-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UtqJbFs8S+FYkdZhgIhuGZsaW0I3/Ad3kLh3CefO/XMAD5gc/NSdSydtBODbLXGx PYCoiOnql8Mk6y5P20yzzQ== 0000950131-99-003845.txt : 19990618 0000950131-99-003845.hdr.sgml : 19990618 ACCESSION NUMBER: 0000950131-99-003845 CONFORMED SUBMISSION TYPE: N-2 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19990617 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND INC CENTRAL INDEX KEY: 0000870780 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363743025 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-2 SEC ACT: SEC FILE NUMBER: 333-80871 FILM NUMBER: 99647863 FILING VALUES: FORM TYPE: N-2 SEC ACT: SEC FILE NUMBER: 811-06265 FILM NUMBER: 99647864 BUSINESS ADDRESS: STREET 1: 333 W WACKER DRIVE CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3129178200 MAIL ADDRESS: STREET 1: 333 W WACKER CITY: CHICAGO STATE: IL ZIP: 60606 N-2 1 PENNSYLVANIA INVESTMENT QUALITY MUNICPAL FUND As filed with the Securities and Exchange Commission on June 17, 1999 1933 Act File No. 333- 1940 Act File No. 811-06265 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-2 (Check appropriate box or boxes) [X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [_] Pre-Effective Amendment No. [_] Post-Effective Amendment No. and/or [_] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 9 Nuveen Pennsylvania Investment Quality Municipal Fund Enter Name of Registrant as Specified in Charter 333 West Wacker Drive, Chicago, Illinois 60606 Address of Principal Executive Offices (Number, Street, City, State and Zip Code) (312) 917-7700 Registrant's Telephone Number, including Area Code Gifford R. Zimmerman, Esq.--Vice President and Secretary 333 West Wacker Drive Chicago, Illinois 60606 Name and Address (Number, Street, City, State and Zip Code) of Agent for Service Copies of Communications To: Thomas S. Harman Gary S. Schpero Morgan, Lewis & Bockius LLP Simpson Thacher & Bartlett 1800 M Street, N.W. 425 Lexington Avenue Washington, DC 20036 New York, NY 10017 Approximate Date of Proposed Public Offering: As soon as practicable after the effective date of this Registration Statement If any of the securities being registered on this Form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. [_] -------------- CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933 - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
Proposed Proposed Amount Maximum Maximum Amount of Title of Securities Being Offering Price Aggregate Registration Being Registered Registered Per Unit Offering Price Fee - ------------------------------------------------------------------------------ Municipal Auction Rate Cumulative Preferred Shares Series T....... 880 shares $25,000 $22,000,000 $6,116
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such dates as the Commission, acting pursuant to said Section 8(a), may determine. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424 (b) (1) or (4) or 497 (b) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NUVEEN PENNSYLVANIA INVESTMENT QUALITY 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. Inside Front and Outside Inapplicable Back Cover Page Item 3. Fee Table and Synopsis Inapplicable Item 4. Financial Highlights Financial Highlights Item 5. Plan of Distribution Cover Page; Prospectus Summary; The Auction; Underwriting Item 6. Selling Shareholders Inapplicable Item 7. Use of Proceeds Use of Proceeds; Investment Objectives and Policies Item 8. General Description of Cover Page; Prospectus Summary; The the Registrant Fund; Investment Objectives and Policies; Description of MuniPreferred; Common Stock Item 9. Management Prospectus Summary; Management of the Fund; Other Service Providers Item 10. Capital Stock, Long-Term Debt, and Other Capitalization; Investment Objectives Securities and Policies; Description of MuniPreferred; The Auction; Common Stock; Control of the Fund; Tax Matters Item 11. Defaults and Arrears on Inapplicable Senior Securities Item 12. Legal Proceedings Legal Proceedings Item 13. Table of Contents of the Statement of Additional Table of Contents for the Statement of Information Additional Information Part B--Statement of Additional Information Location in Statement of Items in Part B of Form N-2 Additional Information --------------------------- ------------------------ Item 14. Cover Page Cover Page Item 15. Table of Contents Cover Page Item 16. General Information and Inapplicable History Item 17. Investment Objective and Investment Objectives and Policies; Policies Certain Trading Strategies of the Fund; Portfolio Transactions Item 18. Management Management of the Fund; Portfolio Transactions Item 19. Control Persons and Principal Holders of Management of the Fund; Certain Owners Securities of Record Item 20. Investment Advisory and Management of the Fund; Experts Other Services Item 21. Brokerage Allocation and Portfolio Transactions Other Practices Item 22. Tax Status Tax Matters Item 23. Financial Statements Financial Statements
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. We may + +not sell these securities until the Registration Statement filed with the + +Securities and Exchange Commission is effective. This Prospectus is not an + +offer to sell these securities and is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED JUNE 17, 1999 PROSPECTUS Nuveen Pennsylvania Investment Quality Municipal Fund Municipal Auction Rate Cumulative Preferred Shares ("MuniPreferred(R)") 880 Shares Series T Liquidation Preference $25,000 Per Share ---------- This Prospectus Part A may not be distributed unless accompanied by the Part B of the Nuveen Exchange-Traded Funds MuniPreferred Prospectus to which any reference in this Part A applies. This Prospectus sets out the information that a prospective investor should know before investing in the Fund. You should retain both Parts of the Prospectus for future reference. Investing in MuniPreferred shares involves certain risks, which are described in the "Risk Factors" section beginning on page B-5 of this Prospectus. Nuveen Pennsylvania Investment Quality Municipal Fund (the "Fund") is a closed-end, diversified management investment company. The Fund's primary investment objective is current income exempt from both regular Federal and Pennsylvania personal income taxes, consistent with the Fund's investment policies. The Fund's secondary investment objective is to enhance portfolio value relative to the Pennsylvania municipal bond market by investing in tax- exempt Pennsylvania municipal bonds that, in the opinion of the Fund's investment adviser, are underrated or undervalued or that represent municipal market sectors that are undervalued. The Fund seeks to achieve its investment objectives by investing substantially all of its assets (more than 80%) in tax- exempt Pennsylvania municipal bonds rated within the four highest grades (Baa or BBB or better) by Moody's or Standard & Poor's, except that the Fund may invest up to 20% of its assets in unrated Pennsylvania municipal bonds that, in the opinion of the Fund's adviser, are of comparable quality to those so rated. There is no assurance that the Fund will achieve its objectives. Dividends paid to MuniPreferred shareholders, to the extent payable from tax- exempt income earned on the Fund's investments, will be exempt from regular Federal income tax and Pennsylvania personal income tax. All or a portion of the Fund's exempt-interest dividends may be subject to the alternative minimum tax and therefore MuniPreferred shares may not be suitable for persons subject to this tax. The Fund is required to allocate net capital gains and other taxable income, if any, proportionately between common shares and MuniPreferred shares, based on the percentage of total dividends distributed to each class for that year. The Fund, in the case of the ordinary seven-day rate periods or special rate periods of no more than 28 days, will give notice of taxable income to be included in a dividend on MuniPreferred shares in advance of the auction for these shares, and may give advance notice to MuniPreferred shareholders during longer rate periods. Under certain circumstances the Fund will be required to make shareholders whole for taxes owing on dividends paid to shareholders that include taxable income and gain. The amount of taxable income and gain allocated to MuniPreferred shares will depend on the amount of taxable income and gain the Fund realizes. The Fund's principal office is located at 333 West Wacker Drive, Chicago, Illinois 60606, and its telephone number is (800) 257-8787. A Statement of Additional Information dated , 1999 has been filed with the Securities and Exchange Commission and is incorporated by reference in its entirety into this Prospectus. You may receive a copy of the Statement of Additional Information, the table of contents of which appears at page B-28 of this Prospectus, at no charge by calling the Fund at (800) 257-8787. The Securities and Exchange Commission maintains a web site (http://www.sec.gov) that contains the Statement of Additional Information, other documents incorporated by reference, and other information the Fund has filed electronically with the Commission, including proxy statements and reports filed under the Securities Exchange Act of 1934. This Prospectus (comprised of Parts A and B) does not contain all of the information in the Fund's registration statement, including amendments, exhibits, and schedules. Statements in this Prospectus about the contents of any contract or other document are not necessarily complete and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by this reference. The Fund is offering the shares of MuniPreferred, Series T, listed above. The shares are referred to in this Prospectus as "New MuniPreferred." Except as otherwise described in this Prospectus, the terms of this offering and all other series of MuniPreferred the Fund previously offered are the same. The dividend rate for the initial rate period (the period from the date of issue through , 1999) will be %. For subsequent rate periods, MuniPreferred shares pay dividends based on a rate set at auction, usually held weekly. Prospective purchasers should carefully review the auction procedures described beginning at Page B-18 of this Prospectus and should note: (1) a buy order (called a "bid order") or sell order is a commitment to buy or sell MuniPreferred shares based on the results of an auction; (2) auctions will be conducted by telephone; and (3) purchases and sales will be settled on the next business day after the auction. MuniPreferred shares are not listed on an exchange. You may only buy or sell MuniPreferred shares through an order placed at an auction with or through a broker-dealer that has entered into an agreement with the auction agent and the Fund, or in a secondary market maintained by certain broker-dealers. These broker-dealers are not required to maintain this market and it may not provide you with liquidity. ---------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. (R)Registered Trademark of John Nuveen & Co. Incorporated
Per Share Total ------------ ------------ Public Offering Price $ 25,000 $ 22,000,000 ------------ ------------ Sales Load $ $ ------------ ------------ Proceeds to Fund (before expenses) $ $ ============ ============
The public offering price per share will be increased by the amount of dividends, if any, that have accumulated from the date the New MuniPreferred shares are first issued. ---------- The underwriters are offering the shares of the New MuniPreferred subject to various conditions. It is expected that the shares of New MuniPreferred will be delivered to the underwriters through the facilities of The Depository Trust Company on or about , 1999. ---------- Salomon Smith Barney A.G. Edwards & Sons, Inc. BT Alex. Brown Goldman, Sachs & Co. John Nuveen & Co. Incorporated PaineWebber Incorporated Prudential Securities You should rely only on the information contained in this Prospectus. Neither the Fund nor the underwriters have authorized anyone to provide you with different information. The Fund is not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information provided by this Prospectus is accurate as of any date other than the date on the front of this Prospectus. 2 Prospectus Summary The following information is a summary of more detailed information included in Parts A and B of this Prospectus and the Fund's Statement of Additional Information. The Fund and its Adviser Nuveen Pennsylvania Investment Quality Municipal Fund (the "Fund") is a closed-end, diversified management investment company. Nuveen Advisory Corp. ("Nuveen Advisory") is the Fund's investment adviser. Nuveen Advisory is responsible for the selection and on-going monitoring of the Fund's investment portfolio. As of March 31, 1999 the Fund had 15,978,392 common shares outstanding and 4,400 MuniPreferred shares outstanding. The Offering The Fund is offering 880 shares of New MuniPreferred. The purchase price for this series is $25,000 per share. Investment Objectives The Fund's primary investment objective is current income exempt from regular Federal income tax and Pennsylvania personal income tax, consistent with the Fund's investment policies. The Fund's secondary investment objective is to enhance portfolio value relative to the Pennsylvania municipal bond market by investing in tax-exempt Pennsylvania municipal bonds that, in the opinion of Nuveen Advisory, are underrated or undervalued. The Fund seeks to achieve its investment objectives by investing substantially all of its assets (more than 80%) in Pennsylvania tax-exempt municipal bonds rated at the time of purchase within the four highest grades (Baa or BBB or better) by Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Corporation ("Standard & Poor's"), except that the Fund may invest up to 20% of its assets in unrated Pennsylvania municipal bonds that, in Nuveen Advisory's opinion, have credit characteristics equivalent to, and are of comparable quality to, municipal bonds rated Baa or BBB or better. There is no assurance that the Fund will achieve its investment objectives. See "Investment Objectives and Policies." Risk Factors Risk is inherent in all investing. Therefore, before investing you should consider certain risks carefully when you invest in the Fund. See "Risk Factors" at Page B-5 of this Prospectus. The primary risks of investing in MuniPreferred shares are: if an auction fails you may not be able to sell some or all of your shares; because of the nature of the market for MuniPreferred shares, you may receive less than the price you paid for your shares if you sell them outside of the auction, especially when market interest rates are rising; a rating agency could downgrade MuniPreferred shares, which could affect liquidity; the Fund may be forced to redeem your shares to meet regulatory or rating agency requirements or may voluntarily redeem your shares under certain circumstances; and in extraordinary circumstances the Fund may not earn sufficient income from its investments to pay dividends. In addition, because the Fund invests substantially all of its assets in Pennsylvania municipal bonds, the Fund is susceptible to political, economic or regulatory factors affecting Pennsylvania state and governmental bodies in Pennsylvania. See "Special Factors Affecting Pennsylvania Municipal Bonds." Trading Market MuniPreferred shares are not listed on an exchange. Instead, you may buy or sell MuniPreferred shares at an auction that normally is held weekly, by submitting orders to a broker-dealer that has entered into an agreement with the auction agent and the Fund (a "Broker-Dealer"), or to a broker-dealer that has entered into a separate agreement with a Broker-Dealer. In addition to the auctions, Broker-Dealers and other broker-dealers may maintain a secondary trading market in MuniPreferred shares outside of auctions, but may discontinue this activity at any time. There is no assurance that a secondary market will provide shareholders with liquidity. You may transfer shares outside of auctions only to or through a Broker-Dealer, a broker-dealer that has entered into a separate agreement with a Broker-Dealer, or other persons as the Fund permits. See "The Auction--Secondary Market" at Page B-25 of this Prospectus. New MuniPreferred will trade at auction starting in the week following this offering. A-1 The first auction date for New MuniPreferred will be Tuesday, , 1999, the business day before the dividend payment date for the initial rate period for New MuniPreferred. The auction date for New MuniPreferred shares normally will be a Tuesday, and the start date for subsequent rate periods normally will be the following business day, typically a Wednesday, unless the then-current rate period is a special rate period, or the day that normally would be the auction date or the first day of the subsequent rate period is not a business day. Dividends and Rate Periods The dividend rate for the initial rate period on the shares offered in this Prospectus will be %. For subsequent rate periods, New MuniPreferred shares will pay dividends based on a rate set at these auctions, normally held weekly. In most instances, dividends are also paid weekly, on the day following the end of the rate period. The rate set at auction will not exceed the Maximum Rate. See "Description of MuniPreferred--Dividends and Rate Periods--Maximum Rate" at Page B-12 of this Prospectus. Dividends on New MuniPreferred shares will accumulate at the initial rate beginning on Friday, , 1999. Dividends will be paid on shares of New MuniPreferred on Wednesday, , 1999 and normally thereafter on each Wednesday. If the Wednesday on which dividends otherwise would be paid is not a business day, then your dividends will be paid on the first business day that falls before that Wednesday. The initial rate period will be twelve days. Subsequent rate periods generally will be seven days. The dividend payment date for a special rate period of more than 28 days will be set out in the notice designating a special rate period. See "Description of MuniPreferred--Dividends and Rate Periods-- Designation of Special Rate Periods" at Page B-12 of this Prospectus. Taxation Because under normal circumstances the Fund will invest substantially all of its assets in municipal bonds that pay interest exempt from regular Federal income tax, as well as Pennsylvania personal income tax, the income you receive will be similarly exempt. All or a portion of the income from these bonds will be subject to the Federal alternative minimum tax, so MuniPreferred shares may not be a suitable investment if you are subject to this tax. Taxable income or gain earned by the Fund will be allocated proportionately to holders of MuniPreferred shares and common shares, based on the percentage of total dividends paid to each class for that year. Accordingly, certain specified MuniPreferred dividends may be subject to income tax on income or gains attributed to the Fund. The Fund intends to notify shareholders, before any applicable auction for a rate period of 28 days or less, of the amount of any taxable income to be paid for the period relating to that auction. For longer rate periods, the Fund may notify shareholders. Under certain circumstances, the Fund will make shareholders whole for taxes owing on dividends paid to shareholders that include taxable income. See "Tax Matters" at Page B-25 of this Prospectus. Ratings Shares of each series of MuniPreferred are issued with a rating of "Aaa" from Moody's Investors Service, Inc. ("Moody's") and "AAA" from Standard & Poor's Corporation ("Standard & Poor's"). Because the Fund is required to maintain at least one of these ratings, it must own portfolio securities of a sufficient value and with adequate credit quality to meet the rating agencies' guidelines. See "Description of MuniPreferred--Asset Maintenance and Rating Agency Guidelines--Rating Agencies" at Page B-15 of this Prospectus. Redemption Although the Fund does not ordinarily redeem MuniPreferred shares, it may be required to redeem shares if, for example, the Fund does not meet an asset coverage ratio required by law or correct a failure to meet a rating agency guideline in a timely manner. The Fund voluntarily may redeem MuniPreferred shares under certain conditions. See "Description of MuniPreferred--Redemption" and "Description of MuniPreferred-- A-2 Asset Maintenance and Rating Agency Guidelines--Rating Agencies" at Pages B-14 and B-15 of this Prospectus. Liquidation Preference The liquidation preference of New MuniPreferred shares will be $25,000 per share plus any accumulated, unpaid dividends. FINANCIAL HIGHLIGHTS The table below shows financial information for the Fund, expressed in terms of one share outstanding throughout the period. The information in the table is covered by the report of Ernst & Young LLP except where noted. The report is contained in the Statement of Additional Information and is available from the Fund.
Year Ended 6/30 ---------------------------------------------------------------------------------- 1998+ 1998 1997 1996 1995 1994 1993 1992++ 1991+++ ----------- -------- -------- -------- -------- -------- -------- -------- -------- (Unaudited) Net asset value beginning of period.... $ 15.94 $ 15.91 $ 15.72 $ 15.86 $ 15.49 $ 16.42 $ 15.14 $ 14.60 $ 14.05 -------- -------- -------- -------- -------- -------- -------- -------- -------- Operating performance: Net investment income... .61 1.23 1.26 1.28 1.29 1.30 1.31 .88 .68 Net realized & unrealized gain (loss) from investments....... -- .10 .22 (.08) .41 (.86) 1.27 .49 .71 -------- -------- -------- -------- -------- -------- -------- -------- -------- Total from investment operations............. .61 1.33 1.48 1.20 1.70 .44 2.58 1.37 1.39 -------- -------- -------- -------- -------- -------- -------- -------- -------- Dividends from net investment income: To Common shareholders.. (.50) (1.01) (1.01) (1.05) (1.07) (1.16) (1.12) (.66) (.50) To Preferred shareholders#.......... (.11) (.23) (.24) (.25) (.26) (.16) (.18) (.17) (.12) Distributions from capital gains: To Common shareholders.. -- (.05) (.03) (.03) -- (.04) -- -- -- To Preferred shareholders#.......... -- (.01) (.01) (.01) -- (.01) -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total distributions.. (.61) (1.30) (1.29) (1.34) (1.33) (1.37) (1.30) (.83) (.62) -------- -------- -------- -------- -------- -------- -------- -------- -------- Organization and offering costs and Preferred share underwriting discounts. -- -- -- -- -- -- -- -- (.22) -------- -------- -------- -------- -------- -------- -------- -------- -------- Net asset value end of period................. $ 15.94 $ 15.94 $ 15.91 $ 15.72 $ 15.86 $ 15.49 $ 16.42 $ 15.14 $ 14.60 ======== ======== ======== ======== ======== ======== ======== ======== ======== Per Common share market value end of period.... $18.0625 $17.2500 $16.8750 $16.3750 $15.5000 $16.2500 $17.5000 $15.7500 $15.5000 Total investment return on market value**...... 7.79% 8.77% 9.75% 12.74% 2.32% (.39)% 18.83% 5.97% 6.71% Total return on net asset value**.......... 3.22% 7.02% 8.01% 6.00% 9.77% 1.23% 16.50% 8.48% 7.61% Ratios/Supplemental data: Net assets end of period (in thousands).. $364,115 $363,139 $360,749 $355,823 $355,831 $191,718 $197,920 $185,576 $180,203 Ratio of expenses to average net assets applicable to Common shares## (unaudited)... 1.15%* 1.15% 1.17 1.18 1.27% 1.21% 1.25% 1.17%* .96%* Ratio of net investment income to average net assets applicable to Common shares ## (unaudited)............ 7.54%* 7.65% 7.96 7.98 8.28% 7.95% 8.35% 9.01%* 6.55%* Ratio of expenses to average total net assets including Preferred ##........... .80%* .80% .81% .82% .87% .84% .86% .78%* .81%* Ratio of net investment income to average total net assets including Preferred ##..................... 5.26%* 5.34% 5.52% 5.53% 5.70% 5.54% 5.73% 6.04%* 5.50%* Portfolio turnover rate................... 4% 9% 8% 12% 9% 3% 2% --% --%
- -------- * Annualized. ** Total investment return on market value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in stock price per share. Total return on net asset value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in net asset value per share. Total returns are not annualized for periods less than one year. # The amounts shown are based on Common share equivalents. ## Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred Shares. +For the six months ended December 31, 1998. ++ For the eight months ended June 30, 1992. +++ For the period February 21, 1991 to October 31, 1991. A-3 THE FUND The Fund is a closed-end, diversified management investment company registered under the Investment Company Act of 1940 (the "1940 Act"). The Fund was organized as a Massachusetts business trust on December 20, 1990, and may issue an unlimited amount of MuniPreferred and common shares. In February and March, 1991, the Fund issued 8,200,000 common shares. In June 1991, the Fund issued 1,200 Series W MuniPreferred shares. On January 6, 1994, the Fund conducted a 2-for-1 preferred share split which was effected by dividing each outstanding share of MuniPreferred into two shares, with a liquidation preference of $25,000 per share, for an aggregate of 2,400 MuniPreferred shares. In January 1995, the Fund acquired all of the assets and liabilities of the Nuveen Pennsylvania Quality Income Municipal Fund, Inc., which previously had issued 2,000 shares of Series TH MuniPreferred. The Fund had 15,978,392 common shares outstanding as of March 31, 1999. The common shares trade on the New York Stock Exchange under the symbol "NQP." The Fund's principal office is located at 333 West Wacker Drive, Chicago, Illinois 60606, and its telephone number is (800) 257-8787. The table below provides information on MuniPreferred shares since their issuance.
Amount Outstanding Exclusive of Treasury Asset Coverage Involuntary Liquidating As of Securities Per Share* Preference Per Share ----- --------------------- -------------- ----------------------- 10/31/1991..... 1,200 $150,169 $50,000 6/30/1992...... 1,200 $154,646 $50,000 6/30/1993...... 1,200 $164,933 $50,000 6/30/1994...... 2,400 $ 79,883 $25,000 6/30/1995...... 4,400 $ 80,871 $25,000 6/30/1996...... 4,400 $ 80,869 $25,000 6/30/1997...... 4,400 $ 81,988 $25,000 6/30/1998...... 4,400 $ 82,532 $25,000 12/31/1998..... 4,400 $ 82,753 $25,000
- -------- *Calculated by dividing net assets by the number of MuniPreferred shares outstanding. The following provides information about the Fund's outstanding shares as of March 31, 1999:
Amount Held by the Fund or for its Title of Class Account Amount Outstanding -------------- ------------------ ------------------ Common................................. 0 15,978,392 MuniPreferred.......................... 0 4,400
USE OF PROCEEDS The Fund will use the net proceeds of the offering, about $ after payment of the sales load and offering costs, to buy municipal bonds (see "Investment Objectives and Policies--Portfolio Investments"). The Fund expects to invest almost all of the proceeds in long-term Pennsylvania municipal bonds within eight to ten weeks after the offering concludes, but if it cannot, it will invest in high quality short-term securities, the income on which may be exempt from both regular Federal and Pennsylvania personal income taxes; or in high quality Pennsylvania municipal bonds with relatively low volatility, such as pre-refunded and intermediate-term securities, if these securities are available. In the unlikely event that the Fund cannot find suitable short- term, tax-exempt securities, the Fund may buy short-term taxable securities. The income on these securities would be subject to Pennsylvania personal income taxes and regular Federal income tax. A-4 CAPITALIZATION (Unaudited) The following table sets forth the capitalization of the Fund as of June 30, 1998, December 31, 1998 and as adjusted, as of December 31, 1998 to give effect to the issuance of the shares of New MuniPreferred offered hereby.
Actual Actual As Adjusted ------------ ------------ ------------ June 30, December 31, December 31, 1998 1998 1998 Shareholders' Equity: Preferred Stock, $25,000 stated value per share, at liquidation value; unlimited shares authorized (4,400, 4,400 and 5,280 shares issued, as adjusted, respectively)............... $110,000,000 $110,000,000 $132,000,000 Common Stock, $.01 par value per share; unlimited shares authorized, 15,884,079, 15,942,228 and 15,942,228 shares outstanding, respectively...... 158,841 159,422 159,422 Paid-in surplus........................ 224,443,348 225,453,689 225,126,073 Balance of undistributed net investment income................................ 529,828 416,001 416,001 Accumulated net realized gain (loss) from investment transactions.......... 52,381 50,542 50,542 Net unrealized appreciation of investments........................... 27,954,650 28,035,440 28,035,440 ------------ ------------ ------------ Net Assets.......................... $363,139,048 $364,115,094 $385,787,478 ============ ============ ============
- -------- *None of these outstanding shares are held by or for the account of the Fund. A-5 INVESTMENT OBJECTIVES AND POLICIES Investment Objectives The Fund's primary investment objective is current income exempt from both regular Federal and Pennsylvania personal income taxes, consistent with the Fund's investment policies. The Fund's secondary investment objective is to enhance portfolio value relative to the Pennsylvania municipal bond market through investments in tax-exempt Pennsylvania municipal bonds which, in Nuveen Advisory's opinion, are underrated or undervalued or that represent municipal market sectors that are undervalued. The Fund seeks to achieve its investment objectives by investing substantially all of its assets (more than 80%) in tax-exempt Pennsylvania municipal bonds rated at the time of purchase within the four highest grades (Baa or BBB or better by Moody's or Standard and Poor's, except that the Fund may invest up to 20% of its assets in unrated Pennsylvania municipal bonds which, in Nuveen Advisory's opinion, are underrated or undervalued and have credit characteristics equivalent to, and are of comparable quality to, municipal bonds rated Baa or BBB or better. The Fund will not invest in any rated Pennsylvania municipal bonds that are rated lower than Baa by Moody's or BBB by Standard & Poor's at the time of purchase. Municipal bonds rated Baa or BBB or better are considered "investment grade" securities. Bonds rated Baa are considered medium grade obligations that lack outstanding investment characteristics and in fact have speculative characteristics as well, while municipal bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. See Appendix A to the Statement of Additional Information for a description of securities ratings. Pennsylvania municipal bonds are those municipal bonds that, in the opinion of bond counsel to the issuer (or on the basis of other authority Nuveen Advisory believes to be reliable), are exempt from regular Federal income taxes as well as Pennsylvania personal income taxes. The Fund will invest primarily in Pennsylvania municipal bonds that are issued by the state of Pennsylvania and cities and local authorities in Pennsylvania, but the Fund also may invest no more than 10% of its assets in municipal bonds issued by U.S. possessions or territories, the income on which is exempt from regular Federal income tax as well as Pennsylvania personal income taxes. These U.S. possessions or territories bonds are considered to be Pennsylvania municipal bonds. Underrated municipal bonds are those municipal bonds whose ratings do not, in Nuveen Advisory's opinion, reflect their true value. They may be underrated because of the time that has elapsed since their last ratings, or because rating agencies have not fully taken into account positive factors, or for other reasons. Undervalued municipal bonds are those bonds that, in Nuveen Advisory's opinion, are worth more than their market value. They may be undervalued because there is a temporary excess of supply in that particular sector (such as hospital bonds, or bonds of a particular municipal issuer). Nuveen Advisory may buy such a bond even if the value of that bond is consistent with the value of other bonds in that sector. Municipal bonds also may be undervalued because there has been a general decline in the market price of municipal bonds for reasons that do not apply to the particular municipal bonds that Nuveen Advisory considers undervalued. Nuveen Advisory believes that the prices of these municipal bonds should ultimately reflect their true value. Therefore, the Fund's secondary investment objective of enhancing portfolio value relative to the municipal bond market refers to the Fund's objective of attempting to realize above-average capital appreciation in a rising market, and to experience less than average capital losses in a declining market. Capital appreciation, alone, is not an investment objective. Rather, the Fund seeks to enhance portfolio value relative to the municipal bond market by prudently selecting municipal bonds, regardless of whether the market is rising or declining. Portfolio Investments Except to the extent that the Fund buys temporary investments as described in Part B, the Fund will, as a fundamental policy, invest substantially all of its assets (more than 80%) in tax-exempt Pennsylvania municipal bonds that are rated at the time of purchase within the four highest grades (Baa or BBB or better) by Moody's or Standard and Poor's, except that the Fund may invest up to 20% of its assets in unrated Pennsylvania municipal bonds which, in Nuveen Advisory's opinion, have credit characteristics equivalent to, and are of comparable quality to, municipal bonds so rated. These policies and the Fund's investment objectives are fundamental A-6 policies, which cannot be changed without the approval of the holders of a majority of the outstanding shares of common shares and MuniPreferred shares, voting together, and of the holders of a majority of the outstanding MuniPreferred shares, voting separately. For this purpose, "a majority of the outstanding shares" means the vote of (1) 67% or more of the shares present at a meeting, if the holders of more than 50% of the shares are present or represented by proxy; or (2) more than 50% of the shares, whichever is less. The Fund is diversified for purposes of the 1940 Act. Consequently, as to 75% of its total assets, the Fund may not invest more than 5% of its total assets in the securities of any single issuer. Special Factors Affecting Pennsylvania Municipal Bonds As described above, except during temporary defensive periods, the Fund will invest substantially all of its net assets in Pennsylvania municipal bonds. The Fund is therefore susceptible to political, economic or regulatory factors affecting issuers of Pennsylvania municipal bonds. There can be no assurance that the Commonwealth will not experience a decline in economic conditions or that portions of the Pennsylvania municipal bonds purchased by the Fund will not be affected by such a decline. Without intending to be complete, the following briefly summarizes some of these factors and the current financial situation, as well as some of the complex factors affecting the financial situation in the Commonwealth. It is derived from sources that are generally available to investors and is based in part on information obtained from various agencies in the Commonwealth. No independent verification has been made of the following information. State Economy--The Commonwealth of Pennsylvania is one of the most populous states, ranking fifth behind California, New York, Texas and Florida. Pennsylvania is an established yet growing state with a diversified economy. It is the headquarters for many major corporations. Pennsylvania has been historically identified as a heavy industry state. That reputation has changed over the last thirty years as the coal, steel and railroad industries declined and the Commonwealth's business environment readjusted to reflect a more diversified industrial base. This economic readjustment was a direct result of a long-term shift in jobs, investment and workers away from the northeast part of the nation. Currently, the major sources of growth in Pennsylvania are in the service sector, including trade, medical and the health services, education and financial institutions. Pennsylvania's agricultural industries remain an important component of the Commonwealth's economic structure, accounting for more than $3.6 billion in crop and livestock products annually. Agribusiness and food-related industries support $39 billion in economic activity annually. Over 51,000 farms form the backbone of the State's agricultural economy. Farmland in Pennsylvania includes over four million acres of harvested cropland and four million acres of pasture and farm woodlands--nearly one-third of the Commonwealth's total land area. Employment within the Commonwealth increased steadily from 1984 to 1990. From 1990 to 1992, employment in the Commonwealth declined 1.8%. From 1992 to 1998, employment increased 4.1%. The growth in employment experienced in the Commonwealth during such periods is slightly higher that the growth in employment in the Middle Atlantic region of the United States. Non- manufacturing employment in the Commonwealth has increased steadily since 1980 to its 1998 level of 82.8% of total Commonwealth employment. Manufacturing, which contributed 17.1% of 1998 non-agricultural employment, has fallen behind both the services sector and the trade sector as the largest single source of employment within the Commonwealth. In 1998, the services sector accounted for 32.3% of all non-agricultural employment in the Commonwealth while the trade sector accounted for 22.4%. Economic strengths and weakness vary in different parts of the Commonwealth. In general, heavy industry and manufacturing have been facing increasing competition from foreign producers. During 1998, the annual average unemployment rate in the Commonwealth was 4.6%, compared to 4.5% for the United States. For March 1999, the unadjusted unemployment rate was 4.8% in the Commonwealth and 4.4% in the United States, while the seasonally adjusted unemployment rate for the Commonwealth was 4.4% and for the United States was 4.2%. For more information, see "Special Considerations Relating to Pennsylvania Municipal Obligations" in the Statement of Additional Information. A-7 UNDERWRITING Subject to the terms and conditions of the underwriting agreement dated the date hereof, each underwriter named below has severally agreed to purchase, and the Fund has agreed to sell to such underwriter, the number of New MuniPreferred shares set forth opposite the name of such underwriter.
Name Number of Shares ---- ---------------- Salomon Smith Barney Inc. ............................... A.G. Edwards & Sons, Inc. ............................... BT Alex. Brown Incorporated.............................. Goldman, Sachs & Co. .................................... John Nuveen & Co. Incorporated........................... PaineWebber Incorporated................................. Prudential Securities Incorporated....................... --- Total................................................ 880 ===
The underwriting agreement provides that the obligations of the underwriters to purchase the shares included in this offering are subject to the approval of certain legal matters by counsel and to certain other conditions. The underwriters are obligated to purchase all the New MuniPreferred shares if they purchase any of the shares. The underwriters, for whom Salomon Smith Barney Inc. is acting as representative, propose to offer some of the shares directly to the public at the public offering price set forth on the cover page of this Prospectus and some of the shares to certain dealers at the public offering price less a concession not in excess of $ per share. The sales load the Fund will pay of $ per share is equal to % of the initial offering price. The underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share on sales to certain other dealers. After the initial public offering, the underwriters may change the public offering price and the concession. Investors must pay for any New MuniPreferred shares purchased in the initial public offering on or before , 1999. The Fund anticipates that the underwriters may from time to time act as brokers or dealers in executing the Fund's portfolio transactions after they have ceased to be underwriters. The underwriters are active underwriters of, and dealers in, securities and act as market makers in a number of such securities, and therefore can be expected to engage in portfolio transactions with the Fund. John Nuveen & Co. Incorporated may engage in these transactions only in compliance with the 1940 Act. The Fund anticipates that the underwriters or one of their respective affiliates may, from time to time, act in auctions as Broker-Dealers as set forth under "The Auction." John Nuveen & Co. Incorporated, one of the underwriters, is the parent company of Nuveen Advisory. The Fund and Nuveen Advisory have agreed to indemnify the underwriters against certain liabilities, including liabilities arising under the 1933 Act, or to contribute payments the underwriters may be required to make for any of those liabilities. LEGAL OPINIONS Morgan, Lewis & Bockius LLP, Washington, D.C., will pass on certain legal matters for the Fund, and Simpson Thacher & Bartlett will pass on certain legal matters for the underwriters. Morgan, Lewis & Bockius LLP and Simpson Thacher & Bartlett will rely as to certain matters under Massachusetts law on the opinion of Bingham, Dana & Gould, Boston, Massachusetts. Dechert Price & Rhoads, Philadelphia, Pennsylvania, will pass on certain matters of Pennsylvania law for the Fund. A-8 EXPERTS The financial statements of the Fund at June 30, 1998 and the selected per share data and ratios set forth under the caption "Financial Highlights" for the period 1991 to June 30, 1998, appearing in Part A of this Prospectus, have been audited by Ernst & Young LLP, Sears Tower, 223 South Wacker Drive, Chicago, Illinois 60606, independent auditors, as set forth on their report appearing elsewhere in this Registration Statement, and are included in reliance upon that report given upon Ernst & Young's authority as experts in accounting and auditing. Ernst & Young audits and reports on the Fund's annual financial statements, reviews certain regulatory reports and the Fund's Federal income tax returns, and performs other professional accounting, auditing, tax and advisory services when engaged to do so by the Fund. A-9 NUVEEN EXCHANGE-TRADED FUNDS MuniPreferred(R) Shares Prospectus Part B The Prospectus offering MuniPreferred shares for a Nuveen closed-end fund (each, a "Fund") is divided into two parts. Part A of the Prospectus relates exclusively to a particular closed-end fund and provides specific information about the Fund's portfolio, investment objectives, and financial highlights. Part B of the Prospectus provides a more general description of the municipal bonds in which each Fund invests and related risks, and more general information about MuniPreferred shares, including the auction at which MuniPreferred shares are traded, dividends and rate periods, tax status, and voting rights. You should read both parts of the Prospectus and retain them for future reference. Except as provided in Part A or this Part B, the information contained in this Part B will apply to each Fund. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. (R)Registered Trademark of John Nuveen & Co. Incorporated Municipal Bonds States, local governments and municipalities issue municipal bonds to raise money for public purposes such as building public facilities, refinancing outstanding obligations, and financing internal operating expenses. Municipal bonds are generally either general obligation bonds, which are backed by the full faith and credit of the issuer and may be repaid from any revenue source, or revenue bonds, which may be repaid only from the revenues of a specific facility or source. Each Fund also may buy municipal bonds that represent interests in lease obligations. These bonds carry special risks because the issuer may not be required to appropriate money annually to make payments under the lease. To reduce this risk, a Fund will only buy these bonds where the issuer has a strong incentive to continue making appropriations until the municipal bond matures. The Funds do not have any limits on investing in lease obligations that do not contain a "nonappropriation" clause. Each Fund may buy municipal bonds that pay a variable or floating rate of interest that changes with changes in specified market rates or indices, such as a bank prime rate or a tax-exempt money market index. As used in this Prospectus, the term "municipal bonds" includes municipal securities with relatively short-term maturities. Some of these short-term securities may be variable or floating rate securities. The Funds, however, intend to emphasize investments in municipal bonds with long- or intermediate-term maturities. Yields on municipal bonds depend on many factors, including the condition of the general money market and the municipal bond market, the size of a particular offering, and the maturity and rating of a particular municipal bond. Moody's and Standard & Poor's ratings represent their opinions of the quality of a particular municipal bond, but these ratings are general and are not absolute quality standards. Therefore, municipal bonds with the same maturity, coupon, and rating may have different yields, while municipal bonds with the same maturity and coupon and different ratings may have the same yield. The market value of municipal bonds will vary with changes in interest rates and in the ability of their issuers to make interest and principal payments. Obligations of municipal bond issuers are subject to bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors. These obligations also may be subject to future Federal or state laws or referenda that extend the time to payment of interest and/or principal, or that constrain the enforcement of B-1 these obligations or the power of municipalities to levy taxes. Legislation or other conditions may materially affect the power of a municipal bond issuer to pay interest and/or principal when due. Portfolio Investments Each Fund buys municipal bonds with different maturities and intends to maintain an average portfolio maturity of 15 to 30 years, although this may be shortened depending on market conditions. As a result, a Fund's portfolio may include long-term and intermediate-term municipal bonds. If the long-term municipal bond market is unstable, a Fund may temporarily invest up to 100% of its assets in temporary investments. Temporary investments are high quality, generally uninsured, short-term municipal bonds that may either be tax-exempt or taxable. Each Fund will buy taxable temporary investments only if suitable tax-exempt temporary investments are not available at reasonable prices and yields. Each Fund will invest only in taxable temporary securities that are U.S. Government securities or corporate debt securities rated within the highest grade by Moody's or Standard & Poor's, and that mature within one year from the date of issuance. The Funds' policies on securities ratings only apply when the Fund buys a security, and a Fund is not required to sell securities that have been downgraded. See Appendix A to the Statement of Additional Information for a description of securities ratings. Each Fund also may invest in taxable temporary investments that are certificates of deposit from U.S. banks with assets of at least $1 billion, or repurchase agreements. Each Fund is required to allocate taxable income on temporary investments, if any, proportionately between common shares and MuniPreferred shares, based on the percentage of total dividends distributed to each class for that year. Insured Funds: Municipal Bond Insurance The following discussion relates only to the following Funds: Nuveen Insured Quality Municipal Fund, Inc.; Nuveen Insured Municipal Opportunity Fund, Inc.; Nuveen Premier Insured Municipal Income Fund, Inc.; Nuveen New York Investment Quality Municipal Fund, Inc.; Nuveen New York Select Quality Municipal Fund, Inc.; Nuveen New York Quality Income Municipal Fund, Inc. and Nuveen Insured Premium Income Municipal Fund 2. Each insured municipal bond a Fund acquires will be covered by a specific insurance policy (either original issue insurance or secondary market insurance) or portfolio insurance. While each Fund has obtained several policies of portfolio insurance, a Fund may emphasize investments in municipal bonds insured under specific insurance policies. Each Fund has obtained portfolio insurance from the insurers described in Appendix C to the Statement of Additional Information and may in the future obtain portfolio insurance from other insurers. In any event, each Fund has obtained and in the future will only obtain portfolio insurance issued by insurers whose claims-paying ability Moody's rates "Aaa" or Standard & Poor's rates "AAA." There is no limit on the percentage of a Fund's assets that may be invested in municipal bonds insured by any one insurer. Municipal bonds covered by a specific insurance policy, rather than by portfolio insurance, will be rated "Aaa" by Moody's or "AAA" by Standard & Poor's, because of the rating of the insurer's claims-paying ability. Municipal bonds covered by portfolio insurance, however, will be rated based primarily on the credit characteristics of the issuer, without regard to the portfolio insurance, and generally will be rated below "Aaa" or "AAA." While a Fund holds a municipal bond covered by portfolio insurance, it will, effectively, be of the same credit quality as a municipal bond covered by a specific insurance policy. Each Fund's policy of buying municipal bonds insured by insurers whose claims-paying ability is rated "Aaa" or "AAA" applies only when the Fund buys the municipal bond. If either rating agency downgrades an insurer's claims- paying ability, the Fund is not required to sell bonds covered by that insurer's policies. If a rating agency downgrades its rating of an insurer, it likely would downgrade its rating of a municipal bond covered by that insurer's original issuance insurance or secondary market insurance. Municipal bonds in the Fund's portfolio covered by that insurer's portfolio insurance also would be downgraded. Moody's and Standard & Poor's continually assess the claims-paying ability of insurers and the creditworthiness of municipal bond issuers, and the Fund cannot guarantee that Moody's and Standard & Poor's will not downgrade their ratings. The value of municipal bonds covered by portfolio insurance that are in default or in significant risk of default will be determined by separately establishing a value for the municipal bond and a value for the portfolio insurance. Original Issue Insurance. The issuer of municipal bonds or a third party buys original issue insurance for a particular issue of municipal bonds at the time the municipal bonds are issued. Under this insurance, B-2 the insurer unconditionally guarantees to the holder of the municipal bond the timely payment of principal and interest when and as these payments become due if the issuer does not pay them. However, if the due date of the principal is accelerated because of mandatory or optional redemption (other than acceleration because of a mandatory sinking fund payment), default or otherwise, the payments guaranteed may be made in the amounts and at the times as principal payments would have been due had there not been any acceleration. The insurer is responsible for these payments less any amounts the holders receive from any trustee for the municipal bonds issuer or from any other source. Original issue insurance does not guarantee the payment of any redemption premium (except for certain premium payments for certain small issue industrial development and pollution control municipal bonds), the value of the Fund's shares or the market value of municipal bonds, or payments of any tender purchase price upon the tender of the municipal bonds. Original issue insurance also does not insure against nonpayment of principal or interest on municipal bonds resulting from the insolvency, negligence or any other act or omission of the trustee or other paying agent for these bonds. Original issue insurance remains in effect as long as the municipal bonds it covers remain outstanding and the insurer remains in business, regardless of whether the Fund ultimately disposes of these municipal bonds. Consequently, original issue insurance may be considered to represent an element of market value of the municipal bonds so insured, but the exact effect, if any, of this insurance on the market value cannot be estimated. Secondary Market Insurance. After a municipal bond is issued, the Fund or a third party may purchase insurance on that security. Secondary market insurance generally provides the same type of coverage as original issue insurance and, as with original issue insurance, secondary market insurance remains in effect as long as the municipal bonds it covers remain outstanding and the insurer remains in business, regardless of whether the Fund ultimately disposes of these municipal bonds. One of the purposes of acquiring secondary market insurance for a particular municipal bond is to enable the Fund to enhance the value of the security. The Fund, for example, might seek to buy a particular municipal bond and obtain secondary market insurance for it if, in Nuveen Advisory's opinion, the market value of the security, as insured, would exceed the current value of the security without insurance plus the cost of the secondary market insurance. Similarly, if the Fund owns but wishes to sell a municipal bond that is then covered by portfolio insurance, the Fund might seek to obtain secondary market insurance for it if, in Nuveen Advisory's opinion, the net proceeds of the Fund's sale of the security, as insured, would exceed the current value of the security plus the cost of the secondary market insurance. In determining whether to insure municipal bonds the Fund owns, an insurer will apply its own standards, which correspond generally to the standards it has established for determining the insurability of new issues of municipal bonds. See "Original Issue Insurance" above. Portfolio Insurance. Each Fund has purchased several policies of portfolio insurance, each of which would guarantee the payment of principal and interest on specified eligible municipal bonds the Fund has bought. Except as described below, portfolio insurance generally provides the same type of coverage as original issue insurance or secondary market insurance. Municipal bonds insured under one portfolio insurance policy would generally not be insured under any other policy the Fund buys. A municipal bond is eligible for coverage under a policy if it meets certain requirements of the insurer. If a municipal bond is already covered by original issue insurance or secondary market insurance, then the security is not required to be additionally insured under any portfolio insurance policy that the Fund may buy. Each portfolio insurance policy will terminate for any municipal bond that has been redeemed or that the Fund has sold, on the date of redemption or the settlement date of sale, and an insurer will not have any liability thereafter under a policy for any municipal bond, except that if the redemption date or settlement date occurs after a record date and before the related payment date for any municipal bond, the policy will terminate for that municipal bond on the business day immediately following the payment date. One or more portfolio insurance policies may provide the Fund, under an irrevocable commitment of the insurer, with the option to exercise the right to obtain permanent insurance for a municipal bond that the Fund will sell. The Fund would exercise the right to obtain permanent insurance upon payment of a single, predetermined insurance premium payable from the sale proceeds of the municipal bond. The Fund expects to B-3 exercise the right to obtain permanent insurance for a municipal bond only if, in Nuveen Advisory's opinion, upon the exercise the net proceeds from the sale of the municipal bond, as insured, would exceed the proceeds from the sale of the security without insurance. The permanent insurance premium for each municipal bond is determined based upon the insurability of each security as of the date the Fund originally bought the security. This premium will not be increased or decreased for any change in the security's creditworthiness, unless the security is in default as to payment of principal or interest, or both. If this happens, the permanent insurance premium will be subject to an increase predetermined at the date of the Fund's purchase. Each Fund generally intends to retain any insured bonds covered by portfolio insurance that are in default or in significant risk of default and to place a value on the insurance, which ordinarily will be the difference between the market value of the defaulted bond and the market value of similar bonds of minimum investment grade (that is, rated "Baa" or "BBB") that are not in default. In certain circumstances, however, Nuveen Advisory may determine that an alternative value for the insurance, such as the difference between the market value of the defaulted bond and either its par value or the market value of similar bonds that are not in default or in significant risk of default, is more appropriate. To the extent that the Fund holds defaulted municipal bonds, it may be limited in its ability to manage its investment portfolio and to purchase other bonds. Except as described above for bonds covered by portfolio insurance that are in default or subject to significant risk of default, the Fund will not place any value on the insurance in valuing the municipal bonds it holds. Because each portfolio insurance policy will terminate for a particular covered bond on the date a Fund sells that bond, the insurer will be liable only for those payments of principal and interest that are then due and owing (unless the Fund obtains permanent insurance). Portfolio insurance will not enhance the marketability of the Fund's bonds, whether or not the bonds are in default or in significant risk of default. On the other hand, because original issue insurance and secondary market insurance will remain in effect as long as the municipal bonds they cover are outstanding, these insurance policies may enhance the marketability of these bonds even when they are in default or in significant risk of default, but the exact effect, if any, on marketability, cannot be estimated. Accordingly, the Fund may determine to retain or, alternatively, to sell municipal bonds covered by original issue insurance or secondary market insurance that are in default or in significant risk of default. Each Fund generally pays the premiums for a portfolio insurance policy monthly, and premiums are adjusted for purchases and sales of municipal bonds covered by the policy during the month. The yield on the Fund's portfolio is reduced to the extent of the insurance premiums the Fund pays which, in turn, will depend upon the characteristics of the covered municipal bonds. If the Fund were to buy secondary market insurance for any municipal bond then covered by a portfolio insurance policy, the coverage and the obligation to pay monthly premiums under the portfolio policy would cease. Investment Restrictions The following investment restrictions are fundamental policies of each Fund which may not be changed without the approval of the holders of a majority of the outstanding shares of common and MuniPreferred shares (voting together as a single class) and of the holders of a majority of the outstanding shares of MuniPreferred shares (voting as a separate class). Each Fund may not: . Invest more than 25% of its total assets in securities of issuers in any one industry, other than municipal bonds issued by states and local governments and their instrumentalities or agencies (not including those backed only by the assets and revenues of non-governmental users), and municipal bonds issued or guaranteed by the U.S. Government or its instrumentalities or agencies; and . Invest more than 5% of its total assets in securities of any one issuer (not including securities of the U.S. Government and its agencies, or the investment of 25% of the Fund's total assets). B-4 See the Statement of Additional Information for additional fundamental and non-fundamental policies of each Fund. Moody's and Standard & Poor's, in connection with establishing and maintaining ratings on the Fund's MuniPreferred shares, restrict a Fund's ability to borrow money, sell securities short, lend securities, buy and sell futures contracts, and write put or call options. Each Fund does not expect that these restrictions will adversely affect its ability to achieve its investment objectives. These restrictions are not fundamental policies and a Fund may change them without shareholder approval. Except to the extent that a Fund invests in temporary investments, each Fund will invest substantially all of its assets in municipal bonds that pay interest that is exempt from regular Federal income tax. No Fund has set any limit on the percentage of its portfolio that may be invested in municipal bonds subject to the Federal alternative minimum tax. Because a substantial part of the income from these bonds is expected to be subject to the Federal alternative minimum tax, MuniPreferred shares may not be a suitable investment for shareholders subject to this tax. Suitability will depend on a comparison of the Fund's likely after-tax yield with the likely after-tax yield from comparable tax-exempt investments not subject to the alternative minimum tax, and with fully taxable investments, in light of an investor's tax position. Special considerations apply to corporate shareholders. Dividends paid on MuniPreferred shares may include an allocated portion of net capital gain or other Federal taxable income. See "Tax Matters" and "The Auction--Auction Dates; Advance Notice of Allocation of Taxable Income." Risk Factors Risk is inherent in all investing. Investing in any investment company security involves risk, including the risk that you may receive little or no return on your investment or even that you may lose part or all of your investment. Therefore, before investing you should consider carefully the following risks that you assume when you invest in MuniPreferred shares. Auction Risk. You may not be able to sell your MuniPreferred shares at an auction if the auction fails; that is, if there are more MuniPreferred shares offered for sale than there are buyers for those shares. The Fund believes this event is unlikely. Also, if you place hold orders (orders to retain MuniPreferred shares) at an auction only at a specified rate, and that bid rate exceeds the rate set at the auction, you will not retain your MuniPreferred shares. Finally, if you buy shares or elect to retain shares without specifying a rate below which you would not wish to continue to hold those shares, and the auction sets a below-market rate, you may receive a lower rate of return on your shares than the market rate. See "Description of MuniPreferred" and "The Auction--Summary of Auction Procedures" and "-- Acceptance or Rejection of Orders and Allocation of Shares." Secondary Market Risk. If you try to sell your MuniPreferred shares between auctions, you may not be able to sell any or all of your shares, or you may not be able to sell them for $25,000 per share or $25,000 per share plus accumulated dividends. If the Fund has designated a special rate period (a rate period of more than 7 days), changes in interest rates could affect the price you would receive if you sold your shares in the secondary market. Broker-dealers that maintain a secondary trading market for MuniPreferred shares are not required to maintain this market, and the Fund is not required to redeem shares either if an auction or an attempted secondary market sale fails because of a lack of buyers. MuniPreferred shares are not registered on a stock exchange or the NASDAQ stock market. If you sell your MuniPreferred shares to a broker-dealer between auctions, you may receive less than the price you paid for them, especially when market interest rates have risen since the last auction. Accrued MuniPreferred dividends, however, should at least partially compensate for the increased market interest rates. Ratings and Asset Coverage Risk. While Moody's and Standard & Poor's assign ratings of "Aaa" or "AAA" to MuniPreferred shares, the ratings do not eliminate or necessarily mitigate the risks of investing in MuniPreferred shares. A rating agency could downgrade MuniPreferred shares, which may make your shares less liquid at an auction or in the secondary market, though probably with higher resulting dividend rates. If a B-5 rating agency downgrades MuniPreferred shares, the Fund will alter its portfolio or redeem MuniPreferred shares. The Fund may voluntarily redeem MuniPreferred shares under certain circumstances. See "Description of MuniPreferred--Asset Maintenance and Rating Agency Guidelines" for a description of the asset maintenance tests the Fund must meet. Interest Rate Risk. The Fund issues MuniPreferred shares, which pay dividends based on short-term interest rates, and uses the proceeds to buy municipal bonds, which pay interest based on long-term yields. Long-term municipal bond yields are typically, although not always, higher than short- term interest rates. So long as the return on the Fund's long-term bond portfolio, net of Fund expenses, exceeds MuniPreferred dividend rates, the investment of the proceeds of the issuance of MuniPreferred will generate more income than is needed to pay MuniPreferred dividends, and the excess will be used to pay higher dividends on common shares. Dividends paid to MuniPreferred shareholders could, however, exceed the income from the portfolio securities purchased with the proceeds from the sale of MuniPreferred. Short-term interest rates may fluctuate. If short-term rates exceed the net rate of return on the Fund's bond portfolio, the Fund could invest up to 100% of its assets in temporary, short-term instruments. Only if MuniPreferred dividend rates were to greatly exceed the Fund's net portfolio returns would the Fund need to sell municipal bonds to pay MuniPreferred dividends, which would tend to reduce the amount of the assets standing behind the MuniPreferred shares. Inflation Risk. Inflation is the reduction in the purchasing power of money resulting from the increase in the price of goods and services. Inflation risk is the risk that the inflation adjusted (or "real") value of your MuniPreferred investment or the income from that investment will be worth less in the future. As inflation occurs, the real value of the MuniPreferred shares and distributions declines. In an inflationary period, however, it is expected that, through the auction process, MuniPreferred dividend rates would increase, tending to offset this risk. Credit Risk. Credit risk is the risk that an issuer of a municipal bond will become unable to meet its obligation to make interest and principal payments. If rating agencies lower their ratings of municipal bonds in a Fund's portfolio, the value of those bonds could decline, which could jeopardize the rating agencies' ratings of MuniPreferred shares. In that case, the Fund may be forced to sell downgraded portfolio securities (possibly at a loss) and buy higher-rated securities to replace them. In general, lower-rated municipal bonds are perceived to carry a greater degree of risk that the issuer will lose its ability to make interest and principal payments. Credit risk is reduced because of the Fund's asset coverage ratio for MuniPreferred shares. See "Description of MuniPreferred--Asset Maintenance and Rating Agency Guidelines." Year 2000 Risk. Nuveen Advisory relies on computer systems to manage the Fund's investments, process shareholder transactions, and maintain shareholder accounts. Because of the way computers historically have stored dates, some of these systems currently may not be able to process activity occurring in the year 2000. Nuveen Advisory is working with the Fund's service providers to adapt their systems to address this "Year 2000" issue. Although there can be no absolute assurance, Nuveen Advisory and the Fund expect that the necessary work will be completed on a timely basis. In addition, Year 2000 issues may affect the ability of municipal issuers to meet their interest and principal payment obligations to their bond holders, and may adversely affect the bonds' credit ratings and values. Municipal issuers may have greater Year 2000 risks than other issuers. Nuveen Advisory is requesting information from municipal issuers so that Nuveen Advisory can take the issuers' Year 2000 readiness, if made available, into account in making investment decisions. There can be no assurance that issuers will provide this information to Nuveen Advisory, or that issuers will begin or complete the work necessary to address any Year 2000 issues on a timely basis. State Concentration Risk. Some of the Funds invest primarily in bonds from a single state. These Funds bear investment risk from the economic, political or regulatory changes that could adversely affect municipal bond issuers in that state and therefore the value of the Fund's investment portfolio. See Part A of the Prospectus for a discussion of the specific risks for each state. B-6 MANAGEMENT OF THE FUND Board of Trustees The Fund's Board of Trustees is responsible for the management of the Fund, including general supervision of Nuveen Advisory's duties. Investment Adviser and Portfolio Managers Nuveen Advisory was organized in 1976 and is a wholly-owned subsidiary of John Nuveen & Co. Incorporated ("Nuveen"). The offices of Nuveen Advisory and Nuveen are located at 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen Advisory is responsible for the selection and ongoing monitoring of the bonds in each Fund's investment portfolio. Nuveen Advisory also administers each Fund's business affairs and provides office facilities, equipment and certain administrative services. Nuveen Advisory may buy municipal bonds or other portfolio investments for a Fund from an underwriting syndicate of which Nuveen or its affiliates is a member under conditions set out in Rule 10f-3 under the 1940 Act. A Fund also may buy or sell municipal bonds or other portfolio investments from or to another Fund or account managed by Nuveen Advisory or an affiliate, under conditions set out in Rule 17a-7 under the 1940 Act. Founded in 1898, Nuveen currently sponsors 100 investment company portfolios with approximately $39 billion of assets under management. Nuveen is a subsidiary of The John Nuveen Company, which is a majority-owned subsidiary of The St. Paul Companies. Portfolio Managers Michael Davern, a Vice President and Portfolio Manager of Nuveen Advisory (since 1997), and prior thereto Vice President and Portfolio Manager of Flagship Financial Inc., manages Nuveen Michigan Quality Income Municipal Fund, Inc. (since 1993), and Nuveen Texas Quality Income Municipal Fund (since 1998). Mr. Davem manages eight Nuveen-sponsored open-end and seven other Nuveen-sponsored closed-end investment companies. William Fitzgerald, a Vice President (since 1995) and Portfolio Manager (since 1998) of Nuveen Advisory, manages Nuveen Municipal Market Opportunity Fund, Inc. (since 1990), Nuveen Quality Income Municipal Fund, Inc. (since 1991), Nuveen California Performance Plus Municipal Fund, Inc. (since 1991), Nuveen California Municipal Market Opportunity Fund, Inc. (since 1991), Nuveen California Investment Quality Municipal Fund, Inc. (since 1990), Nuveen California Select Quality Municipal Fund, Inc. (since 1998), and Nuveen California Quality Income Municipal Fund, Inc. (since 1991). Mr. Fitzgerald manages three Nuveen-sponsored open-end and three other Nuveen-sponsored closed-end investment companies. J. Thomas Futrell, a Vice President (since 1991) and Portfolio Manager of Nuveen Advisory (since 1986), manages Nuveen Premium Income Municipal Fund, Inc. (since 1988), Nuveen Investment Quality Municipal Fund, Inc. (since 1990), and Nuveen New Jersey Investment Quality Municipal Fund, Inc. (since 1998). Mr. Futrell manages five Nuveen-sponsored open-end and four other Nuveen-sponsored closed-end investment companies. Richard Huber, a Vice President and Portfolio Manager of Nuveen Advisory (since 1997), and prior thereto Vice President and Portfolio Manager of Flagship Financial Inc., manages Nuveen Municipal Advantage Fund, Inc. (since 1998) and Nuveen Select Quality Municipal Fund, Inc. (since 1998). Mr. Huber manages three Nuveen-sponsored open-end investment companies. Steven Krupa, a Vice President and Portfolio Manager of Nuveen Advisory (since 1990), manages Nuveen Insured Municipal Opportunity Fund, Inc. (since 1991), Nuveen Insured Quality Municipal Fund, Inc. (since 1991), Nuveen Premier Insured Municipal Income Fund, Inc. (since 1998), and Nuveen Insured Premium Income Municipal Fund 2 (since 1998). Mr. Krupa manages one Nuveen- sponsored open-end investment company. B-7 Edward Neild, a Vice President (since 1996), and prior thereto Assistant Vice President (since 1993) of Nuveen Advisory, manages Nuveen Premium Income Municipal Fund 4, Inc. (since 1993). Mr. Neild manages one other Nuveen- sponsored closed-end investment company. He is Managing Director of Nuveen Investment Advisory Services, and has overall supervisory responsibility for Nuveen's investment and management activity. Thomas O'Shaughnessy, an Assistant Vice President (since 1998) and Portfolio Manager of Nuveen Advisory since 1991, manages Nuveen Pennsylvania Investment Quality Municipal Fund (since 1991), Nuveen Florida Investment Quality Municipal Fund (since 1991), and Nuveen Florida Quality Income Municipal Fund (since 1991). Mr. O'Shaughnessy manages seven Nuveen-sponsored open-end and three other Nuveen-sponsored closed-end investment companies. Stephen Peterson, a Vice President (since 1997) and Portfolio Manager of Nuveen Advisory (since 1991), manages Nuveen Premier Municipal Income Fund, Inc. (since 1992), Nuveen Premium Income Municipal Fund 2, Inc. (since 1994), Nuveen Performance Plus Municipal Fund, Inc. (since 1998), Nuveen New York Select Quality Municipal Fund, Inc. (since 1999), Nuveen New York Quality Income Municipal Fund, Inc. (since 1999), Nuveen New York Performance Plus Municipal Fund, Inc. (since 1999), and Nuveen New York Investment Quality Municipal Fund, Inc. (since 1999). Mr. Peterson manages one Nuveen-sponsored open-end and two other Nuveen-sponsored closed-end investment companies. For its services, Nuveen Advisory is paid an annual management fee for each Fund, as a percentage of average daily net asset value of each Fund, according to the following schedule: Management Fees
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 .5875%
In addition to the management fee, each Fund pays all other costs and expenses of its operations, including fees to third-party service providers such as the custodian and transfer agent, the compensation of its directors (other than those affiliated with Nuveen Advisory), legal and accounting fees, and printing expenses. Legal Proceedings On June 21, 1996, a lawsuit was filed against Nuveen, Nuveen Advisory, six Nuveen-sponsored closed-end funds (Nuveen Massachusetts Premium Income Municipal Fund (ticker symbol NMT), Nuveen Insured Municipal Opportunity Fund, Inc. (NIO), Nuveen Insured Premium Income Municipal Fund, Inc. (NPE), Nuveen Premium Income Municipal Fund 2, Inc. (NPM), Nuveen Insured Premium Income Municipal Fund 2 (NPX), and Nuveen Premium Income Municipal Fund 4, Inc. (NPT)), and two of the funds' former directors (the "Defendants"). The suit, which is pending in federal district court in the Northern District of Illinois, seeks unspecified damages, an injunction, and other relief. The plaintiffs allege that the funds' directors and Nuveen Advisory breached their fiduciary duty in connection with alleged undisclosed conflicts of interest relating to the maintenance of leverage in the funds and the alleged financial interest of the Defendants. The plaintiffs also allege various misrepresentations and omissions in prospectuses and shareholder reports about the use of leverage through the issuance and auctioning of MuniPreferred and the Defendants' alleged financial interest in maintaining leverage, and relating to expense ratios. The plaintiffs filed a motion to certify a plaintiff class (which would include current and former shareholders of all Nuveen leveraged closed-end funds) and a motion to certify a defendant class (which would include the same leveraged closed-end funds). On March 30, 1999, the court entered a memorandum opinion and order granting the Defendants' motion to dismiss four of the plaintiffs' B-8 counts; denying the Defendants' motion to dismiss the remaining count (breach of fiduciary duty under Section 36(b) of the 1940 Act) as to Nuveen Advisory, and granting the same motion as to the remaining Defendants; and denying the plaintiffs' motion to certify a plaintiff class and a defendant class. CERTAIN TRADING STRATEGIES OF THE FUNDS When-Issued or Delayed-Delivery Securities. Each Fund may buy municipal bonds on a when-issued or delayed-delivery basis, paying for and taking delivery of the bonds at a later date, normally within 15 to 45 days of the trade date. These transactions may be more risky than transactions in which a Fund pays for and takes delivery of bonds within several days of the trade date, because the value of the bond to be purchased may decline before the delivery date. When a Fund buys on a when-issued or delayed-delivery basis, it establishes a separate account with its custodian that consists at all times of cash, cash equivalents, or liquid securities having a market value at least equal to the amount of the bonds the Fund has committed to buy. A "when- issued" municipal bond will be covered under a portfolio insurance policy upon the security's settlement date. See "Insured Funds: Municipal Bond Insurance." Portfolio Trading and Turnover Rate. Each Fund may buy and sell municipal bonds to accomplish its investment objective(s) in relation to actual and anticipated changes in interest rates. A Fund also may sell one municipal bond and buy another of comparable quality at about the same time to take advantage of what Nuveen Advisory believes to be a temporary price disparity between the two bonds that may result from imbalanced supply and demand. A Fund also may engage in a limited amount of short-term trading, consistent with its investment objectives. A Fund may sell securities in anticipation of a market decline (a rise in interest rates) or buy securities in anticipation of a market rise (a decline in interest rates) and later sell them, but the Fund will not engage in trading solely to recognize a gain. A Fund will attempt to achieve its investment objectives by prudently selecting municipal bonds with a view to holding them for investment. Each Fund expects, though it cannot guarantee, that its annual portfolio turnover rate generally will not exceed 100%. Turnover rate will not be a limiting factor when a Fund deems it desirable to buy or sell securities, so depending on market conditions, the turnover rate may exceed 100% in some years. DESCRIPTION OF MUNIPREFERRED General The following is a brief description of the terms of the New MuniPreferred shares. This is not a complete description and is subject to and entirely qualified by reference to a Fund's Articles of Incorporation or Declaration of Trust and the Statement of Preferences. These documents are filed with the Securities and Exchange Commission as exhibits to the Fund's registration statement of which this Prospectus is a part and the Statement of Preferences (the "Statement") also is Appendix B to the Fund's Statement of Additional Information. Copies may be obtained as described under "Available Information." Many of the terms in this section have a special meaning. Any terms in this section not defined have the meaning assigned to them in the Statement of Preferences. MuniPreferred shares are preferred shares that pay dividends based on a rate set at auction. The auction usually is held weekly, but may be held less frequently. MuniPreferred shares may be bought and sold at these auctions for $25,000 per share. Shares also may trade in the secondary market. MuniPreferred shareholders, voting separately, elect at least two of a Fund's directors and will elect a majority of the Fund's directors in the unlikely event that the Fund fails to pay dividends to MuniPreferred shareholders for two years. MuniPreferred shares have a liquidation preference of $25,000 per share plus accumulated but unpaid dividends, whether or not earned or declared. MuniPreferred shares are fully paid and non-assessable when issued and have no preemptive, conversion, or exchange rights or rights to cumulative voting. New MuniPreferred shares will rank equally with shares of all other MuniPreferred series of a Fund, and with any other series of preferred shares of the Fund, as to payment of dividends and the distribution of the Fund's assets upon liquidation. B-9 As long as either Moody's or Standard & Poor's is rating MuniPreferred shares, a Fund may, without the vote of MuniPreferred shareholders, issue additional series of MuniPreferred only if (1) any additional series ranks equally with the outstanding MuniPreferred shares as to payment of dividends and distribution of assets on liquidation; and (2) the Fund obtains written confirmation from Moody's and/or Standard & Poor's that issuing additional series of MuniPreferred would not impair the rating for outstanding MuniPreferred shares. Dividends and Rate Periods General. The following is a general description of dividends and rate periods. The calculation of dividends and rate periods is complex and subject to special rules. See Appendix B to the Statement of Additional Information for a description of the terms used in this section and a more detailed discussion of this topic. The dividend rate for the initial rate period for New MuniPreferred shares will be the rate set out on the cover of Part A of the Prospectus for a particular Fund. For subsequent rate periods, New MuniPreferred shares will pay dividends based on a rate set at these auctions, normally held weekly, but the rate set at the auction will not exceed the Maximum Rate. See "Description of MuniPreferred--Dividends and Rate Periods--Maximum Rate." Rate periods generally will be seven days, and a rate period will begin on the first business day after the auction. In most instances, dividends are also paid weekly, on the day following the end of the rate period. Each Fund, subject to certain conditions, may change the length of rate periods, designating them as "Special Rate Periods." See "Description of MuniPreferred--Dividends and Rate Periods--Designation of Special Rate Periods." Dividend Payments. Except as provided below, the dividend payment date will be the day after the rate period ends. If your shares normally pay dividends on Monday or Tuesday, and that day is not a business day, then your dividends will be paid on the first business day that falls after that Monday or Tuesday. If your shares normally pay dividends on Wednesday, Thursday, or Friday, and that day is not a business day, then your dividends will be paid on the first business day that falls before that Wednesday, Thursday, or Friday. See "Description of MuniPreferred--Dividends and Rate Periods-- Designation of Special Rate Periods" for a discussion of payment dates for a special rate period. Dividends on New MuniPreferred shares will be paid on the dividend payment date to holders of record as their names appear on a Fund's stock books, on the business day next preceding the dividend payment date. If dividends are in arrears, they may be declared and paid at any time, to holders of record as their names appear on the Fund's stock books, on that date, not more than 15 days before the payment date, as the Fund's Board of Directors may fix. The Depository Trust Company, in accordance with its current procedures, is expected to credit on each dividend payment date dividends received from a Fund to the accounts of its agent members, in next-day funds. "Agent members" are Broker-Dealers or broker-dealers that are members of or participants in the Depository Trust Company who act on behalf of MuniPreferred shareholders. Agent members, in turn, are expected to distribute these dividend payments to the person for whom they are acting as agents. Each of the firms listed on the front cover of Part A of the Prospectus, however, has indicated to the Funds that it or the agent member it designates will make these dividend payments available in same-day funds, rather than next-day funds, on each dividend payment date to customers that use that Broker-Dealer or its designee as its agent member. A MuniPreferred shareholder that does not use one of the firms listed on the front cover of Part A of the Prospectus, or one of its affiliates, should contact his or her Broker-Dealer or broker-dealer to determine whether it will make dividends payments available to the shareholder in same-day or next-day funds. If a Broker-Dealer or a broker-dealer that is an agent member of the Depository Trust Company does not make dividends available to MuniPreferred shareholders in same-day funds, these shareholders will not have funds available until the next business day. Dividend Rate Set at Auction. MuniPreferred shares pay dividends based on a rate set at auction. The auction usually is held weekly, but may be held less frequently. The auction sets the dividend rate, and MuniPreferred shares may be bought and sold at the auction. Bankers Trust Company, the auction agent, reviews orders from B-10 Broker-Dealers on behalf of existing shareholders that wish to sell, hold at the auction rate, or hold only at a specified rate, and on behalf of potential shareholders that wish to buy MuniPreferred shares, and determines the lowest dividend rate that will result in all of the outstanding MuniPreferred shares of that series continuing to be held. The shares in this offering will trade at auction starting in the week following this offering. See "The Auction." Determination of Dividend Rate. Each Fund computes the dividends per share by multiplying the dividend rate determined at the auction by the following fraction: the numerator normally is seven and the denominator is 365. If a Fund has designated a special rate period, then the numerator is the number of days in the rate period, and the denominator is 360. In either case, this rate is then multiplied against $25,000 to arrive at the dividend per share. The numerator may be different if the rate period includes a holiday. If an auction for any subsequent rate period of New MuniPreferred shares is not held for any reason other than as described below, the dividend rate on those shares will be the Maximum Rate on the auction date for that subsequent rate period. Each Fund may only pay dividends when and if the Fund's Board of Directors declares dividends out of monies legally available for this purpose, at the applicable rate per year for this purpose and no more (except as described under "Gross-Up Payments"), payable on the dates determined as described below. If the Fund does not pay a dividend when the Board declares it, then that dividend will be added to dividends payable on those MuniPreferred shares in the future. Effect of Failure to Pay Dividends in Timely Manner. If a Fund fails to pay, in a timely manner, the auction agent the full amount of any dividend on any New MuniPreferred shares during any rate period (other than any special rate period of more than 364 rate period days or any rate period succeeding any special rate period of more than 364 rate period days during which a failure occurred that has not been cured), but the Fund cures the failure and pays any late charge before 12:00 Noon on the third business day following the date the failure occurred, no auction will be held for New MuniPreferred shares for the first subsequent rate period thereafter, and the dividend rate for New MuniPreferred shares for that subsequent rate period will be the Maximum Rate on the auction date for that subsequent rate period. If a Fund fails to pay, in a timely manner, the auction agent the full amount of any dividend on any New MuniPreferred shares during any rate period (other than any special rate period of more than 364 rate period days or any rate period succeeding any special rate period of more than 364 rate period days during which a failure occurred that has not been cured), and the Fund does not cure the failure and pay any late charge before 12:00 Noon on the third business day next succeeding the date on which the failure occurred, no auction will be held for New MuniPreferred shares for the first subsequent rate period thereafter (or for any rate period thereafter, to and including the rate period during which the failure is cured and the late charge is paid) (the late charge is to be paid only in the event Moody's is rating the shares at the time the Fund cures the failure), and the dividend rate for shares of that series for each such subsequent rate period will be an annual rate equal to the Maximum Rate on the auction date for that subsequent rate period (but with the prevailing rating for New MuniPreferred, for purposes of determining the Maximum Rate, being "Below ba3/BB-"). If a Fund fails to pay, in a timely manner, the auction agent the full amount of any dividend on any shares of New MuniPreferred during a special rate period of more than 364 rate period days, or during any rate period succeeding any special rate period of more than 364 rate period days during which a failure occurred that has not been cured, and the Fund does not cure the failure and pay a late charge before 12:00 Noon on the fourth business day preceding the auction date for the rate period subsequent to such rate period, no auction will be held for New MuniPreferred shares for the subsequent rate period (or for any rate period thereafter, to and including the rate period during which the failure is cured and the late charge paid) (the late charge is to be paid only in the event Moody's is rating New MuniPreferred shares at the time the Fund cures the failure), and the dividend rate for New MuniPreferred shares for each such subsequent rate period will be an annual rate equal to the Maximum Rate on the auction date for each such subsequent rate period (but with the prevailing rating for New MuniPreferred, for purposes of determining the Maximum Rate, being "Below ba3/BB-"). A Fund cures a failure to pay dividends on shares of New MuniPreferred for any rate period if, within the respective time periods described in the Statement, the Fund pays the auction agent all accumulated and unpaid dividends on the New MuniPreferred shares. B-11 Designation of Special Rate Periods. Each Fund may instruct the auction agent to hold auctions and pay dividends less frequently than weekly. A Fund may do this if, for example, Fund management expects that short-term rates might increase or market conditions otherwise change, in an effort to optimize the effect of the Fund's leverage on common shareholders. If a Fund decides to use a special rate period, the special rate period will consist of a number of days evenly divisible by seven and not more than 1,820 days (approximately five years), subject to certain adjustments. The Funds do not currently expect to hold auctions and pay dividends less frequently than weekly in the near future, although this has happened in the past. If a Fund designates a special rate period, changes in interest rates could affect the price you would receive if you sold your shares in the secondary market. Before a Fund designates a special rate period: (1) at least 20 and not more than 30 days before the first day of the proposed special rate period, the Fund must publish a notice of its intention to designate a special rate period in a newspaper circulated to the financial community in New York, and must mail a notice to MuniPreferred shareholders of that series of its intent to designate a special rate period; (2) the Fund must inform the auction agent by 11:00 a.m. Eastern time on the second business day before the first day of the proposed special rate period; (3) an auction must have been held in the rate period before the special rate period, and in that auction potential shareholders seeking a dividend rate equal to or lower than the dividend rate resulting from the auction entered bid orders for as many or more MuniPreferred shares than current shareholders entering sell orders submitted and current shareholders entering bid orders and seeking a dividend rate higher than the dividend rate resulting from the auction; and (4) the Fund must deposit the redemption price with the auction agent for any shares of that series it has decided to redeem. If a Fund has designated a special rate period of 14, 21, or 28 days, then dividends will be paid weekly on the same day of the week on which dividends are paid in a seven day rate period. The dividend payment date for a special rate period of more than 28 days will be set out in the notice designating a special rate period. The dividend payment date will be a business day, and the last dividend payment date for any special rate period will be the business day immediately following the last day of the special rate period. After any special rate period, the rate periods normally will be seven days, and dividends on New MuniPreferred shares will be payable, except as described below, on each succeeding regular dividend payment date, but the Fund may further designate any subsequent rate period as a special rate period. Maximum Rate. The dividend rate that results from an auction for New MuniPreferred shares will not be greater than the Maximum Rate, which is: (a) for any auction date which is not the auction date immediately prior to the first day of any proposed special rate period, the product of (i) the Reference Rate on that auction date for the next rate period of New MuniPreferred shares and (ii) the Rate Multiple on that auction date, unless New MuniPreferred shares have or had a special rate period (other than a special rate period of 28 days or fewer) and an auction at which "sufficient clearing bids" existed has not yet occurred after that special rate period for a minimum rate period (seven days) of New MuniPreferred shares, in which case the higher of. (A) the dividend rate on New MuniPreferred shares for the then- ending rate period, and (B) the product of (x) the higher of (I) the Reference Rate on that auction date for a rate period equal in length to the then-ending rate period of New MuniPreferred shares, if the then-ending rate period was 364 days or fewer, or the Treasury Note Rate on that auction date for a rate period equal in length to the then-ending rate period of New MuniPreferred shares, if the then-ending rate period was more than 364 days, and (II) the Reference Rate on that auction date for a rate period equal in length to that special rate period of New MuniPreferred shares, if that special rate period was 364 days or fewer, or the Treasury Note Rate on that auction date for a rate period equal in length to that special rate period, if that special rate period was more than 364 days and (y) the Rate Multiple on that auction date; or B-12 (b) for any auction date that is the auction date immediately prior to the first day of any proposed special rate period, the product of (i) the highest of (x) the Reference Rate on that auction date for a rate period equal in length to the then-ending rate period of New MuniPreferred shares, if the then-ending rate period was 364 days or fewer, or the Treasury Note Rate on that auction date for a rate period equal in length to the then- ending rate period of New MuniPreferred shares, if the then-ending rate period was more than 364 days, (y) the Reference Rate on that auction date for the special rate period for which the auction is being held if that special rate period is 364 days or fewer or the Treasury Note Rate on that auction date for the special rate period for which the auction is being held if that special rate period is more than 364 days, and (z) the Reference Rate on that auction date for minimum rate periods and (ii) the Rate Multiple on that auction date. The "Reference Rate" is, for a seven-day rate period or a special rate period of 28 days or less, the higher of the taxable equivalent of the short- term municipal bond rate and the "AA" Composite Commercial Paper Rate; for a special rate period of more than 28 but less than 183 days, the "AA" Composite Commercial Paper Rate; and for a special rate period of more than 182 but less than 365 days, the Treasury Bill Rate. The "AA" Composite Commercial Paper Rate, Treasury Note Rate, and Treasury Bill Rate will be the rates announced on the auction date for the business day immediately before the auction date. See Appendix B to the Statement of Additional Information for a definition of these rates and the taxable equivalent of the short-term municipal bond rate. The "Rate Multiple" will be a percentage, determined as set out below, based on the prevailing rating of MuniPreferred shares of that series in effect at the close of business on the business day immediately before the auction date. See Page A-5 of Appendix B to the Statement of Additional Information for a description of "prevailing rating."
Prevailing MuniPreferred Rating Percentage ------------------------------- ---------- aa3/AA- or higher.............................................. 110% a3/A-.......................................................... 125% baa3/BBB-...................................................... 150% ba3/BB-........................................................ 200% Below ba3/BB-.................................................. 250%
If a Fund has notified the auction agent that it intends to allocate Federal taxable income to MuniPreferred shares before the auction establishing the dividend rate for those shares, the applicable percentage in the table above will be divided by the quantity 1 minus the maximum marginal regular Federal individual income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate, whichever is greater (or if the Fund is a state Fund, the maximum marginal combined Federal, state and local individual or corporate income tax rate (taking into account the Federal income tax deductibility of state and local taxes paid or incurred)). If only one rating agency is rating MuniPreferred shares, that agency's rating will be the prevailing rating. Restrictions on Dividends and Other Distributions. When a Fund has any MuniPreferred shares outstanding, the Fund may not pay any dividend or distribution (other than a stock dividend) to shareholders of its common stock unless (1) it has paid all cumulative dividends on MuniPreferred shares; (2) it has redeemed any MuniPreferred shares that it has called for mandatory redemption, and (3) after paying the dividend, the Fund meets Moody's and Standard & Poor's asset coverage requirements for "Aaa" and "AAA" ratings, respectively and 1940 Act asset coverage requirements. Gross-Up Payments. If a Fund allocates net capital gain or other taxable income on a dividend on MuniPreferred shares for a rate period of 28 days or less, the Fund usually will inform the auction agent of this fact before the next auction. The auction agent will notify Broker-Dealers, who in turn are expected to notify MuniPreferred shareholders and potential MuniPreferred shareholders. If the Fund does not inform the auction agent that the dividend will include net capital gain or other taxable income before the next auction, and the allocation is made retroactively solely as a result of the redemption of some or all of the MuniPreferred shares or the liquidation of the Fund, the Fund will, before the end of the calendar year in which the dividend was paid, send a "gross-up" payment to MuniPreferred shareholders. B-13 If a Fund allocates net capital gains or other taxable income~ on a dividend on MuniPreferred shares for a rate period of more than 28 days, the Fund will send a "gross-up" payment to MuniPreferred shareholders before the end of the calendar year in which the dividend was paid. A "gross-up" payment is the amount of money that, giving effect to the taxable portion of a dividend, would cause a shareholder's Federal after-tax return (taking into account both the taxable portion of the dividend and the gross-up payment) to be equal to the after-tax return the shareholder would have received if no such taxable allocation had occurred. For state funds, the gross-up payment will take into account what the shareholder's Federal, state and local after- tax return would have been (taking into account the Federal income tax deductibility of state and local taxes paid or incurred). When the Fund calculates the gross-up payment, it does not take into account the time value of money, and it assumes that you are in the highest applicable federal, state and local tax bracket and that you are not subject to the federal alternative minimum tax. See "Tax Matters" in the Statement of Additional Information for additional details. The Funds have received an opinion of counsel to the effect that the manner in which the Funds intend to allocate items of tax-exempt income, net capital gain and other taxable income, if any, between common shares and MuniPreferred shares will be respected for Federal income tax purposes. This opinion of counsel represents only counsel's best legal judgment, and is not binding on the Internal Revenue Service or the courts. The Funds are not required to make gross-up payments for any net capital gain or other taxable income the Internal Revenue Service ("IRS") determines is allocable in a manner different from the manner in which the Funds allocated those gains or income. See "Tax Matters" in the Statement of Additional Information. Redemption You do not have the right to redeem your MuniPreferred shares. A Fund will be required to redeem your shares in certain circumstances, and has the right to redeem your MuniPreferred shares under certain conditions. Mandatory Redemption. Each Fund is required under the 1940 Act to maintain a ratio of total assets to MuniPreferred shares of at least two to one (200% asset coverage). Essentially, for every two dollars of Fund assets, a Fund can issue one dollar of MuniPreferred shares (measured by liquidation preference). Each Fund's Articles of Incorporation or Declaration of Trust require it to redeem MuniPreferred shares if it does not maintain this two to one ratio. After the offering, each Fund expects that its asset coverage will be approximately 285%. Each Fund also must redeem MuniPreferred shares if it fails to maintain the rating agencies' MuniPreferred Basic Maintenance Amount. See "Description of MuniPreferred--Asset Maintenance and Rating Agency Guidelines --Rating Agencies." The redemption price will be $25,000 per share plus the amount of accumulated but unpaid dividends, up to the redemption date. A Fund will redeem only the amount of MuniPreferred shares necessary to comply with the 1940 Act restrictions, the rating agencies' requirements, or both. Optional Redemption. Each Fund may, but is not required to, redeem MuniPreferred shares under certain conditions. The redemption price will be $25,000 per share plus the amount of accumulated but unpaid dividends, up to the redemption date. A Fund may redeem MuniPreferred shares in whole or in part, on the second business day before any dividend payment date for shares of that series, out of funds legally available, at the redemption price, but (1) the Fund may not redeem shares in part if after the partial redemption there are fewer than 500 shares of that series outstanding; and (2) the notice establishing a special rate period of shares of that series may provide that shares of that series may not be redeemable during all or a part of the special rate period, or shall be redeemable only upon payment of specified redemption premiums. The Fund also may redeem shares as a whole but not in part, out of funds legally available, on the first day after any dividend period included in a special rate period of more than 364 days if, on the date the dividend rate was determined for shares of that series for the special rate period, the dividend rate equaled or exceeded the yield on the most recently auctioned U.S. Treasury note with a remaining maturity closest to the same special rate period. Notice of Redemption. Notice of redemption will be made by mailing a notice to each shareholder of any series to be redeemed, at least 20 but not more than 45 days before the redemption date, at the address as it appears in a Fund's stock books. The notice will state (1) the redemption date; (2) the number of shares of each MuniPreferred series to be redeemed; (3) the CUSIP number for that series; (4) the redemption price; (5) that the dividends on shares to be redeemed will cease to accumulate on the redemption date; and (6) the provisions of the Statement of Preferences under which the redemption is made. If the Fund intends to redeem fewer than all of the shares of a series, the notice will state the number of shares to be redeemed from the shareholder. B-14 Other Redemption Procedures. If a Fund mails a notice of redemption, but does not redeem shares because there are no legally available monies for this purpose, the Fund will redeem shares as soon as practicable when monies are legally available. The Fund will be deemed to have failed to redeem shares at any time after a redemption date when the Fund has failed, for any reason, to deposit the redemption price for those shares with the auction agent. Even if the Fund has failed to redeem shares for which a notice has been mailed, dividends on MuniPreferred shares may be declared and paid on all shares of MuniPreferred, including those shares for which a notice of redemption has been mailed. When the Fund has mailed a notice of redemption and deposited monies sufficient to redeem those shares with the auction agent, dividends on those shares will cease to accumulate and the shares will no longer be deemed to be outstanding for any purpose. All rights of the holders of these shares will cease except for the right to receive the redemption price, but without any interest or other payments, except as provided under "Description of MuniPreferred--Dividends and Rate Periods--Gross-Up Payments." The Fund is entitled to receive from the auction agent, promptly after the redemption date, any monies deposited in excess of the redemption price of the shares called for redemption, and all other amounts to which MuniPreferred shares called for redemption may be entitled. Any deposited funds that are unclaimed after 90 days from the redemption date will, if permitted by law, be repaid to the Fund. After this time MuniPreferred shareholders whose shares were called for redemption may look only to the Fund for payment of the redemption price and all other amounts to which they may be entitled. The Fund may receive, after the redemption date, any interest on the funds deposited with the auction agent. If any dividends on MuniPreferred shares of a series are in arrears, a Fund may not redeem any MuniPreferred shares of that series unless it redeems all outstanding shares of that series simultaneously, and the Fund may not buy or acquire any MuniPreferred shares of that series. This will not prevent the Fund from buying or acquiring all of the outstanding shares of that MuniPreferred series through the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, all holders of outstanding shares of that series of MuniPreferred. Liquidation If a Fund is liquidated, MuniPreferred shareholders will receive $25,000 per share, plus all dividends that have been declared but not paid, and any gross-up payments (see "Description of MuniPreferred--Dividends and Rate Periods--Gross-Up Payments"), subject to the rights of holders of shares ranking equally with MuniPreferred shares as to distribution of assets on liquidation. MuniPreferred shareholders will receive these payments before any common shareholders receive any payments or distributions. After MuniPreferred shareholders have been paid, they will not have the right to receive any remaining assets of the Fund. The Fund will not be considered "liquidated" if it sells all or substantially all of its property, or merges or consolidates with or into any other corporation. Asset Maintenance and Rating Agency Guidelines 1940 Act. The 1940 Act requires each Fund to maintain, immediately after the issuance of New MuniPreferred, asset coverage of at least 200% for senior securities that are stock, including MuniPreferred shares. Each Fund's Articles of Incorporation or Declaration of Trust require the Fund to maintain, as of the last business day of each month in which any MuniPreferred shares are outstanding, asset coverage of at least 200% for MuniPreferred shares (or other asset coverage that the 1940 Act may require in the future). If a Fund fails to maintain this asset coverage, and the Fund does not cure this failure as of the last business day of the following month, the Articles of Incorporation or Declaration of Trust require the Fund under certain circumstances to redeem MuniPreferred shares. See "Description of MuniPreferred--Redemption." Based on the composition of each Fund's portfolio and market conditions as of the date of the offering, assuming the issuance of all shares of New MuniPreferred for each Fund, and taking into account the deduction of offering costs and sales loads, the asset coverage for each Fund's MuniPreferred shares would have been approximately 285%. Rating Agencies. So long as a Fund has MuniPreferred shares outstanding, the Fund is required to maintain ratings for MuniPreferred shares of "Aaa" from Moody's or "AAA" from Standard & Poor's. These ratings B-15 reflect the rating agencies' opinion of the creditworthiness of MuniPreferred shares. The Fund will pay fees to Moody's and/or Standard & Poor's for these ratings. A preferred stock rating is a rating agency's assessment of the issuer's capacity and willingness to pay preferred share obligations. MuniPreferred ratings are not recommendations to buy, hold, or sell MuniPreferred shares, because they do not comment on market price or suitability for a particular investor. Ratings agency guidelines do not address the likelihood that a shareholder will be able to sell its shares at an auction or otherwise. The ratings are based on current information the Fund and Nuveen Advisory furnish to the rating agencies, and on information obtained from other sources. The rating agencies may change, suspend, or withdraw their ratings because of changes in, or the unavailability of, this information. No rating agency has rated the Fund's common stock. Moody's and Standard & Poor's have developed guidelines the Funds must follow to maintain these ratings. The guidelines are designed to ensure that portfolio securities underlying MuniPreferred shares will be sufficiently varied, and of sufficient quality and amount, to justify the assigned ratings. While the guidelines do not have the force of law, each Fund has adopted them to obtain the rating agencies' ratings on MuniPreferred shares. The guidelines supplement and in some cases are more restrictive than the 1940 Act's requirements for closed-end funds that issue preferred stock. A Fund may, but is not required to, adopt any modifications to these guidelines that Moody's or Standard & Poor's may later establish. If a Fund fails to adopt these modifications, however, the rating agencies may change or withdraw their ratings. In any event, the rating agencies may at any time change or withdraw their ratings. Because each Fund must maintain "Aaa" (from Moody's) or "AAA" (from Standard & Poor's) ratings on MuniPreferred shares, each Fund would be required to take action if the rating agencies lowered or withdrew their ratings. See "Description of MuniPreferred--Redemption." A Fund's Board of Directors may, without shareholder approval, change certain definitions or restrictions that the Fund has adopted in connection with the rating agency guidelines, but only if Moody's or Standard & Poor's has confirmed to the Fund or the Board in writing that any change would not impair their ratings of MuniPreferred shares. The rating agencies also limit some of each Fund's activities. So long as a rating agency is rating a Fund's MuniPreferred shares, the Fund will only enter into futures or options transactions in accordance with that agency's guidelines and after the rating agency confirms in writing that these transactions will not impair the rating on MuniPreferred shares. In addition, a Fund may not, among other things, (1) borrow money (except to clear securities transactions or pay dividends and only if the Fund maintains the MuniPreferred Basic Maintenance Amount, described below); (2) sell securities short, or (3) lend any securities, unless the rating agency confirms in writing that the loan would not impair the rating on MuniPreferred shares. Each Fund does not intend to borrow money; each has an operating policy that prevents it from borrowing an amount greater than 5% of its total assets so long as MuniPreferred shares are outstanding; and the rating agencies restrict each Fund's ability to borrow money. Nevertheless, under certain circumstances each Fund is allowed to borrow money for temporary or emergency purposes or to repurchase shares when borrowing is deemed to be in the best interests of the common shareholders. See "Repurchase of Shares or Conversion to an Open-End Fund." If a Fund borrows, it would be required to pay interest on that debt before it pays any dividends to MuniPreferred shareholders, and it likely would have to repay the principal due before it could pay the liquidation preference on MuniPreferred shares. Interest expense will reduce the Fund's net investment income, and thus borrowing may impair the Fund's ability to pay dividends to MuniPreferred shareholders. This risk will be higher if the Fund borrows money at a variable interest rate that increases when prevailing market rates increase. MuniPreferred Basic Maintenance Amount. Moody's and Standard & Poor's require each Fund to maintain assets having, in the aggregate, a "discounted value" at least equal to the MuniPreferred Basic Maintenance Amount. Each rating agency has its own guidelines for determining the "discounted value" of the value of the Fund's portfolio holdings. The discount factors applied by each rating agency to portfolio securities include the sensitivity of a security's value to changes in interest rates, the liquidity and depth of the market for the security, the security's credit quality, and how often the security is marked to market. If a security in the Fund's portfolio does not meet a rating agency's guidelines, all or part of it will not be included in the calculation of "discounted value." See Appendix A to the Statement of Additional Information for a detailed description of the Moody's and Standard & Poor's rating guidelines. These requirements are discussed below. B-16 The Moody's and Standard & Poor's guidelines do not limit the percentage of a Fund's assets that may be invested in holdings not eligible to be included in calculating discounted value. The amount of these ineligible assets included in the portfolio at any time may vary depending upon the rating, diversification and other characteristics of the eligible assets included in the portfolio, although each Fund does not expect that in the normal course of business the value of these ineligible assets would exceed 20% of the Fund's total assets. The MuniPreferred Basic Maintenance Amount is, on any day, the sum of the liquidation preference value of MuniPreferred shares outstanding, accumulated but unpaid dividends, estimated dividends for the next nine weeks, a Fund's anticipated expenses for the next three months, any gross-up payments the Fund intends to pay to MuniPreferred shareholders, and any other current liabilities; minus the value of any assets the Fund has set aside to pay its current liabilities. If a Fund does not cure its failure to maintain the MuniPreferred Basic Maintenance Amount, the Fund promptly will alter its portfolio to reattain the MuniPreferred Basic Maintenance Amount, which will cause the Fund to incur transaction costs and possible gains or losses on the sale of portfolio securities. Further, if the Fund does not cure a failure in a timely manner and Moody's and/or Standard & Poor's is rating MuniPreferred shares, the Fund will be required to redeem MuniPreferred shares. See "Description of MuniPreferred--Redemption." Nuveen Advisory will not alter the Fund's portfolio if, in its reasonable belief, the effect of the alteration would cause the Fund to have "eligible" assets (assets that can be included in the calculation of discounted value) on any business day with an aggregate discounted value of less than the MuniPreferred Basic Maintenance Amount as of the previous business day. If, however, on a business day the Fund has "eligible" assets with an aggregate discounted value that exceeds the MuniPreferred Basic Maintenance Amount by 5 percent or less as of the previous business day, Nuveen Advisory will not alter the Fund's portfolio in a manner reasonably expected to reduce the discounted value of the Fund's eligible assets, unless the Fund confirms that after the alteration, the aggregate discounted value of the Fund's eligible assets would exceed the MuniPreferred Basic Maintenance Amount. Voting Rights MuniPreferred shareholders generally have equal voting rights with common shareholders (that is, each common or MuniPreferred share has one vote), and will vote with them as a single class. MuniPreferred shareholders vote separately in several circumstances. First, MuniPreferred shareholders vote as a separate class to elect two of the Fund's directors, and to elect a majority of the Fund's directors if the Fund fails to pay dividends to MuniPreferred shareholders for two years. The common shareholders and the MuniPreferred shareholders, voting together, will elect the remaining directors, in each case. Second, a majority of MuniPreferred shareholders, voting as a separate class, must approve a Fund's conversion from a closed-end to an open-end fund, or a plan of reorganization adversely affecting the MuniPreferred shares. Third, a majority of MuniPreferred shareholders, voting as a separate class, must approve changes to a Fund's fundamental investment policies. For those Funds organized as Minnesota corporations, when MuniPreferred shareholders vote as a class, Minnesota law requires a vote of holders of a majority of the MuniPreferred shares to approve the action, unless the Fund's Articles of Incorporation or the 1940 Act require a different percentage. For those Funds organized as Massachusetts business trusts, when MuniPreferred shareholders vote as a class, the Declaration of Trust generally requires a vote of holders of a majority of the MuniPreferred shares to approve the action, unless the 1940 Act requires a different percentage. Each Fund may not, without the approval of holders of a majority of the MuniPreferred shares: (1) create or issue any class of security that ranks superior to shares of MuniPreferred, as to paying dividends or distributing assets if the Fund liquidates, or (2) materially modify the Fund's Articles of Incorporation, Declaration of Trust, or the Statement of Preferences to affect the rights or powers of the MuniPreferred shareholders. Subject to certain rating agency approvals, the Board, without the vote or consent of the MuniPreferred shareholders, may from time to time authorize and create (and a Fund may from time to time issue) additional shares of any series of MuniPreferred or classes or series of preferred stock that rank equal to shares of MuniPreferred as to the payment of dividends and the distribution of assets upon liquidation. B-17 If you do not vote your MuniPreferred shares, and you hold your shares through a member of the New York Stock Exchange, the Exchange's rules allow your Broker-Dealer or broker-dealer to vote them for you and for all of its customers who own MuniPreferred shares but have not voted, if: (1) the Broker- Dealer or broker-dealer has sent you the proxy; (2) you have not instructed your Broker-Dealer or broker-dealer how to vote your shares; (3) the owners of at least 30% of the MuniPreferred shares of a particular Fund (or shares of each series of a Fund's MuniPreferred shares, when a series-by-series vote is required) have voted; (4) less than 10% of the MuniPreferred shares of a particular Fund (or shares of each series of the Fund's MuniPreferred shares, when a series-by-series vote is required) have voted against the proposal; (5) in situations when the common and MuniPreferred shareholders vote together on the proposal, the common shareholders have approved the proposal; and (6) a majority of the Fund's independent directors approved the proposal. Your Broker-Dealer or broker-dealer will vote your shares in the same proportion as all of its other customers who own MuniPreferred shares and who actually voted. For example, if 60% of a Broker-Dealer's customers who own MuniPreferred shares vote their shares, and 92% vote "for" a proposal and 8% vote "against," then the Broker-Dealer will vote the remaining 40% of its customers MuniPreferred shares 92% "for" and 8% "against." If you do not hold your shares through a member of the New York Stock Exchange, your Broker- Dealer, broker-dealer, or other nominee may not be able to vote your shares for you and for all of its customers who own MuniPreferred shares but have not voted, depending on the rules applicable to that Broker-Dealer, broker-dealer, or nominee. THE AUCTION Summary of Auction Procedures The following is a brief summary of the auction procedures. They are described in more detail after this summary. The auction procedures are complicated, and there are exceptions to these procedures. Many of the terms in this section have a special meaning. Any terms in this section not defined have the meaning assigned to them in the Statement of Preferences. See Appendix B to the Statement of Additional Information for a full description of the auction procedures. The auction determines the Applicable Rate (the dividend rate) for MuniPreferred shares, but the Applicable Rate will not be higher than the Maximum Rate. See "Description of MuniPreferred--Dividends and Rate Periods--Maximum Rate." You also may buy or sell shares in the auction. If you own MuniPreferred shares, you may instruct, orally or in writing, a Broker-Dealer or a broker-dealer that has entered into an agreement with a Broker-Dealer, to enter an order in the auction. If your broker-dealer is not an agent member of the Depository Trust Company, or an affiliate of an agent member, it may submit orders for MuniPreferred shares to John Nuveen & Co. Incorporated. Existing MuniPreferred shareholders can enter three kinds of orders regarding their MuniPreferred shares: sell, bid, and hold. . If you enter a sell order, you indicate that you want to sell shares of MuniPreferred at $25,000 per share, no matter what the next rate period's Applicable Rate will be. . If you enter a bid (or "hold at a rate") order, you indicate that you want to sell shares of MuniPreferred only if the next rate period's Applicable Rate is less than the rate you specify. . If you enter a hold order, you indicate that you want to continue to own shares of MuniPreferred, no matter what the next rate period's Applicable Rate will be. You may enter different types of orders for your MuniPreferred shares, as well as orders for additional MuniPreferred shares. All orders must be for whole shares. All orders you submit are irrevocable. There are a fixed number of MuniPreferred shares, and the Applicable Rate likely will vary from auction to auction depending on the number of bidders, the number of shares the bidders seek to buy, and general economic conditions including current interest rates. If you own MuniPreferred shares and submit a bid higher than the Maximum Rate, your bid will be treated as a sell order. If you do not enter an order, the Broker-Dealer will assume that you want to continue to hold MuniPreferred shares, but if you fail to submit an order and the rate period is longer than 28 days, the Broker-Dealer will treat your failure to submit a bid as a sell order. B-18 If you do not currently own shares of MuniPreferred, or want to buy more shares, you may instruct a Broker-Dealer, or a broker-dealer that has entered into an agreement with a Broker-Dealer, to enter a bid order to buy shares in an auction at $25,000 per share, at a specified dividend rate. If your bid specifies a rate higher than the Maximum Rate, your order will not be accepted. Broker-Dealers will submit orders from existing and potential shareholders to the auction agent. Neither the Fund nor the auction agent will be responsible for a Broker-Dealer's failure to submit orders from existing shareholders and potential shareholders. A Broker-Dealer's failure to submit orders for MuniPreferred shares held by it or its customers will be treated in the same manner as a shareholder's failure to submit an order to the Broker- Dealer. A Broker-Dealer (other than an affiliate of a Fund) may submit orders to the auction agent for its own account. If the number of MuniPreferred shares of a series subject to bid orders with a dividend rate equal to or lower than the Maximum Rate for shares of that series is at least equal to the number of MuniPreferred shares of that series subject to sell orders, then the Applicable Rate for the next rate period will be the lowest rate submitted which, taking into account that rate and all lower rates submitted in order from existing and potential shareholders, would result in existing and potential shareholders owning all the MuniPreferred shares available for purchase in the auction. If the number of MuniPreferred shares of a series subject to bid orders with a dividend rate equal to or lower than the Maximum Rate for shares of that series is less than the number of MuniPreferred shares of that series subject to sell orders, then the auction is considered to be a failed auction, and the dividend rate will be the Maximum Rate. In that event, existing shareholders that have submitted sell orders (or are treated as having submitted sell orders) may not be able to sell any or all the shares for which they submitted sell orders. The auction agent will not accept a bid above the Maximum Rate from a potential shareholder, and will treat such a bid from an existing shareholder as a sell order. The purpose of the Maximum Rate is to place an upper limit on MuniPreferred dividends and in so doing to help protect the earnings available to pay common share dividends, and to serve as the Applicable Rate in the event of a failed auction (that is, an auction where there are more MuniPreferred shares offered for sale than there are buyers for those shares). If Broker-Dealers submit or are deemed to submit hold orders for all outstanding shares of a series of MuniPreferred, this is considered an "all hold" auction and the Applicable Rate for the next rate period will be the All Hold Order Rate. See "The Auction--Determination of Sufficient Clearing Bids, Winning Bid Rate, and Applicable Rate" and Appendix B to the Statement of Additional Information for a description of this rate. The auction procedures include a pro rata allocation of shares for purchase and sale. This may result in an existing shareholder continuing to hold or selling, or a potential shareholder buying, fewer shares than the number of shares in its order. If this happens, Broker-Dealers will be required to make appropriate pro rata allocations among their customers. Settlement of purchases and sales will be made on the next business day (which also is a dividend payment date) after the auction date, through the Depository Trust Company. Purchasers will pay for their shares through Broker- Dealers in same-day funds to the Depository Trust Company against delivery to the Broker-Dealers. The Depository Trust Company will make payment to the sellers' Broker-Dealers in accordance with its normal procedures, which require Broker-Dealers to make payment against delivery in same-day funds. If a Fund plans to include any net capital gains or other Federal taxable income in a MuniPreferred dividend, it generally will notify the auction agent of the amount to be included, at least a week before the dividend payment date for the rate period in which taxable income will be included in a dividend. The auction agent will notify Broker-Dealers, who in turn will notify their customers. B-19 The following is a simplified example of how a typical auction works. Assume that a Fund has 1,000 outstanding shares of New MuniPreferred, and three current shareholders. The three current shareholders and three potential shareholders submit orders through Broker-Dealers at the auction: Current Shareholder A... Owns 500 shares, wants to sell all Bid order of 3.5% rate for all 500 500 shares if auction rate is less shares than 3.5% Current Shareholder B... Owns 300 shares, wants to hold Hold order--will take the auction rate Current Shareholder C... Owns 200 shares, wants to sell all Bid order of 3.3% rate for all 200 200 shares if auction rate is less shares than 3.3% Potential Shareholder D. Wants to buy 200 shares Places order to buy at or above 3.4% Potential Shareholder E. Wants to buy 300 shares Places order to buy at or above 3.3% Potential Shareholder F. Wants to buy 200 shares Places order to buy at or above 3.5%
The lowest dividend rate that will result in all 1,000 shares of New MuniPreferred continuing to be held is 3.4% (the offer by D). Therefore, the Applicable Rate will be 3.4%. Current shareholders B and C will continue to own their shares, and current shareholder A will sell its shares, because A's dividend rate bid was higher than the Applicable Rate. Potential shareholder D will buy 200 shares, and Potential shareholder E will buy 300 shares, because their bid rates were at or below the Applicable Rate. Potential shareholder F will not buy any shares because its bid rate was above the Applicable Rate. The foregoing discussion is a summary of the auction procedures. What follows is a more detailed explanation of the auction procedures. Auction Dates; Advance Notice of Allocation of Taxable Income An auction to determine the Applicable Rate for New MuniPreferred shares for each rate period after the initial rate period will be held on the first business day preceding the first day of the rate period. The date is the "auction date." The auction date and the first day of the related rate period (which is also the dividend payment date for the preceding rate period) must be business days but need not be consecutive days. See "Description of MuniPreferred--Dividends and Rate Periods--Designation of Special Rate Periods" for information about the circumstances under which the first day of a rate period or the auction date, or both, may be moved to another date. Whenever a Fund intends to include any net capital gains or other federal taxable income in any MuniPreferred dividend, it will, for any rate period of 28 days or less, and may, for any rate period of more than 28 days, notify the auction agent of the amount to be included, on or before the dividend payment date next preceding the auction date on which the Applicable Rate is to be set. When the auction agent receives this notice from the Fund, it will in turn notify each Broker-Dealer who, on or before the auction date and in accordance with its broker-dealer agreement, will notify its existing shareholders and persons it believes are interested in submitting an order in that auction. Orders by Existing Shareholders and Potential Shareholders You may submit orders for an auction only through a Broker-Dealer (one that has signed a dealer agreement with a Fund and the auction agent), or through a broker-dealer that has entered into a correspondent arrangement with a Broker- Dealer. Your order must be submitted before the submission deadline, which is 1:30 p.m. Eastern B-20 time on the auction date. Your orders must indicate whether you want to buy, sell, or hold some or all of your shares, and the lowest dividend rate you will accept for the next rate period (normally one week, although this can be extended). The auction agent selects the lowest dividend rate bid that will result in all of the MuniPreferred continuing to be held. You may enter different types of orders for your MuniPreferred shares, as well as orders for additional MuniPreferred shares. All orders you submit are irrevocable. An existing shareholder's sell order will be an irrevocable offer to sell MuniPreferred shares subject to the order. An existing shareholder's bid order will be an irrevocable offer to sell MuniPreferred shares subject to the order if the Applicable Rate is less than the rate specified in the bid order. A potential shareholder's bid order will be an irrevocable offer to buy MuniPreferred shares subject to the order if the Applicable Rate is equal to or greater than the rate specified in the bid order. The number of shares you buy or sell may be subject to proration. Your order must be in whole shares. If you are an existing shareholder and want to buy additional MuniPreferred shares, you will be treated as a potential shareholder for those additional shares, for the purpose of determining the priority of orders. See "The Auction--Submission of Orders by Broker-Dealers to Auction Agent." Broker-Dealers may contact prospective purchasers of MuniPreferred shares to determine whether they wish to submit orders. Any bid order that specifies a rate higher than the Maximum Rate will be (1) treated as a sell order if an existing shareholder submits the order, and (2) not be accepted if a potential shareholder submits the order. The auction procedures establish the Maximum Rate that can result from an auction. See "The Auction-- Determination of Sufficient Clearing Bids, Winning Bid Rate, and Applicable Rate" and "The Auction--Acceptance or Rejection of Orders and Allocation of Shares." Submission of Orders by Broker-Dealers to Auction Agent Before the submission deadline, which is 1:30 p.m. Eastern time on each auction date (or another time the auction agent specifies), each Broker-Dealer will submit to the auction agent in writing all orders it obtained for the auction. Any order submitted before the auction deadline will be irrevocable. The auction agent is entitled to rely on the terms of any order a Broker- Dealer submits. If any rate specified in a bid order contains more than three figures to the right of the decimal point, the auction agent will round up that rate to the next highest one-thousandth (.001) of 1%. If a potential shareholder submits more than one bid order through a Broker-Dealer, each bid order will be treated as a separate bid order with the rate and number of shares specified in the order. If an existing shareholder submits through a Broker-Dealer one or more orders covering in the aggregate more MuniPreferred shares of a series than the existing shareholder owns, the orders will be considered valid in the following order of priority: 1. All hold orders will be considered valid, up to and including in the aggregate the number of MuniPreferred shares of that series the shareholder owns. 2. (a) Any bid order will be considered valid, up to and including the excess of the number of outstanding MuniPreferred shares of that series the shareholder owns over the number of MuniPreferred shares of that series subject to hold orders referred to in clause 1 above; (b) subject to 2(a), if more than one bid order with the same specified rate is submitted on behalf of an existing shareholder and the number of MuniPreferred shares of that series subject to those bid orders is greater than the excess, the bid orders will be considered valid up to and including the amount of that excess, and the number of MuniPreferred shares of that series subject to each bid order with the same rate will be reduced pro rata to cover the number of MuniPreferred shares of that series equal to the excess; (c) subject to 2(a) and 2(b), if more than one bid order with different rates is submitted on behalf of an existing shareholder, the bid orders will be considered valid in the ascending order of their respective rates up to and including the amount of that excess; and (d) in any event, the number of shares subject to bids not valid under this clause 2 will be treated as the subject of a bid order by a potential shareholder at the rate specified in the order. B-21 3. All sell orders will be considered valid, up to and including the excess of the number of outstanding MuniPreferred shares of that series the existing shareholder owns, over the sum of MuniPreferred shares of that series subject to valid hold orders referred to in clause 1 above and valid bid orders referred to in clause 2 above. Determination of Sufficient Clearing Bids, Winning Bid Rate, and Applicable Rate The auction agent will assemble, not earlier than the submission deadline, all valid orders submitted or deemed submitted by Broker-Dealers for a series of MuniPreferred. The auction agent will determine the excess of the number of outstanding shares of that series of MuniPreferred over the number of outstanding shares subject to submitted hold orders, and will then determine whether "sufficient clearing bids" have been made in the auction. "Sufficient clearing bids" means that the number of outstanding MuniPreferred shares of that series that are the subject of bid orders submitted by potential shareholders specifying a rate not higher than the Maximum Rate, equals or exceeds the number of outstanding shares of that series that are the subject of sell orders submitted by existing shareholders (including the shares of that series that are the subject of bid orders by existing shareholders specifying rates higher than the Maximum Rate). If sufficient clearing bids have been made, the auction agent will determine the winning bid rate; that is, the lowest rate specified in the bid orders which, taking into account the rates in the bid orders submitted by existing shareholders, would result in existing shareholders continuing to hold an aggregate number of outstanding MuniPreferred shares of that series which, when added to the number of outstanding MuniPreferred shares of that series to be bought by potential shareholders, would equal not less than the available amount of outstanding MuniPreferred shares. The winning bid rate will be the Applicable Rate for the next rate period for all outstanding shares of that series. If sufficient clearing bids have not been made (other than because all of the outstanding MuniPreferred shares of that series are subject to hold orders), the Applicable Rate for the next rate period for all outstanding shares of that series will be the Maximum Rate. If sufficient clearing bids have not been made, existing shareholders that submitted sell orders may not be able to sell any or all of their shares in the auction, and will continue to hold those unsold shares in the next rate period. Dividends in that next rate period may include taxable income and gain. See "The Auction--Auction Dates; Advance Notice of Allocation of Taxable Income" and "--Acceptance or Rejection of Orders and Allocation of Shares." If all of the outstanding shares of MuniPreferred for that series are subject to hold orders, the Applicable Rate for the next period for all shares of that series will be the All Hold Order Rate, which is the lesser of the Kenny Index (if the rate period is less than 183 days) or the product of: (1) (a) the "AA" Composite Commercial Paper Rate on the auction date for that rate period if the rate period is less than 183 days; (b) the Treasury Bill Rate on that auction date for that rate period if the rate period is more than 182 days but less than 365 days; or (c) the Treasury Note Rate on that auction date for that rate period if the rate period is more than 364 days (the rate in clauses a, b or c is the "benchmark rate"); and (2) 1 minus the maximum marginal combined regular Federal, and California individual income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state and local taxes paid or incurred) or the maximum marginal regular Federal corporate income tax rate, whichever is greater. If a Fund has notified the auction agent that it intends to allocate any net capital gains or other Federally taxable income to MuniPreferred shares for that rate period, the Applicable Rate in an "all hold" auction for the portion of the dividends that represents the allocation of net capital gains or other Federally taxable income will be: (1) if the "taxable yield rate" is greater than the benchmark rate, then the benchmark rate; or (2) if the taxable yield rate is less than or equal to the benchmark rate, then the rate equal to the sum of (a) the lesser of the Kenny Index (if the rate period is less than 183 days) or the product of the benchmark B-22 rate multiplied by the factor in clause (2) above, and (b) the product of the maximum marginal combined regular Federal and California individual income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state and local taxes paid or incurred) or the maximum marginal regular Federal corporate income tax applicable to ordinary income, whichever is greater, multiplied by the taxable yield rate. The "taxable yield rate" is the rate determined by (a) dividing the amount of taxable income available for distribution per share of MuniPreferred by the number of days in the dividend period in which the Fund intends to distribute taxable income, (b) multiplying the amount in (a) by 365 (if the dividend period is seven days) or by 360 (for any other dividend period), and (c) dividing the amount determined in (b) by $25,000. See Appendix B to the Statement of Additional Information for the definitions of "Kenny Index," "AA Composite Commercial Paper Rate," "Treasury Bill Rate" and "Treasury Note Rate." Acceptance or Rejection of Orders and Allocation of Shares Based on the determinations made under "Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate," and subject to the auction agent's discretion to round and allocate shares as described below, the auction agent will accept or reject submitted bid and sell orders in the order of priority set out in the Auction Procedures. The result will be that existing and potential shareholders will sell, continue to hold, and/or purchase outstanding MuniPreferred shares of that series as described below. Existing shareholders that submitted or were deemed to have submitted hold orders will continue to own MuniPreferred shares subject to those hold orders. Sufficient Clearing Bids. If sufficient clearing bids have been made in an auction for a series of MuniPreferred, orders will be accepted or rejected in the following order: 1. Each existing shareholder that submitted a sell or bid order specifying a rate higher than the winning bid rate will sell outstanding MuniPreferred shares subject to that sell or bid order. 2. Each existing shareholder that submitted a bid order specifying a rate lower than the winning bid rate will continue to hold outstanding MuniPreferred shares subject to that bid order. 3. Each potential shareholder that submitted a bid order specifying a rate lower than the winning bid rate will have its bid order accepted (although it may not be able to buy all the shares specified in its order). 4. Each existing shareholder that submitted a bid order specifying a rate equal to the winning bid rate will continue to hold the outstanding MuniPreferred shares subject to that bid order. But if the number of outstanding MuniPreferred shares subject to all bid orders is greater than the number of outstanding MuniPreferred shares in excess of the available outstanding MuniPreferred shares of that series over the number of outstanding MuniPreferred shares accounted for in clauses 2 and 3 above, then each existing shareholder that submitted a bid order specifying a rate equal to the winning bid rate will continue to hold a number of the outstanding MuniPreferred shares subject to that bid order, determined on a pro rata basis based on the number of outstanding MuniPreferred shares subject to all bid orders by existing shareholders. 5. Each potential shareholder that submitted a bid order specifying a rate equal to the winning bid rate will buy any shares of available outstanding MuniPreferred shares not accounted for in clauses 2 through 4, above, on a pro rata basis based on the number of outstanding MuniPreferred shares subject to all bid orders. Insufficient Clearing Bids. If sufficient clearing bids have not been made in an auction for a series of MuniPreferred (unless this is because all outstanding MuniPreferred shares of that series are subject to hold orders): 1. Each existing shareholder that submitted a bid order specifying a rate equal to or lower than the Maximum Rate will continue to hold outstanding MuniPreferred shares subject to that bid order. 2. Each potential shareholder that submitted a bid order specifying a rate equal to or lower than the Maximum Rate will buy the number of outstanding MuniPreferred shares subject to that bid order. B-23 3. Each existing shareholder that submitted bid order specifying a rate higher than the Maximum Rate, or a sell order, will sell a number of outstanding MuniPreferred shares determined on a pro rata basis based on the number of outstanding MuniPreferred shares subject to all bid and sell orders. If, because of the pro rata allocation described in clauses 4 and 5 in "Sufficient Clearing Bids," or in clause 3 of "Insufficient Clearing Bids," any existing shareholder would be entitled or required to sell, or any potential shareholder would be entitled or required to buy, a fractional share of MuniPreferred, the auction agent will, in its sole discretion, round up or down to the nearest whole share the number of MuniPreferred shares sold or bought on the auction date so that the number of shares an existing or potential shareholder sells or buys will be whole shares. If, because of the pro rata allocation described in clause 5 in "Sufficient Clearing Bids," any potential shareholder would be entitled or required to buy less than a whole MuniPreferred share, the auction agent will in its sole discretion, allocate MuniPreferred shares for purchase among potential shareholders so that any potential shareholders will only buy whole shares, even if this means that one or more potential shareholders will not buy any MuniPreferred shares. Notification of Results; Settlement The auction agent will notify, by telephone by approximately 3:00 p.m. Eastern time on the auction date, each Broker-Dealer that submitted an order, of the Applicable Rate for the next rate period and, if the order was a bid or sell order, whether the order was accepted or rejected in whole or in part. Each Broker-Dealer that submitted an order on behalf of an existing or potential shareholder will notify that person of the Applicable Rate for the next rate period and, if the order was a bid or sell order, whether the order was accepted or rejected in whole or in part; and will confirm purchases and sales with each existing or potential shareholder purchasing or selling shares as a result of the auction. The auction agent will record each transfer of MuniPreferred shares on the registry of existing shareholders it maintains. In accordance with the Depository Trust Company's normal procedures, on the business day after the auction date, purchases and sales of MuniPreferred shares will be executed through the Depository Trust Company and the accounts of the agent members will be debited and credited and shares delivered as necessary to effect the purchases and sales of MuniPreferred shares as determined in the auction. Purchasers will make payment through their agent members in same-day funds to the Depository Trust Company against delivery through their agent members; the Depository Trust Company will make payment in accordance with its normal procedures, which now provide for payment against delivery by its agent members in same-day funds. If any existing shareholder selling MuniPreferred shares in an auction fails to deliver its shares, the Broker-Dealer of any buyer of shares in an auction may deliver to that person a number of whole MuniPreferred shares that is less than the number of shares that the person otherwise was to buy. In that event, the Broker-Dealer will determine the number of MuniPreferred shares to be delivered, and delivery of the lesser number of shares will constitute good delivery. Auction Agent The auction agent acts as an agent of each of the Funds. Unless the auction agent acts in bad faith or negligently, it will not be liable for any action taken, suffered, or omitted or for any error of judgment it makes in the performance of its duties under the Auction Agency Agreement, and it will not be liable for any error of judgment it makes in good faith unless it is negligent in ascertaining the pertinent facts. The auction agent may terminate the Auction Agency Agreement as to one or more Funds upon 45 days' notice to the Fund(s). If the auction agent should resign, the Fund will use its best efforts to enter into an agreement with a successor auction agent that contains substantially the same terms and conditions as the Auction Agent Agreement. A Fund may remove the auction agent, but before this removal, the Fund must have entered into an agreement with a successor auction agent. B-24 Broker-Dealers; Participation Fee After each auction, the auction agent will pay to each Broker-Dealer, from monies a Fund provides, a participation fee at the annual rate of 1/4 of 1% of the Fund's net assets for any auction immediately preceding a rate period of less than one year. For a rate period of one year or longer, the amount will be a percentage of the purchase price of MuniPreferred shares the broker- dealer places at that auction, as the Fund and Broker-Dealers may agree. "Places at auction" means that the shares were (1) the subject of hold orders deemed to be sell orders made by existing shareholders who acquired their shares from that Broker-Dealer, or (2) the subject of an order the Broker- Dealer submitted that is (a) a bid order from an existing shareholder that results in the shareholder continuing to hold those shares as a result of the auction; (b) a bid order from a potential shareholder that results in the shareholder buying those shares as a result of the auction; or (c) a valid hold order. The broker-dealer agreements allow a Broker-Dealer (other than an affiliate of a Fund), to submit orders in auctions for its own account, unless a Fund notifies all Broker-Dealers that they may no longer do so. In that case, Broker-Dealers may continue to submit hold and sell orders, but not bid orders, for their own accounts. Any Broker-Dealer that is an affiliate of a Fund may submit orders in auctions, but only if these orders are not for its own account. If a Broker-Dealer submits an order for its own account in an auction, it might have an advantage over other bidders because it would know about orders it placed through the auction. This Broker-Dealer, however, would not know about orders other Broker-Dealers submitted in the auction. A Fund may request that the auction agent terminate one or more broker-dealer agreements at any time, provided that at least one broker-dealer agreement is in effect after the termination(s). Secondary Market Broker-Dealers and other broker-dealers may maintain a secondary trading market for MuniPreferred shares, although they are not required to do so. The secondary trading market in MuniPreferred shares may not provide you with liquidity. MuniPreferred shares are not registered on a stock exchange or on the Nasdaq Stock Market. You may sell or transfer shares of MuniPreferred only in whole shares and only: (1) pursuant to a bid or sell order placed with the auction agent in accordance with the auction procedures; (2) to a Broker-Dealer or other broker-dealer; or (3) to other persons as a Fund may permit; provided, however, that (a) a sale or transfer of your shares (if you hold your shares in the name of a Broker-Dealer) to that Broker-Dealer, or to another customer of that Broker-Dealer, will not be considered a sale or transfer for purposes of the foregoing if that Broker-Dealer remains the existing holder of the shares immediately after the transaction; and (b) in the case of all transfers, other than through an auction, the Broker-Dealer (or other person, if the Fund permits) receiving the transfer will advise the auction agent of the transfer. TAX MATTERS Federal Income Tax Matters Each Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") and intends to distribute substantially all of its net income and gains to its shareholders. Therefore, it is not expected that the Fund will be subject to any Federal income tax. Substantially all of the Fund's dividends to the common shareholders and MuniPreferred shareholders will qualify as "exempt- interest dividends." A shareholder treats an exempt-interest dividend as interest on state and local bonds exempt from regular Federal income tax. Some or all of an exempt-interest dividend, however, may be subject to Federal alternative minimum tax imposed on the shareholder. Different Federal alternative tax rules apply to individuals and to corporations. In addition to exempt-interest dividends, the Fund also may distribute amounts that are treated as long-term capital gain or ordinary income to its shareholders. Each Fund will allocate distributions to shareholders that are treated as tax- exempt interest and as long-term capital gain and ordinary income, if any, proportionately among the common and MuniPreferred shares. Each Fund intends to notify MuniPreferred shareholders in advance if it will allocate income that is not exempt from regular Federal income tax. In certain circumstances a Fund will make payments to MuniPreferred shareholders to offset the tax effects of the taxable distribution. See "Description of MuniPreferred-- Dividends and Rate Periods--Gross-Up B-25 Payments" in Part B of this Prospectus. The Statement of Additional Information contains a more detailed summary of the Federal tax rules that apply to the Fund and its shareholders. Legislative, judicial or administrative action may change the tax rules that apply to each Fund or its shareholders. Any change may be retroactive for Fund transactions. You should consult with your tax adviser about Federal income tax matters. State Funds: State and Local Tax Matters See "Tax Matters" in the Statement of Additional Information for state tax information. National Funds: State and Local Tax Matters While exempt-interest dividends are exempt from regular Federal income tax, they may not be exempt from state or local income or other taxes. Some states exempt from state income tax that portion of any exempt-interest dividend that is derived from interest a regulated investment company receives on its holdings of securities of that state and its political subdivisions and instrumentalities. Therefore, the Fund will report annually to its shareholders the percentage of interest income the Fund earned during the preceding year on tax-exempt obligations and the Fund will indicate, on a state-by-state basis, the source of this income. You should consult with your tax adviser about state and local tax matters. COMMON SHARES Common shares have equal voting rights and equal rights as to dividends, assets, and liquidation with respect to one another. Common shares are fully paid and non-assessable when issued and have no preemptive, conversion, or exchange rights. No Fund may declare dividends or make any distributions on common shares, or repurchase common shares, if it has declared but not paid all accumulated dividends on MuniPreferred shares. CONTROL OF THE FUND Each Fund's Articles of Incorporation or Declaration of Trust may limit the ability of other companies or persons to acquire control of the Fund. The holders of at least two-thirds of the common and MuniPreferred shares, voting together, must approve the Fund's conversion from a closed-end to an open-end fund; its merger or consolidation; a sale, lease, or transfer of all or substantially all of the Fund's assets (other than in the course of the Fund's regular investment activities); or the Fund's liquidation or dissolution. If two-thirds of the Fund's directors vote to approve one of these transactions, then the holders of at least a majority of the shares of common and MuniPreferred, voting together, must approve the transaction. These voting requirements are higher than legally required. They could have the effect of making it more difficult for a third party to assume control of a Fund or merge it with another fund. However, these voting requirements could cause third parties seeking control of the Fund to negotiate the price to be paid with Nuveen Advisory, and could assure the continuity of the Fund's investment objectives and policies. Each Fund's Board believes that the higher voting requirements are in the best interest of the Fund and its shareholders. REPURCHASE OF SHARES OR CONVERSION TO AN OPEN-END FUND Each of the Funds is a closed-end fund, and you do not have the right to cause a Fund to redeem your MuniPreferred shares. MuniPreferred shares trade primarily through the auction, while each Fund's common shares trade on the New York Stock Exchange. Common shares may trade at a premium or a discount to net asset value. Each Fund's Board of Directors will consider, at least annually, whether it should take any action to reduce or eliminate a material discount from net asset value of the common shares. The Board could authorize a Fund to repurchase some of its common shares, make a tender offer for some of its common shares, or convert the Fund to an open-end fund. All of these actions are subject to certain legal restrictions. If the Fund repurchases common shares or makes a tender offer, this may not reduce the discount. The Fund may borrow money to repurchase common shares or pay for tendered shares. If the Fund borrows, the costs of borrowing would reduce the Fund's net income. If the Fund converted to an open-end fund, it could not have preferred stock outstanding. B-26 The Fund would be required to redeem all outstanding MuniPreferred shares (requiring in turn that the Fund liquidate a portion of its portfolio), and the Fund's common shares would no longer be listed on the New York Stock Exchange. The Board's present policy, which is subject to change, is that the Board will not authorize any of these actions if: this would result in the delisting of the common stock from the New York Stock Exchange or cause a Fund to fail to qualify as a regulated investment company under the Code; the Fund could not sell portfolio securities in an orderly manner, or without imposing significant tax consequences on remaining common shareholders, sufficient to repurchase shares; there are material legal challenges to the repurchase; the New York Stock Exchange suspends trading; or there are other large-scale events that affect the Fund's ability to repurchase its shares, such as a federal banking moratorium. NET ASSET VALUE The Funds' custodian calculates each Fund's net asset value. The custodian uses prices for portfolio securities from a pricing service the Fund's Board of Directors has approved. The pricing service values portfolio securities at the mean between the quoted bid and asked price or the yield equivalent when quotations are readily available. Securities for which quotations are not readily available (which will constitute the majority of the Fund's portfolio securities) are valued at fair value. The pricing service uses methods that consider yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity, and ratings; dealers indications of value; and general market conditions. The pricing service may use electronic data processing techniques or a matrix system, or both. The Fund's officers review the pricing service's procedures and valuations, under the general supervision of the Board of Directors. OTHER SERVICE PROVIDERS The Chase Manhattan Bank, located at One Chase Plaza, New York, NY 10081, is the Fund's custodian, and the transfer agent and dividend disbursing agent for the Fund's common shares. Bankers Trust Company, located at 4 Albany Street, New York, NY 10006, is the auction agent, transfer agent, registrar, dividend disbursing agent and redemption agent for the MuniPreferred shares. Purchases and sales of MuniPreferred shares are cleared and settled at the Depository Trust Company, 55 Water Street, New York, NY 10041. AVAILABLE INFORMATION The Funds are subject to the informational requirements of the Securities Exchange Act of 1934, the 1940 Act, and are required to file reports, proxy statements and other information with the SEC. These documents can be inspected and copied for a fee at the SEC's public reference room, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's New York Regional Office, Seven World Trade Center, New York, New York 10048 and Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois, 60661-2511. Reports, proxy statements, and other information about the Funds can be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. This Part B of the Prospectus does not contain all of the information in each Fund's registration statement, including amendments, exhibits, and schedules. Statements in this Part B of the Prospectus about the contents of any contract or other document are not necessarily complete and in each instance reference is made to the copy of the contract or other document filed as an exhibit to the registration statement, each such statement being qualified in all respects by this reference. Additional information about each Fund and MuniPreferred shares can be found in each Fund's Registration Statement (including amendments, exhibits, and schedules) on Form N-2 filed with the SEC. The SEC maintains a web site (http://www.sec.gov) that contains each Fund's Registration Statement, other documents incorporated by reference, and other information the Fund has filed electronically with the Commission, including proxy statements and reports filed under the Securities Exchange Act of 1934. Additional information may be found on the Internet at http://www.nuveen.com. B-27 TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
Page ---- Investment Objectives and Policies......................................... S-1 Certain Trading Strategies of the Fund..................................... S-7 Management of the Fund..................................................... S-19 Portfolio Transactions..................................................... S-26 Net Asset Value............................................................ S-28 Additional Information Concerning the Auctions for MuniPreferred........... S-28 Tax Matters................................................................ S-30 Certain Owners of Record................................................... S-36 Experts.................................................................... S-36 Financial Statements....................................................... S-37 Report of Independent Auditors............................................. S-51 Appendix A--Ratings of Investments......................................... A-1 Appendix B--Statement of Preferences....................................... B-1
B-28 APPENDIX A TAXABLE EQUIVALENT YIELD TABLE The taxable equivalent yield is the current yield you would need to earn on a taxable investment in order to equal a stated 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%
PENNSYLVANIA
Federal State Combined Tax Tax Tax Single Return Joint Return Bracket Bracket* Bracket* ------------- ------------ ------- -------- -------- $0-25,750 $0-43,050 15.00% 2.80% 17.80% 25,750-62,450 43,050-104,050 28.00% 2.80% 30.80% 62,450-130,250 104,050-158,550 31.00% 2.80% 33.80% 130,250-283,150 158,550-283,150 36.00% 2.80% 38.80% Over 283,150 Over 283,150 39.60% 2.80% 42.40%
- -------- *The State tax brackets are those for 1998. Please note that the table does not reflect (i) any federal or state limitations on the amounts of allowable itemized deductions, phase-outs of personal or dependent exemption credits or other allowable credits, (ii) any local taxes imposed, (iii) any taxes other than personal income taxes, or (iv) income derived from the disposition of Pennsylvania municipal bonds issued on or after February 1, 1994. The table assumes that federal taxable income is equal to state income subject to tax. B-A-1 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- No dealer, salesperson or other individual has been authorized to give any information or to make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Fund or any underwriter. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ---------------- TABLE OF CONTENTS
Page ----- Prospectus Summary........................................................ A-1 Financial Highlights...................................................... A-3 The Fund.................................................................. A-4 Use of Proceeds........................................................... A-4 Capitalization............................................................ A-5 Investment Objectives and Policies........................................ A-6 Underwriting.............................................................. A-8 Legal Opinions............................................................ A-8 Experts................................................................... A-9 Municipal Bonds........................................................... B-1 Portfolio Investments..................................................... B-2 Insured Funds: Municipal Bond Insurance .................................. B-2 Investment Restrictions................................................... B-4 Risk Factors.............................................................. B-5 Management of the Fund.................................................... B-7 Certain Trading Strategies of the Funds................................... B-9 Description of MuniPreferred.............................................. B-9 The Auction............................................................... B-18 Tax Matters............................................................... B-25 Common Stock.............................................................. B-26 Control of the Fund....................................................... B-26 Repurchase of Shares or Conversion to an Open-End Fund.................... B-26 Net Asset Value........................................................... B-27 Other Service Providers................................................... B-27 Available Information..................................................... B-27 Table of Contents of the Statement of Additional Information.............. B-28 Taxable Equivalent Yield Table............................................ B-A-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $22,000,000 Nuveen Pennsylvania Investment Quality Municipal Fund Municipal AuctionRate CumulativePreferred Shares MuniPreferred(R) 880 Shares Series T -------- PROSPECTUS , 1999 -------- Salomon Smith Barney A.G. Edwards & Sons, Inc. BT Alex. Brown Goldman, Sachs & Co. John Nuveen & Co. Incorporated PaineWebber Incorporated Prudential Securities - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. STATEMENT OF ADDITIONAL INFORMATION DATED , 1999 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND This Statement of Additional Information relating to this offering does not constitute a prospectus, but should be read in conjunction with the Prospectus relating thereto dated , 1999 (the "Prospectus"). This Statement of Additional Information does not include all information that a prospective investor should consider before purchasing shares of MuniPreferred in this offering, and investors should obtain and read the Prospectus prior to purchasing such shares. A copy of the Prospectus may be obtained without charge by calling (800) 257-8787. Capitalized terms used but not defined in this Statement of Additional Information have the meanings assigned to them in the Prospectus.
TABLE OF CONTENTS PAGE Investment Objectives and Policies ............... S-1 Certain Trading Strategies of the Fund ........... S-7 Management of the Fund ........................... S-19 Portfolio Transactions ........................... S-26 Net Asset Value .................................. S-28 Additional Information Concerning the Auctions for MuniPreferred .................................... S-28 Tax Matters ...................................... S-30 Certain Owners of Record ......................... S-36 Experts .......................................... S-36 Financial Statements ............................. S-37 Report of Independent Auditors ................... S-51 Ratings of Investments ........................... A-1 Statement of Preferences ......................... B-1
INVESTMENT OBJECTIVES AND POLICIES INVESTMENT OBJECTIVES The Fund's primary investment objective is current income exempt from both regular Federal and Pennsylvania personal income taxes, consistent with the Fund's investment policies. The Fund's secondary investment objective is to enhance portfolio value relative to the Pennsylvania municipal bond market through investments in tax-exempt Pennsylvania municipal bonds which, in Nuveen Advisory's opinion, are underrated or undervalued or that represent municipal market sectors that are undervalued. The Fund seeks to achieve its investment objectives by investing substantially all of its assets (more than 80%) in tax-exempt Pennsylvania municipal bonds rated at the time of purchase within the four highest grades (Baa or BBB or better) by Moody's or Standard and Poor's, except that the Fund may invest up to 20% of its assets in unrated Pennsylvania municipal bonds which, in Nuveen Advisory's opinion, are underrated or undervalued and have credit characteristics equivalent to, and are of comparable quality to, Pennsylvania municipal bonds rated Baa or BBB or better. The Fund will not invest in any rated Pennsylvania municipal bonds that are rated lower than Baa by Moody's or BBB by Standard & Poor's at the time of purchase. Municipal bonds rated Baa or BBB or better are considered "investment grade" securities. Bonds rated Baa are considered medium grade obligations that lack outstanding investment characteristics and in fact have speculative characteristics as well, while municipal bonds rated BBB are regarded as having an adequate capacity to pay principal and interest. See Appendix A for a description of securities ratings. S-1 PORTFOLIO INVESTMENTS Except to the extent that the Fund buys temporary investments as described below, the Fund will, as a fundamental policy, invest substantially all of its assets (more than 80%) in tax-exempt Pennsylvania municipal bonds that are rated at the time of purchase within the four highest grades (Baa or BBB or better) by Moody's or Standard and Poor's, except that the Fund may invest up to 20% of its assets in unrated Pennsylvania municipal bonds which, in Nuveen Advisory's opinion, have credit characteristics equivalent to, and are of comparable quality to, municipal bonds so rated. These policies and the Fund's investment objectives are fundamental policies, which cannot be changed without the approval of the holders of a majority of the outstanding shares of common shares and MuniPreferred shares, voting together, and of the holders of a majority of the outstanding MuniPreferred shares, voting separately. For this purpose, a "majority of the outstanding shares" means the vote of (1) 67% or more of the shares present at a meeting, if the holders of more than 50% of the shares are present or represented by proxy; or (2) more than 50% of the shares, whichever is less. S-2 The Fund buys Pennsylvania municipal bonds with different maturities and intends to maintain an average portfolio maturity of 15 to 30 years, although this may be shortened depending on market conditions. As a result, the Fund's portfolio may include long-term and intermediate-term Pennsylvania municipal bonds. If the long-term Pennsylvania municipal bond market is unstable, the Fund may temporarily invest up to 100% of its assets in temporary investments. Temporary investments are high quality, generally uninsured, short-term municipal bonds that may either be tax-exempt or taxable, for Pennsylvania personal income tax purposes, or both for Pennsylvania personal, and regular Federal, income tax purposes. The Fund will buy taxable temporary investments, which generally are uninsured, only if suitable tax-exempt temporary investments are not available at reasonable prices and yields. The Fund will invest only in taxable temporary securities that are U.S. Government securities or corporate debt securities rated within the highest grade by Moody's or Standard & Poor's, and that mature within one year from the date of issuance. The Fund's policies on securities ratings only apply when the Fund buys a security, and the Fund is not required to sell securities that have been downgraded. See Appendix A for a description of securities ratings. The Fund also may invest in taxable temporary investments that are certificates of deposit from U.S. banks with assets of at least $1 billion, or repurchase agreements. The Fund is required to allocate taxable income on temporary investments, if any, proportionately between common shares and MuniPreferred shares, based on the percentage of total dividends distributed to each class for that year. The Fund has not established any limit on the percentage of its portfolio that may be invested in municipal bonds subject to the alternative minimum tax provisions of Federal tax law, and a substantial portion of the income produced by the Fund may be includable in alternative minimum taxable income. MuniPreferred shares therefore would not ordinarily be a suitable investment for investors who are subject to the Federal alternative minimum tax. The suitability of an investment in MuniPreferred shares will depend upon a comparison of the after-tax yield likely to be provided from the Fund with that from comparable tax-exempt investments not subject to the alternative minimum tax, and from comparable fully taxable investments, in light of each such investor's tax position. Special considerations apply to corporate investors. In addition, the dividends paid on MuniPreferred shares during specified Rate Periods will include an allocated portion of any net capital gains or other income taxable for Federal income tax purposes the Fund realizes. See "Tax Matters." MUNICIPAL BONDS Included within the general category of municipal bonds described in the Prospectus are participations in lease obligations or installment purchase contract obligations (hereinafter collectively called "Municipal Lease Obligations") of municipal authorities or entities. Although Municipal Lease Obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged, a Municipal Lease Obligation is ordinarily backed by the municipality's covenant to budget for, appropriate and make the payments due under the Municipal Lease Obligation. However, certain Municipal Lease Obligations contain "non-appropriation" clauses which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is S-3 appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the Fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, without recourse to the general credit of the lessee, and disposition or releasing of the property might prove difficult. The Fund seeks to minimize these risks by only investing in those "non-appropriation" Municipal Lease Obligations where (a) the nature of the leased equipment or property is such that its ownership or use is essential to a governmental function of the municipality, (b) the lease payments will commence amortization of principal at an early date that results in an average life of seven years or less for the Municipal Lease Obligation, (c) appropriate covenants will be obtained from the municipal obligor prohibiting the substitution or purchase of similar equipment if lease payments are not appropriated, (d) the lease obligor has maintained good market acceptability in the past, (e) the investment is of a size that will be attractive to institutional investors and (f) the underlying leased equipment has elements of portability or use, or both, that enhance its marketability in the event foreclosure on the underlying equipment were ever required. Certain municipal bonds may carry variable or floating rates of interest whereby the rate of interest is not fixed but varies with changes in specified market rates or indexes, such as a bank prime rate or a tax-exempt money market index. As used in the Prospectus and in this Statement of Additional Information, the term municipal bonds also includes obligations, such as tax-exempt notes, municipal commercial paper and Municipal Lease Obligations, having relatively short-term maturities, although the Fund emphasizes investments in municipal bonds with long-term maturities. Obligations of issuers of municipal bonds are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Bankruptcy Reform Act of 1978, as amended. In addition, Congress, state legislatures or referenda may in the future enact laws affecting the obligations of these issuers by extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations or upon municipalities to levy taxes. There is also the possibility that, as a result of legislation or other conditions, the power or ability of any issuer to pay, when due, the principal of and interest on its Municipal Obligations may be materially affected. INVESTMENT RESTRICTIONS Except as described below, the Fund, as a fundamental policy, may not, without the approval of the holders of a majority of the outstanding shares of common stock and preferred stock of the Fund, including MuniPreferred, voting together as a single class, and of the holders of a majority of the outstanding shares of preferred stock of the Fund, including MuniPreferred, voting as a separate class: S-4 (1) Issue senior securities, as defined in the 1940 Act, other than preferred stock, except to the extent such issuance might be involved with respect to borrowings described under subparagraph (3) below or with respect to transactions involving futures contracts or the writing of options within the limits described under "Certain Trading Strategies of the Fund -- Financial Futures and Options Transactions" below; (2) Make short sales of securities or purchase any securities on margin (except for such short-term credits as are necessary for the clearance of transactions), or write or purchase put or call options, except to the extent that the purchase of a standby commitment may be considered the purchase of a put, and except for transactions involving options within the limits described under "Certain Trading Strategies of the Fund -- Financial Futures and Options Transactions" below; (3) Borrow money, except from banks for temporary or emergency purposes or for repurchase of its shares, and then only in an amount not exceeding one-third of the value of its total assets including the amount borrowed; while any such borrowings exceed 5% of its total assets, no additional purchases of investment securities will be made; (4) Underwrite any issue of securities, except to the extent that the purchase of Municipal Obligations in accordance with its investment objective, policies and limitations may be deemed to be an underwriting; (5) Invest more than 25% of its total assets in securities of issuers in any one industry; provided, however, that such limitation shall not apply to Municipal Obligations other than those Municipal Obligations backed only by the assets and revenues of non-governmental users, nor shall it apply to Municipal Obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities; (6) Purchase or sell real estate, but this shall not prevent the Fund from investing in Municipal Obligations secured by real estate or interests therein; (7) Purchase or sell commodities or commodities contracts, except for transactions involving futures contracts within the limits described under "Certain Trading Strategies of the Fund -- Financial Futures and Options Transactions" below; (8) Make loans, other than by entering into repurchase agreements and through the purchase of Municipal Obligations or temporary investments in accordance with its investment objective, policies and limitations; (9) Invest in securities other than Pennsylvania Municipal Obligations and temporary investments as described under "Investment Objectives and Policies -- Portfolio Investments" above; and purchase financial futures and options except within the limits described in "Certain Trading Strategies of the Fund -- Financial Futures and Options Transactions." S-5 (10) Invest more than 5% of its total assets in securities of any one issuer, except that this limitation shall not apply to securities of the U.S. Government, its agencies and instrumentalities or to the investment of 25% of its total assets; (11) Pledge, mortgage or hypothecate its assets, except that, to secure borrowings permitted by subparagraph (3) above, it may pledge securities having a market value at the time of pledge not exceeding 20% of the value of its total assets; (12) Invest more than 10% of its total assets in repurchase agreements maturing in more than seven days; and (13) Purchase or retain the securities of any issuer other than its own securities if, to its knowledge, those of its directors, or those officers and directors of the Nuveen Advisory Corp. who individually own beneficially more than 1/2 of 1% of the outstanding securities of such issuer, together own beneficially more than 5% of such outstanding securities. For the purpose of applying the limitation set forth in subparagraph (10) above, an issuer shall be deemed the sole issuer of a security when its assets and revenues are separate from other governmental entities and its securities are backed only by its assets and revenues. Similarly, in the case of a non-governmental user, such as an industrial corporation or a privately owned or operated hospital, if the security is backed only by the assets and revenues of the non-governmental user, then such non-governmental user would be deemed to be the sole issuer. Where a security is also backed by the enforceable obligation of a superior or unrelated governmental or other entity, (other than a bond insurer) it shall also be included in the computation of securities owned that are issued by such governmental or other entity. Where a security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or letter of credit, the guarantee or letter of credit would be considered a separate security and would be treated as an issue of that government or other entity. When a municipal bond is insured by bond insurance, it shall not be considered a security that is issued or guaranteed by the insurer; instead, the issuer of the municipal bond will be determined in accordance with the principles set out above. The foregoing restrictions do not limit the percentage of the Fund's assets that may be invested in municipal bonds insured by any given insurer. In addition to the limitations set forth above, the Fund will not, as a matter of operating policy, (1) invest for the purpose of exercising control or management, or (2) borrow in excess of 5% of its total assets if and so long as its preferred shares are outstanding. These policies are not fundamental and the Board may change them without shareholder approval. The restrictions and other limitations set forth above will apply only at the time of purchase of securities and will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities. S-6 The Fund has no intention to file a voluntary application for relief under Federal bankruptcy law or any similar application under state law for so long as the Fund is solvent and does not foresee becoming insolvent. CERTAIN TRADING STRATEGIES OF THE FUND PORTFOLIO TRADING AND TURNOVER RATE Portfolio trading may be undertaken to accomplish the investment objective of the Fund in relation to actual and anticipated movements in interest rates. In addition, a security may be sold and another of comparable quality purchased at approximately the same time to take advantage of what Nuveen Advisory believes to be a temporary price disparity between the two securities. Temporary price disparities between two comparable securities may result from supply and demand imbalances where, for example, a temporary oversupply of certain bonds may cause a temporarily low price for such bonds, as compared with other bonds of like quality and characteristics. The Fund may also engage to a limited extent in short-term trading consistent with its investment objective. Securities may be sold in anticipation of a market decline (a rise in interest rates) or purchased in anticipation of a market rise (a decline in interest rates) and later sold, but the Fund will not engage in trading solely to recognize a gain. Subject to the foregoing, the Fund will attempt to achieve its investment objective by prudent selection of Municipal Obligations with a view to holding them for investment. The Fund anticipates that its annual portfolio turnover rate generally will not exceed 100%, although there can be no assurance of this. However, the rate of turnover will not be a limiting factor when the Fund deems it desirable to sell or purchase securities. Therefore, depending upon market conditions, the Fund's annual portfolio turnover rate may exceed 100% in particular years. WHEN-ISSUED AND DELAYED-DELIVERY The Fund may purchase and sell Municipal Obligations on a when-issued or delayed-delivery basis. When-issued and delayed-delivery transactions arise when securities are purchased or sold with payment and delivery beyond the regular settlement date. (When-issued transactions normally settle within 30-45 days). On such transactions the payment obligation and the interest rate are fixed at the time the buyer enters into the commitment. Beginning on the date the Fund enters into a commitment to purchase securities on a when-issued or delayed delivery basis, it is required under rules promulgated by the Securities and Exchange Commission ("SEC") to maintain in a segregated account cash or liquid assets, equal in value to the purchase price due on the settlement date. Income these assets generate in a segregated account, which provides taxable income for Federal income tax purposes, is includable in the taxable income of the Fund. The Fund currently intends to allocate net capital gains and other income taxable for Federal income tax purposes, if any, proportionately between its common stock and its MuniPreferred shares, and dividends paid on its MuniPreferred shares during specified periods will include an allocated portion of any S-7 such net capital gains and other taxable income. See "Tax Matters." The commitment to purchase securities on a when-issued or delayed delivery basis may involve an element of risk because the value of the securities is subject to market fluctuation. No interest accrues to the purchaser prior to settlement of the transaction, and at the time of delivery the market value may be less than cost. FINANCIAL FUTURES AND OPTIONS TRANSACTIONS The Fund may attempt to hedge all or a portion of its investment portfolio against market risk by engaging in transactions in financial futures contracts, options on financial futures or options that either are based on an index of long-term Municipal Obligations (i.e., those with remaining maturities averaging 20-30 years) or relate to debt securities whose prices Nuveen Advisory anticipates to correlate with the prices of the Municipal Obligations the Fund owns. The Fund has no present intention to engage in such hedging transactions and in no event does it expect that any material portion of its assets would be so committed. To accomplish such hedging, the Fund may take an investment position in a futures contract or in an option which is expected to move in the opposite direction from the position being hedged. Hedging may be utilized to reduce the risk that the value of securities the Fund owns may decline on account of an increase in interest rates and to hedge against increases in the cost of the securities the Fund intends to purchase as a result of a decline in interest rates. The use of futures and options for hedging purposes can be expected to result in taxable income or gain. The Fund currently intends to allocate any taxable income or gain proportionately between its common stock and its MuniPreferred shares. See "Tax Matters." The sale of financial futures or the purchase of put options on financial futures or on debt securities or indexes is a means of hedging against the risk of rising interest rates, whereas the purchase of financial futures or of call options on financial futures or on debt securities or indexes is a means of hedging the Fund's portfolio against an increase in the price of securities such Fund intends to purchase. Writing a call option on a futures contract or on debt securities or indexes may serve as a hedge against a modest decline in prices of Municipal Obligations held in the Fund's portfolio, and writing a put option on a futures contract or on debt securities or indexes may serve as a partial hedge against an increase in the value of Municipal Obligations the Fund intends to acquire. The writing of these options provides a hedge to the extent of the premium received in the writing transaction. Although certain risks are involved in futures and options transactions (as discussed under "Risks of Futures and Options Transactions" below), because the Fund will engage in these transactions only for hedging purposes, these futures and options portfolio strategies should not subject the Fund to those risks frequently associated with speculation in futures or options transactions. Regulations of the Commodity Futures Trading Commission (the "CFTC") require that the Fund engage in transactions in futures and options on futures only for bona fide hedging purposes or if the aggregate initial margin deposits and premiums the Fund pays do not exceed 5% of the market value of its assets. The Fund will not purchase futures unless it has segregated S-8 cash, government securities or high grade liquid debt equal to the contract price of the futures less any margin on deposit, or unless the purchase of a put option covers the long futures position. The Fund will not sell futures unless the Fund owns the instruments underlying the futures or owns options on such instruments or owns a portfolio whose market price may be expected to move in tandem with the market price of the instruments or index underlying the futures. If the Fund engages in transactions involving the purchase or writing of put and call options on debt securities or indexes, the Fund will not purchase these options if more than 5% of its assets would be invested in the premiums for these options, and it will only write "covered" or "secured" options, where the Fund holds the securities or cash required to be delivered upon exercise, with such cash being maintained in a segregated account. These requirements and limitations may limit the Fund's ability to engage in hedging transactions. So long as Moody's or S&P, or both, are rating the Fund's MuniPreferred shares, the Fund will only engage in futures or options transactions in accordance with the then-current guidelines of such rating agencies, and only after it has received written confirmation from Moody's and S&P, as appropriate, that these transactions would not impair the ratings then assigned by Moody's and S&P to such shares. DESCRIPTION OF FINANCIAL FUTURES AND OPTIONS. A futures contract is a contract between a seller and a buyer for the sale and purchase of specified property at a specified future date for a specified price. An option is a contract that gives the holder of the option the right, but not the obligation, to buy (in the case of a call option) specified property from, or to sell (in the case of a put option) specified property to, the writer of the option for a specified price during a specified period prior to the option's expiration. Financial futures contracts and options cover specified debt securities (such as U.S. Treasury securities) or indexes designed to correlate with price movements in certain categories of debt securities. At least one exchange trades futures contracts on an index designed to correlate with the long-term municipal bond market. Financial futures contracts and options on financial futures contracts are traded on exchanges regulated by the CFTC. Options on certain financial instruments and financial indexes are traded on securities markets regulated by the SEC. Although futures contracts and options on specified financial instruments call for settlement by delivery of the financial instruments covered by the contracts, in most cases positions in these contracts are closed out in cash by entering into offsetting liquidating or closing transactions. Index futures and options are designed for cash settlement only. RISKS OF FUTURES AND OPTIONS TRANSACTIONS. There are certain risks associated with the use of financial futures and options to hedge investment portfolios. There may be an imperfect correlation between price movements of the futures and options and price movements of the portfolio securities being hedged. Losses may be incurred in hedging transactions, which could reduce the portfolio gains that might have been realized if the hedging transactions had not been entered into. The ability to close out positions in futures and options depends upon the existence of a liquid secondary market, which may not exist for all futures and options at all times. If the Fund engages in futures transactions or in the writing of options on futures, it will be required to maintain initial margin and maintenance margin and may be required to make daily variation margin payments in accordance with applicable rules of the S-9 exchanges and the CFTC. If the Fund purchases a financial futures contract or a call option or writes a put option in order to hedge the anticipated purchase of Municipal Obligations, and if the Fund fails to complete the anticipated purchase transaction, the Fund may have a loss or a gain on the futures or options transaction that will not be offset by price movements in the Municipal Obligations that were the subject of the anticipatory hedge. The cost of put options on debt securities or indexes effectively increases the cost of the securities subject to them, thereby reducing the yield otherwise available from these securities. If the Fund decides to use futures contracts or options on futures contracts for hedging purposes, the Fund will be required to establish an account for such purposes with one or more CFTC-registered futures commission merchants. A futures commission merchant could establish initial and maintenance margin requirements for the Fund that are greater than those which would otherwise apply to the Fund under applicable rules of the exchanges and the CFTC. REPURCHASE AGREEMENTS. The Fund may buy repurchase agreements as temporary investments. A repurchase agreement is a contract in which the seller of securities (U.S. government securities or municipal bonds) agrees to repurchase the same securities from the buyer at a specified price on a future date. The repurchase price determines the yield during the Fund's holding period. Repurchase agreements are considered to be loans whose collateral is the underlying security that is the subject of the repurchase agreement. Income from repurchase agreements is taxable and required to be allocated between common shares and MuniPreferred shares. See "Tax Matters" and "The Auction - Auction Dates; Advance Notice of Allocation of Taxable Income" in the Prospectus. The Fund will enter into repurchase agreements only with registered securities dealers or domestic banks that, in Nuveen Advisory's opinion, present minimal credit risks. The risk to the Fund is limited to the ability of the other party to pay the agreed-upon repurchase price on the delivery date; however, although the value of the underlying collateral at the time of the transaction always equals or exceeds the repurchase price, if the value of the collateral declines there is a risk of loss of principal and interest. If the other party defaults, the collateral may be sold, but the Fund may lose money if the value of the collateral declines and may have to pay the costs of the sale or experience delays in selling the collateral. If the seller files for bankruptcy, the Fund may not be able to sell the collateral quickly or at all. Nuveen Advisory will monitor the value of the collateral at the time the Fund enters into a repurchase agreement and during the term of the repurchase agreement to determine that at all times that value of the collateral equals or exceeds the repurchase price. If the value of the collateral is less than the repurchase price, Nuveen Advisory will demand additional collateral from the other party to increase the value of the collateral to at least the redemption price plus interest. S-10 Special Considerations Relating to Pennsylvania Municipal Obligations As described above, except during temporary defensive periods, the Fund will invest substantially all of its net assets in Pennsylvania Municipal Obligations. The Fund is therefore susceptible to political, economic or regulatory factors affecting issuers of Pennsylvania Municipal Obligations. There can be no assurance that the Commonwealth will not experience a decline in economic conditions or that portions of the Pennsylvania Municipal Obligations purchased by the Fund will not be affected by such a decline. Without intending to be complete, the following briefly summarizes some of these difficulties and the current financial situation, as well as some of the complex factors affecting the financial situation in the Commonwealth. It is derived from sources that are generally available to investors and is based in part on information obtained from various agencies in the Commonwealth. No independent verification has been made of the following information. State Economy--The Commonwealth of Pennsylvania is one of the most populous states, ranking fifth behind California, New York, Texas and Florida. Pennsylvania is an established yet growing state with a diversified economy. It is the headquarters for many major corporations. Pennsylvania had been historically identified as a heavy industry state. That reputation has changed over the last thirty years as the coal, steel and railroad industries declined and the Commonwealth's business environment readjusted to reflect a more diversified industrial base. This economic readjustment was a direct result of a long-term shift in jobs, investment and workers away from the northeast part of the nation. Currently, the major sources of growth in Pennsylvania are in the service sector, including trade, medical and the health services, education and financial institutions. Pennsylvania's agricultural industries remain an important component of the Commonwealth's economic structure, accounting for more than $3.6 billion in crop and livestock products annually. Agribusiness and food-related industries support $39 billion in economic activity annually. Over 51,000 farms form the backbone of the State's agricultural economy. Farmland in Pennsylvania includes over four million acres of harvested cropland and four million acres of pasture and farm woodlands--nearly one-third of the Commonwealth's total land area. Agricultural diversity in the Commonwealth is demonstrated by the fact that Pennsylvania ranks among the top ten states in the production of a number of agricultural products. Employment within the Commonwealth increased steadily from 1984 to 1990. From 1990 to 1992, employment in the Commonwealth declined 1.8%. From 1992 to 1998, employment increased 4.1%. The growth in employment experienced in the Commonwealth during such periods is slightly higher than the growth in employment in the Middle Atlantic region of the United States. Non-manufacturing employment in the Commonwealth has increased steadily since 1980 to its 1998 level of 82.8% of total Commonwealth employment. S-11 Manufacturing, which contributed 17.1% of 1998 non-agricultural employment, has fallen behind both the services sector and the trade sector as the largest single source of employment within the Commonwealth. In 1998, the services sector accounted for 32.3% of all nonagricultural employment in the Commonwealth while the trade sector accounted for 22.4%. Economic strengths and weakness vary in different parts of the Commonwealth. In general, heavy industry and manufacturing have been facing increasing competition from foreign producers. During 1998, the annual average unemployment rate in the Commonwealth was 4.6%, compared to 4.5% for the United States. For March 1999, the unadjusted unemployment rate was 4.8% in the Commonwealth and 4.4% in the United States, while the seasonally adjusted unemployment rate for the Commonwealth was 4.4% and for the United States was 4.2%. State Budget--The Commonwealth operates under an annual budget that is formulated and submitted for legislative approval by the Governor each February. The Pennsylvania Constitution requires that the Governor's budget proposal consist of three parts: (i) a balanced operating budget setting forth proposed expenditures and estimated revenues from all sources and, if estimated revenues and available surplus are less than proposed expenditures, recommending specific additional sources of revenue sufficient to pay the deficiency; (ii) a capital budget setting forth proposed expenditures to be financed from the proceeds of obligations of the Commonwealth or its agencies or from operating funds; and (iii) a financial plan for not less than the succeeding five fiscal years, that includes for each year projected operating expenditures and estimated revenues and projected expenditures for capital projects. The General Assembly may add, change or delete any items in the budget prepared by the Governor, but the Governor retains veto power over the individual appropriations passed by the legislature. The Commonwealth's fiscal year begins on July 1 and ends on June 30. All funds received by the Commonwealth are subject to appropriation in specific amounts by the General Assembly or by executive authorization by the Governor. Total appropriations enacted by the General Assembly may not exceed the ensuing year's estimated revenues, plus (less) the unappropriated fund balance (deficit) of the preceding year, except for constitutionally authorized debt service payments. Appropriations from the principal operating funds of the Commonwealth (the General Fund, the Motor License Fund and the State Lottery Fund) are generally made for one fiscal year and are returned to the unappropriated surplus of the fund if not spent or encumbered by the end of the fiscal year. The Constitution specifies that a surplus of operating funds at the end of a fiscal year must be appropriated for the ensuing year. Pennsylvania uses the "fund" method of accounting for receipts and disbursements. For purposes of government accounting, a "fund" is an independent fiscal and accounting entity with a self-balancing set of accounts, recording cash and/or other resources together with all related liabilities and equities that are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with the fund's special regulations, restrictions or limitations. In the Commonwealth, over 150 funds have been established by legislative enactment or in certain cases by administrative action for the purpose of recording the receipt and S-12 disbursement of money's received by the Commonwealth. Annual budgets are adopted each fiscal year for the principal operating funds of the Commonwealth and several other special revenue funds. Expenditures and encumbrances against these funds may only be made pursuant to appropriation measures enacted by the General Assembly and approved by the Governor. The General Fund, the Commonwealth's largest fund, receives all tax revenues, non-tax revenues and federal grants and entitlements that are not specified by law to be deposited elsewhere. The majority of the Commonwealth's operating and administrative expenses are payable from the General Fund Debt service on all bond indebtedness of the Commonwealth, except that issued for highway purposes or for the benefit of other special revenue funds, is payable from the General Fund. Financial information for the principal operation funds of the Commonwealth are maintained on a budgetary basis of accounting, which is used for the purpose of ensuring compliance with the enacted operating budget. The Commonwealth also prepares annual financial statements in accordance with generally accepted accounting principles ("GAAP"). Budgetary basis financial reports are based on a modified cash basis of accounting as opposed to a modified accrual basis of accounting prescribed by GAAP. Financial information is adjusted at fiscal year- end to reflect appropriate accruals for financial reporting in conformity with GAAP. Financial Condition and Results of Operations--The period from fiscal year 1993 through fiscal 1997 was a time of steady, modest economic growth and low rates of inflation in the Commonwealth. These economic conditions, together with tax reductions in the several years following the tax rate increases and tax base expansions enacted in fiscal 1991 for the General Fund, produced tax revenue gains averaging 4.1 percent per year during the period. Total revenues during this same period increased at a 4.7 percent average rate. Intergovernmental revenue recorded the largest percentage gain during this period, averaging 8.1 percent. Expenditures and other uses during the fiscal 1993 through fiscal 1997 period rose at a 3.8 percent rate, led by an average 13.8 percent annual increase for protection of persons and property program costs. This high rate of increase reflects the cost to acquire, staff and operate expanded prison facilities to house a greater population. Public health and welfare program costs expanded an average 5.4 percent annually during this period, the second largest rate of increase for program categories. At the close of fiscal 1997, the fund balance for the governmental fund type totaled $2,900.9 million, an increase of $914.6 million. Financial Results for Recent Fiscal Years (GAAP Basis)--During the five year period from fiscal 1993 through fiscal 1997, revenues and other sources increased by an average 4.7 percent annually. Tax revenues during this same period increased by an annual average of 4.1 percent. Intergovernmental revenues, at an 8.5 percent annual average rate of increase, were the revenue source with the largest rate of growth over the five-year period. Expenditures and other uses during the fiscal 1993 through fiscal 1997 period rose at an average annual rate of 4.9 percent. Program costs for protection of persons and property increased an average 13.8 percent annually, the largest growth rate of all programs. Public health and welfare program costs increased at a 5.7 percent annual average rate during the period. S-13 Efforts to control costs for various social programs and the presence of favorable economic conditions have helped restrain these costs. The general fund balance at June 30, 1998 totaled $1,958.9 million. The general fund balance at June 30, 1997 totaled $1,364.9 million, an increase of $729.7 million over the $635.2 million balance at June 30, 1996. Fiscal 1996 Financial Results (Budgetary Basis)--The unappropriated surplus for Commonwealth revenues (prior to transfers to Tax Stabilization Reserve Fund) at the close of the 1996 fiscal year for the General Fund was $183.8 million, $65.5 million above estimate. Fiscal 1996 was the fifth consecutive fiscal year the Commonwealth reported an increase in the fiscal year-end unappropriated balance. Expenditures from Commonwealth revenues for the fiscal year, including $113.0 million of supplemental appropriations but excluding pooled financing expenditures, totaled $16,074.7 million. Expenditures exceeded available revenues and lapses by $253.2 million. The difference was funded from a planned partial drawdown of the $437.0 million fiscal year adjusted beginning unappropriated surplus. Commonwealth revenues (prior to tax refunds) for the 1996 fiscal year increased by $113.9 million over the prior fiscal year to $16,338.5 million representing a growth rate of 0.7 percent. The Commonwealth has estimated that tax changes enacted for the 1996 fiscal year reduced Commonwealth revenues by $283.4 million representing 1.7 percentage points of fiscal 1996 growth in Commonwealth revenues. The most significant tax changes enacted for the 1996 fiscal year were (i) the reduction of the corporate net income tax rate to 9.99 percent; (ii) double weighing of the sales factor of the corporate net income apportionment calculation; (iii) an increase in the maximum annual allowance for a net operating loss deduction from $0.5 million to $ 1.0 million; (iv) an increase in the basic exemption amount for the capital stock and franchise tax; (v) the repeal of the tax on annuities; and (vi) the elimination of inheritance tax on transfers of certain property to surviving spouses. Fiscal 1997 Financial Results (Budgetary Basis)--The unappropriated balance of Commonwealth revenues increased during the 1997 fiscal year by $432.9 million. Higher than estimated revenues and slightly lower expenditures than budgeted caused the increase. The unappropriated balance rose from an adjusted amount of $158.5 million at the beginning of fiscal 1997, to $591.4 million (prior to reserves for transfer to the Tax Stabilization Reserve Fund) at the close of the fiscal year. Transfers to the Tax Stabilization Reserve Fund for fiscal 1997 operations are expected to be $88.7 million, which represents the normal fifteen percent of the ending unappropriated balance, plus an additional $100 million authorized by the General Assembly when it enacted the fiscal 1998 budget. Commonwealth revenues (prior to tax refunds) during the 1997 fiscal year totaled $17,320.6 million, $576.1 (3.4 percent) above the estimate made at the time the budget was enacted. Revenue from taxes was the largest contributor to higher than estimated receipts. Tax revenue in fiscal 1997 grew 6.1 percent over tax revenues in fiscal 1996. This rate of increase was not adjusted for legislated tax reductions that affected receipts during both of those fiscal years and therefor understates the actual underlying rate of growth of tax revenue during fiscal S-14 1997. Receipts from the personal income tax produced the largest single component of higher revenues for the fiscal year. Personal income collections were $236.3 million over estimate representing a 6.9 percent increase over fiscal 1996 receipts. Receipts of the sales and use tax were $185.6 million over estimate representing a 6.2 percent increase. Collections of corporate taxes, led by the capital stock and franchise and the gross receipt taxes, also exceeded their estimates for the fiscal year. Non-tax revenues were $19.8 million (5.8 percent) over estimate mostly due to higher than anticipated interest earnings. Expenditures from Commonwealth revenues (excluding pooled financing expenditures) during fiscal 1997 totaled $16,347.7 million and were close to the estimate made in February 1997 with the presentation of the Governor's fiscal 1998 budget request. Total expenditures represent an increase over fiscal 1996 expenditures of 1.7 percent. Fiscal 1998 Financial Results (Budgetary Basis)--Operations during the 1998 fiscal year increased the unappropriated balance of commonwealth revenues during that period by $86.4 million to $488.7 million at June 30, 1998 (prior to reserves for transfer to the Tax Stabilization Reserve Fund). Higher than estimated revenues, offset in part by increased reserves for tax refunds, and slightly lower expenditures than budgeted were responsible for the increase. Transfers to the Tax Stabilization Reserve Fund for fiscal 1998 operations will total $223.3 million consisting of $73.3 million representing the required transfer of fifteen percent of the ending unappropriated surplus balance, plus an additional $150 million authorized by the General Assembly when it enacted the fiscal 1999 budget. With these transfers, the balance in the Tax Stabilization Reserve Fund will exceed $664 million and represents 3.7 percent of fiscal 1998 revenues. Commonwealth revenues (prior to tax refunds) during the 1998 fiscal year totaled $18,123.2 million, $676.1 million (3.9 percent) above the estimate made at the time the budget was enacted. Tax revenue received in fiscal 1998 grew 4.8 percent over tax revenues received during fiscal 1997. This rate of increase includes the effect of legislated tax reductions that affected receipts during both fiscal years and therefore understates the actual underlying rate of growth of tax revenue during fiscal 1998. Receipts from the personal income tax produced the largest single component of higher revenues during fiscal 1998. Personal income tax collections were $416.6 million over estimate representing an 8.5 percent increase over fiscal 1997 receipts. Receipts of the sales and use tax were $6.2 million over estimate representing a 1.9 percent increase. Collections of all corporate taxes exceeded their estimate for the fiscal year, led by the capital stock and franchise tax and the corporate net income tax which were over estimate by 7.8 percent and 2.7 percent, respectively. Non-tax revenues were $27.5 million (8.6 percent) over estimate, mostly due to greater than anticipated interest earnings for the fiscal year. Expenditures from all fiscal 1998 appropriations of Commonwealth revenues totaled $17,229.8 million (excluding pooled financing expenditures and net of current year lapses). This amount represents an increase of 4.5 percent over fiscal 1997 appropriation expenditures. Fiscal 1999 Budget--The budget for fiscal 1999 was enacted in April 1998 at which time the official revenue estimate for the 1999 fiscal year was established at $18,456.6 million. The S-15 official revenue estimate is based on an economic forecast for national gross domestic product, on a year-over-year basis, to slow from an estimated annualized 3.9 percent rate in the fourth quarter of 1997 to a projected 1.8 percent annualized growth rate by the second quarter of 1999. The forecast of slowing economic activity is based on the expectation that consumers will reduce their pace of spending, particularly on motor vehicles, housing and other durable goods. Business is also expected to trim its spending on fixed investments. Foreign demand for domestic goods is expected to decline in reaction to economic difficulties in Asia and Latin America, while an economic recovery in Europe is expected to proceed slowly. The underlying growth rate, excluding any effect of scheduled or proposed tax changes, for the General Fund fiscal 1999 official revenue estimate is 3.0 percent over actual fiscal 1998 revenues. When adjusted to include the estimated effect of enacted tax changes, fiscal 1999 Commonwealth revenues are projected to increase by 1.66 percent over actual Commonwealth revenues for fiscal 1998. Appropriations enacted for fiscal 1999 are 4.1 percent ($705.1 million) above the appropriations enacted for fiscal 1998 (including supplemental appropriations). Major increases in expenditures budgeted for fiscal 1999 include: (i) $249.5 million in direct support of local school district education costs (local school districts will also benefit from an estimated $104 million of reduced contributions by school districts to their worker's retirement costs from a reduced employer contribution rate); (ii) $60.4 million for higher education, including scholarship grants; (iii) $56.5 million to fund the correctional system including $21 million to operate a new correctional facility; (iv) $121.1 million for long-term care medial assistance costs; (v) $14.4 million for technology and Year 2000 investments; (vi) $55.9 million to fund the first year's cost of a July 1, 1998 annuitant cost of living increase for state and school district employees and (vii) $20 million to replace bond funding for equipment loans for volunteer fire and rescue companies. The balance of the increase is spread over many departments and program operations. The enacted fiscal 1999 budget assumes the draw down of the $265.4 million beginning budgetary balance by approximately $144 million to an estimated closing balance, prior to transfer of the required portion to the Tax Stabilization Reserve Fund, of $124.3 million. The amount of the anticipated draw down does not consider the availability of appropriation lapses normally occurring during a fiscal year that are used to fund supplemental appropriations or increase unappropriated surplus. Debt Limits and Outstanding Debt--The Pennsylvania Constitution permits the issuance of the following types of debt: (i) debt to suppress insurrection or rehabilitate areas affected by disaster; (ii) electorate approved debt; (iii) debt for capital projects subject to an aggregate outstanding debt limit of 1.75 times the annual average tax revenues of the preceding five fiscal years; and (iv) tax anticipation notes payable in the fiscal year of issuance. Under the Pennsylvania Fiscal Code, the Auditor General is required to certify to the Governor and the General Assembly certain information regarding the Commonwealth's indebtedness. According to the August 26, 1998 Auditor General certificate, the average annual S-16 tax revenues deposited in all funds in the five fiscal years ended August 26, 1998 was approximately $20.4 billion, and, therefore, the net debt limitation for the 1999 fiscal year is $32.0 billion. Outstanding net debt totaled $3.7 billion at June 30, 1998 approximately equal to the net debt at June 30, 1997. At August 26, 1998, the amount of debt authorized by law to be issued, but not yet incurred, was $22.7 billion. Debt Ratings--All outstanding general obligation bonds of the Commonwealth are rated AA by S&P and Aa3 by Moody's. City of Philadelphia--The City of Philadelphia (the "City" or "Philadelphia") is the largest city in the Commonwealth, with an estimated population of 1,585,577 according to the 1990 Census. Philadelphia experienced a series of general fund deficits for fiscal years 1988 through 1992 which culminated in serious financial difficulties for the City. In its 1992 Comprehensive Annual Financial Report, Philadelphia reported a cumulative general fund deficit of $71.4 million for fiscal year 1992. In June 1991, the Pennsylvania legislature established the Pennsylvania Intergovernmental Cooperation Authority ("PICA"), a five-member board to assist Philadelphia in remedying fiscal emergencies. PICA is designed to provide assistance through the issuance of funding debt and to make factual findings and recommendations to Philadelphia concerning its budgetary and fiscal affairs. The legislation empowered PICA to issue notes and bonds on behalf of Philadelphia, and also authorized Philadelphia to levy a one-percent sales tax the proceeds of which would be used to pay off the bonds. In return for PICA's fiscal assistance, Philadelphia is required, among other things, to establish five-year financial plans that include balanced annual budgets. Under the legislation, if Philadelphia does not comply with such requirements, PICA may withhold bond revenues and certain state funding. At this time, the City is operating under a five-year fiscal plan approved by PICA on June 9, 1998. As of November 25, 1998, PICA has issued approximately $1,761.7 million of its Special Tax Revenue Bonds. The financial assistance has included the refunding of certain city general obligation bonds, funding of capital projects and the liquidation of the City's Cumulative General Fund balance deficit as of June 30, 1992 of $224.9 million. No further PICA bonds are to be issued by PICA for the purpose of financing a capital project or deficit as the authority for such bond sales expired on December 31, 1994. PICA's authority to issue debt for the purpose of financing a cash flow deficit expired on December 31 1996. Its ability to refund existing outstanding debt is unrestricted. PICA had $1,055.0 million in Special Tax Revenue Bonds outstanding as of June 30, 1998. The audited General Fund balance of the City as of June 30, 1995, 1996 and 1997 showed a surplus of approximately $80.5 million, $118.5 million and $128.8 million, respectively. S&P's rating on Philadelphia's general obligation bonds is "BBB." Moody's rating is currently "BBB." Moody's rating is currently "Baa2." S-17 Litigation--The Commonwealth is a party to numerous lawsuits in which an adverse final decision could materially affect the Commonwealth's governmental operations and consequently its ability to pay debt service on its obligations. The Commonwealth also faces tort claims made possible by the limited waiver of sovereign immunity effected by Act 152, approved September 28, 1978, as amended. Under Act 152, damages for any loss are limited to $250,000 per person and $1 million for each accident. Year 2000 Planning--A well-established standard in the computer industry governing traditional programming practices is expected to result in many current computer systems being unable to recognize dates beyond the year 1999. As a result, computers worldwide may begin to malfunction by producing erroneous data or failing completely as the year 2000 draws near. The Governor has made fixing the year 2000 problem a top priority for Pennsylvania state agencies. At the Governor's direction, Pennsylvania has begun an aggressive program to make its computer systems year 2000-compatible and to identify potential problems with entities outside state government with which the Commonwealth does business or exchanges data. An initial assessment of state agencies' computer resources was completed in June, 1996. This overview assessment was used to develop the Governor's Year 2000 Action Plan, which tracks state agencies' computer programs through a three-step process of correction, testing, and implementation. Under this action plan, 45,937 mission-critical and non mission-critical computer programs used by state agencies are scheduled for corrective measures to ensure they will be year 2000-compatible. Mission-critical computer programs are those which impact the health, safety and welfare of the Commonwealth and its citizens, and for which failure to be year compliant could have a material and adverse impact upon operations of the Commonwealth. The projected cost of the Commonwealth's year 2000 modification work is $39.5 million and is being paid from appropriations from current revenues. S-18 MANAGEMENT OF THE FUND TRUSTEES AND OFFICERS The Board of Trustees is responsible for the management of the Fund, including general supervision of the duties Nuveen Advisory performs under the Investment Management Agreement. There are seven trustees of the Fund, one of whom is an "interested person" (as defined in the 1940 Act) and six of whom are "disinterested 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.
NAME, AGE POSITIONS AND OFFICES PRINCIPAL OCCUPATIONS AND ADDRESS WITH FUND DURING PAST FIVE YEARS - ---------------------------------------- ------------------------------------- ------------------------------------- Timothy R. Schwertfeger,* 50 Chairman of the Board and Trustee Chairman (since July 1996) and 333 West Wacker Drive Director of The John Nuveen Chicago, IL 60606 Company, John Nuveen & Co. Incorporated, Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; prior thereto, Executive Vice President; Chairman and Director (since January 1997) of Nuveen Asset Management, Inc.; Director (since 1996) of Institutional Capital Corporation; Chairman and Director of Rittenhouse Financial Services Inc. (since 1999). - ---------------------------------------- ------------------------------------- ------------------------------------- Robert P. Bremner, 58 Trustee Private investor and management 3725 Huntington Street, NW consultant. Washington, D.C. 20015 - ---------------------------------------- ------------------------------------- ------------------------------------- Lawrence H. Brown, 64 Trustee Retired in August 1989 as Senior 201 Michigan Avenue Vice President of The Northern Highwood, IL 60040 Trust Company - ---------------------------------------- ------------------------------------- ------------------------------------- Anne E. Impellizzeri, 65 Trustee President and Chief Executive 3 West 29th Street Officer of Blanton-Peale Institute, New York, NY 10001 a training and counseling organization. - ---------------------------------------- ------------------------------------- -------------------------------------
S-19 - ---------------------------------------- ------------------------------------- ---------------------------------------- Peter R. Sawers, 66 Trustee Adjunct Professor of 22 The Landmark Business and Economics, Northfield, IL 60093 University of Dubuque, Iowa; Adjunct Professor, Lake Forest Graduate School of Management, Lake Forest, Illinois; prior thereto, Executive Director, Towers Perrin Australia (management consultant); Chartered Financial Analyst; Certified Management Consultant. - ---------------------------------------- ------------------------------------- ---------------------------------------- William J. Schneider, 54 Trustee Senior Partner and Chief Operating 4000 Miller-Valentine Ct. Officer, Miller-Valentine Partners; P.O. Box 744 Vice President, Miller-Valentine Group, Dayton, OH 45401 a development and contract company; Member Community Advisory Board, National City Bank, Dayton, Ohio. - ---------------------------------------- ------------------------------------- ---------------------------------------- Judith M. Stockdale, 50 Trustee Executive Director (since 35 East Wacker Drive 1994) of the Gaylord and Chicago, IL 60601 Dorothy Donnelley Foundation, a private family foundation; prior thereto, Executive Director (from 1990 to 1994) of the Great Lakes Protection Fund. - ---------------------------------------- ------------------------------------- ---------------------------------------- Alan G. Berkshire, 38 Vice President and Assistant Vice President and General Counsel 333 W. Wacker Drive Secretary (since September 1997) and Chicago, IL 60606 Secretary (since May 1998) of the John Nuveen Company, John Nuveen & Co. Incorporated, Nuveen Advisory Corp. and Nuveen Corp., prior thereto, Partner in the law firm of Kirkland & Ellis. - ---------------------------------------- ------------------------------------- -------------------------------------
S-20 - ---------------------------------------- ------------------------------------- ------------------------------------- Peter H. D'Arrigo, 31 Vice President and Treasurer Vice President of John Nuveen & Co. 333 West Wacker Drive Incorporated (since January 1999), Chicago, IL 60606 prior thereto, Assistant Vice President (since January 1997); formerly, Associate of John Nuveen & Co. Incorporated; Chartered Financial Analyst - ---------------------------------------- ------------------------------------- ------------------------------------- Michael S. Davern, 41 Vice President Vice President of Nuveen Advisory 333 W. Wacker Drive Corp.; prior thereto, Vice Chicago, IL 60606 President and Portfolio Manager of Flagship Financial. - ---------------------------------------- ------------------------------------- ------------------------------------- Lorna C. Ferguson, 53 Vice President Vice President of John Nuveen & Co. 333 W. Wacker Drive (since January 1998) of Nuveen Chicago, IL 60606 Advisory Corp. and Nuveen Institutional Advisory Corp. - ---------------------------------------- ------------------------------------- ------------------------------------- William M. Fitzgerald, 35 Vice President Vice President of Nuveen Advisory 333 W. Wacker Drive Corp (since December 1995); prior Chicago, IL 60606 thereto, Assistant Vice President of Nuveen Advisory Corp. (from September 1992 to December 1995); Chartered Financial Analyst. - ---------------------------------------- ------------------------------------- ------------------------------------- Stephen D. Foy, 44 Vice President and Controller Vice President of John Nuveen & Co. 333 W. Wacker Drive Incorporated. Chicago, IL 60606 - ---------------------------------------- ------------------------------------- ------------------------------------- J. Thomas Futrell, 43 Vice President Vice President of Nuveen Advisory 333 W. Wacker Drive Corp.; Chartered Financial Analyst. Chicago, IL 60606 - ---------------------------------------- ------------------------------------- -------------------------------------
S-21 - ---------------------------------------- ------------------------------------- ------------------------------------- Richard A. Huber, 36 Vice President Vice President of Nuveen 333 W. Wacker Drive Institutional Advisory Corp. (since Chicago, IL 60606 March 1998) and Nuveen Advisory Corp. (since January 1997); prior thereto, Vice President and Portfolio Manager of Flagship Financial. - ---------------------------------------- ------------------------------------- ------------------------------------- Steven J. Krupa, 41 Vice President Vice President of Nuveen Advisory 333 West Wacker Drive Corp. Chicago, IL 60606 - ---------------------------------------- ------------------------------------- ------------------------------------- Larry W. Martin, 47 Vice President and Assistant Vice President, Assistant Secretary 333 West Wacker Drive Secretary and Assistant General Counsel of Chicago, IL 60606 John Nuveen & Co. Incorporated; Vice President and Assistant Secretary of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp.; Assistant Secretary of The John Nuveen Company. - ---------------------------------------- ------------------------------------- ------------------------------------- Edward F. Neild, IV, 33 Vice President Vice President of Nuveen Advisory 333 West Wacker Drive Corp. and Nuveen Institutional Chicago, IL 60606 Advisory Corp. (since September 1996); prior thereto, Assistant Vice President of Nuveen Advisory Corp. (from December 1993 to September 1996) and Nuveen Institutional Advisory Corp. (from May 1995 to September 1996; Chartered Financial Analyst. - ---------------------------------------- ------------------------------------- -------------------------------------
S-22 - ---------------------------------------- ------------------------------------- ------------------------------------- Stephen S. Peterson, 41 Vice President Vice President (since September 333 W. Wacker Drive 1997); previously Assistant Vice Chicago, IL 60606 President of Nuveen Advisory Corp. (since September 1996), Portfolio Manager prior thereto; Chartered Financial Analyst. - ---------------------------------------- ------------------------------------- ------------------------------------- Stuart W. Rogers, 42 Vice President Vice President of John Nuveen & Co. 333 W. Wacker Drive Incorporated. Chicago, IL 60606 - ---------------------------------------- ------------------------------------- ------------------------------------- Thomas C. Spalding, Jr., 47 Vice President Vice President of Nuveen Advisory 333 W. Wacker Drive Corp. and Nuveen Institutional Chicago, IL 60606 Advisory Corp., Chartered Financial Analyst. - ---------------------------------------- ------------------------------------- ------------------------------------- William S. Swanson, 33 Vice President Vice President of John Nuveen & Co. 333 West Wacker Drive Incorporated (since October 1997), Chicago, IL 60606 prior thereto, Assistant Vice President (since September 1996); formerly, Associate of John Nuveen & Co. Incorporated; Chartered Financial Analyst. - ---------------------------------------- ------------------------------------- ------------------------------------- Gifford R. Zimmerman, 42 Vice President and Secretary Vice President, Assistant Secretary 333 West Wacker Drive and Associate General Counsel of Chicago, IL 60606 John Nuveen & Co. Incorporated; Vice President and Assistant Secretary of Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp., Chartered Financial Analyst. - ---------------------------------------- ------------------------------------- ------------------------------------- - ---------------------------------------- ------------------------------------- -------------------------------------
At the next annual meeting of the Fund's shareholders, the holders of MuniPreferred, voting as a separate class, will elect two trustees, and holders of outstanding Common Shares S-23 and MuniPreferred, voting together as a single class, will elect five trustees. See "Description of MuniPreferred -- Voting Rights" in the Prospectus. The Fund has adopted a Trustees' Deferred Compensation Plan pursuant to which a trustee of the Fund may elect to have all or a portion of the trustee's fee deferred. Trustees may defer fees for any calendar quarter by the execution of a Participation Agreement before the beginning of the calendar quarter during which the trustee wishes to begin deferral. Peter 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 a director or trustee, as the case of may be, of 100 Nuveen open-end and closed- end funds advised by Nuveen Advisory and Nuveen Institutional Advisory Corp. The trustees of the Fund are directors or trustees, as the case may be, of 42 open- end funds and 52 Nuveen closed-end funds advised by Nuveen Advisory. The table below shows, for each trustee who is not affiliated with Nuveen or Nuveen Advisory, the aggregate compensation the Fund paid for its fiscal year ended June 30, 1998 and the total compensation that Nuveen funds paid to each trustee during the calendar year 1998. The Fund has no retirement or pension plans. The officers and trustees affiliated with Nuveen serve without compensation from the Fund.
TOTAL COMPENSATION AGGREGATE FROM NUVEEN FUNDS COMPENSATION PAID TO NAME OF TRUSTEE FROM THE FUND TRUSTEES(1) - --------------- ------------- ------------- Robert P. Bremner ............ $ 548 $ 71,500 Lawrence H. Brown ............ 588 79,000 Anne E. Impellizzeri ......... 548 71,500 Peter R. Sawers .............. 548 72,000 William J. Schneider ......... 548 71,500 Judith M. Stockdale .......... 534 72,000
- ---------- (1) Includes compensation for service on the boards of 37 Nuveen open-end funds and 52 Nuveen closed-end funds managed by Nuveen Advisory ("NAC Funds"). At March 31, 1999, the Fund's officers and trustees as a group owned less than 1% of the outstanding shares of Common Shares and no shares of MuniPreferred. INVESTMENT ADVISER S-24 Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, acts as the investment adviser for, and manages the investment and reinvestment of the assets of, the Fund. Nuveen Advisory also administers the Fund's business affairs, provides office facilities and equipment and certain clerical, bookkeeping and administrative services, and permits any of its officers or employees to serve without compensation as directors or officers of the Fund if elected to such positions. Under the Management Agreement the Fund has agreed to pay an annual management fee as follows: MANAGEMENT FEE SCHEDULE
AVERAGE DAILY NET ASSETS RATE ------------------------ ---- Up to $125 million.......................................... .6500% $125 to $250 million........................................ .6375 $250 to $500 million........................................ .6250 $500 million to $1 billion.................................. .6125 $1 billion to $2 billion.................................... .6000 $2 billion and over......................................... .5875
The Fund paid aggregate management fees of $2,318,967, $2,288,982 and $2,289,677 for the fiscal years ended June 30, 1998, 1997 and 1996, for an effective management fee rate of .64%, .64% and .64%, respectively. Nuveen Advisory was organized in 1976 and is a wholly-owned subsidiary of John Nuveen & Co. Incorporated ("Nuveen"), 333 West Wacker Drive, Chicago, Illinois 60606. Nuveen is the co-managing underwriter of the Fund's shares. Founded in 1898, Nuveen currently sponsors 100 investment company portfolios (including the Fund). Nuveen and its affiliates have over $60 billion of net assets under management or surveillance. Nuveen is a subsidiary of The John Nuveen Company which, in turn, is a majority-owned subsidiary of The St. Paul Companies, Inc., a management company of St. Paul, Minnesota, principally engaged in providing property-liability insurance through subsidiaries. The names, addresses and principal occupations of the principal executive officers and the directors of Nuveen Advisory are as follows:
NAME AND ADDRESS PRINCIPAL OCCUPATIONS ---------------- --------------------- Timothy R. Schwertfeger...................Chairman of the Board and Director (Principal Executive 333 West Wacker Drive Officer), John Nuveen & Co. Incorporated
S-25 Chicago, Illinois 60606 John P. Amboian...........................President, John Nuveen & Co. 333 West Wacker Drive Incorporated Chicago, Illinois 60606
PORTFOLIO TRANSACTIONS Nuveen Advisory, in effecting purchases and sales of portfolio securities for the account of the Fund, places orders in such manner as, in the opinion of its management, offers the best price and market for the execution of each transaction. Portfolio securities are normally purchased directly from an underwriter or in the over-the-counter market from the principal dealers in such securities, unless it appears that a better price or execution may be obtained elsewhere. Portfolio securities are not purchased from Nuveen or its affiliates except in compliance with the 1940 Act. Generally, all portfolio transactions are effected on a principal (as opposed to an agency) basis and, accordingly, the Fund has not paid and does not expect to pay any brokerage commissions. Purchases from underwriters include a commission or concession the issuer pays to the underwriter, and purchases from dealers include the spread between the bid and asked price. Given the best price and execution obtainable, it is the practice of the Fund to select dealers which, in addition, furnish research information (primarily credit analyses of issuers) and statistical and other services to Nuveen Advisory. It is not possible to place a dollar value on information, statistical and other services received from dealers. Since it is only supplementary to Nuveen Advisory's own research efforts, the receipt of research information is not believed to reduce significantly Nuveen Advisory's expenses. Any research benefits obtained are available to all of Nuveen Advisory's other clients. While Nuveen Advisory is primarily responsible for the placement of the business of the Fund, the policies and practices of Nuveen Advisory in this regard must be consistent with the foregoing and are at all times subject to Board review. Nuveen Advisory reserves the right to, and does, manage other investment accounts and investment companies for other clients which may have investment objectives similar or identical to those of the Fund. Subject to applicable laws and regulations, Nuveen Advisory will attempt to allocate equitably portfolio transactions among the Fund and the portfolios of its other clients purchasing or selling securities whenever Nuveen Advisory decides to purchase or sell securities for the Fund and one or more other clients simultaneously. In making these allocations, the main factors to be considered will be the respective investment objectives of the Fund and such other clients, the relative size of the portfolio holdings of the same or comparable securities, the availability of cash for investment by the Fund and such other clients, the size of investment commitments the Fund and other clients generally hold, and opinions of the persons responsible for recommending investments to the Fund and such other clients. While this procedure could have a detrimental effect on the price or amount of the securities available to the Fund from time to time, it is the opinion of the Board that the benefits available from Nuveen Advisory's S-26 organization will outweigh any disadvantage that may arise from exposure to simultaneous transactions. Notwithstanding the similarity of the investment objective of the Fund with that of other funds Nuveen Advisory manages, the Fund will be separately managed and the composition of its investment portfolio is likely to differ. Accordingly, the investment performance of the Fund will likely not be the same as other funds. Under the 1940 Act, the Fund may not purchase portfolio securities from any underwriting syndicate of which Nuveen is a member except under certain limited conditions set forth in Rule 10f-3. The Rule sets forth requirements relating to, among other things, the terms of an issue of Municipal Obligations the Fund may purchase and the amount of Municipal Obligations the Fund may purchase in any one issue. In addition, the Board must approve at least quarterly purchases of securities made pursuant to the terms of the Rule, including a majority of the directors who are not interested persons of the Fund. For the fiscal years ended June 30, 1998, June 30, 1997 and June 30, 1996, the Fund did not pay any brokerage commissions. S-27 NET ASSET VALUE In determining the net asset value of the Fund, the Fund's custodian uses the valuations of portfolio securities a pricing service approved by the Board furnishes. The pricing service values portfolio securities at the mean between the quoted bid and asked price or the yield equivalent when quotations are readily available. Securities for which quotations are not readily available (which will constitute a majority of the securities the Fund holds) are valued at fair value as the pricing service determines using methods which include consideration of: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating; indications as to value from dealers; and general market conditions. The pricing service may employ electronic data processing techniques or a matrix system, or both, to determine valuations. The officers of the Fund, under the general supervision of the Board, review procedures of the pricing service and its valuations. ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR MUNIPREFERRED GENERAL Note: Capitalized terms used in the following section have the meaning assigned to them in the Statement of Preferences, which is included as Appendix B to this Statement of Additional Information. AUCTION AGENCY AGREEMENT. The Fund has entered into an Auction Agency Agreement (the "Auction Agency Agreement") with the Auction Agent (currently, Bankers Trust Company) which provides, among other things, that the Auction Agent will follow the Auction Procedures for purposes of determining the Applicable Rate for shares of each series of MuniPreferred so long as the Applicable Rate for shares of such series is to be based on the results of an Auction. BROKER-DEALER AGREEMENTS. Each Auction requires the participation of one or more Broker-Dealers. The Auction Agent has entered into agreements (collectively, the "Broker-Dealer Agreements") with several Broker-Dealers the Fund selected, which provide for the participation of those Broker-Dealers in Auctions for MuniPreferred shares. See "Broker-Dealers" below. SECURITIES DEPOSITORY. The Depository Trust Company ("DTC") will act as the Securities Depository for the Agent Members for shares of each series of MuniPreferred. One certificate for all of the shares of each series of MuniPreferred will be registered in the name of Cede, as nominee of the Securities Depository. The certificate will bear a legend to the effect that the certificate is issued subject to the provisions restricting transfers of MuniPreferred shares contained in the Statement. The Fund will also issue stop-transfer instructions to the transfer agent for shares of each series of MuniPreferred. Prior to the commencement of the right of holders of preferred shares to elect a majority of the Fund's directors, as described under "Description of MuniPreferred -- Voting Rights" in the Prospectus, Cede will be the holder of record of all shares of each series of MuniPreferred and owners of these shares will not be entitled to receive certificates representing their ownership interest in these shares. S-28 DTC, a New York-chartered limited purpose trust company, performs services for its participants (including the Agent Members), some of whom (and/or their representatives) own DTC. DTC maintains lists of its participants and will maintain the positions (ownership interests) each participant holds (the "Agent Member") in MuniPreferred shares, whether for its own account or as a nominee for another person. THE AUCTION AGENT The Auction Agent is acting as agent for the Fund in connection with Auctions. In the absence of bad faith or negligence on its part, the Auction Agent will not be liable for any action taken, suffered, or omitted or for any error of judgment it makes in the performance of its duties under the Auction Agency Agreement and will not be liable for any error of judgment made in good faith unless the Auction Agent will have been negligent in ascertaining the pertinent facts. The Auction Agent may rely upon, as evidence of the identities of the Existing Holders of MuniPreferred shares, the Auction Agent's registry of Existing Holders, the results of Auctions and notices from any Broker-Dealer (or other person, if the Fund permits) with respect to transfers described under "Description of MuniPreferred -- The Auction -- Secondary Market Trading" in the Prospectus and notices from the Fund. TheAuction Agent is not required to accept any such notice for an Auction unless it receives the notice by 3:00 p.m., New York City time, on the Business Day preceding such Auction. The Auction Agent may terminate the Auction Agency Agreement upon notice to the Fund on a date no earlier than 45 days after such notice. If the Auction Agent should resign, the Fund will use its best efforts to enter into an agreement with a successor Auction Agent containing substantially the same terms and conditions as the Auction Agency Agreement. The Fund may remove the Auction Agent provided that before the removal the Fund shall have entered into such an agreement with a successor Auction Agent. S-29 TAX MATTERS The following is based upon the advice of Morgan, Lewis & Bockius LLP, counsel to the Fund. The Fund intends to qualify under Subchapter M of the Code as a regulated investment company and satisfy conditions which enable dividends on Common Stock or MuniPreferred shares which are attributable to interest on Municipal Obligations to be exempt from Federal income tax in the hands of owners of such stock, subject to the possible application of the alternative minimum tax. To qualify under Subchapter M for tax treatment as a regulated investment company, the Fund must, among other things: (a) distribute to its shareholders at least 90% of the sum of (i) net investment income (i.e., its investment company taxable income as that term is defined in the Code determined without regard to the deduction for dividends paid) and (ii) its net tax-exempt income; and (b) diversify its holdings so that, at the end of each fiscal quarter of the Fund (i) at least 50% of the market value of the Fund's assets is represented by cash, cash items, U.S. government securities and securities of other regulated investment companies, and other securities, with these other securities limited, with respect to any one issuer, to an amount not greater in value than 5% of the Fund's total assets, and to not more than 10% of the outstanding voting securities of such issuer; and (ii) not more than 25% of the market value of the Fund's assets is invested in the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies, or in two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses). In meeting these requirements of Subchapter M of the Code, the Fund may be restricted in the utilization of certain of the investment techniques described under "Investment Objective and Policies -- Investment Restrictions" above. If in any year the Fund should fail to qualify under Subchapter M for tax treatment as a regulated investment company, the Fund S-30 would incur a regular Federal corporate income tax upon its taxable income for that year, and distributions to its shareholders would be taxable to such holders as ordinary income to the extent of the earnings and profits of the Fund. A regulated investment company that fails to distribute, by the close of each calendar year, an amount equal to the sum of 98% of its ordinary taxable income for such year and 98% of its capital gain net income for the one year period ending October 31 in such year, plus any shortfalls from the prior year's required distribution, is liable for a 4% excise tax on the portion of the undistributed amount of such income that is less than the required amount for such distributions. To avoid the imposition of this excise tax, the Fund generally makes the required distributions of its ordinary taxable income, if any, and its capital gain net income, to the extent possible, by the close of each calendar year. The Fund intends to qualify to pay "exempt-interest" dividends on its shares of Common Stock and MuniPreferred shares as defined under the Code. Under the Code, at the close of each quarter of its taxable year, if at least 50% of the value of its total assets consists of Municipal Obligations, the Fund shall be qualified to pay exempt-interest dividends to its shareholders. Exempt-interest dividends are dividends or any part thereof (other than a capital gain dividend) the Fund pays that are attributable to interest on Municipal Obligations and that the Fund so designates. Exempt-interest dividends will be exempt from Federal income tax, subject to the possible application of the Federal alternative minimum tax. Insurance proceeds the Fund received under any insurance policies for scheduled interest payments on defaulted Municipal Obligations, as described herein, will be excludable from Federal gross income under Section 103(a) of the Code. Gains of the Fund that are attributable to market discount on certain Municipal Obligations acquired after April 30, 1993 are treated as ordinary income. Distributions to shareholders of net income received, if any, from taxable temporary investments and net short-term capital gains, if any, the Fund realizes will be taxable to its shareholders as ordinary income. Distributions of net capital gain (i.e., the excess of the Fund's net long-term capital gain over net short-term capital loss), if any, are taxable as long-term capital gain, regardless of the length of time the shareholder has owned shares of Common Stock or MuniPreferred shares of the Fund. The amount of taxable income allocable to the Fund's MuniPreferred shares will depend upon the amount of this income the Fund realizes, but is not generally expected to be significant. Except for dividends paid on MuniPreferred shares which include an allocated portion of any net capital gain or other taxable income, the Fund anticipates that all other dividends paid on its MuniPreferred shares will constitute exempt-interest dividends for Federal income tax purposes. Because the taxable portion of the Fund's investment income consists primarily of interest, as long as the Fund qualifies as a regulated investment company under the Code, no part of its distributions to shareholders will qualify for the dividends-received deduction for corporations. The IRS currently requires that a regulated investment company that has two or more classes of shares must designate to each such class proportionate amounts of each type of its income for each tax year based upon the percentage of total dividends distributed to each class for such year. S-31 The Fund intends each year to allocate, to the fullest extent practicable, net tax-exempt interest, net capital gain and other taxable income, if any, between its shares of Common Stock and MuniPreferred shares in proportion to the total dividends paid to each class for that year. To the extent permitted under applicable law, and consistent with the Fund's objectives, the Fund reserves the right to make special allocations of income within a class, as follows. The Fund shall, in the case of a Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer, and may, in the case of any other Special Rate Period, notify the Auction Agent of the amount of any net capital gain or other income taxable for Federal income tax purposes to be included in any dividend on shares of its MuniPreferred prior to the Auction establishing the Applicable Rate for such dividend. If, (a) in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net capital gain or other income taxable for Federal income tax purposes to a dividend paid on shares of MuniPreferred without having given advance notice thereof to the Auction Agent as the Statement requires solely by reason of the fact that such allocation is made retroactively as a result of the redemption of all or a portion of the outstanding shares of its MuniPreferred or the liquidation of the Fund or (b) in the case of any Special Rate Period of more than 28 Rate Period Days, the Fund allocates any net capital gain or other taxable income for Federal income tax purposes to its MuniPreferred shares, the Fund will arrange to make certain payments to owners of its MuniPreferred shares to which such allocation was made to offset the Federal income tax effect thereof as described under "Description of MuniPreferred -- Dividends and Rate Periods -- Gross-up Payments" in the Prospectus. The Fund received an opinion of counsel to the effect that the manner in which the Fund intends to allocate items of tax-exempt income, net capital gain and other taxable income, if any, between its shares of Common Stock and MuniPreferred shares will be respected for Federal income tax purposes. This opinion of counsel represents only counsel's best legal judgment, and is not binding on the IRS or the courts. Currently there is no guidance from the IRS or other sources specifically addressing whether the Fund's method for making such allocations will be respected for Federal income tax purposes, and it is possible that the IRS could disagree with counsel's opinion. If the IRS were to disagree with the Fund's allocation, it either could assert the need to reallocate the Fund's net capital gain or other taxable income or it could disallow a portion of the Fund's dividends paid deduction. In the event of a reallocation, some of the dividends the Fund identified as tax-exempt to owners of its MuniPreferred shares may be recharacterized as additional capital gain or other taxable income. Under these circumstances, the Fund would not be required to make gross-up payments to such owners to offset the tax effect of such reallocation. In addition, a reallocation or a disallowance of part of the Fund's dividends paid deduction would likely cause the Fund to be liable for income tax on any reallocated taxable income and possibly an excise tax. Counsel S-32 has advised the Fund that, in its opinion, if the IRS were to challenge in court the Fund's allocations of income and gain, the IRS should not prevail. In order for any distributions to owners of the Fund's MuniPreferred shares to be eligible to be treated as exempt-interest dividends, such MuniPreferred shares must be treated as stock for Federal income tax purposes. The Fund received an opinion of counsel, at the time the Fund first issued MuniPreferred shares, to the effect that its MuniPreferred shares will constitute stock of the Fund for Federal income tax purposes and, therefore, distributions declared and paid at the Applicable Rate as dividends with respect to the Fund's MuniPreferred shares, to the extent paid out of current or accumulated earnings and profits of the Fund, will constitute dividends for Federal income tax purposes. The opinion of counsel is based, among other things, on (a) a revenue ruling the IRS published in 1990, which holds that preferred stock that has its dividend rate periodically set pursuant to an auction process substantially similar to the auction process to be established for the Fund's MuniPreferred shares is treated as stock for Federal income tax purposes and (b) the Fund's representation to counsel that there is no express or implied agreement between or among a Broker-Dealer or any other party and the Fund, Nuveen or any owner of the Fund's shares of MuniPreferred that the Broker-Dealer or other party will guarantee or otherwise arrange to ensure that an owner of such shares will be able to sell such shares. This opinion represents only counsel's best legal judgment and is not binding on the IRS or the courts. If at any time when the Fund's MuniPreferred shares are outstanding the Fund fails to meet the MuniPreferred Basic Maintenance Amount or the 1940 Act MuniPreferred Asset Coverage, the Fund will be required to suspend distributions to holders of its shares of Common Stock until such maintenance amount or asset coverage, as the case may be, is restored. See "Description of MuniPreferred -- Dividends and Rate Periods -- Restrictions on Dividends and Other Distributions" in the Prospectus. This may prevent the Fund from distributing at least 90% of its net investment income and net tax-exempt income, and may therefore jeopardize the Fund's qualification for taxation as a regulated investment company or cause the Fund to incur an income tax liability or a non-deductible 4% excise tax on the undistributed taxable income (including gain), or both. Upon failure to meet the MuniPreferred Basic Maintenance Amount or the 1940 Act MuniPreferred Asset Coverage, the Fund will be required to redeem its MuniPreferred shares in order to maintain or restore such maintenance amount or asset coverage and avoid the adverse consequences to the Fund and its shareholders of failing to qualify as a regulated investment company. There can be no assurance, however, that any such redemption would achieve such objectives. The Code provides that interest on indebtedness incurred or continued to purchase or carry the Fund's shares to which exempt-interest dividends are allocated is not deductible. Under rules the IRS uses for determining when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase or ownership of shares may be considered to have been made with borrowed funds even though such funds are not directly used for the purchase or ownership of such shares. S-33 The interest on private activity bonds in most instances is not Federally tax-exempt to a person who is a "substantial user" of a facility these bonds financed or a "related person" of a "substantial user." As a result, the Fund may not be an appropriate investment for shareholders who are considered either a "substantial user" or a "related person" within the meaning of the Code. In general, a "substantial user" of a facility includes a "non-exempt person who regularly uses a part of such facility in his trade or business." "Related persons" are in general defined to include persons among whom there exists a relationship, either by family or business, which would result in a disallowance of losses in transactions among them under various provisions of the Code (or if they are members of the same controlled group of corporations under the Code), including a partnership and each of its partners (and their spouses and minor children), an S corporation and each of its shareholders (and their spouses and minor children) and various combinations of these relationships. The foregoing is not a complete statement of all of the provisions of the Code covering the definitions of "substantial user" and "related person." The Fund may, at its option, redeem its MuniPreferred shares in whole or in part, and is required to redeem its MuniPreferred shares to the extent required to maintain the MuniPreferred Basic Maintenance Amount and the 1940 Act MuniPreferred Asset Coverage. Gain or loss, if any, resulting from a redemption of the MuniPreferred shares will be taxed as gain or loss from the sale or exchange of the MuniPreferred shares under Section 302 of the Code rather than as a dividend, but only if the redemption distribution (a) is deemed not to be essentially equivalent to a dividend, (b) is in complete redemption of an owner's interest in the Fund, (c) is substantially disproportionate with respect to the owner, or (d) for non-corporate owners, is in partial liquidation of the Fund. For purposes of (a), (b) and (c) above, an owner's common share ownership of the Fund will be taken into account. Nonresident alien individuals and certain foreign corporations and other entities ("foreign investors") generally are subject to U.S. withholding tax at the rate of 30% (or possibly a lower rate an applicable tax treaty provides) on distributions of taxable net investment income (which term includes net short-term capital gain). To the extent received by foreign investors, exempt-interest dividends, distributions of net capital gain and any gain from the sale or other disposition of the MuniPreferred shares generally are exempt from U.S. taxation. Different tax consequences may result if the owner is engaged in a trade or business in the United States or, in the case of an individual, is present in the United States for more than 182 days during a taxable year. Although dividends generally will be treated as distributed when paid, dividends declared in October, November or December, payable to shareholders of record on a specified date in one of those months and paid during the following January will be treated as having been distributed by the Fund (and received by the shareholders) on December 31 of the year declared. The sale or other disposition of MuniPreferred shares of the Fund will normally result in capital gain or loss to shareholders. Present law taxes both long-term and short-term capital gain of corporations at the rates applicable to ordinary income. For non-corporate taxpayers, however, S-34 under current law, short-term capital gain and ordinary income will be taxed at a maximum rate of 39.6% while long-term capital gain of non-corporate taxpayers may be taxed at more favorable rates. However, because of the limitations on itemized deductions and the deduction for personal exemptions applicable to higher income taxpayers, the effective rate of tax may be higher in certain circumstances. Losses a shareholder realizes on the sale or exchange of shares of the Fund held for six months or less are disallowed to the extent of any distribution of exempt-interest dividends received with respect to such shares, and, if not disallowed, such losses are treated as long-term capital losses to the extent of any distribution of net capital gain received with respect to such shares. Non-corporate investors who dispose of capital assets held for more than twelve (12) months generally will pay tax upon disposition of those assets at a 10% rate if they are in the lowest tax bracket (for 1999, singles with taxable income of $25,750 or less and married couples filing jointly with taxable income of $43,050 or less), and at a 20% rate if they are in higher tax brackets. In addition, beginning in the year 2001, for certain capital assets held for more than five years, the 10% maximum capital gains rate will be lowered to 8%, and in 2006 the 20% maximum capital gains rate will be lowered to 18%. Federal tax law imposes an alternative minimum tax on both corporations and individuals. Interest on certain Municipal Obligations, such as bonds issued to make loans for housing purposes or to private entities (but not to certain tax-exempt organizations such as universities and non-profit hospitals) is included as an item of tax preference in determining the amount of a taxpayer's alternative minimum taxable income. To the extent that the Fund receives income from Municipal Obligations subject to the Federal alternative minimum tax, a portion of the dividends it paid, although otherwise exempt from Federal income tax, will be taxable to its shareholders to the extent that their tax liability is determined under the alternative minimum tax. The Fund will annually supply a report indicating the percentage of the Fund's income attributable to Municipal Obligations subject to the Federal alternative minimum tax. In addition, for certain corporations, alternative minimum taxable income is increased by 75% of the difference between an alternative measure of income ("adjusted current earnings") and the amount otherwise determined to be the alternative minimum taxable income. Interest on all Municipal Obligations, and therefore all distributions the Fund makes that would otherwise be tax-exempt, is included in calculating a corporation's adjusted current earnings. Certain small corporations are not subject to the alternative minimum tax. A corporation qualifies for such exemption provided that (i) for the corporation's first taxable year beginning after December 31, 1996, its average annual gross receipts for the three prior taxable year period does not exceed $5,000,000 and (ii) the corporation's average annual gross receipts for each three prior taxable year period thereafter does not exceed $7,500,000. S-35 Tax-exempt income, including exempt-interest dividends the Fund pays, is taken into account in calculating the amount of social security and railroad retirement benefits that may be subject to Federal income tax. The Fund is required in certain circumstances to withhold 31% of taxable dividends and certain other payments paid to non-corporate holders of the Fund's shares who do not furnish to the Fund their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. The Code provides that every shareholder required to file a tax return must include for information purposes on the return the amount of tax-exempt interest received during the taxable year, including any exempt-interest dividends received from the Fund. This is a general, abbreviated summary of the provisions of the Code and regulations thereunder presently in effect as they directly govern the taxation of the Fund and its shareholders. These provisions are subject to change by legislative or administrative action, and any change may be retroactive with respect to the Fund's transactions. Moreover, the foregoing does not address many of the factors that may be determinative of whether an investor will be liable for the alternative minimum tax. Shareholders are advised to consult their own tax advisers for more detailed information concerning Federal income tax matters. State Tax Matters The following is based upon the advice of Dechert Price & Rhoads, special Pennsylvania counsel to the Fund. Shares of MuniPreferred are not subject to any of the personal property taxes presently in effect in Pennsylvania to the extent of that proportion of the Fund represented by Pennsylvania Municipal Obligations. The taxes referred to above include the County Personal Property Tax, and the additional personal property taxes imposed on Pittsburgh residents by the School District of Pittsburgh and by the City of Pittsburgh. Shares of MuniPreferred may be taxable under the Pennsylvania inheritance and estate taxes. The proportion of interest income representing interest income from Pennsylvania Municipal Obligations distributable to shareholders of the Fund is not taxable under the Pennsylvania Personal Income Tax or under the Corporate Net Income Tax, nor will such interest be taxable under the Philadelphia School District Investment Income tax imposed on Philadelphia resident individuals. The disposition by the Fund of a Pennsylvania Municipal Obligation issued before February 1, 1994 (whether by sale, exchange, redemption or payment at maturity) will not constitute a taxable event to a shareholder under the Pennsylvania Personal Income Tax. The disposition of Pennsylvania Municipal Obligations issued on or after February 1, 1994 are taxable. Further, although there is no published authority on the subject, special Pennsylvania counsel is of the opinion that (i) a shareholder of the Fund will not have a taxable event under the Pennsylvania state and local income taxes referred to in the preceding paragraph (other than the Corporate Net Income Tax) upon the redemption or sale of shares of MuniPreferred to the extent that the Fund is then composed of Pennsylvania Municipal Obligations issued before February 1, 1994 and (ii) the disposition by the Fund of a Pennsylvania Municipal Obligation (whether by sale, exchange, redemption or payment at maturity) will not constitute a taxable event to a shareholder under the Corporate Net Income Tax for those obligations issued before February 1, 1994 or the Philadelphia School District Investment Income Tax. (The School District tax has no application to gain on the disposition of property held by the taxpayer for more than six months.) The Fund is not subject to the Pennsylvania Corporate Net Income Tax or Capital Stock/Franchise Tax. If a shareholder is a business subject to the Pennsylvania Capital Stock/Franchise Tax, the value of shares of MuniPreferred owned by such shareholder and income derived from their ownership may be taken into account in determining the "capital stock value" of such shareholder. The foregoing is a general, abbreviated summary of certain of the provisions of Pennsylvania statutes and administrative interpretations presently in effect governing the taxation of shareholders of the Fund. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive with respect to Fund transactions. Shareholders are advised to consult with their own tax advisors for more detailed information concerning Pennsylvania tax matters. CERTAIN OWNERS OF RECORD As of May 21, 1999, Cede & Co., Bowling Green Station, P.O. Box 20, New York, NY, 10274-0020, was the record owner of 78% of the Fund's common shares. As of May 21, 1999, the following persons owned of record 5% or more of the Fund's MuniPreferred shares: Merrill Lynch & Co. Inc., World Financial Center, North Tower, New York, NY 10281 (21.9%); John Nuveen & Co. Incorporated, 333 West Wacker Drive, Chicago, IL 60606-1286 (19.8%); Paine Webber Inc., 1285 Avenue of the Americas, New York, NY 10019 (18.0%); Salomon Smith Barney Inc., 388 Greenwich Street, New York, NY 10013 (10.5%); BT Alex Brown, 130 Liberty Street, New York, NY 10006 (9.7%). EXPERTS The Fund's financial statements as of June 30, 1998 appearing in this Registration Statement have been audited by Ernst & Young LLP, Sears Tower, 233 South Wacker Drive, Chicago, Illinois 60606, independent auditors, as set forth in their report thereon appearing elsewhere herein, and is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. Ernst & Young audits and reports on the Fund's annual financial statements, reviews certain regulatory reports and the Fund's Federal income tax returns, and performs other professional accounting, auditing, tax and advisory services when engaged to do so by the Fund. S-36 Portfolio of Investments Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) December 31, 1998 (Unaudited)
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ----------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 13.9% $ 2,000,000 Allegheny County Higher Education Building Authority (Commonwealth of 9/08 at 102 BBB $1,960,220 Pennsylvania), College Revenue Bonds, Series A of 1998 (Chatham College), 5.250%, 9/01/18 4,500,000 Delaware County Authority (Commonwealth of Pennsylvania), University 8/01 at 100 AAA 4,828,050 Revenue Bonds, Series of 1991 (Villanova University), 6.900%, 8/01/16 3,400,000 Lehigh County General Purpose Authority, College Revenue Bonds, Series 6/02 at 100 AAA 3,681,996 of 1992 (Allentown College of St. Francis de Sales Project), 6.750%, 12/15/12 4,970,000 Pennsylvania Higher Education Assistance Agency, Student Loan No Opt. Call AAA 5,246,481 Adjustable Rate Tender Revenue Refunding Bonds, 1985 Series A, 6.800%, 12/01/00 4,000,000 Pennsylvania Higher Education Assistance Agency, Student Loan Revenue 9/01 at 102 AAA 4,294,960 Bonds, Fixed Rate Bonds, 1991 Series C, 7.150%, 9/01/21 (Alternative Minimum Tax) 3,000,000 Pennsylvania Higher Education Assistance Agency, Student Loan Revenue 9/02 at 102 AAA 3,120,030 Bonds, Fixed Rate Bonds, 1992 Series C, 6.400%, 3/01/22 (Alternative Minimum Tax) 10,580,000 Pennsylvania Higher Educational Facilities Authority, Revenue Bonds 7/99 at 102 AAA 10,923,533 (Thomas Jefferson University - Life Sciences Building Project), 1989 Series A, 6.000%, 7/01/19 3,825,000 The Pennsylvania State University, Refunding Bonds, Series 1992, 3/01 at 102 AA- 4,135,934 6.250%, 3/01/11 2,900,000 Scranton - Lackawanna Health and Welfare Authority, City of 3/02 at 102 A- 3,105,755 Scranton, Lackawanna County, Pennsylvania, University Revenue Bonds (University of Scranton Project), 1992 Series A, 6.500%, 3/01/13 8,445,000 Swarthmore Borough Authority, Pennsylvania, Swarthmore College Revenue 9/08 at 100 Aaa 8,246,374 Bonds, Series of 1998, 5.000%, 9/15/28 495,000 The General Municipal Authority of the City of Wilkes - Barre, College 12/02 at 102 N/R 542,381 Misericordia Revenue Bonds Refunding, Series B of 1992, 7.750%, 12/01/12 645,000 The General Municipal Authority of the City of Wilkes - Barre, 12/00 at 100 N/R 706,739 College Misericordia Revenue Bonds, Refunding Series A of 1992, 7.750%, 12/01/12 - ----------------------------------------------------------------------------------------------------------------------------------- Health Care - 2.7% 3,520,000 The Hospitals and Higher Education Facilities Authority of 12/01 at 102 AAA 3,867,670 Philadelphia, Hospital Revenue Refunding Bonds, Series of 1991 (Magee Rehabilitation Hospital Project), 7.000%, 12/01/10 5,500,000 Health Care Facilities Authority of Sayre, Variable Rate Hospital 12/01 at 103 AAA 6,045,105 Revenue Bonds (VHA of Pennsylvania, Inc. Capital Asset Financing Program), Series of 1985E (Guthrie Healthcare System Conversion), 7.200%, 12/01/20 - ----------------------------------------------------------------------------------------------------------------------------------- Housing/Multifamily - 0.3% 995,000 Urban Redevelopment Authority of Pittsburgh, Redevelopment Mortgage 8/02 at 102 A 1,048,352 Revenue Bonds, 1992 Series C, 7.125%, 8/01/13 (Alternative Minimum Tax) - ----------------------------------------------------------------------------------------------------------------------------------- Housing/Single Family - 13.7% 2,000,000 Allegheny County Residential Finance Authority, Single Family Mortgage 11/08 at 102 Aaa 2,022,520 Revenue Bonds, 1998 Series DD-2, 5.400%, 11/01/29 (Alternative Minimum Tax) 11,855,000 Allegheny County Residential Finance Authority, Single Family No Opt. Call Aaa 1,857,441 Mortgage Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27 (Alternative Minimum Tax) 210,000 Redevelopment Authority of the City of Altoona (Altoona, 12/01 at 102 A3 222,443 Pennsylvania), Home Improvement Loan Revenue Bonds, Series of 1991 (Cities of Altoona and Meadville Program) (FHA Title 1 Insured Loans), 7.150%, 12/01/09 (Alternative Minimum Tax) 2,060,000 Redevelopment Authority of the County of Berks (Pennsylvania), No Opt. Call A+ 2,285,323 Senior Single Family Mortgage Bonds, 1986 Series A, 8.000%, 12/01/17 (Alternative Minimum Tax)
S-37
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ------------------------------------------------------------------------------------------------------------------------------------ Housing/Single Family (continued) $ 4,725,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/02 at 102 AA+ $ 5,022,817 Bonds, Series 1992-33, 6.900%, 4/01/17 1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/02 at 102 AA+ 1,046,440 Bonds, Series 1992-34B, 7.000%, 4/01/24 (Alternative Minimum Tax) 5,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/99 at 102 AA+ 5,160,200 Bonds, Series W, 7.625%, 10/01/10 (Alternative Minimum Tax) 2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/05 at 102 AA+ 2,130,300 Bonds, Series 1995-46, 6.200%, 10/01/14 (Alternative Minimum Tax) 1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 1,057,670 Bonds, Series 1996-48, 6.150%, 4/01/25 (Alternative Minimum Tax) 5,725,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 6,166,054 Bonds, Series 1996-49, 6.450%, 4/01/25 (Alternative Minimum Tax) 4,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 4,282,440 Bonds, Series 1996-50B, 6.350%, 10/01/27 (Alternative Minimum Tax) 5,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 4/06 at 102 AA+ 5,324,450 Bonds, Series 1996-52B, 6.250%, 10/01/24 (Alternative Minimum Tax) 5,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/07 at 101 1/2 AA+ 5,178,000 Bonds, Series 1997-59A, 5.750%, 10/01/23 (Alternative Minimum Tax) 2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue 10/08 at 101 AA+ 1,983,800 Bonds, Series 1998-64A Bonds, 4.500%, 4/01/28 (Alternative Minimum Tax) 1,620,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/06 at 102 AAA 1,743,071 1996 Series C, 6.550%, 4/01/28 (Alternative Minimum Tax) 1,110,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 10/07 at 102 AAA 1,187,023 1997 Series A, 6.250%, 10/01/28 (Alternative Minimum Tax) 2,865,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 10/01 at 102 AAA 3,020,655 1991 Series G, 7.050%, 4/01/23 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ Industrial/Other - 0.4% 1,250,000 Philadelphia Authority for Industrial Development, Revenue Bonds, Series 5/02 at 102 A+ 1,359,763 of 1992 (National Board of Medical Examiners Project), 6.750%, 5/01/12 - ------------------------------------------------------------------------------------------------------------------------------------ Long Term Care - 1.1% 3,225,000 Montgomery County Higher Education and Health Authority, Mortgage Revenue 1/06 at 101 BBB 3,429,465 Bonds, Series of 1996 (Waverly Heights Project), 6.375%, 1/01/26 630,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 8/02 at 102 A- 692,672 Hospital Revenue Bonds (Childrens Seashore House), Series 1992A, 7.000%, 8/15/03 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Obligation/General - 4.4% 1,355,000 Bensalem Township School District, Bucks County, Pennsylvania General 7/06 at 100 AAA 1,490,080 Obligation Bonds, Series of 1996, 5.850%, 7/15/12 Redevelopment Authority of the City of Harrisburg, Dauphin County, Pennsylvania, Guaranteed Revenue Bonds, Series B of 1998: 2,750,000 0.000%, 5/01/24 (DD) 5/16 at 103 AAA 739,338 2,750,000 0.000%, 11/01/24 (DD) 5/16 at 103 AAA 720,060 5,160,000 0.000%, 5/01/25 (DD) 5/16 at 103 AAA 1,315,697 6,000,000 Commonwealth of Pennsylvania, General Obligation Bonds, First Series 3/02 at 101 1/2 AA 6,515,880 of 1992, 6.375%, 9/15/11 5,000,000 State Public School Building Authority (Commonwealth of Pennsylvania), 3/01 at 100 AAA 5,285,500 School Revenue Bonds (Hazelton Area School District Project), Series J of 1991, 6.500%, 3/01/08 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Obligation/Limited - 0.3% 1,000,000 York County Solid Waste and Refuse Authority (Commonwealth of No Opt. Call AAA 1,098,850 Pennsylvania), Solid Waste System Refunding Revenue Bonds (County Guaranteed), Series of 1997, 5.500%, 12/01/12
S-38 Portfolio of Investments Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) (continued) December 31, 1998 (Unaudited)
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ----------------------------------------------------------------------------------------------------------------------------------- Transportation - 3.4% $ 2,500,000 County of Allegheny, Pennsylvania, Airport Revenue Bonds, 1/02 at 102 AAA $2,715,200 Series 1992A and 1992B (Greater Pittsburgh International Airport), 6.625%, 1/01/22 (Alternative Minimum Tax) 1,650,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue 12/01 at 102 Aa3 1,793,220 Bonds, Series N of 1991, 6.500%, 12/01/13 735,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue 12/02 at 102 AAA 759,512 Bonds, Series O of 1992, 5.500%, 12/01/17 7,315,000 Philadelphia Authority for Industrial Development, Airport Revenue 7/08 at 101 AAA 7,128,468 Bonds, Series 1998A (Philadelphia Airport System Project), 5.000%, 7/01/23 (Alternative Minimum Tax) - ----------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed - 46.6% 6,300,000 Allegheny County Hospital Development Authority, Hospital 10/01 at 100 BBB+*** 6,858,747 Revenue Bonds, Series 1991 A (St. Margaret Memorial Hospital), 7.125%, 10/01/21 (Pre-refunded to 10/01/01) Bethlehem Authority, Northampton and Lehigh Counties, Pennsylvania, Water Revenue Bonds, Series of 1992: 3,045,000 6.250%, 11/15/11 (Pre-refunded to 11/15/01) 11/01 at 100 AAA 3,264,453 4,000,000 6.250%, 11/15/21 (Pre-refunded to 11/15/01) 11/01 at 100 AAA 4,288,280 8,250,000 Blair County Hospital Authority, Hospital First Mortgage Revenue 2/99 at 102 N/R*** 8,447,918 Bonds, Series of 1989 (Mercy Hospital, Sublessee), 8.125%, 2/01/14 (Pre-refunded to 2/01/99) 5,000,000 Butler County Hospital Authority (Butler County, Pennsylvania), 6/01 at 102 AAA 5,481,400 Hospital Revenue Bonds, Series 1991 A (North Hills Passavant Hospital), 7.000%, 6/01/22 (Pre-refunded to 6/01/01) 3,400,000 Erie County Hospital Authority, Pennsylvania, Hospital Revenue Bonds 2/01 at 102 AAA 3,707,258 (Hamot Medical Center), 1991 Series A, 7.100%, 2/15/10 (Pre-refunded to 2/15/01) 2,875,000 Franklin County Industrial Development Authority, Hospital Revenue 7/99 at 102 AAA 2,983,819 Refunding Bonds (The Chambersburg Hospital), Series of 1991, 6.700%, 7/01/08 (Pre-refunded to 7/01/99) 2,000,000 Hampton Township School District (Allegheny County, Pennsylvania), 11/04 at 100 AAA 2,298,500 General Obligation Bonds, Series of 1995, 6.750%, 11/15/21 (Pre-refunded to 11/15/04) 4,000,000 Lower Pottsgrove Township Authority, Montgomery County, 11/99 at 100 AAA 4,120,080 Pennsylvania, Guaranteed Sewer Revenue Bonds, Series of 1991 (Guaranteed by the Township of Lower Pottsgrove), 6.700%, 11/01/16 (Pre-refunded to 11/01/99) 3,130,000 McKean County Solid Waste Authority (McKean County, 1/02 at 100 AAA 3,398,711 Pennsylvania), Guaranteed Solid Waste Revenue Bonds, Series of 1992, 6.650%, 1/01/12 (Pre-refunded to 1/01/02) 4,500,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue 12/01 at 102 AAA 5,019,930 Bonds, Series I of 1986, 7.200%, 12/01/17 (Pre-refunded to 12/01/01) 1,000,000 Philadelphia Authority for Industrial Development, Convertible 7/99 at 102 AAA 1,039,330 Project Revenue Bonds (PGH Development Corporation), Series of 1989, 7.000%, 7/01/17 (Pre-refunded to 7/01/99) 4,885,000 Philadelphia Authority for Industrial Development, Convertible 7/99 at 102 AA*** 5,079,276 Project Revenue Bonds (PGH/CHDC Parking Facilities), Series of 1989, 7.125%, 7/01/17 (Pre-refunded to 7/01/99) 4,270,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 6/01 at 102 AAA 4,756,823 Thirteenth Series, 7.700%, 6/15/21 (Pre-refunded to 6/15/01) 8,530,000 The Hospitals and Higher Education Facilities Authority of 8/01 at 102 Aa*** 9,450,387 Philadelphia, Refunding Revenue Bonds, Saint Agnes Medical Center Project (FHA Insured Mortgage), Series 1991, 7.250%, 8/15/31 (Pre-refunded to 8/15/01) 1,850,000 The School District of Philadelphia, Pennsylvania, General 5/02 at 100 3/4 AAA 2,025,584 Obligation Bonds, Series A of 1992, 6.500%, 5/15/05 (Pre-refunded to 5/15/02) 3,250,000 The School District of Philadelphia, Pennsylvania, General Obligation 7/01 at 102 AAA 3,531,093 Bonds, Series B of 1991, 7.000%, 7/01/05 (Pre-refunded to 7/01/01) 10,625,000 City of Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 8/01 at 100 AAA 11,512,188 Sixteenth Series, 7.000%, 8/01/18 (Pre-refunded to 8/01/01) 8,800,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 12/01 at 102 N/R*** 9,812,704 Hospital Revenue Bonds, Series of 1991 (Presbyterian Medical Center of Philadelphia), 7.250%, 12/01/21 (Pre-refunded to 12/01/01)
S-39
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ----------------------------------------------------------------------------------------------------------------------------------- U.S. Guaranteed (continued) $6,110,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 2/02 at 102 Aaa $6,720,633 Hospital Revenue Bonds (The Childrens Hospital of Philadelphia Project), Series A of 1992, 6.500%, 2/15/21 (Pre-refunded to 2/15/02) The Philadelphia Municipal Authority, Pennsylvania, Justice Lease Revenue Bonds, 1991 Series B: 1,500,000 7.100%, 11/15/11 (Pre-refunded to 11/15/01) 11/01 at 102 AAA 1,669,515 9,900,000 7.125%, 11/15/18 (Pre-refunded to 11/15/01) 11/01 at 102 AAA 11,025,234 3,000,000 The Pittsburgh Water and Sewer Authority (Pennsylvania), Water No Opt. Call AAA 3,470,490 and Sewer System Revenue Refunding Bonds, Series of 1986, 7.625%, 9/01/04 7,065,000 The Pittsburgh Water and Sewer Authority (Pennsylvania), Water and 9/01 at 102 AAA 7,712,437 Sewer System Revenue Refunding Bonds, Series A of 1991, 6.500%, 9/01/14 (Pre-refunded to 9/01/01) 2,500,000 Saint Mary Hospital Authority, Hospital Revenue Bonds, 7/02 at 102 AAA 2,769,625 Series 1992A (Franciscan Health System/Saint Mary Hospital Of Langhorne Inc.), 6.500%, 7/01/12 (Pre-refunded to 7/01/02) 3,730,000 Scranton - Lackawanna Health and Welfare Authority, City of 6/00 at 102 N/R*** 4,009,340 Scranton, Lackawanna County, Pennsylvania, University Revenue Bonds, Series of 1990 (University of Scranton Project), 1990 Series A, 7.400%, 6/15/10 (Pre-refunded to 6/15/00) 8,475,000 Somerset County General Authority, Commonwealth of 10/01 at 100 AAA 9,235,970 Pennsylvania, Commonwealth Lease Revenue Bonds, Series of 1991, 7.000%, 10/15/13 (Pre-refunded to 10/15/01) 3,500,000 Upper Merion Area School District, Montgomery County, 9/01 at 100 Aa2*** 3,790,500 Pennsylvania, General Obligation Bonds, Series of 1993, 6.900%, 9/01/16 (Pre-refunded to 9/01/01) 3,000,000 Warrington Township Municipal Authority, Bucks County, 11/15 at 100 AAA 3,622,620 Pennsylvania, Water and Sewer Revenue Bonds, Series of 1991, 7.100%, 12/01/21 (Pre-refunded to 11/15/15) 5,000,000 West Chester Area School District, Chester and Delaware Counties, 1/01 at 100 Aa1*** 5,310,200 Pennsylvania, General Obligation Bonds, Series A of 1991, 6.700%, 1/15/11 (Pre-refunded to 1/15/01) 5,450,000 The Municipal Authority of the Borough of West View (Allegheny No Opt. Call AAA 7,756,713 County, Pennsylvania,) Special Obligation Bonds, Series of 1985A, 9.500%, 11/15/14 5,000,000 County of Westmoreland, Commonwealth of Pennsylvania, 8/01 at 100 AAA 5,378,250 General Obligation Bonds, Series 1992, 6.700%, 8/01/09 (Pre-refunded to 8/01/01) - ----------------------------------------------------------------------------------------------------------------------------------- Utilities - 11.3% 5,000,000 Beaver County Industrial Development Authority (Pennsylvania), 9/99 at 102 Baa3 5,192,550 Pollution Control Revenue Refunding Bonds, 1989 Series A (Ohio Edison Company, Beaver Valley Project), 7.750%, 9/01/24 3,750,000 Delaware County Industrial Development Authority, Pollution 4/01 at 102 BBB+ 4,017,300 Control Revenue Refunding Bonds, 1991 Series A (Philadelphia Electric Company Project), 7.375%, 4/01/21 400,000 Greater Lebanon Refuse Authority, Lebanon County, Pennsylvania, 11/02 at 100 A- 426,080 Solid Waste Revenue Bonds, Series of 1992, 7.000%, 11/15/04 Lancaster County Solid Waste Management Authority, Resource Recovery System Revenue Bonds, 1998 Series A: 3,780,000 5.250%, 12/15/07 (Alternative Minimum Tax) No Opt. Call AAA 4,049,136 3,900,000 5.250%, 12/15/08 (Alternative Minimum Tax) No Opt. Call AAA 4,183,023 4,000,000 Lehigh County Industrial Development Authority, Pollution Control 8/05 at 102 AAA 4,477,720 Revenue Refunding Bonds, 1995 Series A (Pennsylvania Power and Light Company Project), 6.150%, 8/01/29 3,000,000 Luzerne County Industrial Development Authority, Exempt Facilities 10/02 at 102 A 3,325,830 Revenue Refunding Bonds, 1992 Series A (Pennsylvania Gas and Water Company Project), 7.200%, 10/01/17 (Alternative Minimum Tax) 3,550,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/02 at 102 A- 3,937,837 Revenue Bonds, 1992 Series B (Pennsylvania Gas and Water Company Project), 7.125%, 12/01/22 (Alternative Minimum Tax) 5,000,000 Luzerne County Industrial Development Authority, Exempt Facilities 12/04 at 102 AAA 5,738,449 Revenue Refunding Bonds, 1994 Series A (Pennsylvania Gas and Water Company Project), 7.000%, 12/01/17 (Alternative Minimum Tax) 5,500,000 Montgomery County Industrial Development Authority (Pennsylvania), 1/03 at 100 A 5,846,664 Resource Recovery Revenue Bonds (Montgomery County Project), Series 1989, 7.500%, 1/01/12
S - 40 Portfolio of Investments Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) (continued) December 31, 1998 (Unaudited)
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ----------------------------------------------------------------------------------------------------------------------------------- Water and Sewer - 1.3% $ 4,390,000 Fairview Township Authority, York County, Pennsylvania, Guaranteed 11/01 at 100 AAA $ 4,714,332 Sewer Revenue Bonds, Series of 1991 (Guaranteed by the Township of Fairview, York County, Pennsylvania), 6.700%, 11/01/21 - ----------------------------------------------------------------------------------------------------------------------------------- $353,475,000 Total Investments - (cost $333,909,421) - 99.4% 361,944,861 =============---------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - 0.6% 2,170,233 -------------------------------------------------------------------------------------------------------------------- Net Assets - 100% $364,115,094 ==================================================================================================================== * Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings: Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. N/R Investment is not rated. (DD) Security purchased on a delayed delivery basis (note 1). See accompanying notes to financial statements.
S - 41 Statement of Net Assets December 31, 1998 (Unaudited)
New Jersey New Jersey Pennsylvania Pennsylvania Investment Quality Premium Income Investment Quality Premium Income 2 - ------------------------------------------------------------------------------------------------------------------------------- Assets Investments in municipal securities, at market value (note 1) $440,632,951 $274,690,307 $361,944,861 $362,517,168 Cash -- 220,688 -- 10,075 Receivables: Interest 7,974,838 5,116,126 6,064,503 5,473,488 Investments sold 9,486,000 390,000 360,558 512,563 Other assets 11,056 25,392 11,431 23,953 - ------------------------------------------------------------------------------------------------------------------------------- Total assets 458,104,845 280,442,513 368,381,353 368,537,247 - ------------------------------------------------------------------------------------------------------------------------------- Liabilities Payable for investments purchased 16,162,437 3,100,470 2,776,875 11,538,358 Accrued expenses: Management fees (note 6) 238,262 151,446 197,448 192,844 Other 1,083,726 321,203 1,291,936 1,503,041 - ------------------------------------------------------------------------------------------------------------------------------- Total liabilities 17,484,425 3,573,119 4,266,259 13,234,243 - ------------------------------------------------------------------------------------------------------------------------------- Net assets (note 7) $440,620,420 $276,869,394 $364,115,094 $355,303,004 =============================================================================================================================== Preferred shares, at liquidation value $130,000,000 $ 91,600,000 $110,000,000 $118,100,000 =============================================================================================================================== Preferred shares outstanding 5,200 3,664 4,400 4,724 ================================================================================================================================ Common shares outstanding 19,804,656 11,945,059 15,942,228 15,747,463 ================================================================================================================================ Net asset value per Common share outstanding (net assets less Preferred shares at liquidation value, divided by Common shares outstanding) $ 15.68 $ 15.51 $ 15.94 $ 15.06 ================================================================================================================================ See accompanying notes to financial statements.
S-42 Statement of Operations Six Months ended December 31, 1998 (Unaudited)
New Jersey New Jersey Pennsylvania Pennsylvania Investment Quality Premium Income Investment Quality Premium Income 2 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Income (note1) $13,034,076 $7,602,417 $11,136,376 $ 9,592,779 - ---------------------------------------------------------------------------------------------------------------------------------- Expenses Management fees (note 6) 1,411,898 894,980 1,171,288 1,141,069 Preferred shares -- auction fees 163,835 115,442 138,629 148,838 Preferred shares -- dividend disbursing agent fees 10,081 15,123 10,081 15,123 Shareholders' servicing agent fees and expenses 24,814 12,721 29,142 26,728 Custodian's fees and expenses 36,647 28,540 32,358 31,757 Directors'/Trustees' fees and expenses (note 6) 2,120 1,312 1,765 1,682 Professional fees 9,187 8,939 9,086 9,044 Shareholders' reports -- printing and mailing expenses 61,085 40,601 42,719 53,436 Stock exchange listing fees 12,484 12,230 12,560 12,230 Investor relations expense 19,035 11,831 17,007 15,988 Other expenses 13,403 9,716 10,679 8,519 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 1,764,589 1,151,435 1,475,314 1,464,414 - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income 11,269,487 6,450,982 9,661,062 8,128,365 - ---------------------------------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain (Loss) from Investments Net realized gain (loss) from investment transactions (notes 1 and 4) 33,519 (384,786) 72,124 1,357 Net change in unrealized appreciation or depreciation of investments 1,157,389 2,549,638 80,789 2,692,910 - ---------------------------------------------------------------------------------------------------------------------------------- Net gain from investments 1,190,908 2,164,852 152,913 2,694,267 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations $12,460,395 $8,615,834 $ 9,813,975 $10,822,632 ================================================================================================================================== See accompanying notes to financial statements.
S-43 Statement of Changes in Net Assets (Unaudited)
New Jersey Investment Quality New Jersey Premium Income ------------------------------------- ------------------------------------ Six Months Ended Year Ended Six Months Ended Year Ended 12/31/98 6/30/98 12/31/98 6/30/98 - ------------------------------------------------------------------------------------------------------------------------------------ Operations Net investment income $ 11,269,487 $ 22,760,040 $ 6,450,982 $ 13,081,889 Net realized gain (loss) from investment transactions (notes 1 and 4) 33,519 1,145,279 (384,786) 1,139,335 Net change in unrealized appreciation or depreciation of investments 1,157,389 4,551,886 2,549,638 6,532,010 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets from operations 12,460,395 28,457,205 8,615,834 20,753,234 - ------------------------------------------------------------------------------------------------------------------------------------ Distributions to Shareholders (note 1) From undistributed net investment income: Common shareholders (9,375,634) (18,755,870) (5,212,648) (10,251,340) Preferred shareholders (2,066,200) (4,393,050) (1,419,832) (3,059,919) From accumulated net realized gains from investment transactions: Common shareholders (501,059) (592,823) -- -- Preferred shareholders (56,968) (132,888) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets from distributions to shareholders (11,999,861) (23,874,631) (6,632,480) (13,311,259) - ------------------------------------------------------------------------------------------------------------------------------------ Capital Share Transactions (note 2) Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 1,281,937 2,673,402 610,250 760,188 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets 1,742,471 7,255,976 2,593,604 8,202,163 Net assets at beginning of period 438,877,949 431,621,973 274,275,790 266,073,627 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $440,620,420 $438,877,949 $276,869,394 $274,275,790 ==================================================================================================================================== Balance of undistributed net investment income at end of period $ 387,710 $ 560,057 $ 426,456 $ 607,954 ==================================================================================================================================== Pennsylvania Investment Quality Pennsylvania Premium Income 2 ------------------------------------- ------------------------------------ Six Months Ended Year Ended Six Months Ended Year Ended 12/31/98 6/30/98 12/31/98 6/30/98 - ------------------------------------------------------------------------------------------------------------------------------------ Operations Net investment income $ 9,661,062 $ 19,406,751 $ 8,128,365 $ 16,145,833 Net realized gain (loss) from investment transactions (notes 1 and 4) 72,124 736,176 1,357 2,190,521 Net change in unrealized appreciation or depreciation of investments 80,789 670,433 2,692,910 8,353,368 - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets from operations 9,813,975 20,813,360 10,822,632 26,689,722 - ------------------------------------------------------------------------------------------------------------------------------------ Distributions to Shareholders (note 1) From undistributed net investment income: Common shareholders (8,036,842) (15,952,202) (5,858,055) (12,188,569) Preferred shareholders (1,738,047) (3,634,806) (1,784,927) (4,129,260) From accumulated net realized gains from investment transactions: Common shareholders (71,740) (828,412) -- -- Preferred shareholders (2,148) (192,317) -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Decrease in net assets from distributions to shareholders (9,848,777) (20,607,737) (7,642,982) (16,317,829) - ------------------------------------------------------------------------------------------------------------------------------------ Capital Share Transactions (note 2) Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 1,010,848 2,184,617 -- -- - ------------------------------------------------------------------------------------------------------------------------------------ Net increase in net assets 976,046 2,390,240 3,179,650 10,371,893 Net assets at beginning of period 363,139,048 360,748,808 352,123,354 341,751,461 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets at end of period $364,115,094 $363,139,048 $355,303,004 $352,123,354 ==================================================================================================================================== Balance of undistributed net investment income at end of period $ 416,001 $ 529,828 $ 626,973 $ 141,590 ====================================================================================================================================
See accompanying notes to financial statements. S-44 Notes to Financial Statements (Unaudited) 1. General Information and Significant Accounting Policies The state Funds (the "Funds") covered in this report and their corresponding New York Stock Exchange symbols are Nuveen New Jersey Investment Quality Municipal Fund, Inc. (NQJ), Nuveen New Jersey Premium Income Municipal Fund, Inc. (NNJ), Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) and Nuveen Pennsylvania Premium Income Municipal Fund 2 (NPY). Each Fund invests primarily in a diversified portfolio of municipal obligations issued by state and local government authorities within a single state. The Funds are registered under the Investment Company Act of 1940 as closed-end, diversified management investment companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with generally accepted accounting principles. Securities Valuation The prices of municipal bonds in each Fund's investment portfolio are provided by a pricing service approved by the Fund's Board of Directors/Trustees. When price quotes are not readily available (which is usually the case for municipal securities), the pricing service establishes fair market value based on yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, indications of value from securities dealers and general market conditions. Temporary investments in securities that have variable rate and demand features qualifying them as short-term securities are valued at amortized cost, which approximates market value. Securities Transactions Securities transactions are recorded on a trade date basis. Realized gains and losses from such transactions are determined on the specific identification method. Securities purchased or sold on a when-issued or delayed delivery basis may have extended settlement periods. The securities so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets in a separate account with a current value at least equal to the amount of the when-issued and delayed delivery purchase commitments. At December 31, 1998, New Jersey Investment Quality, New Jersey Premium Income, Pennsylvania Investment Quality and Pennsylvania Premium Income 2 had when-issued and delayed delivery purchase commitments of $16,162,437, $3,100,470, $2,776,875 and $11,538,358, respectively. Investment Income Interest income is determined on the basis of interest accrued, adjusted for amortization of premiums and accretion of discounts on long-term debt securities when required for federal income tax purposes. Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its tax-exempt net investment income, in addition to any significant amounts of net realized capital gains and/or market discount realized from investment transactions. The Funds currently consider significant net realized capital gains and/or market discount as amounts in excess of $.01 per Common share. Furthermore, each New Jersey Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal and New Jersey state income taxes, to retain such tax-exempt status when distributed to the shareholders of the New Jersey Funds. Each Pennsylvania Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal, Pennsylvania state personal income and the Philadelphia School District Investment Income taxes, to retain such tax-exempt status when distributed to shareholders of the Pennsylvania Funds. Net realized capital gain and market discount distributions are subject to federal taxation. Dividends and Distributions to Shareholders Tax-exempt net investment income is declared as a dividend monthly and payment is made or reinvestment is credited to shareholder accounts on the first business day after month end. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to shareholders of tax-exempt net investment income, net realized capital gains and/or market discount are recorded on the ex-dividend date. The amount and timing of such distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. Accordingly, temporary over-distributions as a result of these S-45 Notes to Financial Statements (continued) (Unaudited) differences may occur and will be classified as either distributions in excess of net investment income, distributions in excess of net realized gains and/or distributions in excess of net ordinary taxable income from investment transactions, where applicable. Preferred Shares The Funds have issued and outstanding $25,000 stated value Preferred shares. Each Fund's Preferred shares are issued in more than one Series. The dividend rate on each Series may change every seven days, as set by the auction agent. The number of shares outstanding, by Series and in total, were as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - --------------------------------------------------------------------------------------------------------- Number of Shares: Series M 3,200 -- -- 844 Series T -- 624 -- -- Series W -- 1,440 2,400 -- Series Th 2,000 1,600 2,000 2,080 Series F -- -- -- 1,800 - --------------------------------------------------------------------------------------------------------- Total 5,200 3,664 4,400 4,724 =========================================================================================================
Derivative Financial Instruments The Funds may invest in transactions in certain derivative financial instruments including futures, forward, swap and option contracts, and other financial instruments with similar characteristics. Although the Funds are authorized to invest in such financial instruments, and may do so in the future, they did not make any such investments during the six months ended December 31, 1998. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results may differ from those estimates. 2. Fund Shares Transactions in Common shares were as follows:
New Jersey Investment Quality New Jersey Premium Income ----------------------------- ------------------------------ Six Months Ended Year Ended Six Months Ended Year Ended 12/31/98 6/30/98 12/31/98 6/30/98 - --------------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 73,582 161,805 37,519 49,041 =============================================================================================================== Pennsylvania Pennsylvania Investment Quality Premium Income 2 ------------------------------- ------------------------------ Six Months Ended Year Ended Six Months Ended Year Ended 12/31/98 6/30/98 12/31/98 6/30/98 - --------------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 58,149 128,464 -- -- ===============================================================================================================
S-46 3. Distributions to Common Shareholders The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid February 1, 1999, to shareholders of record on January 15, 1999, as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - -------------------------------------------------------------------------------------------------- Dividend per share $ .0765 $ .0720 $ .0840 $ .0620 ==================================================================================================
4. Securities Transactions Purchases and sales (including maturities) of investments in municipal securities and temporary municipal investments during the six months ended December 31, 1998, were as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ---------------------------------------------------------------------------------------------------- Purchases: Investments in municipal securities $36,103,382 $16,217,094 $15,703,058 $15,142,088 Temporary municipal investments 12,900,000 5,400,000 9,195,000 14,905,000 Sales and Maturities: Investments in municipal securities 26,767,540 17,648,202 20,050,740 695,000 Temporary municipal investments 12,900,000 5,400,000 9,995,000 17,305,000 ====================================================================================================
At December 31, 1998, the identified cost of investments owned for federal income tax purposes was the same as the cost for financial reporting purposes for each Fund. At June 30, 1998, the Funds' last fiscal year end, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied the carryforwards will expire as follows:
New Jersey Pennsylvania Premium Premium Income Income 2 - ---------------------------------------------------------------------------------------------------- Expiration year: 2002 $3,583,548 $ -- 2003 129,409 67,894 2004 650,143 40,999 2005 174,583 169,168 - ---------------------------------------------------------------------------------------------------- Total $4,537,683 $278,061 ====================================================================================================
5. Unrealized Appreciation (Depreciation) Gross unrealized appreciation and gross unrealized depreciation of investments at December 31, 1998, were as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ---------------------------------------------------------------------------------------------------- Gross unrealized: appreciation $31,246,486 $17,704,578 $28,053,730 $21,511,960 depreciation (99,936) (626,544) (18,290) (95,049) - ---------------------------------------------------------------------------------------------------- Net unrealized appreciation $31,146,550 $17,078,034 $28,035,440 $21,416,911 ====================================================================================================
S-47 Notes to Financial Statements (continued) (Unaudited) 6. Management Fee and Other Transactions with Affiliates Under the Funds' investment management agreements with Nuveen Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund pays an annual management fee, payable monthly, at the rates set forth below, which are based upon the average daily net asset value of each Fund: Average Daily Net Asset Value Management Fee - -------------------------------------------------------------------------------- For the first $125 million .6500 of 1% For the next $125 million .6375 of 1 For the next $250 million .6250 of 1 For the next $500 million .6125 of 1 For the next $1 billion .6000 of 1 For net assets over $2 billion .5875 of 1 ================================================================================
The fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Funds pay no compensation directly to those of its Directors/Trustees who are affiliated with the Adviser or to their officers, all of whom receive remuneration for their services to the Funds from the Adviser. 7. Composition of Net Assets At December 31, 1998, net assets consisted of:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ---------------------------------------------------------------------------------------------------------- Preferred shares, $25,000 stated value per share, at liquidation value $ 130,000,000 $ 91,600,000 $110,000,000 $118,100,000 Common shares, $.01 par value per share 198,047 119,451 159,422 157,475 Paid-in surplus 278,811,071 172,572,553 225,453,689 215,275,700 Balance of undistributed net investment income 387,710 426,456 416,001 626,973 Accumulated net realized gain (loss) from investment transactions 77,042 (4,927,100) 50,542 (274,055) Net unrealized appreciation of investments 31,146,550 17,078,034 28,035,440 21,416,911 - --------------------------------------------------------------------------------------------------------- Net assets $440,620,420 $276,869,394 $364,115,094 $355,303,004 ========================================================================================================= Authorized shares: Common 200,000,000 200,000,000 Unlimited Unlimited Preferred 1,000,000 1,000,000 Unlimited Unlimited =========================================================================================================
S-48 Financial Highlights (Unaudited) Selected data for a Common share outstanding throughout each period is as follows:
Investment Operations ------------------------------------- Net Realized/ Beginning Net Unrealized Net Asset Investment Investment Value Income Gain (Loss) Total - ---------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1999 (a) $ 15.65 $ .57 $ .06 $ .63 1998 15.41 1.16 .29 1.45 1997 15.05 1.18 .34 1.52 1996 15.06 1.17 (.01) 1.16 1995 14.73 1.20 .40 1.60 1994 15.88 1.20 (1.07) .13 New Jersey Premium Income Year Ended 6/30: 1999 (a) 15.34 .54 .19 .73 1998 14.71 1.10 .65 1.75 1997 14.18 1.09 .51 1.60 1996 13.97 1.08 .20 1.28 1995 13.46 1.06 .55 1.61 11 mos. ended 6/30/94 14.52 .94 (1.12) (.18) Pennsylvania Investment Quality Year Ended 6/30: 1999 (a) 15.94 .61 -- .61 1998 15.91 1.23 .10 1.33 1997 15.72 1.26 .22 1.48 1996 15.86 1.28 (.08) 1.20 1995 15.49 1.29 .41 1.70 1994 16.42 1.30 (.86) .44 Pennsylvania Premium Income 2 Year Ended 6/30: 1999 (a) 14.86 .52 .16 .68 1998 14.20 1.02 .67 1.69 1997 13.57 1.04 .63 1.67 1996 13.25 1.04 .33 1.37 1995 12.53 1.05 .77 1.82 1994 14.35 1.00 (1.71) (.71) ================================================================================== Less Distributions -------------------------------------------------------------------------------- Net Net Investment Investment Capital Capital Income Income Gain Gain To Common To Preferred To Common To Preferred Shareholders Shareholders+ Shareholders Shareholders+ Total - ------------------------------------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1999 (a) $ (.47) $ (.10) $ (.03) $ -- $ (.60) 1998 (.95) (.22) (.03) (.01) (1.21) 1997 (.95) (.21) -- -- (1.16) 1996 (.94) (.23) -- -- (1.17) 1995 (1.01) (.24) (.02) -- (1.27) 1994 (1.07) (.14) (.06) (.01) (1.28) New Jersey Premium Income Year Ended 6/30: 1999 (a) (.44) (.12) -- -- (.56) 1998 (.86) (.26) -- -- (1.12) 1997 (.84) (.23) -- -- (1.07) 1996 (.81) (.26) -- -- (1.07) 1995 (.81) (.28) (.01) -- (1.10) 11 mos. ended 6/30/94 (.71) (.17) -- -- (.88) Pennsylvania Investment Quality Year Ended 6/30: 1999 (a) (.50) (.11) -- -- (.61) 1998 (1.01) (.23) (.05) (.01) (1.30) 1997 (1.01) (.24) (.03) (.01) (1.29) 1996 (1.05) (.25) (.03) (.01) (1.34) 1995 (1.07) (.26) -- -- (1.33) 1994 (1.16) (.16) (.04) (.01) (1.37) Pennsylvania Premium Income 2 Year Ended 6/30: 1999 (a) (.37) (.11) -- -- (.48) 1998 (.77) (.26) -- -- (1.03) 1997 (.78) (.26) -- -- (1.04) 1996 (.78) (.27) -- -- (1.05) 1995 (.81) (.29) -- -- (1.10) 1994 (.79) (.18) -- -- (.97) =============================================================================================================
Organization and Offering Costs and Preferred Share Underwriting Discounts - ----------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1999 (a) $-- 1998 -- 1997 -- 1996 -- 1995 -- 1994 -- New Jersey Premium Income Year Ended 6/30: 1999 (a) -- 1998 -- 1997 -- 1996 -- 1995 -- 11 mos. ended 6/30/94 -- Pennsylvania Investment Quality Year Ended 6/30: 1999 (a) -- 1998 -- 1997 -- 1996 -- 1995 -- 1994 -- Pennsylvania Premium Income 2 Year Ended 6/30: 1999 (a) -- 1998 -- 1997 -- 1996 -- 1995 -- 1994 (.14) ======================================================
* Annualized. ** Total Return on Market Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in stock price per share. Total Return on Net Asset Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in net asset value per share. Total returns are not annualized. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders; income ratios reflect income earned on assets attributable to Preferred shares. (a) For the six months ended December 31, 1998. S-49
Total Returns ---------------------------- Ending Net Asset Ending Based on Based on Net Value Market Value Market Value** Asset Value** - ----------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1999 (a) $15.68 $16.9375 1.77% 3.39% 1998 15.65 17.1250 11.38 8.12 1997 15.41 16.3125 16.50 8.92 1996 15.05 14.8750 8.17 6.28 1995 15.06 14.6250 3.03 9.71 1994 14.73 15.2500 (4.63) (.27) New Jersey Premium Income Year Ended 6/30: 1999 (a) 15.51 16.6250 9.71 3.98 1998 15.34 15.5625 11.12 10.35 1997 14.71 14.8125 20.95 9.94 1996 14.18 13.0000 4.24 7.37 1995 13.97 13.2500 14.60 10.39 11 mos. ended 6/30/94 13.46 12.3750 (13.16) (2.61) Pennsylvania Investment Quality Year Ended 6/30: 1999 (a) 15.94 18.0625 7.79 3.22 1998 15.94 17.2500 8.77 7.02 1997 15.91 16.8750 9.75 8.01 1996 15.72 16.3750 12.74 6.00 1995 15.86 15.5000 2.32 9.77 1994 15.49 16.2500 (.39) 1.23 Pennsylvania Premium Income 2 Year Ended 6/30: 1999 (a) 15.06 14.1875 8.38 3.87 1998 14.86 13.4375 6.27 10.29 1997 14.20 13.3750 14.82 10.61 1996 13.57 12.3750 2.21 8.39 1995 13.25 12.8750 11.50 12.87 1994 12.53 12.3750 (10.29) (7.60) =============================================================================
Ratios/Supplemental Data ------------------------------------------------------------------------------------------- Ratio of Net Ratio of Net Ratio of Investment Ratio of Investment Expenses to Income to Expenses to Income to Average Average Average Total Average Total Ending Net Assets Net Assets Net Assets Net Assets Portfolio Net Assets Applicable to Applicable to Including Including Turnover (000) Common Shares++ Common Shares++ Preferred++ Preferred++ Rate - --------------------------------------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1999 (a) $ 440,620 1.13%* 7.20%* .79%* 5.07%* 6 1998 438,878 1.13 7.40 .79 5.20 6 1997 431,622 1.14 7.70 .80 5.36 15 1996 422,338 1.16 7.67 .81 5.33 16 1995 420,944 1.23 8.06 .85 5.57 13 1994 259,718 1.16 7.67 .82 5.39 5 New Jersey Premium Income Year Ended 6/30: 1999 (a) 276,869 1.23* 6.92* .83* 4.63* 6 1998 274,276 1.25 7.24 .83 4.81 13 1997 266,074 1.27 7.53 .83 4.91 18 1996 259,708 1.32 7.53 .86 4.90 32 1995 257,251 1.46 7.89 .94 5.08 15 11 mos. ended 6/30/94 113,458 1.38* 7.12* .91* 4.72* 12 Pennsylvania Investment Quality Year Ended 6/30: 1999 (a) 364,115 1.15* 7.54* .80* 5.26* 4 1998 363,139 1.15 7.65 .80 5.34 9 1997 360,749 1.17 7.96 .81 5.52 8 1996 355,823 1.18 7.98 .82 5.53 12 1995 355,831 1.27 8.28 .87 5.70 9 1994 191,718 1.21 7.95 .84 5.54 3 Pennsylvania Premium Income 2 Year Ended 6/30: 1999 (a) 355,303 1.23* 6.82* .82* 4.55* -- 1998 352,123 1.24 6.99 .82 4.63 32 1997 341,751 1.27 7.47 .83 4.85 29 1996 331,863 1.30 7.59 .84 4.90 19 1995 326,771 1.46 8.23 .92 5.20 5 1994 139,053 1.36 7.11 .90 4.70 11 ===============================================================================================================
S-50 Report of Independent Auditors The Boards of Directors, Trustees and Shareholders Nuveen New Jersey Investment Quality Municipal Fund, Inc. Nuveen New Jersey Premium Income Municipal Fund, Inc. Nuveen Pennsylvania Investment Quality Municipal Fund Nuveen Pennsylvania Premium Income Municipal Fund 2 We have audited the accompanying statements of net assets, including the portfolios of investments, of Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund and Nuveen Pennsylvania Premium Income Municipal Fund 2 as of June 30, 1998, and the related statements of operations, changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of June 30, 1998, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund and Nuveen Pennsylvania Premium Income Municipal Fund 2 at June 30, 1998, and the results of their operations, changes in their net assets and financial highlights for the periods indicated therein in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Chicago, Illinois August 14, 1998 S-51 Portfolio of Investments Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) June 30, 1998
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ----------------------------------------------------------------------------------------------------------------------------------- Education and Civic Organizations - 13.5% $ 4,970,000 Pennsylvania Higher Education Assistance Agency, Student Loan Adjustable No Opt. Call Aaa $ 5,262,485 Rate Tender Revenue Refunding Bonds, 1985 Series A, 6.800%, 12/01/00 4,000,000 Pennsylvania Higher Education Assistance Agency, Student Loan Revenue 9/01 at 102 Aaa 4,328,880 Bonds, Fixed Rate Bonds, 1991 Series C, 7.150%, 9/01/21 (Alternative Minimum Tax) 3,000,000 Pennsylvania Higher Education Assistance Agency, Student Loan 9/02 at 102 Aaa 3,135,360 Revenue Bonds, Fixed Rate Bonds, 1992 Series C, 6.400%, 3/01/22 (Alternative Minimum Tax) 10,580,000 Pennsylvania Higher Educational Facilities Authority, Revenue Bonds 7/99 at 102 Aa 10,978,654 (Thomas Jefferson University--Life Sciences Building Project), 1989 Series A, 6.000%, 7/01/19 3,825,000 The Pennsylvania State University Refunding Bonds, Series 1992, 3/01 at 102 AA- 4,115,126 6.250%, 3/01/11 4,500,000 Delaware County Authority (Commonwealth of Pennsylvania), 8/01 at 100 Aaa 4,842,630 University Revenue Bonds, Series of 1991 (Villanova University), 6.900%, 8/01/16 3,400,000 Lehigh County, General Purpose Authority, College Revenue Bonds, 6/02 at 100 AAA 3,669,348 Series of 1992 (Allentown College of St. Francis de Sales Project), 6.750%, 12/15/12 2,900,000 Scranton-Lackawanna Health and Welfare Authority, City of Scranton, 3/02 at 102 A- 3,111,033 Lackawanna County, Pennsylvania, University Revenue Bonds, Series of 1992 (University of Scranton Project), 1992 Series A, 6.500%, 3/01/13 8,445,000 Swarthmore Borough Authority (Borough of Swarthmore, Pennsylvania), 9/08 at 100 Aaa 8,232,355 Swarthmore College Revenue Bonds, Series of 1998, 5.000%, 9/15/28 (WI) 645,000 The General Municipal Authority of the City of Wilkes-Barre, College 12/00 at 100 N/R 708,558 Misericordia Revenue Bonds, Series A of 1992, 7.750%, 12/01/12 565,000 The General Municipal Authority of the City of Wilkes-Barre, College 12/02 at 102 N/R 620,675 Misericordia Revenue Bonds, Refunding Series B of 1992, 7.750%, 12/01/12 - ------------------------------------------------------------------------------------------------------------------------------------ Health Care - 3.5% 3,520,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 12/01 at 102 Aaa 3,871,648 Hospital Revenue Refunding Bonds, Series of 1991 (Magee Rehabilitation Hospital Project), 7.000%, 12/01/10 2,500,000 Saint Mary Hospital Authority, Hospital Revenue Bonds, Series 1992A 7/02 at 102 Aaa 2,724,100 (Franciscan Health System/Saint Mary Hospital of Langhorne, Inc.), 6.500%, 7/01/12 5,500,000 Health Care Facilities Authority of Sayre, Variable Rate Hospital Revenue 12/01 at 103 Aaa 6,056,215 Bonds (VHA of Pennsylvania, Inc. Capital Asset Financing Program), Series of 1985E (Guthrie Healthcare System Conversion), 7.200%, 12/01/20 - ------------------------------------------------------------------------------------------------------------------------------------ Housing/Multifamily - 0.3% 995,000 Urban Redevelopment Authority of Pittsburgh, Redevelopment Mortgage Revenue 8/02 at 102 A 1,047,984 Bonds, 1992 Series C, 7.125%, 8/01/13 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ Housing/Single Family - 12.7% 5,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage 10/07 at 101 1/2 AA+ 5,116,000 Revenue Bonds, Series 1997-59A, 5.750%, 10/01/23 (Alternative Minimum Tax) 5,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 10/99 at 102 AA+ 5,189,750 Series W, 7.265%, 10/01/10 (Alternative Minimum Tax) 5,100,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 4/02 at 102 AA+ 5,423,544 Series 1992-33, 6.900%, 4/01/17 (Alternative Minimum Tax) 1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 4/02 at 102 AA+ 1,072,430 Series 1992-34B, 7.000%, 4/01/24 (Alternative Minimum Tax) 2,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 10/05 at 102 AA+ 2,112,140 Series 1995-46, 6.200%, 10/01/14 (Alternative Minimum Tax)
S-52 Portfolio of Investments Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) (continued) June 30, 1998
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ------------------------------------------------------------------------------------------------------------------------------------ Housing/Single Family (continued) $ 1,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 4/06 at 102 AA+ $ 1,047,690 Series 1996-48, 6.150%, 4/01/25 (Alternative Minimum Tax) 5,725,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 4/06 at 102 AA+ 6,112,869 Series 1996-49, 6.450%, 4/01/25 (Alternative Minimum Tax) 4,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 4/06 at 102 AA+ 4,244,280 Series 1996-50B, 6.350%, 10/01/27 (Alternative Minimum Tax) 5,000,000 Pennsylvania Housing Finance Agency, Single Family Mortgage Revenue Bonds, 4/06 at 102 AA+ 5,275,750 Series 1996-52B, 6.250%, 10/01/24 (Alternative Minimum Tax) 11,855,000 Allegheny County Residential Finance Authority, Single Family Mortgage No Opt. Call Aaa 1,767,581 Revenue Bonds, 1994 Series Y, 0.000%, 5/01/27 (Alternative Minimum Tax) 210,000 Redevelopment Authority of the City of Altoona (Altoona, Pennsylvania), 12/01 at 102 A 222,657 Home Improvement Loan Revenue Bonds, Series of 1991 (Cities of Altoona and Meadville Program) (FHA Title I Insured Loans), 7.150%, 12/01/09 (Alternative Minimum Tax) 2,060,000 Redevelopment Authority of the County of Berks (Pennsylvania), No Opt. Call A+ 2,251,044 Senior Single Family Mortgage Revenue Bonds, 1986 Series A, 8.000%, 12/01/17 (Alternative Minimum Tax) 2,865,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 10/01 at 102 AAA 3,023,119 1991 Series G, 7.050%, 4/01/23 (Alternative Minimum Tax) 1,635,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 4/06 at 102 AAA 1,744,005 1996 Series C, 6.550%, 4/01/28 (Alternative Minimum Tax) 1,450,000 Urban Redevelopment Authority of Pittsburgh, Mortgage Revenue Bonds, 10/07 at 102 AAA 1,533,622 1997 Series A, 6.250%, 10/01/28 (Alternative Minimum Tax) - ------------------------------------------------------------------------------------------------------------------------------------ Industrial/Other - 0.4% 1,250,000 Philadelphia Authority for Industrial Development Revenue Bonds, 5/02 at 102 A+ 1,372,225 Series of 1992 (National Board of Medical Examiners Project), 6.750%, 5/01/12 - ------------------------------------------------------------------------------------------------------------------------------------ Long Term Care - 1.1% 3,225,000 Montgomery County Higher Education and Health Authority, Mortgage Revenue 1/06 at 101 BBB 3,431,303 Bonds, Series of 1996 (Waverly Heights Project), 6.375%, 1/01/26 630,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 8/02 at 102 A- 691,501 Hospital Revenue Bonds (Children's Seashore House), Series 1992A, 7.000%, 8/15/03 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Obligation/General - 6.5% 6,000,000 Commonwealth of Pennsylvania, General Obligation Bonds, First 3/02 at 101 1/2 AA- 6,490,380 Series of 1992, 6.375%, 9/15/11 1,355,000 Bensalem Township School District, Bucks County, Pennsylvania, General 7/06 at 100 Aaa 1,453,725 Obligation Bonds, Series of 1996, 5.850%, 7/15/12 10,000,000 Pittsburgh General Obligation Refunding Bonds, Series A, No Opt. Call Aaa 10,287,700 5.000%, 3/01/02 5,000,000 State Public School Building Authority (Commonwealth of Pennsylvania), 3/01 at 100 Aaa 5,297,950 School Revenue Bonds (Hazelton Area School District Project), Series J of 1991, 6.500%, 3/01/08 - ------------------------------------------------------------------------------------------------------------------------------------ Tax Obligation/Limited - 0.3% 1,000,000 York County Solid Waste and Refuse Authority (Commonwealth of No Opt. Call Aaa 1,076,530 Pennsylvania), Solid Waste System Refunding Revenue Bonds (County Guaranteed), Series of 1997, 5.500%, 12/01/12 - ------------------------------------------------------------------------------------------------------------------------------------ Transportation - 1.4% 1,650,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue Bonds, 12/01 at 102 A1 1,790,547 Series N of 1991, 6.500%, 12/01/13 735,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue Bonds, 12/01 at 102 Aaa 752,706 Series O of 1992, 5.500%, 12/01/17 2,500,000 County of Allegheny, Pennsylvania Airport Revenue Bonds, Series 1992A 1/02 at 102 Aaa 2,708,500 and 1992B (Greater Pittsburgh International Airport), 6.625%, 1/01/22 (Alternative Minimum Tax)
S-53
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Guaranteed - 48.5% $ 2,000,000 Pennsylvania Higher Educational Facilities Authority (Commonwealth 10/98 at 102 N/R*** $ 2,063,480 of Pennsylvania), Lycoming College Revenue Bonds, Series of 1988, 8.375%, 10/01/18 (Pre-refunded to 10/01/98) 4,500,000 Pennsylvania Turnpike Commission, Pennsylvania Turnpike Revenue Bonds, 12/01 at 102 Aaa 5,021,325 Series I of 1986, 7.200%, 12/01/17 (Pre-refunded to 12/01/01) 4,000,000 State of Pennsylvania, General Obligation Bonds, Second Series 1991A, 11/01 at 101 1/2 AAA 4,374,760 6.600%, 11/01/11 (Pre-refunded to 11/01/01) 6,300,000 Allegheny County Hospital Development Authority, Hospital Revenue Bonds, 10/01 at 100 BBB+*** 6,873,300 Series 1991 A (St. Margaret Memorial Hospital), 7.125%, 10/01/21 (Pre-refunded to 10/01/01) Bethlehem Authority, Northhampton and Lehigh Counties, Pennsylvania, Water Revenue Bonds, Series of 1992: 3,045,000 6.250%, 11/15/11 (Pre-refunded to 11/15/01) 11/01 at 100 Aaa 3,259,612 4,000,000 6.250%, 11/15/21 (Pre-refunded to 11/15/01) 11/01 at 100 Aaa 4,281,920 8,250,000 Blair County Hospital Authority, Hospital First Mortgage Revenue Bonds, 2/99 at 102 N/R*** 8,624,138 Series of 1989 (Mercy Hospital, Sublessee), 8.125%, 2/01/14 (Pre-refunded to 2/01/99) 5,000,000 Butler County Hospital Authority (Butler County, Pennsylvania), Hospital 6/01 at 102 Aaa 5,492,200 Revenue Bonds, Series 1991 A (North Hills Passavant Hospital), 7.000%, 6/01/22 (Pre-refunded to 6/01/01) 3,400,000 Erie County Hospital Authority, Hospital Revenue Bonds (Hamot Medical 2/01 at 102 Aaa 3,718,104 Center), 1991 Series A, 7.100%, 2/15/10 (Pre-refunded to 2/15/01) 2,875,000 Franklin County Industrial Development Authority, Hospital Revenue 7/99 at 102 Aaa 3,017,054 Refunding Bonds (The Chambersburg Hospital), Series of 1991, 6.700%, 7/01/08 (Pre-refunded to 7/01/99) 2,000,000 Hampton Township School District (Allegheny County, Pennsylvania), General 11/04 at 100 Aaa 2,280,720 Obligation Bonds, Series of 1995, 6.750%, 11/15/21 (Pre-refunded to 11/15/04) 4,000,000 Lower Pottsgrove Township Authority, Montgomery County, Pennsylvania, 11/99 at 100 Aaa 4,156,800 Guaranteed Sewer Revenue Bonds, Series of 1991 (Guaranteed by the Township of Lower Pottsgrove), 6.700%, 11/01/16 (Pre-refunded to 11/01/99) 3,130,000 McKean County Solid Waste Authority (McKean County, Pennsylvania), 1/02 at 100 Aaa 3,394,892 Guaranteed Solid Waste Revenue Bonds, Series of 1992, 6.650%, 1/01/12 (Pre-refunded to 1/01/02) Philadelphia Authority for Industrial Development, Convertible Project Revenue Bonds (PGH Development Corporation), Series of 1989: 4,885,000 7.125%, 7/01/17 (Pre-refunded to 7/01/99) 7/99 at 102 AA*** 5,144,149 1,000,000 7.000%, 7/01/17 (Pre-refunded to 7/01/99) 7/99 at 102 Aaa 1,052,130 4,270,000 City of Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 6/01 at 102 Aaa 4,780,863 Thirteenth Series, 7.700%, 6/15/21 (Pre-refunded to 6/15/01) 8,530,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 8/01 at 102 Aa*** 9,443,563 Refunding Revenue Bonds, Saint Agnes Medical Center Project (FHA Insured Mortgage), Series 1991, 7.250%, 8/15/31 (Pre-refunded to 8/15/01) 3,250,000 The School District of Philadelphia, Pennsylvania, General Obligation 7/01 at 102 Aaa 3,545,393 Bonds, Series B of 1991, 7.000%, 7/01/05 (Pre-refunded to 7/01/01) 1,850,000 The School District of Philadelphia, Pennsylvania, General Obligation 5/02 at 100 3/4 Aaa 2,020,385 Bonds, Series A of 1992, 6.500%, 5/15/05 (Pre-refunded to 5/15/02) 10,625,000 City of Philadelphia, Pennsylvania, Water and Sewer Revenue Bonds, 8/01 at 100 AAA 11,536,519 Sixteenth Series, 7.000%, 8/01/18 (Pre-refunded to 8/01/01) 8,800,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 12/01 at 102 N/R*** 9,827,312 Hospital Revenue Bonds, Series of 1991 (Presbyterian Medical Center of Philadelphia), 7.250%, 12/01/21 (Pre-refunded to 12/01/01) 6,110,000 The Hospitals and Higher Education Facilities Authority of Philadelphia, 2/02 at 102 Aaa 6,701,142 Hospital Revenue Bonds (The Children's Hospital of Philadelphia Project), Series A of 1992, 6.500%, 2/15/21 (Pre-refunded to 2/15/02) The Philadelphia Municipal Authority, Philadelphia, Pennsylvania, Justice Lease Revenue Bonds, 1991 Series B: 1,500,000 7.100%, 11/15/11 (Pre-refunded to 11/15/01) 11/01 at 102 Aaa 1,670,835 9,900,000 7.125%, 11/15/18 (Pre-refunded to 11/15/01) 11/01 at 102 Aaa 11,035,332 3,000,000 The Pittsburgh Water and Sewer Authority, Water and Sewer System Revenue No Opt. Call Aaa 3,428,520 Refunding Bonds, Series of 1986, 7.625%, 9/01/04
S-54 Portfolio of Investments Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) (continued) June 30, 1998
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ------------------------------------------------------------------------------------------------------------------------------------ U.S. Guaranteed (continued) $ 7,065,000 The Pittsburgh Water and Sewer Authority, Water and Sewer System Revenue 9/01 at 102 Aaa $ 7,711,165 Refunding Bonds, Series A of 1991, 6.500%, 9/01/14 (Pre-refunded to 9/01/01) 3,730,000 Scranton-Lackawanna Health and Welfare Authority, City of Scranton, 6/00 at 102 N/R*** 4,037,016 Lackawanna County, Pennsylvania, University Revenue Bonds, 1990 Series A, 7.400%, 6/15/10 (Pre-refunded to 6/15/00) 8,475,000 Somerset County General Authority, Commonwealth of Pennsylvania, 10/01 at 100 Aaa 9,247,072 Commonwealth Lease Revenue Bonds, Series of 1991, 7.000%, 10/15/13 (Pre-refunded to 10/15/01) 2,545,000 Temple University of the Commonwealth System of Higher Education, Hospital 8/98 at 100 Aaa 2,552,762 Revenue Bonds (FHA Insured Mortgage), Series A, 7.250%, 8/01/11 (Pre-refunded to 8/01/98) 3,500,000 Upper Merion Area School District, Montgomery County, Pennsylvania 9/01 at 100 Aa*** 3,795,050 General Obligation Bonds, Series of 1993, 6.900%, 9/01/16 (Pre-refunded to 9/01/01) 3,000,000 Warrington Township Municipal Authority, Bucks County, Pennsylvania, 11/15 at 100 Aaa 3,605,460 Water and Sewer Revenue Bonds, Series of 1991, 7.100%, 12/01/21 (Pre-refunded to 11/15/15) 5,000,000 West Chester Area School District, Chester and Delaware Counties, 1/01 at 100 Aa1*** 5,321,200 Pennsylvania, General Obligation Bonds, Series A of 1991, 6.700%, 1/15/11 (Pre-refunded to 1/15/01) 5,450,000 The Municipal Authority of the Borough of West View (Allegheny County, No Opt. Call Aaa 7,693,002 Pennsylvania), Special Obligation Bonds, Series of 1985A, 9.500%, 11/15/14 5,000,000 County of Westmoreland, Commonwealth of Pennsylvania, General Obligation 8/01 at 100 Aaa 5,388,800 Bonds, Series of 1992, 6.700%, 8/01/09 (Pre-refunded to 8/01/01) - ------------------------------------------------------------------------------------------------------------------------------------ Utilities - 11.3% 5,000,000 Beaver County Industrial Development Authority (Pennsylvania), Pollution 9/99 at 102 Baa3 5,263,700 Control Revenue Refunding Bonds, 1989 Series A (Ohio Edison Company Beaver Valley Project), 7.750%, 9/01/24 3,750,000 Delaware County Industrial Development Authority, Pollution Control Revenue 4/01 at 102 Baa1 4,062,675 Refunding Bonds, 1991 Series A (Philadelphia Electric Company Project), 7.375%, 4/01/21 400,000 Greater Lebanon Refuse Authority, Lebanon County, Pennsylvania, Solid Waste 11/02 at 100 A- 426,852 Revenue Bonds, Series of 1992, 7.000%, 11/15/04 Lancaster County Solid Waste Management Authority, Resource Recovery System Revenue Bonds, 1998 Series A (AMT): 3,780,000 5.250%, 12/15/07 (Alternative Minimum Tax) No Opt. Call Aaa 3,977,014 3,900,000 5.250%, 12/15/08 (Alternative Minimum Tax) No Opt. Call Aaa 4,103,540 4,000,000 Lehigh County Industrial Development Authority, Pollution Control Revenue 8/05 at 102 Aaa 4,404,760 Refunding Bonds, 1995 Series A (Pennsylvania Power and Light Company Project), 6.150%, 8/01/29 3,000,000 Luzerne County Industrial Development Authority, Exempt Facilities Revenue 10/02 at 102 A- 3,318,810 Refunding Bonds, 1992 Series A (Pennsylvania Gas and Water Company Project), 7.200%, 10/01/17 (Alternative Minimum Tax) 3,550,000 Luzerne County Industrial Development Authority, Exempt Facilities Revenue 12/02 at 102 A- 3,921,330 Bonds, 1992 Series B (Pennsylvania Gas and Water Company Project), 7.125%, 12/01/22 (Alternative Minimum Tax) 5,000,000 Luzerne County Industrial Development Authority, Exempt Facilities Revenue 12/04 at 102 Aaa 5,683,950 Refunding Bonds, 1994 Series A (Pennsylvania Gas and Water Company Project), 7.000%, 12/01/17 (Alternative Minimum Tax) 5,500,000 Montgomery County Industrial Development Authority (Pennsylvania), Resource 1/03 at 100 A- 6,025,580 Recovery Revenue Bonds (Montgomery County Project), Series 1989, 7.500%, 1/01/12 (Mandatory put 1/01/99) - ------------------------------------------------------------------------------------------------------------------------------------ Water and Sewer - 1.3% 4,390,000 Fairview Township Authority, York County, Pennsylvania, Guaranteed Sewer 11/01 at 100 Aaa 4,722,367 RevenueBonds, Series of 1991 (Guaranteed by the Township of Fairview, York County, Pennsylvania), 6.700%, 11/01/21 - ------------------------------------------------------------------------------------------------------------------------------------ $348,845,000 Total Investments - (cost $338,246,502) - 100.8% 366,201,152 =============-----------------------------------------------------------------------------------------------------------------------
S-55
Principal Optional Call Market Amount Description Provisions* Ratings** Value - ------------------------------------------------------------------------------------------------------------------------------------ Temporary Investments in Short-Term Municipal Securities - 0.2% $ 800,000 Allegheny County Hospital Development Authority (Allegheny County, VMIG-1 $ 800,000 =========== Pennsylvania), Health Center Revenue Bonds, Series 1990 D (Presbyterian-University Health System, Inc.), Variable Rate Demand Bonds, 3.600%, 3/01/20+ --------------------------------------------------------------------------------------------------------------------- Other Assets Less Liabilities - (1.0)% (3,862,104) --------------------------------------------------------------------------------------------------------------------- Net Assets - 100% $ 363,139,048 =====================================================================================================================
* Optional Call Provisions (not covered by the report of independent auditors): Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. ** Ratings (not covered by the report of independent auditors): Using the higher of Standard & Poor's or Moody's rating. *** Securities are backed by an escrow or trust containing sufficient U.S. government or U.S. government agency securities which ensures the timely payment of principal and interest. Securities are normally considered to be equivalent to AAA rated securities. N/R Investment is not rated. (WI) Security purchased on a when-issued basis (note 1). + The security has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term security. The rate disclosed is that currently in effect. This rate changes periodically based on market conditions or a specified market index. See accompanying notes to financial statements. S-56 Statement of Net Assets June 30, 1998
New Jersey New Jersey Pennsylvania Pennsylvania Investment Quality Premium Income Investment Quality Premium Income 2 - ------------------------------------------------------------------------------------------------------------------------------------ Assets Investments in municipal securities, at market value (note 1) $430,251,496 $274,151,582 $366,201,152 $345,485,510 Temporary investments in short-term municipal securities, at amortized cost, which approximates market value (note 1) -- -- 800,000 2,400,000 Cash 4,003,382 -- 62,167 8,617,737 Receivables: Interest 7,495,861 4,790,428 6,052,424 5,035,044 Investments sold 350,000 55,000 -- 60,000 Other assets 20,390 25,588 28,751 25,915 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets 442,121,129 279,022,598 373,144,494 361,624,206 - ------------------------------------------------------------------------------------------------------------------------------------ Liabilities Cash overdraft -- 3,486,194 -- -- Payable for investments purchased 1,229,315 -- 8,223,544 8,074,743 Accrued expenses: Management fees (note 6) 229,391 144,646 190,468 184,860 Other 182,059 207,269 204,658 233,938 Preferred share dividends payable 33,795 51,356 52,513 30,968 Common share dividends payable 1,568,620 857,343 1,334,263 976,343 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 3,243,180 4,746,808 10,005,446 9,500,852 - ------------------------------------------------------------------------------------------------------------------------------------ Net assets (note 7) $438,877,949 $274,275,790 $363,139,048 $352,123,354 ==================================================================================================================================== Preferred shares, at liquidation value $130,000,000 $ 91,600,000 $110,000,000 $118,100,000 ==================================================================================================================================== Preferred shares outstanding 5,200 3,664 4,400 4,724 ==================================================================================================================================== Common shares outstanding 19,731,074 11,907,540 15,884,079 15,747,463 ==================================================================================================================================== Net asset value per Common share outstanding (net assets less Preferred shares at liquidation value, divided by Common shares outstanding) $ 15.65 $ 15.34 $ 15.94 $ 14.86 ====================================================================================================================================
See accompanying notes to financial statements. S-57 Statement of Operations Year Ended June 30, 1998
New Jersey New Jersey Pennsylvania Pennsylvania Investment Quality Premium Income Investment Quality Premium Income 2 - ---------------------------------------------------------------------------------------------------------------------------------- Investment Income (note 1) $26,227,003 $15,333,181 $22,325,746 $19,009,187 - ---------------------------------------------------------------------------------------------------------------------------------- Expenses Management fees (note 6) 2,782,068 1,747,972 2,318,967 2,228,612 Preferred shares -- auction fees 325,000 229,001 274,998 295,249 Preferred shares -- dividend disbursing agent fees 20,533 33,830 23,119 33,933 Shareholders' servicing agent fees and expenses 56,531 31,375 61,691 50,528 Custodian's fees and expenses 74,140 57,891 66,591 65,814 Directors'/Trustees' fees and expenses (note 6) 5,256 3,534 4,523 4,235 Professional fees 18,122 17,090 17,685 17,395 Shareholders' reports -- printing and mailing expenses 95,458 53,617 66,494 85,419 Stock exchange listing fees 24,727 27,559 28,372 27,554 Investor relations expense 36,581 22,631 32,749 30,552 Other expenses 28,547 26,792 23,806 24,063 - --------------------------------------------------------------------------------------------------------------------------------- Total expenses 3,466,963 2,251,292 2,918,995 2,863,354 - --------------------------------------------------------------------------------------------------------------------------------- Net investment income 22,760,040 13,081,889 19,406,751 16,145,833 - ---------------------------------------------------------------------------------------------------------------------------------- Realized and Unrealized Gain from Investments Net realized gain from investment transactions (notes 1 and 4) 1,145,279 1,139,335 736,176 2,190,521 Net change in unrealized appreciation or depreciation of investments 4,551,886 6,532,010 670,433 8,353,368 - --------------------------------------------------------------------------------------------------------------------------------- Net gain from investments 5,697,165 7,671,345 1,406,609 10,543,889 - --------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations $28,457,205 $20,753,234 $20,813,360 $26,689,722 =================================================================================================================================
See accompanying notes to financial statements. S-58 Statement of Changes in Net Assets
New Jersey Investment Quality New Jersey Premium Income ---------------------------------- ------------------------------ Year Ended Year Ended Year Ended Year Ended 6/30/98 6/30/97 6/30/98 6/30/97 - --------------------------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 22,760,040 $ 22,951,956 $ 13,081,889 $ 12,911,202 Net realized gain (loss) from investment transactions (notes 1 and 4) 1,145,279 626,155 1,139,335 (823,979) Net change in unrealized appreciation or depreciation of investments 4,551,886 6,063,373 6,532,010 7,032,022 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations 28,457,205 29,641,484 20,753,234 19,119,245 - ---------------------------------------------------------------------------------------------------------------------------------- Distributions to Shareholders (note 1) From undistributed net investment income: Common shareholders (18,755,870) (18,519,904) (10,251,340) (10,008,574) Preferred shareholders (4,393,050) (4,188,974) (3,059,919) (2,744,682) From accumulated net realized gains from investment transactions: Common shareholders (592,823) -- -- -- Preferred shareholders (132,888) -- -- -- - --------------------------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions to shareholders (23,874,631) (22,708,878) (13,311,259) (12,753,256) - --------------------------------------------------------------------------------------------------------------------------------- Capital Share Transactions (note 2) Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 2,673,402 2,351,238 760,188 -- - --------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets 7,255,976 9,283,844 8,202,163 6,365,989 Net assets at beginning of year 431,621,973 422,338,129 266,073,627 259,707,638 - --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $438,877,949 $431,621,973 $274,275,790 $266,073,627 ================================================================================================================================= Balance of undistributed net investment income at end of year $ 560,057 $ 948,937 $ 607,954 $ 837,324 ================================================================================================================================= Pennsylvania Investment Quality Pennsylvania Premium Income 2 - --------------------------------------------------------------------------------------------------------------------------------- Year Ended Year Ended Year Ended Year Ended 6/30/98 6/30/97 6/30/98 6/30/97 - --------------------------------------------------------------------------------------------------------------------------------- Operations Net investment income $ 19,406,751 $ 19,790,342 $ 16,145,833 $ 16,358,970 Net realized gain (loss) from investment transactions (notes 1 and 4) 736,176 360,973 2,190,521 (266,763) Net change in unrealized appreciation or depreciation of investments 670,433 2,891,910 8,353,368 10,125,469 - --------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets from operations 20,813,360 23,043,225 26,689,722 26,217,676 - --------------------------------------------------------------------------------------------------------------------------------- Distributions to Shareholders (note 1) From undistributed net investment income: Common shareholders (15,952,202) (15,875,077) (12,188,569) (12,220,049) Preferred shareholders (3,634,806) (3,710,061) (4,129,260) (4,109,035) From accumulated net realized gains from investment transactions: Common shareholders (828,412) (395,040) -- -- Preferred shareholders (192,317) (90,536) -- -- - --------------------------------------------------------------------------------------------------------------------------------- Decrease in net assets from distributions to shareholders (20,607,737) (20,070,714) (16,317,829) (16,329,084) - --------------------------------------------------------------------------------------------------------------------------------- Capital Share Transactions (note 2) Net proceeds from Common shares issued to shareholders due to reinvestment of distributions 2,184,617 1,952,811 -- -- - --------------------------------------------------------------------------------------------------------------------------------- Net increase in net assets 2,390,240 4,925,322 10,371,893 9,888,592 Net assets at beginning of year 360,748,808 355,823,486 341,751,461 331,862,869 - --------------------------------------------------------------------------------------------------------------------------------- Net assets at end of year $363,139,048 $360,748,808 $352,123,354 $341,751,461 ================================================================================================================================= Balance of undistributed net investment income at end of year $ 529,828 $ 710,085 $ 141,590 $ 313,586 =================================================================================================================================
See accompanying notes to financial statements. S-59 Notes to Financial Statements 1. General Information and Significant Accounting Policies The state Funds (the "Funds") covered in this report and their corresponding New York Stock Exchange symbols are Nuveen New Jersey Investment Quality Municipal Fund, Inc. (NQJ), Nuveen New Jersey Premium Income Municipal Fund, Inc. (NNJ), Nuveen Pennsylvania Investment Quality Municipal Fund (NQP) and Nuveen Pennsylvania Premium Income Municipal Fund 2 (NPY). Each Fund invests primarily in a diversified portfolio of municipal obligations issued by state and local government authorities within a single state. The Funds are registered under the Investment Company Act of 1940 as closed-end, diversified management investment companies. The following is a summary of significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with generally accepted accounting principles. Securities Valuation The prices of municipal bonds in each Fund's investment portfolio are provided by a pricing service approved by the Fund's Board of Directors/Trustees. When price quotes are not readily available (which is usually the case for municipal securities), the pricing service establishes fair market value based on yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating, indications of value from securities dealers and general market conditions. Temporary investments in securities that have variable rate and demand features qualifying them as short-term securities are valued at amortized cost, which approximates market value. Securities Transactions Securities transactions are recorded on a trade date basis. Realized gains and losses from such transactions are determined on the specific identification method. Securities purchased or sold on a when-issued or delayed delivery basis may have extended settlement periods. The securities so purchased are subject to market fluctuation during this period. The Funds have instructed the custodian to segregate assets in a separate account with a current value at least equal to the amount of the when-issued and delayed delivery purchase commitments. At June 30, 1998, New Jersey Investment Quality, Pennsylvania Investment Quality and Pennsylvania Premium Income 2 had when-issued and delayed delivery purchase commitments of $1,229,315, $8,223,544 and $8,074,743, respectively. There were no such outstanding purchase commitments in New Jersey Premium Income. Investment Income Interest income is determined on the basis of interest accrued, adjusted for amortization of premiums and accretion of discounts on long-term debt securities when required for federal income tax purposes. Income Taxes Each Fund is a separate taxpayer for federal income tax purposes. Each Fund intends to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its tax-exempt net investment income, in addition to any significant amounts of net realized capital gains and/or market discount realized from investment transactions. The Funds currently consider significant net realized capital gains and/or market discount as amounts in excess of $.01 per Common share. Furthermore, each New Jersey Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal and New Jersey state income taxes, to retain such tax-exempt status when distributed to the shareholders of the New Jersey Funds. Each Pennsylvania Fund intends to satisfy conditions which will enable interest from municipal securities, which is exempt from regular federal, Pennsylvania state personal income and the Philadelphia School District Investment Income taxes, to retain such tax-exempt status when distributed to shareholders of the Pennsylvania Funds. All monthly tax-exempt income dividends paid during the fiscal year ended June 30, 1998, have been designated Exempt Interest Dividends. Net realized capital gain and market discount distributions are subject to federal taxation. Dividends and Distributions to Shareholders Tax-exempt net investment income is declared as a dividend monthly and payment is made or reinvestment is credited to shareholder accounts on the first business day after month end. Net realized capital gains and/or market discount from investment transactions, if any, are distributed to shareholders not less frequently than annually. Furthermore, capital gains are distributed only to the extent they exceed available capital loss carryforwards. Distributions to shareholders of tax-exempt net investment income, net realized capital gains and/or market discount are recorded on the ex-dividend date. The amount and timing of such distributions are determined in accordance with federal income tax regulations, which may differ from generally accepted accounting principles. Accordingly, temporary over-distributions as a result of these differ- S-60 ences may occur and will be classified as either distributions in excess of net investment income, distributions in excess of net realized gains and/or distributions in excess of net ordinary taxable income from investment transactions, where applicable. Preferred Shares The Funds have issued and outstanding $25,000 stated value Preferred shares. Each Fund's Preferred shares are issued in more than one Series. The dividend rate on each Series may change every seven days, as set by the auction agent. The number of shares outstanding, by Series and in total, were as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ------------------------------------------------------------------------------------------------------------- Number of Shares: Series M 3,200 -- -- 844 Series T -- 624 -- -- Series W -- 1,440 2,400 -- Series Th 2,000 1,600 2,000 2,080 Series F -- -- -- 1,800 - - ----------------------------------------------------------------------------------------------------------- Total 5,200 3,664 4,400 4,724 =============================================================================================================
Derivative Financial Instruments The Funds may invest in transactions in certain derivative financial instruments including futures, forward, swap, and option contracts, and other financial instruments with similar characteristics. Although the Funds are authorized to invest in such financial instruments, and may do so in the future, they did not make any such investments during the fiscal year ended June 30, 1998. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. 2. Fund Shares Transactions in Common shares were as follows:
New Jersey Investment Quality New Jersey Premium Income ----------------------------- ------------------------- Year Ended Year Ended Year Ended Year Ended 6/30/98 6/30/97 6/30/98 6/30/97 - ---------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 161,805 150,625 49,041 -- ==========================================================================================================
Pennsylvania Pennsylvania Investment Quality Premium Income 2 ------------------------------- ------------------------ Year Ended Year Ended Year Ended Year Ended 6/30/98 6/30/97 6/30/98 6/30/97 - --------------------------------------------------------------------------------------------------------- Shares issued to shareholders due to reinvestment of distributions 128,464 118,967 -- -- =========================================================================================================
3. Distributions to Common Shareholders The Funds declared Common share dividend distributions from their tax-exempt net investment income which were paid August 3, 1998, to shareholders of record on July 15, 1998, as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ------------------------------------------------------------------------------------------------------------- Dividend per share $ .0795 $ .0720 $ .0840 $ .0620 =============================================================================================================
S-61 NOTES TO FINANCIAL STATEMENTS (continued) 4. Securities Transactions Purchases and sales (including maturities) of investments in municipal securities and temporary municipal investments during the fiscal year ended June 30, 1998, were as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - --------------------------------------------------------------------------------------------------------- Purchases: Investments in municipal securities $26,970,668 $39,214,548 $47,146,967 $117,039,087 Temporary municipal investments 51,100,000 12,300,000 63,165,000 91,600,000 Sales and Maturities: Investments in municipal securities 30,405,185 34,552,850 32,879,697 109,393,086 Temporary municipal investments 51,100,000 12,300,000 62,365,000 90,325,000 =========================================================================================================
At June 30, 1998, the identified cost of investments owned for federal income tax purposes was the same as the cost for financial reporting purposes for each Fund. At June 30, 1998, the following Funds had unused capital loss carryforwards available for federal income tax purposes to be applied against future capital gains, if any. If not applied the carryforwards will expire as follows:
New Jersey Pennsylvania Premium Premium Income Income 2 - --------------------------------------------------------------------------------------------------------- Expiration year: 2002 $3,583,548 $ -- 2003 129,409 67,894 2004 650,143 40,999 2005 174,583 169,168 - --------------------------------------------------------------------------------------------------------- Total $4,537,683 $278,061 =========================================================================================================
5. Unrealized Appreciation (Depreciation) Gross unrealized appreciation and gross unrealized depreciation of investments at June 30, 1998, were as follows:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ------------------------------------------------------------------------------------------------------------- Gross unrealized: appreciation $30,081,552 $15,338,926 $27,963,524 $18,741,165 depreciation (92,392) (810,530) (8,874) (17,164) - ------------------------------------------------------------------------------------------------------------- Net unrealized appreciation $29,989,160 $14,528,396 $27,954,650 $18,724,001 =============================================================================================================
S-62 6. Management Fee and Other Transactions with Affiliates Under the Funds' investment management agreements with Nuveen Advisory Corp. (the "Adviser"), a wholly owned subsidiary of The John Nuveen Company, each Fund pays an annual management fee, payable monthly, at the rates set forth below, which are based upon the average daily net asset value of each Fund:
Average Daily Net Asset Value Management Fee - -------------------------------------------------------------------------------- For the first $125 million .6500 of 1% For the next $125 million .6375 of 1 For the next $250 million .6250 of 1 For the next $500 million .6125 of 1 For the next $1 billion .6000 of 1 For net assets over $2 billion .5875 of 1 ================================================================================
The fee compensates the Adviser for overall investment advisory and administrative services and general office facilities. The Funds pay no compensation directly to those of its Directors/Trustees who are affiliated with the Adviser or to their officers, all of whom receive remuneration for their services to the Funds from the Adviser. 7. Composition of Net Assets At June 30, 1998, net assets consisted of: At June 30, 1998, net assets consisted of:
New Jersey New Jersey Pennsylvania Pennsylvania Investment Premium Investment Premium Quality Income Quality Income 2 - ------------------------------------------------------------------------------------------------------------- Preferred shares, $25,000 stated value per share, at liquidation value $130,000,000 $91,600,000 $110,000,000 $118,100,000 Common shares, $.01 par value per share 197,311 119,075 158,841 157,475 Paid-in surplus 277,529,872 171,962,679 224,443,348 215,278,352 Balance of undistributed net investment income 560,057 607,954 529,828 141,590 Accumulated net realized gain (loss) from investment transactions 601,549 (4,542,314) 52,381 (278,064) Net unrealized appreciation of investments 29,989,160 14,528,396 27,954,650 18,724,001 - ------------------------------------------------------------------------------------------------------------- Net assets $438,877,949 $274,275,790 $363,139,048 $352,123,354 ============================================================================================================= Authorized shares: Common 200,000,000 200,000,000 Unlimited Unlimited Preferred 1,000,000 1,000,000 Unlimited Unlimited =============================================================================================================
S-63 Financial Highlights Selected data for a Common share outstanding throughout each period is as follows:
Investment Operations ------------------------------------ Net Realized/ Beginning Net Unrealized Net Asset Investment Investment Value Income Gain (Loss) Total - -------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1998 $15.41 $1.16 $ .29 $1.45 1997 15.05 1.18 .34 1.52 1996 15.06 1.17 (.01) 1.16 1995 14.73 1.20 .40 1.60 1994 15.88 1.20 (1.07) .13 New Jersey Premium Income Year Ended 6/30: 1998 14.71 1.10 .65 1.75 1997 14.18 1.09 .51 1.60 1996 13.97 1.08 .20 1.28 1995 13.46 1.06 .55 1.61 11 mos. ended 6/30/94 14.52 .94 (1.12) (.18) 12/17/92 to 7/31/93 14.05 .40 .68 1.08 Pennsylvania Investment Quality Year ended 6/30: 1998 15.91 1.23 .10 1.33 1997 15.72 1.26 .22 1.48 1996 15.86 1.28 (.08) 1.20 1995 15.49 1.29 .41 1.70 1994 16.42 1.30 (.86) .44 Pennsylvania Premium Income 2 Year ended 6/30: 1998 14.20 1.02 .67 1.69 1997 13.57 1.04 .63 1.67 1996 13.25 1.04 .33 1.37 1995 12.53 1.05 .77 1.82 1994 14.35 1.00 (1.71) (.71) =================================================================================
Less Distributions ---------------------------------------------------------------- Net Net Investment Investment Capital Capital Income Income Gains Gains To Common To Preferred To Common To Preferred Shareholders Shareholders+ Shareholders Shareholders+ Total - -------------------------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1998 $ (.95) $(.22) $(.03) $(.01) $(1.21) 1997 (.95) (.21) -- -- (1.16) 1996 (.94) (.23) -- -- (1.17) 1995 (1.01) (.24) (.02) -- (1.27) 1994 (1.07) (.14) (.06) (.01) (1.28) New Jersey Premium Income Year Ended 6/30: 1998 (.86) (.26) -- -- (1.12) 1997 (.84) (.23) -- -- (1.07) 1996 (.81) (.26) -- -- (1.07) 1995 (.81) (.28) (.01) -- (1.10) 11 mos. ended 6/30/94 (.71) (.17) -- -- (.88) 12/17/92 to 7/31/93 (.34) (.06) -- -- (.40) Pennsylvania Investment Quality Year ended 6/30: 1998 (1.01) (.23) (.05) (.01) (1.30) 1997 (1.01) (.24) (.03) (.01) (1.29) 1996 (1.05) (.25) (.03) (.01) (1.34) 1995 (1.07) (.26) -- -- (1.33) 1994 (1.16) (.16) (.04) (.01) (1.37) Pennsylvania Premium Income 2 Year ended 6/30: 1998 (.77) (.26) -- -- (1.03) 1997 (.78) (.26) -- -- (1.04) 1996 (.78) (.27) -- -- (1.05) 1995 (.81) (.29) -- -- (1.10) 1994 (.79) (.18) -- -- (.97) =================================================================================================
* Annualized. ** Total Investment Return on Market Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in stock price per share. Total Return on Net Asset Value is the combination of reinvested dividend income, reinvested capital gains distributions, if any, and changes in net asset value per share. Total returns are not annualized. + The amounts shown are based on Common share equivalents. ++ Ratios do not reflect the effect of dividend payments to Preferred shareholders. S-64
Total Returns ---------------------------------------------------------------------------------- Organization and Offering Costs and Preferred Share Ending Underwriting Net Asset Ending Based on Based on Net Discounts Value Market Value Market Value** Asset Value** - ------------------------------------------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1998 $ -- $15.65 $17.1250 11.38% 8.12% 1997 -- 15.41 16.3125 16.50 8.92 1996 -- 15.05 14.8750 8.17 6.28 1995 -- 15.06 14.6250 3.03 9.71 1994 -- 14.73 15.2500 (4.63) (.27) New Jersey Premium Income Year Ended 6/30: 1998 -- 15.34 15.5625 11.12 10.35 1997 -- 14.71 14.8125 20.95 9.94 1996 -- 14.18 13.0000 4.24 7.37 1995 -- 13.97 13.2500 14.60 10.39 11 mos. ended 6/30/94 -- 13.46 12.3750 (13.16) (2.61) 12/17/92 to 7/31/93 (.21) 14.52 15.0000 2.27 5.78 Pennsylvania Investment Quality Year ended 6/30: 1998 -- 15.94 17.2500 8.77 7.02 1997 -- 15.91 16.8750 9.75 8.01 1996 -- 15.72 16.3750 12.74 6.00 1995 -- 15.86 15.5000 2.32 9.77 1994 -- 15.49 16.2500 (.39) 1.23 Pennsylvania Premium Income 2 Year ended 6/30: 1998 -- 14.86 13.4375 6.27 10.29 1997 -- 14.20 13.3750 14.82 10.61 1996 -- 13.57 12.3750 2.21 8.39 1995 -- 13.25 12.8750 11.50 12.87 1994 (.14) 12.53 12.3750 (10.29) (7.60) ===================================================================================================================
Ratios/Supplemental Data ------------------------------------------------------- Ratio of Net Ratio of Investment Ending Expenses to Income to Portfolio Net Assets Average Average Turnover (000) Net Assets++ Net Assets++ Rate - -------------------------------------------------------------------------------------------------- New Jersey Investment Quality Year Ended 6/30: 1998 $438,878 .79% 5.20% 6% 1997 431,622 .80 5.36 15 1996 422,338 .81 5.33 16 1995 420,944 .85 5.57 13 1994 259,718 .82 5.39 5 New Jersey Premium Income Year Ended 6/30: 1998 274,276 .83 4.81 13 1997 266,074 .83 4.91 18 1996 259,708 .86 4.90 32 1995 257,251 .94 5.08 15 11 mos. ended 6/30/94 113,458 .91* 4.72* 12 12/17/92 to 7/31/93 118,885 .97* 3.75* 5 Pennsylvania Investment Quality Year ended 6/30: 1998 363,139 .80 5.34 9 1997 360,749 .81 5.52 8 1996 355,823 .82 5.53 12 1995 355,831 .87 5.70 9 1994 191,718 .84 5.54 3 Pennsylvania Premium Income 2 Year ended 6/30: 1998 352,123 .82 4.63 32 1997 341,751 .83 4.85 29 1996 331,863 .84 4.90 19 1995 326,771 .92 5.20 5 1994 139,053 .90 4.70 11 =================================================================================================
S-65 APPENDIX A RATINGS OF INVESTMENTS STANDARD & POOR'S RATINGS GROUP -- A brief description of the applicable Standard & Poor's Ratings Group ("S&P") rating symbols and their meanings (as published by S&P) follows: LONG TERM DEBT An S&P corporate or municipal debt rating is a current assessment of the creditworthiness of an obligor with respect to a specific obligation. This assessment may take into consideration obligors such as guarantors, insurers, or lessees. The debt rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in, or unavailability of, such information, or based on other circumstances. The ratings are based, in varying degrees, on the following considerations: 1. Likelihood of default -- capacity and willingness of the obligor as to the timely payment of interest and repayment of principal in accordance with the terms of the obligation; 2. Nature of and provisions of the obligation; 3. Protection afforded by, and relative position of, the obligation in the event of bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws affecting creditors' rights. INVESTMENT GRADE AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay interest and repay principal is extremely strong. AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. A-1 BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. SPECULATIVE GRADE RATING Debt rated "BB", "B", "CCC", "CLARK CURBO" and "C" is regarded as having predominantly speculative characteristics with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation and "C" the highest. While such debt will likely have some quality and protective characteristics these are outweighed by major uncertainties or major exposures to adverse conditions. BB Debt rated "BB" has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. The "BB" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BBB-" rating. B Debt rated "B" has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The "B" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "BB" or "BB-" rating. CCC Debt rated "CCC" has a currently identifiable vulnerability to default, and is dependent upon favorable business, financial, and economic conditions to meet timely payment of interest and repayment of principal. In the event of adverse business, financial, or economic conditions, it is not likely to have the capacity to pay interest and repay principal. The "CCC" rating category is also used for debt subordinated to senior debt that is assigned an actual or implied "B" or "B-" rating. CLARK CURBO The rating "CLARK CURBO" typically is applied to debt subordinated to senior debt that is assigned an actual or implied "CCC" debt rating. C The rating "C" typically is applied to debt subordinated to senior debt which is assigned an actual or implied "CCC-" debt rating. The "C" rating may be used to cover a situation where a bankruptcy petition has been filed, but debt service payments are continued. CI The rating "CI" is reserved for income bonds on which no interest is being paid. D Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal payments are not made on the date due even if the applicable grace period A-2 has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of, or the risk of default upon failure of, such completion. The investor should exercise judgment with respect to such likelihood and risk. L The letter "L" indicates that the rating pertains to the principal amount of those bonds to the extent that the underlying deposit collateral is federally insured and interest is adequately collateralized.* In the case of certificates of deposit the letter "L" indicates that the deposit, combined with other deposits being held in the same right and capacity, will be honored for principal and accrued pre-default interest up to the federal insurance limits within 30 days after closing of the insured institution or, in the event that the deposit is assumed by a successor insured institution, upon maturity. * Continuance of the rating is contingent upon S&P's receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flow. NR Indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy. MUNICIPAL NOTES An S&P note rating reflects the liquidity concerns and market access risks unique to notes. Notes due in 3 years or less will likely receive a note rating. Notes maturing beyond 3 years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment: -- Amortization schedule (the larger the final maturity relative to other maturities, the more likely it will be treated as a note). -- Source of payment (the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note). NOTE RATING SYMBOLS ARE AS FOLLOWS: A-3 SP-1 Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest. SP-3 Speculative capacity to pay principal and interest. A note rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information or based on other circumstances. COMMERCIAL PAPER An S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories, ranging from "A-1" for the highest quality obligations to "D" for the lowest. These categories are as follows: A-1 This highest category indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation. A-2 Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated "A-1." A-3 Issues carrying this designation have adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designation. B Issues rated "B" are regarded as having only speculative capacity for timely payment. C This rating is assigned to short-term debt obligations with a doubtful capacity for payment. D Debt rated "D" is in payment default. The "D" rating category is used when interest payments or principal payments are not made on the date due, even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. A-4 A commercial paper rating is not a recommendation to purchase, sell, or hold a security, inasmuch as it does not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to S&P by the issuer or obtained by S&P from other sources it considers reliable. S&P does not perform an audit in connection with any rating and may, on occasion, rely on unaudited financial information. The ratings may be changed, suspended, or withdrawn as a result of changes in or unavailability of such information or based on other circumstances. MOODY'S INVESTORS SERVICE, INC -- A brief description of the applicable Moody's Investors Service, Inc. ("Moody's") rating symbols and their meanings (as published by Moody's) follows: MUNICIPAL BONDS AAA Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A Bonds that are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA Bonds that are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA Bonds that are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. A-5 B Bonds that are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. CAA Bonds that are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. CA Bonds that are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C Bonds that are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. CON(-) Bonds for which the security depends upon the completion of some act or the fulfillment of some condition are rated conditionally. These are bonds secured by (a) earnings of projects under construction, (b) earnings of projects unseasoned in operation experience, (c) rentals which begin when facilities are completed, or (d) payments to which some other limiting condition attaches. Parenthetical rating denotes probable credit stature upon completion of construction or elimination of basis of condition. NOTE: Those bonds in the Aa, A, Baa, Ba, and B groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa1, A1, Baa1, Ba1 and B1. SHORT-TERM LOANS MIG 1/VMIG 1 This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad based access to the market for refinancing. MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. MIG 3/VMIG 3 This designation denotes favorable quality. All security elements are accounted for but there is lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is likely to be less well-established. MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly regarded as required of an investment security is present and although not distinctly or predominantly speculative, there is specific risk. S.G. This designation denotes speculative quality. Debt instruments in this category lack margins of protection. A-6 COMMERCIAL PAPER Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: -- Leading market positions in well established industries. -- High rates of return on funds employed. -- Conservative capitalization structures with moderate reliance on debt and ample asset protection. -- Broad margins in earnings coverage of fixed financial charges and high internal cash generation. -- Well-established access to a range of financial markets and assured sources of alternate liquidity. Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers rated Prime-3 (or related supporting institutions) have an acceptable capacity for repayment of short-term promissory obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and profitability may result in changes in the level of debt protection measurements and the requirement for relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. A-7 APPENDIX B CERTIFICATE OF AMENDMENT TO STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, a Vice President and Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies as follows: 2. The Board of Trustees of the Trust, in accordance with (SS)5(1)(i) and 13(A) of the Trust's Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Shares (the "Statement"), and (SS)1(a) and 2 of Article IV of the Trust's Declaration of Trust, adopted a resolution on December 18, 1998, to amend the Statement. 3. Such amendment shall be effective on as of the close of business on June 22, 1999. 4. The following portions of the Statement are hereby set forth in their amended form as follows: a. Appendix A, Section 1 shall include the following paragraph after the second paragraph of the Section: "SERIES T: a series of 10,000 shares of Preferred Shares, par value $.01 per share, liquidation preference $25,000 per share, is hereby designated "Municipal Auction Rate Cumulative Preferred Shares, Series T." shares of Series T MuniPreferred shall be issued at the close of business on June 25, 1999 and, for purposes hereof, be deemed to have a Date of Original Issue of ___________; have an Applicable Rate for its Initial Dividend Period equal to % per annum; have an initial Dividend Payment Date of Friday, July 7, 1999; and have such other preferences, limitation and relative voting rights, in addition to those required by applicable law or set forth in the Declaration applicable to Preferred Shares of the Fund, as set forth in Part I and Part II of this Statement. The Series T MuniPreferred shall constitute a separate series of Preferred Shares of the Fund, and each share of Series T MuniPreferred shall be identical except as provided in Section 11 of Part I of this Statement. b. Appendix A, Section 2 of the Statement shall read in its entirety as follows: "The number of authorized shares constituting Series T MuniPreferred is 10,000, Series W MuniPreferred is 2,400, and Series TH MuniPreferred is 2,000." c. Appendix A, Section 5 shall include the following sentence after the second sentence of the section. "The Initial Rate Period of shares of Series T MuniPreferred shall be the period from and including the Date of Original Issue thereof to but excluding July 6, 1999." d. Appendix A, Section 6 of the Statement shall read in its entirety as follows: "November 30, 1993 for Series W MuniPreferred, February 28, 1995 for Series TH MuniPreferred, and August 31, 1999 for Series T MuniPreferred." e. Appendix A, Section 7 of the Statement shall read in its entirety as follows: SERIES OF "PARTY: MUNIPREFERRED: Salomon Smith Barney Inc. Series T Merrill Lynch, Pierce, Fenner & Series W Smith Incorporated Lehman Brothers, Inc. Series TH" f. Appendix A, Section 9 shall read in its entirety as follows: "Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement, dividends shall be payable on shares of Series W MuniPreferred on Thursday, June 20, 1991, and on each Thursday thereafter; on Series TH MuniPreferred on Friday, January 13, 1995, and on each Friday thereafter, and on Series T MuniPreferred on Friday, July 7, 1999, and on each Wednesday thereafter." g. Appendix A, Section 10 shall provide that the amount for purposes of subparagraph (c)(i) of Section 5 of Part I of this Statement is $110,000,000. IN WITNESS WHEREOF, the undersigned, being a Vice President and Secretary of the Trust, has executed this instrument as of this 22nd day of June, 1999. ___________________________ Gifford R. Zimmerman Vice President and Secretary CERTIFICATE OF AMENDMENT TO STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, a Vice President and Assistant Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby Certifies as follows. 1. The Board of Trustees of the Trust, in accordance with the Trust's Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Shares (the "Statement"), and the Trust's Declaration of Trust, adopted a resolution on August 30, 1994 to amend the Statement. 2. Such amendment shall be effective as of the close of business on January 9, 1995. 3. The following portions of the Statement are hereby set forth in their amended form as follows: a. Appendix A. Section 1 shall include the following paragraph after the first Paragraph of the Section: "Series TH: a series of 2,000 shares of Preferred Shares, par value $.01 per share. Liquidation preference $25,000 per share, is hereby designated "Municipal Auction Rate Cumulative Preferred Shares. Series TH. "Each share of Series TH MuniPreferred shall be issued at the close of business on January 9, 1995 and, for purposes hereof, be deemed to have a Date of Original Issue of January, 10, 1995; have an Applicable Rate for its Initial Dividend Period equal to 3.99% per annum have an Initial Dividend Payment Date of Friday, January 13 1995, and have such other preferences, limitation and relative voting rights in addition to those required by applicable law or set forth in the Declaration applicable to Preferred Shares of the Fund as set forth in Part I and Part II of this Statement. The Series TH MuniPreferred shall constitute a separate series of Preferred Shares of the Fund, and each share of Series TH MuniPreferred shall be identical except as provided in Section II of Part I of this Statement" b. Appendix A. Section 2 of the Statement shall read in its entirety as follows: "The number of authorized shares constituting Series W MuniPreferred is 2,400 and constituting Series TH MuniPreferred is 2,000." c. Appendix A. Section 5 shall include the following sentence after the first sentence of the section. "The Initial Rate Period for shares of Series TH MuniPreferred shall be the period from and including the Date of the Original Rate thereof to but excluding January 13, 1995. d. Appendix A. Series 6 of the Statement shall read in its entirety as follows: "November 30, 1993 for Series W MuniPreferred and February 28, 1995 for Series TH MuniPreferred." C. Appendix A. Series 7 of the Statement shall read in its entirety as follows: "Party: Series of MuniPreferred: Merrill Lynch, Pierce, Series W Fenner & Smith Incorporated Lehman Brothers, Inc. Series TH" f. Appendix A. Section 9 shall read in its entirety as follows: "Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement, dividends shall be payable on shares of Series W MuniPreferred on Thursday, June 20, 1991, and on each Thursday thereafter and on Series TH MuniPreferred on Friday January 13, 1995, and on each Friday thereafter." g. Appendix A. Section 10 shall provide that the amount for purposes of Subparagraph (?) of Section 5 of Part I of this Statement is $110,000,000. IN WITNESS WHEREOF, The undersigned being a Vice President and Assistant Secretary of the Trust, has executed this instrument as of this 5th day of January, 1995. /s/ Larry W. Martin ------------------------- Larry W. Martin Vice President and Assistant Secretary 2 AMENDMENT TO DECLARATION NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND A TRUE COPY ATTEST WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH 12-10-98 LC DATE CLERK FEE PAID $100.00 MAY 11, 1998 CASHIERS Marie Wilson SECRETARY'S OFFICE Bingham, Dana & Gould. Michael Joseph Conolly 951-8000 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND CERTIFIED COPY OF CORPORATE RESOLUTION THE UNDERSIGNED, JAMES J. WESOLOWSKI, Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust, (the "Fund") does hereby certify: 1. That he is the duly elected, qualified and acting Secretary of the Fund, has custody of the corporate records and is a proper officer to make this certification. 2. That at a meeting of the Board of Trustees of the Fund held on Tuesday, April 26, 1994, at which a quorum was present and voted throughout, the following resolution was duly adopted by said Board and said resolution has not been amended, altered or repealed and remains in full force and effect on the date hereof: WHEREAS, Standard & Poor's Corporation ("S&P") has indicated that it no longer requires leveraged closed-end municipal bond funds to maintain a minimum liquidity level as a condition to assigning a AAA rating to preferred shares issued by such funds; WHEREAS, pursuant to express authority granted in the Statement, the Board may from time to time, without vote or consent of shareholders, amend, alter or repeal certain definitions in the Statement, including the definition of "Minimum Liquidity Level", provided the Board receives written confirmation from S&P that such action would not impair the rating then assigned by S&P to the Fund's shares of MuniPreferred, MMP or MPS, as the case may be; and WHEREAS, in light of S&P's elimination of the minimum liquidity requirement, the Board believes it to be in the best interest of the Fund to amend the Statement to repeal the definition of Minimum Liquidity Level; NOW, THEREFORE, BE IT RESOLVED, that the Fund's Statement be, and hereby is, amended as follows: (a) the definition of Minimum Liquidity Level shall be, and hereby is, repealed in its entirety, subject to the Fund's receipt of the written confirmation from S&P described above; and (b) the definitions of "Dividend Coverage Assets", "Valuation Date" and "Dividend Coverage Amount" shall be, and hereby are, repealed to the extent such definitions pertain to the definition of "Minimum Liquidity Level", subject to the Fund's receipt of the written confirmation from S&P described above. IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed this 16th day of June, 1994. /s/ James J. Wesolowski ----------------------------------------- James J. Wesolowski, Secretary CERTIFICATE OF AMENDMENT TO STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES, SERIES W, OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, a Vice President and Assistant Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies as follows: 1. The Board of Trustees of the Trust, in accordance with the Trust's Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Shares, Series W (the "Statement"), and the Trust's Declaration of Trust, adopted a resolution on October 19, 1993, to amend the Statement. 2. Such amendment shall be effective as of the close of business on January 6, 1994. 3. The following portions of the Statement are hereby set forth in their amended form as follows: a. Paragraph FIRST, Line 6 of the Statement shall read in its entirety as follows: "Preferred Shares, liquidation preference $25,000 per share, having such designation." b. Definitions, Paragraph (tt) of the Statement shall read in its entirety as follows: "(tt) "LIQUIDATION PREFERENCE," with respect to a given number of shares of MuniPreferred, means $25,000 times that number." c. Definitions, Paragraph (fff) Line 4 of the Statement shall read in its entirety as follows: "$25,000 (plus the product of the number of shares of any other series of Pre-" d. Part I, Section 2, Subparagraph (e)(ii), Line 10 of the Statement shall read in its entirety as follows: "applying the rate obtained against $25,000." e. Part I, Section 11, Subparagraph (a)(i), Line 6 of the Statement shall read in its entirety as follows: "to the sum of $25,000 plus an amount equal to accumulated but unpaid" f. Part I, Section 11, Subparagraph (a)(i), Line 10 of the Statement shall read in its entirety as follows: "redemption fewer than 500 shares of such series remain outstanding; (2)" g. Part I, Section 11, Subparagraph (a)(iv), Line 9 of the Statement shall read in its entirety as follows: "redemption price per share equal to the sum of $25,000 plus an amount" h. Part I, Section 11, Subparagraph (b), Line 2 of the Statement shall read in its entirety as follows: "price equal to $25,000 per share plus accumulated but unpaid dividends" i. Appendix A, Section 1, Lines 1 and 2 of the Statement shall read in their entirety as follows: "Series W: A series of 2,400 Preferred Shares, liquidation preference $25,000 per share, is hereby designated "Municipal Auction Rate Cumulative" j. Appendix A, Section 2 of the Statement shall read in its entirety as follows: "The number of authorized shares constituting Series W MuniPreferred is 2,400." k. Appendix A, Section 12, Line 39 of the Statement shall read in its entirety as follows: $25,000." IN WITNESS WHEREOF, the undersigned, being a Vice President and Assistant Secretary of the Trust, has executed this instrument as of the 3rd day of January, 1994. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: /s/ Larry W. Martin, ------------------------------- Larry W. Martin, Vice President and Assistant Secretary -2- CERTIFICATE OF AMENDMENT TO THE STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF THE MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES, SERIES W OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies as follows: 1. The Board of Trustees of the Trust, in accordance with the Trust's Statement Establishing and Fixing the Rights and Preferences of the Municipal Auction Rate Cumulative Preferred Shares (the "Statement") and the Trust's Declaration of Trust (the "Declaration"), adopted a resolution, on April 20, 1993, to amend and restate the Statement in its entirety. 2. On September 16, 1993, such amendment and restatement was approved by the requisite number of holders of the outstanding common shares and preferred shares of beneficial interest in accordance with the Statement and the Declaration. 3. The statement, as amended and restated in its entirety, is attached hereto as Exhibit A. IN WITNESS WHEREOF, the undersigned, being Secretary of the Trust, has executed this instrument as of the 16th day of September, 1993. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: /s/ 0. Walter Renfftlen ------------------------------- 0. Walter Renfftlen Vice President and Controller NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES ("MUNIPREFERRED") NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, A MASSACHUSETTS BUSINESS TRUST (THE "FUND"), CERTIFIES THAT: FIRST: Pursuant to authority expressly vested in the Board of Trustees of the Fund by Article IV of the Fund's Declaration of Trust, as amended (which, as hereafter restated or amended from time to time is, together with this Statement, herein called the "Declaration"), the Board of Trustees has, by resolution, authorized the issuance of shares of the Fund's authorized Preferred Shares, liquidation preference $50,000 per share, having such designation or designations as to series as is set forth in Section 1 of APPENDIX A hereto and such number of shares per such series as is set forth in Section 2 of APPENDIX A hereto. SECOND: The preferences, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of each series of MuniPreferred described in Section 1 of APPENDIX A hereto are as follows (each such series being referred to herein as a series of MuniPreferred, and shares of all such series being referred to herein individually as a share of MuniPreferred and collectively as shares of MuniPreferred): DEFINITIONS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SECTION 3 OF APPENDIX A hereto, as used in Parts I and II of this Statement, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: (a)"'AA' COMPOSITE COMMERCIAL PAPER RATE," on any date for any Rate Period of shares of a series of MuniPreferred, shall mean (i) (A) in the case of any Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period Days, the interest equivalent of the 30-day rate; PROVIDED, HOWEVER, that if such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial Paper Rate is being used to determine the Applicable Rate for shares of such series when all of the Outstanding shares of such series are subject to Submitted Hold Orders, then the interest equivalent of the seven-day rate, and (B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70 Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but fewer than 85 Rate Period Days, the arithmetic average of the interest equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but fewer than 120 Rate Period Days, the arithmetic average of the interest equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141 Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more but fewer than 162 Rate Period Days, the arithmetic average of the 120-day and 180-day rates; and (7) 162 or more but fewer than 183 Rate 1 Period Days, the interest equivalent of the 180-day rate, in each case on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or the equivalent of such rating by S&P or another rating agency, as made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day next preceding such date; or (ii) in the event that the Federal Reserve Bank of New York does not make available any such rate, then the arithmetic average of such rates, as quoted on a discount basis or otherwise, by the Commercial Paper Dealers to the Auction Agent for the close of business on the Business Day next preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Fund to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Fund does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a given days' maturity shall be equal to the quotient (rounded upwards to the next higher one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. (b) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in paragraph (c) of Section 7 of Part I of this Statement. (c) "AFFILIATE" shall mean, for purposes of the definition of "Outstanding," any Person known to the Auction Agent to be controlled by, in control of or under common control with the Fund, PROVIDED, HOWEVER, that no Broker-Dealer controlled by, in control of or under common control with the Fund shall be deemed to be an Affiliate nor shall any corporation or any Person controlled by, in control of or under common control with such corporation one of the trustees, directors or executive officers of which is a trustee of the Fund be deemed to be an Affiliate solely because such trustee, director or executive officer is also a trustee of the Fund. (d) "AGENT MEMBER" shall mean a member of or participant in the Securities Depository that will act on behalf of a Bidder. (e) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes (TANs), Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs), Grant Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation Notes (BANs) that are rated by S&P. 2 (f) "APPLICABLE RATE" shall have the meaning specified in subparagraph (e)(i) of Section 2 of Part I of this Statement. (g) "AUCTION" shall mean each periodic implementation of the Auction Procedures. (h) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Fund and the Auction Agent which provides, among other things, that the Auction Agent will follow the Auction Procedures for purposes of determining the Applicable Rate for shares of a series of MuniPreferred so long as the Applicable Rate for shares of such series is to be based on the results of an Auction. (i) "AUCTION AGENT" shall mean the entity appointed as such by a resolution of the Board of Trustees in accordance with Section 6 of Part II of this Statement. (j) "AUCTION DATE," with respect to any Rate Period, shall mean the Business Day next preceding the first day of such Rate Period. (k) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions set forth in Part II of this Statement. (l) "AVAILABLE MUNIPREFERRED" shall have the meaning specified in paragraph (a) of Section 3 of Part II of this Statement. (m) "BENCHMARK RATE" shall have the meaning specified in Section 12 of Appendix A hereto. (n) "BENEFICIAL OWNER," with respect to shares of a series of MuniPreferred, means a customer of a Broker-Dealer who is listed on the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of shares of such series. (o) "BID" and "BIDS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (p) "BIDDER" AND "BIDDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement, PROVIDED, HOWEVER, that neither the Fund nor any affiliate thereof shall be permitted to be a Bidder in an Auction, except that any Broker-Dealer that is an affiliate of the Fund may be a Bidder in an Auction, but only if the orders placed by such Broker-Dealer are not for its own account. (q) "BOARD OF TRUSTEES" shall mean the Board of Trustees of the Fund or any duly authorized committee thereof. (r) "BROKER-DEALER" shall mean any broker-dealer commercial bank or other entity permitted by law to perform the functions required of a Broker-Dealer in Part II of this statement, that is a member of, or a participant in, the Securities Depository or is an affiliate of such member or participant, has been selected by the Fund and has entered into a Broker-Dealer Agreement that remains effective. (s) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Fund, the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in Part II of this Statement. (t) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange is open for trading and which is neither a Saturday, Sunday nor any other day on which banks in The City of New York, New York, are authorized by law to close. (u) "Code" means the Internal Revenue Code of 1986, as amended. (v) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or, in lieu of any thereof, their respective affiliates or successors, if such entity is a commercial paper dealer. (w) "COMMON SHARES" shall mean the common shares of beneficial interest, par value $.01 per share, of the Fund. (x) "CURE DATE" shall mean the MuniPreferred Basic Maintenance Cure Date or the 1940 Act Cure Date, as the case may be. (y) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of MuniPreferred, shall mean the date on which the Fund initially issued such shares. (z) "DECLARATION" shall have the meaning specified on the first page of this Statement. (aa) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated at least A-l+ or SP-I+ by S&P, except that, for purposes of subparagraph (a)(v) of Section 11 of Part I of this Statement, such Municipal Obligations shall be considered "Deposit Securities" only if they are also rated P-1, MIG-1 or VMIG-1 by Moody's. (bb) "DISCOUNTED VALUE," as of any Valuation Date, shall mean, (i) with respect to an S&P Eligible Asset, the quotient of the Market Value thereof divided by the applicable S&P Discount Factor and (ii) (a) with respect to a Moody's Eligible Asset that is not currently callable as of such Valuation Date at the option of the issuer thereof, the quotient of the Market Value thereof divided by the applicable Moody's Discount Factor, or (b) with respect to a Moody's Eligible Asset that is currently callable as of such Valuation Date at the option of the issuer thereof, the quotient of (1) the lesser of the Market Value or call price thereof, including any call premium, divided by (2) the applicable Moody's Discount Factor. (cc) "DIVIDEND COVERAGE AMOUNT," as of any Valuation Date, shall mean, with respect to each share of MuniPreferred, (i) the aggregate amount of 4 dividends that will accumulate on such share of MuniPreferred to (but not including) the first Dividend Payment Date for such share that follows such Valuation Date, less (ii) the combined value of Deposit Securities irrevocably deposited for the payment of dividends on such share of MuniPreferred. (dd) "DIVIDEND COVERAGE ASSETS," as of any Valuation Date, shall mean, with respect to each share of MuniPreferred, Deposit Securities with maturity or tender dates not later than the day preceding the first Dividend Payment Date for such share that follows such Valuation Date and having a value not less than the Dividend Coverage Amount with respect to such share. (ee) "DIVIDEND PAYMENT DATE," with respect to shares of a series of MuniPreferred, shall mean any date on which dividends are payable on shares of such series pursuant to the provisions of paragraph (d) of Section 2 of Part I of this Statement. (ff) "DIVIDEND PERIOD," with respect to shares of a series of MuniPreferred, shall mean the period from and including the Date of Original Issue of shares of such series to but excluding the initial Dividend Payment Date for shares of such series and any period thereafter from and including one Dividend Payment Date for shares of such series to but excluding the next succeeding Dividend Payment Date for shares of such series. (gg) "EXISTING HOLDER," with respect to shares of a series of MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may be permitted by the Fund) that is listed on the records of the Auction Agent as a holder of shares of such series. (hh) "FAILURE TO DEPOSIT," with respect to shares of a series of MuniPreferred, shall mean a failure by the Fund to pay to the Auction Agent, not later than 12:00 noon, New York City time, (A) on the Business Day next preceding any Dividend Payment Date for shares of such series, in funds available on such Dividend Payment Date in The City of New York, New York, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of such series or (B) on the Business Day next preceding any redemption date in funds available on such redemption date for shares of such series in The City of New York, New York, the Redemption Price to be paid on such redemption date for any share of such series after notice of redemption is mailed pursuant to paragraph (c) of Section 11 of Part I of this Statement; PROVIDED, HOWEVER, that the foregoing clause (B) shall not apply to the Fund's failure to pay the Redemption Price in respect of shares of MuniPreferred when the related Notice of Redemption provides that redemption of such shares is subject to one or more conditions precedent and any such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. (ii) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the definition of "Moody's Volatility Factor." 5 (jj) "FUND" shall mean the entity named on the first page of this Statement, which is the issuer of the shares of MuniPreferred. (kk) "GROSS-UP PAYMENT" shall have the meaning specified in Section 4 of APPENDIX A hereto. (ll) "HOLDER," with respect to shares of a series of MuniPreferred, shall mean the registered holder of such shares as the same appears on the record books of the Fund. (mm) "HOLD ORDER" AND "HOLD ORDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (nn) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized accountant, or firm of accountants, that is with respect to the Fund an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended from time to time. (oo) "INITIAL RATE PERIOD," with respect to shares of a series of MuniPreferred, shall have the meaning specified with respect to shares of such series in Section 5 of APPENDIX A hereto. (pp) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security. (qq) "ISSUE TYPE CATEGORY," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (rr) "KENNY INDEX" shall have the meaning specified in the definition of "Taxable Equivalent of the Short-Term Municipal Bond Rate." (ss) "LATE CHARGE" shall have the meaning specified in subparagraph (e)(1)(B) of Section 2 of Part I of this Statement. (tt) "LIQUIDATION PREFERENCE," with respect to a given number of shares of MuniPreferred, means $50,000 times that number. (uu) "MARKET VALUE" of any asset of the Fund shall mean the market value thereof determined by the pricing service designated from time to time by the Board of Trustees. Market Value of any asset shall include any interest accrued thereon. The pricing service values portfolio securities at the mean between the quoted bid and asked price or the yield equivalent when quotations are readily available. Securities for which quotations are not readily available are valued at fair value as determined by the pricing service using methods which include consideration of: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating; indications as to value from dealers; and general market conditions. The pricing service may employ electronic data processing techniques or a matrix system, or both, to determine valuations. 6 (vv) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation Date, shall mean the aggregate amount of Gross-up Payments that would be due if the Fund were to make Taxable Allocations, with respect to any taxable year, estimated based upon dividends paid and the amount of undistributed realized net capital gains and other taxable income earned by the Fund, as of the end of the calendar month immediately preceding such Valuation Date, and assuming such Gross-up Payments are fully taxable. (ww) "MAXIMUM RATE," for shares of a series of MuniPreferred on any Auction Date for shares of such series, shall mean: (i) in the case of any Auction Date which is not the Auction Date immediately prior to the first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of this Statement, the product of (A) the Reference Rate on such Auction Date for the next Rate Period of shares of such series and (B) the Rate Multiple on such Auction Date, unless shares of such series have or had a Special Rate Period (other than a Special Rate Period of 28 Rate Period Days or fewer) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate Period of shares of such series after such Special Rate Period, in which case the higher of: (A) the dividend rate on shares of such series for the then- ending Rate Period; and (B) the product of (1) the higher of (x) the Reference Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of such series, if such then-ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of such series, if such then-ending Rate Period was more than 364 Rate Period Days, and (y) the Reference Rate on such Auction Date for a Rate Period equal in length to such Special Rate Period of shares of such series, if such Special Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to such Special Rate Period, if such Special Rate Period was more than 364 Rate Period Days and (2) the Rate Multiple on such Auction Date; or (ii) in the case of any Auction Date which is the Auction Date immediately prior to the first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of this Statement, the product of (A) the highest of (1) the Reference Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of such series, if such then-ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of 7 such series, if such then-ending Rate Period was more than 364 Rate Period Days, (2) the Reference Rate on such Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate Period is 364 Rate Period Days or fewer or the Treasury Note Rate on such Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate Period is more than 364 Rate Period Days, and (3) the Reference Rate on such Auction Date for Minimum Rate Periods and (B) the Rate Multiple on such Auction Date. (xx) "MINIMUM LIQUIDITY LEVEL" shall have the meaning specified in Section 8 of Part I of this Statement. (yy) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate Period Days. (zz) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware corporation, and its successors. (aaa) "MOODY'S DISCOUNT FACTOR" shall have the meaning specified in Section 4 of APPENDIX A, hereto. (bbb) "MOODY'S ELIGIBLE ASSET" shall have the meaning specified in Section 4 of APPENDIX A hereto. (ccc) "MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a given Valuation Date and ending 56 days thereafter. (ddd) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date, (i) in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or more, a multiplicative factor equal to 275%, except as otherwise provided in the last sentence of this definition: (ii) in the case of any Special Rate Period of more than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to 203%; (iii) in the case of any Special Rate Period of more than 35 but fewer than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the case of any Special Rate Period of more than 42 but fewer than 50 Rate Period Days, a multiplicative factor equal to 226%; and (v) in the case of any Special Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative factor equal to 235%. If, as a result of the enactment of changes to the Code, the greater of the maximum marginal Federal individual income tax rate applicable to ordinary income and the maximum marginal Federal corporate income tax rate applicable to ordinary income will increase, such increase being rounded up to the next five percentage points (the "Federal Tax Rate Increase"), until the effective date of such increase, the Moody's 8 Volatility Factor in the case of any Rate Period described in (i) above in this definition instead shall be determined by reference to the following table: FEDERAL TAX RATE INCREASE VOLATILITY ------------- ---------- 5% 295% 10% 317% 15% 341% 20% 369% 25% 400% 30% 436% 35% 477% 40% 525% (eee) "MUNIPREFERRED" shall have the meaning set forth on the first page of this Statement. (fff) "MUNIPREFERRED BASIC MAINTENANCE AMOUNT," as of any Valuation Date, shall mean the dollar amount equal to the sum of (i)(A) the product of the number of shares of MuniPreferred outstanding on such date multiplied by $50,000 (plus the product of the number of shares of any other series of Preferred Shares outstanding on such date multiplied by the liquidation preference of such shares), plus any redemption premium applicable to shares of MuniPreferred (or other Preferred Shares) then subject to redemption, (B) the aggregate amount of dividends that will have accumulated at the respective Applicable Rates (whether or not earned or declared) to (but not including) the first respective Dividend Payment Dates for shares of MuniPreferred outstanding that follow such Valuation Date (plus the aggregate amount of dividends, whether or not earned or declared, that will have accumulated in respect of other outstanding Preferred Shares to, but not including, the first respective dividend payment dates for such other shares that follow such Valuation Date); (C) the aggregate amount of dividends that would accumulate on shares of each series of MuniPreferred outstanding from such first respective Dividend Payment Date therefor through the 56th day after such Valuation Date, at the Maximum Rate (calculated as if such Valuation Date were the Auction Date for the Rate Period commencing on such Dividend Payment Date) for a Minimum Rate Period of shares of such series to commence on such Dividend Payment Date, assuming, solely for purposes of the foregoing, that if on such Valuation Date the Fund shall have delivered a Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such series, such Maximum Rate shall be the higher of (a) the Maximum Rate for the Special Rate Period of shares of such 9 series to commence on such Dividend Payment Date and (b) the Maximum Rate for a Minimum Rate Period of shares of such series to commence on such Dividend Payment Date, multiplied by the Volatility Factor applicable to a Minimum Rate Period, or, in the event the Fund shall have delivered a Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such series designating a Special Rate Period consisting of 56 Rate Period Days or more, the Volatility Factor applicable to a Special Rate Period of that length (plus the aggregate amount of dividends that would accumulate at the maximum dividend rate or rates on any other Preferred Shares outstanding from such respective dividend payment dates through the 56th day after such Valuation Date, as established by or pursuant to the respective statements establishing and fixing the rights and preferences of such other Preferred Shares) (except that (1) if such Valuation Date occurs at a time when a Failure to Deposit (or, in the case of Preferred Shares other than MuniPreferred, a failure similar to a Failure to Deposit) has occurred that has not been cured, the dividend for purposes of calculation would accumulate at the current dividend rate then applicable to the shares in respect of which such failure has occurred and (2) for those days during the period described in this subparagraph (C) in respect of which the Applicable Rate in effect immediately prior to such Dividend Payment Date will remain in effect (or, in the case of Preferred Shares other than MuniPreferred, in respect of which the dividend rate or rates in effect immediately prior to such respective dividend payment dates will remain in effect), the dividend for purposes of calculation would accumulate at such Applicable Rate (or other rate or rates, as the case may be) in respect of those days); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's Maximum Potential Gross-up Payment Liability in respect of shares of MuniPreferred (and similar amounts payable in respect of other Preferred Shares pursuant to provisions similar to those contained in Section 3 of Part I of this Statement) as of such Valuation Date: and (F) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(E) (including, without limitation, any payables for Municipal Obligations purchased as of such Valuation Date and any liabilities incurred for the purpose of clearing securities transactions) less (H) the value (i.e., for purposes of current Moody's guidelines, the face value of cash, short-term Municipal Obligations rated MIG-1, VMIG-1 or P-1, and short-term securities that are the direct obligation of the U.S. government, provided in each case that such securities mature on or prior to the date upon which any of (i)(A) through (i)(F) become payable, otherwise the Moody's Discounted Value) of any of the Fund's assets irrevocably deposited by the Fund for the payment of any of (i)(A) through (i)(F). (ggg) "MUNIPREFERRED BASIC MAINTENANCE CURE DATE," with respect to the failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount (as required by paragraph (a) of Section 7 of Part I of this Statement) as of a 10 given Valuation Date, shall mean the seventh Business Day following such Valuation Date. (hhh) "MUNIPREFERRED BASIC MAINTENANCE REPORT" shall mean a report signed by the President, Treasurer or any Senior Vice President or Vice President of the Fund which sets forth, as of the related Valuation Date, the assets of the Fund, the Market Value and the Discounted Value thereof (seriatim and in aggregate), and the MuniPreferred Basic Maintenance Amount. (iii) "MUNICIPAL OBLIGATIONS" shall mean "Municipal Obligations" as defined in the Fund's registration statement on Form N-2 on file with the Securities and Exchange Commission, as such registration statement may be amended from time to time (the "Registration Statement"). (jjj) "1940 ACT" shall mean the Investment Company Act of 1940, as amended from time to time. (kkk) "1940 ACT CURE DATE," with respect to the failure by the Fund to maintain the 1940 Act MuniPreferred Asset Coverage (as required by Section 6 of Part I of this Statement) as of the last Business Day of each month, shall mean the last Business Day of the following month. (lll) "1940 ACT MUNIPREFERRED ASSET COVERAGE" shall mean asset coverage, as defined in Section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior securities of the Fund which are shares of beneficial interest, including all outstanding shares of MuniPreferred (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are shares or stock of a closed-end investment company as a condition of declaring dividends on its common shares or stock). (mmm) "NOTICE OF REDEMPTION" shall mean any notice with respect to the redemption of shares of MuniPreferred pursuant to paragraph (c) of Section 11 of Part I of this Statement. (nnn) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to a Special Rate Period of shares of MuniPreferred pursuant to subparagraph (d)(i) of Section 4 of Part I of this Statement. (ooo) "ORDER" and "ORDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (ppp) "ORIGINAL ISSUE INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (qqq) "OTHER ISSUES," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (rrr) "OUTSTANDING" shall mean, as of any Auction Date with respect to shares of a series of MuniPreferred, the number of shares of such series theretofore issued by the Fund except, without duplication, (i) any shares of such 11 series theretofore cancelled or delivered to the Auction Agent for cancellation or redeemed by the Fund, (ii) any shares of such series as to which the Fund or any Affiliate thereof shall be an Existing Holder and (iii) any shares of such series represented by any certificate in lieu of which a new certificate has been executed and delivered by the Fund. (sss) "PERMANENT INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (ttt) "PERSON" shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (uuu) "PORTFOLIO INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (vvv) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of MuniPreferred, shall mean a customer of a Broker-Dealer that is not a Beneficial Owner of shares of such series but that wishes to purchase shares of such series, or that is a Beneficial Owner of shares of such series that wishes to purchase additional shares of such series. (www) "POTENTIAL HOLDER," with respect to shares of a series of MuniPreferred, shall mean a Broker-Dealer (or any such other person as may be permitted by the Fund) that is not an Existing Holder of shares of such series or that is an Existing Holder of shares of such series that wishes to become the Existing Holder of additional shares of such series. (xxx) "PREFERRED SHARES" shall mean the preferred shares of the Fund, and includes the shares of MuniPreferred. (yyy) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each February, May, August and November of each year, commencing on the date set forth in Section 6 of APPENDIX A hereto. (zzz) "RATE MULTIPLE" shall have the meaning specified in Section 4 of APPENDIX A hereto. (aaaa) "RATE PERIOD," with respect to shares of a series of MuniPreferred, shall mean the Initial Rate Period of shares of such series and any Subsequent Rate Period, including any Special Rate Period, of shares of such series. (bbbb) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means the number of days that would constitute such Rate Period or Dividend Period but for the application of paragraph (d) of Section 2 of Part I of this Statement or paragraph (b) of Section 4 of Part I of this Statement. (cccc) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean (A) for purposes of calculation of Moody's Eligible Assets as of any Valuation Date, no more than the aggregate of the following: (i) the book value of receivables for Municipal Obligations sold as of or prior to such Valuation Date if such 12 receivables are due within five business days of such Valuation Date, and if the trades which generated such receivables are (x) settled through clearing house firms with respect to which the Fund has received prior written authorization from Moody's or (y) with counterparties having a Moody's long-term debt rating of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations sold as of or prior to such Valuation Date which generated receivables, if such receivables are due within five business days of such Valuation Date but do not comply with either of the conditions specified in (i) above, and (B) for purposes of calculation of S&P Eligible Assets as of any Valuation Date, the book value of receivables for Municipal Obligations sold as of or prior to such Valuation Date if such receivables are due within five business days of such Valuation Date. (dddd) "REDEMPTION PRICE" shall mean the applicable redemption price specified in paragraph (a) or (b) of Section 11 of Part I of this Statement. (eeee) "REFERENCE RATE" shall mean (i) the higher of the Taxable Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case of Special Rate Periods of more than 28 Rate Period Days but fewer than 183 Rate Period Days, and (iii) the Treasury Bill Rate in the case of Special Rate Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days. (ffff) "REGISTRATION STATEMENT" has the meaning specified in the definition of "Municipal Obligations." (gggg) "S&P" shall mean Standard & Poor's Corporation, a New York corporation, and its successors. (hhhh) "S&P DISCOUNT FACTOR" shall have the meaning specified in Section 4 of APPENDIX A hereto. (iiii) "S&P ELIGIBLE ASSET" shall have the meaning specified in Section 4 of APPENDIX A hereto. (jjjj) "S&P EXPOSURE PERIOD" shall mean the maximum period of time following a Valuation Date that the Fund has under this Statement to cure any failure to maintain, as of such Valuation Date, the Discounted Value for its portfolio at least equal to the MuniPreferred Basic Maintenance Amount (as described in paragraph (a) of Section 7 of Part I of this Statement). (kkkk) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation Date, a multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer; (ii) 268% in the case of any Special Rate Period of more than 28 Rate Period Days but fewer than 183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of more than 182 Rate Period Days. 13 (llll) "SECONDARY MARKET INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (mmmm) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Fund which agrees to follow the procedures required to be followed by such securities depository in connection with shares of MuniPreferred. (nnnn) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (oooo) "SPECIAL RATE PERIOD," with respect to shares of a series of MuniPreferred, shall have the meaning specified in paragraph (a) of Section 4 of Part I of this Statement. (pppp) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in subparagraph (a)(i) of Section 11 of Part I of this Statement. (qqqq) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Auction Agent as specified by the Auction Agent from time to time. (rrrr) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (ssss) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (tttt) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (uuuu) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (vvvv) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of MuniPreferred, shall mean the period from and including the first day following the Initial Rate Period of shares of such series to but excluding the next Dividend Payment Date for shares of such series and any period thereafter from and including one Dividend Payment Date for shares of such series to but excluding the next succeeding Dividend Payment Date for shares of such series; provided, however, that if any Subsequent Rate Period is also a Special Rate Period, such term shall mean the period commencing on the first day of such Special Rate Period and ending on the last day of the last Dividend Period thereof. 14 (wwww) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean The First Boston Company or Morgan Stanley & Co. Incorporated or their respective affiliates or successors, if such entity is a commercial paper dealer; provided, however, that none of such entities shall be a Commercial Paper Dealer. (xxxx) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" shall mean The First Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their respective affiliates or successors, if such entity is a U.S. Government securities dealer; provided, however, that none of such entities shall be a U.S. Government Securities Dealer. (yyyy) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in paragraph (a) of Section 3 of Part II of this Statement. (zzzz) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3 of Part I of this Statement. (aaaaa) "TAXABLE INCOME" shall have the meaning specified in Section 12 of APPENDIX A hereto. (bbbbb) "TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND RATE," on any date for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days or fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the Kenny S&P 30 day High Grade Index or any successor index (the "Kenny Index") (provided, however, that any such successor index must be approved by Moody's (if Moody's is then rating the shares of MuniPreferred) or S&P (if S&P is then rating the shares of MuniPreferred)), made available for the Business Day immediately preceding such date but in any event not later than 8:30 A.M., New York City time, on such date by Kenny S&P Evaluation Services or any successor thereto, based upon 30-day yield evaluations at par of short-term bonds the interest on which is excludable for regular Federal income tax purposes under the Code of "high grade" component issuers selected by Kenny S&P Evaluation Services or any such successor from time to time in its discretion, which component issuers shall include, without limitation, issuers of general obligation bonds, but shall exclude any bonds the interest on which constitutes an item of tax preference under Section 57(a)(5) of the Code, or successor provisions, for purposes of the "alternative minimum tax," divided by (B) 1.00 minus the maximum marginal regular Federal individual income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income (in each case expressed as a decimal), whichever is greater; provided, however, that if the Kenny Index is not made so available by 8:30 A.M., New York City time, on such date by Kenny S&P Evaluation Services or any successor, the Taxable Equivalent of the Short-Term Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the most recent Kenny Index so made available for any preceding Business Day, divided by (B) 1.00 minus the maximum marginal regular Federal individual 15 income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income (in each case expressed as a decimal), whichever is greater. (ccccc) "TREASURY BILL" shall mean a direct obligation of the U.S. Government having a maturity at the time of issuance of 364 days or less. (ddddd) "TREASURY BILL RATE," on any date for any Rate Period, shall mean (i) the bond equivalent yield, calculated in accordance with prevailing industry convention, of the rate on the most recently auctioned Treasury Bill with a remaining maturity closest to the length of such Rate Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding such date; or (ii) in the event that any such rate is not published in The Wall Street Journal, then the bond equivalent yield, calculated in accordance with prevailing industry convention, as calculated by reference to the arithmetic average of the bid price quotations of the most recently auctioned Treasury Bill with a remaining maturity closest to the length of such Rate Period, as determined by bid price quotations as of the close of business on the Business Day immediately preceding such date obtained from the U.S. Government Securities Dealers to the Auction Agent. (eeeee) "TREASURY NOTE" shall mean a direct obligation of the U.S. Government having a maturity at the time of issuance of five years or less but more than 364 days. (fffff) "TREASURY NOTE RATE," on any date for any Rate Period, shall mean (i) the yield on the most recently auctioned Treasury Note with a remaining maturity closest to the length of such Rate Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding such date; or (ii) in the event that any such rate is not published in The Wall Street Journal, then the yield as calculated by reference to the arithmetic average of the bid price quotations of the most recently auctioned Treasury Note with a remaining maturity closest to the length of such Rate Period, as determined by bid price quotations as of the close of business on the Business Day immediately preceding such date obtained from the U.S. Government Securities Dealers to the Auction Agent. If any U.S. Government Securities Dealer does not quote a rate required to determine the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill Rate or the Treasury Note Rate shall be determined on the basis of the quotation or quotations furnished by the remaining U.S. Government Securities Dealer or U.S. Government Securities Dealers and any Substitute U.S. Government Securities Dealers selected by the Fund to provide such rate or rates not being supplied by any U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the case may be, or, if the Fund does not select any such Substitute U.S. Government Securities Dealer or Substitute U.S. Government Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S. Government Securities Dealers. 16 (ggggg) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman Government Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc. and Morgan Guaranty Trust Company of New York or their respective affiliates or successors, if such entity is a U.S. Government securities dealer. (hhhhh) "VALUATION DATE" shall mean, for purposes of determining whether the Fund is maintaining the MuniPreferred Basic Maintenance Amount and the Minimum Liquidity Level, each Business Day. (iiiii) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the greater of the Moody's Volatility Factor and the S&P Volatility Factor. (jjjjj) "VOTING PERIOD" shall have the meaning specified in paragraph (b) of Section 5 of Part I of this Statement. (kkkkk) "WINNING BID RATE" shall have the meaning specified in paragraph (a) of Section 3 of Part II of this Statement. Any additional definitions specifically set forth in Section 8 of Appendix A hereto shall be incorporated herein and made part hereof by reference thereto. PART I 1. NUMBER OF AUTHORIZED SHARES. The number of authorized shares constituting a series of MuniPreferred shall be as set forth with respect to such series in Section 2 of APPENDIX A hereto. 2. DIVIDENDS. (a) RANKING. The shares of a series of MuniPreferred shall rank on a parity with each other, with shares of any other series of MuniPreferred and with shares of any other series of Preferred Shares as to the payment of dividends by the Fund. (b) CUMULATIVE CASH DIVIDENDS. The Holders of shares of MuniPreferred of any series shall be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor in accordance with the Declaration and applicable law, cumulative cash dividends at the Applicable Rate for shares of such series, determined as set forth in paragraph (e) of this Section 2, and no more (except to the extent set forth in Section 3 of this Part I), payable on the Dividend Payment Dates with respect to shares of such series determined pursuant to paragraph (d) of this Section 2. Holders of shares of MuniPreferred shall not be entitled to any dividend, whether payable in cash, property or shares, in excess of full cumulative dividends, as herein provided, on shares of MuniPreferred. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on shares of MuniPreferred which may be in arrears, and, except to the extent set 17 forth in subparagraph (e)(i) of this Section 2, no additional sum of money shall be payable in respect of any such arrearage. (c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE. Dividends on shares of MuniPreferred of any series shall accumulate at the Applicable Rate for shares of such series from the Date of Original Issue thereof. (d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF. The Dividend Payment Dates with respect to shares of a series of MuniPreferred shall be as set forth with respect to shares of such series in Section 9 of APPENDIX A hereto: PROVIDED, HOWEVER, that: (i) (A) in the case of a series of MuniPreferred designated as "Series F MuniPreferred" or "Series M MuniPreferred" in Section 1 of APPENDIX A hereto, if the Monday or Tuesday, as the case may be, on which dividends would otherwise be payable on shares of such series is not a Business Day, then such dividends shall be payable on such shares on the first Business Day that falls after such Monday or Tuesday, as the case may be, and (B) in the case of a series of MuniPreferred designated as "Series T MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in Section 1 of APPENDIX A hereto, if the Wednesday, Thursday or Friday, as the case may be, on which dividends would otherwise be payable on shares of such series is not a Business Day, then such dividends shall be payable on such shares on the first Business Day that falls prior to such Wednesday, Thursday or Friday, as the case may be; and (ii) notwithstanding Section 9 of APPENDIX A hereto, the Fund in its discretion may establish the Dividend Payment Dates in respect of any Special Rate Period of shares of a series of MuniPreferred consisting of more than 28 Rate Period Days; PROVIDED, HOWEVER, that such dates shall be set forth in the Notice of Special Rate Period relating to such Special Rate Period, as delivered to the Auction Agent, which Notice of Special Rate Period shall be filed with the Secretary of the Fund; and FURTHER PROVIDED that (1) any such Dividend Payment Date shall be a Business Day and (2) the last Dividend Payment Date in respect of such Special Rate Period shall be the Business Day immediately following the last day thereof, as such last day is determined in accordance with paragraph (b) of Section 4 of this Part I. (e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS. (i) DIVIDEND RATES. The dividend rate on shares of MuniPreferred of any series during the period from and after the Date of Original Issue of shares of such series to and including the last day of the Initial Rate Period of shares of such series shall be equal to the rate per annum set forth with respect to shares of such series under "Designation" in Section 1 of APPENDIX A hereto. For each Subsequent Rate Period of shares of such series thereafter, the dividend rate on shares of such series shall be equal to the rate per annum that results from an Auction 18 for shares of such series on the Auction Date next preceding such Subsequent Rate period; PROVIDED, HOWEVER, that if: (A) an Auction for any such Subsequent Rate Period is not held for any reason other than as described below, the dividend rate on shares of such series for such Subsequent Rate Period will be the Maximum Rate for shares of such series on the Auction Date therefor; (B) any Failure to Deposit shall have occurred with respect to shares of such series during any Rate Period thereof (other than any Special Rate Period consisting of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period consisting of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured), but, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall have been cured in accordance with paragraph (f) of this Section 2 and the Fund shall have paid to the Auction Agent a late charge ("Late Charge") equal to the sum of (1) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the full amount of dividends with respect to any Dividend Period of the shares of such series, an amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such Failure to Deposit occurs on the Dividend Payment Date for such Dividend Period by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit has not been cured in accordance with paragraph (f) of this Section 2 (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate Liquidation Preference of the outstanding shares of such series and (2) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the Redemption Price of the shares, if any, of such series for which Notice of Redemption has been mailed by the Fund pursuant to paragraph (c) of Section 11 of this Part I, an amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such Failure to Deposit occurs on the redemption date by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit is not cured in accordance with paragraph (f) of this Section 2 (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate Liquidation Preference of the outstanding shares of such series to be redeemed, no Auction will be held in respect of shares of such series for the Subsequent Rate Period thereof and the dividend rate for shares of such series for 19 such Subsequent Rate Period will be the Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period; (C) any Failure to Deposit shall have occurred with respect to shares of such series during any Rate Period thereof (other than any Special Rate Period consisting of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period consisting of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured), and, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured in accordance with paragraph (f) of this Section 2 or the Fund shall not have paid the applicable Late Charge to the Auction Agent, no Auction will be held in respect of shares of such series for the first Subsequent Rate Period thereof thereafter (or for any Rate Period thereof thereafter to and including the Rate Period during which (1) such Failure to Deposit is cured in accordance with paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late Charge to the Auction Agent (the condition set forth in this clause (2) to apply only in the event Moody's is rating such shares at the time the Fund cures such Failure to Deposit), in each case no later than 12:00 Noon, New York City time, on the fourth Business Day prior to the end of such Rate Period), and the dividend rate for shares of such series for each such Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period (but with the prevailing rating for shares of such series, for purposes of determining such Maximum Rate, being deemed to be "Below ba3/BB--"); or (D) any Failure to Deposit shall have occurred with respect to shares of such series during a Special Rate Period thereof consisting of more than 364 Rate Period Days, or during any Rate Period thereof succeeding any Special Rate Period consisting of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured, and, prior to 12:00 Noon, New York City time, on the fourth Business Day preceding the Auction Date for the Rate Period subsequent to such Rate Period, such Failure to Deposit shall not have been cured in accordance with paragraph (f) of this Section 2 or, in the event Moody's is then rating such shares, the Fund shall not have paid the applicable Late Charge to the Auction Agent (such Late Charge, for purposes of this subparagraph (D), to be calculated by using, as the Reference Rate, the Reference Rate applicable to a Rate Period (x) consisting of more than 182 Rate Period Days but fewer than 365 Rate Period Days and (y) commencing on the date on which the Rate Period during which Failure to Deposit occurs commenced), no Auction will be held in respect of shares of such series for such 20 Subsequent Rate Period (or for any Rate Period thereof thereafter to and including the Rate Period during which (1) such Failure to Deposit is cured in accordance with paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late Charge to the Auction Agent (the condition set forth in this clause (2) to apply only in the event Moody's is rating such shares at the time the Fund cures such Failure to Deposit), in each case no later than 12:00 Noon, New York City time, on the fourth Business Day prior to the end of such Rate Period), and the dividend rate for shares of such series for each such Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period (but with the prevailing rating for shares of such series, for purposes of determining such Maximum Rate, being deemed to be "Below "ba3"/BB") (the rate per annum at which dividends are payable on shares of a series, of MuniPreferred for any Rate Period thereof being herein referred to as the "Applicable Rate" for shares of such series). (ii) CALCULATION OF DIVIDENDS. The amount of dividends per share payable on shares of a series of MuniPreferred on any date on which dividends shall be payable on shares of such series shall be computed by multiplying the Applicable Rate for shares of such series in effect for such Dividend Period or Dividend Periods or part thereof for which dividends have not been paid by a fraction, the numerator of which shall be the number of days in such Dividend Period or Dividend Periods or part thereof and the denominator of which shall be 365 if such Dividend Period consists of 7 Rate Period Days and 360 for all other Dividend Periods, and applying the rate obtained against $50,000. (f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to shares of a series of MuniPreferred shall have been cured (if such Failure to Deposit is not solely due to the willful failure of the Fund to make the required payment to the Auction Agent) with respect to any Rate Period of shares of such series if, within the respective time periods described in subparagraph (e)(i) of this Section 2, the Fund shall have paid to the Auction Agent (A) all accumulated and unpaid dividends on shares of such series and (B) without duplication, the Redemption Price for shares, if any, of such series for which Notice of Redemption has been mailed by the Fund pursuant to paragraph (C) of Section 11 of Part I of this Statement; provided, however, that the foregoing clause (B) shall not apply to the Fund's failure to pay the Redemption Price in respect of shares of MuniPreferred when the related Redemption Notice provides that redemption of such shares is subject to one or more conditions precedent and any such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. 21 (g) DIVIDEND PAYMENTS BY FUND TO AUCTION AGENT. The Fund shall pay to the Auction Agent, not later than 12:00 Noon, New York City time, on the Business Day next preceding each Dividend Payment Date for shares of a series of MuniPreferred, an aggregate amount of funds available on the next Business Day in The City of New York, New York, equal to the dividends to be paid to all Holders of shares of such series on such Dividend Payment Date. (h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY FUND. All moneys paid to the Auction Agent for the payment of dividends (or for the payment of any Late Charge) shall be held in trust for the payment of such dividends (and any such Late Charge) by the Auction Agent for the benefit of the Holders specified in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in accordance with the foregoing but not applied by the Auction Agent to the payment of dividends (and any such Late Charge) will, to the extent permitted by law, be repaid to the Fund at the end of 90 days from the date on which such moneys were so to have been applied. (i) DIVIDENDS PAID TO HOLDERS. Each dividend on shares of MuniPreferred shall be paid on the Dividend Payment Date therefor to the Holders thereof as their names appear on the record books of the Fund on the Business Day next preceding such Dividend Payment Date. (j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID DIVIDENDS. Any dividend payment made on shares of MuniPreferred shall first be credited against the earliest accumulated but unpaid dividends due with respect to such shares. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holders as their names appear on the record books of the Fund on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Trustees. (k) Dividends Designated as Exempt-Interest Dividends. Dividends on shares of MuniPreferred shall be designated as exempt-interest dividends up to the amount of tax-exempt income of the Fund, to the extent permitted by, and for purposes of, Section 852 of the Code. 3. GROSS-UP PAYMENTS. Holders of shares of MuniPreferred shall be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor in accordance with the Declaration and applicable law, dividends in an amount equal to the aggregate Gross-up Payments as follows: (a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE PERIOD DAYS OR FEWER. If, in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net capital gains or other income taxable for Federal income tax purposes to a dividend paid on shares of MuniPreferred without having given advance notice 22 thereof to the Auction Agent as provided in Section 5 of Part II of this Statement (such allocation being referred to herein as a "Taxable Allocation") solely by reason of the fact that such allocation is made retroactively as a result of the redemption of all or a portion of the outstanding shares of MuniPreferred or the liquidation of the Fund, the Fund shall, prior to the end of the calendar year in which such dividend was paid, provide notice thereof to the Auction Agent and direct the Fund's dividend disbursing agent to send such notice with a Gross-up Payment to each Holder of such shares that was entitled to such dividend payment during such calendar year at such Holder's address as the same appears or last appeared on the record books of the Fund. (b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS. If, in the case of any Special Rate Period of more than 28 Rate Period Days, the Fund makes a Taxable Allocation to a dividend paid on shares of MuniPreferred, the Fund shall, prior to the end of the calendar year in which such dividend was paid, provide notice thereof to the Auction Agent and direct the Fund's dividend disbursing agent to send such notice with a Gross-up Payment to each Holder of shares that was entitled to such dividend payment during such calendar year at such Holder's address as the same appears or last appeared on the record books of the Fund. (c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The Fund shall not be required to make Gross-up Payments with respect to any net capital gains or other taxable income determined by the Internal Revenue Service to be allocable in a manner different from that allocated by the Fund. 4. DESIGNATION OF SPECIAL RATE PERIODS. (a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Fund, at its option, may designate any succeeding Subsequent Rate Period of shares of a series of MuniPreferred as a Special Rate Period consisting of a specified number of Rate Period Days evenly divisible by seven and not more than 1,820, subject to adjustment as provided in paragraph (b) of this Section 4. A designation of a Special Rate Period shall be effective only if (A) notice thereof shall have been given in accordance with paragraph (c) and subparagraph (d)(i) of this Section 4, (B) an Auction for shares of such series shall have been held on the Auction Date immediately preceding the first day of such proposed Special Rate Period and Sufficient Clearing Bids for shares of such series shall have existed in such Auction, and (C) if any Notice of Redemption shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of this Part I with respect to any shares of such series, the Redemption Price with respect to such shares shall have been deposited with the Auction Agent. In the event the Fund wishes to designate any succeeding Subsequent Rate Period for shares of a series of MuniPreferred as a Special Rate Period consisting of more than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such series) and Moody's (if Moody's is then rating such series) in advance of the commencement of such Subsequent Rate Period 23 that the Fund wishes to designate such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if S&P is then rating such series) and Moody's (if Moody's is then rating such series) with such documents as either may request. (b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event the Fund wishes to designate a Subsequent Rate Period as a Special Rate Period, but the day following what would otherwise be the last day of such Special Rate Period is not (a) a Tuesday that is a Business Day in the case of a series of MuniPreferred designated as "Series M MuniPreferred" in Section 1 of APPENDIX A hereto, (b) a Wednesday that is a Business Day in the case of a series of MuniPreferred designated as "Series T MuniPreferred" in Section 1 of APPENDIX A hereto, (c) a Thursday that is a Business Day in the case of a series of MuniPreferred designated as "Series W MuniPreferred" in Section 1 of APPENDIX A hereto, (d) a Friday that is a Business Day in the case of a series of MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of APPENDIX A hereto, (e) a Monday that is a Business Day in the case of a series of MuniPreferred designated as "Series F MuniPreferred" in Section 1 of APPENDIX A hereto, then the Fund shall designate such Subsequent Rate Period as a Special Rate Period consisting of the period commencing on the first day following the end of the immediately preceding Rate Period and ending (a) on the first Monday that is followed by a Tuesday that is a Business Day preceding what would otherwise be such last day, in the case of Series M MuniPreferred, (b) on the first Tuesday that is followed by a Wednesday that is a Business Day preceding what would otherwise be such last day, in the case of Series T MuniPreferred, (c) on the first Wednesday that is followed by a Thursday that is a Business Day preceding what would otherwise be such last day, in the case of Series W MuniPreferred, (d) on the first Thursday that is followed by a Friday that is a Business Day preceding what would otherwise be such last day, in the case of Series TH MuniPreferred, and (e) on the first Sunday that is followed by a Monday that is a Business Day preceding what would otherwise be such last day, in the case of Series F MuniPreferred. (c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Fund proposes to designate any succeeding Subsequent Rate Period of shares of a series of MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section 4, not less than 20 (or such lesser number of days as may be agreed to from time to time by the Auction Agent) nor more than 30 days prior to the date the Fund proposes to designate as the first day of such Special Rate Period (which shall be such day that would otherwise be the first day of a Minimum Rate Period), notice shall be (i) published or caused to be published by the Fund in a newspaper of general circulation to the financial community in The City of New York, New York, which carries financial news, and (ii) mailed by the Fund by first-class mail, postage prepaid, to the Holders of shares of such series. Each such notice shall state (A) that the Fund may exercise its option to designate a succeeding Subsequent Rate Period of shares 24 of such series as a Special Rate Period, specifying the first day thereof and (B) that the Fund will, by 11:00 A.M., New York City time, on the second Business Day next preceding such date (or by such later time or date, or both, as may be agreed to by the Auction Agent) notify the Auction Agent of either (x) its determination, subject to certain conditions, to exercise such option, in which case the Fund shall specify the Special Rate Period designated, or (y) its determination not to exercise such option. (d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York City time, on the second Business Day next preceding the first day of any proposed Special Rate Period of shares of a series of MuniPreferred as to which notice has been given as set forth in paragraph (c) of this Section 4 (or such later time or date, or both, as may be agreed to by the Auction Agent), the Fund shall deliver to the Auction Agent either: (i) a notice ("Notice of Special Rate Period") stating (A) that the Fund has determined to designate the next succeeding Rate Period of shares of such series as a Special Rate Period, specifying the same and the first day thereof, (B) the Auction Date immediately prior to the first day of such Special Rate Period, (C) that such Special Rate Period shall not commence if (1) an Auction for shares of such series shall not be held on such Auction Date for any reason or (2) an Auction for shares of such series shall be held on such Auction Date but Sufficient Clearing Bids for shares of such series shall not exist in such Auction, (D) the scheduled Dividend Payment Dates for shares of such series during such Special Rate Period and (E) the Special Redemption Provisions, if any, applicable to shares of such series in respect of such Special Rate Period; such notice to be accompanied by a MuniPreferred Basic Maintenance Report showing that, as of the third Business Day next preceding such proposed Special Rate Period, Moody's Eligible Assets (if Moody's is then rating such series) and S&P Eligible Assets (if S&P is then rating such series) each have an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount as of such Business Day (assuming for purposes of the foregoing calculation that (a) the Maximum Rate is the Maximum Rate on such Business Day as if such Business Day were the Auction Date for the proposed Special Rate Period, and (b) the Moody's Discount Factors applicable to Moody's Eligible Assets are determined by reference to the first Exposure Period longer than the Exposure Period then applicable to the Fund, as described in the definition of Moody's Discount Factor herein); or (ii) a notice stating that the Fund has determined not to exercise its option to designate a Special Rate Period of shares of such series and that the next succeeding Rate Period of shares of such series shall be a Minimum Rate Period. 25 (e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Fund fails to deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of this Section 4 (and, in the case of the notice described in subparagraph (d)(a) of this Section 4, a MuniPreferred Basic Maintenance Report to the effect set forth in such subparagraph (if either Moody's or S&P is then rating the series in question)) with respect to any designation of any proposed Special Rate Period to the Auction Agent by 11:00 A.M., New York City time, on the second Business Day next preceding the first day of such proposed Special Rate Period (or by such later time or date, or both, as may be agreed to by the Auction Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent with respect to such Special Rate Period to the effect set forth in subparagraph (d)(ii) of this Section 4. In the event the Fund delivers to the Auction Agent a notice described in subparagraph (d)(a) of this Section 4, it shall file a copy of such notice with the Secretary of the Fund, and the contents of such notice shall be binding on the Fund. In the event the Fund delivers to the Auction Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund will provide Moody's (if Moody's is then rating the series in question) and S&P (if S&P is then rating the series in question) a copy of such notice. 5. VOTING RIGHTS. (a) ONE VOTE PER SHARE OF MUNIPREFERRED. Except as otherwise provided in the Declaration or as otherwise required by law, (i) each Holder of shares of MuniPreferred shall be entitled to one vote for each share of MuniPreferred held by such Holder on each matter submitted to a vote of shareholders of the Fund, and (ii) the holders of outstanding Preferred Shares, including each share of MuniPreferred, and of Common Shares shall vote together as a single class; PROVIDED, HOWEVER, that, at any meeting of the shareholders of the Fund held for the election of trustees, the holders of outstanding Preferred Shares, including MuniPreferred, represented in person or by proxy at said meeting, shall be entitled, as a class, to the exclusion of the holders of all other securities and classes of shares of beneficial interest of the Fund, to elect two trustees of the Fund, each Preferred Share, including each share of MuniPreferred, entitling the holder thereof to one vote. Subject to paragraph (b) of this Section 5, the holders of outstanding Common Shares and Preferred Shares, including MuniPreferred, voting together as a single class, shall elect the balance of the trustees. (b) VOTING FOR ADDITIONAL TRUSTEES. (a) Voting Period. During any period in which any one or more of the conditions described in subparagraphs (A) or (B) of this subparagraph (b)(i) shall exist (such period being referred to herein as a "Voting Period"), the number of trustees constituting the Board of Trustees shall be automatically increased by the smallest number that, when added to the two trustees elected exclusively by the holders of Preferred Shares, including shares of MuniPreferred, would constitute a majority of the Board of Trustees as so increased by such smallest number; and the holders of Preferred 26 Shares, including MuniPreferred, shall be entitled, voting as a class on a one- vote-per-share basis (to the exclusion of the holders of all other securities and classes of shares of beneficial interest of the Fund), to elect such smallest number of additional trustees, together with the two trustees that such holders are in any event entitled to elect. A Voting Period shall commence: (A) if at the close of business on any dividend payment date accumulated dividends (whether or not earned or declared) on any outstanding Preferred Share, including MuniPreferred, equal to at least two full years' dividends shall be due and unpaid and sufficient cash or specified securities shall not have been deposited with the Auction Agent for the payment of such accumulated dividends; or (B) if at any time holders of Preferred Shares are entitled under the 1940 Act to elect a majority of the trustees of the Fund. Upon the termination of a Voting Period, the voting rights described in this subparagraph (b)(i) shall cease, subject always, however, to the revesting of such voting rights in the Holders upon the further occurrence of any of the events described in this subparagraph (b)(i). (ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the accrual of any right of the holders of Preferred Shares to elect additional trustees as described in subparagraph (b)(i) of this Section 5, the Fund shall notify the Auction Agent and the Auction Agent shall call a special meeting of such holders, by mailing a notice of such special meeting to such holders, such meeting to be held not less than 10 nor more than 20 days after the date of mailing of such notice. If the Fund fails to send such notice to the Auction Agent or if the Auction Agent does not call such a special meeting, it may be called by any such holder on like notice. The record date for determining the holders entitled to notice of and to vote at such special meeting shall be the close of business on the fifth Business Day preceding the day on which such notice is mailed. At any such special meeting and at each meeting of holders of Preferred Shares held during a Voting Period at which trustees are to be elected, such holders, voting together as a class (to the exclusion of the holders of all other securities and classes of shares of beneficial interest of the Fund), shall be entitled to elect the number of trustees prescribed in subparagraph (b)(i) of this Section 5 on a one-vote-per-share basis. (iii) TERMS OF OFFICE OF EXISTING TRUSTEES. The terms of office of all persons who are trustees of the Fund at the time of a special meeting of Holders and holders of other Preferred Shares to elect trustees shall continue, notwithstanding the election at such meeting by the Holders and such other holders of the number of trustees that they are entitled to elect, and the persons so elected by the Holders and such other holders, together with the two incumbent trustees elected by the Holders and such other holders of Preferred Shares and the remaining incumbent trustees elected 27 by the holders of the Common Shares and Preferred Shares, shall constitute the duly elected trustees of the Fund. (iv) TERMS OF OFFICE OF CERTAIN TRUSTEES TO TERMINATE UPON TERMINATION OF VOTING PERIOD. Simultaneously with the termination of a Voting Period, the terms of office of the additional trustees elected by the Holders and holders of other Preferred Shares pursuant to subparagraph (b)(i) of this Section 5 shall terminate, the remaining trustees shall constitute the trustees of the Fund and the voting rights of the Holders and such other holders to elect additional trustees pursuant to subparagraph (b)(i) of this Section 5 shall cease, subject to the provisions of the last sentence of subparagraph (b)(i) of this Section 5. (c) HOLDERS OF MUNIPREFERRED TO VOTE ON CERTAIN OTHER MATTERS. (i) INCREASES IN CAPITALIZATION. So long as any shares of MuniPreferred are outstanding, the Fund shall not, without the affirmative vote or consent of the Holders of at least a majority of the shares of MuniPreferred outstanding at the time, in person or by proxy, either in writing or at a meeting (voting separately as one class): (a) authorize, create or issue any class or series of shares ranking prior to or on a parity with shares of MuniPreferred with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, or increase the authorized amount of any series of MuniPreferred (except that, notwithstanding the foregoing, but subject to the provisions of paragraph (c) of Section 10 of this Part I, the Board of Trustees, without the vote or consent of the Holders of MuniPreferred, may from time to time authorize and create, and the Fund may from time to time issue, classes or series of Preferred Shares ranking on a parity with shares of MuniPreferred with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund: PROVIDED HOWEVER, that if Moody's or S&P is not then rating the shares of MuniPreferred, the aggregate liquidation preference of all Preferred Shares of the Fund outstanding after any such issuance, exclusive of accumulated and unpaid dividends, may not exceed the amount set forth in Section 10 of APPENDIX A hereto) or (b) amend, alter or repeal the provisions of the Declaration, or this Statement, whether by merger, consolidation or otherwise, so as to affect any preference, right or power of such shares of MuniPreferred or the Holders thereof; PROVIDED, HOWEVER, that (i) none of the actions permitted by the exception to (a) above will be deemed to affect such preferences, rights or powers and (ii) the authorization, creation and issuance of classes or series of shares ranking junior to shares of MuniPreferred with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, will be deemed to affect such preferences, rights or powers only if Moody's or S&P is then rating shares of MuniPreferred and such issuance would, at the time thereof, cause the Fund not to satisfy the 1940 Act MuniPreferred Asset Coverage or the MuniPreferred Basic Maintenance Amount. So long as any shares 28 of MuniPreferred are outstanding, the Fund shall not, without the affirmative vote or consent of the Holders of at least 66 2/3% of the shares of MuniPreferred outstanding at the time, in person or by proxy, either in writing or at a meeting (voting separately as one class), file a voluntary application for relief under Federal bankruptcy law or any similar application under state law for so long as the Fund is solvent and does not foresee becoming insolvent. If any action set forth above would adversely affect the rights of one or more series (the "Affected Series") of MuniPreferred in a manner different from any other series of MuniPreferred, the Fund will not approve any such action without the affirmative vote of at least a majority of the votes of the shares of each such Affected Series (each such Affected Series voting separately as a class). (ii) 1940 ACT MATTERS. Unless a higher percentage is provided for in the Declaration, the affirmative vote of the holders of a majority of the outstanding Preferred Shares, including MuniPreferred, voting as a separate class, shall be required to approve any plan of reorganization (as such term is used in the 1940 Act) adversely affecting such shares or any action requiring a vote of security holders of the Fund under Section 13(a) of the 1940 Act. In the event a vote of Holders of MuniPreferred is required pursuant to the provisions of Section 13(a) of the 1940 Act, the Fund shall, not later than ten Business Days prior to the date on which such vote is to be taken, notify Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P is then rating the shares of MuniPreferred) that such vote is to be taken and the nature of the action with respect to which such vote is to be taken. The Fund shall, not later than ten Business Days after the date on which such vote is taken, notify Moody's (if Moody's is then rating the shares of MuniPreferred) of the results of such vote. (d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board of Trustees, without the vote or consent of the shareholders of the Fund, may from time to time amend, alter or repeal any or all of the definitions of the terms listed below, or any provision of this Statement viewed by Moody's or S&P as a predicate for any such definition, and any such amendment, alteration or repeal will not be deemed to affect the preferences, rights or powers of shares of MuniPreferred or the Holders thereof; PROVIDED, HOWEVER, that the Board of Trustees receives written confirmation from Moody's (such confirmation being required to be obtained only in the event Moody's is rating the shares of MuniPreferred and in no event being required to be obtained in the case of the definitions of (x) Deposit Securities, Discounted Value, Receivables for Municipal Obligations Sold, Issue Type Category and Other Issues as such terms apply to S&P Eligible Assets, (y) Dividend Coverage Amount, Dividend Coverage Assets, Minimum Liquidity Level, S&P Discount Factor, S&P Eligible Asset, S&P Exposure Period and S&P Volatility 29 Factor and (z) Valuation Date as such term applies to the definitions of Dividend Coverage Amount, Dividend Coverage Assets and Minimum Liquidity Level) and S&P (such confirmation being required to be obtained only in the event S&P is rating the shares of MuniPreferred and in no event being required to be obtained in the case of the definitions of (x) Discounted Value, Receivables for Municipal obligations Sold, Issue Type Category and Other Issues as such terms apply to Moody's Eligible Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period and Moody's Volatility Factor) that any such amendment, alteration or repeal would not impair the ratings then assigned by Moody's or S&P, as the case may be, to shares of MuniPreferred: Deposit Securities Moody's Eligible Asset Discounted Value Moody's Exposure Period Dividend Coverage Amount Moody's Volatility Factor Dividend Coverage Assets 1940 Act Cure Date Issue Type Category 1940 Act MuniPreferred, Asset Market Value Coverage Maximum Potential Gross-up Other Issues Payment Liability Quarterly Valuation Date Minimum Liquidity Level Receivables for Municipal MuniPreferred Basic Maintenance Obligations Sold Amount S&P Discount Factor MuniPreferred Basic Maintenance S&P Eligible Asset Cure Date S&P Exposure Period MuniPreferred Basic Maintenance S&P Volatility Factor Report Valuation Date Moody's Discount Factor Volatility Factor (e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless otherwise required by law, the Holders of shares of MuniPreferred shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. (f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of shares of MuniPreferred shall have no preemptive rights or rights to cumulative voting. (g) VOTING FOR TRUSTEES SOLE REMEDY FOR FUND'S FAILURE TO PAY DIVIDENDS. In the event that the Fund fails to pay any dividends on the shares of MuniPreferred, the exclusive remedy of the Holders shall be the right to vote for trustees pursuant to the provisions of this Section 5. (h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights of the Holders to vote on any matter, whether such right is created by this Statement, by the other provisions of the Declaration, by statute or otherwise, no Holder shall be entitled to vote any share of MuniPreferred and no share of MuniPreferred shall be deemed to be "outstanding" for the purpose of voting 30 or determining the number of shares required to constitute a quorum if, prior to or concurrently with the time of determination of shares entitled to vote or shares deemed outstanding for quorum purposes, as the case may be, the requisite Notice of Redemption with respect to such shares shall have been mailed as provided in paragraph (c) of Section 11 of this Part I and the Redemption Price for the redemption of such shares shall have been deposited in trust with the Auction Agent for that purpose. No share of MuniPreferred held by the Fund or any affiliate of the Fund (except for shares held by a Broker-Dealer that is an affiliate of the Fund for the account of its customers) shall have any voting rights or be deemed to be outstanding for voting or other purposes. 6. 1940 ACT MUNIPREFERRED ASSET COVERAGE. The Fund shall maintain, as of the last Business Day of each month in which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred Asset Coverage. 7. MUNIPREFERRED BASIC MAINTENANCE AMOUNT. (a) So long as shares of MuniPreferred are outstanding, the Fund shall maintain, on each Valuation Date, and shall verify to its satisfaction that it is maintaining on such Valuation Date, (i) S&P Eligible Assets having an aggregate Discounted Value equal to or greater than the MuniPreferred Basic Maintenance Amount (if S&P is then rating the shares of MuniPreferred), and (ii) Moody's Eligible Assets having an aggregate Discounted Value equal to or greater than the MuniPreferred, Basic Maintenance Amount (if Moody's is then rating the shares of MuniPreferred). (b) On or before 5:00 P.M., New York City time, on the third Business Day after a Valuation Date on which the Fund fails to satisfy the MuniPreferred Basic Maintenance Amount, and on the third Business Day after the MuniPreferred Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) a MuniPreferred Basic Maintenance Report as of the date of such failure or such MuniPreferred Basic Maintenance Cure Date, as the case may be, which will be deemed to have been delivered to the Auction Agent if the Auction Agent receives a copy or telecopy, telex or other electronic transcription thereof and on the same day the Fund mails to the Auction Agent for delivery on the next Business Day the full MuniPreferred Basic Maintenance Report. The Fund shall also deliver a MuniPreferred Basic Maintenance Report to (i) the Auction Agent (if either Moody's or S&P is then rating the shares of MuniPreferred) as of (A) the fifteenth day of each month (or, if such day is not a Business Day, the next succeeding Business Day) and (B) the last Business Day of each month, (ii) Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if 31 S&P is then rating the shares of MuniPreferred) as of any Quarterly Valuation Date, in each case on or before the third Business Day after such day, and (iii) S&P, if and when requested for any Valuation Date, on or before the third Business Day after such request. A failure by the Fund to deliver a MuniPreferred Basic Maintenance Report pursuant to the preceding sentence shall be deemed to be delivery of a MuniPreferred Basic Maintenance Report indicating the Discounted Value for all assets of the Fund is less than the MuniPreferred Basic Maintenance Amount, as of the relevant Valuation Date. (c) Within ten Business Days after the date of delivery of a MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of this Section 7 relating to a Quarterly Valuation Date, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred), (i) the mathematical accuracy of the calculations reflected in such Report (and in any other MuniPreferred Basic Maintenance Report, randomly selected by the Independent Accountant, that was delivered by the Fund during the quarter ending on such Quarterly Valuation Date) and (ii) that, in such Report (and in such randomly selected Report), the Fund determined in accordance with this Statement whether the Fund had, at such Quarterly Valuation Date (and at the Valuation Date addressed in such randomly selected Report), S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) of an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the shares of MuniPreferred) of an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount (such confirmation being herein called the "Accountant's Confirmation"). (d) Within ten Business Days after the date of delivery of a MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of this Section 7 relating to any Valuation Date on which the Fund failed to satisfy the MuniPreferred Basic Maintenance Amount, and relating to the MuniPreferred Basic Maintenance Cure Date with respect to such failure to satisfy the MuniPreferred Basic Maintenance Amount, the Fund shall cause the Independent Accountant to provide to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) an Accountant's Confirmation as to such MuniPreferred Basic Maintenance Report. (e) If any Accountant's Confirmation delivered pursuant to paragraph (c) or (d) of this Section 7 shows that an error was made in the MuniPreferred Basic Maintenance Report for a particular Valuation Date for which such Accountant's Confirmation was required to be delivered, or shows that a lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) or Moody's Eligible Assets (if 32 Moody's is then rating the shares of MuniPreferred), as the case may be, of the Fund was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Fund, and the Fund shall accordingly amend and deliver the MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) promptly following receipt by the Fund of such Accountant's Confirmation. (f) On or before 5:00 p.m., New York City time, on the first Business Day after the Date of Original Issue of any shares of MuniPreferred, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred) and Moody's (if Moody's is then rating the shares of MuniPreferred) a MuniPreferred Basic Maintenance Report as of the close of business on such Date of Original Issue. Within five Business Days of such Date of Original Issue, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the shares of MuniPreferred) (i) the mathematical accuracy of the calculations reflected in such Report and (ii) that the Discounted Value of S&P Eligible Assets reflected thereon equals or exceeds the MuniPreferred Basic Maintenance Amount reflected thereon. (g) On or before 5:00 p.m., New York City time, on the third Business Day after either (i) the Fund shall have redeemed Common Shares or (ii) the ratio of the Discounted Value of S&P Eligible Assets or the Discounted Value of Moody's Eligible Assets to the MuniPreferred Basic Maintenance Amount is less than or equal to 105%, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred) or Moody's (if Moody's is then rating the shares of MuniPreferred), as the case may be, a MuniPreferred Basic Maintenance Report as of the date of either such event. 8. MINIMUM LIQUIDITY LEVEL. So long as S&P is rating the shares of MuniPreferred, the Fund shall have, as of each Valuation Date, Dividend Coverage Assets, with respect to each then outstanding share of MuniPreferred, having a value not less than the Dividend Coverage Amount with respect to such share (the "Minimum Liquidity Level"). If, as of each Valuation Date, the Fund does not have the required Dividend Coverage Assets, the Fund shall, as soon as practicable, adjust its portfolio in order to meet the Minimum Liquidity Level, but only if S&P is then rating the shares of MuniPreferred. 9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. (a) DIVIDENDS ON PREFERRED SHARES OTHER THAN MUNIPREFERRED. Except as set forth in the next sentence, no dividends shall be declared or paid or set apart for payment on the shares of any class or series of shares of beneficial interest of the Fund ranking, as to the payment of dividends, on a parity with 33 shares of MuniPreferred for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of each series of MuniPreferred through its most recent Dividend Payment Date. When dividends are not paid in full upon the shares of each series of MuniPreferred through its most recent Dividend Payment Date or upon the shares of any other class or series of shares of beneficial interest of the Fund ranking on a parity as to the payment of dividends with shares of MuniPreferred through their most recent respective dividend payment dates, all dividends declared upon shares of MuniPreferred and any other such class or series of shares of beneficial interest ranking on a parity as to the payment of dividends with shares of MuniPreferred shall be declared pro rata so that the amount of dividends declared per share on shares of MuniPreferred and such other class or series of shares of beneficial interest shall in all cases bear to each other the same ratio that accumulated dividends per share on the shares of MuniPreferred and such other class or series of shares of beneficial interest bear to each other (for purposes of this sentence, the amount of dividends declared per share of MuniPreferred shall be based on the Applicable Rate for such share for the Dividend Periods during which dividends were not paid in full). (b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON SHARES UNDER THE 1940 ACT. The Board of Trustees shall not declare any dividend (except a dividend payable in Common Shares), or declare any other distribution, upon the Common Shares, or purchase Common Shares, unless in every such case the Preferred Shares have, at the time of any such declaration or purchase, an asset coverage (as defined in and determined pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are shares or stock of a closed-end investment company as a condition of declaring dividends on its common shares or stock) after deducting the amount of such dividend, distribution or purchase price, as the case may be. (c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so long as any share of MuniPreferred is outstanding, and except as set forth in paragraph (a) of this Section 9 and paragraph (c) of Section 12 of this Part I, (A) the Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or in options, warrants or rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to the shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of the Common Shares or any other shares of the Fund ranking junior to or on a parity with the shares of MuniPreferred as to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Fund ranking 34 junior to the shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), or any such parity shares (except by conversion into or exchange for shares of the Fund ranking junior to or on a parity with MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), unless (a) full cumulative dividends on shares of each series of MuniPreferred through its most recently ended Dividend Period shall have been paid or shall have been declared and sufficient funds for the payment thereof deposited with the Auction Agent and (ii) the Fund has redeemed the full number of shares of MuniPreferred required to be redeemed by any provision for mandatory redemption pertaining thereto, and (B) the Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or in options, warrants or rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of Common Shares or any other shares of the Fund ranking junior to shares of MuniPreferred as to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Fund ranking junior to shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), unless immediately after such transaction the Discounted Value of Moody's Eligible Assets (if Moody's is then rating the shares of MuniPreferred) and S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) would each at least equal the MuniPreferred Basic Maintenance Amount. 10. RATING AGENCY RESTRICTIONS. For so long as any shares of MuniPreferred are outstanding and Moody's or S&P, or both, are rating such shares, the Fund will not, unless it has received written confirmation from Moody's or S&P, or both, as appropriate, that any such action would not impair the ratings then assigned by such rating agency to such shares, engage in any one or more of the following transactions: (a) buy or sell futures or write put or call options; (b) borrow money, except that the Fund may, without obtaining the written confirmation described above, borrow money for the purpose of clearing securities transactions if (a) the MuniPreferred Basic Maintenance Amount would continue to be satisfied after giving effect to such borrowing and (ii) such borrowing (A) is privately arranged with a bank or other person and is evidenced by a promissory note or other evidence of indebtedness that is not intended to be publicly distributed or (B) is for "temporary purposes," is evidenced by a promissory note or other evidence of indebtedness and is in an amount not exceeding 5 per centum of the value of the total assets of the Fund 35 at the time of the borrowing; for purposes of the foregoing, "temporary purpose" means that the borrowing is to be repaid within sixty days and is not to be extended or renewed; (c) issue any class or series of shares ranking prior to or on a parity with shares of MuniPreferred with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Fund, or reissue any shares of MuniPreferred previously purchased or redeemed by the Fund; (d) engage in any short sales of securities; (e) lend securities; (f) merge or consolidate into or with any corporation; (g) change the pricing service (currently J.J. Kenny) referred to in the definition of Market Value; or (h) enter into reverse repurchase agreements. 11. REDEMPTION. (a) OPTIONAL REDEMPTION. (i) Subject to the provisions of subparagraph (v) of this paragraph (a), shares of MuniPreferred of any series may be redeemed, at the option of the Fund, as a whole or from time to time in part, on the second Business Day preceding any Dividend Payment Date for shares of such series, out of funds legally available therefor, at a redemption price per share equal to the sum of $50,000 plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not including) the date fixed for redemption; PROVIDED, HOWEVER, that (1) shares of a series of MuniPreferred may not be redeemed in part if after such partial redemption fewer than 250 shares of such series remain outstanding; (2) unless otherwise provided in Section 11 of APPENDIX A hereto, shares of a series of MuniPreferred are redeemable by the Fund during the Initial Rate Period thereof only on the second Business Day next preceding the last Dividend Payment Date for such Initial Rate Period; and (3) subject to subparagraph (ii) of this paragraph (a), the Notice of Special Rate Period relating to a Special Rate Period of shares of a series of MuniPreferred, as delivered to the Auction Agent and filed with the Secretary of the Fund, may provide that shares of such series shall not be redeemable during the whole or any part of such Special Rate Period (except as provided in subparagraph (iv) of this paragraph (a)) or shall be redeemable during the whole or any part of such Special Rate Period only upon payment of such redemption premium or premiums as shall be specified therein ("Special Redemption Provisions"). 36 (ii) A Notice of Special Rate Period relating to shares of a series of MuniPreferred for a Special Rate Period thereof may contain Special Redemption Provisions only if the Fund's Board of Trustees, after consultation with the Broker-Dealer or Broker-Dealers for such Special Rate Period of shares of such series, determines that such Special Redemption Provisions are in the best interest of the Fund. (iii) If fewer than all of the outstanding shares of a series of MuniPreferred are to be redeemed pursuant to subparagraph (a) of this paragraph (a), the number of shares of such series to be redeemed shall be determined by the Board of Trustees, and such shares shall be redeemed pro rata from the Holders of shares of such series in proportion to the number of shares of such series held by such Holders. (iv) Subject to the provisions of subparagraph (v) of this paragraph (a), shares of any series of MuniPreferred may be redeemed, at the option of the Fund, as a whole but not in part, out of funds legally available therefor, on the first day following any Dividend Period thereof included in a Rate Period consisting of more than 364 Rate Period Days if, on the date of determination of the Applicable Rate for shares of such series for such Rate Period, such Applicable Rate equalled or exceeded on such date of determination the Treasury Note Rate for such Rate Period, at a redemption price per share equal to the sum of $50,000 plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not including) the date fixed for redemption. (v) The Fund may not on any date mail a Notice of Redemption pursuant to paragraph (c) of this Section 11 in respect of a redemption contemplated to be effected pursuant to this paragraph (a) unless on such date (a) the Fund has available Deposit Securities with maturity or tender dates not later than the day preceding the applicable redemption date and having a value not less than the amount (including any applicable premium) due to Holders of shares of MuniPreferred by reason of the redemption of such shares on such redemption date and (b) the Discounted Value of Moody's Eligible Assets (if Moody's is then rating the shares of MuniPreferred) and the Discounted Value of S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) each at least equal the MuniPreferred Basic Maintenance Amount, and would at least equal the MuniPreferred Basic Maintenance Amount immediately subsequent to such redemption if such redemption were to occur on such date. For purposes of determining in clause (b) of the preceding sentence whether the Discounted Value of Moody's Eligible Assets at least equals the MuniPreferred Basic Maintenance Amount, the Moody's Discount Factors applicable to Moody's Eligible Assets shall be determined by reference to the first Exposure Period longer than the Exposure Period then applicable to the Fund, as described in the definition of Moody's Discount Factor herein. 37 (b) MANDATORY REDEMPTION. The Fund shall redeem, at a redemption price equal to $50,000 per share plus accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not including) the date fixed by the Board of Trustees for redemption, certain of the shares of MuniPreferred, if the Fund fails to have either Moody's Eligible Assets with a Discounted Value or S&P Eligible Assets with a Discounted Value greater than or equal to the MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act MuniPreferred Asset Coverage, in accordance with the requirements of the rating agency or agencies then rating the shares of MuniPreferred, and such failure is not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940 Act Cure Date, as the case may be. The number of shares of MuniPreferred to be redeemed shall be equal to the lesser of (i) the minimum number of shares of MuniPreferred, together with all other Preferred Shares subject to redemption or retirement, the redemption or retirement of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, would have resulted in the Fund's having both Moody's Eligible Assets with a Discounted Value and S&P Eligible Assets with a Discounted Value greater than or equal to the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act MuniPreferred, Asset Coverage, as the case may be, on such Cure Date (PROVIDED, HOWEVER, that if there is no such minimum number of shares of MuniPreferred and other Preferred Shares the redemption or retirement of which would have had such result, all shares of MuniPreferred and Preferred Shares then outstanding shall be redeemed), and (ii) the maximum number of shares of MuniPreferred, together with all other Preferred Shares subject to redemption or retirement, that can be redeemed out of funds expected to be legally available therefor in accordance with the Declaration and applicable law. In determining the shares of MuniPreferred required to be redeemed in accordance with the foregoing, the Fund shall allocate the number required to be redeemed to satisfy the MuniPreferred Basic Maintenance Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro rata among shares of MuniPreferred and other Preferred Shares (and, then, pro rata among each series of MuniPreferred) subject to redemption or retirement. The Fund shall effect such redemption on the date fixed by the Fund therefor, which date shall not be earlier than 20 days nor later than 40 days after such Cure Date, except that if the Fund does not have funds legally available for the redemption of all of the required number of shares of MuniPreferred and other Preferred Shares which are subject to redemption or retirement or the Fund otherwise is unable to effect such redemption on or prior to 40 days after such Cure Date, the Fund shall redeem those shares of MuniPreferred and other Preferred Shares which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. If fewer than all of the outstanding shares of a series of MuniPreferred are to be redeemed pursuant to this paragraph (b), the number of shares of such series to be redeemed shall be redeemed pro rata 38 from the Holders of shares of such series in proportion to the number of shares of such series held by such Holders. (c) NOTICE OF REDEMPTION. If the Fund shall determine or be required to redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of this Section 11, it shall mail a Notice of Redemption with respect to such redemption by first class mail, postage prepaid, to each Holder of the shares of such series to be redeemed, at such Holder's address as the same appears on the record books of the Fund on the record date established by the Board of Trustees. Such Notice of Redemption shall be so mailed not less than 20 nor more than 45 days prior to the date fixed for redemption. Each such Notice of Redemption shall state: (i) the redemption date; (ii) the number of shares of MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for shares of such series; (iv) the Redemption Price; (v) the place or places where the certificate(s) for such shares (properly endorsed or assigned for transfer, if the Board of Trustees shall so require and the Notice of Redemption shall so state) are to be surrendered for payment of the Redemption Price; (vi) that dividends on the shares to be redeemed will cease to accumulate on such redemption date; and (vii) the provisions of this Section 11 under which such redemption is made. If fewer than all shares of a series of MuniPreferred held by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder shall also specify the number of shares of such series to be redeemed from such Holder. The Fund may provide in any Notice of Redemption relating to a redemption contemplated to be effected pursuant to paragraph (a) of this Section 11 that such redemption is subject to one or more conditions precedent and that the Fund shall not be required to effect such redemption unless each such condition shall have been satisfied at the time or times and in the manner specified in such Notice of Redemption. (d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the provisions of paragraphs (a) or (b) of this Section 11, if any dividends on shares of a series of MuniPreferred (whether or not earned or declared) are in arrears, no shares of such series shall be redeemed unless all outstanding shares of such series are simultaneously redeemed, and the Fund shall not purchase or otherwise acquire any shares of such series; PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase or acquisition of all outstanding shares of such series pursuant to the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, Holders of all outstanding shares of such series. (e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any redemption for which Notice of Redemption has been mailed is not made by reason of the absence of legally available funds therefor in accordance with the Declaration and applicable law, such redemption shall be made as soon as practicable to the extent such funds become available. Failure to redeem shares of MuniPreferred shall be deemed to exist at any time after the date specified for redemption in a Notice of Redemption when the Fund shall have 39 failed, for any reason whatsoever, to deposit in trust with the Auction Agent the Redemption Price with respect to any shares for which such Notice of Redemption has been mailed; PROVIDED, HOWEVER, that the foregoing shall not apply in the case of the Fund's failure to deposit in trust with the Auction Agent the Redemption Price with respect to any shares where (1) the Notice of Redemption relating to such redemption provided that such redemption was subject to one or more conditions precedent and (2) any such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. Notwithstanding the fact that the Fund may not have redeemed shares of MuniPreferred for which a Notice of Redemption has been mailed, dividends may be declared and paid on shares of MuniPreferred and shall include those shares of MuniPreferred for which a Notice of Redemption has been mailed. (f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY FUND. All moneys paid to the Auction Agent for payment of the Redemption Price of shares of MuniPreferred called for redemption shall be held in trust by the Auction Agent for the benefit of Holders of shares so to be redeemed. (g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on the Business Day next preceding the date fixed for redemption thereby, in funds available on the next Business Day in The City of New York, New York) of funds sufficient to redeem the shares of MuniPreferred that are the subject of such notice, dividends on such shares shall cease to accumulate and such shares shall no longer be deemed to be outstanding for any purpose, and all rights of the Holders of the shares so called for redemption shall cease and terminate, except the right of such Holders to receive the Redemption Price, but without any interest or other additional amount, except as provided in subparagraph (e)(i) of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in accordance with the Notice of Redemption of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Trustees shall so require and the Notice of Redemption shall so state), the Redemption Price shall be paid by the Auction Agent to the Holders of shares of MuniPreferred subject to redemption. In the case that fewer than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued, representing the unredeemed shares, without cost to the Holder thereof. The Fund shall be entitled to receive from the Auction Agent, promptly after the date fixed for redemption, any cash deposited with the Auction Agent in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred called for redemption on such date and (ii) all other amounts to which Holders of shares of MuniPreferred called for redemption may be entitled. Any funds so deposited that are unclaimed at the end of 90 days from such redemption date shall, to the extent permitted by law, be repaid to the Fund, after which time the Holders of shares of MuniPreferred 40 so called for redemption may look only to the Fund for payment of the Redemption Price and all other amounts to which they may be entitled. The Fund shall be entitled to receive, from time to time after the date fixed for redemption, any interest on the funds so deposited. (h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption pursuant to this Section 11, the Fund shall use its best efforts to comply with all applicable conditions precedent to effecting such redemption under the 1940 Act and any applicable Massachusetts law, but shall effect no redemption except in accordance with the 1940 Act and any applicable Massachusetts law. (i) ONLY WHOLE SHARES OF MUNIPREFERRED MAY BE REDEEMED. In the case of any redemption pursuant to this Section 11, only whole shares of MuniPreferred shall be redeemed, and in the event that any provision of the Declaration would require redemption of a fractional share, the Auction Agent shall be authorized to round up so that only whole shares are redeemed. 12. LIQUIDATION RIGHTS. (a) RANKING. The shares of a series of MuniPreferred shall rank on a parity with each other, with shares of any other series of MuniPreferred and with shares of any other series of Preferred Shares as to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund. (b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation or winding up of the affairs of the Fund, whether voluntary or involuntary, the Holders of shares of MuniPreferred then outstanding shall be entitled to receive and to be paid out of the assets of the Fund available for distribution to its shareholders, before any payment or distribution shall be made on the Common Shares or on any other class of shares of the Fund ranking junior to the MuniPreferred upon dissolution, liquidation or winding up, an amount equal to the Liquidation Preference with respect to such shares plus an amount equal to all dividends thereon (whether or not earned or declared) accumulated but unpaid to (but not including) the date of final distribution in same day funds, together with any payments required to be made pursuant to Section 3 of this Part I in connection with the liquidation of the Fund. After the payment to the Holders of the shares of MuniPreferred of the full preferential amounts provided for in this paragraph (b), the Holders of MuniPreferred as such shall have no right or claim to any of the remaining assets of the Fund. (c) PRO RATA DISTRIBUTIONS. In the event the assets of the Fund available for distribution to the Holders of shares of MuniPreferred upon any dissolution, liquidation, or winding up of the affairs of the Fund, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such Holders are entitled pursuant to paragraph (b) of this Section 12, no such distribution shall be made on account of any shares of any other class or series of Preferred Shares ranking on a parity with the shares of MuniPreferred with 41 respect to the distribution of assets upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of MuniPreferred, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the holders of shares of any series or class or classes of shares ranking on a parity with the shares of MuniPreferred with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, after payment shall have been made in full to the Holders of the shares of MuniPreferred as provided in paragraph (b) of this Section 12, but not prior thereto, any other series or class or classes of shares ranking junior to the shares of MuniPreferred with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the Holders of the shares of MuniPreferred shall not be entitled to share therein. (e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of all or substantially all the property or business of the Fund, nor the merger or consolidation of the Fund into or with any Massachusetts business trust or corporation nor the merger or consolidation of any Massachusetts business trust or corporation into or with the Fund shall be a dissolution, liquidation or winding up, whether voluntary or involuntary, for the purposes of this Section 12. 13. MISCELLANEOUS. (a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject to the provisions of paragraph (c) of Section 10 of this Part I, the Board of Trustees may, by resolution duly adopted, without shareholder approval (except as otherwise provided by this Statement or required by applicable law), amend APPENDIX A hereto to add additional series of MuniPreferred (and terms relating thereto) to the series of MuniPreferred theretofore described thereon, and each such additional series shall be governed by the terms of this Statement as if such series had been described on APPENDIX A hereto on the date hereof. (b) APPENDIX A INCORPORATED BY REFERENCE. APPENDIX A hereto is incorporated in and made a part of this Statement by reference thereto. (c) NO FRACTIONAL SHARES. No fractional shares of MuniPreferred shall be issued. (d) STATUS OF SHARES OF MUNIPREFERRED REDEEMED, EXCHANGED OR OTHERWISE ACQUIRED BY THE FUND. Shares of MuniPreferred which are redeemed, exchanged or otherwise acquired by the Fund shall return to the status of authorized and unissued Preferred Shares, without designation as to series. 42 (e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by applicable law, the Board of Trustees may interpret or adjust the provisions of this Statement to resolve any inconsistency or ambiguity or to remedy any formal defect, and may amend this Statement with respect to any series of MuniPreferred prior to the issuance of shares of such series. (f) HEADINGS NOT DETERMINATIVE. The headings contained in this Statement are for convenience of reference only and shall not affect the meaning or interpretation of this Statement. (g) NOTICES. All notices or communications, unless otherwise specified in the By-Laws of the Fund or this Statement, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. PART II 1. ORDERS. (a) Prior to the Submission Deadline on each Auction Date for shares of a series of MuniPreferred: (i) each Beneficial owner of shares of such series may submit to its Broker-Dealer by telephone or otherwise information as to: (A) the number of Outstanding shares, if any, of such series held by such Beneficial Owner which such Beneficial Owner desires to continue to hold without regard to the Applicable Rate for shares of such series for the next succeeding Rate Period of such shares; (B) the number of Outstanding shares, if any, of such series held by such Beneficial Owner which such Beneficial Owner offers to sell if the Applicable Rate for shares of such series for the next succeeding Rate Period of shares of such series shall be less than the rate per annum specified by such Beneficial Owner; and/or (C) the number of Outstanding shares, if any, of such series held by such Beneficial Owner which such Beneficial Owner offers to sell without regard to the Applicable Rate for shares of such series for the next succeeding Rate Period of shares of such series; and (ii) one or more Broker-Dealers, using lists of Potential Beneficial Owners, shall in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, contact Potential Beneficial Owners (by telephone or otherwise), including Persons that are not Beneficial Owners, on such lists to determine the number of shares, if any, of such series which each such Potential Beneficial Owner offers to purchase if the Applicable Rate for shares of such series for the next succeeding 43 Rate Period of shares of such series shall not be less than the rate per annum specified by such Potential Beneficial Owner. For the purposes hereof, the communication by a Beneficial Owner or Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent, of information referred to in clause (i) (A), (i) (B), (i) (C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and collectively as "Orders" and each Beneficial Owner and each Potential Beneficial Owner placing an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the Auction Agent, is hereinafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in clause (i) (A) of this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in clause (i) (B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order containing the information referred to in clause (i) (C) of this paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." (b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a series of MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of such series specified in such Bid if the Applicable Rate for shares of such series determined on such Auction Date shall be less than the rate specified therein; (B) such number or a lesser number of Outstanding shares of such series to be determined as set forth in clause (iv) of paragraph (a) of Section 4 of this Part II if the Applicable Rate for shares of such series determined on such Auction Date shall be equal to the rate specified therein; or (C) the number of Outstanding shares of such series specified in such Bid if the rate specified therein shall be higher than the Maximum Rate for shares of such series, or such number or a lesser number of Outstanding shares of such series to be determined as set forth in clause (iii) of paragraph (b) of Section 4 of this Part II if the rate specified therein shall be higher than the Maximum Rate for shares of such series and Sufficient Clearing Bids for shares of such series do not exist. (ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares of a series of MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of such series specified in such Sell Order; or 44 (B) such number or a lesser number of Outstanding shares of such series as set forth in clause (iii) of paragraph (b) of Section 4 of this Part II if Sufficient Clearing Bids for shares of such series do not exist, PROVIDED, HOWEVER, that a Broker-Dealer that is an Existing Holder with respect to shares of a series of MuniPreferred shall not be liable to any person for failing to sell such shares pursuant to a Sell Order described in the proviso to paragraph (c) of Section 2 of this Part 11 if such shares were transferred by the Beneficial owner thereof without compliance by such Beneficial owner or its transferee Broker-Dealer (or other transferee person, if permitted by the Fund) with the provisions of Section 7 of this Part II. (iii) A Bid by a Potential Beneficial Holder or a Potential Holder of shares of a series of MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of such series specified in such Bid if the Applicable Rate for shares of such series determined on such Auction Date shall be higher than the rate specified therein; or (B) such number or a lesser number of Outstanding shares of such series as set forth in clause (v) of paragraph (a) of Section 4 of this Part II if the Applicable Rate for shares of such series determined on such Auction Date shall be equal to the rate specified therein. (c) No Order for any number of shares of MuniPreferred other than whole shares shall be valid. 2. SUBMISSION OF ORDERS BY BROKER-DEALERS to AUCTION AGENT. (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders for shares of MuniPreferred of a series subject to an Auction on such Auction Date obtained by such Broker-Dealer, designating itself (unless otherwise permitted by the Fund) as an Existing Holder in respect of shares subject to orders submitted or deemed submitted to it by Beneficial Owners and as a Potential Holder in respect of shares subject to orders submitted to it by Potential Beneficial owners, and shall specify with respect to each order for such shares: (i) the name of the Bidder placing such order (which shall be the Broker-Dealer unless otherwise permitted by the Fund); (ii) the aggregate number of shares of such series that are the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder of shares of such series: 45 (A) the number of shares, if any, of such series subject to any Hold Order of such Existing Holder: (B) the number of shares, if any, of such series subject to any Bid of such Existing Holder and the rate specified in such Bid; and (C) the number of shares, if any, of such series subject to any Sell Order of such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder of shares of such series, the rate and number of shares of such series specified in such Potential Holder's Bid. (b) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Auction Agent shall round such rate up to the next highest one thousandth (.001) of 1%. (c) If an Order or Orders covering all of the Outstanding shares of MuniPreferred of a series held by any Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to have been submitted by or on behalf of such Existing Holder covering the number of Outstanding shares of such series held by such Existing Holder and not subject to Orders submitted to the Auction Agent; PROVIDED, HOWEVER, that if an Order or Orders covering all of the Outstanding shares of such series held by any Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline for an Auction relating to a Special Rate Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem a Sell Order to have been submitted by or on behalf of such Existing Holder covering the number of outstanding shares of such series held by such Existing Holder and not subject to Orders submitted to the Auction Agent. (d) If one or more Orders of an Existing Holder is submitted to the Auction Agent covering in the aggregate more than the number of Outstanding shares of MuniPreferred of a series subject to an Auction held by such Existing Holder, such Orders shall be considered valid in the following order of priority: (i) all Hold Orders for shares of such series shall be considered valid, but only up to and including in the aggregate the number of Outstanding shares of such series held by such Existing Holder, and if the number of shares of such series subject to such Hold Orders exceeds the number of Outstanding shares of such series held by such Existing Holder, the number of shares subject to each such Hold Order shall be reduced pro rata to cover the number of Outstanding shares of such series held by such Existing Holder; (ii) (A) any Bid for shares of such series shall be considered valid up to and including the excess of the number of Outstanding shares of such 46 series held by such Existing Holder over the number of shares of such series subject to any Hold Orders referred to in clause (a) above; (B) subject to subclause (A), if more than one Bid of an Existing Holder for shares of such series is submitted to the Auction Agent with the same rate and the number of Outstanding shares of such series subject to such Bids is greater than such excess, such Bids shall be considered valid up to and including the amount of such excess, and the number of shares of such series subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares of such series equal to such excess; (C) subject to subclauses (A) and (B), if more than one Bid of an Existing Holder for shares of such series is submitted to the Auction Agent with different rates, such Bids shall be considered valid in the ascending order of their respective rates up to and including the amount of such excess; and (D) in any such event, the number, if any, of such Outstanding shares of such series subject to any portion of Bids considered not valid in whole or in part under this clause (ii) shall be treated as the subject of a Bid for shares of such series by or on behalf of a Potential Holder at the rate therein specified; and (iii) all Sell Orders for shares of such series shall be considered valid up to and including the excess of the number of Outstanding shares of such series held by such Existing Holder over the sum of shares of such series subject to valid Hold Orders referred to in clause (a) above and valid Bids referred to in clause (ii) above. (e) If more than one Bid for one or more shares of a series of MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential Holder, each such Bid submitted shall be a separate Bid with the rate and number of shares therein specified. (f) Any Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the Submission Deadline on any Auction Date, shall be irrevocable. 3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND APPLICABLE RATE. (a) Not earlier than the Submission Deadline on each Auction Date for shares of a series of MuniPreferred, the Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the Broker-Dealers in respect of shares of such series (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," 47 "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine for such series: (i) the excess of the number of Outstanding shares of such series over the number of Outstanding shares of such series subject to Submitted Hold Orders (such excess being hereinafter referred to as the "Available MuniPreferred" of such series); (ii) from the Submitted Orders for shares of such series whether: (A) the number of Outstanding shares of such series subject to Submitted Bids of Potential Holders specifying one or more rates equal to or lower than the Maximum Rate for shares of such series; exceeds or is equal to the sum of: (B) the number of Outstanding shares of such series subject to Submitted Bids of Existing Holders specifying one or more rates higher than the Maximum Rate for shares of such series; and (C) the number of Outstanding shares of such series subject to Submitted Sell Orders (in the event such excess or such equality exists (other than because the number of shares of such series in subclauses (B) and (C) above is zero because all of the Outstanding shares of such series are subject to Submitted Hold Orders), such Submitted Bids in subclause (A) above being hereinafter referred to collectively as "Sufficient Clearing Bids" for shares of such series); and (iii) if Sufficient Clearing Bids for shares of such series exist, the lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for shares of such series) which if: (A)(I) each such Submitted Bid of Existing Holders specifying such lowest rate and (II) all other such Submitted Bids of Existing Holders specifying lowef rates were rejected, thus entitling such Existing Holders to continue to hold the shares of such series that are subject to such Submitted Bids; and (B)(I) each such Submitted Bid of Potential Holders specifying such lowest rate and (II) all other such Submitted Bids of Potential Holders specifying lower rates were accepted; would result in such Existing Holders described in subclause (A) above continuing to hold an aggregate number of Outstanding shares of such series which, when added to the number of Outstanding shares of such series to be purchased by such Potential Holders described in subclause (B) above, would equal not less than the Available MuniPreferred of such series. 48 (b) Promptly after the Auction Agent has made the determinations pursuant to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of the Maximum Rate for shares of the series of MuniPreferred for which an Auction is being held on the Auction Date and, based on such determination, the Applicable Rate for shares of such series for the next succeeding Rate Period thereof as follows: (i) if Sufficient Clearing Bids for shares of such series exist, that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be equal to the Winning Bid Rate for shares of such series so determined, (ii) if Sufficient Clearing Bids for shares of such series do not exist (other than because all of the Outstanding shares of such series are subject to Submitted Hold Orders), that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be equal to the Maximum Rate for shares of such series; or (iii) if all of the Outstanding shares of such series are subject to Submitted Hold Orders, that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be as set forth in Section 12 of APPENDIX A hereto. 4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND ALLOCATION OF SHARES. Existing Holders shall continue to hold the shares of MuniPreferred that are subject to Submitted Hold Orders, and, based on the determinations made pursuant to paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected by the Auction Agent and the Auction Agent shall take such other action as set forth below: (a) If Sufficient Clearing Bids for shares of a series of MuniPreferred have been made, all Submitted Sell Orders with respect to shares of such series shall be accepted and, subject to the provisions of paragraphs (d) and (e) of this Section 4, Submitted Bids with respect to shares of such series shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids with respect to shares of such series shall be rejected: (i) "Existing Holders" Submitted Bids for shares of such series specifying any rate that is higher than the Winning Bid Rate for shares of such series shall be accepted, thus requiring each such Existing Holder to sell the shares of MuniPreferred subject to such Submitted Bids; (ii) "Existing Holders" Submitted Bids for shares of such series specifying, any rate that is lower than the Winning Bid Rate for shares of such series shall be rejected, thus entitling each such Existing Holder to continue to hold the shares of MuniPreferred subject to such Submitted Bids; 49 (iii) "Potential Holders" Submitted Bids for shares of such series specifying any rate that is lower than the Winning Bid Rate for shares of such series shall be accepted: (iv) each Existing Holder's Submitted Bid for shares of such series specifying a rate that is equal to the Winning Bid Rate for shares of such series shall be rejected, thus entitling such Existing Holder to continue to hold the shares of MuniPreferred subject to such Submitted Bid, unless the number of Outstanding shares of MuniPreferred subject to all such Submitted Bids shall be greater than the number of shares of MuniPreferred ("remaining shares") in the excess of the Available MuniPreferred of such series over the number of shares of MuniPreferred subject to Submitted Bids described in clauses (ii) and (iii) of this paragraph (a), in which event such Submitted Bid of such Existing Holder shall be rejected in part, and such Existing Holder shall be entitled to continue to hold shares of MuniPreferred subject to such Submitted Bid, but only in an amount equal to the number of shares of MuniPreferred of such series obtained by multiplying the number of remaining shares by a fraction, the numerator of which shall be the number of Outstanding shares of MuniPreferred held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of MuniPreferred subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate for shares of such series; and (v) each Potential Holder's Submitted Bid for shares of such series specifying a rate that is equal to the Winning Bid Rate for shares of such series shall be accepted but only in an amount equal to the number of shares of such series obtained by multiplying the number of shares in the excess of the Available MuniPreferred of such series over the number of shares of MuniPreferred subject to Submitted Bids described in clauses (ii) through (iv) of this paragraph (a) by a fraction, the numerator of which shall be the number of Outstanding shares of MuniPreferred subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of MuniPreferred subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate for shares of such series. (b) If Sufficient Clearing Bids for shares of a series of MuniPreferred have not been made (other than because all of the Outstanding shares of such series are subject to Submitted Hold Orders), subject to the provisions of paragraph (d) of this Section 4, Submitted Orders for shares of such series shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids for shares of such series shall be rejected: (a) Existing Holders' Submitted Bids for shares of such series specifying any rate that is equal to or lower than the Maximum Rate for shares of 50 such series shall be rejected, thus entitling such Existing Holders to continue to hold the shares of MuniPreferred subject to such Submitted Bids: (ii) Potential Holders' Submitted Bids for shares of such series specifying any rate that is equal to or lower than the Maximum Rate for shares of such series shall be accepted; and (iii) Each Existing Holder's Submitted Bid for shares of such series specifying any rate that is higher than the Maximum Rate for shares of such series and the Submitted Sell Orders for shares of such series of each existing holder shall be accepted, thus entitling each existing holder that submitted or on whose behalf was submitted any such submitted bid or submitted sell order to sell the shares of such series subject to such submitted bid or submitted sell order, but in both cases only in an amount equal to the number of shares of such series obtained by multiplying the number of shares of such series subject to submitted bids described in clause (ii) of this paragraph (b) by a fraction, the numerator of which shall be the number of outstanding shares of such series held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the aggregate number of Outstanding shares of such series subject to all such Submitted Bids and Submitted Sell Orders. (c) If all of the Outstanding shares of a series of MuniPreferred are subject to Submitted Hold Orders, all Submitted Bids for shares of such series shall be rejected. (d) If, as a result of the procedures described in clause (iv) or (v) of paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of a series of MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, round up or down the number of shares of MuniPreferred of such series to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date as a result of such procedures so that the number of shares so purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of MuniPreferred. (e) If, as a result of the procedures described in clause (v) of paragraph (a) of this Section 4, any Potential Holder would be entitled or required to purchase less than a whole share of a series of MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, allocate shares of MuniPreferred of such series for purchase among Potential Holders so that only whole shares of MuniPreferred of such series are purchased on such Auction Date as a result of such procedures by any Potential Holder, even if such allocation results in one or more Potential 51 Holders not purchasing shares of MuniPreferred of such series on such Auction Date. (f) Based on the results of each Auction for shares of a series of MuniPreferred, the Auction Agent shall determine the aggregate number of shares of such series to be purchased and the aggregate number of shares of such series to be sold by Potential Holders and Existing Holders and, with respect to each Potential Holder and Existing Holder, to the extent that such aggregate number of shares to be purchased and such aggregate number of shares to be sold differ, determine to which other Potential Holder(s) or Existing Holder(s) they shall deliver, or from which other Potential Holder(s) or Existing Holder(s) they shall receive, as the case may be, shares of MuniPreferred of such series. 5. NOTIFICATION OF ALLOCATIONS. Whenever the Fund intends to include any net capital gains or other income taxable for Federal income tax purposes in any dividend on shares of MuniPreferred, the Fund shall, in the case of a Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer, and may, in the case of any other Special Rate Period, notify the Auction Agent of the amount to be so included not later than the Dividend Payment Date next preceding the Auction Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction Agent receives such notice from the Fund, it will be required in turn to notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance with its Broker-Dealer Agreement, will be required to notify its Beneficial Owners and Potential Beneficial Owners of shares of MuniPreferred believed by it to be interested in submitting an Order in the Auction to be held on such Auction Date. 6. AUCTION AGENT. For so long as any shares of MuniPreferred are outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be in each case a commercial bank, trust company or other financial institution independent of the Fund and its affiliates (which however, may engage or have engaged in business transactions with the Fund or its affiliates) and at no time shall the Fund or any of its affiliates act as the Auction Agent in connection with the Auction Procedures. If the Auction Agent resigns or for any reason its appointment is terminated during any period that any shares of MuniPreferred are outstanding, the Board of Trustees shall use its best efforts promptly thereafter to appoint another qualified commercial bank, trust company or financial institution to act as the Auction Agent. 7. TRANSFER OF SHARES OF MUNIPREFERRED Unless otherwise permitted by the Fund, a Beneficial Owner or an Existing Holder may sell, transfer or otherwise dispose of shares of MuniPreferred only in whole shares and only pursuant to a Bid or Sell Order placed with the Auction Agent in accordance with the procedures described in this Part II 52 or to a Broker-Dealer; PROVIDED, HOWEVER, that (a) a sale, transfer or other disposition of shares of MuniPreferred from a customer of a Broker-Dealer who is listed on the records of that Broker-Dealer as the holder of such shares to that Broker-Dealer or another customer of that Broker-Dealer shall not be deemed to be a sale, transfer or other disposition for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder of the shares so sold, transferred or disposed of immediately after such sale, transfer or disposition and (b) in the case of all transfers other than pursuant to Auctions, the Broker-Dealer (or other Person, if permitted by the Fund) to whom such transfer is made shall advise the Auction Agent of such transfer. 8. GLOBAL CERTIFICATE. Prior to the commencement of a Voting Period, (i) all of the shares of a series of MuniPreferred outstanding from time to time shall be represented by one global certificate registered in the name of the Securities Depository or its nominee and (ii) no registration of transfer of shares of a series of MuniPreferred shall be made on the books of the Fund to any Person other than the Securities Depository or its nominee. IN WITNESS WHEREOF, NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, has caused these presents to be signed on September 16, 1993, in its name and on its behalf by its Vice President and attested by its Assistant Secretary. The Fund's Declaration of Trust is on file with the Secretary of State of the Commonwealth of Massachusetts, and the said officers of the Fund have executed this Statement as officers and not individually, and the obligations and rights set forth in this Statement are not binding upon any such officers, or the trustees or shareholders of the Fund, individually, but are binding only upon the assets and property of the Fund. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND by /s/ O. Walter Renfftlen ------------------------------ O. Walter Renfftlen Vice President and Controller ATTEST: /s/ Gifford R. Zimmerman - ------------------------------- Gifford R. Zimmerman Assistant Secretary 53 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND APPENDIX A SECTION 1. DESIGNATION AS TO SERIES. SERIES W: A series of 1,200 Preferred Shares, liquidation preference $50,000 per share, is hereby designated "Municipal Auction Rate Cumulative Preferred Shares, Series W." Each share of Series W MuniPreferred shall be issued on June 10, 1991; have an Applicable Rate for its Initial Rate Period equal to 4.10% per annum; have an initial Dividend Payment Date of June 20, 1991, and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration applicable to Preferred Shares of the Fund, as set forth in Part I and Part II of this Statement. The Series W MuniPreferred shall constitute a separate series of Preferred Shares of the Fund, and each share of Series W MuniPreferred shall be identical except as provided in Section 11 of Part I of this Statement. SECTION 2. NUMBER OF AUTHORIZED SHARES PER SERIES. The number of authorized shares constituting Series W MuniPreferred is 1,200. SECTION 3. EXCEPTIONS TO CERTAIN DEFINITIONS. Notwithstanding the definitions contained under the heading "Definitions" in this Statement, the following terms shall have the following meanings for purposes of this Statement: Not applicable. SECTION 4. CERTAIN DEFINITIONS. For purposes of this Statement, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), except where the context otherwise requires: "GROSS-UP PAYMENT" means payment to a Holder of shares of MuniPreferred of an amount which, when taken together with the aggregate amount of Taxable Allocations made to such Holder to which such Gross-up Payment relates, would cause such Holder's dividends in dollars (after Federal and Pennsylvania income tax consequences) from the aggregate of such Taxable Allocations and the related Gross-up Payment to be equal to the dollar amount of the dividends which would have been received by such Holder if the amount of such aggregate Taxable Allocations would have been excludable from the gross income of such Holder. Such Gross-up Payment shall be calculated (i) without consideration being A-1 given to the time value of money; (h) assuming that no Holder of shares of MuniPreferred is subject to the Federal alternative minimum tax with respect to dividends received from the Fund; and (iii) assuming that each Taxable Allocation and each Gross-up Payment (except to the extent such Gross-up Payment is designated as an exempt-interest dividend under Section 852(b)(5) of the Code or successor provisions) would be taxable in the hands of each Holder of shares of MuniPreferred at the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or net capital gains, as applicable, or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income or net capital gains, as applicable, whichever is greater, in effect at the time such Gross-up Payment is made. "ISSUE TYPE CATEGORY" shall mean, with respect to a Municipal Obligation acquired by the Fund, (A) for purposes of calculating Moody's Eligible Assets as of any Valuation Date, one of the following categories into which such Municipal Obligation falls based upon a good faith determination by the Fund: health care issues (including issues related to teaching and non-teaching hospitals, public or private); housing issues (including issues related to single- and multi- family housing projects); educational facilities issues (including issues related to public and private schools); student loan issues; resource recovery issues, transportation issues (including issues related to mass transit, airports and highways); industrial development bond issues (including issues related to pollution control facilities); utility issues (including issues related to the provision of gas, water, sewers and electricity); general obligation issues; lease obligations (including certificates of participation); escrowed bonds, and other issues ("Other Issues") not failing within one of the aforementioned categories; and (B) for purposes of calculating S&P Eligible Assets as of any Valuation Date, one of the following categories into which such Municipal Obligation falls based upon a good faith determination by the Fund: health care issues (including issues related to teaching and non-teaching hospitals, public or private); housing issues (including issues related to single- and multi-family housing projects); educational facilities issues (including issues related to public and private schools); student loan issues, transportation issues (including issues related to mass transit, airports and highways); industrial development bond issues (including issues related to pollution control facilities); public power utilities issues (including issues related to the provision of electricity, either singly or in combination with the provision of other utilities, and issues related only to the provision of gas); water and sewer utilities issues (including issues related to the provision of water and sewers as well as combination utilities not falling within the public power utilities category); special utilities issues (including issues related to resource recovery, solid waste and irrigation as well as other utility issues A-2 not falling within the public power and water and sewer utilities categories); general obligation issues; lease obligations (including certificates of participation); escrowed bonds; and other issues ("Other Issues") not falling within one of the aforementioned categories. "MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted Value of any Moody's Eligible Asset, the percentage determined by reference to the rating on such asset and the shortest Exposure Period set forth opposite such rating that is the same length as or is longer than the Moody's Exposure Period, in accordance with the table set forth below:
RATING CATEGORY ----------------------------------------------------------------- EXPOSURE PERIOD Aaa* Aa- A* Baa* Other** (V)MIG-*** SP-1+*** - --------------- ---- ---- ---- ---- ------- ---------- -------- 7 weeks................ 151% 159% 168% 202% 229% 136% 148% 8 weeks or less but greater than seven weeks................ 154 164 173 205 235 137 149 9 weeks or less but greater than eight weeks................ 158 169 179 209 242 138 150
- --------------- * Moody's rating. ** Municipal Obligations not rated by Moody's but rated BBB or BBB+ by S&P. *** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's, rated SP-1+ by S&P, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating. Notwithstanding the foregoing, (i) the Moody's Discount Factor for short- term Municipal Obligations will be 115%, so long as such Municipal Obligations are rated at least MIG-1, VMIG-l or P-1 by Moody's and mature or have a demand feature at par exercisable in 30 days or less or 125% as long as such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and mature or have a demand feature at par exercisable in 30 days or less and (ii) no Moody's Discount Factor will be applied to cash or to Receivables for Municipal Obligations Sold. "MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (PROVIDED, HOWEVER, that for purposes of determining the Moody's Discount Factor applicable to any such S&P-rated Municipal Obligation, such Municipal Obligation (excluding any short-term Municipal Obligation) shall be deemed to have a A-3 Moody's rating which is one full rating category lower than its S&P rating), (iii) does not have its Moody's rating suspended by Moody's, and (iv) is part of an issue of Municipal Obligations of at least $10,000,000. Except for general obligation bonds, Municipal Obligations issued by any one issuer and rated BBB by S&P may comprise no more than 4% of total Moody's Eligible Assets; such BBB- rated municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated Baa by Moody's or A by S&P, may comprise no more than 6% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated A by Moody's or AA by S&P, may comprise no more than 10% of total Moody's Eligible Assets, and such BBB, Baa, A and AA-rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of total Moody's Eligible Assets. For purposes of the foregoing sentence, any Municipal Obligation backed by the guaranty, letter of credit or insurance issued by a third party shall be deemed to be issued by such third party if the issuance of such third party credit is the sole determinant of the rating on such Municipal Obligation. Municipal Obligations falling within a particular Issue Type Category and rated BBB by S&P may comprise no more than 12% of total Moody's Eligible Assets; such BBB-rated Municipal Obligations, if any, together with any Municipal Obligations falling within a particular Issue Type Category and rated Baa by Moody's or A by S&P, may comprise no more than 20% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal Obligations falling within a particular Issue Type Category and rated A by Moody's or AA by S&P, may comprise no more than 40% of total Moody's Eligible Assets; and such BBB, Baa, A and AA-rated Municipal Obligations, if any, together with any Municipal Obligations falling within a particular Issue Type Category and rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total Moody's Eligible Assets. For purposes of this definition, a Municipal Obligation shall be deemed to be rated BBB by S&P if rated BBB or BBB+ by S&P. Notwithstanding any other provision of this definition, (A) in the case of general obligation Municipal Obligations only, Municipal Obligations issued by issuers located within any one county and rated BEB by S&P may comprise no more than 4% of Moody's Eligible Assets; such BBB- rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same county and rated Baa by Moody's or A by S&P, may comprise no more than 6% of Moody's Eligible Assets; such BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same county and rated A by Moody's or AA by S&P, may comprise no more than 10% of Moody's Eligible Assets; and such BBB, Baa, A and AA-rated Municipal A-4 Obligations, if any, together with any Municipal Obligations issued by issuers located within the same county and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of Moody's Eligible Assets; and (B) in no event may (i) student loan Municipal Obligations comprise more than 10% of Moody's Eligible Assets; (ii) resource recovery Municipal Obligations comprise more than 10% of Moody's Eligible Assets; and (iii) Other Issues comprise more than 10% of Moody's Eligible Assets. For purposes of applying the foregoing requirements, a Municipal Obligation rated BBB- by S&P shall not be considered to be rated BBB by S&P, Moody's Eligible Assets shall be calculated without including cash, and Municipal Obligations rated MIG-1 or VMIG-l or, if not rated by Moody's, rated SP-l+ by S&P, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating, shall be considered to have a long-term rating of A. When the Fund sells a Municipal Obligation and agrees to repurchase such Municipal Obligation at a future date, such Municipal Obligation shall be valued at its Discounted Value for purposes of determining Moody's Eligible Assets, and the amount of the repurchase price of such Municipal Obligation shall be included as a liability for purposes of calculating the MuniPreferred Basic Maintenance Amount. When the Fund purchases a Moody's Eligible Asset and agrees to sell it at a future date, such Eligible Asset shall be valued at the amount of cash to be received by the Fund upon such future date, provided that the counterparty to the transaction has a long-term debt rating of at least A2 from Moody's and the transaction has a term of no more than 30 days, otherwise such Eligible Asset shall be valued at the Discounted Value of such Eligible Asset. Notwithstanding the foregoing, an asset will not be considered a Moody's Eligible Asset to the extent it is (i) subject to any material lien, mortgage, pledge, security interest or security agreement of any kind (collectively, "Liens"), except for (a) Liens which are being contested in good faith by appropriate proceedings and which Moody's has indicated to the Fund will not affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes that are not then due and payable or that can be paid thereafter without penalty, (c) Liens to secure payment for services rendered or cash advanced to the Fund by Nuveen Advisory Corp., United States Trust Company of New York or the Auction Agent and (d) Liens by virtue of any repurchase agreement; or (ii) deposited irrevocably for the payment of any liabilities for purposes of determining the MuniPreferred Basic Maintenance Amount. "OTHER ISSUES" shall have the respective meanings specified in the definition of "Issue Type Category." "RATE MULTIPLE," for shares of a series of MuniPreferred on any Auction Date for shares of such series, shall mean the percentage, determined as set forth below, based on the prevailing rating of shares of such series in A-5 effect at the close of business on the Business Day next preceding such Auction Date: PREVAILING RATING PERCENTAGE ----------------- ---------- "aa3"/AA- or higher ...................... 110% "a3"/A- .................................. 125% "baa3"/BBB- .............................. 150% "ba3"/BB- ................................ 200% Below "ba3"/BB- .......................... 250% PROVIDED, HOWEVER, that in the event the Fund has notified the Auction Agent of its intent to allocate income taxable for Federal income tax purposes to shares of such series prior to the Auction establishing the Applicable Rate for shares of such series, the applicable percentage in the foregoing table shall be divided by the quantity 1 minus the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income, whichever is greater. For purposes of this definition, the "prevailing rating" of shares of a series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher, then "a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not "aa3"/AA- or higher or "aa3"/A-, then "baa3"/BBB- if such shares have a rating of "baa3" or better by Moody's and BBB- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of "ba3" or better by Moody's and BB- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-, "baa3",/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; PROVIDED, HOWEVER, that if such shares are rated by only one rating agency, the prevailing rating will be determined without reference to the rating of any other rating agency. The Fund shall take all reasonable action necessary to enable either S&P or Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor Moody's shall make such a rating available, the party set forth in Section 7 of APPENDIX A or its successor shall select at least one nationally recognized statistical rating organization (as A-6 that term is used in the rules and regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended from time to time) to act as a substitute rating agency in respect of shares of the series of MuniPreferred set forth opposite such party's name in Section 7 of APPENDIX A and the Fund shall take all reasonable action to enable such rating agency to provide a rating for such shares. "S&P DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted Value of any S&P Eligible Asset, the percentage determined by reference to the rating on such asset and the shortest Exposure Period set forth opposite such rating that is the same length as or is longer than the S&P Exposure Period, in accordance with the table set forth below:
RATING CATEGORY ----------------------- EXPOSURE PERIOD AAA* AA* A* BBB* --------------- ---- --- -- ---- 40 Business Days........................... 210% 215% 230% 270% 22 Business Days........................... 190 195 210 250 10 Business Days........................... 175 180 195 235 7 Business Days........................... 170 175 190 230 3 Business Days........................... 150 155 170 210 - ---------- * S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term Municipal Obligations will be 115%, so long as such Municipal Obligations are rated A-1+ or SP-l+ by S&P and mature or have a demand feature exercisable within 30 days or less, or 125% if such Municipal Obligations are not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; PROVIDED, HOWEVER, that any such Moody's-rated short-term Municipal Obligations which have demand features exercisable within 30 days or less must be backed by a letter of credit, liquidity facility or guarantee from a bank or other financial institution with a short-term rating of at least A-I+ from S&P; and FURTHER PROVIDED that such Moody's-rated short-term Municipal Obligations may comprise no more than 50% of short-term Municipal Obligations that qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or to Receivables for Municipal Obligations Sold. For purposes of the foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating, shall be considered to be short-term Municipal Obligations. "S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably deposited by the Fund for the payment of any liabilities within the meaning of MuniPreferred Basic Maintenance Amount), Receivables for Municipal Obligations Sold or a Municipal Obligation owned by the Fund that (i) is interest bearing and pays interest at least semi-annually; (ii) is A-7 payable with respect to principal and interest in U.S. Dollars, (iii) is publicly rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by Moody's (PROVIDED, HOWEVER, that such Moody's- rated Municipal Obligations will be included in S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 50% of the aggregate Market Value of S&P Eligible Assets; and FURTHER PROVIDED that, for purposes of determining the S&P Discount Factor applicable to any such Moody's-rated Municipal Obligation, such Municipal Obligation will be deemed to have an S&P rating which is one full rating category lower than its Moody's rating); (iv) is not part of a private placement of Municipal Obligations; and (v) is part of an issue of Municipal Obligations with an original issue size of at least $10 million or, if of an issue with an original issue size below $10 million (but in no event below $5 million), is issued by an issuer with a total of at least $50 million of securities outstanding. Solely for purposes of this definition, the term "Municipal Obligation" means any obligation the interest on which is exempt from regular Federal income taxation and which is issued by any of the fifty United States, the District of Columbia or any of the territories of the United States, their subdivisions, counties, cities, towns, villages, school districts and agencies (including authorities and special districts created by the states), and federally sponsored agencies such as local housing authorities. Notwithstanding the foregoing limitations: (1) Municipal Obligations of any one issuer or guarantor (excluding bond insurers) shall be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 10% of the aggregate Market Value of S&P Eligible Assets, provided that 2% is added to the applicable S&P Discount Factor for every 1% by which the Market Value of such Municipal Obligations exceeds 5% of the aggregate Market Value of S&P Eligible Assets; (2) Municipal Obligations guaranteed or insured by any one bond insurer shall be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 25% of the aggregate Market Value of S&P Eligible Assets; (3) Municipal Obligations of any one Issue Type Category shall be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 20% of the aggregate Market Value of S&P Eligible Assets. For purposes of this requirement, Municipal Obligations shall be classified into one of the following categories: health care issues, housing issues, educational facilities issues, student loan issues, transportation issues, industrial development bond issues, public power utilities issues, water and sewer utilities issues, special utilities issues, general obligation issues, lease obligations, escrowed bonds and Other Issues not failing within one of the A-8 aforementioned categories. Furthermore, special utilities issues that are not rated by S&P shall not comprise S&P Eligible Assets; and (4) Non-Pennsylvania long-term Municipal Obligations shall be considered S&P Eligible Assets only to the extent that the Market Value of such Municipal Obligations does not exceed 20% of the aggregate Market Value of S&P Eligible Assets. SECTION 5. INITIAL RATE PERIODS. The Initial Rate Period for shares of Series W MuniPreferred shall be the period from and including the Date of Original Issue thereof to but excluding June 20, 1991. SECTION 6. DATE FOR PURPOSES of PARAGRAPH (yyy) CONTAINED UNDER THE HEADING "DEFINITIONS" IN THIS STATEMENT. November 30, 1993. SECTION 7. PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE" IN THIS STATEMENT. PARTY: SERIES OF MUNIPREFERRED: Merrill Lynch, Pierce, Fenner & Smith Incorporated W SECTION 8. ADDITIONAL DEFINITIONS. "PENNSYLVANIA MUNICIPAL OBLIGATION" shall mean "Pennsylvania Municipal Obligation" as defined in the Fund's Registration Statement. SECTION 9. DIVIDEND PAYMENT DATES. Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement, dividends shall be payable on shares of Series W MuniPreferred on Thursday, June 20, 1991, and thereafter on each Thursday. SECTION 10. AMOUNT FOR PURPOSES OF SUBPARAGRAPH (c)(i) OF SECTION 5 OF PART I OF THIS STATEMENT. $60,000,000. SECTION 11. REDEMPTION PROVISIONS APPLICABLE TO INITIAL RATE PERIODS. Not applicable. SECTION 12. APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH (b)(iii) OF SECTION 3 OF PART II OF THIS STATEMENT. For purposes of subparagraph (b)(iii) of Section 3 of Part II of this Statement, the Applicable Rate for shares of such series for the next succeeding Rate Period of shares of such series shall be equal to the lesser of the Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the A-9 product of (A) (I) the "AA" Composite Commercial Paper Rate on such Auction Date for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if such Rate Period consists of more than 182 but fewer than 365 Rate Period Days; or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if such Rate Period is more than 364 Rate Period Days (the rate described in the foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein as the "Benchmark Rate") and (B) I minus the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income, whichever is greater, PROVIDED, HOWEVER, that if the Fund has notified the Auction Agent of its intent to allocate to shares of such series in such Rate Period any net capital gains or other income taxable for Federal income tax purposes ("Taxable Income"), the Applicable Rate for shares of such series for such Rate Period will be (i) if the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied by the factor set forth in the preceding clause (B) and (y) the product of the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or the maximum marginal regular Federal corporate income tax applicable to ordinary income, whichever is greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing, Taxable Yield Rate means the rate determined by (a) dividing the amount of Taxable Income available for distribution per such share of MuniPreferred by the number of days in the Dividend Period in respect of which such Taxable Income is contemplated to be distributed, (b) multiplying the amount determined in (a) above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or 360 (in the case of any other Dividend Period), and (c) dividing the amount determined in (b) above by $50,000. A-10 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND STATEMENT OF ADDITIONAL INFORMATION ________, 1999 PART C -- OTHER INFORMATION ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS (1) FINANCIAL STATEMENTS: Included in Part A of the Registration Statement Financial Highlights for each of the eight years ended June 30, 1998 (audited) and the six month period ended December 31, 1998 (unaudited). PART I Portfolio of Investments, June 30, 1998 (audited) and December 31, 1998 (unaudited) Statement of Net Assets, June 30, 1998 (audited) and December 31, 1998 (unaudited) Statement of Operations for the year ended June 30, 1998 (audited) and the six month period ended December 31, 1998 (unaudited) Statement of Changes in Net Assets for the two years ended June 30, 1998 (audited) and the six month period ended December 31, 1998 (unaudited). (2) EXHIBITS The exhibits to this Registration Statement are listed in the Exhibit Index located elsewhere herein. ITEM 25: MARKETING ARRANGEMENTS See Sections 2(a) and 3(i) of the Purchase Agreement filed as an Exhibit herein. ITEM 26: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission fees $ 6,116 Printing and engraving expenses 60,000 Legal fees 21,000 Accounting expenses 5,000 Rating Agency fees 22,500 Blue Sky filing fees and expenses 10,000 Miscellaneous expenses 5,000 -------- Total* $129,616 ========
C-I [*Estimated] ITEM 27: PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT Not applicable ITEM 28: NUMBER OF HOLDERS OF SECURITIES At March 31, 1999:
NUMBER OF TITLE OF CLASS RECORD HOLDERS -------------- -------------- Common Shares, $.01 par value................................ 12,147 Preferred Shares, $.01 par value............................. 17
ITEM 29: INDEMNIFICATION Section 4. Indemnification. 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 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 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. 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. C-II The directors and officers of the Registrant are covered by Investment Trust Errors and Omission policies in the aggregate amount of $40,000,000 (with a maximum deductible of $500,000) against liability and expenses of claims of wrongful acts arising out of their position with the Registrant, except for matters which involve willful acts, bad faith, gross negligence and willful disregard of duty (i.e., where the insured did not act in good faith for a purpose he or she reasonably believed to be in the best interest of the Registrant or where he or she had reasonable cause to believe this conduct was unlawful). Section 7 of the Underwriting Agreement filed as Exhibit h to this Registration Statement provides for each of the parties thereto, including the Registrant and the Underwriters, to indemnify the others, their directors, certain of their officers and directors and persons who control them against certain liabilities in connection with the offering described herein, including liabilities under the Federal securities laws. ITEM 30: BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER Nuveen Advisory Corp. serves as investment adviser to the following open-end management type investment companies: Nuveen Flagship Multistate Trust I, Nuveen Flagship Multistate Trust II, Nuveen Flagship Multistate Trust III, Nuveen Flagship Multistate Trust IV, Nuveen Flagship Municipal Trust, Nuveen Taxable Funds Inc., Nuveen California Tax-Free Fund, Inc., Nuveen Tax-Free Money Market Fund, Inc., Nuveen Tax-Exempt Money Market Fund, Inc., and Nuveen Tax-Free Reserves, Inc. It also serves as investment adviser to the following closed-end management type investment companies: Nuveen Municipal Value Fund, Inc., Nuveen California Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund, Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund, Inc., C-III Nuveen Performance Plus Municipal Fund, Inc., Nuveen California Performance Plus Municipal Fund, Inc., Nuveen New York Performance Plus Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal Market Opportunity Fund, Inc., Nuveen California Municipal Market Opportunity Fund, Inc., Nuveen Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc., Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Investment Quality Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc., Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Select Quality Municipal Fund, Inc., Nuveen California Select Quality Municipal Fund, Inc., Nuveen New York Select Quality Municipal Fund, Inc., Nuveen Quality Income Municipal Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen Florida Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas Quality Income Municipal Fund, Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York Quality Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Insured California Premium Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal Fund, Inc., Nuveen Select Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc., Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund, Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California Premium Income Municipal Fund 2, Inc., Nuveen Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen Virginia Premium Income Municipal Fund, Nuveen Washington Premium Income Municipal Fund, Nuveen Connecticut Premium Income Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri Premium Income Municipal Fund, Nuveen North Carolina Premium Income Municipal Fund, Nuveen California Premium Income Municipal Fund, and Nuveen Insured Premium Income Municipal Fund 2. Nuveen Advisory Corp. has no other clients or business at the present time. The principal business address for all of these investment companies is 333 West Wacker Drive, Chicago, Illinois 60606. ITEM 31: LOCATION OF ACCOUNTS AND RECORDS Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606, maintains Articles of Incorporation, By-Laws, minutes of directors and shareholders meetings, and contracts of the Registrant and all advisory material of the investment adviser. The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004, maintains all general and subsidiary ledgers, journals, trial balances, records of all portfolio purchases and sales, and all other required records not maintained by Nuveen Advisory Corp. It also maintains all the required records in its capacity as transfer, dividend paying, and shareholder service agent for shares of the Registrant's Common Stock. Bankers Trust Company, 4 Albany Street, New C-IV York, New York 10006, maintains all required records in its capacity as transfer agent, registrar, dividend disbursing agent and redemption agent for the Registrant's MuniPreferred shares. ITEM 32: MANAGEMENT SERVICES Not applicable. ITEM 33: UNDERTAKINGS (1) Registrant undertakes to suspend the offering of its shares until it amends its prospectus if (1) subsequent to the effective date of its Registration Statement, the net asset value declines more than 10 percent from its net asset value as of the effective date of the Registration Statement, or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus. (2) Not applicable (3) Not applicable (4) Not applicable (5) Registrant undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as a part of a registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 497(h) under the Securities Act of 1933 shall be deemed to be a part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (6) Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information. (7) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding (is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. C-V SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, and State of Illinois, on the 17th day of June, 1999. NUVEEN PENNSYLVANIA INVESTMENT QUALITY FUND /s/ GIFFORD R. ZIMMERMAN -------------------------------------- Gifford R. Zimmerman, Vice President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ STEPHEN D. FOY Vice President and June 17, 1999 - ----------------------------------------- Controller (Principal Stephen D. Foy Financial and Accounting Officer) Timothy R. Schwertfeger* Executive Officer Robert P. Bremner* Trustee Lawrence H. Brown* Trustee Anne E. Impellizzeri* Trustee Peter R. Sawers* Trustee William J. Schneider* Trustee Judith M. Stockdale* Trustee
By /s/ GIFFORD R. ZIMMERMAN ----------------------- Gifford R. Zimmerman Attorney-in-Fact June 17, 1999 - ----------------- * An original power of attorney authorizing, among others, Timothy R. Schwertfeger, Gifford R. Zimmerman, Larry W. Martin, and each of them, to execute this Registration Statement, and Amendments thereto, for each of the officers and trustees of Registrant on whose behalf this Registration Statement is filed, have been executed and are filed herewith. C-VI INDEX TO EXHIBITS SEQUENTIALLY EXHIBIT NUMBERED NUMBER PAGE - ------- ------------ a. Declaration of Trust, as amended, including the Statement Establishing and Fixing the Rights and Preferences of Registrant's Municipal Auction Rate Cumulative Preferred Shares.................................................. b. By-Laws of Registrant............................................. c. Not applicable.................................................... d.1 Basic Terms of Auction Agency Agreement, including form of request and acceptance letter related thereto............................. d.2 Basic Terms of Broker-Dealer Agreement, including form of request and acceptance letter related thereto............................. d.3 Form of Letter of Representation to The Depository Trust Company relating to the Series of MuniPreferred........................... e. Dividend Reinvestment Plan........................................ f. Not applicable.................................................... g.1 Investment Management Agreement................................... g.2 Renewal of Investment Management Agreement........................ h. Form of Underwriting Agreement.................................... i. Deferred Compensation Plan for Non-Employee Directors............. j.1 Exchange-Traded Fund Custody Agreement............................ j.2 Fund Accounting Agreement......................................... j.3 Letter of Succession to Agreements................................ k. Not applicable.................................................... l.1 Opinion and consent of Morgan, Lewis & Bockius LLP................ 1.2 Opinion and consent of Bingham, Dana & Gould......................* m. Not applicable.................................................... n. Consent of Ernst & Young..........................................* o. Not applicable.................................................... p. Not applicable.................................................... q. Not applicable.................................................... r. Financial Data Schedule........................................... s. Powers of Attorney................................................ * To be filed by amendment. C-VII EX-99.A 2 ARTICLES OF INCORPORATION EXHIBIT A CERTIFICATE OF AMENDMENT TO DECLARATION OF TRUST The undersigned, Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies that in accordance with Article XIII, Section 4 of the Trust's Declaration of Trust, the Board of Trustees of the Trust, by unanimous vote, duly adopted a resolution on October 21, 1992 amending the Trust's Declaration of Trust effective as of the date hereof as follows: FIRST: The Declaration of Trust of this Trust is hereby amended by striking clause (iv) of the second sentence of Article IX, Section 1 in its entirety and substituting in lieu thereof the following: (iv) a termination of the Trust, unless in any case such action has previously been approved, adopted or authorized by the affirmative vote of two-thirds of the total number of Trustees fixed in accordance with this Declaration of Trust or the By-Laws, in which case the affirmative vote of the holders of at least a majority of the outstanding Common Shares and outstanding Preferred Shares, voting as a single class, shall be required. IN WITNESS WHEREOF, the undersigned, being Secretary of the Trust, has executed this instrument as of the 22nd day of October, 1992. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: /s/ James J. Wesolowski ---------------------------------- James J. Wesolowski, Secretary STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) Then personally appeared the above-named James J. Wesolowski, known to me as the Secretary of the Nuveen Pennsylvania Investment Quality Municipal Fund, who acknowledged the foregoing instrument to be his free act and deed, before me this 22nd day of October, 1992. - -------------------------------------- /s/ Karen L. Healy | "OFFICIAL SEAL" | --------------------------------- | Karen L. Healy | Notary Public | Notary Public, State of Illinois | | My Commission Expires 12/30/95 | My Commission Expires: 12/30/95 - -------------------------------------- ---------- NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND CERTIFIED COPY OF CORPORATE RESOLUTION -------------------------------------- The undersigned, James J. Wesolowski, Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust, (the "Fund") does hereby certify: 1. That he is the duly elected, qualified and acting Secretary of the Fund, has custody of the corporate records and is a proper officer to make this certification. 2. That at a meeting of the Board of Trustees of the Fund held on Tuesday, April 26, 1994, at which a quorum was present and voted throughout, the following resolution was duly adopted by said Board and said resolution has not been amended, altered or repealed and remains in full force and effect on the date hereof. WHEREAS, Standard & Poor's Corporation ("S&P") has indicated that it no longer requires leveraged closed-end municipal bond funds to maintain a minimum liquidity level as a condition to assigning a AAA rating to preferred shares issued by such funds; WHEREAS, pursuant to express authority granted in the Statement, the Board may from time to time, without vote or consent of shareholders, amend, alter or repeal certain definitions in the Statement, including the definition of "Minimum Liquidity Level", provided the Board receives written confirmation from S&P that such action would not impair the rating then assigned by S&P to the Fund's shares of MuniPreferred, MMP or MPS, as the case may be; and WHEREAS, in light of S&P's elimination of the minimum liquidity requirement, the Board believes it to be in the best interest of the Fund to amend the Statement to repeal the definition of Minimum Liquidity Level; NOW, THEREFORE, BE IT RESOLVED, that the Fund's Statement be, and hereby is, amended as follows: (a) the definition of Minimum Liquidity Level shall be, and hereby is, repealed in its entirety, subject to the Fund's receipt of the written confirmation from S&P described above; and (b) the definitions of "Dividend Coverage Assets", "Valuation Date" and "Dividend Coverage Amount" shall be, and hereby are, repealed to the extent such definitions pertain to the definition of Minimum Liquidity Level", subject to the Fund's receipt of the written confirmation from S&P described above. IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed this 16th day of June, 1994. /s/ James J. Wesolowski ---------------------------------- James J. Wesolowski, Secretary NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND Incumbency Certification ------------------------ The undersigned, being the sole Trustee of the Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies that, pursuant to Section 2 of Article V of the Declaration of Trust of the Trust dated December 19, 1990, the undersigned consented to an increase in the number of Trustees of the Trust from one (1) to seven (7), and to the appointment of the following six individuals as additional Trustees of the Trust, effective December 20, 1990: Richard J. Franke 333 West Wacker Drive Chicago, Illinois 60606 Royce A. Hoyle, Jr. 78 Brams Point Road Hilton Head, South Carolina 29928 John E. O'Toole 666 Third Avenue New York, New York 10017 Margaret K. Rosenheim 969 East 60th Street Chicago, Illinois 60637 Robert G. Sether P.O. Box 4274 Palm Desert, California 92261 Frank P. Wendt Box 63 363 Pequot Avenue Southport, Connecticut 06490 IN WITNESS WHEREOF, the undersigned Trustee has executed this Incumbency Certificate on the 2nd day of January, 1991. /s/ Donald E. Sveen ------------------------ R E C E I V E D Donald E. Sveen, Trustee JAN 0 7 1991 SECRETARY OF STATE C 0 R P 0 R A T I O N AMENDED AND RESTATED DECLARATION OF TRUST ----------------------------------------- AMENDED AND RESTATED DECLARATION OF TRUST made this 29th day of May, 1991 by the Trustee hereunder. WHEREAS, the Trustees have established a trust fund for the purposes of carrying on the business of a management investment company, such trust fund being established under a Declaration of Trust made on the 19th day of December, 1990 by Donald E. Sveen, as original Trustee (the "Original Declaration"); WHEREAS, in furtherance of such purposes, the Trustees and any successor Trustees elected in accordance with Article V hereof have acquired and may hereafter acquire assets and properties which they will hold and manage as trustees of a Massachusetts business trust with transferable shares in accordance with the provisions hereinafter set forth; and WHEREAS, pursuant to Section 4 of Article XIII of the Original Declaration, the Trustees desire, out of an abundance of caution, to amend and restate the Original Declaration in its entirety in order to cure certain possible ambiguities, make certain minor changes and correct certain possibly defective provisions of the Original Declaration; NOW, THEREFORE, the Trustees and any successor Trustees elected in accordance with Article V hereof hereby declare that they will hold all cash, securities and other assets and properties, which they may from time to time acquire in any manner as Trustees hereunder, IN TRUST, that they will manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders from time to time of shares of beneficial interest in this Trust as hereinafter set forth, and that the Original Declaration is hereby amended and restated to read in its entirety as follows. ARTICLE I --------- NAME AND DEFINITIONS -------------------- Section 1. Name. This Trust shall be known as the "Nuveen Pennsylvania Investment Quality 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. Section 2. Definition. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Massachusetts voluntary association established by this Declaration of Trust, as amended from time to time, pursuant to Massachusetts General Laws, Chapter 182; (b) "Trustees" refers to the Trustees of the Trust named herein or elected in accordance with Article V hereof and then in office; (c) "Shares" mean the various units authorized by Article IV hereof into which the beneficial interest in the Trust shall be divided from time to time and include fractions of Shares as well as whole Shares; (d) "Shareholder" means a record owner of Shares; (e) The "1940 Act" refers to the Investment Company Act of 1940 (and any successor statute) and the Rules and Regulations thereunder, all as amended from time to time: (f) The terms "Affiliated Person", "Assignment", "Commission", "Interested Person", "Principal Underwriter" and "vote of a majority of the outstanding voting securities" shall have the meanings given them in the 1940 Act; (g) "Declaration of Trust" shall mean this Amended and Restated Declaration of Trust as it may be further amended or restated from time to time; (h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time. ARTICLE II ---------- NATURE AND PURPOSE OF TRUST --------------------------- The Trust is a voluntary association (commonly known as a business trust) of the type referred to in Chapter 182 of the General Laws of the Commonwealth of Massachusetts. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general or a limited partnership, joint venture, corporation or joint stock company, nor shall the Trustees or shareholders or any of them for any purpose be deemed to be, or be treated in any way whatsoever as though they were, liable or responsible hereunder as partners or joint venturers. The purpose of the Trust is to engage in, operate and carry on the business of a closed-end management investment company and to do any and all acts or things as are necessary, convenient, appropriate, incidental or customary in connection therewith, including the following: To hold, invest, and reinvest its funds, and in connection therewith to hold part of all of its funds in cash, and to purchase or otherwise sell, assign, negotiate, transfer, exchange or otherwise dispose of or turn to account or realize upon securities and other negotiable or non- negotiable instruments, obligations and evidences of indebtedness created or issued by any persons, firms, associations, corporations, syndicates, combinations, organizations, governments or subdivisions thereof, and generally deal in any such securities and other negotiable or non- negotiable instruments, obligations and evidences of, indebtedness; and to exercise, as owner or holder of any securities or other instruments, all rights, powers, and privileges in respect thereof; and to do any and all acts and things for the preservation, protection and improvement of any and all such securities or other instruments, and, in general, to conduct the business of a closed-end investment company -2- as that term is defined in the 1940 Act; and To engage in any lawful act or activity for which business trusts may be organized under Massachusetts law. The enumeration herewith of the objects and purposes of the Trust shall be construed as powers as well as objects and purposes and shall not be deemed to exclude by inference any powers, objects or purposes which the Trust may lawfully pursue or exercise. ARTICLE III REGISTERED AGENT ---------------- The name of the registered agent of the Trust is CT Corporation System at 2 Oliver Street, Boston, Massachusetts. The Principal office of the Trust is 333 W. Wacker Drive, Chicago, IL 60606. ARTICLE IV ---------- BENEFICIAL INTEREST ------------------- Section 1. Shares Of Beneficial Interest. The beneficial interest in the Trust shall be divided into such transferable Shares of beneficial interest, of such classes or series, and of such designations and par values (if any), and with such rights, preferences, privileges and restrictions as the Trustees may, without shareholder approval, from time to time create and establish. The number of Shares is unlimited and each Share shall be fully paid and nonassessable. There shall be no cumulative voting. The Shares shall initially be divided into two classes, a class of an unlimited number of common Shares, $.01 par value (the "Common Shares"), and a class of an unlimited number of preferred Shares, $.01 par value (the "Preferred Shares"), each having the powers, preferences, rights, qualifications, limitations and restrictions described below: (a) Preferred Shares. The Preferred Shares shall be issued from time to time in one or more classes or series with such distinctive serial designations and (i) may have such voting powers, full or limited; (ii) may be subject to redemption at such time or times and at such price or prices; (iii) may be entitled to receive dividends (which may be cumulative or noncumulative) at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes of Shares; (iv) may have such rights upon the termination of, or upon any distribution of the assets of, the Trust; (v) may be made convertible into, or exchangeable for, Shares of any other class or classes or of any other series of the same or any other class or classes of Shares of the Trust, at such price or prices or at such rates of exchange and with such adjustments; and (vi) shall have such other relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, all as shall hereafter be stated and expressed in the resolution or resolutions providing for the issue of such Preferred Shares from time to time adopted by the Trustees (or a Committee thereof) in accordance with Section 2 of this Article IV. Any of such matters may be made dependent upon facts ascertainable outside this -3- Declaration of Trust, or outside the resolution or resolutions providing for the issue of such Preferred Shares. (b) Common Shares. (i) Subject to the rights of the holders of the Preferred Shares, in the event of the termination of the Trust the holders of the Common Shares shall be entitled to receive pro rata the net distributable assets of the Trust. (ii) The holders of the Common Shares shall not, as such holders, have any right to acquire, purchase or subscribe for any Common Shares or securities of the Trust which it may hereafter issue or sell, other than such right, if any, as the Trustees in their discretion may determine. (iii) Subject to the rights of the holders of the Preferred Shares, dividends, when, as and if declared by the Trustees, shall be shared equally by the holders of Common Shares on a share for share basis. The Trustees may direct that any dividends as declared and distributed shall be paid in cash to the holder, or, alternatively, may direct that any such dividends be reinvested in full and fractional Shares of the Trust if such holder elects to have them reinvested. (iv) If any Common Shares shall have been purchased or otherwise reacquired by the Trust in accordance with law, all Shares so purchased or otherwise reacquired shall be retired automatically, and such retired Shares shall have the status of authorized but unissued Common Shares. (v) Common Shares shall be issued from time to time either for cash or for such other consideration (which may be in any one or more instances a certain specified consideration or certain specified considerations) as the Trustees, from time to time, may deem advisable subject to any applicable limitations contained in the 1940 Act. (vi) The Trust may issue Common Shares in fractional denominations to the same extent as its whole Shares, and Shares in fractional denominations shall be Common Shares having proportionately to the respective fractions represented thereby all the rights of whole Shares, including, without limitation, the right to vote, the right to receive dividends and distributions and the right to participate upon termination of the Trust, but excluding the right to receive a certificate representing fractional Shares. Section 2. Establishment of Class or Series of Shares. The establishment and designation of any class or series of Shares shall be effective upon the adoption of a resolution by a majority of the then Trustees (or a Committee thereof) setting forth such establishment and designation and the relative rights and preferences of the Shares of such class or series. At any time that there are no Shares outstanding of any particular class or series previously established and designated, the Trustees (or a Committee thereof) may by a majority vote abolish that class or series and the establishment and designation thereof. -4- Section 3. Ownership of Shares. The ownership and transfer of Shares shall be recorded on the books of the Trust or its transfer or similar agent. No certificates certifying the ownership of Preferred Shares shall be issued except as the Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the issuance of Share certificates, transfer of Shares and similar matters. The record books of the Trust, as kept by the Trust or any transfer or similar agent of the Trust, shall be conclusive as to who are the holders of Shares and as to the number of Shares held from time to time by each Shareholder. Section 4. No Preemptive Rights, Etc. The holders of Shares of any class or series shall not, as such holders, have any right to acquire, purchase or subscribe for any Shares or securities of the Trust which it may hereafter issue or sell, other than such right, if any, as the Trustees in their discretion may determine. The holders of Shares of any class or series shall have no appraisal rights with respect to their Shares and, except as otherwise determined by resolution of the Trustees in their sole discretion, shall have no exchange or conversion rights with respect to their Shares. Section 5. Status of Shares and Limitation of Personal Liability. Shares shall be deemed to be personal property giving only the rights provided in this instrument. Every shareholder by virtue of having become a shareholder shall be held to have expressly assented and agreed to the terms of this Declaration of Trust and to have become a party thereto. The death of a shareholder during the continuance of the Trust shall not operate to terminate the same nor entitle the representative of any deceased shareholder to an accounting or to take any action in court of elsewhere against the trust or the Trustees, but only to the rights of said decedent under this Trust. Ownership of Shares shall not entitle the shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting. Neither the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind any shareholder personally or to call upon any shareholder for the payment of any sum of money or assessment whatsoever other than such as the shareholder may at any time personally agree to pay by way of subscription for any Shares or otherwise. ARTICLE V --------- THE TRUSTEES ------------ Section 1. Management of the Trust. The business and affairs of the Trust shall be managed by the Trustees, and they shall have all powers necessary and desirable to carry out that responsibility. Section 2. Qualification and Number. 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 shall be such number as shall be fixed from time to time by the vote or consent of a majority of the Trustees then in office; provided, however, that the number of Trustees shall in no event be less than one (1) nor more than fifteen (15). The initial number of Trustees of the Trust shall be one (1), and the following person shall act as Trustee: Donald E. Sveen. By the vote or consent of a majority of the Trustees then in office, the Trustees may fix the number of Trustees at a number greater than one (1) and may fill the vacancies created by any such increase in the number of Trustees. Except as determined from time to time by -5- resolution of the Trustees, no decrease in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his term, but the number of Trustees may be decreased in conjunction with the removal of a Trustee pursuant to Section 4 of this Article V. Section 3. Term and Election. Each Trustee named in or pursuant to the provisions of Section 2 shall serve as a Trustee until the first meeting of shareholders and until his successor is duly elected and qualified. Thereafter, each Trustee shall hold office until the next meeting of shareholders called for the purpose of considering the election or re-election of such Trustee or of a successor to such Trustee, and until his successor is elected and qualified, and any Trustee who is elected in the interim to fill a vacancy shall have the same remaining term as that of his predecessor, if any, or such term as the Trustees may determine. Any vacancy resulting from a newly created Trusteeship or the death, resignation, retirement, removal, or disqualification of a Trustee may be filled by the affirmative vote of a majority of the remaining Trustees, even though less than a quorum. The power of appointment described in this Section 3 is subject to the provisions of Section 16(a) of the 1940 Act. Section 4. Resignation and Removal. Any Trustee may resign his trust or retire as a Trustee (without need for prior or subsequent accounting except in the event of removal) by an instrument in writing signed by him and delivered or mailed to the Chairman, if any, the President or the Secretary and such resignation or retirement shall be effective upon such delivery, or at a later date according to the terms of the instrument. Any Trustee may be removed from office only for "Cause" (as hereinafter defined) and only (i) by action of at least sixty-six and two-thirds percent (66 2/3%) of the outstanding Shares of the class or classes of Shares that elected such Trustee, or (ii) by written instrument, signed by at least sixty-six and two-thirds percent (66 2/3%) of the remaining Trustees, specifying the date when such removal shall become effective. "Cause" shall require willful misconduct, dishonesty, fraud or a felony conviction. Upon the resignation, retirement or removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the purpose of conveying to the Trust or the remaining Trustees any Trust property held in the name of the resigning or removed Trustee. Upon the incapacity or death of any Trustee, his legal representative shall execute and deliver on his behalf such documents as the remaining Trustees shall require as provided in the preceding sentence. Section 5. Effect of Death, Resignation, Etc. The death, declination, resignation, retirement, removal, incapacity, or inability of the Trustees, or any one of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Section 6. Owner of Assets of the Trust. The assets of the Trust shall be held separate and apart from any assets now or hereafter held in any capacity other than as Trustee hereunder by the Trustees or any successor Trustees. All of the assets of the Trust shall at all times be considered as vested in the Trustees. No shareholder shall be deemed to have a severable ownership in any individual asset of the Trust or any right of partition or possession thereof, but each shareholder of a class shall have an undivided beneficial interest in the Trust which is proportionate to the interests of each other shareholder of such class. -6- Section 7. Voting Requirements. In addition to the voting requirements imposed by law or by any other provision of this Declaration of Trust, the provisions set forth in this Article V may not be amended, altered or repealed in any respect, nor may any provision inconsistent with this Article V be adopted, unless such action is approved by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding Common Shares and outstanding Preferred Shares, voting together as a single class. In the event the holders of Common Shares or the holders of Preferred Shares, as the case may be, are required by law or by any other provision of this Declaration of Trust to approve such an action by a class vote of such holders, such action must be approved by the holders of at least sixty-six and two-thirds percent (66-2/3%) of such holders or such lower percentage as may be required by law or by any other provision of this Declaration of Trust. ARTICLE VI ---------- POWERS OF TRUSTEES ------------------ Section 1. Powers. The Trustees in all instances shall have full, absolute and exclusive power, control and authority over the Trust assets and the business and affairs of the Trust to the same extent as if the Trustees were the sole and absolute owners thereof in their own right. The Trustees shall have full power and authority to do any and all acts and to make and execute any and all contracts and instruments that they may consider necessary or appropriate in connection with the management of the Trust. The enumeration of any specific power herein shall not be construed as limiting the aforesaid powers. In construing the provisions of this Declaration of Trust, there shall be a presumption in favor of the grant of power and authority to the Trustees. Subject to any applicable limitation in the 1940 Act, this Declaration, or any resolution of the Trustees which authorizes the issuance of Preferred Shares, the Trustees shall have power and authority: (a) To invest and reinvest in, to buy or otherwise acquire, to hold, for investment or otherwise, to sell or otherwise dispose of, to lend or to pledge, to trade in or deal in securities or interests of all kinds, however evidenced, or obligations of all kinds, however evidenced, or rights, warrants, or contracts to acquire such securities, interests, or obligations, of any private or public company, corporation, association, general or limited partnership, trust or other enterprise or organization, foreign or domestic, or issued or guaranteed by any national or state government, foreign or domestic, or their agencies, instrumentalities or subdivisions (including but not limited to, bonds, debentures, bills, time notes and all other evidences of indebtedness); negotiable or non-negotiable instruments; any and all futures contracts; government securities and money market instruments (including but not limited to, bank certificates of deposit, finance paper, commercial paper, bankers acceptances, and all kinds of repurchase agreements); (b) To adopt By-Laws not inconsistent with this Declaration of Trust providing for the conduct of the business of the Trust and to amend and repeal them to the extent that they do not reserve that right to the shareholders; (c) To elect and remove such officers and appoint and terminate such agents as they consider appropriate; -7- (d) To employ a bank or trust company as custodian of any assets of the Trust subject to any conditions set forth in this Declaration of Trust or in the By-Laws; (e) To retain a transfer agent and shareholder servicing agent, or both; (f) To provide for the distribution of interests of the Trust either through a principal underwriter in the manner hereinafter provided for or by the Trust itself or both; (g) To set record dates in the manner hereinafter provided for; (h) To delegate such authority as they consider desirable to any officers of the Trust and to any agent, custodian or underwriter; (i) To sell or exchange any or all of the assets of the Trust, subject to the provisions of Article XIII, Section 1 hereof; (j) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (k) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities; (l) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form; or either in its own name or in the name of a custodian or a nominee or nominees, subject in either case to proper safeguards according to the usual practice of investment companies; (m) To authorize the issuance from time to time of one or more classes or series of Shares, and to issue, sell, repurchase, retire, cancel, acquire, hold, resell, reissue, dispose of, transfer and otherwise deal in Shares and, except as prohibited by the 1940 Act, in any options, warrants or other rights to purchase Shares or any other interests in the Trust other than Shares; (n) To set apart, from time to time, out of any funds of the Trust available for dividends a reserve or reserves for any proper purpose, and to abolish any such reserve; (o) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer, any security or property of which is held in the Trust; to consent to any contract, lease, mortgage, purchase, or sale of property by such corporation or issuer, and to pay calls or subscriptions with respect to any security held in the Trust; (p) To compromise, arbitrate, or otherwise adjust claims in favor of or against the Trust or any matter in controversy including, but not limited to, claims for taxes; (q) To make distributions of income and of capital gains to shareholders; -8- (r) To borrow money and to pledge, mortgage, or hypothecate the assets of the Trust, subject to applicable requirements of the 1940 Act; (s) To establish, from time to time, a minimum total investment for shareholders, and to require the redemption of the Shares of any shareholders whose investment is less than such minimum upon giving notice to such shareholder of the terms of such redemption as established by the Trustees; (t) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper; (u) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business of the Trust, including, without limitation, insurance policies insuring the assets of the Trust and payment of distributions and principal on its portfolio investments, and insurance policies insuring the shareholders, Trustees, officers, employees, agents, investment advisers or managers, principal underwriters, or independent contractors of the Trust individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as shareholder, Trustee, officer, employee, agent, investment adviser or manager, principal underwriter, or independent contractor, whether or not any such action may be determined to constitute negligence, and whether or not the Trust would have the power to indemnify such person against such liability; and (v) To pay pensions for faithful service, as deemed appropriate by the Trustees, and to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust. Any determination made by or pursuant to the direction of the Trustees in good faith and consistent with the provisions of this Declaration of Trust as to any of the following matters shall be final and conclusive and shall be binding upon the Trust and every holder at any time of Shares, namely: the amount of the assets, obligations, liabilities and expenses of the Trust; the amount of the net income of the Trust from dividends and interest for any period and the amount of assets at any time legally available for the payment of dividends or distributions; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges were created shall have been paid or discharged); the market value, or any quoted price to be applied in determining the market value, of any security owned or held by the Trust; the fair value of any security for which quoted prices are not readily available, or of any other asset owned or held by the Trust; the number of Shares of the Trust issued or issuable; the net asset value per share; any matter relating to the acquisition, holding and depositing of securities and other assets by the Trust; any question as to whether any transaction constitutes a purchase of securities on margin, a short sale of securities, or an underwriting of the sale of, or participation in any underwriting or selling -9- group in connection with the public distribution of, any securities, and any matter relating to the issue, sale, redemption, repurchase, and/or other acquisition or disposition of Shares of the Trust. No provision of this Declaration of Trust shall be effective to (i) require a waiver of compliance with any provision of the Securities Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or order of the Commission thereunder, or (ii) protect or purport to protect any Trustee or officer of the Trust against any liability to the Trust or to its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. Section 2. 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 Board 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. 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 this Declaration of Trust, or the By-Laws of the Trust. Section 4. Committees. The Trustees, by resolution adopted by the affirmative vote of a majority of the Trustees, may designate from its 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, each such committee to consist of two or more persons who need not be Trustees and to have such powers and authority (to the extent permitted by law) as may be provided in such resolution. Section 5. Action By Written Consent In Lieu Of Meetings. Any action required or permitted to be taken by the Trustees (or a committee thereof) 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 a committee thereof) at which all Trustees were present. -10- ARTICLE VII ----------- EXPENSES OF THE TRUST --------------------- The Trustees shall have the power to reimburse themselves from the Trust property for their expenses and disbursements, to pay reasonable compensation to themselves from the Trust property, and to incur and pay any other expense which in the opinion of the Trustees are necessary or incidental to carry out any of the purposes of this Declaration of Trust, including, without limitation, interest expenses, taxes, fees and commissions of every kind, expenses of pricing Trust portfolio securities, expenses of issue, repurchase and redemption of Shares, including expenses attributable to a program of periodic repurchases or redemptions, expenses of registering and qualifying the Trust and its Shares under Federal and State laws and regulations, charges of custodians, transfer agents, and registrars, expenses of preparing prospectuses and statements of additional information, expenses of printing and distributing prospectuses to existing shareholders, auditing and legal expenses, reports to shareholders, expenses of meetings of shareholders and proxy solicitations therefor, insurance expenses, association membership dues, and for such non-recurring items as may arise, including litigation to which the Trust is a party, and for all losses and liabilities by them incurred in administering the Trust. This section shall not preclude the Trust from directly paying any of the aforementioned fees and expenses. ARTICLE VIII ------------ INVESTMENT ADVISER, PRINCIPAL UNDERWRITERS AND TRANSFER AGENT ------------------------------------------------------------- Section 1. Investment Adviser. The Trust may enter into a written contract with one or more persons (which term shall include any firm, corporation, trust or association), hereinafter referred to as the "Investment Adviser", to act as investment adviser to the Trust and as such to perform such functions as the Trustees may deem reasonable and proper, including, without limitation, investment advisory, management, research, valuation of assets, clerical and administrative functions. Any such contract shall be subject to the approval of those persons required by the 1940 Act to approve such contract, and shall be terminable at any time upon not more than 60 days' notice by resolution of the Trustees or by vote of a majority of the outstanding Common Shares. Subject to the provisions of Section 4 of this Article VIII, any such contract may be made with any firm or corporation in which any Trustee of the Trust may be interested. The compensation of the Investment Adviser may be based upon a percentage of the value of the net assets of the Trust, a percentage of the income or gross realized or unrealized gain of the Trust, or a combination thereof, or otherwise, as may be provided in such contract. Upon the termination of any contract with Nuveen Advisory Corp., or any corporation affiliated with John Nuveen & Co. Incorporated, acting as investment adviser or manager, the Trustees are hereby authorized to promptly change the name of the Trust to a name which does not include "Nuveen" or any approximation or abbreviation thereof. -11- The Trustees may, subject to applicable requirements of the 1940 Act, including those relating to shareholder approval, authorize the investment adviser to employ one or more sub-advisers from time to time to perform such of the acts and services of the investment adviser, and upon such terms and conditions, as may be agreed upon between the investment adviser and sub- adviser. Section 2. Principal Underwriter. The Trust may enter into a written contract or contracts with an underwriter or underwriters or distributor or distributors whereby the Trust may either agree to sell Shares to the other party or parties to the contract or appoint such other party or parties its sales agent or agents for such Shares. Any such contract may provide that the Trust shall pay such other party or parties such amounts as the Trustees may in their discretion deem reasonable and proper, and may also provide that such other party or parties may enter into selected dealer agreements with registered securities dealers to further the purpose of the distribution of the Shares. Subject to the provisions of Section 4 of this Article VIII, any such contract may be made with any firm or corporation, including, without limitation, the Investment Adviser, or any firm or corporation in which any Trustee of the Trust or the Investment Adviser may be interested. Section 3. Transfer Agent. The Trustees may in their discretion from time to time enter into a transfer agency and shareholder service contract(s) whereby the other party shall undertake to furnish the Trustees with transfer agency and shareholder services. The contract shall be on such terms and conditions as the Trustees may in their discretion determine not inconsistent with the provisions of this Declaration of Trust or of the By-Laws. Such services may be provided by one or more entities. Section 4. Parties To Contract. Any contract of the character described in Sections 1, 2 and 3 of this Article VIII or in Article X hereof may be entered into with any corporation, firm, partnership, trust or association, although one or more of the Trustees or officers of the Trust may be an officer, director, trustee, shareholder, or member of such other party to the contract, and no such contract shall be invalidated or rendered voidable by reason of the existence of any such relationship, nor shall any person holding such relationship be liable merely by reason of such relationship for any loss or expense to the Trust under or by reason of said contract or accountable for any profit realized directly or indirectly therefrom, provided that the contract when entered into was not inconsistent with the provisions of this Article VIII, Article X, or the By- Laws. The same person (including a firm, corporation, partnership, trust or association) may be the other party to contracts entered into pursuant to Sections 1, 2 and 3 above or Article X, and any individual may be financially interested or otherwise affiliated with persons who are parties to any or all of the contracts mentioned in this Section 4. Section 5. Provisions and Amendments. Any contract entered into pursuant to Sections 1 and 2 of this Article VIII shall be consistent with and subject to the requirements of Section 15 of the 1940 Act (including any amendments thereof or other applicable laws) with respect to its continuance in effect, its termination, and the method of authorization and approval of such contract or renewal thereof, and no amendment to any contract entered into pursuant to Section 1, shall be effective unless made in accordance with the requirements of the 1940 Act. -12- ARTICLE IX ---------- SHAREHOLDERS' VOTING POWERS AND MEETINGS ---------------------------------------- Section 1. Voting Power. The shareholders shall have power to vote only: (a) for the election or removal of Trustees as provided in Article V, (b) with respect to any investment advisory or management contract as provided in Article VIII, Sections 1 and 5, (c) with respect to any termination of the Trust to the extent and as provided in Article XIII, Section 1, (d) with respect to any amendment of this Declaration of Trust to the extent and as provided in Article XIII, Section 4, (e) to the same extent as the shareholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should be brought or maintained derivatively or as a class action on behalf of the Trust or the shareholders, provided, however that a shareholder of a particular class or series shall not be entitled to bring any derivative or class action on behalf of any other class or series of the Trust, and (f) with respect to such additional matters relating to the Trust as may be required or authorized by law, the 1940 Act, this Declaration of Trust, the By-Laws of the Trust, any resolution of the Trustees which authorizes the issuance of Preferred Shares, or any registration of the Trust with the Commission or any State, as the Trustees may consider necessary or desirable. Notwithstanding any other provision of this Declaration of Trust, an affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding Common Shares and outstanding Preferred Shares, voting as a single class, shall be required to approve, adopt or authorize (i) a conversion of the Trust from a closed-end investment company to an open-end investment company, (ii) a merger or consolidation of the Trust with any corporation or a reorganization or recapitalization, (iii) a sale, lease or transfer of all or substantially all of the assets of the Trust (other than in the regular course of the Trust's investment activities), or (iv) a termination of the Trust, unless in any case such action 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 By-Laws, in which case the affirmative vote of the holders of at least a majority of the outstanding Common Shares and outstanding Preferred Shares, voting as a single class, shall be required. Except as may otherwise be required by law, in the case of the conversion of the Trust from a closed-end investment company to an open-end investment company, or in the case of any of the foregoing transactions constituting a plan or reorganization (as such term is used in the 1940 Act) which adversely affects the Preferred Shares within the meaning of Section 18(a)(2)(D) of the 1940 Act, approval, adoption or authorization of the action in question will also require the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) of the Preferred Shares voting as a separate class; provided, however, that such separate class vote shall be a majority vote if the action in question has previously been approved, adopted or authorized by the affirmative vote of two-thirds of the total number of Trustees fixed in accordance with this Declaration of Trust or the By-Laws. In addition to the voting requirements imposed by law or by any other provision of this Declaration of Trust, the provisions set forth in this Article IX may not be amended, altered or repealed in any respect, nor may any provision inconsistent with this Article IX be adopted, unless such action is approved by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding Common Shares and outstanding Preferred Shares, voting as -13- a single class. In the event the holders of Common Shares or the holders of Shares of Preferred Shares, as the case may be, are required by law to approve such an action by a class vote of such holders, such action must be approved by the holders of at least sixty-six and two-thirds percent (66 2/3%) of such holders or such lower percentage as may be required by law. Section 2. Meetings. Meetings of the shareholders may be called and held from time to time for the purpose of taking action upon any matter requiring the vote or authority of the shareholders as herein provided or upon any other matter deemed by the Trustees to be necessary or desirable. Meetings of the shareholders shall be held at such place within the United States as shall be fixed by the Trustees, and stated in the notice of the meeting. Meetings of the shareholders may be called by the Trustees and shall be called by the Trustees upon the written request of shareholders owning at least one-tenth of the outstanding Shares entitled to vote. Shareholders shall be entitled to at least ten days' written notice of any 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 3. Quorum and Action. (a) The holders of a majority of the voting power of the Shares entitled to vote at a meeting are a quorum for the transaction of business. If a quorum is present when a duly called or held meeting is convened, the shareholders present may continue to transact business until adjournment, even though the withdrawal of a number of shareholders originally present leaves less than the proportion or number otherwise required for a quorum. Notwithstanding the foregoing, when holders of Preferred Shares are entitled to elect any of the Trustees by class vote of such holders, the holders of 33 1/3% of such Shares entitled to vote at a meeting shall constitute a quorum for the purpose of such an election. (b) The shareholders shall take action by the affirmative vote of the holders of a majority, 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 1940 Act, any provision of this Declaration of Trust, any resolution of the Trustees which authorizes the issuance of Preferred Shares, or the By-Laws. Section 4. 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 may be otherwise provided by the 1940 Act, this Declaration of Trust, any resolution of the Trustees which authorizes the issuance of Preferred Shares, or the By-Laws, shall have one vote for each Share registered in his name. Section 5. Action by Written Consent in Lieu of Meeting of Shareholders. Any 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. -14- ARTICLE X --------- CUSTODIAN --------- Section 1. Appointment and Duties. 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 directly to the successor custodian. The Trustees may also authorize the custodian to employ one or more sub- custodians from time to time to perform such of the acts and services of the custodian, and upon such terms and conditions, as may be agreed upon between the custodian and such sub-custodian and approved by the Trustees, provided that in every case such sub-custodian shall meet the requirements for it custodian contained in the 1940 Act and the rules and regulations thereunder and in any applicable state securities or blue sky laws. Section 2. Central Certificate System. Subject to such rules, regulations and orders as the Commission may adopt, the Trustees may direct the custodian to deposit all or any part of the securities owned by the Trust in a system for the central handling of securities established by a national securities exchange or a national securities association registered with the Commission under the Securities Exchange Act of 1934, or such other person as may be permitted by the Commission, or otherwise in accordance with the 1940 Act, pursuant to which system all securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of such securities, provided that all such deposits shall be subject to withdrawal only upon the order of the Trust. ARTICLE XI ---------- DISTRIBUTIONS ------------- The Trustees may in their sole discretion from time to time declare and pay such dividends and distributions to shareholders as they may deem necessary or desirable, after providing for actual and accrued expenses and liabilities (including such reserves as the Trustees may establish) determined in accordance with this Declaration of Trust and good accounting practices. ARTICLE XII ----------- LIMITATION OF LIABILITY AND INDEMNIFICATION ------------------------------------------- Section 1. Limitation of Liability. No personal liability for any debt or obligation of the Trust -15- shall attach to any Trustee of the Trust. Without limiting the foregoing, a Trustee shall not be responsible for or liable in any event for any neglect or wrongdoing of any officer, agent, employee, investment adviser, principal underwriter or custodian of the Trust, nor shall any Trustee be responsible or liable for the act or omission of any other Trustee. Nothing contained herein shall protect any Trustee against any liability to which such Trustee 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. Every note, bond, contract, instrument, certificate, Share or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been executed or done only in or with respect to their or his capacity as Trustees or Trustee and neither such Trustees or Trustee nor the shareholders shall be personally liable thereon. Every note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officers or officer shall give notice that this Declaration of Trust is on file with the Secretary of State of the Commonwealth of Massachusetts, shall recite that the same was executed or made by or on behalf of the Trust by them as Trustees or Trustee or as officers or officer and not individually and that the obligations of such instrument are not binding upon any of them or the shareholders individually but are binding only upon the assets and property of the Trust, and may contain such further recital as they or he may deem appropriate, but the omission thereof shall not operate to bind any Trustees or Trustee or officers or officer or shareholders or shareholder individually. All persons extending credit to, contracting with or having any claim against the Trust shall look only to the assets of the Trust for payment under such credit, contract or claim; and neither the shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Section 2. Trustees' Good Faith Action, Expert Advice, No Bond or Surety. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. A Trustee shall be liable only for his own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and for nothing else, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust and their duties as Trustees hereunder, and shall be under no liability for any act or omission in accordance with such advice or for failing to follow such advice. In discharging their duties, the Trustees, when acting in good faith, shall be entitled to rely upon the books of account of the Trust and upon written reports made to the Trustees by any officer appointed by them, any independent public accountant and (with respect to the subject matter of the contract involved) any officer, partner or responsible employee of any other party to any contract entered into hereunder. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. Section 3. Liability of Third Persons Dealing with Trustees. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. -16- Section 4. Indemnification. 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 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: -17- (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 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. 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. Section 5. Shareholders. No personal liability for any debt or obligation of the Trust shall attach to any shareholder or former shareholder of the Trust. In case any shareholder or former shareholder of the Trust shall be held to be personally liable solely by reason of his being or having been a shareholder and not because of his acts or omissions or for some other reason, the shareholder or former shareholder (or his heirs, executors, administrators or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust to be held harmless from and indemnified against all loss and expense arising from such liability; provided, however, there shall be no liability or obligation of the Trust arising hereunder to reimburse any shareholder for taxes paid by reason of such shareholder's ownership of any Share or for losses suffered by reason of any changes in value of any Trust assets. The Trust shall, upon request by the shareholder or former shareholder, assume the defense of any claim made against the shareholder for any act or obligation of the Trust and satisfy any judgment thereon. ARTICLE XIII ------------ MISCELLANEOUS ------------- Section 1. Termination of Trust. (a) Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the Trustees by written notice to the shareholders without a vote of the shareholders of the Trust or by the affirmative vote of the shareholders entitled to vote at least sixty-six and two-thirds percent (66 2/3%) of the outstanding Common Shares and Preferred Shares, voting as a single class, unless such action has previously been approved, adopted or authorized by the affirmative vote of two-thirds of the total number of Trustees fixed in accordance with this Declaration of Trust or the By-Laws, in which case the affirmative vote of the holders of at least a majority of the outstanding Common Shares -18- and Preferred Shares, voting as a single class, shall be required. Subject to any requirements of the 1940 Act, upon termination of the Trust, after paying or otherwise providing for all charges, taxes, expenses and liabilities, whether due or accrued or anticipated, as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets of the Trust to distributable form in cash or other securities, or any combination thereof, and distribute the proceeds to the holders of Preferred Shares in the manner set forth by resolution of the Trustees, and to the holders of Common Shares held by such holders on the date of termination. At any time by the affirmative vote of the shareholders of the Trust entitled to vote more than fifty percent (50%) of the votes entitled to be cast, the Trustees may sell, convey and transfer the assets of the Trust to another trust, partnership, association or corporation organized under the laws of any state of the United States in exchange for cash, shares or other securities with such transfer being made subject to, or with the assumption by the transferee of, the liabilities belonging to the Trust. Following such transfer, the Trustees shall distribute such cash, shares or other securities among the shareholders of the Trust, and if all of the assets of the Trust have been so distributed, the Trust shall be terminated. Section 2. Filing of Copies, References, Headings. The original or a copy of this instrument and of each amendment hereto shall be kept in the office of the Trust where it may be inspected by any shareholder. A copy of this instrument and of each amendment shall be filed by the Trustees with the Secretary of State of the Commonwealth of Massachusetts and with the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer or Trustee of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder, and with the same effect as if it were the original, may rely on a copy certified by an officer or Trustee of the Trust to be a copy of this instrument or of any such amendments. In this instrument or in any such amendment, references to this instrument, and all expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such amendment. Headings are placed herein for convenience of reference only, and in case of any conflict, the text of this instrument, rather than the headings, shall control. This instrument may be executed in any number of counterparts, each of which shall be deemed an original. Section 3. Applicable Law. The Trust set forth in this instrument is made in the Commonwealth of Massachusetts, and it is created under and is to be governed by and construed and administered according to the laws of said Commonwealth. The Trust shall be of the type commonly called a business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. Section 4. Amendments. Except as otherwise specifically provided in this Declaration of Trust, this Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees with the consent of shareholders holding more than fifty percent (50%) of Shares entitled to vote. In addition, notwithstanding any other provision to the contrary contained in this Declaration of Trust, the Trustees may amend this Declaration of Trust without the vote or consent of shareholders (i) at any time if the Trustees deem it necessary to conform this Declaration of Trust to the requirements of applicable federal or state laws or regulations or the -19- requirements of the regulated investment company provisions of the Internal Revenue Code or (ii) for any reason at any time before a registration statement under the Securities Act of 1933, as amended, covering the first public offering of securities of the Trust has become effective. Amendments having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein shall not require authorization by shareholder vote. Copies of amendments shall be filed as specified in Section 2 of this Article XIII. -20- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. /s/ DE Sveen ----------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 ----------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 ----------------------------- Frank P. Wendt, Trustee 824 Harbor Road Southport, CT 06490 ----------------------------- Royce A. Hoyle, Jr., Trustee 78 Brams Point Road Hilton Head, SC 29928 ----------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 ----------------------------- Margaret K. Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 ----------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. ----------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 /s/ Richard J. Franke ----------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 ----------------------------- Frank P. Wendt, Trustee 824 Harbor Road Southport, CT 06490 ----------------------------- Royce A. Hoyle, Jr., Trustee 78 Brains Point Road Hilton Head, SC 29928 ----------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 ----------------------------- Margaret K Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 ----------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. ----------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 ----------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 /s/ Frank P. Wendt ----------------------------- Frank P. Wendt, Trustee 824 Harbor Road Southport, CT 06490 ----------------------------- Royce A. Hoyle, Jr., Trustee 78 Brains Point Road Hilton Head, SC 29928 ----------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 ----------------------------- Margaret K. Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 ----------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. ----------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 ----------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 ----------------------------- Frank P. Wendt, Trustee 824 Harbor Road South t, CT 06490 /s/ Royce A. Hoyle, Jr. ----------------------------- Royce A. Hoyle, Jr., Trustee 78 Brains Point Road Hilton Head, SC 29928 ----------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 ----------------------------- Margaret K. Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 ----------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. ----------------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 ----------------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 ----------------------------------- Frank P. Wendt, Trustee 824 Harbor Road Southport, CT 06490 ----------------------------------- Royce A. Hoyle, Jr., Trustee 78 Brams Point Road Hilton Head, SC 29928 /s/ John E. O'Toole ----------------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 ----------------------------------- Margaret K. Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 ----------------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. ----------------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 ----------------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 ----------------------------------- Frank P. Wendt, Trustee 824 Harbor Road Southport, CT 06490 ----------------------------------- Royce A. Hoyle, Jr., Trustee 78 Brams Point Road Hilton Head, SC 29928 ----------------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 /s/ Margaret K. Rosenheim ----------------------------------- Margaret K. Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 ----------------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust, have executed this instrument as of the date first written above. ----------------------------------- Donald E. Sveen, Trustee 25 W. 461 Plamondon Road Wheaton, IL 60187 ----------------------------------- Richard J. Franke, Trustee 179 East Lake Shore Drive, Apt. 28 Chicago, IL 60611 ----------------------------------- Frank P. Wendt, Trustee 824 Harbor Road Southport, CT 06490 ----------------------------------- Royce A. Hoyle, Jr., Trustee 78 Brams Point Road Hilton Head, SC 29928 ----------------------------------- John E. O'Toole, Trustee 309 Stanwich Road Greenwich, CT 06830 ----------------------------------- Margaret K. Rosenheim, Trustee 5805 S. Dorchester Chicago, IL 60637 /s/ Robert G. Sether ----------------------------------- Robert G. Sether, Trustee 45 460 Camino Del Rey Indian Wells, CA 92210 -21- STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) Then personally appeared the above-named Donald E. Sveen, Richard J. Franke, Frank P. Wendt, John E. O'Toole, Margaret K. Rosenheim and Robert G. Sether known to me to be the trustees of the Nuveen Pennsylvania Investment Quality Municipal Fund, who each acknowledged the foregoing instrument to be his free act and deed, before me this 21st day of May, 1991. - -------------------------------------- /s/ Arlene C. Riley | "OFFICIAL SEAL" | ----------------------------------- | Arlene C. Riley | Notary public | Notary Public State of Illinois | | My Commission Expires 4/6/95 | My Commission Expires: 4/6/95 - -------------------------------------- ------------ -22- NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND Incumbency Certificate ---------------------- The undersigned, being the sole Trustee of the Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies that, pursuant to Section 2 of Article V of the Declaration of Trust of the Trust dated December 19, 1990, the undersigned consented to an increase in the number of Trustees of the Trust from one (1) to seven (7), and to the appointment of the following six individuals as additional Trustees of the Trust, effective December 20, 1990: Richard J. Franke 333 West Wacker Drive Chicago, Illinois 60606 Royce A. Hoyle, Jr. 78 Brams Point Road Hilton Head, South Carolina 29928 John E. O'Toole 666 Third Avenue New York, New York 10017 Margaret K. Rosenheim 969 East 60th Street Chicago, Illinois 60637 Robert G. Sether P.O. Box 4274 Palm Desert, California 92261 Frank P. Wendt Box 63 363 Pequot Avenue Southport, Connecticut 06490 IN WITNESS WHEREOF, the undersigned Trustee has executed this Incumbency Certificate on the 2nd day of January, 1991. /s/ Donald E. Sveen ----------------------------------- Donald E. Sveen, Trustee CERTIFICATE OF AMENDMENT TO STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, a Vice President and Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies as follows: 2. The Board of Trustees of the Trust, in accordance with [(SS)5(1)(i) and 13(A) of] the Trust's Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Shares (the "Statement"), and [(SS)1(a) and 2 of Article IV of] the Trust's Declaration of Trust, adopted a resolution on December 18, 1998, to amend the Statement. 3. Such amendment shall be effective [on] [as of the close of business on] [June 22, 1999]. 4. The following portions of the Statement are hereby set forth in their amended form as follows: a. Appendix A, Section 1 shall include the following paragraph after the second paragraph of the Section: "SERIES T: a series of 10,000 shares of Preferred Shares, par value $.01 per share, liquidation preference $25,000 per share, is hereby designated "Municipal Auction Rate Cumulative Preferred Shares, Series T." _____ shares of Series T MuniPreferred shall be issued at the close of business on June 25, 1999 and, for purposes hereof, be deemed to have a Date of Original Issue of [___________]; have an Applicable Rate for its Initial Dividend Period equal to ____% per annum; have an initial Dividend Payment Date of Friday, July 7, 1999; and have such other preferences, limitation and relative voting rights, in addition to those required by applicable law or set forth in the Declaration applicable to Preferred Shares of the Fund, as set forth in Part I and Part II of this Statement. The Series T MuniPreferred shall constitute a separate series of Preferred Shares of the Fund, and each share of Series T MuniPreferred shall be identical except as provided in Section 11 of Part I of this Statement. b. Appendix A, Section 2 of the Statement shall read in its entirety as follows: "The number of authorized shares constituting Series T MuniPreferred is 10,000, Series W MuniPreferred is 2,400, and Series TH MuniPreferred is 2,000." c. Appendix A, Section 5 shall include the following sentence after the second sentence of the section. "The Initial Rate Period of shares of Series T MuniPreferred shall be the period from and including the Date of Original Issue thereof to but excluding July 6, 1999." d. Appendix A, Section 6 of the Statement shall read in its entirety as follows: "November 30, 1993 for Series W MuniPreferred, February 28, 1995 for Series TH MuniPreferred, and August 31, 1999 for Series T MuniPreferred." e. Appendix A, Section 7 of the Statement shall read in its entirety as follows: SERIES OF "PARTY: MUNIPREFERRED: Salomon Smith Barney Inc. Series T Merrill Lynch, Pierce, Fenner & Series W Smith Incorporated Lehman Brothers, Inc. Series TH" f. Appendix A, Section 9 shall read in its entirety as follows: "Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement, dividends shall be payable on shares of Series W MuniPreferred on Thursday, June 20, 1991, and on each Thursday thereafter; on Series TH MuniPreferred on Friday, January 13, 1995, and on each Friday thereafter, and on Series T MuniPreferred on Friday, July 7, 1999, and on each Wednesday thereafter." g. Appendix A, Section 10 shall provide that the amount for purposes of subparagraph (c)(i) of Section 5 of Part I of this Statement is $110,000,000. IN WITNESS WHEREOF, the undersigned, being a Vice President and Secretary of the Trust, has executed this instrument as of this 22nd day of June, 1999. ___________________________ Gifford R. Zimmerman Vice President and Secretary CERTIFICATE OF AMENDMENT TO STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, a Vice President and Assistant Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby Certifies as follows. 1. The Board of Trustees of the Trust, in accordance with the Trust's Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Shares (the "Statement"), and the Trust's Declaration of Trust, adopted a resolution on August 30, 1994 to amend the Statement. 2. Such amendment shall be effective as of the close of business on January 9, 1995. 3. The following portions of the Statement are hereby set forth in their amended form as follows: a. Appendix A. Section 1 shall include the following paragraph after the first Paragraph of the Section: "Series TH: a series of 2,000 shares of Preferred Shares, par value $.01 per share. Liquidation preference $25,000 per share, is hereby designated "Municipal Auction Rate Cumulative Preferred Shares. Series TH. "Each share of Series TH MuniPreferred shall be issued at the close of business on January 9, 1995 and, for purposes hereof, be deemed to have a Date of Original Issue of January, 10, 1995; have an Applicable Rate for its Initial Dividend Period equal to 3.99% per annum have an Initial Dividend Payment Date of Friday, January 13 1995, and have such other preferences, limitation and relative voting rights in addition to those required by applicable law or set forth in the Declaration applicable to Preferred Shares of the Fund as set forth in Part I and Part II of this Statement. The Series TH MuniPreferred shall constitute a separate series of Preferred Shares of the Fund, and each share of Series TH MuniPreferred shall be identical except as provided in Section II of Part I of this Statement" b. Appendix A. Section 2 of the Statement shall read in its entirety as follows: "The number of authorized shares constituting Series W MuniPreferred is 2,400 and constituting Series TH MuniPreferred is 2,000." c. Appendix A. Section 5 shall include the following sentence after the first sentence of the section. "The Initial Rate Period for shares of Series TH MuniPreferred shall be the period from and including the Date of the Original Rate thereof to but excluding January 13, 1995. d. Appendix A. Series 6 of the Statement shall read in its entirety as follows: "November 30, 1993 for Series W MuniPreferred and February 28, 1995 for Series TH MuniPreferred." C. Appendix A. Series 7 of the Statement shall read in its entirety as follows: "Party: Series of MuniPreferred: Merrill Lynch, Pierce, Series W Fenner & Smith Incorporated Lehman Brothers, Inc. Series TH" f. Appendix A. Section 9 shall read in its entirety as follows: "Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement, dividends shall be payable on shares of Series W MuniPreferred on Thursday, June 20, 1991, and on each Thursday thereafter and on Series TH MuniPreferred on Friday January 13, 1995, and on each Friday thereafter." g. Appendix A. Section 10 shall provide that the amount for purposes of Subparagraph (?) of Section 5 of Part I of this Statement is $110,000,000. IN WITNESS WHEREOF, The undersigned being a Vice President and Assistant Secretary of the Trust, has executed this instrument as of this 5th day of January, 1995. /s/ Larry W. Martin ------------------------- Larry W. Martin Vice President and Assistant Secretary 2 AMENDMENT TO DECLARATION NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND A TRUE COPY ATTEST WILLIAM FRANCIS GALVIN SECRETARY OF THE COMMONWEALTH 12-10-98 LC DATE CLERK FEE PAID $100.00 MAY 11, 1998 CASHIERS Marie Wilson SECRETARY'S OFFICE Bingham, Dana & Gould. Michael Joseph Conolly 951-8000 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND CERTIFIED COPY OF CORPORATE RESOLUTION THE UNDERSIGNED, JAMES J. WESOLOWSKI, Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust, (the "Fund") does hereby certify: 1. That he is the duly elected, qualified and acting Secretary of the Fund, has custody of the corporate records and is a proper officer to make this certification. 2. That at a meeting of the Board of Trustees of the Fund held on Tuesday, April 26, 1994, at which a quorum was present and voted throughout, the following resolution was duly adopted by said Board and said resolution has not been amended, altered or repealed and remains in full force and effect on the date hereof: WHEREAS, Standard & Poor's Corporation ("S&P") has indicated that it no longer requires leveraged closed-end municipal bond funds to maintain a minimum liquidity level as a condition to assigning a AAA rating to preferred shares issued by such funds; WHEREAS, pursuant to express authority granted in the Statement, the Board may from time to time, without vote or consent of shareholders, amend, alter or repeal certain definitions in the Statement, including the definition of "Minimum Liquidity Level", provided the Board receives written confirmation from S&P that such action would not impair the rating then assigned by S&P to the Fund's shares of MuniPreferred, MMP or MPS, as the case may be; and WHEREAS, in light of S&P's elimination of the minimum liquidity requirement, the Board believes it to be in the best interest of the Fund to amend the Statement to repeal the definition of Minimum Liquidity Level; NOW, THEREFORE, BE IT RESOLVED, that the Fund's Statement be, and hereby is, amended as follows: (a) the definition of Minimum Liquidity Level shall be, and hereby is, repealed in its entirety, subject to the Fund's receipt of the written confirmation from S&P described above; and (b) the definitions of "Dividend Coverage Assets", "Valuation Date" and "Dividend Coverage Amount" shall be, and hereby are, repealed to the extent such definitions pertain to the definition of "Minimum Liquidity Level", subject to the Fund's receipt of the written confirmation from S&P described above. IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed this 16th day of June, 1994. /s/ James J. Wesolowski ----------------------------------------- James J. Wesolowski, Secretary CERTIFICATE OF AMENDMENT TO STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES, SERIES W, OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, a Vice President and Assistant Secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies as follows: 1. The Board of Trustees of the Trust, in accordance with the Trust's Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Shares, Series W (the "Statement"), and the Trust's Declaration of Trust, adopted a resolution on October 19, 1993, to amend the Statement. 2. Such amendment shall be effective as of the close of business on January 6, 1994. 3. The following portions of the Statement are hereby set forth in their amended form as follows: a. Paragraph FIRST, Line 6 of the Statement shall read in its entirety as follows: "Preferred Shares, liquidation preference $25,000 per share, having such designation." b. Definitions, Paragraph (tt) of the Statement shall read in its entirety as follows: "(tt) "LIQUIDATION PREFERENCE," with respect to a given number of shares of MuniPreferred, means $25,000 times that number." c. Definitions, Paragraph (fff) Line 4 of the Statement shall read in its entirety as follows: "$25,000 (plus the product of the number of shares of any other series of Pre-" d. Part I, Section 2, Subparagraph (e)(ii), Line 10 of the Statement shall read in its entirety as follows: "applying the rate obtained against $25,000." e. Part I, Section 11, Subparagraph (a)(i), Line 6 of the Statement shall read in its entirety as follows: "to the sum of $25,000 plus an amount equal to accumulated but unpaid" f. Part I, Section 11, Subparagraph (a)(i), Line 10 of the Statement shall read in its entirety as follows: "redemption fewer than 500 shares of such series remain outstanding; (2)" g. Part I, Section 11, Subparagraph (a)(iv), Line 9 of the Statement shall read in its entirety as follows: "redemption price per share equal to the sum of $25,000 plus an amount" h. Part I, Section 11, Subparagraph (b), Line 2 of the Statement shall read in its entirety as follows: "price equal to $25,000 per share plus accumulated but unpaid dividends" i. Appendix A, Section 1, Lines 1 and 2 of the Statement shall read in their entirety as follows: "Series W: A series of 2,400 Preferred Shares, liquidation preference $25,000 per share, is hereby designated "Municipal Auction Rate Cumulative" j. Appendix A, Section 2 of the Statement shall read in its entirety as follows: "The number of authorized shares constituting Series W MuniPreferred is 2,400." k. Appendix A, Section 12, Line 39 of the Statement shall read in its entirety as follows: $25,000." IN WITNESS WHEREOF, the undersigned, being a Vice President and Assistant Secretary of the Trust, has executed this instrument as of the 3rd day of January, 1994. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: /s/ Larry W. Martin, ------------------------------- Larry W. Martin, Vice President and Assistant Secretary -2- CERTIFICATE OF AMENDMENT TO THE STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF THE MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES, SERIES W OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The undersigned, secretary of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Trust"), hereby certifies as follows: 1. The Board of Trustees of the Trust, in accordance with the Trust's Statement Establishing and Fixing the Rights and Preferences of the Municipal Auction Rate Cumulative Preferred Shares (the "Statement") and the Trust's Declaration of Trust (the "Declaration"), adopted a resolution, on April 20, 1993, to amend and restate the Statement in its entirety. 2. On September 16, 1993, such amendment and restatement was approved by the requisite number of holders of the outstanding common shares and preferred shares of beneficial interest in accordance with the Statement and the Declaration. 3. The statement, as amended and restated in its entirety, is attached hereto as Exhibit A. IN WITNESS WHEREOF, the undersigned, being Secretary of the Trust, has executed this instrument as of the 16th day of September, 1993. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: /s/ 0. Walter Renfftlen ------------------------------- 0. Walter Renfftlen Vice President and Controller NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND STATEMENT ESTABLISHING AND FIXING THE RIGHTS AND PREFERENCES OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED SHARES ("MUNIPREFERRED") NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, A MASSACHUSETTS BUSINESS TRUST (THE "FUND"), CERTIFIES THAT: FIRST: Pursuant to authority expressly vested in the Board of Trustees of the Fund by Article IV of the Fund's Declaration of Trust, as amended (which, as hereafter restated or amended from time to time is, together with this Statement, herein called the "Declaration"), the Board of Trustees has, by resolution, authorized the issuance of shares of the Fund's authorized Preferred Shares, liquidation preference $50,000 per share, having such designation or designations as to series as is set forth in Section 1 of APPENDIX A hereto and such number of shares per such series as is set forth in Section 2 of APPENDIX A hereto. SECOND: The preferences, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, of the shares of each series of MuniPreferred described in Section 1 of APPENDIX A hereto are as follows (each such series being referred to herein as a series of MuniPreferred, and shares of all such series being referred to herein individually as a share of MuniPreferred and collectively as shares of MuniPreferred): DEFINITIONS EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SECTION 3 OF APPENDIX A hereto, as used in Parts I and II of this Statement, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), unless the context otherwise requires: (a)"'AA' COMPOSITE COMMERCIAL PAPER RATE," on any date for any Rate Period of shares of a series of MuniPreferred, shall mean (i) (A) in the case of any Minimum Rate Period or any Special Rate Period of fewer than 49 Rate Period Days, the interest equivalent of the 30-day rate; PROVIDED, HOWEVER, that if such Rate Period is a Minimum Rate Period and the "AA" Composite Commercial Paper Rate is being used to determine the Applicable Rate for shares of such series when all of the Outstanding shares of such series are subject to Submitted Hold Orders, then the interest equivalent of the seven-day rate, and (B) in the case of any Special Rate Period of (1) 49 or more but fewer than 70 Rate Period Days, the interest equivalent of the 60-day rate; (2) 70 or more but fewer than 85 Rate Period Days, the arithmetic average of the interest equivalent of the 60-day and 90-day rates; (3) 85 or more but fewer than 99 Rate Period Days, the interest equivalent of the 90-day rate; (4) 99 or more but fewer than 120 Rate Period Days, the arithmetic average of the interest equivalent of the 90-day and 120-day rates; (5) 120 or more but fewer than 141 Rate Period Days, the interest equivalent of the 120-day rate; (6) 141 or more but fewer than 162 Rate Period Days, the arithmetic average of the 120-day and 180-day rates; and (7) 162 or more but fewer than 183 Rate 1 Period Days, the interest equivalent of the 180-day rate, in each case on commercial paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or the equivalent of such rating by S&P or another rating agency, as made available on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day next preceding such date; or (ii) in the event that the Federal Reserve Bank of New York does not make available any such rate, then the arithmetic average of such rates, as quoted on a discount basis or otherwise, by the Commercial Paper Dealers to the Auction Agent for the close of business on the Business Day next preceding such date. If any Commercial Paper Dealer does not quote a rate required to determine the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Fund to provide such rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the case may be, or, if the Fund does not select any such Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the "interest equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a given days' maturity shall be equal to the quotient (rounded upwards to the next higher one-thousandth (.001) of 1%) of (A) the discount rate divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be the product of the discount rate times the number of days in which such commercial paper matures and the denominator of which shall be 360. (b) "ACCOUNTANT'S CONFIRMATION" shall have the meaning specified in paragraph (c) of Section 7 of Part I of this Statement. (c) "AFFILIATE" shall mean, for purposes of the definition of "Outstanding," any Person known to the Auction Agent to be controlled by, in control of or under common control with the Fund, PROVIDED, HOWEVER, that no Broker-Dealer controlled by, in control of or under common control with the Fund shall be deemed to be an Affiliate nor shall any corporation or any Person controlled by, in control of or under common control with such corporation one of the trustees, directors or executive officers of which is a trustee of the Fund be deemed to be an Affiliate solely because such trustee, director or executive officer is also a trustee of the Fund. (d) "AGENT MEMBER" shall mean a member of or participant in the Securities Depository that will act on behalf of a Bidder. (e) "ANTICIPATION NOTES" shall mean Tax Anticipation Notes (TANs), Revenue Anticipation Notes (RANs), Tax and Revenue Anticipation Notes (TRANs), Grant Anticipation Notes (GANs) that are rated by S&P and Bond Anticipation Notes (BANs) that are rated by S&P. 2 (f) "APPLICABLE RATE" shall have the meaning specified in subparagraph (e)(i) of Section 2 of Part I of this Statement. (g) "AUCTION" shall mean each periodic implementation of the Auction Procedures. (h) "AUCTION AGENCY AGREEMENT" shall mean the agreement between the Fund and the Auction Agent which provides, among other things, that the Auction Agent will follow the Auction Procedures for purposes of determining the Applicable Rate for shares of a series of MuniPreferred so long as the Applicable Rate for shares of such series is to be based on the results of an Auction. (i) "AUCTION AGENT" shall mean the entity appointed as such by a resolution of the Board of Trustees in accordance with Section 6 of Part II of this Statement. (j) "AUCTION DATE," with respect to any Rate Period, shall mean the Business Day next preceding the first day of such Rate Period. (k) "AUCTION PROCEDURES" shall mean the procedures for conducting Auctions set forth in Part II of this Statement. (l) "AVAILABLE MUNIPREFERRED" shall have the meaning specified in paragraph (a) of Section 3 of Part II of this Statement. (m) "BENCHMARK RATE" shall have the meaning specified in Section 12 of Appendix A hereto. (n) "BENEFICIAL OWNER," with respect to shares of a series of MuniPreferred, means a customer of a Broker-Dealer who is listed on the records of that Broker-Dealer (or, if applicable, the Auction Agent) as a holder of shares of such series. (o) "BID" and "BIDS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (p) "BIDDER" AND "BIDDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement, PROVIDED, HOWEVER, that neither the Fund nor any affiliate thereof shall be permitted to be a Bidder in an Auction, except that any Broker-Dealer that is an affiliate of the Fund may be a Bidder in an Auction, but only if the orders placed by such Broker-Dealer are not for its own account. (q) "BOARD OF TRUSTEES" shall mean the Board of Trustees of the Fund or any duly authorized committee thereof. (r) "BROKER-DEALER" shall mean any broker-dealer commercial bank or other entity permitted by law to perform the functions required of a Broker-Dealer in Part II of this statement, that is a member of, or a participant in, the Securities Depository or is an affiliate of such member or participant, has been selected by the Fund and has entered into a Broker-Dealer Agreement that remains effective. (s) "BROKER-DEALER AGREEMENT" shall mean an agreement among the Fund, the Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow the procedures specified in Part II of this Statement. (t) "BUSINESS DAY" shall mean a day on which the New York Stock Exchange is open for trading and which is neither a Saturday, Sunday nor any other day on which banks in The City of New York, New York, are authorized by law to close. (u) "Code" means the Internal Revenue Code of 1986, as amended. (v) "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper Incorporated, Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or, in lieu of any thereof, their respective affiliates or successors, if such entity is a commercial paper dealer. (w) "COMMON SHARES" shall mean the common shares of beneficial interest, par value $.01 per share, of the Fund. (x) "CURE DATE" shall mean the MuniPreferred Basic Maintenance Cure Date or the 1940 Act Cure Date, as the case may be. (y) "DATE OF ORIGINAL ISSUE," with respect to shares of a series of MuniPreferred, shall mean the date on which the Fund initially issued such shares. (z) "DECLARATION" shall have the meaning specified on the first page of this Statement. (aa) "DEPOSIT SECURITIES" shall mean cash and Municipal Obligations rated at least A-l+ or SP-I+ by S&P, except that, for purposes of subparagraph (a)(v) of Section 11 of Part I of this Statement, such Municipal Obligations shall be considered "Deposit Securities" only if they are also rated P-1, MIG-1 or VMIG-1 by Moody's. (bb) "DISCOUNTED VALUE," as of any Valuation Date, shall mean, (i) with respect to an S&P Eligible Asset, the quotient of the Market Value thereof divided by the applicable S&P Discount Factor and (ii) (a) with respect to a Moody's Eligible Asset that is not currently callable as of such Valuation Date at the option of the issuer thereof, the quotient of the Market Value thereof divided by the applicable Moody's Discount Factor, or (b) with respect to a Moody's Eligible Asset that is currently callable as of such Valuation Date at the option of the issuer thereof, the quotient of (1) the lesser of the Market Value or call price thereof, including any call premium, divided by (2) the applicable Moody's Discount Factor. (cc) "DIVIDEND COVERAGE AMOUNT," as of any Valuation Date, shall mean, with respect to each share of MuniPreferred, (i) the aggregate amount of 4 dividends that will accumulate on such share of MuniPreferred to (but not including) the first Dividend Payment Date for such share that follows such Valuation Date, less (ii) the combined value of Deposit Securities irrevocably deposited for the payment of dividends on such share of MuniPreferred. (dd) "DIVIDEND COVERAGE ASSETS," as of any Valuation Date, shall mean, with respect to each share of MuniPreferred, Deposit Securities with maturity or tender dates not later than the day preceding the first Dividend Payment Date for such share that follows such Valuation Date and having a value not less than the Dividend Coverage Amount with respect to such share. (ee) "DIVIDEND PAYMENT DATE," with respect to shares of a series of MuniPreferred, shall mean any date on which dividends are payable on shares of such series pursuant to the provisions of paragraph (d) of Section 2 of Part I of this Statement. (ff) "DIVIDEND PERIOD," with respect to shares of a series of MuniPreferred, shall mean the period from and including the Date of Original Issue of shares of such series to but excluding the initial Dividend Payment Date for shares of such series and any period thereafter from and including one Dividend Payment Date for shares of such series to but excluding the next succeeding Dividend Payment Date for shares of such series. (gg) "EXISTING HOLDER," with respect to shares of a series of MuniPreferred, shall mean a Broker-Dealer (or any such other Person as may be permitted by the Fund) that is listed on the records of the Auction Agent as a holder of shares of such series. (hh) "FAILURE TO DEPOSIT," with respect to shares of a series of MuniPreferred, shall mean a failure by the Fund to pay to the Auction Agent, not later than 12:00 noon, New York City time, (A) on the Business Day next preceding any Dividend Payment Date for shares of such series, in funds available on such Dividend Payment Date in The City of New York, New York, the full amount of any dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share of such series or (B) on the Business Day next preceding any redemption date in funds available on such redemption date for shares of such series in The City of New York, New York, the Redemption Price to be paid on such redemption date for any share of such series after notice of redemption is mailed pursuant to paragraph (c) of Section 11 of Part I of this Statement; PROVIDED, HOWEVER, that the foregoing clause (B) shall not apply to the Fund's failure to pay the Redemption Price in respect of shares of MuniPreferred when the related Notice of Redemption provides that redemption of such shares is subject to one or more conditions precedent and any such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. (ii) "FEDERAL TAX RATE INCREASE" shall have the meaning specified in the definition of "Moody's Volatility Factor." 5 (jj) "FUND" shall mean the entity named on the first page of this Statement, which is the issuer of the shares of MuniPreferred. (kk) "GROSS-UP PAYMENT" shall have the meaning specified in Section 4 of APPENDIX A hereto. (ll) "HOLDER," with respect to shares of a series of MuniPreferred, shall mean the registered holder of such shares as the same appears on the record books of the Fund. (mm) "HOLD ORDER" AND "HOLD ORDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (nn) "INDEPENDENT ACCOUNTANT" shall mean a nationally recognized accountant, or firm of accountants, that is with respect to the Fund an independent public accountant or firm of independent public accountants under the Securities Act of 1933, as amended from time to time. (oo) "INITIAL RATE PERIOD," with respect to shares of a series of MuniPreferred, shall have the meaning specified with respect to shares of such series in Section 5 of APPENDIX A hereto. (pp) "INTEREST EQUIVALENT" means a yield on a 360-day basis of a discount basis security which is equal to the yield on an equivalent interest-bearing security. (qq) "ISSUE TYPE CATEGORY," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (rr) "KENNY INDEX" shall have the meaning specified in the definition of "Taxable Equivalent of the Short-Term Municipal Bond Rate." (ss) "LATE CHARGE" shall have the meaning specified in subparagraph (e)(1)(B) of Section 2 of Part I of this Statement. (tt) "LIQUIDATION PREFERENCE," with respect to a given number of shares of MuniPreferred, means $50,000 times that number. (uu) "MARKET VALUE" of any asset of the Fund shall mean the market value thereof determined by the pricing service designated from time to time by the Board of Trustees. Market Value of any asset shall include any interest accrued thereon. The pricing service values portfolio securities at the mean between the quoted bid and asked price or the yield equivalent when quotations are readily available. Securities for which quotations are not readily available are valued at fair value as determined by the pricing service using methods which include consideration of: yields or prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating; indications as to value from dealers; and general market conditions. The pricing service may employ electronic data processing techniques or a matrix system, or both, to determine valuations. 6 (vv) "MAXIMUM POTENTIAL GROSS-UP PAYMENT LIABILITY," as of any Valuation Date, shall mean the aggregate amount of Gross-up Payments that would be due if the Fund were to make Taxable Allocations, with respect to any taxable year, estimated based upon dividends paid and the amount of undistributed realized net capital gains and other taxable income earned by the Fund, as of the end of the calendar month immediately preceding such Valuation Date, and assuming such Gross-up Payments are fully taxable. (ww) "MAXIMUM RATE," for shares of a series of MuniPreferred on any Auction Date for shares of such series, shall mean: (i) in the case of any Auction Date which is not the Auction Date immediately prior to the first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of this Statement, the product of (A) the Reference Rate on such Auction Date for the next Rate Period of shares of such series and (B) the Rate Multiple on such Auction Date, unless shares of such series have or had a Special Rate Period (other than a Special Rate Period of 28 Rate Period Days or fewer) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate Period of shares of such series after such Special Rate Period, in which case the higher of: (A) the dividend rate on shares of such series for the then- ending Rate Period; and (B) the product of (1) the higher of (x) the Reference Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of such series, if such then-ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of such series, if such then-ending Rate Period was more than 364 Rate Period Days, and (y) the Reference Rate on such Auction Date for a Rate Period equal in length to such Special Rate Period of shares of such series, if such Special Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to such Special Rate Period, if such Special Rate Period was more than 364 Rate Period Days and (2) the Rate Multiple on such Auction Date; or (ii) in the case of any Auction Date which is the Auction Date immediately prior to the first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of this Statement, the product of (A) the highest of (1) the Reference Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of such series, if such then-ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of shares of 7 such series, if such then-ending Rate Period was more than 364 Rate Period Days, (2) the Reference Rate on such Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate Period is 364 Rate Period Days or fewer or the Treasury Note Rate on such Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate Period is more than 364 Rate Period Days, and (3) the Reference Rate on such Auction Date for Minimum Rate Periods and (B) the Rate Multiple on such Auction Date. (xx) "MINIMUM LIQUIDITY LEVEL" shall have the meaning specified in Section 8 of Part I of this Statement. (yy) "MINIMUM RATE PERIOD" shall mean any Rate Period consisting of 7 Rate Period Days. (zz) "MOODY'S" shall mean Moody's Investors Service, Inc., a Delaware corporation, and its successors. (aaa) "MOODY'S DISCOUNT FACTOR" shall have the meaning specified in Section 4 of APPENDIX A, hereto. (bbb) "MOODY'S ELIGIBLE ASSET" shall have the meaning specified in Section 4 of APPENDIX A hereto. (ccc) "MOODY'S EXPOSURE PERIOD" shall mean the period commencing on a given Valuation Date and ending 56 days thereafter. (ddd) "MOODY'S VOLATILITY FACTOR" shall mean, as of any Valuation Date, (i) in the case of any Minimum Rate Period, any Special Rate Period of 28 Rate Period Days or fewer, or any Special Rate Period of 57 Rate Period Days or more, a multiplicative factor equal to 275%, except as otherwise provided in the last sentence of this definition: (ii) in the case of any Special Rate Period of more than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to 203%; (iii) in the case of any Special Rate Period of more than 35 but fewer than 43 Rate Period Days, a multiplicative factor equal to 217%; (iv) in the case of any Special Rate Period of more than 42 but fewer than 50 Rate Period Days, a multiplicative factor equal to 226%; and (v) in the case of any Special Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative factor equal to 235%. If, as a result of the enactment of changes to the Code, the greater of the maximum marginal Federal individual income tax rate applicable to ordinary income and the maximum marginal Federal corporate income tax rate applicable to ordinary income will increase, such increase being rounded up to the next five percentage points (the "Federal Tax Rate Increase"), until the effective date of such increase, the Moody's 8 Volatility Factor in the case of any Rate Period described in (i) above in this definition instead shall be determined by reference to the following table: FEDERAL TAX RATE INCREASE VOLATILITY ------------- ---------- 5% 295% 10% 317% 15% 341% 20% 369% 25% 400% 30% 436% 35% 477% 40% 525% (eee) "MUNIPREFERRED" shall have the meaning set forth on the first page of this Statement. (fff) "MUNIPREFERRED BASIC MAINTENANCE AMOUNT," as of any Valuation Date, shall mean the dollar amount equal to the sum of (i)(A) the product of the number of shares of MuniPreferred outstanding on such date multiplied by $50,000 (plus the product of the number of shares of any other series of Preferred Shares outstanding on such date multiplied by the liquidation preference of such shares), plus any redemption premium applicable to shares of MuniPreferred (or other Preferred Shares) then subject to redemption, (B) the aggregate amount of dividends that will have accumulated at the respective Applicable Rates (whether or not earned or declared) to (but not including) the first respective Dividend Payment Dates for shares of MuniPreferred outstanding that follow such Valuation Date (plus the aggregate amount of dividends, whether or not earned or declared, that will have accumulated in respect of other outstanding Preferred Shares to, but not including, the first respective dividend payment dates for such other shares that follow such Valuation Date); (C) the aggregate amount of dividends that would accumulate on shares of each series of MuniPreferred outstanding from such first respective Dividend Payment Date therefor through the 56th day after such Valuation Date, at the Maximum Rate (calculated as if such Valuation Date were the Auction Date for the Rate Period commencing on such Dividend Payment Date) for a Minimum Rate Period of shares of such series to commence on such Dividend Payment Date, assuming, solely for purposes of the foregoing, that if on such Valuation Date the Fund shall have delivered a Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such series, such Maximum Rate shall be the higher of (a) the Maximum Rate for the Special Rate Period of shares of such 9 series to commence on such Dividend Payment Date and (b) the Maximum Rate for a Minimum Rate Period of shares of such series to commence on such Dividend Payment Date, multiplied by the Volatility Factor applicable to a Minimum Rate Period, or, in the event the Fund shall have delivered a Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such series designating a Special Rate Period consisting of 56 Rate Period Days or more, the Volatility Factor applicable to a Special Rate Period of that length (plus the aggregate amount of dividends that would accumulate at the maximum dividend rate or rates on any other Preferred Shares outstanding from such respective dividend payment dates through the 56th day after such Valuation Date, as established by or pursuant to the respective statements establishing and fixing the rights and preferences of such other Preferred Shares) (except that (1) if such Valuation Date occurs at a time when a Failure to Deposit (or, in the case of Preferred Shares other than MuniPreferred, a failure similar to a Failure to Deposit) has occurred that has not been cured, the dividend for purposes of calculation would accumulate at the current dividend rate then applicable to the shares in respect of which such failure has occurred and (2) for those days during the period described in this subparagraph (C) in respect of which the Applicable Rate in effect immediately prior to such Dividend Payment Date will remain in effect (or, in the case of Preferred Shares other than MuniPreferred, in respect of which the dividend rate or rates in effect immediately prior to such respective dividend payment dates will remain in effect), the dividend for purposes of calculation would accumulate at such Applicable Rate (or other rate or rates, as the case may be) in respect of those days); (D) the amount of anticipated expenses of the Fund for the 90 days subsequent to such Valuation Date; (E) the amount of the Fund's Maximum Potential Gross-up Payment Liability in respect of shares of MuniPreferred (and similar amounts payable in respect of other Preferred Shares pursuant to provisions similar to those contained in Section 3 of Part I of this Statement) as of such Valuation Date: and (F) any current liabilities as of such Valuation Date to the extent not reflected in any of (i)(A) through (i)(E) (including, without limitation, any payables for Municipal Obligations purchased as of such Valuation Date and any liabilities incurred for the purpose of clearing securities transactions) less (H) the value (i.e., for purposes of current Moody's guidelines, the face value of cash, short-term Municipal Obligations rated MIG-1, VMIG-1 or P-1, and short-term securities that are the direct obligation of the U.S. government, provided in each case that such securities mature on or prior to the date upon which any of (i)(A) through (i)(F) become payable, otherwise the Moody's Discounted Value) of any of the Fund's assets irrevocably deposited by the Fund for the payment of any of (i)(A) through (i)(F). (ggg) "MUNIPREFERRED BASIC MAINTENANCE CURE DATE," with respect to the failure by the Fund to satisfy the MuniPreferred Basic Maintenance Amount (as required by paragraph (a) of Section 7 of Part I of this Statement) as of a 10 given Valuation Date, shall mean the seventh Business Day following such Valuation Date. (hhh) "MUNIPREFERRED BASIC MAINTENANCE REPORT" shall mean a report signed by the President, Treasurer or any Senior Vice President or Vice President of the Fund which sets forth, as of the related Valuation Date, the assets of the Fund, the Market Value and the Discounted Value thereof (seriatim and in aggregate), and the MuniPreferred Basic Maintenance Amount. (iii) "MUNICIPAL OBLIGATIONS" shall mean "Municipal Obligations" as defined in the Fund's registration statement on Form N-2 on file with the Securities and Exchange Commission, as such registration statement may be amended from time to time (the "Registration Statement"). (jjj) "1940 ACT" shall mean the Investment Company Act of 1940, as amended from time to time. (kkk) "1940 ACT CURE DATE," with respect to the failure by the Fund to maintain the 1940 Act MuniPreferred Asset Coverage (as required by Section 6 of Part I of this Statement) as of the last Business Day of each month, shall mean the last Business Day of the following month. (lll) "1940 ACT MUNIPREFERRED ASSET COVERAGE" shall mean asset coverage, as defined in Section 18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior securities of the Fund which are shares of beneficial interest, including all outstanding shares of MuniPreferred (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are shares or stock of a closed-end investment company as a condition of declaring dividends on its common shares or stock). (mmm) "NOTICE OF REDEMPTION" shall mean any notice with respect to the redemption of shares of MuniPreferred pursuant to paragraph (c) of Section 11 of Part I of this Statement. (nnn) "NOTICE OF SPECIAL RATE PERIOD" shall mean any notice with respect to a Special Rate Period of shares of MuniPreferred pursuant to subparagraph (d)(i) of Section 4 of Part I of this Statement. (ooo) "ORDER" and "ORDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (ppp) "ORIGINAL ISSUE INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (qqq) "OTHER ISSUES," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (rrr) "OUTSTANDING" shall mean, as of any Auction Date with respect to shares of a series of MuniPreferred, the number of shares of such series theretofore issued by the Fund except, without duplication, (i) any shares of such 11 series theretofore cancelled or delivered to the Auction Agent for cancellation or redeemed by the Fund, (ii) any shares of such series as to which the Fund or any Affiliate thereof shall be an Existing Holder and (iii) any shares of such series represented by any certificate in lieu of which a new certificate has been executed and delivered by the Fund. (sss) "PERMANENT INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (ttt) "PERSON" shall mean and include an individual, a partnership, a corporation, a trust, an unincorporated association, a joint venture or other entity or a government or any agency or political subdivision thereof. (uuu) "PORTFOLIO INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (vvv) "POTENTIAL BENEFICIAL OWNER," with respect to shares of a series of MuniPreferred, shall mean a customer of a Broker-Dealer that is not a Beneficial Owner of shares of such series but that wishes to purchase shares of such series, or that is a Beneficial Owner of shares of such series that wishes to purchase additional shares of such series. (www) "POTENTIAL HOLDER," with respect to shares of a series of MuniPreferred, shall mean a Broker-Dealer (or any such other person as may be permitted by the Fund) that is not an Existing Holder of shares of such series or that is an Existing Holder of shares of such series that wishes to become the Existing Holder of additional shares of such series. (xxx) "PREFERRED SHARES" shall mean the preferred shares of the Fund, and includes the shares of MuniPreferred. (yyy) "QUARTERLY VALUATION DATE" shall mean the last Business Day of each February, May, August and November of each year, commencing on the date set forth in Section 6 of APPENDIX A hereto. (zzz) "RATE MULTIPLE" shall have the meaning specified in Section 4 of APPENDIX A hereto. (aaaa) "RATE PERIOD," with respect to shares of a series of MuniPreferred, shall mean the Initial Rate Period of shares of such series and any Subsequent Rate Period, including any Special Rate Period, of shares of such series. (bbbb) "RATE PERIOD DAYS," for any Rate Period or Dividend Period, means the number of days that would constitute such Rate Period or Dividend Period but for the application of paragraph (d) of Section 2 of Part I of this Statement or paragraph (b) of Section 4 of Part I of this Statement. (cccc) "RECEIVABLES FOR MUNICIPAL OBLIGATIONS SOLD" shall mean (A) for purposes of calculation of Moody's Eligible Assets as of any Valuation Date, no more than the aggregate of the following: (i) the book value of receivables for Municipal Obligations sold as of or prior to such Valuation Date if such 12 receivables are due within five business days of such Valuation Date, and if the trades which generated such receivables are (x) settled through clearing house firms with respect to which the Fund has received prior written authorization from Moody's or (y) with counterparties having a Moody's long-term debt rating of at least Baa3; and (ii) the Moody's Discounted Value of Municipal Obligations sold as of or prior to such Valuation Date which generated receivables, if such receivables are due within five business days of such Valuation Date but do not comply with either of the conditions specified in (i) above, and (B) for purposes of calculation of S&P Eligible Assets as of any Valuation Date, the book value of receivables for Municipal Obligations sold as of or prior to such Valuation Date if such receivables are due within five business days of such Valuation Date. (dddd) "REDEMPTION PRICE" shall mean the applicable redemption price specified in paragraph (a) or (b) of Section 11 of Part I of this Statement. (eeee) "REFERENCE RATE" shall mean (i) the higher of the Taxable Equivalent of the Short-Term Municipal Bond Rate and the "AA" Composite Commercial Paper Rate in the case of Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days or fewer; (ii) the "AA" Composite Commercial Paper Rate in the case of Special Rate Periods of more than 28 Rate Period Days but fewer than 183 Rate Period Days, and (iii) the Treasury Bill Rate in the case of Special Rate Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days. (ffff) "REGISTRATION STATEMENT" has the meaning specified in the definition of "Municipal Obligations." (gggg) "S&P" shall mean Standard & Poor's Corporation, a New York corporation, and its successors. (hhhh) "S&P DISCOUNT FACTOR" shall have the meaning specified in Section 4 of APPENDIX A hereto. (iiii) "S&P ELIGIBLE ASSET" shall have the meaning specified in Section 4 of APPENDIX A hereto. (jjjj) "S&P EXPOSURE PERIOD" shall mean the maximum period of time following a Valuation Date that the Fund has under this Statement to cure any failure to maintain, as of such Valuation Date, the Discounted Value for its portfolio at least equal to the MuniPreferred Basic Maintenance Amount (as described in paragraph (a) of Section 7 of Part I of this Statement). (kkkk) "S&P VOLATILITY FACTOR" shall mean, as of any Valuation Date, a multiplicative factor equal to (i) 305% in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer; (ii) 268% in the case of any Special Rate Period of more than 28 Rate Period Days but fewer than 183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of more than 182 Rate Period Days. 13 (llll) "SECONDARY MARKET INSURANCE," if defined in Section 4 of APPENDIX A hereto, shall have the meaning specified in that section. (mmmm) "SECURITIES DEPOSITORY" shall mean The Depository Trust Company and its successors and assigns or any other securities depository selected by the Fund which agrees to follow the procedures required to be followed by such securities depository in connection with shares of MuniPreferred. (nnnn) "SELL ORDER" and "SELL ORDERS" shall have the respective meanings specified in paragraph (a) of Section 1 of Part II of this Statement. (oooo) "SPECIAL RATE PERIOD," with respect to shares of a series of MuniPreferred, shall have the meaning specified in paragraph (a) of Section 4 of Part I of this Statement. (pppp) "SPECIAL REDEMPTION PROVISIONS" shall have the meaning specified in subparagraph (a)(i) of Section 11 of Part I of this Statement. (qqqq) "SUBMISSION DEADLINE" shall mean 1:30 P.M., New York City time, on any Auction Date or such other time on any Auction Date by which Broker-Dealers are required to submit Orders to the Auction Agent as specified by the Auction Agent from time to time. (rrrr) "SUBMITTED BID" and "SUBMITTED BIDS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (ssss) "SUBMITTED HOLD ORDER" and "SUBMITTED HOLD ORDERS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (tttt) "SUBMITTED ORDER" and "SUBMITTED ORDERS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (uuuu) "SUBMITTED SELL ORDER" and "SUBMITTED SELL ORDERS" shall have the respective meanings specified in paragraph (a) of Section 3 of Part II of this Statement. (vvvv) "SUBSEQUENT RATE PERIOD," with respect to shares of a series of MuniPreferred, shall mean the period from and including the first day following the Initial Rate Period of shares of such series to but excluding the next Dividend Payment Date for shares of such series and any period thereafter from and including one Dividend Payment Date for shares of such series to but excluding the next succeeding Dividend Payment Date for shares of such series; provided, however, that if any Subsequent Rate Period is also a Special Rate Period, such term shall mean the period commencing on the first day of such Special Rate Period and ending on the last day of the last Dividend Period thereof. 14 (wwww) "SUBSTITUTE COMMERCIAL PAPER DEALER" shall mean The First Boston Company or Morgan Stanley & Co. Incorporated or their respective affiliates or successors, if such entity is a commercial paper dealer; provided, however, that none of such entities shall be a Commercial Paper Dealer. (xxxx) "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" shall mean The First Boston Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their respective affiliates or successors, if such entity is a U.S. Government securities dealer; provided, however, that none of such entities shall be a U.S. Government Securities Dealer. (yyyy) "SUFFICIENT CLEARING BIDS" shall have the meaning specified in paragraph (a) of Section 3 of Part II of this Statement. (zzzz) "TAXABLE ALLOCATION" shall have the meaning specified in Section 3 of Part I of this Statement. (aaaaa) "TAXABLE INCOME" shall have the meaning specified in Section 12 of APPENDIX A hereto. (bbbbb) "TAXABLE EQUIVALENT OF THE SHORT-TERM MUNICIPAL BOND RATE," on any date for any Minimum Rate Period or Special Rate Period of 28 Rate Period Days or fewer, shall mean 90% of the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the Kenny S&P 30 day High Grade Index or any successor index (the "Kenny Index") (provided, however, that any such successor index must be approved by Moody's (if Moody's is then rating the shares of MuniPreferred) or S&P (if S&P is then rating the shares of MuniPreferred)), made available for the Business Day immediately preceding such date but in any event not later than 8:30 A.M., New York City time, on such date by Kenny S&P Evaluation Services or any successor thereto, based upon 30-day yield evaluations at par of short-term bonds the interest on which is excludable for regular Federal income tax purposes under the Code of "high grade" component issuers selected by Kenny S&P Evaluation Services or any such successor from time to time in its discretion, which component issuers shall include, without limitation, issuers of general obligation bonds, but shall exclude any bonds the interest on which constitutes an item of tax preference under Section 57(a)(5) of the Code, or successor provisions, for purposes of the "alternative minimum tax," divided by (B) 1.00 minus the maximum marginal regular Federal individual income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income (in each case expressed as a decimal), whichever is greater; provided, however, that if the Kenny Index is not made so available by 8:30 A.M., New York City time, on such date by Kenny S&P Evaluation Services or any successor, the Taxable Equivalent of the Short-Term Municipal Bond Rate shall mean the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the most recent Kenny Index so made available for any preceding Business Day, divided by (B) 1.00 minus the maximum marginal regular Federal individual 15 income tax rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income (in each case expressed as a decimal), whichever is greater. (ccccc) "TREASURY BILL" shall mean a direct obligation of the U.S. Government having a maturity at the time of issuance of 364 days or less. (ddddd) "TREASURY BILL RATE," on any date for any Rate Period, shall mean (i) the bond equivalent yield, calculated in accordance with prevailing industry convention, of the rate on the most recently auctioned Treasury Bill with a remaining maturity closest to the length of such Rate Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding such date; or (ii) in the event that any such rate is not published in The Wall Street Journal, then the bond equivalent yield, calculated in accordance with prevailing industry convention, as calculated by reference to the arithmetic average of the bid price quotations of the most recently auctioned Treasury Bill with a remaining maturity closest to the length of such Rate Period, as determined by bid price quotations as of the close of business on the Business Day immediately preceding such date obtained from the U.S. Government Securities Dealers to the Auction Agent. (eeeee) "TREASURY NOTE" shall mean a direct obligation of the U.S. Government having a maturity at the time of issuance of five years or less but more than 364 days. (fffff) "TREASURY NOTE RATE," on any date for any Rate Period, shall mean (i) the yield on the most recently auctioned Treasury Note with a remaining maturity closest to the length of such Rate Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding such date; or (ii) in the event that any such rate is not published in The Wall Street Journal, then the yield as calculated by reference to the arithmetic average of the bid price quotations of the most recently auctioned Treasury Note with a remaining maturity closest to the length of such Rate Period, as determined by bid price quotations as of the close of business on the Business Day immediately preceding such date obtained from the U.S. Government Securities Dealers to the Auction Agent. If any U.S. Government Securities Dealer does not quote a rate required to determine the Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill Rate or the Treasury Note Rate shall be determined on the basis of the quotation or quotations furnished by the remaining U.S. Government Securities Dealer or U.S. Government Securities Dealers and any Substitute U.S. Government Securities Dealers selected by the Fund to provide such rate or rates not being supplied by any U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the case may be, or, if the Fund does not select any such Substitute U.S. Government Securities Dealer or Substitute U.S. Government Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S. Government Securities Dealers. 16 (ggggg) "U.S. GOVERNMENT SECURITIES DEALER" shall mean Lehman Government Securities Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc. and Morgan Guaranty Trust Company of New York or their respective affiliates or successors, if such entity is a U.S. Government securities dealer. (hhhhh) "VALUATION DATE" shall mean, for purposes of determining whether the Fund is maintaining the MuniPreferred Basic Maintenance Amount and the Minimum Liquidity Level, each Business Day. (iiiii) "VOLATILITY FACTOR" shall mean, as of any Valuation Date, the greater of the Moody's Volatility Factor and the S&P Volatility Factor. (jjjjj) "VOTING PERIOD" shall have the meaning specified in paragraph (b) of Section 5 of Part I of this Statement. (kkkkk) "WINNING BID RATE" shall have the meaning specified in paragraph (a) of Section 3 of Part II of this Statement. Any additional definitions specifically set forth in Section 8 of Appendix A hereto shall be incorporated herein and made part hereof by reference thereto. PART I 1. NUMBER OF AUTHORIZED SHARES. The number of authorized shares constituting a series of MuniPreferred shall be as set forth with respect to such series in Section 2 of APPENDIX A hereto. 2. DIVIDENDS. (a) RANKING. The shares of a series of MuniPreferred shall rank on a parity with each other, with shares of any other series of MuniPreferred and with shares of any other series of Preferred Shares as to the payment of dividends by the Fund. (b) CUMULATIVE CASH DIVIDENDS. The Holders of shares of MuniPreferred of any series shall be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor in accordance with the Declaration and applicable law, cumulative cash dividends at the Applicable Rate for shares of such series, determined as set forth in paragraph (e) of this Section 2, and no more (except to the extent set forth in Section 3 of this Part I), payable on the Dividend Payment Dates with respect to shares of such series determined pursuant to paragraph (d) of this Section 2. Holders of shares of MuniPreferred shall not be entitled to any dividend, whether payable in cash, property or shares, in excess of full cumulative dividends, as herein provided, on shares of MuniPreferred. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on shares of MuniPreferred which may be in arrears, and, except to the extent set 17 forth in subparagraph (e)(i) of this Section 2, no additional sum of money shall be payable in respect of any such arrearage. (c) DIVIDENDS CUMULATIVE FROM DATE OF ORIGINAL ISSUE. Dividends on shares of MuniPreferred of any series shall accumulate at the Applicable Rate for shares of such series from the Date of Original Issue thereof. (d) DIVIDEND PAYMENT DATES AND ADJUSTMENT THEREOF. The Dividend Payment Dates with respect to shares of a series of MuniPreferred shall be as set forth with respect to shares of such series in Section 9 of APPENDIX A hereto: PROVIDED, HOWEVER, that: (i) (A) in the case of a series of MuniPreferred designated as "Series F MuniPreferred" or "Series M MuniPreferred" in Section 1 of APPENDIX A hereto, if the Monday or Tuesday, as the case may be, on which dividends would otherwise be payable on shares of such series is not a Business Day, then such dividends shall be payable on such shares on the first Business Day that falls after such Monday or Tuesday, as the case may be, and (B) in the case of a series of MuniPreferred designated as "Series T MuniPreferred," "Series W MuniPreferred" or "Series TH MuniPreferred" in Section 1 of APPENDIX A hereto, if the Wednesday, Thursday or Friday, as the case may be, on which dividends would otherwise be payable on shares of such series is not a Business Day, then such dividends shall be payable on such shares on the first Business Day that falls prior to such Wednesday, Thursday or Friday, as the case may be; and (ii) notwithstanding Section 9 of APPENDIX A hereto, the Fund in its discretion may establish the Dividend Payment Dates in respect of any Special Rate Period of shares of a series of MuniPreferred consisting of more than 28 Rate Period Days; PROVIDED, HOWEVER, that such dates shall be set forth in the Notice of Special Rate Period relating to such Special Rate Period, as delivered to the Auction Agent, which Notice of Special Rate Period shall be filed with the Secretary of the Fund; and FURTHER PROVIDED that (1) any such Dividend Payment Date shall be a Business Day and (2) the last Dividend Payment Date in respect of such Special Rate Period shall be the Business Day immediately following the last day thereof, as such last day is determined in accordance with paragraph (b) of Section 4 of this Part I. (e) DIVIDEND RATES AND CALCULATION OF DIVIDENDS. (i) DIVIDEND RATES. The dividend rate on shares of MuniPreferred of any series during the period from and after the Date of Original Issue of shares of such series to and including the last day of the Initial Rate Period of shares of such series shall be equal to the rate per annum set forth with respect to shares of such series under "Designation" in Section 1 of APPENDIX A hereto. For each Subsequent Rate Period of shares of such series thereafter, the dividend rate on shares of such series shall be equal to the rate per annum that results from an Auction 18 for shares of such series on the Auction Date next preceding such Subsequent Rate period; PROVIDED, HOWEVER, that if: (A) an Auction for any such Subsequent Rate Period is not held for any reason other than as described below, the dividend rate on shares of such series for such Subsequent Rate Period will be the Maximum Rate for shares of such series on the Auction Date therefor; (B) any Failure to Deposit shall have occurred with respect to shares of such series during any Rate Period thereof (other than any Special Rate Period consisting of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period consisting of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured), but, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall have been cured in accordance with paragraph (f) of this Section 2 and the Fund shall have paid to the Auction Agent a late charge ("Late Charge") equal to the sum of (1) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the full amount of dividends with respect to any Dividend Period of the shares of such series, an amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such Failure to Deposit occurs on the Dividend Payment Date for such Dividend Period by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit has not been cured in accordance with paragraph (f) of this Section 2 (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate Liquidation Preference of the outstanding shares of such series and (2) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the Redemption Price of the shares, if any, of such series for which Notice of Redemption has been mailed by the Fund pursuant to paragraph (c) of Section 11 of this Part I, an amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such Failure to Deposit occurs on the redemption date by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit is not cured in accordance with paragraph (f) of this Section 2 (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate Liquidation Preference of the outstanding shares of such series to be redeemed, no Auction will be held in respect of shares of such series for the Subsequent Rate Period thereof and the dividend rate for shares of such series for 19 such Subsequent Rate Period will be the Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period; (C) any Failure to Deposit shall have occurred with respect to shares of such series during any Rate Period thereof (other than any Special Rate Period consisting of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period consisting of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured), and, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured in accordance with paragraph (f) of this Section 2 or the Fund shall not have paid the applicable Late Charge to the Auction Agent, no Auction will be held in respect of shares of such series for the first Subsequent Rate Period thereof thereafter (or for any Rate Period thereof thereafter to and including the Rate Period during which (1) such Failure to Deposit is cured in accordance with paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late Charge to the Auction Agent (the condition set forth in this clause (2) to apply only in the event Moody's is rating such shares at the time the Fund cures such Failure to Deposit), in each case no later than 12:00 Noon, New York City time, on the fourth Business Day prior to the end of such Rate Period), and the dividend rate for shares of such series for each such Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period (but with the prevailing rating for shares of such series, for purposes of determining such Maximum Rate, being deemed to be "Below ba3/BB--"); or (D) any Failure to Deposit shall have occurred with respect to shares of such series during a Special Rate Period thereof consisting of more than 364 Rate Period Days, or during any Rate Period thereof succeeding any Special Rate Period consisting of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured, and, prior to 12:00 Noon, New York City time, on the fourth Business Day preceding the Auction Date for the Rate Period subsequent to such Rate Period, such Failure to Deposit shall not have been cured in accordance with paragraph (f) of this Section 2 or, in the event Moody's is then rating such shares, the Fund shall not have paid the applicable Late Charge to the Auction Agent (such Late Charge, for purposes of this subparagraph (D), to be calculated by using, as the Reference Rate, the Reference Rate applicable to a Rate Period (x) consisting of more than 182 Rate Period Days but fewer than 365 Rate Period Days and (y) commencing on the date on which the Rate Period during which Failure to Deposit occurs commenced), no Auction will be held in respect of shares of such series for such 20 Subsequent Rate Period (or for any Rate Period thereof thereafter to and including the Rate Period during which (1) such Failure to Deposit is cured in accordance with paragraph (f) of this Section 2 and (2) the Fund pays the applicable Late Charge to the Auction Agent (the condition set forth in this clause (2) to apply only in the event Moody's is rating such shares at the time the Fund cures such Failure to Deposit), in each case no later than 12:00 Noon, New York City time, on the fourth Business Day prior to the end of such Rate Period), and the dividend rate for shares of such series for each such Subsequent Rate Period shall be a rate per annum equal to the Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period (but with the prevailing rating for shares of such series, for purposes of determining such Maximum Rate, being deemed to be "Below "ba3"/BB") (the rate per annum at which dividends are payable on shares of a series, of MuniPreferred for any Rate Period thereof being herein referred to as the "Applicable Rate" for shares of such series). (ii) CALCULATION OF DIVIDENDS. The amount of dividends per share payable on shares of a series of MuniPreferred on any date on which dividends shall be payable on shares of such series shall be computed by multiplying the Applicable Rate for shares of such series in effect for such Dividend Period or Dividend Periods or part thereof for which dividends have not been paid by a fraction, the numerator of which shall be the number of days in such Dividend Period or Dividend Periods or part thereof and the denominator of which shall be 365 if such Dividend Period consists of 7 Rate Period Days and 360 for all other Dividend Periods, and applying the rate obtained against $50,000. (f) CURING A FAILURE TO DEPOSIT. A Failure to Deposit with respect to shares of a series of MuniPreferred shall have been cured (if such Failure to Deposit is not solely due to the willful failure of the Fund to make the required payment to the Auction Agent) with respect to any Rate Period of shares of such series if, within the respective time periods described in subparagraph (e)(i) of this Section 2, the Fund shall have paid to the Auction Agent (A) all accumulated and unpaid dividends on shares of such series and (B) without duplication, the Redemption Price for shares, if any, of such series for which Notice of Redemption has been mailed by the Fund pursuant to paragraph (C) of Section 11 of Part I of this Statement; provided, however, that the foregoing clause (B) shall not apply to the Fund's failure to pay the Redemption Price in respect of shares of MuniPreferred when the related Redemption Notice provides that redemption of such shares is subject to one or more conditions precedent and any such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. 21 (g) DIVIDEND PAYMENTS BY FUND TO AUCTION AGENT. The Fund shall pay to the Auction Agent, not later than 12:00 Noon, New York City time, on the Business Day next preceding each Dividend Payment Date for shares of a series of MuniPreferred, an aggregate amount of funds available on the next Business Day in The City of New York, New York, equal to the dividends to be paid to all Holders of shares of such series on such Dividend Payment Date. (h) AUCTION AGENT AS TRUSTEE OF DIVIDEND PAYMENTS BY FUND. All moneys paid to the Auction Agent for the payment of dividends (or for the payment of any Late Charge) shall be held in trust for the payment of such dividends (and any such Late Charge) by the Auction Agent for the benefit of the Holders specified in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent in accordance with the foregoing but not applied by the Auction Agent to the payment of dividends (and any such Late Charge) will, to the extent permitted by law, be repaid to the Fund at the end of 90 days from the date on which such moneys were so to have been applied. (i) DIVIDENDS PAID TO HOLDERS. Each dividend on shares of MuniPreferred shall be paid on the Dividend Payment Date therefor to the Holders thereof as their names appear on the record books of the Fund on the Business Day next preceding such Dividend Payment Date. (j) DIVIDENDS CREDITED AGAINST EARLIEST ACCUMULATED BUT UNPAID DIVIDENDS. Any dividend payment made on shares of MuniPreferred shall first be credited against the earliest accumulated but unpaid dividends due with respect to such shares. Dividends in arrears for any past Dividend Period may be declared and paid at any time, without reference to any regular Dividend Payment Date, to the Holders as their names appear on the record books of the Fund on such date, not exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Trustees. (k) Dividends Designated as Exempt-Interest Dividends. Dividends on shares of MuniPreferred shall be designated as exempt-interest dividends up to the amount of tax-exempt income of the Fund, to the extent permitted by, and for purposes of, Section 852 of the Code. 3. GROSS-UP PAYMENTS. Holders of shares of MuniPreferred shall be entitled to receive, when, as and if declared by the Board of Trustees, out of funds legally available therefor in accordance with the Declaration and applicable law, dividends in an amount equal to the aggregate Gross-up Payments as follows: (a) MINIMUM RATE PERIODS AND SPECIAL RATE PERIODS OF 28 RATE PERIOD DAYS OR FEWER. If, in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer, the Fund allocates any net capital gains or other income taxable for Federal income tax purposes to a dividend paid on shares of MuniPreferred without having given advance notice 22 thereof to the Auction Agent as provided in Section 5 of Part II of this Statement (such allocation being referred to herein as a "Taxable Allocation") solely by reason of the fact that such allocation is made retroactively as a result of the redemption of all or a portion of the outstanding shares of MuniPreferred or the liquidation of the Fund, the Fund shall, prior to the end of the calendar year in which such dividend was paid, provide notice thereof to the Auction Agent and direct the Fund's dividend disbursing agent to send such notice with a Gross-up Payment to each Holder of such shares that was entitled to such dividend payment during such calendar year at such Holder's address as the same appears or last appeared on the record books of the Fund. (b) SPECIAL RATE PERIODS OF MORE THAN 28 RATE PERIOD DAYS. If, in the case of any Special Rate Period of more than 28 Rate Period Days, the Fund makes a Taxable Allocation to a dividend paid on shares of MuniPreferred, the Fund shall, prior to the end of the calendar year in which such dividend was paid, provide notice thereof to the Auction Agent and direct the Fund's dividend disbursing agent to send such notice with a Gross-up Payment to each Holder of shares that was entitled to such dividend payment during such calendar year at such Holder's address as the same appears or last appeared on the record books of the Fund. (c) NO GROSS-UP PAYMENTS IN THE EVENT OF A REALLOCATION. The Fund shall not be required to make Gross-up Payments with respect to any net capital gains or other taxable income determined by the Internal Revenue Service to be allocable in a manner different from that allocated by the Fund. 4. DESIGNATION OF SPECIAL RATE PERIODS. (a) LENGTH OF AND PRECONDITIONS FOR SPECIAL RATE PERIOD. The Fund, at its option, may designate any succeeding Subsequent Rate Period of shares of a series of MuniPreferred as a Special Rate Period consisting of a specified number of Rate Period Days evenly divisible by seven and not more than 1,820, subject to adjustment as provided in paragraph (b) of this Section 4. A designation of a Special Rate Period shall be effective only if (A) notice thereof shall have been given in accordance with paragraph (c) and subparagraph (d)(i) of this Section 4, (B) an Auction for shares of such series shall have been held on the Auction Date immediately preceding the first day of such proposed Special Rate Period and Sufficient Clearing Bids for shares of such series shall have existed in such Auction, and (C) if any Notice of Redemption shall have been mailed by the Fund pursuant to paragraph (c) of Section 11 of this Part I with respect to any shares of such series, the Redemption Price with respect to such shares shall have been deposited with the Auction Agent. In the event the Fund wishes to designate any succeeding Subsequent Rate Period for shares of a series of MuniPreferred as a Special Rate Period consisting of more than 28 Rate Period Days, the Fund shall notify S&P (if S&P is then rating such series) and Moody's (if Moody's is then rating such series) in advance of the commencement of such Subsequent Rate Period 23 that the Fund wishes to designate such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if S&P is then rating such series) and Moody's (if Moody's is then rating such series) with such documents as either may request. (b) ADJUSTMENT OF LENGTH OF SPECIAL RATE PERIOD. In the event the Fund wishes to designate a Subsequent Rate Period as a Special Rate Period, but the day following what would otherwise be the last day of such Special Rate Period is not (a) a Tuesday that is a Business Day in the case of a series of MuniPreferred designated as "Series M MuniPreferred" in Section 1 of APPENDIX A hereto, (b) a Wednesday that is a Business Day in the case of a series of MuniPreferred designated as "Series T MuniPreferred" in Section 1 of APPENDIX A hereto, (c) a Thursday that is a Business Day in the case of a series of MuniPreferred designated as "Series W MuniPreferred" in Section 1 of APPENDIX A hereto, (d) a Friday that is a Business Day in the case of a series of MuniPreferred designated as "Series TH MuniPreferred" in Section 1 of APPENDIX A hereto, (e) a Monday that is a Business Day in the case of a series of MuniPreferred designated as "Series F MuniPreferred" in Section 1 of APPENDIX A hereto, then the Fund shall designate such Subsequent Rate Period as a Special Rate Period consisting of the period commencing on the first day following the end of the immediately preceding Rate Period and ending (a) on the first Monday that is followed by a Tuesday that is a Business Day preceding what would otherwise be such last day, in the case of Series M MuniPreferred, (b) on the first Tuesday that is followed by a Wednesday that is a Business Day preceding what would otherwise be such last day, in the case of Series T MuniPreferred, (c) on the first Wednesday that is followed by a Thursday that is a Business Day preceding what would otherwise be such last day, in the case of Series W MuniPreferred, (d) on the first Thursday that is followed by a Friday that is a Business Day preceding what would otherwise be such last day, in the case of Series TH MuniPreferred, and (e) on the first Sunday that is followed by a Monday that is a Business Day preceding what would otherwise be such last day, in the case of Series F MuniPreferred. (c) NOTICE OF PROPOSED SPECIAL RATE PERIOD. If the Fund proposes to designate any succeeding Subsequent Rate Period of shares of a series of MuniPreferred as a Special Rate Period pursuant to paragraph (a) of this Section 4, not less than 20 (or such lesser number of days as may be agreed to from time to time by the Auction Agent) nor more than 30 days prior to the date the Fund proposes to designate as the first day of such Special Rate Period (which shall be such day that would otherwise be the first day of a Minimum Rate Period), notice shall be (i) published or caused to be published by the Fund in a newspaper of general circulation to the financial community in The City of New York, New York, which carries financial news, and (ii) mailed by the Fund by first-class mail, postage prepaid, to the Holders of shares of such series. Each such notice shall state (A) that the Fund may exercise its option to designate a succeeding Subsequent Rate Period of shares 24 of such series as a Special Rate Period, specifying the first day thereof and (B) that the Fund will, by 11:00 A.M., New York City time, on the second Business Day next preceding such date (or by such later time or date, or both, as may be agreed to by the Auction Agent) notify the Auction Agent of either (x) its determination, subject to certain conditions, to exercise such option, in which case the Fund shall specify the Special Rate Period designated, or (y) its determination not to exercise such option. (d) NOTICE OF SPECIAL RATE PERIOD. No later than 11:00 A.M., New York City time, on the second Business Day next preceding the first day of any proposed Special Rate Period of shares of a series of MuniPreferred as to which notice has been given as set forth in paragraph (c) of this Section 4 (or such later time or date, or both, as may be agreed to by the Auction Agent), the Fund shall deliver to the Auction Agent either: (i) a notice ("Notice of Special Rate Period") stating (A) that the Fund has determined to designate the next succeeding Rate Period of shares of such series as a Special Rate Period, specifying the same and the first day thereof, (B) the Auction Date immediately prior to the first day of such Special Rate Period, (C) that such Special Rate Period shall not commence if (1) an Auction for shares of such series shall not be held on such Auction Date for any reason or (2) an Auction for shares of such series shall be held on such Auction Date but Sufficient Clearing Bids for shares of such series shall not exist in such Auction, (D) the scheduled Dividend Payment Dates for shares of such series during such Special Rate Period and (E) the Special Redemption Provisions, if any, applicable to shares of such series in respect of such Special Rate Period; such notice to be accompanied by a MuniPreferred Basic Maintenance Report showing that, as of the third Business Day next preceding such proposed Special Rate Period, Moody's Eligible Assets (if Moody's is then rating such series) and S&P Eligible Assets (if S&P is then rating such series) each have an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount as of such Business Day (assuming for purposes of the foregoing calculation that (a) the Maximum Rate is the Maximum Rate on such Business Day as if such Business Day were the Auction Date for the proposed Special Rate Period, and (b) the Moody's Discount Factors applicable to Moody's Eligible Assets are determined by reference to the first Exposure Period longer than the Exposure Period then applicable to the Fund, as described in the definition of Moody's Discount Factor herein); or (ii) a notice stating that the Fund has determined not to exercise its option to designate a Special Rate Period of shares of such series and that the next succeeding Rate Period of shares of such series shall be a Minimum Rate Period. 25 (e) FAILURE TO DELIVER NOTICE OF SPECIAL RATE PERIOD. If the Fund fails to deliver either of the notices described in subparagraphs (d)(i) or (d)(ii) of this Section 4 (and, in the case of the notice described in subparagraph (d)(a) of this Section 4, a MuniPreferred Basic Maintenance Report to the effect set forth in such subparagraph (if either Moody's or S&P is then rating the series in question)) with respect to any designation of any proposed Special Rate Period to the Auction Agent by 11:00 A.M., New York City time, on the second Business Day next preceding the first day of such proposed Special Rate Period (or by such later time or date, or both, as may be agreed to by the Auction Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent with respect to such Special Rate Period to the effect set forth in subparagraph (d)(ii) of this Section 4. In the event the Fund delivers to the Auction Agent a notice described in subparagraph (d)(a) of this Section 4, it shall file a copy of such notice with the Secretary of the Fund, and the contents of such notice shall be binding on the Fund. In the event the Fund delivers to the Auction Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund will provide Moody's (if Moody's is then rating the series in question) and S&P (if S&P is then rating the series in question) a copy of such notice. 5. VOTING RIGHTS. (a) ONE VOTE PER SHARE OF MUNIPREFERRED. Except as otherwise provided in the Declaration or as otherwise required by law, (i) each Holder of shares of MuniPreferred shall be entitled to one vote for each share of MuniPreferred held by such Holder on each matter submitted to a vote of shareholders of the Fund, and (ii) the holders of outstanding Preferred Shares, including each share of MuniPreferred, and of Common Shares shall vote together as a single class; PROVIDED, HOWEVER, that, at any meeting of the shareholders of the Fund held for the election of trustees, the holders of outstanding Preferred Shares, including MuniPreferred, represented in person or by proxy at said meeting, shall be entitled, as a class, to the exclusion of the holders of all other securities and classes of shares of beneficial interest of the Fund, to elect two trustees of the Fund, each Preferred Share, including each share of MuniPreferred, entitling the holder thereof to one vote. Subject to paragraph (b) of this Section 5, the holders of outstanding Common Shares and Preferred Shares, including MuniPreferred, voting together as a single class, shall elect the balance of the trustees. (b) VOTING FOR ADDITIONAL TRUSTEES. (a) Voting Period. During any period in which any one or more of the conditions described in subparagraphs (A) or (B) of this subparagraph (b)(i) shall exist (such period being referred to herein as a "Voting Period"), the number of trustees constituting the Board of Trustees shall be automatically increased by the smallest number that, when added to the two trustees elected exclusively by the holders of Preferred Shares, including shares of MuniPreferred, would constitute a majority of the Board of Trustees as so increased by such smallest number; and the holders of Preferred 26 Shares, including MuniPreferred, shall be entitled, voting as a class on a one- vote-per-share basis (to the exclusion of the holders of all other securities and classes of shares of beneficial interest of the Fund), to elect such smallest number of additional trustees, together with the two trustees that such holders are in any event entitled to elect. A Voting Period shall commence: (A) if at the close of business on any dividend payment date accumulated dividends (whether or not earned or declared) on any outstanding Preferred Share, including MuniPreferred, equal to at least two full years' dividends shall be due and unpaid and sufficient cash or specified securities shall not have been deposited with the Auction Agent for the payment of such accumulated dividends; or (B) if at any time holders of Preferred Shares are entitled under the 1940 Act to elect a majority of the trustees of the Fund. Upon the termination of a Voting Period, the voting rights described in this subparagraph (b)(i) shall cease, subject always, however, to the revesting of such voting rights in the Holders upon the further occurrence of any of the events described in this subparagraph (b)(i). (ii) NOTICE OF SPECIAL MEETING. As soon as practicable after the accrual of any right of the holders of Preferred Shares to elect additional trustees as described in subparagraph (b)(i) of this Section 5, the Fund shall notify the Auction Agent and the Auction Agent shall call a special meeting of such holders, by mailing a notice of such special meeting to such holders, such meeting to be held not less than 10 nor more than 20 days after the date of mailing of such notice. If the Fund fails to send such notice to the Auction Agent or if the Auction Agent does not call such a special meeting, it may be called by any such holder on like notice. The record date for determining the holders entitled to notice of and to vote at such special meeting shall be the close of business on the fifth Business Day preceding the day on which such notice is mailed. At any such special meeting and at each meeting of holders of Preferred Shares held during a Voting Period at which trustees are to be elected, such holders, voting together as a class (to the exclusion of the holders of all other securities and classes of shares of beneficial interest of the Fund), shall be entitled to elect the number of trustees prescribed in subparagraph (b)(i) of this Section 5 on a one-vote-per-share basis. (iii) TERMS OF OFFICE OF EXISTING TRUSTEES. The terms of office of all persons who are trustees of the Fund at the time of a special meeting of Holders and holders of other Preferred Shares to elect trustees shall continue, notwithstanding the election at such meeting by the Holders and such other holders of the number of trustees that they are entitled to elect, and the persons so elected by the Holders and such other holders, together with the two incumbent trustees elected by the Holders and such other holders of Preferred Shares and the remaining incumbent trustees elected 27 by the holders of the Common Shares and Preferred Shares, shall constitute the duly elected trustees of the Fund. (iv) TERMS OF OFFICE OF CERTAIN TRUSTEES TO TERMINATE UPON TERMINATION OF VOTING PERIOD. Simultaneously with the termination of a Voting Period, the terms of office of the additional trustees elected by the Holders and holders of other Preferred Shares pursuant to subparagraph (b)(i) of this Section 5 shall terminate, the remaining trustees shall constitute the trustees of the Fund and the voting rights of the Holders and such other holders to elect additional trustees pursuant to subparagraph (b)(i) of this Section 5 shall cease, subject to the provisions of the last sentence of subparagraph (b)(i) of this Section 5. (c) HOLDERS OF MUNIPREFERRED TO VOTE ON CERTAIN OTHER MATTERS. (i) INCREASES IN CAPITALIZATION. So long as any shares of MuniPreferred are outstanding, the Fund shall not, without the affirmative vote or consent of the Holders of at least a majority of the shares of MuniPreferred outstanding at the time, in person or by proxy, either in writing or at a meeting (voting separately as one class): (a) authorize, create or issue any class or series of shares ranking prior to or on a parity with shares of MuniPreferred with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, or increase the authorized amount of any series of MuniPreferred (except that, notwithstanding the foregoing, but subject to the provisions of paragraph (c) of Section 10 of this Part I, the Board of Trustees, without the vote or consent of the Holders of MuniPreferred, may from time to time authorize and create, and the Fund may from time to time issue, classes or series of Preferred Shares ranking on a parity with shares of MuniPreferred with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund: PROVIDED HOWEVER, that if Moody's or S&P is not then rating the shares of MuniPreferred, the aggregate liquidation preference of all Preferred Shares of the Fund outstanding after any such issuance, exclusive of accumulated and unpaid dividends, may not exceed the amount set forth in Section 10 of APPENDIX A hereto) or (b) amend, alter or repeal the provisions of the Declaration, or this Statement, whether by merger, consolidation or otherwise, so as to affect any preference, right or power of such shares of MuniPreferred or the Holders thereof; PROVIDED, HOWEVER, that (i) none of the actions permitted by the exception to (a) above will be deemed to affect such preferences, rights or powers and (ii) the authorization, creation and issuance of classes or series of shares ranking junior to shares of MuniPreferred with respect to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, will be deemed to affect such preferences, rights or powers only if Moody's or S&P is then rating shares of MuniPreferred and such issuance would, at the time thereof, cause the Fund not to satisfy the 1940 Act MuniPreferred Asset Coverage or the MuniPreferred Basic Maintenance Amount. So long as any shares 28 of MuniPreferred are outstanding, the Fund shall not, without the affirmative vote or consent of the Holders of at least 66 2/3% of the shares of MuniPreferred outstanding at the time, in person or by proxy, either in writing or at a meeting (voting separately as one class), file a voluntary application for relief under Federal bankruptcy law or any similar application under state law for so long as the Fund is solvent and does not foresee becoming insolvent. If any action set forth above would adversely affect the rights of one or more series (the "Affected Series") of MuniPreferred in a manner different from any other series of MuniPreferred, the Fund will not approve any such action without the affirmative vote of at least a majority of the votes of the shares of each such Affected Series (each such Affected Series voting separately as a class). (ii) 1940 ACT MATTERS. Unless a higher percentage is provided for in the Declaration, the affirmative vote of the holders of a majority of the outstanding Preferred Shares, including MuniPreferred, voting as a separate class, shall be required to approve any plan of reorganization (as such term is used in the 1940 Act) adversely affecting such shares or any action requiring a vote of security holders of the Fund under Section 13(a) of the 1940 Act. In the event a vote of Holders of MuniPreferred is required pursuant to the provisions of Section 13(a) of the 1940 Act, the Fund shall, not later than ten Business Days prior to the date on which such vote is to be taken, notify Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if S&P is then rating the shares of MuniPreferred) that such vote is to be taken and the nature of the action with respect to which such vote is to be taken. The Fund shall, not later than ten Business Days after the date on which such vote is taken, notify Moody's (if Moody's is then rating the shares of MuniPreferred) of the results of such vote. (d) BOARD MAY TAKE CERTAIN ACTIONS WITHOUT SHAREHOLDER APPROVAL. The Board of Trustees, without the vote or consent of the shareholders of the Fund, may from time to time amend, alter or repeal any or all of the definitions of the terms listed below, or any provision of this Statement viewed by Moody's or S&P as a predicate for any such definition, and any such amendment, alteration or repeal will not be deemed to affect the preferences, rights or powers of shares of MuniPreferred or the Holders thereof; PROVIDED, HOWEVER, that the Board of Trustees receives written confirmation from Moody's (such confirmation being required to be obtained only in the event Moody's is rating the shares of MuniPreferred and in no event being required to be obtained in the case of the definitions of (x) Deposit Securities, Discounted Value, Receivables for Municipal Obligations Sold, Issue Type Category and Other Issues as such terms apply to S&P Eligible Assets, (y) Dividend Coverage Amount, Dividend Coverage Assets, Minimum Liquidity Level, S&P Discount Factor, S&P Eligible Asset, S&P Exposure Period and S&P Volatility 29 Factor and (z) Valuation Date as such term applies to the definitions of Dividend Coverage Amount, Dividend Coverage Assets and Minimum Liquidity Level) and S&P (such confirmation being required to be obtained only in the event S&P is rating the shares of MuniPreferred and in no event being required to be obtained in the case of the definitions of (x) Discounted Value, Receivables for Municipal obligations Sold, Issue Type Category and Other Issues as such terms apply to Moody's Eligible Assets, and (y) Moody's Discount Factor, Moody's Eligible Asset, Moody's Exposure Period and Moody's Volatility Factor) that any such amendment, alteration or repeal would not impair the ratings then assigned by Moody's or S&P, as the case may be, to shares of MuniPreferred: Deposit Securities Moody's Eligible Asset Discounted Value Moody's Exposure Period Dividend Coverage Amount Moody's Volatility Factor Dividend Coverage Assets 1940 Act Cure Date Issue Type Category 1940 Act MuniPreferred, Asset Market Value Coverage Maximum Potential Gross-up Other Issues Payment Liability Quarterly Valuation Date Minimum Liquidity Level Receivables for Municipal MuniPreferred Basic Maintenance Obligations Sold Amount S&P Discount Factor MuniPreferred Basic Maintenance S&P Eligible Asset Cure Date S&P Exposure Period MuniPreferred Basic Maintenance S&P Volatility Factor Report Valuation Date Moody's Discount Factor Volatility Factor (e) VOTING RIGHTS SET FORTH HEREIN ARE SOLE VOTING RIGHTS. Unless otherwise required by law, the Holders of shares of MuniPreferred shall not have any relative rights or preferences or other special rights other than those specifically set forth herein. (f) NO PREEMPTIVE RIGHTS OR CUMULATIVE VOTING. The Holders of shares of MuniPreferred shall have no preemptive rights or rights to cumulative voting. (g) VOTING FOR TRUSTEES SOLE REMEDY FOR FUND'S FAILURE TO PAY DIVIDENDS. In the event that the Fund fails to pay any dividends on the shares of MuniPreferred, the exclusive remedy of the Holders shall be the right to vote for trustees pursuant to the provisions of this Section 5. (h) HOLDERS ENTITLED TO VOTE. For purposes of determining any rights of the Holders to vote on any matter, whether such right is created by this Statement, by the other provisions of the Declaration, by statute or otherwise, no Holder shall be entitled to vote any share of MuniPreferred and no share of MuniPreferred shall be deemed to be "outstanding" for the purpose of voting 30 or determining the number of shares required to constitute a quorum if, prior to or concurrently with the time of determination of shares entitled to vote or shares deemed outstanding for quorum purposes, as the case may be, the requisite Notice of Redemption with respect to such shares shall have been mailed as provided in paragraph (c) of Section 11 of this Part I and the Redemption Price for the redemption of such shares shall have been deposited in trust with the Auction Agent for that purpose. No share of MuniPreferred held by the Fund or any affiliate of the Fund (except for shares held by a Broker-Dealer that is an affiliate of the Fund for the account of its customers) shall have any voting rights or be deemed to be outstanding for voting or other purposes. 6. 1940 ACT MUNIPREFERRED ASSET COVERAGE. The Fund shall maintain, as of the last Business Day of each month in which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred Asset Coverage. 7. MUNIPREFERRED BASIC MAINTENANCE AMOUNT. (a) So long as shares of MuniPreferred are outstanding, the Fund shall maintain, on each Valuation Date, and shall verify to its satisfaction that it is maintaining on such Valuation Date, (i) S&P Eligible Assets having an aggregate Discounted Value equal to or greater than the MuniPreferred Basic Maintenance Amount (if S&P is then rating the shares of MuniPreferred), and (ii) Moody's Eligible Assets having an aggregate Discounted Value equal to or greater than the MuniPreferred, Basic Maintenance Amount (if Moody's is then rating the shares of MuniPreferred). (b) On or before 5:00 P.M., New York City time, on the third Business Day after a Valuation Date on which the Fund fails to satisfy the MuniPreferred Basic Maintenance Amount, and on the third Business Day after the MuniPreferred Basic Maintenance Cure Date with respect to such Valuation Date, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) a MuniPreferred Basic Maintenance Report as of the date of such failure or such MuniPreferred Basic Maintenance Cure Date, as the case may be, which will be deemed to have been delivered to the Auction Agent if the Auction Agent receives a copy or telecopy, telex or other electronic transcription thereof and on the same day the Fund mails to the Auction Agent for delivery on the next Business Day the full MuniPreferred Basic Maintenance Report. The Fund shall also deliver a MuniPreferred Basic Maintenance Report to (i) the Auction Agent (if either Moody's or S&P is then rating the shares of MuniPreferred) as of (A) the fifteenth day of each month (or, if such day is not a Business Day, the next succeeding Business Day) and (B) the last Business Day of each month, (ii) Moody's (if Moody's is then rating the shares of MuniPreferred) and S&P (if 31 S&P is then rating the shares of MuniPreferred) as of any Quarterly Valuation Date, in each case on or before the third Business Day after such day, and (iii) S&P, if and when requested for any Valuation Date, on or before the third Business Day after such request. A failure by the Fund to deliver a MuniPreferred Basic Maintenance Report pursuant to the preceding sentence shall be deemed to be delivery of a MuniPreferred Basic Maintenance Report indicating the Discounted Value for all assets of the Fund is less than the MuniPreferred Basic Maintenance Amount, as of the relevant Valuation Date. (c) Within ten Business Days after the date of delivery of a MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of this Section 7 relating to a Quarterly Valuation Date, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred), (i) the mathematical accuracy of the calculations reflected in such Report (and in any other MuniPreferred Basic Maintenance Report, randomly selected by the Independent Accountant, that was delivered by the Fund during the quarter ending on such Quarterly Valuation Date) and (ii) that, in such Report (and in such randomly selected Report), the Fund determined in accordance with this Statement whether the Fund had, at such Quarterly Valuation Date (and at the Valuation Date addressed in such randomly selected Report), S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) of an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount and Moody's Eligible Assets (if Moody's is then rating the shares of MuniPreferred) of an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount (such confirmation being herein called the "Accountant's Confirmation"). (d) Within ten Business Days after the date of delivery of a MuniPreferred Basic Maintenance Report in accordance with paragraph (b) of this Section 7 relating to any Valuation Date on which the Fund failed to satisfy the MuniPreferred Basic Maintenance Amount, and relating to the MuniPreferred Basic Maintenance Cure Date with respect to such failure to satisfy the MuniPreferred Basic Maintenance Amount, the Fund shall cause the Independent Accountant to provide to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) an Accountant's Confirmation as to such MuniPreferred Basic Maintenance Report. (e) If any Accountant's Confirmation delivered pursuant to paragraph (c) or (d) of this Section 7 shows that an error was made in the MuniPreferred Basic Maintenance Report for a particular Valuation Date for which such Accountant's Confirmation was required to be delivered, or shows that a lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) or Moody's Eligible Assets (if 32 Moody's is then rating the shares of MuniPreferred), as the case may be, of the Fund was determined by the Independent Accountant, the calculation or determination made by such Independent Accountant shall be final and conclusive and shall be binding on the Fund, and the Fund shall accordingly amend and deliver the MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating the shares of MuniPreferred), Moody's (if Moody's is then rating the shares of MuniPreferred) and the Auction Agent (if either S&P or Moody's is then rating the shares of MuniPreferred) promptly following receipt by the Fund of such Accountant's Confirmation. (f) On or before 5:00 p.m., New York City time, on the first Business Day after the Date of Original Issue of any shares of MuniPreferred, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred) and Moody's (if Moody's is then rating the shares of MuniPreferred) a MuniPreferred Basic Maintenance Report as of the close of business on such Date of Original Issue. Within five Business Days of such Date of Original Issue, the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating the shares of MuniPreferred) (i) the mathematical accuracy of the calculations reflected in such Report and (ii) that the Discounted Value of S&P Eligible Assets reflected thereon equals or exceeds the MuniPreferred Basic Maintenance Amount reflected thereon. (g) On or before 5:00 p.m., New York City time, on the third Business Day after either (i) the Fund shall have redeemed Common Shares or (ii) the ratio of the Discounted Value of S&P Eligible Assets or the Discounted Value of Moody's Eligible Assets to the MuniPreferred Basic Maintenance Amount is less than or equal to 105%, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of MuniPreferred) or Moody's (if Moody's is then rating the shares of MuniPreferred), as the case may be, a MuniPreferred Basic Maintenance Report as of the date of either such event. 8. MINIMUM LIQUIDITY LEVEL. So long as S&P is rating the shares of MuniPreferred, the Fund shall have, as of each Valuation Date, Dividend Coverage Assets, with respect to each then outstanding share of MuniPreferred, having a value not less than the Dividend Coverage Amount with respect to such share (the "Minimum Liquidity Level"). If, as of each Valuation Date, the Fund does not have the required Dividend Coverage Assets, the Fund shall, as soon as practicable, adjust its portfolio in order to meet the Minimum Liquidity Level, but only if S&P is then rating the shares of MuniPreferred. 9. RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. (a) DIVIDENDS ON PREFERRED SHARES OTHER THAN MUNIPREFERRED. Except as set forth in the next sentence, no dividends shall be declared or paid or set apart for payment on the shares of any class or series of shares of beneficial interest of the Fund ranking, as to the payment of dividends, on a parity with 33 shares of MuniPreferred for any period unless full cumulative dividends have been or contemporaneously are declared and paid on the shares of each series of MuniPreferred through its most recent Dividend Payment Date. When dividends are not paid in full upon the shares of each series of MuniPreferred through its most recent Dividend Payment Date or upon the shares of any other class or series of shares of beneficial interest of the Fund ranking on a parity as to the payment of dividends with shares of MuniPreferred through their most recent respective dividend payment dates, all dividends declared upon shares of MuniPreferred and any other such class or series of shares of beneficial interest ranking on a parity as to the payment of dividends with shares of MuniPreferred shall be declared pro rata so that the amount of dividends declared per share on shares of MuniPreferred and such other class or series of shares of beneficial interest shall in all cases bear to each other the same ratio that accumulated dividends per share on the shares of MuniPreferred and such other class or series of shares of beneficial interest bear to each other (for purposes of this sentence, the amount of dividends declared per share of MuniPreferred shall be based on the Applicable Rate for such share for the Dividend Periods during which dividends were not paid in full). (b) DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO COMMON SHARES UNDER THE 1940 ACT. The Board of Trustees shall not declare any dividend (except a dividend payable in Common Shares), or declare any other distribution, upon the Common Shares, or purchase Common Shares, unless in every such case the Preferred Shares have, at the time of any such declaration or purchase, an asset coverage (as defined in and determined pursuant to the 1940 Act) of at least 200% (or such other asset coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage for senior securities which are shares or stock of a closed-end investment company as a condition of declaring dividends on its common shares or stock) after deducting the amount of such dividend, distribution or purchase price, as the case may be. (c) OTHER RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS. For so long as any share of MuniPreferred is outstanding, and except as set forth in paragraph (a) of this Section 9 and paragraph (c) of Section 12 of this Part I, (A) the Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or in options, warrants or rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to the shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of the Common Shares or any other shares of the Fund ranking junior to or on a parity with the shares of MuniPreferred as to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Fund ranking 34 junior to the shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), or any such parity shares (except by conversion into or exchange for shares of the Fund ranking junior to or on a parity with MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), unless (a) full cumulative dividends on shares of each series of MuniPreferred through its most recently ended Dividend Period shall have been paid or shall have been declared and sufficient funds for the payment thereof deposited with the Auction Agent and (ii) the Fund has redeemed the full number of shares of MuniPreferred required to be redeemed by any provision for mandatory redemption pertaining thereto, and (B) the Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than a dividend or distribution paid in shares of, or in options, warrants or rights to subscribe for or purchase, Common Shares or other shares, if any, ranking junior to shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in respect of Common Shares or any other shares of the Fund ranking junior to shares of MuniPreferred as to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up, or call for redemption, redeem, purchase or otherwise acquire for consideration any Common Shares or any other such junior shares (except by conversion into or exchange for shares of the Fund ranking junior to shares of MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution, liquidation or winding up), unless immediately after such transaction the Discounted Value of Moody's Eligible Assets (if Moody's is then rating the shares of MuniPreferred) and S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) would each at least equal the MuniPreferred Basic Maintenance Amount. 10. RATING AGENCY RESTRICTIONS. For so long as any shares of MuniPreferred are outstanding and Moody's or S&P, or both, are rating such shares, the Fund will not, unless it has received written confirmation from Moody's or S&P, or both, as appropriate, that any such action would not impair the ratings then assigned by such rating agency to such shares, engage in any one or more of the following transactions: (a) buy or sell futures or write put or call options; (b) borrow money, except that the Fund may, without obtaining the written confirmation described above, borrow money for the purpose of clearing securities transactions if (a) the MuniPreferred Basic Maintenance Amount would continue to be satisfied after giving effect to such borrowing and (ii) such borrowing (A) is privately arranged with a bank or other person and is evidenced by a promissory note or other evidence of indebtedness that is not intended to be publicly distributed or (B) is for "temporary purposes," is evidenced by a promissory note or other evidence of indebtedness and is in an amount not exceeding 5 per centum of the value of the total assets of the Fund 35 at the time of the borrowing; for purposes of the foregoing, "temporary purpose" means that the borrowing is to be repaid within sixty days and is not to be extended or renewed; (c) issue any class or series of shares ranking prior to or on a parity with shares of MuniPreferred with respect to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding up of the Fund, or reissue any shares of MuniPreferred previously purchased or redeemed by the Fund; (d) engage in any short sales of securities; (e) lend securities; (f) merge or consolidate into or with any corporation; (g) change the pricing service (currently J.J. Kenny) referred to in the definition of Market Value; or (h) enter into reverse repurchase agreements. 11. REDEMPTION. (a) OPTIONAL REDEMPTION. (i) Subject to the provisions of subparagraph (v) of this paragraph (a), shares of MuniPreferred of any series may be redeemed, at the option of the Fund, as a whole or from time to time in part, on the second Business Day preceding any Dividend Payment Date for shares of such series, out of funds legally available therefor, at a redemption price per share equal to the sum of $50,000 plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not including) the date fixed for redemption; PROVIDED, HOWEVER, that (1) shares of a series of MuniPreferred may not be redeemed in part if after such partial redemption fewer than 250 shares of such series remain outstanding; (2) unless otherwise provided in Section 11 of APPENDIX A hereto, shares of a series of MuniPreferred are redeemable by the Fund during the Initial Rate Period thereof only on the second Business Day next preceding the last Dividend Payment Date for such Initial Rate Period; and (3) subject to subparagraph (ii) of this paragraph (a), the Notice of Special Rate Period relating to a Special Rate Period of shares of a series of MuniPreferred, as delivered to the Auction Agent and filed with the Secretary of the Fund, may provide that shares of such series shall not be redeemable during the whole or any part of such Special Rate Period (except as provided in subparagraph (iv) of this paragraph (a)) or shall be redeemable during the whole or any part of such Special Rate Period only upon payment of such redemption premium or premiums as shall be specified therein ("Special Redemption Provisions"). 36 (ii) A Notice of Special Rate Period relating to shares of a series of MuniPreferred for a Special Rate Period thereof may contain Special Redemption Provisions only if the Fund's Board of Trustees, after consultation with the Broker-Dealer or Broker-Dealers for such Special Rate Period of shares of such series, determines that such Special Redemption Provisions are in the best interest of the Fund. (iii) If fewer than all of the outstanding shares of a series of MuniPreferred are to be redeemed pursuant to subparagraph (a) of this paragraph (a), the number of shares of such series to be redeemed shall be determined by the Board of Trustees, and such shares shall be redeemed pro rata from the Holders of shares of such series in proportion to the number of shares of such series held by such Holders. (iv) Subject to the provisions of subparagraph (v) of this paragraph (a), shares of any series of MuniPreferred may be redeemed, at the option of the Fund, as a whole but not in part, out of funds legally available therefor, on the first day following any Dividend Period thereof included in a Rate Period consisting of more than 364 Rate Period Days if, on the date of determination of the Applicable Rate for shares of such series for such Rate Period, such Applicable Rate equalled or exceeded on such date of determination the Treasury Note Rate for such Rate Period, at a redemption price per share equal to the sum of $50,000 plus an amount equal to accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not including) the date fixed for redemption. (v) The Fund may not on any date mail a Notice of Redemption pursuant to paragraph (c) of this Section 11 in respect of a redemption contemplated to be effected pursuant to this paragraph (a) unless on such date (a) the Fund has available Deposit Securities with maturity or tender dates not later than the day preceding the applicable redemption date and having a value not less than the amount (including any applicable premium) due to Holders of shares of MuniPreferred by reason of the redemption of such shares on such redemption date and (b) the Discounted Value of Moody's Eligible Assets (if Moody's is then rating the shares of MuniPreferred) and the Discounted Value of S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) each at least equal the MuniPreferred Basic Maintenance Amount, and would at least equal the MuniPreferred Basic Maintenance Amount immediately subsequent to such redemption if such redemption were to occur on such date. For purposes of determining in clause (b) of the preceding sentence whether the Discounted Value of Moody's Eligible Assets at least equals the MuniPreferred Basic Maintenance Amount, the Moody's Discount Factors applicable to Moody's Eligible Assets shall be determined by reference to the first Exposure Period longer than the Exposure Period then applicable to the Fund, as described in the definition of Moody's Discount Factor herein. 37 (b) MANDATORY REDEMPTION. The Fund shall redeem, at a redemption price equal to $50,000 per share plus accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not including) the date fixed by the Board of Trustees for redemption, certain of the shares of MuniPreferred, if the Fund fails to have either Moody's Eligible Assets with a Discounted Value or S&P Eligible Assets with a Discounted Value greater than or equal to the MuniPreferred Basic Maintenance Amount or fails to maintain the 1940 Act MuniPreferred Asset Coverage, in accordance with the requirements of the rating agency or agencies then rating the shares of MuniPreferred, and such failure is not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940 Act Cure Date, as the case may be. The number of shares of MuniPreferred to be redeemed shall be equal to the lesser of (i) the minimum number of shares of MuniPreferred, together with all other Preferred Shares subject to redemption or retirement, the redemption or retirement of which, if deemed to have occurred immediately prior to the opening of business on the Cure Date, would have resulted in the Fund's having both Moody's Eligible Assets with a Discounted Value and S&P Eligible Assets with a Discounted Value greater than or equal to the MuniPreferred Basic Maintenance Amount or maintaining the 1940 Act MuniPreferred, Asset Coverage, as the case may be, on such Cure Date (PROVIDED, HOWEVER, that if there is no such minimum number of shares of MuniPreferred and other Preferred Shares the redemption or retirement of which would have had such result, all shares of MuniPreferred and Preferred Shares then outstanding shall be redeemed), and (ii) the maximum number of shares of MuniPreferred, together with all other Preferred Shares subject to redemption or retirement, that can be redeemed out of funds expected to be legally available therefor in accordance with the Declaration and applicable law. In determining the shares of MuniPreferred required to be redeemed in accordance with the foregoing, the Fund shall allocate the number required to be redeemed to satisfy the MuniPreferred Basic Maintenance Amount or the 1940 Act MuniPreferred Asset Coverage, as the case may be, pro rata among shares of MuniPreferred and other Preferred Shares (and, then, pro rata among each series of MuniPreferred) subject to redemption or retirement. The Fund shall effect such redemption on the date fixed by the Fund therefor, which date shall not be earlier than 20 days nor later than 40 days after such Cure Date, except that if the Fund does not have funds legally available for the redemption of all of the required number of shares of MuniPreferred and other Preferred Shares which are subject to redemption or retirement or the Fund otherwise is unable to effect such redemption on or prior to 40 days after such Cure Date, the Fund shall redeem those shares of MuniPreferred and other Preferred Shares which it was unable to redeem on the earliest practicable date on which it is able to effect such redemption. If fewer than all of the outstanding shares of a series of MuniPreferred are to be redeemed pursuant to this paragraph (b), the number of shares of such series to be redeemed shall be redeemed pro rata 38 from the Holders of shares of such series in proportion to the number of shares of such series held by such Holders. (c) NOTICE OF REDEMPTION. If the Fund shall determine or be required to redeem shares of a series of MuniPreferred pursuant to paragraph (a) or (b) of this Section 11, it shall mail a Notice of Redemption with respect to such redemption by first class mail, postage prepaid, to each Holder of the shares of such series to be redeemed, at such Holder's address as the same appears on the record books of the Fund on the record date established by the Board of Trustees. Such Notice of Redemption shall be so mailed not less than 20 nor more than 45 days prior to the date fixed for redemption. Each such Notice of Redemption shall state: (i) the redemption date; (ii) the number of shares of MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for shares of such series; (iv) the Redemption Price; (v) the place or places where the certificate(s) for such shares (properly endorsed or assigned for transfer, if the Board of Trustees shall so require and the Notice of Redemption shall so state) are to be surrendered for payment of the Redemption Price; (vi) that dividends on the shares to be redeemed will cease to accumulate on such redemption date; and (vii) the provisions of this Section 11 under which such redemption is made. If fewer than all shares of a series of MuniPreferred held by any Holder are to be redeemed, the Notice of Redemption mailed to such Holder shall also specify the number of shares of such series to be redeemed from such Holder. The Fund may provide in any Notice of Redemption relating to a redemption contemplated to be effected pursuant to paragraph (a) of this Section 11 that such redemption is subject to one or more conditions precedent and that the Fund shall not be required to effect such redemption unless each such condition shall have been satisfied at the time or times and in the manner specified in such Notice of Redemption. (d) NO REDEMPTION UNDER CERTAIN CIRCUMSTANCES. Notwithstanding the provisions of paragraphs (a) or (b) of this Section 11, if any dividends on shares of a series of MuniPreferred (whether or not earned or declared) are in arrears, no shares of such series shall be redeemed unless all outstanding shares of such series are simultaneously redeemed, and the Fund shall not purchase or otherwise acquire any shares of such series; PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase or acquisition of all outstanding shares of such series pursuant to the successful completion of an otherwise lawful purchase or exchange offer made on the same terms to, and accepted by, Holders of all outstanding shares of such series. (e) ABSENCE OF FUNDS AVAILABLE FOR REDEMPTION. To the extent that any redemption for which Notice of Redemption has been mailed is not made by reason of the absence of legally available funds therefor in accordance with the Declaration and applicable law, such redemption shall be made as soon as practicable to the extent such funds become available. Failure to redeem shares of MuniPreferred shall be deemed to exist at any time after the date specified for redemption in a Notice of Redemption when the Fund shall have 39 failed, for any reason whatsoever, to deposit in trust with the Auction Agent the Redemption Price with respect to any shares for which such Notice of Redemption has been mailed; PROVIDED, HOWEVER, that the foregoing shall not apply in the case of the Fund's failure to deposit in trust with the Auction Agent the Redemption Price with respect to any shares where (1) the Notice of Redemption relating to such redemption provided that such redemption was subject to one or more conditions precedent and (2) any such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. Notwithstanding the fact that the Fund may not have redeemed shares of MuniPreferred for which a Notice of Redemption has been mailed, dividends may be declared and paid on shares of MuniPreferred and shall include those shares of MuniPreferred for which a Notice of Redemption has been mailed. (f) AUCTION AGENT AS TRUSTEE OF REDEMPTION PAYMENTS BY FUND. All moneys paid to the Auction Agent for payment of the Redemption Price of shares of MuniPreferred called for redemption shall be held in trust by the Auction Agent for the benefit of Holders of shares so to be redeemed. (g) SHARES FOR WHICH NOTICE OF REDEMPTION HAS BEEN GIVEN ARE NO LONGER OUTSTANDING. Provided a Notice of Redemption has been mailed pursuant to paragraph (c) of this Section 11, upon the deposit with the Auction Agent (on the Business Day next preceding the date fixed for redemption thereby, in funds available on the next Business Day in The City of New York, New York) of funds sufficient to redeem the shares of MuniPreferred that are the subject of such notice, dividends on such shares shall cease to accumulate and such shares shall no longer be deemed to be outstanding for any purpose, and all rights of the Holders of the shares so called for redemption shall cease and terminate, except the right of such Holders to receive the Redemption Price, but without any interest or other additional amount, except as provided in subparagraph (e)(i) of Section 2 of this Part I and in Section 3 of this Part I. Upon surrender in accordance with the Notice of Redemption of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board of Trustees shall so require and the Notice of Redemption shall so state), the Redemption Price shall be paid by the Auction Agent to the Holders of shares of MuniPreferred subject to redemption. In the case that fewer than all of the shares represented by any such certificate are redeemed, a new certificate shall be issued, representing the unredeemed shares, without cost to the Holder thereof. The Fund shall be entitled to receive from the Auction Agent, promptly after the date fixed for redemption, any cash deposited with the Auction Agent in excess of (i) the aggregate Redemption Price of the shares of MuniPreferred called for redemption on such date and (ii) all other amounts to which Holders of shares of MuniPreferred called for redemption may be entitled. Any funds so deposited that are unclaimed at the end of 90 days from such redemption date shall, to the extent permitted by law, be repaid to the Fund, after which time the Holders of shares of MuniPreferred 40 so called for redemption may look only to the Fund for payment of the Redemption Price and all other amounts to which they may be entitled. The Fund shall be entitled to receive, from time to time after the date fixed for redemption, any interest on the funds so deposited. (h) COMPLIANCE WITH APPLICABLE LAW. In effecting any redemption pursuant to this Section 11, the Fund shall use its best efforts to comply with all applicable conditions precedent to effecting such redemption under the 1940 Act and any applicable Massachusetts law, but shall effect no redemption except in accordance with the 1940 Act and any applicable Massachusetts law. (i) ONLY WHOLE SHARES OF MUNIPREFERRED MAY BE REDEEMED. In the case of any redemption pursuant to this Section 11, only whole shares of MuniPreferred shall be redeemed, and in the event that any provision of the Declaration would require redemption of a fractional share, the Auction Agent shall be authorized to round up so that only whole shares are redeemed. 12. LIQUIDATION RIGHTS. (a) RANKING. The shares of a series of MuniPreferred shall rank on a parity with each other, with shares of any other series of MuniPreferred and with shares of any other series of Preferred Shares as to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund. (b) DISTRIBUTIONS UPON LIQUIDATION. Upon the dissolution, liquidation or winding up of the affairs of the Fund, whether voluntary or involuntary, the Holders of shares of MuniPreferred then outstanding shall be entitled to receive and to be paid out of the assets of the Fund available for distribution to its shareholders, before any payment or distribution shall be made on the Common Shares or on any other class of shares of the Fund ranking junior to the MuniPreferred upon dissolution, liquidation or winding up, an amount equal to the Liquidation Preference with respect to such shares plus an amount equal to all dividends thereon (whether or not earned or declared) accumulated but unpaid to (but not including) the date of final distribution in same day funds, together with any payments required to be made pursuant to Section 3 of this Part I in connection with the liquidation of the Fund. After the payment to the Holders of the shares of MuniPreferred of the full preferential amounts provided for in this paragraph (b), the Holders of MuniPreferred as such shall have no right or claim to any of the remaining assets of the Fund. (c) PRO RATA DISTRIBUTIONS. In the event the assets of the Fund available for distribution to the Holders of shares of MuniPreferred upon any dissolution, liquidation, or winding up of the affairs of the Fund, whether voluntary or involuntary, shall be insufficient to pay in full all amounts to which such Holders are entitled pursuant to paragraph (b) of this Section 12, no such distribution shall be made on account of any shares of any other class or series of Preferred Shares ranking on a parity with the shares of MuniPreferred with 41 respect to the distribution of assets upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be paid on account of the shares of MuniPreferred, ratably, in proportion to the full distributable amounts for which holders of all such parity shares are respectively entitled upon such dissolution, liquidation or winding up. (d) RIGHTS OF JUNIOR SHARES. Subject to the rights of the holders of shares of any series or class or classes of shares ranking on a parity with the shares of MuniPreferred with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund, after payment shall have been made in full to the Holders of the shares of MuniPreferred as provided in paragraph (b) of this Section 12, but not prior thereto, any other series or class or classes of shares ranking junior to the shares of MuniPreferred with respect to the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the Holders of the shares of MuniPreferred shall not be entitled to share therein. (e) CERTAIN EVENTS NOT CONSTITUTING LIQUIDATION. Neither the sale of all or substantially all the property or business of the Fund, nor the merger or consolidation of the Fund into or with any Massachusetts business trust or corporation nor the merger or consolidation of any Massachusetts business trust or corporation into or with the Fund shall be a dissolution, liquidation or winding up, whether voluntary or involuntary, for the purposes of this Section 12. 13. MISCELLANEOUS. (a) AMENDMENT OF APPENDIX A TO ADD ADDITIONAL SERIES. Subject to the provisions of paragraph (c) of Section 10 of this Part I, the Board of Trustees may, by resolution duly adopted, without shareholder approval (except as otherwise provided by this Statement or required by applicable law), amend APPENDIX A hereto to add additional series of MuniPreferred (and terms relating thereto) to the series of MuniPreferred theretofore described thereon, and each such additional series shall be governed by the terms of this Statement as if such series had been described on APPENDIX A hereto on the date hereof. (b) APPENDIX A INCORPORATED BY REFERENCE. APPENDIX A hereto is incorporated in and made a part of this Statement by reference thereto. (c) NO FRACTIONAL SHARES. No fractional shares of MuniPreferred shall be issued. (d) STATUS OF SHARES OF MUNIPREFERRED REDEEMED, EXCHANGED OR OTHERWISE ACQUIRED BY THE FUND. Shares of MuniPreferred which are redeemed, exchanged or otherwise acquired by the Fund shall return to the status of authorized and unissued Preferred Shares, without designation as to series. 42 (e) BOARD MAY RESOLVE AMBIGUITIES. To the extent permitted by applicable law, the Board of Trustees may interpret or adjust the provisions of this Statement to resolve any inconsistency or ambiguity or to remedy any formal defect, and may amend this Statement with respect to any series of MuniPreferred prior to the issuance of shares of such series. (f) HEADINGS NOT DETERMINATIVE. The headings contained in this Statement are for convenience of reference only and shall not affect the meaning or interpretation of this Statement. (g) NOTICES. All notices or communications, unless otherwise specified in the By-Laws of the Fund or this Statement, shall be sufficiently given if in writing and delivered in person or mailed by first-class mail, postage prepaid. PART II 1. ORDERS. (a) Prior to the Submission Deadline on each Auction Date for shares of a series of MuniPreferred: (i) each Beneficial owner of shares of such series may submit to its Broker-Dealer by telephone or otherwise information as to: (A) the number of Outstanding shares, if any, of such series held by such Beneficial Owner which such Beneficial Owner desires to continue to hold without regard to the Applicable Rate for shares of such series for the next succeeding Rate Period of such shares; (B) the number of Outstanding shares, if any, of such series held by such Beneficial Owner which such Beneficial Owner offers to sell if the Applicable Rate for shares of such series for the next succeeding Rate Period of shares of such series shall be less than the rate per annum specified by such Beneficial Owner; and/or (C) the number of Outstanding shares, if any, of such series held by such Beneficial Owner which such Beneficial Owner offers to sell without regard to the Applicable Rate for shares of such series for the next succeeding Rate Period of shares of such series; and (ii) one or more Broker-Dealers, using lists of Potential Beneficial Owners, shall in good faith for the purpose of conducting a competitive Auction in a commercially reasonable manner, contact Potential Beneficial Owners (by telephone or otherwise), including Persons that are not Beneficial Owners, on such lists to determine the number of shares, if any, of such series which each such Potential Beneficial Owner offers to purchase if the Applicable Rate for shares of such series for the next succeeding 43 Rate Period of shares of such series shall not be less than the rate per annum specified by such Potential Beneficial Owner. For the purposes hereof, the communication by a Beneficial Owner or Potential Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent, of information referred to in clause (i) (A), (i) (B), (i) (C) or (ii) of this paragraph (a) is hereinafter referred to as an "Order" and collectively as "Orders" and each Beneficial Owner and each Potential Beneficial Owner placing an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the Auction Agent, is hereinafter referred to as a "Bidder" and collectively as "Bidders"; an Order containing the information referred to in clause (i) (A) of this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively as "Hold Orders"; an Order containing the information referred to in clause (i) (B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order containing the information referred to in clause (i) (C) of this paragraph (a) is hereinafter referred to as a "Sell Order" and collectively as "Sell Orders." (b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a series of MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of such series specified in such Bid if the Applicable Rate for shares of such series determined on such Auction Date shall be less than the rate specified therein; (B) such number or a lesser number of Outstanding shares of such series to be determined as set forth in clause (iv) of paragraph (a) of Section 4 of this Part II if the Applicable Rate for shares of such series determined on such Auction Date shall be equal to the rate specified therein; or (C) the number of Outstanding shares of such series specified in such Bid if the rate specified therein shall be higher than the Maximum Rate for shares of such series, or such number or a lesser number of Outstanding shares of such series to be determined as set forth in clause (iii) of paragraph (b) of Section 4 of this Part II if the rate specified therein shall be higher than the Maximum Rate for shares of such series and Sufficient Clearing Bids for shares of such series do not exist. (ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares of a series of MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to sell: (A) the number of Outstanding shares of such series specified in such Sell Order; or 44 (B) such number or a lesser number of Outstanding shares of such series as set forth in clause (iii) of paragraph (b) of Section 4 of this Part II if Sufficient Clearing Bids for shares of such series do not exist, PROVIDED, HOWEVER, that a Broker-Dealer that is an Existing Holder with respect to shares of a series of MuniPreferred shall not be liable to any person for failing to sell such shares pursuant to a Sell Order described in the proviso to paragraph (c) of Section 2 of this Part 11 if such shares were transferred by the Beneficial owner thereof without compliance by such Beneficial owner or its transferee Broker-Dealer (or other transferee person, if permitted by the Fund) with the provisions of Section 7 of this Part II. (iii) A Bid by a Potential Beneficial Holder or a Potential Holder of shares of a series of MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to purchase: (A) the number of Outstanding shares of such series specified in such Bid if the Applicable Rate for shares of such series determined on such Auction Date shall be higher than the rate specified therein; or (B) such number or a lesser number of Outstanding shares of such series as set forth in clause (v) of paragraph (a) of Section 4 of this Part II if the Applicable Rate for shares of such series determined on such Auction Date shall be equal to the rate specified therein. (c) No Order for any number of shares of MuniPreferred other than whole shares shall be valid. 2. SUBMISSION OF ORDERS BY BROKER-DEALERS to AUCTION AGENT. (a) Each Broker-Dealer shall submit in writing to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders for shares of MuniPreferred of a series subject to an Auction on such Auction Date obtained by such Broker-Dealer, designating itself (unless otherwise permitted by the Fund) as an Existing Holder in respect of shares subject to orders submitted or deemed submitted to it by Beneficial Owners and as a Potential Holder in respect of shares subject to orders submitted to it by Potential Beneficial owners, and shall specify with respect to each order for such shares: (i) the name of the Bidder placing such order (which shall be the Broker-Dealer unless otherwise permitted by the Fund); (ii) the aggregate number of shares of such series that are the subject of such Order; (iii) to the extent that such Bidder is an Existing Holder of shares of such series: 45 (A) the number of shares, if any, of such series subject to any Hold Order of such Existing Holder: (B) the number of shares, if any, of such series subject to any Bid of such Existing Holder and the rate specified in such Bid; and (C) the number of shares, if any, of such series subject to any Sell Order of such Existing Holder; and (iv) to the extent such Bidder is a Potential Holder of shares of such series, the rate and number of shares of such series specified in such Potential Holder's Bid. (b) If any rate specified in any Bid contains more than three figures to the right of the decimal point, the Auction Agent shall round such rate up to the next highest one thousandth (.001) of 1%. (c) If an Order or Orders covering all of the Outstanding shares of MuniPreferred of a series held by any Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a Hold Order to have been submitted by or on behalf of such Existing Holder covering the number of Outstanding shares of such series held by such Existing Holder and not subject to Orders submitted to the Auction Agent; PROVIDED, HOWEVER, that if an Order or Orders covering all of the Outstanding shares of such series held by any Existing Holder is not submitted to the Auction Agent prior to the Submission Deadline for an Auction relating to a Special Rate Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem a Sell Order to have been submitted by or on behalf of such Existing Holder covering the number of outstanding shares of such series held by such Existing Holder and not subject to Orders submitted to the Auction Agent. (d) If one or more Orders of an Existing Holder is submitted to the Auction Agent covering in the aggregate more than the number of Outstanding shares of MuniPreferred of a series subject to an Auction held by such Existing Holder, such Orders shall be considered valid in the following order of priority: (i) all Hold Orders for shares of such series shall be considered valid, but only up to and including in the aggregate the number of Outstanding shares of such series held by such Existing Holder, and if the number of shares of such series subject to such Hold Orders exceeds the number of Outstanding shares of such series held by such Existing Holder, the number of shares subject to each such Hold Order shall be reduced pro rata to cover the number of Outstanding shares of such series held by such Existing Holder; (ii) (A) any Bid for shares of such series shall be considered valid up to and including the excess of the number of Outstanding shares of such 46 series held by such Existing Holder over the number of shares of such series subject to any Hold Orders referred to in clause (a) above; (B) subject to subclause (A), if more than one Bid of an Existing Holder for shares of such series is submitted to the Auction Agent with the same rate and the number of Outstanding shares of such series subject to such Bids is greater than such excess, such Bids shall be considered valid up to and including the amount of such excess, and the number of shares of such series subject to each Bid with the same rate shall be reduced pro rata to cover the number of shares of such series equal to such excess; (C) subject to subclauses (A) and (B), if more than one Bid of an Existing Holder for shares of such series is submitted to the Auction Agent with different rates, such Bids shall be considered valid in the ascending order of their respective rates up to and including the amount of such excess; and (D) in any such event, the number, if any, of such Outstanding shares of such series subject to any portion of Bids considered not valid in whole or in part under this clause (ii) shall be treated as the subject of a Bid for shares of such series by or on behalf of a Potential Holder at the rate therein specified; and (iii) all Sell Orders for shares of such series shall be considered valid up to and including the excess of the number of Outstanding shares of such series held by such Existing Holder over the sum of shares of such series subject to valid Hold Orders referred to in clause (a) above and valid Bids referred to in clause (ii) above. (e) If more than one Bid for one or more shares of a series of MuniPreferred is submitted to the Auction Agent by or on behalf of any Potential Holder, each such Bid submitted shall be a separate Bid with the rate and number of shares therein specified. (f) Any Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction Agent, prior to the Submission Deadline on any Auction Date, shall be irrevocable. 3. DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND APPLICABLE RATE. (a) Not earlier than the Submission Deadline on each Auction Date for shares of a series of MuniPreferred, the Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the Broker-Dealers in respect of shares of such series (each such Order as submitted or deemed submitted by a Broker-Dealer being hereinafter referred to individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," 47 "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine for such series: (i) the excess of the number of Outstanding shares of such series over the number of Outstanding shares of such series subject to Submitted Hold Orders (such excess being hereinafter referred to as the "Available MuniPreferred" of such series); (ii) from the Submitted Orders for shares of such series whether: (A) the number of Outstanding shares of such series subject to Submitted Bids of Potential Holders specifying one or more rates equal to or lower than the Maximum Rate for shares of such series; exceeds or is equal to the sum of: (B) the number of Outstanding shares of such series subject to Submitted Bids of Existing Holders specifying one or more rates higher than the Maximum Rate for shares of such series; and (C) the number of Outstanding shares of such series subject to Submitted Sell Orders (in the event such excess or such equality exists (other than because the number of shares of such series in subclauses (B) and (C) above is zero because all of the Outstanding shares of such series are subject to Submitted Hold Orders), such Submitted Bids in subclause (A) above being hereinafter referred to collectively as "Sufficient Clearing Bids" for shares of such series); and (iii) if Sufficient Clearing Bids for shares of such series exist, the lowest rate specified in such Submitted Bids (the "Winning Bid Rate" for shares of such series) which if: (A)(I) each such Submitted Bid of Existing Holders specifying such lowest rate and (II) all other such Submitted Bids of Existing Holders specifying lowef rates were rejected, thus entitling such Existing Holders to continue to hold the shares of such series that are subject to such Submitted Bids; and (B)(I) each such Submitted Bid of Potential Holders specifying such lowest rate and (II) all other such Submitted Bids of Potential Holders specifying lower rates were accepted; would result in such Existing Holders described in subclause (A) above continuing to hold an aggregate number of Outstanding shares of such series which, when added to the number of Outstanding shares of such series to be purchased by such Potential Holders described in subclause (B) above, would equal not less than the Available MuniPreferred of such series. 48 (b) Promptly after the Auction Agent has made the determinations pursuant to paragraph (a) of this Section 3, the Auction Agent shall advise the Fund of the Maximum Rate for shares of the series of MuniPreferred for which an Auction is being held on the Auction Date and, based on such determination, the Applicable Rate for shares of such series for the next succeeding Rate Period thereof as follows: (i) if Sufficient Clearing Bids for shares of such series exist, that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be equal to the Winning Bid Rate for shares of such series so determined, (ii) if Sufficient Clearing Bids for shares of such series do not exist (other than because all of the Outstanding shares of such series are subject to Submitted Hold Orders), that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be equal to the Maximum Rate for shares of such series; or (iii) if all of the Outstanding shares of such series are subject to Submitted Hold Orders, that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be as set forth in Section 12 of APPENDIX A hereto. 4. ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND ALLOCATION OF SHARES. Existing Holders shall continue to hold the shares of MuniPreferred that are subject to Submitted Hold Orders, and, based on the determinations made pursuant to paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted Sell Orders shall be accepted or rejected by the Auction Agent and the Auction Agent shall take such other action as set forth below: (a) If Sufficient Clearing Bids for shares of a series of MuniPreferred have been made, all Submitted Sell Orders with respect to shares of such series shall be accepted and, subject to the provisions of paragraphs (d) and (e) of this Section 4, Submitted Bids with respect to shares of such series shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids with respect to shares of such series shall be rejected: (i) "Existing Holders" Submitted Bids for shares of such series specifying any rate that is higher than the Winning Bid Rate for shares of such series shall be accepted, thus requiring each such Existing Holder to sell the shares of MuniPreferred subject to such Submitted Bids; (ii) "Existing Holders" Submitted Bids for shares of such series specifying, any rate that is lower than the Winning Bid Rate for shares of such series shall be rejected, thus entitling each such Existing Holder to continue to hold the shares of MuniPreferred subject to such Submitted Bids; 49 (iii) "Potential Holders" Submitted Bids for shares of such series specifying any rate that is lower than the Winning Bid Rate for shares of such series shall be accepted: (iv) each Existing Holder's Submitted Bid for shares of such series specifying a rate that is equal to the Winning Bid Rate for shares of such series shall be rejected, thus entitling such Existing Holder to continue to hold the shares of MuniPreferred subject to such Submitted Bid, unless the number of Outstanding shares of MuniPreferred subject to all such Submitted Bids shall be greater than the number of shares of MuniPreferred ("remaining shares") in the excess of the Available MuniPreferred of such series over the number of shares of MuniPreferred subject to Submitted Bids described in clauses (ii) and (iii) of this paragraph (a), in which event such Submitted Bid of such Existing Holder shall be rejected in part, and such Existing Holder shall be entitled to continue to hold shares of MuniPreferred subject to such Submitted Bid, but only in an amount equal to the number of shares of MuniPreferred of such series obtained by multiplying the number of remaining shares by a fraction, the numerator of which shall be the number of Outstanding shares of MuniPreferred held by such Existing Holder subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of MuniPreferred subject to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning Bid Rate for shares of such series; and (v) each Potential Holder's Submitted Bid for shares of such series specifying a rate that is equal to the Winning Bid Rate for shares of such series shall be accepted but only in an amount equal to the number of shares of such series obtained by multiplying the number of shares in the excess of the Available MuniPreferred of such series over the number of shares of MuniPreferred subject to Submitted Bids described in clauses (ii) through (iv) of this paragraph (a) by a fraction, the numerator of which shall be the number of Outstanding shares of MuniPreferred subject to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding shares of MuniPreferred subject to such Submitted Bids made by all such Potential Holders that specified a rate equal to the Winning Bid Rate for shares of such series. (b) If Sufficient Clearing Bids for shares of a series of MuniPreferred have not been made (other than because all of the Outstanding shares of such series are subject to Submitted Hold Orders), subject to the provisions of paragraph (d) of this Section 4, Submitted Orders for shares of such series shall be accepted or rejected as follows in the following order of priority and all other Submitted Bids for shares of such series shall be rejected: (a) Existing Holders' Submitted Bids for shares of such series specifying any rate that is equal to or lower than the Maximum Rate for shares of 50 such series shall be rejected, thus entitling such Existing Holders to continue to hold the shares of MuniPreferred subject to such Submitted Bids: (ii) Potential Holders' Submitted Bids for shares of such series specifying any rate that is equal to or lower than the Maximum Rate for shares of such series shall be accepted; and (iii) Each Existing Holder's Submitted Bid for shares of such series specifying any rate that is higher than the Maximum Rate for shares of such series and the Submitted Sell Orders for shares of such series of each existing holder shall be accepted, thus entitling each existing holder that submitted or on whose behalf was submitted any such submitted bid or submitted sell order to sell the shares of such series subject to such submitted bid or submitted sell order, but in both cases only in an amount equal to the number of shares of such series obtained by multiplying the number of shares of such series subject to submitted bids described in clause (ii) of this paragraph (b) by a fraction, the numerator of which shall be the number of outstanding shares of such series held by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator of which shall be the aggregate number of Outstanding shares of such series subject to all such Submitted Bids and Submitted Sell Orders. (c) If all of the Outstanding shares of a series of MuniPreferred are subject to Submitted Hold Orders, all Submitted Bids for shares of such series shall be rejected. (d) If, as a result of the procedures described in clause (iv) or (v) of paragraph (a) or clause (iii) of paragraph (b) of this Section 4, any Existing Holder would be entitled or required to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share of a series of MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, round up or down the number of shares of MuniPreferred of such series to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date as a result of such procedures so that the number of shares so purchased or sold by each Existing Holder or Potential Holder on such Auction Date shall be whole shares of MuniPreferred. (e) If, as a result of the procedures described in clause (v) of paragraph (a) of this Section 4, any Potential Holder would be entitled or required to purchase less than a whole share of a series of MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it shall determine in its sole discretion, allocate shares of MuniPreferred of such series for purchase among Potential Holders so that only whole shares of MuniPreferred of such series are purchased on such Auction Date as a result of such procedures by any Potential Holder, even if such allocation results in one or more Potential 51 Holders not purchasing shares of MuniPreferred of such series on such Auction Date. (f) Based on the results of each Auction for shares of a series of MuniPreferred, the Auction Agent shall determine the aggregate number of shares of such series to be purchased and the aggregate number of shares of such series to be sold by Potential Holders and Existing Holders and, with respect to each Potential Holder and Existing Holder, to the extent that such aggregate number of shares to be purchased and such aggregate number of shares to be sold differ, determine to which other Potential Holder(s) or Existing Holder(s) they shall deliver, or from which other Potential Holder(s) or Existing Holder(s) they shall receive, as the case may be, shares of MuniPreferred of such series. 5. NOTIFICATION OF ALLOCATIONS. Whenever the Fund intends to include any net capital gains or other income taxable for Federal income tax purposes in any dividend on shares of MuniPreferred, the Fund shall, in the case of a Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer, and may, in the case of any other Special Rate Period, notify the Auction Agent of the amount to be so included not later than the Dividend Payment Date next preceding the Auction Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction Agent receives such notice from the Fund, it will be required in turn to notify each Broker-Dealer, who, on or prior to such Auction Date, in accordance with its Broker-Dealer Agreement, will be required to notify its Beneficial Owners and Potential Beneficial Owners of shares of MuniPreferred believed by it to be interested in submitting an Order in the Auction to be held on such Auction Date. 6. AUCTION AGENT. For so long as any shares of MuniPreferred are outstanding, the Auction Agent, duly appointed by the Fund to so act, shall be in each case a commercial bank, trust company or other financial institution independent of the Fund and its affiliates (which however, may engage or have engaged in business transactions with the Fund or its affiliates) and at no time shall the Fund or any of its affiliates act as the Auction Agent in connection with the Auction Procedures. If the Auction Agent resigns or for any reason its appointment is terminated during any period that any shares of MuniPreferred are outstanding, the Board of Trustees shall use its best efforts promptly thereafter to appoint another qualified commercial bank, trust company or financial institution to act as the Auction Agent. 7. TRANSFER OF SHARES OF MUNIPREFERRED Unless otherwise permitted by the Fund, a Beneficial Owner or an Existing Holder may sell, transfer or otherwise dispose of shares of MuniPreferred only in whole shares and only pursuant to a Bid or Sell Order placed with the Auction Agent in accordance with the procedures described in this Part II 52 or to a Broker-Dealer; PROVIDED, HOWEVER, that (a) a sale, transfer or other disposition of shares of MuniPreferred from a customer of a Broker-Dealer who is listed on the records of that Broker-Dealer as the holder of such shares to that Broker-Dealer or another customer of that Broker-Dealer shall not be deemed to be a sale, transfer or other disposition for purposes of this Section 7 if such Broker-Dealer remains the Existing Holder of the shares so sold, transferred or disposed of immediately after such sale, transfer or disposition and (b) in the case of all transfers other than pursuant to Auctions, the Broker-Dealer (or other Person, if permitted by the Fund) to whom such transfer is made shall advise the Auction Agent of such transfer. 8. GLOBAL CERTIFICATE. Prior to the commencement of a Voting Period, (i) all of the shares of a series of MuniPreferred outstanding from time to time shall be represented by one global certificate registered in the name of the Securities Depository or its nominee and (ii) no registration of transfer of shares of a series of MuniPreferred shall be made on the books of the Fund to any Person other than the Securities Depository or its nominee. IN WITNESS WHEREOF, NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, has caused these presents to be signed on September 16, 1993, in its name and on its behalf by its Vice President and attested by its Assistant Secretary. The Fund's Declaration of Trust is on file with the Secretary of State of the Commonwealth of Massachusetts, and the said officers of the Fund have executed this Statement as officers and not individually, and the obligations and rights set forth in this Statement are not binding upon any such officers, or the trustees or shareholders of the Fund, individually, but are binding only upon the assets and property of the Fund. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND by /s/ O. Walter Renfftlen ------------------------------ O. Walter Renfftlen Vice President and Controller ATTEST: /s/ Gifford R. Zimmerman - ------------------------------- Gifford R. Zimmerman Assistant Secretary 53 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND APPENDIX A SECTION 1. DESIGNATION AS TO SERIES. SERIES W: A series of 1,200 Preferred Shares, liquidation preference $50,000 per share, is hereby designated "Municipal Auction Rate Cumulative Preferred Shares, Series W." Each share of Series W MuniPreferred shall be issued on June 10, 1991; have an Applicable Rate for its Initial Rate Period equal to 4.10% per annum; have an initial Dividend Payment Date of June 20, 1991, and have such other preferences, limitations and relative voting rights, in addition to those required by applicable law or set forth in the Declaration applicable to Preferred Shares of the Fund, as set forth in Part I and Part II of this Statement. The Series W MuniPreferred shall constitute a separate series of Preferred Shares of the Fund, and each share of Series W MuniPreferred shall be identical except as provided in Section 11 of Part I of this Statement. SECTION 2. NUMBER OF AUTHORIZED SHARES PER SERIES. The number of authorized shares constituting Series W MuniPreferred is 1,200. SECTION 3. EXCEPTIONS TO CERTAIN DEFINITIONS. Notwithstanding the definitions contained under the heading "Definitions" in this Statement, the following terms shall have the following meanings for purposes of this Statement: Not applicable. SECTION 4. CERTAIN DEFINITIONS. For purposes of this Statement, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and vice versa), except where the context otherwise requires: "GROSS-UP PAYMENT" means payment to a Holder of shares of MuniPreferred of an amount which, when taken together with the aggregate amount of Taxable Allocations made to such Holder to which such Gross-up Payment relates, would cause such Holder's dividends in dollars (after Federal and Pennsylvania income tax consequences) from the aggregate of such Taxable Allocations and the related Gross-up Payment to be equal to the dollar amount of the dividends which would have been received by such Holder if the amount of such aggregate Taxable Allocations would have been excludable from the gross income of such Holder. Such Gross-up Payment shall be calculated (i) without consideration being A-1 given to the time value of money; (h) assuming that no Holder of shares of MuniPreferred is subject to the Federal alternative minimum tax with respect to dividends received from the Fund; and (iii) assuming that each Taxable Allocation and each Gross-up Payment (except to the extent such Gross-up Payment is designated as an exempt-interest dividend under Section 852(b)(5) of the Code or successor provisions) would be taxable in the hands of each Holder of shares of MuniPreferred at the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or net capital gains, as applicable, or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income or net capital gains, as applicable, whichever is greater, in effect at the time such Gross-up Payment is made. "ISSUE TYPE CATEGORY" shall mean, with respect to a Municipal Obligation acquired by the Fund, (A) for purposes of calculating Moody's Eligible Assets as of any Valuation Date, one of the following categories into which such Municipal Obligation falls based upon a good faith determination by the Fund: health care issues (including issues related to teaching and non-teaching hospitals, public or private); housing issues (including issues related to single- and multi- family housing projects); educational facilities issues (including issues related to public and private schools); student loan issues; resource recovery issues, transportation issues (including issues related to mass transit, airports and highways); industrial development bond issues (including issues related to pollution control facilities); utility issues (including issues related to the provision of gas, water, sewers and electricity); general obligation issues; lease obligations (including certificates of participation); escrowed bonds, and other issues ("Other Issues") not failing within one of the aforementioned categories; and (B) for purposes of calculating S&P Eligible Assets as of any Valuation Date, one of the following categories into which such Municipal Obligation falls based upon a good faith determination by the Fund: health care issues (including issues related to teaching and non-teaching hospitals, public or private); housing issues (including issues related to single- and multi-family housing projects); educational facilities issues (including issues related to public and private schools); student loan issues, transportation issues (including issues related to mass transit, airports and highways); industrial development bond issues (including issues related to pollution control facilities); public power utilities issues (including issues related to the provision of electricity, either singly or in combination with the provision of other utilities, and issues related only to the provision of gas); water and sewer utilities issues (including issues related to the provision of water and sewers as well as combination utilities not falling within the public power utilities category); special utilities issues (including issues related to resource recovery, solid waste and irrigation as well as other utility issues A-2 not falling within the public power and water and sewer utilities categories); general obligation issues; lease obligations (including certificates of participation); escrowed bonds; and other issues ("Other Issues") not falling within one of the aforementioned categories. "MOODY'S DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted Value of any Moody's Eligible Asset, the percentage determined by reference to the rating on such asset and the shortest Exposure Period set forth opposite such rating that is the same length as or is longer than the Moody's Exposure Period, in accordance with the table set forth below:
RATING CATEGORY ----------------------------------------------------------------- EXPOSURE PERIOD Aaa* Aa- A* Baa* Other** (V)MIG-*** SP-1+*** - --------------- ---- ---- ---- ---- ------- ---------- -------- 7 weeks................ 151% 159% 168% 202% 229% 136% 148% 8 weeks or less but greater than seven weeks................ 154 164 173 205 235 137 149 9 weeks or less but greater than eight weeks................ 158 169 179 209 242 138 150
- --------------- * Moody's rating. ** Municipal Obligations not rated by Moody's but rated BBB or BBB+ by S&P. *** Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moody's, rated SP-1+ by S&P, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating. Notwithstanding the foregoing, (i) the Moody's Discount Factor for short- term Municipal Obligations will be 115%, so long as such Municipal Obligations are rated at least MIG-1, VMIG-l or P-1 by Moody's and mature or have a demand feature at par exercisable in 30 days or less or 125% as long as such Municipal Obligations are rated at least A-1+/AA or SP-1+/AA by S&P and mature or have a demand feature at par exercisable in 30 days or less and (ii) no Moody's Discount Factor will be applied to cash or to Receivables for Municipal Obligations Sold. "MOODY'S ELIGIBLE ASSET" shall mean cash, Receivables for Municipal Obligations Sold or a Municipal Obligation that (i) pays interest in cash, (ii) is publicly rated Baa or higher by Moody's or, if not rated by Moody's but rated by S&P, is rated at least BBB by S&P (PROVIDED, HOWEVER, that for purposes of determining the Moody's Discount Factor applicable to any such S&P-rated Municipal Obligation, such Municipal Obligation (excluding any short-term Municipal Obligation) shall be deemed to have a A-3 Moody's rating which is one full rating category lower than its S&P rating), (iii) does not have its Moody's rating suspended by Moody's, and (iv) is part of an issue of Municipal Obligations of at least $10,000,000. Except for general obligation bonds, Municipal Obligations issued by any one issuer and rated BBB by S&P may comprise no more than 4% of total Moody's Eligible Assets; such BBB- rated municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated Baa by Moody's or A by S&P, may comprise no more than 6% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated A by Moody's or AA by S&P, may comprise no more than 10% of total Moody's Eligible Assets, and such BBB, Baa, A and AA-rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same issuer and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of total Moody's Eligible Assets. For purposes of the foregoing sentence, any Municipal Obligation backed by the guaranty, letter of credit or insurance issued by a third party shall be deemed to be issued by such third party if the issuance of such third party credit is the sole determinant of the rating on such Municipal Obligation. Municipal Obligations falling within a particular Issue Type Category and rated BBB by S&P may comprise no more than 12% of total Moody's Eligible Assets; such BBB-rated Municipal Obligations, if any, together with any Municipal Obligations falling within a particular Issue Type Category and rated Baa by Moody's or A by S&P, may comprise no more than 20% of total Moody's Eligible Assets; such BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal Obligations falling within a particular Issue Type Category and rated A by Moody's or AA by S&P, may comprise no more than 40% of total Moody's Eligible Assets; and such BBB, Baa, A and AA-rated Municipal Obligations, if any, together with any Municipal Obligations falling within a particular Issue Type Category and rated Aa by Moody's or AAA by S&P, may comprise no more than 60% of total Moody's Eligible Assets. For purposes of this definition, a Municipal Obligation shall be deemed to be rated BBB by S&P if rated BBB or BBB+ by S&P. Notwithstanding any other provision of this definition, (A) in the case of general obligation Municipal Obligations only, Municipal Obligations issued by issuers located within any one county and rated BEB by S&P may comprise no more than 4% of Moody's Eligible Assets; such BBB- rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same county and rated Baa by Moody's or A by S&P, may comprise no more than 6% of Moody's Eligible Assets; such BBB, Baa and A-rated Municipal Obligations, if any, together with any Municipal Obligations issued by issuers located within the same county and rated A by Moody's or AA by S&P, may comprise no more than 10% of Moody's Eligible Assets; and such BBB, Baa, A and AA-rated Municipal A-4 Obligations, if any, together with any Municipal Obligations issued by issuers located within the same county and rated Aa by Moody's or AAA by S&P, may comprise no more than 20% of Moody's Eligible Assets; and (B) in no event may (i) student loan Municipal Obligations comprise more than 10% of Moody's Eligible Assets; (ii) resource recovery Municipal Obligations comprise more than 10% of Moody's Eligible Assets; and (iii) Other Issues comprise more than 10% of Moody's Eligible Assets. For purposes of applying the foregoing requirements, a Municipal Obligation rated BBB- by S&P shall not be considered to be rated BBB by S&P, Moody's Eligible Assets shall be calculated without including cash, and Municipal Obligations rated MIG-1 or VMIG-l or, if not rated by Moody's, rated SP-l+ by S&P, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating, shall be considered to have a long-term rating of A. When the Fund sells a Municipal Obligation and agrees to repurchase such Municipal Obligation at a future date, such Municipal Obligation shall be valued at its Discounted Value for purposes of determining Moody's Eligible Assets, and the amount of the repurchase price of such Municipal Obligation shall be included as a liability for purposes of calculating the MuniPreferred Basic Maintenance Amount. When the Fund purchases a Moody's Eligible Asset and agrees to sell it at a future date, such Eligible Asset shall be valued at the amount of cash to be received by the Fund upon such future date, provided that the counterparty to the transaction has a long-term debt rating of at least A2 from Moody's and the transaction has a term of no more than 30 days, otherwise such Eligible Asset shall be valued at the Discounted Value of such Eligible Asset. Notwithstanding the foregoing, an asset will not be considered a Moody's Eligible Asset to the extent it is (i) subject to any material lien, mortgage, pledge, security interest or security agreement of any kind (collectively, "Liens"), except for (a) Liens which are being contested in good faith by appropriate proceedings and which Moody's has indicated to the Fund will not affect the status of such asset as a Moody's Eligible Asset, (b) Liens for taxes that are not then due and payable or that can be paid thereafter without penalty, (c) Liens to secure payment for services rendered or cash advanced to the Fund by Nuveen Advisory Corp., United States Trust Company of New York or the Auction Agent and (d) Liens by virtue of any repurchase agreement; or (ii) deposited irrevocably for the payment of any liabilities for purposes of determining the MuniPreferred Basic Maintenance Amount. "OTHER ISSUES" shall have the respective meanings specified in the definition of "Issue Type Category." "RATE MULTIPLE," for shares of a series of MuniPreferred on any Auction Date for shares of such series, shall mean the percentage, determined as set forth below, based on the prevailing rating of shares of such series in A-5 effect at the close of business on the Business Day next preceding such Auction Date: PREVAILING RATING PERCENTAGE ----------------- ---------- "aa3"/AA- or higher ...................... 110% "a3"/A- .................................. 125% "baa3"/BBB- .............................. 150% "ba3"/BB- ................................ 200% Below "ba3"/BB- .......................... 250% PROVIDED, HOWEVER, that in the event the Fund has notified the Auction Agent of its intent to allocate income taxable for Federal income tax purposes to shares of such series prior to the Auction establishing the Applicable Rate for shares of such series, the applicable percentage in the foregoing table shall be divided by the quantity 1 minus the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income, whichever is greater. For purposes of this definition, the "prevailing rating" of shares of a series of MuniPreferred shall be (i) "aa3"/AA- or higher if such shares have a rating of "aa3" or better by Moody's and AA- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (ii) if not "aa3"/AA- or higher, then "a3"/A- if such shares have a rating of "a3" or better by Moody's and A- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iii) if not "aa3"/AA- or higher or "aa3"/A-, then "baa3"/BBB- if such shares have a rating of "baa3" or better by Moody's and BBB- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, (iv) if not "aa3"/AA- or higher, "a3"/A- or "baa3"/BBB-, then "ba3"/BB- if such shares have a rating of "ba3" or better by Moody's and BB- or better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute rating agencies selected as provided below, and (v) if not "aa3"/AA- or higher, "a3"/A-, "baa3",/BBB-, or "ba3"/BB-, then Below "ba3"/BB-; PROVIDED, HOWEVER, that if such shares are rated by only one rating agency, the prevailing rating will be determined without reference to the rating of any other rating agency. The Fund shall take all reasonable action necessary to enable either S&P or Moody's to provide a rating for shares of MuniPreferred. If neither S&P nor Moody's shall make such a rating available, the party set forth in Section 7 of APPENDIX A or its successor shall select at least one nationally recognized statistical rating organization (as A-6 that term is used in the rules and regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended from time to time) to act as a substitute rating agency in respect of shares of the series of MuniPreferred set forth opposite such party's name in Section 7 of APPENDIX A and the Fund shall take all reasonable action to enable such rating agency to provide a rating for such shares. "S&P DISCOUNT FACTOR" shall mean, for purposes of determining the Discounted Value of any S&P Eligible Asset, the percentage determined by reference to the rating on such asset and the shortest Exposure Period set forth opposite such rating that is the same length as or is longer than the S&P Exposure Period, in accordance with the table set forth below:
RATING CATEGORY ----------------------- EXPOSURE PERIOD AAA* AA* A* BBB* --------------- ---- --- -- ---- 40 Business Days........................... 210% 215% 230% 270% 22 Business Days........................... 190 195 210 250 10 Business Days........................... 175 180 195 235 7 Business Days........................... 170 175 190 230 3 Business Days........................... 150 155 170 210 - ---------- * S&P rating.
Notwithstanding the foregoing, (i) the S&P Discount Factor for short-term Municipal Obligations will be 115%, so long as such Municipal Obligations are rated A-1+ or SP-l+ by S&P and mature or have a demand feature exercisable within 30 days or less, or 125% if such Municipal Obligations are not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moody's; PROVIDED, HOWEVER, that any such Moody's-rated short-term Municipal Obligations which have demand features exercisable within 30 days or less must be backed by a letter of credit, liquidity facility or guarantee from a bank or other financial institution with a short-term rating of at least A-I+ from S&P; and FURTHER PROVIDED that such Moody's-rated short-term Municipal Obligations may comprise no more than 50% of short-term Municipal Obligations that qualify as S&P Eligible Assets and (ii) no S&P Discount Factor will be applied to cash or to Receivables for Municipal Obligations Sold. For purposes of the foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by Moody's, which do not mature or have a demand feature at par exercisable in 30 days and which do not have a long-term rating, shall be considered to be short-term Municipal Obligations. "S&P ELIGIBLE ASSET" shall mean cash (excluding any cash irrevocably deposited by the Fund for the payment of any liabilities within the meaning of MuniPreferred Basic Maintenance Amount), Receivables for Municipal Obligations Sold or a Municipal Obligation owned by the Fund that (i) is interest bearing and pays interest at least semi-annually; (ii) is A-7 payable with respect to principal and interest in U.S. Dollars, (iii) is publicly rated BBB or higher by S&P or, if not rated by S&P but rated by Moody's, is rated at least A by Moody's (PROVIDED, HOWEVER, that such Moody's- rated Municipal Obligations will be included in S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 50% of the aggregate Market Value of S&P Eligible Assets; and FURTHER PROVIDED that, for purposes of determining the S&P Discount Factor applicable to any such Moody's-rated Municipal Obligation, such Municipal Obligation will be deemed to have an S&P rating which is one full rating category lower than its Moody's rating); (iv) is not part of a private placement of Municipal Obligations; and (v) is part of an issue of Municipal Obligations with an original issue size of at least $10 million or, if of an issue with an original issue size below $10 million (but in no event below $5 million), is issued by an issuer with a total of at least $50 million of securities outstanding. Solely for purposes of this definition, the term "Municipal Obligation" means any obligation the interest on which is exempt from regular Federal income taxation and which is issued by any of the fifty United States, the District of Columbia or any of the territories of the United States, their subdivisions, counties, cities, towns, villages, school districts and agencies (including authorities and special districts created by the states), and federally sponsored agencies such as local housing authorities. Notwithstanding the foregoing limitations: (1) Municipal Obligations of any one issuer or guarantor (excluding bond insurers) shall be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 10% of the aggregate Market Value of S&P Eligible Assets, provided that 2% is added to the applicable S&P Discount Factor for every 1% by which the Market Value of such Municipal Obligations exceeds 5% of the aggregate Market Value of S&P Eligible Assets; (2) Municipal Obligations guaranteed or insured by any one bond insurer shall be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 25% of the aggregate Market Value of S&P Eligible Assets; (3) Municipal Obligations of any one Issue Type Category shall be considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations does not exceed 20% of the aggregate Market Value of S&P Eligible Assets. For purposes of this requirement, Municipal Obligations shall be classified into one of the following categories: health care issues, housing issues, educational facilities issues, student loan issues, transportation issues, industrial development bond issues, public power utilities issues, water and sewer utilities issues, special utilities issues, general obligation issues, lease obligations, escrowed bonds and Other Issues not failing within one of the A-8 aforementioned categories. Furthermore, special utilities issues that are not rated by S&P shall not comprise S&P Eligible Assets; and (4) Non-Pennsylvania long-term Municipal Obligations shall be considered S&P Eligible Assets only to the extent that the Market Value of such Municipal Obligations does not exceed 20% of the aggregate Market Value of S&P Eligible Assets. SECTION 5. INITIAL RATE PERIODS. The Initial Rate Period for shares of Series W MuniPreferred shall be the period from and including the Date of Original Issue thereof to but excluding June 20, 1991. SECTION 6. DATE FOR PURPOSES of PARAGRAPH (yyy) CONTAINED UNDER THE HEADING "DEFINITIONS" IN THIS STATEMENT. November 30, 1993. SECTION 7. PARTY NAMED FOR PURPOSES OF THE DEFINITION OF "RATE MULTIPLE" IN THIS STATEMENT. PARTY: SERIES OF MUNIPREFERRED: Merrill Lynch, Pierce, Fenner & Smith Incorporated W SECTION 8. ADDITIONAL DEFINITIONS. "PENNSYLVANIA MUNICIPAL OBLIGATION" shall mean "Pennsylvania Municipal Obligation" as defined in the Fund's Registration Statement. SECTION 9. DIVIDEND PAYMENT DATES. Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement, dividends shall be payable on shares of Series W MuniPreferred on Thursday, June 20, 1991, and thereafter on each Thursday. SECTION 10. AMOUNT FOR PURPOSES OF SUBPARAGRAPH (c)(i) OF SECTION 5 OF PART I OF THIS STATEMENT. $60,000,000. SECTION 11. REDEMPTION PROVISIONS APPLICABLE TO INITIAL RATE PERIODS. Not applicable. SECTION 12. APPLICABLE RATE FOR PURPOSES OF SUBPARAGRAPH (b)(iii) OF SECTION 3 OF PART II OF THIS STATEMENT. For purposes of subparagraph (b)(iii) of Section 3 of Part II of this Statement, the Applicable Rate for shares of such series for the next succeeding Rate Period of shares of such series shall be equal to the lesser of the Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the A-9 product of (A) (I) the "AA" Composite Commercial Paper Rate on such Auction Date for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period Days; (II) the Treasury Bill Rate on such Auction Date for such Rate Period, if such Rate Period consists of more than 182 but fewer than 365 Rate Period Days; or (III) the Treasury Note Rate on such Auction Date for such Rate Period, if such Rate Period is more than 364 Rate Period Days (the rate described in the foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein as the "Benchmark Rate") and (B) I minus the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or the maximum marginal regular Federal corporate income tax rate applicable to ordinary income, whichever is greater, PROVIDED, HOWEVER, that if the Fund has notified the Auction Agent of its intent to allocate to shares of such series in such Rate Period any net capital gains or other income taxable for Federal income tax purposes ("Taxable Income"), the Applicable Rate for shares of such series for such Rate Period will be (i) if the Taxable Yield Rate (as defined below) is greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the Taxable Yield Rate is less than or equal to the Benchmark Rate, then the rate equal to the sum of (x) the lesser of the Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days) or the product of the Benchmark Rate multiplied by the factor set forth in the preceding clause (B) and (y) the product of the maximum marginal combined regular Federal and Pennsylvania personal income tax rate applicable to ordinary income (taking into account the Federal income tax deductibility of state taxes paid or incurred) or the maximum marginal regular Federal corporate income tax applicable to ordinary income, whichever is greater, multiplied by the Taxable Yield Rate. For purposes of the foregoing, Taxable Yield Rate means the rate determined by (a) dividing the amount of Taxable Income available for distribution per such share of MuniPreferred by the number of days in the Dividend Period in respect of which such Taxable Income is contemplated to be distributed, (b) multiplying the amount determined in (a) above by 365 (in the case of a Dividend Period of 7 Rate Period Days) or 360 (in the case of any other Dividend Period), and (c) dividing the amount determined in (b) above by $50,000. A-10 EX-99.B 3 BY-LAWS EXHIBIT 99.b Amendments to By-Laws of NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The By-Laws of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust, (the "Fund") have been amended by unanimous vote of the Board of Trustees at a meeting duly called, convened and held on October 30, 1998, to read as follows: WHEREAS, the Fund's By-Laws permit shareholders to cast a vote at any regular or special meeting of shareholders either in person or by proxy; and WHEREAS, such proxies are currently returned to the Fund by means of the United States Postal Service or by overnight courier; and WHEREAS, the Board now deems it beneficial to include the submission of proxies by telephonic and electronic means. NOW, THEREFORE, BE IT RESOLVED, that Section 2.7 of the Fund's By-Laws be amended to include the following at the end of such section: The placing of a Shareholder's name on a proxy pursuant to telephonic or electronically transmitted instructions (including, without limitation, instructions transmitted over the Internet) obtained pursuant to procedures which are reasonably designed to verify that such instructions have been authorized by such Shareholder, shall constitute execution of such proxy by or on behalf of such Shareholder. AMENDMENT TO BY-LAWS of NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The third sentence of Section 5.1 of the By-Laws of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust, have been amended by unanimous vote of the Board of Trustees at a meeting duly called, convened and held on November 19, 1997, to read as follows: "The certificates representing Common Shares shall be signed in the name of the Trust by the Chairman, 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)." AMENDMENT TO BY-LAWS OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND The By-Laws of Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust, have been amended, by unanimous vote of the Board of Trustees at a meeting duly called, convened and held on February 2, 1994, to read as follows: WHEREAS, the Board of Directors (Trustees) desires to amend the By-laws of the Fund by adding SECTION 5.6(b) and revising what becomes Section 5.6(c) in order to clarify certain provisions regarding the Board's ability to declare a record date for the payment of dividends or other distributions or allocations. NOW, THEREFORE, BE IT RESOLVED, that Section 5.6 of the By-Laws of the fund is amended and restated in its entirety to read as follows: Section 5.6 Record Date: Certification of Beneficial Owner. (a) The directors may fix a date not more than sixty (60) days before the date of a meeting of shareholders as the date for the determination of the holders of shares entitled to notice of and entitled to vote, at the meeting. (b) The directors (trustees) may fix a date for determining shareholders entitled to receive payment of any dividend or distribution or an allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock (shares). (c) In the absence of any such fixed record date, (i) the date for the determination of holders of shares entitled to notice of and entitled to vote at a meeting of shareholders shall be the later of the close of business on the day on which notice of the meeting is mailed or the thirtieth day before the meeting, and (ii) the date for determining shareholders entitled to receive payment of any dividend or distribution or an allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock (shares) shall be the close of business on the day on which the resolution of the Board of Directors (Trustees) is adopted. (d) A resolution approved by the affirmative vote of a majority of the directors (trustees) present may establish a procedure whereby a shareholder may certify in writing to the Corporation (Trust) that all or a portion of the shares registered in the name of the shareholder are held for the account of one or more beneficial owners. Upon receipt by the Corporation (Trust) of the writing, the persons specified as beneficial owners, rather than the actual shareholders, are deemed the shareholders for the purposes specified in the writing. BY-LAWS OF NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND 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 Pennsylvania Investment Quality 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. 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 10 percent of all the votes entitled to be cast at the meeting. Section 2.4 Notice of Meetings. Notice stating the time and place of the meeting, and in the case of a special meeting the purpose or purposes thereof and by whom called, shall be delivered to each shareholder entitled to vote, and each other shareholder entitled to notice of the meeting, not less than ten nor more than sixty days prior to the meeting, except where the meeting is an adjourned meeting and the date, time and place of the meeting were announced at the time of the adjournment. Section 2.5 Quorum and Action. (a) The holders of a majority of the voting power of the shares entitled to vote at a meeting are a quorum for the transaction of business. If a quorum is present when a duly called or held meeting is convened, the shareholders present may continue to transact business until adjournment, even though the withdrawal of a number of shareholders originally present leaves less than the proportion or number otherwise required for a quorum. Notwithstanding the foregoing, when holders of 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 such shares entitled to vote at a meeting shall constitute a quorum for the purpose of such an election. (b) The shareholders shall take action by the affirmative vote of the holders of a majority, 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 stock then entitled to vote may vote in person or by proxy and, except as may be 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 of stock registered in his name. Section 2.7 Proxy Representation. A shareholder may cast or authorize the casting of a vote by filing a written appointment of a proxy with an officer of the Trust at or before the meeting at which the appointment is to be effective. The appointment of a proxy is valid for eleven months, unless a longer period is expressly provided in the appointment. No appointment is irrevocable unless the appointment is coupled with an interest in the shares or in the Trust. Section 2.8 Adjourned Meetings. Any meeting of shareholders may, by announcement thereat, be adjourned to a designated time and place by the vote of the holders of a majority of the shares present and entitled to vote thereat even though less than a quorum is so present. An adjourned meeting may reconvene as designated, and when a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. 2 Section 2.9 Action by Written Consent in Lieu of Meeting of Stockholders. -- See Section 6.4 of these By-Laws. 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 initial 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 as are permitted by the Declaration of Trust, to the Executive Committee or any other committee, or to an individual or corporate investment adviser to act as investment adviser pursuant to a written contract to be approved or ratified initially by the vote of a majority of the outstanding voting securities of the Trust at the first annual meeting of shareholders and to be renewable annually by the affirmative vote of a majority of the entire Board of Trustees, including a majority of the Trustees of the Trust who are not parties to such contract or affiliated persons (other than as Trustees) of the Trust or the investment adviser. 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 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. 3 Meetings of the Board 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 ByLaws or by the Declaration of Trust. Section 3.6 Action by Written Consent in Lieu of Meetings of Trustees. - --See Section 6.4 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 its 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, each such Committee to consist of two or more persons who need not be Trustees and to have such powers and authority (to the extent permitted by law) as may be provided in such resolution. OFFICERS Section 4.1 Number and Qualifications. The officers of the Trust shall include a Chairman, a President, a Controller, one or more Vice Presidents (one of whom may be designated an Executive vice President), a Treasurer, and a Secretary. Any two or more offices may be held by the same person. Unless otherwise determined by the 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 4 may from time to time elect, or delegate to the Chairman 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, the President of 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. The Chairman 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. 5 The Chairman shall be authorized to do or cause to be done all things necessary or appropriate, including preparation, execution and filing of any documents, to effectuate the registration from time to time of 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 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, 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 from time to time. In the absence of the Chairman 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 and when so acting shall have all the powers of, and be subject to all the restrictions upon, the Chairman. Section 4.7 Executive Vice-President. In the case of the absence or inability to act of the President and the Chairman, 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 or the President. Section 4.9 Controller. The Controller shall: (a) keep accurate financial records for the Trust; (b) render to the Chairman, 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 or the President. 6 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 6.7 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 or the President. Section 4.11 The Secretary. The Secretary shall: (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the 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 and the seal of the Trust and affix and attest the seal to all stock certificates of the Trust (unless the seal of the Trust on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Trust under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by statute to be kept and filed are properly kept and filed; and (e) in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Trustees, the Chairman 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. 7 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. No certificates shall be issued for fractional Common Shares. The certificates representing Common Shares shall be signed in the name of the Trust by the Chairman, the President, the Executive Vice President or a Vice President and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer (which signatures may be either manual or facsimile, engraved or printed) and sealed with the seal of the Trust (which seal may be a facsimile, engraved or printed). In case any officer who shall have signed such certificate shall have ceased to be such officer before such certificates shall be issued, they may nevertheless be issued by the Trust with the same effect as if such officer were still in office at the date of their issue. 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 and classes 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 it may deem expedient concerning the issue, certification, 8 transfer and registration of shares of stock of the Trust. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates for shares of stock to bear the signature or signatures of any of them. Section 5.5 Lost, Destroyed or Mutilated Certificates. The holder of any certificate representing shares of the Trust shall immediately notify the Trust of any loss, destruction or mutilation of such certificate, and the Trust may issue a new certificate of stock in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated, and the 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 days before the date of a meeting of shareholders as the date for the determination of the holders of shares entitled to notice of and entitled to vote at the meeting. (b) In the absence of such fixed record date, (i) the date for determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be the later of the close of business on the day on which notice of the meeting is mailed or the thirtieth day before the meeting, and (ii) the date for determining shareholders entitled to receive payment of a dividend or an allotment of any rights shall be the close of business on the day on which the resolution of the Trustees is adopted, but the payment or allotment shall not be made more than sixty days after the date on which the resolution is adopted. (c) A resolution approved by the affirmative vote of a majority of the 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. 9 MISCELLANEOUS Section 6.1 Seal. The Trustees shall provide a suitable seal which shall be in the charge of the Secretary and shall be used as authorized by these By-Laws. Section 6.2 Fiscal Year. The fiscal year of the Trust shall be as fixed by the Trustees of the Trust. Section 6.3 Notice and Waiver of Notice. (a) Any notice of a meeting required to be given under these By-Laws to shareholders and/or Trustees may be waived by any such person (i) orally or in writing signed by such person before, at or after the meeting or (ii) by attendance at the meeting in person or, in the case of a shareholder, by proxy. (b) Except as otherwise specifically provided herein, all notices required by these By-Laws shall be printed or written, and shall be delivered either personally, by telegraph or cable or by mail and, if mailed, shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder or Trustee at his address as it appears on the records of the Trust. Section 6.4 Action by Written Consent in Lieu of Meetings. (a) An action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting by written action signed by all of the shareholders entitled to vote on that action. The written action is effective when it has been signed by all of those shareholders, unless a different effective time is provided in the written action. (b) An action which requires shareholder approval and which is required or permitted to be taken at a 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 its text and effective date. Section 6.5 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 10 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 6.6 Approval of Firm of Independennt 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 6.7 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 directly to the successor custodian. Section 6.8 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 commissions 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 11 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 6.9 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 Trustees. 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. AMENDMENTS Section 7. 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. 12 EX-99.D.1 4 TERMS OF AUCTION AGENCY AGREEMENT EXHIBIT 99.d.1 NUVEEN AUCTION AGENCY AGREEMENT Basic Terms for Acting as Auction Agent --------------------------------------- November 1, 1993 These basic terms ("Basic Terms") set forth the general terms and conditions pursuant to which a bank or trust company identified in a Request and Acceptance Letter will act as auction agent (an "Auction Agent") for Municipal Auction Rate Cumulative Preferred Stock or Shares issued by an investment company registered under the Investment Company Act of 1940, as amended, as further identified by such Request and Acceptance Letter (a "Fund"), for which Nuveen Advisory Corp. is the investment adviser. - -------------------------------------------------------------------------------- The Fund proposes to issue shares of MuniPreferred(R) pursuant to its Articles of Incorporation or Declaration of Trust, as amended or supplemented by the Statement. The Fund desires that the Auction Agent perform certain duties in connection with the MuniPreferred upon the terms and subject to the conditions of the Agreement. 1. Definitions and Rules of Construction. ------------------------------------- 1.1 Terms Defined By Reference to Statement. --------------------------------------- Capitalized terms not defined herein shall have the respective meanings specified in the Statement. 1.2 Terms Defined Herein. -------------------- As used herein and in the Settlement Procedures, the following terms shall have the following meanings, unless the context otherwise requires: (a) "Agent Member" of any Person shall mean the member of, or participant in, the Securities Depository that will act on behalf of a Bidder. (b) "Agreement" shall mean the Basic Terms, together with the Request and Acceptance Letter relating to one or more series of MuniPreferred. (c) "Auction" shall have the meaning specified in Section 2.1 hereof. (d) "Auction Procedures" shall mean the auction procedures constituting Part II of the form of Statement as of the filing thereof. (e) "Authorized Officer" of the Auction Agent shall mean each Senior Vice President, Vice President, Assistant Vice President, Assistant Treasurer and Assistant Secretary of the Auction Agent assigned to its Corporate Trust and Agency Group and every other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes hereof in a communication to the Fund. (f) "Broker-Dealer Agreement" shall mean each agreement among the Fund, the Auction Agent and a Broker-Dealer substantially in the form attached hereto as Exhibit A. (g) "Fund Officer" shall mean the Chairman of the Board of Directors or Board of Trustees, as the case may be, each Vice Chairman of the Board of Directors or Board of Trustees (whether or not designated by a number or word or words added before or after the title "Vice Chairman"), the President, each Vice President (whether or not designated by a number or word or words added before or after the title "Vice President"), the Secretary, the Treasurer, each Assistant Vice President, each Assistant Secretary and each Assistant Treasurer of the Fund and every other officer or employee of the Fund designated as a "Fund Officer" for purposes hereof in a notice to the Auction Agent. (h) "MuniPreferred" shall mean the preferred stock or shares, par value $.01 per share, of the Fund designated as its "Municipal Auction Rate Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred Shares" and bearing such further designation as to series as the Board of Directors or Board of Trustees, as the case may be, of the Fund or any committee thereof shall specify; as set forth in the Request and Acceptance Letter. (i) "Request and Acceptance Letter" shall mean the letter from the Fund to the Auction Agent pursuant to which the Fund appoints the Auction Agent and the Auction Agent accepts its appointment as auction agent for the MuniPreferred. (j) "Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit B. (k) "Statement" shall mean the Statement Establishing and Fixing the Rights and Preferences of, and authorizing the issuance of, one or more series of Municipal Auction Rate Cumulative Preferred Stock or Municipal Auction Rate Cumulative Preferred Shares, as filed by the Fund with the office of the Secretary of State or other officer of the state where the Fund was incorporated or organized, a copy of which is attached to the Request and Acceptance Letter, as the same may be amended, supplemented or modified from time to time. 1.3 Rules of Construction. --------------------- Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of the Agreement: 2 (a) Words importing the singular number shall include the plural number and vice versa. (b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of the Agreement nor shall they affect its meaning, construction or effect. (c) The words "hereof", "herein", "hereto" and other words of similar import refer to the Agreement as a whole. (d) All references herein to a particular time of day shall be to New York City time. 2. The Auction. ----------- 2.1 Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures. -------------------------------------------- (a) The Statement for each series of MuniPreferred will provide that the Applicable Rate for such series for each Subsequent Rate Period thereof shall, except under certain conditions, be the rate per annum that a bank or trust company appointed by the Fund advises results from implementation of the Auction Procedures for such series. The Board of Directors or Board of Trustees, as the case may be, of the Fund has adopted a resolution appointing the Auction Agent as auction agent for purposes of the Auction Procedures for each series of MuniPreferred. The Auction Agent accepts such appointment and agrees to follow the procedures set forth in this Section 2 and the Auction Procedures for the purpose of determining the Applicable Rate for each series of MuniPreferred for each Subsequent Rate Period thereof for which the Applicable Rate is to be determined by an Auction. Each periodic implementation of such procedures is hereinafter referred to as an "Auction." (b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were fully set forth herein. 2.2 Preparation for Each Auction; Maintenance of Registry of Beneficial Owners. -------------------------------- (a) Not later than seven days prior to the first Auction Date for the first series of MuniPreferred subject to an Auction, the Fund shall provide the Auction Agent with a list of the Broker-Dealers. Not later than seven days prior to any Auction Date for any series of MuniPreferred for which any change in such list of Broker-Dealers is to be effective, the Fund will notify the Auction Agent in writing of such change and, if any such change involves the addition of a Broker-Dealer to such list, shall cause to be delivered to the Auction Agent for 3 execution by the Auction Agent a Broker-Dealer Agreement signed by such Broker- Dealer; provided, however, that if the Fund proposes to designate any Special Rate Period of any series of MuniPreferred pursuant to Section 4 of Part I of the Statement, not later than 11:00 A.M. on the Business Day next preceding the Auction next preceding the first day of such Rate Period or by such later time or date, or both, as may be agreed to by the Auction Agent, the Fund shall provide the Auction Agent with a list of the Broker-Dealers for such series and a manually signed copy of each Broker-Dealer Agreement or a new Schedule A to a Broker-Dealer Agreement (which Schedule A shall replace and supersede any previous Schedule A to such Broker-Dealer Agreement) with each Broker-Dealer for such series. The Auction Agent and the Fund shall have entered into a Broker- Dealer Agreement with each Broker-Dealer prior to the participation of any such Broker-Dealer in any Auction. (b) In the event that any Auction Date for any series of MuniPreferred shall be changed after the Auction Agent shall have given the notice referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or after the notice referred to in Section 2.5(a) hereof, if applicable, the Auction Agent, by such means as the Auction Agent deems practicable, shall give notice of such change to the Broker-Dealers for such series not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date. (c) (i) The Auction Agent shall maintain a registry of the beneficial owners of the shares of MuniPreferred of each series who shall constitute Existing Holders of shares of MuniPreferred of such series for purposes of Auctions and shall indicate thereon the identity of the respective Broker-Dealer of each Existing Holder, if any, on whose behalf such Broker- Dealer submitted the most recent Order in any Auction which resulted in such Existing Holder continuing to hold or purchasing shares of MuniPreferred of such series. The Auction Agent shall keep such registry current and accurate. The Fund shall provide or cause to be provided to the Auction Agent at or prior to the Date of Original Issue of the shares of MuniPreferred of each series a list of the initial Existing Holders of the shares of each such series of MuniPreferred, the number of shares purchased by each such Existing Holder and the respective Broker-Dealer of each such Existing Holder or the affiliate thereof through which each such Existing Holder purchased such shares. The Auction Agent shall advise the Fund in writing whenever the number of Existing Holders is 500 or more. The Auction Agent may rely upon, as conclusive evidence of the identities of the Existing Holders of shares of MuniPreferred of any series (A) such list, (B) the results of Auctions, (C) notices from any Broker- Dealer as described in the first sentence of Section 2.2(c)(iii) hereof and (D) the results of any procedures approved by the Fund that have been devised for the purpose of determining the identities of Existing Holders in situations where shares of MuniPreferred may have been transferred without compliance with any restriction on the transfer thereof set forth in the Auction Procedures. (ii) In the event of any partial redemption of any series of MuniPreferred, the Auction Agent shall, at least two Business Days prior to the next Auction for such series, request each Broker-Dealer to provide the Auction Agent with a list of Persons who such Broker-Dealer believes should remain Existing Holders after such redemption based upon inquiries of those Persons such Broker-Dealer believes are Beneficial Owners as a result 4 of the most recent Auction and with respect to each such Person, the number of shares of MuniPreferred of such series such Broker-Dealer believes are owned by such Person after such redemption. In the absence of receiving any such information from any Broker-Dealer, the Auction Agent may continue to treat the Persons listed in its registry of Existing Holders as the beneficial owner of the number of shares of MuniPreferred of such series shown in such registry. (iii) The Auction Agent shall be required to register a transfer of shares of MuniPreferred of any series from an Existing Holder of such shares of MuniPreferred only if such transfer is to another Existing Holder, or other Person if permitted by the Fund, and only if such transfer is made (A) pursuant to an Auction, (B) the Auction Agent has been notified in writing (I) in a notice substantially in the form of Exhibit C to the Broker-Dealer Agreements by a Broker-Dealer of such transfer or (II) in a notice substantially in the form of Exhibit D to the Broker-Dealer Agreements by the Broker-Dealer of any Existing Holder, or other Person if permitted by the Fund, that purchased or sold such shares of MuniPreferred in an Auction of the failure of such shares of MuniPreferred to be transferred as a result of such Auction or (C) pursuant to procedures approved by the Fund that have been devised for the purpose of determining the identities of Existing Holders in situations where shares of MuniPreferred may have been transferred without compliance with any restriction on the transfer thereof set forth in the Auction Procedures. The Auction Agent is not required to accept any such notice for an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction. (d) The Auction Agent may request the Broker-Dealers, as set forth in the Broker-Dealer Agreements, to provide the Auction Agent with a list of Persons who such Broker-Dealer believes should be Existing Holders based upon inquiries of those Persons such Broker-Dealer believes are Beneficial Owners as a result of the most recent Auction and with respect to each such Person, the number of shares of such series of MuniPreferred such Broker-Dealer believes to be owned by such Person. The Auction Agent shall keep confidential such registry of Existing Holders and shall not disclose the identities of the Existing Holders of such shares of MuniPreferred to any Person other than the Fund and the Broker-Dealer that provided such information. 2.3 Information Concerning Rates. ---------------------------- (a) The Rate Multiple on the date of the Agreement is set forth in the Request and Acceptance Letter. If there is any change in the credit rating of MuniPreferred by either of the rating agencies (or substitute or successor rating agencies) referred to in the definition of "Rate Multiple" resulting in any change in the Rate Multiple for MuniPreferred after the date of the Request and Acceptance Letter, the Fund shall notify the Auction Agent in writing of such change in the Rate Multiple prior to 12:00 Noon on the Business Day prior to the next Auction Date for any series of MuniPreferred succeeding such change. If the Fund designates all or a portion of any dividend on shares of any series of MuniPreferred to consist of net capital gains or other income taxable for Federal income tax purposes, it will indicate, in its notice in the 5 form of Exhibit I hereto to the Auction Agent pursuant to Section 2.6 hereof, the Rate Multiple for such series to be in effect for the Auction Date on which the dividend rate for such dividend is to be fixed. In determining the Maximum Rate for any series of MuniPreferred on any Auction Date as set forth in Section 2.3(b)(i) hereof, the Auction Agent shall be entitled to rely on the last Rate Multiple for MuniPreferred of which it has most recently received notice from the Fund (or, in the absence of such notice, the percentage set forth in the Request and Acceptance Letter), except that if the Fund shall have notified the Auction Agent of a Rate Multiple to be in effect for an Auction Date in accordance with the preceding sentence, the Rate Multiple in effect for the next succeeding Auction Date of any series of MuniPreferred shall be, unless the Fund notifies the Auction Agent of a change in the Rate Multiple for such succeeding Auction Date pursuant to this Section 2.3(a), the Rate Multiple that was in effect on the first preceding Auction Date for MuniPreferred with respect to which the dividend, the rate for which was fixed on such Auction Date, did not include any net capital gains or other income taxable for Federal income tax purposes. (b) (i) On each Auction Date for any series of MuniPreferred, the Auction Agent shall determine the Maximum Rate for such series. The Maximum Rate for any series of MuniPreferred on any Auction Date shall be: (A) in the case of any Auction Date which is not the Auction Date immediately prior to the first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of the Statement, the product of (1) the Reference Rate on such Auction Date for the next Rate Period of such series and (2) the Rate Multiple on such Auction Date, unless such series has or had a Special Rate Period (other than a Special Rate Period of 28 Rate Period Days or fewer) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a Minimum Rate Period of such series after such Special Rate Period, in which case the higher of: (1) the dividend rate on shares of such series for the then- ending Rate Period; and (2) the product of (x) the higher of (I) the Reference Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of such series, if such then ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of such series, if such then ending Rate Period was more than 364 Rate Period Days, and (II) the Reference Rate on such Auction Date for a Rate Period equal in length to such Special Rate Period of such series, if such Special Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to such Special Rate Period, if such Special Rate Period was more than 364 Rate Period Days and (y) the Rate Multiple on such Auction Date; or 6 (B) in the case of any Auction Date which is the Auction Date immediately prior to the first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of the Statement, the product of (1) the highest of (x) the Reference Rate on such Auction Date for a Rate-Period equal in length to the then-ending Rate Period of such series, if such then-ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction Date for a Rate Period equal in length to the then-ending Rate Period of such Rate Period, if such then-ending Rate Period was more than 364 Rate Period Days, (y) the Reference Rate on such Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate Period is 364 Rate Period Days or fewer or the Treasury Note Rate on such Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate Period is more than 364 Rate Period Days, and (z) the Reference Rate on such Auction Date for Minimum Rate Periods and (2) the Rate Multiple on such Auction Date. Not later than 9:30 A.M. on each Auction Date the Auction Agent shall notify the Fund and the Broker-Dealers of the Maximum Rate so determined and the "AA" Composite Commercial Paper Rate(s), the Taxable Equivalent of the Short-Term Municipal Bond Rate(s), Treasury Note Rate(s) and Treasury Bill Rate(s), as the case may be, used to make such determination. (ii) From and after a Failure to Deposit by the Fund during any Rate Period of any series of MuniPreferred, until such failure is cured and a Late Charge (as defined in paragraph (a) of Section 2.7), is paid, in accordance with subparagraph (e)(i) of Section 2 of Part I of the Statement, on the first day of each Rate Period of such series the Auction Agent shall determine the Treasury Note Rate for such Rate Period of more than 364 Rate Period Days and the Reference Rate for Rate Periods of 364 Rate Period Days or fewer. Not later than 9:30 A.M. on each such first day, the Auction Agent shall notify the Fund of the applicable Reference Rate and Treasury Note Rate. (iii) If any "AA" Composite Commercial Paper Rate, Taxable Equivalent of the Short-Term Municipal Bond Rate, Treasury Note Rate or Treasury Bill Rate, as the case may be, is not quoted on an interest or bond equivalent, as the case may be, basis, the Auction Agent shall convert the quoted rate to the interest or bond equivalent thereof as set forth in the definition of such rate in the Statement if the rate obtained by the Auction Agent is quoted on a discount basis, or if such rate is quoted on a basis other than an interest or bond equivalent or discount basis the Auction Agent shall convert the quoted rate to an interest or bond equivalent rate after consultation with the Fund as to the method of such conversion. (iv) If any "AA" Composite Commercial Paper Rate is to be based on rates supplied by Commercial Paper Dealers and one or more of the Commercial Paper Dealers shall not provide a quotation for the determination of such "AA" Composite Commercial Paper Rate, the Auction Agent shall immediately notify the Fund so that the Fund can determine whether to select a Substitute Commercial Paper Dealer or Substitute Commercial Paper Dealers to provide the quotation or quotations not being supplied by any Commercial Paper Dealer or 7 Commercial Paper Dealers. The Fund shall promptly advise the Auction Agent of any such selection. (v) If any Treasury Note Rate or Treasury Bill Rate is to be based on rates supplied by U.S. Government Securities Dealers and one or more of the U.S. Government Securities Dealers shall not provide a quotation for the determination of such Treasury Rate, the Auction Agent shall immediately notify the Fund so that the Fund can determine whether to select a Substitute U.S. Government Securities Dealer or Substitute U.S. Government Securities Dealers to provide the quotation or quotations not being supplied by any U.S. Government Securities Dealer or U.S. Government Securities Dealers. The Fund shall promptly advise the Auction Agent of any such selection. (c) The maximum marginal tax rate referred to in the definition of "Rate Multiple" in the Statement is referred to in this Agreement as the "Highest Marginal Rate." The Highest Marginal Rate on the date of the Agreement is set forth in the Request and Acceptance Letter. If there is any change in the Highest Marginal Rate, the Fund shall notify the Auction Agent in writing of such change prior to 12:00 Noon on the Business Day prior to the next Auction Date for MuniPreferred succeeding such change. In determining the Maximum Rate for any series of MuniPreferred on any Auction Date, the Auction Agent shall be entitled to rely on the Highest Marginal Rate of which it has most recently received notice from the Fund (or, in the absence of such notice, the percentage set forth in the Request and Acceptance Letter). 2.4 Auction Schedule. ---------------- The Auction Agent shall conduct Auctions in accordance with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent of the Fund, which consent shall not be unreasonably withheld. The Auction Agent shall give written notice of any such change to each Broker- Dealer. Such notice shall be given prior to the close of business on the Business Day next preceding the first Auction Date on which any such change shall be effective. Time Event - ---- ----- By 9:30 A.M. Auction Agent advises the Fund and Broker-Dealers of the applicable Maximum Rate and the Reference Rate(s) and Treasury Note Rate(s), as the case may be, used in determining such Maximum Rate as set forth in Section 2.3(b)(i) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent assembles information communicated to it by Broker-Dealers as provided in Section 2(a) of the Auction Procedures. Submission Deadline is 1:30 P.M. 8 Time Event - ---- ----- Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to Section 3(a) of the Auction Procedures. By approximately 3:00 P.M. Auction Agent advises Fund of results of Auction as provided in Section 3(b) of the Auction Procedures. Submitted Bids and Submitted Sell Orders are accepted and rejected and shares of MuniPreferred allocated as provided in Section 4 of the Auction Procedures. Auction Agent gives notice of Auction results as set forth in paragraph(a) of the Settlement Procedures. The Auction Agent shall follow the notification procedures set forth in paragraph (a) of the Settlement Procedures. 2.5 Designation of Special Rate Period. ---------------------------------- (a) The Statement will provide that, subject to the Fund's option to designate a Special Rate Period as referred to in paragraph (b) of this Section 2.5, (i) each Rate Period of any series of MuniPreferred will be a Minimum Rate Period (a duration of seven days, subject to certain exceptions) and (ii) each Rate Period following a Rate Period of any series of MuniPreferred that is other than a Minimum Rate Period will be a Minimum Rate Period. Not less than 10 nor more than 20 days prior to the last day of any such Rate Period that is not a Minimum Rate Period, (i) the Fund shall deliver to the Auction Agent a notice of the Auction Date of the next succeeding Auction for such series in the form of Exhibit C hereto and (ii) the Auction Agent shall deliver such notice by first- class mail, postage prepaid, to each Existing Holder of shares of such series at the address set forth for such Existing Holder in the records of the Auction Agent and to the Broker-Dealers for such series as promptly as practicable after its receipt of such notice from the Fund. (b) Pursuant to the Statement, the Fund may, at its option, designate a Special Rate Period for any series of MuniPreferred in the manner described in Section 4 of Part I of the Statement. (i) If the Board of Directors or Board of Trustees, as the case may be, proposes to designate any succeeding Subsequent Rate Period of any series of MuniPreferred as a Special Rate Period, (A) the Fund shall deliver to the Auction Agent a notice of such proposed Special Rate Period in the form of Exhibit D hereto not less than 20 (or such lesser number of days as may be agreed to from time to time by the Auction Agent) nor more than 30 days prior to the first day of such proposed Special Rate Period and (B) the Auction Agent on behalf of the Fund shall deliver such notice 9 by first-class mail, postage prepaid, to each Existing Holder of shares of such series of MuniPreferred at the address set forth for such Existing Holder in the records of the Auction Agent and to the Broker-Dealers for such series as promptly as practicable after its receipt of such notice from the Fund. (ii) If the Board of Directors or Board of Trustees, as the case may be, determines to designate such succeeding Subsequent Rate Period as a Special Rate Period, (A) the Fund shall deliver to the Auction Agent a notice of such determination in the form of Exhibit E hereto not later than 11:00 A.M. on the second Business Day next preceding the first day of such proposed Special Rate Period (or such later time or date, or both, as may be agreed to by the Auction Agent) and (B) the Auction Agent shall deliver such notice to the Broker-Dealers for such series not later than 3:00 P.M. on such second Business Day (or, if the Auction Agent has agreed to a later time or date, as promptly as practicable thereafter). (iii) If the Fund shall deliver to the Auction Agent a notice not later than 11:00 A.M. on the second Business Day next preceding the first day of such proposed Special Rate Period (or such later time or date, or both, as may be agreed to by the Auction Agent) stating that the Fund has determined not to exercise its option to designate such succeeding Subsequent Rate Period as a Special Rate Period, in the form of Exhibit F hereto, or shall fail to timely deliver either such notice or a notice in the form of Exhibit E hereto, the Auction Agent shall deliver a notice in the form of Exhibit F hereto to the Broker-Dealers for such series not later than 3:00 P.M. on such second Business Day (or, if the Auction Agent has agreed to a later time or date, as promptly as practicable thereafter). Such change in the length of any Rate Period shall not occur if (1) an Auction for shares of such series shall not be held on such Auction Date for any reason or (2) an Auction for shares of such series shall be held on such Auction Date but Sufficient Clearing Bids for shares of such series shall not exist in such Auction. 2.6 Allocation of Taxable Income. ---------------------------- The Fund shall, in the case of a Minimum Rate Period or a Special Rate Period of 28 Rate Period Days or fewer, and may, in the case of any other Special Rate Period, designate all or a portion of any dividend on shares of any series of MuniPreferred to consist of net capital gains or other income taxable for Federal income tax purposes by delivering to the Auction Agent a notice in the form of Exhibit I hereto of such designation not later than the Dividend Payment Date for such series next preceding the Auction Date on which the dividend rate for such dividend is to be fixed. The Auction Agent will deliver such notice to the Broker-Dealers for such series on the Business Day following its receipt of such notice from the Fund. Within two Business Days after any Auction Date involving the allocation of income taxable for Federal income tax purposes, the Auction Agent shall notify each Broker-Dealer for 10 the related series as to the dollar amount per share of such taxable income and income exempt from Federal income taxation included in the related dividend. 2.7 Failure to Deposit. ------------------ (a) If: (i) any Failure to Deposit shall have occurred with respect to shares of MuniPreferred during any Rate Period thereof (other than any Special Rate Period of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured), but, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall have been cured in accordance with Section 2.7(c) hereof and the Fund shall have paid to the Auction Agent a late charge (a "Late Charge") equal to the sum of (1) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the full amount of dividends with respect to any Dividend Period on such shares, an amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such Failure to Deposit occurs on the Dividend Payment Date for such Dividend Period by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit has not been cured in accordance with Section 2.7(c) hereof (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate liquidation preference of the outstanding shares of MuniPreferred and (2) if such Failure to Deposit consisted of the failure timely to pay to the Auction Agent the Redemption Price of the shares of MuniPreferred, if any, for which Notice of Redemption has been given by the Fund, an amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such Failure to Deposit occurs on the redemption date by (y) a fraction, the numerator of which shall be the number of days for which such Failure to Deposit is not cured in accordance with Section 2.7(c) hereof (including the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator of which shall be 360, and applying the rate obtained against the aggregate liquidation preference of the outstanding shares of MuniPreferred to the redeemed, then the Auction Agent shall deliver a notice in the form of Exhibit G hereto by first-class mail, postage prepaid, to the Broker-Dealers for such series not later than one Business Day after its receipt of the payment from the Fund curing such Failure to Deposit and such Late Charge. (b) If: (i) any Failure to Deposit shall have occurred with respect to shares of MuniPreferred during any Rate Period thereof (other than any Special Rate Period of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period 11 of more than 364 Rate Period Days during which a Failure to Deposit occurred but has not been cured), and, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured in accordance with Section 2.7(c) hereof or the Fund shall not have paid the applicable Late Charge to the Auction Agent; or (ii) any Failure to Deposit shall have occurred with respect to shares of MuniPreferred during a Special Rate Period thereof of more than 364 Rate Period Days, or during any Rate Period thereof succeeding any Special Rate Period of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured, and, prior to 12:00 noon, New York City time, on the fourth Business Day preceding the Auction Date for the Rate Period subsequent to such Rate Period, such Failure to Deposit shall not have been cured in accordance with Section 2.7(c) hereof or the Fund shall not have paid the applicable Late Charge to the Auction Agent in accordance with Section 2(e)(i)(D) of the Statement (such Late Charge, for purposes of this clause (b)(iii) of this Section 2.7, to be calculated by using, as the Reference Rate, the Reference Rate applicable to a Rate Period (x) consisting of more than 182 Rate Period Days and (y) commencing on the date on which the Rate Period during which Failure to Deposit occurs commenced); then the Auction Agent shall deliver a notice in the form of Exhibit H hereto to the Broker-Dealers for such series not later than one Business Day after the receipt of the payment from the Fund curing such Failure to Deposit and such Late Charge. (c) A Failure to Deposit with respect to shares of MuniPreferred shall have been cured (if such Failure to Deposit is not solely due to the willful failure to the Fund to make the required payment to the Auction Agent) with respect to any Rate Period if, within the respective time periods described immediately above, the Fund shall have paid to the Auction Agent (i) all accumulated and unpaid dividends on the shares of MuniPreferred and (ii) without duplication, the Redemption Price for the shares of MuniPreferred, if any, for which Notice of Redemption has been mailed; provided, however, that the foregoing clause (ii) shall not apply to the Fund's failure to pay the Redemption Price in respect of shares of MuniPreferred when the related Redemption Notice provides that redemption of such shares is subject to one or more conditions precedent and each such condition precedent shall not have been satisfied at the time or times and in the manner specified in such Notice of Redemption. 2.8 Broker-Dealers. -------------- (a) Not later than 12:00 Noon on each Auction Date for any series of MuniPreferred, the Fund shall pay to the Auction Agent an amount in cash equal to the aggregate fees payable to the Broker-Dealers for such series pursuant to Section 2.8 of the Broker-Dealer Agreements for such series. The Auction Agent shall apply such moneys as set forth in Section 2.8 of each such Broker-Dealer Agreement. 12 (b) The Fund shall obtain the consent of the Auction Agent prior to selecting any Person to act as a Broker-Dealer, which consent shall not be unreasonably withheld. (c) The Auction Agent shall terminate any Broker-Dealer Agreement as set forth therein if so directed by the Fund, provided that at least one Broker- Dealer Agreement would be in effect for each series of MuniPreferred after such termination. (d) Subject to the Auction Agent's having consented to the selection of the relevant Broker-Dealer pursuant to Section 2.8(b) hereof, the Auction Agent shall from time to time enter into such Broker-Dealer Agreements with one or more Broker-Dealers as the Fund shall request, and shall enter into such schedules to any such Broker-Dealer Agreements as the Fund shall request, which schedules, among other things, shall set forth the series of MuniPreferred to which such Broker-Dealer Agreement relates. 2.9 Ownership of Shares of MuniPreferred. ------------------------------------ The Fund shall notify the Auction Agent if the Fund or any affiliate of the Fund acquires any shares of MuniPreferred of any series. Neither the Fund nor any affiliate of the Fund shall submit any Order in any Auction for MuniPreferred, except as set forth in the next sentence. Any Broker-Dealer that is an affiliate of the Fund may submit Orders in Auctions, but only if such Orders are not for its own account. For purposes of this Section 2.9, a Broker- Dealer shall not be deemed to be an affiliate of the Fund solely because one or more of the directors or executive officers of such Broker-Dealer or of any Person controlled by, in control of or under common control with such Broker- Dealer is also a director of the Fund. The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.9. 2.10 Access to and Maintenance of Auction Records. -------------------------------------------- The Auction Agent shall, upon the receipt of prior written notice from the Fund, afford to the Fund access at reasonable times during normal business hours to all books, records, documents and other information concerning the conduct and results of Auctions. The Auction Agent shall maintain records relating to any Auction for a period of six years after such Auction, and such records shall, in reasonable detail, accurately and fairly reflect the actions taken by the Auction Agent hereunder. 3. The Auction Agent as Dividend and Redemption Price Disbursing Agent. --------------------------------- The Auction Agent, as dividend and redemption price disbursing agent, shall pay to the Holders of shares of MuniPreferred of any series (i) on each Dividend Payment Date for such series, dividends on the shares of MuniPreferred of such series, (ii) on any date fixed for redemption of shares of MuniPreferred of any series, the Redemption Price of any shares of such series called for redemption and (iii) any Late Charge related to any payment of dividends 13 or Redemption Price, in each case after receipt of the necessary funds from the Fund with which to pay such dividends, Redemption Price or Late Charge. The amount of dividends for any Rate Period for any series of MuniPreferred to be paid by the Auction Agent to the Holders of such shares of such series will be determined by the Fund as set forth in Section 2 of Part I of the Statement with respect to such series. The Redemption Price of any shares to be paid by the Auction Agent to the Holders will be determined by the Fund as set forth in Section 11 of Part I of the Statement with respect to such series. The Fund shall notify the Auction Agent in writing of a decision to redeem shares of any series of MuniPreferred at least five days prior to the date a notice of redemption is required to be mailed to the Holders of the shares to be redeemed by paragraph (c) of Section 11 of Part I of the Statement. Such notice by the Fund to the Auction Agent shall contain the information required by paragraph (c) of Section 11 of Part I of the Statement to be stated in the notice of redemption required to be mailed by the Fund to such Holders. 4. The Auction Agent as Transfer Agent and Registrar. ------------------------------------------------- 4.1 Issue of Stock or Shares Certificates. ------------------------------------- Upon the Date of Original Issue of each series of MuniPreferred, one or more certificates representing all of the shares of such series issued on such date shall be issued by the Fund and, at the request of the Fund, registered in the name of Cede & Co. and countersigned by the Auction Agent. 4.2 Registration of Transfer of Shares. ---------------------------------- Shares of each series of MuniPreferred shall be registered solely in the name of the Securities Depository or its nominee. 4.3 Removal of Legend on Restricted Shares. -------------------------------------- All requests for removal of legends on shares of MuniPreferred of any series indicating restrictions on transfer shall be accompanied by an opinion of counsel stating that such legends may be removed and such shares freely transferred, such opinion to be delivered under cover of a letter from a Fund Officer authorizing the Auction Agent to remove the legend on the basis of said opinion. 4.4 Lost Stock or Share Certificates. -------------------------------- The Auction Agent shall issue and register replacement certificates for certificates represented to have been lost, stolen or destroyed upon the fulfillment of such requirements as shall be deemed appropriate by the Fund and the Auction Agent, subject at all times to provisions of law, the By-Laws of the Fund governing such matters and resolutions adopted by the Fund with respect to lost securities. The Auction Agent may issue new certificates in 14 exchange for and upon the cancellation of mutilated certificates. Any request by the Fund to the Auction Agent to issue a replacement or new certificate pursuant to this Section 4.4 shall be deemed to be a representation and warranty by the Fund to the Auction Agent that such issuance will comply with such provisions of law and the By-Laws and resolutions of the Fund. 4.5 Disposition of Cancelled Certificates; Record Retention. ------------------------------ The Auction Agent shall retain all stock or share certificates which have been cancelled in transfer or exchange and all accompanying documentation in accordance with applicable rules and regulations of the Securities and Exchange Commission for two calendar years. Upon the expiration of this two- year period, the Auction Agent shall deliver to the Fund the cancelled certificates and accompanying documentation. The Fund shall also undertake to furnish to the Securities and Exchange Commission and to the Board of Governors of the Federal Reserve System, upon demand, at either the principal office or at any regional office, complete, correct and current hard copies of any and all such records. Thereafter such records shall not be destroyed by the Fund without the concurrence of the Auction Agent. 4.6 Stock or Record Books. --------------------- For so long as the Auction Agent is acting as the transfer agent for any series of MuniPreferred pursuant to the Agreement, it shall maintain a stock or record book containing a list of the Holders of the shares of MuniPreferred of each such series. In case of any request or demand for the inspection of the stock or record books of the Fund or any other books in the possession of the Auction Agent, the Auction Agent will notify the Fund and secure instructions as to permitting or refusing such inspection. The Auction Agent reserves the right, however, to exhibit the stock or record books or other books to any Person in case it is advised by its counsel that its failure to do so would be unlawful. 4.7 Return of Funds. --------------- Any funds deposited with the Auction Agent hereunder by the Fund for any reason, including but not limited to redemption of shares of MuniPreferred of any series, that remain unpaid after ninety days shall be repaid to the Fund upon the written request of the Fund, together with interest, if any, earned thereon. 5. Representations and Warranties of the Fund. ------------------------------------------ The Fund represents and warrants to the Auction Agent that: (a) the Fund is a duly incorporated and existing corporation or a duly organized and existing business trust in good standing under the laws of the State of its incorporation or organization and has full corporate power or all requisite power to 15 execute and deliver the Agreement and to authorize, create and issue the shares of MuniPreferred of each series and the shares of MuniPreferred of each series when issued, will be duly authorized, validly issued, fully paid and nonassessable; (b) the Agreement has been duly and validly authorized, executed and delivered by the Fund and constitutes the legal, valid and binding obligation of the Fund; (c) the form of the certificate evidencing the shares of MuniPreferred of each series complies or will comply with all applicable laws of the State of its incorporation or organization; (d) when issued, the shares of MuniPreferred of each series will have been duly registered under the Securities Act of 1933, as amended, and no further action by or before any governmental body or authority of the United States or of any state thereof is required in connection with the execution and delivery of the Agreement or will have been required in connection with the issuance of the shares of MuniPreferred of each series; (e) the execution and delivery of the Agreement and the issuance and delivery of the shares of MuniPreferred of each series do not and will not conflict with, violate or result in a breach of, the terms, conditions or provisions of, or constitute a default under, the Articles of Incorporation or Declaration of Trust (as amended by one or more Statements) or the By- Laws of the Fund, any law or regulation, any order or decree of any court or public authority having jurisdiction, or any mortgage, indenture, contract, agreement or undertaking to which the Fund is a party or by which it is bound the effect of which conflict, violation, default or breach would be material to the Fund or the Fund and its subsidiaries taken as a whole; and (f) no taxes are payable upon or in respect of the execution of the Agreement or the issuance of the shares of MuniPreferred of any series. 6. The Auction Agent. ----------------- 6.1 Duties and Responsibilities. --------------------------- (a) The Auction Agent is acting solely as agent for the Fund hereunder and owes no fiduciary duties to any Person, other than the Fund, by reason of the Agreement. (b) The Auction Agent undertakes to perform such duties and only such duties as are specifically set forth in the Agreement, and no implied covenants or obligations shall be read into the Agreement against the Auction Agent. 16 (c) In the absence of bad faith or negligence on its part, the Auction Agent shall not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties under the Agreement. The Auction Agent shall not be liable for any error of judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining the pertinent facts. 6.2 Rights of the Auction Agent. --------------------------- (a) The Auction Agent may rely and shall be protected in acting or refraining from acting upon any communication authorized hereby and upon any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document believed in good faith by it to be genuine. The Auction Agent shall not be liable for acting upon any telephone communication authorized hereby which the Auction Agent believes in good faith to have been given by the Fund or by a Broker-Dealer. The Auction Agent may record telephone communications with the Fund or with the Broker- Dealers or both. (b) The Auction Agent may consult with counsel of its choice and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder. (d) The Auction Agent may perform its duties and exercise its rights hereunder either directly or by or through agents or attorneys and shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed by it with due care hereunder. 6.3 Auction Agent's Disclaimer. -------------------------- The Auction Agent makes no representation as to the validity or adequacy of the Agreement, the Broker-Dealer Agreements or the shares of MuniPreferred of any series except that the Auction Agent hereby represents that the Agreement has been duly authorized, executed and delivered by the Auction Agent and constitutes a legal and binding obligation of the Auction Agent. 6.4 Compensation, Expenses and Indemnification. ------------------------------------------ (a) The Fund shall pay the Auction Agent from time to time reasonable compensation for all services rendered by it under the Agreement and the Broker- Dealer Agreements. 17 (b) The Fund shall reimburse the Auction Agent upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Auction Agent in accordance with any provision of the Agreement and the Broker-Dealer Agreements (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any expense or disbursement attributable to its negligence or bad faith. (c) The Fund shall indemnify the Auction Agent for and hold it harmless against any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with its agency under the Agreement and the Broker-Dealer Agreements, including the costs and expenses of defending itself against any such claim or liability in connection with its exercise or performance of any of its duties hereunder and thereunder. 7. Miscellaneous. ------------- 7.1 Term of Agreement. ----------------- (a) The term of the Agreement is unlimited unless it shall be terminated as provided in this Section 7.1. The Fund may terminate the Agreement at any time by so notifying the Auction Agent, provided that the Fund has entered into an agreement in substantially the form of the Agreement with a successor Auction Agent. The Auction Agent may terminate the Agreement upon written notice to the Fund on the date specified in such notice, which date shall be no earlier than 45 days after the date of delivery of such notice. (b) Except as otherwise provided in this paragraph (b), the respective rights and duties of the Fund and the Auction Agent under the Agreement with respect to any series of MuniPreferred shall cease upon termination of the Agreement with respect to such series. The Fund's representations, warranties, covenants and obligations to the Auction Agent under Sections 5 and 6.4 hereof shall survive the termination of the Agreement with respect to any series of MuniPreferred. Upon termination of the Agreement with respect to any series of MuniPreferred, the Auction Agent shall, at the Fund's request, promptly deliver to the Fund copies of all books and records maintained by it with respect to MuniPreferred in connection with its duties hereunder. 18 7.2 Communications. -------------- Except for (i) communications authorized to be by telephone pursuant to the Agreement or the Auction Procedures and (ii) communications in connection with Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party hereunder shall be in writing (including telecopy or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to the Fund, [Name of Fund] 333 West Wacker Drive Chicago, Illinois 60606 Attention: Richard J. Franke, Chairman of the Board Telecopier No.: (312) 917-7942 Telephone No.: (312) 917-7700 If to the Auction Agent, to the address or telecopy number set forth in the Request and Acceptance Letter, or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other party. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of the Fund by a Fund Officer and on behalf of the Auction Agent by telephone (confirmed by telecopy or in writing) by an Authorized Officer. 7.3 Entire Agreement. ---------------- The Agreement contains the entire agreement between the parties relating to, and superseding any prior agreement between the parties relating to, the subject matter hereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, between the parties relating to the subject matter hereof except for agreements relating to the compensation of the Auction Agent. 7.4 Benefits. -------- Nothing herein, express or implied, shall give to any Person, other than the Fund, the Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right, remedy or claim hereunder. 19 7.5 Amendment; Waiver. ----------------- (a) The Agreement shall not be deemed or construed to be modified, amended, rescinded, cancelled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. (b) Failure of either party hereto to exercise any right or remedy hereunder in the event of a breach hereof by the other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach. 7.6 Successors and Assigns. ---------------------- The Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and assigns of each of the Fund and the Auction Agent. 7.7 Severability. ------------ If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof. 7.8 Governing Law. ------------- The Agreement shall be governed by and construed in accordance with the laws of the State of New York. If the Fund is a Massachusetts business trust, the following provision is deemed to be included in the Basic Terms: 7.9 Declaration of Trust. -------------------- The Fund's Declaration is on file with the Secretary of State of the Commonwealth of Massachusetts. This Agreement has been executed on behalf of the Fund by the Vice President and Treasurer of the Fund acting in such capacity and not individually, and the obligations of the Fund set forth in this Agreement are not binding upon any of the Fund's trustees, officers or shareholders individually, but are binding only upon the assets and property of the Fund. 20 EXHIBIT A --------- FORM OF BROKER-DEALER AGREEMENT ----------------------- EXHIBIT B --------- SETTLEMENT PROCEDURES --------------------- EXHIBIT C --------- [NAME OF FUND] NOTICE OF AUCTION DATE FOR MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for Series ___ of the Fund's MuniPreferred is scheduled to be _______________, 19___ and the next Dividend Payment Date for Series ___ of the Fund's MuniPreferred will be __________________, 19___. [A Failure to Deposit in respect of the Series ___ MuniPreferred currently exists. If, prior to 12:00 noon, New York City time, on the fourth Business Day preceding the next scheduled Auction Date of the Series ____ MuniPreferred, such Failure to Deposit is not cured or the applicable Late Charge is not paid, the next Auction will not be held. Notice of the next Auction for the Series ___ MuniPreferred will be delivered when such Failure to Deposit is cured and the applicable Late Charge is paid./1/] [NAME OF FUND] - - ---------- /1/Include this language if a Failure to Deposit exists. EXHIBIT D --------- [NAME OF FUND] NOTICE OF PROPOSED CHANGE OF LENGTH OF RATE PERIOD OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") [Name of Fund] (the "Fund") may exercise its option to designate the Rate Period of its Series ____ MuniPreferred commencing [the first day of the Special Rate Period] as a Special Rate Period. By 11:00 A.M. on the second Business Day preceding the first day of such proposed Special Rate Period, the Fund will notify ___________________ of either (a) its determination to exercise such option, designating the length of such Special Rate Period for such series or (b) its determination not to exercise such option. [NAME OF FUND] Dated: ___________________, 19___ EXHIBIT E --------- [NAME OF FUND] NOTICE OF CHANGE OF LENGTH OF RATE PERIOD MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined to designate the Rate Period of its Series ____ MuniPreferred commencing on [the first day of the Special Rate Period] as a Special Rate Period. The Special Rate Period will be __________ [Rate Period Days]. The Auction Date for the Special Rate Period is [the Business Day next preceding the first day of such Special Rate Period]. As a result of the Special Rate Period designation, the amount of dividends payable on Series ____ MuniPreferred during the Special Rate Period will be based on a 360-day year. The Special Rate Period shall not commence if (a) an Auction for shares of MuniPreferred shall not be held on such Auction Date for any reason or (b) an Auction for shares of MuniPreferred shall be held on such Auction Date but Sufficient Clearing Bids for such shares shall not exist in such Auction. The scheduled Dividend Payment Dates for such series of MuniPreferred during such Special Rate Period will be _________________________. [Special Redemption Provisions, if any] Attached hereto is a MuniPreferred Basic Maintenance Report showing that, as of the third Business Day next preceding such proposed Special Rate Period, Moody's Eligible Assets (if Moody's is rating such shares of MuniPreferred) and S&P Eligible Assets (if S&P is rating such shares of MuniPreferred) each have an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount as of such Business Day (assuming for purposes of the foregoing calculation that (i) the Maximum Rate is the Maximum Rate on such Business Day as if such Business Day were the Auction Date for the proposed Special Rate Period, and (ii) the Moody's Discount Factors applicable to Moody's Eligible Assets are determined by reference to the first Moody's Exposure Period longer than the Moody's Exposure Period then applicable to the Fund.) [NAME OF FUND] Dated: _____________, 19____ E-2 EXHIBIT F --------- [NAME OF FUND] NOTICE OF DETERMINATION NOT TO CHANGE LENGTH OF RATE PERIOD OF MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has determined not to exercise its option to designate a Special Rate Period of its Series ___ MuniPreferred and the next succeeding Rate Period of such series will be a Minimum Rate Period of ____ Rate Period Days. [NAME OF FUND] Dated: _______________, 19____ EXHIBIT G --------- [NAME OF FUND] NOTICE OF CURE OF FAILURE TO DEPOSIT ON MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its Failure to Deposit and paid the applicable Late Charge with respect to its Series ___ MuniPreferred. The dividend rate on the shares of Series ___ MuniPreferred for the current Dividend Period is _____________% per annum, the Dividend Payment Date for the current Dividend Period is scheduled to be _______________, 19___ and the next Auction Date is scheduled to be _______________, 19___. [NAME OF FUND] Dated: ________________, 19___ EXHIBIT H --------- [NAME OF FUND] NOTICE OF CURE OF FAILURE TO DEPOSIT ON MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") NOTICE IS HEREBY GIVEN that [NAME OF FUND] (the "Fund") has cured its Failure to Deposit and paid the applicable Late Charge with respect to its Series ____ MuniPreferred. The next Auction Date for the Series ____ MuniPreferred is scheduled to be on _________________, 19___. [NAME OF FUND] Dated: _________________, 19____ EXHIBIT I --------- [NAME OF FUND] NOTICE OF [CAPITAL GAINS] [AND] [TAXABLE ORDINARY INCOME]/1/ DIVIDEND FOR MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES] ("MuniPreferred(R)") NOTICE IS HEREBY GIVEN that the amount of the dividend payable on ________________, 19____ for Series ____ of the Fund's MuniPreferred will be determined by the Auction to be held on _______________, 19___. Up to [$ A ]/2/ [$ B ]/3/ per share of the dividend payable on such date as determined by such Auction will consist of [capital gains]/2/ [ordinary income taxable for Federal income tax purposes]/3/. If the dividend amount payable on such date as determined by such Auction is less than [$ A ]/2/ [$ B ]/3/ per share, the entire amount of the dividend will consist of [capital gains]/2/ [ordinary income taxable for Federal income tax purposes]/3/. [To the extent such dividend amount exceeds [$ A ] per share, any excess up to [$ B ] per share will consist of ordinary income taxable for Federal income tax purposes.]/4/ Accordingly, the aforementioned composition of the dividend payable on _______________, 19___ should be considered in determining Orders to be submitted with respect to the Auction to be held on ________________, 19__. The Rate Multiple in effect for such Auction will be ____%. [NAME OF FUND] - ----------- /1/Include language with respect to capital gains, taxable ordinary income or both, depending on the character of the designation to be made with respect to the dividend(s). /2/Include bracketed material if a portion of the dividend will be designated capital gains. /3/Include bracketed material if a portion of the dividend will be designated ordinary income taxable for Federal income tax purposes and no portion of the dividend will be designated capital gains. /4/Include bracketed material if a portion of the dividend will be designated capital gains and a portion will be designated ordinary income taxable for Federal income tax purposes. (Footnotes continued) - --------------------- A = the maximum amount of capital gains allocated to such series of MuniPreferred to be included in such dividend, divided by the number of shares of MuniPreferred. B = the maximum amount of ordinary income taxable for Federal income tax purposes allocated to such series of MuniPreferred to be included in such dividend, divided by the number of shares in such series. I-2 EX-99.D.2 5 TERMS OF BROKER-DEALER AGREEMENT EXHIBIT 99.d.2 NUVEEN BROKER-DEALER AGREEMENT Basic Terms for Acting as a Broker-Dealer ----------------------------------------- December 14, 1993 These basic terms ("Basic Terms") set forth the general terms and conditions pursuant to which a broker-dealer identified in an Acceptance Letter (together with its successors and assigns, a "BD") will act as a broker-dealer for Municipal Auction Rate Cumulative Preferred Stock or Shares issued by investment companies, now or hereafter organized, registered under the Investment Company Act of 1940, as amended, as further identified by the Request Letters (the "Funds"), for which Nuveen Advisory Corp. (the "Adviser") is the investment adviser. - -------------------------------------------------------------------------------- Each Fund has issued or may issue shares of MuniPreferred, pursuant to its Articles of Incorporation or Declaration of Trust, as amended or supplemented by the Statement of such Fund. A bank or trust company specified in the Request Letter will act as the auction agent (the "Auction Agent") of such Fund pursuant to authority granted it in the Auction Agency Agreement. The Statement of each Fund will provide that, for each Subsequent Rate Period of any series of MuniPreferred of such Fund then outstanding, the Applicable Rate for such series for such Subsequent Rate Period shall, except under certain conditions, be the rate per annum that the Auction Agent of such Fund advises results from implementation of the Auction Procedures for such series. The Board of Directors or Board of Trustees, as the case may be, of each Fund will adopt a resolution appointing the Auction Agent as auction agent for purposes of the Auction Procedures for each series of MuniPreferred of such Fund. The Auction Procedures of each Fund will require the participation of one or more Broker-Dealers for each series of MuniPreferred of such Fund. BD will act as a Broker-Dealer for each series of MuniPreferred of each Fund identified in a Request Letter. 1. Definitions and Rules of Construction. ------------------------------------- 1.1. Terms Defined by Reference to Statement. --------------------------------------- Capitalized terms not defined herein shall have the respective meanings specified in the Statement of the relevant Fund. 1.2. Terms Defined Herein. -------------------- As used herein and in the Settlement Procedures, the following terms shall have the following meanings, unless the context otherwise requires: (a) "Acceptance Letter" shall mean the letter from Adviser to BD pursuant to which the Adviser appoints BD as a Broker Dealer for each series of MuniPreferred issued by any Fund that has executed a Request Letter. (b) "Agreement", with respect to any Fund, shall mean the Basic Terms, together with the Acceptance Letter and the Request Letter relating to one or more series of MuniPreferred of such Fund and any other substantially similar agreement among such Fund, the Adviser, any Auction Agent for such Fund and/or BD. (c) "Auction" shall have the meaning specified in Section 2.1 hereof. (d) "Auction Agency Agreement", with respect to any Fund, shall mean the Auction Agency Agreement between such Fund and the Auction Agent relating to one or more series of MuniPreferred of such Fund. (e) "Auction Procedures", with respect to any Fund, shall mean the auction procedures constituting Part II of the form of Statement of such Fund as of the filing thereof. (f) "Authorized Officer" of an Auction Agent shall mean each Senior Vice President, Vice President, Assistant Vice President, Assistant Treasurer and Assistant Secretary of such Auction Agent assigned to its Corporate Trust and Agency Group and every other officer or employee of such Auction Agent designated as an "Authorized Officer" for purposes of the Agreement in a communication to BD. (g) "BD Officer" shall mean each officer or employee of BD designated as a "BD Officer" for purposes of the Agreement in a communication to any Auction Agent. (h) "MuniPreferred" shall mean the preferred stock or shares, par value $.01 per share, of any Fund designated as its "Municipal Auction Rate Cumulative Preferred Stock" or "Municipal Auction Rate Cumulative Preferred Shares" and bearing such further designation as to series as the Board of Directors or Board of Trustees, as the case may be, of such Fund or any committee thereof shall specify, as set forth in a Request Letter. (i) "Request Letter", with respect to any Fund, shall mean the letter from such Fund to the Adviser and the Auction Agent for such Fund pursuant to which such Fund appoints BD as a Broker-Dealer for each series of MuniPreferred of such Fund. 2 (j) "Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit A. (k) "Statement", with respect to any Fund, shall mean the Statement Establishing and Fixing the Rights and Preferences of, and authorizing the issuance of, one or more series of Municipal Auction Rate Cumulative Preferred Stock or Municipal Auction Rate Cumulative Preferred Shares, as filed by such Fund with the office of the Secretary of State or other officer of the state where such Fund was incorporated or organized, a copy of which will be attached to the Request Letter of such Fund. 1.3. Rules of Construction. --------------------- Unless the context or use indicates another or different meaning or intent, the following rules shall apply to the construction of each Agreement: (a) Words importing the singular number shall include the plural number and vice versa. (b) The captions and headings herein are solely for convenience of reference and shall not constitute a part of such Agreement nor shall they affect its meaning, construction or effect. (c) The words "hereof", "herein", "hereto", and other words of similar import refer to such Agreement as a whole. (d) All references herein to a particular time of day shall be to New York City time. 2. The Auction. ----------- 2.1. Purpose; Incorporation by Reference of Auction Procedures and ------------------------------------------------------------- Settlement Procedures. - ---------------------- (a) The provisions of the Auction Procedures of any Fund will be followed by the Auction Agent of such Fund for the purpose of determining the Applicable Rate for any Subsequent Rate Period of any series of MuniPreferred of such Fund for which the Applicable Rate is to be determined by an Auction. Each periodic operation of such procedures is hereinafter referred to as an "Auction." (b) All of the provisions contained in the Auction Procedures and the Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a part hereof to the same extent as if such provisions were fully set forth herein. 3 (c) BD agrees to act as, and assumes the obligations of, and limitations and restrictions placed upon, a Broker-Dealer under each Agreement for each series of MuniPreferred. BD understands that other Persons meeting the requirements specified in the definition of "Broker-Dealer" contained in the Auction Procedures may execute Agreements and participate as Broker-Dealers in Auctions. 2.2. Preparation for Each Auction. ---------------------------- (a) Not later than 9:30 A.M. on each Auction Date for any series of MuniPreferred, the Auction Agent for such series shall advise the Broker-Dealers for such series by telephone of the Maximum Rate therefor and the Reference Rate(s) and Treasury Note Rate(s), as the case may be, used in determining such Maximum Rate. (b) In the event that any Auction Date for any series of MuniPreferred shall be changed after the Auction Agent for such series has given the notice referred to in clause (vi) of paragraph (a) of the Settlement Procedures, or after the notice referred to in Section 2.5(a) hereof, if applicable, such Auction Agent, by such means as such Auction Agent deems practicable, shall give notice of such change to BD, if it is a Broker-Dealer for such series, not later than the earlier of 9:15 A.M. on the new Auction Date or 9:15 A.M. on the old Auction Date. (c) For purposes of maintaining its list of Existing Holders, the Auction Agent for any series of MuniPreferred from time to time may request any Broker-Dealer to provide such Auction Agent with a list of Persons who such Broker-Dealer believes should be Existing Holders based upon inquiries of those Persons such Broker-Dealer believes are Beneficial Owners as a result of the most recent Auction and with respect to each such Person, the number of shares of such series of MuniPreferred such Broker-Dealer believes are owned by such Person. BD shall comply with any such request relating to a series of MuniPreferred in respect of which BD was named a Broker-Dealer, and the Auction Agent shall keep confidential any such information so provided by BD and shall not disclose any information so provided by BD to any Person other than the Fund and BD. (d) BD agrees to maintain a list of customers relating to a series of MuniPreferred and to use its best efforts, subject to existing laws and regulations, to contact the customers on such list whom BD believes may be interested in participating in the Auction on each Auction Date, as a Potential Holder or a Potential Beneficial Owner, for the purposes set forth in the Auction Procedures. Nothing herein shall require BD to submit an Order for any customer in any Auction. (e) The Auction Agent's registry of Existing Holders of shares of a series of MuniPreferred shall be conclusive and binding on BD. BD may inquire of the Auction Agent between 3:00 P.M. on the Business Day preceding an Auction for shares of a series of MuniPreferred and 9:30 A.M. on the Auction Date for such Auction to ascertain the number of shares of such series in respect of which the Auction Agent has determined BD to be an 4 Existing Holder. If BD believes it is the Existing Holder of fewer shares of such series than specified by the Auction Agent in response to BD's inquiry, BD may so inform the Auction Agent of that belief. BD shall not, in its capacity as Existing Holder of shares of such series, submit Orders in such Auction in respect of shares of such series covering in the aggregate more than the number of shares of such series specified by the Auction Agent in response to BD's inquiry. 2.3. Auction Schedule; Method of Submission of Orders. ------------------------------------------------ (a) Each Fund and the Auction Agent for such Fund shall conduct Auctions for MuniPreferred in accordance with the schedule set forth below. Such schedule with respect to any series of MuniPreferred of any Fund may be changed by the Auction Agent for such series with the consent of such Fund, which consent shall not be unreasonably withheld. Such Auction Agent shall give written notice of any such change to each Broker-Dealer of such series. Such notice shall be given prior to the close of business on the Business Day next preceding the first Auction Date on which such change shall be effective. Time Event ---- ----- By 9:30 A.M. Auction Agent for such series advises such Fund and the Broker-Dealers for such series of the applicable Maximum Rate and the Reference Rate(s) and Treasury Note Rate(s), as the case may be, used in determining such Maximum Rate as set forth in Section 2.2(a) hereof. 9:30 A.M. - 1:30 P.M. Auction Agent assembles information communicated to it by Broker-Dealers as provided in Section 2(a) of the Auction Procedures of such Fund. Submission Deadline is 1:30 P.M. Not earlier than 1:30 P.M. Auction Agent makes determinations pursuant to Section 3(a) of the Auction Procedures of such Fund. 5 Time Event ---- ----- By approximately 3:00 P.M. Auction Agent advises Fund of results of Auction as provided in Section 3(b) of the Auction Procedures of such Fund. Submitted Bids and Submitted Sell Orders are accepted and rejected and shares of such series of MuniPreferred allocated as provided in Section 4 of the Auction Procedures of such Fund. Auction Agent gives notice of Auction results as set forth in Section 2.4(a) hereof. (b) BD shall submit Orders to the appropriate Auction Agent in writing substantially in the form attached hereto as Exhibit B. BD shall submit a separate Order to such Auction Agent for each Potential Holder or Existing Holder with respect to whom BD is submitting an Order and shall not otherwise net or aggregate such Orders prior to their submission to such Auction Agent. (c) BD shall deliver to the appropriate Auction Agent (i) a written notice in substantially the form attached hereto as Exhibit C of transfers of shares of MuniPreferred to BD from another Person other than pursuant to an Auction and (ii) a written notice substantially in the form attached hereto as Exhibit D, of the failure of any shares of MuniPreferred to be transferred to or by any Person that purchased or sold shares of MuniPreferred through BD pursuant to an Auction. Such Auction Agent is not required to accept any such notice described in clause (i) for an Auction unless it is received by the Auction Agent by 3:00 P.M. on the Business Day preceding such Auction. (d) BD and other Broker-Dealers may submit Orders in Auctions for their own accounts (including Orders for their own accounts where the Order is placed beneficially for a customer) unless the relevant Fund shall have notified BD and all other Broker-Dealers that they may no longer do so, in which case Broker-Dealers may continue to submit Hold Orders and Sell Orders for their own accounts. (e) BD agrees to handle its customers' orders in accordance with its duties under applicable securities laws and rules. (f) To the extent that pursuant to Section 4 of the Auction Procedures of any Fund, BD continues to hold, sells, or purchases a number of shares that is fewer than the number of shares in an Order submitted by BD to the Auction Agent in which BD designated itself as an Existing Holder or Potential Holder in respect of customer Orders, BD shall make 6 appropriate pro rata allocations among its customers for which it submitted Orders of similar tenor. If as a result of such allocations, any Beneficial Owner would be entitled or required to sell, or any Potential Beneficial Owner would be entitled or required to purchase, a fraction of a share of MuniPreferred on any Auction Date, BD shall, in such manner as it shall determine in its sole discretion, round up or down the number of shares of MuniPreferred to be purchased or sold on such Auction Date by any Beneficial Owner or Potential Beneficial Owner on whose behalf BD submitted an Order so that the number of shares so purchased or sold by each such Beneficial Owner or Potential Beneficial Owner on such Auction Date shall be whole shares of MuniPreferred. 2.4. Notices. ------- (a) On each Auction Date for any series of MuniPreferred, the Auction Agent for such series shall notify BD, if BD is a Broker-Dealer of such series, by telephone of the results of the Auction as set forth in paragraph (a) of the Settlement Procedures. By approximately 11:30 A.M. on the Business Day next succeeding such Auction Date, the relevant Auction Agent shall confirm to BD in writing the disposition of all Orders submitted by BD in such Auction. (b) BD shall notify each Existing Holder, Potential Holder, Beneficial Owner or Potential Beneficial Owner of shares of MuniPreferred with respect to whom BD has submitted an Order as set forth in paragraph (b) of the Settlement Procedures and take such other action as is required of BD pursuant to the Settlement Procedures. 2.5. Designation of Special Rate Period. ---------------------------------- (a) If any Fund delivers to its Auction Agent a notice of the Auction Date for any series of MuniPreferred of such Fund for a Rate Period thereof that next succeeds a Rate Period that is not a Minimum Rate Period in the form of Exhibit C to the Auction Agency Agreement, and BD is a Broker-Dealer of such series, the Auction Agent shall deliver such notice to BD as promptly as practicable after its receipt of such notice from such Fund. (b) If the Board of Directors or Board of Trustees, as the case may be, of any Fund proposes to designate any succeeding Subsequent Rate Period of any series of MuniPreferred of such Fund as a Special Rate Period and such Fund delivers to its Auction Agent a notice of such proposed Special Rate Period in the form of Exhibit D to the Auction Agency Agreement, and BD is a Broker-Dealer for such series, such Auction Agent shall deliver such notice to BD as promptly as practicable after its receipt of such notice from the Fund. (c) If the Board of Directors or Board of Trustees, as the case may be, of any Fund determines to designate such succeeding Subsequent Rate Period as a Special Rate Period, and such Fund delivers to its Auction Agent a notice of such Special Rate Period in the form of Exhibit E to the Auction Agency Agreement not later than 11:00 A.M. on the second Business Day next preceding the first day of such Rate Period (or by such later time or date, or both, as 7 may be agreed to by such Auction Agent), and BD is a Broker-Dealer for such series, such Auction Agent shall deliver such notice to BD not later than 3:00 P.M. on such second Business Day (or, if such Auction Agent has agreed to a later time or date, as promptly as practicable thereafter). (d) If any Fund shall deliver to its Auction Agent a notice not later than 11:00 A.M. on the second Business Day next preceding the first day of any Rate Period (or by such later time or date, or both, as may be agreed to by such Auction Agent) stating that such Fund has determined not to exercise its option to designate such succeeding Subsequent Rate Period as a Special Rate Period, in the form of Exhibit F to the Auction Agency Agreement, or shall fail to timely deliver either such notice or a notice in the form of Exhibit E to the Auction Agency Agreement, and BD is a Broker-Dealer for such series, such Auction Agent shall deliver a notice in the form of Exhibit F to the Auction Agency Agreement to BD not later than 3:00 P.M. on such second Business Day (or, if such Auction Agent has agreed to a later time or date, as promptly as practicable thereafter). 2.6. Allocation of Taxable Income. ---------------------------- If any Fund delivers to its Auction Agent a notice in the form of Exhibit I to the Auction Agency Agreement designating all or a portion of any dividend on shares of any series of MuniPreferred of such Fund to consist of net capital gains or other income taxable for Federal income tax purposes, and BD is a Broker-Dealer for such series, such Auction Agent shall deliver such notice to BD on the Business Day following its receipt of such notice from such Fund. On or prior to the Auction Date referred to in such notice, BD will contact each of its customers that is a Beneficial Owner of shares of such series of MuniPreferred or a Potential Beneficial Owner of shares of such series of MuniPreferred interested in submitting an Order in the Auction to be held on such Auction Date, and BD will notify such Beneficial Owners and Potential Beneficial Owners of the contents of such notice. BD will be deemed to have notified such Beneficial Owners and Potential Beneficial Owners if, for each of them, (i) BD makes a reasonable effort to contact such Beneficial Owner or Potential Beneficial Owner by telephone, and (ii) upon failing to contact such Beneficial Owner or Potential Beneficial Owner by telephone BD mails written notification to such Beneficial Owner or Potential Beneficial Owner at the mailing address indicated in the account records of BD. The Auction Agent for any series of MuniPreferred shall be required to notify BD if it is a Broker-Dealer for such series within two Business Days after each Auction of such series that involves an allocation of income taxable for Federal income tax purposes as to the dollar amount per share of such taxable income and income exempt from Federal income taxation included in the related dividend. 2.7. Failure to Deposit. ------------------ (a) If: 8 (i) any Failure to Deposit shall have occurred with respect to shares of any series of MuniPreferred of any Fund during any Rate Period thereof (other than any Special Rate Period of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured), but, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall have been cured in accordance with Section 2.7 of the Auction Agency Agreement and such Fund shall have paid to the Auction Agent for such series the applicable Late Charge as described in Section 2.7 of the Auction Agency Agreement, then, if BD is a Broker-Dealer for such series, such Auction Agent shall deliver a notice in the form of Exhibit G to the Auction Agency Agreement by first-class mail, postage prepaid, to BD not later than one Business Day after its receipt of the payment from such Fund curing such Failure to Deposit and such Late Charge. (b) If: (i) any Failure to Deposit shall have occurred with respect to shares of any series of MuniPreferred of any Fund during any Rate Period thereof (other than any Special Rate Period of more than 364 Rate Period Days or any Rate Period succeeding any Special Rate Period of more than 364 Rate Period Days during which a Failure to Deposit occurred but has not been cured), and, prior to 12:00 Noon, New York City time, on the third Business Day next succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall not have been cured as described in Section 2.7 of the Auction Agency Agreement or such Fund shall not have paid to the Auction Agent for such series the applicable Late Charge described in Section 2.7 of the Auction Agency Agreement; or (ii) any Failure to Deposit shall have occurred with respect to shares of any series of MuniPreferred of any Fund during a Special Rate Period thereof of more than 364 Rate Period Days, or during any Rate Period thereof succeeding any Special Rate Period of more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been cured, and, prior to 12:00 noon, New York City time, on the fourth Business Day preceding the Auction Date for the Rate Period subsequent to such Rate Period, such Failure to Deposit shall not have been cured as described in Section 2.7 of the Auction Agency Agreement or such Fund shall not have paid to the Auction Agent for such series the applicable Late Charge described in Section 2.7 of the Auction Agency Agreement; 9 then such Auction Agent shall deliver a notice in the form of Exhibit H to the Auction Agency Agreement to the Broker-Dealers for such series not later than one Business Day after the receipt of the payment from such Fund curing such Failure to Deposit and such Late Charge. 2.8. Service Charge to be Paid to BD. ------------------------------- On the Business Day next succeeding each Auction Date for any series of MuniPreferred specified in, or on Schedule A to, the Request Letter of any Fund, the Auction Agent for such series shall pay to BD from moneys received from such Fund an amount equal to the product of (a) (i) in the case of any Auction Date immediately preceding a Rate Period of such series consisting of 364 Rate Period Days or fewer, 1/4 of 1%, or (ii) in the case of any Auction Date immediately preceding a Rate Period of such series consisting of more than 364 Rate Period Days, such percentage as may be agreed upon by such Fund and BD with respect to such Rate Period, times (b) a fraction, the numerator of which is the number of Rate Period Days in the Rate Period therefor beginning on such Business Day and the denominator of which is 365 if such Rate Period consists of 7 Rate Period Days and 360 for all other Rate Periods, times (c) $25,000 times (d) the sum of (i) the aggregate number of shares of such series placed by BD in such Auction that were (A) the subject of Submitted Bids of Existing Holders submitted by BD and continued to be held as a result of such submission and (B) the subject of Submitted Bids of Potential Holders submitted by BD and purchased as a result of such submission plus (ii) the aggregate number of shares of such series subject to valid Hold Orders (determined in accordance with paragraph (d) of Section 2 of the Auction Procedures) submitted to the Auction Agent by BD plus (iii) the number of shares of MuniPreferred deemed to be subject to Hold Orders of Existing Holders pursuant to paragraph (c) of Section 2 of the Auction Procedures of such Fund that were acquired by BD for its own account or were acquired by BD for its customers who are Beneficial Owners. For purposes of subclause (d)(iii) of the foregoing paragraph, if any Existing Holder or Beneficial Owner who acquired shares of any series of MuniPreferred through BD transfers those shares to another Person other than pursuant to an Auction, then the Broker-Dealer for the shares so transferred shall continue to be BD; provided, however, that if the transfer was effected by, or if the transferee is, a Broker-Dealer other than BD, then such Broker- Dealer shall be the Broker-Dealer for such shares. 2.9. Settlement. ---------- (a) If any Existing Holder or Beneficial Owner with respect to whom BD has submitted a Bid or Sell Order for shares of MuniPreferred of any series that was accepted in whole or in part fails to instruct its Agent Member to deliver the shares of MuniPreferred subject to such Bid or Sell Order against payment therefor, BD, if it knows the identity of such Agent Member, shall instruct such Agent Member to deliver such shares against payment therefor and, if such Agent Member fails to comply with such instructions, BD may deliver to the Potential Holder or Potential Beneficial Owner with respect to whom BD submitted a Bid for shares of MuniPreferred of such series that was accepted in whole or in part a number of 10 shares of MuniPreferred of such series that is less than the number of shares of MuniPreferred of such series specified in such Bid to be purchased by such Potential Holder or Potential Beneficial Owner. (b) Neither the Auction Agent nor the Fund shall have any responsibility or liability with respect to the failure of an Existing Holder, Beneficial Owner, Potential Holder or Potential Beneficial Owner or its respective Agent Member to deliver shares of MuniPreferred of any series or to pay for shares of MuniPreferred of any series sold or purchased pursuant to the Auction Procedures or otherwise. (c) Notwithstanding any provision of the Auction Procedures or the Settlement Procedures to the contrary, in the event BD is an Existing Holder with respect to shares of a series of MuniPreferred and the Auction Procedures provide that BD shall be deemed to have submitted a Sell Order in an Auction with respect to such shares if BD fails to submit an Order in that Auction with respect to such shares, BD shall have no liability to any Person for failing to sell such shares pursuant to such a deemed Sell Order if (i) such shares were transferred by the beneficial owner thereof without notification of such transfer in compliance with the Auction Procedures or (ii) BD has indicated to the Auction Agent pursuant to Section 2.2(e) of this Agreement that, according to BD's records, BD is not the Existing Holder of such shares. (d) Notwithstanding any provision of the Auction Procedures or the Settlement Procedures to the contrary, in the event an Existing Holder or Beneficial Owner of shares of a series of MuniPreferred with respect to whom a Broker-Dealer submitted a Bid to the Auction Agent for such shares that was accepted in whole or in part, or submitted or is deemed to have submitted a Sell Order for such shares that was accepted in whole or in part, fails to instruct its Agent Member to deliver such shares against payment therefor, partial deliveries of shares of MuniPreferred that have been made in respect of Potential Holders, or Potential Beneficial Owners' Submitted Bids for shares of such series that have been accepted in whole or in part shall constitute good delivery to such Potential Holders and Potential Beneficial Owners. (e) Notwithstanding the foregoing terms of this Section, any delivery or non-delivery of shares of MuniPreferred of any series which represents any departure from the results of an Auction for shares of such series, as determined by the Auction Agent, shall be of no effect for purposes of the registry of Existing Holders maintained by the Auction Agent pursuant to the Auction Agency Agreement unless and until the Auction Agent shall have been notified of such delivery or non-delivery. (f) The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.9. 11 3. The Auction Agent. ----------------- 3.1. Duties and Responsibilities. --------------------------- (a) Each Auction Agent is acting solely as agent for the Funds with whom such Auction Agent has entered into Request Letters and owes no fiduciary duties to any other Person, other than such Funds, by reason of the Agreements to which such Auction Agent is a party. (b) Each Auction Agent undertakes to perform such duties and only such duties as are specifically set forth in the Agreements to which it is a party, and no implied covenants or obligations shall be read into such Agreements against such Auction Agent. (c) In the absence of bad faith or negligence on its part, each Auction Agent shall not be liable for any action taken, suffered, or omitted or for any error of judgment made by it in the performance of its duties under the Agreements to which it is a party. Each Auction Agent shall not be liable for any error of judgment made in good faith unless such Auction Agent shall have been negligent in ascertaining the pertinent facts. 3.2. Rights of the Auction Agents. ---------------------------- (a) Each Auction Agent may rely and shall be protected in acting or refraining from acting upon any communication authorized hereby and upon any written instruction, notice, request, direction, consent, report, certificate, share certificate or other instrument, paper or document believed in good faith by it to be genuine. Each Auction Agent shall not be liable for acting upon any telephone communication authorized by the Agreements to which it is a party that such Auction Agent believes in good faith to have been given by the appropriate Fund, by the Adviser or by a Broker-Dealer. Each Auction Agent may record telephone communications with the Broker-Dealers. (b) Each Auction Agent may consult with counsel of its choice and the advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) Each Auction Agent shall not be required to advance, expend or risk its own funds or otherwise incur or become exposed to financial liability in the performance of its duties hereunder. 3.3. Auction Agents' Disclaimers. --------------------------- Each Auction Agent makes no representation as to the validity or adequacy of the Agreements to which it is a party, the Auction Agency Agreements to which it is a party or the shares of MuniPreferred of any series. 12 4. Miscellaneous. ------------- 4.1. Termination. ----------- Any party to any Agreement may terminate such Agreement at any time on five days' notice to the other parties to such Agreement, provided that the Fund party to such Agreement shall not terminate the Agreement unless at least one Broker-Dealer Agreement would be in effect for each series of MuniPreferred of such Fund after such termination. Each Agreement shall automatically terminate with respect to any series of MuniPreferred with respect to which the relevant Auction Agency Agreement has terminated. 4.2. Participant in Securities Depository; Payment of Dividends in ------------------------------------------------------------- Same-Day Funds. - --------------- (a) BD is, and shall remain for the term of the Agreements, a member of, or participant in, the Securities Depository (or an affiliate of such a member or participant). (b) BD represents that it (or if BD does not act as Agent Member, one of its affiliates) shall make all dividend payments on the MuniPreferred available in same-day funds on each Dividend Payment Date to customers that use BD or affiliate as Agent Member. 4.3. Communications. -------------- Except for (i) communications authorized to be by telephone by the Agreement of any Fund or the Auction Procedures of such Fund and (ii) communications in connection with Auctions (other than those expressly required to be in writing), all notices, requests and other communications to any party under such Agreement shall be in writing (including telecopy or similar writing) and shall be given to such party, addressed to it, at its address or telecopy number set forth below: If to a Fund, [Name of Fund] addressed: 333 West Wacker Drive Chicago, Illinois 60606 Attention: Richard J. Franke, Chairman of the Board Telecopier No.: (312) 917-7942 Telephone No.: (312) 917-7700 If to the Adviser, Nuveen Advisory Corp. addressed: 333 West Wacker Drive Chicago, Illinois 60606 Attention: Richard J. Franke, Chairman of the Board 13 If to BD, to the address or telecopy number as set forth in the Acceptance Letter, If to an Action Agent, to the address or telecopy number as set forth in the Request Letter, or such other address or telecopy number as such party may hereafter specify for such purpose by notice to the other parties. Each such notice, request or communication shall be effective when delivered at the address specified herein. Communications shall be given on behalf of BD by a BD Officer and on behalf of an Auction Agent by an Authorized Officer of such Auction Agent. BD may record telephone communications with any Auction Agent. 4.4. Entire Agreement. ---------------- Each Agreement contains the entire agreement among the parties thereto relating to the subject matter thereof, and there are no other representations, endorsements, promises, agreements or understandings, oral, written or implied, among the parties thereto relating to the subject matter thereof. Each Agreement supersedes any prior agreement to which BD was a party in respect of any Fund. 4.5. Benefits. -------- Nothing in any Agreement, express or implied, shall give to any person, other than the Fund party to such Agreement, the Adviser, the Auction Agent party to such Agreement and BD and their respective successors and assigns, any benefit or any legal or equitable right, remedy or claim under such Agreement. 4.6. Amendment; Waiver. ----------------- (a) Each Agreement shall not be deemed or construed to be modified, amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a duly authorized representative of the party to be charged. (b) Failure of any party to any Agreement to exercise any right or remedy thereunder in the event of a breach thereof by any other party shall not constitute a waiver of any such right or remedy with respect to any subsequent breach. 14 4.7. Successors and Assigns. ---------------------- Each Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the respective successors and assigns of the Fund party to such Agreement, the Adviser, the Auction Agent party to such Agreement and BD. 4.8. Severability. ------------ If any clause, provision or section hereof shall be ruled invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections hereof. 4.9. GOVERNING LAW. ------------- EACH AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 4.10. Declaration of Trust. -------------------- The Declaration of each Fund that is a Massachusetts business trust is on file with the Secretary of State of the Commonwealth of Massachusetts. Each Agreement to which a Fund that is a Massachusetts business trust is a party has been executed on behalf of such Fund by the Vice President and Treasurer of such Fund acting in such capacity and not individually, and the obligations of such Fund set forth in such Agreement are not binding upon any of such Fund's trustees, officers or shareholders individually, but are binding only upon the assets and property of such Fund. 15 EXHIBIT A --------- SETTLEMENT PROCEDURES --------------------- ================================================================================================================================ [AUCTION AGENT] AUCTION BID FORM NAME OF Broker-Dealer: ------------------------ AUTHORIZED Submit to: SIGNATURE: ------------------------------------ TOTAL NUMBER OF ORDERS ON THIS BID FORM: ------ ================================================================================================================================
EXHIBIT B --------- [Name of Fund] $_____ Municipal Auction Rate Cumulative Preferred Stock [Shares], Series ____ $_____ Municipal Auction Rate Cumulative Preferred Stock [Shares], Series ____ AUCTION DATE: _____________ ISSUE: ___________________ SERIES: _________ THE UNDERSIGNED Broker-Dealer SUBMITS THE FOLLOWING ORDERS ON BEHALF OF THE BIDDER(S) LISTED BELOW:
================================================================================================================================ ORDERS BY EXISTING HOLDERS- NUMBER OF SHARES OF MUNIPREFERRED ORDERS BY POTENTIAL NUMBER OF SHARES OF HOLDERS- MUNIPREFERRED POTENTIAL HOLDER BID/RATE EXISTING HOLDER HOLD BID/RATE SELL 1. / ----------------- ------------------------ 1. / 2. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 2. / 3. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 3. / 4. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 4. / 5. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 5. / 6. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 6. / 7. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 7. / 8. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 8. / 9. / --------------------------- ------ -------------------- -------- ----------------- ------------------------ 9. / 10. 1 / --------------------------- ------ -------------------- -------- ---------------- ------------------------ 10. / 11. 1 / --------------------------- ------ -------------------- -------- ---------------- ------------------------ 12. 1 / - -------------------------------------------------------------------------------- ---------------- ------------------------ NOTES: 13. 1 / - ------ ---------------- ------------------------ 14. 1 / ---------------- ------------------------ 1. If one or more Orders covering in the aggregate more than the number of 15. 1 / outstanding shares of MuniPreferred held by any Existing holder are submitted, ---------------- ------------------------ such Orders shall be considered valid in the order of priority set forth in the Auction Procedures. 2. A Hold Order or Sell Order may be placed only by an Existing Holder covering a number of shares of MuniPreferred not greater than the number of shares of MuniPreferred currently held by such Existing Holder. 3. Potential Holders may make Bids only, each of which must specify a rate. If more than one Bid is submitted on behalf of any Potential Holder, each Bid submitted shall be a separate Bid with the rate specified. 4. Bids may contain no more than three figures to the right of the decimal point (.001 of 1%). ====================================================================================================================================
EXHIBIT C --------- (To be used only for transfers made to a Broker-Dealer other than pursuant to an Auction) [NAME OF FUND] MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES], SERIES ___ TRANSFER FORM We are the Broker-Dealer to whom the Existing Holder or Beneficial Owner named below transferred shares of the above series of MuniPreferred other than pursuant to an Auction. We hereby notify you that such Existing Holder or Beneficial Owner has transferred _______ shares of the above series of MuniPreferred to us. ------------------------------------------------- (Name of Existing Holder or Beneficial Owner) ------------------------------------------------- (Name of Broker-Dealer) By: ---------------------------------------------- Printed Name: Title: EXHIBIT D --------- (To be used only for failures to deliver shares of MuniPreferred sold pursuant to an Auction) [NAME OF FUND] MUNICIPAL AUCTION RATE CUMULATIVE PREFERRED STOCK [SHARES], SERIES ____ NOTICE OF A FAILURE TO DELIVER Complete either I or II - ----------------------- I. We are a Broker-Dealer for ________________ (the "Purchaser"), which purchased _______ shares of the above series of MuniPreferred in the Auction held on _____ from the seller of such shares. II. We are a Broker-Dealer for ____________ (the "Seller"), which sold ________ shares of the above series of MuniPreferred in the Auction held on ______ to the purchaser of such shares. We hereby notify you that (check one) -- [_] the Seller failed to deliver such shares of MuniPreferred to the Purchaser [_] the Purchaser failed to make payment to the Seller upon delivery of such shares of MuniPreferred Name: -------------------------------------------- (Name of Broker-Dealer) By: ---------------------------------------------- Printed Name: Title: [Form of Broker-Dealer Acceptance Letter] Nuveen Advisory Corp. December ___, 1993 [Broker-Dealer] [Address] Ladies and Gentlemen: Reference is made to (a) the Broker-Dealer Agreements executed by the Funds (as hereinafter defined) listed on Exhibit A hereto, Bankers Trust Company and various broker-dealers, copies of which will be made available to you upon request by Bankers Trust Company (the "Broker-Dealer Agreements") and (b) the Nuveen Broker-Dealer Agreement-Basic Terms for Acting as a Broker-Dealer dated December 14, 1993, receipt of which is hereby acknowledged by you (the "Basic Terms"). For purposes of this letter ("Acceptance Letter") (a) "Fund" shall mean any closed-end investment company registered under the Investment Company Act of 1940, as amended, for which Nuveen Advisory Corp. acts as investment adviser; (b) except as otherwise provided below, the terms of each Broker-Dealer Agreement shall be incorporated herein by reference, and you shall be considered BD for all purposes thereof, as if you were the Broker-Dealer signatory thereto in the place of the actual Broker-Dealer signatory thereto; and (c) the Basic Terms are incorporated herein by reference, you shall be considered BD for all purposes thereof, Bankers Trust Company shall be considered the Auction Agent for all purposes thereof, and each Fund not listed on Exhibit A hereto shall be considered a Fund for all purposes thereof. We hereby request that you act as a Broker-Dealer for the Money Market Cumulative Preferred Stock ("MMP") of each series, and the Municipal Auction Rate Cumulative Preferred Stock or Shares ("MPS" or "MuniPreferred") of each series, of each Fund that executes a letter, substantially in the form attached hereto as Exhibit B or Exhibit C, as appropriate, appointing you as a Broker- Dealer ("Request Letter"). You hereby (a) accept such appointment as a Broker- Dealer for each series of MMP, MPS or MuniPreferred of each Fund identified in a Request Letter and (b) agree to act as BD in accordance with (1) the terms of the Broker-Dealer Agreement relating to such Fund, in the case of any Fund listed on Exhibit A hereto or (2) the Basic Terms, in the case of any other Fund; provided, however, that: 2 (1) for purposes of any such Broker-Dealer Agreement or the Basic Terms, and notwithstanding any provision of any Broker-Dealer Agreement to the contrary, your address, telecopy number and telephone number for communications pursuant to such Broker-Dealer Agreement or the Basic Terms shall be as follows: ------------------------------------- ------------------------------------- ------------------------------------- ------------------------------------- and the address, telecopy number and telephone number of the Auction Agent for communications pursuant to such Broker-Dealer or the Basic Terms shall be as follows: ------------------------------------- ------------------------------------- ------------------------------------- ------------------------------------- (2) notwithstanding any provision of a Broker-Dealer Agreement to the contrary, except as otherwise set forth herein, your appointment as Broker- Dealer extends to each series of MMP, MPS or MuniPreferred issued by the Fund to which such Broker-Dealer Agreement relates. (3) the text of Section 2.9 of each Broker-Dealer Agreement shall be deleted and the following shall be deemed to be inserted in its place: (a) If any Existing Holder with respect to whom BD has submitted a Bid or Sell Order for shares of MMP, MPS or MuniPreferred of any series that was accepted in whole or in part fails to instruct its Agent Member to deliver the shares of MMP, MPS or MuniPreferred subject to such Bid or Sell Order against payment therefor, BD, if it knows the identity of such Agent Member, shall instruct such Agent Member to deliver such shares against payment therefor and, if such Agent Member fails to comply with such instructions, BD may deliver to the Potential Holder with respect to whom BD submitted a Bid for shares of MMP, MPS or MuniPreferred of such series that was accepted in whole or in part a number of shares of MMP, MPS or MuniPreferred of such 3 series that is less than the number of shares of MMP, MPS, or MuniPreferred of such series specified in such Bid to be purchased by such Potential Holder. (b) Neither the Auction Agent nor the Fund shall have any responsibility or liability with respect to the failure of an Existing Holder or a Potential Holder or its respective Agent Member to deliver shares of MMP, MPS or MuniPreferred of any series or to pay for shares of MMP, MPS or MuniPreferred of any series sold or purchased pursuant to the Auction Procedures or otherwise. (c) Notwithstanding any provision of the Auction Procedures or the Settlement Procedures to the contrary, in the event BD is an Existing Holder with respect to shares of a series of MMP, MPS or MuniPreferred and the Auction Procedures provide that BD shall be deemed to have submitted a Sell Order in an Auction with respect to such shares if BD fails to submit in Order in that Auction with respect to such shares, BD shall have no liability to any Person for failing to sell such shares pursuant to such a deemed Sell Order if (i) such shares were transferred by the beneficial owner thereof without notification of such transfer in compliance with the Auction Procedures or (ii) BD has informed the Auction Agent pursuant to Section 2.2(g) of this Agreement that, according to BD's records, BD believes it is not the Existing Holder of such shares. (d) Notwithstanding any provision of the Auction Procedures or the Settlement Procedures to the contrary, in the event an Existing Holder of shares of a series of MMP, MPS or MuniPreferred with respect to whom a Broker-Dealer submitted a Bid to the Auction Agent for such shares that was accepted in whole or in part, or submitted or is deemed to have submitted a Sell Order for such shares that was accepted in whole or in part, fails to instruct its Agent Member to deliver such shares against payment therefor, partial deliveries of shares of MMP, MPS or MuniPreferred that have been made in respect of Potential Holders' Submitted Bids for shares of such series that have been accepted in whole or in part shall constitute good delivery to such Potential Holders. (e) Notwithstanding the foregoing terms of this Section, any delivery or non-delivery of shares of MMP, MPS or MuniPreferred of any series which represents any departure from the results of an Auction for shares of such series, as determined by the Auction Agent, shall be of no effect for purposes of the registry of Existing Holders maintained by the Auction Agent pursuant to the Auction Agency Agreement unless and until the Auction Agent shall have been notified of such delivery or non-delivery. (f) The Auction Agent shall have no duty or liability with respect to enforcement of this Section 2.9. (4) a new Section 2.2(g) shall be added to each Broker-Dealer Agreement, to read as follows: 4 (g) The Auction Agent's registry of Existing Holders of shares of a series of MMP, MPS or MuniPreferred shall be conclusive and binding on BD. BD may inquire of the Auction Agent between 3:00 P.M. on the Business Day preceding an Auction for shares of a series of MMP, MPS or MuniPreferred and 9:30 A.M. on the Auction Date for such Auction to ascertain the number of shares of such series in respect of which the Auction Agent has determined BD to be an Existing Holder. If BD believes it is the Existing Holder of fewer shares of such series than specified by the Auction Agent in response to BD's inquiry, BD may so inform the Auction Agent of that belief. BD shall not, in its capacity as Existing Holder of shares of such series, submit Orders in such Auction in respect of shares of such series covering in the aggregate more than the number of shares of such series specified by the Auction Agent in response to BDs inquiry. (5) a new sentence shall be added to the end of Section 2.2(d) of each Broker-Dealer Agreement, to read as follows: Nothing contained herein shall require BD to submit an Order for any customer in any Auction. You hereby acknowledge that, notwithstanding any provision of any Broker-Dealer Agreement or the Basic Terms to the contrary, the Fund may (a) upon five business days' notice to the Auction Agent and you, amend, alter or repeal any of the provisions contained in any Broker-Dealer Agreement or the Basic Terms, it being understood and agreed that you shall be deemed to have accepted any such amendment, alteration or repeal if, after the expiration of such five business day period, you submit an Order to the Auction Agent in respect of the shares of MMP, MPS, MuniPreferred of the Fund or Funds to which such amendment, alteration or repeal relates, and (b) upon two business days' notice to the Auction Agent and you, exclude you from participating as a Broker- Dealer in any particular Auction for any particular series of MMP, MPS or MuniPreferred. This Acceptance Letter shall be deemed to form part of each Broker- Dealer Agreement and the Basic Terms. Capitalized terms not defined in this Acceptance Letter shall have the meanings ascribed to them in the relevant Broker-Dealer Agreement or the Basic Terms, as the case may be. 5 If the foregoing terms are acceptable to you, please so indicate in the space provided below. This Acceptance Letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. NUVEEN ADVISORY CORP. By: ------------------------------------------- Name: H. William Stabenow Title: Vice President and Treasurer Accepted by and Agreed to as of the date first written above: [Broker-Dealer] By: ------------------ Name: Title: 6 EXHIBIT A TO ACCEPTANCE LETTER ------------------------------ Nuveen Performance Plus Municipal Fund, Inc. Nuveen Municipal Advantage Fund, Inc. Nuveen Investment Quality Municipal Fund, Inc. Nuveen Insured Quality Municipal Fund, Inc. Nuveen Quality Income Municipal Fund, Inc. Nuveen Select Quality Municipal Fund, Inc. Nuveen Insured Municipal Opportunity Fund, Inc. Nuveen California Performance Plus Municipal Fund, Inc. Nuveen California Municipal Market Opportunity Fund, Inc. Nuveen California Investment Quality Municipal Fund, Inc. Nuveen California Select Quality Municipal Fund, Inc. Nuveen California Quality Income Municipal Fund, Inc. Nuveen Florida Investment Quality Municipal Fund Nuveen Florida Quality Income Municipal Fund Nuveen Michigan Quality Income Municipal Fund, Inc. Nuveen New Jersey Quality Income Municipal Fund, Inc. Nuveen New York Performance Plus Municipal Fund, Inc. Nuveen New York Municipal Market Opportunity Fund, Inc. Nuveen New York Investment Quality Municipal Fund, Inc. Nuveen New York Select Quality Municipal Fund, Inc. Nuveen New York Quality Income Municipal Fund, Inc. Nuveen Ohio Quality Income Municipal Fund, Inc. EXHIBIT B TO ACCEPTANCE LETTER ------------------------------ [Form of Request Letter] _____________________, 1993 FROM: All investment companies registered under the Investment Company Act of 1940, as amended, for which Nuveen Advisor Corp. acts as investment adviser and whose registration statements relating to shares of Money Market Cumulative Preferred Stock or Municipal Auction Rate Cumulative Preferred Stock or Shares have been declared effective by the Securities and Exchange Commission on or prior to the date hereof. TO: Nuveen Advisory Corp. Bankers Trust Company Ladies and Gentlemen: Reference is made to (a) the respective Broker-Dealer Agreements, previously executed by the Funds (as hereinafter defined) listed on Exhibit A hereto, various Broker-Dealers and Bankers Trust Company (the "Broker-Dealer Agreements"); (b) the respective Auction Agency Agreements previously executed by the Funds listed on Exhibit A hereto and Bankers Trust Company (the "Auction Agency Agreements"); (c) the Nuveen Broker-Dealer Agreement -- Basic Terms for Acting as a Broker-Dealer dated December 14, 1993, receipt of which is hereby acknowledged by you (the "Broker-Dealer Basic Terms"); and (d) the Nuveen Auction Agency Agreement -- Basic Terms for Acting as Auction Agent dated November 1, 1993, receipt of which is hereby acknowledged by you (the "Auction Agency Basic Terms"). For purposes of this letter ("Request Letter"), (a) "Fund" shall mean any closed-end investment company registered under the Investment Company Act of 1940, as amended, for which Nuveen Advisory Corp. acts as investment adviser; (b) except as otherwise provided below, the terms of each Broker-Dealer Agreement shall be incorporated herein by reference, and each Broker-Dealer listed on Exhibit B hereto shall be considered BD for all purposes thereof, as if such Broker-Dealer were the Broker-Dealer signatory thereto in the place of the actual Broker-Dealer signatory thereto; (c) the Broker-Dealer Basic Terms are incorporated herein by reference, each Broker-Dealer listed on Exhibit B hereto shall be considered BD for all purposes thereof, Bankers Trust Company shall be considered the Auction Agent for all purposes thereof, and each Fund referred to on Exhibit C hereto shall be considered a Fund for all purposes thereof; (d) except as otherwise provided below, the terms of each Auction Agency Agreement shall be incorporated herein by reference, and each Broker- Dealer listed on Exhibit B shall be considered a Broker-Dealer for all purposes thereof; and (e) the Auction Agency Basic Terms are incorporated herein by reference, Bankers Trust Company shall be considered the Auction Agent for all purposes thereof, and each Fund referred to on Exhibit C hereto shall be considered a Fund for all purposes thereof. We hereby appoint the Broker-Dealers listed on Exhibit B hereto as Broker-Dealers for the Money Market Cumulative Preferred Stock ("MMP") or Municipal Auction Rate Cumulative Preferred Stock or Shares ("MPS" or "MuniPreferred") of each series of each Fund listed on Exhibit A hereto or referred to on Exhibit C hereto. Each such Broker-Dealer will act as BD in respect of such series in accordance with (1) the terms of the Broker-Dealer Agreement relating to such Fund, in the case of any Fund listed on Exhibit A hereto, except as otherwise set forth in an Acceptance Letter relating to such Broker-Dealer from Nuveen Advisory Corp, to such Broker-Dealer or (2) the Broker-Dealer Basic Terms, in the case of any Fund referred to on Exhibit C hereto; provided, however, that for purposes of any such Broker-Dealer Agreement or the Broker-Dealer Basic Terms, and notwithstanding any provision of any Broker-Dealer Agreement to the contrary, Bankers Trust Company's address, telecopy number and telephone number for communications pursuant to such Broker- Dealer Agreement or the Broker-Dealer Basic Terms shall be as follows: ------------------------------------- ------------------------------------- ------------------------------------- ------------------------------------- Bankers Trust Company agrees to act as Auction Agent with respect to shares of each series of MMP, MPS or MuniPreferred of each Fund listed on Exhibit A or referred to on Exhibit C hereto in accordance with (1) the terms of the Auction Agency Agreement relating to the MMP, MPS or MuniPreferred of such Fund, in the case of any Fund listed on Exhibit A hereto or (2) the Auction Agency Basic Terms, in the case of any Fund referred to on Exhibit C hereto; provided, however, that Section 2.2(c)(i) of each Auction Agency Agreement shall be amended to read as follows: (c)(i) The Auction Agent shall maintain a registry of the beneficial owners of the shares of MMP, MPS or MuniPreferred who shall constitute Existing Holders of shares of MMP, MPS or MuniPreferred for purposes of Auctions and shall indicate thereon the identity of the respective Broker- Dealer of each Existing Holder, if any, on whose behalf such Broker-Dealer submitted the most recent Order in any Auction which resulted in such Existing Holder continuing to hold or purchasing shares of MMP, MPS or MuniPreferred. The Auction Agent shall keep such registry current and accurate. The Fund shall provide or cause to be provided to the Auction Agent at or prior to the Date of Original Issue of the shares of MMP, MPS or MuniPreferred a list of the initial Existing Holders of the shares of MMP, MPS or MuniPreferred, the number of shares purchased by each such Existing Holder and the respective Broker-Dealer of each such 2 Existing Holder or the affiliate thereof through which each such Existing Holer purchased such shares. The Auction Agent shall advise the Fund in writing whenever the number of Existing Holders is 500 or more. The Auction Agent may rely upon, as conclusive evidence of the identities of the Existing Holders of shares of MMP, MPS or MuniPreferred (A) such list, (B) the results of Auctions, (C) notices from any Existing Holder, the Agent Member of any Existing Holder or the Broker-Dealer of any Existing Holder as described in the first sentence of Section 2.2(c)(iii) hereof and (D) the results of any procedures approved by the Fund that have been devised for the purpose of determining the identities of Existing Holders in situations where shares of MMP, MPS or MuniPreferred may have been transferred without compliance with any restrictions on the transfer thereof set forth in the Auction Procedures. This Request Letter shall be deemed to form part of each Auction Agency Agreement and the Auction Agency Basic Terms. Capitalized terms not defined in this Request Letter shall have the meanings ascribed to them in the relevant Broker-Dealer Agreement, Broker-Dealer Basic Terms, Auction Agency Agreement or Auction Agency Basic Terms, as the case may be. 3 If the foregoing terms are acceptable to you, please so indicate in the space provided below. This Request Letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. All investment companies registered under the Investment Company Act of 1940, as amended, for which Nuveen Advisory Corp. acts as investment adviser and whose registration statements relating to shares of Money Market Cumulative Preferred Stock or Municipal Auction Rate Cumulative Preferred Stock or Shares have been declared effective by the Securities and Exchange Commission on or prior to the date hereof. By: ------------------------------------------- Name: H. William Stabenow Title: Vice President and Treasurer of each Fund Accepted and Agreed to as of the date first written above: NUVEEN ADVISORY CORP. BANKERS TRUST COMPANY By By: ------------------------- ------------------------------------------- Name: H. William Stabenow Name: Sandra Becker Whalen Title: Vice President and Title: Assistant Treasurer Treasurer cc: [Broker-Dealers] 4 EXHIBIT A TO REQUEST LETTER --------------------------- Nuveen Performance Plus Municipal Fund, Inc. Nuveen Municipal Advantage Fund, Inc. Nuveen Investment Quality Municipal Fund, Inc. Nuveen Insured Quality Municipal Fund, Inc. Nuveen Select Quality Municipal Fund, Inc. Nuveen Quality Income Municipal Fund, Inc. Nuveen Insured Municipal Opportunity Fund, Inc. Nuveen California Performance Plus Municipal Fund, Inc. Nuveen California Municipal Market Opportunity Fund, Inc. Nuveen California Investment Quality Municipal Fund, Inc. Nuveen California Select Quality Municipal Fund, Inc. Nuveen California Quality Income Municipal Fund, Inc. Nuveen Florida Investment Quality Municipal Fund Nuveen Florida Quality Income Municipal Fund Nuveen Michigan Quality Income Municipal Fund, Inc. Nuveen New Jersey Quality Income Municipal Fund, Inc. Nuveen New York Performance Plus Municipal Fund, Inc. Nuveen New York Municipal Market Opportunity Fund, Inc. Nuveen New York Investment Quality Municipal Fund, Inc. Nuveen New York Select Quality Municipal Fund, Inc. Nuveen New York Quality Income Municipal Fund, Inc. Nuveen Ohio Quality Income Municipal Fund, Inc. EXHIBIT B TO REQUEST LETTER --------------------------- [LIST OF BROKER-DEALERS] EXHIBIT C TO REQUEST LETTER --------------------------- Each Fund not listed on Exhibit A whose registration statement relating to shares of MMP, MPS or MuniPreferred has been declared effective by the Securities and Exchange Commission on or prior to the date of the Request Letter to which this Exhibit C is attached. EXHIBIT C TO ACCEPTANCE LETTER ------------------------------ [Form of Request Letter] [Name(s) of Fund(s)] __________________, 1993 Ladies and Gentlemen: Reference is made to (a) the Nuveen Broker-Dealer Agreement -- Basic Terms for Acting as a Broker-Dealer dated December 14, 1993, receipt of which is hereby acknowledged by you (the "Broker-Dealer Basic Terms") and (b) the Nuveen Auction Agency Agreement -- Basic Terms for Acting as Auction Agent dated November 1, 1993, receipt of which is hereby acknowledged by you (the "Auction Agency Basic Terms"). For purposes of this letter ("Request Letter"), (a) "Fund" shall mean each undersigned closed-end investment company registered under the Investment Company Act of 1940, as amended, for which Nuveen Advisory Corp. acts as investment adviser; (b) the Broker-Dealer Basic Terms are incorporated herein by reference, each Broker-Dealer listed on Exhibit A hereto shall be considered BD for all purposes thereof, Bankers Trust Company shall be considered the Auction Agent for all purposes thereof, and each Fund shall be considered a Fund for all purposes thereof; and (c) the Auction Agency Basic Terms are incorporated herein by reference, Bankers Trust Company shall be considered the Auction Agent for all purposes thereof, and each Fund shall be considered a Fund for all purposes thereof. Each Fund hereby appoints the Broker-Dealers listed on Exhibit A hereto as Broker-Dealers for each series of Money Market Cumulative Preferred Stock ("MMP") or Municipal Auction Rate Cumulative Preferred Stock or Shares ("MPS" or "MuniPreferred") of such Fund. Each such Broker-Dealer will act as BD in respect of each such series in accordance with the Broker-Dealer Basic Terms; provided, however, that for purposes of the Broker-Dealer Basic Terms, Bankers Trust Company's address, telecopy number and telephone number for communications pursuant to the Broker-Dealer Basic Terms shall be as follows: ------------------------------------- ------------------------------------- ------------------------------------- ------------------------------------- Bankers Trust Company agrees to act as Auction Agent with respect to shares of each series of MMP, MPS or MuniPreferred of each Fund in accordance with the Auction Agency Basic Terms. This Request Letter shall be deemed to form part of the Auction Agency Basic Terms. Capitalized terms not defined in this Request Letter shall have the meanings ascribed to them in the Broker-Dealer Basic Terms or Auction Agency Basic Terms, as the case may be. If the foregoing terms are acceptable to you, please so indicate in the space provided below. This Request Letter may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. [NAME(S) OF FUND(S)] By: ---------------------------------- Name: H. William Stabenow Title: Vice President and Treasurer of each Fund Accepted and Agreed to as of the date first written above: NUVEEN ADVISORY CORP. BANKERS TRUST COMPANY By: By: ------------------------------ ---------------------------------- Name: H. William Stabenow Name: Sandra Becker Whalen Title: Vice President and Title: Assistant Treasurer Treasurer cc: [Broker-Dealers listed on Exhibit A] 2 EXHIBIT A TO REQUEST LETTER --------------------------- [LIST OF BROKER-DEALERS] EX-99.D.3 6 LETTER OF REPRESENTATION TO THE DEPOSITORY TRUST EXHIBIT 99.d.3 [DTC LOGO] BOOK-ENTRY-ONLY AUCTION-RATE/MONEY MARKET PREFERRED/AND REMARKETED PREFERRED SECURITIES LETTER OF REPRESENTATIONS [TO BE COMPLETED BY ISSUER AND TRUST COMPANY] NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND ----------------------------------------------------- [NAME OF ISSUER] BANKERS TRUST COMPANY --------------------- [NAME OF TRUST COMPANY] Attention: General Counsel's Office , 1999 THE DEPOSITORY TRUST COMPANY [DATE] 55 Water Street, 49th Floor New York, NY 10041-0099 Re: 880 Shares of Municipal Auction Rate Cumulative Preferred Stock, Series T, par value $.01 per share of Nuveen Pennsylvania Investment Quality Municipal Fund, CUSIP No._____ [ISSUE DESCRIPTION, INCLUDING CUSIP NUMBER] Ladies and Gentlemen: This letter sets forth our understanding with respect to certain matters relating to the above-referenced issue (the "Securities"). Trust Company will act as transfer agent, registrar, dividend disbursing agent, and redemption agent with respect to the Securities. The Securities will be issued pursuant to a prospectus, private placement memorandum, or other such document authorizing the issuance of the Securities dated _____, 1999 (the "Document"). Salomon Smith Barney Inc. ("Underwriter") is distributing the Securities through The Depository Trust Company ("DTC"). To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with its Rules with respect to the Securities, Issuer and Trust Company make the following representations to DTC: 1. Prior to closing on the Securities on _____, 1999 there shall be deposited with DTC one Security certificate registered in the name of DTC's nominee, Cede & Co., which represents the total number of Securities issued. Said certificate shall remain in DTC's custody as provided in the Document. If, however, the aggregate principal amount of the Securities exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount. Each Security certificate shall bear the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to Issuer or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co.; has an interest herein. 2. Issuer:(a) understands that DTC has no obligation to, and will not, communicate to its Participants or to any person having an interest in the Securities any information contained in the Security certificate(s); and (b) acknowledges that neither DTC, Participants nor any person having an interest in the Securities shall be deemed to have notice of the provisions of the Security certificate(s) by virtue of submission of such certificate(s) to DTC. 3. In the event of any solicitation of consents from or voting by holders of the Securities, Issuer shall establish a record date for such purposes (with no provision for revocation of consents or votes by subsequent holders) and shall send notice of such record date to DTC not less than 15 calendar days in advance of such record date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Reorganization Department at (212) 709-6896 or (212) 709-6897, and receipt of such notices shall be confirmed by telephoning (212) 709-6870. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to DTC's Reorganization Department as indicated in Paragraph 5. 4. In the event of a full or partial redemption of the outstanding Securities, Issuer or Trust Company shall send a notice to DTC specifying: (a) the number of Securities to be redeemed; and (b) the date such notice is to be distributed to Security holders or published (the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before or, if possible, two business days before the Publication Date. Issuer or Trust Company shall forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission for multiple CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 30 days nor more than 60 days prior to the redemption date. Notices to DTC pursuant to this Paragraph by telecopy shall be sent to DTC's Call Notification Department at (516) 227-4039 or (516) 227-4190. If the party sending the notice does not receive a telecopy receipt from DTC confirming that the notice has been received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to this Paragraph by mail or by any other means shall be sent to: Manager; Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, NY 11530-4719 5. In the event of an invitation to tender the Securities (including mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust Company to Security holders specifying the terms of the tender and the Publication Date of such notice shall be sent to DTC by a secure means in the manner set forth in the preceding Paragraph. Notices to DTC pursuant to this Paragraph and notices of other corporate actions by telecopy shall be sent to DTC's Reorganization Department at (212)709-1093 or (212) 709-1094, and receipt of such notices shall be confirmed by telephoning (212) 709-6884. Notices to DTC pursuant to the above by mail or by any other means shall be sent to: Manager; Reorganization Department Reorganization Window The Depository Trust Company 7 Hanover Square; 23rd Floor New York, NY 10004-2695 6. All notices and payment advices sent to DTC shall contain the CUSIP number of the Securities (listed on Schedule A hereto) and the accompanying description of such Security, which, as of the date of this letter is "___________". 7. The Document indicates that the dividend rate for the Securities may vary from time to time. Absent other existing arrangements with DTC, Issuer or Trust Company shall give DTC notice of each such change in the dividend rate, on the same day that the new rate is determined, by telephoning the Supervisor of DTC's Dividend Announcement Section at (212) 709-1270, or by telecopy sent to (212) 709-1723. Such verbal or telecopy notice shall be followed by prompt written confirmation sent by a secure means in the manner set forth in Paragraph 4 to: Manager; Announcements Dividend Department The Depository Trust Company 7 Hanover Square; 22nd Floor New York, NY 10004-2695 8. The Document indicates that each purchaser of Securities must sign a purchaser's letter which contains provisions restricting transfer of the Securities purchased. Issuer and Trust Company acknowledge that as long as Cede & Co. is the sole record owner of the Securities, Cede & Co. shall be entitled to all voting rights applicable to the Securities and to receive the full amount of all dividends, liquidation proceeds, and redemption proceeds payable with respect to the Securities, even if the credits of Securities to the DTC accounts of any DTC Participant ("Participant") result from transfers or failures to transfer in violation of the provisions of the purchaser's letter. Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to the full benefits of ownership of such Securities. Without limiting the generality of the preceding sentence, Issuer and Trust Company acknowledge that DTC shall treat any Participant having Securities credited to its DTC accounts as entitled to receive dividends, distributions, and voting rights, if any, in respect of Securities and, subject to Paragraphs 12 and 13, to receive certificates evidencing Securities if such certificates are to be issued in accordance with Issuer's certificate of incorporation. (The treatment by DTC of the effects of the crediting by it of Securities to the accounts of Participants described in the preceding two sentences shall not affect the rights of issuer, participants in auctions relating to the Securities, purchasers, sellers, or holders of Securities against any Participant.) DTC shall not have any responsibility to ascertain whether any transfer of Securities is made in accordance with the provisions of the purchaser's letter. 9. Issuer or Trust Company shall provide a written notice of dividend payment and distribution information to a standard announcement service subscribed to by DTC as soon as the information is available. In the unlikely event that no such service exists, Issuer or Trust Company shall provide this information directly to DTC electronically, as previously arranged by Issuer or Trust Company and DTC, as soon as the information is available. If electronic transmission has not been arranged, absent any other arrangements between Issuer or Trust Company and DTC, such information should be sent by telecopy to DTC's Dividend Department at (212) 709-1723 or (212) 709-1686, and receipt of such notices shall be confirmed by telephoning (212) 709-1270. Notices to DTC pursuant to the above by mail or by any other means shall be addressed as follows: Manager; Announcements Dividend Department The Depository Trust Company 7 Hanover Square; 22nd Floor New York, NY 10004-2695 10. Issuer or Trust Company shall provide CUSIP-level detail for dividend payments and distributions to DTC no later than noon (Eastern Time) on the payment date. 11. Dividend payments and distributions shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same-day funds no later than 2:30 p.m. (Eastern Time) on each payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA #021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Dividend Deposit Account #066-026776 12. Redemption payments shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same-day funds no later than 2:30 p.m. (Eastern Time) on the payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA #021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Redemption Deposit Account #066-027306 13. Reorganization payments and CUSIP-level detail resulting from corporate actions (such as tender offers, remarketing, or mergers) shall be received by Cede & Co., as nominee of DTC, or its registered assigns in same-day funds no later than 2:30 p.m. (Eastern Time) on the first payment date. Absent any other arrangements between Issuer or Trust Company and DTC, such funds shall be wired as follows: The Chase Manhattan Bank ABA #021 000 021 For credit to a/c Cede & Co. c/o The Depository Trust Company Reorganization Deposit Account #066-027608 14. DTC may direct Issuer or Trust Company to use any other number or address as the number or address to which notices, payments of dividends, distributions, or redemption proceeds may be sent. 15. In the event of a redemption acceleration, or any similar transaction (e.g., tender made and accepted in response to Issuer's or Trust Company's invitation) necessitating a reduction in the number of Securities Outstanding, or an advance refunding of part of the Securities outstanding DTC, in its discretion: (a) may request Issuer or Trust Company to issue and authenticate a new Security certificate; or (b) may make an appropriate notation on the Security certificate indicating the date and amount of such reduction in the number of Securities outstanding, except in the case of final redemption, in which case the certificate will be presented to Issuer or Trust Company prior to payment, if required. 16. In the event that Issuer determines that beneficial owners of Securities shall be able to obtain certificated Securities, Issuer or Trust Company shall notify DTC of the availability of certificates. In such event, Issuer or Trust Company shall issue, transfer, and exchange certificates in appropriate amounts, as required by DTC and others. 17. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust Company the aggregate principal amount of Securities outstanding). Under such circumstances, at DTC's request Issuer and Trust Company shall cooperate fully with DTC by taking appropriate action to make available one or more separate certificates evidencing Securities to any DTC Participant having Securities credited to its DTC accounts. 18. Issuer hereby authorizes DTC to provide to Trust Company security position listings of Participants with respect to the Securities from time to time at the request of Trust Company. Issuer also authorizes DTC, in the event of a partial redemption of Securities, to provide Trust Company, upon request, with the names of those Participants whose positions in Securities have been selected for redemption by DTC. DTC will use its best efforts to notify Trust Company of those Participants whose positions in Securities have been selected for redemption by DTC. Issuer authorizes and instructs Trust Company to provide DTC with such signatures, examples of signatures, and authorizations to act as may be deemed necessary or appropriate by DTC to permit DTC to discharge its obligations to its Participants and appropriate regulatory authorities. Such requests for security position listings shall be sent to DTC's Reorganization Department in the manner set forth in Paragraph 5. This authorization, unless revoked by Issuer, shall continue with respect to the Securities while any Securities are on deposit at DTC, until and unless Trust Company shall no longer be acting. In such event, Issuer shall provide DTC with similar evidence, satisfactory to DTC, of the authorization of any successor thereto so to act. 19. Nothing herein shall be deemed to require Trust Company to advance funds on behalf of Issuer. 20. This Letter of Representations may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts together constitute but one and the same instrument. 21. This Letter of Representations is governed by, and shall be construed in accordance with, the laws of the State of New York. 22. The following riders, attached hereto, are hereby incorporated into this Letter of Representations: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NOTES: A. IF THERE IS A TRUST COMPANY (AS DEFINED IN THIS LETTER OF REPRESENTATIONS), TRUST COMPANY AS WELL AS ISSUER MUST SIGN THIS LETTER. IF THERE IS NO TRUST COMPANY, IN SIGNING THIS LETTER ISSUER ITSELF UNDERTAKES TO PERFORM ALL OF THE OBLIGATIONS SET FORTH HEREIN. B. SCHEDULE B CONTAINS STATEMENTS THAT DTC BELIEVES ACCURATELY DESCRIBE DTC, THE METHOD OF EFFECTING BOOK-ENTRY TRANSFERS OF SECURITIES DISTRIBUTED THROUGH DTC, AND CERTAIN RELATED MATTERS. Very truly yours, Nuveen Pennsylvania Investment Quality Municipal Fund (Issuer) By: -------------------------------------------- (Authorized Officer's Signature) Bankers Trust Company (Trust Company) By: -------------------------------------------- (Authorized Officer's Signature) Received and Accepted: THE DEPOSITORY TRUST COMPANY By: ------------------------------------ cc: Underwriter Underwriter's Counsel SCHEDULE A Municipal Auction Rate Cumulative Preferred Stock, Series T, par value $.01 per share of Nuveen Pennsylvania Investment Quality Municipal Fund. ----------------------------- (Describe Issue) CUSIP Number Share Total Value ($ Amount) - ------------ ----------- ---------------- 880 22,000,000 SCHEDULE B SAMPLE OFFERING DOCUMENT LANGUAGE DESCRIBING BOOK-ENTRY-ONLY ISSUANCE ----------------------------------- (PREPARED BY DTC-BRACKETED MATERIAL MAY BE APPLICABLE ONLY TO CERTAIN ISSUES) 1. The Depository Trust Company ("DTC"), New York, NY, will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC. [If, however, the aggregate principal amount of [any] issue exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal amount of such issue.] 2. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds securities that its participants ("Participants") deposit with DTC. DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission. 3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued. 4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The deposit of Securities with DTC and their registration in the name of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Participants will remain responsible for keeping account of their holdings on behalf of their customers. 5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. [6. Redemption notices shall be sent to DTC. If less than all of the Securities within an issue are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.] 7. Neither DTC nor Cede & Co. will consent or vote with respect to Securities. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy). 8. Redemption proceeds, distributions and dividend payments on the Securities will be made to Cede & Co., as nominee of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of payment and corresponding detail information from Issuer or Trust Company on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Trust Company, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions and dividends to Cede & Co. is the responsibility of Issuer or Trust Company, disbursement of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants. [9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to Trust Company [or Tender/Remarketing Agent], and shall effect delivery of such Securities by causing the Direct Participant to transfer the Participant's interest in the Securities, on DTC's records, to Trust Company [or Tender/Remarketing Agent]. The requirement for physical delivery of Securities in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered Securities to Trustee's [or Tender/Remarketing Agent's] DTC account.] 10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Trust Company. Under such circumstances, in the event that a successor securities depository is not obtained, Security certificates are required to be printed and delivered. 11. Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered. 12. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof. RIDER AMENDING DTC LETTER OF REPRESENTATIONS - BEO AUCTION-RATE/MONEY MARKET PREFERRED/AND REMARKETED PREFERRED SECURITIES DTC's Reorganization and Dividend Departments have relocated to 55 Water Street. Following are revisions to the Letter of Representations including current addresses, telephone numbers, and telecopy numbers. Paragraph 3 of the Letter of Representations: - --------------------------------------------- Old Telecopier Numbers: Current Telecopier Numbers: (212) 709-6896 and (212) 709-6897 (212) 855-5181 and (212) 855-5182 The confirmation number (formerly (212) 709-6870) is now (212) 855-5202. Old Te1ecopier Numbers: Current Telecopier Number: (212) 709-1093 and (212) 709-1094 (212) 855-5278 The confirmation number (formerly (212) 709-6884) is now (212) 855-5280. The current address is: Manager; Reorganization Department Reorganization Window The Depository Trust Company 55 WATER STREET 50TH FLOOR NEW YORK, NY 10041-0099. Paragraph 7 of the Letter of Representations: - --------------------------------------------- Old Telecopier Number: Current Telecopier Number (212) 709-1723 (212) 855-4555 The confirmation number (formerly (212) 709-1270) is now (212) 855-4550. The current address is: Manager; Announcements Dividend Department The Depository Trust Company 55 WATER STREET 25TH FLOOR NEW YORK, NY 10041-0099 Paragraph 9 of the Letter of Representations: - --------------------------------------------- Old Telecopier Numbers: Current Telecopier Numbers: (212) 709-1723 and (212) 709-1686 (212) 855-4555 and (212) 855-4556 The confirmation number (formerly (212) 709-1270) is now (212) 855-4550. The current address for Paragraph 9 is the same as that listed above, for Paragraph 7. The following additional text relates to Paragraph 10 of the Letter of Representations: Such information shall be conveyed by automated notification. If the circumstances prevent the funds being paid to Cede & Co., as nominee of DTC, by 2:30 p.m. ET from equaling the dollar amount associated with detail payments by 12:00 noon ET, Issuer or Agent must provide CUSIP-level reconciliation to DTC no later than 2:30 p.m. ET. Reconciliation may be provided by automated means or in written format. The following additional text relates to Paragraph 11 of the Letter of Representations: Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or at such earlier time as required by Agent to guarantee timely credit to the Dividend Deposit Account of Cede & Co. The following additional text relates to Paragraph 12 of the Letter of Representations: Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or at such earlier time as required by Agent to guarantee timely credit to the Redemption Deposit Account of Cede & Co. Issuer or Agent shall deliver CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on each payment date. The following additional text relates to Paragraph 13 of the Letter of Representations. Issuer must remit free funds to Agent by 1:00 p.m. ET on each payment date, or at such earlier time as required by Agent to guarantee timely credit to the Reorganization Deposit Account of Cede & Co. Issuer or Agent shall deliver CUSIP-level detail regarding such payments to DTC no later than 2:30 p.m. ET on each payment date. EX-99.E 7 DIVIDEND REINVESTMENT PLAN Exhibit 99.e NUVEEN EXCHANGE-TRADED FUNDS (except Nuveen Municipal Value Fund, Inc.) Terms and Conditions of the Dividend Reinvestment Plan This Dividend Reinvestment Plan for the Nuveen Exchange-Traded Funds advised by Nuveen Advisory Corp. set forth on Exhibit A attached hereto (each, a "Fund") provides for reinvestment of Fund distributions, consisting of income dividends, returns of capital and capital gain distributions paid by the Fund, on behalf of Fund shareholders electing to participate in the Plan ("Participants") by United States Trust Company of New York ("U.S. Trust"), the Plan Agent, in accordance with the following terms: 1. U.S. Trust will act as Agent for Participants and will open an account for each Participant under the Dividend Reinvestment Plan in the same name as the Participant's shares are registered, and will put into effect for each Participant the distribution reinvestment option of the Plan as of the first record date for a distribution to shareholders after U.S. Trust receives the Participant's authorization so to do, either in writing duly executed by the Participant or by telephone notice satisfying such reasonable requirements as U.S. Trust and the Fund may agree. In the case of shareholders who hold shares for others who are the beneficial owners, U.S. Trust will administer the Plan on the basis of the number of Shares certified from time to time by the record shareholder as representing the total amount registered in the record shareholder's name and held for the account of beneficial owners who are Participants. 2. Whenever the Fund declares a distribution payable in shares or cash at the option of the shareholders, each Participant shall take such distribution entirely in shares and U.S. Trust shall automatically receive such shares, including fractions, for the Participant's account, except in circumstances described in Paragraph 3 below. Except in such circumstances, the number of additional shares to be credited to each Participant's account shall be determined by dividing the dollar amount of the distribution payable on the Participant's shares by the current market price per share on the payable date for such distribution. 3. Should the net asset value per Fund share exceed the market price per share on the day for which trades will settle on the payment date for such distribution (the "Valuation Date") for a distribution payable in shares or in cash at the option of the shareholder, or should the Fund declare a distribution payable only in cash, each Participant shall take such distribution in cash and U.S. Trust shall apply the amount of such distribution to the purchase on the open market of shares of the Fund for the Participant's account. Such Plan purchases shall be made as early as the Valuation Date, under the supervision of the investment adviser. U.S. Trust shall complete such Plan purchases no more than 30 days after the Valuation Date, except where temporary curtailment or suspension of purchases is necessary to comply with applicable provisions of federal securities law. 4. For the purpose of this Plan, the market price of the Fund's shares on a particular date shall be the last sale price on the Exchange where it is traded on that date, or if there is no sale on such Exchange on that date, then the mean between the closing bid and asked quotations for such shares on such Exchange on such date. 5. Open-market purchases provided for above may be made on any securities exchange where the Fund's shares are traded, in the over-the-counter market or in negotiated transactions and may be on such terms as to price, delivery and otherwise as U.S. Trust shall determine. Participants' funds held uninvested by U.S. Trust will not bear interest, and it is understood that, in any event, U.S. Trust shall have no liability in connection with any inability to purchase shares within 30 days after the Valuation Date as herein provided, or with the timing of any purchases affected. U.S. Trust shall have no responsibility as to the value of the Fund's shares acquired for Participants' accounts. U.S. Trust may commingle all Participants' amounts to be used for open-market purchases of Fund shares and the price per share allocable to each Participant in connection with such purchases shall be the average price (including brokerage commissions and other related costs) of all Fund shares purchased by U.S. Trust as Agent. 6. U.S. Trust may hold each Participant's shares acquired pursuant to this Plan, together with the shares of other Participants, in non-certificated form in U.S. Trust's name or that of its nominee. U.S. Trust will forward to each Participant any proxy solicitation material and will vote any shares so held only in accordance with proxies returned to the Fund. 7. U.S. Trust will confirm to each Participant each acquisition made for the Participant's account as soon as practicable but not later than 60 days after the date thereof. U.S. Trust will deliver to any Participant upon request, without charge, a certificate or certificates for his full shares. Although a Participant may from time to time have an undivided fractional interest (computed to three decimal places) in a share of the Fund, and distributions on fractional shares will be credited to the Participant's account, no certificates for a fractional share will be issued. In the event of termination of a Participant's account under the Plan, U.S. Trust will adjust for any such undivided fractional interest at the market value of the Fund's shares at the time of termination. 8. Any stock dividends or split shares distributed by the Fund on full and fractional shares held by U.S. Trust for a Participant will be credited to the Participant's account. In the event that the Fund makes available to its shareholders rights to purchase additional shares or other securities, the shares held for each Participant under the Plan will be added to other shares held by the Participant in calculating the number of rights to be issued to that Participant. 9. U.S. Trust's service fee for handling reinvestment of distributions pursuant hereto will be paid by the Fund. Participants will be charged their pro rated shares of brokerage commissions on all open market purchases. 2 10. Each Participant may terminate his account under the Plan by notifying U.S. Trust of his intent so to do, such notice to be provided either in writing duly executed by the Participant or by telephone in accordance with such reasonable requirements as U.S. Trust and the Fund may agree. Such termination will be effective immediately if notice is received by U.S. Trust not less than ten days prior to any distribution record date for the next succeeding distribution; otherwise such termination will be effective shortly after the investment of such distribution with respect to all subsequent distributions. The Plan may be terminated by the Fund or U.S. Trust upon at least 90 days prior notice. Upon any termination, U.S. Trust will cause a certificate or certificates for the full shares held for each Participant under the Plan and cash adjustment for any fraction to be delivered to the Participant without charge. If any Participant elects in advance of such termination to have U.S. Trust sell part or all of his shares, U.S. Trust is authorized to deduct from the proceeds a $2.50 fee plus the brokerage commissions incurred for the transaction. 11. These terms and conditions may be amended or supplemented by U.S. Trust or the Fund at any time or times but, except when necessary or appropriate to comply with applicable law or the rules or policies of the Securities and Exchange Commission or any other regulatory authority, only by mailing to each Participant appropriate written notice at least 90 days prior to the effective date thereof. The amendment or supplement shall be deemed to be accepted by each Participant unless, prior to the effective date thereof, U.S. Trust receives notice of the termination of such Participant's account under the Plan in accordance with the terms hereof. Any such amendment may include an appointment by U.S. Trust in its place and stead of a successor Agent under these terms and conditions. Upon any such appointment of any Agent for the purpose of receiving distributions, the Fund will be authorized to pay to such successor Agent, for each Participant's account, all dividends and distributions payable on shares of the Fund held in the Participant's name or under the Plan for retention or application by such successor Agent as provided in these terms and conditions. 12. U.S. Trust shall at all times act in good faith and agree to use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by its negligence, bad faith or willful misconduct or that of its employees. 13. These terms and conditions shall be governed by the laws of the State of New York. 3 Exhibit A Nuveen Municipal Income Fund, Inc. Nuveen California Municipal Income Fund, Inc. Nuveen New York Municipal Income Fund, Inc. Nuveen Premium Income Municipal Fund, Inc. Nuveen Performance Plus Municipal Fund, Inc. Nuveen Municipal Advantage Fund, Inc. Nuveen Municipal Market Opportunity Fund, Inc. Nuveen Investment Quality Municipal Fund, Inc. Nuveen Insured Quality Municipal Fund, Inc. Nuveen Select Quality Municipal Fund, Inc. Nuveen Quality Income Municipal Fund, Inc. Nuveen Insured Opportunity Municipal Fund, Inc. Nuveen Premier Municipal Income Fund, Inc. Nuveen Premier Insured Municipal Income Fund, Inc. Nuveen Premium Income Municipal Fund 2, Inc. Nuveen Premium Income Municipal Fund 4, Inc. Nuveen Insured Premium Income Municipal Fund, Inc. Nuveen Insured Premium Income Municipal Fund 2 Nuveen Select Maturities Fund Nuveen California Municipal Value Fund, Inc. Nuveen California Performance Plus Municipal Fund, Inc. Nuveen California Municipal Market Opportunity Fund, Inc. Nuveen California Investment Quality Municipal Fund, Inc. Nuveen California Select Quality Municipal Fund, Inc. Nuveen California Quality Income Municipal Fund, Inc. Nuveen Insured California Premium Income Municipal Fund, Inc. Nuveen Insured California Premium Income Municipal Fund 2, Inc. Nuveen California Premium Income Municipal Fund Nuveen Florida Investment Quality Municipal Fund Nuveen Florida Quality Income Municipal Fund Nuveen Insured Florida Premium Income Municipal Fund Nuveen New Jersey Investment Quality Municipal Fund, Inc. Nuveen New Jersey Premium Income Municipal Fund, Inc. Nuveen New York Municipal Value Fund, Inc. Nuveen New York Performance Plus Municipal Fund, Inc. Nuveen New York Investment Quality Municipal Fund, Inc. Nuveen New York Select Quality Municipal Fund, Inc. Nuveen New York Quality Income Municipal Fund, Inc. Nuveen Insured New York Premium Income Municipal Fund, Inc. Nuveen Pennsylvania Investment Quality Municipal Fund Nuveen Pennsylvania Premium Income Municipal Fund 2 Nuveen Arizona Premium Income Municipal Fund, Inc. Nuveen Connecticut Premium Income Municipal Fund Nuveen Georgia Premium Income Municipal Fund Nuveen Maryland Premium Income Municipal Fund Nuveen Massachusetts Premium Income Municipal Fund Nuveen Michigan Quality Income Municipal Fund, Inc. Nuveen Michigan Premium Income Municipal Fund, Inc. Nuveen Missouri Premium Income Municipal Fund Nuveen North Carolina Premium Income Municipal Fund Nuveen Ohio Quality Income Municipal Fund, Inc. Nuveen Texas Quality Income Municipal Fund Nuveen Virginia Premium Income Municipal Fund Nuveen Washington Premium Income Municipal Fund 4 EX-99.G.1 8 INVESTMENT MANAGEMENT AGREEMENT Exhibit 99.g.1 INVESTMENT MANAGEMENT AGREEMENT AGREEMENT made this 28th day of July, 1993, by and between NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, a Massachusetts business trust (the "Fund"), and NUVEEN ADVISORY CORP., a Delaware corporation (the "Adviser"). WITNESSETH In consideration of the mutual covenants hereinafter contained, it is hereby agreed by and between the parties hereto as follows: 1. The Fund hereby employs the Adviser to act as the investment adviser for, and to manage the investment and reinvestment of the assets of the Fund in accordance with the Fund's investment objective and policies and limitations, and to administer the Fund's affairs to the extent requested by and subject to the supervision of the Board of 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% For the first $125 million .6375% For the next $125 million .6250% For the next $250 million .6125% For the next $500 million .6000% For the next $1 billion .5875% On assets of $2 billion and over For the month and year in which this Agreement becomes effective, or terminates, there shall be an appropriate proration on the basis of the number of days that the Agreement shall have been in effect during the month and year, respectively. The services of the Adviser to the Fund under this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar services or other services to others so long as its services hereunder are not impaired thereby. 2 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. 3 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, 1994, 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. 4 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. 5 IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to be executed on the day and year above written. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND by: /s/ (SIG) ----------------------- Vice President Attest: /s/ G R Zimmerman ------------------------- Assistant Secretary NUVEEN ADVISORY CORP. by: /s/ Thomas C. Spalding ----------------------- Vice President Attest: /s/ Larry Martin ------------------------- Assistant Secretary 6 EX-99.G.2 9 RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT Exhibit 99.g.2 NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND RENEWAL OF INVESTMENT MANAGEMENT AGREEMENT This Agreement made this 5th day of May, 1998 by and between Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Fund"), and Nuveen Advisory Corp., a Delaware corporation (the "Adviser"); WHEREAS, the parties hereto are the contracting parties under that certain Investment Management Agreement (the "Agreement") pursuant to which the Adviser furnishes investment management and other services to the Fund; and WHEREAS, the Agreement terminates August 1, 1998 unless continued in the manner required by the Investment Company Act of 1940; and WHEREAS, the Board of Trustees, at a meeting called for the purpose of reviewing the Agreement, have approved the Agreement and its continuance until August 1, 1999 in the manner required by the Investment Company Act of 1940. NOW THEREFORE, in consideration of the mutual covenants contained in the Agreement the parties hereto do hereby continue the Agreement in effect until August 1, 1999 and ratify and confirm the Agreement in all respects. NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: /s/ G. R. ZIMMERMAN --------------------------------- Vice President ATTEST: /s/ KAREN HEALY - --------------------------- Assistant Secretary NUVEEN ADVISORY CORP. By: /s/ J. THOMAS FUTRELL --------------------------------- Vice President ATTEST: /s/ LARRY MARTIN - --------------------------- Assistant Secretary EX-99.H 10 FORM OF UNDERWRITING AGREEMENT EXHIBIT 99.h Municipal Auction Rate Cumulative Preferred Shares NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND 880 Shares, Series T Liquidation Preference $25,000 Per Share UNDERWRITING AGREEMENT ________ __, 1999 SALOMON SMITH BARNEY INC. A.G. EDWARDS & SONS, INC. BT ALEX. BROWN GOLDMAN, SACHS & CO. JOHN NUVEEN & CO. INCORPORATED PAINE WEBBER INCORPORATED PRUDENTIAL SECURITIES c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: Nuveen Pennsylvania Investment Quality Municipal Fund, a Massachusetts business trust (the "Fund"), proposes, upon the terms and conditions set forth herein, to issue and sell an aggregate of 880 shares of its Municipal Auction Rate Cumulative Preferred Shares, Series T, (the "MuniPreferred"), par value .01 per share, with a liquidation preference of $25,000 per share (the shares of MuniPreferred to be sold hereby are referred to herein, collectively, as the "Shares"). The Shares will be authorized by, and subject to the terms and conditions of, the Statement Establishing and Fixing the Rights and Preferences of Municipal Auction Rate Cumulative Preferred Stock (the "Statement") in the form filed as an exhibit to the registration statement referred to in Section 1 of this agreement. Nuveen Advisory Corp., a Delaware corporation (the "Adviser"), is the Fund's investment adviser. This is to confirm the agreement concerning the purchase of the Shares from the Fund by Salomon Smith Barney Inc. (the "Representative") and A.G. Edwards & Sons, Inc., BT Alex. Brown, Goldman, Sachs & Co., John Nuveen & Co., Incorporated, Paine Webber Incorporated, and Prudential Securities (each an "Underwriter", and together with the Representative, the "Underwriters"). The Representative has been duly authorized by each of the Underwriters to execute this Underwriting Agreement (the "Agreement") on behalf of such Underwriters and has been duly authorized to act hereunder on behalf of each of the Underwriters. The Fund has entered into an investment management agreement with the Adviser, an exchange traded fund custody agreement with United States Trust Company of New York, a fund accounting agreement with United States Trust Company of New York and an auction agency agreement, including the Basic Terms in respect thereof, with Bankers Trust Company. 2 Such agreements are hereinafter referred to as the "Investment Management Agreement", the "Custodian Agreement", the "Fund Accounting Agreement" and the "Auction Agency Agreement", respectively. Collectively, the Investment Management Agreement, the Custodian Agreement, the Fund Accounting Agreement and the Auction Agency Agreement are hereinafter referred to as the "Fund Agreements". 1. Registration Statement and Prospectus. The Fund has prepared, in conformity with the provisions of the Securities Act of 1933, as amended (the "1933 Act"), the Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and regulations of the Securities and Exchange Commission (the "Commission"), promulgated under the 1933 Act (the "1933 Act Rules and Regulations") and the 1940 Act (the "1940 Act Rules and Regulations" and, together with the 1933 Act Rules and Regulations, the "Rules and Regulations"), a registration statement on Form N-2 under the 1933 Act and the 1940 Act (the "registration statement"), including a prospectus relating to the Shares, and has filed the registration statement and prospectus in accordance with the 1933 Act and the 1940 Act. The Fund also has filed a notification of registration of the Fund as an investment company under the 1940 Act on Form N-8A (the "1940 Act Notification"). The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective under the 1933 Act, or, if the registration statement became effective under the 1933 Act prior to the execution of this Agreement, as amended or supplemented at the time it became effective, prior to the execution of this Agreement. If it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed under the 1933 Act and must be declared effective before the offering of the Shares may commence, the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment. If the Fund has filed an abbreviated registration statement to register an additional amount of Shares pursuant to Rule 462(b) under the 1933 Act (the "Rule 462 Registration Statement"), then any reference herein to the term "Registration Statement" shall include such Rule 462 Registration Statement. The term "Prospectus" as used in this Agreement means the prospectus and statement of additional information in the forms included in the Registration Statement or, if the prospectus and statement of additional information included in the Registration Statement omit information in reliance on Rule 430A under the 1933 Act Rules and Regulations and such information is included in a prospectus and statement of additional information filed with the Commission pursuant to Rule 497 under the 1933 Act, the term "Prospectus" as used in this Agreement means the prospectus and statement of additional information in the forms included in the Registration Statement as supplemented by the addition of the information contained in the prospectus filed with the Commission pursuant to Rule 497. The term "Prepricing Prospectus" as used in this Agreement means the prospectus and statement of additional information subject to completion in the forms included in the registration statement at the time of filing of pre-effective amendment no. 1 to the registration statement under the 1933 Act with the Commission on April __, 1999, and as such prospectus and statement of additional information shall have been amended from time to time prior to the date of the Prospectus, together with any other prospectus and statement of additional information relating to the Fund other than the Prospectus approved in writing by or directly or indirectly prepared by the Fund or the Adviser; it being understood that the definition of Prepricing Prospectus above shall not include any Prepricing Prospectus prepared by the 3 Underwriters unless approved in writing by the Fund or Adviser. The terms "Registration Statement", "Prospectus" and "Prepricing Prospectus" shall also include any financial statements incorporated by reference therein. The Fund has furnished the Underwriters with copies of such Registration Statement, each amendment to such Registration Statement filed with the Commission and each Prepricing Prospectus. 2. Agreements to Sell and Purchase. The Fund hereby agrees, subject to all the terms and conditions set forth herein, to issue and sell to the Underwriters, and, upon the basis of the representations, warranties and agreements of the Fund and the Adviser herein contained and subject to all the terms and conditions set forth herein, the Underwriters agree to purchase from the Fund, at a purchase price of $_______ per Share, the number of shares of MuniPreferred set forth opposite the names of the Underwriters in Schedule I hereto. 3. Terms of Public Offering. The Fund and the Adviser have been advised by the Underwriters that the Underwriters propose to make a public offering of the Shares as soon after the Registration Statement and this Agreement have become effective as in the Underwriters' judgment is advisable and initially to offer the Shares upon the terms set forth in the Prospectus. 4. Delivery of the Shares and Payment Therefor. Delivery to the Underwriters of and payment for the Shares shall be made at the office of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, NY 10017, at 9:30 A.M., New York City time, on ________ __, 1999 (the "Closing Date"). The place of closing for the Shares and the Closing Date may be varied by agreement between the Representative and the Fund. Certificates for the Shares shall be registered in such names and in such denominations as the Underwriters shall request prior to 9:30 A.M., New York City time, on the second business day preceding the Closing Date. Such certificates shall be made available to the Underwriters in New York City for inspection not later than 9:30 A.M., New York City time, on the business day next preceding the Closing Date. The certificates evidencing the Shares shall be delivered to the Underwriters on the Closing Date, through the facilities of The Depository Trust Company, against payment of the purchase price therefor in immediately available funds. 5. Agreements of the Fund and the Adviser. The Fund and the Adviser, jointly and severally, agree with the Underwriters as follows: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective under the 1933 Act before the offering of the Shares may commence, the Fund will endeavor to cause the Registration Statement or such post-effective amendment to become effective under the 1933 Act as soon as possible and will advise the Underwriters promptly and, if requested by the Underwriters, will confirm such advice in writing when the Registration Statement or such post-effective amendment has become effective. 4 (b) The Fund will advise the Underwriters promptly and, if requested by the Underwriters, will confirm such advice in writing: (i) of any request made by the Commission for amendment of or a supplement to the Registration Statement, any Prepricing Prospectus or the Prospectus (or any amendment or supplement to any of the foregoing) or for additional information, (ii) of the issuance by the Commission, the National Association of Securities Dealers, Inc. (the "NASD"), any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official of any order suspending the effectiveness of the Registration Statement, prohibiting or suspending the use of the Prospectus or any Prepricing Prospectus, or any sales material (as hereinafter defined), of any notice pursuant to Section 8(e) of the 1940 Act, of the suspension of qualification of the Shares for offering or sale in any jurisdiction, or the initiation of any proceeding for any such purposes, (iii) of receipt by the Fund, the Adviser, any affiliate of the Fund or the Adviser or any representative or attorney of the Fund or the Adviser of any other material communication from the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official relating to the Fund (if such communication relating to the Fund is received by such person within three years after the date of this Agreement), the Registration Statement, the 1940 Act Notification, the Prospectus, any Prepricing Prospectus, any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) or this Agreement or any of the Fund Agreements and (iv) within the period of time referred to in paragraph (f) below, of any material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Fund or the Adviser or of the happening of any other event which makes any statement of a material fact made in the Registration Statement or the Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) untrue or which requires the making of any additions to or changes in the Registration Statement or the Prospectus, or any Prepricing Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) in order to state a material fact required by the 1933 Act, the 1940 Act or the Rules and Regulations to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading or of the necessity to amend or supplement the Registration Statement, the Prospectus, or any Prepricing Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) to comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other law or order of any court or regulatory body. If at any time the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or any other governmental, regulatory, self-regulatory or administrative agency or any official shall issue any order suspending the effectiveness of the Registration Statement, prohibiting or suspending the use of the Prospectus or any sales material (as herein defined) (or any amendment or supplement to any of the foregoing) or suspending the qualification of the Shares for offering or sale in any jurisdiction, the Fund will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. (c) The Fund will furnish to the Underwriters, without charge, three signed copies of the Registration Statement as originally filed with the Commission and of each amendment thereto, including financial statements and all exhibits thereto, and will also furnish to the 5 Underwriters, without charge, such number of conformed copies of the Registration Statement as originally filed and of each amendment thereto, but without exhibits, as the Underwriters may request. (d) The Fund will not (i) file any amendment to the Registration Statement or make any amendment or supplement to the Prospectus, or any sales material (as herein defined), of which the Underwriters shall not previously have been advised or to which the Underwriters shall reasonably object after being so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a Prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer, file any information, documents or reports pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act") or the 1940 Act, without delivering a copy of such information, documents or reports to the Underwriters prior to or concurrently with such filing. (e) Prior to the execution and delivery of this Agreement, the Fund has delivered to the Underwriters, without charge, in such quantities as the Underwriters have requested, copies of each form of the Prepricing Prospectus. The Fund consents to the use, in accordance with the provisions of the 1933 Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Underwriters and by dealers, prior to the date of the Prospectus, of each Prepricing Prospectus so furnished by the Fund. (f) As soon after the execution and delivery of this Agreement as possible and thereafter from time to time for such period as in the opinion of counsel for the Underwriters a prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer, the Fund will expeditiously deliver to the Underwriters and each dealer, without charge, as many copies of the Prospectus (and of any amendment or supplement thereto) as the Underwriters may request. The Fund consents to the use of the Prospectus (and of any amendment or supplement thereto) in accordance with the provisions of the 1933 Act and with the state securities or blue sky laws of the jurisdictions in which the Shares are offered by the Underwriters and by all dealers to whom Shares may be sold, both in connection with the offering and sale of the Shares and for such period of time thereafter as the Prospectus is required by the 1933 Act to be delivered in connection with sales by the Underwriters or any dealer. If during such period of time any event shall occur that in the judgment of the Fund or in the opinion of counsel for the Underwriters is required to be set forth in the Registration Statement or the Prospectus (as then amended or supplemented) or should be set forth therein in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Registration Statement or the Prospectus to comply with the 1933 Act, the 1940 Act, the Rules and Regulations or any other federal law, rule or regulation, or any state securities or blue sky disclosure laws, rules or regulations, the Fund will forthwith prepare and, subject to the provisions of paragraph (d) above, promptly file with the Commission an appropriate supplement or amendment thereto, and will expeditiously furnish to the Underwriters and dealers, without charge, a reasonable number of copies thereof. In the event that the Fund and the Representative agree that the Registration Statement or the Prospectus should be amended or supplemented, the Fund, if requested by the Representative, will promptly 6 issue a press release announcing or disclosing the matters to be covered by the proposed amendment or supplement. (g) The Fund will make generally available to its security holders an earnings statement, which need not be audited, covering a twelve-month period ending not later than 15 months after the effective date of the Registration Statement as soon as practicable after the end of such period, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 of the 1933 Act Rules and Regulations. (h) During the period of five years hereafter, the Fund will furnish to the Underwriters (i) as soon as available, a copy of each report of the Fund mailed to stockholders or filed with the Commission or furnished to the New York Stock Exchange (the "NYSE") other than reports on Form N-SAR, and (ii) from time to time such other information concerning the Fund as the Underwriters may reasonably request. (i) The Fund will apply the net proceeds from the sale of the Shares substantially in accordance with the description set forth in the Prospectus and in such a manner as to comply with the investment objectives, policies and restrictions of the Fund as described in the Prospectus. (j) The Fund will timely file the requisite copies of the Prospectus with the Commission pursuant to Rule 497(c) or Rule 497(h) of the 1933 Act Rules and Regulations, whichever is applicable or, if applicable, will timely file the certification permitted by Rule 497(j) of the 1933 Act Rules and Regulations and will advise the Representative of the time and manner of such filing. (k) Except as provided in this Agreement, the Fund will not sell, contract to sell, or otherwise dispose of any senior securities (as defined in the 1940 Act) of the Fund, or grant any options or warrants to purchase senior securities of the Fund, for a period of 120 days after the date of the Prospectus, without the prior written consent of the Representative. (l) Except as stated in this Agreement and in the Prepricing Prospectus and Prospectus, neither the Fund nor the Adviser has taken, nor will it take, directly or indirectly, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of any securities issued by the Fund to facilitate the sale or resale of the Shares. (m) The Fund will use its best efforts to cause the MuniPreferred, prior to the Closing Date, to be assigned a rating of 'aaa' by Moody's Investors Service, Inc. ("Moody's") and AAA by Standard & Poor's Rating Group ("S&P" and, together with Moody's, the "Rating Agencies"). (n) The Fund and the Adviser will use their best efforts to perform all of the agreements required of them and discharge all conditions to closing as set forth in this Agreement. 7 6. Representations and Warranties of the Fund and the Adviser. The Fund and the Adviser, jointly and severally, represent and warrant to the Underwriters that: (a) Each Prepricing Prospectus included as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, or filed pursuant to Rule 497 of the 1933 Act Rules and Regulations, complied when so filed in all material respects with the provisions of the 1933 Act, the 1940 Act and the Rules and Regulations. The Commission has not issued any order preventing or suspending the use of any Prepricing Prospectus. (b) The Registration Statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective and the Prospectus and any supplement or amendment thereto when filed with the Commission under Rule 497 of the 1933 Act Rules and Regulations and the 1940 Act Notification when originally filed with the Commission and any amendment or supplement thereto when filed with the Commission, complied or will comply in all material respects with the provisions of the 1933 Act, the 1940 Act and the Rules and Regulations and did not or will not at any such times contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except that this representation and warranty does not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to the Underwriters furnished to the Fund in writing by or on behalf of the Underwriters expressly for use therein. (c) All the outstanding shares of capital stock of the Fund have been duly authorized and validly issued, are fully paid and nonassessable and are free of any preemptive or similar rights; the Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms hereof, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights and will conform to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them); and the capital stock of the Fund conforms to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them). (d) The Fund is a business trust duly organized and validly existing in good standing under the laws of the Commonwealth of Massachusetts with full power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification; and the Fund has no subsidiaries. (e) There are no legal or governmental proceedings pending or, to the knowledge of the Fund, threatened, against the Fund, or to which the Fund or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them), but are not described as required, and there are no 8 agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them), or to be filed as an exhibit to the Registration Statement that are not described or filed as required by the 1933 Act, the 1940 Act or the Rules and Regulations. (f) The Fund is not in violation of its Articles of Incorporation (the "Articles"), the Statement or by-laws (the "By-Laws"), or other organizational documents (together, the "Organizational Documents") of the Fund or of any law, ordinance, administrative or governmental rule or regulation of any decree of the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or governmental agency, body or official having jurisdiction over the Fund, or in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Fund is a party or by which it or any of its properties may be bound. (g) Neither the issuance and sale of the Shares, the execution, delivery or performance of this Agreement or any of the Fund Agreements by the Fund, nor the consummation by the Fund of the transactions contemplated hereby or thereby (A) requires any consent, approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official (except such as may have been obtained prior to the date hereof and such as may be required for compliance with the state securities or blue sky laws of various jurisdictions which have been or will be effected in accordance with this Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the Organizational Documents of the Fund or (B) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Fund is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or judgment, injunction, order or decree applicable to the Fund or any of its properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Fund pursuant to the terms of any agreement or instrument to which it is a party or by which it may be bound or to which any of its property or assets is subject. The Fund is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency. (h) The accountants, Ernst & Young, who have certified or shall certify the financial statements included or incorporated by reference in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), are independent public accountants as required by the 1933 Act, the 1940 Act and the Rules and Regulations. (i) The financial statements, together with related schedules and notes, included or incorporated by reference in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), present fairly the financial position, results of operations and changes in financial position of the Fund on the basis stated or incorporated by reference in the Registration Statement at the respective dates or for the respective periods to which they apply; such statements and related schedules and notes have been prepared in accordance with generally 9 accepted accounting principles consistently applied throughout the periods involved, except as disclosed therein; and the other financial and statistical information and data included in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), are accurately presented and prepared on a basis consistent with such financial statements and the books and records of the Fund. (j) The execution and delivery of, and the performance by the Fund of its obligations under, this Agreement and the Fund Agreements have been duly and validly authorized by the Fund, and this Agreement and the Fund Agreements have been duly executed and delivered by the Fund and constitute the valid and legally binding agreements of the Fund, enforceable against the Fund in accordance with their terms, except as rights to indemnity and contribution hereunder and thereunder may be limited by federal or state securities laws. (k) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Fund has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Fund, and there has not been any change in the capital stock, or material increase in the short-term debt or long-term debt, of the Fund, or any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Fund, whether or not arising in the ordinary course of business. (l) The Fund has filed all tax returns required to be filed, which returns are complete and correct in all material respects, and the Fund is not in material default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto. (m) The Fund is registered under the 1940 Act as a closed-end diversified management investment company, and the 1940 Act Notification has been duly filed with the Commission and, at the time of filing thereof and any amendment or supplement thereto, conformed in all material respects with all applicable provisions of the 1940 Act and the Rules and Regulations. The Fund is, and at all times through the completion of the transactions contemplated hereby, will be, in compliance in all material respects with the terms and conditions of the 1933 Act and the 1940 Act. No person is serving or acting as an officer, director or investment adviser of the Fund except in accordance with the provisions of the 1940 Act and the Rules and Regulations and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and regulations of the Commission promulgated under the Advisers Act (the "Advisers Act Rules and Regulations"). (n) As required by Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), the Fund is currently in compliance with the requirements to qualify as a regulated investment company under the Code. (o) The Fund's common shares are duly listed on the New York Stock Exchange. 10 (p) The Fund has not distributed and, prior to the later to occur of (i) the Closing Date and (ii) completion of the distribution of the Shares, will not distribute any offering material in connection with the offering and sale of the Shares other than the Registration Statement, the Prepricing Prospectus, the Prospectus or other materials, if any, permitted by the 1933 Act, the 1940 Act or the Rules and Regulations. (q) No holder of any security of the Fund has any right to require registration of shares of common stock, shares of MuniPreferred or any other security of the Fund because of the filing of the Registration Statement or consummation of the transactions contemplated by this Agreement. (r) The conduct by the Fund of its business (as described in the Prospectus) does not require it to be the owner, possessor or licensee of any patents, patent licenses, trademarks, service marks or trade names which it does not own, possess or license. (s) Except as stated in this Agreement and in the Prospectus (and any amendment or supplement thereto), the Fund has not taken, nor will it take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any securities issued by the Fund to facilitate the sale or resale of the Shares, and the Fund is not aware of any such action taken or to be taken by any affiliates of the Fund. (t) The Fund has filed in a timely manner each document or report required to be filed by it pursuant to the 1940 Act, the 1940 Act Rules and Regulations, the 1934 Act and the rules and regulations of the Commission promulgated thereunder (the "1934 Act Rules and Regulations"); each such document or report at the time it was filed conformed to the requirements of the 1934 Act and the 1934 Act Rules and Regulations; and none of such documents or reports contained an untrue statement of any material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (u) All advertising, sales literature or other promotional material (including "prospectus wrappers," "broker kits," "road show slides" and "road show scripts") authorized in writing by or prepared by the Fund or the Adviser for use in connection with the offering and sale of the Shares (collectively, "sales material") complied and comply in all material respects with the applicable requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the rules and interpretations of the NASD and no such sales material contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (v) The Fund has implemented a comprehensive, detailed program to analyze and address the risk that its computer hardware and software may be unable to recognize and properly execute date-sensitive functions involving certain dates prior to and any dates after December 31, 11 1999 (the "Year 2000 Problem") and has determined that its computer hardware and software are and will be able to process all date information prior to and after December 31,1999 without any errors, aborts, delays or other interruptions in operations associated with the Year 2000 Problem; and the Fund believes, after due inquiry, that each supplier, vendor, customer or financial service organization used by the Fund has remedied or will remedy on a timely basis the Year 2000 Problem, except to the extent that a failure to remedy by any such supplier, vendor, customer or financial service organization would not have a material adverse effect on the Fund. The Fund is in compliance with the Commission's staff legal bulletin No. 5 dated January 12, 1998 related to Year 2000 compliance, as amended to date. 7. Representations and Warranties of the Adviser. The Adviser represents and warrants to the Underwriters as follows: (a) The Adviser is a corporation duly incorporated and validly existing in good standing under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification. (b) The Adviser is duly registered with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and Regulations from acting under the Investment Management Agreement for the Fund as contemplated by the Prospectus (or any amendment or supplement thereto). There does not exist any proceeding or any facts or circumstances the existence of which could lead to any proceeding which might adversely affect the registration of the Adviser with the Commission. (c) There are no legal or governmental proceedings pending or, to the knowledge of the Adviser, threatened against the Adviser, or to which the Adviser or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement to either of them), but are not described as required or that may reasonably be expected to involve a prospective material adverse change, in the condition (financial or other), business, prospects, properties, assets or results of operations of the Adviser or on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement. (d) The Adviser is not in violation of its corporate charter or by-laws, or other organizational documents, in default under any agreement, indenture or instrument or in breach or violation of any judgment, decree, order, rule or regulation of any court or governmental or self-regulatory agency or body. (e) Neither the execution, delivery or performance of this Agreement or the Investment Management Agreement by the Adviser, nor the consummation by the Adviser of the 12 transactions contemplated hereby or thereby (A) requires the Adviser to obtain any consent, approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official or conflicts or will conflict with or constitutes or will constitute a breach of or a default under, the corporate charter or by-laws, or other organizational documents, of the Adviser or (B) conflicts or will conflict with or constitutes or will constitute a breach of or a default under, any agreement, indenture, lease or other instrument to which the Adviser is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Adviser or any of its properties or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Adviser pursuant to the terms of any agreement or instrument to which it is a party or by which it may be bound or to which any of the property or assets of the Adviser is subject. The Adviser is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency. (f) The execution and delivery of, and the performance by the Adviser of its obligations under, this Agreement and the Investment Management Agreement have been duly and validly authorized by the Adviser, and this Agreement and the Investment Management Agreement have been duly executed and delivered by the Adviser and each constitutes the valid and legally binding agreement of the Adviser, enforceable against the Adviser in accordance with its terms. (g) The Adviser has the financial resources available to it necessary for the performance of its services and obligations as contemplated in the Prospectus (or any amendment or supplement thereto) and under this Agreement and the Investment Management Agreement. (h) The description of the Adviser in the Registration Statement and the Prospectus (and any amendment or supplement thereto) complied and comply in all material respects with the provisions the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (i) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Adviser has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Adviser or the Fund and that is required to be disclosed in the Registration Statement or the Prospectus and there has not been any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, assets or results of operations of the Adviser, whether or not arising in the ordinary course of business, or which, in each case, could 13 have a material adverse effect on the ability of the Adviser to perform its obligations under this Agreement and the Investment Management Agreement. 8. Indemnification and Contribution. (a) The Fund and the Adviser, jointly and severally, agree to indemnify and hold harmless each of the Underwriters and each person, if any, who controls the Underwriters within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation), joint or several, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Prepricing Prospectus or in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with the information relating to the Underwriters furnished in writing to the Fund by or on behalf of the Underwriters expressly for use in connection therewith; provided, however, that the indemnification contained in this paragraph (a) with respect to any Prepricing Prospectus shall not inure to the benefit of the Underwriters (or to the benefit of any person controlling the Underwriters) on account of any such loss, claim, damage, liability or expense arising from the sale of the Shares by the Underwriters to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the 1933 Act and the 1933 Act Rules and Regulations, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Prepricing Prospectus was corrected in the Prospectus, provided that the Fund has delivered the Prospectus to the Underwriters in requisite quantity on a timely basis to permit such delivery or sending. The foregoing indemnity agreement shall be in addition to any liability which the Fund or the Adviser may otherwise have. (b) If any action, suit or proceeding shall be brought against the Underwriters or any person controlling any Underwriter in respect of which indemnity may be sought against the Fund or the Adviser, the Underwriters or such controlling person shall promptly notify the Fund or the Adviser, and the Fund or the Adviser shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. The Underwriters or any such controlling person shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Underwriters or such controlling person unless (i) the Fund or the Adviser has agreed in writing to pay such fees and expenses, (ii) the Fund and the Adviser have failed to assume the defense and employ counsel, or (iii) the named parties to any such action, suit or proceeding (including any impleaded parties) include both the Underwriters or such controlling person and the Fund or the Adviser and the Underwriters or such controlling person shall have been advised by its counsel that representation of such indemnified party and the Fund or the Adviser by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Fund and the Adviser shall not have the right to assume the defense of such action, suit or proceeding on behalf of the 14 Underwriters or such controlling person). It is understood, however, that the Fund and the Adviser shall, in connection with any one such action, suit or proceeding or separate but substantially similar or related actions, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for the Underwriters and controlling persons not having actual or potential differing interests with you or among themselves, which firm shall be designated in writing by the Representative, and that all such fees and expenses shall be reimbursed as they are incurred. The Fund and the Adviser shall not be liable for any settlement of any such action, suit or proceeding effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such action, suit or proceeding, the Fund and the Adviser agree to indemnify and hold harmless the Underwriters, to the extent provided in the preceding paragraph, and any such controlling person from and against any loss, claim, damage, liability or expense by reason of such settlement or judgment. (c) The Underwriters agree, severally and not jointly, to indemnify and hold harmless the Fund and the Adviser, their directors, any officers who sign the Registration Statement, and any person who controls the Fund or the Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, to the same extent as the foregoing indemnity from the Fund and the Adviser to the Underwriters, but only with respect to information relating to the Underwriters furnished in writing by or on behalf of the Underwriters expressly for use in the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto. If any action, suit or proceeding shall be brought against the Fund or the Adviser, any of their directors, any such officer, or any such controlling person based on the Registration Statement, the Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto, and in respect of which indemnity may be sought against the Underwriters pursuant to this paragraph (c), the Underwriters shall have the rights and duties given to the Fund and the Adviser by paragraph (b) above (except that if the Fund or the Adviser shall have assumed the defense thereof the Underwriters shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at the Underwriters' expense), and the Fund and the Adviser, their directors, any such officer, and any such controlling person shall have the rights and duties given to the Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be in addition to any liability which the Underwriters may otherwise have. (d) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under paragraphs (a) or (c) hereof in respect of any losses, claims, damages, liabilities or expenses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Fund and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other hand from the offering of the Shares, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Fund and the Adviser on the one hand 15 (treated jointly for this purpose as one person) and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Fund and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Fund bear to the total sales load received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Fund and the Adviser on the one hand (treated jointly for this purpose as one person) and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Fund and the Adviser on the one hand (treated jointly for this purpose as one person) or by the Underwriters on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Fund, the Adviser and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by a pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities and expenses referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating any claim or defending any such action, suit or proceeding. Notwithstanding the provisions of this Section 8, the Underwriters shall not be required to contribute any amount in excess of the amount by which the total price of the Shares underwritten by it and distributed to the public exceeds the amount of any damages which the Underwriters have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (f) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action, suit or proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such action, suit or proceeding. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Fund and the Adviser set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of the Underwriters or any person controlling the Underwriters, the Fund, the Adviser, their directors or officers, or any person controlling the Fund or the Adviser, (ii) acceptance of 16 any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to the Underwriters or any person controlling any Underwriter, or to the Fund, the Adviser, their directors or officers, or any person controlling the Fund or the Adviser, shall be entitled to the benefits of the indemnity, contribution, and reimbursement agreements contained in this Section 8. 9. Conditions of Underwriters' Obligations. The obligation of the Underwriters to purchase the Shares hereunder are subject to the following conditions: (a) If, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, the Registration Statement or such post-effective amendment shall have become effective not later than 5:30 P.M., New York City time, on the date hereof, or at such later date and time as shall be consented to in writing by the Underwriters, and all filings, if any, required by Rules 497 and 430A under the 1933 Act and the 1933 Act Rules and Regulations shall have been timely made; no stop order suspending the effectiveness of the Registration Statement or order pursuant to Section 8(e) of the 1940 Act shall have been issued and no proceeding for those purposes shall have been instituted or, to the knowledge of the Fund, the Adviser or the Underwriters, threatened by the Commission, and any request of the Commission for additional information (to be included in the registration statement or the prospectus or otherwise) shall have been complied with to the Underwriters' satisfaction. (b) Subsequent to the effective date of this Agreement, there shall not have occurred (i) any change or any development involving a prospective change in or affecting the condition (financial or other), business, prospects, properties, net assets, or results of operations of the Fund or the Adviser not contemplated by the Prospectus, which in the Underwriters' opinion would materially, adversely affect the market for the Shares, or (ii) any event or development relating to or involving the Fund or the Adviser or any officer or director of the Fund or the Adviser which makes any statement made in the Prospectus untrue or which, in the opinion of the Fund and its counsel or the Underwriters and their counsel, requires the making of any addition to or change in the Prospectus in order to state a material fact required by the 1933 Act, the 1940 Act or the Rules and Regulations or any other law to be stated therein or necessary in order to make the statements therein not misleading, if amending or supplementing the Prospectus to reflect such event or development would, in the Underwriters' opinion, materially adversely affect the market for the Shares. (c) The Fund shall have furnished to the Representative a report showing compliance with the asset coverage requirements of the 1940 Act and a Basic Maintenance Report (as defined in the Statement), each dated the Closing Date and in form and substance satisfactory to the Representative. Each such report may use portfolio holdings and valuations as of the close of business of any day not more than six business days preceding the Closing Date, provided, however, that the Fund represents in such report that its total net assets as of the Closing Date have not declined by 5% or more from such valuation date. 17 (d) Morgan, Lewis & Bockius LLP, counsel to the Fund, shall have furnished to the Representative on the Closing Date their opinion addressed to the Underwriters and dated the Closing Date, to the effect that: (i) The Fund has been duly organized and is validly existing and in good standing as a business trust under the laws of the Commonwealth of Massachusetts, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification; (ii) The Fund has no subsidiaries; (iii) All of the outstanding capital shares of the Fund have been duly authorized and validly issued, are fully paid and nonassessable and are free of any preemptive or similar rights; (iv) The Shares have been duly authorized and, when issued and delivered to the Underwriters against payment therefor in accordance with the terms of the Underwriting Agreement, will be validly issued, fully paid and nonassessable and free of any preemptive or similar rights. Except as set forth in the Articles and the Statement, there are no restrictions upon the transfer of any Shares pursuant to the Articles or By-Laws of the Fund or any agreement or other outstanding instrument known to such counsel; and the certificate evidencing the Shares complies with all formal requirements of Minnesota law; (v) The Shares conform in all material respects to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them) and the capital stock of the Fund (including the MuniPreferred and any other outstanding series of preferred stock) conforms in all material respects to the description thereof in the Registration Statement and the Prospectus (and any amendment or supplement to either of them); and the authorized and outstanding capital stock of the Fund is as set forth in the Prospectus; (vi) The Registration Statement is effective under the 1933 Act and the 1940 Act; any required filing of the Prospectus pursuant to Rule 497 of the Rules and Regulations has been made within the time periods required by Rule 497; to the best of such counsel's knowledge, no stop-order suspending the effectiveness of the Registration Statement or order pursuant to Section 8(e) of the 1940 Act has been issued and no proceeding for any such purpose has been instituted or is pending or threatened by the Commission; 18 (vii) The 1940 Act Notification, the Registration Statement and the Prospectus and each amendment or supplement to the Registration Statement and the Prospectus as of their respective or issue dates (except that no opinion need be expressed as to the financial statements or other financial data contained therein) complied as to form in all material respects with the requirements of the 1933 Act, the 1940 Act and the Rules and Regulations; (viii) The statements made in the Prospectus under the captions "The Auction" and "Description of MuniPreferred", insofar as they purport to summarize the provisions of the Statement or other documents or agreements specifically referred to therein, constitute accurate summaries of the terms of any such documents; (ix) The statements made in the Prospectus under the caption "Prospectus Summary-Taxation" and both captions entitled "Tax Matters", insofar as they constitute matters of law or legal conclusions, have been reviewed by such counsel and constitute accurate statements of any such matters of law or legal conclusions, and fairly present the information called for with respect thereto by Form N-2; (x) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending or threatened against the Fund, or to which the Fund or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them), but are not described as required; (xi) To the best of such counsel's knowledge, there are no agreements, contracts, indentures, leases or other instruments that are required to be described in the Registration Statement or the Prospectus (and any amendment or supplement to either of them), or to be filed as an exhibit to the Registration Statement that are not described or filed as required by the 1933 Act, the 1940 Act or the Rules and Regulations; (xii) To the best of such counsel's knowledge, the Fund is not in violation of its Articles, the Statement or its By-Laws, or other organizational documents of the Fund or of any law, ordinance, administrative or governmental rule or regulation, of any decree of the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court or governmental agency, body or official having jurisdiction over the Fund, or in default in any material respect in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any material agreement, indenture, lease or other instrument to which the Fund is a party or by which it or any of its properties may be bound; 19 (xiii) The Underwriting Agreement and the Fund Agreements have each been duly and validly authorized, executed and delivered by the Fund, each complies with all applicable provisions of the 1940 Act and each constitutes the valid and legally binding agreement of the Fund, enforceable against the Fund in accordance with its terms, except as rights to indemnity and contribution under the Underwriting Agreement and the Fund Agreements may be limited by federal or state securities laws, subject as to enforcement to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; (xiv) The Fund is registered under the 1940 Act as a closed-end diversified management investment company; the provisions of the Articles, Statement and By-Laws of the Fund and the investment policies and restrictions described in the Prospectus under the caption "Prospectus Summary-Investment Objectives", "The Fund" and "Risk Factors", both captions entitled "Investment Objectives and Policies", and the captions entitled "Municipal Bonds", "Portfolio Investments", "Insured Funds: Municipal Bond Insurance", "Investment Restrictions" and "Certain Trading Strategies of the Funds" comply with the requirements of the 1940 Act; (xv) To the best of such counsel's knowledge, no person is serving or acting as an officer, director or investment adviser of the Fund except in accordance with the provisions of the 1940 Act and the 1940 Act Rules and Regulations and the Investment Advisers Act and the Advisers Act Rules and Regulations. (xvi) Neither the issuance and sale of the Shares, the execution, delivery or performance of the Underwriting Agreement or any of the Fund Agreements by the Fund, nor the consummation by the Fund of the transactions contemplated in the Underwriting Agreement or any of the Fund Agreements (A) requires any consent, approval, authorization, or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or governmental body, agency or official (except such as may have been obtained prior to the date hereof and such as may be required for compliance with the state securities or blue sky laws of various jurisdictions in accordance with the Underwriting Agreement) or conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, the Organizational Documents of the Fund or (B) conflicts or will conflict with or constitutes or will constitute a breach of, or a default under, any agreement, indenture, lease or other instrument to which the Fund is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or judgment, injunction, order or decree applicable to the Fund or any of its properties, or will result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Fund pursuant to the terms of any agreement or instrument to which it is a party or 20 by which it may be bound or to which any of its property or assets is subject. The Fund is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency; (xvii) No holder of any security of the Fund has any right to require registration of shares of common stock, shares of MuniPreferred or any other security of the Fund because of the filing of the Registration Statement or consummation of the transactions contemplated by the Underwriting Agreement; and (xviii) Such counsel shall also state that they have participated in conferences with officers and employees of the Fund, representatives of the independent accountants for the Fund, Massachusetts counsel to the Fund, the Underwriters and counsel for the Underwriters at which the contents of the Registration Statement and the Prospectus and related matters were discussed and, although they are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, except to the limited extent otherwise covered by paragraphs (v), (vii), (viii), (ix) and (xiv), and have made no independent check or verification thereof, and on the basis of the foregoing, no facts have come to their attention that would have led them to believe that the Registration Statement or any amendment or supplement thereto, at the time it became effective, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading or that the Prospectus or any amendment or supplement thereto, as of its issue date and as of the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading, except that they express no belief with respect to the financial statements, schedules and other financial information and statistical data included therein or excluded therefrom or the exhibits to the Registration Statement, including the information under the caption "Taxable Equivalent Yield Table" in Appendix A to the Prospectus. Such opinion shall also contain a statement that such counsel has no reason to believe that the 1940 Act Notification contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. In giving such opinion, Morgan, Lewis & Bockius LLP may rely on the opinion of Bingham, Dana & Gould as to matters of Massachusetts law, provided that Morgan, Lewis & Bockius LLP furnish a copy thereof to the Underwriters and state that such opinion is satisfactory in substance and form and that the Underwriters and counsel for the Underwriters are entitled to rely thereon. 21 (e) Gifford Zimmerman, Esq., Vice President and Secretary of the Adviser, shall have furnished to the Representative on the Closing Date his opinion addressed to the Underwriters and dated the Closing Date, to the effect that: (i) The Adviser has been duly organized and is validly existing and in good standing as a corporation under the laws of the State of Delaware, with full corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement and the Prospectus (and any amendment or supplement to either of them), and is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification; (ii) The Adviser is duly registered and in good standing with the Commission as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act, the Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and Regulations from acting under the Investment Management Agreement for the Fund as contemplated by the Prospectus (or any amendment or supplement thereto); there does not exist any proceeding or any facts or circumstances the existence of which could lead to any proceeding which might adversely affect the registration of the Adviser with the Commission; (iii) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending or threatened against the Adviser, or to which the Adviser or any of its properties is subject, that are required to be described in the Registration Statement or the Prospectus (or any amendment or supplement to either of them), but are not described as required or that may reasonably be expected to involve a prospective material adverse change, in the condition (financial or other), business, prospects, properties, assets or results of operations of the Adviser or on the ability of the Adviser to perform its obligations under the Underwriting Agreement and the Investment Management Agreement; (iv) To the best of such counsel's knowledge, the Adviser is not in violation of its corporate charter or by-laws, or other organizational documents, nor is the Adviser in default under any agreement, indenture or instrument or in breach or violation of any judgment, decree, order, rule or regulation of any court or governmental or self-regulatory agency or body; (v) The Underwriting Agreement and the Investment Management Agreement have each been duly and validly authorized, executed and delivered by the Adviser, each complies with all applicable provisions of the 1940 Act and the Advisers Act and the 1940 Act Rules and Regulations and the Advisers Act Rules and Regulations and each constitutes the valid and legally binding agreement of the Adviser, enforceable against the Adviser in accordance with its terms, subject as to 22 enforcement to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles; (vi) The description of the Adviser in the Registration Statement and the Prospectus (and any amendment or supplement thereto) complied and comply in all material respects with the provisions of the 1933 Act, the 1940 Act, the Advisers Act, the Rules and Regulations and the Advisers Act Rules and Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vii) Except as disclosed in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus (or any amendment or supplement to either of them), the Adviser has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Adviser or the Fund and that is required to be disclosed in the Registration Statement or the Prospectus and there has not been any material adverse change, or any development involving or which may reasonably be expected to involve, a prospective material adverse change, in the condition (financial or other), business, prospects, properties, assets or results of operations of the Adviser, whether or not arising in the ordinary course of business, or which, in each case, could have a material adverse effect on the ability of the Adviser to perform its obligations under the Underwriting Agreement and the Investment Management Agreement; and (viii) Neither the execution, delivery or performance of the Underwriting Agreement or the Investment Management Agreement by the Adviser, nor the consummation by the Adviser of the transactions contemplated in the Underwriting Agreement or the Investment Management Agreement (A) requires the Adviser to obtain any consent, approval, authorization or other order of or registration or filing with, the Commission, the NASD, any state securities commission, any national securities exchange, any arbitrator, any court, regulatory body, administrative agency or other governmental body, agency or official or conflicts or will conflict with or constitutes or will constitute a breach of or a default under, the corporate charter or by-laws, or other organizational documents, of the Adviser or (B) conflicts or will conflict with or constitutes or will constitute a breach of or a default under, any agreement, indenture, lease or other instrument to which the Adviser is a party or by which it or any of its properties may be bound, or violates or will violate any statute, law, regulation or filing or judgment, injunction, order or decree applicable to the Adviser or any of its properties or will result in the creation or imposition of any lien, charge or encumbrance upon any 23 property or assets of the Adviser pursuant to the terms of any agreement or instrument to which it is a party or by which it may be bound or to which any of the property or assets of the Adviser is subject. The Adviser is not subject to any order of any court or of any arbitrator, governmental authority or administrative agency. (f) The Representative shall have received on the Closing Date an opinion of Dechert Price & Rhoads, special Pennsylvania counsel to the Fund, in form and substance satisfactory to counsel for the Underwriters, to the effect that the statements made in the Prospectus under the caption "Prospectus Summary -- Taxation" in the first sentence thereof with respect to the Pennsylvania personal income tax, and the other matters in the Statement of Additional Information under the caption "Tax Matters -- State Tax Matters", insofar as they constitute matters of law or legal conclusions, constitute accurate statements of any such matters of law or legal conclusions, and fairly present the information called for with respect thereto by Form N-2 as of Closing Date. Such counsel shall also have furnished to the Underwriters a statement, addressed to the Underwriters, dated as of the Closing Date, to the effect that such counsel has participated in the preparation of, and has had discussions with representatives of the Fund concerning, the statements set forth in the Registration Statement and the Prospectus under the caption "Prospectus Summary -- Taxation" in the first sentence thereof with respect to the Pennsylvania personal income tax, under the caption "Investment Objectives and Policies -- Special Factors Affecting Pennsylvania Municipal Bonds", and in the Statement of Additional Information under the captions "Special Considerations Relating to Pennsylvania Municipal Obligations" and "Tax Matters -- State Tax Matters", and that based upon the foregoing, no facts have come to the attention of such counsel which would lead them to believe that the statements contained in the Registration Statement under such captions, as of the effective date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading or that the statements contained in the Prospectus under such captions at the Closing Date contain any untrue statement of a material fact or omit to state any material fact required to be stated therein, in light of the circumstances under which they were made, not misleading. (g) The Representative shall have received on the Closing Date an opinion of Simpson Thacher & Bartlett, counsel for the Underwriters, dated the Closing Date and addressed to the Underwriters, with respect to such matters as the Underwriters may reasonably request. (h) The Fund shall have furnished to the Representative on the Closing Date a certificate, dated the Closing Date, of its President or a Vice President and its Controller or Treasurer stating that: (i) The representations, warranties and agreements of the Fund in Section 6 hereof are true and correct as of the Closing Date; the Fund has complied with all its agreements contained herein; and the conditions set forth in Section 9(a) have been fulfilled; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion, (A) as of the date of its effectiveness (or the most recent post-effective amendment thereto), the Registration Statement did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and on such Closing Date, the Prospectus did not include any untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (B) since the date of effectiveness of the Registration Statement (or the most recent post-effective amendment thereto), no event has occurred which should have been set forth in a supplement to or amendment of the Prospectus which has not been set forth in such a supplement or amendment. (i) The Adviser shall have furnished to the Representative on the Closing Date a certificate, dated the Closing Date, of its Chairman of the Board, President or a Vice President and its Controller or Treasurer stating that: (i) The representations, warranties and agreements of the Adviser in Sections 6 and 7 hereof are true and correct as of such Closing Date and the Adviser has complied with all its agreements contained herein; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion, (A) as of the date of its effectiveness (or the most recent post-effective amendment thereto), the Registration Statement did not include any untrue statement of a material fact and did not omit to state any material fact 24 required to be stated therein or necessary to make the statements therein not misleading and on such Closing Date, the Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (B) since the date of its effectiveness, (or the most recent post-effective amendment thereto) the Registration Statement, no event has occurred which should have been set forth in a supplement to or amendment of the Prospectus which has not been set forth in such a supplement or amendment. (j) The Representative shall have received letters addressed to the Underwriters, and dated the date hereof and the Closing Date from Ernst & Young, independent certified public accountants, substantially in the forms heretofore approved by the Representative. (k) Subsequent to the date of effectiveness of the Registration Statement (or the most recent post-effective amendment thereto), there shall not have occurred any change, or any development involving a prospective change, in or affecting particularly the business or financial affairs of the Fund or the Adviser which, in the opinion of the Underwriters, would materially and adversely affect the market for the Shares. (l) (i) No order suspending the effectiveness of the Registration Statement or prohibiting or suspending the use of the Prospectus (or any amendment or supplement thereto) or any Prepricing Prospectus or any sales material shall have been issued and no proceedings for such purpose or for the purpose of commencing an enforcement action against the Fund, the Adviser or, with respect to the transactions contemplated by the Prospectus (or any amendment or supplement thereto) and this Agreement, the Underwriters, may be pending before or, to the knowledge of the Fund, the Adviser or the Underwriters or in the reasonable view of counsel to the Underwriters, shall be threatened or contemplated by the Commission at or prior to the Closing Date and that any request for additional information on the part of the Commission (to be included in the Registration Statement, the Prospectus or otherwise) be complied with to the satisfaction of the Underwriters; (ii) there shall not have been any change in the capital stock of the Fund nor any material increase in the short-term or long-term debt of the Fund (other than in the ordinary course of business) from that set forth or contemplated in the Registration Statement or the Prospectus (or any amendment or supplement thereto); (iii) there shall not have been, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus (or any amendment or supplement thereto), except as may otherwise be stated in the Registration Statement and Prospectus (or any amendment or supplement thereto), any material adverse change in the condition (financial or other), business, prospects, properties, net assets or results of operations of the Fund or the Adviser; (iv) the Fund shall not have any liabilities or obligations, direct or contingent (whether or not in the ordinary course of business), that are material to the Fund, other than those reflected in the Registration Statement or the Prospectus (or any amendment or supplement to either of them); and (v) all the representations and warranties of the Fund and the Adviser contained in this Agreement shall be true and correct 25 on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date. (m) Neither the Fund nor the Adviser shall have failed at or prior to the Closing Date to have performed or complied in all material respects with any of its agreements herein contained and required to be performed or complied with by it hereunder at or prior to the Closing Date. (n) The Fund shall have delivered and the Underwriters shall have received evidence satisfactory to the Representative that the shares of MuniPreferred are rated `aaa' by Moody's and AAA by S&P as of the Closing Date, and there shall not have been given any notice of any intended or potential downgrading, or of any review for a potential downgrading, in the rating accorded to any outstanding shares of capital stock of the Fund by any Rating Agency. (o) The Fund and the Adviser shall have furnished or caused to be furnished to the Underwriters such further certificates and documents as the Representative shall have reasonably requested. (p) The issuance of the Shares will not impair the rating for any outstanding capital shares of the Fund. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to the Representative and the Underwriters' counsel. Any certificate or document signed by any officer of the Fund or the Adviser and delivered to the Underwriters, or to counsel for the Underwriters, shall be deemed a representation and warranty by the Fund or the Adviser to the Underwriters as to the statements made therein. 10. Expenses. The Fund agrees to pay the costs incident to the authorization, issuance, sale and delivery of the Shares to be sold by the Fund to the Underwriters and any taxes payable in that connection; the costs incident to the preparation, printing and filing under the 1933 Act and 1940 Act of the Registration Statement and any amendments and exhibits thereto; the costs of preparing, printing and distributing the Registration Statement as originally filed and each amendment and any post-effective amendment thereto (including exhibits), any Prepricing Prospectus, the Prospectus and any amendment or supplement to the Prospectus; the costs of printing this Agreement and distributing the terms of agreements relating to the organization of any underwriting syndicate by mail, telex or other means of communication; the fees paid to Rating Agencies in connection with the rating of the Shares; the fees and expenses of qualifying the Shares under the securities laws of the several jurisdictions as provided in this Section and of preparing and printing a blue sky survey (including related fees and expenses of counsel to the Underwriters); the fees and expenses of the Auction Agent as set forth in the Auction Agency Agreement; and all other costs and expenses incident to the performance of the obligations of the Fund under this Agreement; provided that (i) the Fund, the Adviser and each Underwriter shall 26 pay its own costs and expenses in attending any information meeting relating to the Fund, (ii) each Underwriter shall pay the costs and expenses of any sales material prepared by it in connection with the public offering of the Shares, (iii) the Underwriters shall pay the costs and expenses of any "tombstone" advertisements, and (iv) except as provided in this Section and in Section 5 hereof, the Underwriters shall pay their own costs and expenses, including the fees and expenses of their counsel and any transfer taxes on the Shares which they may sell. If notice shall have been given pursuant to Paragraph 12 terminating the Underwriters' obligations hereunder, or if the sale of the Shares provided for herein is not consummated because of any failure, refusal or inability on the part of the Fund or Adviser to perform any agreement on its part to be performed or if the Underwriters shall decline to purchase the Shares for any reason permitted under this Agreement, the Fund shall reimburse the Underwriters for the fees and expenses of their counsel and for such other out-of-pocket expenses as shall have been incurred by them in connection with this Agreement and the proposed purchase of the Shares, and upon demand the Fund shall pay the full amount thereof to the Underwriters; it being understood that the Fund shall not in any event be liable to any of the Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. If the Fund fails to reimburse the Underwriters for such fees and expenses, the Adviser shall upon demand, pay the full amount thereof to the Underwriters. 11. Effective Date of Agreement. This Agreement shall become effective: (i) upon the execution and delivery hereof by the parties hereto; or (ii) if, at the time this Agreement is executed and delivered, it is necessary for the Registration Statement or a post-effective amendment thereto to be declared effective before the offering of the Shares may commence, when notification of the effectiveness of the Registration Statement or such post-effective amendment has been released by the Commission. Until such time as this Agreement shall have become effective, it may be terminated by the Fund, by notifying the Underwriters, or by the Underwriters, by notifying the Fund. If either of the Underwriters shall fail or refuse to purchase Shares which it is obligated to purchase hereunder on the Closing Date, and the aggregate number of Shares which such defaulting Underwriter is obligated but fails or refuses to purchase is not more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date, the non-defaulting Underwriter shall be obligated to purchase the Shares which such defaulting Underwriter is obligated, but fails or refuses, to purchase. If either of the Underwriters shall fail or refuse to purchase Shares which it is obligated to purchase on the Closing Date and the number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares which the Underwriters are obligated to purchase on the Closing Date and arrangements satisfactory to the Representative and the Fund for the purchase of such Shares by the non-defaulting Underwriter or other party or parties approved by you and the Fund are not made within 36 hours after such default, this Agreement will terminate without liability on the part of the non-defaulting Underwriter or the Fund. In any such case which does not result in termination of this Agreement, either the Representative or the Fund shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and the Prospectus or any other 27 documents or arrangements may be effected. Any action taken under this paragraph shall not relieve the defaulting Underwriter from liability in respect of any such default of any such Underwriter under this Agreement. The term "Underwriter" as used in this Agreement includes, for all purposes of this Agreement, any party not listed in Schedule I hereto who, with your approval and the approval of the Fund, purchases Shares which a defaulting Underwriter is obligated, but fails or refuses, to purchase. Any notice under this Section 11 may be given by telegram, telecopy or telephone but shall be subsequently confirmed by letter. 12. Termination of Agreement. This Agreement shall be subject to termination in the Representative's absolute discretion, without liability on the part of the Underwriters to the Fund or the Adviser, by notice to the Fund or the Adviser, if prior to the Closing Date (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market shall have been suspended or materially limited, (ii) a general moratorium on commercial banking activities in New York shall have been declared by either federal or state authorities, or (iii) there shall have occurred any outbreak or escalation of hostilities or other international or domestic calamity, crisis or change in political, financial or economic conditions, the effect of which on the financial markets of the United States is to make it, in the Representative's judgment, impracticable or inadvisable to commence or continue the offering of the Shares at the offering price to the public set forth on the cover page of the Prospectus or to enforce contracts for the resale of the Shares by the Underwriters. Notice of such termination may be given to the Fund by telegram, telecopy or telephone and shall be subsequently confirmed by letter. 13. Information Furnished by the Underwriters. The statements set forth in the first and third paragraphs under the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus, constitute the only information furnished by or on behalf of the Underwriters as such information is referred to in Sections 6(b) and 8 hereof. 14. Miscellaneous. Except as otherwise provided in Sections 5, 11 and 12 hereof, notice given pursuant to any provision of this Agreement shall be in writing and shall be delivered (i) if to the Fund or the Adviser, at the office of the Fund at 333 West Wacker Drive, Chicago, IL 60606, Attention: Gifford R. Zimmerman, Vice President and Secretary; or (ii) if to the Underwriters, to Salomon Smith Barney Inc, 388 Greenwich Street, New York, New York 10013, Attention: Manager, Investment Banking Division. This Agreement has been and is made solely for the benefit of the Underwriters, the Fund, the Adviser, their directors and officers, and the other controlling persons referred to in Section 8 hereof and their respective successors and assigns, to the extent provided herein, and no other person shall acquire or have any right under or by virtue of this Agreement. Neither the term "successor" nor the term "successors and assigns" as used in this Agreement shall include a purchaser from the Underwriters of any of the Shares in his status as such purchaser. 28 15. Applicable Law; Counterparts. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. This Agreement may be signed in various counterparts which together constitute one and the same instrument. If signed in counterparts, this Agreement shall not become effective unless at least one counterpart hereof shall have been executed and delivered on behalf of each party hereto. [End of Text] Please confirm that the foregoing correctly sets forth the agreement among the Fund, the Adviser and the Underwriters. Very truly yours, NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND By: --------------------------------------- Name: Title : NUVEEN ADVISORY CORP. By: --------------------------------------- Name: Title : The foregoing Agreement is hereby confirmed and accepted as of the date first above written. SALOMON SMITH BARNEY INC. By: ------------------------------------------- Name: Title : For itself and the other Underwriters named in Schedule I to the foregoing Agreement SCHEDULE I NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND
Number of Underwriters Shares ------------ ------ Salomon Smith Barney Inc................................. A.G. Edwards & Sons, Inc................................. BT Alex. Brown........................................... Goldman, Sachs & Co...................................... John Nuveen and Co., Incorporated........................ PainWebber Incorporated.................................. Prudential Securities.................................... Total.................................................... 880
EX-99.I 11 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECT Exhibit 99.i NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN FOR INDEPENDENT DIRECTORS AND TRUSTEES PREAMBLE The Board of each Participating Fund hereby establishes this Deferred Compensation Plan for Independent Directors and Trustees. The purpose of the Plan is to allow the independent directors and trustees of the Participating Funds to defer receipt of all, or a portion, of the compensation they earn for their service to the Participating Funds in lieu of receiving current payments of such compensation, and to treat any deferred amount as though an equivalent dollar amount had been invested in shares of one or more Eligible Funds. Each Board intends that the Plan shall be maintained at all times on an unfunded basis for federal income tax purposes under the Internal Revenue Code of 1986, as amended. The Plan is not covered by the Employee Retirement Income Security Act of 1974, as amended. SECTION 1 DEFINITIONS OF TERMS AND CONSTRUCTION 1.1 Definitions. The following terms as used in this Plan shall have the following meanings: (a) "Administrator" shall mean Nuveen or such other person or persons as the Boards may from time to time designate, provided that no Eligible Participant may serve as Administrator. (b) "Beneficiary" shall mean such person or persons designated pursuant to Section 4.4 hereof to receive benefits after the death of an Eligible Participant. (c) "Board" shall mean the Board of Directors or the Board of Trustees of the respective Participating Funds. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute. (e) "Compensation" shall mean the retainer and fees paid by Participating Funds to an Eligible Participant for a Deferral Period prior to reduction for Deferrals made under this Plan. (f) "Deferral" shall mean the amount or amounts of an Eligible Participant's Compensation deferred under the provisions of Section 3 of this Plan. (g) "Deferral Account" shall mean the account maintained to reflect an Eligible Participant's Deferrals made pursuant to Section 3 herein and any other credits or debits thereto. (h) "Deferral Election" shall mean the Eligible Participant's election to defer his or her compensation under Plan Section 3.1(a). (i) "Deferral Period" shall mean each calendar quarter during which an Eligible Participant makes, or is entitled to make, Deferrals under Section 3 hereof. (j) "Eligible Fund" means an open-end fund managed by Nuveen and designated by the Boards as a fund that may be chosen by an Eligible Participant as a fund in which the Eligible Participant's Deferral Account may be deemed to be invested. (k) "Eligible Participant" shall mean a member of a Board who is not an "interested person" of a Participating Fund or of Nuveen, as such term is defined under Section 2(a)(19) of the Investment Company Act of 1940, as amended ("1940 Act"). (l) "Hardship and Unforeseeable Emergency" shall mean a severe financial hardship to an Eligible Participant resulting from a sudden and unexpected illness or accident of the Eligible Participant or a dependent (within the meaning of Section 152(a) of the Code), of the Eligible Participant, loss of the Eligible Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances, arising from events beyond the Eligible Participant's control. Whether circumstances constitute a Hardship and Unforeseeable Emergency depends on the facts of each case, as determined by the Administrator, but in any case does not include a hardship that may be relieved: (i) through reimbursement or compensation by insurance or otherwise; (ii) by liquidation of the Eligible Participant's assets to the extent that liquidation itself would not cause such a severe financial hardship; or (iii) by ceasing to defer receipt of any Compensation not yet earned. The term "Hardship and Unforeseeable Emergency" shall have the same meaning as the term "unforeseeable emergency" as used in regulations issued under Section 457 of the Code, and shall be applied accordingly. The need to send an Eligible Participant's child to college and the desire to purchase a home shall not constitute a Hardship and Unforeseeable Emergency. (n) "Net Asset Value" shall mean the per share value of an open-end fund, as determined as set forth in such fund's registration statement under the 1940 Act, governing instruments and otherwise in accordance with law. (o) "Nuveen" shall mean The John Nuveen Company and its affiliates. (p) "Participating Fund" shall mean an open-end or closed-end fund managed by Nuveen, whether existing at the time of adoption of the Plan or established at a later date, designated by its Board as a fund compensation from which may be deferred by an Eligible Participant. Participating Funds shall be listed on Exhibit A to the Plan, which shall be revised from time to time by the Administrator, provided that failure to list a Participating Fund on Exhibit A shall not affect its status as a Participating Fund. (q) "Plan" shall mean this Deferred Compensation Plan for Independent Directors and Trustees, as amended from time to time. 2 (r) "Separation from Service" shall mean the date on which an Eligible Participant ceases to be a member of a Board. (s) "Valuation Date" shall mean the last business day of each calendar quarter and any other day upon which Nuveen makes a valuation of the Deferral Account. 1.2 Plurals and Gender. Where appearing in this Plan the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning. 1.3 Headings. The headings and subheadings in this Plan are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. 1.4 Separate Agreement. This Plan shall be construed as a separate agreement between each Eligible Participant and each of the Participating Funds. SECTION 2 PERIOD DURING WHICH DEFERRALS ARE PERMITTED 2.1 Commencement of Deferrals. An Eligible Participant may elect, on a form provided by, and submitted to, the Administrator, to commence Deferrals under Section 3 hereof for the period beginning on the first day of the first quarter beginning on or after the date such form is submitted to the Administrator. 2.2 Termination of Deferrals. An Eligible Participant shall not be eligible for Deferral of additional Compensation after the earlier of the following dates: (a) The date he cancels his election pursuant to Section 3.3(b); (b) his Separation from Service; or (c) the effective date of the termination of this Plan. SECTION 3 DEFERRALS 3.1 Deferral Elections. (a) Subject to Section 3.1(d), an Eligible Participant participating in the Plan may elect to defer receipt of all, or a specified dollar amount or percentage of the Compensation (including fees for attending meetings) earned per quarter by such Eligible Participant for serving as a member of the Board of each Participating Fund or as a member of any committee (or subcommittee of such committee) of the Board of a Participating Fund of which such Eligible Participant from time to time may be a member. Reimbursement of expenses of attending meetings of the Board, committees of the Board or subcommittees of such committees may not be deferred. (b) Deferrals described in Section 3.1(a) above shall be withheld, based upon the percentage or dollar amount elected, from each payment of Compensation which the Eligible 3 Participant would otherwise have been entitled but for his election in Section 3.1(a) below. If a dollar amount per quarter is elected, 100% of each payment of Compensation in each quarter will be deferred until such amount is reached. (c) Each Participating Fund shall establish a book entry account ("Deferral Account") to which will be credited an amount equal to the Eligible Participant's Deferrals under this Plan. Any Compensation earned by an Eligible Participant which he has elected to defer pursuant to the Plan will be credited to such Eligible Participant's Deferral Account on the date such Compensation otherwise would have been payable to such Eligible Participant. The Deferral Account shall be debited to reflect any distributions from such Account. Such debits shall be allocated to the Deferral Account as of the date such distributions are made. (d) Each amount that an Eligible Participant elects to defer shall be allocated among all Participating Funds for which the Eligible Participant serves as a director or trustee in the same proportion that the Eligible Participant's Compensation would have been allocated if it had not been deferred, and all subsequent earnings credited, and all distributions, losses and expenses charged, to the Eligible Participant's Deferral Account, shall be allocated among the Participating Funds in the same manner. The obligations of the Participating Funds to pay their respective allocated shares of an Eligible Participant's Deferral Account shall be several and not joint. 3.2 Valuation of Deferral Account. (a) Each Board shall from time to time designate one or more open-end funds managed by Nuveen as Eligible Funds. An Eligible Participant, on his deferral election form, shall have the right to select from the then-current list of Eligible Funds one or more, but not more than three, funds in which his Deferral Account shall be deemed invested as set forth in this Section 3 ("Designated Funds"). An Eligible Participant may designate an Eligible Fund even if he is not a member of the Board of that Eligible Fund. Except as provided below, amounts credited to an Eligible Participant's Deferral Account shall be treated as though such amounts had been invested and reinvested in shares of the Eligible Participant's Designated Funds, initially calculated as follows: (i) the product of (x) the amount of such Deferrals and (y) the percentage of such Deferrals to be deemed invested in that Designated Fund, divided by (ii) the Designated Fund's Net Asset Value per share as of the date such amount is so credited. (b) As of the last day of each calendar year, by written election delivered to the Administrator not less than 10 business days prior to the end of such year, each Eligible Participant may direct that the Designated Funds in which his or her Deferral Account is deemed invested be changed. Any election to change such investment direction shall indicate the dollar 4 amount or percentage of the balance in such Deferral Account (determined based on the then current Net Asset Value of each Designated Fund in which the Deferral Account is deemed invested immediately prior to giving effect to such investment change) to be invested in each such Designated Fund. The number of shares of each Designated Fund to be deemed held in the Eligible Participant's Deferral Account following such investment change shall be calculated as follows: (i) the product of (x) the balance in such Deferral Account and (y) the percentage of such balance to be deemed invested in that Designated Fund divided by (ii) the Designated Fund's Net Asset Value per share as of the last day of such calendar year. (c) If a Designated Fund shall pay a stock dividend on, or split, combine, reclassify or substitute other securities by merger, consolidation or otherwise for its outstanding shares, the Eligible Participant's Deferral Account shall be adjusted as though shares of such Designated Fund were actually held by the Deferral Account in order to preserve rights substantially proportionate to the rights deemed held immediately prior to such event. (d) On each payment date of dividends or capital gains distributions declared on shares of any Designated Fund in which an Eligible Participant's Deferral Account is deemed invested, the Deferral Account will be credited with book adjustments representing all dividends or capital gains distributions which would have been realized had such account been invested in shares of such Designated Fund and such dividend or capital gains distribution had been received and reinvested. (e) The value of a Deferral Account on any Valuation Date shall be the sum of (i) the number of shares of each Designated Fund deemed to be held in the Deferral Account by the preceding paragraphs, multiplied by (ii) the Net Asset Value per share of such Designated Fund on the Valuation Date. (f) On each date upon which a distribution of less than the entire balance is to be charged to an Eligible Participant's Deferral Account, the amount of such distribution shall, unless the Eligible Participant otherwise specifies in accordance with rules established by the Administrator, be allocated among all of the Designated Funds in which the Deferral Account is deemed to be invested in proportion to the aggregate value of the number of deemed shares of each such Designated Fund, and the number of deemed shares of each such Designated Fund shall then be reduced by the portion of the distribution allocated to such Designated Fund divided by the Net Asset Value per share of such Designated Fund on the date on which the distribution is charged. (g) Unless and until each Board otherwise determines, the Eligible Funds shall include only one or more open-end funds managed by Nuveen. Open-end funds that cease to be 5 managed by Nuveen shall automatically cease to be Eligible Funds, unless one of the Boards otherwise determines with respect to Eligible Participants that are members of such Board. Either Board may at any time remove any open-end fund from the list of Eligible Funds, or may add any open-end fund (whether or not managed by Nuveen), for Eligible Participants who are members of that Board. If an Eligible Fund is removed from the list of Eligible Funds for any reason then no further deferrals shall be deemed invested in such Fund and, unless the Board otherwise determines, the Administrator shall give each Eligible Participant whose Deferral Account is deemed to be invested in such Eligible Fund a reasonable period to submit a new designation, and any Eligible Participant who fails to submit a new designation shall be subject to the provisions of Section 3.2(h)(iii) below. (h) As of each Valuation Date, income, gain and loss equivalents (determined as if the Deferral Account is invested in the manner set forth under Section 3.2(a), above) attributable to the period following the next preceding Valuation Date shall be credited to and/or deducted from the Eligible Participant's Deferral Account. Except as provided below, the Eligible Participant's Deferral Account shall receive a return in accordance with his investment designations, provided such designations conform to the provisions of this Section. If: (i) the Eligible Participant does not furnish the Administrator with a written designation, (ii) the written designation from the Eligible Participant is unclear, or (iii) less than all of the Eligible Participant's Deferral Account is covered by such written designation, then the Eligible Participant's Deferral Account shall receive no return until such time as the Eligible Participant shall provide the Administrator with instructions. 3.3 Manner of Electing Deferral. (a) An Eligible Participant shall elect to participate in this Plan and defer his Compensation by completing, signing and filing with the Administrator a Notice of Election to Defer Compensation (the "Notice") in the form attached to this Plan. The Notice shall include: (i) the amount of Compensation to be deferred; (ii) the time at which the distribution of such amount will commence, which may be: (A) a specified date selected by the Participant not prior to the third anniversary of such election, (B) the first day of the month, quarter or year following the Eligible Participant's Separation from Service, or (C) the earlier of (A) or (B); 6 provided that the distribution of an Eligible Participant's Deferral Account shall in any event commence no later than the fifth anniversary of that Eligible Participant's Separation from Service. (iii) the manner of distribution of such deferred compensation (i.e., in a lump sum or the number of annual or quarterly installments); (iv) the Designated Fund or Designated Funds in which such deferrals are to be deemed invested and in what amounts or percentages; and (v) any beneficiary designated pursuant to Section 4.4 of this Plan. (b) All Deferral Elections shall remain in effect until the earliest of: (i) the date on which the Deferral Election is canceled or modified, (ii) the date of the Eligible Participant's Separation from Service, or (iii) the date on which the Eligible Participant begins to receive distributions from his or her Deferral Account. An Eligible Participant may modify the amount of his Deferral Election and/or the Designated Fund(s) specified in the Deferral Election, on a prospective basis by submitting an amended Notice to the Administrator. Such change will be effective as of the first day of the year following the date such revision is submitted to the Administrator. An Eligible Participant may cancel his Deferral Election on a prospective basis by submitting an amended Notice to the Administrator, which cancellation of the Deferral Election shall be effective for all Compensation for calendar quarters beginning or for meetings held after such notice is received, subject to any delay necessary for administrative processing. An Eligible Participant who cancels his Deferral Election may thereafter make a new Deferral Election as of the first day of any subsequent year pursuant to Section 3.3(a), but all new deferrals shall be credited to the same Deferral Account, and the time and manner of distribution of the Deferral Account, the manner in which the Deferral Election is deemed invested, and the identity of the Eligible Participant's Beneficiary, shall remain the same unless changed for the entire Deferral Account as otherwise provided herein. 3.4 Time of Electing Deferral. An Eligible Participant's initial Notice under Section 3.3(a) shall be filed with the Administrator no later than 10 business days prior to the last business day of the calendar quarter preceding the quarter for which the Deferral Election is made. An Eligible Participant's Notice under Section 3.3(b) modifying the amount of his Deferral Election, or a Notice under Section 3.3(a) making a Deferral Election after a prior Deferral Election has been cancelled, shall be filed with the Administrator no later than 10 business days prior to the last business day of the year preceding the year for which the modified or new Deferral Election is effective. SECTION 4 DISTRIBUTIONS FROM DEFERRAL ACCOUNT 4.1 Eligible Participant's Election. An Eligible Participant shall elect at the time of his Deferral Election the time at which his distribution is to commence, and the form of distribution, which may be either: (a) lump sum; or 7 (b) annual or quarterly installments over a period of five (5) years, with each installment being equal to the balance in the Deferral Account immediately prior to payment of the installment divided by the number of installments remaining to be paid (including the installment the amount of which is being determined). (c) If an Eligible Participant fails to designate the manner of distribution to apply to his Deferral Account, such Deferral Account shall be distributed in a lump sum on the first day of the month following the Eligible Participant's Separation from Service. (d) An Eligible Participant may elect to change his distribution election with respect to his Deferral Account by filing an amended Notice with the Administrator not less than six months prior to the earlier of the date on which distribution was scheduled to begin under the original Notice or the date on which it is scheduled to begin under the amended Notice. The Eligible Participant's new distribution election shall be void and the Eligible Participant's original election shall be reinstated if the date on which distribution was originally scheduled to begin occurs (by reason of Separation from Service or otherwise) within six months after the date on which the changed distribution election was filed with the Administrator. 4.2 Death Prior to Complete Distribution of Deferral Account. If an Eligible Participant dies prior to the commencement of the distribution of the amounts credited to his Deferral Account, the balance of such Account shall be distributed to his Beneficiary in a lump sum as soon as practicable after the Eligible Participant's death. If an Eligible Participant dies after the commencement of such distributions, but prior to the complete distribution of his Deferral Account, the balance of the amounts credited to his Deferral Account shall be distributed to his Beneficiary over the remaining period during which such amounts were otherwise distributable to the Eligible Participant under Section 4.1 hereof. Notwithstanding the above, the Administrator, in its sole discretion, may accelerate the distribution of the Deferral Account. 4.3 Hardship and Unforeseeable Emergency. An Eligible Participant may request at any time a withdrawal of part or all of the amount then credited to his Deferral Account on account of Hardship and Unforeseeable Emergency by submitting a written request to the Administrator accompanied by evidence that his financial condition constitutes a Hardship and Unforeseeable Emergency. The Administrator shall review the Eligible Participant's request and determine the extent, if any, to which such request is justified. Any such withdrawal shall be limited to an amount reasonably necessary to meet the Hardship and Unforeseeable Emergency, but not more than the amount of the Eligible Participant's Deferral Account. 4.4 Designation of Beneficiary. For the purposes of Section 4.2 hereof, the Eligible Participant's Beneficiary shall be the person or persons so designated by the Eligible Participant in a written instrument submitted to the Administrator. Subject to rules established by the Administrator, an Eligible Participant may designate multiple or alternative Beneficiaries, and may change his Beneficiary at any time without the consent of any prior Beneficiary; provided that no change of a Beneficiary shall be effective unless and until actually received, in proper form, by the Administrator during the Eligible Participant's life. The Administrator's determination of the person eligible to receive the Deferral Account of a deceased Eligible Participant, if made in good faith, shall be final and binding on all parties. If an Eligible Participant fails to properly designate 8 a Beneficiary or if his Beneficiary predeceases him, his beneficiary shall be his estate. 4.5 Domestic Relations Orders. If any judgment, decree or order (including approval of a property settlement agreement) which (i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of an Eligible Participant, and (ii) is made pursuant to a state or foreign domestic relations law (including a community property law) directs assignment of a portion of an Eligible Participant's Deferral Account to a spouse, former spouse, child, or other dependent of an Eligible Participant, such amount may be paid in a lump-sum cash payment at the request of the person to whom assignment is directed to be made as soon as administratively possible after the Administrator's receipt of the signed order, as long as the order (or a written direction to the Administrator of how to interpret the order, signed by the Eligible Participant and the person to whom the order directs assignment) clearly specifies the amount of the Deferral Account assigned and the timing of payment to the person to whom the assignment is made. SECTION 5 AMENDMENTS AND TERMINATION 5.1 Amendments. The Boards reserve the right to amend, in whole or in part, and in any manner, any or all of the provisions of this Plan by action of both Boards, except that no amendment shall reduce the balance in any Eligible Participant's Deferral Account, or (unless necessary to comply with the 1940 Act or other applicable law) significantly delay the time at which such balance is payable without the consent of the Eligible Participant affected. 5.2 Termination. Each Board may terminate this Plan at any time by action of the Board and the Eligible Participants' Deferral Accounts shall become payable as of the Valuation Date next following the effective date of the termination of this Plan. If one Board elects to terminate the Plan with respect to the Eligible Participants who are members of such Board, the Plan shall remain in effect with respect to Eligible Participants who are members of the other Board. 9 SECTION 6 MISCELLANEOUS 6.1 Rights of Creditors. (a) This Plan is unfunded. Neither an Eligible Participant nor any other person shall have any interest in any specific asset or assets of a Participating Fund by reason of any Deferral Account hereunder, nor any rights to receive distribution of his Deferral Account except and to the extent expressly provided hereunder. Except for money market funds complying with rule 2a-7 under the 1940 Act, a Participating Fund shall not be required to purchase, hold or dispose of any investments pursuant to this Plan. If in order to cover its obligations hereunder a Participating Fund purchases any investments, the same shall continue for all purposes to be a part of the general assets and property of that Participating Fund subject to the claims of its general creditors and no person other than the Participating Fund shall by virtue of the provisions of this Plan have any interest in such assets other than an interest as a general creditor of the Participating Fund. (b) The rights of an Eligible Participant and the Beneficiaries to the amounts held in the Deferral Account are unsecured and such amounts shall be subject to the claims of the creditors of a Participating Fund. With respect to the payment of amounts held under the Deferral Account, the Eligible Participant and his Beneficiaries have the status of unsecured creditors of that Participating Fund. This Plan is executed on behalf of each Participating Fund by an officer of that Participating Fund as such and not individually. Any obligation of a Participating Fund hereunder shall be an unsecured obligation of that Participating Fund and not of any other person. 6.2 Agents. Each Participating Fund may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as it deems necessary to perform its duties under this Plan. Each Participating Fund shall bear the cost of such services and all other expenses it incurs in connection with the administration of this Plan. 6.3 Incapacity. If the Administrator shall receive evidence satisfactory to it that an Eligible Participant or any Beneficiary entitled to receive any benefit under the Plan is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Eligible Participant or Beneficiary and that no guardian, committee or other representative of the estate of the Eligible Participant or Beneficiary shall have been duly appointed, a Participating Fund may make payment of such benefit otherwise payable to the Eligible Participant or Beneficiary to such other person or institution, including a custodian under a Uniform Transfers to Minors Act or corresponding legislation (who shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit. 6.4 Statement of Deferral Account. The Administrator will furnish each Eligible Participant with a statement setting forth the value of such Eligible Participant's Deferral Account as of the end of each calendar year and all credits to and payments from such Deferral Account during such year. Such statements will be furnished no later than 60 days after the end of each calendar year. 10 6.5 Governing Law. This Plan shall be governed by the laws of the State of Illinois. 6.6 Non-guarantee of Status. Nothing contained in this Plan shall be construed as a contract or guarantee of the right of an Eligible Participant to be, or remain as, a director or a trustee of a fund, or to receive any, or any particular rate of, Compensation. 6.7 Counsel. Each Board may consult with legal counsel with respect to the meaning or construction of this Plan, its obligations or duties hereunder or with respect to any action or proceeding or any question of law, and it shall be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of legal counsel. 6.8 Interests Not Transferable. An Eligible Participant's and Beneficiaries' interests in the Deferral Account may not be anticipated, sold, encumbered, pledged, mortgaged, charged, transferred, alienated, assigned nor become subject to execution, garnishment or attachment and any attempt to do so by any person shall be deemed null and void; no Participating Fund shall recognize the rights of any party under this Plan except those of the Eligible Participant or his Beneficiary; provided that this Section 6.8 shall not preclude a Participating Fund from offsetting any amount payable to an Eligible Participant hereunder by any amount owed by such Eligible Participant to that Participating Fund or to Nuveen. 6.9 Entire Agreement. This Plan contains the entire understanding between each Participating Fund and the Eligible Participants with respect to the payment of non-qualified deferred compensation by a Participating Fund to the Eligible Participants. 6.10 Powers of Administrator. In addition to other powers specifically set forth herein, the Administrator shall have all power and authority necessary or convenient for the administration of this Plan, including without limitation the authority to: (i) construe and interpret the Plan, and resolve any inconsistency or ambiguity with respect to any of its terms; (ii) decide all questions of eligibility and determine the amount, manner and time of payment of any benefits hereunder; (iii) prescribe rules and procedures to be followed by Eligible Participants or Beneficiaries in making any election or taking any action provided for herein, which rules and procedures may alter any provision of the Plan that is administrative or ministerial in nature without the necessity for an amendment; (iv) allocate Deferral Accounts among the Eligible Funds; (v) maintain all the necessary records for the administration of the Plan; (vi) delegate any of it duties or powers under the Plan to any other person acting under its supervision; and (vi) do all other acts which the Administrator deems necessary or proper to accomplish 11 and implement its responsibilities under the Plan. Any rule or procedure adopted by the Administrator, or any decision, ruling or determination made by the Administrator, in good faith shall be final, binding and conclusive on all Participating Funds, Eligible Participants, Beneficiaries and all persons claiming through them. The authority of the Administrator may be exercised by such person as the Chief Executive Officer of the Administrator may designate or, in the absence of a specific designation, by those officers and employees of the Administrator whose normal duties include payment of compensation to independent directors and trustees. 6.11 Participant Litigation. In any action or proceeding regarding the Plan Eligible Participants or their Beneficiaries or any other persons having or claiming to have an interest in this Plan shall not be necessary parties and shall not be entitled to any notice or process. Any final judgment which is not appealed or appealable and may be entered in any such action or proceeding shall be binding and conclusive on the parties hereto and all persons having or claiming to have any interest in this Plan. To the extent permitted by law, if a legal action is begun against either Board, any Participating Fund, the Administrator, or any of their respective officers, directors, trustees, employees or agents (an "indemnified party"), by or on behalf of any person and such action results adversely to such person or if a legal action arises because of conflicting claims to an Eligible Participant's or other person's benefits, the costs to the indemnified party of defending the action will be charged to the amounts, if any, which were involved in the action or were payable to the Eligible Participant or other person concerned. To the extent permitted by applicable law, acceptance of participation in this Plan shall constitute a release of each of the indemnified parties from any and all liability and obligation not involving willful misconduct or gross neglect. 6.12 Successors and Assigns. This Plan shall be binding upon, and shall inure to the benefit of, the Participating Funds and their successors and assigns and to the Eligible Participants and their heirs, executors, administrators and personal representatives. 6.13 Severability. In the event any one or more provisions of this Plan are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions hereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability. 12 IN WITNESS WHEREOF, each Participating Fund has caused this Plan to be executed by one of its duly authorized officers, this 30th day of October, 1998. By: ------------------------- Name: Alan G. Berkshire Title: Vice President Nuveen Municipal Bond Fund Nuveen New York Performance Plus Municipal Fund, Inc. Nuveen Municipal Value Fund, Inc. Nuveen Insured Florida Premium Income Municipal Fund Nuveen Insured Municipal Opportunity Fund, Inc. Nuveen Florida Quality Income Municipal Fund Nuveen Premium Income Municipal Fund, Inc. Nuveen Tax-Exempt Money Market Fund, Inc. Nuveen Performance Plus Municipal Fund, Inc. Nuveen Flagship Tennessee Municipal Bond Fund Nuveen Quality Income Municipal Fund, Inc. Nuveen California Investment Quality Municipal Fund, Inc. Nuveen Municipal Market Opportunity Fund, Inc. Nuveen California Performance Plus Municipal Fund, Inc. Nuveen Municipal Advantage Fund, Inc. Nuveen Insured California Premium Income Municipal Fund 2, Inc. Nuveen Premium Income Municipal Fund 2, Inc. Nuveen New Jersey Premium Income Municipal Fund, Inc. Nuveen Premium Income Municipal Fund 4, Inc. Nuveen Select Tax-Free Income Portfolio Nuveen Insured Quality Municipal Fund, Inc. Nuveen Select Tax-Free Income Portfolio 2 Nuveen Insured Municipal Bond Fund Nuveen Select Tax-Free Income Portfolio 3 Nuveen Investment Quality Municipal Fund, Inc. Nuveen Insured California Select Tax-Free Income Portfolio Nuveen Insured Premium Income Municipal Fund 2 Nuveen Insured New York Select Tax-Free Income Portfolio Nuveen Select Quality Municipal Fund, Inc. Nuveen Growth and Income Stock Fund Nuveen Flagship Ohio Municipal Bond Fund Nuveen Balanced Stock and Bond Fund Nuveen New York Quality Income Municipal Fund, Inc. Nuveen Balanced Municipal and Stock Fund Nuveen New York Select Quality Municipal Fund, Inc. Nuveen Rittenhouse Growth Fund Nuveen California Select Quality Municipal Fund, Inc. Nuveen California Quality Income Municipal Fund, Inc. Nuveen Flagship Limited Term Municipal Bond Fund Nuveen Flagship Kentucky Municipal Bond Fund Nuveen Premier Municipal Income Fund, Inc. Nuveen Premier Insured Municipal Income Fund, Inc. Nuveen New Jersey Investment Quality Municipal Fund, Inc. Nuveen New York Investment Quality Municipal Fund, Inc. Nuveen New York Insured Municipal Bond Fund Nuveen Flagship Florida Municipal Bond Fund Nuveen Florida Investment Quality Municipal Fund Nuveen Pennsylvania Investment Quality Municipal Fund Nuveen Flagship All-American Municipal Bond Fund Nuveen Pennsylvania Premium Income Fund 2 Nuveen Flagship Michigan Municipal Bond Fund
- ---------------------------------- Witness 13 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 15 Exhibit B NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN FOR INDEPENDENT DIRECTORS AND TRUSTEES ELIGIBLE FUNDS You may choose from the following Eligible Funds: Nuveen Municipal Bond Fund Nuveen Flagship All-American Municipal Bond Fund Flagship Utility Income Fund Nuveen Balanced Stock and Bond Fund Nuveen European Value Fund Nuveen Growth and Income Stock Fund Nuveen Rittenhouse Growth Fund As of January 1, 1999 Exhibit C NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN FOR INDEPENDENT DIRECTORS AND TRUSTEES DEFERRAL ELECTION FORM I. Deferral of Compensation You may elect to defer up to 100 percent of your compensation from Participating Funds, in fixed dollar or whole percentage amounts, to be credited to your Deferral Account under the Plan. The Deferral Account will be further credited with a return on the Deferral Account balance as provided under the Plan. Starting _____________, ____ and for each quarter thereafter (unless subsequently amended by completion of a new election form), I hereby elect that the following amount of my compensation from Participating Funds be deferred under the Plan: $_______ or _______% II. Election of Deferral Period You are required under the Plan to elect the date to which Deferrals (plus applicable investment return) are to be deferred. Your election shall specify that distribution be deferred to (a) a specific date (which must be at least three years after the date of this election), (b) the beginning of the month, quarter or year following your Separation from Service, or (c) the earlier of a specific date or the beginning of the month, quarter or year following your Separation from Service; provided that distribution from your Deferral Account must in any event begin no later than the fifth anniversary of your Separation from Service I hereby make the following elections regarding my Deferrals under the Plan (choose one): [ ] The compensation I elect to defer under the Plan is to be deferred until ___________________________ (specify a date). [ ] The compensation I elect to defer under the Plan is to be deferred until the [ ] first day of the month [ ] first day of the calendar year [ ] fifth anniversary (choose one) following my Separation from Service. [ ] The compensation I elect to defer under the Plan is to be deferred until the [ ] earlier of (i) ____________________ (specify a date) or (ii) the beginning of the first [ ] month [ ] quarter [ ] year (choose one) following my Separation from Service. III. Form of Distribution You are required to elect the form of distribution, which may be either (a) a lump sum or (b) equal annual installments over five years (may be paid to you quarterly). My distributions from the Plan are to be in the form of (choose one): [ ] a lump sum; or [ ] annual installments over five (5) years; or [ ] quarterly installments over five (5) years. I understand that the amounts held in the Deferral Account shall remain the general assets of the Fund in which those amounts are held and that, with respect to the payment of such amounts, I am merely a general unsecured creditor of that Fund. I may not sell, encumber, pledge, assign or otherwise alienate the amounts held under the Deferral Account. I hereby agree that the terms of the Plan are incorporated herein and are made a part hereof. IV. Decline or Terminate Participation [ ] I do not wish to participate in the Plan, or if currently participating, I wish to terminate my participation at this time. PARTICIPANT Date Accepted by Administrator: - ----------------------------- Administrator Date 18 Exhibit D NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN FOR INDEPENDENT DIRECTORS AND TRUSTEES RETURN DESIGNATION FORM Under the Deferred Compensation Plan for Independent Directors and Trustees (the "Plan"), I hereby elect that the return on my Deferral Account under the Plan be computed as if the Deferral Account was invested in the following Eligible Fund(s) (selected from the list of Eligible Funds attached): TRANSFER ATTRIBUTION OF MY EXISTING DEFERRAL ACCOUNT BALANCE: Percentage or Dollar Amount of Deferral Name of Eligible Fund Account Balance to be Transferred to Fund $------ -----% $------ -----% $------ -----% Total $------ -----% ATTRIBUTE MY NEW DEFERRALS: Percentage or Dollar Amount of New Name of Eligible Fund Deferrals to be Attributed to Fund $------ -----% $------ -----% $------ -----% Total $------ -----% total must equal 100% I realize that the designation included on this Form shall be effective until I have filed another valid Return Designation Form with the Administrator. If (a) I make no written designation, (b) the written designation is unclear or (c) less than 100% of my Deferral Account is covered by this election, then my Deferral Account shall not be credited with any returns until I provide the Administrator with appropriate instructions. This form must be delivered to the Administrator at least 5 business days before the end of the calendar quarter to be effective the following quarter. PARTICIPANT Date Accepted by Administrator: - ------------------------------------------- Administrator Date 20 Exhibit E NUVEEN OPEN-END AND CLOSED-END FUNDS DEFERRED COMPENSATION PLAN FOR INDEPENDENT DIRECTORS AND TRUSTEES BENEFICIARY DESIGNATION FORM Under the Deferred Compensation Plan for Independent Directors and Trustees (the "Plan"), I hereby make the following beneficiary designations: I. PRIMARY BENEFICIARY I hereby select the following as my primary Beneficiary(ies) to receive at my death, in accordance with the Plan, the amounts held in my Deferral Account under the Plan. In the event I am survived by more than one primary Beneficiary, such primary Beneficiaries shall share equally in the distribution of my Deferral Account unless I indicate otherwise on an attachment to this form: [ ] My estate. The trustee or trustees of (provide name and date of trust) ----------------------------------------------- The following individuals: a. Name (Relationship) Address / City State Zip SSN b. Name (Relationship) Address City State Zip SSN Please include an attachment to this form if you wish to select additional primary Beneficiaries. II. SECONDARY BENEFICIARY In the event I am not survived by any primary Beneficiary, I hereby appoint the following as secondary Beneficiary(ies) to receive at my death, in accordance with the Plan, the amounts held in my deferral account under the Plan. In the event I am survived by more than one secondary Beneficiary, such secondary Beneficiaries shall share equally in the distribution of my Deferral Account unless I indicate otherwise on an attachment to this form: [ ] My estate. The trustee or trustees of _____________________________________________________ (provide name and date of trust) The following individuals: a. Name (Relationship) Address / City State Zip SSN b. Name (Relationship) Address / City State Zip SSN Please include an attachment to this form if you wish to select additional secondary Beneficiaries. I understand that if I am not survived by any primary or secondary Beneficiary, my Beneficiary shall be as set forth under the Plan. Date: --------------------- PARTICIPANT Accepted by Administrator: - ------------------------------------ Administrator Date 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 EX-99.J.1 12 EXCHANGE-TRADED FUND CUSTODY AGREEMENT EXHIBIT 99.j.1 MUTUAL FUND CUSTODY AGREEMENT THIS AGREEMENT is made this 21st of February, 1991 by and between NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, (the "Fund"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York State chartered bank and trust company ("U.S. Trust"). W I T N E S S E T H WHEREAS, the Fund is registered as a closed-end diversified, management investment company under the Investment Company Act of 1940, as amended ("the 1940 Act"); and WHEREAS, the Fund desires to retain U.S. Trust to serve as the Fund's custodian and U.S. Trust is willing to furnish such services; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. APPOINTMENT. The Fund hereby appoints U.S. Trust to act as custodian of its portfolio securities, cash and other property on the terms set forth in this Agreement. U.S. Trust accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Section 23 of this Agreement. 2. DELIVERY OF DOCUMENTS. The Fund has furnished U.S. Trust with copies properly certified or authenticated of each of the following: (a) Resolutions of the Fund's Board of Trustees authorizing the appointment of U.S. Trust as Custodian of the portfolio securities, cash and other property of the Fund and approving this Agreement; (b) Incumbency and signature certificates identifying and containing the signatures of the Fund's officers and/or the persons authorized to sign Proper Instructions, as hereinafter defined, on behalf of the Fund; 1 (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 as amended from time to time, is 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, as filed with the SEC; and (h) The Fund's Registration Statement on Form N-2 under the 1940 Act and the Securities Act of 1933, as amended ("the 1933 Act") as filed with the SEC; and (i) The Fund's most recent prospectus including all amendments and supplements thereto (the "Prospectus"). Upon request the Fund will furnish U.S. Trust with copies of all amendments of or supplements to the foregoing, if any. The Fund will also furnish U.S. Trust upon request with a copy of the opinion of counsel for the Fund with respect to the validity of the Shares and the status of such Shares under the 1933 Act filed with the SEC, and any other applicable federal law or regulation. 3. DEFINITIONS. (a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means the Fund's President, Treasurer and any other person, whether or not any such person is an officer or employee of the Fund, duly authorized by the Board of 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. 2 (b) "Book-Entry System". As used in this Agreement, the term "Book-Entry System" means a book-entry system authorized by the U.S. Department of Treasury, its successor or successors and its nominee or nominees. (c) Proper Instructions. Proper Instructions as used herein means a writing signed or initialled by two or more persons as the Board of 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 U.S. Trust reasonably believes them to have been given by a person authorized to give such instructions with respect to the transaction involved. The Fund shall cause all oral instructions to be confirmed in writing. Upon receipt of a certificate of the Secretary or an Assistant Secretary as to the authorization by the Board of 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 U.S. Trust are satisfied that such procedures afford adequate safeguards for the Fund's assets. For purposes of this Section, Proper Instructions shall include instructions received by U.S. Trust pursuant to any three-party agreement which requires a segregated asset account in accordance with Section 9. (d) "Property". The term "Property", as used in this Agreement, means: (i) any and all securities and other property of the Fund which the Fund may from time to time deposit, or cause to be deposited, with U.S. Trust or which U.S. Trust may from time to time hold for the Fund; (ii) all income in respect of any such securities or other property; (iii) all proceeds of the sales of any of such securities or other property; and (iv) all proceeds of the sale of securities issued by the Fund, which are received by U.S. Trust from time to time from or on behalf of the Fund. 3 (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 U.S. Trust therein. 4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Fund will deliver or cause to be delivered to U.S. Trust all securities and all monies owned by it, including payments of interest, principal and capital distributions and cash received for the issuance of its Shares, at any time during the period of this Agreement, except for securities and monies to be delivered to any subcustodian appointed pursuant to Section 7 hereof. U.S. Trust will not be responsible for such securities and such monies until actually received by it. All securities delivered to U.S. Trust or to any such subcustodian (other than in bearer form) shall be registered in the name of the Fund or in the name of a nominee of the Fund or in the name of U.S. Trust or any nominee of U.S. Trust (with or without indication of fiduciary status) or in the name of any subcustodian or any nominee of such subcustodian appointed pursuant to Paragraph 7 hereof or shall be properly endorsed and in form for transfer satisfactory to U.S. Trust. 5. VOTING RIGHTS. With respect to all securities, however registered, it is understood that the voting and other rights and powers shall be exercised by the Fund. U.S. Trust's only duty shall be to mail for delivery on the next business day to the Fund any documents received, including proxy statements and offering circulars, with any proxies for securities registered in a nominee name executed by such nominee. Where warrants, options, tenders or other securities have fixed expiration dates, the Fund understands that in order for U.S. Trust to act, U.S. Trust must receive the Fund's instructions at its offices in New York, addressed as U.S. Trust may from time to time request, by no later than noon (NY City time) at least one business day prior to the last scheduled date to act with respect 4 thereto (or such earlier date or time as U.S. Trust may reasonably notify the Fund). Absent U.S. Trust's timely receipt of such instructions, such instruments will expire without liability to U.S. Trust. 6. RECEIPT AND DISBURSEMENT OF MONEY. (a) U.S. Trust shall open and maintain a custody account for the Fund, subject only to draft or order by U.S. Trust acting pursuant to the terms of this Agreement, and shall hold in such account, subject to the provisions hereof, all cash received by it from or for the Fund other than cash maintained by the Fund in a bank account established and used in accordance with Rule 17f-3 under the 1940 Act. Funds held by U.S. Trust for the Fund may be deposited by it to its credit at U.S. Trust in the Banking Department of U.S. Trust or in such other banks or trust companies as it may in its discretion deem necessary or desirable; provided, however, that every such bank or trust company shall be qualified to act as a custodian under the 1940 Act, and that each such bank or trust company shall be approved by vote of a majority of the Board of Trustees of the Fund. Such funds shall be deposited by U.S. Trust in its capacity as Custodian and shall be withdrawable by U.S. Trust only in that capacity. (b) Upon receipt of Proper Instructions (which may be continuing instructions as deemed appropriate by the parties) U.S. Trust shall make payments of cash to, or for the account of, the Fund from such cash only (i) for the purchase of securities, options, futures contracts or options on futures contracts for the Fund as provided in Section 13 hereof; (ii) in the case of a purchase of securities effected through a Book-Entry System or Securities Depository, in accordance with the conditions set forth in Section 8 hereof; (iii) in the case of repurchase agreements entered into between the Fund and U.S. Trust, or another bank, or a broker-dealer which is a member of The National Association of Securities Dealers, Inc. ("NASD"), either (a) against delivery of the securities either in certificate form or through an entry crediting U.S. Trust's account at the Federal Reserve Bank with such securities or (b) against delivery of the receipt evidencing purchase by the Fund of securities owned by 5 U.S. Trust along with written evidence of the agreement by U.S. Trust to repurchase such securities from the Fund, (iv) for transfer to a time deposit account of the Fund in any bank, whether domestic or foreign; such transfer may be effected prior to receipt of a confirmation from a broker and/or the applicable bank pursuant to Proper Instructions from the Fund; (v) for the payment of dividends or other distributions on shares declared pursuant to the governing documents of the Fund, or for the payment of interest, taxes, administration, distribution or advisory fees or expenses which are to be borne by the Fund under the terms of this Agreement, any Advisory Agreement, or any administration agreement; (vi) for payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Fund and held by or to be delivered to U.S. Trust; (vii) to a subcustodian pursuant to Section 7 hereof; (viii) for such common expenses incurred by the Fund in the ordinary course of its business, including but not limited to printing and mailing expenses, legal fees, accountants fees, exchange fees. Or (ix) for any other proper purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Trustees or of the Executive Committee of the Fund signed by an officer of the Fund and certified by its Secretary or an Assistant Secretary, specifying the amount of such payment, setting forth the purpose for which such payment is to be made, declaring such purpose to be a proper purpose, and naming the person or persons to whom such payment is to be made. (c) U.S. Trust is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received as custodian for the Fund. 6A. Advances by Custodian. The Fund may from time to time purchase securities for settlement payable in "next day" funds and provide for payment for such transactions by selling securities for settlement in "same day" funds settling on the day after settlement of the Fund's purchase transaction. Under these circumstances the Fund may require the Custodian to advance funds in amounts not exceeding 20% of the value of the Fund's assets at the time of the advance for payment of the securities purchase transaction, and the Custodian shall recover an amount equal to its advance, without interest, from the proceeds of the securities sale. In addition to the foregoing, the Custodian may from time to time agree to advance cash to the Fund, without interest, for the Fund's other proper corporate purposes. If the Custodian advances cash for any purpose, the Fund shall and hereby does grant to the Custodian a security interest in Fund securities equal in value to the amount of the cash advance but in no event shall the value of securities in which a security interest has been granted exceed 20% of the value of the Fund's total assets at the time of the pledge; should the Fund fail to repay the Custodian promptly, the Custodian shall be entitled to utilize available cash and to reasonably dispose of any securities in which it has a security interest to the extent necessary to obtain reimbursement. 6 7. RECEIPT AND DELIVERY OF SECURITIES. (a) Except as provided by Section 8 hereof, U.S. Trust shall hold and physically segregate all securities and noncash Property received by it for the Fund. All such securities and non-cash Property are to be held or disposed of by U.S. Trust for the Fund pursuant to the terms of this Agreement. In the absence of Proper Instructions accompanied by a certified resolution authorizing the specific transaction by the Fund's Board, U.S. Trust shall have no power or authority to withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such securities and investments, except in accordance with the express terms provided for in this Agreement. In no case may any director, officer, employee or agent of the Fund withdraw any securities. In connection with its duties under this Section 7, U.S. Trust may, at its own expense, enter into subcustodian agreements with other banks or trust companies for the receipt of certain securities and cash to be held by U.S. Trust for the account of the Fund pursuant to this Agreement; provided that each such bank or trust company has an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000) and that such bank or trust company agrees with U.S. Trust to comply with all relevant provisions of the 1940 Act and applicable rules and regulations 7 thereunder. U.S. Trust will be liable for acts or omissions of any subcustodian. U.S. Trust shall employ subcustodians upon receipt of Proper Instructions, but only in accordance with an applicable vote by the Board of Trustees of the Fund. (b) Promptly after the close of business on each day U.S. Trust shall furnish the Fund with confirmations and a summary of all transfers to or from the account of the Fund during said day. Where securities are transferred to the account of the Fund established at a Securities Depository or Book Entry System pursuant to Section 8 hereof, U.S. Trust shall also by book-entry or otherwise identify as belonging to such Fund the quantity of securities in a fungible bulk of securities registered in the name of U.S. Trust (or its nominee) or shown in U.S. Trust's account on the books of a Securities Depository or Book-Entry System. At least monthly and from time to time, U.S. Trust shall furnish the Fund with a detailed statement of the Property held for the Fund under this Agreement. 8. USE OF SECURITIES DEPOSITORY OR BOOK-ENTRY SYSTEM. The Fund shall deliver to U.S. Trust a certified resolution of the Board of Trustees of the Fund approving, authorizing and instructing U.S. Trust on a continuous and ongoing basis until instructed to the contrary by Proper Instructions actually received by U.S. Trust (i) to deposit in a Securities Depository or Book-Entry System all securities of the Fund eligible for deposit therein and (ii) to utilize a Securities Depository or Book-Entry System to the extent possible in connection with the performance of its duties hereunder, including without limitation settlements of purchases and sales of securities by the Fund, and deliveries and returns of securities collateral in connection with borrowings. Without limiting the generality of such use, it is agreed that the following provisions shall apply thereto: (a) Securities and any cash of the Fund deposited in a Securities Depository or Book-Entry System will at all times (1) be represented in an account of U.S. Trust in the Securities Depository or Book Entry System (the "Account") and (2) be segregated from any assets and cash controlled by U.S. Trust in other than a fiduciary or custodian capacity but may be commingled with other assets held in such capacities. U.S. Trust will effect 8 payment for securities and receive and deliver securities in accordance with accepted industry practices as set forth in (b) below, unless the Fund has given U.S. Trust Proper Instructions to the contrary. The records of U.S. Trust with respect to securities of the Fund maintained in a Securities Depository or Book Entry System shall identify by book-entry those securities belonging to the Fund. (b) U.S. Trust shall pay for securities purchased for the account of the Fund upon (i) receipt of advice from the Securities Depository or Book Entry System that such securities have been transferred to the Account, and (ii) the making of an entry on the records of U.S. Trust to reflect such payment and transfer for the account of the Fund. Upon receipt of Proper Instructions, U.S. Trust shall transfer securities sold for the account of the Fund upon (i) receipt of advice from the Securities Depository or Book Entry System that payment for such securities has been transferred to the Account, and (ii) the making of an entry on the records of U.S. Trust to reflect such transfer and payment for the account of the Fund. Copies of all advices from the Securities Depository or Book Entry System of transfers of securities for the account of the Fund shall identify the Fund, be maintained for the Fund by U.S. Trust and be provided to the Fund at its request. Upon request, U.S. Trust shall furnish the Fund confirmation of each transfer to or from the account of the Fund in the form of a written advice or notice and shall furnish to the Fund copies of daily transaction sheets reflecting each day's transactions in a Securities Depository or Book Entry System for the account of the Fund. (c) U.S. Trust shall provide the Fund with any report obtained by U.S. Trust on the Securities Depository or Book Entry System's accounting system, internal accounting control and procedures for safeguarding securities deposited in the Securities Depository or Book Entry System; (d) All Books and records maintained by U.S. Trust which relate to the Fund participation in a Securities Depository or Book-Entry System will at all times during U.S. Trust's regular business hours be open to the inspection of the Fund's duly authorized 9 employees or agents, and the Fund will be furnished with all information in respect of the services rendered to it as it may require. (e) Anything to the contrary in this Agreement notwithstanding, U.S. Trust shall be liable to the Fund for any loss or damage to the Fund resulting from any negligence, misfeasance or misconduct of U.S. Trust or any of its agents or of any of its or their employees in connection with its or their use of the Securities Depository or Book Entry Systems or from failure of U.S. Trust or any such agent to enforce effectively such rights as it may have against such Securities Depository or Book Entry System; at the election of the Fund, it shall be entitled to be subrogated to the rights of U.S. Trust with respect to any claim against the Securities Depository or Book Entry System or any other person which U.S. Trust may have as a consequence of any such loss or damage if and to the extent that the Fund has not been made whole for any such loss or damage. 9. SEGREGATED ACCOUNT. U.S. Trust shall upon receipt of Proper Instructions establish and maintain a segregated account or accounts for and on behalf of the Fund, into which account or accounts may be transferred cash and/or securities, including securities maintained in an account by U.S. Trust pursuant to Section 8 hereof, (i) in accordance with the provisions of any agreement among the Fund, U.S. Trust and a broker-dealer registered under the Securities and Exchange Act of 1934 and a member of the NASD (or any futures commission merchant registered under the Commodity Exchange Act), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange (or the Commodity Futures Trading Commission or any registered contract market), or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Fund, (ii) for purposes of segregating cash or government securities in connection with options purchased, sold or written by the Fund or commodity futures contracts or options thereon purchased or sold by the Fund, (iii) for the purposes of compliance by the Fund with the procedures required by Investment Company Act Release No. 10666, or any subsequent release or releases of the 10 Securities and Exchange Commission relating to the maintenance of segregated accounts by registered investment companies and (iv) for other proper corporate purposes, but only, in the case of clause (iv), upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of Trustees or of the Executive Committee signed by an officer of the Fund and certified by the Secretary or an Assistant Secretary, setting forth the purpose or purposes of such segregated account and declaring such purposes to be proper corporate purposes. 10. INSTRUCTIONS CONSISTENT WITH THE ARTICLES, ETC. (a) Unless otherwise provided in this Agreement, U.S. Trust shall act only upon Proper Instructions. U.S. Trust may assume that any Proper Instruction received hereunder are not in any way inconsistent with any provision of the Declaration or By-Laws or any vote or resolution of the Fund's Board of Trustees or any committee thereof. U.S. Trust shall be entitled to rely upon any Proper Instructions actually received by U.S. Trust pursuant to this Agreement. The Fund agrees that U.S. Trust shall incur no liability in acting in good faith upon Proper Instructions given to U.S. Trust, except to the extent such liability was incurred as a result of U.S. Trust's negligence or willful misconduct. In accord with instructions from the Fund, as required by accepted industry practice or as U.S. Trust may elect in effecting the execution of Fund instructions, advances of cash or other Property made by U.S. Trust, arising from the purchase, sale, redemption, transfer or other disposition of Property of the Fund, or in connection with the disbursement of funds to any party, or in payment of fees, expenses, claims or liabilities owed to U.S. Trust by the Fund, or to any other party which has secured judgment in a court of law against the Fund which creates an overdraft in the accounts or overdelivery of Property, shall be deemed a loan by U.S. Trust to the Fund, payable on demand, bearing interest at such rate customarily charged by U.S. Trust for similar loans. (b) The Fund agrees that test arrangements, authentication methods or other security devices to be used with respect to instructions which the Fund may give by 11 telephone, telex, TWX, facsimile transmission, bank wire or other teleprocess, or through an electronic instruction system, shall be processed in accordance with terms and conditions for the use of such arrangements, methods or devices as U.S. Trust may put into effect and modify from time to time. The Fund shall safeguard any test keys, identification codes or other security devices which U.S. Trust makes available to the Fund and agrees that the Fund shall be responsible for any loss, liability or damage incurred by U.S. Trust or by the Fund as a result of U.S. Trust's acting in accordance with instructions from any unauthorized person using the proper security device except to the extent such loss, liability or damage was incurred as a result of U.S. Trust's negligence or willful misconduct. U.S. Trust may electronically record, but shall not be obligated to so record, any instructions given by telephone and any other telephone discussions with respect to the Fund. In the event that the Fund uses U.S. Trust's Asset Management system or any successor electronic communications or information system, the Fund agrees that U.S. Trust is not responsible for the consequences of the failure of that system to perform for any reason, beyond the reasonable control of U.S. Trust, or the failure of any communications carrier, utility, or communications network. In the event that system is inoperable, the Fund agrees that it will accept the communication of transaction instructions by telephone, facsimile transmission on equipment compatible to U.S. Trust's facsimile receiving equipment or by letter, at no additional charge to the Fund. (c) U.S. Trust shall transmit promptly to the Fund all written information (including, without limitation, pendency of calls and maturities of securities and expirations of rights in connection therewith and notices of exercise of call and put options written by the Fund and the maturity of futures contracts purchased or sold by the Fund) received by U.S. Trust from issuers of the securities being held for the Fund. With respect to tender or exchange offers, U.S. Trust shall transmit promptly by facsimile to the Fund all written information received by U.S. Trust from issuers of the securities whose tender or exchange is sought and from the party (or his agents) making the tender or exchange offer. If the Fund desires to 12 take action with respect to any tender offer, exchange offer or any other similar transaction, the Fund shall notify U.S. Trust at least three business days prior to the date on which U.S. Trust is to take such action or upon the date such notification is first received by the Fund, if later. If any Property registered in the name of a nominee of U.S. Trust is called for partial redemption by the issuer of such property, U.S. Trust is authorized to allot the called portion to the respective beneficial holders of the Property in such manner deemed to be fair and equitable by U.S. Trust in its sole discretion. 11. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. U.S. Trust is authorized to take the following action without Proper Instructions: (a) COLLECTION OF INCOME AND OTHER PAYMENTS. U.S. Trust shall: (i) collect and receive on a timely basis for the account of the Fund, all income and other payments and distributions, including (without limitation) stock dividends, rights, warrants and similar items, included or to be included in the Property of the Fund, and promptly advise the Fund of such receipt and shall credit such income, as collected, to the Fund. From time to time, U.S. Trust may elect, but shall not be obligated, to credit the account with interest, dividends or principal payments on payable or contractual settlement date, in anticipation of receiving same from a payor, central depository, broker or other agent employed by the Fund or U.S. Trust. Any such crediting and posting shall be at the Fund's sole risk, and U.S. Trust shall be authorized to reverse any such advance posting in the event it does not receive good funds from any such payor, central depository, broker or agent of the Customer. U.S. Trust agrees to promptly notify the Fund of the reversal of any such advance posting. (ii) endorse and deposit for collection in the name of the Fund, checks, drafts, or other orders for the payment of money on the same day as received; 13 (iii) receive and hold for the account of the Fund all securities received by the Fund as a result of a stock dividend, share split-up or reorganization, merger, recapitalization, readjustment or other rearrangement or distribution of rights or similar securities issued with respect to any portfolio securities of the Fund held by U.S. Trust hereunder; (iv) present for payment and collect the amount payable upon all securities which may mature or be called, redeemed or retired, or otherwise become payable on the date such securities become payable; (v) take any action which may be necessary and proper in connection with the collection and receipt of such income and other payments and the endorsement for collection of checks, drafts and other negotiable instruments; (vi) to effect an exchange of the securities where the par value is changed, and to surrender securities at maturity or upon an earlier call for redemption, or when securities otherwise become payable, against payment therefore in accordance with accepted industry practice. If any Property registered in the name of a nominee of U.S. Trust is called for partial redemption by the issuer of such property, U.S. Trust is authorized to allot the called portion to the respective beneficial holders of the Property in such manner deemed to be fair and equitable by U.S. Trust in its sole discretion. (b) Miscellaneous Transactions. U.S. Trust is authorized to deliver or cause to be delivered Property against payment or other consideration or written receipt therefore for examination by a dealer selling for the account of the Fund in accordance with street delivery custom. 12. TRANSACTIONS REQUIRING INSTRUCTIONS. In addition to the actions requiring Proper Instructions set forth herein, upon receipt of Proper Instructions and not otherwise, U.S. Trust, directly or through the use of a Securities Depository or Book-Entry System, shall: 14 (a) Execute and deliver to such persons as may be designated in such Proper Instructions, proxies, consents, authorizations, and any other instruments whereby the authority of the Fund as owner of any securities may be exercised; (b) Deliver any securities held for the Fund against receipt of other securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any issuer of securities or corporation, or the exercise of any conversion privilege; (c) Deliver any securities held for the Fund to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any issuer of securities or corporation, against receipt of such certificates of deposit, interim receipts or other instruments or documents, and cash, if any, as may be issued to it to evidence such delivery; (d) Make such transfers or exchanges of the assets of the Fund and take such other steps as shall be stated in said instructions to be for the purpose of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund; (e) Release securities belonging to the Fund to any bank or trust company for the purpose of pledge or hypothecation to secure any loan incurred by the Fund; provided, however, that securities shall be released only upon payment to U.S. Trust of the monies borrowed, or upon receipt of adequate collateral as agreed upon by the Fund and U.S. Trust which may be in the form of cash or obligations issued by the U.S. government, its agencies or instrumentalities, except that in cases where additional collateral is required to secure a borrowing already made, subject to proper prior authorization, further securities may be released for that purpose; and pay such loan upon redelivery to it of the securities pledged or hypothecated therefore and upon surrender of the note or notes evidencing the loan; and 15 (f) Deliver securities in accordance with the provisions of any agreement among the Fund, U.S. Trust and a brokerdealer registered under the Securities Exchange Act of 1934 (the "Exchange Act") and a member of The National Association of Securities Dealers, Inc. ("NASD"), relating to compliance with the rules of The Options Clearing Corporation and of any registered national securities exchange, or of any similar organization or organizations, regarding escrow or other arrangements in connection with transactions by the Funds; (g) Deliver securities in accordance with the provisions of any agreement among the Fund, U.S. Trust and a Futures Commission Merchant registered under the Commodity Exchange Act, relating to compliance with the rules of the Commodity Futures Trading Commission and/or any Contract Market, or any similar organization or organizations, regarding account deposits in connection with transactions by the Fund; and (h) Deliver securities against payment of other consideration or written receipt therefor for transfer of securities into the name of the Fund or U.S. Trust or a nominee of either, or for exchange or securities for a different number of bonds, certificates, or other evidence, representing the same aggregate face amount or number of units bearing the same interest rate, maturity date and call provisions, if any; provided that, in any such case, the new securities are to be delivered to U.S. Trust; (i) Exchange securities in temporary form for securities in definitive form; (j) Surrender, in connection with their exercise, warrants, rights or similar securities, provided that in each case, the new securities and cash, if any, are to be delivered to U.S. Trust; (k) Deliver securities upon receipt of payment in connection with any repurchase agreement related to such securities entered into by the Fund; (l) Deliver securities pursuant to any other proper corporate purpose, but only upon receipt of, in addition to Proper Instructions, a certified copy of a resolution of the Board of 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 16 forth the purpose for which such delivery is to be made, declaring such purpose to be a proper corporate purpose, and naming the person or persons to whom delivery of such securities shall be made. 13. PURCHASE OF SECURITIES. Promptly after each purchase of securities, options, futures contracts or options on futures contracts by the investment advisor, the Fund shall deliver to U.S. Trust (as Custodian) Proper Instructions specifying with respect to each such purchase: (a) the name of the issuer and the title of the securities, (b) the number of shares of the principal amount purchased and accrued interest, if any, (c) the dates of purchase and settlement, (d) the purchase price per unit, (e) the total amount payable upon such purchase, (f) the name of the person from whom or the broker through whom the purchase was made and (g) the Fund name. U.S. Trust shall upon receipt of securities purchased by or for the Fund registered in the name of the Fund or in the name of a nominee of U.S. Trust or of the Fund or in proper form for transfer or upon receipt of evidence of title to options, futures contracts or options on futures contracts purchased by the Fund, pay out of the monies held for the account of the Fund the total amount payable to the person from whom or the broker through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Proper Instructions. Except as specifically stated otherwise in this Agreement, in any and every case where payment for purchase of securities for the account of the Fund is made by U.S. Trust in advance of receipt of the securities purchased in the absence of specific written instructions from the Fund to so pay in advance, U.S. Trust shall be absolutely liable to the Fund for such securities to the same extent as if the securities had been received by U.S. Trust. 14. SALE OF SECURITIES. Promptly after each sale of securities by the Fund at the instruction of the investment advisor, the Fund shall deliver to U.S. Trust (as Custodian) Proper Instructions, specifying with respect to each such sale; (a) the name of the issuer and the title of the security, (b) the number of shares or principal amount sold, and accrued interest, if any, (c) the date of sale, (d) the sale price per unit, (e) the total amount payable to 17 the Fund upon such sale, (f) the name of the broker through whom or the person to whom the sale was made and (g) the Fund name. U.S. Trust shall deliver the securities upon receipt of the total amount payable to the Fund upon such sale, provided that the same conforms to the total amount payable as set forth in such Proper Instructions. Subject to the foregoing, U.S. Trust may accept payment in such form as shall be satisfactory to it, and may deliver securities and arrange for payment in accordance with the customs prevailing among dealers in securities. 15. AUTHORIZED SHARES. The Fund has an unlimited number of authorized shares. 16. RECORDS. The books and records pertaining to the Fund which are in the possession of U.S. Trust shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act, as amended, and other applicable securities laws and rules and regulations. The Fund, or the Fund's authorized representative, shall have access to such books and records at all times during U.S. Trust's normal business hours, and such books and records shall be surrendered to the Fund promptly upon request. Upon reasonable request of the Fund, copies of any such books and records shall be provided by U.S. Trust to the Fund or the Fund's authorized representative at the Fund's expense. 17. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the Fund's independent certified public accountants and shall take all reasonable action in the performance of its obligations under this Agreement to assure that the necessary information is made available to such accountants for the expression of their unqualified opinion, including but not limited to the opinion included in the Fund's Form N-2, Form N-SAR and other reports to the Securities and Exchange Commission and with respect to any other requirement of such Commission. 18. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS. U.S. Trust shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants on the accounting system, internal accounting control and 18 procedures for safeguarding securities, futures contracts and options on futures contracts, including securities deposited and/or maintained in a Securities Depository or Book Entry System, relating to the services provided by U.S. Trust under this Contract; such reports shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 19. CONFIDENTIALITY. U.S. Trust agrees on behalf of itself and its employees to treat confidentially and as the proprietary information of the Fund all records and other information relative to the Fund and its prior, present or potential Shareholders and relative to the advisors and its prior, present or potential customers, and not to use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where U.S. Trust may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Fund. Nothing contained herein, however, shall prohibit U.S. Trust from advertising or soliciting the public generally with respect to other products or services, regardless of whether such advertisement or solicitation may include prior, present or potential Shareholders of the Fund. 20. EQUIPMENT FAILURES. In the event of equipment failures beyond U.S. Trust's control, U.S. Trust shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions but shall not have liability with respect thereto. U.S. Trust shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for back up emergency use of electronic data processing equipment to the extent appropriate equipment is available. 19 21. RIGHT TO RECEIVE ADVICE. (a) Advice of Fund. If U.S. Trust shall be in doubt as to any action to be taken or omitted by it, it may request, and shall receive, from the Fund clarification or advice. (b) Advice of Counsel. If U.S. Trust shall be in doubt as to any question of law involved in any action to be taken or omitted by U.S. Trust, it may request advice at its own cost from counsel of its own choosing (who may be counsel for the Fund or U.S. Trust, at the option of U.S. Trust). (c) Conflicting Advice. In case of conflict between directions or advice received by U.S. Trust pursuant to subparagraph (a) of this paragraph and advice received by U.S. Trust pursuant to subparagraph (b) of this paragraph, U.S. Trust shall be entitled to rely on and follow the advice received pursuant to the latter provision alone. (d) Protection of U.S. Trust. U.S. Trust shall be protected in any action or inaction which it takes or omits to take in reliance on any directions or advice received pursuant to subparagraphs (a) or (b) of this section which U.S. Trust, after receipt of any such directions or advice, in good faith believes to be consistent with such directions or advice. However, nothing in this paragraph shall be construed as imposing upon U.S. Trust any obligation (i) to seek such directions or advice, or (ii) to act in accordance with such directions or advice when received, unless, under the terms of another provision of this Agreement, the same is a condition to U.S. Trust's properly taking or omitting to take such action. Nothing in this subsection shall excuse U.S. Trust when an action or omission on the part of U.S. Trust constitutes willful misfeasance, bad faith, negligence or reckless disregard by U.S. Trust of its duties under this Agreement. 22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. The Fund assumes full responsibility for insuring that the contents of each Prospectus of the Fund complies with all applicable requirements of the 1933 Act, the 1940 Act, and any laws, rules and regulations of governmental authorities having jurisdiction. 20 23. COMPENSATION. As compensation for the services rendered by U.S. Trust during the term of this Agreement, the Fund will pay to U.S. Trust, in addition to reimbursement of its out-of-pocket expenses, monthly fees as outlined in Exhibit A. 24. INDEMNIFICATION. The Fund, as sole owner of the Property, agrees to indemnify and hold harmless U.S. Trust and its nominees from all taxes, charges, expenses, assessments, claims, and liabilities (including, without limitation, liabilities arising under the 1933 Act, the Securities Exchange Act of 1934, the 1940 Act, and any state and foreign securities and blue sky laws, all as or to be amended from time to time) and expenses, including (without limitation) attorney's fees and disbursements (hereafter "liabilities and expenses"), arising directly or indirectly from any action or thing which U.S. Trust takes or does or omits to take or do (i) at the request or on the direction of or in reliance on the advice of the Fund, or (ii) upon Proper Instructions, provided, that neither U.S. Trust nor any of its nominees or subcustodians shall be indemnified against any liability to the Fund or to its Shareholders (or any expenses incident to such liability) arising out of (x) U.S. Trust's or such nominee's or subcustodian's own willful misfeasance, bad faith, negligence or reckless disregard of its duties under this Agreement or any agreement between U.S. Trust and any nominee or subcustodian or (y) U.S. Trust's own negligent failure to perform its duties under this Agreement. U.S. Trust similarly agrees to indemnify and hold harmless the fund from all liabilities and expenses arising directly or indirectly from U.S. Trust's or such nominee's or subcustodian's willful misfeasance, bad faith, negligence or reckless disregard in performing its duties under this agreement. In the event of any advance of cash for any purpose made by U.S. Trust resulting from orders or Proper Instructions of the Fund, or in the event that U.S. Trust or its nominee or subcustodian shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from its or its nominee's or subcustodian's own negligent action, negligent failure to act, willful 21 misconduct, or reckless disregard, the Fund shall promptly reimburse U.S. Trust for such advance of cash or such taxes, charges, expenses, assessments, claims or liabilities. 25. RESPONSIBILITY OF U.S. TRUST. In the performance of its duties hereunder, U.S. Trust shall be obligated to exercise care and diligence and to act in good faith to insure the accuracy and completeness of all services performed under this Agreement. U.S. Trust shall be responsible for its own negligent failure or that of any subcustodian it shall appoint to perform its duties under this Agreement but to the extent that duties, obligations and responsibilities are not expressly set forth in this Agreement, U.S. Trust shall not be liable for any act or omission which does not constitute willful misfeasance, bad faith, or negligence on the part of U.S. Trust or such subcustodian or reckless disregard of such duties, obligations and responsibilities. Without limiting the generality of the foregoing or of any other provision of this Agreement, U.S. Trust in connection with its duties under this Agreement shall, so long as and to the extent it is in the exercise of reasonable care, not be under any duty or obligation to inquire into and shall not be liable for or in respect of (a) the validity or invalidity or authority or lack thereof of any advice, direction, notice or other instrument which conforms to the applicable requirements of this Agreement, if any, and which U.S. Trust believes to be genuine, (b) the validity of the issue of any securities purchased or sold by the Fund, the legality of the purchase or sale thereof or the propriety of the amount paid or received therefor, (c) the legality of the issue or sale of any Shares, or the sufficiency of the amount to be received therefor, (d) the legality of the redemption of any Shares, or the propriety of the amount to be paid therefor, (e) the legality of the declaration or payment of any dividend or distribution on Shares, of (f) delays or errors or loss of data occurring by reason of circumstances beyond U.S. Trust's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, mechanical breakdown (except as provided in Section 20), flood or catastrophe, acts of God, insurrection, war, riots, or failure of the mail, transportation, communication or power supply. 22 26. COLLECTION OF INCOME. U.S. Trust shall collect on a timely basis all income and other payments with respect to registered securities held hereunder to which the Fund shall be entitled either by law or pursuant to custom in the securities business, and shall collect on a timely basis all income and other payments with respect to bearer securities if, on the date of payment by the issuer, such securities are held by U.S. Trust or its agent thereof and shall credit such income, as collected, to the Fund's custodian account. Without limiting the generality of the foregoing, U.S. Trust shall detach and present for payment all coupons and other income items requiring presentation as and when they become due and shall collect interest when due on securities held hereunder. Income due the Fund on securities loaned pursuant to the provisions of Section 9 shall be the responsibility of the Fund. U.S. Trust will have no duty or responsibility in connection therewith, other than to provide the Fund with such information or data as may be necessary to assist the Fund in arranging for the timely delivery to the Custodian of the income to which the Fund is properly entitled. 27. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. U.S. Trust shall execute ownership and other certificates and affidavits for all federal and state tax purposes in connection with receipt of income or other payments with respect to securities of the Fund held by it and in connection with transfers of securities. 28. EFFECTIVE PERIOD: TERMINATION AND AMENDMENT. This Agreement shall become effective as of its execution, shall continue in full force and effect until terminated as hereinafter provided, may be amended at any time by mutual agreement of the parties hereto and may be terminated by either party by an instrument in writing delivered or mailed, postage prepaid to the other party, such termination to take effect not sooner than thirty (30) days after the date of such delivery or mailing; provided, however that U.S. Trust shall not act under Section 8 hereof in the absence of receipt of an initial certificate of the Secretary or an Assistant Secretary that the Board of Directors of the Fund has approved the initial use of a particular Securities Depository or Book Entry 23 System and the receipt of an annual certificate of the Secretary or an Assistant Secretary that the Board of Trustees has reviewed the use by the Fund of such Securities Depository and/or Book Entry System, as required in each case by Rule 17f-4 under the Investment Company Act of 1940, as amended; provided further, however, that the Fund shall not amend or terminate this Agreement in contravention of any applicable federal or state regulations, or any provision of the Articles of Incorporation, and further provided, that the Fund may at any time by action of its Board of Trustees (i) substitute another bank or trust company for U.S. Trust by giving notice as described above to U.S. Trust, or (ii) immediately terminate this Agreement in the event of the appointment of a conservator or receiver for U.S. Trust by the Comptroller of the Currency or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Upon termination of the Agreement, the Fund shall pay to U.S. Trust such compensation as may be due as of the date of such termination and shall likewise reimburse U.S. Trust for its costs, expenses and disbursements. 29. SUCCESSOR CUSTODIAN. If a successor custodian shall be appointed by the Board of Directors of the Fund, U.S. Trust shall, upon termination, deliver to such successor custodian at the office of the custodian, duly endorsed and in the form for transfer, all securities then held by it hereunder and shall transfer to an account of the successor custodian all of the Fund's securities held in a Securities Depository or Book Entry System. If no such successor custodian shall be appointed, U.S. Trust shall, in like manner, upon receipt of a certified copy of a vote of the Board of 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 U.S. Trust on or before the date when such termination shall be come effective, then U.S. Trust shall have the right to 24 deliver to a bank or trust company, which is a "bank" as defined in the 1940 Act, doing business in New York, New York, of its own selection, having an aggregate capital, surplus, and undivided profits, as shown by its last published report, of not less than $25,000,000, all securities, funds and other properties held by U.S. Trust and all instruments held by U.S. Trust relative thereto and all other property held by it under this Agreement and to transfer to an account of such successor custodian all of the Fund's securities held in any Securities Depository or Book Entry System. Thereafter, such bank or trust company shall be the successor of the Custodian under this Contract. In the event that securities, funds and other properties remain in the possession of U.S. Trust after the date of termination hereof owing to failure of the Fund to procure the certified copy of the vote referred to or of the Board of Directors to appoint a successor custodian, U.S. Trust shall be entitled to fair compensation for its services during such period as U.S. Trust retains possession of such securities, funds and other properties and the provisions of this Contract relating to the duties and obligations of U.S. Trust shall remain in full force and effect. 30. NOTICES. All notices and other communications (collectively referred to as "Notice" or "Notices") in this section hereunder shall be in writing and shall be first sent by telegram, cable, telex, or facsimile sending device and thereafter by overnight mail for delivery on the next business day. Notices shall be addressed (a) if to U.S. Trust, at U.S. Trust's address, 114 West 47th Street, New York, New York, 10036-1532, facsimile number (212) 852-1488; (b) if to the Fund, at the address of the Fund Attention: Portfolio Manager, facsimile number (312) 917-8211; or (c) if to neither of the foregoing, at such other address as shall have been notified to the sender of any such Notice or other communication. Notices sent by overnight mail shall be deemed to have been given the next business day. Notices sent by messenger shall be deemed to have been given on the day delivered, and notices sent by confirming telegram, cable, telex or facsimile sending device shall be deemed to 25 have been given immediately. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender. 31. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 32. AMENDMENTS. This Agreement or any part hereof may be changed or waived only by an instrument in writing signed by the party against which enforcement of such change or waiver is sought. 33. MISCELLANEOUS. This Agreement embodies the entire Agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement shall be deemed to be a contract made in New York and governed by New York law. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. 34. 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. 26 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year second above written. UNITED STATES TRUST COMPANY OF NEW YORK Attest: Jacqueline Binder By: Peter C. Arrighetti ---------------------------- ------------------------------- JACQUELINE BINDER PETER C. ARRIGHETTI ASSISTANT VICE PRESIDENT VICE PRESIDENT NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND Attest: Larry W. Martin By: O. Walter Renfftlen ---------------------------- ------------------------------- LARRY W. MARTIN O. WALTER RENFFTLEN ASSISTANT GENERAL COUNSEL VICE PRESIDENT & CONTROLLER 27 EXHIBIT A CUSTODY SERVICE FEE Administration and Maintenance Fee .03% (3-Basis Points) on first $50 million .02% (2-Basis Points) on next $50 million .01% (1-Basis Point) on remainder Transaction Fees $15.00 Per Book Entry Transaction $25.00 Per Physical Transaction $35.00 Per Future Contract or Option Wire $8.00 Per Wire Transfer Earnings on Balances An earning credit, adjusted on a monthly basis, will be applied against the Custody Service Fee and Fund Accounting Fee equal to 75% of the latest available three month average of the 91 day treasury bill coupon equivalent rate times the average collected balance in the custodian account (or accounts) for the month billed. If the credit exceeds the fees for the month, this excess is carried forward to subsequent months. However, this carryforward is only available as a credit against fees incurred through December 31 of each calendar year and expires effective January 1 of the following year. NOTES: 1. Schedule should be applied separately to each fund; All fees are billed monthly. 2. Add $5.00 per book entry transaction and physical transaction if U.S. Trust inputs trades. 3. Minimum charge of $1,000 per month. NUVEEN PENNSYLVANIA INVESTMENT UNITED STATES TRUST COMPANY QUALITY MUNICIPAL FUND OF NEW YORK By /s/ O. Walter Renfftlen By [SIG] ------------------------------ --------------------------- Title V.P. & Controller Title Vice President --------------------------- ------------------------ Date 2-13-91 Date 2-8-91 ---------------------------- ------------------------ EX-99.J.2 13 FUND ACCOUNTING AGREEMENT EXHIBIT 99.j.2 FUND ACCOUNTING AGREEMENT THIS AGREEMENT, made this 21st day of February, 1991, by and between, NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND, a business trust organized under the laws of the Commonwealth of Massachusetts (the "Fund"), and UNITED STATES TRUST COMPANY OF NEW YORK, a New York State chartered bank and trust company ("U.S. Trust"). W I T N E S S E T H: WHEREAS, the Fund is a registered closed-end diversified management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund desires to hire U.S. Trust to provide the Fund with certain accounting services, and U.S. Trust is willing to provide such services upon the terms and conditions herein set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 1. APPOINTMENT. The Fund hereby appoints U.S. Trust to provide the accounting services hereinafter set forth to the Fund, and U.S. Trust accepts such appointment and agrees to provide such services, under the terms and conditions set forth herein. 2. CALCULATION OF NET ASSET VALUE. U.S. Trust will calculate the Fund's daily net asset value and the daily per-share net asset value in accordance with the Fund's effective Registration Statement on Form N-2 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), including its current prospectus. If so directed, U.S. Trust shall also calculate daily the net income of the Fund and shall advise the Fund daily of the total amounts of such net income and, if instructed in writing by an officer of the Fund to do so, of the division of such net income among its various components. 3. BOOKS AND RECORDS. U.S. Trust will (a) maintain such books and records as are necessary to enable it to perform its duties under this Agreement; (b) prepare and maintain complete, accurate and current all records with respect to the Fund required to be maintained by the Fund under the Internal Revenue Code of 1986, as amended (the "Code"), and under the 1940 Act and the applicable rules and regulations thereunder; (c) at the Fund's expense, retain and preserve said records in the manner and for the periods prescribed in the Code and such rules and regulations; and (d) assist to the extent requested by the Fund in the preparation of reports to the Fund's shareholders, the Fund's Registration Statement and reports and filings required pursuant to the Code or the 1940 Act and the rules and regulations thereunder. U.S. Trust hereby acknowledges and agrees that all records prepared and maintained by U.S. Trust pursuant to this paragraph 3 which are required to be maintained by the Fund under the Code and the 1940 Act ("Required Records") are the property of the Fund. If this agreement is terminated, all Required Records shall be delivered, at the Fund's expense, to the Fund or any such person designated by the Fund, and U.S. Trust shall be relieved of responsibility for the preparation and maintenance of any Required Records delivered to the Fund or any such person. 4. COOPERATION WITH ACCOUNTANTS. U.S. Trust shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of its -2- obligation under this Agreement to assure that the necessary information is made available to such accountants for the expression of their unqualified opinion where required for any document for the Fund. 5. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS U.S. Trust shall provide the Fund, at such times as the Fund may reasonably require, with reports by independent public accountants relating to the services provided by U.S. Trust under this Contract; such reports, shall be of sufficient scope and in sufficient detail, as may reasonably be required by the Fund to provide reasonable assurance that any material inadequacies would be disclosed by such examination, and, if there are no such inadequacies, the reports shall so state. 6. FEES AND CHARGES. In consideration of services rendered pursuant to this Agreement, the Fund shall pay to U.S. Trust a fee in accordance with the schedule attached hereto (Exhibit A) and shall promptly reimburse U.S. Trust for any out-of-pocket expenses and advances payable by the Fund in accordance with Paragraph 6. 7. EXPENSES. The expenses connected with the performance of this Agreement shall be allocated between the Fund and U.S. Trust as follows: (a) U.S. Trust shall furnish, at its expense and without cost to the Fund, (i) the services of its personnel to the extent required to carry out its obligations under this Agreement, and (ii) use of data processing equipment. (b) All costs and expenses not expressly assumed by U.S. Trust under Paragraph 6 (a) of this Agreement shall be paid by the Fund, including but not limited to costs and expenses for pricing service fees; necessary outside record storage; media for storage or records (e.g., microfilm, microfiche); and any and all assessments, taxes or levies assessed on U.S. Trust for services provided under this Agreement. -3- 8. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Except as otherwise provided in this Agreement and except for the accuracy of information furnished to it by U.S. Trust, the Fund assumes full responsibility of the preparation, contents and distribution of each prospectus of the Fund, and for compliance with all applicable requirements of the 1940 Act, the Securities Act and any laws, rules and regulations of governmental authorities having jurisdiction over the Fund. 9. CONFIDENTIALITY. U.S. Trust agrees to treat all records and other information relative to the Fund as proprietary information of the Fund and, on behalf of itself and its employees, to keep confidential all such information, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where U.S. Trust may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities or when so requested by the Fund. 10. REFERENCES TO U.S. TRUST. The Fund shall not circulate any printed matter which contains any reference to U.S. Trust without the prior written approval of U.S. Trust, except solely such printed matter as merely identifies U.S. Trust as Accounting and Pricing Services Agent. The Fund will submit printed matter requiring approval to U.S. Trust in draft form, allowing sufficient time for review by U.S. Trust and its counsel prior to any deadline for printing. 11. FORCE MAJEURE: EQUIPMENT FAILURES. (a) If U.S. Trust shall be delayed in its performance of services or prevented entirely or in part from performing services because of causes or events beyond its control, including and without limitation, acts of God, interruption of power or other utility, transportation or communication services, acts of civil or military authority, sabotages, national emergencies, explosion, flood, accident, earthquake or other catastrophe, fire, strike or other labor -4- problems, legal action, present or future law, governmental order, rule or regulation, or shortage of suitable parts, materials, labor or transportation, then such delay or nonperformance shall be excused and a reasonable time for performance in connection with this Agreement shall be extended to include the period of such delay or nonperformance. (b) In the event of equipment failures beyond U.S. Trust's control, U.S. Trust shall take all steps necessary to minimize service interruptions but shall have no liability with respect thereto. U.S. Trust shall endeavor to enter into one or more agreements making provision for emergency use of electronic data processing equipment to the extent appropriate equipment is available. 12. INDEMNIFICATION OF U.S. TRUST. (a) U.S. Trust, its directors, officers, employees, shareholders, and agents shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of this Agreement, except a loss resulting from a breach of fiduciary duty or a loss resulting from willful misfeasance, bad faith or negligence on the part of U.S. Trust in the performance of its obligations and duties under this Agreement. (b) Notwithstanding any other provision of this Agreement, the Fund shall indemnify and hold harmless U.S. Trust, its directors, officers, employees, shareholders, and agents from and against any and all claims, demands, expenses and liabilities (whether with or without basis in fact or law) of any and every nature which U.S. Trust may sustain or incur or which be asserted against U.S. Trust by any person by reason of, or as a result of any action taken or omitted to be taken by U.S. Trust in connection with its appointment, in good faith, in reliance upon any law, act, regulation or official interpretation of same even though the same may have been altered, changed, amended or repealed subsequent to -5- the date of U.S. Trust's actions in reliance there on. However, indemnification under this subparagraph shall not apply to actions or omissions of U.S. Trust or its directors, officers, employees, shareholders, agents, or subcontractors in cases of its or their own negligence, willful misconduct, bad faith, or reckless disregard of its or their own duties hereunder. 13. TERM; TERMINATION. (a) The provisions of this Agreement shall be effective as of February 21, 1991, shall continue in force from year to year thereafter, but only so long as such continuance is approved by U.S. Trust and the Fund. (b) Either party may terminate this Agreement on any date by giving the other party at least ninety (90) days prior written notice of such termination specifying the date fixed therefore. (c) In the event that in connection with termination of this Agreement a successor to any of U.S. Trust's duties or responsibilities under this Agreement is designated by the Fund by written notice to U.S. Trust, U.S. Trust shall, promptly upon such termination and at the expense of the Fund, transfer all Required Records and shall cooperate in the transfer of such duties and responsibilities, including provision for assistance from the U.S. Trust's cognizant personnel in the establishment of books, records, and other data by such successor. 14. ASSIGNMENT. Except as hereinafter provided, neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assignees. U.S. Trust may, without further consent on the part of the Fund, subcontract for the performance hereof with third parties who are subsidiaries or other affiliates of U.S. Trust; provided, however, that U.S. -6- Trust shall be as fully responsible to the Fund for the acts and omissions of any subcontractor as it is for its own acts and omissions and shall be responsible for its choice of subcontractors. 15. SERVICES FOR OTHERS. Nothing in this Agreement shall prevent U.S. Trust or any affiliated person (as defined in the Act) of U.S. Trust from providing services for any other person, firm or corporation (including other investment companies). 16. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. 17. SEVERABILITY. In the event any provision of this Agreement is determined to be void or unenforceable, such determination shall not affect the remainder of this Agreement, which shall continue to be in force. 18. GOVERNING LAWS. This Agreement shall be deemed to be a contract made under, and shall be construed in accordance with, the laws (other than the laws governing conflict-of-law matters) of The State of New York. 19. NOTICES. Any notice or demand given in connection with any agreement, document or instrument executed pursuant hereto shall be deemed to have been sufficiently given or served for all purposes if sent by certified or registered mail, postage and charges prepaid, to the following addresses: if to the Fund, at 333 West Wacker Drive, Chicago, IL 60606, Attention: O.W. Renfftlen, Vice President, or at any other address or addresses designated by the Fund to U.S. Trust in writing; and if to U.S. Trust, to it at 114 West 47th Street, New York, NY 10036, or at any other address or addresses designated by U.S. Trust to the Fund in writing. -7- 20. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 21. 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 parties hereto have caused this Agreement to be executed as of the day and year second above written. U.S. Trust Co. of New York Attest: /s/Jacqueline Binder By: /s/Peter C. Arrighetti ----------------------- ------------------------- Jacqueline Binder Peter C. Arrighetti Assistant Vice President Vice President NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND Attest: /s/ Larry W. Martin By: /s/ O. Walter Renfftlen ------------------------- ------------------------ Larry W. Martin O. Walter Renfftlen Assistant General Counsel Vice President -8- EXHIBIT A FUND ACCOUNTING FEE $18,000 PER ANNUM EX-99.J.3 14 LETTER OF SUCCESSION TO AGREEMENTS EXHIBIT 99.j.3 [THE CHASE MANHATTAN BANK, N.A. LETTERHEAD] April 16, 1996 Mr. Giff Zimmerman John Nuveen & Co. Incorporated 333 West Wacker Drive Chicago, IL 60606 Dear Giff: On September 2, 1995, The United States Trust Company of New York (UST) was merged into Chase Manhattan Bank, N.A. (Chase). As a result of this transaction, Chase succeeded by operation of law, all rights and responsibilities of UST under all Transfer Agency, Custodian and Fund Accounting agreements between US Trust and John Nuveen & Co.'s managed investment companies. Sincerely, /s/ ANDREW M. MASSA Andrew M. Massa Vice President EX-99.L.1 15 OPINION AND CONSENT OF MORGAN, LEWIS & BOCKIUS LLP EXHIBIT 99.l.1 [MLB LETTERHEAD] Nuveen Pennsylvania Investment Quality Municipal Fund 333 West Wacker Drive Chicago, IL 60606 RE: NUVEEN PENNSYLVANIA INVESTMENT QUALITY MUNICIPAL FUND REGISTRATION STATEMENT ON FORM N-2 (REGISTRATION NOS. 333- AND 811-06265) Ladies and Gentlemen: We are acting as counsel for Nuveen Pennsylvania Investment Quality Municipal Fund (the "Fund"), in connection with the Fund's filing of a registration statement on Form N-2 (the "Registration Statement") with the Securities and Exchange Commission covering the registration of 880 authorized but unissued shares of Municipal Auction Rate Cumulative Preferred Shares, of Series T, $.01 par value per share, with a liquidation preference of $25,000 per share, of the Fund (the "MuniPreferred"). In that capacity, we have examined such corporate records, certificates and other documents, and have made such other factual and legal investigations as we have deemed necessary and appropriate for the purposes of this opinion. Based upon the foregoing, it is our opinion that: (1) The Fund is validly existing as a business trust in good standing under the laws of the Commonwealth of Massachusetts. (2) The MuniPreferred, when issued and delivered by the Fund pursuant to and upon satisfaction of the conditions in, the Purchase Agreement against payment of the consideration set forth therein, will be legally issued, fully paid and non-assessable. In giving this opinion we have relied on the opinion of Bingham, Dana & Gould, special Massachusetts counsel to the Fund. We hereby consent to the filing of this opinion as Exhibit 1 to the Registration Statement and to the reference to us under the caption "Legal Opinions" in the prospectus contained in the Registration Statement. Very truly yours, MORGAN LEWIS & BOCKIUS LLP EX-27.1 16 FINANCIAL DATA SCHEDULE
6 This schedule contains Financial Information extracted from the Form N-SAR and the Financial Statements and is qualified in its entirety by references to such documents. 1000 6-MOS JUN-30-1999 JUL-01-1998 DEC-31-1998 333909 361945 6426 10 0 368381 2777 0 1489 4266 110000 225613 15942 15884 416 0 51 0 28035 364115 0 11136 0 1475 9661 72 81 9814 0 8037 72 0 0 0 58 976 530 52 0 0 1171 0 1475 364261 0 0 0 0 0 0 0 0
EX-27.2 17 FINANCIAL DATA SCHEDULE
6 This schedule contains Summary Financial Information extracted from the Form N-SAR and the Financial Statements and is qualified in its entirety by references to such documents. 1000 12-MOS JUN-30-1998 JUL-01-1997 JUN-30-1998 339047 367001 6052 91 0 373144 8224 0 1781 10005 110000 224602 15884 15756 530 0 52 0 27955 363139 0 22326 0 2919 19407 736 670 20813 0 15952 828 0 0 0 128 2390 710 337 0 0 2319 0 2919 363540 0 0 0 0 0 0 0 0
EX-99.S 18 POWERS OF ATTORNEY EXHIBIT 99.S NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him on his behalf and in his name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of l933 and the Investment Company Act of l940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set his hand this 11th day of March, 1999. /s/ Timothy R. Schwertfeger ------------------------------- Timothy R. Schwertfeger STATE OF ILLINOIS ) )SS COUNTY OF COOK ) On this 11th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ------------------------------- My Commission Expires: 10/27/01 Notary Public NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him on his behalf and in his name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of l933 and the Investment Company Act of l940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set his hand this 11th day of March, 1999. /s/ Robert P. Bremner ----------------------------------- Robert P. Bremner STATE OF ILLINOIS ) )SS COUNTY OF COOK ) On this 11th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ----------------------------------- My Commission Expires: 10/27/01 Notary Public NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him on his behalf and in his name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of l933 and the Investment Company Act of l940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set his hand this 11th day of March, 1999. /s/ Lawrence H. Brown ------------------------------- Lawrence H. Brown STATE OF ILLINOIS ) )SS COUNTY OF COOK ) On this 11th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ------------------------------- My Commission Expires: 10/27/01 Notary Public NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) her true and lawful attorney-in-fact and agent, for her on her behalf and in her name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of 1933 and the Investment Company Act of 1940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as she might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set her hand this 12th day of March, 1999. /s/ Anne E. Impellizzeri ------------------------------ Anne E. Impellizzeri STATE OF ILLINOIS ) )SS COUNTY OF COOK ) On this 12th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be her voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/ Virginia L. Corcoran Notary Public, State of Illinois ------------------------ My Commission Expires: 10/27/01 Notary Public NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him on his behalf and in his name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of 1933 and the Investment Company Act of 1940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set his hand this 8th day of March, 1999. /s/ Peter R. Sawers ----------------------------- Peter R. Sawers STATE OF ILLINOIS ) )SS COUNTY OF COOK ) On this 8th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/ Virginia L. Corcoran Notary Public, State of Illinois ------------------------ My Commission Expires: 10/27/01 Notary Public NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints TIMOTHY R. SCHWWERTFEGER, ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) his true and lawful attorney-in-fact and agent, for him on his behalf and in his name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of l933 and the Investment Company Act of l940, including any amendment or amendments thereto, with all exhibits, and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set his hand this 11th day of March, 1999. /s/ William J. Schneider ------------------------------- William J. Schneider STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) On this 11th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be his voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/Virginia L. Corcoran Notary Public, State of Illinois ------------------------------- My Commission Expires: 10/27/01 Notary Public NUVEEN LEVERAGED EXCHANGE-TRADED FUNDS POWER OF ATTORNEY RE PREFERRED STOCK KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a director/trustee of each of the closed-end investment companies listed on Attachment A, hereby constitutes and appoints TIMOTHY R. SCHWERTFEGER, ANTHONY T. DEAN, GIFFORD R. ZIMMERMAN, ALAN G. BERKSHIRE and LARRY W. MARTIN and each of them (with full power to each of them to act alone) her true and lawful attorney-in-fact and agent, for her on her behalf and in her name, place and stead, in any and all capacities, to sign and file one or more Registration Statements relating to shares of preferred stock on Form N-2 under the Securities Act of 1933 and the Investment Company Act 1940, including any amendment or amendments thereto, with all exhibits and any and all other documents required to be filed with any regulatory authority, federal or state, relating to the registration thereof, or the issuance of preferred shares thereof, without limitation, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as she might or could do if personally present, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned director/trustee of the listed organizations has hereunto set her hand this 10th day of March, 1999. /s/ Judith M. Stockdale -------------------------- Judith M. Stockdale STATE OF ILLINOIS ) ) SS COUNTY OF COOK ) On this 10th day of March, 1999, personally appeared before me, a Notary Public in and for said County and State, the person named above who is known to me to be the person whose name and signature is affixed to the foregoing Power of Attorney and who acknowledged the same to be her voluntary act and deed for the intent and purposes therein set forth. "OFFICIAL SEAL" Virginia L. Corcoran /s/ Virginia L. Corcoran Notary Public, State of Illinois ------------------------------- My Commission Expires: 10/27/01 Notary Public ATTACHMENT A Nuveen Performance Plus Municipal Fund, Inc. Nuveen California Performance Plus Municipal Fund, Inc. Nuveen New York Performance Plus Municipal Fund, Inc. Nuveen Insured Municipal Opportunity Fund, Inc. Nuveen Municipal Market Opportunity Fund, Inc. Nuveen California Municipal Market Opportunity Fund, Inc. Nuveen Municipal Advantage Fund, Inc. Nuveen Insured Quality Municipal Fund, Inc. Nuveen Premium Income Municipal Fund, Inc. Nuveen Investment Quality Municipal Fund, Inc. Nuveen Florida Investment Quality Municipal Fund Nuveen Pennsylvania Investment Quality Municipal Fund Nuveen Premium Income Municipal Fund 2, Inc. Nuveen California Select Quality Municipal Fund, Inc. Nuveen New York Select Quality Municipal Fund, Inc. Nuveen Select Quality Municipal Fund, Inc. Nuveen California Quality Income Municipal Fund, Inc. Nuveen New York Quality Income Municipal Fund, Inc. Nuveen New Jersey Investment Quality Municipal Fund, Inc. Nuveen California Investment Quality Municipal Fund, Inc. Nuveen New York Investment Quality Municipal Fund, Inc. Nuveen Quality Income Municipal Fund, Inc. Nuveen Florida Quality Income Municipal Fund Nuveen Michigan Quality Income Municipal Fund, Inc. Nuveen Texas Quality Income Municipal Fund Nuveen Premier Insured Municipal Income Fund, Inc. Nuveen Premier Municipal Income Fund, Inc. Nuveen Premium Income Municipal Fund 4, Inc. Nuveen Insured Premium Income Municipal Fund 2 Assistant Secretary's Certificate The undersigned, Karen L. Healy, hereby certifies that she is a duly elected and acting Assistant Secretary of the Nuveen Exchange-Traded Funds and that the following resolution was duly adopted by the Board of Directors at a meeting duly called and held on December 18, 1998, at which meeting a quorum was present and acting throughout, and that such resolution has not been amended, modified or rescinded and remains in full force and effect: RESOLVED, that each director or officer of the Fund who may be required to execute any registration statement on Form N-2, or any amendment or amendments thereto, be, and each of them hereby is, authorized to execute a power of attorney appointing Timothy R. Schwertfeger, Anthony T. Dean, Alan G. Berkshire, Larry W. Martin, Gifford R. Zimmerman, and Thomas S. Harman, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the registration statement, and any and all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, and ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof. /s/ Karen L. Healy ----------------------------------- Karen L. Healy, Assistant Secretary Dated: April 20, 1999 -----END PRIVACY-ENHANCED MESSAGE-----