[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_] Pre-Effective Amendment No. __________
[_] Post-Effective Amendment No. __________
and
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[_] Amendment No. __________
Nuveen Dividend Advantage Municipal Fund
Exact Name of Registrant as Specified in Declaration of Trust
333 West Wacker Drive, Chicago, Illinois 60606
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
(800) 257-8787
Registrant's Telephone Number, including Area Code
Gifford R. Zimmerman
Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
Name and Address (Number, Street, City, State, Zip Code) of Agent for Service
Copies of Communications to:
Janet D. Olsen Thomas S. Harman Thomas A. DeCapo
Bell, Boyd & Lloyd Morgan, Lewis & Bockius LLP Skadden, Arps, Slate,
70 W. Madison St. 1800 M Street, N.W. Meagher & Flom LLP
Chicago, IL 60602 Washington, D.C. 20036 One Beacon Street
Boston, MA 02108
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If any of the securities being registered on this form are offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. [_]
It is proposed that this filing will become effective (check appropriate box)
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
========================================================================================================================
Proposed Maximum
Title of Securities Being Amount Being Proposed Maximum Aggregate Offering Amount of
Registered Registered Offering Price Per Unit Price(1) Registration Fee
------------------------------------------------------------------------------------------------------------------------
Common Shares, $.01 par value 100,000 Shares $15.00 $1,500,000 $417
========================================================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee.
NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND
CROSS REFERENCE SHEET
Part A - Prospectus
Items in Part A of Form N-2 Location in Prospectus
--------------------------- ----------------------
Item 1. Outside Front cover...................... Cover Page
Item 2. Cover Pages; Other Offering Information.. Cover Page
Item 3. Fee Table and Synopsis................... Prospectus Summary; Summary of
Fund Expenses
Item 4. Financial Highlights..................... Not Applicable
Item 5. Plan of Distribution..................... Cover Page; Prospectus Summary;
Underwriting
Item 6. Selling Shareholders..................... Not Applicable
Item 7. Use of Proceeds.......................... Use of Proceeds; The Fund's
Investments
Item 8. General Description of the Registrant.... The Fund; The Fund's
Investments; MuniPreferred(R)
Shares and Leverage;
Description of Shares
Item 9. Management............................... Management of the Fund;
Custodian and Transfer Agent
Item 10. Capital Stock, Long-Term Debt, and Other
Securities............................... Description of Shares;
MuniPreferred Shares and
Leverage; Distributions;
Dividend Reinvestment Plan;
Certain Provisions in the
Declaration of Trust; Tax Matters
Item 11. Defaults and Arrears on Senior
Securities.............................. Not Applicable
Item 12. Legal Proceedings........................ Other Matters
Item 13. Table of Contents of the Statement of
Additional Information.................. Table of Contents for the
Statement of Additional
Information
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Part B - Statement of Additional Information
Location in Statement of
Items in Part A of Form N-2 Additional Information
--------------------------- ------------------------
Item 14. Cover Page............................... Cover Page
Item 15. Table of Contents........................ Cover Page
Item 16. General Information and History.......... Not Applicable
Item 17. Investment Objective and Policies........ The Fund's Investments; Certain
Trading Strategies of the Fund;
Portfolio Transactions
Item 18. Management............................... Management of the Fund; Portfolio
Transactions
Item 19. Control Persons and Principal Holders of
Securities.............................. Management of the Fund;
Statement of Net Assets
Item 20. Investment Advisory and Other Services... Management of the Fund;
Custodian and Transfer Agent;
Experts
Item 21. Brokerage Allocation and Other Practices. Portfolio Transactions
Item 22. Tax Status............................... Tax Matters; Distributions
Item 23. Financial Statements..................... Report of Independent Auditors;
Statement of Net Assets
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Part C - Other Information
Items 24-33 have been answered in Part C of this Registration Statement.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. No + +person may sell these securities until the registration statement filed with + +the Securities and Exchange Commission is effective. This Prospectus is not + |
+an offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--DATED APRIL 16, 1999
[LOGO OF NUVEEN APPEARS HERE]
PROSPECTUS
Shares
Nuveen Dividend Advantage Municipal Fund
Common Shares
Investment Objectives. The Fund is a newly organized, closed-end, diversified management investment company. The Fund's investment objectives are:
. to provide current income exempt from regular Federal income tax; and
. to enhance portfolio value relative to the municipal bond market by investing in tax-exempt municipal bonds that the Fund's investment adviser believes are underrated or undervalued or that represent municipal market sectors that are undervalued.
Portfolio Contents. The Fund will invest its net assets in a diversified portfolio of municipal bonds that are exempt from regular Federal income tax. Under normal market conditions, the Fund expects to be fully invested in such tax-exempt municipal bonds. The Fund will invest at least 80% of its net assets in investment grade quality municipal bonds. Investment grade quality bonds are those rated by national rating agencies within the four highest grades (Baa or BBB or better), or bonds that are unrated but judged to be of comparable quality by the Fund's investment adviser. The Fund may invest up to 20% of its net assets in municipal bonds that are rated Ba/BB or B or that are unrated but judged to be of comparable quality by the Fund's investment adviser. Bonds of below investment grade quality are regarded as having predominately speculative characteristics with respect to capacity to pay interest and repay principal, and are commonly referred to as "junk bonds." See "The Fund's Investments." The Fund cannot assure you that it will achieve its investment objectives. You may have to pay Federal alternative minimum tax on some of the Fund's dividends. In addition, capital gains distributions will be subject to capital gains taxes. See "Tax Matters."
No Prior History. Because the Fund is newly organized, its common shares have no history of public trading. Shares of closed-end investment companies frequently trade at a discount from their net asset value.
MuniPreferred(R) Shares. The Fund intends to offer preferred shares, called "MuniPreferred Shares" in this Prospectus. The Fund expects that the MuniPreferred Shares will represent about 35% of the Fund's capital. The issuance of MuniPreferred Shares will "leverage" your common shares, meaning that the issuance of the MuniPreferred Shares may cause you to receive a larger return or loss on your common shares than you would have received without the issuance of the MuniPreferred Shares. Leverage provides special risks, but also affords an opportunity for greater return. See "MuniPreferred Shares and Leverage" and "Description of Shares."
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Price to Proceeds to
Public Sales Load(1) the Fund(2)
--------------------------------------------------------------------------------
Per Share................... $15.00 $ $
--------------------------------------------------------------------------------
Total(3).................... $ $ $
--------------------------------------------------------------------------------
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The common shares are being offered by the Underwriters named herein, subject to prior sale, when, as and if accepted by them and subject to certain conditions. It is expected that delivery of the common shares will be made available for delivery through the facilities of the Depository Trust Company. as they receive them and retain the right to reject any order. The Underwriters expect to deliver your common shares at the offices of
on or about .
Salomon Smith Barney John Nuveen & Co.
Incorporated
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The date of this Prospectus is
This Prospectus contains important information about the Fund. You should
read the Prospectus before deciding whether to invest and retain it for future
reference. A Statement of Additional Information, dated ,
containing additional information about the Fund, has been filed with the
Securities and Exchange Commission and is hereby incorporated by reference in
its entirety into this Prospectus. You can review the table of contents of the
Statement of Additional Information on page 28 of this Prospectus. You may
request a free copy of the Statement of Additional Information by calling
(800) 257-8787. You may also obtain the Statement of Additional Information on
the Securities and Exchange Commission web site (http://www.sec.gov).
The Fund's common shares do not represent a deposit or obligation of, and are not guaranteed or endorsed by, any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency.
No public market for the common shares currently exists. Shares of closed- end investment companies frequently trade at a discount from their net asset value. This risk may be greater for investors expecting to sell their shares in a relatively short period after completion of the public offering. The Fund has applied to list the common shares on the New York Stock Exchange. The trading or "ticker" symbol of the common shares is expected to be " ".
PROSPECTUS SUMMARY
This is only a summary. You should review the more detailed information contained in the Prospectus and in the Statement of Additional Information.
The Fund............... Nuveen Dividend Advantage Municipal Fund (the "Fund")
is a newly organized, closed-end, diversified
management investment company. See "The Fund."
The Offering........... The Fund is offering common shares of
beneficial interest at $15.00 per share through a
group of underwriters (the "Underwriters") led by
Salomon Smith Barney Inc., John Nuveen & Co.
Incorporated, and . The common shares of
beneficial interest will be called "Common Shares" in
the rest of this Prospectus. You must purchase at
least 100 Common Shares. The Fund has given the
Underwriters an option to purchase up to
additional Common Shares to cover orders in excess of
Common Shares. See "Underwriting."
Investment Objectives.. The Fund's investment objectives are to provide
current income exempt from regular Federal income tax
and enhance portfolio value relative to the municipal
bond market by investing in tax-exempt municipal
bonds that the Fund's investment adviser believes are
underrated or undervalued or that represent municipal
markets that are undervalued. The Fund will invest
its net assets in a diversified portfolio of
municipal bonds that are exempt from regular Federal
income tax. Under normal market conditions, the Fund
expects to be fully invested in such tax-exempt
municipal bonds. The Fund will invest at least 80% of
its net assets in investment grade quality municipal
bonds rated as such at the time of investment.
Investment grade quality bonds are bonds rated within
the four highest grades (Baa or BBB or better by
Moody's Investor Service, Inc. ("Moody's"), Standard
& Poors Corporation ("S&P") or Fitch IBCA, Inc.
("Fitch")), or bonds that are unrated but judged to
be of comparable quality by the Fund's investment
adviser. The Fund may invest up to 20% of its net
assets in municipal bonds that, at the time of
investment, are rated Ba/BB or B by Moody's, S&P or
Fitch or that are, at the time of investment, unrated
but judged to be of comparable quality by the Fund's
investment adviser. Bonds of below investment grade
quality are regarded as having predominately
speculative characteristics with respect to capacity
to pay interest and repay principal and are commonly
referred to as "junk bonds." The Fund cannot assure
you that it will attain its investment objectives.
|
See "The Fund's Investments."
Special
Considerations.........
The Fund expects that a substantial portion of its
investments will pay interest that is taxable under
the Federal alternative minimum tax. If you are
subject to the Federal alternative minimum tax, the
Fund may not be a suitable investment for you. In
addition, capital gains distribution will be subject
to capital gains taxes. See "Tax Matters."
Proposed Offering of Approximately three to six months after completion of
MuniPreferred(R) this offering, the Fund intends to offer preferred
Shares................. shares of beneficial interest ("MuniPreferred
Shares") representing approximately 35% of the Fund's
capital after their issuance. The issuance of
MuniPreferred Shares will leverage your shares. The
money the Fund obtains by selling the MuniPreferred
Shares will be invested in long-term municipal bonds.
Long-term municipal bond yields are typically,
although not always, higher than shorter-term yields.
The MuniPreferred Shares will pay dividends based on
shorter-term rates. So long as long-term bond yields,
net of applicable Fund expenses, exceed MuniPreferred
Share dividend rates, the investment of the proceeds
of the MuniPreferred Shares will generate more income
than will be needed to pay dividends on the
MuniPreferred Shares. If so, the excess will be used
to pay higher dividends to holders of Common Shares
("Common Shareholders"). However, the Fund cannot
assure you that the issuance of MuniPreferred Shares
will result in a higher yield on your Common Shares.
There are risks associated with the leveraging of
your Common Shares. Once MuniPreferred Shares are
issued, the net asset value and market price of the
Common Shares and the yield to Common Shareholders
will be more volatile. See "MuniPreferred Shares and
Leverage" and "Description of Shares--MuniPreferred
Shares."
Investment Adviser..... Nuveen Advisory Corp. ("Nuveen Advisory") will be the
Fund's investment adviser. Nuveen Advisory will
receive an annual fee, payable monthly, in a maximum
amount equal to .65% of the Fund's average daily net
asset value (including assets attributable to any
MuniPreferred Shares that may be outstanding), with
lower fee levels for assets that exceed $125 million.
Nuveen Advisory has agreed to reimburse the Fund for
fees and expenses in the amount of .30% of average
daily net assets of the Fund for the first five years
of the Fund's operations (through July 31, 2004), and
for a declining amount for an additional five years
(through July 31, 2009). Nuveen Advisory is a wholly-
owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"). See "Management of the Fund."
Distributions..........
The Fund intends to make regular monthly cash
distributions to you at a level rate based on the
projected performance of the Fund. The Fund's ability
to maintain a level dividend rate will depend on a
number of factors, including dividends payable on the
MuniPreferred Shares. As portfolio and market
conditions change, the rate of dividends on the
Common Shares and the Fund's dividend policy could
change. Over time, the Fund will distribute all of
its net investment income (after it pays accrued
dividends on any outstanding MuniPreferred Shares).
In addition, at least annually, the Fund intends to
distribute net capital gains and taxable ordinary
income, if any, to you so long as the net capital
gains and taxable
4
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ordinary income are not necessary to pay accrued
dividends on, or redeem or liquidate, any
MuniPreferred Shares. Your initial distribution is
expected to be declared approximately 45 days, and
paid approximately 90 days, from the completion of
this offering. You may elect to automatically
reinvest some or all of your distributions in
additional Common Shares under the Fund's Dividend
Reinvestment Plan. See "Distributions" and "Dividend
Reinvestment Plan."
Listing............... The Fund has applied to list the Common Shares on the
New York Stock Exchange. See "Description of Shares--
Common Shares." The trading or "ticker" symbol of the
Common Shares is expected to be " ."
Custodian............. The Chase Manhattan Bank will serve as custodian of
the Fund's assets. See "Custodian and Transfer
Agent."
Market Price of Shares of closed-end investment companies may
Shares................ frequently trade at prices lower than net asset
value. Shares of closed-end investment companies like
the Fund that invest predominately in investment
grade municipal bonds have during some periods traded
at prices higher than net asset value and during
other periods have traded at prices lower than net
asset value. The Fund cannot assure you that Common
Shares will trade at a price higher than net asset
value in the future. Net asset value will be reduced
immediately following the offering by the amount of
the organization and offering expenses paid by the
Fund. See "Use of Proceeds." The Common Shares are
designed primarily for long-term investors, and you
should not view the Fund as a vehicle for trading
purposes. See "MuniPreferred Shares and Leverage,"
"Risks," "Description of Shares," "Repurchase of Fund
Shares; Conversion to Open-End Fund" and the
Statement of Additional Information under "Repurchase
of Fund Shares; Conversion to Open-End Fund." In
addition to net asset value, market price may be
affected by such factors as dividend levels (which
are in turn affected by expenses), call protection,
stability and market demand. See "Description of
Shares."
Special Risk
Considerations........
Interest Rate Risk. Interest rate risk is the risk
that the municipal bonds in the Fund's portfolio will
decline in value because of increases in market
interest rates. The prices of longer-term bonds
fluctuate more than prices of shorter-term bonds as
interest rates change. Because the Fund will invest
primarily in long-term bonds, the Common Share net
asset value and market price per share will fluctuate
more in response to changes in market interest rates
than if the Fund were invested in shorter-term bonds.
The Fund's use of leverage, as described below, will
tend to increase Common Share interest rate risk.
5
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Credit Risk. Credit risk is the risk that one or more
municipal bonds in the Fund's portfolio will decline
in price, or fail to pay interest or principal when
due, because the issuer of the bond experiences a
decline in its financial status. The Fund may invest
up to 20% of its net assets in municipal bonds that
are rated Ba/BB or B or that are unrated but judged
to be of comparable quality by Nuveen Advisory. The
prices of these lower grade bonds are more sensitive
to negative developments, such as a decline in the
issuer's revenues or a general economic downturn,
than are the prices of higher grade securities.
The Effects of Leverage. The use of leverage through
the issuance of MuniPreferred Shares creates an
opportunity for increased Common Share net income,
but leverage also creates special risks for Common
Shareholders. It is anticipated that MuniPreferred
dividends will be based on shorter-term rates (which
would be redetermined periodically, pursuant to an
auction process), and that the Fund will invest the
proceeds of the MuniPreferred Shares offering in
long-term municipal bonds. Long-term municipal bond
yields are typically, although not always, higher
than shorter-term yields. So long as the Fund's
municipal bond portfolio provides a higher rate of
return (net of expenses) than the MuniPreferred
dividend rate, the leverage will cause Common
Shareholders to receive a higher current rate of
return than if the Fund were not leveraged. Leverage
creates two major types of risks for Common
Shareholders:
. the likelihood of greater volatility of net
asset value and market price of Common
Shares, because changes in the value of the
Fund's bond portfolio (including bonds bought
with the proceeds of the MuniPreferred Shares
offering) are borne entirely by the Common
Shareholders; and
. the possibility either that Common Share
income will fall if the MuniPreferred
dividend rate rises above the rate of return
(net of expenses) on the Fund's bond
portfolio, or that Common Share income will
fluctuate because the MuniPreferred dividend
rate varies.
Municipal Bond Market. The amount of public
information available about the municipal bonds in
the Fund's portfolio is generally less than for
corporate equities or bonds, and the investment
performance of the Fund may therefore be more
dependent on the analytical abilities of Nuveen
Advisory than would be a stock fund or taxable bond
fund. The secondary market for municipal bonds also
tends to be less well-developed than many other
securities markets, which may adversely affect the
Fund's ability to sell its bonds at attractive
prices.
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SUMMARY OF FUND EXPENSES
The following table assumes the issuance of MuniPreferred Shares in an amount equal to 35% of the Fund's capital (including the amount obtained through leverage), and shows Fund expenses both as a percentage of net assets attributable to Common Shares and as a percentage of total net assets.
Percentage of
Total Net Assets
----------------
Shareholder Transaction Expenses
Sales Load Paid by You (as a percentage
of offering price)..................... 4.5%
Dividend Reinvestment Plan Fees......... None*
Percentage of Net
Assets Attributable Percentage of
to Common Shares Total Net Assets
------------------- ----------------
Annual Expenses
Management Fees......................... 1.00% .65%
Fee and Expense Reimbursement........... .46%+ (.30%)
----- -----
Net Management Fees....................... .54%+ .35%+
Other Expenses............................ .23% .15%
----- -----
Total Net Annual Expenses............. .77%+ .50%+
===== =====
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+ Nuveen Advisory has agreed to reimburse the Fund for fees and expenses in the amount of .30% of average daily net assets for the first 5 years of the Fund's operations, .25% of average daily net assets in year 6, .20% in year 7, .15% in year 8, .10% in year 9 and .05% in year 10. Without the reimbursement, "Total Annual Expense" would be estimated to be .80% of average daily total net assets and 1.23% of average daily net assets attributable to Common Shares. Nuveen has agreed to pay organizational expenses and offering costs (other than Sales Load) that exceed $0.02 per Common Share.
The purpose of the table above is to help you understand all fees and expenses that you, as a Common Shareholder, would bear directly or indirectly. The expenses shown in the table are based on estimated amounts for the Fund's first year of operations and assume that the Fund issued Common Shares. See "Management of the Fund" and "Dividend Reinvestment Plan."
The following example illustrates the expenses (including the sales load of $45) that you would pay on a $1,000 investment in Common Shares, assuming (1) total annual expenses of .77% of net assets attributable to Common Shares and .50% of total net assets in years 1 through 5, increasing to 1.15% and .75%, respectively, in year 10 and (2) a 5% annual return:/1/
Expenses Based on a Percentage of 1 Year 3 Years 5 Years 10 Years(2) --------------------------------- ------ ------- ------- ----------- Net Assets Attributable to Common Shares................................. $53 $68 $86 $151 Total Net Assets........................ $50 $60 $72 $115 |
THE FUND
The Fund is a recently organized, closed-end, diversified management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund was organized as a Massachusetts business trust on January 15, 1999, pursuant to a Declaration of Trust governed by the laws of the Commonwealth of Massachusetts (the "Declaration"). As a newly organized entity, the Fund has no operating history. The Fund's principal office is located at 333 West Wacker Drive, Chicago, Illinois 60606, and its telephone number is (800) 257-8787.
USE OF PROCEEDS
The net proceeds of the offering of Common Shares will be approximately $ ($ if the Underwriters exercise the over-allotment option in full) after payment of the estimated organization and offering costs. Nuveen Advisory has agreed to pay all organizational expenses and offering costs (other than Sales Load) that exceed $0.02 per Common Share. The Fund will invest the net proceeds of the offering in accordance with the Fund's investment objectives and policies as stated below. It is presently anticipated that the Fund will be able to invest substantially all of the net proceeds in municipal bonds that meet those investment objectives and policies within three months after the completion of the offering. Pending such investment, it is anticipated that the proceeds will be invested in short- term, tax-exempt securities.
THE FUND'S INVESTMENTS
Investment Objectives and Policies
The Fund's investment objectives are
. to provide current income exempt from regular Federal income tax; and
. to enhance portfolio value relative to the municipal bond market by investing in tax-exempt municipal bonds that Nuveen Advisory believes are underrated or undervalued or that represent municipal market sectors that are undervalued.
Underrated municipal bonds are those whose ratings do not, in Nuveen Advisory's opinion, reflect their true credit worthiness. Undervalued municipal bonds are bonds that, in Nuveen Advisory's opinion, are worth more than the value assigned to them in the marketplace. Nuveen Advisory may at times believe that bonds associated with a particular municipal market sector (for example, electric utilities), or issued by a particular municipal issuer, are undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio because it represents a market sector or issuer that Nuveen Advisory considers undervalued, even if the value of the particular bond is consistent with the value of similar bonds. Municipal bonds 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 bonds of the market sector for reasons that do not apply to the particular municipal bonds that are considered undervalued. The Fund's investment in underrated or undervalued municipal bonds will be based on Nuveen Advisory's belief that their prices should ultimately rise (relative to the market) to reflect their true value. The Fund attempts to increase its portfolio value relative to the municipal bond market by prudent selection of municipal bonds regardless of the direction the market may move. Any capital appreciation realized by the Fund will generally result in the distribution of taxable capital gains to Common Shareholders.
The Fund will invest its net assets in a diversified portfolio of municipal bonds that are exempt from regular Federal income tax. Under normal market conditions, the Fund expects to be fully invested (at least 95% of its assets) in such tax-exempt municipal bonds. The Fund will invest at least 80% of its net assets in investment grade quality municipal bonds. Investment grade quality means that bonds are rated, at the time of investment, within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated but judged to be of comparable quality by Nuveen Advisory. The Fund may invest up to 20% of its net assets in municipal bonds that are rated, at the time of investment, Ba/BB or B by Moody's, S&P or Fitch or that are unrated but judged to be of comparable quality by Nuveen Advisory. Bonds of below investment grade quality (Ba/BB or below) are commonly referred to as "junk bonds." Issuers of bonds rated Ba/BB or B are regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. A general description of Moody's, S&P's and Fitch's ratings of municipal bonds is set forth in Appendix A to the Statement of Additional Information. The Fund may also invest in securities of other open or closed- end investment companies that invest primarily in municipal bonds of the types in which the Fund may invest directly. See "--Other Investment Companies" and "--Initial Portfolio Composition."
Upon Nuveen Advisory's recommendation, during temporary defensive periods and in order to keep the Fund's cash fully invested, including the period during which the net proceeds of the offering are being invested, the Fund may invest up to 100% of its net assets in short-term investments including high quality, short-term securities that may be either tax-exempt or taxable. The Fund intends to invest in taxable short-term investments only in the event that suitable tax-exempt short-term investments are not available at reasonable prices and yields. For more information, see the Statement of Additional Information.
The Fund cannot change its investment objectives without the approval of the holders of a "majority of the outstanding" Common Shares and MuniPreferred Shares voting together as a single class, and of the holders of a "majority of the outstanding" MuniPreferred Shares voting as a separate class. A "majority of the outstanding," means (i) 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 (ii) more than 50% of the shares, whichever is less. See "Description of Shares--MuniPreferred Shares--Voting Rights" and the Statement of Additional Information under "Description of Shares--MuniPreferred Shares-- Voting Rights" for additional information with respect to the voting rights of holders of MuniPreferred Shares.
If you are subject to the Federal alternative minimum tax, the Fund may not be a suitable investment for you because the Fund expects that a substantial portion of its investments will pay interest that is taxable under the Federal alternative minimum tax. Special rules apply to corporate holders. In addition, capital gains distributions will be subject to capital gains taxes. See "Tax Matters."
Municipal Bonds
Municipal bonds are either general obligation or revenue bonds and typically are issued to finance public projects (such as roads or public buildings), to pay general operating expenses, or to refinance outstanding debt. Municipal bonds may also be issued for private activities, such as housing, medical and educational facility construction, or for privately owned industrial development and pollution control projects. General obligation bonds are backed by the full faith and credit, or taxing authority, of the issuer and may be repaid from any revenue source; revenue bonds may be repaid only from the revenues of a specific facility or source. The Fund also may purchase municipal bonds that represent
lease obligations. These carry special risks because the issuer of the bonds may not be obligated to appropriate money annually to make payments under the lease. In order to reduce this risk, the Fund will only purchase municipal bonds representing lease obligations where Nuveen Advisory believes the issuer has a strong incentive to continue making appropriations until maturity.
The municipal bonds in which the Fund will invest are generally issued by states, cities and local authorities and certain possessions and territories of the United States (such as Puerto Rico or Guam), and pay interest that, in the opinion of bond counsel to the issuer, is exempt from Federal income tax, although the interest may be subject to the Federal alternative minimum tax.
The yields on municipal bonds are dependent on a variety of factors, including prevailing interest rates and the condition of the general money market and the municipal bond market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The market value of municipal bonds will vary with changes in interest rate levels and as a result of changing evaluations of the ability of their issuers to meet interest and principal payments.
The Fund will primarily invest in municipal bonds with long-term maturities in order to maintain a weighted average maturity of 15-30 years, but the weighted average maturity of obligations held by the Fund may be shortened, depending on market conditions.
Delayed Delivery Transactions
The Fund may buy and sell municipal bonds on a when-issued or delayed delivery basis, making payment or taking delivery at a later date, normally within 15 to 45 days of the trade date. This type of transaction may involve an element of risk because no interest accrues on the bonds prior to settlement and, since bonds are subject to market fluctuations, the value of the bonds at time of delivery may be less (or more) than cost. A separate account of the Fund will be established with its custodian consisting of cash, cash equivalents, or liquid securities having a market value at all times at least equal to the amount of the commitment.
Other Investment Companies
The Fund may invest in securities of other open or closed-end investment companies that invest primarily in municipal bonds of the types in which the Fund may invest directly. The Fund generally expects to invest in other investment companies either during periods when it has large amounts of uninvested cash, such as the period shortly after the Fund receives the proceeds of the offering of its Common Shares or MuniPreferred Shares, or during periods when there is a shortage of attractive, high-yielding municipal bonds available in the market. As a stockholder in an investment company, the Fund will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Fund's management, advisory and administrative fees with respect to assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. Nuveen Advisory will take expenses into account when evaluating the investment merits of an investment in the investment company relative to available municipal bond investments. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein. As described in the Prospectus in the section entitled "Risks", the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
Initial Portfolio Composition
If current market conditions persist, the Fund expects that approximately 85% of its initial portfolio will consist of investment grade quality municipal bonds, rated as such at the time of investment, meaning that such bonds are rated by national rating agencies within the four highest grades of the investment grade category or are unrated but judged to be of comparable quality by Nuveen Advisory (approximately 50% in Aaa/AAA; 15% in A and 20% in Baa/BBB and 15% in Ba/BB or B). The Fund will generally select obligations which may not be redeemed at the option of the issuer for approximately seven to nine years from the date of purchase by the Fund. See the Statement of Additional Information under "Certain Trading Strategies of the Fund-- Portfolio Trading and Turnover Rate." Subject to market availability, the Fund would likely seek to invest approximately 15% of its initial portfolio in municipal bonds that are, at the time of investment, either rated below investment grade or that are unrated but judged to be of comparable quality by Nuveen Advisory. See "The Fund's Investments--Investment Objectives and Policies."
MUNIPREFERRED SHARES AND LEVERAGE
Approximately three to six months after the completion of the offering of the Common Shares, the Fund intends to offer MuniPreferred Shares representing approximately 35% of the Fund's capital immediately after the issuance of the MuniPreferred Shares. The MuniPreferred Shares have complete priority upon distribution of assets over any other class of shares of the Fund, including the Common Shares. The issuance of MuniPreferred Shares will leverage the Common Shares. Although the timing and other terms of the offering and the terms of the MuniPreferred Shares will be determined by the Fund's Board of Trustees, the Fund expects to invest the proceeds of the MuniPreferred Shares offering in long-term municipal bonds. Long-term municipal bond yields are typically, although not always, higher than shorter-term yields. The MuniPreferred Shares will pay dividends based on shorter-term rates (which would be redetermined periodically, by an auction process). So long as the Fund's portfolio is invested in securities that provide a higher rate of return than the dividend rate of the MuniPreferred Shares (after taking expenses into consideration), the leverage will cause you to receive a higher current rate of return than if the Fund were not leveraged.
Changes in the value of the Fund's bond portfolio (including bonds bought with the proceeds of the MuniPreferred Shares offering) will be borne entirely by the Common Shareholders. If there is a net decrease (or increase) in the value of the Fund's investment portfolio, the leverage will decrease (or increase) the net asset value per Common Share to a greater extent than if the Fund were not leveraged.
For tax purposes, the Fund is currently required to allocate net capital gains and other taxable income, if any, between the Common Shares and MuniPreferred Shares in proportion to total distributions paid to each class for the year in which the net capital gains or other taxable income is realized. If net capital gains and other taxable income are allocated to MuniPreferred Shares (instead of solely tax-exempt income), the Fund will likely have to pay higher total dividends to MuniPreferred Shareholders or make special payments to MuniPreferred Shareholders to compensate them for the increased tax liability. This would reduce the total amount of dividends paid to the Common Shareholders, but would increase the portion of the dividend that is tax-exempt. On an after-tax basis, Common Shareholders may still be better off than if they had been allocated all of the Fund's net capital gains or other taxable income (resulting in a higher amount of total dividends), but received a lower amount of tax-exempt income. If the increase in dividend payments or the special payments to
MuniPreferred Shareholders are not entirely offset by a reduction in the tax liability of, and an increase in the tax-exempt dividends received by, the Common Shareholders, the advantage of the Fund's leveraged structure to Common Shareholders will be reduced.
Assuming that the MuniPreferred Shares will represent approximately 35% of the Fund's capital and pay dividends at an annual average rate of 3.20%, the income generated by the Fund's portfolio (net of estimated expenses) must exceed 1.06% in order to cover such dividend payments and other expenses specifically related to the MuniPreferred Shares. Of course, these numbers are merely estimates, used for illustration. Actual MuniPreferred Share dividend rates will vary frequently and may be significantly higher or lower than the rate estimated above.
The following table is furnished in response to requirements of the Securities and Exchange Commission. It is designed to illustrate the effect of leverage on Common Share total return, assuming investment portfolio total returns (comprised of income and changes in the value of bonds held in the Fund's portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or expected to be experienced by the Fund. The table further reflects the issuance of MuniPreferred Shares representing 35% of the Fund's total capital, a 4.85% yield on the Fund's investment portfolio, net of expenses, and the Fund's currently projected annual MuniPreferred Share dividend rate of 2.80%. The table also assumes no adjustments to investment portfolio or capital structure in response to actual or anticipated changes in interest rates, although in fact the Fund expects to manage its investment portfolio and may manage its capital structure to mitigate the increased volatility in current income and net asset value associated with leverage. See "MuniPreferred Shares and Leverage."
Components of Portfolio Return Net Income............................. 4.85% 4.85% 4.85% 4.85% 4.85% Capital (Loss) or Gain................. (14.85)% (9.85)% (4.85)% 0.15% 5.15% Assumed Portfolio Total Return........... (10.00)% (5.00)% (0.00)% 5.00% 10.00% Common Share Dividends................. 5.95% 5.95% 5.95% 5.95% 5.95% Common Share Capital Gain/(Loss)....... (22.85)% (15.15)% (7.46)% 0.23% 7.92% Common Share Total Return................ (16.89)% (9.20)% (1.51)% 6.18% 13.88% |
Common Share total return is composed of two elements--the Common Share dividends paid by the Fund (the amount of which is largely determined by the net investment income of the Fund after paying dividends on MuniPreferred Shares) and gains or losses on the value of the securities the Fund owns. As required by the Securities and Exchange Commission rules, the table assumes that the Fund is more likely to suffer capital losses than to enjoy capital gains. So, to assume a total return of 0%, the Fund must assume that the tax- exempt interest it receives on its municipal bond investments is entirely offset by losses in the value of those bonds.
Unless and until MuniPreferred Shares are issued, the Common Shares will not be leveraged and this section will not apply.
RISKS
The Fund is a newly organized, diversified, closed-end management investment company and has no operating history. Shares of closed-end management companies frequently trade at a discount from their net asset values. The net asset value of the Common Shares will fluctuate with and be affected by
interest rate risk, credit risk, reinvestment risk, leverage risk, inflation risk, and "Year 2000" risk, each of which is more fully described below.
Interest rate risk is the risk that bonds will decline in value because of changes in interest rates. Generally, municipal bonds will decrease in value when interest rates rise and increase in value when interest rates decline. This means that the net asset value of the Common Shares will fluctuate with interest rate changes and the corresponding changes in the value of the Fund's municipal bond holdings.
Credit risk is the risk that an issuer of a municipal bond will become unable to meet its obligation to make interest and principal payments. In general, lower rated municipal bonds are perceived to carry a greater degree of risk that the issuer will lose its ability to make interest and principal payments, which could have a negative impact to the Fund's net asset value. The Fund may invest up to 20% of its net assets in municipal bonds that are rated Ba/BB or B by Moody's, S&P or Fitch or that are unrated but judged to be of comparable quality by the Fund's investment adviser. Issuers of bonds rated Ba/BB or B are regarded as having current capacity to make principal and interest payments but are subject to business, financial or economic conditions which could adversely affect such payment capacity. Bonds of below investment grade quality (Ba/BB or below) are commonly referred to as "junk bonds."
The Fund intends to invest substantially all its assets in municipal bonds issued by states, cities and local authorities and certain possessions and territories of the United States. As a result, the Fund bears the investment risk that economic, political or regulatory changes could hurt many municipal bond issuers, which would likely reduce the value of the Fund's bond portfolio and a Common Shareholder's investment in the Fund.
Reinvestment risk is the risk that income from the Fund's bond portfolio will decline if and when the Fund invests the proceeds from matured, traded or called bonds at market interest rates that are below the portfolio's current earnings rate. A decline in income could affect the Fund's overall returns.
Leverage risk is the risk associated with the issuance of the MuniPreferred Shares to leverage the Common Shares. Once the MuniPreferred Shares are issued, the net asset value and market value of Common Shares will be more volatile, and the yield to Common Shareholders will tend to fluctuate with changes in the shorter-term dividend rates on the MuniPreferred Shares. If the dividend rate on the MuniPreferred Shares approaches the net rate of return on the Fund's investment portfolio, the benefit of leverage to Common Shareholders would be reduced. If the dividend rate on the MuniPreferred Shares exceeds the net rate of return on the Fund's portfolio, the leverage will result in a lower rate of return to Common Shareholders than if the Fund were not leveraged. In addition, the Fund will pay (and Common Shareholders will bear) any costs and expenses relating to the issuance and ongoing maintenance of the MuniPreferred Shares. Accordingly, the Fund cannot assure you that the issuance of MuniPreferred Shares will result in a higher yield or return to Common Shareholders.
Similarly, any decline in the net asset value of the Fund's investments will be borne entirely by Common Shareholders. Therefore, if the market value of the Fund's portfolio declines, the leverage will result in a greater decrease in net asset value to Common Shareholders than if the Fund were not leveraged. Such greater net asset value decrease will also tend to cause a greater decline in the market price for the Common Shares. In an extreme case, the Fund's current investment income might not be sufficient to meet the dividend requirements on the MuniPreferred Shares; or the Fund might be in danger of failing to maintain the required 200% asset coverage or of losing its AAA/aaa ratings on the MuniPreferred Shares. In order to counteract such an event, the Fund might need to liquidate
investments in order to fund a redemption of some or all of the MuniPreferred Shares. Liquidation at times of low municipal bond prices will tend to reduce the net asset value of the Common Shares and to reduce returns to Common Shareholders.
The Fund may invest in the securities of other investment companies. Such securities may also be leveraged and will therefore be subject to the leverage risks described above. There can be no assurance that such additional leverage will not reduce the net asset value of the Fund's Common Shares and the returns to Common Shareholders.
Inflation risk is the risk that the value of assets or income from investment will be worth less in the future as inflation decreases the value of money. As inflation increases, the real value of the Common Shares and distributions can decline. In addition, during any periods of rising inflation, MuniPreferred Share dividend rates would likely increase, which would tend to further reduce returns to Common Shareholders.
"Year 2000" risk is the risk that the computer systems used by Nuveen Advisory, its service providers and industry wide information and transaction clearinghouses to manage the Fund's investments and process shareholder transactions may not be able to correctly process activity occurring in the Year 2000 because of the way computers historically have stored dates. In addition, Year 2000 issues may affect the ability of municipal issuers to meet their interest and principal payment obligations to their bond holders, and may adversely affect their credit ratings.
HOW THE FUND MANAGES RISK
Investment Limitations
The Fund has adopted certain investment limitations designed to limit investment risk and maintain portfolio diversification. These limitations are fundamental and may not be changed without the approval of the holders of a majority of the outstanding Common Shares and MuniPreferred Shares voting together as a single class, and the approval of the holders of a majority of the MuniPreferred Shares voting as a separate class. The Fund may not:
. Invest more than 25% of total fund assets in securities of issuers in any one industry; except that this limitation does not apply to municipal bonds backed by the assets and revenues of governments or political subdivisions of governments; and
. Invest more than 5% of total fund assets in securities of any one issuer, except that this limitation does not apply to bonds issued by the United States Government, its agencies and instrumentalities or to the investment of 25% of its total assets.
The Fund may become subject to guidelines which are more limiting than the investment restrictions set forth above in order to obtain and maintain ratings from Moody's or S&P on the MuniPreferred Shares that it intends to issue. The Fund does not anticipate that such guidelines would have a material adverse effect on the Fund's Common Shareholders or the Fund's ability to achieve its investment objectives. See "Investment Objectives and Policies-- Investment Restrictions" in the Statement of Additional Information for information about these guidelines and additional fundamental investment policies of the Fund.
Quality Investments
The Fund will invest at least 80% of its net assets in investment grade quality municipal bonds rated as such at the time of investment. Investment grade quality means that such bonds are rated by national rating agencies within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated but judged to be of comparable quality by Nuveen Advisory.
Limited Issuance of MuniPreferred Shares
Under the 1940 Act, the Fund could issue MuniPreferred Shares having a total liquidation value (original purchase price of the shares being liquidated plus any accrued and unpaid dividends ) of up to one-half of the net asset value of the Fund's portfolio. If the total liquidation value of the MuniPreferred Shares was ever more than one-half the value of the Fund's assets, the Fund would not be able to declare dividends on the Common Shares until the liquidation value, as a percentage of the Fund's assets, was reduced. The Fund intends to issue MuniPreferred Shares representing about 35% of the Fund's total capital, if the Fund sells all the Common Shares and MuniPreferred Shares discussed in this Prospectus. This higher than required margin of net asset value provides a cushion against later fluctuations in the value of the Fund's portfolio and will subject Common Shareholders to less income and net asset value volatility than if the Fund were more leveraged. The Fund intends to purchase or redeem MuniPreferred Shares, if necessary, to keep the liquidation value of the MuniPreferred Shares below one-half the Fund's assets.
Management of Investment Portfolio and Capital Structure to Limit Leverage Risk
The Fund may take certain actions if short-term rates increase or market conditions otherwise change (or the Fund anticipates such an increase or change) and the Fund's leverage begins to adversely affect Common Shareholders. In order to offset such a negative impact of leverage on Common Shareholders, the Fund may shorten the average maturity of its investment portfolio (by investing in short-term, high quality securities) or may extend the maturity of outstanding MuniPreferred Shares. The Fund may also attempt to reduce the leverage by redeeming or otherwise purchasing MuniPreferred Shares. If market conditions suggest that additional leverage would be beneficial, the Fund may sell previously unissued MuniPreferred Shares or MuniPreferred Shares that the Fund previously issued but later repurchased.
Currently, the Fund may not invest in inverse floating rate securities, which are securities that pay interest at rates that vary inversely with changes in prevailing short-term tax-exempt interest rates and which represent a leveraged investment in an underlying municipal bond. This restriction is a non-fundamental policy of the Fund that may be changed by vote of the Fund's Board of Trustees.
Hedging Strategies
The Fund may use various investment strategies designed to limit the risk of bond price fluctuations and to preserve capital. These hedging strategies include using financial futures contracts, options on financial futures or options based on either an index of long-term municipal securities or on taxable debt securities whose prices, in the opinion of Nuveen Advisory, correlate with the prices of the Fund's investments. Successful implementation of most hedging strategies would generate taxable income, and the Fund has no present intention to use these strategies.
Year 2000 Issues
Nuveen Advisory is working with the Fund's service providers and clearinghouses to adapt their systems to address the Year 2000 issue. Nuveen Advisory and the Fund expect, but there can be no absolute assurance, that the necessary work will be completed on a timely basis. Nuveen Advisory is also requesting information from municipal issuers so that issuers' Year 2000 readiness, if made available, can be taken into account in making investment decisions. However, there can be no assurance that the requested information will be provided to Nuveen Advisory, or that issuers of municipal bonds in the Fund's portfolio will begin or complete the work necessary to address any Year 2000 issues on a timely basis.
In addition, it is possible that the markets for municipal securities in which the Fund invests may be detrimentally affected by computer failures throughout the financial services industry beginning on or before January 1, 2000. Improperly functioning trading systems may result in settlement problems and liquidity issues. In addition, corporate and governmental data processing errors may result in production problems for individual issuers and overall economic uncertainties. Earnings of individual issuers will be affected by remediation costs, which may be substantial and may be reported inconsistently in financial statements. Accordingly, the Fund's investments may be adversely affected. The statements above are subject to the Year 2000 Information and Readiness Disclosure Act, which may limit the legal rights regarding the use of such statements in the case of a dispute.
MANAGEMENT OF THE FUND
Trustees and Officers
The Board of Trustees is responsible for the management of the Fund, including supervision of the duties performed by Nuveen Advisory. There are seven trustees of the Fund, one of whom is an "interested person" (as defined in the 1940 Act) and six of whom are not "interested persons." The names and business addresses of the trustees and officers of the Fund and their principal occupations and other affiliations during the past five years are set forth under "Management of the Fund" in the Statement of Additional Information.
Investment Adviser
Nuveen Advisory, 333 West Wacker Drive, Chicago, Illinois 60606, serves as the investment adviser to the Fund. In this capacity, Nuveen Advisory is responsible for the selection and on-going monitoring of the municipal bonds in the Fund's investment portfolio, managing the Fund's business affairs and providing certain clerical, bookkeeping and administrative services. Nuveen Advisory serves as investment adviser to investment portfolios with more than $39 billion in assets under management. See the Statement of Additional Information under "Management of the Fund--Investment Adviser."
Overall investment management strategy and operating policies for the Fund are set by the Investment Management Committee of John Nuveen & Co. Incorporated ("Nuveen") subject to the ultimate oversight and supervision of the Board of Trustees. The Investment Management Committee is comprised of several principal executive officers and portfolio managers of Nuveen and Nuveen Advisory. Day to day operations and execution of specific investment strategies is the responsibility of Nuveen Advisory. Nuveen Advisory manages the Fund using a team of analysts and portfolio managers that focus on a specific group of funds. Stephen S. Peterson is the portfolio manager of the Fund and
will provide daily oversight for, and execution of, the Fund's investment activities. Mr. Peterson currently manages nine municipal bond funds for Nuveen Advisory with assets aggregating more than $2.8 billion. He is a Chartered Financial Analyst and a Vice President of Nuveen Advisory.
Nuveen Advisory is a wholly-owned subsidiary of Nuveen, 333 West Wacker Drive, Chicago, Illinois 60606. Founded in 1898, Nuveen and its affiliates have over $60 billion of net assets under management or surveillance. Nuveen is a subsidiary of The John Nuveen Company which, in turn, is a majority-owned subsidiary of The St. Paul Companies, Inc., which is principally engaged in providing property-liability insurance through subsidiaries.
Investment Management Agreement
Pursuant to an investment management agreement between Nuveen Advisory and the Fund, the Fund has agreed to pay for the services and facilities provided by Nuveen Advisory an annual management fee, payable on a monthly basis, according to the following schedule:
Management
Average Daily Net Asset Value Fee
----------------------------- ----------
For the first $125 million..................................... .6500%
For the next $125 million...................................... .6375%
For the next $250 million...................................... .6250%
For the next $500 million...................................... .6125%
For the next $1 billion........................................ .6000%
For assets over $2 billion..................................... .5750%
|
In addition to the fee of Nuveen Advisory, the Fund pays all other costs and expenses of its operations, including compensation of its trustees (other than those affiliated with Nuveen Advisory), custodian, transfer and dividend disbursing expenses, legal fees, expenses of independent auditors, expenses of repurchasing shares, expenses of preparing, printing and distributing shareholder reports, notices, proxy statements and reports to governmental agencies, and taxes, if any.
For the first ten years of the Fund's operation, Nuveen Advisory has agreed to reimburse the Fund for fees and expenses in the amounts, and for the time periods, set forth below:
Year Ending Percentage July 31, Reimbursed -------- ---------- 1999*........... .30% 2000............ .30% 2001............ .30% 2002............ .30% 2003............ .30% 2004............ .30% |
Year Ending Percentage July 31, Reimbursed -------- ---------- 2005............ 0.25% 2006............ 0.20% 2007............ 0.15% 2008............ 0.10% 2009............ 0.05% |
Nuveen Advisory has not agreed to reimburse the Fund for any portion of its fees and expenses beyond July 31, 2009.
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of trading (normally 4:00 p.m. eastern time) on each day the New York Stock Exchange is open for business. Net asset value is
calculated by taking the fair value of the Fund's total assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing by the total number of shares outstanding. The result, rounded to the nearest cent, is the net asset value per share.
In determining net asset value, expenses are accrued and applied daily and securities and other assets for which market quotations are available are valued at market value. The prices of municipal bonds are provided by a pricing service and based on the mean between the bid and asked price. When price quotes are not readily available (which is usually the case for municipal bonds), the pricing service establishes fair market value based on prices of comparable municipal bonds. All valuations are subject to review by the Fund's Board of Trustees or its delegate, Nuveen Advisory.
DISTRIBUTIONS
The Fund intends to make regular monthly cash distributions to Common Shareholders at a level rate that reflects the past and projected performance of the Fund. The Fund's ability to maintain a level dividend rate will depend on a number of factors, including dividends payable on the MuniPreferred Shares. Distributions can only be made from net investment income after paying any accrued dividends to MuniPreferred Shareholders. The net income of the Fund consists of all interest income accrued on portfolio assets less all expenses of the Fund. Expenses of the Fund are accrued each day. Over time, all the net investment income of the Fund will be distributed. At least annually, the Fund also intends to distribute net capital gains and ordinary taxable income, if any, after paying any accrued dividends or making any liquidation payments to MuniPreferred Shareholders. Initial distributions to Common Shareholders are expected to be declared approximately 45 days, and paid approximately 90 days, from the completion of this offering. Although it does not now intend to do so, the Board of Trustees may change the Fund's dividend policy and the amount or timing of the distributions based on a number of factors, including the amount of the Fund's undistributed net investment income and historical and projected investment income and the amount of the expenses and dividend rates on the outstanding MuniPreferred Shares.
To make the amount of each monthly distribution roughly the same, the Fund will initially distribute less than the entire amount of net investment income earned in a particular period. The undistributed net investment income would be available to supplement future distributions. As a result, the distributions paid by the Fund for any particular monthly period may be more or less than the amount of net investment income actually earned by the Fund during the period. Undistributed net investment income will be added to the Fund's net asset value and, correspondingly, distributions from undistributed net investment income will be deducted from the Fund's net asset value.
DIVIDEND REINVESTMENT PLAN
You may elect to have all dividends or capital gains distributions on your Common Shares, or both, automatically reinvested by Chase Global Funds Services Company, as agent for the Common Shareholders (the "Plan Agent"), in additional Common Shares under the Dividend Reinvestment Plan (the "Plan"). You may elect to participate in the Plan by completing the Dividend Reinvestment Plan Application Form. If you do not participate, you will receive all distributions in cash paid by check mailed directly to you by Chase Global Funds Services Company as dividend paying agent.
If you decide to participate in the Plan, the number of Common Shares you will receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value at the time of valuation, the Fund will issue new shares at the then current market price; or
(2) If Common Shares are trading below net asset value at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the New York Stock Exchange or elsewhere, for the participants' accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer 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 Common Shares in the open market within 30 days of the dividend payment date. Interest will not be paid on any uninvested cash payments.
You may withdraw from the Plan at any time by giving written notice to the Plan Agent. If you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan and you will receive a cash payment for any fraction of a share in your account. If you wish, the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions and a $2.50 service fee.
The Plan Agent maintains all shareholders' accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. Common Shares in your account will be held by the Plan Agent in non-certificated form. Any proxy you receive will include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases.
Automatically reinvesting dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions.
The Fund reserves the right to amend or terminate the Plan if change seems desirable to the Board of Trustees. 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 Global Funds Services Company, P.O. Box 5186, Bowling Green Station, New York, NY 10275-0672 (regular mail) or 4 New York Plaza, 6th Floor, New York, NY 10004 (for overnight carriers), (800) 257-8787.
DESCRIPTION OF SHARES
Common Shares
The Declaration authorizes the issuance of an unlimited number of Common Shares, par value $.01 per share. All Common Shares have equal rights to the payment of dividends and the distribution of assets upon liquidation. Common Shares will, when issued, be fully paid and, subject to matters discussed in "Certain Provisions in the Declaration of Trust," non-assessable, and will have no pre-emptive or conversion rights or rights to cumulative voting. Whenever MuniPreferred Shares are outstanding, Common Shareholders will not be entitled to receive any distributions from the Fund unless all accrued dividends on MuniPreferred Shares have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to MuniPreferred Shares would be at least 200% after giving effect to the distributions. See "MuniPreferred Shares" below.
The Fund has applied to list the Common Shares on the New York Stock Exchange. The Fund intends to hold annual meetings of shareholders so long as the Common Shares are listed on a national securities exchange and such meetings are required as a condition to such listing.
The Fund's net asset value per share generally increases when interest rates decline, and decreases when interest rates rise, and these changes are likely to be greater in the case of a fund having a leveraged capital structure. Net asset value will be reduced immediately following the offering by the amount of the organization and offering expenses paid by the Fund. See "Use of Proceeds."
Unlike open-end funds, closed-end funds, like the Fund, do not continuously offer shares and do not provide daily redemptions. Rather, if a shareholder determines to buy additional shares or sell shares already held, the shareholder may conveniently do so by trading on the exchange through a broker or otherwise. Shares of closed-end investment companies may frequently trade on an exchange at prices lower than net asset value. Shares of closed-end investment companies like the Fund that invest predominately in investment grade municipal bonds have during some periods traded at prices higher than net asset value and during other periods have traded at prices lower than net asset value. Because the market value of the Fund's Common Shares will be determined by such factors as dividend levels (which are in turn affected by expenses), call protection, stability, relative demand for and supply of such shares in the market, general market and economic conditions and other factors beyond the control of the Fund, the Fund cannot assure you that Common Shares will trade at a price higher than net asset value in the future. The Common Shares are designed primarily for long-term investors, and investors in the Common Shares should not view the Fund as a vehicle for trading purposes. See "MuniPreferred Shares and Leverage" and the Statement of Additional Information under "Repurchase of Fund Shares; Conversion to Open--End Fund."
MuniPreferred Shares
The Declaration authorizes the issuance of an unlimited number of MuniPreferred Shares, par value $.01 per share, in one or more classes or series, with rights as determined by the Board of Trustees, by action of the Board of Trustees without the approval of the Common Shareholders.
The Fund's Board of Trustees has indicated its intention to authorize an offering of MuniPreferred Shares (representing approximately 35% of the Fund's capital immediately after the time the MuniPreferred Shares are issued) approximately three to six months after completion of the offering of Common Shares. Any such decision is subject to market conditions and to the Board's continuing belief that leveraging the Fund's capital structure through the issuance of MuniPreferred Shares is likely to achieve the benefits to the Common Shareholders described in this Prospectus. Although the terms of the MuniPreferred Shares will be determined by the Board of Trustees (subject to applicable law and the Fund's Declaration) if and when it authorizes a MuniPreferred Shares offering, the Board has stated that the initial series of MuniPreferred Shares would likely pay cumulative dividends at rates determined over relatively shorter-term periods (such as 7 days), by providing for the periodic redetermination of the dividend rate through an auction or remarketing procedure. The Board of Trustees has indicated that the preference on distribution, liquidation preference, voting rights and redemption provisions of the MuniPreferred Shares will likely be as stated below.
Limited Issuance of MuniPreferred Shares. Under the 1940 Act, the Fund could issue MuniPreferred Shares with an aggregate liquidation value of up to one-half of the net asset value of the Fund's portfolio, measured immediately after issuance of the MuniPreferred Shares. "Liquidation value"
means the original purchase price of the shares being liquidated plus any accrued and unpaid dividends. In addition, the Fund is not permitted to declare any cash dividend or other distribution on its Common Shares unless the liquidation value of the MuniPreferred shares is more than one-half of the net asset value of the Fund's portfolio (determined after deducting the amount of such dividend or distribution) immediately after the distribution. If the Fund sells all the Common Shares and MuniPreferred Shares discussed in this Prospectus, the liquidation value of the MuniPreferred Shares is expected to be approximately 35% of the net asset value of the Fund's portfolio. The Fund intends to purchase or redeem MuniPreferred Shares, if necessary, to keep that fraction below one-half.
Distribution Preference. The MuniPreferred Shares have complete priority over any other class of shares of the Fund as to distribution of assets, including the Common Shares.
Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Fund, holders of MuniPreferred Shares will be entitled to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus accumulated and unpaid dividends thereon, whether or not earned or declared) before any distribution of assets is made to holders of Common Shares.
Voting Rights. MuniPreferred Shares are required to be voting shares and to have equal voting rights with Common Shares. Except as otherwise indicated in this Prospectus or the Statement of Additional Information and except as otherwise required by applicable law, holders of MuniPreferred Shares will vote together with Common Shareholders as a single class.
Holders of MuniPreferred Shares, voting as a separate class, will be entitled to elect two of the Fund's trustees. The remaining trustees will be elected by Common Shareholders and holders of MuniPreferred Shares, voting together as a single class. In the unlikely event that two full years of accrued dividends are unpaid on the MuniPreferred Shares, the holders of MuniPreferred Shares, voting as a separate class, will be entitled to elect a majority of the Fund's trustees until all dividends in arrears have been paid or declared and set apart for payment. In order for the Fund to take certain actions or enter into certain transactions, a separate class vote of holders of MuniPreferred Shares will be required, in addition to the single class vote of the holders of MuniPreferred Shares and Common Shares. See the Statement of Additional Information under "Description of Shares--MuniPreferred Shares-- Voting Rights."
Redemption, Purchase and Sale of MuniPreferred Shares. The terms of the MuniPreferred Shares may provide that they are redeemable at certain times, in whole or in part, at the original purchase price per share plus accumulated dividends. The terms may also state that the Fund may tender for or purchase MuniPreferred Shares and resell any shares so tendered. Any redemption or purchase of MuniPreferred Shares by the Fund will reduce the leverage applicable to Common Shares, while any resale of shares by the Fund will increase such leverage. See "MuniPreferred Shares and Leverage."
The discussion above describes the Board of Trustees' present intention with respect to a possible offering of MuniPreferred Shares. If the Board of Trustees determines to authorize such an offering, the terms of the MuniPreferred Shares may be the same as, or different from, the terms described above, subject to applicable law and the Fund's Declaration.
CERTAIN PROVISIONS IN THE DECLARATION OF TRUST
Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Declaration contains an express disclaimer of
shareholder liability for debts or obligations of the Fund and requires that notice of such limited liability be given in each agreement, obligation or instrument entered into or executed by the Fund or the trustees. The Declaration further provides for indemnification out of the assets and property of the Fund for all loss and expense of any shareholder held personally liable for the obligations of the Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations. The Fund believes that the likelihood of such circumstances is very remote.
The Declaration includes provisions that could limit the ability of other entities or persons to acquire control of the Fund. Specifically, the Declaration requires a vote by holders of at least two-thirds of the Common Shares and MuniPreferred Shares, voting together as a single class, except as described below, to authorize (1) a conversion of the Fund from a closed-end to an open-end investment company, (2) a merger or consolidation of the Fund, or a series or class of the Fund, with any corporation, association, trust or other organization or a reorganization or recapitalization of the Fund, or a series or class of the Fund, (3) a sale, lease or transfer of all or substantially all of the Fund's assets (other than in the regular course of the Fund's investment activities) or (4) a termination of the Fund, or a series or class of the Fund, unless such transaction has already been authorized by the affirmative vote of two-thirds of the total number of trustees fixed in accordance with the Declaration or the By-laws, in which case the affirmative vote of the holders of at least a majority of the Fund's Common Shares and MuniPreferred Shares outstanding at the time, voting together as a single class, is required, provided, however, that where only a particular class or series is affected, only the required vote by the applicable class or series will be required. In the case of the conversion of the 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 MuniPreferred Shares, the action in question will also require the affirmative vote of the holders of at least two-thirds of the Fund's MuniPreferred Shares outstanding at the time, voting as a separate class, or, if such action has been authorized by the affirmative vote of two- thirds of the total number of trustees fixed in accordance with the Declaration or the By-laws, the affirmative vote of the holders of at least a majority of the Fund's MuniPreferred Shares outstanding at the time, voting as a separate class. The votes required to approve the conversion of the Fund from a closed-end to an open-end investment company or to approve transactions constituting a plan of reorganization which adversely affects the holders of MuniPreferred Shares are higher than those required by the 1940 Act. The Board of Trustees believes that the provisions of the Declaration relating to such higher votes are in the best interest of the Fund and its shareholders. See the Statement of Additional Information under "Certain Provisions in the Declaration of Trust."
The provisions of the Declaration described above could have the effect of depriving the Common Shareholders of opportunities to sell their Common Shares at a premium over net asset value by discouraging a third party from seeking to obtain control of the Fund in a tender offer or similar transaction. The overall effect of these provisions is to render more difficult the accomplishment of a merger or the assumption of control by a third party. They provide, however, the advantage of potentially requiring persons seeking control of the Fund to negotiate with its management regarding the price to be paid and facilitating the continuity of the Fund's investment objectives and policies. The Board of Trustees of the Fund has considered the foregoing anti- takeover provisions and concluded that they are in the best interests of the Fund and its Common Shareholders.
Reference should be made to the Declaration on file with the Securities and Exchange Commission for the full text of these provisions.
REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND
The Fund is a closed-end investment company and as such its shareholders will not have the right to cause the Fund to redeem their shares. Instead, the Fund's Common Shares will trade in the open market at a price that will be a function of several factors, including net asset value and yield. Because shares of closed-end investment companies may frequently trade at prices lower than net asset value, the Fund's Board of Trustees has currently determined that, at least annually, it will consider action that might be taken to reduce or eliminate any material discount from net asset value in respect of 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 the Fund to an open-end investment company. The Fund cannot assure you that its Board of Trustees will decide to take any of these actions, or that share repurchases or tender offers will actually reduce market discount.
If the Fund converted to an open-end company, it would be required to redeem all MuniPreferred Shares then outstanding (requiring in turn that it liquidate a portion of its investment portfolio), and the Fund's Common Shares would no longer be listed on the New York Stock Exchange. In contrast to a closed-end investment company, 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 any redemption charge that is in effect at the time of redemption. See the Statement of Additional Information under "Certain Provisions in the Declaration of Trust" for a discussion of the voting requirements applicable to the conversion of the Fund to an open-end company.
Before deciding whether to take any action if the Common Shares trade below net asset value, the Board would consider all relevant factors, including the extent and duration of the discount, the liquidity of the Fund's portfolio, the impact of any action that might be taken on the Fund or its shareholders, and market considerations. Based on these considerations, even if the Fund's shares should trade at a discount, the Board of Trustees may determine that, in the interest of the Fund and its shareholders, no action should be taken. See the Statement of Additional Information under "Repurchase of Fund Shares; Conversion to Open-End Fund" for a further discussion of possible action to reduce or eliminate such discount to net asset value.
TAX MATTERS
Federal Income Tax Matters
The discussion below and in the statement of additional information provides general tax information related to an investment in the Fund. Because tax laws are complex and often change, you should consult your tax adviser about the tax consequences of an investment in the Fund.
The Fund primarily invests in municipal bonds issued by states, cities and local authorities and certain possessions and territories of the United States (such as Puerto Rico or Guam) or in municipal bonds whose income is otherwise exempt from regular Federal income tax. Consequently, the regular monthly dividends you receive will be exempt from regular Federal income taxes. A portion of these dividends, however, will likely be subject to the federal alternative minimum tax ("AMT").
Although the Fund does not seek to realize taxable income or capital gains, the Fund may realize and distribute taxable income or capital gains from time to time as a result of the Fund's normal investment activities. The Fund will distribute at least annually any taxable income or realized capital
gains. Distributions of net short-term gains are taxable as ordinary income. Distributions of net long-term capital gains are taxable as long-term capital gains regardless of how long you have owned your investment. Taxable dividends do not qualify for a dividends received deduction if you are a corporate shareholder.
Each year, you will receive a year-end statement that describes the tax status of dividends paid to you during the preceding year, including the source of investment income by state and the portion of income that is subject to the AMT. You will receive this statement from the firm where you purchased your Fund shares if you hold your investment in street name; the Fund will send you this statement if you hold your shares in registered form.
The tax status of your dividends is not affected by whether you reinvest your dividends or receive them in cash.
In order to avoid corporate taxation of its earnings and to pay tax-free dividends, the Fund must meet certain I.R.S. requirements that govern the Fund's sources of income, diversification of assets and distribution of earnings to shareholders. The Fund intends to meet these requirements. If the Fund failed to do so, the Fund would be required to pay corporate taxes on its earnings and all your distributions would be taxable as ordinary income. In particular, in order for the Fund to pay tax-free dividends, at least 50% of the value of the Fund's total assets must consist of tax-exempt obligations. The Fund intends to meet this requirement. If the Fund failed to do so, it would not be able to pay tax-free dividends and your distributions attributable to interest received by the Fund from any source would be taxable as ordinary income.
The Fund may be required to withhold 31% of certain of your dividends if you have not provided the Fund with your correct taxpayer identification number (normally your Social Security number), or if you are otherwise subject to back-up withholding. If you receive Social Security benefits, you should be aware that tax-free income is taken into account in calculating the amount of these benefits that may be subject to Federal income tax. If you borrow money to buy Fund shares, you may not deduct the interest on that loan. Under I.R.S. rules, Fund shares may be treated as having been bought with borrowed money even if the purchase of the Fund shares cannot be traced directly to borrowed money.
If you are subject to the AMT, a portion of your regular monthly dividends may be taxable.
State and Local Tax Matters
The exemption from Federal income tax for exempt-interest dividends does not necessarily result in exemption for such dividends under the income or other tax laws of any state or local taxing authority. Some states exempt from state income tax that portion of any exempt-interest dividend that is derived from interest received by a regulated investment company on its holdings of securities of that state and its political subdivisions and instrumentalities. Therefore, the Fund will report annually to its shareholders the percentage of interest income earned by the Fund during the preceding year on tax-exempt obligations indicating, on a state-by-state basis, the source of such income. Shareholders of the Fund are advised to consult with their own tax advisers about state and local tax matters.
Please refer to the Statement of Additional Information for more detailed information. You are urged to consult your tax adviser.
OTHER MATTERS
A lawsuit brought in June 1996 (Green et al. v. Nuveen Advisory Corp., et al.) by certain individual common shareholders of six leveraged closed-end funds sponsored by Nuveen is currently pending in Federal district court. The plaintiffs allege that the leveraged closed-end funds engaged in certain
practices that violated various provisions of the 1940 Act and common law. The plaintiffs also alleged, among other things, breaches of fiduciary duty by the funds' directors and Nuveen Advisory and various misrepresentations and omissions in prospectuses and shareholder reports relating to the use of leverage through the issuance and periodic auctioning of preferred stock and the basis of the calculation and payment of management fees to Nuveen Advisory and Nuveen. Plaintiffs also filed a motion to certify defendant and plaintiff classes.
The defendants are vigorously defending the case and filed motions to dismiss the entire lawsuit asserting that the claims are without merit and to oppose certification of any classes. By opinion dated March 30, 1999, the court granted most of the defendants' motion to dismiss and denied plaintiffs' motion to certify defendant and plaintiff classes. The court dismissed all claims against the funds, the funds' directors and Nuveen. The court dismissed these claims without prejudice (which means that the plaintiffs can re-file the claims if they can correct the defect that led to the claim being dismissed) on the ground that the claims should have been brought as derivative claims on behalf of the funds. The only remaining claim is brought under Section 36(b) of the 1940 Act against Nuveen Advisory, and relates solely to advisory fees Nuveen Advisory received from the six relevant funds. While the Fund cannot assure you that the litigation will be decided in Nuveen Advisory's favor, Fund management believes a decision, if any, against the defendants would have no material effect on the Fund, its Common Shares or the ability of Nuveen Advisory to perform its duties under the investment management agreement.
UNDERWRITING
The Underwriters named herein for whom Salomon Smith Barney Inc., 388 Greenwich Street, New York, New York 10013, John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois 60606, and are acting as Representatives (the "Representatives"), have severally agreed, subject to the terms and conditions contained in the Underwriting Agreement among the Fund, Nuveen Advisory and the several Underwriters (the "Underwriting Agreement"), to purchase from the Fund the number of Common Shares set forth below opposite their respective names.
Number
of
Name Shares
---- ------
Salomon Smith Barney Inc.................................................
John Nuveen & Co. Incorporated...........................................
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The Representatives have informed the Fund that the Underwriters do not intend to confirm Common Shares to any accounts over which they exercise discretionary authority.
The Underwriters, through their Representatives, have advised the Fund that they propose to offer the Common Shares initially at the public offering price set forth on the cover page of this Prospectus less a sales load of per Common Share ( of the initial public offering price); that the Underwriters may allow to selected dealers a concession of per Common Share; and that such dealers may reallow a concession of per Common Share to certain other dealers. The Underwriters reserve the right to reject orders in whole or in part. After the initial offering of the Common Shares to the public, the offering price and other selling terms may be changed by the Representatives. The Fund is obligated to sell, and the Underwriters are obligated to purchase, all of the Common Shares offered hereby (other than shares covered by the overallotment option described below) if any are sold. Investors must pay for any Common Shares purchased on or before , 1999. In connection with this offering, Nuveen may perform clearing services without charge for brokers and dealers for whom it regularly provides clearing services.
The Fund has granted to the Underwriters an overallotment option, exercisable within 45 days of this Prospectus, to purchase up to additional Common Shares at the same price to public as set forth on the cover page of this Prospectus. The Underwriters may exercise the overallotment option solely for the purpose of covering sales they made but could not fill in connection with the sale of the Common Shares offered hereby. To the extent the Underwriters exercise the overallotment option, each of the Underwriters will be obligated, subject to certain conditions, to purchase the same proportion of such additional shares as the number of shares set forth opposite such underwriter's name in the preceding table bears to the total number of shares set forth in such table.
The Fund and Nuveen Advisory have each agreed to indemnify the several Underwriters or contribute to losses arising out of certain liabilities, including liabilities under the Securities Act.
The Fund has agreed to pay the Underwriters as partial reimbursement of expenses incurred in connection with the offering. Nuveen Advisory has agreed to pay all organizational expenses and offering costs (other than sales load) that exceed $0.02 per share.
In connection with the requirements for listing the Fund's Common Shares on the New York Stock Exchange, the Underwriters have undertaken to sell lots of 100 or more Common Shares to a minimum of 2,000 beneficial owners in the United States. The minimum investment requirement is 100 Common Shares.
Prior to the offering, there has been no public market for the Common Shares. Consequently, the initial public offering price has been determined by negotiation between the Fund, Nuveen Advisory and the Representatives. The Common Shares have been approved for listing on the New York Stock Exchange, subject to official notice of issuance. [Salomon Smith Barney Inc. may make a market in the Common Shares after trading in the Common Shares has commenced on the New York Stock Exchange. Salomon Smith Barney Inc., however, is not obligated to conduct market-making activities and any such activities may be discontinued at any time without notice, at the sole discretion of Salomon Smith Barney Inc. No assurance can be given as to the liquidity of, or the trading market for, the Common Shares as a result of any market-making activities undertaken by Salomon Smith Barney Inc. This Prospectus is to be used by Salomon Smith Barney Inc. in connection with the offering and with offers and sales of the Common Shares in market-making transaction in the over-the-counter market at negotiated prices related to prevailing market prices at the time of the sale.]
The Underwriters have advised the Fund that, pursuant to Regulation M under the Securities Exchange Act of 1934, as amended, certain persons participating in the offering may engage in transactions, including stabilizing bids, covering transactions or the imposition of penalty bids, which may have the effect of stabilizing or maintaining the market price of the Common Shares at a level above that which might otherwise prevail in the open market. A "stabilizing bid" is a bid for or the purchase of the Common Shares on behalf of an Underwriter for the purpose of fixing or maintaining the price of the Common Shares. A "covering transaction" is a bid for or purchase of the Common Shares on behalf of an Underwriter to reduce a short position incurred by the Underwriters in connection with the offering. A "penalty bid" is a contractual arrangement whereby if the Underwriters purchase Common Shares in the open market for the account of the underwriting syndicate and the Common Shares purchased can be traced to a particular underwriter or member of the selling group, the underwriting syndicate may require the underwriter or selling group member in question to purchase the Common Shares in question at the cost price to the syndicate or may recover from (or decline to pay to) the underwriter or selling group in question any or all compensation applicable to the Common Shares in question. As a result, an underwriter or selling group member and, in turn, brokers
may lose the fees that they otherwise would have earned from a sale of the Common Shares if their customer resells the Common Shares while the penalty bid is in effect. The Underwriters are not required to engage in any of these activities, and any such activities, if commenced, may be discontinued at any time.
The Underwriting Agreement provides that it may be terminated in the absolute discretion of the Representatives without liability on the part of any underwriter to the Fund or Nuveen Advisory if, prior to delivery of and payment for the Common Shares, (i) trading in the Fund's Common Shares shall have been suspended by the Securities and Exchange Commission or the New York Stock Exchange or trading in securities generally on the New York Stock Exchange shall have been suspended or limited, (ii) additional material governmental restrictions not in force on the date of the Underwriting Agreement have been imposed upon trading in securities generally or a general moratorium on commercial banking activities in New York shall have been declared by either Federal or state authorities or (iii) any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, occurs, the effect of which is such as to make it, in the judgment of the Representatives, impracticable or inadvisable to commence or continue the offering of the Common Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Common Shares by the Underwriters.
Representatives that sell at least a specified number of shares will share in the syndicate management fee based on the respective number of shares sold by them.
The Fund anticipates that from time to time the Representatives of the Underwriters and certain other Underwriters may act as brokers or dealers in connection with the execution of the Fund's portfolio transactions after they have ceased to be Underwriters and, subject to certain restrictions, may act as brokers while they are Underwriters.
The Fund has agreed not to offer or sell any additional Common Shares for a period of 180 days after the date of this Prospectus, without the prior written consent of Salomon Smith Barney Inc.
John Nuveen & Co. Incorporated, one of the Representatives of the Underwriters, is the parent company of Nuveen Advisory.
CUSTODIAN AND TRANSFER AGENT
The custodian of the assets of the Fund is The Chase Manhattan Bank, 4 New York Plaza, New York, NY 10004-2413. The Custodian performs custodial, fund accounting and portfolio accounting services. The Fund's transfer, shareholder services and dividend paying agent is Chase Global Funds Services Company, P.O. Box 5186, Bowling Green Station, New York, NY 10275-0672 (regular mail) or 4 New York Plaza, 6th Floor, New York, NY 10004.
LEGAL OPINIONS
Certain legal matters in connection with the Common Shares will be passed upon for the Fund by Bell, Boyd & Lloyd, Chicago, Illinois, and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, Boston, Massachusetts, Bell, Boyd & Lloyd and Skadden, Arps, Slate, Meagher & Flom LLP will rely as to certain matters of Massachusetts law on the opinion of Bingham Dana LLP, Boston, Massachusetts.
TABLE OF CONTENTS FOR THE
STATEMENT OF ADDITIONAL INFORMATION
Page
----
Use of Proceeds...................................................... B-2
Investment Objectives and Policies................................... B-2
Investment Policies and Techniques................................... B-6
Management of the Fund............................................... B-14
Investment Adviser................................................... B-18
Portfolio Transactions............................................... B-20
Distributions........................................................ B-21
Description of Shares................................................ B-21
Certain Provisions in the Declaration of Trust....................... B-24
Repurchase of Fund Shares; Conversion to Open-End Fund............... B-26
Tax Matters.......................................................... B-28
Performance Related and Comparative Information...................... B-31
Experts.............................................................. B-34
Additional Information............................................... B-34
Report of Independent Auditors....................................... B-35
Financial Statements................................................. B-36
Ratings of Investments (Appendix A).................................. A-1
Taxable Equivalent Yield Table (Appendix B).......................... B-1
Hedging Strategies and Risks (Appendix C)............................ C-1
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No dealer, salesperson or other person has been authorized to give any infor- mation or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Fund or any Underwriter. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction.
TABLE OF CONTENTS
Page
----
Prospectus Summary......................................................... 3
Summary of Fund Expenses................................................... 7
The Fund................................................................... 8
Use of Proceeds............................................................ 8
The Fund's Investments..................................................... 8
MuniPreferred Shares and Leverage.......................................... 11
Risks...................................................................... 12
How the Fund Manages Risks................................................. 14
Management of the Fund..................................................... 16
Net Asset Value............................................................ 17
Distributions.............................................................. 18
Dividend Reinvestment Plan................................................. 18
Description of Shares...................................................... 19
Certain Provisions in the Declaration of Trust............................. 21
Repurchase of Fund Shares; Conversion to Open-End Fund..................... 23
Tax Matters................................................................ 23
Other Matters.............................................................. 24
Underwriting............................................................... 25
Custodian and Transfer Agent............................................... 27
Legal Opinions............................................................. 27
Table of Contents for the Statement of Additional Information.............. 28
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Until (25 days from the date of this Prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Shares
Nuveen Dividend
Advantage
Municipal Fund
Common Shares
PROSPECTUS
Salomon Smith Barney John Nuveen & Co.
Incorporated
, 19
The information in this Statement of Additional Information is not complete and may be changed. No person may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION - DATED APRIL 16, 1999
Nuveen Dividend Advantage Municipal Fund
STATEMENT OF ADDITIONAL INFORMATION
Nuveen Dividend Advantage Municipal Fund (the "Fund") is a newly organized,
closed-end, diversified management investment company. On _______, 1999, the
name of the Fund was changed from Nuveen National Municipal Advantage Fund II to
Nuveen Dividend Advantage Municipal Fund. The Fund's investment objective is to
provide current income exempt from regular Federal income tax, and enhance
portfolio value relative to the municipal bond market by investing in tax-exempt
municipal bonds that, in the opinion of the Fund's investment adviser, are
underrated or undervalued or that represent municipal market sectors that are
undervalued. This Statement of Additional Information relating to Common Shares
does not constitute a prospectus, but should be read in conjunction with the
Prospectus relating thereto dated _______________ (the "Prospectus"). This
Statement of Additional Information does not include all information that a
prospective investor should consider before purchasing Common Shares, and
investors should obtain and read the Prospectus prior to purchasing such shares.
A copy of the Prospectus may be obtained without charge by calling
(800) 257-8787. You may also obtain a copy of the Prospectus on the Securities
and Exchange Commission's web site (http://www.sec.gov). Capitalized terms used
but not defined in this Statement of Additional Information have the meanings
ascribed to them in the Prospectus.
TABLE OF CONTENTS
Page
----
Use of Proceeds.......................................................... B-2
Investment Objectives and Policies....................................... B-2
Investment Policies and Techniques....................................... B-6
Management of the Fund................................................... B-14
Investment Adviser....................................................... B-18
Portfolio Transactions................................................... B-20
Distributions............................................................ B-21
Description of Shares.................................................... B-21
Certain Provisions in the Declaration of Trust........................... B-24
Repurchase of Fund Shares; Conversion to Open-End Fund................... B-26
Tax Matters.............................................................. B-28
Performance Related and Comparative Information.......................... B-31
Experts.................................................................. B-34
Additional Information................................................... B-34
Report of Independent Auditors........................................... B-35
Financial Statements..................................................... B-36
Ratings of Investments (Appendix A)...................................... A-1
Taxable Equivalent Yield Table (Appendix B).............................. B-1
Hedging Strategies and Risks (Appendix C)................................ C-1
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This Statement of Additional Information is dated __________________, 19______
USE OF PROCEEDS
The net proceeds of the offering of Common Shares will be approximately $_______ ($_______ if the Underwriters exercise the over-allotment option in full) after payment of organizational and offering costs. Nuveen Advisory has agreed to pay all organizational expenses and offering costs (other than sales load) that exceed $0.02 per Common Share.
Pending investment in municipal bonds that meet the Fund's investment objectives and policies, the net proceeds of the offering will be invested in high quality, short-term tax-exempt money market securities or in high quality municipal bonds with relatively low volatility (such as pre-refunded and intermediate-term bonds), to the extent such securities are available. If necessary to invest fully the net proceeds of the offering immediately, the Fund may also purchase, as temporary investments, short-term taxable investments of the type described under "Investment Objectives and Policies--Portfolio Investments," the income on which is subject to regular Federal income tax and securities of other open or closed-end investment companies that invest primarily in municipal bonds of the type in which the Fund may invest directly.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is to provide current income exempt from regular Federal income tax and enhance portfolio value relative to the municipal bond market by investing in tax-exempt municipal bonds that Nuveen Advisory Corp. ("Nuveen Advisory") believes are underrated or undervalued or that represent municipal market sectors that are undervalued. Underrated municipal bonds are those whose ratings do not, in Nuveen Advisory's opinion, reflect their true creditworthiness. Municipal bonds may be underrated because of the time that has elapsed since their rating was assigned or reviewed, or because of positive factors that may not have been fully taken into account by rating agencies, or for other similar reasons. Undervalued municipal bonds are bonds that, in Nuveen Advisory's opinion, are worth more than the value assigned to them in the marketplace. Nuveen Advisory may at times believe that bonds associated with a particular municipal market sector (for example, electric utilities), or issued by a particular municipal issuer, are undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio because it represents a market sector or issuer that Nuveen Advisory considers undervalued, even if the value of the particular bond is consistent with the value of similar bonds. Municipal bonds 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 bonds of the market sector for reasons that do not apply to the particular municipal bonds that are considered undervalued.
The Fund's investment in underrated or undervalued municipal bonds will be based on Nuveen Advisory's belief that their prices will ultimately reflect their true creditworthiness. The Fund attempts to increase its portfolio value relative to the municipal bond market by prudent selection of municipal bonds, regardless of which direction the market may move. Any capital appreciation realized by the Fund will generally result in the distribution of taxable capital gains to Fund shareholders. The Fund's investment objectives are fundamental policies of the Fund.
The Fund has not established any limit on the percentage of its portfolio that may be invested in municipal bonds subject to the alternative minimum tax provisions of Federal tax law, and the Fund expects that a substantial portion of the income it produces will be includable in alternative minimum taxable income. Common Shares therefore would not ordinarily be a suitable investment for investors who are subject to the Federal alternative minimum tax. The suitability of an investment in Common Shares will depend upon a comparison of the after-tax yield likely to be provided from the Fund with that from comparable tax-exempt investments not subject to the alternative minimum tax, and from comparable fully taxable investments, in light of each such investor's tax position. Special considerations apply to corporate investors. See "Tax Matters."
Investment Restrictions
Except as described below, the Fund, as a fundamental policy, may not, without the approval of the holders of a majority of the outstanding Common Shares and MuniPreferred Shares voting together as a single class, and of the holders of a majority of the outstanding MuniPreferred Shares voting as a separate class:
(1) Issue senior securities, as defined in the Investment Company Act of 1940, other than MuniPreferred Shares, except to the extent permitted under the Investment Company Act of 1940, except as otherwise described under "Financial Futures and Options Transactions" in the Prospectus;
(2) 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 the Fund's total assets (including the amount borrowed) less the Fund's liabilities (other than borrowings);
(3) Act as underwriter of another issuer's securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933 in connection with the purchase and sale of portfolio securities;
(4) Invest more than 25% of its total assets in securities of issuers in any one industry; provided, however, that such limitation shall not apply to municipal bonds other than those municipal bonds backed only by the assets and revenues of non-governmental users;
(5) Purchase or sell real estate, but this shall not prevent the Fund from investing in municipal bonds secured by real estate or interests therein or foreclosing upon and selling such security;
(6) Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options, futures contracts, derivative instruments or from investing in securities or other instruments backed by physical commodities);
(7) Make loans, other than by entering into repurchase agreements and through the purchase of municipal bonds or short-term investments in accordance with its investment objectives, policies and limitations;
(8) Invest more than 5% of its total assets in securities of any one issuer, except that this limitation shall not apply to bonds issued by the United States Government, its agencies and instrumentalities or to the investment of 25% of its total assets.
For purposes of the foregoing and "Description of Shares--MuniPreferred Shares--Voting Rights" below, "majority of the outstanding," when used with respect to particular shares of the Fund, means (i) 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 (ii) more than 50% of the shares, whichever is less.
For the purpose of applying the limitation set forth in subparagraph (8) 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 bond 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 municipal bond will be determined in accordance with the principles set forth above. The foregoing restrictions do not limit the percentage of the Fund's assets that may be invested in municipal bonds insured by any given insurer.
Under the Investment Company Act of 1940, the Fund may invest only up to 10% of its total assets in the aggregate in shares of other investment companies and only up to 5% of its total assets in any one investment company, provided the investment does not represent more than 3% of the voting stock of the acquired investment company at the time such shares are purchased. As a stockholder in any investment company, the Fund will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Fund's management, advisory and administrative fees with respect to assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein. As described in the Prospectus in the section entitled "Risks", the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
In addition to the foregoing fundamental investment policies, the Fund is also subject to the following non-fundamental restrictions and policies, which may be changed by the Board of Trustees. The Fund may not:
(1) Sell securities short, unless the Fund owns or has the right to obtain securities equivalent in kind and amount to the securities sold at no added cost, and provided that transactions in options, futures contracts, options on futures contracts, or other derivative instruments are not deemed to constitute selling securities short.
(2) Purchase securities of open-end or closed-end investment companies except in compliance with the Investment Company Act of 1940 or any exemptive relief obtained thereunder.
(3) Enter into futures contracts or related options or forward contracts, if more than 30% of the Fund's net assets would be represented by futures contracts or more than 5% of the Fund's net assets would be committed to initial margin deposits and premiums on futures contracts and related options.
(4) Purchase securities when borrowings exceed 5% of its total assets if and so long as MuniPreferred Shares are outstanding.
(5) Purchase securities of companies for the purpose of exercising control.
(6) Invest in inverse floating rate securities (which are securities that pay interest at rates that vary inversely with changes in prevailing short-term tax-exempt interest rates and which represent a leveraged investment in an underlying municipal bond).
The restrictions and other limitations set forth above will apply only at the time of purchase of securities and will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities.
The Fund intends to apply for ratings for the MuniPreferred Shares from Moody's and/or S&P. In order to obtain and maintain the required ratings, the Fund may be required to comply with investment quality, diversification and other guidelines established by Moody's or S&P. Such guidelines will likely be more restrictive than the restrictions set forth above. The Fund does not anticipate that such guidelines would have a material adverse effect on the Fund's Common Shareholders or its ability to achieve its investment objectives. The Fund presently anticipates that any MuniPreferred Shares that it intends to issue would be initially given the highest ratings by Moody's ("Aaa") or by S&P ("AAA"), but no assurance can be given that such ratings will be obtained. No minimum rating is required for the issuance of MuniPreferred Shares by the Fund. Moody's and S&P receive fees in connection with their ratings issuances.
INVESTMENT POLICIES AND TECHNIQUES
The following information supplements the discussion of the Fund's investment objectives, policies, and techniques that are described in the Prospectus.
Investment in Municipal Bonds
Portfolio Investments
The Fund will invest its net assets in a diversified portfolio of municipal bonds that are exempt from regular Federal income tax. Under normal market conditions, and except for the temporary investments described below, the Fund expects to be fully invested (at least 95% of its assets) in such tax-exempt municipal bonds. The Fund will invest at least 80% of its net assets in investment grade quality municipal bonds rated as such at the time of investment. Investment grade quality means that such bonds are rated within the four highest grades (Baa or BBB or better) by Moody's, S&P or Fitch or are unrated but judged to be of comparable quality by Nuveen Advisory. The Fund may invest up to 20% of its net assets in municipal bonds that are, at the time of investment, rated Ba/BB or B by Moody's, S&P or Fitch or that are unrated but judged to be of comparable quality by Nuveen Advisory. Bonds of below investment grade quality (Ba/BB or below) are commonly referred to as "junk bonds." Issuers of bonds rated Ba/BB or B are regarded as having current capacity to make principal and interest payments but are subject to business, financial or economic conditions which could adversely affect such payment capacity. The foregoing policies are fundamental policies of the Fund. Municipal bonds rated Baa or BBB are considered "investment grade" securities; municipal bonds rated Baa are considered medium grade obligations which lack outstanding investment characteristics and have speculative characteristics, while municipal bonds rated BBB are regarded as having adequate capacity to pay principal and interest. Municipal bonds rated AAA in which the 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. Municipal bonds of below investment grade quality are obligations of issuers that are considered predominantly speculative with respect to the issuer's capacity to pay interest and repay principal according to the terms of the obligation and, therefore, carry greater investment risk, including the possibility of issuer default and bankruptcy and increased market price volatility. Municipal bonds rated below investment grade tend to be less marketable than higher-quality bonds because the market for them is less broad. The market for unrated municipal bonds is even narrower. During periods of thin trading in these markets, the spread between bid and asked prices is likely to increase significantly and the Fund may have greater difficulty selling its portfolio securities. The Fund will be more dependent on Nuveen Advisory's research and analysis when investing in these securities.
A general description of Moody's, S&P's and Fitch's ratings of municipal bonds is set forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch represent their opinions as to the quality of the municipal bonds they rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, municipal bonds with the same maturity, coupon and rating may have different yields while obligations of the same maturity and coupon with different ratings may have the same yield.
The Fund will primarily invest in municipal bonds with long-term maturities in order to maintain a weighted average maturity of 15-30 years, but the average weighted maturity may be
shortened from time to time depending on market conditions. As a result, the Fund's portfolio at any given time may include both long-term and intermediate- term municipal bonds. Moreover, during temporary defensive periods (e.g., times when, in Nuveen Advisory's opinion, temporary imbalances of supply and demand or other temporary dislocations in the tax-exempt bond market adversely affect the price at which long-term or intermediate-term municipal bonds are available), and in order to keep cash on hand fully invested, including the period during which the net proceeds of the offering are being invested, the Fund may invest any percentage of its assets in short-term investments including high quality, short-term securities which may be either tax-exempt or taxable and securities of other open or closed-end investment companies that invest primarily in municipal bonds of the type in which the Fund may invest directly. The Fund intends to invest in taxable short-term investments only in the event that suitable tax-exempt temporary investments are not available at reasonable prices and yields. Tax-exempt temporary investments include various obligations issued by state and local governmental issuers, such as tax-exempt notes (bond anticipation notes, tax anticipation notes and revenue anticipation notes or other such municipal bonds maturing in three years or less from the date of issuance) and municipal commercial paper. The Fund will invest only in taxable temporary investments which are U.S. Government securities or securities rated within the highest grade by Moody's, S&P or Fitch, and which mature within one year from the date of purchase or carry a variable or floating rate of interest. See Appendix A for a general description of Moody's, S&P's and Fitch's ratings of securities in such categories. Taxable temporary investments of the Fund may include certificates of deposit issued by U.S. banks with assets of at least $1 billion, or commercial paper or corporate notes, bonds or debentures with a remaining maturity of one year or less, or repurchase agreements. See "Certain Trading Strategies of The Fund--Repurchase Agreements." To the extent the Fund invests in taxable investments, the Fund will not at such times be in a position to achieve its investment objective of tax-exempt income.
The foregoing policies as to ratings of portfolio investments will apply only at the time of the purchase of a security, and the Fund will not be required to dispose of securities in the event Moody's, S&P or Fitch downgrades its assessment of the credit characteristics of a particular issuer.
Nuveen Advisory seeks to enhance portfolio value relative to the municipal bond market by investing in tax-exempt municipal bonds that it believes are underrated or undervalued or that represent municipal market sectors that are undervalued. Underrated municipal bonds are those whose ratings do not, in Nuveen Advisory's opinion, reflect their true value. Undervalued municipal bonds are bonds that, in Nuveen Advisory's opinion, are worth more than the value assigned to them in the marketplace. Nuveen Advisory may at times believe that bonds associated with a particular municipal market sector (for example, electric utilities), or issued by a particular municipal issuer, are undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio because it represents a market sector or issuer that Nuveen Advisory considers undervalued, even if the value of the particular bond is consistent with the value of similar bonds. Municipal bonds 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 bonds of the market sector for reasons that do not apply to the particular municipal bonds that are considered undervalued. The Fund's investment in underrated or undervalued municipal bonds will be based on Nuveen Advisory's belief that their prices will ultimately reflect their true value.
The Fund has not established any limit on the percentage of its portfolio investments that may be invested in municipal bonds subject to the alternative minimum tax provisions of Federal tax law. The Fund expects that a substantial portion of the current income it produces will be included in alternative minimum taxable income. Special considerations apply to corporate investors. See "Tax Matters."
Also included within the general category of municipal bonds described in the Prospectus are participations in lease obligations or installment purchase contract obligations (hereinafter collectively called "Municipal Lease Obligations") of municipal authorities or entities. Although a Municipal Lease Obligation does not constitute a general obligation of the municipality for which the municipality's taxing power is pledged, a Municipal Lease Obligation is ordinarily backed by the municipality's covenant to budget for, appropriate and make the payments due under the Municipal Lease Obligation. However, certain Municipal Lease Obligations contain "non-appropriation" clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the Fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, without recourse to the general credit of the lessee, and disposition or releasing of the property might prove difficult. In order to reduce this risk, the Fund will only purchase Municipal Lease Obligations where Nuveen Advisory believes the issuer has a strong incentive to continue making appropriations until maturity.
During temporary defensive periods and in order to keep the Fund's cash fully invested, including the period during which the net proceeds of the offering are being invested, the Fund may invest up to 100% of its net assets in short-term investments including high quality, short-term securities that may be either tax-exempt or taxable. To the extent the Fund invests in taxable short- term investments, the Fund will not at such times be in a position to achieve that portion of its investment objective of seeking current income exempt from Federal income tax. For further information, see, "Short-Term Investments" below.
Obligations of issuers of municipal bonds are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Bankruptcy Reform Act of 1978. In addition, the obligations of such issuers may become subject to the laws enacted in the future by Congress, state legislatures or referenda extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations or upon municipalities to levy taxes. There is also the possibility that, as a result of legislation or other conditions, the power or ability of any issuer to pay, when due, the principal of and interest on its municipal bonds may be materially affected.
The Fund may also invest in securities of other open or closed-end investment companies that invest primarily in municipal bonds of the type in which the Fund may invest directly. The Fund will generally select obligations which may not be redeemed at the option of the issuer for approximately 7 to 9 years.
Short-Term Investments
Short-Term Taxable Fixed Income Securities
For temporary defensive purposes or to keep cash on hand fully invested, the Fund may invest up to 100% of its total assets in cash equivalents and short-term taxable fixed-income securities, although the Fund intends to invest in taxable short-term investments only in the event that suitable tax-exempt short-term investments are not available at reasonable prices and yields. Short- term taxable fixed income investments are defined to include, without limitation, the following:
(1) U.S. government securities, including bills, notes and bonds
differing as to maturity and rates of interest that are either issued or
guaranteed by the U.S. Treasury or by U.S. government agencies or
instrumentalities. U.S. government agency securities include securities
issued by (a) the Federal Housing Administration, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United States;
(b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of
the agency to borrow from the U.S. Treasury; (c) the Federal National
Mortgage Association, whose securities are supported by the discretionary
authority of the U.S. government to purchase certain obligations of the
agency or instrumentality; and (d) the Student Loan Marketing Association,
whose securities are supported only by its credit. While the U.S.
government provides financial support to such U.S. government-sponsored
agencies or instrumentalities, no assurance can be given that it always
will do so since it is not so obligated by law. The U.S. government, its
agencies, and instrumentalities do not guarantee the market value of their
securities. Consequently, the value of such securities may fluctuate.
(2) Certificates of Deposit issued against funds deposited in a bank or a savings and loan association. Such certificates are for a definite period of time, earn a specified rate of return, and are normally negotiable. The issuer of a certificate of deposit agrees to pay the amount deposited plus interest to the bearer of the certificate on the dated specified thereon. Under current FDIC regulations, the maximum insurance payable as to any one certificate of deposit is $100,000; therefore, certificates of deposit purchased by the Fund may not be fully insured.
(3) Repurchase agreements, which involve purchases of debt securities. At the time the Fund purchases securities pursuant to a repurchase agreement, it simultaneously agrees to resell and redeliver such securities to the seller, who also simultaneously agrees to buy back the securities at a fixed price and time. This assures a predetermined yield for the Fund during its holding period, since the resale price is always greater than the purchase price and reflects an agreed-upon market rate. Such actions afford an opportunity for the Fund to invest temporarily available cash. The Fund may enter into repurchase agreements only with respect to obligations of the U.S. government, its agencies or instrumentalities; certificates of deposit; or bankers' acceptances in which the Fund may invest. Repurchase agreements may be considered
loans to the seller, collateralized by the underlying securities. The risk to the Fund is limited to the ability of the seller to pay the agreed-upon sum on the repurchase date; in the event of default, the repurchase agreement provides that the Fund is entitled to sell the underlying collateral. If the value of the collateral declines after the agreement is entered into, and if the seller defaults under a repurchase agreement when the value of the underlying collateral is less than the repurchase price, the Fund could incur a loss of both principal and interest. The investment adviser monitors the value of the collateral at the time the action is entered into and at all times during the term of the repurchase agreement. The investment adviser does so in an effort to determine that the value of the collateral always equals or exceeds the agreed-upon repurchase price to be paid to the Fund. If the seller were to be subject to a federal bankruptcy proceeding, the ability of the Fund to liquidate the collateral could be delayed or impaired because of certain provisions of the bankruptcy laws.
(4) Commercial paper, which consists of short-term unsecured promissory notes, including variable rate master demand notes issued by corporations to finance their current operations. Master demand notes are direct lending arrangements between the Fund and a corporation. There is no secondary market for such notes. However, they are redeemable by the Fund at any time. The investment adviser will consider the financial condition of the corporation (e.g., earning power, cash flow, and other liquidity ratios) and will continuously monitor the corporation's ability to meet all of its financial obligations, because the Fund's liquidity might be impaired if the corporation were unable to pay principal and interest on demand. Investments in commercial paper will be limited to commercial paper rated in the highest categories by a major rating agency and which mature within one year of the date of purchase or carry a variable or floating rate of interest.
Short-Term Tax-Exempt Fixed Income Securities
Short-term tax-exempt fixed-income securities are securities that are exempt from regular federal income tax and mature within three years or less from the date of issuance. Short-term tax-exempt fixed income securities are defined to include, without limitation, the following:
Bond Anticipation Notes ("BANs") are usually general obligations of state and local governmental issuers which are sold to obtain interim financing for projects that will eventually be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to meet its obligations on its BANs is primarily dependent on the issuer's access to the long-term municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay the principal and interest on the BANs.
Tax Anticipation Notes ("TANs") are issued by state and local governments to finance the current operations of such governments. Repayment is generally to be derived from specific future tax revenues. TANs are usually general obligations of the issuer. A weakness in an issuer's capacity to raise taxes due to, among other things, a decline in its tax base or a rise in delinquencies, could adversely affect the issuer's ability to meet its obligations on outstanding TANs.
Revenue Anticipation Notes ("RANs") are issued by governments or governmental bodies with the expectation that future revenues from a designated source will be used to repay the notes. In general, they also constitute general obligations of the issuer. A decline in the receipt of projected revenues, such as anticipated revenues from another level of government, could adversely affect an issuer's ability to meet its obligations on outstanding RANs. In addition, the possibility that the revenues would, when received, be used to meet other obligations could affect the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for specific projects. Frequently, these notes are redeemed with funds obtained from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies as those described above to commercial banks as evidence of borrowings. The purposes for which the notes are issued are varied but they are frequently issued to meet short-term working capital or capital-project needs. These notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper ("Municipal Paper") represents very short-term unsecured, negotiable promissory notes, issued by states, municipalities and their agencies. Payment of principal and interest on issues of municipal paper may be made from various sources, to the extent the funds are available therefrom. Maturities or municipal paper generally will be shorter than the maturities of TANs, BANs or RANs. There is a limited secondary market for issues of Municipal Paper.
Certain municipal bonds may carry variable or floating rates of interest whereby the rate of interest is not fixed but varies with changes in specified market rates or indices, such as a bank prime rate or a tax-exempt money market indexes.
While the various types of notes described above as a group represent the major portion of the tax-exempt note market, other types of notes are occasionally available in the marketplace and the Fund may invest in such other types of notes to the extent permitted under its investment objectives, policies and limitations. Such notes may be issued for different purposes and may be secured differently from those mentioned above.
Hedging Strategies
The Fund may periodically engage in hedging transactions. Hedging is a term used for various methods of seeking to preserve portfolio capital value of offsetting price changes in one investment through making another investment whose price should tend to move in the opposite direction. It may be desirable and possible in various market environments to partially hedge the portfolio against fluctuations in market value due to interest rate fluctuations by investment in financial futures and index futures as well as related put and call options on such instruments. Both parties entering into an index or financial futures contract are required to post an initial deposit of 1% to 5% of the total contract price. Typically, option holders enter into offsetting closing transactions to enable settlement in cash rather than take delivery of the position in the future of the underlying security. The Fund will only sell covered futures contracts, which means that the Fund segregates assets equal to the amount of the obligations.
These transactions present certain risks. In particular, the imperfect correlation between price movements in the futures contract and price movements in the securities being hedged creates the possibility that losses on the hedge by the Fund may be greater than gains in the value of the securities in the Fund's portfolio. In addition, futures and options markets may not be liquid in all circumstances. As a result, in volatile markets, the Fund may not be able to close out the transaction without incurring losses substantially greater than the initial deposit. Finally, the potential deposit requirements in futures contracts create an ongoing greater potential financial risk than do options transactions, where the exposure is limited to the cost of the initial premium. Losses due to hedging transactions will reduce yield. Net gains, if any, from hedging and other portfolio transactions will be distributed as taxable distributions to shareholders. The Fund will not make any investment (whether an initial premium or deposit or a subsequent deposit) other than as necessary to close a prior investment if, immediately after such investment, the sum of the amount of its premiums and deposits would exceed 5% of the Fund's net assets. The Fund will invest in these instruments only in markets believed by Nuveen Advisory to be active and sufficiently liquid. For further information regarding these investment strategies and risks presented thereby, see Appendix C to this Statement of Additional Information.
Illiquid Securities
The Fund may invest in illiquid securities (i.e., securities that are not readily marketable), including, but not limited to, restricted securities (securities the disposition of which is restricted under the federal securities laws), securities that may only be resold pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"); and repurchase agreements with maturities in excess of seven days.
Restricted securities may be sold only in privately negotiated transactions or in a public offering with respect to which a registration statement is in effect under the Securities Act. Where registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time the Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than that which prevailed when it decided to sell. Illiquid securities will be priced at a fair value as determined in good faith by the Board of Trustees or its delegate.
Portfolio Trading and Turnover Rate
Portfolio trading may be undertaken to accomplish the investment objectives of the Fund in relation to actual and anticipated movements in interest rates. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what Nuveen Advisory believes to be a temporary price disparity between the two securities. Temporary price disparities between two comparable securities may result from supply and demand imbalances where, for example, a temporary oversupply of certain bonds may cause a temporarily low price for such bonds, as compared with other bonds of like quality and characteristics. The Fund may also engage to a limited extent in short-term trading consistent with its investment 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 the Fund will not engage in trading solely to recognize a gain.
Subject to the foregoing, the Fund will attempt to achieve its investment objectives by prudent selection of municipal bonds with a view to holding them for investment. While there can be no assurance thereof, the Fund anticipates that its annual portfolio turnover rate will generally not exceed 10%. However, the rate of turnover will not be a limiting factor when the Fund deems it desirable to sell or purchase securities. Therefore, depending upon market conditions, the annual portfolio turnover rate of the Fund may exceed 100% in particular years.
Other Investment Companies
The Fund may invest in securities of other open or closed-end investment companies that have similar investment objectives and policies to the Fund. The Fund generally expects to invest in other investment companies either during periods when it has large amounts of uninvested cash, such as the period shortly after the Fund receives the proceeds of the offering of its Common Shares or MuniPreferred Shares, or during periods when there is a shortage of attractive, high-yielding municipal bonds available in the market. As a stockholder in an investment company, the Fund will bear its ratable share of that investment company's expenses, and would remain subject to payment of the Fund's management, advisory and administrative fees with respect to assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. Nuveen Advisory will take expenses into account when evaluating the investment merits of an investment in the investment company relative to available municipal bond investments. In addition, the securities of other investment companies may also be leveraged and will therefore be subject to the same leverage risks described herein. As described in the Prospectus in the section entitled "Risks," the net asset value and market value of leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more than the yield generated by unleveraged shares.
When-Issued and Delayed Delivery
The Fund may buy and sell municipal bonds on a when-issued or delayed delivery basis, making payment or taking delivery at a later date, normally within 15-45 days of the trade date. On such transactions the payment obligation and the interest rate are fixed at the time the buyer enters into the commitment. Beginning on the date the Fund enters into a commitment to purchase securities on a when-issued or delayed delivery basis, the Fund is required under rules of the Securities and Exchange Commission to maintain in a separate account liquid assets, consisting of cash, cash equivalents or liquid securities having a market value at all times of at least equal to the amount of the commitment. Income generated by any such assets which provide taxable income for Federal income tax purposes is includable in the taxable income of the Fund. The commitment to purchase securities on a when-issued or delayed delivery basis may involve an element of risk because no interest accrues on the bonds prior to settlement and since securities are subject to market fluctuations, to the purchaser prior to settlement of the transaction, and at the time of delivery the market value may be less than cost.
Repurchase Agreements
As temporary investments, the Fund may invest in repurchase agreements. A repurchase agreement is a contractual agreement whereby the seller of securities (U.S. Government securities or municipal bonds) 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 the 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 will be taxable. See "Tax Matters" for information relating to the allocation of taxable income between Common Shares and MuniPreferred Shares, if any. The Fund will only enter into repurchase agreements with registered securities dealers or domestic banks that, in the opinion of Nuveen Advisory, present minimal credit risk. The risk to the 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 the 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 the Fund may be delayed or limited. Nuveen Advisory 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, Nuveen Advisory will demand additional collateral from the issuer to increase the value of the collateral to at least that of the repurchase price, including interest.
Zero Coupon Bonds
The Fund may invest in zero coupon bonds. A zero coupon bond is a bond that does not pay interest for its entire life. The market prices of zero coupon bonds are affected to a greater extent by changes in prevailing levels of interest rates and thereby tend to be more volatile in price than securities that pay interest periodically. In addition, because the Fund accrues income with respect to these securities prior to the receipt of such interest, it may have to dispose of portfolio securities under disadvantageous circumstances in order to obtain cash needed to pay income dividends in amounts necessary to avoid unfavorable tax consequences.
MANAGEMENT OF THE FUND
Trustees and Officers
The management of the Fund, including general supervision of the duties performed for the Fund under the Management Agreement, is the responsibility of the Board of Trustees. The number of trustees of the Fund is currently set at seven, one of whom is an "interested person" (as the term "interested persons" is defined in the Investment Company Act of 1940) and six of whom are not "interested persons." The names and business addresses of the trustees and officers of the Fund and their principal occupations and other affiliations during the past five years are set forth below, with those trustees who are "interested persons" of the Fund indicated by an asterisk.
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Positions and Principal Occupations
Name and Address Age Offices with the During Past Five Years
Fund
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Timothy R. Schwertfeger* 50 Chairman and Trustee Chairman since July 1, 1996 of The John Nuveen
333 W. Wacker Drive Company, John Nuveen & Co. Incorporated, Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.; prior thereto, Executive Vice President and
Director of The John Nuveen Company, John Nuveen &
Co. Incorporated, Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Chairman and Director
(since January 1997) of Nuveen Asset Management,
Inc.; Director (since 1996) of Institutional Capital
Corporation.
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Robert P. Bremner 58 Trustee Private Investor and Management Consultant.
3725 Huntington Street, N.W.
Washington, D.C. 20015
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Lawrence H. Brown 64 Trustee Retired (August 1989) as Senior Vice President of
201 Michigan Avenue The Northern Trust Company.
Highwood, IL 60040
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Anne E. Impellizzeri 66 Trustee Executive Director of Manitoga (Center for Russel
5 Peter Cooper Rd. Wright's Design with Nature); formerly President and
New York, NY 10010 Chief Executive Officer of Blanton-Peale Institute.
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Peter R. Sawers 66 Trustee Adjunct Professor of Business and Economics,
22 The Landmark University of Dubuque, Iowa; Adjunct Professor, Lake
Northfield, IL 60093 Forest Graduate School of Management, Lake Forest,
Illinois; Chartered Financial Analyst; Certified
Management Consultant.
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William J. Schneider 54 Trustee Senior Partner, Miller-Valentine Partners, Vice
4000 Miller-Valentine Ct. President, Miller-Valentine Group.
P.O. Box 744
Dayton, OH 45401
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Judith M. Stockdale 51 Trustee Executive Director, Gaylord and Dorothy Donnelley
35 E. Wacker Drive Foundation (since 1994); prior thereto, Executive
Suite 2600 Director, Great Lakes Protection Fund (from 1990 to
Chicago, IL 60601 1994).
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Alan G. Berkshire 38 Vice President and Vice President and General Counsel (since September
333 W. Wacker Drive Assistant Secretary 1997) and Secretary (since May 1998) of The John
Chicago, IL 60606 Nuveen Company, John Nuveen & Co. Incorporated,
Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp., prior thereto, Partner in the law
firm of Kirkland & Ellis.
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Positions and Principal Occupations
Name and Address Age Offices with the During Past Five Years
Fund
---------------------------------------------------------------------------------------------------------------------
Peter H. D'Arrigo 31 Vice President and Vice President of John Nuveen & Co. Incorporated
333 W. Wacker Drive Treasurer (January 1999), prior thereto, Assistant Vice
Chicago, IL 60606 President (January 1997); formerly, Associate of
John Nuveen & Co. Incorporated; Chartered Financial
Analyst.
---------------------------------------------------------------------------------------------------------------------
Michael S. Davern 41 Vice President Vice President of Nuveen Advisory Corp. (since
333 W. Wacker Drive January 1997); prior thereto, Vice President and
Chicago, IL 60606 Portfolio Manager of Flagship Financial.
---------------------------------------------------------------------------------------------------------------------
Lorna C. Ferguson 53 Vice President Vice President of John Nuveen & Co. Incorporated;
333 W. Wacker Drive Vice President (since January 1998) of Nuveen
Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory
Corp.
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William M. Fitzgerald 35 Vice President Vice President of Nuveen Advisory Corp. (since
333 W. Wacker Drive December 1995); Assistant Vice President of Nuveen
Chicago, IL 60606 Advisory Corp. (from September 1992 to December
1995), prior thereto, Assistant Portfolio Manager of
Nuveen Advisory Corp.; Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------------------
Stephen D. Foy 44 Vice President and Vice President of John Nuveen & Co. Incorporated;
333 W. Wacker Drive Controller Certified Public Accountant.
Chicago, IL 60606
---------------------------------------------------------------------------------------------------------------------
J. Thomas Futrell 43 Vice President Vice President of Nuveen Advisory Corp.; Chartered
333 W. Wacker Drive Financial Analyst.
Chicago, IL 60606
---------------------------------------------------------------------------------------------------------------------
Richard A. Huber 36 Vice President Vice President of Nuveen Institutional Advisory
333 W. Wacker Drive Corp. (since March 1998) and Nuveen Advisory Corp.
Chicago, IL 60606 (since January 1997); prior thereto, Vice President
and Portfolio Manager of Flagship Financial.
---------------------------------------------------------------------------------------------------------------------
Steven J. Krupa 41 Vice President Vice President of Nuveen Advisory Corp.
333 W. Wacker Drive
Chicago, IL 60606
---------------------------------------------------------------------------------------------------------------------
Larry W. Martin 47 Vice President and Vice President, Assistant Secretary and Assistant
333 W. Wacker Drive Assistant Secretary General Counsel of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President and Assistant Secretary of Nuveen
Advisory Corp. and Nuveen Institutional Advisory
Corp.; Vice President and Assistant Secretary (since
January 1997) of Nuveen Asset Management, Inc.;
Assistant Secretary of The John Nuveen Company.
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========================================================================================================================
Positions and Principal Occupations
Name and Address Age Offices with the During Past Five Years
Fund
---------------------------------------------------------------------------------------------------------------------
Edward F. Neild, IV 33 Vice President Vice President (since September 1996), previously
333 W. Wacker Drive Assistant Vice President (since December 1993) of
Chicago, IL 60606 Nuveen Advisory Corp., Portfolio Manager prior
thereto; Vice President (since September 1996),
previously Assistant Vice President (since May
1995), of Nuveen Institutional Advisory Corp.,
Portfolio Manager prior thereto; Chartered Financial
Analyst.
---------------------------------------------------------------------------------------------------------------------
Stephen S. Peterson 41 Vice President Vice President (since September 1997), previously
333 W. Wacker Drive Assistant Vice President (since September 1996) of
Chicago, IL 60606 Nuveen Advisory Corp., Portfolio Manager prior
thereto; Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------------------
Stuart W. Rogers 42 Vice President Vice President of John Nuveen & Co. Incorporated.
333 W. Wacker Drive
Chicago, IL 60606
---------------------------------------------------------------------------------------------------------------------
Thomas C. Spalding, Jr. 47 Vice President Vice President of Nuveen Advisory Corp. and Nuveen
333 W. Wacker Drive Institutional Advisory Corp.; Chartered Financial
Chicago, IL 60606 Analyst.
---------------------------------------------------------------------------------------------------------------------
William S. Swanson 33 Vice President Vice President of John Nuveen & Co. Incorporated
333 W. Wacker Drive (since October 1997), prior thereto, Assistant Vice
Chicago, IL 60606 President (since September 1996); formerly,
Associate of John Nuveen & Co. Incorporated;
Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman 42 Vice President and Vice President, Assistant Secretary and Associate
333 W. Wacker Drive Secretary General Counsel of John Nuveen & Co. Incorporated;
Chicago, IL 60606 Vice President and Assistant Secretary of Nuveen
Advisory Corp., Vice President and Assistant
Secretary of Nuveen Institutional Advisory Corp.;
Assistant Secretary, The John Nuveen Company (since
May 1994); Chartered Financial Analyst.
---------------------------------------------------------------------------------------------------------------------
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Peter R. Sawers and Timothy R. Schwertfeger serve as members of the Executive Committee of the Board of Trustees. The Executive Committee, which meets between regular meetings of the Board of Trustees, is authorized to exercise all of the powers of the Board of Trustees.
Mr. Schwertfeger is also a director or trustee, as the case may be, of 100 Nuveen open-end and closed-end funds advised by Nuveen Advisory and Nuveen Institutional Advisory Corp.
The trustees of the Fund are directors or trustees, as the case may be, of 36 open-end funds and 53 Nuveen closed-end funds advised by Nuveen Advisory.
The Common Shareholders will elect trustees at the next annual meeting of Common Shareholders, unless any MuniPreferred Shares are outstanding at that time, in which event holders of MuniPreferred Shares, voting as a separate class, will elect two trustees and the remaining trustees shall be elected by Common Shareholders and holders of MuniPreferred Shares, voting together as a single class. Holders of MuniPreferred Shares will be entitled to elect a majority of the Fund's trustees under certain circumstances. See "Description of Shares--MuniPreferred Shares--Voting Rights."
The following table sets forth compensation to be paid by the Fund projected through the end of the Fund's first full fiscal year. The Fund has no retirement or pension plans. The officers and trustees affiliated with Nuveen serve without any compensation from the Fund.
Estimated Aggregate Compensation Estimated Total Compensation From
Name of Trustee From Fund* Fund and Fund Complex**
--------------------------------- -------------------------------- ---------------------------------
Robert P. Bremner $330 $68,000(1)
Lawrence H. Brown $359 $74,000
Anne E. Impellizzeri $330 $68,000(2)
Peter R. Sawers $330 $68,000(2)
William J. Schneider $330 $68,000(2)
Judith M. Stockdale $330 $68,000(3)
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* Based on the estimated compensation to be earned by the independent trustees for the period from inception to the fiscal year ending 10/31/99 for services to the trust.
**Based on the estimated compensation paid to the trustees for the one year period ending 12/31/99 for services to the open-end and closed-end funds advised by Nuveen Advisory.
(1) Includes $7,871 in estimated deferred compensation.
(2) Includes $52,470 in estimated deferred compensation.
(3) Includes $13,118 in estimated deferred compensation.
The Fund has no employees. Its officers are compensated by Nuveen Advisory or Nuveen.
INVESTMENT ADVISER
Nuveen Advisory acts as investment adviser to the Fund, with responsibility for the overall management of the Fund. Its address is 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Advisory is also responsible for managing the Fund's business affairs and providing day-to-day administrative services to the Fund. For additional information regarding the management services performed by Nuveen Advisory, see "Management of the Fund" in the Prospectus.
Nuveen Advisory is a wholly-owned subsidiary of Nuveen, which is also the co-managing underwriter of the Fund's shares. Nuveen is 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 (57) 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.
Pursuant to an investment management agreement between Nuveen Advisory and the Fund, the Fund has agreed to pay for the services and facilities provided by Nuveen Advisory an annual management fee, payable on a monthly basis, according to the following schedule:
Average Daily Net Asset Value Management Fee
----------------------------- --------------
For the first $125 million .6500%
For the next $125 million .6375%
For the next $250 million .6250%
For the next $500 million .6125%
For the next $1 billion .6000%
For assets over $2 billion .5750%
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All fees and expenses are accrued daily and deducted before payment of dividends to investors. The investment management agreement has been approved by a majority of the disinterested trustees of the Fund and the sole shareholder of the Fund.
For the first ten years of the Fund's operation, Nuveen Advisory has agreed to reduce the Fund's operating expenses by waiving the percentage of its management fee set forth below:
Year Ending Percentage Year Ending Percentage July 31, Reimbursed July 31, Reimbursed -------- ---------- -------- ---------- 1999* .30% 2005 0.25% 2000 .30% 2006 0.20% 2001 .30% 2007 0.15% 2002 .30% 2008 0.10% 2003 .30% 2009 0.05% 2004 .30% |
Reducing fund expenses in this manner will tend to increase the amount of income available for the Common Shareholders. Nuveen Advisory has not agreed to reimburse the Fund for any portion of its fees and expenses beyond July 31, 2009.
PORTFOLIO TRANSACTIONS
Nuveen Advisory is responsible for decisions to buy and sell securities for the Fund and for the placement of the Fund's securities business, the negotiation of the prices to be paid for principal trades and the allocation of its transactions among various dealer firms. Portfolio securities will normally be 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 through other means. Portfolio securities will not be purchased from Nuveen or its affiliates except in compliance with the 1940 Act.
The Fund expects that substantially all portfolio transactions will be effected on a principal (as opposed to an agency) basis and, accordingly, does not expect to pay any brokerage commissions. Purchases from underwriters will include a commission or concession paid by the issuer to the underwriter, and purchases from dealers will include the spread between the bid and asked price. It is the policy of Nuveen Advisory to seek the best execution under the circumstances of each trade. Nuveen Advisory evaluates price as the primary consideration, with the financial condition, reputation and responsiveness of the dealer considered secondary in determining best execution. Give the best execution obtainable, it will be Nuveen Advisory's practice to select dealers which, in addition, furnish research information (primarily credit analyses of issuers and general economic reports) and statistical and other services to Nuveen Advisory. It is not possible to place a dollar value on information and statistical and other services received from dealers. Since it is only supplementary to Nuveen Advisory's own research efforts, the receipt of research information is not expected to reduce significantly Nuveen Advisory's expenses. While Nuveen Advisory will be primarily responsible for the placement of the business of the Fund, the policies and practices of Nuveen Advisory in this regard must be consistent with the foregoing and will, at all times, be subject to review by the Board of Trustees of the Fund.
Nuveen Advisory may manage other investment accounts and investment companies for other clients which have investment objectives similar to those of the Fund. Subject to applicable laws and regulations, Nuveen Advisory seeks to allocate portfolio transactions equitably whenever concurrent decisions are made to purchase or sell securities by the Fund and another advisory account. In making such allocations the main factors to be considered will be the respective investment objectives, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment and the size of investment commitments generally held. While this procedure could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Board of Trustees that the benefits available from Nuveen Advisory's organization will outweigh any disadvantage that may arise from exposure to simultaneous transactions.
Under the 1940 Act, the Fund may not purchase portfolio securities from any underwriting syndicate of which Nuveen is a member except under certain limited conditions set forth in Rule 10f-3. The Rule sets forth requirements relating to, among other things, the terms
of an issue of municipal bonds purchased by the Fund, the amount of municipal bonds which may be purchased in any one issue and the assets of the Fund that 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 Trustees, including a majority of the members thereof who are not interested persons of the Fund.
DISTRIBUTIONS
As described in the Prospectus, initial distributions to Common Shareholders are expected to be declared approximately 45 days, and paid approximately 90 days, from the completion of the offering. To permit the Fund to maintain a more stable monthly distribution, the Fund will initially (prior to its first distribution) and may from time to time thereafter, 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 the Fund's monthly net income due to fluctuations in investment income or expenses, or due to an increase in the dividend rate on the Fund's outstanding MuniPreferred Shares. As a result, the distributions paid by the 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 will be added to the Fund's net asset value and, correspondingly, distributions from undistributed net investment income will be deducted from the Fund's net asset value.
For tax purposes, the Fund is currently required to allocate net capital gains and other taxable income, if any, between Common Shares and MuniPreferred Shares in proportion to total distributions paid to each class for the year in which such net capital gains or other taxable income is realized. For information relating to the impact of the issuance of MuniPreferred Shares on the distributions made by the Fund to Common Shareholders, see the Prospectus under "MuniPreferred Shares and Leverage."
While any MuniPreferred Shares are outstanding, the Fund may not declare any cash dividend or other distribution on its Common Shares unless at the time of such declaration (1) all accumulated dividends on the MuniPreferred Shares have been paid and (2) the net asset value of the Fund's portfolio (determined after deducting the amount of such dividend or other distribution) is at least 200% of the liquidation value of any outstanding MuniPreferred Shares. This latter limitation on the Fund's ability to make distributions on its Common Shares could under certain circumstances impair the ability of the Fund to maintain its qualification for taxation as a regulated investment company. See "Tax Matters."
DESCRIPTION OF SHARES
Common Shares
The Declaration authorizes the issuance of an unlimited number of Common Shares, par value $.01 per share. All Common Shares have equal rights as to the payment of dividends and the distribution of assets upon liquidation. Common Shares will, when issued, be fully paid and, subject to matters discussed in "Certain Provisions in the Declaration of Trust," non-assessable,
and will have no pre-emptive or conversion rights or rights to cumulative voting. At any time when the Fund's MuniPreferred Shares are outstanding, Common Shareholders will not be entitled to receive any net income of or other distributions from the Fund unless all accrued dividends on MuniPreferred Shares have been paid, and unless asset coverage (as defined in the 1940 Act) with respect to MuniPreferred Shares would be at least 200% after giving effect to such distributions. See "MuniPreferred Shares" below.
Application will be made to list the Common Shares on the New York Stock Exchange. The Fund intends to hold annual meetings of shareholders so long as the Common Shares are listed on a national securities exchange and such meetings are required as a condition to such listing.
Shares of closed-end investment companies may frequently trade at prices lower than net asset value. Shares of closed-end investment companies like the Fund that invest predominately in investment grade municipal bonds have during some periods traded at prices higher than net asset value and during other periods have traded at prices lower than net asset value. There can be no assurance that Common Shares or shares of other municipal funds will trade at a price higher than net asset value in the future. Net asset value will be reduced immediately following the offering after payment of organization and offering expenses. Net asset value generally increases when interest rates decline, and decreases when interest rates rise, and these changes are likely to be greater in the case of a fund having a leveraged capital structure. Whether investors will realize gains or losses upon the sale of Common Shares will not depend upon the Fund's net asset value but will depend entirely upon whether the market price of the Common Shares at the time of sale is above or below the original purchase price for the shares. Since the market price of the Fund's Common Shares will be determined by such factors as relative demand for and supply of such shares in the market, general market and economic conditions and other factors beyond the control of the Fund, the Fund cannot predict whether the Common Shares will trade at, below, or above net asset value or at, below or above the initial public offering price. Accordingly, the Common Shares are designed primarily for long-term investors, and investors in the Common Shares should not view the Fund as a vehicle for trading purposes. See "Repurchase of Fund Shares; Conversion to Open-End Fund" and the Prospectus under "Special Considerations Relating to Municipal Bonds and Leverage."
MuniPreferred Shares
The Declaration authorizes the issuance of an unlimited number of MuniPreferred Shares, par value $.01 per share, in one or more classes or series, with rights as determined by the Board of Trustees, by action of the Board of Trustees without the approval of the Common Shareholders.
The Fund's Board of Trustees has indicated its intention to authorize an offering of MuniPreferred Shares (representing approximately 35% of the Fund's capital immediately after the time the MuniPreferred Shares are issued) approximately three to six months after completion of the offering of Common Shares, subject to market conditions and to the Board's continuing belief that leveraging the Fund's capital structure through the issuance of MuniPreferred Shares is likely to achieve the benefits to the Common Shareholders described in this Statement of Additional Information. Although the terms of the MuniPreferred Shares,
including its dividend rate, voting rights, liquidation preference and redemption provisions, will be determined by the Board of Trustees (subject to applicable law and the Fund's Declaration) if and when it authorizes a MuniPreferred Shares offering, the Board has stated that the initial series of MuniPreferred Shares would likely pay cumulative dividends at relatively shorter-term rates, by providing for the periodic redetermination of the dividend rate through an auction or remarketing procedure. The Board of Trustees that the liquidation preference, voting rights and redemption provisions of the MuniPreferred Shares will likely be as stated below.
Preference on Distribution. The MuniPreferred Shares have complete priority over any other class of shares of the Fund as to distribution of assets, including the Common Shares.
Liquidation Preference. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Fund, holders of MuniPreferred Shares will be entitled to receive a preferential liquidating distribution (expected to equal the original purchase price per share plus accumulated and unpaid dividends thereon, whether or not earned or declared) before any distribution of assets is made to holders of Common Shares. After payment of the full amount of the liquidating distribution to which they are entitled, holders of MuniPreferred Shares will not be entitled to any further participation in any distribution of assets by the Fund. A consolidation or merger of the Fund with or into any Massachusetts business trust or corporation or a sale of all or substantially all of the assets of the Fund shall not be deemed to be a liquidation, dissolution or winding up of the Fund.
Voting Rights. In connection with any issuance of MuniPreferred Shares, the Fund must comply with Section 18(i) of the 1940 Act which requires, among other things, that MuniPreferred Shares be voting shares and have equal voting rights with Common Shares. Except as otherwise indicated in this Statement of Additional Information and except as otherwise required by applicable law, holders of MuniPreferred Shares will vote together with Common Shareholders as a single class.
In connection with the election of the Fund's trustees, holders of MuniPreferred Shares, voting as a separate class, shall be entitled to elect two of the Fund's trustees, and the remaining trustees shall be elected by Common Shareholders and holders of MuniPreferred Shares, voting together as a single class. In addition, if at any time dividends on the Fund's outstanding MuniPreferred Shares shall be unpaid in an amount equal to two full years' dividends thereon, the holders of all outstanding MuniPreferred Shares, voting as a separate class, will be entitled to elect a majority of the Fund's trustees until all dividends in arrears have been paid or declared and set apart for payment.
The affirmative vote of the holders of at least two-thirds of the outstanding MuniPreferred Shares of any class or series, as the case may be, voting as a separate class, will be required to, among other things (1) take certain actions which would affect the preferences, rights, or powers of such class or series or (2) increase the authorized number of such class or series, provided however, that 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 Trustees fixed in accordance with the Declaration or the By-laws. Except as may otherwise be required by law (1) the affirmative vote of the holders of at least
two-thirds of the MuniPreferred Shares outstanding at the time, voting as a separate class, will be required to approve any conversion of the Fund from a closed-end to an open-end investment company and (2) the affirmative vote of the holders at least two-thirds of the outstanding MuniPreferred Shares, 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, provided however, that 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 Trustees fixed in accordance with the Declaration or the By-laws. The affirmative vote of the holders of a majority of the outstanding MuniPreferred Shares, voting as a separate class, shall be required to approve any action not described in the preceding sentence requiring a vote of security holders under Section 13(a) of the 1940 Act including, among other things, changes in the Fund's investment objectives or changes in the investment restrictions described as fundamental policies under "Investment Objectives and Policies--Investment Restrictions." The class or series vote of holders of MuniPreferred Shares described above shall in each case be in addition to any separate vote of the requisite percentage of Common Shares and MuniPreferred Shares necessary to authorize the action in question.
The foregoing voting provisions will not apply with respect to the Fund's MuniPreferred Shares if, at or prior to the time when a vote is required, such shares shall have been (1) redeemed or (2) called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.
Redemption, Purchase and Sale of MuniPreferred Shares by the Fund. The terms of the MuniPreferred Shares may provide that it is redeemable at certain times, in whole or in part, at the original purchase price per share plus accumulated dividends, that the Fund may tender for or purchase MuniPreferred Shares and that the Fund may subsequently resell any shares so tendered for or purchased. Any redemption or purchase of MuniPreferred Shares by the Fund will reduce the leverage applicable to Common Shares, while any resale of shares by the Fund will increase such leverage. See "Special Considerations Relating to Municipal Bonds and Leverage."
The discussion above describes the Board of Trustees' present intention with respect to a possible offering of MuniPreferred Shares. If the Board of Trustees determines to authorize such an offering, the terms of the MuniPreferred Shares may be the same as, or different from, the terms described above, subject to applicable law and the Fund's Declaration.
CERTAIN PROVISIONS IN THE DECLARATION OF TRUST
Under Massachusetts law, shareholders could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Declaration contains an express disclaimer of shareholder liability for debts or obligations of the Fund and requires that notice of such limited liability be given in each agreement, obligation or instrument entered into or executed by the Fund or the trustees. The Declaration further provides for indemnification out of the assets and property of the Fund for all loss and expense of any shareholder held personally liable for the obligations of the Fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations. The Fund believes that the likelihood of such circumstances is remote.
The Declaration includes provisions that could limit the ability of other entities or persons to acquire control of the Fund. Specifically, the Declaration requires a vote by holders of at least two-thirds of the Common Shares and MuniPreferred Shares, voting together as a single class, except as described below, to authorize (1) a conversion of the Fund from a closed-end to an open-end investment company, (2) a merger or consolidation of the Fund, or a series or class of the Fund, with any corporation, association, trust or other organization or a reorganization or recapitalization of the Fund, or a series or class of the Fund, (3) a sale, lease or transfer of all or substantially all of the Fund's assets (other than in the regular course of the Fund's investment activities) or (4) a termination of the Fund, or a series or class of the Fund, unless such transaction has already been authorized by the affirmative vote of two-thirds of the total number of trustees fixed in accordance with the Declaration or the By-laws, in which case the affirmative vote of the holders of at least a majority of the Fund's Common Shares and MuniPreferred Shares outstanding at the time, voting together as a single class, is required, provided, however, that where only a particular class or series is affected, only the required vote by the applicable class or series will be required. In the case of the conversion of the 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 MuniPreferred Shares, the action in question will also require the affirmative vote of the holders of at least two-thirds of the Fund's MuniPreferred Shares outstanding at the time, voting as a separate class, or, if such action has been authorized by the affirmative vote of two-thirds of the total number of trustees fixed in accordance with the Declaration or the By-laws, the affirmative vote of the holders of at least a majority of the Fund's MuniPreferred Shares outstanding at the time, voting as a separate class. The votes required to approve the conversion of the Fund from a closed-end to an open-end investment company or to approve transactions constituting a plan of reorganization which adversely affects the holders of MuniPreferred Shares are higher than those required by the 1940 Act. The Board of Trustees believes that the provisions of the Declaration relating to such higher votes are in the best interest of the Fund and its shareholders. See the Statement of Additional Information under "Certain Provisions in the Declaration of Trust."
The provisions of the Declaration described above could have the effect of depriving the Common Shareholders of opportunities to sell their Common Shares at a premium over net asset value by discouraging a third party from seeking to obtain control of the Fund in a tender offer or similar transaction. The overall effect of these provisions is to render more difficult the accomplishment of a merger or the assumption of control by a third party. They provide, however, the advantage of potentially requiring persons seeking control of the Fund to negotiate with its management regarding the price to be paid and facilitating the continuity of the Fund's investment objectives and policies. The Board of Trustees of the Fund has considered the foregoing anti-takeover provisions and concluded that they are in the best interests of the Fund and its Common Shareholders.
Reference should be made to the Declaration on file with the Securities and Exchange Commission for the full text of these provisions, which could have the effect of depriving shareholders 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 Fund.
The Declaration provides that the obligations of the Fund are not binding upon the trustees of the Fund individually, but only upon the assets and property of the Fund, and that the
trustees shall not be liable for errors of judgment or mistakes of fact or law. Nothing in the Declaration, however, protects a trustee against any liability 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.
REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND
The Fund is a closed-end investment company and as such its shareholders will not have the right to cause the Fund to redeem their shares. Instead, the Fund's Common Shares will trade in the open market at a price that will be a function of several factors, including net asset value and yield. Because shares of a closed-end investment company may frequently trade a prices lower than net asset value, the Fund's Board of Trustees has currently determined that, at least annually, it will consider action that might be taken to reduce or eliminate any material discount from net asset value in respect of 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 the Fund to an open-end investment company. There can be no assurance, however, that the Board of Trustees will decide to take any of these actions, or that share repurchases or tender offers, if undertaken, will reduce market discount.
Notwithstanding the foregoing, at any time when the Fund's MuniPreferred Shares are outstanding, the Fund may not purchase, redeem or otherwise acquire any of its Common Shares unless (1) all accrued MuniPreferred Shares dividends have been paid and (2) at the time of such purchase, redemption or acquisition, the net asset value of the Fund's portfolio (determined after deducting the acquisition price of the Common Shares) is at least 200% of the liquidation value of the outstanding MuniPreferred Shares (expected to equal the original purchase price per share plus any accrued and unpaid dividends thereon). The staff of the Securities and Exchange 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 of business on the last day of the tender offer. Any service fees incurred in connection with any tender offer made by the Fund will be borne by the Fund and will not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment limitations, the Fund may borrow to finance the repurchase of shares or to make a tender offer. Interest on any borrowings to finance share repurchase transactions or the accumulation of cash by the Fund in anticipation of share repurchases or tenders will reduce the Fund's net income. Any share repurchase, tender offer or borrowing that might be approved by the Board of Trustees would have to comply with the Securities Exchange Act of 1934, as amended, 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 the Board at the time it considers such issue, it is the Board's present policy, which may be changed by the Board, not to authorize repurchases of Common Shares or a tender offer for such shares if (1) such transactions, if consummated, would (a) result in the delisting of the Common Shares from the New York Stock Exchange, or (b) impair the Fund's status as a regulated investment company under the Code (which would make the Fund a taxable entity, causing the Fund's income to be taxed at the corporate level in addition to the taxation of shareholders who receive dividends from the Fund) or as a registered closed-end investment
company under the 1940 Act; (2) the Fund would not be able to liquidate portfolio securities in an orderly manner and consistent with the Fund's investment objectives and policies in order to repurchase shares; or (3) there is, in the Board's judgment, any (a) material legal action or proceeding instituted or threatened challenging such transactions or otherwise materially adversely affecting the Fund, (b) general suspension of or limitation on prices for trading securities on the New York Stock Exchange, (c) declaration of a banking moratorium by Federal or state authorities or any suspension of payment by United States banks in which the Fund invests, (d) material limitation affecting the 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, (e) commencement of war, armed hostilities or other international or national calamity directly or indirectly involving the United States, or (f) other event or condition which would have a material adverse effect (including any adverse tax effect) on the Fund or its shareholders if shares were repurchased. The Board of Trustees may in the future modify these conditions in light of experience.
Conversion to an open-end company would require the approval of the holders of at least two-thirds of the Fund's Common Shares and MuniPreferred Shares outstanding at the time, voting together as a single class, and of the holders of at least two-thirds of the Fund's MuniPreferred Shares outstanding at the time, voting as a separate class. See the Prospectus under "Description of Shares--Certain Provisions in the Declaration of Trust" for a discussion of voting requirements applicable to conversion of the Fund to an open-end company. If the Fund converted to an open-end company, it would be required to redeem all MuniPreferred Shares then outstanding, and the Fund's Common Shares would no longer be listed on the New York Stock Exchange. 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 Trustees may at any time propose conversion of the Fund to an open-end company depending upon their judgment as to the advisability of such action in light of circumstances then prevailing.
The repurchase by the Fund of its shares at prices below net asset value will result in an increase in the net asset value of those shares that remain outstanding. However, there can be no assurance that share repurchases or tenders at or below net asset value will result in the Fund's shares trading at a price equal to their net asset value. Nevertheless, the fact that the Fund's shares may be the subject of repurchase or tender offers at net asset value from time to time, or that the Fund may be converted to an open-end company, may reduce any spread between market price and net asset value that might otherwise exist.
In addition, a purchase by the Fund of its Common Shares will decrease the Fund's total assets which would likely have the effect of increasing the Fund's expense ratio. Any purchase by the Fund of its Common Shares at a time when MuniPreferred Shares are outstanding will increase the leverage applicable to the outstanding Common Shares then remaining. See the Prospectus and this Statement of Additional Information under "Special Considerations Relating to Municipal Bonds and Leverage."
Before deciding whether to take any action in response to a discount from net asset value, the Board would consider all relevant factors, including the extent and duration of the discount, the liquidity of the Fund's portfolio, the impact of any action that might be taken on the Fund or its shareholders and market considerations. Based on these considerations, even if the Fund's shares should trade at a discount, the Board of Trustees may determine that, in the interest of the Fund and its shareholders, no action should be taken.
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the advice of Bell, Boyd & Lloyd, special counsel to the Trust.
The Fund intends to qualify under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), for tax treatment as a regulated investment company. In order to qualify as a regulated investment company, the Fund must satisfy certain requirements relating to the source of its income, diversification of its assets, and distributions of its income to Common Shareholders. First, the Fund must derive at least 90% of its annual gross income (including tax-exempt interest) from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock securities or foreign currencies, or other income (including but not limited to gains from options and futures) derived with respect to its business of investing in such stock, securities or currencies (the "90% gross income test"). Second, the Fund must diversify its holdings so that, at the close of each quarter of its taxable year, (i) at least 50% of the value of its total assets is comprised of cash, cash items, United States Government securities, securities of other regulated investment companies and other securities limited in respect of any one issuer to an amount not greater in value than 5% of the value of the Fund's total assets and to not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the total assets is invested in the securities of any one issuer (other than United States Government securities and securities of other regulated investment companies) or two or more issuers controlled by the Fund and engaged in the same, similar or related trades or business.
As a regulated investment company, the Fund will not be subject to federal income tax in any taxable year for which it distributes at least 90% of the sum of (i) its "investment company taxable income" (which includes dividends, taxable interest, taxable original issue discount and market discount income, income from securities lending, net short-term capital gain in excess of long- term capital loss, and any other taxable income other than "net capital gain" (as defined below) and is reduced by deductible expenses) and (ii) its net tax- exempt interest (the excess of its gross tax-exempt interest income over certain disallowed deductions). The Fund may retain for investment its net capital gain (which consists of the excess of its net long-term capital gain over its short- term capital loss). However, if the Fund retains any net capital gain or any investment company taxable income, it will be subject to tax at regular corporate rates on the amount retained. If the Fund retains any capital gain, it may designate the retained amount as undistributed capital gains in a notice to its Common Shareholders who, if subject to federal income tax on long-term capital gains, (i) will be required to include in income for federal income tax purposes, as long-term capital gain, their share of such undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax paid by the Fund against their
federal income tax liabilities, if any, and to claim refunds to the extent the credit exceeds such liabilities. For federal income tax purposes, the tax basis of shares owned by a Common Shareholder of the Fund will be increased by an amount equal under current law to the difference between the amount of undistributed capital gains included in the Common Shareholder's gross income and the tax deemed paid by the Common Shareholder under clause (ii) of the preceding sentence. The Fund intends to distribute at least annually to its Common Shareholders all or substantially all of its net tax-exempt interest and any investment company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in determining its investment company taxable income and net capital gain, i.e., the excess of net long-term capital gain over net short-term capital loss for any taxable year, to elect (unless it has made a taxable year election for excise tax purposes as discussed below) to treat all or part of any net capital loss, any net long-term capital loss or any net foreign currency loss incurred after October 31 as if it had been incurred in the succeeding year.
Distributions by the Fund of net interest received from certain taxable temporary investments (such as certificates of deposit, commercial paper and obligations of the U.S. Government, its agencies and instrumentalities) and net short-term capital gains realized by the Fund, if any, will be taxable to Common Shareholders as ordinary income whether received in cash or additional shares. Any net long-term capital gains realized by the Fund and distributed to Common Shareholders in cash or additional shares, will be taxable to Common Shareholders as long-term capital gains regardless of the length of time investors have owned shares of the Fund. Distributions by the Fund that do not constitute ordinary income dividends or capital gain dividends will be treated as a return of capital to the extent of (and in reduction of) the Common Shareholder's tax basis in his or her shares. Any excess will be treated as gain from the sale of his or her shares, as discussed below.
If the Fund engages in hedging transactions involving financial futures and options, these transactions will be subject to special tax rules, the effect of which may be to accelerate income to the Fund, defer the Fund's losses, cause adjustments in the holding periods of the Fund's securities, convert long-term capital gains into short-term capital gains and convert short-term capital losses into long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to Common Shareholders.
Prior to purchasing shares in the Fund, an investor should carefully consider the impact of dividends or distributions which are expected to be or have been declared, but not paid. Any dividend or distribution declared shortly after a purchase of such shares prior to the record date will have the effect of reducing the per share net asset value by the per share amount of the dividend or distribution.
Although dividends generally will be treated as distributed when paid, dividends declared in October, November or December, payable to Common Shareholders of record on a specified date in one of those months and paid during the following January, will be treated as having been distributed by the Fund (and received by the Common Shareholders) on December 31.
The redemption or exchange of Common Shares normally will result in capital gain or loss to the Common Shareholders. Generally, a Common Shareholder's gain or loss will be long-term gain or loss if the shares have been held for more than one year. Present law taxes both long- and short-term capital gains of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, net capital gains (i.e., the excess of net long-term capital gain over net short-term capital loss) with respect to securities 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%. Because of the limitations on itemized deductions and the deduction for personal exemptions applicable to higher income taxpayers, the effective tax rate may be higher in certain circumstances.
All or a portion of a sales charge paid in purchasing Common Shares cannot be taken into account for purposes of determining gain or loss on the redemption or exchange of such shares within 90 days after their purchase to the extent Common Shares or shares of another fund are subsequently acquired without payment of a sales charge pursuant to the reinvestment or exchange privilege. Any disregarded portion of such charge will result in an increase in the Common Shareholder's tax basis in the shares subsequently acquired. In addition, no loss will be allowed on the redemption or exchange of Common Shares if the Common Shareholder purchases other shares of the Fund (whether through reinvestment of distributions or otherwise) or the Common Shareholder acquires or enters into a contract or option to acquire securities that are substantially identical to shares of the Fund within a period of 61 days beginning 30 days before and ending 30 days after such redemption or exchange. If disallowed, the loss will be reflected in an adjustment to the basis of the shares acquired.
In order to avoid a 4% federal excise tax, the Fund must distribute or be deemed to have distributed by December 31 of each calendar year at least 98% of its taxable ordinary income for such year, at least 98% of the excess of its realized capital gains over its realized capital losses (generally computed on the basis of the one-year period ending on October 31 of such year) and 100% of any taxable ordinary income and any excess of realized capital gains over realized capital losses for the prior year that was not distributed during such year and on which the Fund paid no federal income tax. For purposes of the excise tax, a regulated investment company may reduce its capital gain net income (but not below its net capital gain) by the amount of any net ordinary loss for the calendar year. The Fund intends to make timely distributions in compliance with these requirements and consequently it is anticipated that it generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax treatment as a regulated investment company, the Fund would incur a regular corporate federal income tax upon its income for that year, and distributions to its Common Shareholders would be taxable to Common Shareholders as ordinary dividend income for federal income tax purposes to the extent of the Fund's earnings and profits.
The Fund is required in certain circumstances to withhold 31% of taxable dividends and certain other payments paid to non-corporate holders of shares who have not furnished to the Fund their correct taxpayer identification number (in the case of individuals, their Social Security number) and certain certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the Code and Treasury Regulations presently in effect as they directly govern the taxation of the Fund and its Common Shareholders. For complete provisions, reference should be made to the pertinent Code sections and Treasury Regulations. The Code and Treasury Regulations are subject to change by legislative or administrative action, and any such change may be retroactive with respect to Fund transactions. Common Shareholders are advised to consult their own tax Advisers for more detailed information concerning the federal taxation of the Fund and the income tax consequences to its Common Shareholders.
State Tax Matters
The exemption from Federal income tax for exempt-interest dividends does not necessarily result in exemption for such dividends under the income or other tax laws of any state or local taxing authority. Some states exempt from state income tax that portion of any exempt-interest dividend that is derived from interest received by a regulated investment company on its holdings of securities of that state and its political subdivisions and instrumentalities. Therefore, the Fund will report annually to its Common Shareholders the percentage of interest income earned by the Fund during the preceding year on tax-exempt obligations indicating, on a state-by-state basis, the source of such income. Shareholders of the Fund are advised to consult with their own tax advisers about state and local tax matters.
PERFORMANCE RELATED AND COMPARATIVE INFORMATION
The Fund may quote certain performance-related information and may compare certain aspects of its portfolio and structure to other substantially similar closed-end funds as categorized by Lipper Analytical ("Lipper"), Morningstar or other independent services. Comparison of the Fund to an alternative investment should be made with consideration of differences in features and expected performance. The Fund may obtain data from sources or reporting services, such as Bloomberg Financial ("Bloomberg") and Lipper that the Fund believe to be generally accurate.
Past performance is not indicative of future results. At the time Common Shareholders sell their shares, they may be worth more or less than their original investment.
Current Share Prices and Dividends of Similar Funds
(as of March 31, 1999)
National Fund "Ticker" Symbol Div Price VKL $0.600 $12.7500 MPT $0.625 $13.0000 XAA $0.628 $13.8125 MVT $0.768 $13.8800 PIA $0.425 $19.1875 IQM $0.650 $13.6250 MQT $0.649 $14.5000 MUH $0.780 $14.1300 VKS $0.780 $13.6900 VOT $0.780 $14.0000 MVF $0.792 $14.7150 |
MQY $0.792 $14.5000 MAF $0.804 $13.6300 MNP $0.804 $13.6900 MYI $0.804 $15.1300 PML $0.804 $13.6900 EVN $0.825 $15.0000 NPT $0.840 $14.5600 MYD $0.852 $15.5000 NPI $0.852 $14.9400 VIG $0.855 $13.7500 BKN $0.864 $15.5600 AMU $0.876 $13.6300 MHD $0.888 $15.5000 IQT $0.900 $15.0600 NPP $0.900 $15.0000 PPM $0.900 $15.8800 VKA $0.900 $15.6900 VMO $0.900 $16.3800 PMO $0.912 $14.8100 IQI $0.936 $15.4400 NPM $0.936 $16.4400 DTF $0.960 $16.8800 NQM $0.960 $15.8800 NQS $0.960 $15.7500 PMG $0.960 $15.0000 VKQ $0.960 $16.4400 VMT $0.972 $16.0350 NPF $0.972 $15.9400 VKI $0.744 $13.1900 NMA $0.996 $16.5600 VGM $0.996 $16.6300 NMO $1.008 $16.4400 NQU $1.032 $16.3800 KTF $1.035 $15.8625 VKV $0.816 $14.3800 PGM $1.200 $17.7375 EVN $0.825 $15.0000 |
An analysis of national closed-end municipal funds represented in the Lipper General Municipal Debt Funds (Leveraged) category supplemented by all funds newly issued between 1/11/99 and 3/31/99 show a positive correlation between higher dividends and higher market prices. For comparative purposes, prices and dividends for each fund noted have been normalized as necessary to calibrate each fund's initial offering price with the Fund's $15 initial offering price.
As previously noted, Nuveen Advisory will be reimbursing a significant amount of expenses for the Fund's first several years. According to Lipper, after this reimbursement, the Fund offers a lower expense structure than all non-proprietary municipal funds offered on a no-load basis in the last five years.* According to Lipper, these funds on average have total annual expenses of 1.10%. In contrast, the Fund expects that its total annual expenses will be no more than .55% for the first five years and only .85% after reimbursements terminate in the eleventh year.
In addition, for the first five years, the Fund offers a lower expense structure than every existing non-Nuveen, non-insured, non-high yield exchange traded municipal fund, including funds originally offered on a load basis. According to Lipper, the average annual expenses for this group are 0.99%, and the lowest for any fund is 0.64%. "Non-proprietary" funds are those managed by sponsors that do not have their own retail distribution capacity.
The Fund's significantly reduced annual expenses will enable the Fund to pay higher common share dividends, although the Nuveen Fund will have a lower initial net asset value than a no-load fund. The fact that the Fund's expenses are significantly lower than 1.10% will operate to increase common share income for the first five years by more than twice the amount of the reduction resulting from the lower net asset value.
The Fund's expenses will be far less than average expenses of all recent non-proprietary exchange-traded municipal funds offered in a no-load basis. The additional Common Share income resulting from the Fund's lower expenses units first several years more than offsets the reduction to income resulting from its lower net asset value.
Lower Fees Can Result in Higher Income Even After Sales Load
-----------------------------
Lower Expenses
Average No Loan Fund* $1.10%
Nuveen Funds+ 0.50%
-----------------------------
0.60
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*Non-proprietary closed-end exchange-traded municipal funds brought to market in
the last five years.
+During first five years.
Data from Lipper
-------------------------------------------------------
Higher Net Income
Decreased income from lower NAV $(0.06)
Increased income from lower expenses 0.14
Higher Net Income 0.08
Source: Nuveen
-------------------------------------------------------
|
Data for both the Fund and the comparative no-load fund example assumes net portfolio earnings of 5%, preferred dividend rates of 3%, and a leverage ratio of 35%. These assumptions do not represent or predict actual fund yields or returns. This table is designed simply to illustrate the impact that reduced expenses can have an Common Share income and dividends of a leveraged municipal bond fund.
EXPERTS
The Statement of Net Assets of the Fund as of _________________________
[and Statement of Operations for period ____________] appearing in this
Statement of Additional Information has been audited by Ernst & Young LLP,
__________________, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing. Ernst &
Young LLP, located at ______________ provides accounting and auditing services
to the Fund.
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto, relating to the shares offered hereby, has been filed by the Fund with the Securities and Exchange Commission (the "Commission"), Washington, D.C. The Prospectus and this Statement of Additional Information do not contain all of the information set forth in the Registration Statement, including any exhibits and schedules thereto. For further information with respect to the Fund and the shares offered hereby, reference is made to the Registration Statement. Statements contained in the Prospectus and this Statement of Additional Information as to the contents 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 filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A copy of the Registration Statement may be inspected without charge at the Commission's principal office in Washington, D.C., and copies of all or any part thereof may be obtained from the Commission upon the payment of certain fees prescribed by the Commission.
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder Nuveen Dividend Advantage Municipal Fund
[To Come]
NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND
FINANCIAL STATEMENTS
[TO COME]
APPENDIX 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
A-1
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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.
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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.
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
A-2
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grace period. The "D" rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
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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 by the Federal Savings & Loan Insurance Corp. or the Federal Deposit Insurance Corp.* and interest is adequately collateralized. In the case of certificates of deposit the letter "L" indicates that the deposit, combined with other deposits being held in the same right and capacity will be honored for principal and accrued pre-default interest up to the federal insurance limits within 30 days after closing of the insured institution or, in the event that the deposit is assumed by a successor insured institution, upon maturity.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flow.
NR Indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy.
Municipal Notes
An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:
--Amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note).
--Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
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.
A-3
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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, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
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A commercial rating is not a recommendation to purchase, sell, or hold a security inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information or based on other
circumstances.
Moody's Investors Service, Inc.--A brief description of the applicable Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings (as published by Moody's) follows:
Municipal Bonds
Aaa Bonds 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.
A-5
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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.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
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category from Aa to B in the public finance sectors. The modifier 1 indicates that the issuer is in the higher end of its letter rating category; the modifier 2 indicates a mid-range ranking; the modifier 3 indicates that the issuer is in the lower end of the letter ranking category.
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.
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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.
Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc. ("Fitch") ratings symbols and meanings (as published by Fitch) follows:
Long-Term Credit Ratings
Investment Grade
AAA Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. 'A' ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB Good credit quality. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances
and in economic conditions are more likely to impair this capacity. This
is the lowest investment-grade category.
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Speculative Grade
BB Speculative. 'BB' ratings indicate that there is a possibility
of credit risk developing, particularly as the result of
adverse economic change over time; however, business or
financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are
not investment grade.
B Highly speculative. 'B' ratings indicate that significant
credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however,
capacity for continued payment is contingent upon a sustained,
favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A 'CC' rating
indicates that default of some kind appears probable. 'C'
ratings signal imminent default.
DDD, DD, and D Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated
with any precision, the following serve as general guidelines.
'DDD' obligations have the highest potential for recovery,
around 90%-100% of outstanding amounts and accrued interest.
'DD' indicates potential recoveries in the range of 50%-90%,
and 'D' the lowest recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all
of their obligations. Entities rated 'DDD' have the highest
prospect for resumption of performance or continued operation
with or without a formal reorganization process. Entities rated
'DD' and 'D' are generally undergoing a formal reorganization
or liquidation process; those rated 'DD' are likely to satisfy
a higher portion of their outstanding obligations, while
entities rated 'D' have a poor prospect for repaying all
obligations.
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Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most obligations, or up to three years for U.S. public finance securities, and thus places greater emphasis on the liquidity necessary to meet financial commitments in a timely manner.
F1 Highest credit quality. Indicates the strongest capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of financial commitments, but the margin of safety is not as great as in the case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial commitments is adequate; however, near-term adverse changes could result in a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near-term adverse changes in financial and economic conditions.
C High default risk. Default is a real possibility. Capacity for meeting financial commitments is solely reliant upon a sustained, favorable business and economic environment.
D Default. Denotes actual or imminent payment default.
Notes:
"+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'AAA' long-term rating category, to categories below 'CCC', or to short-term ratings other than 'F1'.
'NR' indicates that Fitch IBCA does not rate the issuer or issue in question.
'Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of information available to be inadequate for rating purposes, or when an obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that there is a reasonable probability of a rating change and the likely direction of such change. These are designated as "Positive", indicating a potential upgrade, "Negative", for a potential downgrade, or "Evolving", if ratings may be raised, lowered or maintained. RatingAlert is typically resolved over a relatively short period.
APPENDIX B
TAXABLE EQUIVALENT YIELD TABLE
The taxable equivalent yield is the current yield you would need to earn on a taxable investment in order to equal a stated tax-free yield on a municipal investment. To assist you to more easily compare municipal investments like the Fund with taxable alternative investments, the table below presents the taxable equivalent yields for a range of hypothetical tax-free yields and tax rates:
Taxable Equivalent of Tax-Free Yields
Tax Free Yield
Tax Rate 4.00% 4.50% 5.00% 5.50% 6.00%
------------------------------------------------------------------------------------------------------------------------------
28.0% 5.56% 6.25% 6.94% 7.64% 8.33%
31.0% 5.80% 6.52% 7.25% 7.97% 8.70%
36.0% 6.25% 7.03% 7.81% 8.59% 9.38%
39.6% 6.62% 7.45% 8.28% 9.11% 9.93%
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APPENDIX C
HEDGING STRATEGIES AND RISKS
Set forth below is additional information regarding the various defensive hedging techniques.
Futures and Index Transactions
Financial Futures
A financial future is an agreement between two parties to buy and sell a security for a set price on a future date. They have been designed by boards of trade which have been designated "contracts markets" by the Commodity Futures Trading Commission ("CFTC").
The purchase of financial futures is for the purpose of hedging a Fund's existing or anticipated holdings of long-term debt securities. When a Fund purchases a financial future, it deposits in cash or securities an "initial margin" of between 1% and 5% of the contract amount. Thereafter, the Fund's account is either credited or debited on a daily basis in correlation with the fluctuation in price of the underlying future or other requirements imposed by the exchange in order to maintain an orderly market. The Fund must make additional payments to cover debits to its account and has the right to withdraw credits in excess of the liquidity, the Fund may close out its position at any time prior to expiration of the financial future by taking an opposite position. At closing a final determination of debits and credits is made, additional cash is paid by or to the Fund to settle the final determination and the Fund realizes a loss or gain depending on whether on a net basis it made or received such payments.
The sale of financial futures is for the purpose of hedging a Fund's existing or anticipated holdings of long-term debt securities. For example, if a Fund owns long-term bonds and interest rates were expected to increase, it might sell financial futures. If interest rates did increase, the value of long-term bonds in the Fund's portfolio would decline, but the value of the Fund's financial futures would be expected to increase at approximately the same rate thereby keeping the net asset value of the Fund from declining as much as it otherwise would have.
Among the risks associated with the use of financial futures by the Funds as a hedging device, perhaps the most significant is the imperfect correlation between movements in the price of the financial futures and movements in the price of the debt securities which are the subject of the hedge.
Thus, if the price of the financial future moves less or more than the price of the securities which are the subject of the hedge, the hedge will not be fully effective. To compensate for this imperfect correlation, the Fund may enter into financial futures in a greater dollar amount than the dollar amount of the securities being hedged if the historical volatility of the prices of such securities has been greater than the historical volatility of the financial futures. Conversely, the Fund may enter into fewer financial futures if the historical volatility of the price of the securities being hedged is less than the historical volatility of the financial futures.
The market prices of financial futures may also be affected by factors other than interest rates. One of these factors is the possibility that rapid changes in the volume of closing transactions, whether due to volatile markets or movements by speculators, would temporarily distort the normal relationship between the markets in the financial future and the chosen debt securities. In these circumstances as well as in periods of rapid and large price movements. The Fund might find it difficult or impossible to close out a particular transaction.
Options on Financial Futures
The Fund may also purchase put or call options on financial futures which are traded on a U.S. Exchange or board of trade and enter into closing transactions with respect to such options to terminate an existing position. Currently, options can be purchased with respect to financial futures on U.S. Treasury Bonds on The Chicago Board of Trade. The purchase of put options on financial futures is analogous to the purchase of put options by a Fund on its portfolio securities to hedge against the risk of rising interest rates. As with options on debt securities, the holder of an option may terminate his position by selling an option of the same Fund. There is no guarantee that such closing transactions can be effected.
Index Contracts
Index Futures
A tax-exempt bond index which assigns relative values to the tax-exempt bonds included in the index is traded on the Chicago Board of Trade. The index fluctuates with changes in the market values of all tax-exempt bonds included rather than a single bond. An index future is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of cash-rather than any security-equal to specified dollar amount times the difference between the index value at the close of the last trading day of the contract and the price at which the index future was originally written. Thus, an index future is similar to traditional financial futures except that settlement is made in cash.
Index Options
The Fund may also purchase put or call options on U.S. Government or tax- exempt bond index futures and enter into closing transactions with respect to such options to terminate an existing position. Options on index futures are similar to options on debt instruments except that an option on an index future gives the purchaser the right, in return for the premium paid, to assume a position in an index contract rather than an underlying security at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance of the writer's futures margin account which represents the amount by which the market price of the index futures contract, at exercise, is less than the exercise price of the option on the index future.
Bond index futures and options transactions would be subject to risks similar to transactions in financial futures and options thereon as described above. No series will enter into transactions in index or financial futures or related options unless and until, in the Adviser's opinion, the market for such instruments has developed sufficiently.
Nuveen Dividend Advantage Municipal Fund
Common Shares
_____________________, 19 ______
PART C - OTHER INFORMATION
Item 24: Financial Statements and Exhibits
1. Financial Statements:
Registrant has not conducted any business as of the date of this filing, other than in connection with its organization. Financial Statements indicating that the Registrant has met the net worth requirements of Section 14(a) of the 1940 Act will be filed by pre-effective amendment to this registration statement.
2. Exhibits:
a.1 Agreement and Declaration of Trust dated January 15, 1999.
a.2 Certificate of Amendment to Declaration of Trust dated April 9, 1999.
b. By-laws of Registrant dated January 15, 1999.
c. None.
d. None.
e. Dividend Investment Plan.*
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Advisory Corp. dated _________.
h. Form of Underwriting Agreement.*
i. Deferred Compensation Plan for Non-Employee Trustees.
j. Exchange Traded Fund Custody Agreement between Registrant and The Chase
Manhattan Bank dated _______.
k.1 Transfer Agency Agreement between Registrant and Chase Global Funds
Services Company dated ________.
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Advisory Corp. dated _________, 1999.
l.1 Opinion and consent of Bell, Boyd & Lloyd.*
l.2 Opinion and consent of Bingham Dana LLP.*
m. None.
n. Consent of Ernst & Young LLP.*
o. None.
p. Subscription Agreement of Nuveen Advisory Corp. dated April 12, 1999.
q. None.
r. None.
s. Powers of Attorney.
___________________
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*To be filed by amendment.
Item 25: Marketing Arrangements
See Section 3 of the Underwriting Agreement filed as Exhibit h to this Registration Statement.
Part C - 1
Item 26: Other Expenses of Issuance and Distribution
Securities and Exchange Commission fees................... $417.00
National Association of Securities Dealers, Inc. fees..... *
Printing and engraving expenses........................... *
Legal fees................................................ *
New York Stock Exchange listing fees...................... *
Accounting expenses....................................... *
Blue Sky filing fees and expenses......................... *
Transfer agent fees....................................... *
Miscellaneous expenses.................................... *
-------
Total............................................. $ *
=======
-----------------
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*To be completed by amendment.
Item 27: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 28: Number of Holders of Securities
At April 16, 1999
Number of
Title of Class Record Holders
-------------- --------------
Common Shares, $.01 par value............ 0
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Item 29: Indemnification
Section 4 of Article XII of the Registrant's Declaration of Trust provides as follows:
Subject to the exceptions and limitations contained in this Section 4, every person who is, or has been, a Trustee, officer, employee or agent of the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the Trust has an interest as a shareholder, creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the
Part C - 2
conduct of his office;
(b) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by a Covered Person, unless there has been either a determination that such Covered Person did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition or a reasonable determination, based on a review of readily available facts (as opposed to a full trial-type inquiry), that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such a Covered Person and shall inure to the benefit of the heirs, executors and administrators of such a person. Nothing contained herein shall affect any rights to indemnification to which Trust personnel other than Covered Persons may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate security or the Trust shall be insured against losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or independent legal counsel in a written opinion shall determine, based upon a review of the readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not an Interested Person of the Trust (including, as such Disinterested Trustee, anyone who has been exempted from being an Interested Person by any rule, regulation or order of the Commission), and (y) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or has been pending.
Part C-3
As used in this Section 4, the words "claim," "action," "suit" or "proceeding" shall apply to all claims, actions, suits, proceedings (civil, criminal, administrative or other, including appeals), actual or threatened; and the words "liability" and "expenses" shall include without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
The trustees and officers of the Registrant are covered by Investment Trust Errors and Omission policies 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 involve willful acts, bad faith, gross negligence and willful disregard of duty (i.e., where the insured did not act in good faith for a purpose he or she reasonably believed to be in the best interest of Registrant or where he or she had reasonable cause to believe this conduct was unlawful).
Section 8 of the Underwriting Agreement filed as Exhibit h to this Registration Statement provides for each of the parties thereto, including the Registrant and the Underwriters, to indemnify the others, their trustees, directors, certain of their officers, trustees, directors and persons who control them against certain liabilities in connection with the offering described herein, including liabilities under the federal securities laws.
Item 30: Business and Other Connections of Investment Adviser
Nuveen Advisory Corp. serves as investment adviser to the following open-
end management type investment companies: Nuveen Flagship Multistate Trust I,
Nuveen Flagship Multistate II, Nuveen Flagship Multistate Trust III, Nuveen
Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen California
Tax Free Fund, Inc., Nuveen Tax-Free Money Market Fund, Inc., Nuveen Tax-Exempt
Money Market Fund, Inc., Nuveen Tax-Free Reserves, Inc. and Nuveen Taxable Funds
Inc., Nuveen Advisory Corp. also serves as investment adviser to the following
closed-end management type investment companies other than the Registrant:
Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value Fund, Inc.,
Nuveen New York Municipal Value Fund, Inc., Nuveen Municipal Income Fund, Inc.,
Nuveen Premium Income Municipal Fund, Inc., Nuveen Performance Plus Municipal
Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc., Nuveen New
York Performance Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund,
Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California
Municipal Market Opportunity Fund, Inc., Nuveen New York Municipal Market
Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen
California Investment Quality Municipal Fund, Inc., Nuveen New York Investment
Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc.,
Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment
Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal
Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select
Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund,
Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal
Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen
Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income
Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen
California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income
Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier
Insured Municipal Income Fund, Inc., Nuveen Insured
Part C-4
California Premium Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen Insured New York Premium Income Municipal Fund 2, Nuveen New Jersey Premium Income Municipal Fund 2, Nuveen Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen California Premium Income Municipal Fund, Nuveen Insured Premium Income Municipal Fund 2, Nuveen New York Municipal Advantage Fund and Nuveen California Municipal Advantage Fund. Nuveen Advisory Corp. has no other clients or business at the present time. For a description of other business, profession, vocation or employment of a substantial nature in which any director or officer of the investment adviser has engaged during the last two years for his account or in the capacity of director, officer, employee, partner or trustee, see the descriptions under "Management of the Fund" in Part A of this Registration Statement.
Item 31: Location of Accounts and Records
Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, maintains the Declaration of Trust, By-Laws, minutes of trustees and shareholders meetings and contracts of the Registrant and all Advisery material of the investment adviser.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413 maintains all general and subsidiary ledgers, journals, trial balances, records of all portfolio purchases and sales, and all other required records not maintained by Nuveen Advisory Corp. or Chase Global Funds Services Company.
Part C-5
Chase Global Funds Services Company, P.O. Box 5186, Bowling Green Station, New York, NY 10275-0672 (regular mail) or 4 New York Plaza, 6th Floor, New York, NY 10004, maintains all the required records in its capacity as transfer and dividend paying agent for the Registrant.
Item 32: Management Services
Not applicable.
Item 33: Undertakings
1. Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement, or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. Not applicable.
5. The Registrant undertakes that:
a. For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant under Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of the Registration Statement as of the time it was declared effective.
b. For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery within two business days of receipt of a written or oral request, any Statement of Additional Information.
Part C - 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in this City of Chicago, and State of Illinois, on the 16th day of April, 1999.
NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND
/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 and on the date indicated.
Signature Title Date
-------------------- ------------------ ---------------------
/s/ Stephen D. Foy Vice President and April 16, 1999
-------------------- Controller (Principal
Stephen D. Foy Financial and Accounting
Officer)
Timothy R. Schwertfeger Chairman of the Board )
and Trustee (Principal )
Executive Officer) ) By /s/ Gifford R. Zimmerman
) ------------------------
) Gifford R. Zimmerman
Robert P. Bremner Trustee ) Attorney-in-Fact
)
Lawrence H. Brown Trustee )
)
Anne E. Impellizzeri Trustee )
)
Peter R. Sawers Trustee )
) April 16, 1999
William J. Schneider Trustee )
)
Judith M. Stockdale Trustee )
|
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 filed as an exhibit.
INDEX TO EXHIBITS
a.1 Agreement and Declaration of Trust dated January 15, 1999.
a.2 Certificate of Amendment to Declaration of Trust dated April 9,
1999.
b. By-laws of Registrant dated January 15, 1999.
c. None.
d. None.
e. Dividend Investment Plan.*
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Advisory Corp. dated _________.
h. Form of Underwriting Agreement.*
i. Deferred Compensation Plan for Non-Employee Trustees.
j. Exchange Traded Fund Custody Agreement between Registrant and The Chase
Manhattan Bank dated _______.
k.1 Transfer Agency Agreement between Registrant and Chase Global Funds
Services Company dated ________.
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Advisory Corp. dated _________, 1999.
l.1 Opinion and consent of Bell, Boyd & Lloyd.*
l.2 Opinion and consent of Bingham Dana LLP.*
m. None.
n. Consent of Ernst & Young LLP.*
o. None.
p. Subscription Agreement of Nuveen Advisory Corp. dated April 12, 1999.
q. None.
r. None.
s. Powers of Attorney.
___________________
|
*To be filed by amendment.
CERTIFICATE OF AMENDMENT
TO
DECLARATION OF TRUST
The undersigned, Secretary of Nuveen Municipal Advantage Fund 2, a Massachusetts business trust, (the "Trust"), hereby certifies that in accordance with Article XIII, Section 4 of the Declaration of Trust of the Trust, the Board of Trustees of the Trust, by unanimous vote duly adopted resolutions on April 9, 1999 amending the Declaration of Trust of the Trust effective as of the date hereof as follows:
FIRST. Article I, Section 1, of the Declaration of Trust is hereby amended to read in its entirety:
Section 1. Name. This trust shall be known as the "Nuveen Dividend Advantage Municipal Fund," and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.
SECOND. Section 4 of Article XIII is hereby amended by striking the first sentence in its entirety and substituting in lieu thereof the following:
"Except as otherwise specifically provided by this Declaration of Trust, this Declaration of Trust may be amended at any time by vote of a majority of the then Trustees with the consent of shareholders holding more than fifty percent (50%) of Shares entitled to vote."
THIRD. Section 4 of Article XIII is hereby amended by adding the following to the end of said session:
"A certification in recordable form signed by a majority of the Trustees or by the Secretary or any Assistant Secretary of the Trust setting forth such amendment and reciting that it was duly adopted by the shareholders or by the Trustees as aforesaid or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees or certified by the Secretary or any Assistant Secretary of the Trust, shall be conclusive evidence of such amendment when lodged among the records of the Trust."
IN WITNESS WHEREOF, the undersigned, being Secretary of the Trust, has executed this instrument as of the 9th day of April, 1999.
NUVEEN MUNICIPAL ADVANTAGE
FUND 2
By:_________________________________________
Gifford R. Zimmerman, Secretary
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
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Then personally appeared the above-named Gifford R. Zimmerman, known to me as the Secretary of the Nuveen Municipal Advantage Fund 2, who acknowledged the foregoing instrument to be his free act and deed, before me this 9th day of April, 1999.
My Commission Expires:_________
CERTIFICATE OF AMENDMENT
TO
DECLARATION OF TRUST
The undersigned, Secretary of Nuveen California Municipal Advantage Fund, a Massachusetts business trust, (the "Trust"), hereby certifies that in accordance with Article XIII, Section 4 of the Declaration of Trust of the Trust, the Board of Trustees of the Trust, by unanimous vote duly adopted resolutions on April 9, 1999 amending the Declaration of Trust of the Trust effective as of the date hereof as follows:
FIRST. Article I, Section 1 of the Declaration of Trust is hereby amended to read in its entirety:
Section 1. Name. This Trust shall be known as the "Nuveen California Dividend Advantage Municipal Fund," and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.
SECOND. Section 4 of Article XIII is hereby amended by striking the first sentence in its entirety and substituting in lieu thereof the following:
"Except as otherwise specifically provided in this Declaration of Trust, this Declaration of Trust may be amended at any time by vote of a majority of the then Trustees with the consent of shareholders holding more than fifty percent (50%) of Shares entitled to vote."
THIRD. Section 4 of Article XIII is hereby amended by adding the following to the end of said Section:
"A certification in recordable form signed by a majority of the Trustees or by the Secretary or any Assistant Secretary of the Trust setting forth such amendment and reciting that it was duly adopted by the shareholders or by the Trustees as aforesaid or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees or certified by the Secretary or any Assistant Secretary of the Trust, shall be conclusive evidence of such amendment when lodged among the records of the Trust."
IN WITNESS WHEREOF, the undersigned, being Secretary of Trust, has executed this instrument as of the 9th day of April, 1999.
NUVEEN CALIFORNIA MUNICIPAL
ADVANTAGE FUND
By: /s/ Gifford R. Zimmerman
------------------------------------
Gifford R. Zimmerman, Secretary
|
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
|
Then personally appeared the above-named Gifford R. Zimmerman, known to me as the Secretary of the Nuveen California Municipal Advantage Fund, who acknowledged the foregoing instrument to be his free act and deed, before me this 9th day of April, 1999.
/s/ Olivia Rubio ----------------- Notary Public |
[Official Seal of Olivia Rubio here]
CERTIFICATE OF AMENDMENT
TO
DECLARATION OF TRUST
The undersigned, Secretary of Nuveen New York Municipal Advantage Fund, a Massachusetts business trust, (the "Trust"), hereby certifies that in accordance with Article XIII, Section 4 of the Declaration of Trust of the Trust, the Board of Trustees of the Trust, by unanimous vote duly adopted resolutions on April 9, 1999 amending the Declaration of Trust of the Trust effective as of the date hereof as follows:
FIRST. Article I, Section 1 of the Declaration of Trust is hereby amended to read in its entirety:
Section 1. Name. This Trust shall be known as the "Nuveen New York Dividend Advantage Municipal Fund," and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.
SECOND. Section 4 of Article XIII is hereby amended by striking the first sentence in its entirety and substituting in lieu thereof the following:
"Except as otherwise specifically provided in this Declaration of Trust, this Declaration of Trust may be amended at any time by vote of a majority of the then Trustees with the consent of shareholders holding more than fifty percent (50%) of Shares entitled to vote."
THIRD. Section 4 of Article XIII is hereby amended by adding the following to the end of said Section:
"A certification in recordable form signed by a majority of the Trustees or by the Secretary or any Assistant Secretary of the Trust setting forth such amendment and reciting that it was duly adopted by the shareholders or by the Trustees as aforesaid or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees or certified by the Secretary or any Assistant Secretary of the Trust, shall be conclusive evidence of such amendment when lodged among the records of the Trust."
IN WITNESS WHEREOF, the undersigned, being Secretary of Trust, has executed this instrument as of the 9th day of April, 1999.
NUVEEN NEW YORK MUNICIPAL
ADVANTAGE FUND
By: /s/ Gifford R. Zimmerman
-------------------------------------
Gifford R. Zimmerman, Secretary
|
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
|
Then personally appeared the above-named Gifford R. Zimmerman, known to me as the Secretary of the Nuveen New York Municipal Advantage Fund, who acknowledged the foregoing instrument to be his free act and deed, before me this 9th day of April, 1999.
/s/ Olivia Rubio ----------------------- Notary Public |
[Official Seal of Olivia Rubio here]
CERTIFICATE OF AMENDMENT
TO
DECLARATION OF TRUST
The undersigned, Secretary of Nuveen New York Municipal Advantage Fund, a Massachusetts business trust, (the "Trust"), hereby certifies that in accordance with Article XIII, Section 4 of the Declaration of Trust of the Trust, the Board of Trustees of the Trust, by unanimous vote duly adopted resolutions on April 9, 1999 amending the Declaration of Trust of the Trust effective as of the date hereof as follows:
FIRST. Article I, Section 1 of the Declaration of Trust is hereby amended to read in its entirety:
Section 1. Name. This Trust shall be known as the "Nuveen New York Dividend Advantage Municipal Fund," and the Trustees shall conduct the business of the Trust under that name or any other name as they may from time to time determine.
SECOND. Section 4 of Article XIII is hereby amended by striking the first sentence in its entirety and substituting in lieu thereof the following:
"Except as otherwise specifically provided in this Declaration of Trust, this Declaration of Trust may be amended at any time by vote of a majority of the then Trustees with the consent of shareholders holding more than fifty percent (50%) of Shares entitled to vote."
THIRD. Section 4 of Article XIII is hereby amended by adding the following to the end of said Section:
"A certification in recordable form signed by a majority of the Trustees or by the Secretary or any Assistant Secretary of the Trust setting forth such amendment and reciting that it was duly adopted by the shareholders or by the Trustees as aforesaid or a copy of the Declaration, as amended, in recordable form, and executed by a majority of the Trustees or certified by the Secretary or any Assistant Secretary of the Trust, shall be conclusive evidence of such amendment when lodged among the records of the Trust."
IN WITNESS WHEREOF, the undersigned, being Secretary of Trust, has executed this instrument as of the 9th day of April, 1999.
NUVEEN MUNICIPAL ADVANTAGE
FUND 2
By: /s/ Gifford R. Zimmerman
-------------------------------
Gifford R. Zimmerman, Secretary
|
STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
|
Then personally appeared the above-named Gifford R. Zimmerman, known to me as the Secretary of the Nuveen New York Municipal Advantage Fund 2, who acknowledged the foregoing instrument to be his free act and deed, before me this 9th day of April, 1999.
/s/ Olivia Rubio ---------------- Notary Public |
My Commission Expires: 3/19/01
[Official Seal of Olivia Rubio Appears Here]
BY-LAWS
OF
NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND
ARTICLE I
DECLARATION OF TRUST
AND
OFFICES
Section 1.1. Declaration of Trust. These By-Laws shall be subject to the Declaration of Trust, as from time to time in effect (the "Declaration of Trust"), of Nuveen Dividend Advantage Municipal Fund, the Massachusetts business trust established by the Declaration of Trust (the "Trust").
Section 1.2. Registered Agent. The registered agent of the Trust in the Commonwealth of Massachusetts shall be CT Corporation System, 2 Oliver Street, Boston, Massachusetts, or such other agent as may be fixed by the Board of Trustees.
Section 1.3. Other Offices. The Trust may have such other offices and places of business within or without the Commonwealth of Massachusetts as the Board of Trustees shall determine.
ARTICLE II
SHAREHOLDERS
Section 2.1. Place of Meetings. Meetings of the Shareholders may be held at such place or places within or without the Commonwealth of Massachusetts as shall be fixed by the Board of Trustees and stated in the notice of the meeting.
Section 2.2. Regular Meeting. Regular meetings of the Shareholders for the election of Trustees 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 Trustees by resolution shall designate, except as otherwise required by 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 Trustees, and must be called at the written request stating the purpose or purposes of the meeting, of Shareholders entitled to cast at least l0 percent of all the votes entitled to be cast at the meeting.
Section 2.4. Notice of Meetings. Notice stating the time and place of the meeting and in the case of a special meeting the purpose or purposes thereof and by whom called, shall be delivered to each Shareholder 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 of beneficial interest of the Trust (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 the holders of Preferred Shares are entitled to elect any of the Trust's Trustees by class vote of such holders, the holders of 33 1/3% of the 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, except in the case of the election of Trustees which shall only require a plurality, 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 Declaration of Trust or any resolution of the Trustees which authorizes the issuance of Preferred Shares.
Section 2.6. Voting. At each meeting of the Shareholders, every holder of Shares then entitled to vote may vote in person or by proxy and, except as otherwise provided by the 1940 Act, the Declaration of Trust or any resolution of the Trustees which authorizes the issuance of Preferred Shares, shall have one vote for each Share 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 Trust at or before the meeting at which the appointment is to be effective. The placing of a Shareholder's name on a proxy pursuant to telephonic or electronically transmitted instructions 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. 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 Trust. Any copy, facsimile telecommunication or other reliable reproduction of a proxy may be substituted for or used in lieu of the original proxy for any and all purposes for which the original proxy could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original proxy.
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 designed, 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 Shareholders. See Section 6.3 of these By-Laws.
ARTICLE III
TRUSTEES
Section 3.1. Qualifications and Number: Vacancies. Each Trustee shall be a natural person. A Trustee need not be a Shareholder, a citizen of the United States, or a resident of the Commonwealth of Massachusetts. The number of Trustees of the Trust, their term and election and the filling of vacancies, shall be as provided in the Declaration of Trust.
Section 3.2. Powers. The business and affairs of the Trust shall be managed under the direction of the Board of Trustees. All powers of the Trust may be exercised by or under the authority of the Board of Trustees, except those conferred on or reserved to the Shareholders by statute, the Declaration of Trust or these By-Laws.
Section 3.3. Investment Policies. It shall be the duty of the Board of Trustees to ensure that the purchase, sale, retention and disposal of portfolio securities and the other investment practices of the Trust are at all times consistent with the investment objectives, policies and restrictions with respect to securities investments and otherwise of the Trust 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 Declaration of Trust. The Trustees, however, may delegate the duty of management of the assets of the Trust and may delegate such other of their powers and duties to the Executive Committee or any other committee, or to an individual or corporate investment adviser to act as investment adviser or subadviser pursuant to a written contract.
Section 3.4. Meetings. Regular meetings of the Trustees may be held without notice at such times as the Trustees shall fix. Special meetings of the Trustees may be called by the Chairman of the Board or the President, and shall be called at the written request of two or more Trustees. Unless waived by each Trustee, three days' notice of special meetings shall be given to each Trustee 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. Meetings of the Trustees may be held at any place within or outside the Commonwealth of Massachusetts. A conference among Trustees by any means of communication through which the Trustees may simultaneously hear each other during the conference constitutes a meeting of the Trustees or of a committee of the Trustees, if the notice requirements have been met (or waived) and if the number of Trustees 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 Trustees currently holding office, or in the case of a meeting of a committee of the Trustees, 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 Trustees present may continue to transact business until adjournment, even though the withdrawal of a number of Trustees 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 Trustees present shall be the act of the Trustees or the committee, as the case may be, on any question, except where the act
of a greater number is required by these By-Laws or by the Declaration of Trust.
Section 3.6. Action by Written Consent in Lieu of Meetings of Trustees. See Section 6.3 of these By-Laws.
Section 3.7. Committees. The Trustees, by resolution adopted by the affirmative vote of a majority of the Trustees, may designate from their members an Executive Committee, an Audit Committee (whose function shall be to advise the Trustees as to the selection of and review of the work of the independent public accountants of the Trust) and any other committee or committees, each such committee to consist of two or more Trustees and to have such powers and authority (to the extent permitted by law) as may be provided in such resolution. Any such committee may be terminated at any time by the affirmative vote of a majority of the Trustees.
ARTICLE IV
OFFICERS
Section 4.1. Number and Qualifications. The officers of the Trust shall include a Chairman of the Board, a President, a Controller, one or more Vice Presidents (one of whom may be designated 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 Trustees, each officer shall be appointed by the Trustees for a term which shall continue until the meeting of the Trustees 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 Trustees 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 Trust. Such other officers shall hold office for such terms as may be prescribed by the Trustees or by the appointing authority.
Section 4.2. Resignations. Any officer of the Trust may resign at any time by giving written notice of his resignation to the Trustees, 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 Trustees present at a duly convened meeting of the Trustees.
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 Trustees, or in the manner determined by the Trustees.
Section 4.5. The Chairman of the Board. The Chairman of the Board shall be elected from among the Trustees. He shall be the chief executive officer of the Trust and shall:
(a) have general active management of the business of the Trust;
(b) when present, preside at all meetings of the Trustees and of the Shareholders;
(c) see that all orders and resolutions of the Trustees are carried into effect;
(d) sign and deliver in the name of the Trust any deeds, mortgages, bonds, contracts or other instruments pertaining to the business of the Trust, 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 Declaration of Trust or By-Laws or by the Trustees to some other officer or agent of the Trust; and
(e) maintain records of and, whenever necessary, certify all proceedings of the Trustees and the Shareholders.
The Chairman of the Board 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 the Common Shares or Preferred Shares of the Trust 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 of the Board and such other duties as from time to time may be assigned to him by the Trustees or by these By-Laws.
Section 4.6. The President. The President shall be the chief operating officer of the Trust 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 Trust. In general, he shall discharge all duties incident to the office of the chief operating officer of the Trust and such other duties as may be prescribed by the Trustees 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 Trustees, 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 Trustees, the Chairman of the Board or the President.
Section 4.9. Controller. The Controller shall:
(a) keep accurate financial records for the Trust;
(b) render to the Chairman of the Board, the President and the Trustees, whenever requested, an account of all transactions by and of the financial condition of the Trust; and
(c) in general, perform all the duties incident to the office of Controller and such other duties as from time to time may be assigned to him by the Trustees, the Chairman of the Board 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 Trust, except those which the Trust 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 Trust, 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 Trust in the banks and depositories designated by the Trustees;
(c) endorse for deposit all notes, checks, and drafts received by the Trust making proper vouchers therefor:
(d) disburse corporate funds and issue checks and drafts in the name of the Trust, as ordered by the Trustees; 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 Trustees, the Chairman of the Board or the President.
Section 4.11. 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 Trustees, the committees of the Trustees 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 Trust;
(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 Trustees, the Chairman of the Board or the President.
Section 4.12. Salaries. The salaries of all officers shall be fixed by the Trustees and the Trustees have the authority by majority vote to reimburse expenses and to establish reasonable compensation of all Trustees for services to the Trust as Trustees, officers, or otherwise.
ARTICLE V
SHARES
Section 5.1. Share Certificates. Each owner of Common Shares of the Trust shall be entitled upon request to have a certificate, in such form as shall be approved by the Trustees, representing the number of Common Shares of the Trust owned by him. Certificates representing fractional Common Shares shall not be issued. The certificates representing Common Shares shall be signed in the name of the Trust 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 Trust with the same effect as if such officer were still in office at the date of their issuance. No certificates representing Preferred Shares shall be issued except as the Trustees may otherwise authorize.
Section 5.2. Books and Records; Inspection. The Trust shall keep at its principal executive office, or at another place or places within the United States determined by the Trustees, a share register not more than one year old, containing the names and addresses of the shareholders and the number of Shares held by each Shareholder. The Trust shall also keep, at its principal executive office, or at another place or places within the United States determined by the Trustees, a record of the dates on which certificates representing Shares were issued.
Section 5.3. Share Transfers. Upon compliance with any provisions restricting the transferability of Shares that may be set forth in the Declaration of Trust, these By-Laws, or any resolution or written agreement in respect thereof, transfers of Shares of the Trust shall be made only on the books of the Trust by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with an officer of the Trust, 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 Trust shall be deemed the owner thereof for all purposes as regards the Trust; 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 Trust, shall be so expressed in the entry of transfer.
Section 5.4. Regulations. The Trustees may make such additional rules and regulations, not inconsistent with these By-Laws, as they may deem expedient concerning the issue, certification, transfer and registration of Shares of the Trust. They 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 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 Trust shall immediately notify the Trust of any loss, destruction or mutilation of such certificate, and the Trust may issue a new certificate 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 Trustees may, in their discretion, require such owner or his legal representatives to give to the Trust a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Trustees in their absolute discretion shall determine, to indemnify the Trust 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 Trustees, in their absolute discretion, may refuse to issue any such new certificate, except as otherwise required by law.
Section 5.6. Record Date; Certification of Beneficial Owner. (a) The Trustees 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 or any adjournment thereof.
(b) The Trustees may fix a date for determining Shareholders entitled to receive payment of any dividend or distribution or allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of Shares.
(c) In the absence of such fixed record date, (i) the date for determination of Shareholders 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 Shares shall be the close of business on the day on which the resolution of the Trustees is adopted.
(c) A resolution approved by the affirmative vote of a majority of the Trustees present may establish a procedure whereby a Shareholder may certify in writing to the 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 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.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Fiscal Year. The fiscal year of the Trust shall be as fixed by the Trustees of the Trust.
Section 6.2. Notice and Waiver of Notice. (a) Any notice of a meeting required to be given under these By-Laws to Shareholders or Trustees, or both, 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 telecopy, telegraph or cable, or by mail or courier or delivery service, and, if mailed, shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the Shareholder or Trustee at his address as it appears on the records of the Trust.
Section 6.3. Action by Written Consent in Lieu of Meeting. (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 meeting of Trustees may be taken by written action signed by all of the Trustees. An action which does not
require Shareholder approval and which is required or permitted to be taken at a meeting of the Trustees or a Committee of the Trustees may be taken by written action signed by the number of Trustees that would be required to take the same action at a meeting of the Trustees or Committee, as the case may be, at which all Trustees were present. The written action is effective when signed by the required number of Trustees, unless a different effective time is provided in the written action. When written action is taken by less than all Trustees, all Trustees shall be notified immediately of this text and effective date.
Section 6.4. Reports to Shareholders. The books of account of the Trust shall be examined by an independent firm of public accountants at the close of each annual period of the Trust and at such other times, if any, as may be directed by the Trustees. A report to the Shareholders based upon such examination shall be mailed to each Shareholder of the Trust of record at his address as the same appears on the books of the Trust. Each such report shall show the assets and liabilities of the Trust as of the annual or other period covered by the report and the securities in which the funds of the Trust were then invested; such report shall also show the Trust's income and expenses for the period from the end of the Trust'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 Trustees or such independent firm of public accountants shall determine.
Section 6.5. Approval of Firm of Independent Public Accountants. At any regular meeting of the Shareholders of the Trust 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 Trustees who are not investment advisers of, or affiliated persons of an investment adviser of, or officers or employees of, the Trust, as such terms are defined in the 1940 Act.
Section 6.6. Custodian. All securities and cash of the Trust 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 Trust 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 Trust held by the custodian. Said contract and all amendments thereto shall be approved by the Trustees of the Trust. The Trust 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 Trust be delivered to the successor custodian.
Section 6.7. Prohibited Transactions. No officer or Trustee of the Trust
or of its investment adviser shall deal for or on behalf of the Trust 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 Trustees of the Trust from having a financial interest in the Trust, its
principal underwriter or its investment adviser; (b) the purchase of securities
for the portfolio of the Trust or the sale of securities owned by the Trust
through a securities dealer, one or more of whose partners, officers or
directors is an officer or Trustee of the Trust, provided such transactions are
handled in the capacity of broker only and provided commission charged do not
exceed customary brokerage charges for such service; (c) the purchase or sale of
securities for the portfolio of the Trust 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 Trustee of the Trust, provided only customary fees are charged for
services rendered to or for the benefit of the Trust.
Section 6.8. Bonds. The Trustees may require any officer, agent or employee of the Trust to give a bond to the Trust, conditioned upon the faithful discharge of his duties, with one or more sureties and in such amount as may be satisfactory to the Trustee. The Trustees shall, in any event, require the Trust 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 Trust, who may singly, or jointly with others, have access to securities or funds of the Trust, 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 Trustees who are not "interested persons" of the Trust 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 Trust 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 Trust's portfolio, and as meet all requirements which the Securities and Exchange Commission may prescribe by order, rule or regulation.
ARTICLE VII
AMENDMENTS
Section 7.1. These By-Laws may be amended or repealed, or new By-Laws may be adopted, by the Trustees 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
Trustees by written consent in lieu of a meeting.
NUVEEN EXCHANGE-TRADED FUNDS
(except Nuveen Municipal Value Fund, Inc.)
This Dividend Reinvestment Plan for the Nuveen Exchange-Traded Funds advised by Nuveen Advisory Corp. (except for Nuveen Municipal Value Fund) (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 The Chase Manhattan Bank ("Chase"), the Plan Agent, in accordance with the following terms:
1. Chase 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 Chase 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 Chase and the Fund may agree. In the case of shareholders who hold shares for others who are the beneficial owners, Chase 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 Chase 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 Chase 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. Chase 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.
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 Chase shall determine. Participants' funds held uninvested by Chase will not bear interest, and it is understood that, in any event, Chase 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. Chase shall have no responsibility as to the value of the Fund's shares acquired for Participants' accounts. Chase 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 Chase as Agent.
6. Chase may hold each Participant's shares acquired pursuant to this Plan, together with the shares of other Participants, in non-certificated form in Chase's name or that of its nominee. Chase 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. Chase 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. Chase 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, Chase 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 Chase 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. Chase'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.
10. Each Participant may terminate his account under the Plan by notifying Chase 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 Chase and the Fund may agree. Such termination will be effective immediately if notice is received by Chase 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 Chase upon at least 90 days prior notice. Upon any termination, Chase 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 Chase sell part or all of his shares, Chase 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 Chase 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, Chase 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 Chase 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. Chase 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.
AGREEMENT made this ____ day of May, 1999, by and between NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND, a Massachusetts business trust (the "Fund"), and NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser").
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 Trustees 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.
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 trustees 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 by applying the following annual rate to the average daily net assets of the Fund:
Rate Net Assets ---- ---------- .6500% Up to $125 million .6375% $125 to $250 million .6250% $250 to $500 million .6125% $500 million to $1 billion .6000% $1 billion to $2 billion .5750% $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.
3. The Adviser shall arrange for officers or employees of the Adviser to serve, without compensation from the Fund, as trustees, 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, trustees, 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 trustees, 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. 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, 2000, 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 Trustees or by vote of a majority of the outstanding voting securities of the Fund, accompanied by appropriate notice.
This Agreement may be terminated, at any time, without the payment of any penalty, by the Board of Trustees 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.
10. The Fund's Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund by the Fund's officers as officers and not individually and the obligations imposed upon the Fund by 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.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to be executed on the day and year above written.
NUVEEN DIVIDEND ADVANTAGE
MUNICIPAL FUND
NUVEEN ADVISORY CORP.
Assistant Secretary
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR
INDEPENDENT DIRECTORS AND TRUSTEES
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.
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).
(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.
(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.
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.
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 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.
(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 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 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.
(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);
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.
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
(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 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.
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.
(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.
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 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.
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: /s/ Alan G. Berkshire
------------------------
Name: Alan G. Berkshire
Title: Vice President
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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
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.
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
Exhibit B
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
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
Exhibit C
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
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 _______%
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.
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.
[_] I do not wish to participate in the Plan, or if currently participating, I wish to terminate my participation at this time.
Accepted by Administrator:
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_________________________________________ $______ _____%
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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%
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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
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
Accepted by Administrator:
Exhibit E
NUVEEN OPEN-END AND CLOSED-END FUNDS
DEFERRED COMPENSATION PLAN FOR INDEPENDENT
DIRECTORS AND TRUSTEES
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BENEFICIARY DESIGNATION FORM
Under the Deferred Compensation Plan for Independent Directors and Trustees (the "Plan"), I hereby make the following beneficiary designations:
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 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 primary Beneficiaries.
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 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
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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
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EXCHANGE TRADED FUND CUSTODY AGREEMENT
THIS AGREEMENT is made this ___ day of __________, 199_ by and between NUVEEN ___________________ FUND, a closed-end investment company organized as a Massachusetts business trust (the "Fund"), and THE CHASE MANHATTAN BANK, a New York banking corporation ("Chase").
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 (the "1940 Act")
WHEREAS, the Fund desires to retain Chase to serve as the Fund's custodian and Chase is willing to act as custodian hereunder.
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 Chase to act as custodian of its portfolio securities, cash and other property on the terms set forth in this Agreement. Chase 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 Chase with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the appointment of Chase 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;
(c) The Fund's Declaration of Trust filed with the Commonwealth of Massachusetts and all amendments thereto (such Declaration of Trust as currently in effect and from time to time, be amended, are herein called the "Declaration");
(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 Trustees appointing the investment advisor of the Fund and resolutions of the Fund's Board of Trustees 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 and the Securities Act of 1933, as amended ("the 1933 Act") with the SEC; and
(h) The Fund's most recent prospectus and statement including all amendments and supplements thereto (the "Prospectus").
Upon request the Fund will furnish Chase with copies of all amendments of or supplements to the foregoing, if any. The Fund will also furnish Chase upon request with a copy of the opinion of counsel for the Fund with respect to the validity of the Shares of the Fund 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 Trustees of the Fund to give Proper Instructions on behalf of the Fund as set forth in resolutions of the Fund's Board of Trustees.
(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 initialed by two or more persons as the Board of Trustees 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 Chase 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 such 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 Trustees of the Fund accompanied by a detailed description of procedures approved by the Board of Trustees, Proper Instructions may include communications effected directly between electro-mechanical or electronic devices provided that the Board of Trustees and Chase 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 Chase 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 Chase or which Chase may from time to time hold for the Fund;
(ii) all income in respect of any such securities or other property; and
(iii) all proceeds of the sales of any of such securities or other property.
(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 Trustees approving deposits by Chase therein.
4. Delivery and Registration of the Property. The Fund will deliver or cause to be delivered to Chase all securities and all moneys owned by it, including payments of interest, principal and capital distributions and cash received by it from 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. Chase will not be responsible for such securities and such monies until actually received by it. All securities delivered to Chase 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 Chase or any nominee of Chase (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 with a Securities Depository or its nominee pursuant to Section 8 hereof, or shall be properly endorsed and in form for transfer satisfactory to Chase.
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. Chase'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 Chase to act, Chase must receive the Fund's instructions at its offices in New York, addressed as Chase may from time to time request, by no later than noon (NY City time) at least two business days prior to the last scheduled date to act with respect thereto (or such earlier date or time as Chase may reasonably notify the Fund). Absent Chase's
timely receipt of such instructions, such instruments will expire without liability to Chase.
6. Receipt and Disbursement of Money.
(a) Chase shall open and maintain a custody account for the Fund, subject only to draft or order by Chase 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 Chase for the Fund may be deposited by Chase to the Fund's credit at Chase or in such other banks or trust companies as Chase 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 Trustees of the Fund. Such funds shall be deposited by Chase in its capacity as Custodian and shall be withdrawable by Chase only in that capacity.
(b) Upon receipt of Proper Instructions (which may be continuing
instructions as deemed appropriate by the parties) Chase 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
Chase, 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 Chase'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 Chase
along with written evidence of the agreement by Chase 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
Chase; (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.
(c) Chase 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, with interest at the rate it customarily charges for such transactions, 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, with 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 to reasonably dispose of any securities in which it has a security interest to the extent necessary to obtain reimbursement.
7. Receipt and Delivery of Securities.
(a) Except as provided by Section 8 hereof, Chase 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 Chase for the Fund pursuant to the terms of this Agreement. In the absence of Proper Instructions, Chase 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 trustee, officer, employee or agent of the Fund withdraw any securities. In connection with its duties under this Section 7, Chase 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 Chase 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. Chase will be liable for acts or omissions of any subcustodian. Chase shall employ sub-custodians upon receipt of Proper Instructions.
(b) Promptly after the close of business on each day Chase 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, Chase 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 Chase (or its nominee) or shown in Chase's account on the books of a Securities Depository or Book-Entry System. At least monthly and from time to time, Chase 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 Chase a certified resolution of the Board of Trustees of the Fund approving, authorizing and instructing Chase on a continuous and ongoing basis until instructed to the contrary by Proper Instructions actually received by Chase (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 Chase in the Securities Depository or Book Entry System (the "Account") and (2) be segregated from any assets and cash controlled by Chase in other than a fiduciary or custodian capacity but may be commingled with other assets held in such capacities. Chase will effect 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 Chase Proper Instructions to the contrary. The records of Chase 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) Chase 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 Chase to reflect such payment and transfer for the account of the Fund. Upon receipt of Proper Instructions, Chase 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 Chase 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 Chase and be provided to the Fund at its request. Upon request, Chase 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) Chase shall provide the Fund with any report obtained by Chase 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 Chase which relate to the Fund participation in a Securities Depository or Book-Entry System will at all times during Chase's regular business hours be open to the inspection of the Fund's duly authorized 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, Chase shall be liable to the Fund for any loss or damage to the Fund resulting from any negligence, misfeasance or misconduct of Chase 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 Chase or any such agent to enforce effectively such rights as it may have against such Securities Depository or Book Entry System.
9. Segregated Account. Chase 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 Chase pursuant to Section 8 hereof, (i) in accordance with the provisions of any agreement among the Fund, Chase and a broker dealer registered under the Securities and Exchange Act of 1934 and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, and (iii) for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of Proper Instructions.
10. Instructions Consistent With The Declaration, etc.
(a) Unless otherwise provided in this Agreement, Chase shall act only upon Proper Instructions. Chase may assume that any Proper Instructions 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 Trustees or any committee thereof. Chase shall be entitled to rely upon any Proper Instructions actually received by Chase pursuant to this Agreement. The Fund agrees that Chase shall incur no liability for following Proper
Instructions given to Chase. In accord with instructions from the Fund, as required by accepted industry practice or as Chase may elect in effecting the execution of Fund instructions, advances of cash or other Property made by Chase, 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 Chase 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 over-delivery of Property, shall be deemed a loan by Chase to the Fund, payable on demand, bearing interest at such rate customarily charged by Chase 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 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 Chase may put into effect and modify from time to time. The Fund shall safeguard any test keys, identification codes or other security devices which Chase makes available to the Fund and agrees that the Fund shall be responsible for any loss, liability or damage incurred by Chase or by the Fund as a result of Chase's acting in accordance with instructions from any unauthorized person using the proper security device, unless such unauthorized use is a result of Chase's negligence or willful misconduct. Chase 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 Chase's Asset Management system or any successor electronic communications or information system, the Fund agrees that Chase is not responsible for the consequences of the failure of that system to perform for any reason, beyond the reasonable control of Chase, 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 Chase's facsimile receiving equipment or by letter, at no additional charge to the Fund.
(c) Chase shall transmit promptly to the Fund all written information received by Chase's Corporate Actions Department from issuers of the securities being held for the Fund. With respect to tender or exchange offers, Chase shall transmit promptly by facsimile to the Fund all written information received by Chase's Corporate Actions Department 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 take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify Chase's Corporate Actions Department at least three business days prior to the date on which Chase 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 Chase is called for partial redemption by the issuer of such property, Chase 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 Chase in its sole discretion.
11. Transactions Not Requiring Instructions. Chase is authorized to take the following action without Proper Instructions:
(a) Collection of Income and Other Payments. Chase 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, Chase 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 Chase. Any such crediting and posting shall be at the Fund's sole risk, and Chase 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. Chase 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;
(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 Chase 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; and
(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 Chase is called for partial redemption by the issuer of such property, Chase 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 Chase in its sole discretion.
(b) Miscellaneous Transactions. Chase is authorized to deliver or cause to be delivered Property against payment or other consideration or written receipt therefor 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, Chase, directly or through the use of a Securities Depository or Book-Entry System, shall:
(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 Chase of the monies borrowed, or upon receipt of adequate collateral as agreed upon by the Fund and Chase 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 re-delivery to it of the securities pledged or hypothecated therefore and upon surrender of the note or notes evidencing the loan;
(f) Deliver securities in accordance with the provisions of any agreement among the Fund, Chase and a broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Funds;
(g) Deliver securities in accordance with the provisions of any agreement among the Fund, Chase 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;
(h) Deliver securities against payment or other consideration or written receipt therefore for transfer of securities into the name of the Fund or Chase 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 Chase;
(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 Chase;
(k) Deliver securities upon receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; and
(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 Trustees 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 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 Chase (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. Chase 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 Chase 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 moneys 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 Chase in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, Chase shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by Chase.
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 Chase (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 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. Chase 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, Chase 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. Not in Use.
16. Records. Chase shall preserve its books and records relating to the Funds securities for the period required by Rule31a-2 of the 1940 Act. The Fund, or the Fund's authorized representative, shall have access to such books and records at all times during Chase's normal business hours. Upon reasonable request of the Fund and at the Fund's expense, copies of any such books and records shall be provided by Chase to the Fund or the Fund's authorized representative.
17. Cooperation with Accountants. Chase 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-1A, 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. Chase 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 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 Chase under this Agreement; 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. Chase agrees on behalf of itself and its employees to treat confidentially and as the proprietary information of the Fund all information relative to the Fund's assets held under this Agreement, and not to use such 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 Chase 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.
20. Equipment Failures. In the event of equipment failures beyond Chase's control, Chase shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall not have liability with respect thereto.
21. Right to Receive Advice.
(a) Advice of Fund. If Chase 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 Chase shall be in doubt as to any question of law involved in any action to be taken or omitted by Chase, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Fund or Chase, at the option of Chase).
(c) Conflicting Advice. In case of conflict between directions or advice received by Chase pursuant to sub-paragraph (a) of this paragraph and advice received by Chase pursuant to subparagraph (b) of this paragraph, Chase shall be entitled to rely on and follow the advice received pursuant to the latter provision alone.
(d) Protection of Chase. Chase 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 Chase, 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 Chase 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 Chase's properly taking or omitting to take such action. Nothing in this subsection shall excuse Chase when an action or omission on the part of Chase constitutes willful misfeasance, bad faith, negligence or reckless disregard by Chase of its duties under this Agreement.
22. Not in Use.
23. Compensation. As compensation for the services rendered by Chase
during the term of this Agreement, the Fund will pay to Chase, in addition to
reimbursement of its out-of-pocket expenses, monthly fees as outlined in Exhibit
A.
24. Indemnification; Limitation of Liability.
(a) The Fund, as sole owner of the Property, agrees to indemnify and hold Chase and Chase's directors, officers, agents and employees (collectively the "Indemnitees") harmless from and against any and all claims, liabilities, losses, damages, fines, penalties, and expenses, including out-of-pocket and incidental expenses and legal fees ("Losses") that may be imposed on, incurred by, or asserted against, the Indemnitees or any of them for following any instructions or other directions upon which Chase is authorized to rely pursuant to the terms of this Agreement.
(b) In addition to and not in limitation of paragraph (a) immediately above, Company also agrees to indemnify and hold the Indemnitees and each of them harmless from and against any and all Losses that may be imposed on, incurred by, or asserted against, the Indemnitees or any of them in connection with or arising out of Chase's performance under this Agreement, provided the Indemnitees have not acted with negligence or bad faith or engaged in willful misconduct.
(c) Chase shall indemnify and hold the Fund harmless from and against any and all Losses, excluding attorneys' fees and expenses, arising out of or attributable to Chase's breach of any material terms of this Agreement or Chase's bad faith, negligence or willful misconduct; provided the Fund in respect of such Losses, has not acted in bad faith or with negligence or engaged in willful misconduct.
(d) Anything in this Agreement to the contrary notwithstanding in no event shall Chase be liable for incidental, indirect, special, or consequential losses or damages of any kind whatsoever, even if Chase is advised of the likelihood of any such loss or damage and regardless of the form of action in which any such loss or damage may be claimed.
25. Responsibility of Chase. In the performance of its duties hereunder, Chase 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. Chase shall be responsible for its own negligent failure or that of any subcustodian it shall appoint to perform its duties under this Agreement. Chase shall not be liable for any act or omission which does not constitute willful misconduct, bad faith, or negligence on the part of Chase or such subcustodian or reckless disregard of such duties, obligations and responsibilities. Chase shall 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 Chase 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 of the Fund, or the sufficiency of the amount to be received therefore, (d) the legality of the redemption of any Shares of the Fund, 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, or (f) delays or errors or loss of data occurring by reason of circumstances beyond Chase'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.
26. Collection of Income. Chase 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 Chase or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, Chase 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. Chase 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. Chase 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.
Upon termination of the Agreement, the Fund shall pay to Chase such compensation as may be due as of the date of such termination and shall likewise reimburse Chase for its costs, expenses and disbursements.
29. Successor Custodian. If a successor custodian shall be appointed by the Board of Trustees of the Fund, Chase 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, Chase shall, in like manner, upon receipt of a certified copy of a vote of the Board of Trustees 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 Trustees shall have been delivered to Chase on or before the date when such termination shall be come effective, then Chase shall have the right to 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 Chase and all instruments held by Chase 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 Agreement.
In the event that securities, funds and other properties remain in the possession of Chase 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 Trustees to appoint a successor custodian, Chase's sole obligation to the Fund shall be to safekeep the Fund's assets until they are transferred as directed by the Fund and Chase shall be entitled to fair compensation for its services during such period as Chase retains possession of such
securities, funds and other properties and the provisions of this Agreement relating to the Chase's rights 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 Chase, at Chase's address, 4 New York Plaza, 3rd floor, New York, New York 10004, attention Mutual Fund Custody, facsimile number (212) 623-8997; (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 have been given immediately. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
31. Further Actions. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof.
32. Amendments. This Agreement or any part hereof may be changed or waived only by an instrument in writing signed by the party against which enforcement of such change or waiver is sought.
33. Miscellaneous. This Agreement embodies the entire Agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement shall be deemed to be a contract made in New York and governed by New York law. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall insure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first above written.
THE CHASE MANHATTAN BANK
Attest: ___________________________ By:___________________________
THOMAS A. DE ANGELO
VICE PRESIDENT
|
NUVEEN__________FUND
Attest: __________________________ By:___________________________
[TITLE]
SHAREHOLDER TRANSFER AGENCY AGREEMENT
This Agreement is made this _____ day of ____________, 199_ by and between The Chase Manhattan Bank ("Chase") a banking corporation organized under the laws of the State of New York having an office at 4 New York Plaza, New York, New York 10004, and Nuveen _________________ Fund, a closed-end investment company organized as a business trust under the laws of the State of Massachusetts. (The "Fund").
Commencing on the date first hereinabove written and in accordance with
procedures established from time to time by the Fund and Chase, Chase shall
perform the (i) shareholder account maintenance services, (ii) mailing services,
(iii) dividend and distribution payment services and (iv) recordkeeping services
(collectively, the "Standard Services") in connection with the Fund's shares of
common stock, par value $.01 per share (the "Shares"), as more fully described
herein.
A. Account Maintenance Services. Chase shall perform transfer agent, registrar and other shareholder account maintenance services in connection with the Shares. Such services are composed of (i) registering Share issuance, redemption and transfers on the Fund's records of the holders of Shares (the "Shareholders") upon receipt of instructions from, in the case of issuance and redemption, the Fund, and in the case of a transfer, the transferor and documentation in proper form to effect a transfer of Shares; (ii) canceling the certificates/1/ representing such Shares, if any, and if so requested, countersigning, registering, issuing and mailing by insured first 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 top such loss, theft or destruction and a lost certificate bond in form satisfactory to Chase; (iv) combining certificates into larger 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 Chase to be properly endorsed for transfer accompanied by delivery of such documents, certifications and opinions Chase may deem necessary to evidence the authority of the person making the transfer and payment of any applicable stock transfer tax. Chase reserves the right to refuse to transfer Shares until it is satisfied that the endorsement or signature on any document is valid and genuine, and for that purpose it will require a signature guarantee by a member or participant in the Securities Transfer Agents Medallion Program or such other guarantor previously approved by Chase. Chase shall
not be required to effect any transfer unless and until it has received the approvals, documents, certifications and opinions provided for herein. Chase's sole responsibility in connection with any redemption of Shares shall be to register the same on the Fund's records upon receipt of instruction from the Fund.
B. Mailing. Mailing services provided to the Fund shall consist of (i)
annual preparation of a list of Shareholders owning 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 the annual meeting of
Shareholders , if any, and (vii) upon request of the Fund, mailing to each
Shareholder such other information relating to the Fund as the Fund may
reasonably request.
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 Chase 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 Chase of the amount of such dividend at the appropriate intervals. Chase shall notify the Fund and the entity then acting as the custodian (which entity may be an affiliate of Chase) 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 by Chase or a drawee bank selected by Chase of such funds from the Custodian, Chase shall prepare and mail to Shareholders, at their addresses as they appear on the records maintained by Chase or pursuant to any written order of a Shareholder on file with Chase, checks representing any dividend or distributions to which they are entitled, and an accompanying distribution statement.
(2) In addition to the forgoing, dividend and distribution payment services are composed of (i) inserting any enclosure supplied by the Fund with each dividend or distribution check; (ii) replacing lost dividend checks; (iii) providing photocopies of canceled 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 record keeping of accumulated uncashed dividends; (vii) furnishing requested dividend and distribution information to Shareholders; and (viii) withholding from such payments any taxes required to be withheld by Chase under, and remitting the same in accordance with, applicable provisions of the Internal Revenue Code.
D. Dividend reinvestment Plan Services. Chase will act as agent for shareholders under the Dividend Reinvestment Plan, a copy of which is attached hereto as Exhibit D.
E. Recordkeeping Services.
(1) Chase 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, Chase agrees that all such records prepared or maintained by Chase relating to the service to be performed by Chase 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. Chase 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 Chase pursuant to this Agreement.
(2) Chase and the Fund agree that all books, records, information and data pertaining to the business of the 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, Chase will endeavor to notify the Fund and to secure instructions from an authorized officer of the Fund as to such inspection. Chase 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.
The Fund shall supply Chase with sufficient Share certificates. Such blank Share certificates shall be properly signed, manually or by facsimile signature, by duly authorized officers of the Fund, and shall bear the seal or other facsimile thereof of the Fund. Notwithstanding the death, resignation or removal of any officer of the Fund authorized to sign such share certificates, Chase may continue to countersign certificates which bear the manual or facsimile signature of such officer until otherwise directed by the Fund. Chase shall establish and maintain facilities and procedures reasonably acceptable to the Fund for the safekeeping of Shares certificates and facsimile signature imprinting devices, if any, and for the preparation or sue and for keeping account of such certificates and devices. Chase agrees to establish and maintain facilities and procedures that are reasonably acceptable to the Fund and Chase 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.
For the services to be performed by Chase pursuant to this Agreement, the Fund shall pay to Chase all fees and expenses described herein:
A. Shareholder Services Fee. The Fund shall pay Chase a service fee (the "Shareholder Service Fee") in the amount set forth in Exhibit B hereto. The Shareholder Service Fee is payable quarterly and shall be prorated for any period less than a full calendar quarter.
B. Out-of-Pocket Expenses. The Fund agrees to reimburse Chase for any and all out-of-pocket expenses, including, without limiting the preceding, the expenses described and listed in Exhibit B.
C. Additional Services. The Fund may request additional processing, special reports, 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 Chase, and Chase 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 Chase shall be billed on a quarterly basis and shall be due and payable within 15 days after receipt of the invoice. Chase will render, after the close of each quarter in which services have been furnished, a statement reflecting all of the charges for such quarter.
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 Chase of goods or services hereunder, except for taxes based on Chase's net income.
A. Chase. Chase represents and warrants to the Fund that:
(1) It is a duly organized and existing corporation having the powers of a
trust company under the laws of the State of New York;
(2) It is empowered under applicable laws and by its charter 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;
(4) Its entering into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of Chase; and
(5) It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
B. The Fund. The Fund represents and warrants to Chase that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts;
(2) It is empowered under applicable laws and by its Declaration of Trust,
its by-laws, and the Resolutions of the Board of Trustees (the "Organization
Documents") to enter into and perform this Agreement;
(3) All requisite proceedings have been taken to authorize it to enter
into and perform this Agreement;
(4) 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
(5) The Fund is validly registered as a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended, and the
issuance of Shares to subscribers at closing will be in compliance with
applicable securities laws or qualify for exemption therefrom.
A. Initially Furnished Documents. The Fund has furnished to Chase the following documents:
(1) A copy of the Organization Documents of the Fund, attached hereto as
Exhibit A;
(2) Copies of the Fund's notice of registration on Form N-8A attached
hereto as Exhibit C;
(3) A certificate signed by an officer of the Fund specifying: the number
of authorized Shares, the number of such authorized Shares issued and currently
outstanding, and the names, Share amounts and other applicable information
required for issuance of Shares to subscribers; and
(4) An opinion of counsel to the Fund with respect to the validity of the
authorized and outstanding Shares and whether such Shares are fully paid and
non-assessable.
B. Prospectively Furnished Documents. The Fund shall furnish the following documents upon request by Chase:
(1) Copies of all amendments to the Organization Documents of the Fund;
(2) Copies of all subsequent amendments to the Fund's registration
statement; and
(3) Such other certificates, documents and opinions as Chase shall deem to
be appropriate or necessary for the proper performance of its duties hereunder.
A. Fund Indemnification Obligation. Chase shall not be responsible for, and the Fund shall indemnify and hold Chase 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 Chase 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;
(3) The reliance on or use by Chase or its agents or subcontractors of
information, records or documents which are received by Chase 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
Chase or its agents or subcontractors) on behalf of the Fund;
(4) The reliance on, or the carrying out by Chase or its agents or
subcontractors of, any instructions or requests of the Fund which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
the Fund; and
(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. Chase Indemnification Obligation. Chase shall indemnify and hold the Fund harmless from and against any and all losses, damages, costs, charges, but excluding attorneys fees, payments and expenses, arising out of or attributable to Chase's material breach of this Agreement, or Chase's bad faith, negligence or willful misconduct.
C. Claims. Upon the assertion of a claim for which either Chase or the Fund 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, which consent shall not be withheld unreasonably.
D. Chase's Limitation of Liability. Anything in this agreement to the contrary notwithstanding, in no event shall Chase be liable for special, indirect, or consequential losses or damages of any kind whatsoever whether or not Chase has been advised as to the possibility of such losses or damages and regardless of the form of action in which any such claim for losses or damages may be made.
E. Force Majeure. In the event either Chase or the Fund 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. Chase shall use all reasonable efforts to 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, Chase shall use its reasonable efforts to mitigate the effects of such occurrence.
A. Notice. This Agreement shall remain in effect until terminated by any party, without penalty, upon 90 days' prior written notice.
B. Breach. This Agreement may be terminated by any non-breaching party if a 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 party in breach 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 any non-breaching may terminate this Agreement immediately, upon written notice to the other parties.
C. Expenses. Should this Agreement be terminated, all out-of-pocket expenses reasonably incurred by Chase in connection with the movement of records and materials to its successor or to the Fund shall be borne by the Fund.
The Fund shall not use Chase's name in any offering material, Shareholder report, advertisement or other material relating to the Fund, other than for the purpose of merely identifying and describing the functions of Chase hereunder, in a manner not approved by Chase in writing prior to such use; provided, however, that Chase 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.
Except as hereunder provided, neither this Agreement nor any rights or obligations hereunder may be assigned by any party without the written consent of the other parties. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns. Chase may, with the Fund's consent, subcontract for the performance hereof with any subsidiary or other affiliate of Chase, and may, with the Fund's consent, subcontract for the performance hereof with third parties other than a subsidiary or affiliate of Chase; provided, however, that Chase shall be as fully responsible to the Fund for the acts or omissions of any subcontractor as it is for its own acts and omissions and shall be responsible for its choice of subcontractor.
The information contained in this Agreement is confidential and proprietary in nature. By receiving this Agreement, the Fund agrees that none of its trustees, officers, employees, or agents, without the prior written consent of Chase, 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 person 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.
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
[text continued on next page]
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 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.
THE CHASE MANHATTAN BANK
By ____________________________
Name:
Title:
NUVEEN ___________________ FUND
By ____________________________
Name:
Title:
AGREEMENT made this ____ day of May, 1999, by and between NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND, a Massachusetts business trust (the "Fund"), and NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser").
WHEREAS, the Fund and the Adviser have separately entered into an Investment Management Agreement of even date herewith (the "Management Agreement");
In consideration of the mutual covenants hereinafter contained, and in connection with the establishment and commencement of operations of the Fund, it is hereby agreed by and between the parties hereto as follows:
1. For the period from the commencement of the Fund's operations through July 31, 1999 and for the 12 month periods ending July 31 in each indicated year during the term of the Management Agreement (including any continuation done in accordance with Section 15(c) of the Investment Company Act of 1940), the Adviser agrees to reimburse expenses (including the management fee and other expenses) in the amounts determined by applying the following annual rates to the average daily net assets of the Fund:
Period Ending Period Ending July 31 Reimbursement July 31 Reimbursement ------- ------------- ------- ------------- 1999 .30% 2000 .30% 2005 .25% 2001 .30% 2006 .20% 2002 .30% 2007 .15% 2003 .30% 2008 .10% 2004 .30% 2009 .05% |
2. To effect the expense reimbursement provided for in this Agreement, the Fund may offset the appropriate amount of the reimbursement contemplated hereunder against the management fee payable under the Management Agreement.
3. This Agreement, and the Adviser's obligation to so reimburse expenses hereunder, shall terminate on the earlier of (a) July 31, 2009 or (b) termination of the Management Agreement.
4. Except as provided in paragraph 3, above, this Agreement may be terminated only by the vote of (a) the Board of Trustees of the Fund, including the vote of the members of the Board who are not "interested persons" within the meaning of the Investment Company Act of 1940, and (b) a majority of the outstanding voting securities of the Fund.
5. 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.
6. The Fund's Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund by the Fund's officers as officers and not individually and the obligations imposed upon the Fund by 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.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to be executed on the day and year above written.
NUVEEN DIVIDEND ADVANTAGE
MUNICIPAL FUND
NUVEEN ADVISORY CORP.
NUVEEN DIVIDEND ADVANTAGE MUNICIPAL FUND
This Agreement made this 12th day of April, 1999 by and between Nuveen Dividend Advantage Municipal Fund, a Massachusetts business trust (the "Fund"), and Nuveen Advisory Corp., a Delaware corporation (the "Subscriber");
WITNESSETH:
WHEREAS, the Fund has been formed for the purposes of carrying on business as a closed-end diversified management investment company; and
WHEREAS, the Subscriber has been selected by the Fund's Board of Trustees to serve as investment adviser to the Fund; and
WHEREAS, the Subscriber wishes to subscribe for and purchase, and the Fund wishes to sell to the Subscriber, 6,667 common shares for a purchase price of $15.00 per share;
NOW THEREFORE, IT IS AGREED:
1. The Subscriber subscribes for and agrees to purchase from the Fund 6,667 common shares for a purchase price of $15.00 per share. Subscriber agrees to make payment for these shares at such time as demand for payment may be made by an officer of the Fund.
2. The Fund agrees to issue and sell said shares to Subscriber promptly upon its receipt of the purchase price.
3. To induce the Fund to accept its subscription and issue the shares subscribed for, the Subscriber represents that it is informed as follows:
(a) That the shares being subscribed for have not been and will not be registered under the Securities Act of 1933 ("Securities Act");
(b) That the shares will be sold by the Fund in reliance on an exemption from the registration requirements of the Securities Act;
(c) That the Fund's reliance upon an exemption from the registration requirements of the Securities Act is predicated in part on the representations and agreements contained in this Subscription Agreement;
(d) That when issued, the shares will be "restricted securities" as defined in paragraph (a)(3) of Rule 144 of the General Rules and Regulations under the Securities Act ("Rule 144") and cannot be sold or transferred by Subscriber unless they are subsequently registered under the Securities Act or unless an exemption from such registration is available;
(e) That there do not appear to be any exemptions from the registration provisions of the Securities Act available to the Subscriber for resale of the shares. In the future, certain exemptions may possibly become available, including an exemption for limited sales including an exemption for limited sales in accordance with the conditions of Rule 144.
The Subscriber understands that a primary purpose of the information acknowledged in subparagraphs (a) through (e) above is to put it on notice as to restrictions on the transferability of the shares.
4. To further induce the Fund to accept its subscription and issue the shares subscribed for, the Subscriber:
(a) Represents and warrants that the shares subscribed for are being and will be acquired for investment for its own account and not on behalf of any other person or persons and not with a view to, or for sale in connection with, any public distribution thereof; and
(b) Agrees that any certificates representing the shares subscribed for may bear a legend substantially in the following form:
The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933 or any other federal or state securities law. These shares may not be offered for sale, sold or otherwise transferred unless registered under said securities laws or unless some exemption from registration is available.
5. This Subscription Agreement and all of its provisions shall be binding upon the legal representatives, heirs, successors and assigns of the parties hereto.
6. The Fund's Declaration of Trust is on file with the Secretary of the Commonwealth of Massachusetts. This Agreement is executed on behalf of the Fund by the Fund's officers as officers and not individually and the obligations imposed upon the Fund by 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.
IN WITNESS WHEREOF, this Subscription Agreement has been executed by the parties hereto as of the day and date first above written.
NUVEEN DIVIDEND ADVANTAGE
MUNICIPAL FUND
By: /s/ Gifford R. Zimmerman ------------------------------------ |
NUVEEN ADVISORY CORP.
By: /s/ Larry W. Martin ------------------------------------ |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above- referenced organization, hereby constitutes and appoints ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and each of them (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him on his behalf and in his name, place and stead, in any and all capacities, to sign and file one or more Registration Statements on Form N-2 under the Securities Act of l933 and the Investment Company Act of l940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that said attorneys- in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set his hand this 2nd day of February, 1999.
/s/ Timothy R. Schwertfeger --------------------------- Timothy R. Schwertfeger |
STATE OF ILLINOIS )
----------------
)SS
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set his hand this 2nd day of February, 1999.
/s/ Robert P. Bremner --------------------- Robert P. Bremner |
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set his hand this 2nd day of February, 1999.
/s/ Lawrence H. Brown --------------------- Lawrence H. Brown |
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) her
true and lawful attorney-in-fact and agent, for her on her behalf and in her
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set her hand this 2nd day of February, 1999.
/s/ Anne E. Impellizzeri ------------------------ Anne E. Impellizzeri |
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set his hand this 2nd day of February, 1999.
/s/ Peter R. Sawers ------------------- Peter R. Sawers |
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) his
true and lawful attorney-in-fact and agent, for him on his behalf and in his
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set his hand this 2nd day of February, 1999.
/s/ William J. Schneider ------------------------ William J. Schneider |
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |
NUVEEN MUNICIPAL ADVANTAGE FUND 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organization, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ANTHONY T. DEAN, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R.
ZIMMERMAN, and each of them (with full power to each of them to act alone) her
true and lawful attorney-in-fact and agent, for her on her behalf and in her
name, place and stead, in any and all capacities, to sign and file one or more
Registration Statements on Form N-2 under the Securities Act of l933 and the
Investment Company Act of l940, including any amendment or amendments thereto,
with all exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization has hereunto set her hand this 2nd day of February, 1999.
/s/ Judith M. Stockdale ----------------------- Judith M. Stockdale |
STATE OF ILLINOIS )
----------------
)SS
COUNTY OF COOK )
--------------
|
On this 2nd day of February, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------- My Commission Expires: 10/27/01 Notary Public |