, 5.750%, 7/01/16 7/06 at 100 Aaa 844,376
900,000 City of Richland, Washington, Water and Sewer Improvement Revenue Bonds,
1993, 5.625%, 4/01/12 4/03 at 100 Aaa 945,441
1,200,000 Sammamish Plateau Water and Sewer District, King County, Washington, Water and Sewer Revenue
Refunding Bonds, 1996, 5.500%, 12/01/16 12/06 at 100 Aaa 1,234,452
500,000 The City of Seattle, Washington, Water System and Refunding Revenue Bonds,
1993, 5.250%, 12/01/23 6/03 at 101 AA 500,870
1,000,000 Yakima-Tieton Irrigation District, Yakima County, Washington, Refunding Revenue Bonds, 1992,
6.125%, 6/01/13 6/03 at 102 Aaa 1,090,470
- ------------------------------------------------------------------------------------------------------------------------------------
$ 47,805,000 Total Investments - (cost $47,643,718) - 98.2% 51,031,735
=============
Temporary Investments in Short-Term Municipal Securities - 0.4%
$ 200,000 Washington Health Care Facilities Authority, Variable Rate Demand Revenue Bonds (Sisters of
=============
Providence), Series 1985B, 3.950%, 10/01/05+ VMIG-1 200,000
--------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - 1.4% 716,360
--------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $ 51,948,095
====================================================================================================================
</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 or 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 as a short-term security. The rate
disclosed is that currently in effect. This rate changes periodically based on
market conditions or a specified market index.
See accompanying notes to financial statements.
F-107
<PAGE> 215
STATEMENT OF NET ASSETS
May 31, 1998
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments in municipal securities, at
market value (note 1) $111,997,081 $100,775,384 $45,961,066 $51,031,735
Temporary investments in short-term municipal securities,
at amortized cost, which approximates market value (note 1) -- 300,000 300,000 200,000
Cash -- 230,610 22,063 57,938
Receivables:
Interest 1,969,949 1,852,756 842,644 883,115
Investments sold -- 200,000 -- --
Other assets 13,877 12,307 4,418 2,918
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 113,980,907 103,371,057 47,130,191 52,175,706
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Cash overdraft 133,034 -- -- --
Accrued expenses:
Management fees (note 6) 62,157 56,478 25,741 28,462
Other 47,720 45,592 30,971 47,606
Preferred share dividends payable 9,441 6,988 5,326 5,380
Common share dividends payable 344,483 326,029 132,833 146,163
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 596,835 435,087 194,871 227,611
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets (note 7) $113,384,072 $102,935,970 $46,935,320 $51,948,095
- ------------------------------------------------------------------------------------------------------------------------------------
Preferred shares, at liquidation value $ 38,300,000 $ 34,000,000 $16,000,000 $17,000,000
====================================================================================================================================
Preferred shares outstanding 1,532 1,360 640 680
====================================================================================================================================
Common shares outstanding 5,180,192 4,624,524 2,142,460 2,320,051
====================================================================================================================================
Net asset value per Common share outstanding (net assets less Preferred shares
at liquidation value, divided by Common shares
outstanding) $ 14.49 $ 14.91 $ 14.44 $ 15.06
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-108
<PAGE> 216
STATEMENT OF OPERATIONS
Year Ended May 31, 1998
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
<S> <C> <C> <C> <C>
INVESTMENT INCOME (NOTE 1) $6,139,952 $5,781,968 $2,581,960 $2,832,407
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Management fees (note 6) 726,805 661,353 301,470 333,129
Preferred shares - auction fees 95,750 85,001 40,000 42,501
Preferred shares - dividend disbursing agent fees 9,629 9,548 9,629 9,548
Shareholders' servicing agent fees and expenses 17,063 8,584 7,125 2,997
Custodian's fees and expenses 38,206 37,528 32,810 32,080
Trustees' fees and expenses (note 6) 1,991 1,893 1,363 1,408
Professional fees 17,228 16,910 16,732 16,554
Shareholders' reports - printing and mailing expenses 31,228 28,835 20,183 7,333
Stock exchange listing fees 16,188 16,183 1,979 2,121
Investor relations expense 9,701 8,222 4,190 3,945
Other expenses 16,793 16,523 12,353 12,446
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 980,582 890,580 447,834 464,062
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 5,159,370 4,891,388 2,134,126 2,368,345
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
Net realized gain from investment transactions (notes 1 and 4) 422,013 671,439 380,799 94,941
Net change in unrealized appreciation or
depreciation of investments 4,143,106 3,102,632 1,267,040 2,195,317
- ------------------------------------------------------------------------------------------------------------------------------------
Net gain from investments 4,565,119 3,774,071 1,647,839 2,290,258
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations $9,724,489 $8,665,459 $3,781,965 $4,658,603
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-109
<PAGE> 217
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/98 5/31/97 5/31/98 5/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 5,159,370 $ 5,134,299 $ 4,891,388 $ 4,887,537
Net realized gain (loss) from investment transactions
(notes 1 and 4) 422,013 (580,033) 671,439 (139,469)
Net change in unrealized appreciation or
depreciation of investments 4,143,106 3,607,938 3,102,632 2,550,049
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 9,724,489 8,162,204 8,665,459 7,298,117
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Common shareholders (4,108,452) (3,909,724) (3,905,877) (3,840,666)
Preferred shareholders (1,169,485) (1,050,779) (1,096,311) (1,017,157)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (5,277,937) (4,960,503) (5,002,188) (4,857,823)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Net proceeds from Common shares issued to shareholders due
to reinvestment of distributions 413,844 394,287 266,611 262,693
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions 413,844 394,287 266,611 262,693
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 4,860,396 3,595,988 3,929,882 2,702,987
Net assets at beginning of year 108,523,676 104,927,688 99,006,088 96,303,101
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $113,384,072 $108,523,676 $102,935,970 $99,006,088
===================================================================================================================================
Balance of undistributed net investment income
at end of year $ 284,103 $ 402,670 $ 214,228 $ 325,028
===================================================================================================================================
</TABLE>
F-110
<PAGE> 218
<TABLE>
<CAPTION>
MISSOURI WASHINGTON
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/98 5/31/97 5/31/98 5/31/97
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS
Net investment income $ 2,134,126 $ 2,125,190 $ 2,368,345 $ 2,371,693
Net realized gain (loss) from investment transactions
(notes 1 and 4) 380,799 135,827 94,941 22,234
Net change in unrealized appreciation or
depreciation of investments 1,267,040 1,026,731 2,195,317 1,324,756
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from operations 3,781,965 3,287,748 4,658,603 3,718,683
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1)
From undistributed net investment income:
Common shareholders (1,629,870) (1,553,262) (1,753,958) (1,742,358)
Preferred shareholders (526,508) (524,137) (596,423) (602,507)
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (2,156,378) (2,077,399) (2,350,381) (2,344,865)
- -----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (NOTE 2)
Net proceeds from Common shares issued to shareholders due
to reinvestment of distributions 85,411 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets from capital share transactions 85,411 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets 1,710,998 1,210,349 2,308,222 1,373,818
Net assets at beginning of year 45,224,322 44,013,973 49,639,873 48,266,055
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year $46,935,320 $45,224,322 $51,948,095 $49,639,873
===================================================================================================================================
Balance of undistributed net investment income
at end of year $ 156,882 $ 179,134 $ 105,628 $ 87,664
===================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-111
<PAGE> 219
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The state Funds (the "Funds") covered in this report and their corresponding
stock exchange symbols are Nuveen Connecticut Premium Income Municipal Fund
(NTC), Nuveen Massachusetts Premium Income Municipal Fund (NMT), Nuveen Missouri
Premium Income Municipal Fund (NOM) and Nuveen Washington Premium Income
Municipal Fund (NPW). Connecticut and Massachusetts are traded on the New York
Stock Exchange while Missouri and Washington are traded on the American Stock
Exchange.
Each Fund invests primarily in a diversified portfolio of municipal obligations
issued by state and local government authorities within a single state. 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 Trustees. 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 May
31, 1998, there were no such outstanding purchase commitments in any of the
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.
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 Common share. Furthermore, each Fund
intends to satisfy conditions which will enable interest from municipal
securities, which is exempt from regular federal and designated state income
taxes, if any, 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 May 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.
F-112
<PAGE> 220
Preferred Shares
The Funds have issued and outstanding $25,000 stated value Preferred shares.
Each Fund's Preferred shares are issued in one Series. The dividend rate on each
Series may change every seven days, as set by the auction agent. The number of
shares outstanding for each Fund is as follows:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of Shares:
Series Th 1,532 1,360 640 680
==========================================================================================================
</TABLE>
Derivative Financial Instruments
The Funds may invest in transactions in certain derivative financial instruments
including futures, forward, swap, 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 May 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.
2. FUND SHARES
Transactions in Common shares were as follows:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/98 5/31/97 5/31/98 5/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued to shareholders
due to reinvestment of
distributions 27,446 25,362 17,254 18,609
==========================================================================================================
<CAPTION>
MISSOURI WASHINGTON
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
5/31/98 5/31/97 5/31/98 5/31/97
- ----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
due to reinvestment of
distributions 5,923 -- -- --
==========================================================================================================
</TABLE>
3. DISTRIBUTIONS TO COMMON SHAREHOLDERS
The Funds declared Common share dividend distributions from their tax-exempt net
investment income which were paid on July 1, 1998, to shareholders of record on
June 15, 1998, as follows:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend per share $.0665 $.0705 $.0620 $.0630
==========================================================================================================
</TABLE>
4. SECURITIES TRANSACTIONS
Purchases and sales (including maturities) of investments in municipal
securities and temporary municipal investments for the year ended May 31, 1998,
were as follows:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases:
Investments in municipal securities $16,347,950 $16,775,239 $12,062,820 $4,928,148
Temporary municipal investments 5,600,000 8,300,000 4,800,000 4,600,000
Sales and Maturities:
Investments in municipal securities 14,670,110 16,722,320 11,650,583 4,939,330
Temporary municipal investments 6,300,000 8,200,000 7,800,000 4,400,000
==========================================================================================================
</TABLE>
F-113
<PAGE> 221
At May 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 May 31, 1998, the Funds had unused capital loss carryforwards available for
federal income tax purposes to be applied against future capital gains, if any.
If not applied, the carryforwards will expire as follows:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Expiration year:
2003 $ 895,482 $ 615,511 $ 949,075 $469,931
2004 1,105,901 945,779 708,417 70,082
2005 847,914 195,761 -- --
- ----------------------------------------------------------------------------------------------------------
Total $2,849,297 $1,757,051 $1,657,492 $540,013
==========================================================================================================
</TABLE>
5. UNREALIZED APPRECIATION (DEPRECIATION)
Gross unrealized appreciation and gross unrealized depreciation of investments
at May 31, 1998, were as follows:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gross unrealized:
appreciation $6,012,681 $6,441,166 $3,002,438 $3,394,435
depreciation (41,194) -- -- (6,418)
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation $5,971,487 $6,441,166 $3,002,438 $3,388,017
=========================================================================================================
</TABLE>
6. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Under the Funds' investment management agreements with Nuveen Advisory Corp.
(the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, 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 Trustees who are affiliated with the
Adviser or to their officers, all of whom receive remuneration for their
services to the Funds from the Adviser.
7. COMPOSITION OF NET ASSETS
At May 31, 1998, net assets consisted of:
<TABLE>
<CAPTION>
CONNECTICUT MASSACHUSETTS MISSOURI WASHINGTON
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Preferred shares, $25,000 stated value per share,
at liquidation value $ 38,300,000 $ 34,000,000 $16,000,000 $17,000,000
Common shares, $.01 par value per share 51,802 46,245 21,425 23,201
Paid-in surplus 71,625,977 63,991,382 29,412,067 31,971,262
Balance of undistributed net investment income 284,103 214,228 156,882 105,628
Accumulated net realized gain (loss)
from investment transactions (2,849,297) (1,757,051) (1,657,492) (540,013)
Net unrealized appreciation of investments 5,971,487 6,441,166 3,002,438 3,388,017
- ----------------------------------------------------------------------------------------------------------
Net assets $113,384,072 $102,935,970 $46,935,320 $51,948,095
==========================================================================================================
Authorized shares:
Common Unlimited Unlimited Unlimited Unlimited
Preferred Unlimited Unlimited Unlimited Unlimited
==========================================================================================================
</TABLE>
F-114
<PAGE> 222
Financial Highlights
Selected data for a Common share outstanding throughout each period is
as follows:
<TABLE>
<CAPTION>
Investment Operations Less Distributions
-------------------------------------------------------------------------------------------
Net Net Net
Realized/ Investment Investment Capital Capital
Beginning Net Unrealized Income Income Gain Gain
Net Asset Investment Investment To Common To Preferred To Common To Preferred
Value Income Gain (Loss) Total Shareholders Shareholders+ Shareholders Shareholders+ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1998 $ 13.63 $ 1.00 $ .89 $ 1.89 $ (.80) $ (.23) $-- $-- $ (1.03)
1997 12.99 1.00 .60 1.60 (.76) (.20) -- -- (.96)
1996 13.20 .98 (.21) .77 (.73) (.25) -- -- (.98)
1995 12.45 .98 .74 1.72 (.74) (.23) -- -- (.97)
1994 13.96 .77 (1.40) (.63) (.61) (.13) -- -- (.74)
<CAPTION>
Massachusetts
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1998 14.11 1.06 .83 1.89 (.85) (.24) -- -- (1.09)
1997 13.58 1.06 .53 1.59 (.84) (.22) -- -- (1.06)
1996 13.76 1.05 (.19) .86 (.80) (.24) -- -- (1.04)
1995 12.90 1.04 .84 1.88 (.78) (.24) -- -- (1.02)
1994 14.08 .87 (1.01) (.14) (.74) (.15) -- -- (.89)
<CAPTION>
Missouri
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1998 13.68 .99 .78 1.77 (.76) (.25) -- -- (1.01)
1997 13.11 1.00 .55 1.55 (.73) (.25) -- -- (.98)
1996 13.37 .96 (.30) .66 (.67) (.25) -- -- (.92)
1995 12.35 .95 1.02 1.97 (.69) (.26) -- -- (.95)
1994 13.90 .76 (1.40) (.64) (.59) (.14) -- -- (.73)
<CAPTION>
Washington
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended 5/31:
1998 14.07 1.02 .99 2.01 (.76) (.26) -- -- (1.02)
1997 13.48 1.02 .58 1.60 (.75) (.26) -- -- (1.01)
1996 13.71 1.02 (.23) .79 (.74) (.28) -- -- (1.02)
1995 12.97 1.01 .77 1.78 (.77) (.27) -- -- (1.04)
1994 14.09 .91 (.93) (.02) (.76) (.16) (.01) -- (.93)
</TABLE>
F-115
<PAGE> 223
<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**
<S> <C> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1998 $-- $14.49 $15.5000 15.61% 12.39%
1997 -- 13.63 14.1250 9.58 11.01
1996 -- 12.99 13.6250 14.06 3.97
1995 -- 13.20 12.6250 2.22 12.74
1994 (.14) 12.45 13.1250 (8.73) (6.74)
<CAPTION>
Massachusetts
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1998 -- 14.91 16.5000 18.08 11.91
1997 -- 14.11 14.7500 13.76 10.28
1996 -- 13.58 13.7500 8.99 4.55
1995 -- 13.76 13.3750 14.12 13.58
1994 (.15) 12.90 12.5000 (13.64) (3.38)
<CAPTION>
Missouri
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1998 -- 14.44 14.1875 14.53 11.31
1997 -- 13.68 13.0625 10.53 10.09
1996 -- 13.11 12.5000 10.07 3.09
1995 -- 13.37 12.0000 6.13 14.74
1994 (.18) 12.35 12.0000 (17.26) (7.16)
<CAPTION>
Washington
<S> <C> <C> <C> <C> <C>
Year Ended 5/31:
1998 -- 15.06 13.6250 15.26 12.64
1997 -- 14.07 12.5000 12.94 10.16
1996 -- 13.48 11.7500 7.44 3.75
1995 -- 13.71 11.6250 .41 12.36
1994 (.17) 12.97 12.3750 (16.88) (2.73)
</TABLE>
F-116
<PAGE> 224
<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
<S> <C> <C> <C> <C>
Connecticut
Year Ended 5/31:
1998 $ 113,384 .88% 4.61% 13%
1997 108,524 .89 4.79 18
1996 104,928 .89 4.71 15
1995 105,851 .92 4.99 18
1994 101,595 .95 3.95 9
Massachusetts
Year Ended 5/31:
1998 102,936 .88 4.81 17
1997 99,006 .88 4.99 22
1996 96,303 .88 4.95 18
1995 97,071 .94 5.20 29
1994 93,078 .97 4.26 33
Missouri
Year Ended 5/31:
1998 46,935 .97 4.60 25
1997 45,224 .99 4.74 36
1996 44,014 1.01 4.57 34
1995 44,566 1.08 4.86 34
1994 42,343 1.05 3.92 39
Washington
Year Ended 5/31:
1998 51,948 .91 4.62 10
1997 49,640 .94 4.83 11
1996 48,266 .94 4.81 20
1995 48,812 1.04 5.04 16
1994 47,095 1.08 4.42 29
</TABLE>
* Annualized.
** Total Investment Return on Market Value is the combination of reinvested
dividend income, reinvested capital gain 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 gain 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.
F-117
<PAGE> 225
Building a Better Portfolio Can Make You a Successful Investor
NUVEEN FAMILY
OF MUTUAL FUNDS
Nuveen offers a variety of funds designed to help you reach your financial
goals.
GROWTH
Nuveen Rittenhouse Growth Fund
GROWTH AND
INCOME
European Value Fund
Growth and
Income Stock Fund
Balanced Stock
and Bond Fund
Balanced Municipal
and Stock Fund
TAX-FREE INCOME
NATIONAL FUNDS
Long-Term
Insured
Intermediate-Term
Limited-Term
STATE FUNDS
Alabama
Arizona
California
Colorado
Connecticut
Florida
Georgia
Kansas
Kentucky
Louisiana
Maryland
Massachusetts
Michigan
Missouri
New Jersey
New Mexico
New York
North Carolina
Ohio
Pennsylvania
South Carolina
Tennessee
Virginia
Wisconsin
Successful investors know that a well-diversified portfolio - one that balances
different types of investments, levels of risk and tax management - can be the
foundation for building and sustaining wealth. That's why Nuveen offers you and
your financial adviser a wide range of quality investments that can help you
build a better portfolio in the pursuit of your financial goals
Exchange-Traded Funds
Nuveen Exchange-Traded Funds offer investors actively managed portfolios of
investment-grade quality municipal bonds. The fund shares are listed and traded
on the New York and American stock exchanges. Exchange-traded funds provide the
investment convenience, price visibility and liquidity of common stocks.
MuniPreferred(R)
Nuveen MuniPreferred offers investors a AAA rated investment with an attractive
tax-free yield for the cash reserves portion of an investment portfolio.
MuniPreferred shares are backed 2-to-1 by the long-term portfolios of Nuveen
dual-class exchange-traded funds and are available for national as well as a
wide variety of state-specific portfolios.
Mutual Funds
Nuveen offers a family of equity, balanced and municipal bond funds featuring
Premier AdvisersSM including Institutional Capital Corporation, Rittenhouse
Financial Services, and Nuveen Advisory Corp. Each brings a specialized
expertise in a particular investment style or asset class, time-tested
investment strategies and a focus on consistent, long-term performance. With
Nuveen's Premier Adviser funds, you have all the advantages of a family of funds
plus the benefits of specialized investment expertise.
Private Asset Management
Rittenhouse Financial Services and Nuveen Asset Management offer comprehensive,
customized investment management solutions to investors with assets of $250,000
or more to invest. A range of actively managed growth, balanced and municipal
income-oriented portfolios are available, all based upon a disciplined
investment philosophy.
Defined Portfolios
Nuveen Defined Portfolios are fixed portfolios of quality securities that are a
convenient, attractive alternative to purchasing individual securities. They
provide low-cost diversification to reduce risk, experienced, professional
security selection and surveillance and daily liquidity at that day's net asset
value for quick access to your assets.
F-118
<PAGE> 226
Fund Information
BOARD OF TRUSTEES
Robert P. Bremner
Lawrence H. Brown
Anthony T. Dean
Anne E. Impellizzeri
Peter R. Sawers
William J. Schneider
Timothy R. Schwertfeger
Judith M. Stockdale
FUND MANAGER
Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
CUSTODIAN, TRANSFER AGENT
AND SHAREHOLDER SERVICES
The Chase Manhattan Bank
4 New York Plaza
New York, NY 10004-2413
(800) 257-8787
LEGAL COUNSEL
Morgan, Lewis &
Bockius LLP
Washington, D.C.
INDEPENDENT AUDITORS
Ernst & Young LLP
Chicago, IL
YEAR 2000
The concern that computer systems may have problems processing date-related
information in the year 2000 and beyond has challenged businesses and
organizations to thoroughly review all aspects of their operations. We have
undertaken just such an approach at Nuveen in preparation for the millennium.
Over the last 10 years, our trading, fund management and pricing systems at
Nuveen - the systems that directly affect our investors and their financial
advisers - have been updated or replaced to address the Year 2000 concerns.
We continue to work closely with our transfer agent, custodian and other service
partners to monitor readiness and address other remaining systems issues. Our
initial testing indicates we are on schedule, and we have targeted year-end 1998
to complete verification of vendor compliance and service partner readiness.
However, we can give no complete assurance at this time that the steps we have
taken will be sufficient to prevent any problems that would impact the Nuveen
Exchange-Traded Funds.
Each fund intends to repurchase shares of its own common or preferred stock in
the future at such times and in such amounts as is deemed advisable. No shares
were repurchased during the 12-month period ended May 31, 1998. Any future
repurchases will be reported to shareholders in the next
annual or semiannual report.
F-119
<PAGE> 227
Serving Investors for Generations
Photo of: JOHN NUVEEN, SR.
Since our founding in 1898, John Nuveen & Co. has been
synonymous with investments that withstand the test of time. Today we offer a
broad range of quality investments designed for individuals seeking to build and
sustain wealth. In fact, more than 1.3 million investors have trusted Nuveen to
help them pursue their financial goals.
The cornerstone of Nuveen's investment philosophy is a commitment to disciplined
long-term investment strategies focused on providing consistent, attractive
performance over time - with moderated risk. We emphasize quality securities
carefully chosen through in-depth research, and we follow those securities
closely over time to ensure that they continue to meet our exacting standards.
Whether your focus is long-term growth, dependable
current income or sustaining accumulated wealth, Nuveen offers a wide variety of
investments and services to help meet your unique circumstances and financial
planning needs. Our equity, balanced, and tax-free income funds, along with our
defined portfolios and private asset management, can help you build a better,
well-diversified portfolio.
Talk with your financial adviser to learn more about how Nuveen investment
products and services can help you. Or call us at (800) 257-8787 for more
information, including a prospectus where applicable. Please read that
information carefully before investing.
LOGO:
1898 - 1998
NUVEEN
OUR SECOND CENTURY
helping investors sustain the wealth of a lifetime.(tm)
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, IL60606-1286
www.nuveen.com
FAN-3-5-98
F-120
<PAGE> 228
ANNEX A
RATINGS OF INVESTMENTS
Standard & Poor's Corporation--A brief description of the applicable
Standard & Poor's Corporation ("S&P") rating symbols and their meanings (as
published by S&P) follows:
LONG TERM DEBT
An S&P corporate or municipal debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees. The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor. The ratings are based on current information furnished by
the issuer or obtained by S&P from other sources it considers reliable. S&P does
not perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information, or
based on other circumstances. The ratings are based, in varying degrees, on the
following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
INVESTMENT GRADE
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
SPECULATIVE GRADE RATING
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of
speculation and 'C' the highest. While such debt will likely have some quality
and protective characteristics these are outweighed by major uncertainties or
major exposures to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to
default than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied 'BBB-' rating.
A-1
<PAGE> 229
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.
CC The rating 'CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' debt rating.
C The rating 'C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC--' debt rating. The 'C'
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
CI The rating 'CI' is reserved for income bonds on which no interest is
being paid.
D Debt rated 'D' is in payment default. The 'D' rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The
'D' rating also will be used upon the filing of a bankruptcy petition
if debt service payments are jeopardized.
PLUS (+) OR MINUS (--): The ratings from 'AA' to 'CCC' may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.
PROVISIONAL RATINGS: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project financed by the debt being rated and indicates that payment of debt
service requirements is largely or entirely dependent upon the successful and
timely completion of the project. This rating, however, while addressing credit
quality subsequent to completion of the project, makes no comment on the
likelihood of, or the risk of default upon failure of, such completion. The
investor should exercise judgment with respect to such likelihood and risk.
L The letter 'L' indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit
collateral is federally insured and interest is adequately
collateralized.* In the case of certificates of deposit the letter 'L'
indicates that the deposit, combined with other deposits being held in
the same right and capacity, will be honored for principal and accrued
pre-default interest up to the federal insurance limits within 30 days
after closing of the insured institution or, in the event that the
deposit is assumed by a successor insured institution, upon maturity.
- ------------------
* Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation
confirming investments and cash flow.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
A-2
<PAGE> 230
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:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will
be given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
COMMERCIAL PAPER
An S&P commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
Ratings are graded into several categories, ranging from "A-1" for the
highest quality obligations to "D" for the lowest. These categories are as
follows:
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign +
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher
designation.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date
due, even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period.
A commercial paper rating is not a recommendation to purchase, sell, or
hold a security inasmuch as it does not comment as to market price or
suitability for a particular investor. The ratings are based on current
information
A-3
<PAGE> 231
furnished to S&P by the issuer or obtained by S&P from other sources it
considers reliable. S&P does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended, or withdrawn as a result of changes in or unavailability
of such information or based on other circumstances.
MOODY'S INVESTORS SERVICE, INC.--A brief description of the applicable
Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings
(as published by Moody's) follows:
MUNICIPAL BONDS
AAA Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
AA Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
CAA Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
CON(...) Bonds for which the security depends upon the completion of some act
or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b)
earnings of projects unseasoned in operation experience, (c) rentals
which begin when facilities are completed, or (d) payments to which
some other limiting condition attaches. Parenthetical rating denotes
probable credit stature upon completion of construction or elimination
of basis of condition.
A-4
<PAGE> 232
NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes
possess the strongest investment attributes are designated by the
symbols Aa1, A1, Baa1, Ba1 and B1.
SHORT-TERM LOANS
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity
support or demonstrated broadbased access to the market for
refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is
likely to be less well established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and
although not distinctly or predominantly speculative, there is
specific risk.
S.G. This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.
COMMERCIAL PAPER
Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance
on debt and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
-- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
A-5
<PAGE> 233
ANNEX B
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 $50,000 per share,
having such designation or designations as to series as is set forth in Section
1 of APPENDIX A hereto and such number of shares per such series as is set forth
in Section 2 of APPENDIX A hereto.
SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the shares
of each series of MuniPreferred described in Section 1 of APPENDIX A hereto are
as follows (each such series being referred to herein as a series of
MuniPreferred, and shares of all such series being referred to herein
individually as a share of MuniPreferred and collectively as shares of
MuniPreferred):
DEFINITIONS
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SECTION 3 OF APPENDIX A
HERETO, as used in Parts I and II of this Statement, the following terms shall
have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
(a) "'AA' COMPOSITE COMMERCIAL PAPER RATE," on any date for
any Rate Period of shares of a series of MuniPreferred, shall mean (i) (A) in
the case of any Minimum Rate Period or any Special Rate Period of fewer than 49
Rate Period Days, the interest equivalent of the 30-day rate; PROVIDED, HOWEVER,
that if such Rate Period is a Minimum Rate Period and the "AA" Composite
Commercial Paper Rate is being used to determine the Applicable Rate for shares
of such series when all of the Outstanding shares of such series are subject to
Submitted Hold Orders, then the interest equivalent of the seven-day rate, and
(B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70
Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but
fewer than 85 Rate Period Days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate
Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but
fewer than 120-Rate Period Days, the arithmetic average of the interest
equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141
Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more
but fewer than 162 Rate Period Days, the arithmetic average of the 120-day and
180-day rates; and (7) 162 or more but fewer than 183 Rate Period Days, the
interest equivalent of the 180-day rate, in each case on commercial paper placed
on behalf of issuers whose corporate bonds are rated "AA" by S&P or the
equivalent of such rating by S&P or another rating agency, as made available on
a discount basis or otherwise by the Federal Reserve Bank of New York for the
Business Day next preceding such date; or (ii) in the event that the Federal
Reserve Bank of New York does not make available any such rate, then the
arithmetic average of such rates, as quoted on a discount basis or otherwise, by
the Commercial Paper Dealers to the Auction Agent for the close of business on
the Business Day next preceding such date. If any Commercial Paper Dealer does
not quote a rate required to determine the "AA" Composite Commercial Paper Rate,
the "AA" Composite Commercial Paper Rate shall be determined on the basis of the
quotation or quotations furnished by the remaining Commercial Paper Dealer or
Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers selected by the Fund to provide such rate or
rates not being supplied by any Commercial Paper Dealer or Commercial Paper
Dealers, as the case may be, or, if the Fund does not select any such Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining
Commercial Paper Dealer or Commercial Paper Dealers. For purposes of this
definition, the "interest equivalent" of a rate stated on a discount basis (a
"discount rate") for commercial paper of a given days' maturity shall be equal
to the quotient (rounded upwards to the next higher one-thousandth (.001) of 1%)
of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y)
a fraction the numerator of which shall be the product of the discount rate
times the number of days in which such commercial paper matures and the
denominator of which shall be 360.
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<PAGE> 234
(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 (BAN's) that are rated by S&P.
(f) "APPLICABLE RATE" shall have the meaning specified in
subparagraph (e) (i) of Section 2 of Part I of this Statement.
(g) "ARTICLES" shall have the meaning specified on the first
page of this Statement.
(h) "AUCTION" shall mean each periodic implementation of the
Auction Procedures.
(i) "AUCTION AGENCY AGREEMENT" shall mean the agreement
between the Fund and the Auction Agent which provides, among other things, that
the Auction Agent will follow the Auction Procedures for purposes of determining
the Applicable Rate for shares of a series of MuniPreferred so long as the
Applicable Rate for shares of such series is to be based on the results of an
Auction.
(j) "AUCTION AGENT" shall mean the entity appointed as such by
a resolution of the Board of Directors in accordance with Section 6 of Part II
of this Statement.
(k) "AUCTION DATE," with respect to any Rate Period, shall
mean the Business Day next preceding the first day of such Rate Period.
(l) "AUCTION PROCEDURES" shall mean the procedures for
conducting Auctions set forth in Part II of this Statement.
(m) "AVAILABLE MUNIPREFERRED" shall have the meaning specified
in paragraph (a) of Section 3 of Part II of this Statement.
(n) "BENCHMARK RATE" shall have the meaning specified in
Section 12 of APPENDIX A hereto.
(o) "BENEFICIAL OWNER," with respect to shares of a series of
MuniPreferred, means a customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of
shares of such series.
(p) "BID" AND "BIDS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(q) "BIDDER" AND "BIDDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement; PROVIDED,
HOWEVER, that neither the Fund nor any affiliate thereof shall be permitted to
be a Bidder in an Auction, except that any Broker-Dealer that is an affiliate of
the Fund may be a Bidder in an Auction, but only if the Orders placed by such
Broker-Dealer are not for its own account.
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<PAGE> 235
(r) "BOARD OF DIRECTORS" shall mean the Board of Directors of
the Fund or any duly authorized committee thereof.
(s) "BROKER-DEALER" shall mean any broker-dealer, commercial
bank or other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member or
participant, has been selected by the Fund and has entered into a Broker-Dealer
Agreement that remains effective.
(t) "BROKER-DEALER AGREEMENT" shall mean an agreement among
the Fund, the Auction Agent and a Broker-Dealer pursuant to which such
Broker-Dealer agrees to follow the procedures specified in Part II of this
Statement.
(u) "BUSINESS DAY" shall mean a day on which the New York
Stock Exchange is open for trading and which is neither a Saturday, Sunday nor
any other day on which banks in The City of New York, New York, are authorized
by law to close.
(v) "CODE" means the Internal Revenue Code of 1986, as
amended.
(w) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial
Paper Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof, their respective affiliates or
successors, if such entity is a commercial paper dealer.
(x) "COMMON STOCK" shall mean the common stock, par value $.01
per share, of the Fund.
(y) "CURE DATE" shall mean the MuniPreferred Basic Maintenance
Cure Date or the 1940 Act Cure Date, as the case may be.
(z) "DATE OF ORIGINAL ISSUE," with respect to shares of a
series of MuniPreferred, shall mean the date on which the Fund initially issued
such shares.
(aa) "DEPOSIT SECURITIES" shall mean cash and Municipal
Obligations rated at least A-1+ or SP-1+ by S&P, except that, for purposes of
subparagraph (a)(v) of Section 11 of Part I of this Statement, such Municipal
Obligations shall be considered "Deposit Securities" only if they are also rated
P-1, MIG-1 or VMIG-1 by Moody's.
(bb) "DISCOUNTED VALUE," as of any Valuation Date, shall mean,
(i) with respect to an S&P Eligible Asset, the quotient of the Market Value
thereof divided by the applicable S&P Discount Factor and (ii) (a) with respect
to a Moody's Eligible Asset that is not currently callable as of such Valuation
Date at the option of the issuer thereof, the quotient of the Market Value
thereof divided by the applicable Moody's Discount Factor, or (b) with respect
to a Moody's Eligible Asset that is currently callable as of such Valuation Date
at the option of the issuer thereof, the quotient of (1) the lesser of the
Market Value or call price thereof, including any call premium, divided by (2)
the applicable Moody's Discount Factor.
(cc) "DIVIDEND COVERAGE AMOUNT," as of any Valuation Date,
shall mean, with respect to each share of MuniPreferred, (i) the aggregate
amount of dividends that will accumulate on such share of MuniPreferred to (but
not including) the first Dividend Payment Date for such share that follows such
Valuation Date, less (ii) the combined value of Deposit Securities irrevocably
deposited for the payment of dividends on such share of MuniPreferred.
(dd) "DIVIDEND COVERAGE ASSETS," as of any Valuation Date,
shall mean, with respect to each share of MuniPreferred, Deposit Securities with
maturity or tender dates not later than the day preceding the first Dividend
Payment Date for such share that follows such Valuation Date and having a value
not less than the Dividend Coverage Amount with respect to such share.
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<PAGE> 236
(ee) "DIVIDEND PAYMENT DATE," with respect to shares of a
series of MuniPreferred, shall mean any date on which dividends are payable on
shares of such series pursuant to the provisions of paragraph (d) of Section 2
of Part I of this Statement.
(ff) "DIVIDEND PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the Date of Original
Issue of shares of such series to but excluding the initial Dividend Payment
Date for shares of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding the next
succeeding Dividend Payment Date for shares of such series.
(gg) "EXISTING HOLDER," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may be
permitted by the Fund) that is listed on the records of the Auction Agent as a
holder of shares of such series.
(hh) "FAILURE TO DEPOSIT," with respect to shares of a series
of MuniPreferred, shall mean a failure by the Fund to pay to the Auction Agent,
not later than 12:00 noon, New York City time, (A) on the Business Day next
preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend Payment Date in The City of New York, New York, the
full amount of any dividend (whether or not earned or declared) to be paid on
such Dividend Payment Date on any share of such series or (B) on the Business
Day next preceding any redemption date in funds available on such redemption
date for shares of such series in The City of New York, New York, the Redemption
Price to be paid on such redemption date for any share of such series after
notice of redemption is mailed pursuant to paragraph (c) of Section II 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.
B-4
<PAGE> 237
(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 $50,000 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.
(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
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<PAGE> 238
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) "MINIMUM LIQUIDITY LEVEL" shall have the meaning
specified in Section 8 of Part I of this Statement.
(yy) "MINIMUM RATE PERIOD" shall mean any Rate Period
consisting of 7 Rate Period Days.
(zz) "MOODY'S" shall mean Moody's Investors Service, Inc., a
Delaware corporation, and its successors.
(aaa) "MOODY'S DISCOUNT FACTOR" shall have the meaning
specified in Section 4 of APPENDIX A hereto.
(bbb) "MOODY'S ELIGIBLE ASSET" shall have the meaning
specified in Section 4 of APPENDIX A hereto.
(ccc) "MOODY'S EXPOSURE PERIOD" shall mean the period
commencing on a given Valuation Date and ending 56 days thereafter.
(ddd) "MOODY'S VOLATILITY FACTOR" shall mean, as of any
Valuation Date, (i) in the case of any Minimum Rate Period, any Special Rate
Period of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate
Period Days or more, a multiplicative factor equal to 275%, except as otherwise
provided in the last sentence of this definition; (ii) in the case of any
Special Rate Period of more than 28 but fewer than 36 Rate Period Days, a
multiplicative factor equal to 203%; (iii) in the case of any Special Rate
Period of more than 35 but fewer than 43 Rate Period Days, a multiplicative
factor equal to 217%; (iv) in the case of any Special Rate Period of more than
42 but fewer than 50 Rate Period Days, a multiplicative factor equal to 226%;
and (v) in the case of any Special Rate Period of more than 49 but fewer than 57
Rate Period Days, a multiplicative factor equal to 235%. If, as a result of the
enactment of changes to the Code, the greater of the maximum marginal Federal
individual income tax rate applicable to ordinary income and the maximum
marginal Federal corporate income tax rate applicable to ordinary income will
increase, such increase being rounded up to the next five percentage points (the
"Federal Tax Rate Increase"), until the effective date of such increase, the
Moody's Volatility Factor in the case of any Rate Period described in (i) above
in this definition instead shall be determined by reference to the following
table:
<TABLE>
<CAPTION>
FEDERAL TAX RATE INCREASE VOLATILITY FACTOR
------------------------- -----------------
<S> <C>
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
</TABLE>
(eee) "MUNIPREFERRED" shall have the meaning set forth on the
first page of this Statement.
(fff) "MUNIPREFERRED BASIC MAINTENANCE AMOUNT," as of any
Valuation Date, shall mean the dollar amount equal to the sum of (i) (A) the
product of the number of shares of MuniPreferred outstanding on such date
multiplied by $50,000 (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
B-6
<PAGE> 239
have accumulated at the respective Applicable Rates (whether or not earned or
declared) to (but not including) the first respective Dividend Payment Dates for
shares of MuniPreferred outstanding that follow such Valuation Date (plus the
aggregate amount of dividends, whether or not earned or declared, that will have
accumulated in respect of other outstanding shares of Preferred Stock to, but
not including, the first respective dividend payment dates for such other shares
that follow such Valuation Date); (C) the aggregate amount of dividends that
would accumulate on shares of each series of MuniPreferred outstanding from such
first respective Dividend Payment Date therefor through the 56th day after such
Valuation Date, at the Maximum Rate (calculated as if such Valuation Date were
the Auction Date for the Rate Period commencing on such Dividend Payment Date)
for a Minimum Rate Period of shares of such series to commence on such Dividend
Payment Date, assuming, solely for purposes of the foregoing, that if on such
Valuation Date the Fund shall have delivered a Notice of Special Rate Period to
the Auction Agent pursuant to Section 4 (d)(i) of this Part I with respect to
shares of such series, such Maximum Rate shall be the higher of (a) the Maximum
Rate for the Special Rate Period of shares of such series to commence on such
Dividend Payment Date and (b) the Maximum Rate for a Minimum Rate Period of
shares of such series to commence on such Dividend Payment Date, multiplied by
the Volatility Factor applicable to a Minimum Rate Period, or, in the event the
Fund shall have delivered a Notice of Special Rate Period to the Auction Agent
pursuant to Section 4(d)(i) of this Part I with respect to shares of such series
designating a Special Rate Period consisting of 56 Rate Period Days or more, the
Volatility Factor applicable to a Special Rate Period of that length (plus the
aggregate amount of dividends that would accumulate at the maximum dividend rate
or rates on any other shares of Preferred Stock outstanding from such respective
dividend payment dates through the 56th day after such Valuation Date, as
established by or pursuant to the respective statements establishing and fixing
the rights and preferences of such other shares of Preferred Stock) (except that
(1) if such Valuation Date occurs at a time when a Failure to Deposit (or, in
the case of shares of Preferred Stock other than MuniPreferred, a failure
similar to a Failure to Deposit) has occurred that has not been cured, the
dividend for purposes of calculation would accumulate at the current dividend
rate then applicable to the shares in respect of which such failure has occurred
and (2) for those days during the period described in this subparagraph (C) in
respect of which the Applicable Rate in effect immediately prior to such
Dividend Payment Date will remain in effect (or, in the case of shares of
Preferred Stock other than MuniPreferred, in respect of which the dividend rate
or rates in effect immediately prior to such respective dividend payment dates
will remain in effect), the dividend for purposes of calculation would
accumulate at such Applicable Rate (or other rate or rates, as the case may be)
in respect of those days); (D) the amount of anticipated expenses of the Fund
for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's
Maximum Potential Gross-up Payment Liability in respect of shares of
MuniPreferred (and similar amounts payable in respect of other shares of
Preferred Stock pursuant to provisions similar to those contained in Section 3
of Part I of this Statement) as of such Valuation Date; and (F) any current
liabilities as of such Valuation Date to the extent not reflected in any of
(i)(A) through (i)(E) (including, without limitation, any payables for Municipal
Obligations purchased as of such Valuation Date and any liabilities incurred for
the purpose of clearing securities transactions) less (ii) the value (i.e., for
purposes of current Moody's guidelines, the face value of cash, short-term
Municipal Obligations rated MIG-1, VMIG-1 or P-1, and short-term securities that
are the direct obligation of the U.S. government, provided in each case that
such securities mature on or prior to the date upon which any of (i)(A) through
(i)(F) become payable, otherwise the Moody's Discounted Value) of any of the
Fund's assets irrevocably deposited by the Fund for the payment of any of (i)(A)
through (i)(F).
(ggg) "MUNIPREFERRED BASIC MAINTENANCE CURE DATE," with
respect to the failure by the Fund to satisfy the MuniPreferred Basic
Maintenance Amount (as required by paragraph (a) of Section 7 of Part I of this
Statement) as of a given Valuation Date, shall mean the seventh Business Day
following such Valuation Date.
(hhh) "MUNIPREFERRED BASIC MAINTENANCE REPORT" shall mean a
report signed by the President, Treasurer or any Senior Vice President or Vice
President of the Fund which sets forth, as of the related Valuation Date, the
assets of the Fund, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the MuniPreferred Basic Maintenance Amount.
(iii) "MUNICIPAL OBLIGATIONS" shall mean "Municipal
Obligations" as defined in the Fund's registration statement on Form N-2 on file
with the Securities and Exchange Commission, as such registration statement may
be amended from time to time (the "Registration Statement").
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<PAGE> 240
(jjj) "1940 ACT" shall mean the Investment Company Act of
1940, as amended from time to time.
(kkk) "1940 ACT CURE DATE," with respect to the failure by the
Fund to maintain the 1940 Act MuniPreferred Asset Coverage (as required by
Section 6 of Part I of this Statement) as of the last Business Day of each
month, shall mean the last Business Day of the following month.
(lll) "1940 ACT MUNIPREFERRED ASSET COVERAGE" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200% with
respect to all outstanding senior securities of the Fund which are stock,
including all outstanding shares of MuniPreferred (or such other asset coverage
as may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common stock).
(mmm) "NOTICE OF REDEMPTION" shall mean any notice with
respect to the redemption of shares of MuniPreferred pursuant to paragraph (c)
of Section 11 of Part I of this Statement.
(nnn) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice
with respect to a Special Rate Period of shares of MuniPreferred pursuant to
subparagraph (d)(i) of Section 4 of Part I of this Statement.
(ooo) "ORDER" AND "ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "ORIGINAL ISSUE INSURANCE," if defined in Section 4 of
APPENDIX A hereto, shall have the meaning specified in that section.
(qqq) "OTHER ISSUES," if defined in Section 4 of APPENDIX A
hereto, shall have the meaning specified in that section.
(rrr) "OUTSTANDING" shall mean, as of any Auction Date with
respect to shares of a series of MuniPreferred, the number of shares of such
series theretofore issued by the Fund except, without duplication, (i) any
shares of such series theretofore cancelled or delivered to the Auction Agent
for cancellation or redeemed by the Fund, (ii) any shares of such series as to
which the Fund or any Affiliate thereof shall be an Existing Holder and (iii)
any shares of such series represented by any certificate in lieu of which a new
certificate has been executed and delivered by the Fund.
(sss) "PERMANENT INSURANCE," if defined in Section 4 of
APPENDIX A hereto, shall have the meaning specified in that section.
(ttt) "PERSON" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a joint
venture or other entity or a government or any agency or political subdivision
thereof.
(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.
B-8
<PAGE> 241
(xxx) "PREFERRED STOCK" shall mean the preferred stock of the
Fund, and includes the shares of MuniPreferred.
(yyy) "QUARTERLY VALUATION DATE" shall mean the last Business
Day of each February, May, August and November of each year, commencing on the
date set forth in Section 6 of APPENDIX A hereto.
(zzz) "RATE MULTIPLE" shall have the meaning specified in
Section 4 of APPENDIX A hereto.
(aaaa) "RATE PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the Initial Rate Period of shares of such series and
any Subsequent Rate Period, including any Special Rate Period, of shares of such
series.
(bbbb) "RATE PERIOD DAYS," for any Rate Period or Dividend
Period, means the number of days that would constitute such Rate Period or
Dividend Period but for the application of paragraph (d) of Section 2 of Part I
of this Statement or paragraph (b) of Section 4 of Part I of this Statement.
(cccc) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean
(A) for purposes of calculation of Moody's Eligible Assets as of any Valuation
Date, no more than the aggregate of the following: (i) the book value of
receivables for Municipal Obligations sold as of or prior to such Valuation Date
if such receivables are due within five business days of such Valuation Date,
and if the trades which generated such receivables are (x) settled through
clearing house firms with respect to which the Fund has received prior written
authorization from Moody's or (y) with counterparties having a Moody's long-term
debt rating of at least Baa3; and (ii) the Moody's Discounted Value of Municipal
Obligations sold as of or prior to such Valuation Date which generated
receivables, if such receivables are due within five business days of such
Valuation Date but do not comply with either of the conditions specified in (i)
above, and (B) for purposes of calculation of S&P Eligible Assets as of any
Valuation Date, the book value of receivables for Municipal Obligations sold as
of or prior to such Valuation Date if such receivables are due within five
business days of such Valuation Date.
(dddd) "REDEMPTION PRICE" shall mean the applicable redemption
price specified in paragraph (a) or (b) of Section 11 of Part I of this
Statement.
(eeee) "REFERENCE RATE" shall mean (i) the higher of the
Taxable Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial
Paper Rate in the case of Special Rate Periods of more than 28 Rate 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).
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(kkkk) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation
Date, a multiplicative factor equal to (i) 305% in the case of any Minimum Rate
Period or any Special Rate Period of 28 Rate Period Days or fewer, (ii) 268% in
the case of any Special Rate Period of more than 28 Rate Period Days but fewer
than 183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period
of more than 182 Rate Period Days.
(llll) "SECONDARY MARKET INSURANCE," if defined in Section 4
of APPENDIX A hereto, shall have the meaning specified in that section.
(mmmm) "SECURITIES DEPOSITORY" shall mean The Depository Trust
Company and its successors and assigns or any other securities depository
selected by the Fund which agrees to follow the procedures required to be
followed by such securities depository in connection with shares of
MuniPreferred.
(nnnn) "SELL ORDER" AND "SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 1 of Part II of this
Statement.
(oooo) "SPECIAL RATE PERIOD," with respect to shares of a
series of MuniPreferred, shall have the meaning specified in paragraph (a) of
Section 4 of Part I of this Statement.
(pppp) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning
specified in subparagraph (a) (i) of Section 11 of Part I of this Statement.
(qqqq) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York
City time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as specified
by the Auction Agent from time to time.
(rrrr) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(ssss) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS"
shall have the respective meanings specified in paragraph (a) of Section 3 of
Part II of this Statement.
(tttt) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(uuuu) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS"
shall have the respective meanings specified in paragraph (a) of Section 3 of
Part II of this Statement.
(vvvv) "SUBSEQUENT RATE PERIOD," with respect to shares of a
series of MuniPreferred, shall mean the period from and including the first day
following the 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.
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(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 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
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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 and the Minimum Liquidity Level, 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.
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 1), 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.
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(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 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
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<PAGE> 246
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 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
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<PAGE> 247
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
$50,000.
(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.
(j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID
DIVIDENDS. Any dividend payment made on shares of MuniPreferred shall first be
credited against the earliest accumulated but unpaid dividends due with respect
to such shares. Dividends in arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to the Holders as their names appear on the stock books of the Fund on
such date, not exceeding 15 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS.
Dividends on shares of MuniPreferred shall be designated as exempt-interest
dividends up to the amount of tax-exempt income of the Fund, to the extent
permitted by, and for purposes of, Section 852 of the Code.
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<PAGE> 248
3. GROSS-UP PAYMENTS
Holders of shares of MuniPreferred shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE
PERIOD DAYS OR FEWER. If, in the case of any Minimum Rate Period or any Special
Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net capital
gains or other income taxable for Federal income tax purposes to a dividend paid
on shares of MuniPreferred without having given advance notice thereof to the
Auction Agent as provided in Section 5 of Part II of this Statement (such
allocation being referred to herein as a "Taxable Allocation") solely by reason
of the fact that such allocation is made retroactively as a result of the
redemption of all or a portion of the outstanding shares of MuniPreferred or the
liquidation of the Fund, the Fund shall, prior to the end of the calendar year
in which such dividend was paid, provide notice thereof to the Auction Agent and
direct the Fund's dividend disbursing agent to send such notice with a Gross-up
Payment to each Holder of such shares that was entitled to such dividend payment
during such calendar year at such Holder's address as the same appears or last
appeared on the stock books of the Fund.
(b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS. If,
in the case of any Special Rate Period of more than 28 Rate Period Days, the
Fund makes a Taxable Allocation to a dividend paid on shares of MuniPreferred,
the Fund shall, prior to the end of the calendar year in which such dividend was
paid, provide notice thereof to the Auction Agent and direct the Fund's dividend
disbursing agent to send such notice with a Gross-up Payment to each Holder of
shares that was entitled to such dividend payment during such calendar year at
such Holder's address as the same appears or last appeared on the stock books of
the Fund.
(c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The
Fund shall not be required to make Gross-up Payments with respect to any net
capital gains or other taxable income determined by the Internal Revenue Service
to be allocable in a manner different from that allocated by the Fund.
4. Designation of Special Rate Periods
(a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The
Fund, at its option, may designate any succeeding Subsequent Rate Period of
shares of a series of MuniPreferred as a Special Rate Period consisting of a
specified number of Rate Period Days evenly divisible by seven and not more than
1,820, subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred as a Special Rate Period consisting of more
than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Fund wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event
the Fund wishes to designate a Subsequent Rate Period as a Special Rate Period,
but the day following what would otherwise be the last 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
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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 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
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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.
Upon the termination of a Voting Period, the voting rights described in
this subparagraph (b)(i) shall cease, subject always, however, to the
revesting of such voting rights in the Holders upon the further
occurrence of any of the events described in this subparagraph (b)(i).
(ii) Notice of Special Meeting. As soon as
practicable after the accrual of any right of the holders of shares of
Preferred Stock to elect additional directors as described in
subparagraph (b)(i) of this Section 5, the Fund shall notify the
Auction Agent and the Auction Agent shall call a special meeting of
such holders, by mailing a notice of such special meeting to such
holders, such meeting to be held not less than 10 nor more than 20 days
after the date of mailing of such notice. If the Fund fails to send
such notice to the Auction Agent or if the Auction Agent does not call
such a special meeting, it may be called by any such holder on like
notice. The record date for determining the holders entitled to notice
of and to vote at such
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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 the affirmative vote
or consent of the Holders of at least 662/3% 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).
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(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) Deposit Securities, Discounted
Value, Receivables for Municipal Obligations Sold, Issue Type Category and Other
Issues as such terms apply to S&P Eligible Assets, (y) Dividend Coverage Amount,
Dividend Coverage Assets, Minimum Liquidity Level, S&P Discount Factor, S&P
Eligible Asset, S&P Exposure Period and S&P Volatility Factor and (z) Valuation
Date as such term applies to the definitions of Dividend Coverage Amount,
Dividend Coverage Assets and Minimum Liquidity Level) and S&P (such confirmation
being required to be obtained only in the event S&P is rating the shares of
MuniPreferred and in no event being required to be obtained in the case of the
definitions of (x) Discounted Value, Receivables for Municipal Obligations Sold,
Issue Type Category and Other Issues as such terms apply to Moody's Eligible
Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's
Exposure Period and Moody's Volatility Factor) that any such amendment,
alteration or repeal would not impair the ratings then assigned by Moody's or
S&P, as the case may be, to shares of MuniPreferred:
<TABLE>
<S> <C>
Deposit Securities Moody's Exposure Period
Discounted Value Moody's Volatility Factor
Dividend Coverage Amount 1940 Act Cure Date
Dividend Coverage Assets 1940 Act MuniPreferred Asset Coverage
Issue Type Category Other Issues
Market Value Quarterly Valuation Date
Maximum Potential Gross-up Payment Liability Receivables for Municipal Obligations Sold
Minimum Liquidity Level S&P Discount Factor
MuniPreferred Basic Maintenance Amount S&P Eligible Asset
MuniPreferred Basic Maintenance Cure Date S&P Exposure Period
MuniPreferred Basic Maintenance Report S&P Volatility Factor
Moody's Discount Factor Valuation Date
Moody's Eligible Asset Volatility Factor
</TABLE>
(e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS.
Unless otherwise required by law, the Holders of shares of MuniPreferred shall
not have any relative rights or preferences or other special rights other than
those specifically set forth herein.
(f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of
shares of MuniPreferred shall have no preemptive rights or rights to cumulative
voting.
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(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.
(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
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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. Minimum Liquidity Level
So long as S&P is rating the shares of MuniPreferred, the Fund shall
have, as of each Valuation Date, Dividend Coverage Assets, with respect to each
then outstanding share of MuniPreferred, having a value not less than the
Dividend Coverage Amount with respect to such share (the "Minimum Liquidity
Level"). If, as of each Valuation Date, the Fund does not have the required
Dividend Coverage Assets, the Fund shall, as soon as practicable, adjust its
portfolio in order to meet the Minimum Liquidity Level, but only if S&P is then
rating the shares of MuniPreferred.
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9. Restrictions on Dividends and Other Distributions
(a) DIVIDENDS ON PREFERRED STOCK OTHER THAN MUNIPREFERRED.
Except as set forth in the next sentence, no dividends shall be declared or paid
or set apart for payment on the shares of any class or series of stock ranking,
as to the payment of dividends, on a parity with shares of MuniPreferred for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid on the shares of each series of MuniPreferred through its most
recent Dividend Payment Date. When dividends are not paid in full upon the
shares of each series of MuniPreferred through its most recent Dividend Payment
Date or upon the shares of any other class or series of stock ranking on a
parity as to the payment of dividends with shares of MuniPreferred through their
most recent respective dividend payment dates, all dividends declared upon
shares of MuniPreferred and any other such class or series of stock ranking on a
parity as to the payment of dividends with shares of MuniPreferred shall be
declared pro rata so that the amount of dividends declared per share on shares
of MuniPreferred and such other class or series of stock shall in all cases bear
to each other the same ratio that accumulated dividends per share on the shares
of MuniPreferred and such other class or series of stock bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
MuniPreferred shall be based on the Applicable Rate for such share for the
Dividend Periods during which dividends were not paid in full).
(b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON
STOCK UNDER THE 1940 ACT. The Board of Directors shall not declare any dividend
(except a dividend payable in shares of Common Stock), or declare any other
distribution, upon shares of Common Stock, or purchase shares of Common Stock,
unless in every such case the shares of Preferred Stock have, at the time of any
such declaration or purchase, an asset coverage (as defined in and determined
pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may
in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common stock) after
deducting the amount of such dividend, distribution or purchase price, as the
case may be.
(c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.
For so long as any share of MuniPreferred is outstanding, and except as set
forth in paragraph (a) of this Section 9 and paragraph (d) of Section 12 of this
Part I, (A) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to the shares of
MuniPreferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up) in respect of the Common Stock or any
other stock of the Fund ranking junior to or on a parity with the shares of
MuniPreferred as to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption, redeem, purchase
or otherwise acquire for consideration any shares of Common Stock or any other
such junior stock (except by conversion into or exchange for stock of the Fund
ranking junior to the shares of MuniPreferred as to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up), or any
such parity stock (except by conversion into or exchange for stock of the Fund
ranking junior to or on a parity with MuniPreferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), unless (i) full cumulative dividends on shares of each series of
MuniPreferred through its most recently ended Dividend Period shall have been
paid or shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent and (ii) the Fund has redeemed the full number
of shares of MuniPreferred required to be redeemed by any provision for
mandatory redemption pertaining thereto, and (B) the Fund shall not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or in options, warrants or rights to
subscribe for or purchase, Common Stock or other stock, if any, ranking junior
to shares of MuniPreferred as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up) in respect of Common
Stock or any other stock of the Fund ranking junior to shares of MuniPreferred
as to the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other such junior
stock (except by conversion into or exchange for stock of the Fund ranking
junior to shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless
immediately after such transaction the Discounted Value of Moody's Eligible
Assets (if Moody's is then rating the shares of MuniPreferred) and S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) would each at least
equal the MuniPreferred Basic Maintenance Amount.
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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 $50,000 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 250 shares of such series remain outstanding; (2) unless
otherwise provided in Section 11 of APPENDIX A hereto, shares of a series of
MuniPreferred are redeemable by the Fund during the Initial Rate Period thereof
only on the second Business Day next preceding the last Dividend Payment Date
for such Initial Rate Period; and (3) subject to subparagraph (ii) of this
paragraph (a), the Notice of Special Rate Period relating to a Special Rate
Period of shares of a series of MuniPreferred, as delivered to the Auction Agent
and filed with the Secretary of the Fund, may provide that shares of such series
shall not be redeemable during the whole or any part of such Special Rate Period
(except as provided in subparagraph (iv) of this paragraph (a)) or shall be
redeemable during the whole or any part of such Special Rate Period only upon
payment of such redemption premium or premiums as shall be specified therein
("Special Redemption Provisions").
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(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 $50,000 plus an amount equal to accumulated
but unpaid dividends thereon (whether or not earned or declared) to
(but not including) the date fixed for redemption.
(v) The Fund may not on any date mail a Notice of
Redemption pursuant to paragraph (c) of this Section 11 in respect of a
redemption contemplated to be effected pursuant to this paragraph (a)
unless on such date (a) the Fund has available Deposit Securities with
maturity or tender dates not later than the day preceding the
applicable redemption date and having a value not less than the amount
(including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such
redemption date and (b) the Discounted Value of Moody's Eligible Assets
(if Moody's is then rating the shares of MuniPreferred) and the
Discounted Value of S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) each at least equal the MuniPreferred Basic
Maintenance Amount, and would at least equal the MuniPreferred Basic
Maintenance Amount immediately subsequent to such redemption if such
redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of
Moody's Eligible Assets at least equals the MuniPreferred Basic
Maintenance Amount, the Moody's Discount Factors applicable to Moody's
Eligible Assets shall be determined by reference to the first Exposure
Period longer than the Exposure Period then applicable to the Fund, as
described in the definition of Moody's Discount Factor herein.
(b) MANDATORY REDEMPTION. The Fund shall redeem, at a
redemption price equal to $50,000 per share plus accumulated but unpaid
dividends thereon (whether or not earned or declared) to (but not including) the
date fixed by the Board of Directors for redemption, certain of the shares of
MuniPreferred, if the Fund fails to have either Moody's Eligible Assets with a
Discounted Value or S&P Eligible Assets with a Discounted Value greater than or
equal to the MuniPreferred Basic Maintenance Amount or fails to maintain the
1940 Act MuniPreferred Asset Coverage, in accordance with the requirements of
the rating agency or agencies then rating the shares of MuniPreferred, and such
failure is not cured on or before the MuniPreferred Basic Maintenance Cure Date
or the 1940 Act Cure Date, as the case may be. The number of shares of
MuniPreferred to be redeemed shall be equal to the lesser of (i) the minimum
number of shares of MuniPreferred, together with all shares of other Preferred
Stock subject to redemption or retirement, the redemption of which, if deemed to
have occurred immediately prior to the opening of business on the Cure Date,
would have resulted in the Fund's having both Moody's Eligible Assets with a
Discounted Value and S&P Eligible Assets with a Discounted Value greater than or
equal to the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (PROVIDED,
HOWEVER, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro
rata among shares of MuniPreferred and other Preferred Stock
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(and, then, pro rata among each series of MuniPreferred) subject to redemption
or retirement. The Fund shall effect such redemption on the date fixed by the
Fund therefor, which date shall not be earlier than 20 days nor later than 40
days after such Cure Date, except that if the Fund does not have funds legally
available for the redemption of all of the required number of shares of
MuniPreferred and shares of other Preferred Stock which are subject to
redemption or retirement or the Fund otherwise is unable to effect such
redemption on or prior to 40 days after such Cure Date, the Fund shall redeem
those shares of MuniPreferred and shares of other Preferred Stock which it was
unable to redeem on the earliest practicable date on which it is able to effect
such redemption. If fewer than all of the outstanding shares of a series of
MuniPreferred are to be redeemed pursuant to this paragraph (b), the number of
shares of such series to be redeemed shall be redeemed Pro rata from the Holders
of shares of such series in proportion to the number of shares of such series
held by such Holders.
(c) NOTICE OF REDEMPTION. If the Fund shall determine or be
required to redeem shares of a series of MuniPreferred pursuant to paragraph (a)
or (b) of this Section 11, it shall mail a Notice of Redemption with respect to
such redemption by first class mail, postage prepaid, to each Holder of the
shares of such series to be redeemed, at such Holder's address as the same
appears on the stock books of the Fund on the record date established by the
Board of Directors. Such Notice of Redemption shall be so mailed not less than
20 nor more than 45 days prior to the date fixed for redemption. Each such
Notice of Redemption shall state: (i) the redemption date; (ii) the number of
shares of MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP
number for shares of such series; (iv) the Redemption Price; (v) the place or
places where the certificate(s) for such shares (properly endorsed or assigned
for transfer, if the Board of Directors shall so require and the Notice of
Redemption shall so state) are to be surrendered for payment of the Redemption
Price; (vi) that dividends on the shares to be redeemed will cease to accumulate
on such redemption date; and (vii) the provisions of this Section 11 under which
such redemption is made. If fewer than all shares of a series of MuniPreferred
held by any Holder are to be redeemed, the Notice of Redemption mailed to such
Holder shall also specify the number of shares of such series to be redeemed
from such Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section
11 that such redemption is subject to one or more conditions precedent and that
the Fund shall not be required to effect such redemption unless each such
condition shall have been satisfied at the time or times and in the manner
specified in such Notice of Redemption.
(d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding
the provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; PROVIDED, HOWEVER, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
(e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent
that any redemption for which Notice of Redemption has been mailed is not made
by reason of the absence of legally available funds therefor, such redemption
shall be made as soon as practicable to the extent such funds become available.
Failure to redeem shares of MuniPreferred shall be deemed to exist at any time
after the date specified for redemption in a Notice of Redemption when the Fund
shall have failed, for any reason whatsoever, to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares for which such
Notice of Redemption has been mailed; PROVIDED, HOWEVER, that the foregoing
shall not apply in the case of the Fund's failure to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares where (1) the
Notice of Redemption relating to such redemption provided that such redemption
was subject to one or more conditions precedent and (2) any such condition
precedent shall not have been satisfied at the time or times and in the manner
specified in such Notice of Redemption. Notwithstanding the fact that the Fund
may not have redeemed shares of MuniPreferred for which a Notice of Redemption
has been mailed, dividends may be declared and paid on shares of MuniPreferred
and shall include those shares of MuniPreferred for which a Notice of Redemption
has been mailed.
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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 be held in trust by the
Auction Agent for the benefit of Holders of shares so to be redeemed.
(g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE
NO LONGER OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant
to paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares shall
no longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i)
of Section 2 of this Part I and in Section 3 of this Part 1. 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.
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(c) PRO RATA DISTRIBUTIONS. In the event the assets of the
Fund available for distribution to the Holders of shares of MuniPreferred upon
any dissolution, liquidation, or winding up of the affairs of the Fund, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to paragraph (b) of this Section 12, no
such distribution shall be made on account of any shares of any other class or
series of Preferred Stock ranking on a parity with the shares of MuniPreferred
with respect to the distribution of assets upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) RIGHTS OF JUNIOR STOCK. Subject to the rights of the
holders of shares of any series or class or classes of stock ranking on a parity
with the shares of MuniPreferred with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund, after payment
shall have been made in full to the Holders of the shares of MuniPreferred as
provided in paragraph (b) of this Section 12, but not prior thereto, any other
series or class or classes of stock ranking junior to the shares of
MuniPreferred with respect to the distribution of assets upon dissolution,
liquidation or winding up of the affairs of the Fund shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the Holders
of the shares of MuniPreferred shall not be entitled to share therein.
(e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the
sale of all or substantially all the property or business of the Fund, nor the
merger or consolidation of the Fund into or with any other corporation nor the
merger or consolidation of any other corporation into or with the Fund shall be
a dissolution, liquidation or winding up, whether voluntary or involuntary, for
the purposes of this Section 12.
13. Miscellaneous
(a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject
to the provisions of paragraph (c) of Section 10 of this Part I, the Board of
Directors may, by resolution duly adopted, without shareholder approval (except
as otherwise provided by this Statement or required by applicable law), amend
APPENDIX A hereto to 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.
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(f) HEADINGS NOT DETERMINATIVE. The headings contained in this
Statement are for convenience of reference only and shall not affect the meaning
or interpretation of this Statement.
(g) NOTICES. All notices or communications, unless otherwise
specified in the By-Laws of the Fund or this Statement, shall be sufficiently
given if in writing and delivered in person or mailed by first-class mail,
postage prepaid.
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;
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(B) such number or a lesser number of
Outstanding shares of such series to be determined as set
forth in clause (iv) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series
determined on such Auction Date shall be equal to the rate
specified therein; or
(C) the number of Outstanding shares of such
series specified in such Bid if the rate specified therein
shall be higher than the Maximum Rate for shares of such
series, or such number or a lesser number of Outstanding
shares of such series to be determined as set forth in clause
(iii) of paragraph (b) of Section 4 of this Part II if the
rate specified therein shall be higher than the 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 Holder or a
Potential Holder of shares of a series of MuniPreferred subject to an
Auction on any Auction Date shall constitute an irrevocable offer to
purchase:
(A) the number of Outstanding shares of such
series specified in such Bid if the Applicable Rate for shares
of such series determined on such Auction Date shall be higher
than the rate specified therein; or
(B) such number or a lesser number of
Outstanding shares of such series as set forth in clause (v)
of paragraph (a) of Section 4 of this Part II if the
Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred other
than whole shares shall be valid.
2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT. (a) Each
Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of MuniPreferred
of a series subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Fund) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which
shall be the Broker-Dealer unless otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series
that are the subject of such Order;
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(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%.
(c) If an Order or Orders covering all of the Outstanding
shares of MuniPreferred of a series held by any Existing Holder is not submitted
to the Auction Agent prior to the Submission Deadline, the Auction Agent shall
deem a Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; PROVIDED,
HOWEVER, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted
to the Auction Agent covering in the aggregate more than the number of
Outstanding shares of MuniPreferred of a series subject to an Auction held by
such Existing Holder, such Orders shall be considered valid in the following
order of priority:
(i) all Hold Orders for shares of such series shall
be considered valid, but only up to and including in the aggregate the
number of Outstanding shares of such series held by such Existing
Holder, and if the number of shares of such series subject to such Hold
Orders exceeds the number of Outstanding shares of such series held by
such Existing Holder, the number of shares subject to each such Hold
Order shall be reduced pro rata to cover the number of Outstanding
shares of such series held by such Existing Holder,
(ii) (A) any Bid for shares of such series shall
be considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder over the
number of shares of such series subject to any Hold Orders referred to
in clause (i) above;
(B) subject to subclause (A), if more than
one Bid of an Existing Holder for shares of such series is
submitted to the Auction Agent with the same rate and the
number of Outstanding shares of such series subject to such
Bids is greater than such excess, such Bids shall be
considered valid up to and including the amount of such
excess, and the number of shares of such series subject to
each Bid with the same rate shall be reduced pro rata to cover
the number of shares of such series equal to such excess;
(C) subject to subclauses (A) and (B), if
more than one Bid of an Existing Holder for shares of such
series is submitted to the Auction Agent with different rates,
such Bids shall be considered valid in the ascending order of
their respective rates up to and including the amount of such
excess; and
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(D) in any such event, the number, if any,
of such Outstanding shares of such series subject to any
portion of Bids considered not valid in whole or in part under
this clause (ii) shall be treated as the subject of a Bid for
shares of such series by or on behalf of a Potential Holder at
the rate therein specified; and
(iii) all Sell Orders for shares of such series shall
be considered valid up to and including the excess of the number of
Outstanding shares of such series held by such Existing Holder over the
sum of shares of such series subject to valid Hold Orders referred to
in clause (i) above and valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of
MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential
Holder, each such Bid submitted shall be a separate Bid with the rate and number
of shares therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND
APPLICABLE RATE. (a) Not earlier than the Submission Deadline on each Auction
Date for shares of a series of MuniPreferred, the Auction Agent shall assemble
all valid Orders submitted or deemed submitted to it by the Broker-Dealers in
respect of shares of such series (each such Order as submitted or deemed
submitted by a Broker-Dealer being hereinafter referred to individually as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order" and collectively as "Submitted Hold
Orders," "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine for such series:
(i) the excess of the number of Outstanding shares of
such series over the number of Outstanding shares of such series
subject to Submitted Hold Orders (such excess being hereinafter
referred to as the "Available MuniPreferred" of such series);
(ii) from the Submitted Orders for shares of such
series whether:
(A) the number of Outstanding shares of such
series subject to Submitted Bids of Potential Holders
specifying one or more rates equal to or lower than the
Maximum Rate for shares of such series;
exceeds or is equal to the sum of
(B) the number of Outstanding shares of such
series subject to Submitted Bids of Existing Holders
specifying one or more rates higher than the Maximum Rate for
shares of such series; and
(C) the number of Outstanding shares of such
series subject to Submitted Sell Orders
(in the event such excess or such equality exists
(other than because the number of shares of such series in subclauses
(B) and (C) above is zero because all of the Outstanding shares of such
series are subject to Submitted Hold Orders), such Submitted Bids in
subclause (A) above being hereinafter referred to collectively as
"Sufficient Clearing Bids" for shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such
series exist, the lowest rate specified in such Submitted Bids (the
"Winning Bid Rate" for shares of such series) which if:
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<PAGE> 265
(A) (I) each such Submitted Bid of Existing
Holders specifying such lowest rate and (II) all other such
Submitted Bids of Existing Holders specifying lower rates were
rejected, thus entitling such Existing Holders to continue to
hold the shares of such series that are subject to such
Submitted Bids; and
(B) (I) each such Submitted Bid of Potential
Holders specifying such lowest rate and (II)) all other such
Submitted Bids of Potential Holders specifying lower rates
were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such series
which, when added to the number of Outstanding shares of such series to be
purchased by such Potential Holders described in subclause (B) above, would
equal not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the
determinations pursuant to paragraph (a) of this Section 3, the Auction Agent
shall advise the Fund of the Maximum Rate for shares of the series of
MuniPreferred for which an Auction is being held on the Auction Date and, based
on such determination, the Applicable Rate for shares of such series for the
next succeeding Rate Period thereof as follows:
(i) if Sufficient Clearing Bids for shares of such
series exist, that the Applicable Rate for all shares of such series
for the next succeeding Rate Period thereof shall be equal to the
Winning Bid Rate for shares of such series so determined;
(ii) if Sufficient Clearing Bids for shares of such
series do not exist (other than because all of the Outstanding shares
of such series are subject to Submitted Hold Orders), that the
Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Maximum Rate for shares of
such series; or
(iii) if all of the Outstanding shares of such series
are subject to Submitted Hold Orders, that the Applicable Rate for all
shares of such series for the next succeeding Rate Period thereof shall
be as set forth in Section 12 of APPENDIX A hereto.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS
AND ALLOCATION OF SHARES. Existing Holders shall continue to hold the shares of
MuniPreferred that are subject to Submitted Hold Orders, and, based on the
determinations made pursuant to paragraph (a) of Section 3 of this Part II, the
Submitted Bids and Submitted Sell Orders shall be accepted or rejected by the
Auction Agent and the Auction Agent shall take such other action as set forth
below:
(a) If Sufficient Clearing Bids for shares of a series
MuniPreferred have been made, all Submitted Sell Orders with respect to shares
of such series shall be accepted and, subject to the provisions of paragraphs
(d) and (e) of this Section 4, Submitted Bids with respect to shares of such
series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids with respect to shares of such series
shall be rejected:
(i) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is higher than the Winning Bid
Rate for shares of such series shall be accepted, thus requiring each
such Existing Holder to sell the shares of MuniPreferred subject to
such Submitted Bids;
(ii) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is lower than the Winning Bid Rate
for shares of such series shall be rejected, thus entitling each such
Existing Holder to continue to hold the shares of MuniPreferred subject
to such Submitted Bids;
(iii) Potential Holders' Submitted Bids for shares of
such series specifying any rate that is lower than the Winning Bid Rate
for shares of such series shall be accepted;
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<PAGE> 266
(iv) each Existing Holder's Submitted Bid for shares
of such series specifying a rate that is equal to the Winning Bid Rate
for shares of such series shall be rejected, thus entitling such
Existing Holder to continue to hold the shares of MuniPreferred subject
to such Submitted Bid, unless the number of Outstanding shares of
MuniPreferred subject to all such Submitted Bids shall be greater than
the number of shares of MuniPreferred ("remaining shares") in the
excess of the Available MuniPreferred of such series over the number of
shares of MuniPreferred subject to Submitted Bids described in clauses
(ii) and (iii) of this paragraph (a), in which event such Submitted Bid
of such Existing Holder shall be rejected in part, and such Existing
Holder shall be entitled to continue to hold shares of MuniPreferred
subject to such Submitted Bid, but only in an amount equal to the
number of shares of MuniPreferred of such series obtained by
multiplying the number of remaining shares by a fraction, the numerator
of which shall be the number of Outstanding shares of MuniPreferred
held by such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the aggregate number of Outstanding
shares of MuniPreferred subject to such Submitted Bids made by all such
Existing Holders that specified a rate equal to the Winning Bid Rate
for shares of such series; and
(v) each Potential Holder's Submitted Bid for shares
of such series specifying a rate that is equal to the Winning Bid Rate
for shares of such series shall be accepted but only in an amount equal
to the number of shares of such series obtained by multiplying the
number of shares in the excess of the Available MuniPreferred of such
series over the number of shares of MuniPreferred subject to Submitted
Bids described in clauses (ii) through (iv) of this paragraph (a) by a
fraction, the numerator of which shall be the number of Outstanding
shares of MuniPreferred subject to such Submitted Bid and the
denominator of which shall be the aggregate number of Outstanding
shares of MuniPreferred subject to such Submitted Bids made by all such
Potential Holders that specified a rate equal to the Winning Bid Rate
for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of
MuniPreferred have not been made (other than because all of the Outstanding
shares of such series are subject to Submitted Hold Orders), subject to the
provisions of paragraph (d) of this Section 4, Submitted Orders for shares of
such series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids for shares of such series shall be
rejected:
(i) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be rejected, thus
entitling such Existing Holders to continue to hold the shares of
MuniPreferred subject to such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares of
such series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for shares
of such series specifying any rate that is higher than the Maximum Rate
for shares of such series and the Submitted Sell Orders for shares of
such series of each Existing Holder shall be accepted, thus entitling
each Existing Holder that submitted or on whose behalf was submitted
any such Submitted Bid or Submitted Sell Order to sell the shares of
such series subject to such Submitted Bid or Submitted Sell Order, but
in both cases only in an amount equal to the number of shares of such
series obtained by multiplying the number of shares of such series
subject to Submitted Bids described in clause (ii) of this paragraph
(b) by a fraction, the numerator of which shall be the number of
Outstanding shares of such series held by such Existing Holder subject
to such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the aggregate number of Outstanding shares of such
series subject to all such Submitted Bids and Submitted Sell Orders.
(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
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<PAGE> 267
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 Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of MuniPreferred believed by it to be interested in submitting an Order
in the Auction to be held on such Auction Date.
6. AUCTION AGENT. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its affiliates (which however, may engage or have
engaged in business transactions with the Fund or its affiliates) and at no time
shall the Fund or any of its affiliates act as the Auction Agent in connection
with the Auction Procedures. If the Auction Agent resigns or for any reason its
appointment is terminated during any period that any shares of MuniPreferred are
outstanding, the Board of Directors shall use its best efforts promptly
thereafter to appoint another qualified commercial bank, trust company or
financial institution to act as the Auction Agent.
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
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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 and attested by its Assistant Secretary, and the said officers of the
Fund further acknowledged said instrument to be the corporate act of the Fund,
and stated under penalty of perjury that to the best of their knowledge,
information and belief the matters and facts therein set forth with respect to
approval are true in all material respects, all on June 1, 1993.
NUVEEN PREMIUM INCOME MUNICIPAL
FUND 4, INC.
By /s/ James J. Wesolowski
---------------------------------
James J. Wesolowski
Vice President and Secretary
ATTEST:
/s/ Scott Craven Jones
- ------------------------------------------
Scott Craven Jones
Assistant Secretary
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<PAGE> 269
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
APPENDIX A
SERIES T: A series of 1,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $50,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series T." Each share of
Series T MuniPreferred shall be issued on June 1, 1993; have an Applicable Rate
for its Initial Rate Period equal to 2.625% per annum; have an initial Dividend
Payment Date of June 16, 1993; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set
forth in the Articles applicable to Preferred Stock of the Fund, as set forth in
Part I and Part II of this Statement. The Series T MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series T MuniPreferred shall be identical except as provided in Section 11 of
Part I of this Statement.
SERIES TH: A series of 1,000 shares of Preferred Stock, par value $0.1
per share, liquidation preference $50,000 per share, is hereby designated
"Municipal Auction Rate Cumulative Preferred Stock, Series TH." Each share of
Series TH MuniPreferred shall be issued on June 1, 1993; have an Applicable Rate
for its Initial Rate Period equal to 2.625% per annum; have an initial Dividend
Payment Date of June 11, 1993; 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 TH MuniPreferred shall
constitute a separate series of Preferred Stock of the Fund, and each share of
Series TH MuniPreferred shall be identical except as provided in Section II of
Part I of this Statement.
SERIES F: A series of 900 shares of Preferred Stock, par value $.01 per
share, liquidation preference $50,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series F." Each share of Series F
MuniPreferred shall be issued on June 1, 1993; have an Applicable Rate for its
Initial Rate Period equal to 2.625% per annum; have an initial Dividend Payment
Date of June 14, 1993; 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 Il of this Statement. The Series F MuniPreferred shall constitute a
separate series of Preferred Stock of the Fund, and each share of Series F
MuniPreferred shall be identical except as provided in Section II of Part I of
this Statement.
The number of authorized shares constituting Series T MuniPreferred is
1,000, Series TH MuniPreferred is 1,000 and Series F MuniPreferred is 900.
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.
For purposes of this Statement, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"GROSS-UP PAYMENT" means payment to a Holder of shares of MuniPreferred
of an amount which, when taken together with the aggregate amount of Taxable
Allocations made to such Holder to which such Gross-up Payment relates, would
cause such Holder's dividends in dollars (after Federal income tax consequences)
from the aggregate of such Taxable Allocations and the related Gross-up Payment
to be equal to the dollar amount of the dividends which would have been received
by such Holder if the amount of such aggregate Taxable Allocations would have
been excludable from the gross income of such Holder. Such Gross-up Payment
shall be calculated (i) without consideration being given to the time value of
money; (ii) assuming that no Holder of shares of MuniPreferred is subject to the
Federal alternative minimum tax with respect to dividends received from the
Fund; and (iii) assuming that each Taxable
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<PAGE> 270
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 7 weeks............... 154 164 173 205 235 137 149
9 weeks or less but greater 158 169 179 209 242 138 150
than eight weeks...........
</TABLE>
- ------------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
Notwithstanding the foregoing, (i) the Moody's Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moody's and mature or
have a demand feature at par exercisable in 30 days or less or 125% as long as
such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and
mature or have a demand feature at par exercisable in 30 days or less and (ii)
no Moody's Discount Factor will be applied to cash or to Receivables for
Municipal Obligations Sold.
"MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal
Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii)
is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated
by S&P, is rated at least BBB by S&P (PROVIDED, HOWEVER, that for purposes of
determining the Moody's Discount Factor applicable to any such S&P-rated
Municipal Obligation, such Municipal Obligation (excluding any short-term
Municipal Obligation) shall be deemed to have a Moody's rating which is one full
rating category lower than its S&P rating), (iii) does not have its Moody's
rating suspended by Moody's, and (iv) is part of an issue of Municipal
Obligations of at least $10,000,000. Municipal Obligations issued by any one
issuer and rated BBB by S&P may comprise no more than 4% of total Moody's
Eligible Assets; such BBB-rated Municipal Obligations, if any, together with any
Municipal Obligations issued by the same issuer and rated Baa by Moody's or A by
S&P, may comprise no more than 6% of total Moody's Eligible Assets; such BBB,
Baa and A-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated A by Moody's or AA by S&P, may
comprise no more than 10% of total Moody's Eligible Assets; and such BBB, Baa, A
and AA-rated 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
A-2
<PAGE> 271
located within the same state or territory and rated Aa by Moody's or AAA by
S&P, may comprise no more than 60% of total Moody's Eligible Assets. For
purposes of applying the foregoing requirements, a Municipal Obligation shall be
deemed to be rated BBB by S&P if rated BBB-, BBB or BBB+ by S&P, Moody's
Eligible Assets shall be calculated without including cash, and Municipal
Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by Moody's, rated
A-1+/AA or SP-1+/AA by S&P, shall be considered to have a long-term rating of A.
When the Fund sells a Municipal Obligation and agrees to repurchase such
Municipal Obligation at a future date, such Municipal Obligation shall be valued
at its Discounted Value for purposes of determining Moody's Eligible Assets, and
the amount of the repurchase price of such Municipal Obligation shall be
included as a liability for purposes of calculating the MuniPreferred Basic
Maintenance Amount. When the Fund purchases a Moody's Eligible Asset and agrees
to sell it at a future date, such Eligible Asset shall be valued at the amount
of cash to be received by the Fund upon such future date, provided that the
counterparty to the transaction has a long-term debt rating of at least A2 from
Moody's and the transaction has a term of no more than 30 days, otherwise such
Eligible Asset shall be valued at the Discounted Value of such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered a
Moody's Eligible Asset to the extent it is (i) subject to any material lien,
mortgage, pledge, security interest or security agreement of any kind
(collectively, "Liens"), except for (a) Liens which are being contested in good
faith by appropriate proceedings and which Moody's has indicated to the Fund
will not affect the status of such asset as a Moody's Eligible Asset, (b) Liens
for taxes that are not then due and payable or that can be paid thereafter
without penalty, (c) Liens to secure payment for services rendered or cash
advanced to the Fund by Nuveen Advisory Corp., United States Trust Company of
New York or the Auction Agent and (d) Liens by virtue of any repurchase
agreement; or (ii) deposited irrevocably for the payment of any liabilities for
purposes of determining the MuniPreferred Basic Maintenance Amount.
"RATE MULTIPLE," for shares of a series of MuniPreferred on any Auction
Date for shares of such series, shall mean the percentage, determined as set
forth below, based on the prevailing rating of shares of such series in effect
at the close of business on the Business Day next preceding such Auction Date:
<TABLE>
<CAPTION>
PREVAILING RATING PERCENTAGE
- ----------------- ----------
<S> <C>
"aa3"/AA- or higher................................ 110%
"a3"/A-............................................ 125%
"baa3"/BBB-........................................ 150%
"ba3"/BB-..................................... 200%
Below "ba3"/BB-............................... 250%
</TABLE>
PROVIDED, HOWEVER, that in the event the Fund has notified the Auction Agent of
its intent to allocate income taxable for Federal income tax purposes to shares
of such series prior to the Auction establishing the Applicable Rate for shares
of such series, the applicable percentage in the foregoing table shall be
divided by the quantity 1 minus the maximum marginal regular Federal individual
income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is
greater.
For purposes of this definition, the "prevailing rating" of shares of a
series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a
rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent
of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher then
"a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or
better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below, (iii) if
not "aa3"/AA- or higher or "a3"/A-, then "baa3"/BBB- if such shares have a
rating of "baa3" or better by Moody's and BBB- or better by S&P or the
equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or
higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating
of "ba3" or better by Moody's and BB-or better by S&P or the equivalent of
such ratings by such agencies or a substitute rating agency or substitute rating
agencies selected as provided below, and (v) if not "aa3"/AA- or higher,
"a3"/A-, "baa3"/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; PROVIDED,
HOWEVER, that if such shares are rated by only one rating agency, the prevailing
rating will be determined without reference to the rating of any other rating
agency. The Fund shall take all reasonable action necessary to enable either S&P
or Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor
Moody's shall make such a rating available, the party set forth in Section 7 of
A-3
<PAGE> 272
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:
<TABLE>
<CAPTION>
RATING CATEGORY
------------------------------------------
EXPOSURE PERIOD AAA* AA* A* BBB*
- --------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
40 Business Days.................. 190% 195% 210% 250%
22 Business Days.................. 170 175 190 230
10 Business Days.................. 155 160 175 215
7 Business Days................... 150 155 170 210
3 Business Days................... 130 135 150 190
</TABLE>
- ------------------
* S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Obligations will be 115%, so long as such Municipal
Obligations are rated A-1+ or SP-1+ by S&P and mature or have a demand feature
exercisable within 30 days or less, or 125% if such Municipal Obligations are
not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; PROVIDED,
HOWEVER, that any such Moody's-rated short-term Municipal Obligations which have
demand features exercisable within 30 days or less must be backed by a letter of
credit, liquidity facility or guarantee from a bank or other financial
institution with a short-term rating of at least A-1+ from S&P; and FURTHER
PROVIDED that such Moody's-rated short-term Municipal Obligations may comprise
no more than 50% of short-term Municipal Obligations that qualify as S&P
Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or to
Receivables for Municipal Obligations Sold. For purposes of the foregoing,
Anticipation Notes rated SP-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
(PROVIDED, HOWEVER, that such Moody's-rated Municipal Obligations will be
included in S&P Eligible Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 50% of the aggregate Market Value of S&P
Eligible Assets; and FURTHER PROVIDED that, for purposes of determining the S&P
Discount Factor applicable to any such Moody's-rated Municipal Obligation, such
Municipal Obligation will be deemed to have an S&P rating which is one full
rating category lower than its Moody's rating); (iv) is not part of a private
placement of Municipal Obligations; and (v) is part of an issue of Municipal
Obligations with an original issue size of at least $20 million or, if of an
issue with an original issue size below $20 million (but in no event below $ 10
million), is issued by an issuer with a total of at least $50 million of
securities outstanding. Solely for purposes of this definition, the term
"Municipal Obligation" means any obligation the interest on which is exempt from
regular Federal income taxation and which is issued by any of the fifty United
States, the District of Columbia or any of the territories of the United States,
their subdivisions, counties, cities, towns, villages, school districts and
agencies (including authorities and special districts created by the states),
and federally sponsored agencies such as local housing authorities
Notwithstanding the foregoing limitations:
(1) Municipal Obligations of any one issuer or guarantor
(excluding bond insurers) shall be considered S&P Eligible Assets only to the
extent the Market Value of such Municipal Obligations does not exceed 10% of the
aggregate Market Value of S&P Eligible Assets, provided that 2% is added to the
applicable S&P Discount Factor
A-4
<PAGE> 273
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 guaranteed or insured by any one
bond insurer shall be considered S&P Eligible Assets only to the extent the
Market Value of such Municipal Obligations does not exceed 25% of the aggregate
Market Value of S&P Eligible Assets; and
(3) Long-term Municipal Obligations issued by issuers in any
one state or territory shall be considered S&P Eligible Assets only to the
extent the Market Value of such Municipal Obligations does not exceed 20% of the
aggregate Market Value of S&P Eligible Assets.
The Initial Rate Period for shares of Series T MuniPreferred shall be
the period from and including the Date of Original Issue thereof to but
excluding June 16, 1993.
The Initial Rate Period for shares of Series TH MuniPreferred shall be
the period from and including the Date of Original Issue thereof to but
excluding June 11, 1993.
The Initial Rate Period for shares of Series F MuniPreferred shall be
the period from and including the Date of Original Issue thereof to but
excluding June 14, 1993.
AUGUST 31, 1993.
<TABLE>
<CAPTION>
PARTY: SERIES OF MUNIPREFERRED:
------ ------------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................. Series T
Smith Barney, Harris Upham & Co.
Incorporated.................................. Series TH
Shearson Lehman Brothers Inc................... Series F
</TABLE>
Not applicable.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of:
Series T MuniPreferred on Wednesday, June 16, 1993, and on each
Wednesday thereafter,
Series TH MuniPreferred on Friday, June 11, 1993, and on each Friday
thereafter; and
Series F MuniPreferred on Monday, June 14, 1993, and each Monday
thereafter.
$145,000,000.
Not applicable.
A-5
<PAGE> 274
For purpose of subparagraph (b)(iii) of Section 3 of Part II of this
Statement, the Applicable Rate for shares of such series for the next succeeding
Rate Period of shares of such series shall be equal to the lesser of the Kenny
Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the
product of (A)(I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal 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
$50,000.
A-6
<PAGE> 275
ARTICLES OF CORRECTION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
(PURSUANT TO MINNESOTA STATUTES, SECTION 5.16)
In order to correct that Statement Establishing and Fixing the
Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock
("MuniPreferred(R)") of Nuveen Premium Income Municipal Fund 4, Inc., as filed
with the Minnesota Secretary of State on June 1, 1993, the undersigned hereby
makes the following statements:
1. The name of the person who signed and filed the instrument
is James J. Wesolowski, Vice President and Secretary of Nuveen Premium Income
Municipal Fund 4, Inc. (the "Fund"). These Articles of Correction are signed by
such person or by a person authorized to sign on his behalf.
2. The instrument to be corrected is that Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock ("MuniPreferred(R)") of the Fund filed with the
Minnesota Secretary of State on June 1, 1993 (the "Statement").
3. The error to be corrected is the original issuance date of
the three series of Preferred Stock to be created by the Statement.
4. The following portions of the Statement are hereby set
forth in their corrected form as follows:
Appendix A, Section 1, line 3 of the Statement shall read in
its entirety as follows: "Each share of Series T MuniPreferred shall be
issued on June 4, 1993; have an Applicable".
Appendix A, Section 1, line 12 of the Statement shall read in
its entirety as follows: "Each share of Series TH MuniPreferred shall
be issued on June 4, 1993; have an Applicable Rate for its".
<PAGE> 276
Appendix A, Section 1, line 21 of the Statement shall read in
its entirety as follows: "Each share of Series F MuniPreferred shall be
issued on June 4, 1993; have an Applicable Rate for its".
Dated: June 2, 1993.
Nuveen Premium Income Municipal Fund 4, Inc.
--------------------------------------------
Name:
Title:
<PAGE> 277
ARTICLES OF CORRECTION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
(PURSUANT TO MINNESOTA STATUTES, SECTION 5.16)
In order to correct that Statement Establishing and Fixing the
Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock
("MuniPreferred(R)") of Nuveen Premium Income Municipal Fund 4, Inc., as filed
with the Minnesota Secretary of State on June 1, 1993, and as corrected on June
3, 1993, the undersigned hereby makes the following statements:
1. The name of the person who signed and filed the instrument
and the correction is James J. Wesolowski, Vice President and Secretary of
Nuveen Premium Income Municipal Fund 4, Inc. (the "Fund"). These Articles of
Correction are signed by such person or by a person authorized to sign on his
behalf.
2. The instrument to be corrected is that Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock ("MuniPreferred(R)") of the Fund filed with the
Minnesota Secretary of State on June 1, 1993 and corrected on June 3, 1993 (the
"Statement").
3. The error to be corrected is the par value of the Preferred
Stock, Series TH, to be created by the Statement.
4. The following portion of the Statement is hereby set forth
in its corrected form as follows:
Appendix A, Section 1, Line 10 of the Statement shall read
in its entirety as follows: "SERIES TH: A series of 1,000
shares of Preferred Stock, par value $.01 per share,
liquidation preference"
Dated: December 20, 1993
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
By:
------------------------------------------
Larry W. Martin
Vice President and Assistant Secretary
<PAGE> 278
ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
1. The name of the corporation is Nuveen Premium Income Municipal Fund 4,
Inc. (the "Company").
2. The amendment adopted is an amendment to the Company's Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction
Rate Cumulative Preferred Stock, Series T, TH and F (the "Statement"),
which is a part of the Company's Articles of Incorporation.
3. Such amendment was adopted by the Board of Directors of the Company on
October 19, 1993, pursuant to Section 302A.402, Subdivision 3 of the
Minnesota Business Corporation Act, and the amendment will not
adversely affect the rights or preferences of the holders of
outstanding shares of any class or series and will not result in the
percentage of authorized shares that remains unissued after the
division or combination exceeding the percentage of authorized shares
that were unissued before the division or combination.
4. Such amendment shall be effective as of the close of business on
January 6, 1994.
5. The following portions of the Statement are hereby set forth in their
amended form as follows:
a. Paragraph FIRST, Line 5 of the Statement shall read in its
entirety as follows: "liquidation preference $25,000 per
share, having such designation or designations as to series as
is set forth in"
b. Definitions, Paragraph (tt) of the Statement shall read in its
entirety as follows: "(tt) "LIQUIDATION PREFERENCE," with
respect to a given number of shares of MuniPreferred, means
$25,000 times that number."
c. Definitions, Paragraph (fff), Line 3 of the Statement shall
read in its entirety as follows: "such date multiplied by
$25,000 (plus the product of the number of shares of any other
series of Preferred"
d. Part I, Section 2, Subparagraph (e)(ii), Line 7 of the
Statement shall read in its entirety as follows: "and applying
the rate obtained against $25,000."
e. Part I, Section 11, Subparagraph (a)(i), Line 4 of the
Statement shall read in its entirety as follows: "of funds
legally available therefor, at a redemption price per share
equal to the sum of $25,000 plus an amount"
f. Part I, Section 11, Subparagraph (a)(i), Line 7 of the
Statement shall read in its entirety as follows: "not be
redeemed in part if after such partial redemption fewer than
500 shares of such series remain"
<PAGE> 279
g. Part I, Section 11, Subparagraph (a)(iv), Line 6 of the
Statement shall read in its entirety as follows: "Treasury
Note Rate for such Rate Period, at a redemption price per
share equal to the sum of $25,000 plus an"
h. Part I, Section 11, Subparagraph (b), Line 1 of the Statement
shall read in its entirety as follows: "(b) MANDATORY
REDEMPTION. The Fund shall redeem, at a redemption price equal
to $25,000 per share"
i. Appendix A, Section 1, Series T, Lines 1 and 2 of the
Statement shall read in their entirety as follows: "SERIES T:
A series of 2,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby
designated "Municipal Auction Rate Cumulative Preferred Stock,
Series T.""
j. Appendix A, Section 1, Series TH, Lines 1 and 2 of the
Statement shall read in their entirety as follows: "SERIES
TH:" A series of 2,000 shares of Preferred Stock, par value
$.01 per share, liquidation preference $25,000 per share, is
hereby designated "Municipal Auction Rate Cumulative Preferred
Stock, Series TH.""
k. Appendix A, Section 1, Series F, Lines I and 2 of the
Statement shall read in their entirety as follows: "SERIES F:
A series of 1,800 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby
designated "Municipal Auction Rate Cumulative Preferred Stock,
Series F.""
l. Appendix A, Section 2 of the Statement shall read in its
entirety as follows: "The number of authorized shares
constituting Series T MuniPreferred is 2,000, Series TH
MuniPreferred is 2,000 and
Series F MuniPreferred is 1,800."
m. Appendix A, Section 12, Line 25 of the Statement shall, read
in its entirety as follows: "of any other Dividend Period),
and (c) dividing the amount determined in (b) above by
$25,000."
IN WITNESS WHEREOF, the undersigned, being duly authorized on behalf
of the Company has executed these Articles of Amendment this 3rd day of January,
1994.
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC
By: /s/ Gifford R. Zimmerman
-----------------------------
Gifford R. Zimmerman,
Vice President and
Assistant Secretary
<PAGE> 280
PART C: OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article EIGHTH of the Registrant's Articles of Incorporation provide as follows:
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 proceedings, if authorized by the Board of Directors in
the specific case, upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay that amount of the advance which
exceeds the amount which it is ultimately determined that he is entitled to
receive from the Corporation by reason of indemnification as authorized herein;
provided, however, that prior to making any such advance at least one of the
following conditions shall have been met: (1) the indemnitee shall provide a
security for his undertaking, (2) the Corporation shall be insured against
losses arising by reason of any lawful advances, or (3) a majority of a quorum
of the disinterested, non-party directors of the Corporation, or an independent
legal counsel in a written opinion, shall determine, based on a review of
readily available facts, that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be deemed to
protect or provide indemnification to any director or officer of the Corporation
against any liability to the Corporation or to its security holders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office ("disabling conduct"), and the Corporation shall not indemnify any of its
officers or directors against any liability to the Corporation or to its
security holders unless a determination shall have been made in the manner
provided hereafter that such liability has not arisen from such officer's or
director's disabling conduct. A determination that an officer or director is
entitled to indemnification shall have been properly made if it is based upon
(1) a final decision on the merits by a court or other body before whom the
proceeding was brought that the indemnitee was not liable by reason of disabling
conduct or, (2) in the absence of such 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 an Investment Trust
Errors and Omission policy in the aggregate amount of $20,000,000 (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 involved 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 Registrant
or where he or she shall have had reasonable cause to believe this conduct was
unlawful).
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the officers, directors or controlling persons of the
Registrant pursuant to the Declaration of Trust of the Registrant or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by an officer or trustee or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such officer, trustee 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 of 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.
ITEM 16. EXHIBITS
1(a). Articles of Incorporation dated January 12, 1993.++
1(b). Statement dated June 1, 1993 (Series T, TH, and F).(2)
1(c). Statement dated September 8, 1994 (Series M, T2 W and F2).++
1(d). Articles of Correction dated June 2, 1993.++
1(e). Articles of Correction dated December 20, 1993.++
1(f). Articles of Amendment dated January 5, 1994.++
1(g). Certified copy of Corporate Resolution dated June 16, 1994
C-1
<PAGE> 281
2(a). Bylaws of Registrant.++
2(b). Amendment to Bylaws dated October 19, 1993.++
2(c). Amendment to Bylaws dated February 2, 1994.++
2(d). Amendment to Bylaws dated November 19, 1997.++
2(e). Amendment to Bylaws dated October 30, 1998.++
3. Not applicable.
4. Form of Agreement and Plan of Reorganization for Nuveen
Washington Premium Income Municipal Fund into Nuveen Premium
Income Municipal Fund 4, Inc.(1)
5. Form of Specimen certificates of Shares of Acquiring Fund.++
6(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp dated February 16, 1993.++
6(b). Renewal of Investment Management Agreement dated May 5, 1998.++
7. Not applicable.
8. Deferred Compensation Plan for Independent Directors and
Trustees dated October 30, 1998.++
9(a). Exchange Traded Fund Custody Agreement between Registrant and
United States Trust Company of New York dated February 19,
1993.++
9(b). Fund Accounting Agreement between Registrant and United States
Trust Company of New York dated February 19, 1993.++
9(c). Letter of Succession to Agreements.++
9(d). Shareholder Transfer Agency Agreement between Registrant and
United States Trust Company of New York dated February 19,
1993.++
10. Not applicable.
11(a). Opinion of Vedder, Price, Kaufman & Kammholz.++
11(b). Opinion of Dorsey & Whitney LLP.++
12. Form of Tax Opinion of Vedder, Price, Kaufman & Kammholz
relating to the Reorganization.++
13. Not Applicable.
14. Consent of Ernst & Young LLP, Independent Public
Accountants.++
15. Not applicable.
16(a). Power of Attorney of Robert P. Bremner.(3)
16(b). Power of Attorney of Lawrence H. Brown.(3)
16(c). Power of Attorney of Anne E. Impellizzeri.(3)
16(d). Power of Attorney of Peter R. Sawers.(3)
16(e). Power of Attorney of William J. Schneider.(3)
16(f). Power of Attorney of Timothy R. Schwertfeger.(3)
16(g). Power of Attorney of Judith M. Stockdale.(3)
17(a). Form of proxy cards for Nuveen Premium Income Municipal Fund
4, Inc.++
17(b). Form of proxy cards for Nuveen Washington Premium Municipal
Fund.++
17(c). Auction Agency Agreement.
17(d). Broker-Dealer Agreement.
17(e). Form of Letter of Representations.
17(f). Terms and Conditions of Dividend Reinvestment Plan.
- --------------------
(1) Filed herewith as Appendix A to the Reorganization Statement of Additional
Information contained herein.
(2) Filed herewith as Annex B to the Reorganization Statement of Additional
Information contained herein.
(3) Incorporated herein by reference to Registrant's Registration Statement on
Form N-14, file No. 333-77717, filed on May 4, 1999.
++ Filed herewith.
C-2
<PAGE> 282
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant agrees that prior to any public
re-offering of the securities registered through the use of a prospectus which
is a part of this registration statement by any person or party who is deemed to
be an underwriter within the meaning of Rule 145(c) of the Securities Act, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offerings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
C-3
<PAGE> 283
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the registrant certifies that it has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Chicago and State of Illinois, on the 15th day of
June 1999.
NUVEEN PREMIUM INCOME MUNICIPAL
FUND 4, INC.
By /s/ Gifford R. Zimmerman
----------------------------
Gifford R. Zimmerman
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated, on June 15, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
Principal Financial Accounting Officer:
/s/ Stephen D. Foy
- ---------------------------------------
Stephen D. Foy Vice President and Controller (Principal Financial and
Accounting Officer)
Principal Executive Officer:
Timothy R. Schwertfeger Chairman of the Board and Director (Principal
Executive Officer)
Robert P. Bremner Director
Lawrence H. Brown Director
Anne E. Impellizzeri Director
Peter R. Sawers Director
William J. Schneider Director
Judith M. Stockdale Director
</TABLE>
By: /s/ Gifford R. Zimmerman
------------------------
Gifford R. Zimmerman
Attorney-in-Fact
Original powers of attorney authorizing Alan G. Berkshire and Gifford R.
Zimmerman, among others, to execute this registration statement, and amendments
thereto, for each of the trustees of registrant on whose behalf this
registration statement is filed, have been executed and incorporated by
reference as Exhibits to the Registration Statement.
<PAGE> 284
EXHIBIT INDEX
1(a). Articles of Incorporation dated January 12, 1993.
1(c). Statement dated September 8, 1994 (Series M, T2 and F2).
1(d). Articles of Correction dated June 2, 1993.
1(e). Articles of Correction dated December 20, 1993.
1(f). Articles of Amendment dated January 5, 1994.
1(g). Certified Copy of Corporate Resolution dated June 16, 1994.
2(a). Bylaws of Registrant.
2(b). Amendment to Bylaws dated October 19, 1993.
2(c). Amendment to Bylaws dated February 2, 1994.
2(d). Amendment to Bylaws dated November 19, 1997.
2(e). Amendment to Bylaws dated October 30, 1998.
5. Form of Specimen certificates of Shares of Acquiring Fund.
6(a). Investment Management Agreement between Registrant and Nuveen
Advisory Corp dated February 16, 1993.
6(b). Renewal of Investment Management Agreement dated May 5, 1998.
8. Deferred Compensation Plan for Independent Directors and
Trustees dated October 30, 1998.
9(a). Exchange Traded Fund Custody Agreement between Registrant
and United States Trust Company of New York dated February
19, 1993.
9(b). Fund Accounting Agreement between Registrant and United
States Trust Company of New York dated February 19, 1993.
9(c). Letter of Succession to Agreements.
9(d). Shareholder Transfer Agency Agreement between Registrant
and United States Trust Company of New York dated
February 19, 1993.
11(a). Opinion of Vedder, Price, Kaufman & Kammholz.
11(b). Opinion of Dorsey & Whitney LLP.
12. Form of Tax Opinion of Vedder, Price, Kaufman & Kammholz
relating to the Reorganization.
14. Consent of Ernst & Young LLP, Independent Public Accountants.
17(a). Form of proxy card for Nuveen Premium Income Municipal Fund
4, Inc.
17(b). Form of proxy card for Nuveen Washington Premium Municipal
Fund.
17(c). Auction Agency Agreement.
17(d). Broker-Dealer Agreement.
17(e). Form of Letter of Representations.
17(f). Terms and Conditions of Dividend Reinvestment Plan.
<PAGE> 1
EXHIBIT 1(a)
ARTICLES OF INCORPORATION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND4, 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
Fund4, Inc. (the "Corporation").
THIRD: The purposes for which the Corporation is formed and the business
to be carried on and promoted by it are as follows:
To hold, invest, and reinvest its funds, and in connection therewith to
hold part or all of its funds in cash, and to purchase or otherwise sell,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to account
or realize upon securities and other negotiable or non-negotiable instruments,
obligations and evidences of indebtedness created or issued by any persons,
associations, corporations, syndicates, combinations, organizations, governments
or subdivisions thereof, and generally deal in any such securities and other
negotiable or non-negotiable instruments, obligations and evidences of
indebtedness; and to exercise, as owner or holder of any securities or other
instruments, all rights, powers, and privileges in respect thereof and to do any
and all acts and things for the preservation, protection and improvement of any
and all such securities or other instruments and, in general, to conduct the
business of a closed-end investment company as that term is defined in the Act
of Congress entitled the Investment Company Act of 1940, as amended;
To issue and sell shares or its own capital stock from time to time on such
terms and conditions, for such purposes and for such amount or kind of
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the State of Minnesota and by these Articles
of Incorporation as its Board of Directors may determine; and
To engage in any lawful act or activity for which corporations may be
organized under the Minnesota Business Corporation Act.
The enumeration herewith or the objects and purposes of the Corporation
shall be construed as powers as well as objects and purposes and shall not be
deemed to exclude by inference any powers, objects or purposes which the
Corporation is empowered to exercise, whether expressly by
<PAGE> 2
force of the laws or the State of Minnesota now or hereafter in effect, or
implied by the reasonable construction of such laws.
FOURTH: The address of the registered office of the Corporation in the
state of Minnesota is 33 South Sixth Street, Multifoods Tower, Minneapolis,
Minnesota 55402. The name of its resident agent at such address is The
Prentice-Hall Corporation System, Inc.
FIFTH: The total number of shares of stock which the Corporation is
authorized to issue is Two Hundred and one Million (201,000,000), consisting of
One Million (1,000,000) shares of preferred stock, par value $.01 per share and
of the aggregate par value of Ten Thousand Dollars ($10,000) (the "Preferred
Stock") and Two Hundred Million (200,000,000) shares of common stock, par value
$.01 per share and of the aggregate par value of Two Million Dollars
($2,000,000) (the "Common Stock"). There shall be no cumulative voting. The
designations and powers, preferences and rights, and the qualifications,
limitations and restrictions thereof, of each of the classes of stock of the
Corporation are as follows:
(a) Preferred Stock. The Preferred Stock shall be issued from time to
time in one or more series with such distinctive serial designations and
(i) may have such voting powers, full or limited; (ii) may be subject to
redemption at such time or times and at such price or prices; (iii) may be
entitled to receive dividends (which may be cumulative or noncumulative) at
such rate or rates, on such conditions, and at such times, and payable in
preference to, or in such relation to, the dividends payable on any other
class or classes of stock; (iv) may have such rights upon the dissolution
of, or upon any distribution of the assets of, the Corporation; (v) may be
made convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock of the Corporation, at such price or prices or at such rates of
exchange and with such adjustments; and (vi) shall have such other
relative, participating, optional or other special rights, qualifications,
limitations or restrictions thereof, all as shall hereafter be stated and
expressed in the resolution or resolutions providing for the issue of such
Preferred Stock from time to time adopted by the Board of Directors
pursuant to authority so to do which is hereby expressly vested in the
Board.
(b) Common Stock.
<PAGE> 3
(i) Subject to the rights of the holders of the Preferred Stock of
the corporation, in the event or the liquidation or dissolution of the
Corporation, the holders of the Common Stock shall be entitled to receive
pro rata the net distributable assets of the Corporation.
(ii) The holders of shares of the Common Stock shall not, as such
holders, have any right to acquire, purchase or subscribe for any shares of
Common Stock or securities of the Corporation which it may hereafter issue
or sell (whether out of the number of shares authorized by these Articles
of Incorporation, or out of any shares acquired by it after the issuance
thereof, or otherwise), other than such right, if any, as the Board of
Directors of the Corporation in its discretion may determine.
(iii) Subject to the rights of the holders of the Preferred Stock of
the Corporation, dividends, when, as and if declared by the Board of
Directors, shall be shared equally by the holders of Common Stock on a
share for share basis. The Board of Directors may direct that any dividends
so declared and distributed shall be paid in cash to the holder, or,
alternatively, may direct that any such dividends be reinvested in full and
fractional shares of the Corporation if such holder elects to have them
reinvested.
(iv) If any shares of Common Stock shall have been purchased or
otherwise reacquired by the Corporation in accordance with law, all shares
so purchased or otherwise reacquired shall be retired automatically, and
such retired shares shall have the status of authorized but unissued shares
of Common Stock and the number of authorized shares of Common Stock of the
Corporation shall not be reduced by the number of any shares retired.
(v) Shares of Common Stock shall be issued from time to time either
for cash or for such other considerations (which may be in any one or more
instances a certain specified consideration or certain specified
considerations) as the Board of Directors, from time to time, may deem
advisable, in the manner and to the extent now or hereafter permitted by
the laws of the State of Minnesota and the Investment Company Act.
(vi) The Corporation may issue shares of its Common Stock in
fractional denominations to the same extent as its whole shares, and shares
in fractional denominations shall be shares of Common Stock having
proportionately to the respective fractions represented thereby all the
rights of whole shares, including, without limitation, the right to
-3-
<PAGE> 4
vote, the right to receive dividends and distributions and the right to
participate upon liquidation of the Corporation, but excluding the right to
receive a certificate representing fractional shares.
SIXTH: (a) The initial number of directors of the Corporation shall be
seven. The By-Laws of the Corporation may fix the number of directors at a
number greater or less than seven and may authorize the Board of Directors, by
the vote of the majority of the entire Board of Directors, to increase or
decrease the number of directors fixed by these Articles of Incorporation or by
the By-Laws within limits specified in the By-Laws.
(b) The names of the persons who will serve as the initial directors
of the Corporation are as follows: 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> 5
be approved by the holders of at least sixty-six and two-thirds percent
(66-2/3%) of such holders or such lower percentage as may be required by
law.
SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and shareholders.
(a) All corporate powers of the Corporation shall be exercised by
the Board of Directors except as otherwise provided by law; provided,
subject to the provisions of paragraph (c) of this Article SEVENTH, the
Board of Directors may delegate the management of the assets of the
Corporation and such other functions as it may deem reasonable and proper
to an Investment Adviser, as such term is hereinbelow defined, pursuant to
a written contract. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of
the Corporation, which, to the extent provided in said resolution or
resolutions or in the By-Laws of the Corporation, shall have and may
exercise the powers of the Board 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> 6
or directors shall not be counted in determining the presence of a quorum
and shall not be voted; or (iii) the material facts as to the contract or
transaction and as to the director's or directors' interest are fully
disclosed or known to the board or a committee, and the board or committee
authorizes, approves, or ratifies the contract or transaction in good faith
by a majority of the board or committee, but the interested director or
directors shall not be counted in determining the presence of a quorum and
shall not vote.
(c) The Corporation may enter into a written contract with one or
more persons (which term shall include any firm, corporation, trust or
association), hereinafter referred to as the "Investment Adviser", to act
as investment adviser to the Corporation and as such to perform such
functions as the Board of Directors may deem reasonable and proper,
including, without limitation, investment advisory, management, research,
valuation of assets, clerical and administrative functions. Any such
contract shall be subject to the approval of those persons required by the
Investment Company Act of 1940 to approve such contract, and shall be
terminable at any time upon not more than 60 days' notice by resolution of
the Board of Directors or by vote of a majority of the outstanding shares
of Common Stock.
Subject to the provisions 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> 7
and agent or agents such amounts as the Board of Directors may in its
discretion deem reasonable and proper. Subject to the provisions of
paragraph (b) of this Article SEVENTH, any such contract may be made with
any firm or corporation, including, without limitation, the Investment
Adviser, or any firm or corporation in which any director or directors of
the Corporation or the Investment Adviser may be interested.
(e) The Board of Directors is hereby empowered to authorize the
issuance from time to time of any class or series of class of shares of
Common Stock or Preferred Stock, whether now or hereafter authorized, for
such consideration as the Board of Directors may deem advisable, subject to
such limitations and restrictions as may be set forth in these Articles of
Incorporation or in the By-Laws of the Corporation, or in the laws of the
State of Minnesota.
(f) The Board of Directors shall have the power to make, alter,
amend or repeal the By-Laws of the Corporation, and to adopt any new
By-Laws, except to the extent that the By-Laws may otherwise provide;
provided, however, that any such By-Laws may be altered, amended or
repealed, or new By-Laws may be adopted, by the shareholders of the
corporation.
(g) The Board of Directors shall have power from time to time to
set apart out of any funds of the Corporation available for dividends a
reserve or reserves for any proper purpose, and to abolish any such
reserve.
(h) Any determination made by or pursuant to the direction of the
Board of Directors in good faith and consistent with the provisions of
these Articles of Incorporation as to any of the following matters shall be
final and conclusive and shall be binding upon the Corporation and every
holder at any time of shares of its capital stock, namely: the amount of
the assets, obligations, liabilities and expense of the Corporation; the
amount of the net income of the Corporation from dividends and interest for
any period and the amount of assets at any time legally available for the
payment of dividends or distributions; the amount, purpose, time of
creation, increase or decrease, alteration or cancellation of any reserves
or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been
paid or discharged); the market
-7-
<PAGE> 8
value, or any quoted price to be applied in determining the market value,
of any security owned or held by the Corporation; the fair value of any
security for which quoted prices are not readily available, or of any other
asset owned or held by the Corporation; the number of shares of the
Corporation issued or issuable; the net asset value per share; any matter
relating to the acquisition, holding and depositing of securities and other
assets by the Corporation; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities,
or an underwriting of the sale of, or participation in any underwriting or
selling group in connection with the public distribution of, any
securities, and any matter relating to the issue, sale, repurchase, and/or
other acquisition or disposition of shares of capital stock of the
Corporation. No provision of these Articles of Incorporation shall be
effective to (i) require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act of 1940,
as amended, or of any valid rule, regulation or order of the Commission
thereunder, or (ii) protect or purport to protect any director or officer
of the Corporation against any liability to the Corporation or to its
security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
EIGHTH: To the maximum extent permitted by the Minnesota Business
Corporation Act, as from time to time amended, the Corporation shall indemnify
its currently acting and its former directors, officers, employees and agents,
and those persons who, at the request of the Corporation serve or have served
another corporation, partnership, joint venture, trust or other enterprise in
one or more such capacities. The indemnification provided for herein shall not
be deemed exclusive of any other rights to which those seeking indemnification
may otherwise be entitled.
Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding (including costs connected with the
preparation of a settlement) may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, if authorized by the Board
of Directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay that amount of the
advance which exceeds the amount which it is ultimately determined that he is
entitled to receive from the Corporation by reason of
-8-
<PAGE> 9
indemnification as authorized herein; provided, however, that prior to making
any such advance at least one of the following conditions shall have been met:
(1) the indemnitee shall provide a security for his undertaking, (2) the
Corporation shall be insured against losses arising by reason of any lawful
advances, or (3) a majority of a quorum of the disinterested, non-party
directors of the Corporation, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts, that
there is reason to believe that the indemnitee ultimately will be found entitled
to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be deemed
to protect or provide indemnification to any director or officer of the
Corporation against any liability to the Corporation or to its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office ("disabling conduct"), and the Corporation shall not
indemnify any of its officers or directors against any liability to the
Corporation or to its security holders unless a determination shall have been
made in the manner provided hereafter that such liability has not arisen from
such officer's or director's disabling conduct. A determination that an officer
or director is entitled to indemnification shall have been properly made if it
is based upon (1) a final decision on the merits by a court or other body before
whom the proceeding was brought that the indemnitee was not liable by reason of
disabling conduct or, (2) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority of a quorum
of directors who are neither "interested persons" of the Corporation as defined
in the Investment Company Act of 1940 nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion.
NINTH: The existence of the Corporation shall be perpetual.
TENTH: Any action which requires shareholder approval and which is
required or permitted to be taken by the board of directors may be taken by
written action signed by all of the directors. Any action, other than an action
requiring shareholder approval, required or permitted to be taken by the board
of directors may be taken by written action signed by that number of directors
that would be required to take the same action at a meeting of the board at
which all directors were present.
-9-
<PAGE> 10
ELEVENTH: (a) Notwithstanding any other provision of these Articles of
Incorporation, an affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding Common Stock and outstanding
Preferred Stock, voting as a single class, shall be required to approve, adopt
or authorize (i) a conversion of the Corporation from a closed-end investment
company to an open-end investment company, (ii) a merger or consolidation of the
corporation with any other corporation or a reorganization or recapitalization,
(iii) a sale, lease or transfer of all or substantially all of the assets of the
Corporation (other than in the regular course of the corporation's investment
activities), or (iv) a liquidation or dissolution of the corporation, unless
such action has previously been approved, adopted or authorized by the
affirmative vote of two-thirds of the total number of directors fixed in
accordance with the By-Laws, in which case the affirmative vote of the holders
of at least a majority of the outstanding Common Stock and outstanding Preferred
Stock, voting as a single class, shall be required. Except as may otherwise be
required by law, in the case of the conversion of the Corporation from a
closed-end investment company to an open-end investment company, or in the case
of any of the foregoing transactions constituting a plan of reorganization (as
such term is used in the Investment Company Act of 1940, as amended) which
adversely affects the holders of shares of Preferred Stock, approval, adoption
or authorization of the action in question will also require the affirmative
vote of the holders of sixty-six and two-thirds percent (66-2/3%) of the shares
of Preferred Stock voting as a separate class; provided, however, that such
separate class vote shall be a majority vote if the action in question has
previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of directors fixed in accordance with the
By-Laws.
(b) In addition to the voting requirements imposed by law or by any other
provision of these Articles of Incorporation, the provisions set forth in this
Article ELEVENTH may not be amended; altered or repealed in any respect, nor may
any provision inconsistent with this Article ELEVENTH be adopted, unless such
action is approved by the affirmative vote of the holders of at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding shares of Common Stock and
outstanding shares of Preferred Stock. In the event the holders of shares of
Common Stock or the holders of shares of Preferred Stock, as the case may be,
are required by law to approve such an action by a class vote of such holders,
such action must be approved by the holders of at least sixty-
-10-
<PAGE> 11
six and two-thirds percent (66-2/3%) of such holders or such lower percentage as
may be required by law.
TWELFTH: No person who was or is a director of the Corporation shall be
personally liable to the Corporation or its shareholders for monetary damages
for any breach of fiduciary duty as a director except for liability (a) for any
breach of the director's duty of loyalty to the Corporation or its shareholders,
(b) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (c) under Section 302A.559 or 80A.23
of the Minnesota Business Corporation Act or (d) for any transaction for which
the director derived an improper personal benefit.
THIRTEENTH: (a) The Corporation reserves the right to amend, alter, change
or repeal any provision contained in these Articles of Incorporation, in the
manner now or hereafter prescribed by statute, and any contract rights conferred
upon the shareholders are granted subject to this reservation.
(b) Not withstanding the foregoing, the provisions set forth in Articles
SIXTH and ELEVENTH may not be amended, altered or repealed in any respect, nor
may any provision inconsistent with any of such Articles be adopted unless such
amendment, alteration, repeal or inconsistent provision is approved as specified
in each such respective Article.
IN WITNESS WHEREOF, I have signed these Articles this 12th day of January,
1993.
/s/ Gifford R. Zimmerman
------------------------
Incorporator
Gifford R. Zimmerman
/s/ Katherine A. Erwin
------------------------
Witness
Katherine A. Erwin
-11-
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Exhibit 1(c)
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 M, Series T2, Series W, Series F2
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NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
TABLE OF CONTENTS
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DEFINITIONS.......................................................................................................1
'AA' Composite Commercial Paper Rate..............................................................................1
Accountant's Confirmation.........................................................................................2
Affiliate.........................................................................................................2
Agent Member......................................................................................................2
Anticipation Notes................................................................................................2
Applicable Rate...................................................................................................2
Articles..........................................................................................................2
Auction...........................................................................................................2
Auction Agency Agreement..........................................................................................2
Auction Agent.....................................................................................................2
Auction Date......................................................................................................2
Auction Procedures................................................................................................2
Available MuniPreferred...........................................................................................2
Benchmark Rate....................................................................................................2
Beneficial Owner..................................................................................................2
Bid" and "Bids....................................................................................................2
Bidder" and "Bidders..............................................................................................3
Board of Directors................................................................................................3
Broker-Dealer.....................................................................................................3
Broker-Dealer Agreement...........................................................................................3
Business Day......................................................................................................3
Code..............................................................................................................3
Commercial Paper Dealers..........................................................................................3
Common Stock......................................................................................................3
Cure Date.........................................................................................................3
Date of Original Issue............................................................................................3
Deposit Securities................................................................................................3
Discounted Value..................................................................................................3
[Reserved]........................................................................................................3
[Reserved]........................................................................................................3
Dividend Payment Date.............................................................................................4
Dividend Period...................................................................................................4
Existing Holder...................................................................................................4
Failure to Deposit................................................................................................4
Federal Tax Rate Increase.........................................................................................4
Fund..............................................................................................................4
Gross-up Payment..................................................................................................4
Holder............................................................................................................4
Hold Order" and "Hold Orders......................................................................................4
Independent Accountant............................................................................................4
Initial Rate Period...............................................................................................4
Interest Equivalent...............................................................................................4
Issue Type Category...............................................................................................5
Kenny Index.......................................................................................................5
Late Charge.......................................................................................................5
Liquidation Preference............................................................................................5
Market Value......................................................................................................5
Maximum Potential Gross-up Payment Liability......................................................................5
Maximum Rate......................................................................................................5
[Reserved]........................................................................................................6
Minimum Rate Period...............................................................................................6
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Moody's...........................................................................................................6
Moody's Discount Factor...........................................................................................6
Moody's Eligible Asset............................................................................................6
Moody's Exposure Period...........................................................................................6
Moody's Volatility Factor.........................................................................................6
MuniPreferred.....................................................................................................7
MuniPreferred Basic Maintenance Amount............................................................................7
MuniPreferred Basic Maintenance Cure Date.........................................................................7
MuniPreferred Basic Maintenance Report............................................................................8
Municipal Obligations.............................................................................................8
1940 Act..........................................................................................................8
1940 Act Cure Date................................................................................................8
1940 Act MuniPreferred Asset Coverage.............................................................................8
Notice of Redemption..............................................................................................8
Notice of Special Rate Period.....................................................................................8
Order" and "Orders................................................................................................8
Original Issue Insurance..........................................................................................8
Other Issues......................................................................................................8
Outstanding.......................................................................................................8
Permanent Insurance...............................................................................................8
Person............................................................................................................8
Portfolio Insurance...............................................................................................9
Potential Beneficial Owner........................................................................................9
Potential Holder..................................................................................................9
Preferred Stock...................................................................................................9
Quarterly Valuation Date..........................................................................................9
Rate Multiple.....................................................................................................9
Rate Period.......................................................................................................9
Rate Period Days..................................................................................................9
Receivables for Municipal Obligations Sold........................................................................9
Redemption Price..................................................................................................9
Reference Rate....................................................................................................9
Registration Statement...........................................................................................10
S&P..............................................................................................................10
S&P Discount Factor..............................................................................................10
S&P Eligible Asset...............................................................................................10
S&P Exposure Period..............................................................................................10
S&P Volatility Factor............................................................................................10
Secondary Market Insurance.......................................................................................10
Securities Depository............................................................................................10
Sell Order" and "Sell Orders.....................................................................................10
Special Rate Period..............................................................................................10
Special Redemption Provisions....................................................................................10
Submission Deadline..............................................................................................10
Submitted Bid" and "Submitted Bids...............................................................................10
Submitted Hold Order" and "Submitted Hold Orders.................................................................10
Submitted Order" and "Submitted Orders...........................................................................10
Submitted Sell Order" and "Submitted Sell Orders.................................................................11
Subsequent Rate Period...........................................................................................11
Substitute Commercial Paper Dealer...............................................................................11
Substitute U.S. Government Securities Dealer.....................................................................11
Sufficient Clearing Bids.........................................................................................11
Taxable Allocation...............................................................................................11
Taxable Income...................................................................................................11
Taxable Equivalent of the Short-Term Municipal Bond Rate.........................................................11
Treasury Bill....................................................................................................12
Treasury Bill Rate...............................................................................................12
Treasury Note....................................................................................................12
Treasury Note Rate...............................................................................................12
U.S. Government Securities Dealer................................................................................12
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Valuation Date...................................................................................................12
Volatility Factor................................................................................................12
Voting Period....................................................................................................12
Winning Bid Rate.................................................................................................12
PART I...........................................................................................................13
1. Number of Authorized Shares....................................................................13
2. Dividends......................................................................................13
(a) Ranking...............................................................................13
(b) Cumulative Cash Dividends.............................................................13
(c) Dividends Cumulative From Date of Original Issue......................................13
(d) Dividend Payment Dates and Adjustment Thereof.........................................13
(e) Dividend Rates and Calculation of Dividends...........................................14
(f) Curing a Failure to Deposit...........................................................15
(g) Dividend Payments by Fund to Auction Agent............................................15
(h) Auction Agent as Trustee of Dividend Payments by Fund.................................16
(i) Dividends Paid to Holders.............................................................16
(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends..................16
(k) Dividends Designated as Exempt-Interest Dividends.....................................16
3. Gross-up Payments..............................................................................16
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days or Fewer.........16
(b) Special Rate Periods of More Than 28 Rate Period Days.................................16
(c) No Gross-Up Payments In the Event of a Reallocation...................................16
4. Designation of Special Rate Periods............................................................17
(a) Length of and Preconditions for Special Rate Period...................................17
(b) Adjustment of Length of Special Rate Period...........................................17
(c) Notice of Proposed Special Rate Period................................................17
(d) Notice of Special Rate Period.........................................................18
(e) Failure to Deliver Notice of Special Rate Period......................................18
5. Voting Rights..................................................................................18
(a) One Vote Per Share of MuniPreferred...................................................18
(b) Voting For Additional Directors.......................................................19
(c) Holders of MuniPreferred To Vote On Certain Other Matters.............................20
(d) Board May Take Certain Actions Without Shareholder Approval...........................20
(e) Voting Rights Set Forth Herein Are Sole Voting Rights.................................21
(f) No Preemptive Rights or Cumulative Voting.............................................21
(g) Voting for Directors Sole Remedy for Fund's Failure to Pay Dividends..................21
(h) Holders Entitled to Vote..............................................................21
6. 1940 Act MuniPreferred Asset Coverage..........................................................21
7. MuniPreferred Basic Maintenance Amount.........................................................22
8. [Reserved].....................................................................................23
9. Restrictions on Dividends and Other Distributions..............................................23
(a) Dividends on Preferred Stock Other Than MuniPreferred.................................23
(b) Dividends and Other Distributions With Respect to Common Stock Under the
1940 Act..............................................................................23
(c) Other Restrictions On Dividends and Other Distributions...............................24
10. Rating Agency Restrictions.....................................................................24
11. Redemption.....................................................................................25
(a) Optional Redemption...................................................................25
(b) Mandatory Redemption..................................................................26
(c) Notice of Redemption..................................................................26
(d) No Redemption Under Certain Circumstances.............................................27
(e) Absence of Funds Available for Redemption.............................................27
(f) Auction Agent as Trustee of Redemption Payments by Fund...............................27
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer
Outstanding...........................................................................27
(h) Compliance With Applicable Law........................................................28
(i) Only Whole Shares of MuniPreferred May Be Redeemed....................................28
12. Liquidation Rights.............................................................................28
(a) Ranking...............................................................................28
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(b) Distributions Upon Liquidation........................................................28
(c) Pro Rata Distributions................................................................28
(d) Rights of Junior Stock................................................................28
(e) Certain Events Not Constituting Liquidation...........................................28
13. Miscellaneous..................................................................................29
(a) Amendment of Appendix A to Add Additional Series......................................29
(b) Appendix A Incorporated By Reference..................................................29
(c) No Fractional Shares..................................................................29
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or Otherwise Acquired
by the Fund...........................................................................29
(e) Board May Resolve Ambiguities.........................................................29
(f) Headings Not Determinative............................................................29
(g) Notices...............................................................................29
PART II..........................................................................................................29
1. Orders.........................................................................................29
2. Submission of Orders by Broker-Dealers to Auction Agent........................................31
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate................33
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and
Allocation of Shares...........................................................................34
5. Notification of Allocations....................................................................36
6. Auction Agent..................................................................................36
7. Transfer of Shares of MuniPreferred............................................................36
8. Global Certificate.............................................................................36
APPENDIX A......................................................................................................A-1
Section 1. Designation As To Series......................................................................A-1
Section 2. Number of Authorized Shares Per Series........................................................A-1
Section 3. Exceptions to Certain Definitions.............................................................A-1
Section 4. Certain Definitions...........................................................................A-1
Section 5. Initial Rate Periods..........................................................................A-5
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading "Definitions"
in this Statement.............................................................................A-5
Section 7. Party Named for Purposes of the Definition of "Rate Multiple" in this Statement...............A-5
Section 8. Additional Definitions........................................................................A-5
Section 9. Dividend Payment Dates........................................................................A-6
Section 10. Amount for Purposes of Subparagraph (c)(i) of Section 5 of Part I of this Statement...........A-6
Section 11. Redemption Provisions Applicable to Initial Rate Periods......................................A-6
Section 12. Applicable Rate for Purposes of Subparagraph (b)(iii) of Section 3 of Part II of
this Statement................................................................................A-6
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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) 1.00 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.
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(b) "ACCOUNTANT'S CONFIRMATION" shall have the meaning
specified in paragraph (c) of Section 7 of Part I of this Statement.
(c) "AFFILIATE" shall mean, for purposes of the definition of
"Outstanding," any Person known to the Auction Agent to be controlled by, in
control of or under common control with the Fund; PROVIDED, HOWEVER, that no
Broker-Dealer controlled by, in control of or under common control with the Fund
shall be deemed to be an Affiliate nor shall any corporation or any Person
controlled by, in control of or under common control with such corporation one
of the directors, trustees or executive officers of which is a director of the
Fund be deemed to be an Affiliate solely because such director, trustee or
executive officer is also a director of the Fund.
(d) "AGENT MEMBER" shall mean a member of or participant in
the Securities Depository that will act on behalf of a Bidder.
(e) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes
(TANs), Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation Notes
(TRANs), Grant Anticipation Notes (GANs) that are rated by S&P and Bond
Anticipation Notes (BANs) that are rated by S&P.
(f) "APPLICABLE RATE" shall have the meaning specified in
subparagraph (e)(i) of Section 2 of Part I of this Statement.
(g) "ARTICLES" shall have the meaning specified on the first
page of this Statement.
(h) "AUCTION" shall mean each periodic implementation of the
Auction Procedures.
(i) "AUCTION AGENCY AGREEMENT" shall mean the agreement
between the Fund and the Auction Agent which provides, among other things, that
the Auction Agent will follow the Auction Procedures for purposes of determining
the Applicable Rate for shares of a series of MuniPreferred so long as the
Applicable Rate for shares of such series is to be based on the results of an
Auction.
(j) "AUCTION AGENT" shall mean the entity appointed as such by
a resolution of the Board of Directors in accordance with Section 6 of Part II
of this Statement.
(k) "AUCTION DATE," with respect to any Rate Period, shall
mean the Business Day next preceding the first day of such Rate Period.
(l) "AUCTION PROCEDURES" shall mean the procedures for
conducting Auctions set forth in Part II of this Statement.
(m) "AVAILABLE MUNIPREFERRED" shall have the meaning specified
in paragraph (a) of Section 3 of Part II of this Statement.
(n) "BENCHMARK RATE" shall have the meaning specified in
Section 12 of APPENDIX A hereto.
(o) "BENEFICIAL OWNER," with respect to shares of a series of
MuniPreferred, means a customer of a Broker-Dealer who is listed on the records
of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of
shares of such series.
(p) "BID" and "BIDS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
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(q) "BIDDER" and "BIDDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement; PROVIDED,
HOWEVER, that neither the Fund nor any affiliate thereof shall be permitted to
be a Bidder in an Auction, except that any Broker-Dealer that is an affiliate of
the Fund may be a Bidder in an Auction, but only if the Orders placed by such
Broker-Dealer are not for its own account.
(r) "BOARD OF DIRECTORS" shall mean the Board of Directors of
the Fund or any duly authorized committee thereof.
(s) "BROKER-DEALER" shall mean any broker-dealer, commercial
bank or other entity permitted by law to perform the functions required of a
Broker-Dealer in Part II of this Statement, that is a member of, or a
participant in, the Securities Depository or is an affiliate of such member or
participant, has been selected by the Fund and has entered into a Broker-Dealer
Agreement that remains effective.
(t) "BROKER-DEALER AGREEMENT" shall mean an agreement among
the Fund, the Auction Agent and a Broker-Dealer pursuant to which such
Broker-Dealer agrees to follow the procedures specified in Part II of this
Statement.
(u) "BUSINESS DAY" shall mean a day on which the New York
Stock Exchange is open for trading and which is neither a Saturday, Sunday nor
any other day on which banks in The City of New York, New York, are authorized
by law to close.
(v) "CODE" means the Internal Revenue Code of 1986, as
amended.
(w) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial
Paper Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated or, in lieu of any thereof their respective affiliates or
successors, if such entity is a commercial paper dealer.
(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]
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(ee) "DIVIDEND PAYMENT DATE," with respect to shares of a
series of MuniPreferred, shall mean any date on which dividends are payable on
shares of such series pursuant to the provisions of paragraph (d) of Section 2
of Part I of this Statement.
(ff) "DIVIDEND PERIOD," with respect to shares of a series of
MuniPreferred, shall mean the period from and including the Date of Original
Issue of shares of such series to but excluding the initial Dividend Payment
Date for shares of such series and any period thereafter from and including one
Dividend Payment Date for shares of such series to but excluding the next
succeeding Dividend Payment Date for shares of such series.
(gg) "EXISTING HOLDER," with respect to shares of a series of
MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may be
permitted by the Fund) that is listed on the records of the Auction Agent as a
holder of shares of such series.
(hh) "FAILURE TO DEPOSIT," with respect to shares of a series
of MuniPreferred, shall mean a failure by the Fund to pay to the Auction Agent,
not later than 12:00 noon, New York City time, (A) on the Business Day next
preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend Payment Date in The City of New York, New York, the
full amount of any dividend (whether or not earned or declared) to be paid on
such Dividend Payment Date on any share of such series or (B) on the Business
Day next preceding any redemption date in funds available on such redemption
date for shares of such series in The City of New York, New York, the Redemption
Price to be paid on such redemption date for any share of such series after
notice of redemption is mailed pursuant to paragraph (c) of Section 11 of Part I
of this Statement; PROVIDED, HOWEVER, that the foregoing clause (B) shall not
apply to the Fund's failure to pay the Redemption Price in respect of shares of
MuniPreferred when the related Notice of Redemption provides that redemption of
such shares is subject to one or more conditions 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.
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(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.
(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
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Statement, the product of (A) the highest of (1) the Reference Rate on
such Auction Date for a Rate Period equal in length to the then-ending
Rate Period of shares of such series, if such then-ending Rate Period
was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of shares of such series, if such then-ending Rate Period was
more than 364 Rate Period Days, (2) the Reference Rate on such Auction
Date for the Special Rate Period for which the Auction is being held if
such Special Rate Period is 364 Rate Period Days or fewer or the
Treasury Note Rate on such Auction Date for the Special Rate Period for
which the Auction is being held if such Special Rate Period is more
than 364 Rate Period Days, and (3) the Reference Rate on such Auction
Date for Minimum Rate Periods and (B) the Rate Multiple on such Auction
Date.
(xx) [RESERVED]
(yy) "MINIMUM RATE PERIOD" shall mean any Rate Period
consisting of 7 Rate Period Days.
(zz) "MOODY'S" shall mean Moody's Investors Service, Inc., a
Delaware corporation, and its successors.
(aaa) "MOODY'S DISCOUNT FACTOR" shall have the meaning
specified in Section 4 of APPENDIX A hereto.
(bbb) "MOODY'S ELIGIBLE ASSET" shall have the meaning
specified in Section 4 of APPENDIX A hereto.
(ccc) "MOODY'S EXPOSURE PERIOD" shall mean the period
commencing on a given Valuation Date and ending 56 days thereafter.
(ddd) "MOODY'S VOLATILITY FACTOR" shall mean, as of any
Valuation Date, (i) in the case of any Minimum Rate Period, any Special Rate
Period of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate
Period Days or more, a multiplicative factor equal to 275%, except as otherwise
provided in the last sentence of this definition; (ii) in the case of any
Special Rate Period of more than 28 but fewer than 36 Rate Period Days, a
multiplicative factor equal to 203%; (iii) in the case of any Special Rate
Period of more than 35 but fewer than 43 Rate Period Days, a multiplicative
factor equal to 217%; (iv) in the case of any Special Rate Period of more than
42 but fewer than 50 Rate Period Days, a multiplicative factor equal to 226%;
and (v) in the case of any Special Rate Period of more than 49 but fewer than 57
Rate Period Days, a multiplicative factor equal to 235%. If, as a result of the
enactment of changes to the Code, the greater of the 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:
FEDERAL TAX VOLATILITY
RATE INCREASE FACTOR
------------- ------
5% 295%
10% 317%
15% 341%
20% 369%
25% 400%
30% 436%
35% 477%
40% 525%
6
<PAGE> 12
(eee) "MUNIPREFERRED" shall have the meaning set forth on the
first page of this Statement.
(fff) "MUNIPREFERRED BASIC MAINTENANCE AMOUNT," as of any
Valuation Date, shall mean the dollar amount equal to the sum of (i) (A) the
product of the number of shares of MuniPreferred outstanding on such date
multiplied by $25,000 (plus the product of the number of shares of any other
series of Preferred Stock outstanding on such date multiplied by the liquidation
preference of such shares), plus any redemption premium applicable to shares of
MuniPreferred (or other Preferred Stock) then subject to redemption; (B) the
aggregate amount of dividends that will have accumulated at the respective
Applicable Rates (whether or not earned or declared) to (but not including) the
first respective Dividend Payment Dates for shares of MuniPreferred outstanding
that follow such Valuation Date (plus the aggregate amount of dividends, whether
or not earned or declared, that will have accumulated in respect of other
outstanding shares of Preferred Stock to, but not including, the first
respective dividend payment dates for such other shares that follow such
Valuation Date); (C) the aggregate amount of dividends that would accumulate on
shares of each series of MuniPreferred outstanding from such first respective
Dividend Payment Date therefor through the 56th day after such Valuation Date,
at the Maximum Rate (calculated as if such Valuation Date were the Auction Date
for the Rate Period commencing on such Dividend Payment Date) for a Minimum Rate
Period of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation Date
the Fund shall have delivered a Notice of Special Rate Period to the Auction
Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such
series, such Maximum Rate shall be the higher of (a) the Maximum Rate for the
Special Rate Period of shares of such series to commence on such Dividend
Payment Date and (b) the Maximum Rate for a Minimum Rate Period of shares of
such series to commence on such Dividend Payment Date, multiplied by the
Volatility Factor applicable to a Minimum Rate Period, or, in the event the Fund
shall have delivered a Notice of Special Rate Period to the Auction Agent
pursuant to Section 4(d)(i) of this Part I with respect to shares of such series
designating a Special Rate Period consisting of 56 Rate Period Days or more, the
Volatility Factor applicable to a Special Rate Period of that length (plus the
aggregate amount of dividends that would accumulate at the maximum dividend rate
or rates on any other shares of Preferred Stock outstanding from such respective
dividend payment dates through the 56th day after such Valuation Date, as
established by or pursuant to the respective statements establishing and fixing
the rights and preferences of such other shares of Preferred Stock) (except that
(1) if such Valuation Date occurs at a time when a Failure to Deposit (or, in
the case of shares of Preferred Stock other than MuniPreferred, a failure
similar to a Failure to Deposit) has occurred that has not been cured, the
dividend for purposes of calculation would accumulate at the current dividend
rate then applicable to the shares in respect of which such failure has occurred
and (2) for those days during the period described in this subparagraph (C) in
respect of which the Applicable Rate in effect immediately prior to such
Dividend Payment Date will remain in effect (or, in the case of shares of
Preferred Stock other than MuniPreferred, in respect of which the dividend rate
or rates in effect immediately prior to such respective dividend payment dates
will remain in effect), the dividend for purposes of calculation would
accumulate at such Applicable Rate (or other rate or rates, as the case may be)
in respect of those days); (D) the amount of anticipated expenses of the Fund
for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's
Maximum Potential Gross-up Payment Liability in respect of shares of
MuniPreferred (and similar amounts payable in respect of other shares of
Preferred Stock pursuant to provisions similar to those contained in Section 3
of Part I of this Statement) as of such Valuation Date; and (F) any current
liabilities as of such Valuation Date to the extent not reflected in any of
(i)(A) through (i)(E) (including, without limitation, any payables for Municipal
Obligations purchased as of such Valuation Date and any liabilities incurred for
the purpose of clearing securities transactions) less (ii) the value (i.e., for
purposes of current Moody's guidelines, the face value of cash, short-term
Municipal Obligations rated MIG-1, VMIG-1 or P-1, and short-term securities that
are the direct obligation of the U.S. government, provided in each case that
such securities mature on or prior to the date upon which any of (i)(A) through
(i)(F) become payable, otherwise the Moody's Discounted Value) of any of the
Fund's assets irrevocably deposited by the Fund for the payment of any of (i)(A)
through (i)(F).
(ggg) "MUNIPREFERRED BASIC MAINTENANCE CURE DATE," with
respect to the failure by the Fund to satisfy the MuniPreferred Basic
Maintenance Amount (as required by paragraph (a) of Section 7 of Part I of this
Statement) as of a given Valuation Date, shall mean the seventh Business Day
following such Valuation Date.
7
<PAGE> 13
(hhh) "MUNIPREFERRED BASIC MAINTENANCE REPORT" shall mean a
report signed by the President, Treasurer or any Senior Vice President or Vice
President of the Fund which sets forth, as of the related Valuation Date, the
assets of the Fund, the Market Value and the Discounted Value thereof (seriatim
and in aggregate), and the MuniPreferred Basic Maintenance Amount.
(iii) "MUNICIPAL OBLIGATIONS" shall mean "Municipal
Obligations" as defined in the Fund's registration statement on Form N-2 on file
with the Securities and Exchange Commission, as such registration statement may
be amended from time to time (the "Registration Statement").
(jjj) "1940 ACT" shall mean the Investment Company Act of
1940, as amended from time to time.
(kkk) "1940 ACT CURE DATE," with respect to the failure by the
Fund to maintain the 1940 Act MuniPreferred Asset Coverage (as required by
Section 6 of Part I of this Statement) as of the last Business Day of each
month, shall mean the last Business Day of the following month.
(lll) "1940 ACT MUNIPREFERRED ASSET COVERAGE" shall mean asset
coverage, as defined in Section 18(h) of the 1940 Act, of at least 200% with
respect to all outstanding senior securities of the Fund which are stock,
including all outstanding shares of MuniPreferred (or such other asset coverage
as may in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common stock).
(mmm) "NOTICE OF REDEMPTION" shall mean any notice with
respect to the redemption of shares of MuniPreferred pursuant to paragraph (c)
of Section 11 of Part I of this Statement.
(nnn) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice
with respect to a Special Rate Period of shares of MuniPreferred pursuant to
subparagraph (d)(i) of Section 4 of Part I of this Statement.
(ooo) "ORDER" and "ORDERS" shall have the respective meanings
specified in paragraph (a) of Section 1 of Part II of this Statement.
(ppp) "ORIGINAL ISSUE INSURANCE," if defined in Section 4 of
APPENDIX A hereto, shall have the meaning specified in that section.
(qqq) "OTHER ISSUES," if defined in Section 4 of APPENDIX A
hereto, shall have the meaning specified in that section.
(rrr) "OUTSTANDING" shall mean, as of any Auction Date with
respect to shares of a series of MuniPreferred, the number of shares of such
series theretofore issued by the Fund except, without duplication, (i) any
shares of such series theretofore cancelled or delivered to the Auction Agent
for cancellation or redeemed by the Fund, (ii) any shares of such series as to
which the Fund or any Affiliate thereof shall be an Existing Holder and (iii)
any shares of such series represented by any certificate in lieu of which a new
certificate has been executed and delivered by the Fund.
(sss) "PERMANENT INSURANCE," if defined in Section 4 of
APPENDIX A hereto, shall have the meaning specified in that section.
(ttt) "PERSON" shall mean and include an individual, a
partnership, a corporation, a trust, an unincorporated association, a joint
venture or other entity or a government or any agency or political subdivision
thereof.
8
<PAGE> 14
(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 nor comply with either of the conditions specified in (i)
above, and (B) for purposes of calculation of S&P Eligible Assets as of any
Valuation Date, the book value of receivables for Municipal Obligations sold as
of or prior to such Valuation Date if such receivables are due within five
business days of such Valuation Date.
(dddd) "REDEMPTION PRICE" shall mean the applicable redemption
price specified in paragraph (a) or (b) of Section 11 of Part I of this
Statement.
(eeee) "REFERENCE RATE" shall mean (i) the higher of the
Taxable Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite
Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate
Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial
Paper Rate in the case of Special Rate Periods of more than 28 Rate Period Days
but fewer than 183 Rate Period Days; and (iii) the Treasury Bill Rate in the
case of Special Rate Periods of more than 182 Rate Period Days but fewer than
365 Rate Period Days.
9
<PAGE> 15
(ffff) "REGISTRATION STATEMENT" has the meaning specified in
the definition of "Municipal Obligations."
(gggg) "S&P" shall mean Standard & Poor's Corporation, a New
York corporation, and its successors.
(hhhh) "S&P DISCOUNT FACTOR" shall have the meaning specified
in Section 4 of APPENDIX A hereto.
(iiii) "S&P ELIGIBLE ASSET" shall have the meaning specified
in Section 4 of APPENDIX A hereto.
(jjjj) "S&P EXPOSURE PERIOD" shall mean the maximum period of
time following a Valuation Date that the Fund has under this Statement to cure
any failure to maintain, as of such Valuation Date, the Discounted Value for its
portfolio at least equal to the MuniPreferred Basic Maintenance Amount (as
described in paragraph (a) of Section 7 of Part I of this Statement).
(kkkk) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation
Date, a multiplicative factor equal to (i) 305% in the case of any Minimum Rate
Period or any Special Rate Period of 28 Rate Period Days or fewer, (ii) 268% in
the case of any Special Rate Period of more than 28 Rate Period Days but fewer
than 183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period
of more than 182 Rate Period Days.
(llll) "SECONDARY MARKET INSURANCE," if defined in Section 4
of APPENDIX A hereto, shall have the meaning specified in that section.
(mmmm) "SECURITIES DEPOSITORY" shall mean The Depository Trust
Company and its successors and assigns or any other securities depository
selected by the Fund which agrees to follow the procedures required to be
followed by such securities depository in connection with shares of
MuniPreferred.
(nnnn) "SELL ORDER" and "SELL ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 1 of Part II of this
Statement.
(oooo) "SPECIAL RATE PERIOD," with respect to shares of a
series of MuniPreferred, shall have the meaning specified in paragraph (a) of
Section 4 of Part I of this Statement.
(pppp) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning
specified in subparagraph (a)(i) of Section 11 of Part I of this Statement.
(qqqq) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York
City time, on any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as specified
by the Auction Agent from time to time.
(rrrr) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
(ssss) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS"
shall have the respective meanings specified in paragraph (a) of Section 3 of
Part II of this Statement.
(tttt) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the
respective meanings specified in paragraph (a) of Section 3 of Part II of this
Statement.
10
<PAGE> 16
(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.
11
<PAGE> 17
(ccccc) "TREASURY BILL" shall mean a direct obligation of the
U.S. Government having a maturity at the time of issuance of 364 days or less.
(ddddd) "TREASURY BILL RATE," on any date for any Rate Period,
shall mean (i) the bond equivalent yield, calculated in accordance with
prevailing industry convention, of the rate on the most recently auctioned
Treasury Bill with a remaining maturity closest to the length of such Rate
Period, as quoted in The Wall Street Journal on such date for the Business Day
next preceding such date, or (ii) in the event that any such rate is not
published in The Wall Street Journal, then the bond equivalent yield, calculated
in accordance with prevailing industry convention, as calculated by reference to
the arithmetic average of the bid price quotations of the most recently
auctioned Treasury Bill with a remaining maturity closest to the length of such
Rate Period, as determined by bid price quotations as of the close of business
on the Business Day immediately preceding such date obtained from the U.S.
Government Securities Dealers to the Auction Agent.
(eeeee) "TREASURY NOTE" shall mean a direct obligation of the
U.S. Government having a maturity at the time of issuance of five years or less
but more than 364 days.
(fffff) "TREASURY NOTE RATE," on any date for any Rate Period,
shall mean (i) the yield on the most recently auctioned Treasury Note with a
remaining maturity closest to the length of such Rate Period, as quoted in The
Wall Street Journal on such date for the Business Day next preceding such date;
or (ii) in the event that any such rate is not published in The Wall Street
Journal, then the yield as calculated by reference to the arithmetic average of
the bid price quotations of the most recently auctioned Treasury Note with a
remaining maturity closest to the length of such Rate Period, as determined by
bid price quotations as of the close of business on the Business Day immediately
preceding such date obtained from the U.S. Government Securities Dealers to the
Auction Agent. If any U.S. Government Securities Dealer does not quote a rate
required to determine the Treasury Bill Rate or the Treasury Note Rate, the
Treasury Bill Rate or the Treasury Note Rate shall be determined on the basis of
the quotation or quotations furnished by the remaining U.S. Government
Securities Dealer or U.S. Government Securities Dealers and any Substitute U.S.
Government Securities Dealers selected by the Fund to provide such rate or rates
not being supplied by any U.S. Government Securities Dealer or U.S. Government
Securities Dealers, as the case may be, or, if the Fund does not select any such
Substitute U.S. Government Securities Dealer or Substitute U.S. Government
Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S.
Government Securities Dealers.
(ggggg) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman
Government Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc
and Morgan Guaranty Trust Company of New York or their respective affiliates or
successors, if such entity is a U.S. Government securities dealer.
(hhhhh) "VALUATION DATE" shall mean, for purposes of
determining whether the Fund is maintaining the MuniPreferred Basic Maintenance
Amount and the Minimum Liquidity Level, 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.
12
<PAGE> 18
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 I 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.
13
<PAGE> 19
(e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS. (i)
DIVIDEND RATES. The dividend rate on shares of MuniPreferred of any
series during the period from and after the Date of Original Issue of
shares of such series to and including the last day of the Initial Rate
Period of shares of such series shall be equal to the rate per annum
set forth with respect to shares of such series under "Designation" in
Section 1 of APPENDIX A hereto. For each Subsequent Rate Period of
shares of such series thereafter, the dividend rate on shares of such
series shall be equal to the rate per annum that results from an
Auction for shares of such series on the Auction Date next preceding
such Subsequent Rate Period; PROVIDED, HOWEVER, that if:
(A) an Auction for any such Subsequent Rate
Period is not held for any reason other than as described
below, the dividend rate on shares of such series for such
Subsequent Rate Period will be the Maximum Rate for shares of
such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred
with respect to shares of such series during any Rate Period
thereof (other than any Special Rate Period consisting of more
than 364 Rate Period Days or any Rate Period succeeding any
Special Rate Period consisting of more than 364 Rate Period
Days during which a Failure to Deposit occurred that has not
been cured), but, prior to 12:00 Noon, New York City time, on
the third Business Day next succeeding the date on which such
Failure to Deposit occurred, such Failure to Deposit shall
have been cured in accordance with paragraph (f) of this
Section 2 and the Fund shall have paid to the Auction Agent a
late charge ("Late Charge") equal to the sum of (1) if such
Failure to Deposit consisted of the failure timely to pay to
the Auction Agent the full amount of dividends with respect to
any Dividend Period of the shares of such series, an amount
computed by multiplying (x) 200% of the Reference Rate for the
Rate Period during which such Failure to Deposit occurs on the
Dividend Payment Date for such Dividend Period by (y) a
fraction, the numerator of which shall be the number of days
for which such Failure to Deposit has not been cured in
accordance with paragraph (f) of this Section 2 (including the
day such Failure to Deposit occurs and excluding the day such
Failure to Deposit is cured) and the denominator of which
shall be 360, and applying the rate obtained against the
aggregate Liquidation Preference of the outstanding shares of
such series and (2) if such Failure to Deposit consisted of
the failure timely to pay to the Auction Agent the Redemption
Price of the shares, if any, of such series for which Notice
of Redemption has been mailed by the Fund pursuant to
paragraph (c) of Section 11 of this Part I, an amount computed
by multiplying (x) 200% of the Reference Rate for the Rate
Period during which such Failure to Deposit occurs on the
redemption date by (y) a fraction, the numerator of which
shall be the number of days for which such Failure to Deposit
is not cured in accordance with paragraph (f) of this Section
2 (including the day such Failure to Deposit occurs and
excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate
obtained against the aggregate Liquidation Preference of the
outstanding shares of such series to be redeemed, no Auction
will be held in respect of shares of such series for the
Subsequent Rate Period thereof and the dividend rate for
shares of such series for such Subsequent Rate Period will be
the Maximum Rate for shares of such series on the Auction Date
for such Subsequent Rate Period;
(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
14
<PAGE> 20
Business Day prior to the end of such Rate Period), and the
dividend rate for shares of such series for each such
Subsequent Rate Period shall be a rate per annum equal to the
Maximum Rate for shares of such series on the Auction Date for
such Subsequent Rate Period (but with the prevailing rating
for shares of such series, for purposes of determining such
Maximum Rate, being deemed to be "Below "ba3"/BB-"); or
(D) any Failure to Deposit shall have occurred
with respect to shares of such series during a Special Rate
Period thereof consisting of more than 364 Rate Period Days,
or during any Rate Period thereof succeeding any Special Rate
Period consisting of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured,
and, prior to 12:00 Noon, New York City time, on the fourth
Business Day preceding the Auction Date for the Rate Period
subsequent to such Rate Period, such Failure to Deposit shall
not have been cured in accordance with paragraph (f) of this
Section 2 or, in the event Moody's is then rating such shares,
the Fund shall not have paid the applicable Late Charge to the
Auction Agent (such Late Charge, for purposes of this
subparagraph (D), to be calculated by using, as the Reference
Rate, the Reference Rate applicable to a Rate Period (x)
consisting of more than 182 Rate Period Days but fewer than
365 Rate Period Days and (y) commencing on the date on which
the Rate Period during which Failure to Deposit occurs
commenced), no Auction will be held in respect of shares of
such series for such Subsequent Rate Period (or for any Rate
Period thereof thereafter to and including the Rate Period
during which (1) such Failure to Deposit is cured in
accordance with paragraph (f) of this Section 2 and (2) the
Fund pays the applicable Late Charge to the Auction Agent (the
condition set forth in this clause (2) to apply only in the
event Moody's is rating such shares at the time the Fund cures
such Failure to Deposit), in each case no later than 12:00
Noon, New York City time, on the fourth Business Day prior to
the end of such Rate Period), and the dividend rate for shares
of such series for each such Subsequent Rate Period shall be a
rate per annum equal to the Maximum Rate for shares of such
series on the Auction Date for such Subsequent Rate Period
(but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be
"Below "ba3"/BB-") (the rate per annum at which dividends are
payable on shares of a series of MuniPreferred for any Rate
Period thereof being herein referred to as the "Applicable
Rate" for shares of such series).
(ii) CALCULATION OF DIVIDENDS. The amount of dividends
per share payable on shares of a series of MuniPreferred on any date on
which dividends shall be payable on shares of such series shall be
computed by multiplying the Applicable Rate for shares of such series
in effect for such Dividend Period or Dividend Periods or part thereof
for which dividends have not been paid by a fraction, the numerator of
which shall be the number of days in such Dividend Period or Dividend
Periods or part thereof and the denominator of which shall be 365 if
such Dividend Period consists of 7 Rate Period Days and 360 for all
other Dividend Periods, and applying the rate obtained against $25,000.
(f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with
respect to shares of a series of MuniPreferred shall have been cured (if such
Failure to Deposit is not solely due to the willful failure of 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
15
<PAGE> 21
New York, New York, equal to the dividends to be paid to all Holders of shares
of such series on such Dividend Payment Date.
(h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY FUND. All
moneys paid to the Auction Agent for the payment of dividends (or for the
payment of any Late Charge) shall be held in trust for the payment of such
dividends (and any such Late Charge) by the Auction Agent for the benefit of the
Holders specified in paragraph (i) of this Section 2. Any moneys paid to the
Auction Agent in accordance with the foregoing but not applied by the Auction
Agent to the payment of dividends (and any such Late Charge) will, to the extent
permitted by law, be repaid to the Fund at the end of 90 days from the date on
which such moneys were so to have been applied.
(i) DIVIDENDS PAID TO HOLDERS. Each dividend on shares of
MuniPreferred shall be paid on the Dividend Payment Date therefor to the Holders
thereof as their names appear on the stock books of the Fund on the Business Day
next preceding such Dividend Payment Date.
(j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID
DIVIDENDS. Any dividend payment made on shares of MuniPreferred shall first be
credited against the earliest accumulated but unpaid dividends due with respect
to such shares. Dividends in arrears for any past Dividend Period may be
declared and paid at any time, without reference to any regular Dividend Payment
Date, to the Holders as their names appear on the stock books of the Fund on
such date, not exceeding 15 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
(k) DIVIDENDS DESIGNATED AS EXEMPT-INTEREST DIVIDENDS.
Dividends on shares of MuniPreferred shall be designated as exempt-interest
dividends up to the amount of tax-exempt income of the Fund, to the extent
permitted by, and for purposes of, Section 852 of the Code.
3. GROSS-UP PAYMENTS.
Holders of shares of MuniPreferred shall be entitled to receive, when,
as and if declared by the Board of Directors, out of funds legally available
therefor, dividends in an amount equal to the aggregate Gross-up Payments as
follows:
(a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE
PERIOD DAYS OR FEWER. If, in the case of any Minimum Rate Period or any Special
Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net capital
gains or other income taxable for Federal income tax purposes to a dividend paid
on shares of MuniPreferred without having given advance notice thereof to the
Auction Agent as provided in Section 5 of Part II of this Statement (such
allocation being referred to herein as a ATaxable 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.
16
<PAGE> 22
4. DESIGNATION OF SPECIAL RATE PERIODS.
(a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The
Fund, at its option, may designate any succeeding Subsequent Rate Period of
shares of a series of MuniPreferred as a Special Rate Period consisting of a
specified number of Rate Period Days evenly divisible by seven and not more than
1,820, subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice
thereof shall have been given in accordance with paragraph (c) and subparagraph
(d)(i) of this Section 4, (B) an Auction for shares of such series shall have
been held on the Auction Date immediately preceding the first day of such
proposed Special Rate Period and Sufficient Clearing Bids for shares of such
series shall have existed in such Auction, and (C) if any Notice of Redemption
shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of
this Part I with respect to any shares of such series, the Redemption Price with
respect to such shares shall have been deposited with the Auction Agent. In the
event the Fund wishes to designate any succeeding Subsequent Rate Period for
shares of a series of MuniPreferred as a Special Rate Period consisting of more
than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such
series) and Moody's (if Moody's is then rating such series) in advance of the
commencement of such Subsequent Rate Period that the Fund wishes to designate
such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moody's (if Moody's is then rating such
series) with such documents as either may request.
(b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event
the Fund wishes to designate a Subsequent Rate Period as a Special Rate Period,
but the day following what would otherwise be the last day of such Special Rate
Period is not (a) a Tuesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series M MuniPreferred" in Section 1 of APPENDIX A
hereto, (b) a Wednesday that is a Business Day in the case of a series of
MuniPreferred designated as "Series T MuniPreferred" in Section 1 of APPENDIX A
hereto, (c) a Thursday that is a Business Day in the case of a series of
MuniPreferred designated as "Series W MuniPreferred" in Section 1 of APPENDIX A
hereto, (d) a Friday that is a Business Day in the case of a series of
MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of APPENDIX A
hereto, (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.
17
<PAGE> 23
(d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M.,
New York City time, on the second Business Day next preceding the first day of
any proposed Special Rate Period of shares of a series of MuniPreferred as to
which notice has been given as set forth in paragraph (c) of this Section 4 (or
such later time or date, or both, as may be agreed to by the Auction Agent), the
Fund shall deliver to the Auction Agent either:
(i) a notice ("Notice of Special Rate Period") stating
(A) that the Fund has determined to designate the next succeeding Rate
Period of shares of such series as a Special Rate Period, specifying
the same and the first day thereof, (B) the Auction Date immediately
prior to the first day of such Special Rate Period, (C) that such
Special Rate Period shall not commence if (1) an Auction for shares of
such series shall not be held on such Auction Date for any reason or
(2) an Auction for shares of such series shall be held on such Auction
Date but Sufficient Clearing Bids for shares of such series shall not
exist in such Auction, (D) the scheduled Dividend Payment Dates for
shares of such series during such Special Rate Period and (E) the
Special Redemption Provisions, if any, applicable to shares of such
series in respect of such Special Rate Period; such notice to be
accompanied by a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate
Period, Moody's Eligible Assets (if Moody's is then rating such series)
and S&P Eligible Assets (if S&P is then rating such series) each have
an aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount as of such Business Day (assuming for purposes of
the foregoing calculation that (a) the Maximum Rate is the Maximum Rate
on such Business Day as if such Business Day were the Auction Date for
the proposed Special Rate Period, and (b) the Moody's Discount Factors
applicable to Moody's Eligible Assets are determined by reference to
the first Exposure Period longer than the Exposure Period then
applicable to the Fund, as described in the definition of Moody's
Discount Factor herein); or
(ii) a notice stating that the Fund has determined not to
exercise its option to designate a Special Rate Period of shares of
such series and that the next succeeding Rate Period of shares of such
series shall be a Minimum Rate Period.
(e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the
Fund fails to deliver either of the notices described in subparagraphs (d)(i) or
(d)(ii) of this Section 4 (and, in the case of the notice described in
subparagraph (d)(i) of this Section 4, a MuniPreferred Basic Maintenance Report
to the effect set forth in such subparagraph (if either Moody's or S&P is then
rating the series in question)) with respect to any designation of any proposed
Special Rate Period to the Auction Agent by 11:00 A.M., New York City time, on
the second Business Day next preceding the first day of such proposed Special
Rate Period (or by such later time or date, or both, as may be agreed to by the
Auction Agent), the Fund shall be deemed to have delivered a notice to the
Auction Agent with respect to such Special Rate Period to the effect set forth
in subparagraph (d)(ii) of this Section 4. In the event the Fund delivers to the
Auction Agent a notice described in subparagraph (d)(i) of this Section 4, it
shall file a copy of such notice with the Secretary of the Fund, and the
contents of such notice shall be binding on the Fund. In the event the Fund
delivers to the Auction Agent a notice described in subparagraph (d)(ii) of this
Section 4, the Fund will provide Moody's (if Moody's is then rating the series
in question) and S&P (if S&P is then rating the series in question) a copy of
such notice.
5. VOTING RIGHTS.
(a) ONE VOTE PER SHARE OF MUNIPREFERRED. Except as otherwise
provided in the Articles or as otherwise required by law, (i) each Holder of
shares of MuniPreferred shall be entitled to one vote for each share of
MuniPreferred held by such Holder on each matter submitted to a vote of
shareholders of the Fund, and (ii) the holders of outstanding shares of
Preferred Stock, including each share of MuniPreferred, and of shares of Common
Stock shall vote together as a single class; PROVIDED, HOWEVER, that, at any
meeting of the shareholders of the Fund held for the election of directors, the
holders of outstanding shares of Preferred Stock, including MuniPreferred,
represented in person or by proxy at said meeting, shall be entitled, as a
class, to the exclusion of the holders of all other securities and classes of
capital stock of the Fund, to elect two directors of the Fund, each share of
Preferred Stock, including each share of MuniPreferred, entitling the 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.
18
<PAGE> 24
(b) VOTING FOR ADDITIONAL DIRECTORS. (i) VOTING PERIOD.
During any period in which any one or more of the conditions described
in subparagraphs (A) or (B) of this subparagraph (b)(i) shall exist
(such period being referred to herein as a "Voting Period"), the number
of directors constituting the Board of Directors shall be automatically
increased by the smallest number that, when added to the two directors
elected exclusively by the holders of shares of Preferred Stock,
including shares of MuniPreferred, would constitute a majority of the
Board of Directors as so increased by such smallest number and the
holders of shares of Preferred Stock, including MuniPreferred, shall be
entitled, voting as a class on a one-vote-per-share basis (to the
exclusion of the holders of all other securities and classes of capital
stock of the Fund), to elect such smallest number of additional
directors, together with the two directors that such holders are in any
event entitled to elect. A Voting Period shall commence:
(A) if at the close of business on any dividend
payment date accumulated dividends (whether or not earned or
declared) on any outstanding share of Preferred Stock,
including MuniPreferred, equal to at least two full years'
dividends shall be due and unpaid and sufficient cash or
specified securities shall not have been deposited with the
Auction Agent for the payment of such accumulated dividends;
or
(B) if at any time holders of shares of Preferred
Stock are entitled under the 1940 Act to elect a majority of
the directors of the Fund.
Upon the termination of a Voting Period, the voting rights described in
this subparagraph (b)(i) shall cease, subject always, however, to the
revesting of such voting rights in the Holders upon the further
occurrence of any of the events described in this subparagraph (b)(i).
(ii) NOTICE OF SPECIAL MEETING. As soon as practicable
after the accrual of any right of the holders of shares of Preferred
Stock to elect additional directors as described in subparagraph (b)(i)
of this Section 5, the Fund shall notify the Auction Agent and the
Auction Agent shall call a special meeting of such holders, by mailing
a notice of such special meeting to such holders, such meeting to be
held not less than 10 nor more than 20 days after the date of mailing
of such notice. If the Fund fails to send such notice to the Auction
Agent or if the Auction Agent does not call such a special meeting, it
may be called by any such holder on like notice. The record date for
determining the holders entitled to notice of and to vote at such
special meeting shall be the close of business on the fifth Business
Day preceding the day on which such notice is mailed. At any such
special meeting and at each meeting of holders of shares of Preferred
Stock held during a Voting Period at which directors are to be elected,
such holders, voting together as a class (to the exclusion of the
holders of all other securities and classes of capital stock of the
Fund), shall be entitled to elect the number of directors prescribed in
subparagraph (b)(i) of this Section 5 on a one-vote-per-share basis.
(iii) TERMS OF OFFICE OF EXISTING DIRECTORS. The terms of
office of all persons who are directors of the Fund at the time of a
special meeting of Holders and holders of other Preferred Stock to
elect directors shall continue, notwithstanding the election at such
meeting by the Holders and such other holders of the number of
directors that they are entitled to elect, and the persons so elected
by the Holders and such other holders, together with the two incumbent
directors elected by the Holders and such other holders of Preferred
Stock and the remaining incumbent directors elected by the holders of
the Common Stock and Preferred Stock, shall constitute the duly elected
directors of the Fund.
(iv) TERMS OF OFFICE OF CERTAIN DIRECTORS TO TERMINATE
UPON TERMINATION OF VOTING PERIOD. Simultaneously with the termination
of a Voting Period, the terms of office of the additional directors
elected by the Holders and holders of other Preferred Stock pursuant to
subparagraph (b)(i) of this Section 5 shall terminate, the remaining
directors shall constitute the directors of the Fund and the voting
rights of the Holders and such other holders to elect additional
directors pursuant to subparagraph (b)(i) of this Section 5 shall
cease, subject to the provisions of the last sentence of subparagraph
(b)(i) of this Section 5.
19
<PAGE> 25
(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 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) Deposit
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<PAGE> 26
Securities, Discounted Value, Receivables for Municipal Obligations Sold, Issue
Type Category and Other Issues as such terms apply to S&P Eligible Assets, (y)
Dividend Coverage Amount, Dividend Coverage Assets, Minimum Liquidity Level, S&P
Discount Factor, S&P Eligible Asset, S&P Exposure Period and S&P Volatility
Factor and (z) Valuation Date as such term applies to the definitions of
Dividend Coverage Amount, Dividend Coverage Assets and Minimum Liquidity Level)
and S&P (such confirmation being required to be obtained only in the event S&P
is rating the shares of MuniPreferred and in no event being required to be
obtained in the case of the definitions of (x) Discounted Value, Receivables for
Municipal Obligations Sold, Issue Type Category and Other Issues as such terms
apply to Moody's Eligible Assets, and (y) Moody's Discount Factor, Moody's
Eligible Asset, Moody's Exposure Period and Moody's Volatility Factor) that any
such amendment, alteration or repeal would not impair the ratings then assigned
by Moody's or S&P, as the case may be, to shares of MuniPreferred:
<TABLE>
<S> <C>
Deposit Securities Moody's Exposure Period
Discounted Value Moody's Volatility Factor
Issue Type Category 1940 Act Cure Date
Market Value 1940 Act MuniPreferred Asset Coverage
Maximum Potential Gross-up Other Issues
Payment Liability
MuniPreferred Basic Maintenance Amount Quarterly Valuation Date
MuniPreferred Basic Maintenance Cure Date Receivables for Municipal
Obligations Sold
MuniPreferred Basic Maintenance Report S&P Discount Factor
Moody's Discount Factor S&P Eligible Asset
Moody's Eligible Asset S&P Exposure Period
Valuation Date S&P Volatility Factor
Volatility Factor
</TABLE>
(e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS.
Unless otherwise required by law, the Holders of shares of MuniPreferred shall
not have any relative rights or preferences or other special rights other than
those specifically set forth herein.
(f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of
shares of MuniPreferred shall have no preemptive rights or rights to cumulative
voting.
(g) VOTING FOR DIRECTORS SOLE REMEDY FOR FUND'S FAILURE TO PAY
DIVIDENDS. In the event that the Fund fails to pay any dividends on the shares
of MuniPreferred, the exclusive remedy of the Holders shall be the right to vote
for directors pursuant to the provisions of this Section 5.
(h) HOLDERS ENTITLED TO VOTE. For purposes of determining any
rights of the Holders to vote on any matter, whether such right is created by
this Statement, by the other provisions of the Articles, by statute or
otherwise, no Holder shall be entitled to vote any share of MuniPreferred and no
share of MuniPreferred shall be deemed to be "outstanding" for the purpose of
voting or determining the number of shares required to constitute a quorum if,
prior to or concurrently with the time of determination of shares entitled to
vote or shares deemed outstanding for quorum purposes, as the case may be, the
requisite Notice of Redemption with respect to such shares shall have been
mailed as provided in paragraph (c) of Section 11 of this Part I and the
Redemption Price for the redemption of such shares shall have been deposited in
trust with the Auction Agent for that purpose. No share of MuniPreferred held by
the Fund or any affiliate of the Fund (except for shares held by a Broker-Dealer
that is an affiliate of the Fund for the account of its customers) shall have
any voting rights or be deemed to be outstanding for voting or other purposes.
6. 1940 ACT MUNIPREFERRED ASSET COVERAGE.
The Fund shall maintain, as of the last Business Day of each month in
which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred
Asset Coverage.
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<PAGE> 27
7. MUNIPREFERRED BASIC MAINTENANCE AMOUNT.
(a) So long as shares of MuniPreferred are outstanding, the
Fund shall maintain, on each Valuation Date, and shall verify to its
satisfaction that it is maintaining on such Valuation Date, (i) S&P Eligible
Assets having an aggregate Discounted Value equal to or greater than the
MuniPreferred Basic Maintenance Amount (if S&P is then rating the shares of
MuniPreferred) and (ii) Moody's Eligible Assets having an aggregate Discounted
Value equal to or greater than the MuniPreferred Basic Maintenance Amount (if
Moody's is then rating the shares of MuniPreferred).
(b) On or before 5:00 P.M., New York City time, on the third
Business Day after a Valuation Date on which the Fund fails to satisfy the
MuniPreferred Basic Maintenance Amount, and on the third Business Day after the
MuniPreferred Basic Maintenance Cure Date with respect to such Valuation Date,
the Fund shall complete and deliver to S&P (if S&P is then rating the shares of
MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred)
and the Auction Agent (if either S&P or Moody's is then rating the shares of
MuniPreferred) a MuniPreferred Basic Maintenance Report as of the date of such
failure or such MuniPreferred Basic Maintenance Cure Date, as the case may be,
which will be deemed to have been delivered to the Auction Agent if the Auction
Agent receives a copy or telecopy, telex or other electronic transcription
thereof and on the same day the Fund mails to the Auction Agent for delivery on
the next Business Day the full MuniPreferred Basic Maintenance Report. The Fund
shall also deliver a MuniPreferred Basic Maintenance Report to (i) the Auction
Agent (if either Moody's or S&P is then rating the shares of MuniPreferred) as
of (A) the fifteenth day of each month (or, if such day is not a Business Day,
the next succeeding Business Day) and (B) the last Business Day of each month,
(ii) Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if
S&P is then rating the shares of MuniPreferred) as of any Quarterly Valuation
Date, in each case on or before the third Business Day after such day, and (iii)
S&P, if and when requested for any Valuation Date, on or before the third
Business Day after such request. A failure by the Fund to deliver a
MuniPreferred Basic Maintenance Report pursuant to the preceding sentence shall
be deemed to be delivery of a MuniPreferred Basic Maintenance Report indicating
the Discounted Value for all assets of the Fund is less than the MuniPreferred
Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a
MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of this
Section 7 relating to a Quarterly Valuation Date, the Fund shall cause the
Independent Accountant to confirm in writing to S&P (if S&P is then rating the
shares of MuniPreferred), Moody's (if Moody's is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating
the shares of MuniPreferred) (i) the mathematical accuracy of the calculations
reflected in such Report (and in any other MuniPreferred Basic Maintenance
Report, randomly selected by the Independent Accountant, that was delivered by
the Fund during the quarter ending on such Quarterly Valuation Date) and (ii)
that, in such Report (and in such randomly selected Report), the Fund determined
in accordance with this Statement whether the Fund had, at such Quarterly
Valuation Date (and at the Valuation Date addressed in such randomly-selected
Report), S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred)
of an aggregate Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the
shares of MuniPreferred) of an aggregate Discounted Value at least equal to the
MuniPreferred Basic Maintenance Amount (such confirmation being herein called
the "Accountant's Confirmation").
(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
22
<PAGE> 28
Moody's is then rating the shares of MuniPreferred), as the case may be, of the
Fund was determined by the Independent Accountant, the calculation or
determination made by such Independent Accountant shall be final and conclusive
and shall be binding on the Fund, and the Fund shall accordingly amend and
deliver the MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating
the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating
the shares of MuniPreferred) promptly following receipt by the Fund of such
Accountant's Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first
Business Day after the Date of Original Issue of any shares of MuniPreferred,
the Fund shall complete and deliver to S&P (if S&P is then rating the shares of
MuniPreferred) and Moody's (if Moody's is then rating the shares of
MuniPreferred) a MuniPreferred Basic Maintenance Report as of the close of
business on such Date of Original Issue. Within five Business Days of such Date
of Original Issue, the Fund shall cause the Independent Accountant to confirm in
writing to S&P (if S&P is then rating the shares of MuniPreferred) (i) the
mathematical accuracy of the calculations reflected in such Report and (ii) that
the Discounted Value of S&P Eligible Assets reflected thereon equals or exceeds
the MuniPreferred Basic Maintenance Amount reflected thereon.
(g) On or before 5:00 p.m., New York City time, on the third
Business Day after either (i) the Fund shall have redeemed Common Stock or (ii)
the ratio of the Discounted Value of S&P Eligible Assets or the Discounted Value
of Moody's Eligible Assets to the MuniPreferred Basic Maintenance Amount is less
than or equal to 105%, the Fund shall complete and deliver to S&P (if S&P is
then rating the shares of MuniPreferred) or Moody's (if Moody's is then rating
the shares of MuniPreferred), as the case may be, a MuniPreferred Basic
Maintenance Report as of the date of either such event.
8. [RESERVED]
9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS.
(a) DIVIDENDS ON PREFERRED STOCK OTHER THAN MUNIPREFERRED.
Except as set forth in the next sentence, no dividends shall be declared or paid
or set apart for payment on the shares of any class or series of stock ranking,
as to the payment of dividends, on a parity with shares of MuniPreferred for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid on the shares of each series of MuniPreferred through its most
recent Dividend Payment Date. When dividends are not paid in full upon the
shares of each series of MuniPreferred through its most recent Dividend Payment
Date or upon the shares of any other class or series of stock ranking on a
parity as to the payment of dividends with shares of MuniPreferred through their
most recent respective dividend payment dates, all dividends declared upon
shares of MuniPreferred and any other such class or series of stock ranking on a
parity as to the payment of dividends with shares of MuniPreferred shall be
declared pro rata so that the amount of dividends declared per share on shares
of MuniPreferred and such other class or series of stock shall in all cases bear
to each other the same ratio that accumulated dividends per share on the shares
of MuniPreferred and such other class or series of stock bear to each other (for
purposes of this sentence, the amount of dividends declared per share of
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.
23
<PAGE> 29
(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 I, (A) the Fund shall not declare, pay or set apart for payment any
dividend or other distribution (other than a dividend or distribution paid in
shares of, or in options, warrants or rights to subscribe for or purchase,
Common Stock or other stock, if any, ranking junior to the shares of
MuniPreferred as to the payment of dividends and the distribution of assets upon
dissolution, liquidation or winding up) in respect of the Common Stock or any
other stock of the Fund ranking junior to or on a parity with the shares of
MuniPreferred as to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption, redeem, purchase
or otherwise acquire for consideration any shares of Common Stock or any other
such junior stock (except by conversion into or exchange for stock of the Fund
ranking junior to the shares of MuniPreferred as to the payment of dividends and
the distribution of assets upon dissolution, liquidation or winding up), or any
such parity stock (except by conversion into or exchange for stock of the Fund
ranking junior to or on a parity with MuniPreferred as to the payment of
dividends and the distribution of assets upon dissolution, liquidation or
winding up), unless (i) full cumulative dividends on shares of each series of
MuniPreferred through its most recently ended Dividend Period shall have been
paid or shall have been declared and sufficient funds for the payment thereof
deposited with the Auction Agent and (ii) the Fund has redeemed the full number
of shares of MuniPreferred required to be redeemed by any provision for
mandatory redemption pertaining thereto, and (B) the Fund shall not declare, pay
or set apart for payment any dividend or other distribution (other than a
dividend or distribution paid in shares of, or in options, warrants or rights to
subscribe for or purchase, Common Stock or other stock, if any, ranking junior
to shares of MuniPreferred as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up) in respect of Common
Stock or any other stock of the Fund ranking junior to shares of MuniPreferred
as to the payment of dividends or the distribution of assets upon dissolution,
liquidation or winding up, or call for redemption, redeem, purchase or otherwise
acquire for consideration any shares of Common Stock or any other such junior
stock (except by conversion into or exchange for stock of the Fund ranking
junior to shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), unless
immediately after such transaction the Discounted Value of Moody's Eligible
Assets (if Moody's is then rating the shares of MuniPreferred) and S&P Eligible
Assets (if S&P is then rating the shares of MuniPreferred) would each at least
equal the MuniPreferred Basic Maintenance Amount.
10. RATING AGENCY RESTRICTIONS.
For so long as any shares of MuniPreferred are outstanding and Moody's
or S&P, or both, are rating such shares, the Fund will not, unless it has
received written confirmation from Moody's or S&P, or both, as appropriate, that
any such action would not impair the ratings then assigned by such rating agency
to such shares, engage in any one or more of the following transactions:
(a) buy or sell futures or write put or call options;
(b) borrow money, except that the Fund may, without obtaining
the written confirmation described above, borrow money for the purpose of
clearing securities transactions if (i) the MuniPreferred Basic 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;
24
<PAGE> 30
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred
to in the definition of Market Value; or
(h) enter into reverse repurchase agreements.
11. REDEMPTION.
(a) OPTIONAL REDEMPTION. (i) Subject to the provisions
of subparagraph (v) of this paragraph (a), shares of MuniPreferred of
any series may be redeemed, at the option of the Fund, as a whole or
from time to time in part, on the second Business Day preceding any
Dividend Payment Date for shares of such series, out of funds legally
available therefor, at a redemption price per share equal to the sum of
$25,000 plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to (but not including) the
date fixed for redemption; PROVIDED, HOWEVER, that (1) shares of a
series of MuniPreferred may not be redeemed in part if after such
partial redemption fewer than 500 shares of such series remain
outstanding; (2) unless otherwise provided in Section 11 of APPENDIX A
hereto, shares of a series of MuniPreferred are redeemable by the Fund
during the Initial Rate Period thereof only on the second Business Day
next preceding the last Dividend Payment Date for such Initial Rate
Period; and (3) subject to subparagraph (ii) of this paragraph (a), the
Notice of Special Rate Period relating to a Special Rate Period of
shares of a series of MuniPreferred, as delivered to the Auction Agent
and filed with the Secretary of the Fund, may provide that shares of
such series shall not be redeemable during the whole or any part of
such Special Rate Period (except as provided in subparagraph (iv) of
this paragraph (a)) or shall be redeemable during the whole or any part
of such Special Rate Period only upon payment of such redemption
premium or premiums as shall be specified therein ("Special Redemption
Provisions").
(ii) A Notice of Special Rate Period relating to shares
of a series of MuniPreferred for a Special Rate Period thereof may
contain Special Redemption Provisions only if the Fund's Board of
Directors, after consultation with the Broker-Dealer or Broker-Dealers
for such Special Rate Period of shares of such series, determines that
such Special Redemption Provisions are in the best interest of the
Fund.
(iii) If fewer than all of the outstanding shares of a
series of MuniPreferred are to be redeemed pursuant to subparagraph (i)
of this paragraph (a), the number of shares of such series to be
redeemed shall be determined by the Board of Directors, and such shares
shall be redeemed pro rata from the Holders of shares of such series in
proportion to the number of shares of such series held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of
this paragraph (a), shares of any series of MuniPreferred may be
redeemed, at the option of the Fund, as a whole but not in part, out of
funds legally available therefor, on the first day following any
Dividend Period thereof included in a Rate Period consisting of more
than 364 Rate Period Days if, on the date of determination of the
Applicable Rate for shares of such series for such Rate Period, such
Applicable Rate equalled or exceeded on such date of determination the
Treasury Note Rate for such Rate Period, at a redemption price per
share equal to the sum of $25,000 plus an amount equal to accumulated
but unpaid dividends thereon (whether or not earned or declared) to
(but not including) the date fixed for redemption.
(v) The Fund may not on any date mail a Notice of
Redemption pursuant to paragraph (c) of this Section 11 in respect of a
redemption contemplated to be effected pursuant to this paragraph (a)
unless on such date (a) the Fund has available Deposit Securities with
maturity or tender dates not later than the day preceding the
applicable redemption date and having a value not less than the amount
25
<PAGE> 31
(including any applicable premium) due to Holders of shares of
MuniPreferred by reason of the redemption of such shares on such
redemption date and (b) the Discounted Value of Moody's Eligible Assets
(if Moody's is then rating the shares of MuniPreferred) and the
Discounted Value of S&P Eligible Assets (if S&P is then rating the
shares of MuniPreferred) each at least equal the MuniPreferred Basic
Maintenance Amount, and would at least equal the MuniPreferred Basic
Maintenance Amount immediately subsequent to such redemption if such
redemption were to occur on such date. For purposes of determining in
clause (b) of the preceding sentence whether the Discounted Value of
Moody's Eligible Assets at least equals the MuniPreferred Basic
Maintenance Amount, the Moody's Discount Factors applicable to Moody's
Eligible Assets shall be determined by reference to the first Exposure
Period longer than the Exposure Period then applicable to the Fund, as
described in the definition of Moody's Discount Factor herein.
(b) MANDATORY REDEMPTION. The Fund shall redeem, at a
redemption price equal to $25,000 per share plus accumulated but unpaid
dividends thereon (whether or not earned or declared) to (but not including) the
date fixed by the Board of Directors for redemption, certain of the shares of
MuniPreferred, if the Fund fails to have either Moody's Eligible Assets with a
Discounted Value or S&P Eligible Assets with a Discounted Value greater than or
equal to the MuniPreferred Basic Maintenance Amount or fails to maintain the
1940 Act MuniPreferred Asset Coverage, in accordance with the requirements of
the rating agency or agencies then rating the shares of MuniPreferred, and such
failure is not cured on or before the MuniPreferred Basic Maintenance Cure Date
or the 1940 Act Cure Date, as the case may be. The number of shares of
MuniPreferred to be redeemed shall be equal to the lesser of (i) the minimum
number of shares of MuniPreferred, together with all shares of other Preferred
Stock subject to redemption or retirement, the redemption of which, if deemed to
have occurred immediately prior to the opening of business on the Cure Date,
would have resulted in the Fund's having both Moody's Eligible Assets with a
Discounted Value and S&P Eligible Assets with a Discounted Value greater than or
equal to the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act
MuniPreferred Asset Coverage, as the case may be, on such Cure Date (PROVIDED,
HOWEVER, that if there is no such minimum number of shares of MuniPreferred and
shares of other Preferred Stock the redemption or retirement of which would have
had such result, all shares of MuniPreferred and Preferred Stock then
outstanding shall be redeemed), and (ii) the maximum number of shares of
MuniPreferred, together with all shares of other Preferred Stock subject to
redemption or retirement, that can be redeemed out of funds expected to be
legally available therefor. In determining the shares of MuniPreferred required
to be redeemed in accordance with the foregoing, the Fund shall allocate the
number required to be redeemed to satisfy the MuniPreferred Basic Maintenance
Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro
rata among shares of MuniPreferred and other Preferred Stock (and, then, pro
rata among each series of MuniPreferred) subject to redemption or retirement.
The Fund shall effect such redemption on the date fixed by the Fund therefor,
which date shall not be earlier than 20 days nor later than 40 days after such
Cure Date, except that if the Fund does not have funds legally available for the
redemption of all of the required number of shares of MuniPreferred and shares
of other Preferred Stock which are subject to redemption or retirement or the
Fund otherwise is unable to effect such redemption on or prior to 40 days after
such Cure Date, the Fund shall redeem those shares of MuniPreferred and shares
of other Preferred Stock which it was unable to redeem on the earliest
practicable date on which it is able to effect such redemption. If fewer than
all of the outstanding shares of a series of MuniPreferred are to be redeemed
pursuant to this paragraph (b), the number of shares of such series to be
redeemed shall be redeemed pro rata from the Holders of shares of such series in
proportion to the number of shares of such series held by such Holders.
(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
26
<PAGE> 32
shares of a series of MuniPreferred held by any Holder are to be redeemed, the
Notice of Redemption mailed to such Holder shall also specify the number of
shares of such series to be redeemed from such Holder. The Fund may provide in
any Notice of Redemption relating to a redemption contemplated to be effected
pursuant to paragraph (a) of this Section 11 that such redemption is subject to
one or more conditions precedent and that the Fund shall not be required to
effect such redemption unless each such condition shall have been satisfied at
the time or times and in the manner specified in such Notice of Redemption.
(d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding
the provisions of paragraphs (a) or (b) of this Section 11, if any dividends on
shares of a series of MuniPreferred (whether or not earned or declared) are in
arrears, no shares of such series shall be redeemed unless all outstanding
shares of such series are simultaneously redeemed, and the Fund shall not
purchase or otherwise acquire any shares of such series; PROVIDED, HOWEVER, that
the foregoing shall not prevent the purchase or acquisition of all outstanding
shares of such series pursuant to the successful completion of an otherwise
lawful purchase or exchange offer made on the same terms to, and accepted by,
Holders of all outstanding shares of such series.
(e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent
that any redemption for which Notice of Redemption has been mailed is not made
by reason of the absence of legally available funds therefor, such redemption
shall be made as soon as practicable to the extent such funds become available.
Failure to redeem shares of MuniPreferred shall be deemed to exist at any time
after the date specified for redemption in a Notice of Redemption when the Fund
shall have failed, for any reason whatsoever, to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares for which such
Notice of Redemption has been mailed; PROVIDED, HOWEVER, that the foregoing
shall not apply in the case of the Fund's failure to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares where (1) the
Notice of Redemption relating to such redemption provided that such redemption
was subject to one or more conditions precedent and (2) any such condition
precedent shall not have been satisfied at the time or times and in the manner
specified in such Notice of Redemption. Notwithstanding the fact that the Fund
may not have redeemed shares of MuniPreferred for which a Notice of Redemption
has been mailed, dividends may be declared and paid on shares of MuniPreferred
and shall include those shares of MuniPreferred for which a Notice of Redemption
has been mailed.
(f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY FUND.
All moneys paid to the Auction Agent for payment of the Redemption Price of
shares of MuniPreferred called for redemption shall be held in trust by the
Auction Agent for the benefit of Holders of shares so to be redeemed.
(g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE
NO LONGER OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant
to paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on
the Business Day next preceding the date fixed for redemption thereby, in funds
available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such
notice, dividends on such shares shall cease to accumulate and such shares shall
no longer be deemed to be outstanding for any purpose, and all rights of the
Holders of the shares so called for redemption shall cease and terminate, except
the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i)
of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in
accordance 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.
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<PAGE> 33
(h) COMPLIANCE WITH APPLICABLE LAW. In effecting any
redemption pursuant to this Section 11, the Fund shall use its best efforts to
comply with all applicable conditions precedent to effecting such redemption
under the 1940 Act and Minnesota law, but shall effect no redemption except in
accordance with the 1940 Act and Minnesota law.
(i) ONLY WHOLE SHARES OF MUNIPREFERRED MAY BE REDEEMED. In the
case of any redemption pursuant to this Section 11, only whole shares of
MuniPreferred shall be redeemed, and in the event that any provision of the
Articles would require redemption of a fractional share, the Auction Agent shall
be authorized to round up so that only whole shares are redeemed.
12. LIQUIDATION RIGHTS.
(a) RANKING. The shares of a series of MuniPreferred shall
rank on a parity with each other, with shares of any other series of
MuniPreferred and with shares of any other series of Preferred Stock as to the
distribution of assets upon dissolution, liquidation or winding up of the
affairs of the Fund.
(b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution,
liquidation or winding up of the affairs of the Fund, whether voluntary or
involuntary, the Holders of shares of MuniPreferred then outstanding shall be
entitled to receive and to be paid out of the assets of the Fund available for
distribution to its shareholders, before any payment or distribution shall be
made on the Common Stock or on any other class of stock of the Fund ranking
junior to the MuniPreferred upon dissolution, liquidation or winding up, an
amount equal to the Liquidation Preference with respect to such shares plus an
amount equal to all dividends thereon (whether or not earned or declared)
accumulated but unpaid to (but not including) the date of final distribution in
same-day funds, together with any payments required to be made pursuant to
Section 3 of this Part I in connection with the liquidation of the Fund. After
the payment to the Holders of the shares of MuniPreferred of the full
preferential amounts provided for in this paragraph (b), the Holders of
MuniPreferred as such shall have no right or claim to any of the remaining
assets of the Fund.
(c) PRO RATA DISTRIBUTIONS. In the event the assets of the
Fund available for distribution to the Holders of shares of MuniPreferred upon
any dissolution, liquidation, or winding up of the affairs of the Fund, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such Holders are entitled pursuant to paragraph (b) of this Section 12, no
such distribution shall be made on account of any shares of any other class or
series of Preferred Stock ranking on a parity with the shares of MuniPreferred
with respect to the distribution of assets upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on account of
the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled
upon such dissolution, liquidation or winding up.
(d) RIGHTS OF JUNIOR STOCK. Subject to the rights of the
holders of shares of any series or class or classes of stock ranking on a parity
with the shares of MuniPreferred with respect to the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Fund, after payment
shall have been made in full to the Holders of the shares of MuniPreferred as
provided in paragraph (b) of this Section 12, but not prior 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.
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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.
(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
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<PAGE> 35
series for the next succeeding Rate Period of shares of such
series shall be less than the rate per annum specified by such
Beneficial Owner; and/or
(C) the number of Outstanding shares, if any,
of such series held by such Beneficial Owner which such
Beneficial Owner offers to sell without regard to the
Applicable Rate for shares of such series for the next
succeeding Rate Period of shares of such series;
and
(ii) one or more Broker-Dealers, using lists of
Potential Beneficial Owners, shall in good faith for the purpose of
conducting a competitive Auction in a commercially reasonable manner,
contact Potential Beneficial Owners (by telephone or otherwise),
including Persons that are not Beneficial Owners, on such lists to
determine the number of shares, if any, of such series which each such
Potential Beneficial Owner offers to purchase if the Applicable Rate
for shares of such series for the next succeeding Rate Period of shares
of such series shall not be less than the rate per annum specified by
such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or
Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to
the Auction Agent, of information referred to in clause (i)(A), (i)(B),
(i)(C) or (ii) of this paragraph (a) is hereinafter referred to as an
"Order" and collectively as "Orders" and each Beneficial Owner and each
Potential Beneficial Owner placing an Order with a Broker-Dealer, and
such Broker-Dealer placing an Order with the Auction Agent, is
hereinafter referred to as a "Bidder" and collectively as "Bidders"; an
Order containing the information referred to in clause (i)(A) of this
paragraph (a) is hereinafter referred to as a "Hold Order" and
collectively as "Hold Orders"; an Order containing the information
referred to in clause (i)(B) or (ii) of this paragraph (a) is
hereinafter referred to as a "Bid" and collectively as "Bids"; and an
Order containing the information referred to in clause (i)(C) of this
paragraph (a) is hereinafter referred to as a "Sell Order" and
collectively as "Sell Orders."
(b) (i) A Bid by a Beneficial Owner or an Existing
Holder of shares of a series of MuniPreferred subject to an Auction on
any Auction Date shall constitute an irrevocable offer to sell:
(A) the number of Outstanding shares of such
series specified in such Bid if the Applicable Rate for shares
of such series determined on such Auction Date shall be less
than the rate specified therein;
(B) such number or a lesser number of
Outstanding shares of such series to be determined as set
forth in clause (iv) of paragraph (a) of Section 4 of this
Part II if the Applicable Rate for shares of such series
determined on such Auction Date shall be equal to the rate
specified therein; or
(C) the number of Outstanding shares of such
series specified in such Bid if the rate specified therein
shall be higher than the Maximum Rate for shares of such
series, or such number or a lesser number of Outstanding
shares of such series to be determined as set forth in clause
(iii) of paragraph (b) of Section 4 of this Part II if the
rate specified therein shall be higher than the 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
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<PAGE> 36
(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 Holder or a
Potential Holder of shares of a series of MuniPreferred subject to an
Auction on any Auction Date shall constitute an irrevocable offer to
purchase:
(A) the number of Outstanding shares of such
series specified in such Bid if the Applicable Rate for shares
of such series determined on such Auction Date shall be higher
than the rate specified therein; or
(B) such number or a lesser number of
Outstanding shares of such series as set forth in clause (v)
of paragraph (a) of Section 4 of this Part II if the
Applicable Rate for shares of such series determined on such
Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred
other than whole shares shall be valid.
2. SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT. (a)
Each Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date all Orders for shares of MuniPreferred
of a series subject to an Auction on such Auction Date obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Fund) as an
Existing Holder in respect of shares subject to Orders submitted or deemed
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order
(which shall be the Broker-Dealer unless otherwise permitted by the
Fund);
(ii) the aggregate number of shares of such
series that are the subject of such Order;
(iii) to the extent that such Bidder is an Existing
Holder of shares of such series:
(A) the number of shares, if any, of such
series subject to any Hold Order of such Existing Holder;
(B) the number of shares, if any, of such
series subject to any Bid of such Existing Holder and the rate
specified in such Bid; and
(C) the number of shares, if any, of such
series subject to any Sell Order of such Existing Holder; and
(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> 37
(c) If an Order or Orders covering all of the Outstanding
shares of MuniPreferred of a series held by any Existing Holder is not submitted
to the Auction Agent prior to the Submission Deadline, the Auction Agent shall
deem a Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; PROVIDED,
HOWEVER, that if an Order or Orders covering all of the Outstanding shares of
such series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Rate
Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem
a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.
(d) If one or more Orders of an Existing Holder is
submitted to the Auction Agent covering in the aggregate more than the number of
Outstanding shares of MuniPreferred of a series subject to an Auction held by
such Existing Holder, such Orders shall be considered valid in the following
order of priority:
(i) all Hold Orders for shares of such series
shall be considered valid, but only up to and including in the
aggregate the number of Outstanding shares of such series held by such
Existing Holder, and if the number of shares of such series subject to
such Hold Orders exceeds the number of Outstanding shares of such
series held by such Existing Holder, the number of shares subject to
each such Hold Order shall be reduced pro rata to cover the number of
Outstanding shares of such series held by such Existing Holder;
(ii) (A) any Bid for shares of such series shall be
considered valid up to and including the excess of the number
of Outstanding shares of such series held by such Existing
Holder over the number of shares of such series subject to any
Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one
Bid of an Existing Holder for shares of such series is
submitted to the Auction Agent with the same rate and the
number of Outstanding shares of such series subject to such
Bids is greater than such excess, such Bids shall be
considered valid up to and including the amount of such
excess, and the number of shares of such series subject to
each Bid with the same rate shall be reduced pro rata to cover
the number of shares of such series equal to such excess;
(C) subject to subclauses (A) and (B), if more
than one Bid of an Existing Holder for shares of such series
is submitted to the Auction Agent with different rates, such
Bids shall be considered valid in the ascending order of their
respective rates up to and including the amount of such
excess; and
(D) in any such event, the number, if any, of
such Outstanding shares of such series subject to any portion
of Bids considered not valid in whole or in part under this
clause (ii) shall be treated as the subject of a Bid for
shares of such series by or on behalf of a Potential Holder at
the rate therein specified; and
(iii) all Sell Orders for shares of such series
shall be considered valid up to and including the excess of the number
of Outstanding shares of such series held by such Existing Holder over
the sum of shares of such series subject to valid Hold Orders referred
to in clause (i) above and valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a
series of MuniPreferred is submitted to the Auction Agent by or on behalf of any
Potential Holder, each such Bid submitted shall be a separate Bid with the rate
and number of shares therein specified.
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<PAGE> 38
(f) Any Order submitted by a Beneficial Owner or a
Potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the
Auction Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.
3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE
AND APPLICABLE RATE. (a) Not earlier than the Submission Deadline on each
Auction Date for shares of a series of MuniPreferred, the Auction Agent shall
assemble all valid Orders submitted or deemed submitted to it by the
Broker-Dealers in respect of shares of such series (each such Order as submitted
or deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell
Order," as the case may be, or as a "Submitted Order" and collectively as
"Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the
case may be, or as "Submitted Orders") and shall determine for such series:
(i) the excess of the number of Outstanding shares
of such series over the number of Outstanding shares of such series
subject to Submitted Hold Orders (such excess being hereinafter
referred to as the "Available MuniPreferred" of such series);
(ii) from the Submitted Orders for shares of such
series whether:
(A) the number of Outstanding shares of such
series subject to Submitted Bids of Potential Holders
specifying one or more rates equal to or lower than the
Maximum Rate for shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such
series subject to Submitted Bids of Existing Holders
specifying one or more rates higher than the Maximum Rate for
shares of such series; and
(C) the number of Outstanding shares of such
series subject to Submitted Sell Orders
(in the event such excess or such equality exists (other than because
the number of shares of such series in subclauses (B) and (C) above is
zero because all of the Outstanding shares of such series are subject
to Submitted Hold Orders), such Submitted Bids in subclause (A) above
being hereinafter referred to collectively as "Sufficient Clearing
Bids" for shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such
series exist, the lowest rate specified in such Submitted Bids (the
"Winning Bid Rate" for shares of such series) which if:
(A) (I) each such Submitted Bid of Existing
Holders specifying such lowest rate and (II) all other such
Submitted Bids of Existing Holders specifying lower rates were
rejected, thus entitling such Existing Holders to continue to
hold the shares of such series that are subject to such
Submitted Bids; and
(B) (I) each such Submitted Bid of Potential
Holders specifying such lowest rate and (II) all other such
Submitted Bids of Potential Holders specifying lower rates
were accepted;
would result in such Existing Holders described in subclause (A) above
continuing to hold an aggregate number of Outstanding shares of such
series which, when added to the number of Outstanding shares of such
series to be purchased by such Potential Holders described in subclause
(B) above, would equal not less than the Available MuniPreferred of
such series.
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<PAGE> 39
(b) Promptly after the Auction Agent has made the
determinations pursuant to paragraph (a) of this Section 3, the Auction Agent
shall advise the Fund of the Maximum Rate for shares of the series of
MuniPreferred for which an Auction is being held on the Auction Date and, based
on such determination, the Applicable Rate for shares of such series for the
next succeeding Rate Period thereof as follows:
(i) if Sufficient Clearing Bids for shares of such
series exist, that the Applicable Rate for all shares of such series
for the next succeeding Rate Period thereof shall be equal to the
Winning Bid Rate for shares of such series so determined;
(ii) if Sufficient Clearing Bids for shares of such
series do not exist (other than because all of the Outstanding shares
of such series are subject to Submitted Hold Orders), that the
Applicable Rate for all shares of such series for the next succeeding
Rate Period thereof shall be equal to the Maximum Rate for shares of
such series; or
(iii) if all of the Outstanding shares of such
series are subject to Submitted Hold Orders, that the Applicable Rate
for all shares of such series for the next succeeding Rate Period
thereof shall be as set forth in Section 12 of APPENDIX A hereto.
4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL
ORDERS AND ALLOCATION OF SHARES. Existing Holders shall continue to hold the
shares of MuniPreferred that are subject to Submitted Hold Orders, and, based on
the determinations made pursuant to paragraph (a) of Section 3 of this Part II,
the Submitted Bids and Submitted Sell Orders shall be accepted or rejected by
the Auction Agent and the Auction Agent shall take such other action as set
forth below:
(a) If Sufficient Clearing Bids for shares of a series
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
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<PAGE> 40
shall be the aggregate number of Outstanding shares of MuniPreferred
subject to such Submitted Bids made by all such Existing Holders that
specified a rate equal to the Winning Bid Rate for shares of such
series; and
(v) each Potential Holder's Submitted Bid for
shares of such series specifying a rate that is equal to the Winning
Bid Rate for shares of such series shall be accepted but only in an
amount equal to the number of shares of such series obtained by
multiplying the number of shares in the excess of the Available
MuniPreferred of such series over the number of shares of MuniPreferred
subject to Submitted Bids described in clauses (ii) through (iv) of
this paragraph (a) by a fraction, the numerator of which shall be the
number of Outstanding shares of MuniPreferred subject to such Submitted
Bid and the denominator of which shall be the aggregate number of
Outstanding shares of MuniPreferred subject to such Submitted Bids made
by all such Potential Holders that specified a rate equal to the
Winning Bid Rate for shares of such series.
(b) If Sufficient Clearing Bids for shares of a series of
MuniPreferred have not been made (other than because all of the Outstanding
shares of such series are subject to Submitted Hold Orders), subject to the
provisions of paragraph (d) of this Section 4, Submitted Orders for shares of
such series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids for shares of such series shall be
rejected:
(i) Existing Holders' Submitted Bids for shares of
such series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be rejected, thus
entitling such Existing Holders to continue to hold the shares of
MuniPreferred subject to such Submitted Bids;
(ii) Potential Holders' Submitted Bids for shares
of such series specifying any rate that is equal to or lower than the
Maximum Rate for shares of such series shall be accepted; and
(iii) Each Existing Holder's Submitted Bid for
shares of such series specifying any rate that is higher than the
Maximum Rate for shares of such series and the Submitted Sell Orders
for shares of such series of each Existing Holder shall be accepted,
thus entitling each Existing Holder that submitted or on whose behalf
was submitted any such Submitted Bid or Submitted Sell Order to sell
the shares of such series subject to such Submitted Bid or Submitted
Sell Order, but in both cases only in an amount equal to the number of
shares of such series obtained by multiplying the number of shares of
such series subject to Submitted Bids described in clause (ii) of this
paragraph (b) by a fraction, the numerator of which shall be the number
of Outstanding shares of such series held by such Existing Holder
subject to such Submitted Bid or Submitted Sell Order and the
denominator of which shall be the aggregate number of Outstanding
shares of such series subject to all such Submitted Bids and Submitted
Sell Orders.
(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.
35
<PAGE> 41
(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 Broker-Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of
shares of MuniPreferred believed by it to be interested in submitting an Order
in the Auction to be held on such Auction Date.
6. AUCTION AGENT. For so long as any shares of MuniPreferred are
outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Fund and its affiliates (which however, may engage or have
engaged in business transactions with the Fund or its affiliates) and at no time
shall the Fund or any of its affiliates act as the Auction Agent in connection
with the Auction Procedures. If the Auction Agent resigns or for any reason its
appointment is terminated during any period that any shares of MuniPreferred are
outstanding, the Board of Directors shall use its best efforts promptly
thereafter to appoint another qualified commercial bank, trust company or
financial institution to act as the Auction Agent.
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 and 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 of 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.
36
<PAGE> 42
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 and attested by its Assistant Secretary, and the said officers of the
Fund further acknowledged said instrument to be the corporate act of the Fund,
and stated under penalty of perjury that to the best of their knowledge,
information and belief the matters and facts therein set forth with respect to
approval are true in all material respects, all on September 6, 1994.
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
By __________________________________________
James J. Wesolowski
Vice President and Secretary
ATTEST:
_________________________________
Morrison C. Warren
Assistant Secretary
37
<PAGE> 43
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC.
APPENDIX A
SECTION 1. DESIGNATION AS TO SERIES.
Section 1. Designation As To Series.
Series M: A series of 2,200 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series M." Each share of Series M
MuniPreferred shall be issued on September 8, 1994 (the "Effective Time"); have
an Applicable Rate for its Initial Rate Period equal to 3.85% per annum; have
Dividend Payment Dates in respect of its Initial Rate Period on the first
Business Day of each month, commencing with the month following the month in
which the Effective Time occurs, with a final Dividend Payment Date in respect
of such Initial Rate Period on February 28, 1995; and have such other
preferences, limitations and relative voting rights, in addition to those
required by applicable law or set forth in the Articles applicable to Preferred
Stock of the Fund, as set forth in Part I and Part II of this Statement. The
Series M MuniPreferred shall constitute a separate series of Preferred Stock of
the Fund, and each share of Series M MuniPreferred shall be identical except as
provided in Section 11 of Part I of this Statement.
Series T2: A series of 1,328 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 T2." Each share of Series T2
MuniPreferred shall be issued on the Effective Time; have an Applicable Rate for
its Initial Rate Period equal to 3.2% per annum; have an initial Dividend
Payment Date of the Wednesday following the Effective Time, except as otherwise
provided in Section 9 of Appendix A; 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 T2
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund,
and each share of Series T2 MuniPreferred shall be identical except as provided
in Section 11 of Part I of this Statement,
Series W: A series of 1,680 shares of Preferred Stock, par value $.01 per
share, liquidation preference $25,000 per share, is hereby designated "Municipal
Auction Rate Cumulative Preferred Stock, Series W." Each share of Series W
MuniPreferred shall be issued on the Effective Time; have an Applicable Rate for
its Initial Rate Period equal to 2.90% per annum; have an initial Dividend
Payment Date of the Thursday following the Effective Time, except as otherwise
provided in Section 9 of Appendix A; and have such other preferences,
limitations and relative voting rights, in addition to those required by
applicable law or set forth in the Articles applicable to Preferred Stock of the
Fund, as set forth in Part I and Part II of this Statement. The Series W
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund,
and each share of Series W MuniPreferred shall be identical except as provided
in Section 11 of Part I of this Statement.
Series F2. A series of 1,328 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 F2." Each share of Series F2
MuniPreferred shall be issued on the Effective Time; have an Applicable Rate for
its Initial Rate Period equal to 2.95% per annum; have an initial Dividend
Payment Date of the Monday following the Effective Time, except as otherwise
provided in Section 9 of Appendix A; 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 F2
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund,
and each share of Series F2 MuniPreferred shall be identical except as provided
in Section II of Part I of this Statement.
SECTION 2. NUMBER OF AUTHORIZED SHARES PER SERIES.
The number of authorized shares constituting Series M MuniPreferred is
2,200, Series T2 MuniPreferred is 1,328, Series W MuniPreferred is 1,680 and
Series F2 MuniPreferred is 1,328.
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 by S&P but have
been determined to be legally defeased by Moody's or (iv) have been
determined to be economically defeased by Moody's and assigned a rating
no lower than the rating that is Moody's equivalent of S&P's AAA
rating.
"GROSS-UP PAYMENT" means payment to a Holder of shares of
MuniPreferred of an amount which, when taken together with the
aggregate amount of Taxable Allocations made to such Holder to which
such Gross-up Payment relates, would cause such Holder's dividends in
dollars (after Federal income tax consequences) from the aggregate of
such Taxable Allocations and the related Gross-up Payment to be equal
to the dollar amount of the dividends which would have been received by
such Holder if the amount of such aggregate Taxable Allocations would
have been excludable from the gross income of such Holder. Such
Gross-up Payment shall be calculated (i) without consideration being
given to the time value of money; (ii) assuming that no Holder of
shares of MuniPreferred is subject to the Federal alternative minimum
tax with respect to dividends received from the Fund; and (iii)
assuming that each Taxable Allocation and each Gross-up Payment (except
to the extent such Gross-up Payment is designated as an exempt-interest
dividend under Section 852(b)(5) of the Code or successor provisions)
would be taxable in the hands of each Holder of
A-1
<PAGE> 44
shares of MuniPreferred at the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or net capital
gains, as applicable, or the maximum marginal regular Federal corporate
income tax rate applicable to ordinary income or net capital gains, as
applicable, whichever is greater, in effect at the time such Gross-up
Payment is made.
"MOODY'S DISCOUNT FACTOR" shall mean, for purposes of
determining the Discounted Value of any Moody's Eligible Asset, the
percentage determined by reference to the rating on such asset and the
shortest Exposure Period set forth opposite such rating that is the
same length as or is longer than the Moody's Exposure Period, in
accordance with the table set forth below:
<TABLE>
<CAPTION>
RATING CATEGORY
-----------------------------------------------------------------
EXPOSURE PERIOD Aaa* Aa* A* Baa* OTHER** (V)MIG-1*** SP-1+***
--------------- ---- --- -- ---- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
7 weeks....................................... 151% 159% 168% 202% 229% 136% 148%
8 weeks or less but greater than seven weeks.. 154 164 173 205 235 137 149
9 weeks or less but greater than eight weeks.. 158 169 179 209 242 138 150
</TABLE>
- -----------------------
* Moody's rating.
** Municipal Obligations not rated by Moody's but rated BBB by S&P.
*** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's,
rated SP-1+ by S&P, which do not mature or have a demand feature at par
exercisable in 30 days and which do not have a long-term rating.
Notwithstanding the foregoing, (i) the Moody's Discount Factor
for short-term Municipal Obligations will be 115%, so long as such
Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by
Moody's and mature or have a demand feature at par exercisable in 30
days or less or 125% as long as such Municipal Obligations are rated at
least A-1+/AA or SP-1+/AA by S&P and mature or have a demand feature at
par exercisable in 30 days or less and (ii) no Moody's Discount Factor
will be applied to cash or to Receivables for Municipal Obligations
Sold.
"MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for
Municipal Obligations Sold or a Municipal Obligation that (i) pays
interest in cash, (ii) is publicly rated Baa or higher by Moody's or,
if not rated by Moody's but rated by S&P, is rated at least BBB by S&P
(PROVIDED, HOWEVER, that for purposes of determining the Moody's
Discount Factor applicable 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
A-2
<PAGE> 45
Municipal Obligations issued by issuers located within the same state
or territory and rated A by Moody's or AA by S&P, may comprise no more
than 40% of total Moody's Eligible Assets; and such BBB, Baa, A and
AA-rated Municipal Obligations, if any, together with any Municipal
Obligations issued by issuers located within the same state or
territory and rated Aa by Moody's or AAA by S&P, may comprise no more
than 60% of total Moody's Eligible Assets. For purposes of applying the
foregoing requirements, a Municipal Obligation shall be deemed to be
rated BBB by S&P if rated BBB-, BBB or BBB+ by S&P, Moody's Eligible
Assets shall be calculated without including cash, and Municipal
Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by Moody's,
rated A-1+/AA or SP-1+/AA by S&P, shall be considered to have a
long-term rating of A. When the Fund sells a Municipal Obligation and
agrees to repurchase such Municipal Obligation at a future date, such
Municipal Obligation shall be valued at its Discounted Value for
purposes of determining Moody's Eligible Assets, and the amount of the
repurchase price of such Municipal Obligation shall be included as a
liability for purposes of calculating the MuniPreferred Basic
Maintenance Amount. When the Fund purchases a Moody's Eligible Asset
and agrees to sell it at a future date, such Eligible Asset shall be
valued at the amount of cash to be received by the Fund upon such
future date, provided that the counterparty to the transaction has a
long-term debt rating of at least A2 from Moody's and the transaction
has a term of no more than 30 days, otherwise such Eligible Asset shall
be valued at the Discounted Value of such Eligible Asset.
Notwithstanding the foregoing, an asset will not be considered
a Moody's Eligible Asset to the extent it is (i) subject to any
material lien, mortgage, pledge, security interest or security
agreement of any kind (collectively, "Liens"), except for (a) Liens
which are being contested in good faith by appropriate proceedings and
which Moody's has indicated to the Fund will not affect the status of
such asset as a Moody's Eligible Asset, (b) Liens for taxes that are
not then due and payable or that can be paid thereafter without
penalty, (c) Liens to secure payment for services rendered or cash
advanced to the Fund by Nuveen Advisory Corp., United States Trust
Company of New York or the Auction Agent and (d) Liens by virtue of any
repurchase agreement; or (ii) deposited irrevocably for the payment of
any liabilities for purposes of determining the MuniPreferred Basic
Maintenance Amount.
"RATE MULTIPLE," for shares of a series of MuniPreferred on
any Auction Date for shares of such series, shall mean the percentage,
determined as set forth below, based on the prevailing rating of shares
of such series in effect at the close of business on the Business Day
next preceding such Auction Date:
PREVAILING RATING PERCENTAGE
----------------- ----------
"aa3"/AA- or higher................... 110%
"a3"/A-............................... 125%
"baa3"/BBB-........................... 150%
"ba3"/BB-............................. 200%
Below "ba3"/BB-....................... 250%
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
A-3
<PAGE> 46
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:
<TABLE>
<CAPTION>
RATING CATEGORY
-----------------------------------
EXPOSURE PERIOD AAA* AA* A* BBB*
--------------- ---- --- -- ----
<S> <C> <C> <C> <C>
40 Business Days.............................. 190% 195% 210% 250%
22 Business Days.............................. 170 175 190 230
10 Business Days.............................. 155 160 175 215
7 Business Days.............................. 150 155 170 210
3 Business Days.............................. 130 135 150 190
---------------
*S&P rating.
</TABLE>
Notwithstanding the foregoing, (i) the S&P Discount Factor for
short-term Municipal Obligations will be 115%, so long as such
Municipal Obligations are rated A-1+ or SP-1+ by S&P and mature or have
a demand feature exercisable within 30 days or less, or 125% if such
Municipal Obligations are not rated by S&P but are rated VMIG-1, P-1 or
MIG-1 by Moody's; PROVIDED, HOWEVER, that any such Moody's-rated
short-term Municipal Obligations which have demand features exercisable
within 30 days or less must be backed by a letter of credit, liquidity
facility or guarantee from a bank or other financial institution with a
short-term rating of at least A-1+ from S&P; and FURTHER PROVIDED that
such Moody's-rated short-term Municipal Obligations may comprise no
more than 50% of short-term Municipal Obligations that qualify as S&P
Eligible Assets and (ii) no S&P Discount Factor will be applied to cash
or to Receivables for Municipal Obligations Sold and (iii) except as
set forth in clause (i) above, in the case of any Municipal Obligation
that is not rated by S&P but qualifies as an S&P Eligible Asset
pursuant to clause (iii) of that definition, such Municipal Obligation
will be deemed to have an S&P rating one full rating category lower
than the S&P rating category that is the equivalent of the rating
category in which such Municipal Obligation is placed by Moody's. For
purposes of the foregoing, Anticipation Notes rated SP-1+ or, if not
rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or
have a demand feature at par exercisable in 30 days and which do not
have a long-term rating, shall be considered to be short-term Municipal
Obligations.
"S&P ELIGIBLE ASSET" shall mean cash (excluding any cash
irrevocably deposited by the Fund for the payment of any liabilities
within the meaning of MuniPreferred Basic Maintenance Amount),
Receivables for Municipal Obligations Sold or a Municipal Obligation
owned by the Fund that (i) is interest bearing and pays interest at
least semi-annually; (ii) is payable with respect to principal and
interest in U.S. Dollars; (iii) is publicly rated BBB or higher by S&P
or, if not rated by S&P but rated by Moody's, is rated at least A by
Moody's; (iv) is not part of a private placement of Municipal
Obligations; and (v) is part of an issue of
A-4
<PAGE> 47
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 PERIODS.
The Initial Rate Period for shares of Series M MuniPreferred shall be
the period from the day immediately following the Effective Time to but
excluding February 28, 1995.
The Initial Rate Period for shares of Series T2 MuniPreferred shall be
the period from the day immediately following the Effective Time to but
excluding September 14, 1994.
The Initial Rate Period for shares of Series W MuniPreferred shall be
the period from the day immediately following the Effective Time to but
excluding September 15, 1994.
The Initial Rate Period for Shares of Series F2 MuniPreferred shall be
the period from the day immediately following the Effective Time to but
excluding September 12, 1994.
SECTION 6. DATE FOR PURPOSES OF PARAGRAPH (yyy) CONTAINED UNDER THE
HEADING "DEFINITIONS" IN THIS STATEMENT.
August 31, 1993
SECTION 7. PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE"
IN THIS STATEMENT.
Party: Series of MuniPreferred:
Smith Barney Inc. Series W and Series F2
Lehman Brothers Inc. Series M and Series T2
A-5
<PAGE> 48
SECTION 8. ADDITIONAL DEFINITIONS.
Not applicable.
SECTION 9. DIVIDEND PAYMENT DATES.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of
this Statement, dividends shall be payable on shares of:
Series M MuniPreferred in respect of the Initial Rate Period thereof,
on the first Business Day of each month, commencing with the month following the
month in which the Effective Time occurs, with a final dividend payment in
respect of such Initial Rate Period on February 28, 1995, and each Tuesday
thereafter,
Series T MuniPreferred on the Wednesday next following the Effective
Time, and on each Wednesday thereafter,
Series W MuniPreferred on the Thursday next following the Effective
Time, and on each Thursday thereafter, and
Series F2 MuniPreferred on the Monday next following the Effective
Time, and on each Monday 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 M MuniPreferred are redeemable during the Initial Rate
Period thereof only on the second Business Day next preceding the last Dividend
Payable 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) (I) the "AA" Composite Commercial Paper Rate on such Auction Date
for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period
Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if
such Rate Period consists of more than 182 but fewer than 365 Rate Period Days;
or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if
such Rate Period is more than 364 Rate Period Days (the rate described in the
foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein
as the "Benchmark Rate") and (B) 1 minus the maximum marginal regular Federal
individual income tax rate applicable to ordinary income or the maximum marginal
regular Federal corporate income tax rate applicable to ordinary income,
whichever is greater; PROVIDED, HOWEVER, that if the Fund has notified the
Auction Agent of its intent to allocate to shares of such series in such Rate
Period any net capital gains or other income taxable for Federal income tax
purposes ("Taxable Income"), the Applicable Rate for shares of such series for
such Rate Period will be (i) if the Taxable Yield Rate (as defined below) is
greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the Taxable
Yield Rate is less than or equal to the Benchmark Rate, then the rate equal to
the sum of (x) the lesser of the Kenny Index (if such Rate Period consists of
fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied
by the factor set forth in the preceding clause (B) and (y) the product of the
maximum marginal regular Federal individual income tax rate applicable to
ordinary income or the maximum marginal regular Federal corporate income tax
applicable to ordinary income, whichever is greater, multiplied by the Taxable
Yield Rate. For purposes of the foregoing, Taxable Yield Rate means the rate
determined by (a) dividing the amount of Taxable Income available for
distribution per such share of MuniPreferred by the number of days in the
Dividend Period in respect of which such Taxable Income is contemplated to be
distributed, (b) multiplying the amount determined in (a) above by 365 (in the
case of a Dividend Period of 7 Rate Period Days) or 360 (in the case of any
other Dividend Period), and (c) dividing the amount determined in (b) above by
$25,000.
A-6
<PAGE> 1
EXHIBIT 1(d)
ARTICLES OF CORRECTION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
(PURSUANT TO MINNESOTA STATUTES, SECTION 5.16)
In order to correct that Statement Establishing and Fixing the
Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock
("MuniPreferred(R)") of Nuveen Premium Income Municipal Fund 4, Inc., as filed
with the Minnesota Secretary of State on June 1, 1993, the undersigned hereby
makes the following statements:
1. The name of the person who signed and filed the instrument
is James J. Wesolowski, Vice President and Secretary of Nuveen Premium Income
Municipal Fund 4, Inc. (the "Fund"). These Articles of Correction are signed by
such person or by a person authorized to sign on his behalf.
2. The instrument to be corrected is that Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock ("MuniPreferred(R)") of the Fund filed with the
Minnesota Secretary of State on June 1, 1993 (the "Statement").
3. The error to be corrected is the original issuance date of
the three series of Preferred Stock to be created by the Statement.
4. The following portions of the Statement are hereby set
forth in their corrected form as follows:
Appendix A, Section 1, line 3 of the Statement shall read in
its entirety as follows: "Each share of Series T MuniPreferred shall be
issued on June 4, 1993; have an Applicable".
Appendix A, Section 1, line 12 of the Statement shall read in
its entirety as follows: "Each share of Series TH MuniPreferred shall
be issued on June 4, 1993; have an Applicable Rate for its".
<PAGE> 2
Appendix A, Section 1, line 21 of the Statement shall read in
its entirety as follows: "Each share of Series F MuniPreferred shall be
issued on June 4, 1993; have an Applicable Rate for its".
Dated: June 2, 1993.
Nuveen Premium Income Municipal Fund 4, Inc.
--------------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 1(e)
ARTICLES OF CORRECTION
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
(PURSUANT TO MINNESOTA STATUTES, SECTION 5.16)
In order to correct that Statement Establishing and Fixing the
Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock
("MuniPreferred(R)") of Nuveen Premium Income Municipal Fund 4, Inc., as filed
with the Minnesota Secretary of State on June 1, 1993, and as corrected on June
3, 1993, the undersigned hereby makes the following statements:
1. The name of the person who signed and filed the instrument
and the correction is James J. Wesolowski, Vice President and Secretary of
Nuveen Premium Income Municipal Fund 4, Inc. (the "Fund"). These Articles of
Correction are signed by such person or by a person authorized to sign on his
behalf.
2. The instrument to be corrected is that Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction Rate
Cumulative Preferred Stock ("MuniPreferred(R)") of the Fund filed with the
Minnesota Secretary of State on June 1, 1993 and corrected on June 3, 1993 (the
"Statement").
3. The error to be corrected is the par value of the Preferred
Stock, Series TH, to be created by the Statement.
4. The following portion of the Statement is hereby set forth
in its corrected form as follows:
Appendix A, Section 1, Line 10 of the Statement shall read
in its entirety as follows: "SERIES TH: A series of 1,000
shares of Preferred Stock, par value $.01 per share,
liquidation preference"
Dated: December 20, 1993
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
By:
------------------------------------------
Larry W. Martin
Vice President and Assistant Secretary
<PAGE> 1
EXHIBIT 1(f)
ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
1. The name of the corporation is Nuveen Premium Income Municipal Fund 4,
Inc. (the "Company").
2. The amendment adopted is an amendment to the Company's Statement
Establishing and Fixing the Rights and Preferences of Municipal Auction
Rate Cumulative Preferred Stock, Series T, TH and F (the "Statement"),
which is a part of the Company's Articles of Incorporation.
3. Such amendment was adopted by the Board of Directors of the Company on
October 19, 1993, pursuant to Section 302A.402, Subdivision 3 of the
Minnesota Business Corporation Act, and the amendment will not
adversely affect the rights or preferences of the holders of
outstanding shares of any class or series and will not result in the
percentage of authorized shares that remains unissued after the
division or combination exceeding the percentage of authorized shares
that were unissued before the division or combination.
4. Such amendment shall be effective as of the close of business on
January 6, 1994.
5. The following portions of the Statement are hereby set forth in their
amended form as follows:
a. Paragraph FIRST, Line 5 of the Statement shall read in its
entirety as follows: "liquidation preference $25,000 per
share, having such designation or designations as to series as
is set forth in"
b. Definitions, Paragraph (tt) of the Statement shall read in its
entirety as follows: "(tt) "LIQUIDATION PREFERENCE," with
respect to a given number of shares of MuniPreferred, means
$25,000 times that number."
c. Definitions, Paragraph (fff), Line 3 of the Statement shall
read in its entirety as follows: "such date multiplied by
$25,000 (plus the product of the number of shares of any other
series of Preferred"
d. Part I, Section 2, Subparagraph (e)(ii), Line 7 of the
Statement shall read in its entirety as follows: "and applying
the rate obtained against $25,000."
e. Part I, Section 11, Subparagraph (a)(i), Line 4 of the
Statement shall read in its entirety as follows: "of funds
legally available therefor, at a redemption price per share
equal to the sum of $25,000 plus an amount"
f. Part I, Section 11, Subparagraph (a)(i), Line 7 of the
Statement shall read in its entirety as follows: "not be
redeemed in part if after such partial redemption fewer than
500 shares of such series remain"
<PAGE> 2
g. Part I, Section 11, Subparagraph (a)(iv), Line 6 of the
Statement shall read in its entirety as follows: "Treasury
Note Rate for such Rate Period, at a redemption price per
share equal to the sum of $25,000 plus an"
h. Part I, Section 11, Subparagraph (b), Line 1 of the Statement
shall read in its entirety as follows: "(b) MANDATORY
REDEMPTION. The Fund shall redeem, at a redemption price equal
to $25,000 per share"
i. Appendix A, Section 1, Series T, Lines 1 and 2 of the
Statement shall read in their entirety as follows: "SERIES T:
A series of 2,000 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby
designated "Municipal Auction Rate Cumulative Preferred Stock,
Series T.""
j. Appendix A, Section 1, Series TH, Lines 1 and 2 of the
Statement shall read in their entirety as follows: "SERIES
TH:" A series of 2,000 shares of Preferred Stock, par value
$.01 per share, liquidation preference $25,000 per share, is
hereby designated "Municipal Auction Rate Cumulative Preferred
Stock, Series TH.""
k. Appendix A, Section 1, Series F, Lines I and 2 of the
Statement shall read in their entirety as follows: "SERIES F:
A series of 1,800 shares of Preferred Stock, par value $.01
per share, liquidation preference $25,000 per share, is hereby
designated "Municipal Auction Rate Cumulative Preferred Stock,
Series F.""
l. Appendix A, Section 2 of the Statement shall read in its
entirety as follows: "The number of authorized shares
constituting Series T MuniPreferred is 2,000, Series TH
MuniPreferred is 2,000 and
Series F MuniPreferred is 1,800."
m. Appendix A, Section 12, Line 25 of the Statement shall, read
in its entirety as follows: "of any other Dividend Period),
and (c) dividing the amount determined in (b) above by
$25,000."
IN WITNESS WHEREOF, the undersigned, being duly authorized on behalf
of the Company has executed these Articles of Amendment this 3rd day of January,
1994.
NUVEEN PREMIUM INCOME
MUNICIPAL FUND 4, INC
By: /s/ Gifford R. Zimmerman
-----------------------------
Gifford R. Zimmerman,
Vice President and
Assistant Secretary
<PAGE> 1
EXHIBIT 1(g)
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
CERTIFIED COPY OF CORPORATE RESOLUTION
The undersigned, James J. Wesolowski, Secretary of Nuveen Premium Income
Municipal Fund 4, Inc., a Minnesota corporation, (the "Fund") does hereby
certify:
1. That he is the duly elected, qualified and acting Secretary of the
Fund, has custody of the corporate records and is a proper officer to
make this certification.
2. That at a meeting of the Board of Directors of the Fund held on
Wednesday, February 2, 1994, at which a quorum was present and voted
throughout, the following resolution was duly adopted by said Board
and said resolution has not been amended, altered or repealed and
remains in full force and effect on the date hereof:
RESOLVED, that the Statement Establishing and Fixing the Rights
and Preferences of the Fund's Preferred Stock (or Shares
depending on whether the Fund is organized as a corporation or a
business trust) be amended as follows:
The definition of "S&P ELIGIBLE ASSET" shall be amended as
follows:
(i) provide that a Municipal Obligation that is an Escrowed
Bond shall not be subject to the portfolio concentration
limitations on (a) Municipal Obligations of any one issuer
or guarantor and (b) Long-term Municipal Obligations issued
by issuers in any one state or territory;
(ii) provide that Municipal Obligations that are Escrowed
Bonds and not rated by S&P shall be considered S&P Eligible
Assets only to the extent that the Market Value of such
Municipal Obligation, together with all other Municipal
Obligations not rated by S&P, does not exceed 50% of the
aggregate Market Value of S&P Eligible Assets, and that, for
purposes of calculating the S&P Discount Factor, such
Municipal Obligations will be deemed to have an S&P rating
category that is the equivalent of the rating category in
which any such Municipal Obligation is placed by Moody's; and
(iii) provide that an Escrowed Bond is a Municipal
Obligation (i) which has been determined to be legally
defeased in accordance with S&P's legal defeasance criteria,
(ii) has been determined to be economically defeased in
accordance with S&P's economic defeasance criteria and
assigned a rating of AAA by S&P, or (iii) is not rated by
S&P but has been determined to be legally defeased by
Moody's or determined to be economically defeased by Moody's
and is rated by Moody's with the rating that is Moody's
equivalent of S&P's AAA rating.
<PAGE> 2
3. That at a meeting of the Board of Directors of the Fund held on
Tuesday, April 26, 1994, at which a quorum was present and voted
throughout, the following resolution was duly adopted by said Board
and said resolution has not been amended, altered or repealed and
remains in full force and effect on the date hereof:
WHEREAS, Standard & Poor's Corporation ("S&P") has indicated that
it no longer requires leveraged closed-end municipal bond funds
to maintain a minimum liquidity level as a condition to assigning
a AAA rating to preferred shares issued by such funds;
WHEREAS, pursuant to express authority granted in the Statement,
the Board may from time to time, without vote or consent of
shareholders, amend, alter or repeal certain definitions in the
Statement, including the definition of "Minimum Liquidity Level",
provided the Board receives written confirmation from S&P that
such action would not impair the rating then assigned by S&P to
the Fund's shares of MuniPreferred, MMP or MPS, as the case may
be; and
WHEREAS, in light of S&P's elimination of the minimum liquidity
requirement, the Board believes it to be in the best interest of
the Fund to amend the Statement to repeal the definition of
Minimum Liquidity Level;
NOW, THEREFORE, BE IT RESOLVED, that the Fund's Statement be, and
hereby is, amended as follows:
(a) the definition of Minimum Liquidity level shall be, and
hereby is, repealed in its entirety, subject to the Funds's
receipt of the written confirmation from S&P described
above; and
(b) the definitions of "Dividend Coverage Assets",
"Valuation Date" and "Dividend Coverage Amount" shall be, and
hereby are, repealed to the extent such definitions pertain
to the definition of Minimum Liquidity Level", subject to
the Fund's receipt of the written confirmation from S&P
described above.
IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed
this 16th day of June, 1994.
James J. Wesolowski
--------------------------------
James J. Wesolowski, Secretary
<PAGE> 1
EXHIBIT 2(a)
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 Meeting. 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
<PAGE> 2
elect any of the Corporation's directors by class vote of such holders, the
holders of 331/3% 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
<PAGE> 3
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 Meeting. 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
<PAGE> 4
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:
<PAGE> 5
(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
<PAGE> 6
(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.
<PAGE> 7
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
<PAGE> 8
(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
<PAGE> 9
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 (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 6.3 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.
<PAGE> 10
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.
<PAGE> 11
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.
<PAGE> 1
EXHIBIT 2(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, have been amended, by unanimous vote of the Board of Directors at a
meeting duly called, convened and held on October 19, 1993, to read as follows:
RESOLVED, that Section 3.1 of the By-Laws is hereby amended by
striking the sentences that read: "The Board of Directors shall
consist of six persons.", "The Board of Directors shall never be less
than one.", and by inserting in their place the following sentence:
"The number of Directors shall be no greater than twelve and no less
than three, and the Board of Directors, by a vote of a majority of the
entire Board, may increase or decrease the number of Directors fixed
by these By-Laws within the limits specified herein.".
<PAGE> 1
EXHIBIT 2(c)
AMENDMENT TO BY-LAWS
OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
The By-Laws of Nuveen Premium Income Municipal Fund4, 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 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> 1
EXHIBIT 2(d)
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> 1
EXHIBIT 2(e)
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 not 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> 1
Exhibit 5
[FORM OF FACE OF CERTIFICATE]
NUMBER COMMON STOCK
U-______
COMMON STOCK
INCORPORATED UNDER THE LAWS SHARES
OF THE STATE OF MINNESOTA ________
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR
IN NEW YORK CITY CERTAIN DEFINITIONS
CUSIP 6706K4 10 5
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
THIS CERTIFIES THAT _____________________________________________ IS
THE OWNER OF __________________________________________ FULLY PAID AND
NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.01 EACH OF THE COMMON STOCK OF
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC. (herein called the "Corporation")
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized attorney, upon surrender of this Certificate properly
endorsed. This Certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Articles of Incorporation
of the Corporation as amended (a copy of which is on file at the office of the
Transfer Agent), to all of which the holder by acceptance hereof expressly
assents. This Certificate is not valid until countersigned by the Transfer Agent
and registered by the Registrar.
Witness the facsimile signatures of the duly authorized officers of the
Corporation.
Dated ___________________________ Nuveen Premium Income Municipal Fund 4, Inc.
COUNTERSIGNED AND REGISTERED:
UNITED STATES TRUST COMPANY OF NEW YORK
TRANSFER AGENT AND REGISTRAR,
By________________________________
__________________ ________________ _____________________
AUTHORIZED OFFICER SECRETARY CHAIRMAN OF THE BOARD
<PAGE> 2
[FORM OF BACK OF CERTIFICATE]
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
Nuveen Premium Income Municipal Fund 4, Inc. will furnish to any shareholder,
upon request and without charge, a full statement of the designations,
preferences, limitations and relative rights of the shares of each class or
series of capital stock of the Corporation authorized to be issued, so far as
they have been determined, and the authority of the Board of Directors to
determine the relative rights and preferences of subsequent classes or series.
Any such request should be addressed to the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- Custodian
-------------------------------
TEN ENT -- as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
JT TEN -- as joint tenants with right
of survivorship and not as Act
tenants in common ----------------------------
(State)
For Value Received ____________________ hereby sell, assign and transfer unto
</TABLE>
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares of the capital stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ______________________ Attorney to transfer
the said stock on the books of the within-named Corporation, with full power of
substitution in the premises.
Dated _______________
In presence of
___________________________________
__________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 3
CERTIFICATE NUMBER OF
NUMBER SHARES
--------------
- ---------
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
Organized Under the Laws of the State of Minnesota
Municipal Auction Rate Cumulative Preferred Stock, Series
--------
$.01 Par Value Per Share
$ Liquidation Preference Per Share
------
CUSIP NO.
-----------
This Certifies that is the owner of fully paid and
non-assessable shares of Municipal Auction Rate Cumulative Preferred Stock,
Series , $.01 par value per share, $ liquidation preference per share,
of Nuveen Premium Income Municipal Fund 4, Inc. (the "Fund") transferable only
on the books of the Fund by the holder thereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid unless countersigned by the transfer agent and registrar.
A statement in full, of all the designations, preferences, qualifications,
limitations, restrictions and special or relative rights of the shares of each
class authorized to be issued, will be furnished by the Fund to any shareholder
upon request and without charge. The Fund is organized as a Minnesota
corporation.
IN WITNESS WHEREOF, the Fund has caused this Certificate to be signed by its
duly authorized officers this day of , A.D.
BANKERS TRUST COMPANY NUVEEN PREMIUM INCOME MUNICIPAL FUND
As Transfer Agent and Registrar 4, INC.
By: By:
- ---------------------------------- ----------------------------------
Authorized Signature Vice President
Attest:
-------------------------------
Assistant Secretary
<PAGE> 4
FOR VALUE RECEIVED, hereby sell, assign and transfer unto Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint Attorney to transfer the said Shares on the books of the
within named Corporation with full power of substitution in the premises.
Dated
------------,-------
In the presence of
- -------------------------------------
No registration of transfer of shares of Municipal Auction Rate Cumulative
Preferred Stock evidenced by this Certificate shall be made on the books of
the Corporation to any person other than the Securities Depository (as such
term is defined in the Corporation's Articles of Incorporation, including
the Statement establishing the rights and preferences of such Preferred
Stock) or its nominee, nor may the shares of Municipal Auction Rate
Cumulative Preferred Stock evidenced by this Certificate be sold,
transferred, or otherwise disposed of, except as provided in such Articles
of Incorporation. A copy of such Articles of Incorporation may be obtained
by request addressed to the Secretary of the Corporation and may be
examined at the office of the Secretary of State of the State of Minnesota,
as defined in the Articles.
The Corporation will furnish to any shareholder, upon request and without
charge, a full statement of the designations, preferences, limitations and
relative rights of the shares of each class or series of capital stock of
the Corporation authorized to be issued, so far as they have been
determined, and the authority of the Board of Directors to determine the
relative rights and preferences of subsequent classes or series. Any such
request should be addressed to the Secretary of the Corporation.
<PAGE> 1
EXHIBIT 6(a)
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> 2
The Adviser accepts such employment and agrees during such period to render such
services, to furnish office facilities and equipment and clerical, bookkeeping
and administrative services (other than such services, if any, provided by the
Fund's transfer agent) for the Fund, to permit any of its officers or employees
to serve without compensation as directors or officers of the Fund if elected to
such positions, and to assume the obligations herein set forth for the
compensation herein provided. The Adviser shall, for all purposes herein
provided, be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for nor
represent the Fund in any way, nor otherwise be deemed an agent of the Fund.
2. For the services and facilities described in Section 1, the Fund will pay to
the Adviser, at the end of each calendar month, an investment management fee
computed at an annual rate of .65% 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.
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3. The Adviser shall arrange for officers or employees of the Adviser to serve,
without compensation from the Fund, as directors, officers or agents of the
Fund, if duly elected or appointed to such positions, and subject to their
individual consent and to any limitations imposed by law.
4. Subject to applicable statutes and regulations, it is understood that
officers, directors, or agents of the Fund are, or may be, interested in the
Adviser as officers, directors, agents, shareholders or otherwise, and that the
officers, directors, shareholders and agents of the Adviser may be interested in
the Fund otherwise than as directors, officers or agents.
5. The Adviser shall not be liable for any loss sustained by reason of the
purchase, sale or retention of any security, whether or not such purchase, sale
or retention shall have been based upon the investigation and research made by
any other individual, firm or corporation, if such recommendation shall have
been selected with due care and in good faith, except loss resulting from
willful misfeasance, bad faith, or gross negligence on the part of the Adviser
in the performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6. The Adviser currently manages other investment accounts and funds, including
those with investment objectives similar to the Fund, and reserves the right to
manage other such accounts and funds in the future. Securities considered as
investments for the Fund may also be appropriate for other investment accounts
and funds that may be managed by the Adviser.
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subject to applicable laws and regulations, the Adviser will attempt to allocate
equitably portfolio transactions among the portfolios of its other investment
accounts and funds purchasing securities whenever decisions are made to purchase
or sell securities by the Fund and one or more of such other accounts or funds
simultaneously. In making such allocations, the main factors to be considered by
the Adviser will be the respective investment objectives of the Fund and such
other accounts and funds, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such other accounts and funds, the size of investment commitments generally held
by the Fund and such accounts and funds, and the opinions of the persons
responsible for recommending investments to the Fund and such other accounts and
funds.
7. This Agreement shall continue in effect until August 1, 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.
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This Agreement may be terminated, at any time, without the payment of any
penalty, by the Board of Directors of the Fund, or by vote of a majority of the
outstanding voting securities of the Fund, in the event that it shall have been
established by a court of competent jurisdiction that the Adviser, or any
officer or director of the Adviser, has taken any action which results in a
breach of the covenants of the Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation, described in Section
2, earned prior to such termination.
8. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule, or otherwise, the remainder shall not be thereby
affected.
9. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for receipt of such notice.
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IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year above written.
NUVEEN 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> 1
EXHIBIT 6(b)
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> 1
EXHIBIT 8
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR
INDEPENDENT DIRECTORS AND TRUSTEES
PREAMBLE
The Board of each Participating Fund hereby establishes this Deferred
Compensation Plan for Independent Directors and Trustees. The purpose of the
Plan is to allow the independent directors and trustees of the Participating
Funds to defer receipt of all, or a portion, of the compensation they earn for
their service to the Participating Funds in lieu of receiving current payments
of such compensation, and to treat any deferred amount as though an equivalent
dollar amount had been invested in shares of one or more Eligible Funds. Each
Board intends that the Plan shall be maintained at all times on an unfunded
basis for federal income tax purposes under the Internal Revenue Code of 1986,
as amended. The Plan is not covered by the Employee Retirement Income Security
Act of 1974, as amended.
SECTION 1 DEFINITIONS OF TERMS AND CONSTRUCTION
1.1 Definitions. The following terms as used in this Plan shall have the
following meanings:
(a) "Administrator" shall mean Nuveen or such other person or persons
as the Boards may from time to time designate, provided that no Eligible
Participant may serve as Administrator.
(b) "Beneficiary" shall mean such person or persons designated
pursuant to Section 4.4 hereof to receive benefits after the death of an
Eligible Participant.
(c) "Board" shall mean the Board of Directors or the Board of Trustees
of the respective Participating Funds.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.
(e) "Compensation" shall mean the retainer and fees paid by
Participating Funds to an Eligible Participant for a Deferral Period prior to
reduction for Deferrals made under this Plan.
(f) "Deferral" shall mean the amount or amounts of an Eligible
Participant's Compensation deferred under the provisions of Section 3 of this
Plan.
(g) "Deferral Account" shall mean the account maintained to reflect an
Eligible Participant's Deferrals made pursuant to Section 3 herein and any other
credits or debits thereto.
(h) "Deferral Election" shall mean the Eligible Participant's election
to defer his or her compensation under Plan Section 3.1(a).
<PAGE> 2
(i) "Deferral Period" shall mean each calendar quarter during which an
Eligible Participant makes, or is entitled to make, Deferrals under Section 3
hereof.
(j) "Eligible Fund" means an open-end fund managed by Nuveen and
designated by the Boards as a fund that may be chosen by an Eligible Participant
as a fund in which the Eligible Participant's Deferral Account may be deemed to
be invested.
(k) "Eligible Participant" shall mean a member of a Board who is not
an "interested person" of a Participating Fund or of Nuveen, as such term is
defined under Section 2(a)(19) of the Investment Company Act of 1940, as amended
("1940 Act").
(l) "Hardship and Unforeseeable Emergency" shall mean a severe
financial hardship to an Eligible Participant resulting from a sudden and
unexpected illness or accident of the Eligible Participant or a dependent
(within the meaning of Section 152(a) of the Code), of the Eligible Participant,
loss of the Eligible Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances, arising from events beyond the
Eligible Participant's control. Whether circumstances constitute a Hardship and
Unforeseeable Emergency depends on the facts of each case, as determined by the
Administrator, but in any case does not include a hardship that may be relieved:
(i) through reimbursement or compensation by insurance or
otherwise;
(ii) by liquidation of the Eligible Participant's assets to the
extent that liquidation itself would not cause such a
severe financial hardship; or
(iii) by ceasing to defer receipt of any Compensation not yet
earned.
The term "Hardship and Unforeseeable Emergency" shall have the same meaning as
the term "unforeseeable emergency" as used in regulations issued under Section
457 of the Code, and shall be applied accordingly. The need to send an Eligible
Participant's child to college and the desire to purchase a home shall not
constitute a Hardship and Unforeseeable Emergency.
(n) "Net Asset Value" shall mean the per share value of an open-end
fund, as determined as set forth in such fund's registration statement under the
1940 Act, governing instruments and otherwise in accordance with law.
(o) "Nuveen" shall mean The John Nuveen Company and its affiliates.
(p) "Participating Fund" shall mean an open-end or closed-end fund
managed by Nuveen, whether existing at the time of adoption of the Plan or
established at a later date, designated by its Board as a fund compensation from
which may be deferred by an Eligible Participant. Participating Funds shall be
listed on Exhibit A to the Plan, which shall be revised from time to time by the
Administrator, provided that failure to list a Participating Fund on Exhibit A
shall not affect its status as a Participating Fund.
(q) "Plan" shall mean this Deferred Compensation Plan for Independent
Directors and Trustees, as amended from time to time.
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(r) "Separation from Service" shall mean the date on which an Eligible
Participant ceases to be a member of a Board.
(s) "Valuation Date" shall mean the last business day of each calendar
quarter and any other day upon which Nuveen makes a valuation of the Deferral
Account.
1.2 Plurals and Gender. Where appearing in this Plan the singular shall
include the plural and the masculine shall include the feminine, and vice versa,
unless the context clearly indicates a different meaning.
1.3 Headings. The headings and subheadings in this Plan are inserted for
convenience of reference only and are to be ignored in any construction of the
provisions hereof.
1.4 Separate Agreement. This Plan shall be construed as a separate
agreement between each Eligible Participant and each of the Participating Funds.
SECTION 2 PERIOD DURING WHICH DEFERRALS ARE PERMITTED
2.1 Commencement of Deferrals. An Eligible Participant may elect, on a form
provided by, and submitted to, the Administrator, to commence Deferrals under
Section 3 hereof for the period beginning on the first day of the first quarter
beginning on or after the date such form is submitted to the Administrator.
2.2 Termination of Deferrals. An Eligible Participant shall not be eligible
for Deferral of additional Compensation after the earlier of the following
dates:
(a) The date he cancels his election pursuant to Section 3.3(b);
(b) his Separation from Service; or
(c) the effective date of the termination of this Plan.
SECTION 3 DEFERRALS
3.1 Deferral Elections.
(a) Subject to Section 3.1(d), an Eligible Participant participating
in the Plan may elect to defer receipt of all, or a specified dollar amount or
percentage of the Compensation (including fees for attending meetings) earned
per quarter by such Eligible Participant for serving as a member of the Board of
each Participating Fund or as a member of any committee (or subcommittee of such
committee) of the Board of a Participating Fund of which such Eligible
Participant from time to time may be a member. Reimbursement of expenses of
attending meetings of the Board, committees of the Board or subcommittees of
such committees may not be deferred.
(b) Deferrals described in Section 3.1(a) above shall be withheld,
based upon the percentage or dollar amount elected, from each payment of
Compensation which the Eligible
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Participant would otherwise have been entitled but for his election in Section
3.1(a) below. If a dollar amount per quarter is elected, 100% of each payment of
Compensation in each quarter will be deferred until such amount is reached.
(c) Each Participating Fund shall establish a book entry account
("Deferral Account") to which will be credited an amount equal to the Eligible
Participant's Deferrals under this Plan. Any Compensation earned by an Eligible
Participant which he has elected to defer pursuant to the Plan will be credited
to such Eligible Participant's Deferral Account on the date such Compensation
otherwise would have been payable to such Eligible Participant. The Deferral
Account shall be debited to reflect any distributions from such Account. Such
debits shall be allocated to the Deferral Account as of the date such
distributions are made.
(d) Each amount that an Eligible Participant elects to defer shall be
allocated among all Participating Funds for which the Eligible Participant
serves as a director or trustee in the same proportion that the Eligible
Participant's Compensation would have been allocated if it had not been
deferred, and all subsequent earnings credited, and all distributions, losses
and expenses charged, to the Eligible Participant's Deferral Account, shall be
allocated among the Participating Funds in the same manner. The obligations of
the Participating Funds to pay their respective allocated shares of an Eligible
Participant's Deferral Account shall be several and not joint.
3.2 Valuation of Deferral Account.
(a) Each Board shall from time to time designate one or more open-end
funds managed by Nuveen as Eligible Funds. An Eligible Participant, on his
deferral election form, shall have the right to select from the then-current
list of Eligible Funds one or more, but not more than three, funds in which his
Deferral Account shall be deemed invested as set forth in this Section 3
("Designated Funds"). An Eligible Participant may designate an Eligible Fund
even if he is not a member of the Board of that Eligible Fund. Except as
provided below, amounts credited to an Eligible Participant's Deferral Account
shall be treated as though such amounts had been invested and reinvested in
shares of the Eligible Participant's Designated Funds, initially calculated as
follows:
(i) the product of
(x) the amount of such Deferrals and
(y) the percentage of such Deferrals to be deemed invested
in that Designated Fund, divided by
(ii) the Designated Fund's Net Asset Value per share as of the date
such amount is so credited.
(b) As of the last day of each calendar year, by written election
delivered to the Administrator not less than 10 business days prior to the end
of such year, each Eligible Participant may direct that the Designated Funds in
which his or her Deferral Account is deemed invested be changed. Any election to
change such investment direction shall indicate the dollar
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<PAGE> 5
amount or percentage of the balance in such Deferral Account (determined based
on the then current Net Asset Value of each Designated Fund in which the
Deferral Account is deemed invested immediately prior to giving effect to such
investment change) to be invested in each such Designated Fund. The number of
shares of each Designated Fund to be deemed held in the Eligible Participant's
Deferral Account following such investment change shall be calculated as
follows:
(i) the product of
(x) the balance in such Deferral Account and
(y) the percentage of such balance to be deemed invested in that
Designated Fund divided by
(ii) the Designated Fund's Net Asset Value per share as of the last
day of such calendar year.
(c) If a Designated Fund shall pay a stock dividend on, or split,
combine, reclassify or substitute other securities by merger, consolidation or
otherwise for its outstanding shares, the Eligible Participant's Deferral
Account shall be adjusted as though shares of such Designated Fund were actually
held by the Deferral Account in order to preserve rights substantially
proportionate to the rights deemed held immediately prior to such event.
(d) On each payment date of dividends or capital gains distributions
declared on shares of any Designated Fund in which an Eligible Participant's
Deferral Account is deemed invested, the Deferral Account will be credited with
book adjustments representing all dividends or capital gains distributions which
would have been realized had such account been invested in shares of such
Designated Fund and such dividend or capital gains distribution had been
received and reinvested.
(e) The value of a Deferral Account on any Valuation Date shall be the
sum of (i) the number of shares of each Designated Fund deemed to be held in the
Deferral Account by the preceding paragraphs, multiplied by (ii) the Net Asset
Value per share of such Designated Fund on the Valuation Date.
(f) On each date upon which a distribution of less than the entire
balance is to be charged to an Eligible Participant's Deferral Account, the
amount of such distribution shall, unless the Eligible Participant otherwise
specifies in accordance with rules established by the Administrator, be
allocated among all of the Designated Funds in which the Deferral Account is
deemed to be invested in proportion to the aggregate value of the number of
deemed shares of each such Designated Fund, and the number of deemed shares of
each such Designated Fund shall then be reduced by the portion of the
distribution allocated to such Designated Fund divided by the Net Asset Value
per share of such Designated Fund on the date on which the distribution is
charged.
(g) Unless and until each Board otherwise determines, the Eligible
Funds shall include only one or more open-end funds managed by Nuveen. Open-end
funds that cease to be
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<PAGE> 6
managed by Nuveen shall automatically cease to be Eligible Funds, unless one of
the Boards otherwise determines with respect to Eligible Participants that are
members of such Board. Either Board may at any time remove any open-end fund
from the list of Eligible Funds, or may add any open-end fund (whether or not
managed by Nuveen), for Eligible Participants who are members of that Board. If
an Eligible Fund is removed from the list of Eligible Funds for any reason then
no further deferrals shall be deemed invested in such Fund and, unless the Board
otherwise determines, the Administrator shall give each Eligible Participant
whose Deferral Account is deemed to be invested in such Eligible Fund a
reasonable period to submit a new designation, and any Eligible Participant who
fails to submit a new designation shall be subject to the provisions of Section
3.2(h)(iii) below.
(h) As of each Valuation Date, income, gain and loss equivalents
(determined as if the Deferral Account is invested in the manner set forth under
Section 3.2(a), above) attributable to the period following the next preceding
Valuation Date shall be credited to and/or deducted from the Eligible
Participant's Deferral Account. Except as provided below, the Eligible
Participant's Deferral Account shall receive a return in accordance with his
investment designations, provided such designations conform to the provisions of
this Section. If:
(i) the Eligible Participant does not furnish the Administrator with
a written designation,
(ii) the written designation from the Eligible Participant is
unclear, or
(iii) less than all of the Eligible Participant's Deferral Account is
covered by such written designation,
then the Eligible Participant's Deferral Account shall receive no return until
such time as the Eligible Participant shall provide the Administrator with
instructions.
3.3 Manner of Electing Deferral.
(a) An Eligible Participant shall elect to participate in this Plan
and defer his Compensation by completing, signing and filing with the
Administrator a Notice of Election to Defer Compensation (the "Notice") in the
form attached to this Plan. The Notice shall include:
(i) the amount of Compensation to be deferred;
(ii) the time at which the distribution of such amount will commence,
which may be:
(A) a specified date selected by the Participant not prior to the
third anniversary of such election,
(B) the first day of the month, quarter or year following the
Eligible Participant's Separation from Service, or
(C) the earlier of (A) or (B);
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provided that the distribution of an Eligible Participant's
Deferral Account shall in any event commence no later than the
fifth anniversary of that Eligible Participant's Separation from
Service.
(iii) the manner of distribution of such deferred compensation (i.e.,
in a lump sum or the number of annual or quarterly
installments);
(iv) the Designated Fund or Designated Funds in which such deferrals
are to be deemed invested and in what amounts or percentages;
and
(v) any beneficiary designated pursuant to Section 4.4 of this Plan.
(b) All Deferral Elections shall remain in effect until the earliest
of: (i) the date on which the Deferral Election is canceled or modified, (ii)
the date of the Eligible Participant's Separation from Service, or (iii) the
date on which the Eligible Participant begins to receive distributions from his
or her Deferral Account. An Eligible Participant may modify the amount of his
Deferral Election and/or the Designated Fund(s) specified in the Deferral
Election, on a prospective basis by submitting an amended Notice to the
Administrator. Such change will be effective as of the first day of the year
following the date such revision is submitted to the Administrator. An Eligible
Participant may cancel his Deferral Election on a prospective basis by
submitting an amended Notice to the Administrator, which cancellation of the
Deferral Election shall be effective for all Compensation for calendar quarters
beginning or for meetings held after such notice is received, subject to any
delay necessary for administrative processing. An Eligible Participant who
cancels his Deferral Election may thereafter make a new Deferral Election as of
the first day of any subsequent year pursuant to Section 3.3(a), but all new
deferrals shall be credited to the same Deferral Account, and the time and
manner of distribution of the Deferral Account, the manner in which the Deferral
Election is deemed invested, and the identity of the Eligible Participant's
Beneficiary, shall remain the same unless changed for the entire Deferral
Account as otherwise provided herein.
3.4 Time of Electing Deferral. An Eligible Participant's initial Notice
under Section 3.3(a) shall be filed with the Administrator no later than 10
business days prior to the last business day of the calendar quarter preceding
the quarter for which the Deferral Election is made. An Eligible Participant's
Notice under Section 3.3(b) modifying the amount of his Deferral Election, or a
Notice under Section 3.3(a) making a Deferral Election after a prior Deferral
Election has been cancelled, shall be filed with the Administrator no later than
10 business days prior to the last business day of the year preceding the year
for which the modified or new Deferral Election is effective.
SECTION 4 DISTRIBUTIONS FROM DEFERRAL ACCOUNT
4.1 Eligible Participant's Election. An Eligible Participant shall elect at
the time of his Deferral Election the time at which his distribution is to
commence, and the form of distribution, which may be either:
(a) lump sum; or
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(b) annual or quarterly installments over a period of five (5) years,
with each installment being equal to the balance in the Deferral Account
immediately prior to payment of the installment divided by the number of
installments remaining to be paid (including the installment the amount of which
is being determined).
(c) If an Eligible Participant fails to designate the manner of
distribution to apply to his Deferral Account, such Deferral Account shall be
distributed in a lump sum on the first day of the month following the Eligible
Participant's Separation from Service.
(d) An Eligible Participant may elect to change his distribution
election with respect to his Deferral Account by filing an amended Notice with
the Administrator not less than six months prior to the earlier of the date on
which distribution was scheduled to begin under the original Notice or the date
on which it is scheduled to begin under the amended Notice. The Eligible
Participant's new distribution election shall be void and the Eligible
Participant's original election shall be reinstated if the date on which
distribution was originally scheduled to begin occurs (by reason of Separation
from Service or otherwise) within six months after the date on which the changed
distribution election was filed with the Administrator.
4.2 Death Prior to Complete Distribution of Deferral Account. If an
Eligible Participant dies prior to the commencement of the distribution of the
amounts credited to his Deferral Account, the balance of such Account shall be
distributed to his Beneficiary in a lump sum as soon as practicable after the
Eligible Participant's death. If an Eligible Participant dies after the
commencement of such distributions, but prior to the complete distribution of
his Deferral Account, the balance of the amounts credited to his Deferral
Account shall be distributed to his Beneficiary over the remaining period during
which such amounts were otherwise distributable to the Eligible Participant
under Section 4.1 hereof. Notwithstanding the above, the Administrator, in its
sole discretion, may accelerate the distribution of the Deferral Account.
4.3 Hardship and Unforeseeable Emergency. An Eligible Participant may
request at any time a withdrawal of part or all of the amount then credited to
his Deferral Account on account of Hardship and Unforeseeable Emergency by
submitting a written request to the Administrator accompanied by evidence that
his financial condition constitutes a Hardship and Unforeseeable Emergency. The
Administrator shall review the Eligible Participant's request and determine the
extent, if any, to which such request is justified. Any such withdrawal shall be
limited to an amount reasonably necessary to meet the Hardship and Unforeseeable
Emergency, but not more than the amount of the Eligible Participant's Deferral
Account.
4.4 Designation of Beneficiary. For the purposes of Section 4.2 hereof, the
Eligible Participant's Beneficiary shall be the person or persons so designated
by the Eligible Participant in a written instrument submitted to the
Administrator. Subject to rules established by the Administrator, an Eligible
Participant may designate multiple or alternative Beneficiaries, and may change
his Beneficiary at any time without the consent of any prior Beneficiary;
provided that no change of a Beneficiary shall be effective unless and until
actually received, in proper form, by the Administrator during the Eligible
Participant's life. The Administrator's determination of the person eligible to
receive the Deferral Account of a deceased Eligible Participant, if made in good
faith, shall be final and binding on all parties. If an Eligible Participant
fails to properly designate
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a Beneficiary or if his Beneficiary predeceases him, his beneficiary shall be
his estate.
4.5 Domestic Relations Orders. If any judgment, decree or order (including
approval of a property settlement agreement) which (i) relates to the provision
of child support, alimony payments, or marital property rights to a spouse,
former spouse, child, or other dependent of an Eligible Participant, and (ii) is
made pursuant to a state or foreign domestic relations law (including a
community property law) directs assignment of a portion of an Eligible
Participant's Deferral Account to a spouse, former spouse, child, or other
dependent of an Eligible Participant, such amount may be paid in a lump-sum cash
payment at the request of the person to whom assignment is directed to be made
as soon as administratively possible after the Administrator's receipt of the
signed order, as long as the order (or a written direction to the Administrator
of how to interpret the order, signed by the Eligible Participant and the person
to whom the order directs assignment) clearly specifies the amount of the
Deferral Account assigned and the timing of payment to the person to whom the
assignment is made.
SECTION 5 AMENDMENTS AND TERMINATION
5.1 Amendments. The Boards reserve the right to amend, in whole or in part,
and in any manner, any or all of the provisions of this Plan by action of both
Boards, except that no amendment shall reduce the balance in any Eligible
Participant's Deferral Account, or (unless necessary to comply with the 1940 Act
or other applicable law) significantly delay the time at which such balance is
payable without the consent of the Eligible Participant affected.
5.2 Termination. Each Board may terminate this Plan at any time by action
of the Board and the Eligible Participants' Deferral Accounts shall become
payable as of the Valuation Date next following the effective date of the
termination of this Plan. If one Board elects to terminate the Plan with respect
to the Eligible Participants who are members of such Board, the Plan shall
remain in effect with respect to Eligible Participants who are members of the
other Board.
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SECTION 6 MISCELLANEOUS
6.1 Rights of Creditors.
(a) This Plan is unfunded. Neither an Eligible Participant nor any
other person shall have any interest in any specific asset or assets of a
Participating Fund by reason of any Deferral Account hereunder, nor any rights
to receive distribution of his Deferral Account except and to the extent
expressly provided hereunder. Except for money market funds complying with rule
2a-7 under the 1940 Act, a Participating Fund shall not be required to purchase,
hold or dispose of any investments pursuant to this Plan. If in order to cover
its obligations hereunder a Participating Fund purchases any investments, the
same shall continue for all purposes to be a part of the general assets and
property of that Participating Fund subject to the claims of its general
creditors and no person other than the Participating Fund shall by virtue of the
provisions of this Plan have any interest in such assets other than an interest
as a general creditor of the Participating Fund.
(b) The rights of an Eligible Participant and the Beneficiaries to the
amounts held in the Deferral Account are unsecured and such amounts shall be
subject to the claims of the creditors of a Participating Fund. With respect to
the payment of amounts held under the Deferral Account, the Eligible Participant
and his Beneficiaries have the status of unsecured creditors of that
Participating Fund. This Plan is executed on behalf of each Participating Fund
by an officer of that Participating Fund as such and not individually. Any
obligation of a Participating Fund hereunder shall be an unsecured obligation of
that Participating Fund and not of any other person.
6.2 Agents. Each Participating Fund may employ agents and provide for such
clerical, legal, actuarial, accounting, advisory or other services as it deems
necessary to perform its duties under this Plan. Each Participating Fund shall
bear the cost of such services and all other expenses it incurs in connection
with the administration of this Plan.
6.3 Incapacity. If the Administrator shall receive evidence satisfactory to
it that an Eligible Participant or any Beneficiary entitled to receive any
benefit under the Plan is, at the time when such benefit becomes payable, a
minor, or is physically or mentally incompetent to receive such benefit and to
give a valid release therefor, and that another person or an institution is then
maintaining or has custody of the Eligible Participant or Beneficiary and that
no guardian, committee or other representative of the estate of the Eligible
Participant or Beneficiary shall have been duly appointed, a Participating Fund
may make payment of such benefit otherwise payable to the Eligible Participant
or Beneficiary to such other person or institution, including a custodian under
a Uniform Transfers to Minors Act or corresponding legislation (who shall be an
adult, a guardian of the minor or a trust company), and the release of such
other person or institution shall be a valid and complete discharge for the
payment of such benefit.
6.4 Statement of Deferral Account. The Administrator will furnish each
Eligible Participant with a statement setting forth the value of such Eligible
Participant's Deferral Account as of the end of each calendar year and all
credits to and payments from such Deferral Account during such year. Such
statements will be furnished no later than 60 days after the end of each
calendar year.
10
<PAGE> 11
6.5 Governing Law. This Plan shall be governed by the laws of the State of
Illinois.
6.6 Non-guarantee of Status. Nothing contained in this Plan shall be
construed as a contract or guarantee of the right of an Eligible Participant to
be, or remain as, a director or a trustee of a fund, or to receive any, or any
particular rate of, Compensation.
6.7 Counsel. Each Board may consult with legal counsel with respect to the
meaning or construction of this Plan, its obligations or duties hereunder or
with respect to any action or proceeding or any question of law, and it shall be
fully protected with respect to any action taken or omitted by it in good faith
pursuant to the advice of legal counsel.
6.8 Interests Not Transferable. An Eligible Participant's and
Beneficiaries' interests in the Deferral Account may not be anticipated, sold,
encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor
become subject to execution, garnishment or attachment and any attempt to do so
by any person shall be deemed null and void; no Participating Fund shall
recognize the rights of any party under this Plan except those of the Eligible
Participant or his Beneficiary; provided that this Section 6.8 shall not
preclude a Participating Fund from offsetting any amount payable to an Eligible
Participant hereunder by any amount owed by such Eligible Participant to that
Participating Fund or to Nuveen.
6.9 Entire Agreement. This Plan contains the entire understanding between
each Participating Fund and the Eligible Participants with respect to the
payment of non-qualified deferred compensation by a Participating Fund to the
Eligible Participants.
6.10 Powers of Administrator. In addition to other powers specifically set
forth herein, the Administrator shall have all power and authority necessary or
convenient for the administration of this Plan, including without limitation the
authority to:
(i) construe and interpret the Plan, and resolve any inconsistency
or ambiguity with respect to any of its terms;
(ii) decide all questions of eligibility and determine the amount,
manner and time of payment of any benefits hereunder;
(iii) prescribe rules and procedures to be followed by Eligible
Participants or Beneficiaries in making any election or taking
any action provided for herein, which rules and procedures may
alter any provision of the Plan that is administrative or
ministerial in nature without the necessity for an amendment;
(iv) allocate Deferral Accounts among the Eligible Funds;
(v) maintain all the necessary records for the administration of the
Plan;
(vi) delegate any of it duties or powers under the Plan to any other
person acting under its supervision; and
(vi) do all other acts which the Administrator deems necessary or
proper to accomplish
11
<PAGE> 12
and implement its responsibilities under the Plan.
Any rule or procedure adopted by the Administrator, or any decision, ruling or
determination made by the Administrator, in good faith shall be final, binding
and conclusive on all Participating Funds, Eligible Participants Beneficiaries
and all persons claiming through them. The authority of the Administrator may be
exercised by such person as the Chief Executive Officer of the Administrator may
designate or, in the absence of a specific designation, by those officers and
employees of the Administrator whose normal duties include payment of
compensation to independent directors and trustees.
6.11 Participant Litigation. In any action or proceeding regarding the Plan
Eligible Participants or their Beneficiaries or any other persons having or
claiming to have an interest in this Plan shall not be necessary parties and
shall not be entitled to any notice or process. Any final judgment which is not
appealed or appealable and may be entered in any such action or proceeding shall
be binding and conclusive on the parties hereto and all persons having or
claiming to have any interest in this Plan. To the extent permitted by law, if a
legal action is begun against either Board, any Participating Fund, the
Administrator, or any of their respective officers, directors, trustees,
employees or agents (an "indemnified party"), by or on behalf of any person and
such action results adversely to such person or if a legal action arises because
of conflicting claims to an Eligible Participant's or other person's benefits,
the costs to the indemnified party of defending the action will be charged to
the amounts, if any, which were involved in the action or were payable to the
Eligible Participant or other person concerned. To the extent permitted by
applicable law, acceptance of participation in this Plan shall constitute a
release of each of the indemnified parties from any and all liability and
obligation not involving willful misconduct or gross neglect.
6.12 Successors and Assigns. This Plan shall be binding upon, and shall
inure to the benefit of, the Participating Funds and their successors and
assigns and to the Eligible Participants and their heirs, executors,
administrators and personal representatives.
6.13 Severability. In the event any one or more provisions of this Plan are
held to be invalid or unenforceable, such illegality or unenforceability shall
not affect the validity or enforceability of the other provisions hereof and
such other provisions shall remain in full force and effect unaffected by such
invalidity or unenforceability.
12
<PAGE> 13
IN WITNESS WHEREOF, each Participating Fund has caused this Plan to be executed
by one of its duly authorized officers, this 30th day of October, 1998.
By: -------------------------------
Name: Alan G. Berkshire
Title: Vice President
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.
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 Municipal Fund 2, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
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
- ------------------------------------------------------
Witness
13
<PAGE> 14
EXHIBIT A
NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN
FOR INDEPENDENT DIRECTORS AND TRUSTEES
PARTICIPATING FUNDS
(For Directors and Trustees of Funds managed by Nuveen Advisory Corp.)
Nuveen Municipal Bond Fund
Nuveen Municipal Value Fund, Inc.
Nuveen Insured Municipal Opportunity Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Insured Municipal Bond Fund
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Flagship Ohio Municipal Bond Fund
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Flagship Limited Term Municipal Bond Fund
Nuveen Flagship Kentucky Municipal Bond Fund
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Insured Municipal Bond Fund
Nuveen Flagship Florida Municipal Bond Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Flagship All-American Municipal Bond Fund
Nuveen Pennsylvania Premium Income Fund 2
Nuveen Flagship Michigan Municipal Bond Fund
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Tax-Exempt Money Market Fund, Inc.
<PAGE> 15
EXHIBIT A
Nuveen Flagship Tennessee Municipal Bond Fund
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen Insured California Premium Income Fund 2, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
(For Trustees of Funds managed by Nuveen Institutional Advisory Corp.)
Nuveen Select Tax-Free Income Portfolio
Nuveen Select Tax-Free Income Portfolio 2
Nuveen Select Tax-Free Income Portfolio 3
Nuveen Insured California Select Tax-Free Income Portfolio
Nuveen Insured New York Select Tax-Free Income Portfolio
Nuveen Growth and Income Stock Fund
Nuveen Balanced Stock and Bond Fund
Nuveen Balanced Municipal and Stock Fund
Nuveen Rittenhouse Growth Fund
As of January 1, 1999
15
<PAGE> 16
EXHIBIT B
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
ELIGIBLE FUNDS
You may choose from the following Eligible Funds:
Nuveen Municipal Bond Fund
Nuveen Flagship All-American Municipal Bond Fund
Flagship Utility Income Fund
Nuveen Balanced Stock and Bond Fund
Nuveen European Value Fund
Nuveen Growth and Income Stock Fund
Nuveen Rittenhouse Growth Fund
As of January 1, 1999
<PAGE> 17
EXHIBIT C
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
DEFERRAL ELECTION FORM
I. Deferral of Compensation
You may elect to defer up to 100 percent of your compensation from Participating
Funds, in fixed dollar or whole percentage amounts, to be credited to your
Deferral Account under the Plan. The Deferral Account will be further credited
with a return on the Deferral Account balance as provided under the Plan.
Starting ______________ , ______ and for each quarter thereafter (unless
subsequently amended by completion of a new election form), I hereby elect that
the following amount of my compensation from Participating Funds be deferred
under the Plan:
$___________ or _________%
II. Election of Deferral Period
You are required under the Plan to elect the date to which Deferrals (plus
applicable investment return) are to be deferred. Your election shall specify
that distribution be deferred to (a) a specific date (which must be at least
three years after the date of this election), (b) the beginning of the month,
quarter or year following your Separation from Service, or (c) the earlier of a
specific date or the beginning of the month, quarter or year following your
Separation from Service; provided that distribution from your Deferral Account
must in any event begin no later than the fifth anniversary of your Separation
from Service
I hereby make the following elections regarding my Deferrals under the Plan
(choose one):
[ ] The compensation I elect to defer under the Plan is to be deferred until
_________________ (specify a date).
[ ] The compensation I elect to defer under the Plan is to be deferred until the
[ ] first day of the month [ ] first day of the calendar year [ ] fifth
anniversary (choose one) following my Separation from Service.
[ ] The compensation I elect to defer under the Plan is to be deferred until the
[ ] earlier of (i) _______________ (specify a date) or (ii) the beginning of the
first [ ] month [ ] quarter [ ] year (choose one) following my Separation
from Service.
<PAGE> 18
III. Form of Distribution
You are required to elect the form of distribution, which may be either (a) a
lump sum or (b) equal annual installments over five years (may be paid to you
quarterly).
My distributions from the Plan are to be in the form of
(choose one):
[ ] a lump sum; or
[ ] annual installments over five (5) years; or
[ ] quarterly installments over five (5) years.
I understand that the amounts held in the Deferral Account shall remain the
general assets of the Fund in which those amounts are held and that, with
respect to the payment of such amounts, I am merely a general unsecured creditor
of that Fund. I may not sell, encumber, pledge, assign or otherwise alienate the
amounts held under the Deferral Account.
I hereby agree that the terms of the Plan are incorporated herein and are made a
part hereof.
IV. Decline or Terminate Participation
[ ] I do not wish to participate in the Plan, or if currently participating,
I wish to terminate my participation at this time.
PARTICIPANT
Date
Accepted by Administrator:
- ------------------------------
Administrator Date
18
<PAGE> 19
EXHIBIT D
NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN
FOR INDEPENDENT DIRECTORS AND TRUSTEES
RETURN DESIGNATION FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the
"Plan"), I hereby elect that the return on my Deferral Account under the Plan be
computed as if the Deferral Account was invested in the following Eligible
Fund(s) (selected from the list of Eligible Funds attached):
TRANSFER ATTRIBUTION OF MY EXISTING DEFERRAL ACCOUNT BALANCE:
Percentage or Dollar Amount of Deferral
Name of Eligible Fund Account Balance to be Transferred to Fund
$ ---------- --------- %
$ ---------- --------- %
$ ---------- --------- %
Total $ ---------- --------- %
ATTRIBUTE MY NEW-DEFERRALS:
Percentage or Dollar Amount of New
Name of Eligible Fund Deferrals to be Attributed to Fund
$ ---------- --------- %
$ ---------- --------- %
$ ---------- --------- %
$ ---------- --------- %
Total $ ---------- --------- %
total must equal 100%
I realize that the designation included on this Form shall be effective until I
have filed another valid Return Designation Form with the Administrator. If (a)
I make no written designation, (b) the written designation is unclear or (c)
less than 100% of my Deferral Account is covered by this election, then my
Deferral Account shall not be credited with any returns until I provide the
<PAGE> 20
Administrator with appropriate instructions. This form must be delivered to the
Administrator at least 5 business days before the end of the calendar quarter to
be effective the following quarter.
PARTICIPANT
Date
Accepted by Administrator:
- ----------------------------
Administrator Date
20
<PAGE> 21
EXHIBIT E
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
BENEFICIARY DESIGNATION FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the
"Plan"), I hereby make the following beneficiary designations:
I. PRIMARY BENEFICIARY
I hereby select the following as my primary Beneficiary(ies) to receive at my
death, in accordance with the Plan, the amounts held in my Deferral Account
under the Plan. In the event I am survived by more than one primary Beneficiary,
such primary Beneficiaries shall share equally in the distribution of my
Deferral Account unless I indicate otherwise on an attachment to this form:
[ ] My estate.
The trustee or trustees of
(provide name and date of trust)
-----------------------------------
The following individuals:
a.
Name (Relationship)
Address
/
City State Zip SSN
b .
Name (Relationship)
<PAGE> 22
Address
City State Zip SSN
Please include an attachment to this form if you wish to select additional
primary Beneficiaries.
<PAGE> 23
II. SECONDARY BENEFICIARY
In the event I am not survived by any primary Beneficiary, I hereby appoint the
following as secondary Beneficiary(ies) to receive at my death, in accordance
with the Plan, the amounts held in my deferral account under the Plan. In the
event I am survived by more than one secondary Beneficiary, such secondary
Beneficiaries shall share equally in the distribution of my Deferral Account
unless I indicate otherwise on an attachment to this form:
[ ] My estate.
The trustee or trustees of_________________________________
(provide name and date of trust)
The following individuals:
a.
Name (Relationship)
Address
/
City State Zip SSN
b .
Name (Relationship)
Address
/
City State Zip SSN
Please include an attachment to this form if you wish to select additional
secondary Beneficiaries.
I understand that if I am not survived by any primary or secondary Beneficiary,
my Beneficiary shall be as set forth under the Plan.
Date:
---------------------------- PARTICIPANT
Accepted by Administrator:
- ---------------------------------
Administrator Date
<PAGE> 24
EXHIBIT F
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
HARDSHIP WITHDRAWAL FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the
"Plan"), I may request at any time a Hardship and Unforeseeable Emergency
withdrawal (an "Emergency Withdrawal") of part or all of the amount then
credited to my Deferral Account. The amount of the Emergency Withdrawal shall be
limited to the amount necessary to meet the Emergency.
I request a hardship withdrawal of $_______________ for the following
reason:
[ ] My own or a dependent's sudden and unexpected illness.
[ ] The loss of my property due to casualty.
[ ] Other (explain):
In addition, I certify that the Emergency may not be relieved through (a)
reimbursement or compensation by insurance or otherwise; (b) liquidation of my
assets to the extent that liquidation itself would not cause an Emergency, or
(c) ceasing to defer receipt of any compensation that I have not yet earned. In
addition, I realize that the Administrator may require additional information
from me before deciding whether to grant this request for an Emergency
withdrawal.
PARTICIPANT
Date
[Administrator]: Approved: Denied:
----------- ---------------
- -------------------------------- ----------------------
[Administrator] Date
<PAGE> 1
EXHIBIT 9(a)
EXCHANGE TRADED FUND CUSTODY AGREEMENT
THIS AGREEMENT is made this l9th day of February, 1993 by and between
NUVEEN PREMIUM INCOME MUNICIPAL FUND4 Inc. (the "Fund"), and UNITED STATES TRUST
COMPANY OF NEW YORK, a New York State chartered bank and trust company ("U.S.
Trust").
W I T N E S S E T H
WHEREAS, the Fund is registered as a closed-end diversified, management
investment company under the Investment Company Act of 1940, as amended ("the
1940 Act"); and
WHEREAS, the Fund desires to retain U.S. Trust to serve as the Fund's
custodian and U.S. Trust is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints U.S. Trust to act as custodian of
its portfolio securities, cash and other property on the terms set forth in this
Agreement. U.S. Trust accepts such appointment and agrees to furnish the
services herein set forth in return for the compensation as provided in Section
23 of this Agreement.
2. DELIVERY OF DOCUMENTS. The Fund has furnished U.S. Trust with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of U.S. Trust as Custodian of the portfolio securities, cash and
other property of the Fund and approving this Agreement;
(b) Incumbency and signature certificates identifying and containing the
signatures of the Fund's officers and/or the persons authorized to sign Proper
Instructions, as hereinafter defined, on behalf of the Fund;
1
<PAGE> 2
(c) The Fund's Articles of Incorporation filed with the State of Minnesota
and all amendments thereto (such Articles of Incorporation as currently in
effect and as amended from time to time be amended, are herein called the
("Articles");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
currently in effect and as they shall from time to time be amended, are herein
called the "By-Laws"),
(e) Resolutions of the Fund's Board of Directors appointing the investment
advisor of the Fund and resolutions of the Fund's Board of Directors and the
Fund's Shareholders approving the proposed Investment Advisory Agreement between
the Fund and the advisor (the "Advisory Agreement");
(f) The Advisory Agreement
(g) The Fund's Notification of Registration filed pursuant to Section 8(a)
of the 1940 Act, as filed with the SEC; and
(h) The Fund's Registration Statement on Form N-2 under the 1940 Act and
the Securities Act of 1933, as amended ("the 1933 Act") as filed with the SEC;
and
(i) The Fund's most recent prospectus including all amendments and
supplements thereto (the "Prospectus").
Upon request the Fund will furnish U.S. Trust with copies of all amendments
of or supplements to the foregoing, if any. The Fund will also furnish U.S.
Trust upon request with a copy of the opinion of counsel for the Fund with
respect to the validity of the Shares and the status of such Shares under the
1933 Act filed with the SEC, and any other applicable federal law or regulation.
3. DEFINITIONS.
(a) "Authorized Person". As used in this Agreement, the term "Authorized
Person" means the Fund's President, Treasurer and any other person, whether or
not any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors of the Fund to give Proper Instructions on behalf of the
Fund as set forth in resolutions of the Fund's Board of Directors.
2
<PAGE> 3
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry
System" means a book-entry system authorized by the U.S. Department of Treasury,
its successor or successors and its nominee or nominees.
(c) Proper Instructions. Proper Instructions as used herein means a writing
signed or initialled by two or more persons as the Board of Directors shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if U.S. Trust reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of Directors of the Fund
accompanied by a detailed description of procedures approved by the Board of
Directors, Proper Instructions may include communications effected directly
between electromechanical or electronic devices provided that the Board of
Directors and U.S. Trust are satisfied that such procedures afford adequate
safeguards for the Fund's assets. For purposes of this Section, Proper
Instructions shall include instructions received by U.S. Trust pursuant to any
three-party agreement which requires a segregated asset account in accordance
with Section 9.
(d) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Fund which the
Fund may from time to time deposit, or cause to be deposited, with
U.S. Trust or which U.S. Trust may from time to time hold for the
Fund;
(ii) all income in respect of any such securities or other property;
(iii) all proceeds of the sales of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the Fund, which
are received by U.S. Trust from time to time from or on behalf of the
Fund.
3
<PAGE> 4
(e) "Securities Depository". As used in this Agreement, the term
"Securities Depository" shall mean The Depository Trust Company, a clearing
agency registered with the SEC or its successor or successors and its nominee or
nominees; and shall also mean any other registered clearing agency, its
successor or successors specifically identified in a certified copy of a
resolution of the Company's Board of Directors approving deposits by U.S. Trust
therein.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver or
cause to be delivered to U.S. Trust all securities and all monies owned by it,
including payments of interest, principal and capital distributions and cash
received for the issuance of its Shares, at any time during the period of this
Agreement, except for securities and monies to be delivered to any subcustodian
appointed pursuant to Section 7 hereof. U.S. Trust will not be responsible for
such securities and such monies until actually received by it. All securities
delivered to U.S. Trust or to any such subcustodian (other than in bearer form)
shall be registered in the name of the Fund or in the name of a nominee of the
Fund or in the name of U.S. Trust or any nominee of U.S. Trust (with or without
indication of fiduciary status) or in the name of any subcustodian or any
nominee of such subcustodian appointed pursuant to Paragraph 7 hereof or shall
be properly endorsed and in form for transfer satisfactory to U.S. Trust.
5. VOTING RIGHTS. With respect to all securities, however registered, it is
understood that the voting and other rights and powers shall be exercised by the
Fund. U.S. Trust's only duty shall be to mail for delivery on the next business
day to the Fund any documents received, including proxy statements and offering
circulars, with any proxies for securities registered in a nominee name executed
by such nominee. Where warrants, options, tenders or other securities have fixed
expiration dates, the Fund understands that in order for U.S. Trust to act, U.S.
Trust must receive the Fund's instructions at its offices in New York, addressed
as U.S. Trust may from time to time request, by no later than noon (NY City
time) at least one business day prior to the last scheduled date to act with
respect
4
<PAGE> 5
thereto (or such earlier date or time as U.S. Trust may reasonably notify the
Fund). Absent U.S. Trust's timely receipt of such instructions, such instruments
will expire without liability to U.S. Trust.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) U.S. Trust shall open and maintain a custody account for the Fund,
subject only to draft or order by U.S. Trust acting pursuant to the terms of
this Agreement, and shall hold in such account, subject to the provisions
hereof, all cash received by it from or for the Fund other than cash maintained
by the Fund in a bank account established and used in accordance with Rule 17f-3
under the 1940 Act. Funds held by U.S. Trust for the Fund may be deposited by it
to its credit at U.S. Trust in the Banking Department of U.S. Trust or in such
other banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act, and that each such bank or
trust company shall be approved by vote of a majority of the Board of Directors
of the Fund. Such funds shall be deposited by U.S. Trust in its capacity as
Custodian and shall be withdrawable by U.S. Trust only in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) U.S. Trust shall make
payments of cash to, or for the account of, the Fund from such cash only (i) for
the purchase of securities, options, futures contracts or options on futures
contracts for the Fund as provided in Section 13 hereof; (ii) in the case of a
purchase of securities effected through a Book-Entry System or Securities
Depository, in accordance with the conditions set forth in Section 8 hereof;
(iii) in the case of repurchase agreements entered into between the Fund and
U.S. Trust, or another bank, or a broker-dealer which is a member of The
National Association of Securities Dealers, Inc. ("NASD"), either (a) against
delivery of the securities either in certificate form or through an entry
crediting U.S. Trust's account at the Federal Reserve Bank with such securities
or (b) against delivery of the receipt evidencing purchase by the Fund of
securities owned by
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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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<PAGE> 7
7. RECEIPT AND DELIVERY OF SECURITIES.
(a) Except as provided by Section 8 hereof, U.S. Trust shall hold and
physically segregate all securities and noncash Property received by it for the
Fund. All such securities and non-cash Property are to be held or disposed of by
U.S. Trust for the Fund pursuant to the terms of this Agreement. In the absence
of Proper Instructions accompanied by a certified resolution authorizing the
specific transaction by the Fund's Board, U.S. Trust shall have no power or
authority to withdraw, deliver, assign, hypothecate, pledge or otherwise dispose
of any such securities and investments, except in accordance with the express
terms provided for in this Agreement. In no case may any director, officer,
employee or agent of the Fund withdraw any securities. In connection with its
duties under this Section 7, U.S. Trust may, at its own expense, enter into
subcustodian agreements with other banks or trust companies for the receipt of
certain securities and cash to be held by U.S. Trust for the account of the Fund
pursuant to this Agreement; provided that each such bank or trust company has an
aggregate capital, surplus and undivided profits, as shown by its last published
report, of not less than twenty million dollars ($20,000,000) and that such bank
or trust company agrees with U.S. Trust to comply with all relevant provisions
of the 1940 Act and applicable rules and regulations
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<PAGE> 8
thereunder. U.S. Trust will be liable for acts or omissions of any subcustodian.
U.S. Trust shall employ sub-custodians upon receipt of Proper Instructions, but
only in accordance with an applicable vote by the Board of Directors of the
Fund.
(b) Promptly after the close of business on each day U.S. Trust shall
furnish the Fund with confirmations and a summary of all transfers to or from
the account of the Fund during said day. Where securities are transferred to the
account of the Fund established at a Securities Depository or Book Entry System
pursuant to Section 8 hereof, U.S. Trust shall also by book-entry or otherwise
identify as belonging to such Fund the quantity of securities in a fungible bulk
of securities registered in the name of U.S. Trust (or its nominee) or shown in
U.S. Trust's account on the books of a Securities Depository or Book-Entry
System. At least monthly and from time to time, U.S. Trust shall furnish the
Fund with a detailed statement of the Property held for the Fund under this
Agreement.
8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall
deliver to U.S. Trust a certified resolution of the Board of Directors of the
Fund approving, authorizing and instructing U.S. Trust on a continuous and
ongoing basis until instructed to the contrary by Proper Instructions actually
received by U.S. Trust (i) to deposit in a Securities Depository or Book-Entry
System all securities of the Fund eligible for deposit therein and (ii) to
utilize a Securities Depository or Book-Entry System to the extent possible in
connection with the performance of its duties hereunder, including without
limitation settlements of purchases and sales of securities by the Fund, and
deliveries and returns of securities collateral in connection with borrowings.
Without limiting the generality of such use, it is agreed that the following
provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in a Securities
Depository or Book-Entry System will at all times (1) be represented in an
account of U.S. Trust in the Securities Depository or Book Entry System (the
"Account") and (2) be segregated from any assets and cash controlled by U.S.
Trust in other than a fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. U.S. Trust will effect
8
<PAGE> 9
payment for securities and receive and deliver securities in accordance with
accepted industry practices as set forth in (b) below, unless the Fund has given
U.S. Trust Proper Instructions to the contrary. The records of U.S. Trust with
respect to securities of the Fund maintained in a Securities Depository or Book
Entry System shall identify by book-entry those securities belonging to the
Fund.
(b) U.S. Trust shall pay for securities purchased for the account of the
Fund upon (i) receipt of advice from the Securities Depository or Book Entry
System that such securities have been transferred to the Account, and (ii) the
making of an entry on the records of U.S. Trust to reflect such payment and
transfer for the account of the Fund. Upon receipt of Proper Instructions, U.S.
Trust shall transfer securities sold for the account of the Fund upon (i)
receipt of advice from the Securities Depository or Book Entry System that
payment for such securities has been transferred to the Account, and (ii) the
making of an entry on the records of U.S. Trust to reflect such transfer and
payment for the account of the Fund. Copies of all advices from the Securities
Depository or Book Entry System of transfers of securities for the account of
the Fund shall identify the Fund, be maintained for the Fund by U.S. Trust and
be provided to the Fund at its request. Upon request, U.S. Trust shall furnish
the Fund confirmation of each transfer to or from the account of the Fund in the
form of a written advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in a Securities Depository
or Book Entry System for the account of the Fund.
(c) U.S. Trust shall provide the Fund with any report obtained by U.S.
Trust on the Securities Depository or Book Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Securities Depository or Book Entry System;
(d) All Books and records maintained by U.S. Trust which relate to the Fund
participation in a Securities Depository or Book-Entry System will at all times
during U.S. Trust's regular business hours be open to the inspection of the
Fund's duly authorized
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<PAGE> 10
employees or agents, and the Fund will be furnished with all information in
respect of the services rendered to it as it may require.
(e) Anything to the contrary in this Agreement notwithstanding, U.S. Trust
shall be liable to the Fund for any loss or damage to the Fund resulting from
any negligence, misfeasance or misconduct of U.S. Trust or any of its agents or
of any of its or their employees in connection with its or their use of the
Securities Depository or Book Entry Systems or from failure of U.S. Trust or any
such agent to enforce effectively such rights as it may have against such
Securities Depository or Book Entry System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of U.S. Trust with respect to
any claim against the Securities Depository or Book Entry System or any other
person which U.S. Trust may have as a consequence of any such loss or damage if
and to the extent that the Fund has not been made whole for any such loss or
damage.
9. SEGREGATED ACCOUNT. U.S. Trust shall upon receipt of Proper Instructions
establish and maintain a segregated account or accounts for and on behalf of the
Fund, into which account or accounts may be transferred cash and/or securities,
including securities maintained in an account by U.S. Trust pursuant to Section
8 hereof, (i) in accordance with the provisions of any agreement among the Fund,
U.S. Trust and a brokerdealer registered under the Securities and Exchange Act
of 1934 and a member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract market),
or of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options purchased,
sold or written by the Fund or commodity futures contracts or options thereon
purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund
with the procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the
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<PAGE> 11
Securities and Exchange Commission relating to the maintenance of segregated
accounts by registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in addition to
Proper Instructions, a certified copy of a resolution of the Board of Directors
or of the Executive Committee signed by an officer of the Fund and certified by
the Secretary or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be proper corporate
purposes.
10. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC.
(a) Unless otherwise provided in this Agreement, U.S. Trust shall act only
upon Proper Instructions. U.S. Trust may assume that any Proper Instruction
received hereunder are not in any way inconsistent with any provision of the
Declaration or By-Laws or any vote or resolution of the Fund's Board of
Directors or any committee thereof. U.S. Trust shall be entitled to rely upon
any Proper Instructions actually received by U.S. Trust pursuant to this
Agreement. The Fund agrees that U.S. Trust shall incur no liability in acting in
good faith upon Proper Instructions given to U.S. Trust, except to the extent
such liability was incurred as a result of U.S. Trust's negligence or willful
misconduct. In accord with instructions from the Fund, as required by accepted
industry practice or as U.S. Trust may elect in effecting the execution of Fund
instructions, advances of cash or other Property made by U.S. Trust, arising
from the purchase, sale, redemption, transfer or other disposition of Property
of the Fund, or in connection with the disbursement of funds to any party, or in
payment of fees, expenses, claims or liabilities owed to U.S. Trust by the Fund,
or to any other party which has secured judgment in a court of law against the
Fund which creates an overdraft in the accounts or overdelivery of Property,
shall be deemed a loan by U.S. Trust to the Fund, payable on demand, bearing
interest at such rate customarily charged by U.S. Trust for similar loans.
(b) The Fund agrees that test arrangements, authentication methods or other
security devices to be used with respect to instructions which the Fund may give
by
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<PAGE> 12
telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess,
or through an electronic instruction system, shall be processed in accordance
with terms and conditions for the use of such arrangements, methods or devices
as U.S. Trust may put into effect and modify from time to time. The Fund shall
safeguard any test keys, identification codes or other security devices which
U.S. Trust makes available to the Fund and agrees that the Fund shall be
responsible for any loss, liability or damage incurred by U.S. Trust or by the
Fund as a result of U.S. Trust's acting in accordance with instructions from any
unauthorized person using the proper security device except to the extent such
loss, liability or damage was incurred as a result of U.S. Trust's negligence or
willful misconduct. U.S. Trust may electronically record, but shall not be
obligated to so record, any instructions given by telephone and any other
telephone discussions with respect to the Fund. In the event that the Fund uses
U.S. Trust's Asset Management system or any successor electronic communications
or information system, the Fund agrees that U.S. Trust is not responsible for
the consequences of the failure of that system to perform for any reason, beyond
the reasonable control of U.S. Trust, or the failure of any communications
carrier, utility, or communications network. In the event that system is
inoperable, the Fund agrees that it will accept the communication of transaction
instructions by telephone, facsimile transmission on equipment compatible to
U.S. Trust's facsimile receiving equipment or by letter, at no additional charge
to the Fund.
(c) U.S. Trust shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of securities
and expirations of rights in connection therewith and notices of exercise of
call and put options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by U.S. Trust from issuers of the
securities being held for the Fund. With respect to tender or exchange offers,
U.S. Trust shall transmit promptly by facsimile to the Fund all written
information received by U.S. Trust from issuers of the securities whose tender
or exchange is sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to
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<PAGE> 13
take action with respect to any tender offer, exchange offer or any other
similar transaction, the Fund shall notify U.S. Trust at least three business
days prior to the date on which U.S. Trust is to take such action or upon the
date such notification is first received by the Fund, if later. If any Property
registered in the name of a nominee of U.S. Trust is called for partial
redemption by the issuer of such property, U.S. Trust is authorized to allot the
called portion to the respective beneficial holders of the Property in such
manner deemed to be fair and equitable by U.S. Trust in its sole discretion.
11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. U.S. Trust is authorized to
take the following action without Proper Instructions:
(a) COLLECTION OF INCOME AND OTHER PAYMENTS. U.S. Trust shall:
(i) collect and receive on a timely basis for the account of the
Fund, all income and other payments and distributions, including
(without limitation) stock dividends, rights, warrants and similar
items, included or to be included in the Property of the Fund, and
promptly advise the Fund of such receipt and shall credit such income,
as collected, to the Fund. From time to time, U.S. Trust may elect,
but shall not be obligated, to credit the account with interest,
dividends or principal payments on payable or contractual settlement
date, in anticipation of receiving same from a payor, central
depository, broker or other agent employed by the Fund or U.S. Trust.
Any such crediting and posting shall be at the Fund's sole risk, and
U.S. Trust shall be authorized to reverse any such advance posting in
the event it does not receive good funds from any such payor, central
depository, broker or agent of the Customer. U.S. Trust agrees to
promptly notify the Fund of the reversal of any such advance posting.
(ii) endorse and deposit for collection in the name of the Fund,
checks, drafts, or other orders for the payment of money on the same
day as received;
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<PAGE> 14
(iii) receive and hold for the account of the Fund all securities
received by the Fund as a result of a stock dividend, share split-up
or reorganization, merger, recapitalization, readjustment or other
rearrangement or distribution of rights or similar securities issued
with respect to any portfolio securities of the Fund held by U.S.
Trust hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed or retired, or
otherwise become payable on the date such securities become payable;
(v) take any action which may be necessary and proper in connection
with the collection and receipt of such income and other payments and
the endorsement for collection of checks, drafts and other negotiable
instruments;
(vi) to effect an exchange of the securities where the par value is
changed, and to surrender securities at maturity or upon an earlier
call for redemption, or when securities otherwise become payable,
against payment therefore in accordance with accepted industry
practice. If any Property registered in the name of a nominee of U.S.
Trust is called for partial redemption by the issuer of such property,
U.S. Trust is authorized to allot the called portion to the respective
beneficial holders of the Property in such manner deemed to be fair
and equitable by U.S. Trust in its sole discretion.
(b) Miscellaneous Transactions. U.S. Trust is authorized to deliver or
cause to be delivered Property against payment or other consideration or written
receipt therefore for examination by a dealer selling for the account of the
Fund in accordance with street delivery custom.
12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions
requiring Proper Instructions set forth herein, upon receipt of Proper
Instructions and not otherwise, U.S. Trust, directly or through the use of a
Securities Depository or Book-Entry System, shall:
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<PAGE> 15
(a) Execute and deliver to such persons as may be designated in such Proper
Instructions, proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any securities may be exercised;
(b) Deliver any securities held for the Fund against receipt of other
securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
issuer of securities or corporation, or the exercise of any conversion
privilege;
(c) Deliver any securities held for the Fund to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
issuer of securities or corporation, against receipt of such certificates of
deposit, interim receipts or other instruments or documents, and cash, if any,
as may be issued to it to evidence such delivery;
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said instructions to be for the purpose
of effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(e) Release securities belonging to the Fund to any bank or trust company
for the purpose of pledge or hypothecation to secure any loan incurred by the
Fund; provided, however, that securities shall be released only upon payment to
U.S. Trust of the monies borrowed, or upon receipt of adequate collateral as
agreed upon by the Fund and U.S. Trust which may be in the form of cash or
obligations issued by the U.S. government, its agencies or instrumentalities,
except that in cases where additional collateral is required to secure a
borrowing already made, subject to proper prior authorization, further
securities may be released for that purpose; and pay such loan upon redelivery
to it of the securities pledged or hypothecated therefore and upon surrender of
the note or notes evidencing the loan; and
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<PAGE> 16
(f) Deliver securities in accordance with the provisions of any agreement
among the Fund, U.S. Trust and a brokerdealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement
among the Fund, U.S. Trust and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund; and
(h) Deliver securities against payment of other consideration or written
receipt therefor for transfer of securities into the name of the Fund or U.S.
Trust or a nominee of either, or for exchange or securities for a different
number of bonds, certificates, or other evidence, representing the same
aggregate face amount or number of units bearing the same interest rate,
maturity date and call provisions, if any; provided that, in any such case, the
new securities are to be delivered to U.S. Trust;
(i) Exchange securities in temporary form for securities in definitive
form;
(j) Surrender, in connection with their exercise, warrants, rights or
similar securities, provided that in each case, the new securities and cash, if
any, are to be delivered to U.S. Trust;
(k) Deliver securities upon receipt of payment in connection with any
repurchase agreement related to such securities entered into by the Fund;
(l) Deliver securities pursuant to any other proper corporate purpose, but
only upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors or of the Executive Committee signed by an
officer of the Funds and certified by the Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting
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<PAGE> 17
forth the purpose for which such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
13. PURCHASE OF SECURITIES. Promptly after each purchase of securities,
options, futures contracts or options on futures contracts by the investment
advisor, the Fund shall deliver to U.S. Trust (as Custodian) Proper Instructions
specifying with respect to each such purchase: (a) the name of the issuer and
the title of the securities, (b) the number of shares of the principal amount
purchased and accrued interest, if any, (c) the dates of purchase and
settlement, (d) the purchase price per unit, (e) the total amount payable upon
such purchase, (f) the name of the person from whom or the broker through whom
the purchase was made and (g) the Fund name. U.S. Trust shall upon receipt of
securities purchased by or for the Fund registered in the name of the Fund or in
the name of a nominee of U.S. Trust or of the Fund or in proper form for
transfer or upon receipt of evidence of title to options, futures contracts or
options on futures contracts purchased by the Fund, pay out of the monies held
for the account of the Fund the total amount payable to the person from whom or
the broker through whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Proper Instructions. Except as
specifically stated otherwise in this Agreement, in any and every case where
payment for purchase of securities for the account of the Fund is made by U.S.
Trust in advance of receipt of the securities purchased in the absence of
specific written instructions from the Fund to so pay in advance, U.S. Trust
shall be absolutely liable to the Fund for such securities to the same extent as
if the securities had been received by U.S. Trust.
14. SALE OF SECURITIES. Promptly after each sale of securities by the Fund
at the instruction of the investment advisor, the Fund shall deliver to U.S.
Trust (as Custodian) Proper Instructions, specifying with respect to each such
sale; (a) the name of the issuer and the title of the security, (b) the number
of shares or principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount payable to
17
<PAGE> 18
the Fund upon such sale, (f) the name of the broker through whom or the person
to whom the sale was made and (g) the Fund name. U.S. Trust shall deliver the
securities upon receipt of the total amount payable to the Fund upon such sale,
provided that the same conforms to the total amount payable as set forth in such
Proper Instructions. Subject to the foregoing, U.S. Trust may accept payment in
such form as shall be satisfactory to it, and may deliver securities and arrange
for payment in accordance with the customs prevailing among dealers in
securities.
15. AUTHORIZED SHARES. The Fund has an unlimited number of authorized
shares.
16. RECORDS. The books and records pertaining to the Fund which are in the
possession of U.S. Trust shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act, as
amended, and other applicable securities laws and rules and regulations. The
Fund, or the Fund's authorized representative, shall have access to such books
and records at all times during U.S. Trust's normal business hours, and such
books and records shall be surrendered to the Fund promptly upon request. Upon
reasonable request of the Fund, copies of any such books and records shall be
provided by U.S. Trust to the Fund or the Fund's authorized representative at
the Fund's expense.
17. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the
Fund's independent certified public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to assure that
the necessary information is made available to such accountants for the
expression of their unqualified opinion, including but not limited to the
opinion included in the Fund's Form N-2, Form N-SAR and other reports to the
Securities and Exchange Commission and with respect to any other requirement of
such Commission.
18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. U.S. Trust shall
provide the Fund, at such times as the Fund may reasonably require, with reports
by independent public accountants on the accounting system, internal accounting
control and
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<PAGE> 19
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
Depository or Book Entry System, relating to the services provided by U.S. Trust
under this Contract; such reports shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Fund to provide reasonable
assurance that any material inadequacies would be disclosed by such examination,
and, if there are no such inadequacies, the reports shall so state.
19. CONFIDENTIALITY. U.S. Trust agrees on behalf of itself and its
employees to treat confidentially and as the proprietary information of the Fund
all records and other information relative to the Fund and its prior, present or
potential Shareholders and relative to the advisors and its prior, present or
potential customers, and not to use such records and information for any purpose
other than performance of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld and may not be withheld where U.S. Trust may
be exposed to civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or when
so requested by the Fund. Nothing contained herein, however, shall prohibit U.S.
Trust from advertising or soliciting the public generally with respect to other
products or services, regardless of whether such advertisement or solicitation
may include prior, present or potential Shareholders of the Fund.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond U.S.
Trust's control, U.S. Trust shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions but shall not have liability
with respect thereto. U.S. Trust shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
back up emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
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<PAGE> 20
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If U.S. Trust shall be in doubt as to any action to be
taken or omitted by it, it may request, and shall receive, from the Fund
clarification or advice.
(b) Advice of Counsel. If U.S. Trust shall be in doubt as to any question
of law involved in any action to be taken or omitted by U.S. Trust, it may
request advice at its own cost from counsel of its own choosing (who may be
counsel for the Fund or U.S. Trust, at the option of U.S. Trust).
(c) Conflicting Advice. In case of conflict between directions or advice
received by U.S. Trust pursuant to subparagraph (a) of this paragraph and advice
received by U.S. Trust pursuant to subparagraph (b) of this paragraph, U.S.
Trust shall be entitled to rely on and follow the advice received pursuant to
the latter provision alone.
(d) Protection of U.S. Trust. U.S. Trust shall be protected in any action
or inaction which it takes or omits to take in reliance on any directions or
advice received pursuant to subparagraphs (a) or (b) of this section which U.S.
Trust, after receipt of any such directions or advice, in good faith believes to
be consistent with such directions or advice. However, nothing in this paragraph
shall be construed as imposing upon U.S. Trust any obligation (i) to seek such
directions or advice, or (ii) to act in accordance with such directions or
advice when received, unless, under the terms of another provision of this
Agreement, the same is a condition to U.S. Trust's properly taking or omitting
to take such action. Nothing in this subsection shall excuse U.S. Trust when an
action or omission on the part of U.S. Trust constitutes willful misfeasance,
bad faith, negligence or reckless disregard by U.S. Trust of its duties under
this Agreement.
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund assumes
full responsibility for insuring that the contents of each Prospectus of the
Fund complies with all applicable requirements of the 1933 Act, the 1940 Act,
and any laws, rules and regulations of governmental authorities having
jurisdiction.
20
<PAGE> 21
23. COMPENSATION. As compensation for the services rendered by U.S. Trust
during the term of this Agreement, the Fund will pay to U.S. Trust, in addition
to reimbursement of its out-of-pocket expenses, monthly fees as outlined in
Exhibit A.
24. INDEMNIFICATION. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless U.S. Trust and its nominees from all taxes, charges,
expenses, assessments, claims, and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the Securities Exchange Act of 1934, the
1940 Act, and any state and foreign securities and blue sky laws, all as or to
be amended from time to time) and expenses, including (without limitation)
attorney's fees and disbursements (hereafter "liabilities and expenses"),
arising directly or indirectly from any action or thing which U.S. Trust takes
or does or omits to take or do (i) at the request or on the direction of or in
reliance on the advice of the Fund, or (ii) upon Proper Instructions, provided,
that neither U.S. Trust nor any of its nominees or sub-custodians shall be
indemnified against any liability to the Fund or to its Shareholders (or any
expenses incident to such liability) arising out of (x) U.S. Trust's or such
nominee's or sub-custodian's own willful misfeasance, bad faith, negligence or
reckless disregard of its duties under this Agreement or any agreement between
U.S. Trust and any nominee or sub-custodian or (y) U.S. Trust's own negligent
failure to perform its duties under this Agreement. U.S. Trust similarly agrees
to indemnify and hold harmless the Fund from all liabilities and expenses
arising directly or indirectly from U.S. Trust's or such nominee's or sub-
custodian's willful misfeasance, bad faith, negligence or reckless disregard in
performing its duties under this Agreement. In the event of any advance of cash
for any purpose made by U.S. Trust resulting from orders or Proper Instructions
of the Fund, or in the event that U.S. Trust or its nominee or subcustodian
shall incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement, except such as
may arise from its or its nominee's or sub-custodian's own negligent action,
negligent failure to act, willful
21
<PAGE> 22
misconduct, or reckless disregard, the Fund shall promptly reimburse U.S. Trust
for such advance of cash or such taxes, charges, expenses, assessments, claims
or liabilities.
25. RESPONSIBILITY OF U.S. TRUST. In the performance of its duties
hereunder, U.S. Trust shall be obligated to exercise care and diligence and to
act in good faith to insure the accuracy and completeness of all services
performed under this Agreement. U.S. Trust shall be responsible for its own
negligent failure or that of any subcustodian it shall appoint to perform its
duties under this Agreement but to the extent that duties, obligations and
responsibilities are not expressly set forth in this Agreement, U.S. Trust shall
not be liable for any act or omission which does not constitute willful
misfeasance, bad faith, or negligence on the part of U.S. Trust or such
subcustodian or reckless disregard of such duties, obligations and
responsibilities. Without limiting the generality of the foregoing or of any
other provision of this Agreement, U.S. Trust in connection with its duties
under this Agreement shall, so long as and to the extent it is in the exercise
of reasonable care, not be under any duty or obligation to inquire into and
shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any advice, direction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which U.S. Trust believes to be genuine, (b) the validity of the issue of any
securities purchased or sold by the Fund, the legality of the purchase or sale
thereof or the propriety of the amount paid or received therefor, (c) the
legality of the issue or sale of any Shares, or the sufficiency of the amount to
be received therefor, (d) the legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor, (e) the legality of the declaration
or payment of any dividend or distribution on Shares, of (f) delays or errors or
loss of data occurring by reason of circumstances beyond U.S. Trust's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown (except as provided in Section 20),
flood or catastrophe, acts of God, insurrection, war, riots, or failure of the
mail, transportation, communication or power supply.
22
<PAGE> 23
26. COLLECTION OF INCOME. U.S. Trust shall collect on a timely basis all
income and other payments with respect to registered securities held hereunder
to which the Fund shall be entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of payment by the
issuer, such securities are held by U.S. Trust or its agent thereof and shall
credit such income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, U.S. Trust shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due the Fund on securities loaned pursuant to the provisions
of Section 9 shall be the responsibility of the Fund. U.S. Trust will have no
duty or responsibility in connection therewith, other than to provide the Fund
with such information or data as may be necessary to assist the Fund in
arranging for the timely delivery to the Custodian of the income to which the
Fund is properly entitled.
27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. U.S. Trust shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect to
securities of the Fund held by it and in connection with transfers of
securities.
28. EFFECTIVE PERIOD: TERMINATION AND AMENDMENT.
This Agreement shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however, that U.S. Trust shall not act under Section 8 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Directors of the Fund has approved the initial use of a
particular Securities Depository or Book Entry
23
<PAGE> 24
System and the receipt of an annual certificate of the Secretary or an Assistant
Secretary that the Board of Directors has reviewed the use by the Fund of such
Securities Depository and/or Book Entry System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended; provided further,
however, that the Fund shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations, or any provision
of the Articles of Incorporation, and further provided, that the Fund may at any
time by action of its Board of Directors (i) substitute another bank or trust
company for U.S. Trust by giving notice as described above to U.S. Trust, or
(ii) immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for U.S. Trust by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Agreement, the Fund shall pay to U.S. Trust such
compensation as may be due as of the date of such termination and shall likewise
reimburse U.S. Trust for its costs, expenses and disbursements.
29. SUCCESSOR CUSTODIAN.
If a successor custodian shall be appointed by the Board of Directors of
the Fund, U.S. Trust shall, upon termination, deliver to such successor
custodian at the office of the custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities Depository or Book Entry System.
If no such successor custodian shall be appointed, U.S. Trust shall, in
like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
U.S. Trust on or before the date when such termination shall become effective,
then U.S. Trust shall have the right to
24
<PAGE> 25
deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, doing business in New York, New York, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by U.S. Trust and all instruments held by U.S. Trust relative
thereto and all other property held by it under this Agreement and to transfer
to an account of such successor custodian all of the Fund's securities held in
any Securities Depository or Book Entry System. Thereafter, such bank or trust
company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of U.S. Trust after the date of termination hereof owing to failure
of the Fund to procure the certified copy of the vote referred to or of the
Board of Directors to appoint a successor custodian, U.S. Trust shall be
entitled to fair compensation for its services during such period as U.S. Trust
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of U.S. Trust
shall remain in full force and effect.
30. NOTICES. All notices and other communications (collectively referred to
as "Notice" or "Notices") in this section hereunder shall be in writing and
shall be first sent by telegram, cable, telex, or facsimile sending device and
thereafter by overnight mail for delivery on the next business day. Notices
shall be addressed (a) if to U.S. Trust, at U.S. Trust's address, 114 West 47th
Street, New York, New York, 10036-1532, facsimile number (212) 852-1488; (b) if
to the Fund, at the address of the Fund Attention: Portfolio Manager, facsimile
number (312) 917-8211; or (c) if to neither of the foregoing, at such other
address as shall have been notified to the sender of any such Notice or other
communication. Notices sent by overnight mail shall be deemed to have been given
the next business day. Notices sent by messenger shall be deemed to have been
given on the day delivered, and notices sent by confirming telegram, cable,
telex or facsimile sending device shall be deemed to
25
<PAGE> 26
have been given immediately. All postage, cable, telegram, telex and facsimile
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
31. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of such change or waiver is sought.
33. MISCELLANEOUS. This Agreement embodies the entire Agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in New York and
governed by New York law. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
26
<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year second above
written.
UNITED STATES TRUST
COMPANY OF NEW YORK
Attest: /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> 28
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.
<PAGE> 29
7. Due to FDIC capitalization requirements, overdrafts are not
permissible on June 30th and December 31st.
<PAGE> 1
EXHIBIT 9(b)
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> 2
and shall advise the Fund daily of the total amounts of such net income and, if
instructed in writing by an officer of the Fund to do so, of the division of
such net income among its various components.
3. BOOKS AND RECORDS. U.S. Trust will (a) maintain such books and records
as are necessary to enable it to perform its duties under this Agreement; (b)
prepare and maintain complete, accurate and current all records with respect to
the Fund required to be maintained by the Fund under the Internal Revenue Code
of 1986, as amended (the "Code"), and under the 1940 Act and the applicable
rules and regulations thereunder; (c) at the Fund's expense, retain and preserve
said records in the manner and for the periods prescribed in the Code and such
rules and regulations; and (d) assist to the extent requested by the Fund in the
preparation of reports to the Fund's shareholders, the Fund's Registration
Statement and reports and filings required pursuant to the Code or the 1940 Act
and the rules and regulations thereunder.
U.S. Trust hereby acknowledges and agrees that all records prepared and
maintained by U.S. Trust pursuant to this paragraph 3 which are required to be
maintained by the Fund under the Code and the 1940 Act ("Required Records") are
the property of the Fund. If this agreement is terminated, all Required Records
shall be delivered, at the Fund's expense, to the Fund or any such person
designated by the Fund, and U.S. Trust shall be relieved of responsibility for
the preparation and maintenance of any Required Records delivered to the Fund or
any such person.
4. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its
-2-
<PAGE> 3
obligation under this Agreement to assure that the necessary information is made
available to such accountants for the expression of their unqualified opinion
where required for any document for the Fund.
5. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
U.S. Trust shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants relating to
the services provided by U.S. Trust under this Contract; such reports, shall be
of sufficient scope and in sufficient detail, as may reasonably be required by
the Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
6. FEES AND CHARGES. In consideration of services rendered pursuant to
this Agreement, the Fund shall pay to U.S. Trust a fee in accordance with the
schedule attached hereto (Exhibit A) and shall promptly reimburse U.S. Trust for
any out-of-pocket expenses and advances payable by the Fund in accordance with
Paragraph 6.
7. EXPENSES. The expenses connected with the performance of this
Agreement shall be allocated between the Fund and U.S. Trust as follows:
(a) U.S. Trust shall furnish, at its expense and without cost to the
Fund, (i) the services of its personnel to the extent required to carry out its
obligations under this Agreement, and (ii) use of data processing equipment.
(b) All costs and expenses not expressly assumed by U.S. Trust under
Paragraph 6 (a) of this Agreement shall be paid by the Fund, including but not
limited to costs and expenses for pricing service fees; necessary outside record
storage; media for storage or records (e.g., microfilm, microfiche); and any and
all assessments, taxes or levies assessed on U.S. Trust for services provided
under this Agreement.
-3-
<PAGE> 4
8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as
otherwise provided in this Agreement and except for the accuracy of information
furnished to it by U.S. Trust, the Fund assumes full responsibility of the
preparation, contents and distribution of each prospectus of the Fund, and for
compliance with all applicable requirements of the 1940 Act, the Securities Act
and any laws, rules and regulations of governmental authorities having
jurisdiction over the Fund.
9. CONFIDENTIALITY. U.S. Trust agrees to treat all records and other
information relative to the Fund as proprietary information of the Fund and, on
behalf of itself and its employees, to keep confidential all such information,
except after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where U.S.
Trust may be exposed to civil or criminal contempt proceedings for failure to
comply, when requested to divulge such information by duly constituted
authorities or when so requested by the Fund.
10. REFERENCES TO U.S. TRUST. The Fund shall not circulate any printed
matter which contains any reference to U.S. Trust without the prior written
approval of U.S. Trust, except solely such printed matter as merely identifies
U.S. Trust as Accounting and Pricing Services Agent. The Fund will submit
printed matter requiring approval to U.S. Trust in draft form, allowing
sufficient time for review by U.S. Trust and its counsel prior to any deadline
for printing.
11. FORCE MAJEURE: EQUIPMENT FAILURES. (a) If U.S. Trust shall be delayed
in its performance of services or prevented entirely or in part from performing
services because of causes or events beyond its control, including and without
limitation, acts of God, interruption of power or other utility, transportation
or communication services, acts of civil or military authority, sabotages,
national emergencies, explosion, flood, accident earthquake or other
catastrophe, fire, strike or other labor
-4-
<PAGE> 5
problems, legal action, present or future law, governmental order, rule or
regulation, or shortage of suitable parts, materials, labor or transportation,
then such delay or nonperformance shall be excused and a reasonable time for
performance in connection with this Agreement shall be extended to include the
period of such delay or nonperformance.
(b) In the event of equipment failures beyond U.S. Trust's control, U.S.
Trust shall take all steps necessary to minimize service interruptions but shall
have no liability with respect thereto. U.S. Trust shall endeavor to enter into
one or more agreements making provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
12. INDEMNIFICATION OF U.S. TRUST.
(a) U.S. Trust, its directors, officers, employees, shareholders, and
agents shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty or a loss
resulting from willful misfeasance, bad faith or negligence on the part of U.S.
Trust in the performance of its obligations and duties under this Agreement.
(b) Notwithstanding any other provision of this Agreement, the Fund
shall indemnify and hold harmless U.S. Trust, its directors, officers,
employees, shareholders, and agents from and against any and all claims,
demands, expenses and liabilities (whether with or without basis in fact or law)
of any and every nature which U.S. Trust may sustain or incur or which be
asserted against U.S. Trust by any person by reason of, or as a result of any
action taken or omitted to be taken by U.S. Trust in connection with its
appointment, in good faith, in reliance upon any law, act, regulation or
official interpretation of same even though the same may have been altered,
changed, amended or repealed subsequent to
-5-
<PAGE> 6
the date of U.S. Trust's actions in reliance there on. However, indemnification
under this subparagraph shall not apply to actions or omissions of U.S. Trust or
its directors, officers, employees, shareholders, agents, or subcontractors in
cases of its or their own negligence, willful misconduct, bad faith, or reckless
disregard of its or their own duties hereunder.
13. TERM; TERMINATION. (a) The provisions of this Agreement shall be
effective as of January 1, 1991, shall continue in force from year to year
thereafter, but only so long as such continuance is approved by U.S. Trust and
the Fund.
(b) Either party may terminate this Agreement on any date by giving
the other party at least ninety (90) days prior written notice of such
termination specifying the date fixed therefore.
(c) In the event that in connection with termination of this Agreement
a successor to any of U.S. Trust's duties or responsibilities under this
Agreement is designated by the Fund by written notice to U.S. Trust, U.S. Trust
shall, promptly upon such termination and at the expense of the Fund, transfer
all Required Records and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from the U.S. Trust's
cognizant personnel in the establishment of books, records, and other data by
such successor.
14. ASSIGNMENT. Except as hereinafter provided, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party without
the written consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective permitted
successors and assignees. U.S. Trust may, without further consent on the part of
the Fund, subcontract for the performance hereof with third parties who are
subsidiaries or other affiliates of U.S. Trust; provided, however, that U.S.
-6-
<PAGE> 7
Trust shall be as fully responsible to the Fund for the acts and omissions of
any subcontractor as it is for its own acts and omissions and shall be
responsible for its choice of subcontractors.
15. SERVICES FOR OTHERS. Nothing in this Agreement shall prevent U.S.
Trust or any affiliated person (as defined in the Act) of U.S. Trust from
providing services for any other person, firm or corporation (including other
investment companies).
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect.
17. SEVERABILITY. In the event any provision of this Agreement is
determined to be void or unenforceable, such determination shall not affect the
remainder of this Agreement, which shall continue to be in force.
18. GOVERNING LAWS. This Agreement shall be deemed to be a contract made
under, and shall be construed in accordance with, the laws (other than the laws
governing conflict-of-law matters) of The State of New York.
19. NOTICES. Any notice or demand given in connection with any agreement,
document or instrument executed pursuant hereto shall be deemed to have been
sufficiently given or served for all purposes if sent by certified or registered
mail, postage and charges prepaid, to the following addresses: if to the Fund,
at 333 West Wacker Drive, Chicago, IL 60606, Attention: O.W. Renfftlen, Vice
President, or at any other address or addresses designated by the Fund to U.S.
Trust in writing; and if to U.S. Trust, to it at 114 West 47th Street, New York,
NY 10036, or at any other address or addresses designated by U.S. Trust to the
Fund in writing.
-7-
<PAGE> 8
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year second above written.
U.S. Trust Co. of New York
Attest: /s/ Jacqueline Binder By: /s/ Peter C. Arrighetti
-------------------------- ---------------------------
Jacqueline Binder Peter C. Arrighetti
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> 9
EXHIBIT A
FUND ACCOUNTING FEE
$18,000 PER ANNUM
<PAGE> 1
EXHIBIT 9(c)
[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> 1
Exhibit 9(d)
SHAREHOLDER TRANSFER AGENCY AGREEMENT
This Agreement is made this 19th day of February, 1993 by and between
United States Trust Company of New York ("U.S. Trust"), a New York corporation,
and Nuveen Premium Income Municipal Fund 4, Inc. (the "Fund"), a closed-end
investment company incorporated under the laws of the state of Minnesota.
I. SERVICES
Commencing on February 19, 1993 and in accordance with procedures
established from time to time by the Fund and U.S. Trust, U.S. Trust shall
perform the (i) account maintenance services, (ii) mailing and reporting
services, (iii) dividend and distribution payment services, (iv) dividend
reinvestment plan services, and (v) recordkeeping services (collectively, the
"Standard Services") in connection with the Fund's Common Stock, par value $.01
per share (the "Shares"), as more fully described herein.
A. Account Maintenance Services. U.S. Trust shall perform transfer
agent, registrar and other account maintenance services in connection with the
Shares. Such services are composed of (i) registering Share transfers on the
Fund's records of the holders of Shares (the "Shareholders") upon receipt of
instructions from the transferor and documentation in proper form to effect a
transfer of Shares; (ii) cancelling the certificates* representing such Shares,
if any, and if so requested, countersigning, registering, issuing and mailing by
insured first.
* All references to certificates will include book entry services.
<PAGE> 2
class mail new certificates for the same or a smaller whole number of Shares;
(iii) issuing replacement certificates in lieu of certificates which have been
lost, stolen or destroyed upon receipt of a properly executed affidavit with
respect to such loss, theft or destruction and a lost certificate bond in form
satisfactory to U.S. Trust; (iv) combining certificates into large
denominations; (v) maintaining stop-transfer orders, including placing and
removing the same; (vi) processing new Shareholder accounts; (vii) posting
address changes, and (viii) researching and responding to Shareholder inquiries.
Shares will be transferred and new certificates issued in transfer upon
surrender of the old certificates in form deemed by U.S. Trust to be properly
endorsed for transfer accompanied by delivery of such documents as U.S. Trust
may deem necessary to evidence the authority of the person making the transfer
and payment of any applicable stock transfer taxes. U.S. Trust reserves the
right to refuse to transfer shares until it is satisfied that the endorsement or
signature on the certificate or any other document is valid and genuine, and for
that purpose it will require a signature guarantee by a commercial bank or trust
company having its principal office or correspondent in the City of New York, by
a member firm of a major stock exchange or by a guarantor previously approved by
U.S. Trust.
B. Mailing List and Reporting Services. Mailing list and reporting
services provided to the Fund are composed of (i) annual preparation of a list
of Shareholders owning Fund
- 2 -
<PAGE> 3
Shares, (ii) semi-annual distribution of a report to Shareholders, (iii) mailing
proxies, (iv) receiving and tabulating proxies and mailing shareholder reports
to current shareholders, (v) certifying share vote totals, (vi) assisting with
Annual Meeting of Shareholders.
C. Dividend and Distribution Payment Services.
(1) Upon the declaration of any dividend or distribution payable
either in Shares or cash, the Fund shall notify U.S. Trust in writing setting
forth the date of payment (the "Payment Date") of such dividend or distribution,
the record date as of which Shareholders entitled to payment thereof shall be
determined (the "Record Date"), and the amount payable per Share to Shareholders
of record as of the Record Date. In the case of dividends at regular intervals,
such notification may be a standing notification setting forth the method of
calculating such dividends and the Fund or its agent shall advise U.S. Trust of
the amount of such dividend at the appropriate intervals. U.S. Trust shall
notify the Fund and the entity then acting as the custodian (which entity may be
U.S. Trust) for the portfolio securities and cash of the Fund (the "Custodian")
of the amount of cash required to pay the dividend or distribution so that the
Fund may instruct the Custodian to make sufficient funds available on or before
the Payment Date. Upon receipt of such funds from the Custodian, U.S. Trust
shall prepare and mail to Shareholders who are not participants in the DRP (as
hereinafter defined in accordance
- 3 -
<PAGE> 4
with the terms of Section D), at their addresses as they appear on the records
maintained by U.S. Trust or pursuant to any written order of a Shareholder on
file with U.S. Trust, checks representing any dividends or distributions to
which they are entitled, and an accompanying distribution statement.
(2) In addition to the foregoing, dividend and distribution payment
services are composed of (i) inserting an enclosure supplied by the Fund with
each dividend or distribution check (all checks to be drawn on United States
Trust Company of New York with good funds in-house on mailing date); (ii)
replacing lost dividend checks; (iii) providing photocopies of cancelled checks
when requested by Shareholders; (iv) reconciling paid and outstanding checks;
(v) coding as "undeliverable" certain accounts to suppress mailing of dividend
checks to same; (vi) processing and recordkeeping of accumulated uncashed
dividends; (vii) furnishing requested dividend and distribution information to
Shareholders; and (viii) performing the following duties required by the
Interest and Dividend Tax Compliance Act of 1983:
- Withholding taxes from Shareholders who are not in compliance
with its provisions;
- Reconciling and reporting taxes withheld to the Internal Revenue
Service, including complying with additional 1099 reporting
requirements;
- Responding to Shareholder inquiries regarding regulations
promulgated pursuant to the Act;
- 4 -
<PAGE> 5
- Notifying Shareholders who have had taxes withheld of the
procedures to be followed to curtail future withholding; and
- Adjusting Shareholder account records to reflect subsequent
compliance.
D. Dividend Reinvestment Plan Service. (1) U.S. Trust will act as
agent for Shareholders under the Dividend Reinvestment Plan (the "DRP"), a copy
of which is attached hereto as Exhibit A.
E. Record Keeping Services.
(1) U.S. Trust shall keep records relating to the Standard Services to
be performed hereunder, in such form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules promulgated thereunder, U.S. Trust agrees that all such records
prepared or maintained by U.S. Trust relating to the services to be performed by
U.S. Trust hereunder are the property of the Fund and will be preserved for the
periods prescribed under Rule 31a-2 of said rules and made available in
accordance with such section and rules. U.S. Trust shall forthwith upon the
Fund's demand surrender promptly to the Fund and cease to retain in its files
those records and documents created and maintained by U.S. Trust pursuant to
this Agreement.
(2) U.S. Trust and the Fund agree that all books, records, information
and data pertaining to the business of the
- 5 -
<PAGE> 6
other party which are exchanged or received pursuant to the negotiation or the
carrying out of this Agreement shall remain confidential, and shall not be
voluntarily disclosed to any other person, except as may be required by law.
(3) In case of any requests or demands for the inspection of the
Shareholder records of the Fund, U.S. Trust will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. U.S. Trust reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
II. SHARE CERTIFICATES
The Fund shall supply U.S. Trust with sufficient blank Share
certificates. Such blank Share certificates shall be properly signed, manually
or by facsimile signature, by the duly authorized officers of the Fund, and
shall bear the seal or a facsimile thereof of the Fund. Notwithstanding the
death, resignation or removal of any officer of the Fund authorized to sign such
share certificates, U.S. Trust may continue to countersign certificates which
bear the manual or facsimile signature of such officer until otherwise directed
by the Fund. U.S. Trust shall establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of share certificates and
facsimile signature imprinting devices, if any,
- 6 -
<PAGE> 7
and for the preparation or use and for keeping account of such certificates
and devices. U.S. Trust hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
III. FEES AND EXPENSES
For the services to be performed by U.S. Trust pursuant to this
Agreement, the Fund shall pay to U.S. Trust all fees and expenses described
herein:
A. Shareholder Service Fee. The Fund shall pay U.S. Trust an annual
service fee (the "Shareholder Service Fee") for each Shareholder account, as
described more fully in Exhibit B hereto. For purposes of this Section A, a
"Shareholder account" is an account holding at least a fraction of a Share. The
Shareholder Service Fee is prorated and payable monthly based on the total
number of accounts on the system on the last day of each month.
B. Out-of-Pocket Expenses. The Fund agrees to reimburse U.S. Trust for
any and all out of pocket expenses as described and listed in Exhibit "B".
- 7 -
<PAGE> 8
C. Additional Services. The Fund may request additional processing,
special reports, changes in its DRP, or other additional services. The Fund
shall submit such requests for additional services in writing together with such
specifications as may be reasonably required by U.S. Trust, and U.S. Trust shall
respond to such requests in the form of a price quotation. The Fund's written
acceptance of the quotation must be received prior to implementation of such
request.
D. Terms of Payment. All fees, out-of-pocket expenses, or additional
charges of U.S. Trust shall be billed on a monthly basis and shall be due and
payable within 15 days after receipt of the invoice. U.S. Trust will render,
after the close of each month in which services have been furnished, a statement
reflecting all of the charges for such month.
E. Taxes. In addition to any other charges specified hereunder, the
Fund shall pay any sales tax, use tax, transfer tax, excise tax, tariff, duty,
or any other tax or payment in lieu thereof imposed by any governmental
authority or agency as a direct result of the provision by U.S. Trust of goods
or services hereunder, except for taxes based on U.S. Trust's net income.
- 8 -
<PAGE> 9
IV. REPRESENTATIONS AND WARRANTIES
A. U.S. Trust. U.S. Trust represents and warrants to the Fund that:
(1) It is a corporation duly organized and existing and in good
standing under the laws of the State of New York as a trust company pursuant to
Article III of the New York Banking Law;
(2) It is empowered under applicable laws and by its organization
certificate and by-laws to enter into and perform this Agreement;
(3) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement; and
(4) Its entering into this Agreement shall not cause a material breach
or be in material conflict with any other agreement or obligation of U.S. Trust;
(5) It has and will continue to have access to necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
B. The Fund. The Fund represents and warrants Trust that:
(1) It is a corporation duly organized and in good standing under the
laws of the State of Minnesota;
(2) It is empowered under applicable laws and by its certificate or
articles of incorporation and by-laws (the
- 9 -
<PAGE> 10
"Organizational Documents") to enter into and perform this Agreement;
(3) All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement;
(4) It is a closed-end investment company registered under the
Investment Company Act of 1940, as amended;
(5) Its entering into this Agreement shall not cause a material breach
or be in material conflict with any other agreement or obligation of the Fund;
and
(6) A registration statement on Form N-2 (including a prospectus), as
amended, is currently effective and will remain effective, and all necessary
filings under the securities laws of the states have been made.
V. DOCUMENTS FURNISHED BY THE FUND
A. Initially Furnished Documents. The Fund has furnished to U.S. Trust
the following documents:
(1) A copy of the Organizational Documents of the Fund, attached
hereto as Exhibit C;
(2) A specimen certificate representing outstanding Shares in the form
approved by the Board of the Fund, attached hereto as Exhibit D; and
(3) Copies of the Fund's registration statement on Form N-2 as amended
and declared effective by the Securities and Exchange Commission, attached
hereto as Exhibit E.
- 10 -
<PAGE> 11
B. Prospectively Furnished Documents. The Fund shall furnish the
following documents upon request by U.S. Trust:
(1) Copies of all amendments to the Organizational Documents of the
Fund;
(2) Copies of all post-effective amendments to the Fund's registration
statement on Form N-2; and
(3) Such other certificates, documents and opinions as U.S. Trust
shall deem to be appropriate or necessary for the proper performance of its
duties hereunder.
VI. INDEMNIFICATION
A. Fund Indemnification Obligation. U.S. Trust shall not be
responsible for, and the Fund shall indemnify and hold U.S. Trust harmless from
any and all losses, damages, costs, charges, reasonable attorneys' fees,
payments, expenses and liability arising out of or attributable to:
(1) All actions of U.S. Trust or its agents or subcontractors required
to be taken pursuant to this Agreement unless such actions are taken in bad
faith or with negligence or willful misconduct;
(2) The Fund's refusal or failure to comply with the terms of this
Agreement, or the Fund's lack of good faith, negligence or willful misconduct,
or the breach of any representation or warranty of the Fund hereunder;
- 11 -
<PAGE> 12
(3) The reliance on or use by U.S. Trust or its agents or
subcontractors of information, records or documents which are received by U.S.
Trust or its agents or subcontractors and furnished to it by or on behalf of the
Fund, and which have been prepared or maintained by the Fund or any other person
or firm (other than U.S. Trust or its agents or subcontractors) on behalf of the
Fund;
(4) The reliance on, or the carrying out by U.S. Trust or its agents
or subcontractors of, any instructions or requests of the Fund or recognition by
U.S. Trust of any Share certificates which are reasonably believed to bear the
proper manual or facsimile signatures of the officers of the Fund, and the
proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar;
(5) The offer or sale of Shares by the Fund in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state, or in violation of any stop order or other
determination or ruling by any federal agency or any state agency with respect
to the offer or sale of such Shares in such state.
B. U.S. Trust Indemnification Obligation. U.S. Trust shall indemnify
and hold the Fund harmless from and against any and all losses, damages, costs,
charges, reasonable attorney's fees, payments, expenses and liability arising
out of or attributable to U.S. Trust's refusal or failure to comply with the
- 12 -
<PAGE> 13
terms of this Agreement, or U.S. Trust's lack of good faith, negligence or
willful misconduct, or the breach of any representation or warranty of U.S.
Trust hereunder.
C. Claims. Upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion and shall keep the other party
advised with respect to all developments concerning such claim, but the failure
to give such notice shall not affect rights to indemnification hereunder except
to the extent that the indemnifying party demonstrates actual damage caused by
such failure. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification in the defense of such
claim but not to control such defense. The party seeking indemnification shall
in no case confess any claim or make any compromise in any case in which the
other party may be required to indemnify it, except with the indemnifying
party's prior written consent.
D. Force Majeure. In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
interruption of electrical power or other utilities, equipment or transmission
failure or damage reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable to the other for any damages
resulting from such failure to perform or otherwise from such causes. U.S. Trust
shall use all reasonable efforts to
- 13 -
<PAGE> 14
minimize the likelihood of all damage, loss of data, delays and errors resulting
from uncontrollable events, and should such damage, loss of data, delays or
errors occur, U.S. Trust shall use its reasonable efforts to mitigate the
effects of such occurrence.
VII. TERM AND TERMINATION
A. Notice. This Agreement shall remain in effect until terminated by
either party, without penalty, upon 90 days' prior written notice.
B. Breach. This Agreement may be terminated by either party if the
other party is in material breach of this Agreement. In order to so terminate
this Agreement, written notice shall be given to an officer of the other party
of the non-breaching party's intention to terminate due to a failure to comply
with, or breach of, a material term or condition of this Agreement. Said written
notice shall specifically state the material term or condition claimed to be
breached and shall provide at least 15 days in which to correct such alleged
breach. If such breach is not corrected in the time period allowed, then the
party giving notice may terminate this Agreement immediately, upon written
notice.
C. Expenses. Should this Agreement be terminated, all out-of-pocket
expenses reasonably incurred by U.S. Trust in
- 14 -
<PAGE> 15
connection with the movement of records and materials to its successor or to the
Fund shall be borne by the Fund.
VIII. USE OF U.S. TRUST NAME
The Fund shall not use U.S. Trust's name in any prospectus,
Shareholder report, advertisement or other material relating to the Fund, other
than for the purpose of merely identifying and describing the functions of U.S.
Trust hereunder, in a manner not approved by U.S. Trust in writing prior to such
use; provided, however, that U.S. Trust shall consent to all uses of its name
required by the Securities and Exchange Commission, any state securities
commission, or any federal or state regulatory authority; and provided, further,
that in no case will such approval be unreasonably withheld.
IX. ASSIGNMENT
Except as hereunder 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 assigns.
U.S. Trust may, with the Fund's consent, subcontract for the performance hereof
with third parties, or subsidiaries or other affiliates of U.S. Trust; provided,
however, that U.S. Trust shall be as fully responsible to the Fund for the acts
and omissions of
- 15 -
<PAGE> 16
any subcontractor as it is for its own acts and omissions and shall be
responsible for its choice of subcontractor.
X. CONFIDENTIALITY
The information contained in this Agreement is confidential and
proprietary in nature. By receiving this Agreement, the Fund agrees that none of
its directors, officers, employees, or agents, without the prior written consent
of U.S. Trust, will divulge, furnish or make accessible to any third party,
except as required by law or any regulatory authority or as permitted by the
next sentence, any part of this Agreement or information in connection therewith
which has been or may be made available to it. The Fund agrees that it will
limit access to the Agreement and such information to only those officers or
employees with responsibilities for analyzing the Agreement, to its counsel, to
such independent consultants hired expressly for the purpose of assisting in
such analysis, and to governmental agencies. In addition, the Fund agrees that
any persons to whom such information is properly disclosed shall be informed of
the confidential nature of the Agreement and the information relating thereto,
and shall be directed to treat the same appropriately. The terms set forth in
this Article X shall continue without termination.
- 16 -
<PAGE> 17
XI. MISCELLANEOUS
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York. 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 may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute the entire Agreement between the parties hereto and supersede any
prior oral or written Agreement with respect to the subject matter hereof. This
Agreement may not be amended or modified in any manner except by a written
instrument executed by both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the date first
above written.
UNITED STATES TRUST COMPANY NUVEEN PREMIUM INCOME
OF NEW YORK MUNICIPAL FUND 4, INC.
By /s/ Donald B. Morton By /s/ Anna R. Kucinskis
--------------------------- ---------------------------
Name Donald B. Morton Name Anna R. Kucinskis
------------------------ ------------------------
Title Vice President Title Vice President
------------------------ ------------------------
- 17 -
<PAGE> 18
Exhibit A
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
Terms and Conditions of the Dividend Reinvestment Plan
This Dividend Reinvestment Plan of Nuveen Premium Income Municipal Fund 4, Inc.
(the "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.
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 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 (less each Participant's pro
rata share of brokerage commissions incurred) to the purchase on the open market
of shares of the Fund for the Participant's account. Such purchases will be made
on or shortly after the payment date for such distribution, and in no event more
than 30 days after such date except where temporary curtailment or suspension of
purchases is necessary to comply with applicable provisions of federal
securities law.
4. For the purpose of this Plan, the market price of the Fund's shares on a
particular date shall be the last sale price on the Exchange where it is traded
on that date, or if there is no sale on such Exchange on that date, then the
mean between the closing bid and asked quotations for such shares on such
Exchange on such date.
<PAGE> 19
-2-
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 initial date of such purchase 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) 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 rata
shares of brokerage commissions on all open market purchases.
<PAGE> 20
- 3 -
10. Each Participant may terminate his account under the Plan by notifying U.S.
Trust of his intent so to do, such notice to be provided either in writing duly
executed by the Participant or by telephone in accordance with such reasonable
requirements as U.S. Trust and the Fund may agree. Such termination will be
effective immediately if notice is received by U.S. Trust not less than ten days
prior to any distribution record date for the next succeeding distribution;
otherwise such termination will be effective shortly after the investment of
such distribution with respect to all subsequent distributions. The Plan may be
terminated by the Fund or U.S. Trust upon at least 90 days prior notice. Upon
any termination, U.S. Trust will cause a certificate or certificates for the
full shares held for each Participant under the Plan and cash adjustment for any
fraction to be delivered to the Participant without charge. If any Participant
elects in advance of such termination to have U.S. Trust sell part or all of his
shares, U.S. Trust is authorized to deduct from the proceeds a $2.50 fee plus
the brokerage commissions incurred for the transaction.
11. These terms and conditions may be amended or supplemented by U.S. Trust or
the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, U.S. Trust receives
notice of the termination of such Participant's account under the Plan in
accordance with the terms hereof. Any such amendment may include an appointment
by U.S. Trust in its place and stead of a successor Agent under these terms and
conditions. Upon any such appointment of any Agent for the purpose of receiving
distributions, the Fund will be authorized to pay to such successor Agent, for
each Participant's account, all dividends and distributions payable on shares of
the Fund held in the Participant's name or under the Plan for retention or
application by such successor Agent as provided in these terms and conditions.
12. U.S. Trust shall at all times act in good faith and agree to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its negligence, bad faith or willful misconduct or that
of its employees.
13. These terms and conditions shall be governed by the laws of the State of New
York.
<PAGE> 21
EXHIBIT B
Shareholder Service Fee
$8.00 Per Shareholder Account
$ .50 Per Month Per Account in the Dividend Reinvestment Program
$1.00 Per Certificate Issued During IPO Period
$ .15 Per Certificate Issued After IPO Period
Note: Fee does not include out-of-pocket expenses:
Blank Certificates Proxy
Check Stock Forms/Stationery
Postage Envelopes
Telephone Expense
<PAGE> 1
EXHIBIT 11(a)
June 9, 1999
Nuveen Premium Income Municipal Fund 4, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
Re: Nuveen Premium Income Municipal Fund 4, Inc.
Shares to be Issued Pursuant to Agreement and Plan
of Reorganization and Liquidation
Ladies and Gentlemen:
We have acted as special counsel to Nuveen Premium Income Municipal
Fund 4, Inc., a Minnesota corporation (the "Fund"), in connection with the
Fund's authorization and proposed issuance of up to of its common shares,
par value $.01 per share (the "Common Shares"), and of 760 shares of its
Municipal Auction Rate Cumulative Preferred Stock, Series TH ("Series TH
Preferred") or 760 shares of its Municipal Auction Rate Cumulative Preferred
Stock, Series TH2 ("Series TH2 Preferred"). The Fund has advised us that as
provided in the Joint Proxy Statement--Prospectus included in the Fund's
Registration Statement on Form N-14 (File No. 333-77717) filed with the
Securities and Exchange Commission (the "Registration Statement"), the Fund
will issue shares of Series TH Preferred if shareholders approve an amendment
(the "Amendment") to the Fund's current Statement Establishing and Fixing the
Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock
relating to the Series TH Preferred and certain other series, as previously
amended (the "Series TH Statement") to authorize the issuance of an aggregate of
up to 10,000 shares of Series TH Preferred at the Fund's annual meeting of
shareholders to be held on July 28, 1999. The Fund has also advised us that if
shareholders do not approve the amendment, the Fund will issue shares of Series
TH2 Preferred pursuant to an additional statement establishing the rights and
preferences of Series TH2 Preferred (the "Series TH2 Statement"). The Series TH
Preferred or TH2 Preferred (collectively, the "MuniPreferred(R)") each has a par
value of $.01 per share and a liquidation preference of $25,000 per share. The
Common Shares and the MuniPreferred(R) are referred to herein collectively as
the "Shares." The Shares are to be issued pursuant to an Agreement and Plan of
Reorganization and Liquidation dated as of February 2, 1999 (the "Agreement"),
by and among the Fund Nuveen Washington Premium Income Municipal Fund, a
Massachusetts business trust, the form of which Agreement is included as Annex A
to the Joint Proxy Statement--Prospectus included in the Fund's Registration
Statement.
<PAGE> 2
Vedder, Price, Kaufman & Kammholz
June 9, 1999
Page 2
In rendering the opinions hereinafter expressed, we have reviewed
certificates of an officer of the Fund concerning the corporate proceedings
taken by the Fund in connection with the authorization and issuance of the
Shares, and we have reviewed such questions of law and examined copies of such
corporate records of the Fund, certificates of public officials and of
responsible officers of the Fund, and other documents as we have deemed
necessary as a basis for such opinions. As to the various matters of fact
material to such opinions, we have, when such facts were not independently
established, relied to the extent we deem proper on certificates of public
officials and of responsible officers of the Fund. In connection with such
review and examination, we have assumed that all copies of documents provided to
us conform to the originals; that all signatures are genuine; and that the
Agreement has been duly and validly authorized, executed and delivered on behalf
of each of the parties thereto. In so far as this opinion pertains to matters
governed by the laws of the State of Minnesota, we are relying, with your
consent, upon the opinion of Dorsey & Whitney LLP dated June 9, 1999, which
opinion is satisfactory in substance and form to us.
Based on 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 Shares, when issued and delivered by the Fund pursuant to,
and upon satisfaction of the conditions contained in, the Agreement and, in the
case of the MuniPreferred(R), upon the approval by shareholders and filing of
the Amendment with the Secretary of State of Minnesota pursuant to Minn. Stat.
Section 302A.139 (in the case of Series TH Preferred) or the filing of the
Series TH2 Statement with the Secretary of State of Minnesota pursuant to Minn.
Stat. Section 302A.401 subd. 3(b) (in the case of Series TH2 Preferred), will
be legally issued and fully paid and non-assessable; and the issuance of the
Shares is not subject to preemptive rights.
We hereby consent to the filing of this opinion as Exhibit 11.1 to the
Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Fund's final Joint Proxy Statement--Prospectus relating
to the Shares included in the Registration Statement.
Respectfully submitted,
MLW
DAS
RJM
<PAGE> 1
EXHIBIT 11(b)
[DORSEY & WHITNEY LLP LETTERHEAD]
June 9, 1999
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601
Re: Nuveen Premium Income Municipal Fund 4, Inc.
Shares to be Issued Pursuant to Agreement and Plan of
Reorganization and Liquidation
Ladies and Gentleman:
We have acted as special Minnesota counsel to Nuveen Premium Income
Municipal Fund 4, Inc., a Minnesota corporation (the "Fund"), in connection with
the Fund's authorization and proposed issuance of up to of its
common shares, par value $.01 per share (the "Common Shares"), and of 760 shares
of its Municipal Auction Rate Cumulative Preferred Stock, Series TH ("Series TH
Preferred") or 760 shares of its Municipal Auction Rate Cumulative Preferred
Stock, Series TH2 ("Series TH2 Preferred"). The Fund has advised us that as
provided in the Joint Proxy Statement--Prospectus included in the Fund's
Registration Statement on Form N-14 (File No. 333-77717) filed with the
Securities and Exchange Commission (the "Registration Statement"), the Fund will
issue shares of Series TH Preferred if shareholders approve an amendment (the
"Amendment") to the Fund's current Statement Establishing and Fixing the Rights
and Preferences of Municipal Auction Rate Cumulative Preferred Stock relating to
the Series TH1 Preferred and certain other series, as previously amended (the
"Series TH1 Statement") to authorize the issuance of an aggregate of up to
10,000 shares of Series TH Preferred at the Fund's annual meeting of
shareholders to be held on July 28, 1999. The Fund also has advised us that if
shareholders do not approve the Amendment, the Fund will issue shares of Series
TH2 Preferred pursuant to an additional statement establishing the rights and
preferences of Series TH2 Preferred (the "Series TH2 Statement"). The Series TH
Preferred of TH2 Preferred (collectively, the "MuniPreferred") each has a par
value of $.01 per share and a liquidation preference of $25,000 per share. The
Common Shares and the MuniPreferred(R) are referred to herein collectively as
the "Shares." The Shares are to be issued pursuant to an Agreement and plan of
Reorginization and Liquidation dated as of February 2, 1999 (the "Agreement"),
by and between the Fund and Nuveen Washington Premium Income Municipal Fund, a
Massachusetts business trust, the form of which Agreement is included as Annex A
to the Joint Proxy Statement--Prospectus included in the Registration Statement.
<PAGE> 2
DORSEY & WHITNEY LLP
Vedeer, Price, Kaufman & Kammholz
June 9, 1999
Page 2
In rendering the opinions hereinafter expressed, we have reviewed
certifications of an officer of the Fund concerning the corporate proceedings
taken by the Fund in connection with the authorization and issuance of the
Shares, and we have reviewed such questions of law and examined certificates of
public officials and such other documents as we have deemed necessary as a
basis for such opinions. As to the various matters of fact material to such
opinions, we have, when such facts were not independently established, relied
to the extent we deem proper on certificates of public officials and of
responsible officers of the Fund. In connection with such review and
examination, we have assumed that all copies of documents provided to us
conform to the originals; that all signatures are genuine; and that the
Agreement will have been duly and validly executed and delivered on behalf of
each of the parties thereto.
Based on the forgoing, 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 Shares, when issued and delivered by the Fund pursuant to, and
upon satisfaction of the conditions contained in, the Agreement and, in the case
of the MuniPreferred(R), upon the approval by shareholders and filing of the
Amendment with the Secretary of State of Minnesota pursuant to Minn. Stat.
Section 302A.139 (in the case of Series TH Preferred) or the filing of the
Series TH2 Statement with the Secretary of State of Minnesota pursuant to Minn.
Stat. Section 302A.401 subd. 3(b) (in the case of Series TH2 Preferred), will
be legally issued and fully paid and non-assessable; and the issuance of the
Shares is not subject to preemptive rights.
In rendering the foregoing opinions, we express no opinion as to the
laws of any jurisdiction other than the State of Minnesota. You and the Fund
are hereby authorized to rely on the foregoing opinions in rendering your
opinion to the Fund to be filed as Exhibit 11.1 to the Registration Statement.
Except as aforesaid, the foregoing opinions are not to be relied upon by any
other person without our prior written authorization.
We hereby consent to the filing of this opinion as Exhibit 11.2 to
the Registration Statement and to the reference to this firm under the caption
"Legal Opinions" in the Fund's final Joint Proxy Statement--Prospectus relating
to the Shares included in the Registration Statement.
Very truly yours,
JDA/cmq
<PAGE> 1
Exhibit 12
______________, 1999
Nuveen Premium Income Nuveen Washington Premium
Municipal Fund 4, Inc. Income Municipal Fund
333 West Wacker Drive 333 West Wacker Drive
Chicago, Illinois 60606 Chicago, Illinois 60606
Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences of the proposed reorganization ("Reorganization") of Nuveen
Washington Premium Income Municipal Fund, a Massachusetts business trust
("Acquired Fund"), into Nuveen Premium Income Municipal Fund 4, Inc., a
Minnesota corporation ("Acquiring Fund"). The Reorganization contemplates the
acquisition by the Acquiring Fund of substantially all the assets of the
Acquired Fund in exchange for voting shares ("shares") of the Acquiring Fund and
the assumption of the Acquired Fund's liabilities. Thereafter, the shares of the
Acquiring Fund will be distributed to the shareholders of the Acquired Fund and
the Acquired Fund will be completely liquidated and terminated. The foregoing
will be accomplished pursuant to an Agreement and Plan of Reorganization and
Liquidation, dated as of February 2, 1999 (the "Plan"), entered into by the
Acquired Fund and the Acquiring Fund.
In rendering this opinion, we have reviewed and relied upon statements
made to us by certain of your officers. We have also examined certificates of
such officers and such other agreements, documents, and corporate records that
have been made available to us and such other matters as we have deemed relevant
for purposes of this opinion. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to originals of all documents submitted to us as
copies and the authenticity of the originals of such latter documents.
Our opinion is based, in part, on the assumption that the proposed
Reorganization described herein will occur in accordance with the agreements and
the facts and representations set forth or referred to in this opinion letter,
and that such facts and representations are accurate as of the date hereof and
will be accurate on the effective date of such Reorganization (the "Effective
Time"). As
<PAGE> 2
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Washington Premium Income Municipal Fund
_____________, 1999
Page 2
more fully discussed below, we have also assumed in issuing our opinion that the
shareholders of the Acquired Fund do not have any plan or intention to dispose
of a certain number of the Acquiring Fund shares received by them in the
Reorganization. We have undertaken no independent investigation of the accuracy
of the facts, representations and assumptions set forth or referred to herein.
For the purposes indicated above, and based upon the facts, assumptions
and conditions as set forth herein, and the representations made to us by duly
authorized officers of the Acquired Fund and the Acquiring Fund in a letter
dated ___________, 1999, it is our opinion that:
1. The acquisition by the Acquiring Fund of substantially all
the assets of the Acquired Fund in exchange solely for Acquiring Fund
shares and the assumption by the Acquiring Fund of the Acquired Fund's
liabilities, if any, followed by the distribution by the Acquired Fund
of the Acquiring Fund shares to the shareholders of the Acquired Fund
in exchange for their Acquired Fund shares in complete liquidation of
the Acquired Fund, will constitute a "reorganization" within the
meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the Acquiring Fund and the Acquired Fund
each will be "a party to a reorganization" within the meaning of
Section 368(b) of the Code;
2. The Acquired Fund's shareholders will recognize no gain or
loss upon the exchange of all of their Acquired Fund shares for
Acquiring Fund shares in complete liquidation of the Acquired Fund,
except with respect to cash received for a fractional Acquiring Fund
common share, if any (Code Section 354(a)(1));
3. No gain or loss will be recognized by the Acquired Fund
upon the transfer of substantially all its assets to the Acquiring Fund
in exchange solely for Acquiring Fund shares and the assumption by the
Acquiring Fund of the Acquired Fund's liabilities, if any, and with
respect to the subsequent distribution of those Acquiring Fund shares
to the Acquired Fund shareholders in complete liquidation of the
Acquired Fund (Code Section 361);
4. No gain or loss will be recognized by the Acquiring Fund
upon the acquisition of substantially all the Acquired Fund's assets in
exchange solely for Acquiring Fund shares and the assumption of the
Acquired Fund's liabilities, if any (Code Section 1032(a));
5. The basis of the assets acquired by the Acquiring Fund will
be, in each instance, the same as the basis of those assets when held
by the Acquired Fund immediately before the transfer, and the holding
period of such assets acquired by the Acquiring Fund will
<PAGE> 3
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Washington Premium Income Municipal Fund
_____________, 1999
Page 3
include the holding period thereof when held by the Acquired Fund (Code
Sections 362(b) and 1223(2));
6. The basis of the Acquiring Fund shares to be received by
the Acquired Fund's shareholders upon liquidation of the Acquired Fund
including any fractional common share interest to which the shareholder
is entitled will be, in each instance, the same as the basis of the
Acquired Fund shares surrendered in exchange therefor (Code Section
358(a)(1)); and
7. The holding period of the Acquiring Fund shares to be
received by the Acquired Fund's shareholders will include the period
during which the Acquired Fund shares to be surrendered in exchange
therefor were held, provided such Acquired Fund shares were held as
capital assets by those shareholders on the date of the exchange (Code
Section 1223(1)).
FACTS
Our opinion is based upon the above referenced representations and the
following facts and assumptions, any alteration of which could adversely affect
our conclusions.
The Acquired Fund has been registered and operated since it commenced
operations as a diversified, closed-end, management investment company under the
Investment Company Act of 1940, 15 U.S.C. ss.80a, et seq. (the "1940 Act"). Its
common shares are traded on the American Stock Exchange. The Acquired Fund also
currently has outstanding Municipal Auction Rate Cumulative Preferred Shares,
Series TH ("Acquired Fund MuniPreferred"). The Acquired Fund has qualified and
will qualify as a regulated investment company under Section 851 of the Code for
each of its taxable years, and has distributed and will distribute all or
substantially all its income so that it and its shareholders have been and will
be taxed in accordance with Section 852 of the Code.
The Acquiring Fund has also been registered and operated since it
commenced operations as a diversified, closed-end, management investment company
under the 1940 Act. It has qualified as a regulated investment company under
Section 851 of the Code for each of its taxable years, will so qualify for its
current taxable year, and has distributed and will distribute all or
substantially all its income so that it and its shareholders have been and will
be taxed in accordance with Section 852 of the Code. The Acquiring Fund's common
shares are traded on the New York Stock Exchange. In addition to its common
shares, the Acquiring Fund will also issue in the Reorganization Municipal
Auction Rate Cumulative Preferred Shares, Series TH or TH2 ("Acquiring Fund
MuniPreferred").
<PAGE> 4
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Washington Premium Income Municipal Fund
_____________, 1999
Page 4
Upon satisfaction of certain terms and conditions set forth in the Plan
on or before the closing date, the following will occur: (a) the Acquiring Fund
will acquire substantially all the assets of the Acquired Fund in exchange for
the Acquiring Fund's assumption of substantially all the liabilities of the
Acquired Fund and the issuance of Acquiring Fund shares to such Acquired Fund;
(b) the Acquiring Fund shares will be distributed to the shareholders of the
Acquired Fund; and (c) the Acquired Fund will be dissolved and liquidated. The
assets of the Acquired Fund to be acquired by the Acquiring Fund consist
primarily of bonds whose interest is exempt from federal income taxation, cash
and other securities held in the Acquired Fund's portfolio.
The value of the Acquired Fund's assets to be acquired and the
liabilities to be assumed by the Acquiring Fund and the net asset value per
Acquiring Fund common share to be issued by the Acquiring Fund will be
determined by The Chase Manhattan Bank, N.A. ("Chase"), the custodian for each
of the Funds, as of the Effective Time. Net asset value per Acquiring Fund
common share shall be computed by dividing the value of the Acquiring Fund's
total assets, less liabilities and less the liquidation value of all outstanding
preferred shares of the Acquiring Fund and any accumulated and unpaid dividends
thereon, by the number of Acquiring Fund common shares outstanding. In
determining net asset value per Acquiring Fund common share and the value of the
Acquired Fund's assets, Chase will utilize the valuations of portfolio
securities furnished by a pricing service approved by the Board of Trustees of
the Acquired Fund and the Board of Directors of the Acquiring Fund.
As soon as practicable after the Effective Time, the Acquired Fund will
be liquidated and will distribute the newly issued Acquiring Fund common shares
it receives pro rata to its common shareholders of record, and one share of
Acquiring Fund MuniPreferred to its preferred shareholders of record for each
share of Acquired Fund MuniPreferred held, in exchange for such shareholders'
interests in such Acquired Fund. Such liquidation and distribution will be
accomplished by opening accounts on the books of the Acquiring Fund in the names
of the shareholders of the Acquired Fund and transferring to those shareholder
accounts the Acquiring Fund common shares, or the shares of Acquiring Fund
MuniPreferred, as the case may be. Each common shareholder account would
represent the respective pro rata number of newly issued Acquiring Fund common
shares (rounded down, in the case of fractional Acquiring Fund common shares, to
the next largest number of whole Acquiring Fund common shares) due such Acquired
Fund common shareholder. No fractional Acquiring Fund common shares will be
issued. In lieu thereof, pursuant to the Plan, the Acquired Fund's transfer
agent will aggregate all fractional Acquiring Fund common shares and sell the
resulting whole Acquiring Fund common shares on the New York Stock Exchange for
the account of all shareholders of fractional interests, and each such
shareholder will be entitled to his or her pro rata share of the proceeds of
such sale upon surrender of his or her Acquired Fund common share certificates.
Because the number of shares of Acquiring Fund MuniPreferred to be issued to the
Acquired Fund is equal to the number of outstanding shares of the Acquired
Fund's MuniPreferred,
<PAGE> 5
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Washington Premium Income Municipal Fund
_____________, 1999
Page 5
each preferred shareholder of the Acquired Fund will receive one share of
Acquiring Fund MuniPreferred for each share of Acquired Fund MuniPreferred held
by him or her.
As a result of the Reorganization, every common shareholder of the
Acquired Fund will own Acquiring Fund common shares that, except for cash
payments received in lieu of fractional Acquiring Fund common shares, would have
an aggregate per share net asset value immediately after the Effective Time
equal to the aggregate per share net asset value of that shareholder's Acquired
Fund common shares immediately prior to the Effective Time. Since the Acquiring
Fund common shares issued to the common shareholders of the Acquired Fund would
be issued at net asset value in exchange for the net assets of such Acquired
Fund having a value equal to the aggregate per share net asset value of those
Acquiring Fund common shares so issued, the net asset value of the Acquiring
Fund common shares should remain virtually unchanged by the Reorganization.
The shares of Acquiring Fund MuniPreferred issued pursuant to the
Reorganization rank on a parity with each other and with each other series of
Acquiring Fund preferred shares as to the payment of dividends and the
distribution of assets upon liquidation. All shares of Acquiring Fund
MuniPreferred carry one vote per share on all matters on which such shares are
entitled to be voted. Shares of Acquiring Fund MuniPreferred will be, when
issued, fully paid and generally nonassessable, and have no pre-emptive,
conversion or exchange rights or rights to cumulative voting.
In approving the Reorganization, the Board of Directors of the
Acquiring Fund and the Board of Trustees of the Acquired Fund each identified
certain benefits that are likely to result from combining the funds, including
lower expenses per common share, greater efficiency and flexibility in portfolio
management and a more liquid trading market for the common shares of the
combined fund. Each Board also considered the possible risks and costs of
combining the funds and determined that the Reorganization is likely to provide
benefits to the shareholders of each fund that outweigh the costs incurred.
CONCLUSION
Based on the foregoing, it is our opinion that the acquisition by the
Acquiring Fund, pursuant to the Plan, of substantially all the assets and
liabilities of the Acquired Fund in exchange for voting shares of the Acquiring
Fund will qualify as a reorganization under Code Section 368(a)(1)(C).
Our opinions set forth above with respect to (1) the nonrecognition of
gain or loss to the Acquired Fund and the Acquiring Fund, (2) the basis and
holding period of the assets received by
<PAGE> 6
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Washington Premium Income Municipal Fund
_____________, 1999
Page 6
the Acquiring Fund, (3) the nonrecognition of gain or loss to the Acquired
Fund's shareholders upon the receipt of the Acquiring Fund shares, and (4) the
basis and holding period of the Acquiring Fund shares received by the Acquired
Fund's shareholders, follow as a matter of law from the opinion that the
acquisition under the Plan will qualify as a reorganization under Code Section
368(a)(1)(C).
The opinions expressed in this letter are based on the Code, the Income
Tax Regulations promulgated by the Treasury Department thereunder and judicial
authority reported as of the date hereof. We have also considered the position
of the Internal Revenue Service (the "Service") reflected in published and
private rulings. There can be no assurances that future legislative or
administrative changes, court decisions or Service interpretations will not
significantly modify the statements or opinions expressed herein.
Our opinions are limited to those federal income tax issues
specifically considered herein and are addressed to and are only for the benefit
of the Acquired Fund and Acquiring Fund. We do not express any opinion as to any
other federal income tax issues, or any state or local law issues, arising from
the transactions contemplated by the Plan. Although the discussion herein is
based upon our best interpretation of existing sources of law and expresses what
we believe a court would properly conclude if presented with these issues, no
assurance can be given that such interpretations would be followed if they were
to become the subject of judicial or administrative proceedings.
Very truly yours,
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
<PAGE> 1
Exhibit 14
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated December 11, 1998 and July 14, 1998 for Nuveen Premium
Income Municipal Fund 4, Inc. and Nuveen Washington Premium Income Municipal
Fund in the Registration Statement (Form N-14) and related Joint Proxy Statement
- - Prospectus and Statement of Additional Information of Nuveen Premium Income
Municipal Fund 4, Inc. filed with the Securities and Exchange Commission in this
Pre-Effective Amendment No. 1 to the Registration Statement under the Securities
Act of 1933 (Registration No. 33-77717).
ERNST & YOUNG LLP
Chicago, Illinois
June 9, 1999
<PAGE> 1
<TABLE>
<CAPTION>
<S><C>
[NUVEEN LOGO]
JOHN NUVEEN & CO., INC.
333 WEST WACKER DRIVE Nuveen Premium Income Municipal Fund 4, Inc.
CHICAGO, IL 60606-1286 Annual Meeting of Shareholders
COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, JULY 28, 1999
The annual meeting of shareholders will be held Wednesday, July 28,
1999, at 10:30 a.m. Central Time, in the Grand Ballroom of the
Hotel Inter-Continental, 505 North Michigan Avenue, Chicago,
Illinois. At this meeting, you will be asked to vote on the proposals
described in the attached proxy statement. The undersigned hereby
appoints Timothy R. Schwertfeger, Alan F. Berkshire, Larry W. Martin
and Gifford R. Zimmerman, and each of them, with full power of
substitution, proxies for the undersigned to represent and vote the
shares of the undersigned at the annual Meeting of Shareholders of
Nuveen Premium Income Municipal Fund 4, Inc. to be held on July 28,
1999, or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY AGREED THAT THESE PROPOSALS
ARE IN THE BEST INTERESTS OF SHAREHOLDERS AND URGES YOU TO VOTE IN
FAVOR OF THE PROPOSALS.
You are encouraged to specify your choices by marking the
appropriate boxes. If you do not mark any boxes, your proxy
will be voted "FOR" all of the proposals. Please mark, sign,
date and return this proxy card promptly using the enclosed
envelope if you are not voting by telephone or over the
internet. To vote by telephone, please call (800) 690-6903.
To vote over the Internet, go to www.proxyvote.com.
In either case you will be asked to enter the control
number on the right hand side of this proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X [CONTROL NUMBER]
- ------------------------------------------------------------------------------------------------------------------------------------
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE
COMPLETE, DATE AND SIGN YOUR PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED. AS
AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE
(800-690-6903) OR OVER THE INTERNET (www.proxyvote.com).
SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS ON VOTING
BY PHONE OR OVER THE INTERNET.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote on Directors (Proposal 3)
ELECTION OF NOMINEES TO THE BOARD To withhold authority to vote for an
(01) Robert P. Bremmer, individual nominee mark the box "For All
(02) Lawrence H. Brown, Except" and write the nominee's number
(03) Anne E. Impellizzeri, FOR WITHHOLD FOR ALL on the line below.
(04) Peter R. Sawers ALL ALL EXCEPT
(07) Judith M. Stockdale
/ / / / / / -----------------------------------
Vote on Proposals (2 and 4) - Proposal is not applicable for Common Stock Shareholders.
2. Approval of and amendment to the Fund's FOR AGAINST ABSTAIN
Statement Establishing and Fixing the
Rights and Preferences of Municipal
Auction Rate Cumulative Preferred Stock
as described in the proxy statement. / / / / / /
4. Ratification of the selection of Ernst FOR AGAINST ABSTAIN
& Young LLP as independent auditors for
the current fiscal year. / / / / / /
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the special meeting.
The shares to which this proxy relates will be voted as specified. If no specification is made, such shares will be voted "FOR"
the election of nominees to the Board and "FOR" the proposals set forth on this proxy.
Please be sure to sign and date this proxy if you are not voting by phone or over the internet.
NOTE: Please sign your name exactly as it appears on this proxy. If shares are held jointly, each holder must sign the proxy. If you
are signing on behalf of an estate, trust or corporation, please state your title or capacity.
- ------------------------------------------------- -------------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature [Joint Owners] Date
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S><C>
[NUVEEN LOGO]
JOHN NUVEEN & CO., INC.
333 WEST WACKER DRIVE Nuveen Premium Income Municipal Fund 4, Inc.
CHICAGO, IL 60606-1286 Annual Meeting of Shareholders
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, JULY 28, 1999
The annual meeting of shareholders will be held Wednesday, July 28,
1999, at 10:30 a.m. Central Time, in the Grand Ballroom of the
Hotel Inter-Continental, 505 North Michigan Avenue, Chicago,
Illinois. At this meeting, you will be asked to vote on the proposals
described in the attached proxy statement. The undersigned hereby
appoints Timothy R. Schwertfeger, Alan F. Berkshire, Larry W. Martin
and Gifford R. Zimmerman, and each of them, with full power of
substitution, proxies for the undersigned to represent and vote the
shares of the undersigned at the annual Meeting of Shareholders of
Nuveen Premium Income Municipal Fund 4, Inc. to be held on July 28,
1999, or any adjournment or adjournments thereof.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY AGREED THAT THESE PROPOSALS
ARE IN THE BEST INTERESTS OF SHAREHOLDERS AND URGES YOU TO VOTE IN
FAVOR OF THE PROPOSALS.
You are encouraged to specify your choices by marking the
appropriate boxes. If you do not mark any boxes, your proxy
will be voted "FOR" all of the proposals. Please mark, sign,
date and return this proxy card promptly using the enclosed
envelope if you are not voting by telephone or over the
internet. To vote by telephone, please call (800) 690-6903.
To vote over the Internet, go to www.proxyvote.com.
In either case you will be asked to enter the control
number on the right hand side of this proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X [CONTROL NUMBER]
- ------------------------------------------------------------------------------------------------------------------------------------
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC.
Preferred Stock: Series M, T, T2, W, TH, F and F2
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE
COMPLETE, DATE AND SIGN YOUR PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED. AS
AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE
(800-690-6903) OR OVER THE INTERNET (www.proxyvote.com).
SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS ON VOTING
BY PHONE OR OVER THE INTERNET.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Vote on Directors (Proposal 3)
ELECTION OF NOMINEES TO THE BOARD To withhold authority to vote for an
(01) Robert P. Bremmer For Withheld For All individual nominee mark the box "For All
(02) Lawrence H. Brown All All Except Except" and write the nominee's number
(03) Anne E. Impellizzeri on the line below.
(04) Peter R. Sawers
(05) William J. Schneider (Preferred Only) / / / / / /
(06) Timothy R. Schwertfeger (Preferred Only) -----------------------------------
(07) Judith M. Stockdale
Vote on Proposals (1, 2 and 4)
1. Approval of an Agreement and Plan of For Against Abstain
Reorganization and Liquidation between
Nuveen Premium Income Municipal Fund 4,
Inc. (the "Fund") and Nuveen Washington / / / / / /
Premium Income Municipal Fund.
2. Approval of and amendment to the Fund's For Against Abstain
Statement Establishing and Fixing the
Rights and Preferences of Municipal
Auction Rate Cumulative Preferred Stock
as described in the proxy statement. / / / / / /
4. Ratification of the selection of Ernst For Against Abstain
& Young LLP as independent auditors for
the current fiscal year. / / / / / /
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the special meeting.
The shares to which this proxy relates will be voted as specified. If no specification is made, such shares will be voted "FOR"
the election of nominees to the Board and "FOR" the proposals set forth on this proxy.
Please be sure to sign and date this proxy if you are not voting by phone or over the internet.
If the undersigned is a broker-dealer, it hereby instructs the proxies, pursuant to Rule 452 of the New York Stock Exchange, to vote
any uninstructed shares of Municipal Auction Rate Cumulative Preferred Stock Series M, T, T2, W, TH and F in the same proportion as
votes cast by holders of Municipal Auction Rate Cumulative Preferred Stock Series M, T, T2, W, TH, and F, who have responded to this
proxy solicitation.
NOTE: Please sign your name exactly as it appears on this proxy. If shares are held jointly, each holder must sign the proxy. If you
are signing on behalf of an estate, trust or corporation, please state your title or capacity.
- ------------------------------------------------- -------------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature [Joint Owners] Date
</TABLE>
<PAGE> 1
<TABLE>
<CAPTION>
<S><C>
NUVEEN
Nuveen Washington Premium Income Municipal Fund
Special Meeting of Shareholders
COMMON SHARES
JOHN NUVEEN & CO., INC. PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR THE
333 WEST WACKER DRIVE SPECIAL MEETING OF SHAREHOLDERS, JULY 28,1999
CHICAGO, IL 60606-1286
A special meeting of shareholders will be held Wednesday,
July 28, 1999 at 10:30 a.m. Central Time, in the Grand
Ballroom of the Hotel Inter-Continental, 505 North Michigan
Avenue, Chicago, Illinois. At this meeting, you will be
asked to vote on the proposal described in the attached
proxy statement. The undersigned hereby appoints Timothy
R. Schwertfeger, Alan G. Berkshire, Larry W. Martin and
Gifford R. Zimmerman, and each of them, with full power
of substitution, proxies for the undersigned to represent
and vote the shares of the undersigned at the Special
Meeting of Shareholders of Nuveen Washington Premium
Income Municipal Fund to be held on July 28, 1999,
or any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES HAS UNANIMOUSLY AGREED THAT THIS
PROPOSAL IS IN THE BEST INTEREST OF SHAREHOLDERS AND
URGES YOU TO VOTE IN FAVOR OF THE PROPOSAL.
You are encouraged to specify your choices by marketing the appropriate boxes.
If you do not mark any boxes, your proxy will be voted for "FOR" the
proposal. Please mark, sign, date and return this proxy card promptly using the
enclosed envelope if you are not voting by telephone or over the internet.
To vote by telephone, please call (800) 690-6903. To vote over the Internet,
go to www.proxyvote.com. In either case you will be asked to enter the control
number on the right hand side of this proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X [CONTROL NUMBER]
- ------------------------------------------------------------------------------------------------------------------------------------
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND, INC.
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE
COMPLETE, DATE AND SIGN YOUR PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
AS AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE
(800-690-6903) OR OVER THE INTERNET (www.proxyvote.com).
SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS ON
VOTING BY PHONE OR OVER THE INTERNET.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Proposal 1. Approval of an Agreement and Plan of For Against Abstain
Reorganization and Liquidation between
Nuveen Premium Income Municipal Fund 4, / / / / / /
Inc. and Nuveen Washington Premium Income
Municipal Fund.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the special meeting.
The shares to which this proxy relates will be voted as specified. If no specification is made, such shares will be voted "FOR"
the proposal set forth on this proxy.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IF YOU ARE NOT VOTING BY PHONE OR OVER THE INTERNET.
NOTE: Please sign your name exactly as it appears on this proxy. If shares are held jointly, each
holder must sign the proxy. If you are signing on behalf of an estate, trust or corporation, please
state your title or capacity.
- ------------------------------------------- ---------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
<S><C>
NUVEEN
Nuveen Washington Premium Income Municipal Fund
Special Meeting of Shareholders
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED SHARES
JOHN NUVEEN & CO., INC. PROXY SOLICITED BY THE BOARD OF TRUSTEES FOR THE
333 WEST WACKER DRIVE SPECIAL MEETING OF SHAREHOLDERS, JULY 28,1999
CHICAGO, IL 60606-1286
A special meeting of shareholders will be held Wednesday,
July 28, 1999 at 10:30 a.m. Central Time, in the Grand
Ballroom of the Hotel Inter-Continental, 505 North Michigan
Avenue, Chicago, Illinois. At this meeting, you will be
asked to vote on the proposal described in the attached
proxy statement. The undersigned hereby appoints Timothy
R. Schwertfeger, Alan G. Berkshire, Larry W. Martin and
Gifford R. Zimmerman, and each of them, with full power
of substitution, proxies for the undersigned to represent
and vote the shares of the undersigned at the Special
Meeting of Shareholders of Nuveen Washington Premium
Income Municipal Fund to be held on July 28, 1999, or
any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES HAS UNANIMOUSLY AGREED THAT THIS
PROPOSAL IS IN THE BEST INTEREST OF SHAREHOLDERS AND
URGES YOU TO VOTE IN FAVOR OF THE PROPOSAL.
You are encouraged to specify your choices by marketing the appropriate boxes.
If you do not mark any boxes, your proxy will be voted for "FOR" the
proposal. Please mark, sign, date and return this proxy card promptly using the
enclosed envelope if you are not voting by telephone or over the internet.
To vote by telephone, please call (800) 690-6903. To vote over the Internet,
go to www.proxyvote.com. In either case you will be asked to enter the control
number on the right hand side of this proxy card.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X [CONTROL NUMBER]
- ------------------------------------------------------------------------------------------------------------------------------------
NUVEEN WASHINGTON PREMIUM INCOME MUNICIPAL FUND, INC.
Preferred Shares: Series TH
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE
COMPLETE, DATE AND SIGN YOUR PROXY CARD AND RETURN IT IN
THE ENCLOSED ENVELOPE SO THAT YOUR VOTE WILL BE COUNTED.
AS AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE
(800-690-6903) OR OVER THE INTERNET (www.proxyvote.com).
SEE THE ENCLOSED INSERT FOR FURTHER INSTRUCTIONS ON
VOTING BY PHONE OR OVER THE INTERNET.
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
Proposal 1. Approval of an Agreement and Plan of For Against Abstain
Reorganization and Liquidation between
Nuveen Premium Income Municipal Fund 4, / / / / / /
Inc. and Nuveen Washington Premium Income
Municipal Fund.
In their discretion, the proxies are authorized to vote upon such other business as may properly come before the special meeting.
The shares to which this proxy relates will be voted as specified. If no specification is made, such shares will be voted "FOR"
the proposal set forth on this proxy.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY IF YOU ARE NOT VOTING BY PHONE OR OVER THE INTERNET.
NOTE: Please sign your name exactly as it appears on this proxy. If shares are held jointly, each
holder must sign the proxy. If you are signing on behalf of an estate, trust or corporation, please
state your title or capacity.
- ------------------------------------------- ---------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
<PAGE> 1
EXHIBIT 17(c)
NUVEEN AUCTION AGENCY AGREEMENT
Basic Terms for Acting as Auction Agent
November 1, 1993
These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a bank or trust company identified in a Request and
Acceptance Letter will act as auction agent (an "Auction Agent") for Municipal
Auction Rate Cumulative Preferred Stock or Shares issued by an investment
company registered under the Investment Company Act of 1940, as amended, as
further identified by such Request and Acceptance Letter (a "Fund"), for which
Nuveen Advisory Corp. is the investment adviser.
- --------------------------------------------------------------------------------
The Fund proposes to issue shares of MuniPreferred(R) pursuant to its
Articles of Incorporation or Declaration of Trust, as amended or supplemented by
the Statement. The Fund desires that the Auction Agent perform certain duties in
connection with the MuniPreferred upon the terms and subject to the conditions
of the Agreement.
1. Definitions and Rules of Construction.
1.1 Terms Defined By Reference to Statement.
Capitalized terms not defined herein shall have the respective
meanings specified in the Statement.
1.2 Terms Defined Herein.
As used herein and in the Settlement Procedures, the following terms
shall have the following meanings, unless the context otherwise requires:
(a) "Agent Member" of any Person shall mean the member of, or
participant in, the Securities Depository that will act on behalf of a
Bidder.
(b) "Agreement" shall mean the Basic Terms, together with the Request
and Acceptance Letter relating to one or more series of MuniPreferred.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Procedures" shall mean the auction procedures
constituting Part II of the form of Statement as of the filing thereof.
(e) "Authorized Officer" of the Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant
Treasurer and Assistant Secretary of the Auction Agent assigned to its
Corporate Trust and Agency Group and
<PAGE> 2
every other officer or employee of the Auction Agent designated as an
"Authorized Officer" for purposes hereof in a communication to the Fund.
(f) "Broker-Dealer Agreement" shall mean each agreement among the
Fund, the Auction Agent and a Broker-Dealer substantially in the form
attached hereto as Exhibit A.
(g) "Fund Officer" shall mean the Chairman of the Board of Directors
or Board of Trustees, as the case may be, each Vice Chairman of the Board
of Directors or Board of Trustees (whether or not designated by a number or
word or words added before or after the title "Vice Chairman"), the
President, each Vice President (whether or not designated by a number or
word or words added before or after the title "Vice President"), the
Secretary, the Treasurer, each Assistant Vice President, each Assistant
Secretary and each Assistant Treasurer of the Fund and every other officer
or employee of the Fund designated as a "Fund Officer" for purposes hereof
in a notice to the Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par
value $.01 per share, of the Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of the Fund or any
committee thereof shall specify; as set forth in the Request and Acceptance
Letter.
(i) "Request and Acceptance Letter" shall mean the letter from the
Fund to the Auction Agent pursuant to which the Fund appoints the Auction
Agent and the Auction Agent accepts its appointment as auction agent for
the MuniPreferred.
(j) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit B.
(k) "Statement" shall mean the Statement Establishing and Fixing the
Rights and Preferences of, and authorizing the issuance of, one or more
series of Municipal Auction Rate Cumulative Preferred Stock or Municipal
Auction Rate Cumulative Preferred Shares, as filed by the Fund with the
office of the Secretary of State or other officer of the state where the
Fund was incorporated or organized, a copy of which is attached to the
Request and Acceptance Letter, as the same may be amended, supplemented or
modified from time to time.
1.3 Rules of Construction.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of the Agreement:
2
<PAGE> 3
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of the Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto" and other words of similar
import refer to the Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
2.1 Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The Statement for each series of MuniPreferred will provide that
the Applicable Rate for such series for each Subsequent Rate Period thereof
shall, except under certain conditions, be the rate per annum that a bank or
trust company appointed by the Fund advises results from implementation of the
Auction Procedures for such series. The Board of Directors or Board of Trustees,
as the case may be, of the Fund has adopted a resolution appointing the Auction
Agent as auction agent for purposes of the Auction Procedures for each series of
MuniPreferred. The Auction Agent accepts such appointment and agrees to follow
the procedures set forth in this Section 2 and the Auction Procedures for the
purpose of determining the Applicable Rate for each series of MuniPreferred for
each Subsequent Rate Period thereof for which the Applicable Rate is to be
determined by an Auction. Each periodic implementation of such procedures is
hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial
Owners.
(a) Not later than seven days prior to the first Auction Date for the
first series of MuniPreferred subject to an Auction, the Fund shall provide the
Auction Agent with a list of the Broker-Dealers. Not later than seven days prior
to any Auction Date for any series of MuniPreferred for which any change in such
list of Broker-Dealers is to be effective, the Fund will notify the Auction
Agent in writing of such change and, if any such change involves the addition of
a Broker-Dealer to such list, shall cause to be delivered to the Auction Agent
for
3
<PAGE> 4
execution by the Auction Agent a Broker-Dealer Agreement signed by such
Broker-Dealer; provided, however, that if the Fund proposes to designate any
Special Rate Period of any series of MuniPreferred pursuant to Section 4 of Part
I of the Statement, not later than 11:00 A.M. on the Business Day next preceding
the Auction next preceding the first day of such Rate Period or by such later
time or date, or both, as may be agreed to by the Auction Agent, the Fund shall
provide the Auction Agent with a list of the Broker-Dealers for such series and
a manually signed copy of each Broker-Dealer Agreement or a new Schedule A to a
Broker-Dealer Agreement (which Schedule A shall replace and supersede any
previous Schedule A to such Broker-Dealer Agreement) with each Broker-Dealer for
such series. The Auction Agent and the Fund shall have entered into a
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> 5
of the most recent Auction and with respect to each such Person, the number of
shares of MuniPreferred of such series such Broker-Dealer believes are owned by
such Person after such redemption. In the absence of receiving any such
information from any Broker-Dealer, the Auction Agent may continue to treat the
Persons listed in its registry of Existing Holders as the beneficial owner of
the number of shares of MuniPreferred of such series shown in such registry.
(iii) The Auction Agent shall be required to register a transfer of
shares of MuniPreferred of any series from an Existing Holder of such shares of
MuniPreferred only if such transfer is to another Existing Holder, or other
Person if permitted by the Fund, and only if such transfer is made (A) pursuant
to an Auction, (B) the Auction Agent has been notified in writing (I) in a
notice substantially in the form of Exhibit C to the Broker-Dealer Agreements by
a Broker-Dealer of such transfer or (II) in a notice substantially in the form
of Exhibit D to the Broker-Dealer Agreements by the Broker-Dealer of any
Existing Holder, or other Person if permitted by the Fund, that purchased or
sold such shares of MuniPreferred in an Auction of the failure of such shares of
MuniPreferred to be transferred as a result of such Auction or (C) pursuant to
procedures approved by the Fund that have been devised for the purpose of
determining the identities of Existing Holders in situations where shares of
MuniPreferred may have been transferred without compliance with any restriction
on the transfer thereof set forth in the Auction Procedures. The Auction Agent
is not required to accept any such notice for an Auction unless it is received
by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction.
(d) The Auction Agent may request the Broker-Dealers, as set forth in
the Broker-Dealer Agreements, to provide the Auction Agent with a list of
Persons who such Broker-Dealer believes should be Existing Holders based upon
inquiries of those Persons such Broker-Dealer believes are Beneficial owners as
a result of the most recent Auction and with respect to each such Person, the
number of shares of such series of MuniPreferred such Broker-Dealer believes to
be owned by such Person. The Auction Agent shall keep confidential such registry
of Existing Holders and shall not disclose the identities of the Existing
Holders of such shares of MuniPreferred to any Person other than the Fund and
the Broker-Dealer that provided such information.
2.3 Information Concerning Rates.
(a) The Rate Multiple on the date of the Agreement is set forth in the
Request and Acceptance Letter. If there is any change in the credit rating of
MuniPreferred by either of the rating agencies (or substitute or successor
rating agencies) referred to in the definition of "Rate Multiple" resulting in
any change in the Rate Multiple for MuniPreferred after the date of the Request
and Acceptance Letter, the Fund shall notify the Auction Agent in writing of
such change in the Rate Multiple prior to 12:00 Noon on the Business Day prior
to the next Auction Date for any series of MuniPreferred succeeding such change.
If the Fund designates all or a portion of any dividend on shares of any series
of MuniPreferred to consist of net capital gains or other income taxable for
Federal income tax purposes, it will indicate, in its notice in the
5
<PAGE> 6
form of Exhibit I hereto to the Auction Agent pursuant to Section 2.6 hereof,
the Rate Multiple for such series to be in effect for the Auction Date on which
the dividend rate for such dividend is to be fixed. In determining the Maximum
Rate for any series of MuniPreferred on any Auction Date as set forth in Section
2.3(b)(i) hereof, the Auction Agent shall be entitled to rely on the last Rate
Multiple for MuniPreferred of which it has most recently received notice from
the Fund (or, in the absence of such notice, the percentage set forth in the
Request and Acceptance Letter), except that if the Fund shall have notified the
Auction Agent of a Rate Multiple to be in effect for an Auction Date in
accordance with the preceding sentence, the Rate Multiple in effect for the next
succeeding Auction Date of any series of MuniPreferred shall be, unless the Fund
notifies the Auction Agent of a change in the Rate Multiple for such succeeding
Auction Date pursuant to this Section 2.3(a), the Rate Multiple that was in
effect on the first preceding Auction Date for MuniPreferred with respect to
which the dividend, the rate for which was fixed on such Auction Date, did not
include any net capital gains or other income taxable for Federal income tax
purposes.
(b) (i) On each Auction Date for any series of MuniPreferred, the
Auction Agent shall determine the Maximum Rate for such series. The Maximum Rate
for any series of MuniPreferred on any Auction Date shall be:
(A) in the case of any Auction Date which is not the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement,
the product of (1) the Reference Rate on such Auction Date for the next
Rate Period of such series and (2) the Rate Multiple on such Auction Date,
unless such series has or had a Special Rate Period (other than a Special
Rate Period of 28 Rate Period Days or fewer) and an Auction at which
Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate
Period of such series after such Special Rate Period, in which case the
higher of:
(1) the dividend rate on shares of such series for the then-ending
Rate Period; and
(2) the product of (x) the higher of (I) the Reference Rate on such
Auction Date for a Rate Period equal in length to the then-ending Rate
Period of such series, if such then-ending Rate Period was 364 Rate
Period Days or fewer, or the Treasury Note Rate on such Auction Date
for a Rate Period equal in length to the then-ending Rate Period of
such series, if such then-ending Rate Period was more than 364 Rate
Period Days, and (II) the Reference Rate on such Auction Date for a
Rate Period equal in length to such Special Rate Period of such series,
if such Special Rate Period was 364 Rate Period Days or fewer, or the
Treasury Note Rate on such Auction Date for a Rate Period equal in
length to such Special Rate Period, if such Special Rate Period was
more than 364 Rate Period Days and (y) the Rate Multiple on such
Auction Date; or
6
<PAGE> 7
(B) in the case of any Auction Date which is the Auction Date
immediately prior to the first day of any proposed Special Rate Period
designated by the Fund pursuant to Section 4 of Part I of the Statement, the
product of (1) the highest of (x) the Reference Rate on such Auction Date
for a Rate Period equal in length to the then-ending Rate Period of such
series, if such then-ending Rate Period was 364 Rate Period Days or fewer,
or the Treasury Note Rate on such Auction Date for a Rate Period equal in
length to the then-ending Rate Period of such Rate Period, if such
thenending Rate Period was more than 364 Rate Period Days, (y) the Reference
Rate on such Auction Date for the Special Rate Period for which the Auction
is being held if such Special Rate Period is 364 Rate Period Days or fewer
or the Treasury Note Rate on such Auction Date for the Special Rate Period
for which the Auction is being held if such Special Rate Period is more than
364 Rate Period Days, and (z) the Reference Rate on such Auction Date for
Minimum Rate Periods and (2) the Rate Multiple on such Auction Date.
Not later than 9:30 A.M. on each Auction Date the Auction Agent shall notify the
Fund and the Broker-Dealers of the Maximum Rate so determined and the "AA"
Composite Commercial Paper Rate(s), the Taxable Equivalent of the Short-Term
Municipal Bond Rate(s), Treasury Note Rate(s) and Treasury Bill Rate(s), as the
case may be, used to make such determination.
(ii) From and after a Failure to Deposit by the Fund during any Rate
Period of any series of MuniPreferred, until such failure is cured and a Late
Charge (as defined in paragraph (a) of Section 2.7), is paid, in accordance with
subparagraph (e)(i) of Section 2 of Part I of the Statement, on the first day of
each Rate Period of such series the Auction Agent shall determine the Treasury
Note Rate for such Rate Period of more than 364 Rate Period Days and the
Reference Rate for Rate Periods of 364 Rate Period Days or fewer. Not later than
9:30 A.M. on each such first day, the Auction Agent shall notify the Fund of the
applicable Reference Rate and Treasury Note Rate.
(iii) If any "AA" Composite Commercial Paper Rate, Taxable Equivalent
of the Short-Term Municipal Bond Rate, Treasury Note Rate or Treasury Bill Rate,
as the case may be, is not quoted on an interest or bond equivalent, as the case
may be, basis, the Auction Agent shall convert the quoted rate to the interest
or bond equivalent thereof as set forth in the definition of such rate in the
Statement if the rate obtained by the Auction Agent is quoted on a discount
basis, or if such rate is quoted on a basis other than an interest or bond
equivalent or discount basis the Auction Agent shall convert the quoted rate to
an interest or bond equivalent rate after consultation with the Fund as to the
method of such conversion.
(iv) If any "AA" Composite Commercial Paper Rate is to be based on
rates supplied by Commercial Paper Dealers and one or more of the Commercial
Paper Dealers shall not provide a quotation for the determination of such "AA"
Composite Commercial Paper Rate, the Auction Agent shall immediately notify the
Fund so that the Fund can determine whether to select a Substitute Commercial
Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or
quotations not being supplied by any Commercial Paper Dealer or
7
<PAGE> 8
Commercial Paper Dealers. The Fund shall promptly advise the Auction Agent of
any such selection.
(v) If any Treasury Note Rate or Treasury Bill Rate is to be based on
rates supplied by U.S. Government Securities Dealers and one or more of the U.S.
Government Securities Dealers shall not provide a quotation for the
determination of such Treasury Rate, the Auction Agent shall immediately notify
the Fund so that the Fund can determine whether to select a Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers to
provide the quotation or quotations not being supplied by any U.S. Government
Securities Dealer or U.S. Government Securities Dealers. The Fund shall promptly
advise the Auction Agent of any such selection.
(c) The maximum marginal tax rate referred to in the definition of
"Rate Multiple" in the Statement is referred to in this Agreement as the
"Highest Marginal Rate." The Highest Marginal Rate on the date of the Agreement
is set forth in the Request and Acceptance Letter. If there is any change in the
Highest Marginal Rate, the Fund shall notify the Auction Agent in writing of
such change prior to 12:00 Noon on the Business Day prior to the next Auction
Date for MuniPreferred succeeding such change. In determining the Maximum Rate
for any series of MuniPreferred on any Auction Date, the Auction Agent shall be
entitled to rely on the Highest Marginal Rate of which it has most recently
received notice from the Fund (or, in the absence of such notice, the percentage
set forth in the Request and Acceptance Letter).
2.4 Auction Schedule.
The Auction Agent shall conduct Auctions in accordance with the
schedule set forth below. Such schedule may be changed by the Auction Agent with
the consent of the Fund, which consent shall not be unreasonably withheld. The
Auction Agent shall give written notice of any such change to each Broker-
Dealer. Such notice shall be given prior to the close of business on the
Business Day next preceding the first Auction Date on which any such change
shall be effective.
<TABLE>
<CAPTION>
Time Event
- ---- -----
<S> <C>
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.
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Time Event
- ---- -----
<S> <C>
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.
</TABLE>
The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.
2.5 Designation of Special Rate Period.
(a) The Statement will provide that, subject to the Fund's option to
designate a Special Rate Period as referred to in paragraph (b) of this Section
2.5, (i) each Rate Period of any series of MuniPreferred will be a Minimum Rate
Period (a duration of seven days, subject to certain exceptions) and (ii) each
Rate Period following a Rate Period of any series of MuniPreferred that is other
than a Minimum Rate Period will be a Minimum Rate Period. Not less than 10 nor
more than 20 days prior to the last day of any such Rate Period that is not a
Minimum Rate Period, (i) the Fund shall deliver to the Auction Agent a notice of
the Auction Date of the next succeeding Auction for such series in the form of
Exhibit C hereto and (ii) the Auction Agent shall deliver such notice by
first-class mail, postage prepaid, to each Existing Holder of shares of such
series at the address set forth for such Existing Holder in the records of the
Auction Agent and to the Broker-Dealers for such series as promptly as
practicable after its receipt of such notice from the Fund.
(b) Pursuant to the Statement, the Fund may, at its option, designate
a Special Rate Period for any series of MuniPreferred in the manner described in
Section 4 of Part I of the Statement.
(i) If the Board of Directors or Board of Trustees, as the case
may be, proposes to designate any succeeding Subsequent Rate Period of any
series of MuniPreferred as a Special Rate Period, (A) the Fund shall
deliver to the Auction Agent a notice of such proposed Special Rate Period
in the form of Exhibit D hereto not less than 20 (or such lesser number of
days as may be agreed to from time to time by the Auction Agent) nor more
than 30 days prior to the first day of such proposed Special Rate Period
and (B) the Auction Agent on behalf of the Fund shall deliver such notice
9
<PAGE> 10
by first-class mail, postage prepaid, to each Existing Holder of shares of
such series of MuniPreferred at the address set forth for such Existing
Holder in the records of the Auction Agent and to the Broker-Dealers for
such series as promptly as practicable after its receipt of such notice
from the Fund.
(ii) If the Board of Directors or Board of Trustees, as the case
may be, determines to designate such succeeding Subsequent Rate Period as a
Special Rate Period, (A) the Fund shall deliver to the Auction Agent a
notice of such determination in the form of Exhibit E hereto not later than
11:00 A.M. on the second Business Day next preceding the first day of such
proposed Special Rate Period (or such later time or date, or both, as may
be agreed to by the Auction Agent) and (B) the Auction Agent shall deliver
such notice to the Broker-Dealers for such series not later than 3:00 P.M.
on such second Business Day (or, if the Auction Agent has agreed to a later
time or date, as promptly as practicable thereafter).
(iii) If the Fund shall deliver to the Auction Agent a notice not
later than 11:00 A.M. on the second Business Day next preceding the first
day of such proposed Special Rate Period (or such later time or date, or
both, as may be agreed to by the Auction Agent) stating that the Fund has
determined not to exercise its option to designate such succeeding
Subsequent Rate Period as a Special Rate Period, in the form of Exhibit F
hereto, or shall fail to timely deliver either such notice or a notice in
the form of Exhibit E hereto, the Auction Agent shall deliver a notice in
the form of Exhibit F hereto to the Broker-Dealers for such series not
later than 3:00 P.M. on such second Business Day (or, if the Auction Agent
has agreed to a later time or date, as promptly as practicable thereafter).
Such change in the length of any Rate Period shall not occur if (1) an Auction
for shares of such series shall not be held on such Auction Date for any reason
or (2) an Auction for shares of such series shall be held on such Auction Date
but Sufficient Clearing Bids for shares of such series shall not exist in such
Auction.
2.6 Allocation of Taxable Income.
The Fund shall, in the case of a Minimum Rate Period or a Special Rate
Period of 28 Rate Period Days or fewer, and may, in the case of any other
Special Rate Period, designate all or a portion of any dividend on shares of any
series of MuniPreferred to consist of net capital gains or other income taxable
for Federal income tax purposes by delivering to the Auction Agent a notice in
the form of Exhibit I hereto of such designation not later than the Dividend
Payment Date for such series next preceding the Auction Date on which the
dividend rate for such dividend is to be fixed. The Auction Agent will deliver
such notice to the Broker-Dealers for such series on the Business Day following
its receipt of such notice from the Fund. Within two Business Days after any
Auction Date involving the allocation of income taxable for Federal income tax
purposes, the Auction Agent shall notify each Broker-Dealer for
10
<PAGE> 11
the related series as to the dollar amount per share of such taxable income and
income exempt from Federal income taxation included in the related dividend.
2.7 Failure to Deposit.
(a) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period of more than 364 Rate Period Days during
which a Failure to Deposit occurred that has not been cured), but, prior to
12:00 Noon, New York City time, on the third Business Day next succeeding
the date on which such Failure to Deposit occurred, such Failure to Deposit
shall have been cured in accordance with Section 2.7(c) hereof and the Fund
shall have paid to the Auction Agent a late charge (a "Late Charge") equal
to the sum of (1) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the full amount of dividends with
respect to any Dividend Period on such shares, an amount computed by
multiplying (x) 200% of the Reference Rate for the Rate Period during which
such Failure to Deposit occurs on the Dividend Payment Date for such
Dividend Period by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit has not been cured in
accordance with Section 2.7(c) hereof (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is cured) and
the denominator of which shall be 360, and applying the rate obtained
against the aggregate liquidation preference of the outstanding shares of
MuniPreferred and (2) if such Failure to Deposit consisted of the failure
timely to pay to the Auction Agent the Redemption Price of the shares of
MuniPreferred, if any, for which Notice of Redemption has been given by the
Fund, an amount computed by multiplying (x) 200% of the Reference Rate for
the Rate Period during which such Failure to Deposit occurs on the
redemption date by (y) a fraction, the numerator of which shall be the
number of days for which such Failure to Deposit is not cured in accordance
with Section 2.7(c) hereof (including the day such Failure to Deposit
occurs and excluding the day such Failure to Deposit is cured) and the
denominator of which shall be 360, and applying the rate obtained against
the aggregate liquidation preference of the outstanding shares of
MuniPreferred to the redeemed,
then the Auction Agent shall deliver a notice in the form of Exhibit G hereto by
first-class mail, postage prepaid, to the Broker-Dealers for such series not
later than one Business Day after its receipt of the payment from the Fund
curing such Failure to Deposit and such Late Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during any Rate Period thereof (other than any
Special Rate Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period
11
<PAGE> 12
of more than 364 Rate Period Days during which a Failure to Deposit
occurred but has not been cured), and, prior to 12:00 Noon, New York City
time, on the third Business Day next succeeding the date on which such
Failure to Deposit occurred, such Failure to Deposit shall not have been
cured in accordance with Section 2.7(c) hereof or the Fund shall not have
paid the applicable Late Charge to the Auction Agent; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of MuniPreferred during a Special Rate Period thereof of more than
364 Rate Period Days, or during any Rate Period thereof succeeding any
Special Rate Period of more than 364 Rate Period Days during which a
Failure to Deposit occurred that has not been cured, and, prior to 12:00
noon, New York City time, on the fourth Business Day preceding the Auction
Date for the Rate Period subsequent to such Rate Period, such Failure to
Deposit shall not have been cured in accordance with Section 2.7(c) hereof
or the Fund shall not have paid the applicable Late Charge to the Auction
Agent in accordance with Section 2(e)(i)(D) of the Statement (such Late
charge, for purposes of this clause (b)(iii) of this Section 2.7, to be
calculated by using, as the Reference Rate, the Reference Rate applicable
to a Rate Period (x) consisting of more than 182 Rate Period Days and (y)
commencing on the date on which the Rate Period during which Failure to
Deposit occurs commenced);
then the Auction Agent shall deliver a notice in the form of Exhibit H hereto to
the Broker-Dealers for such series not later than one Business Day after the
receipt of the payment from the Fund curing such Failure to Deposit and such
Late Charge.
(c) A Failure to Deposit with respect to shares of MuniPreferred shall
have been cured (if such Failure to Deposit is not solely due to the willful
failure to the Fund to make the required payment to the Auction Agent) with
respect to any Rate Period if, within the respective time periods described
immediately above, the Fund shall have paid to the Auction Agent (i) all
accumulated and unpaid dividends on the shares of MuniPreferred and (ii) without
duplication, the Redemption Price for the shares of MuniPreferred, if any, for
which Notice of Redemption has been mailed; provided, however, that the
foregoing clause (ii) shall not apply to the Fund's failure to pay the
Redemption Price in respect of shares of MuniPreferred when the related
Redemption Notice provides that redemption of such shares is subject to one or
more conditions precedent and each such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of
Redemption.
2.8 Broker-Dealers.
(a) Not later than 12:00 Noon on each Auction Date for any series of
MuniPreferred, the Fund shall pay to the Auction Agent an amount in cash equal
to the aggregate fees payable to the Broker-Dealers for such series pursuant to
Section 2.8 of the Broker-Dealer Agreements for such series. The Auction Agent
shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer
Agreement.
12
<PAGE> 13
(b) The Fund shall obtain the consent of the Auction Agent prior to
selecting any Person to act as a Broker-Dealer, which consent shall not be
unreasonably withheld.
(c) The Auction Agent shall terminate any Broker-Dealer-Agreement as
set forth therein if so directed by the Fund, provided that at least one Broker-
Dealer Agreement would be in effect for each series of MuniPreferred after such
termination.
(d) Subject to the Auction Agent's having consented to the selection
of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the Auction
Agent shall from time to time enter into such Broker-Dealer Agreements with one
or more Broker-Dealers as the Fund shall request, and shall enter into such
schedules to any such Broker-Dealer Agreements as the Fund shall request, which
schedules, among other things, shall set forth the series of MuniPreferred to
which such Broker-Dealer Agreement relates.
2.9 Ownership of Shares of MuniPreferred.
The Fund shall notify the Auction Agent if the Fund or any affiliate
of the Fund acquires any shares of MuniPreferred of any series. Neither the Fund
nor any affiliate of the Fund shall submit any Order in any Auction for
MuniPreferred, except as set forth in the next sentence. Any Broker-Dealer that
is an affiliate of the Fund may submit Orders in Auctions, but only if such
Orders are not for its own account. For purposes of this Section 2.9, a
Broker-Dealer shall not be deemed to be an affiliate of the Fund solely because
one or more of the directors or executive officers of such Broker-Dealer or of
any Person controlled by, in control of or under common control with such
Broker-Dealer is also a director of the Fund. The Auction Agent shall have no
duty or liability with respect to enforcement of this Section 2.9.
2.10 Access to and Maintenance of Auction Records.
The Auction Agent shall, upon the receipt of prior written notice from
the Fund, afford to the Fund access at reasonable times during normal business
hours to all books, records, documents and other information concerning the
conduct and results of Auctions. The Auction Agent shall maintain records
relating to any Auction for a period of six years after such Auction, and such
records shall, in reasonable detail, accurately and fairly reflect the actions
taken by the Auction Agent hereunder.
3. The Auction Agent as Dividend and Redemption Price Disbursing Agent.
The Auction Agent, as dividend and redemption price disbursing agent,
shall pay to the Holders of shares of MuniPreferred of any series (i) on each
Dividend Payment Date for such series, dividends on the shares of MuniPreferred
of such series, (ii) on any date fixed for redemption of shares of MuniPreferred
of any series, the Redemption Price of any shares of such series called for
redemption and (iii) any Late Charge related to any payment of dividends
13
<PAGE> 14
or Redemption Price, in each case after receipt of the necessary funds from the
Fund with which to pay such dividends, Redemption Price or Late Charge. The
amount of dividends for any Rate Period for any series of MuniPreferred to be
paid by the Auction Agent to the Holders of such shares of such series will be
determined by the Fund as set forth in Section 2 of Part I of the Statement with
respect to such series. The Redemption Price of any shares to be paid by the
Auction Agent to the Holders will be determined by the Fund as set forth in
Section 11 of Part I of the Statement with respect to such series. The Fund
shall notify the Auction Agent in writing of a decision to redeem shares of any
series of MuniPreferred at least five days prior to the date a notice of
redemption is required to be mailed to the Holders of the shares to be redeemed
by paragraph (c) of Section 11 of Part I of the Statement. Such notice by the
Fund to the Auction Agent shall contain the information required by paragraph
(c) of Section 11 of Part I of the Statement to be stated in the notice of
redemption required to be mailed by the Fund to such Holders.
4. The Auction Agent as Transfer Agent and Registrar.
4.1 Issue of Stock or Shares Certificates.
Upon the Date of Original Issue of each series of MuniPreferred, one
or more certificates representing all of the shares of such series issued on
such date shall be issued by the Fund and, at the request of the Fund,
registered in the name of Cede & Co. and countersigned by the Auction Agent.
4.2 Registration of Transfer of Shares.
Shares of each series of MuniPreferred shall be registered solely in
the name of the Securities Depository or its nominee.
4.3 Removal of Legend on Restricted Shares.
All requests for removal of legends on shares of MuniPreferred of any
series indicating restrictions on transfer shall be accompanied by an opinion of
counsel stating that such legends may be removed and such shares freely
transferred, such opinion to be delivered under cover of a letter from a Fund
officer authorizing the Auction Agent to remove the legend on the basis of said
opinion.
4.4 Lost Stock or Share Certificates.
The Auction Agent shall issue and register replacement certificates
for certificates represented to have been lost, stolen or destroyed upon the
fulfillment of such requirements as shall be deemed appropriate by the Fund and
the Auction Agent, subject at all times to provisions of law, the By-Laws of the
Fund governing such matters and resolutions adopted by the Fund with respect to
lost securities. The Auction Agent may issue new certificates in
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<PAGE> 15
exchange for and upon the cancellation of mutilated certificates. Any request by
the Fund to the Auction Agent to issue a replacement or new certificate pursuant
to this Section 4.4 shall be deemed to be a representation and warranty by the
Fund to the Auction Agent that such issuance will comply with such provisions of
law and the By-Laws and resolutions of the Fund.
4.5 Disposition of Cancelled Certificates; Record Retention.
The Auction Agent shall retain all stock or share certificates which
have been cancelled in transfer or exchange and all accompanying documentation
in accordance with applicable rules and regulations of the Securities and
Exchange Commission for two calendar years. Upon the expiration of this two-year
period, the Auction Agent shall deliver to the Fund the cancelled certificates
and accompanying documentation. The Fund shall also undertake to furnish to the
Securities and Exchange Commission and to the Board of Governors of the Federal
Reserve System, upon demand, at either the principal office or at any regional
office, complete, correct and current hard copies of any and all such records.
Thereafter such records shall not be destroyed by the Fund without the
concurrence of the Auction Agent.
4.6 Stock or Record Books.
For so long as the Auction Agent is acting as the transfer agent for
any series of MuniPreferred pursuant to the Agreement, it shall maintain a stock
or record book containing a list of the Holders of the shares of MuniPreferred
of each such series. In case of any request or demand for the inspection of the
stock or record books of the Fund or any other books in the possession of the
Auction Agent, the Auction Agent will notify the Fund and secure instructions as
to permitting or refusing such inspection. The Auction Agent reserves the right,
however, to exhibit the stock or record books or other books to any Person in
case it is advised by its counsel that its failure to do so would be unlawful.
4.7 Return of Funds.
Any funds deposited with the Auction Agent hereunder by the Fund for
any reason, including but not limited to redemption of shares of MuniPreferred
of any series, that remain unpaid after ninety days shall be repaid to the Fund
upon the written request of the Fund, together with interest, if any, earned
thereon.
5. Representations and Warranties of the Fund.
The Fund represents and warrants to the Auction Agent that:
(a) the Fund is a duly incorporated and existing corporation or a duly
organized and existing business trust in good standing under the laws of the
State of its incorporation or organization and has full corporate power or
all requisite power to
15
<PAGE> 16
execute and deliver the Agreement and to authorize, create and issue the
shares of MuniPreferred of each series and the shares of MuniPreferred of
each series when issued, will be duly authorized, validly issued, fully paid
and nonassessable;
(b) the Agreement has been duly and validly authorized, executed and
delivered by the Fund and constitutes the legal, valid and binding
obligation of the Fund;
(c) the form of the certificate evidencing the shares of MuniPreferred
of each series complies or will comply with all applicable laws of the State
of its incorporation or organization;
(d) when issued, the shares of MuniPreferred of each series will have
been duly registered under the Securities Act of 1933, as amended, and no
further action by or before any governmental body or authority of the United
States or of any state thereof is required in connection with the execution
and delivery of the Agreement or will have been required in connection with
the issuance of the shares of MuniPreferred of each series;
(e) the execution and delivery of the Agreement and the issuance and
delivery of the shares of MuniPreferred of each series do not and will not
conflict with, violate or result in a breach of, the terms, conditions or
provisions of, or constitute a default under, the Articles of Incorporation
or Declaration of Trust (as amended by one or more Statements) or the ByLaws
of the Fund, any law or regulation, any order or decree of any court or
public authority having jurisdiction, or any mortgage, indenture, contract,
agreement or undertaking to which the Fund is a party or by which it is
bound the effect of which conflict, violation, default or breach would be
material to the Fund or the Fund and its subsidiaries taken as a whole; and
(f) no taxes are payable upon or in respect of the execution of the
Agreement or the issuance of the shares of MuniPreferred of any series.
6. The Auction Agent.
6.1 Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Fund hereunder
and owes no fiduciary duties to any Person, other than the Fund, by reason of
the Agreement.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreement, and no implied covenants
or obligations shall be read into the Agreement against the Auction Agent.
16
<PAGE> 17
(c) In the absence of bad faith or negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the
Agreement. The Auction Agent shall not be liable for any error of judgment made
in good faith unless the Auction Agent shall have been negligent in ascertaining
the pertinent facts.
6.2 Rights of the Auction Agent.
(a) The Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document believed in good faith
by it to be genuine. The Auction Agent shall not be liable for acting upon any
telephone communication authorized hereby which the Auction Agent believes in
good faith to have been given by the Fund or by a Broker-Dealer. The Auction
Agent may record telephone communications with the Fund or with the
Broker-Dealers or both.
(b) The Auction Agent may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed by it with due care hereunder.
6.3 Auction Agent's Disclaimer.
The Auction Agent makes no representation as to the validity or
adequacy of the Agreement, the Broker-Dealer Agreements or the shares of
MuniPreferred of any series except that the Auction Agent hereby represents that
the Agreement has been duly authorized, executed and delivered by the Auction
Agent and constitutes a legal and binding obligation of the Auction Agent.
6.4 Compensation, Expenses and Indemnification.
(a) The Fund shall pay the Auction Agent from time to time reasonable
compensation for all services rendered by it under the Agreement and the
Broker-Dealer Agreements.
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<PAGE> 18
(b) The Fund shall reimburse the Auction Agent upon its request for
all reasonable out-of-pocket expenses, disbursements and advances incurred or
made by the Auction Agent in accordance with any provision of the Agreement and
the Broker-Dealer Agreements (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any expense or
disbursement attributable to its negligence or bad faith.
(c) The Fund shall indemnify the Auction Agent for and hold it
harmless against any loss, liability or expense incurred without negligence or
bad faith on its part, arising out of or in connection with its agency under the
Agreement and the Broker-Dealer Agreements, including the costs and expenses of
defending itself against any such claim or liability in connection with its
exercise or performance of any of its duties hereunder and thereunder.
7. Miscellaneous.
7.1 Term of Agreement.
(a) The term of the Agreement is unlimited unless it shall be
terminated as provided in this Section 7.1. The Fund may terminate the Agreement
at any time by so notifying the Auction Agent, provided that the Fund has
entered into an agreement in substantially the form of the Agreement with a
successor Auction Agent. The Auction Agent may terminate the Agreement upon
written notice to the Fund on the date specified in such notice, which date
shall be no earlier than 45 days after the date of delivery of such notice.
(b) Except as otherwise provided in this paragraph (b), the respective
rights and duties of the Fund and the Auction Agent under the Agreement with
respect to any series of MuniPreferred shall cease upon termination of the
Agreement with respect to such series. The Fund's representations, warranties,
covenants and obligations to the Auction Agent under Sections 5 and 6.4 hereof
shall survive the termination of the Agreement with respect to any series of
MuniPreferred. Upon termination of the Agreement with respect to any series of
MuniPreferred, the Auction Agent shall, at the Fund's request, promptly deliver
to the Fund copies of all books and records maintained by it with respect to
MuniPreferred in connection with its duties hereunder
18
<PAGE> 19
7.2 Communications.
Except for (i) communications authorized to be by telephone pursuant
to the Agreement or the Auction Procedures and (ii) communications in connection
with Auctions (other than those expressly required to be in writing), all
notices, requests and other communications to any party hereunder shall be in
writing (including telecopy or similar writing) and shall be given to such
party, addressed to it, at its address or telecopy number set forth below:
If to the Fund, [Name of Fund]
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
Telecopier No.: (312) 917-7942
Telephone No.: (312) 917-7700
If to the Auction Agent, to the
address or telecopy number set
forth in the Request and
Acceptance Letter,
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other party. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of the Fund by a Fund Officer and on
behalf of the Auction Agent by telephone (confirmed by telecopy or in writing)
by an Authorized officer.
7.3 Entire Agreement.
The Agreement contains the entire agreement between the parties
relating to, and superseding any prior agreement between the parties relating to
the subject matter hereof, and there are no other representations, endorsements,
promises, agreements or understandings, oral, written or implied, between the
parties relating to the subject matter hereof except for agreements relating to
the compensation of the Auction Agent.
7.4 Benefits.
Nothing herein, express or implied, shall give to any Person, other
than the Fund, the Auction Agent and their respective successors and assigns,
any benefit of any legal or equitable right, remedy or claim hereunder.
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<PAGE> 20
7.5 Amendment; Waiver.
(a) The Agreement shall not be deemed or construed to be modified,
amended, rescinded, cancelled or waived, in whole or in part, except by a
written instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of either party hereto to exercise any right or remedy
hereunder in the event of a breach hereof by the other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
7.6 Successors and Assigns.
The Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of each of the Fund and
the Auction Agent.
7.7 Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
7.8 Governing Law.
The Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
If the Fund is a Massachusetts business trust, the following provision
is deemed to be included in the Basic Terms:
7.9 Declaration of Trust.
The Fund's Declaration is on file with the Secretary of State of the
Commonwealth of Massachusetts. This Agreement has been executed on behalf of the
Fund by the Vice President and Treasurer of the Fund acting in such capacity and
not individually, and the obligations of the Fund set forth in this Agreement
are not binding upon any of the Fund's trustees, officers or shareholders
individually, but are binding only upon the assets and property of the Fund.
20
<PAGE> 21
EXHIBIT A
FORM OF
BROKER-DEALER AGREEMENT
-----------------------
<PAGE> 22
EXHIBIT B
SETTLEMENT PROCEDURES
---------------------
<PAGE> 23
EXHIBIT C
(NAME OF FUND]
NOTICE OF AUCTION DATE FOR
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK (SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for Series
____ of the Fund's MuniPreferred is scheduled to be ___________, 19___ and the
next Dividend Payment Date for Series _____ of the Fund's MuniPreferred will be
_______________, 19__.
[A Failure to Deposit in respect of the Series ____ MuniPreferred
currently exists. If, prior to 12:00 noon, New York City time, on the fourth
Business Day preceding the next scheduled Auction Date of the Series ____
MuniPreferred, such Failure to Deposit is not cured or the applicable Late
Charge is not paid, the next Auction will not be held. Notice of the next
Auction for the Series ____ MuniPreferred will be delivered when such Failure to
Deposit is cured and the applicable Late Charge is paid./l/]
[NAME OF FUND]
(l)Include this language if a Failure to Deposit exists.
<PAGE> 24
EXHIBIT D
[NAME OF FUND]
NOTICE OF PROPOSED CHANGE OF
LENGTH OF RATE PERIOD OF
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
[Name of Fund] (the "Fund") may exercise its option to designate the Rate
Period of its Series _____ MuniPreferred commencing [the first day of the
Special Rate Period] as a Special Rate Period.
By 11:00 A.M. on the second Business Day preceding the first day of such
proposed Special Rate Period, the Fund will notify __________ of either (a) its
determination to exercise such option, designating the length of such Special
Rate Period for such series or (b) its determination not to exercise such
option.
[NAME OF FUND]
Dated: _______________, 19__
<PAGE> 25
EXHIBIT E
[NAME OF FUND]
NOTICE OF CHANGE OF LENGTH OF RATE PERIOD
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined to
designate the Rate Period of its Series _____ MuniPreferred commencing on [the
first day of the Special Rate Period] as a Special Rate Period.
The Special Rate Period will be _______ [Rate Period Days].
The Auction Date for the Special Rate Period is [the Business Day next
preceding the first day of such Special Rate Period].
As a result of the Special Rate Period designation, the amount of dividends
payable on Series _____ MuniPreferred during the Special Rate Period will be
based on a 360-day year.
The Special Rate Period shall not commence if (a) an Auction for shares of
MuniPreferred shall not be held on such Auction Date for any reason or (b) an
Auction for shares of MuniPreferred shall be held on such Auction Date but
Sufficient Clearing Bids for such shares shall not exist in such Auction.
The scheduled Dividend Payment Dates for such series of MuniPreferred
during such Special Rate Period will be _______________________ .
[Special Redemption Provisions, if any]
Attached hereto is a MuniPreferred Basic Maintenance Report showing that,
as of the third Business Day next preceding such proposed Special Rate Period,
Moody's Eligible Assets (if Moody's is rating such shares of MuniPreferred) and
S&P Eligible Assets (if S&P is rating such shares of MuniPreferred) each have an
aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance
Amount as of such Business Day (assuming for purposes of the foregoing
calculation that (i) the Maximum Rate is the Maximum Rate on such Business Day
as if such Business Day were the Auction Date for the proposed Special Rate
Period, and (ii) the Moody's Discount Factors applicable to Moody's Eligible
Assets are determined by
<PAGE> 26
reference to the first Moody's Exposure Period longer than the Moody's Exposure
Period then applicable to the Fund.)
[NAME OF FUND]
Dated: _________, 19__
E-2
<PAGE> 27
EXHIBIT F
[NAME OF FUND]
NOTICE OF DETERMINATION NOT TO CHANGE
LENGTH OF RATE PERIOD OF
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined not
to exercise its option to designate a Special Rate Period of its Series _____
MuniPreferred and the next succeeding Rate Period of such series will be a
Minimum Rate Period of _____ Rate Period Days.
[NAME OF FUND]
Dated: ___________, 19__
<PAGE> 28
EXHIBIT G
[NAME OF FUND]
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its
Failure to Deposit and paid the applicable Late Charge with respect to its
Series ___ MuniPreferred. The dividend rate on the shares of Series ___
MuniPreferred for the current Dividend Period is __________% per annum, the
Dividend Payment Date for the current Dividend Period is scheduled to be
________________, 19__ and the next Auction Date is scheduled to be
________________, 19__.
[NAME OF FUND]
Dated: _________________, 19__
<PAGE> 29
EXHIBIT H
[NAME OF FUND]
NOTICE OF CURE OF
FAILURE TO DEPOSIT ON
MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES]
("MuniPreferred(R)")
NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its
Failure to Deposit and paid the applicable Late Charge with respect to its
Series ______ MuniPreferred. The next Auction Date for the Series ______
MuniPreferred is scheduled to be on _______________, 19__.
[NAME OF FUND]
Dated: ________________, 19__
<PAGE> 30
EXHIBIT I
[NAME OF FUND]
NOTICE OF
[CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME](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> 31
(Footnotes continued)
A = the maximum amount of capital gains allocated to such series of
MuniPreferred to be included in such dividend, divided by the number of
shares of MuniPreferred.
B = the maximum amount of ordinary income taxable for Federal income tax
purposes allocated to such series of MuniPreferred to be included in such
dividend, divided by the number of shares in such series.
I-2
<PAGE> 1
EXHIBIT 17(d)
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> 2
(a) "Acceptance Letter" shall mean the letter from Adviser to BD
pursuant to which the Adviser appoints BD as a Broker Dealer for each series
of MuniPreferred issued by any Fund that has executed a Request Letter.
(b) "Agreement", with respect to any Fund, shall mean the Basic Terms,
together with the Acceptance Letter and the Request Letter relating to one
or more series of MuniPreferred of such Fund and any other substantially
similar agreement among such Fund, the Adviser, any Auction Agent for such
Fund and/or BD.
(c) "Auction" shall have the meaning specified in Section 2.1 hereof.
(d) "Auction Agency Agreement", with respect to any Fund, shall mean
the Auction Agency Agreement between such Fund and the Auction Agent
relating to one or more series of MuniPreferred of such Fund.
(e) "Auction Procedures", with respect to any Fund, shall mean the
auction procedures constituting Part II of the form of Statement of such
Fund as of the filing thereof.
(f) "Authorized Officer" of an Auction Agent shall mean each Senior
Vice President, Vice President, Assistant Vice President, Assistant
Treasurer and Assistant Secretary of such Auction Agent assigned to its
Corporate Trust and Agency Group and every other officer or employee of such
Auction Agent designated as an "Authorized Officer" for purposes of the
Agreement in a communication to BD.
(g) "BD Officer" shall mean each officer or employee of BD designated
as a "BD Officer" for purposes of the Agreement in a communication to any
Auction Agent.
(h) "MuniPreferred" shall mean the preferred stock or shares, par value
$.01 per share, of any Fund designated as its "Municipal Auction Rate
Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred
Shares" and bearing such further designation as to series as the Board of
Directors or Board of Trustees, as the case may be, of such Fund or any
committee thereof shall specify, as set forth in a Request Letter.
(i) "Request Letter", with respect to any Fund, shall mean the letter
from such Fund to the Adviser and the Auction Agent for such Fund pursuant
to which such Fund appoints BD as a Broker-Dealer for each series of
MuniPreferred of such Fund.
2
<PAGE> 3
(j) "Settlement Procedures" shall mean the Settlement Procedures
attached hereto as Exhibit A.
(k) "Statement", with respect to any Fund, shall mean the Statement
Establishing and Fixing the Rights and Preferences of, and authorizing the
issuance of, one or more series of Municipal Auction Rate Cumulative
Preferred Stock or Municipal Auction Rate Cumulative Preferred Shares, as
filed by such Fund with the office of the Secretary of State or other
officer of the state where such Fund was incorporated or organized, a copy
of which will be attached to the Request Letter of such Fund.
1.3. Rules of Construction.
Unless the context or use indicates another or different meaning or
intent, the following rules shall apply to the construction of each Agreement:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) The captions and headings herein are solely for convenience of
reference and shall not constitute a part of such Agreement nor shall they
affect its meaning, construction or effect.
(c) The words "hereof", "herein", "hereto", and other words of similar
import refer to such Agreement as a whole.
(d) All references herein to a particular time of day shall be to New
York City time.
2. The Auction.
2.1. Purpose; Incorporation by Reference of Auction Procedures and
Settlement Procedures.
(a) The provisions of the Auction Procedures of any Fund will be
followed by the Auction Agent of such Fund for the purpose of determining the
Applicable Rate for any Subsequent Rate Period of any series of MuniPreferred of
such Fund for which the Applicable Rate is to be determined by an Auction. Each
periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and
shall be deemed to be a part hereof to the same extent as if such provisions
were fully set forth herein.
3
<PAGE> 4
(c) BD agrees to act as, and assumes the obligations of, and
limitations and restrictions placed upon, a Broker-Dealer under each Agreement
for each series of MuniPreferred. BD understands that other Persons meeting the
requirements specified in the definition of "Broker-Dealer" contained in the
Auction Procedures may execute Agreements and participate as Broker-Dealers in
Auctions.
2.2. Preparation for Each Auction.
(a) Not later than 9:30 A.M. on each Auction Date for any series of
MuniPreferred, the Auction Agent for such series shall advise the Broker-Dealers
for such series by telephone of the maximum Rate therefor and the Reference
Rate(s) and Treasury Note Rate(s), as the case may be, used in determining such
Maximum Rate.
(b) In the event that any Auction Date for any series of MuniPreferred
shall be changed after the Auction Agent for such series has given the notice
referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or
after the notice referred to in Section 2.5(a) hereof, if applicable, such
Auction Agent, by such means as such Auction Agent deems practicable, shall give
notice of such change to BD, if it is a Broker-Dealer for such series, not later
than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old
Auction Date.
(c) For purposes of maintaining its list of Existing Holders, the
Auction Agent for any series of MuniPreferred from time to time may request any
Broker-Dealer to provide such Auction Agent with a list of Persons who such
Broker-Dealer believes should be Existing Holders based upon inquiries of those
Persons such Broker-Dealer believes are Beneficial owners as a result of the
most recent Auction and with respect to each such Person, the number of shares
of such series of MuniPreferred such Broker-Dealer believes are owned by such
Person. BD shall comply with any such request relating to a series of
MuniPreferred in respect of which BD was named a Broker-Dealer, and the Auction
Agent shall keep confidential any such information so provided by BD and shall
not disclose any information so provided by BD to any Person other than the Fund
and BD.
(d) BD agrees to maintain a list of customers relating to a series of
MuniPreferred and to use its best efforts, subject to existing laws and
regulations, to contact the customers on such list whom BD believes may be
interested in participating in the Auction on each Auction Date, as a Potential
Holder or a Potential Beneficial owner, for the purposes set forth in the
Auction Procedures. Nothing herein shall require BD to submit an Order for any
customer in any Auction.
(e) The Auction Agent's registry of Existing Holders of shares of a
series of MuniPreferred shall be conclusive and binding on BD. BD may inquire of
the Auction Agent between 3:00 P.M. on the Business Day preceding an Auction for
shares of a series of MuniPreferred and 9:30 A.M. on the Auction Date for such
Auction to ascertain the number of shares of such series in respect of which the
Auction Agent has determined BD to be an
4
<PAGE> 5
Existing Holder. If BD believes it is the Existing Holder of fewer shares of
such series than specified by the Auction Agent in response to BD's inquiry, BD
may so inform the Auction Agent of that belief. BD shall not, in its capacity as
Existing Holder of shares of such series, submit Orders in such Auction in
respect of shares of such series covering in the aggregate more than the number
of shares of such series specified by the Auction Agent in response to BD's
inquiry.
2.3. Auction Schedule; Method of Submission of Orders.
(a) Each Fund and the Auction Agent for such Fund shall conduct
Auctions for MuniPreferred in accordance with the schedule set forth below. Such
schedule with respect to any series of MuniPreferred of any Fund may be changed
by the Auction Agent for such series with the consent of such Fund, which
consent shall not be unreasonably withheld. Such Auction Agent shall give
written notice of any such change to each Broker-Dealer of such series. Such
notice shall be given prior to the close of business on the Business Day next
preceding the first Auction Date on which such change shall be effective.
<TABLE>
<CAPTION>
Time Event
---- -----
<S> <C>
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.
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Time Event
---- -----
<S> <C>
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.
</TABLE>
(b) BD shall submit orders to the appropriate Auction Agent in writing
substantially in the form attached hereto as Exhibit B. BD shall submit a
separate Order to such Auction Agent for each Potential Holder or Existing
Holder with respect to whom BD is submitting an order and shall not otherwise
net or aggregate such Orders prior to their submission to such Auction Agent.
(c) BD shall deliver to the appropriate Auction Agent (i) a written
notice in substantially the form attached hereto as Exhibit C of transfers of
shares of MuniPreferred to BD from another Person other than pursuant to an
Auction and (ii) a written notice substantially in the form attached hereto as
Exhibit D, of the failure of any shares of MuniPreferred to be transferred to or
by any Person that purchased or sold shares of MuniPreferred through BD pursuant
to an Auction. Such Auction Agent is not required to accept any such notice
described in clause (i) for an Auction unless it is received by the Auction
Agent by 3:00 P.M. on the Business Day preceding such Auction.
(d) BD and other Broker-Dealers may submit Orders in Auctions for
their own accounts (including orders for their own accounts where the Order is
placed beneficially for a customer) unless the relevant Fund shall have notified
BD and all other Broker-Dealers that they may no longer do so, in which case
Broker-Dealers may continue to submit Hold Orders and Sell orders for their own
accounts.
(e) BD agrees to handle its customers' orders in accordance with its
duties under applicable securities laws and rules.
(f) To the extent that pursuant to Section 4 of the Auction Procedures
of any Fund, BD continues to hold, sells, or purchases a number of shares that
is fewer than the number of shares in an Order submitted by BD to the Auction
Agent in which BD designated itself as an Existing Holder or Potential Holder in
respect of customer orders, BD shall make
6
<PAGE> 7
appropriate pro rata allocations among its customers for which it submitted
Orders of similar tenor. If as a result of such allocations, any Beneficial
Owner would be entitled or required to sell, or any Potential Beneficial Owner
would be entitled or required to purchase, a fraction of a share of
MuniPreferred on any Auction Date, BD shall, in such manner as it shall
determine in its sole discretion, round up or down the number of shares of
MuniPreferred to be purchased or sold on such Auction Date by any Beneficial
Owner or Potential Beneficial Owner on whose behalf BD submitted an Order so
that the number of shares so purchased or sold by each such Beneficial Owner or
Potential Beneficial Owner on such Auction Date shall be whole shares of
MuniPreferred.
2.4. Notices.
(a) On each Auction Date for any series of MuniPreferred, the Auction
Agent for such series shall notify BD, if BD is a Broker-Dealer of such series,
by telephone of the results of the Auction as set forth in paragraph (a) of the
Settlement Procedures. By approximately 11:30 A.M. on the Business Day next
succeeding such Auction Date, the relevant Auction Agent shall confirm to BD in
writing the disposition of all Orders submitted by BD in such Auction.
(b) BD shall notify each Existing Holder, Potential Holder, Beneficial
Owner or Potential Beneficial Owner of shares of MuniPreferred with respect to
whom BD has submitted an Order as set forth in paragraph (b) of the Settlement
Procedures and take such other action as is required of BD pursuant to the
Settlement Procedures.
2.5. Designation of Special Rate Period.
(a) If any Fund delivers to its Auction Agent a notice of the Auction
Date for any series of MuniPreferred of such Fund for a Rate Period thereof that
next succeeds a Rate Period that is not a Minimum Rate Period in the form of
Exhibit C to the Auction Agency Agreement, and BD is a Broker-Dealer of such
series, the Auction Agent shall deliver such notice to BD as promptly as
practicable after its receipt of such notice from such Fund.
(b) If the Board of Directors or Board of Trustees, as the case may
be, of any Fund proposes to designate any succeeding Subsequent Rate Period of
any series of MuniPreferred of such Fund as a Special Rate Period and such Fund
delivers to its Auction Agent a notice of such proposed Special Rate Period in
the form of Exhibit D to the Auction Agency Agreement, and BD is a Broker-Dealer
for such series, such Auction Agent shall deliver such notice to BD as promptly
as practicable after its receipt of such notice from the Fund.
(c) If the Board of Directors or Board of Trustees, as the case may
be, of any Fund determines to designate such succeeding Subsequent Rate Period
as a Special Rate Period, and such Fund delivers to its Auction Agent a notice
of such Special Rate Period in the form of Exhibit E to the Auction Agency
Agreement not later than 11:00 A.M. on the second Business Day next preceding
the first day of such Rate Period (or by such later time or date, or both, as
7
<PAGE> 8
may be agreed to by such Auction Agent), and BD is a Broker-Dealer for such
series, such Auction Agent shall deliver such notice to BD not later than 3:00
P.M. on such second Business Day (or, if such Auction Agent has agreed to a
later time or date, as promptly as practicable thereafter).
(d) If any Fund shall deliver to its Auction Agent a notice not later
than 11:00 A.M. on the second Business Day next preceding the first day of any
Rate Period (or by such later time or date, or both, as may be agreed to by such
Auction Agent) stating that such Fund has determined not to exercise its option
to designate such succeeding Subsequent Rate Period as a Special Rate Period, in
the form of Exhibit F to the Auction Agency Agreement, or shall fail to timely
deliver either such notice or a notice in the form of Exhibit E to the Auction
Agency Agreement, and BD is a Broker-Dealer for such series, such Auction Agent
shall deliver a notice in the form of Exhibit F to the Auction Agency Agreement
to BD not later than 3:00 P.M. on such second Business Day (or, if such Auction
Agent has agreed to a later time or date, as promptly as practicable
thereafter).
2.6. Allocation of Taxable Income.
If any Fund delivers to its Auction Agent a notice in the form of
Exhibit I to the Auction Agency Agreement designating all or a portion of any
dividend on shares of any series of MuniPreferred of such Fund to consist of net
capital gains or other income taxable for Federal income tax purposes, and BD is
a Broker-Dealer for such series, such Auction Agent shall deliver such notice to
BD on the Business Day following its receipt of such notice from such Fund. On
or prior to the Auction Date referred to in such notice, BD will contact each of
its customers that is a Beneficial Owner of shares of such series of
MuniPreferred or a Potential Beneficial Owner of shares of such series of
MuniPreferred interested in submitting an Order in the Auction to be held on
such Auction Date, and BD will notify such Beneficial Owners and Potential
Beneficial Owners of the contents of such notice. BD will be deemed to have
notified such Beneficial Owners and Potential Beneficial Owners if, for each of
them, (i) BD makes a reasonable effort to contact such Beneficial Owner or
Potential Beneficial Owner by telephone, and (ii) upon failing to contact such
Beneficial Owner or Potential Beneficial Owner by telephone BD mails written
notification to such Beneficial Owner or Potential Beneficial Owner at the
mailing address indicated in the account records of BD.
The Auction Agent for any series of MuniPreferred shall be required to
notify BD if it is a Broker-Dealer for such series within two Business Days
after each Auction of such series that involves an allocation of income taxable
for Federal income tax purposes as to the dollar amount per share of such
taxable income and income exempt from Federal income taxation included in the
related dividend.
2.7. Failure to Deposit.
(a) If:
8
<PAGE> 9
(i) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period
Days or any Rate Period succeeding any Special Rate Period of more than 364
Rate Period Days during which a Failure to Deposit occurred that has not
been cured), but, prior to 12:00 Noon, New York City time, on the third
Business Day next succeeding the date on which such Failure to Deposit
occurred, such Failure to Deposit shall have been cured in accordance with
Section 2.7 of the Auction Agency Agreement and such Fund shall have paid to
the Auction Agent for such series the applicable Late Charge as described in
Section 2.7 of the Auction Agency Agreement,
then, if BD is a Broker-Dealer for such series, such Auction Agent shall deliver
a notice in the form of Exhibit G to the Auction Agency Agreement by first-class
mail, postage prepaid, to BD not later than one Business Day after its receipt
of the payment from such Fund curing such Failure to Deposit and such Late
Charge.
(b) If:
(i) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during any Rate Period
thereof (other than any Special Rate Period of more than 364 Rate Period
Days or any Rate Period succeeding any Special Rate Period of more than 364
Rate Period Days during which a Failure to Deposit occurred but has not been
cured), and, prior to 12:00 Noon, New York City time, on the third Business
Day next succeeding the date on which such Failure to Deposit occurred, such
Failure to Deposit shall not have been cured as described in Section 2.7 of
the Auction Agency Agreement or such Fund shall not have paid to the Auction
Agent for such series the applicable Late Charge described in Section 2.7 of
the Auction Agency Agreement; or
(ii) any Failure to Deposit shall have occurred with respect to
shares of any series of MuniPreferred of any Fund during a Special Rate
Period thereof of more than 364 Rate Period Days, or during any Rate Period
thereof succeeding any Special Rate Period of more than 364 Rate Period Days
during which a Failure to Deposit occurred that has not been cured, and,
prior to 12:00 noon, New York City time, on the fourth Business Day
preceding the Auction Date for the Rate Period subsequent to such Rate
Period, such Failure to Deposit shall not have been cured as described in
Section 2.7 of the Auction Agency Agreement or such Fund shall not have paid
to the Auction Agent for such series the applicable Late Charge described in
Section 2.7 of the Auction Agency Agreement;
9
<PAGE> 10
then such Auction Agent shall deliver a notice in the form of Exhibit H to the
Auction Agency Agreement to the Broker-Dealers for such series not later than
one Business Day after the receipt of the payment from such Fund curing such
Failure to Deposit and such Late Charge.
2.8. Service Charge to be Paid to BD.
On the Business Day next succeeding each Auction Date for any series
of MuniPreferred specified in, or on Schedule A to, the Request Letter of any
Fund, the Auction Agent for such series shall pay to BD from moneys received
from such Fund an amount equal to the product of (a) (i) in the case of any
Auction Date immediately preceding a Rate Period of such series consisting of
364 Rate Period Days or fewer, 1/4 of 1%, or (ii) in the case of any Auction
Date immediately preceding a Rate Period of such series consisting of more than
364 Rate Period Days, such percentage as may be agreed upon by such Fund and BD
with respect to such Rate Period, times (b) a fraction, the numerator of which
is the number of Rate Period Days in the Rate Period therefor beginning on such
Business Day and the denominator of which is 365 if such Rate Period consists of
7 Rate Period Days and 360 for all other Rate Periods, times (c) $25,000 times
(d) the sum of (i) the aggregate number of shares of such series placed by BD in
such Auction that were (A) the subject of Submitted Bids of Existing Holders
submitted by BD and continued to be held as a result of such submission and (B)
the subject of Submitted Bids of Potential Holders submitted by BD and purchased
as a result of such submission plus (ii) the aggregate number of shares of such
series subject to valid Hold Orders (determined in accordance with paragraph (d)
of Section 2 of the Auction Procedures) submitted to the Auction Agent by BD
plus (iii) the number of shares of MuniPreferred deemed to be subject to Hold
Orders of Existing Holders pursuant to paragraph (c) of Section 2 of the Auction
Procedures of such Fund that were acquired by BD for its own account or were
acquired by BD for its customers who are Beneficial Owners.
For purposes of subclause (d)(iii) of the foregoing paragraph, if any
Existing Holder or Beneficial Owner who acquired shares of any series of
MuniPreferred through BD transfers those shares to another Person other than
pursuant to an Auction, then the Broker-Dealer for the shares so transferred
shall continue to be BD; provided, however, that if the transfer was effected
by, or if the transferee is, a Broker-Dealer other than BD, then such
Broker-Dealer shall be the Broker-Dealer for such shares.
2.9. Settlement.
(a) if any Existing Holder or Beneficial Owner with respect to whom BD
has submitted a Bid or Sell Order for shares of MuniPreferred of any series that
was accepted in whole or in part fails to instruct its Agent Member to deliver
the shares of MuniPreferred subject to such Bid or Sell Order against payment
therefor, BD, if it knows the identity of such Agent Member, shall instruct such
Agent Member to deliver such shares against payment therefor and, if such Agent
Member fails to comply with such instructions, BD may deliver to the Potential
Holder or Potential Beneficial Owner with respect to whom BD submitted a Bid for
shares of MuniPreferred of such series that was accepted in whole or in part a
number of
10
<PAGE> 11
shares of MuniPreferred of such series that is less than the number of shares of
MuniPreferred of such series specified in such Bid to be purchased by such
Potential Holder or Potential Beneficial Owner.
(b) Neither the Auction Agent nor the Fund shall have any
responsibility or liability with respect to the failure of an Existing Holder,
Beneficial Owner, Potential Holder or Potential Beneficial Owner or its
respective Agent Member to deliver shares of MuniPreferred of any series or to
pay for shares of MuniPreferred of any series sold or purchased pursuant to the
Auction Procedures or otherwise.
(c) Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event BD is an Existing Holder
with respect to shares of a series of MuniPreferred and the Auction Procedures
provide that BD shall be deemed to have submitted a Sell Order in an Auction
with respect to such shares if BD fails to submit an Order in that Auction with
respect to such shares, BD shall have no liability to any Person for failing to
sell such shares pursuant to such a deemed Sell Order if (i) such shares were
transferred by the beneficial owner thereof without notification of such
transfer in compliance with the Auction Procedures or (ii) BD has indicated to
the Auction Agent pursuant to Section 2.2(e) of this Agreement that, according
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> 12
3. The Auction Agent.
3.1. Duties and Responsibilities.
(a) Each Auction Agent is acting solely as agent for the Funds with
whom such Auction Agent has entered into Request Letters and owes no fiduciary
duties to any other Person, other than such Funds, by reason of the Agreements
to which such Auction Agent is a party.
(b) Each Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in the Agreements to which it is a party,
and no implied covenants or obligations shall be read into such Agreements
against such Auction Agent.
(c) In the absence of bad faith or negligence on its part, each Auction
Agent shall not be liable for any action taken, suffered, or omitted or for any
error of judgment made by it in the performance of its duties under the
Agreements to which it is a party. Each Auction Agent shall not be liable for
any error of judgment made in good faith unless such Auction Agent shall have
been negligent in ascertaining the pertinent facts.
3.2. Rights of the Auction Agents.
(a) Each Auction Agent may rely and shall be protected in acting or
refraining from acting upon any communication authorized hereby and upon any
written instruction, notice, request, direction, consent, report, certificate,
share certificate or other instrument, paper or document believed in good faith
by it to be genuine. Each Auction Agent shall not be liable for acting upon any
telephone communication authorized by the Agreements to which it is a party that
such Auction Agent believes in good faith to have been given by the appropriate
Fund, by the Adviser or by a Broker-Dealer. Each Auction Agent may record
telephone communications with the Broker-Dealers.
(b) Each Auction Agent may consult with counsel of its choice and the
advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) Each Auction Agent shall not be required to advance, expend or risk
its own funds or otherwise incur or become exposed to financial liability in the
performance of its duties hereunder.
3.3. Auction Agents' Disclaimers.
Each Auction Agent makes no representation as to the validity or
adequacy of the Agreements to which it is a party, the Auction Agency Agreements
to which it is a party or the shares of MuniPreferred of any series.
12
<PAGE> 13
4. Miscellaneous.
4.1. Termination.
Any party to any Agreement may terminate such Agreement at any time on
five days' notice to the other parties to such Agreement, provided that the Fund
party to such Agreement shall not terminate the Agreement unless at least one
Broker-Dealer Agreement would be in effect for each series of MuniPreferred of
such Fund after such termination. Each Agreement shall automatically terminate
with respect to any series of MuniPreferred with respect to which the relevant
Auction Agency Agreement has terminated.
4.2. Participant in Securities Depository; Payment of Dividends in
Same-Day Funds.
(a) BD is, and shall remain for the term of the Agreements, a member
of, or participant in, the Securities Depository (or an affiliate of such a
member or participant).
(b) BD represents that it (or if BD does not act as Agent Member, one
of its affiliates) shall make all dividend payments on the MuniPreferred
available in same-day funds on each Dividend Payment Date to customers that use
BD or affiliate as Agent Member.
4.3. Communications.
Except for (i) communications authorized to be by telephone by the
Agreement of any Fund or the Auction Procedures of such Fund and (ii)
communications in connection with Auctions (other than those expressly required
to be in writing), all notices, requests and other communications to any party
under such Agreement shall be in writing (including telecopy or similar writing)
and shall be given to such party, addressed to it, at its address or telecopy
number set forth below:
If to a Fund, [Name of Fund]
addressed: 333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
Telecopier No.: (312) 917-7942
Telephone No.: (312) 917-7700
If to the Adviser, Nuveen Advisory Corp.
addressed: 333 West Wacker Drive
Chicago, Illinois 60606
Attention: Richard J. Franke,
Chairman of the Board
13
<PAGE> 14
If to BD, to the
address or telecopy number
as set forth in the Acceptance
Letter,
If to an Action
Agent, to the address
or telecopy number as set
forth in the Request Letter,
or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
an Auction Agent by an Authorized Officer of such Auction Agent. BD may record
telephone communications with any Auction Agent.
4.4. Entire Agreement.
Each Agreement contains the entire agreement among the parties thereto
relating to the subject matter thereof, and there are no other representations,
endorsements, promises, agreements or understandings, oral, written or implied,
among the parties thereto relating to the subject matter thereof. Each Agreement
supersedes any prior agreement to which BD was a party in respect of any Fund.
4.5. Benefits.
Nothing in any Agreement, express or implied, shall give to any person,
other than the Fund party to such Agreement, the Adviser, the Auction Agent
party to such Agreement and BD and their respective successors and assigns, any
benefit or any legal or equitable right, remedy or claim under such Agreement.
4.6. Amendment; Waiver.
(a) Each Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged.
(b) Failure of any party to any Agreement to exercise any right or
remedy thereunder in the event of a breach thereof by any other party shall not
constitute a waiver of any such right or remedy with respect to any subsequent
breach.
14
<PAGE> 15
4.7. Successors and Assigns.
Each Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors and assigns of the Fund party to such
Agreement, the Adviser, the Auction Agent party to such Agreement and BD.
4.8. Severability.
If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or
unenforceability of such clause, provision or section shall not affect any of
the remaining clauses, provisions or sections hereof.
4.9. GOVERNING LAW.
EACH AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
4.10. Declaration of Trust.
The Declaration of each Fund that is a Massachusetts business trust is
on file with the Secretary of State of the Commonwealth of Massachusetts. Each
Agreement to which a Fund that is a Massachusetts business trust is a party has
been executed on behalf of such Fund by the Vice President and Treasurer of such
Fund acting in such capacity and not individually, and the obligations of such
Fund set forth in such Agreement are not binding upon any of such Fund's
trustees, officers or shareholders individually, but are binding only upon the
assets and property of such Fund.
15
<PAGE> 16
EXHIBIT A
SETTLEMENT PROCEDURES
---------------------
<PAGE> 17
===============================================================================
[AUCTION AGENT] AUCTION BID FORM NAME OF Broker-Dealer:
--------
AUTHORIZED
Submit to: SIGNATURE:
----------------------
TOTAL NUMBER OF ORDERS ON THIS BID FORM:
--------
===============================================================================
<PAGE> 18
===============================================================================
[AUCTION AGENT] AUCTION BID FORM NAME OF Broker-Dealer:
--------
AUTHORIZED
Submit to: SIGNATURE:
----------------------
TOTAL NUMBER OF ORDERS ON THIS BID FORM:
--------
===============================================================================
<PAGE> 19
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 NUMBER OF SHARES OF ORDERS BY NUMBER OF
EXISTING MUNIPREFERRED POTENTIAL SHARES OF
HOLDERS- HOLDERS- MUNIPREFERRED
EXISTING HOLD BID/RATE SELL POTENTIAL BID/RATE
HOLDER HOLDER
<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. /
--------- ---- ------------------- ---- --------- ---------
11. /
-------- ---------
12. /
-------- ---------
13. /
-------- ---------
14. /
-------- ---------
15. /
-------- ---------
</TABLE>
NOTES:
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
submitted, such Orders shall be considered valid in the order of priority
set forth in the Auction Procedures.
2. A Hold Order or Sell Order may be placed only by an Existing Holder covering
<PAGE> 20
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%).
==============================================================================
<PAGE> 21
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> 22
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> 23
(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> 24
(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> 25
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> 26
(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> 27
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> 28
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> 29
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> 30
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> 31
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> 32
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> 33
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> 34
EXHIBIT B TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE> 35
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> 36
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> 37
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> 38
EXHIBIT A TO REQUEST LETTER
---------------------------
[LIST OF BROKER-DEALERS]
<PAGE> 1
EXHIBIT 17(e)
[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: 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> 2
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> 3
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> 4
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> 5
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> 6
the State of New York.
22. The following riders, attached hereto, are hereby incorporated into
this Letter of Representations:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE> 7
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> 8
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)
- ------------ ----------- ----------------
<PAGE> 9
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> 10
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> 11
[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> 12
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> 13
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> 1
EXHIBIT 17(f)
NUVEEN EXCHANGE-TRADED FUNDS
(except Nuveen Municipal Value Fund, Inc.)
Terms and Conditions of the Dividend Reinvestment Plan
This Dividend Reinvestment Plan for the Nuveen Exchange-Traded Funds advised by
Nuveen Advisory Corp. set forth on Exhibit A attached hereto (each, a "Fund")
provides for reinvestment of Fund distributions, consisting of income dividends,
returns of capital and capital gain distributions paid by the Fund, on behalf of
Fund shareholders electing to participate in the Plan ("Participants") by United
States Trust Company of New York ("U.S. Trust"), the Plan Agent, in accordance
with the following terms:
1. U.S. Trust will act as Agent for Participants and will open an account for
each Participant under the Dividend Reinvestment Plan in the same name as the
Participant's shares are registered, and will put into effect for each
Participant the distribution reinvestment option of the Plan as of the first
record date for a distribution to shareholders after U.S. Trust receives the
Participant's authorization so to do, either in writing duly executed by the
Participant or by telephone notice satisfying such reasonable requirements as
U.S. Trust and the Fund may agree. In the case of shareholders who hold shares
for others who are the beneficial owners, U.S. Trust will administer the Plan on
the basis of the number of Shares certified from time to time by the record
shareholder as representing the total amount registered in the record
shareholder's name and held for the account of beneficial owners who are
Participants.
2. Whenever the Fund declares a distribution payable in shares or cash at the
option of the shareholders, each Participant shall take such distribution
entirely in shares and U.S. Trust shall automatically receive such shares,
including fractions, for the Participant's account, except in circumstances
described in Paragraph 3 below. Except in such circumstances, the number of
additional shares to be credited to each Participant's account shall be
determined by dividing the dollar amount of the distribution payable on the
Participant's shares by the current market price per share on the payable date
for such distribution.
3. Should the net asset value per Fund share exceed the market price per share
on the day for which trades will settle on the payment date for such
distribution (the "Valuation Date") for a distribution payable in shares or in
cash at the option of the shareholder, or should the Fund declare a distribution
payable only in cash, each Participant shall take such distribution in cash and
U.S. Trust shall apply the amount of such distribution to the purchase on the
open market of shares of the Fund for the Participant's account. Such Plan
purchases shall be made as early as the Valuation Date, under the supervision of
the investment adviser. U.S. Trust shall complete such Plan purchases no more
than 30 days after the Valuation Date, except where temporary curtailment or
suspension of purchases is necessary to comply with applicable provisions of
federal securities law.
<PAGE> 2
4. For the purpose of this Plan, the market price of the Fund's shares on a
particular date shall be the last sale price on the Exchange where it is traded
on that date, or if there is no sale on such Exchange on that date, then the
mean between the closing bid and asked quotations for such shares on such
Exchange on such date.
5. Open-market purchases provided for above may be made on any securities
exchange where the Fund's shares are traded, in the-over-the-counter market or
in negotiated transactions and may be on such terms as to price, delivery and
otherwise as U.S. Trust shall determine. Participants' funds held uninvested by
U.S. Trust will not bear interest, and it is understood that, in any event, U.S.
Trust shall have no liability in connection with any inability to purchase
shares within 30 days after the Valuation Date as herein provided, or with the
timing of any purchases affected. U.S. Trust shall have no responsibility as to
the value of the Fund's shares acquired for Participants' accounts. U.S. Trust
may commingle all Participants' amounts to be used for open-market purchases of
Fund shares and the price per share allocable to each Participant in connection
with such purchases shall be the average price (including brokerage commissions
and other related costs) of all Fund shares purchased by U.S. Trust as Agent.
6. U.S. Trust may hold each Participant's shares acquired pursuant to this Plan,
together with the shares of other Participants, in non-certificated form in U.S.
Trust's name or that of its nominee. U.S. Trust will forward to each Participant
any proxy solicitation material and will vote any shares so held only in
accordance with proxies returned to the Fund.
7. U.S. Trust will confirm to each Participant each acquisition made for the
Participant's account as soon as practicable but not later than 60 days after
the date thereof. U.S. Trust will deliver to any Participant upon request,
without charge, a certificate or certificates for his full shares. Although a
Participant may from time to time have an undivided fractional interest
(computed to three decimal places) in a share of the Fund, and distributions on
fractional shares will be credited to the Participant's account, no certificates
for a fractional share will be issued. In the event of termination of a
Participant's account under the Plan, U.S. Trust will adjust for any such
undivided fractional interest at the market value of the Fund's shares at the
time of termination.
8. Any stock dividends or split shares distributed by the Fund on full and
fractional shares held by U.S. Trust for a Participant will be credited to the
Participant's account. In the event that the Fund makes available to its
shareholders rights to purchase additional shares or other securities, the
shares held for each Participant under the Plan will be added to other shares
held by the Participant in calculating the number of rights to be issued to that
Participant.
9. U.S. Trust's service fee for handling reinvestment of distributions pursuant
hereto will be paid by the Fund. Participants will be charged their pro rated
shares of brokerage commissions on all open market purchases.
2
<PAGE> 3
10. Each Participant may terminate his account under the Plan by notifying U.S.
Trust of his intent so to do, such notice to be provided either in writing duly
executed by the Participant or by telephone in accordance with such reasonable
requirements as U.S. Trust and the Fund may agree. Such termination will be
effective immediately if notice is received by U.S. Trust not less than ten days
prior to any distribution record date for the next succeeding distribution;
otherwise such termination will be effective shortly after the investment of
such distribution with respect to all subsequent distributions. The Plan may be
terminated by the Fund or U.S. Trust upon at least 90 days prior notice. Upon
any termination, U.S. Trust will cause a certificate or certificates for the
full shares held for each Participant under the Plan and cash adjustment for any
fraction to be delivered to the Participant without charge. If any Participant
elects in advance of such termination to have U.S. Trust sell part or all of his
shares, U.S. Trust is authorized to deduct from the proceeds a $2.50 fee plus
the brokerage commissions incurred for the transaction.
11. These terms and conditions may be amended or supplemented by U.S. Trust or
the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to each
Participant appropriate written notice at least 90 days prior to the effective
date thereof. The amendment or supplement shall be deemed to be accepted by each
Participant unless, prior to the effective date thereof, U.S. Trust receives
notice of the termination of such Participant's account under the Plan in
accordance with the terms hereof. Any such amendment may include an appointment
by U.S. Trust in its place and stead of a successor Agent under these terms and
conditions. Upon any such appointment of any Agent for the purpose of receiving
distributions, the Fund will be authorized to pay to such successor Agent, for
each Participant's account, all dividends and distributions payable on shares of
the Fund held in the Participant's name or under the Plan for retention or
application by such successor Agent as provided in these terms and conditions.
12. U.S. Trust shall at all times act in good faith and agree to use its best
efforts within reasonable limits to insure the accuracy of all services
performed under this Agreement and to comply with applicable law, but assumes no
responsibility and shall not be liable for loss or damage due to errors unless
such error is caused by its negligence, bad faith or willful misconduct or that
of its employees.
13. These terms and conditions shall be governed by the laws of the State of New
York.
3
<PAGE> 4
EXHIBIT A
Nuveen Municipal Income Fund, Inc.
Nuveen California Municipal Income Fund, Inc.
Nuveen New York Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund, Inc.
Nuveen Performance Plus Municipal Fund, Inc.
Nuveen Municipal Advantage Fund, Inc.
Nuveen Municipal Market Opportunity Fund, Inc.
Nuveen Investment Quality Municipal Fund, Inc.
Nuveen Insured Quality Municipal Fund, Inc.
Nuveen Select Quality Municipal Fund, Inc.
Nuveen Quality Income Municipal Fund, Inc.
Nuveen Insured Opportunity Municipal Fund, Inc.
Nuveen Premier Municipal Income Fund, Inc.
Nuveen Premier Insured Municipal Income Fund, Inc.
Nuveen Premium Income Municipal Fund 2, Inc.
Nuveen Premium Income Municipal Fund 4, Inc.
Nuveen Insured Premium Income Municipal Fund, Inc.
Nuveen Insured Premium Income Municipal Fund 2
Nuveen Select Maturities Fund
Nuveen California Municipal Value Fund, Inc.
Nuveen California Performance Plus Municipal Fund, Inc.
Nuveen California Municipal Market Opportunity Fund, Inc.
Nuveen California Investment Quality Municipal Fund, Inc.
Nuveen California Select Quality Municipal Fund, Inc.
Nuveen California Quality Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund, Inc.
Nuveen Insured California Premium Income Municipal Fund 2, Inc.
Nuveen California Premium Income Municipal Fund
Nuveen Florida Investment Quality Municipal Fund
Nuveen Florida Quality Income Municipal Fund
Nuveen Insured Florida Premium Income Municipal Fund
Nuveen New Jersey Investment Quality Municipal Fund, Inc.
Nuveen New Jersey Premium Income Municipal Fund, Inc.
Nuveen New York Municipal Value Fund, Inc.
Nuveen New York Performance Plus Municipal Fund, Inc.
Nuveen New York Investment Quality Municipal Fund, Inc.
Nuveen New York Select Quality Municipal Fund, Inc.
Nuveen New York Quality Income Municipal Fund, Inc.
Nuveen Insured New York Premium Income Municipal Fund, Inc.
Nuveen Pennsylvania Investment Quality Municipal Fund
Nuveen Pennsylvania Premium Income Municipal Fund 2
Nuveen Arizona Premium Income Municipal Fund, Inc.
Nuveen Connecticut Premium Income Municipal Fund
Nuveen Georgia Premium Income Municipal Fund
Nuveen Maryland Premium Income Municipal Fund
Nuveen Massachusetts Premium Income Municipal Fund
Nuveen Michigan Quality Income Municipal Fund, Inc.
Nuveen Michigan Premium Income Municipal Fund, Inc.
Nuveen Missouri Premium Income Municipal Fund
Nuveen North Carolina Premium Income Municipal Fund
Nuveen Ohio Quality Income Municipal Fund, Inc.
Nuveen Texas Quality Income Municipal Fund
Nuveen Virginia Premium Income Municipal Fund
Nuveen Washington Premium Income Municipal Fund
4
