SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
NUVEEN MUNICIPAL MARKET OPPORTUNITY FUND, INC.(NMO)
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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IMPORTANT NOTICE
TO NUVEEN FUND SHAREHOLDERS
JULY 28, 2003
Although we recommend that you read the complete Joint Proxy Statement, for your
convenience, we have provided a brief overview of the issues to be voted on.
Q. WHY AM I RECEIVING THIS JOINT PROXY STATEMENT?
A. Closed-end investment companies listed on the New York Stock Exchange such
as your Fund are required to hold annual meetings to approve the election
of Directors. In addition, such companies are required to obtain
shareholder approval for certain changes to their investment policies. Your
Fund is seeking shareholder approval on the following items:
1. To elect directors to serve on the Board of Directors.
2. To approve changes to certain fundamental investment policies.
3. To approve an Agreement and Plan of Reorganization and Liquidation to
reorganize the Fund into a newly created Massachusetts business trust.
Please refer to the Joint Proxy Statement for a detailed explanation of the
proposed items.
Q. WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF DIRECTORS?
A. Currently, two separate board clusters oversee the funds in the Nuveen
family of funds. One board cluster comprised of the same board members
oversees the funds managed by Nuveen Advisory Corp. and one board cluster
comprised of the same board members oversees all but one of the funds
managed by Nuveen Institutional Advisory Corp. (the "Adviser"). The Board
of your Fund has proposed to consolidate both board clusters into a single
board cluster so that the same individuals serve on the boards of most
Nuveen funds.
Your Board believes that the consolidation of board clusters will have the
following advantages:
- the consolidation will avoid the need to add new board members to each
board cluster at various later dates to maintain the current size and
structure of each board cluster and thereby avoid the costs associated
with multiple meetings to fill such vacancies;
- the consolidation ensures that each Fund will gain new board members that
are already knowledgeable about Nuveen and investment companies in
general;
- the consolidation would reduce the duplication of board materials and
reports covering the same issues and would avoid the need for repeated
presentation of the same material by the same personnel at different
meetings;
- reducing the administrative burden allows the Adviser and its personnel
to focus on non-administrative matters; and
- a single board cluster overseeing all operations of the Nuveen family of
funds will have a better picture of all issues facing shareholders.
Q. WHICH FUNDAMENTAL INVESTMENT POLICIES ARE CHANGING?
A. Your Board has proposed to amend your Fund's fundamental investment
policies relating to borrowing and lending in connection with the
implementation of a proposed interfund lending program.
Q. WHY IS THE FUND PROPOSING TO CHANGE ITS FUNDAMENTAL INVESTMENT POLICIES?
A. In connection with disaster recovery planning and to provide liquidity in
the event that open-end funds in the Nuveen family of funds encounter
higher than normal redemption requests that may follow a national disaster
such as the events of September 11, 2001, your Board has authorized the
Fund's participation in an interfund lending program that would allow the
Nuveen Funds, including your Fund, to lend and borrow cash for temporary
purposes directly to and from each other. The proposed new fundamental
investment policies will enable your Fund to participate in this interfund
lending program.
Q. WHAT IS THE PURPOSE OF THE REORGANIZATION?
A. The purpose of the reorganization is for each Fund, currently organized as
a Minnesota corporation (each, a "Minnesota Fund"), to reorganize (each, a
"Reorganization") into a newly created Massachusetts business trust (each,
a "Massachusetts Fund"). This type of reorganization may be referred to as
a "change in domicile reorganization."
The Board of each Fund believes that each Reorganization will achieve the
following advantages:
- create savings and operating efficiencies by realizing economies of scale
through increased standardization of documents among the Nuveen family of
funds, most of which are organized as Massachusetts business trusts;
- lower expenses through economies of scale associated with compliance by
the Nuveen family of funds with Massachusetts law only, rather than both
Minnesota and Massachusetts law;
- reducing such administrative burdens will allow the Adviser and its
personnel to focus more on non-administrative matters;
- create flexibility in conducting its business as a closed-end investment
company. For example, under each Fund's interpretation of Minnesota law,
the Board of the Fund does not have the authority, without shareholder
approval, to (a) increase the number of authorized shares of an existing
series of MuniPreferred or (b) make amendments to certain rating agency
definitions in the Fund's Statement Establishing and Fixing the Rights
and Preferences of MuniPreferred. However, a Massachusetts business trust
may provide for the flexibility to take these actions without the time
and expense of obtaining shareholder approval.
Q. HOW DO THE DIRECTORS OF MY FUND SUGGEST THAT I VOTE?
A. After careful consideration, the trustees of your Fund unanimously
recommend that you vote "FOR" each of the items proposed.
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Your vote is needed to ensure that the proposals can be acted upon.
Additionally, your immediate response to these items will help save on the
costs of any future solicitations for a shareholder vote. We encourage all
shareholders to participate in the governance of their Fund.
Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. If you need any assistance, or have any questions regarding the proposals
or how to vote your shares, please call your financial advisor or call
Nuveen at (800) 257-8787 weekdays from 7:00 a.m. to 7:00 p.m. Central time.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy card,
and mailing it in the enclosed postage-paid envelope. In addition, you may
vote by telephone by calling the toll-free number on the proxy card or by
computer over the internet (www.proxyvote.com) and using the control number
on the proxy card.
Q. WILL ANYONE CONTACT ME?
A. You may receive a call to verify that you received your proxy materials, to
answer any questions you may have about the proposals and to encourage you
to vote.
<Table>
NOTICE OF ANNUAL MEETING 333 West Wacker Drive
OF SHAREHOLDERS Chicago, Illinois 60606
JULY 28, 2003 (800) 257-8787
</Table>
NUVEEN MUNICIPAL VALUE FUND, INC. (NUV)
NUVEEN MUNICIPAL INCOME FUND, INC. (NMI)
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI)
NUVEEN PERFORMANCE PLUS MUNICIPAL FUND, INC. (NPP)
NUVEEN MUNICIPAL ADVANTAGE FUND, INC. (NMA)
NUVEEN MUNICIPAL MARKET OPPORTUNITY FUND, INC. (NMO)
NUVEEN INVESTMENT QUALITY MUNICIPAL FUND, INC. (NQM)
NUVEEN INSURED QUALITY MUNICIPAL FUND, INC. (NQI)
NUVEEN SELECT QUALITY MUNICIPAL FUND, INC. (NQS)
NUVEEN QUALITY INCOME MUNICIPAL FUND, INC. (NQU)
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC. (NIO)
NUVEEN PREMIER MUNICIPAL INCOME FUND, INC. (NPF)
NUVEEN PREMIER INSURED MUNICIPAL INCOME FUND, INC. (NIF)
NUVEEN PREMIUM INCOME MUNICIPAL FUND 2, INC. (NPM)
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC. (NPT)
JUNE 17, 2003
TO THE SHAREHOLDERS OF THE ABOVE FUNDS:
Notice is hereby given that the Annual Meeting of Shareholders of each of Nuveen
Municipal Value Fund, Inc. ("Municipal Value"), Nuveen Municipal Income Fund,
Inc. ("Municipal Income"), 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 Municipal Opportunity Fund, Inc., Nuveen Premier Municipal Income Fund,
Inc., Nuveen Premier Insured Municipal Income Fund, Inc., Nuveen Premium Income
Municipal Fund 2, Inc., and Nuveen Premium Income Municipal Fund 4, Inc., each a
Minnesota corporation (individually, a "Fund" and collectively, the "Funds"),
will be held in the Sixth Floor auditorium of the Northern Trust Company, 50
South LaSalle Street, Chicago, Illinois, on Monday, July 28, 2003, at 10:30
a.m., Chicago time, for the following purposes and to transact such other
business, if any, as may properly come before the Annual Meeting:
MATTERS TO BE VOTED ON BY SHAREHOLDERS:
1. To elect Members to the Board of Directors (each a "Board" and each Director
a "Board Member") of each Fund as outlined below:
a. For each Fund except Municipal Value and Municipal Income, to elect
twelve (12) Board Members to serve until the next Annual Meeting and until
their successors shall have been duly elected and qualified:
i) ten (10) Board Members to be elected by the holders of Common
Shares and Municipal Auction Rate Cumulative Preferred Stock
("MuniPreferred"), voting together as a single class; and
ii) two (2) Board Members to be elected by the holders of
MuniPreferred only, voting separately as a single class.
b. For Municipal Value and Municipal Income, to elect eight (8) Board
Members for multiple year terms or until their successors shall have been
duly elected and qualified.
2. To approve changes to each Fund's fundamental investment policies.
3. To approve an Agreement and Plan of Reorganization and Liquidation and the
transactions contemplated thereby, the net effect of which would be to
reorganize each Fund into a newly created Massachusetts business trust.
4. To transact such other business as may properly come before the Annual
Meeting.
Shareholders of record at the close of business on May 29, 2003 are entitled to
notice of and to vote at the Annual Meeting.
As more fully described in the accompanying Joint Proxy Statement, shareholders
of each Fund who do not vote to approve the Agreement and Plan of Reorganization
and Liquidation and who comply with certain other requirements of Minnesota law
may, as an alternative to receiving the consideration specified in the Agreement
and Plan of Reorganization and Liquidation, dissent from the transactions
provided for therein and obtain the payment in cash of the "fair value" of their
shares, as defined under Minnesota law. The full text of Minnesota Statutes,
Sections 302A.471 and 302A.473, which set forth the procedures to be followed by
shareholders who choose to dissent under Minnesota law, is included as Appendix
C to the Joint Proxy Statement and should be read in its entirety.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IN ORDER TO AVOID
DELAY AND ADDITIONAL EXPENSE TO YOUR FUND, AND TO ASSURE THAT YOUR SHARES ARE
REPRESENTED, PLEASE VOTE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. YOU MAY VOTE BY MAIL, TELEPHONE OR OVER THE INTERNET.
TO VOTE BY MAIL, PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. TO VOTE BY TELEPHONE, PLEASE
CALL THE TOLL-FREE NUMBER LOCATED ON YOUR PROXY CARD, ENTER THE CONTROL NUMBER
PROVIDED ON YOUR PROXY CARD, AND FOLLOW THE RECORDED INSTRUCTIONS, USING YOUR
PROXY CARD AS A GUIDE. TO VOTE OVER THE INTERNET, GO TO WWW.PROXYVOTE.COM, ENTER
THE CONTROL NUMBER PROVIDED ON THE PROXY CARD, AND FOLLOW THE INSTRUCTIONS,
USING YOUR PROXY CARD AS A GUIDE.
Jessica R. Droeger
Vice President and Secretary
<Table>
JOINT PROXY STATEMENT 333 West Wacker Drive
Chicago, Illinois 60606
(800) 257-8787
</Table>
June 17, 2003
NUVEEN MUNICIPAL VALUE FUND, INC. (NUV)
NUVEEN MUNICIPAL INCOME FUND, INC. (NMI)
NUVEEN PREMIUM INCOME MUNICIPAL FUND, INC. (NPI)
NUVEEN PERFORMANCE PLUS MUNICIPAL FUND, INC. (NPP)
NUVEEN MUNICIPAL ADVANTAGE FUND, INC. (NMA)
NUVEEN MUNICIPAL MARKET OPPORTUNITY FUND, INC. (NMO)
NUVEEN INVESTMENT QUALITY MUNICIPAL FUND, INC. (NQM)
NUVEEN INSURED QUALITY MUNICIPAL FUND, INC. (NQI)
NUVEEN SELECT QUALITY MUNICIPAL FUND, INC. (NQS)
NUVEEN QUALITY INCOME MUNICIPAL FUND, INC. (NQU)
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC. (NIO)
NUVEEN PREMIER MUNICIPAL INCOME FUND, INC. (NPF)
NUVEEN PREMIER INSURED MUNICIPAL INCOME FUND, INC. (NIF)
NUVEEN PREMIUM INCOME MUNICIPAL FUND 2, INC. (NPM)
NUVEEN PREMIUM INCOME MUNICIPAL FUND 4, INC. (NPT)
GENERAL INFORMATION
This Joint Proxy Statement is furnished in connection with the solicitation by
the Board of Directors (each a "Board" and collectively, the "Boards," and each
Director a "Board Member" and collectively, the "Board Members") of each of
Nuveen Municipal Value Fund, Inc. ("Municipal Value"), Nuveen Municipal Income
Fund, Inc. ("Municipal Income"), Nuveen Premium Income Municipal Fund, Inc.
("Premium Income"), Nuveen Performance Plus Municipal Fund, Inc. ("Performance
Plus"), Nuveen Municipal Advantage Fund, Inc. ("Municipal Advantage"), Nuveen
Municipal Market Opportunity Fund, Inc. ("Municipal Market Opportunity"), Nuveen
Investment Quality Municipal Fund, Inc. ("Investment Quality"), Nuveen Insured
Quality Municipal Fund, Inc. ("Insured Quality"), Nuveen Select Quality
Municipal Fund, Inc. ("Select Quality"), Nuveen Quality Income Municipal Fund,
Inc. ("Quality Income"), Nuveen Insured Municipal Opportunity Fund, Inc.
("Insured Municipal Opportunity"), Nuveen Premier Municipal Income Fund, Inc.
("Premier Municipal"), Nuveen Premier Insured Municipal Income Fund, Inc.
("Premier Insured"), Nuveen Premium Income Municipal Fund 2, Inc. ("Premium
Income 2") and Nuveen Premium Income Municipal Fund 4, Inc. ("Premium Income 4")
(individually, a "Fund" and collectively, the "Funds"), of proxies to be voted
at the Annual Meeting of Shareholders to be held on July 28, 2003 (for each
Fund, an "Annual Meeting" and collectively, the "Annual Meetings"), and at any
and all adjournments thereof.
On the matters coming before each Annual Meeting as to which a choice has been
specified by shareholders on the proxy, the shares will be voted accordingly. If
no choice is so specified, the shares will be voted FOR the election of nominees
as listed in this Joint Proxy Statement, FOR the changes to each Fund's
fundamental investment policies and FOR the Agreement and Plan of Reorganization
and Liquidation. Shareholders who execute proxies may revoke them at any time
before they are voted by filing with that Fund a written notice of revocation,
by delivering a duly executed proxy bearing a later date, or by attending the
Annual Meeting and voting in person.
This Joint Proxy Statement is first being mailed to shareholders on or about
June 17, 2003.
The Board of each Fund has determined that the use of this Joint Proxy Statement
for each Annual Meeting is in the best interest of each Fund and its
shareholders in light of the similar matters being considered and voted on by
the shareholders.
The following table indicates which shareholders are solicited with respect to
each matter:
<Table>
<Caption>
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COMMON MUNI-
MATTER SHARES PREFERRED(1)
----------------------------------------------------------------------------------
1a(i). Election of ten (10) Board Members by all shareholders X X
(except Municipal Value and Municipal Income).
a(ii). Election of two (2) Board Members by MuniPreferred only X
(except Municipal Value and Municipal Income).
b. Election of eight (8) Board Members for Municipal Value and X N/A
Municipal Income by all common shareholders.
2. Change in fundamental investment policies by all X X
shareholders together as a single class and for all Funds
except Municipal Value and Municipal Income by MuniPreferred
shareholders as a separate class.
3. Approval of Agreement and Plan of Reorganization and X X
Liquidation by all shareholders together as a single class
and for all Funds except Municipal Value and Municipal
Income by each series of MuniPreferred voting as a separate
class.
----------------------------------------------------------------------------------
</Table>
(1) "MuniPreferred" means "Municipal Auction Rate Cumulative Preferred Stock."
A quorum of shareholders is required to take action at each Annual Meeting. A
majority of the shares entitled to vote at each Annual Meeting, represented in
person or by proxy, will constitute a quorum of shareholders at that Annual
Meeting, except that for the election of the two Board Member nominees to be
elected by holders of MuniPreferred of each Fund (except Municipal Income and
Municipal Value), 33 1/3% of the MuniPreferred shares entitled to vote and
represented in person or by proxy will constitute a quorum except that for
Premium Income, a majority of the MuniPreferred shares entitled to vote and
represented in person or by proxy will constitute a quorum. Votes cast by proxy
or in person at each Annual Meeting will be tabulated by the inspectors of
election appointed for that Annual Meeting. The inspectors of election will
determine whether or not a quorum is present at the Annual Meeting. The
inspectors of election will treat abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees, typically in "street name," as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) as present for purposes of determining a
quorum.
For each Fund abstentions and broker non-votes will have the effect of a vote
against the election of Board Members, against the proposed changes to each
Fund's fundamental investment policies and against the Agreement and Plan of
Reorganization. The details of the proposals to be voted on by the shareholders
and the vote required for approval of the proposals are set forth under the
description of each proposal below.
Shares of MuniPreferred held in "street name" as to which voting instructions
have not been received from the beneficial owners or persons entitled to vote as
of one business day before the meeting, or, if adjourned, one business day
before the day to which the meeting is adjourned, and that would otherwise be
treated as "broker non-votes" may, pursuant to Rule 452 of the New York Stock
Exchange, be voted by the broker on each item in the same proportion as the
votes cast by all MuniPreferred shareholders as a class who have voted on that
item or in the same proportion as the votes cast by all MuniPreferred
shareholders of a series who have voted on that item. Rule 452 permits
proportionate voting of MuniPreferred with respect to a particular item if,
among other things, (i) a minimum of 30% of the shares of MuniPreferred or
shares of a series of MuniPreferred outstanding has been voted by the holders of
such shares with respect to such item and (ii) less than 10% of the shares of
MuniPreferred or shares of a series of MuniPreferred outstanding has been voted
by the holders of such shares against such item. For the purpose of meeting the
30% test, abstentions will be treated as shares "voted" and, for the purpose of
meeting the 10% test, abstentions will not be treated as shares "voted" against
the item.
Those persons who were shareholders of record at the close of business on May
29, 2003 will be entitled to one vote for each share held. As of May 29, 2003,
the shares of the Funds were issued and outstanding as follows:
<Table>
<Caption>
- ---------------------------------------------------------------
TICKER
FUND SYMBOL COMMON SHARES MUNIPREFERRED
- ---------------------------------------------------------------
Municipal Value (NUV) 194,959,520 N/A
Municipal Income (NMI) 8,105,722.20 N/A
Premium Income (NPI) 63,785,430.99 3,800 Series M
2,000 Series M2
3,800 Series T
3,800 Series W
3,800 Series TH
3,800 Series F
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------
TICKER
FUND SYMBOL COMMON SHARES MUNIPREFERRED
- ---------------------------------------------------------------
Performance Plus (NPP) 59,914,073 4,000 Series M
4,000 Series T
4,000 Series W
3,160 Series TH
4,000 Series F
Municipal (NMA) 42,980,333 3,000 Series M
Advantage 3,000 Series T
3,000 Series W
2,320 Series TH
3,000 Series F
</Table>
2
<Table>
<Caption>
- ---------------------------------------------------------------
TICKER
FUND SYMBOL COMMON SHARES MUNIPREFERRED
- ---------------------------------------------------------------
Municipal Market (NMO) 45,540,872 4,000 Series M
Opportunity 4,000 Series T
3,200 Series W
4,000 Series F
Investment Quality (NQM) 35,748,959 2,500 Series M
2,500 Series T
2,500 Series W
2,040 Series TH
2,500 Series F
Insured Quality (NQI) 37,964,142.06 2,600 Series M
2,600 Series T
2,600 Series W
2,320 Series TH
2,600 Series F
Select Quality (NQS) 33,887,474 2,000 Series M
2,000 Series T
2,800 Series W
1,560 Series TH
2,800 Series F
Quality Income (NQU) 54,204,488 3,000 Series M
3,000 Series T
3,000 Series W
2,080 Series W2
4,000 Series TH
3,000 Series F
Insured Municipal (NIO) 81,060,946 4,000 Series M
Opportunity 4,000 Series T
4,000 Series W
3,200 Series W2
4,000 Series TH1
4,000 Series TH2
4,000 Series F
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------
TICKER
FUND SYMBOL COMMON SHARES MUNIPREFERRED
- ---------------------------------------------------------------
Premier Municipal (NPF) 20,091,018 1,000 Series M
2,800 Series T
2,800 Series TH
Premier Insured (NIF) 19,352,459.99 840 Series W
2,800 Series TH
2,800 Series F
Premium Income 2 (NPM) 41,093,661 2,000 Series M
3,000 Series T
2,000 Series W
3,000 Series TH
2,000 Series F
1,880 Series F2
Premium Income 4 (NPT) 43,236,703 2,200 Series M
2,000 Series T
1,328 Series T2
1,680 Series W
520 Series W2
2,680 Series TH
1,800 Series F
1,328 Series F2
</Table>
- --------------------------------------------------------------------------------
* The common shares of all the Funds are listed on the New York Stock Exchange.
1. ELECTION OF BOARD MEMBERS OF EACH FUND
GENERAL
Currently, two separate board clusters oversee the funds in the Nuveen family of
funds. One board cluster comprised of the same board members oversees the funds
managed by Nuveen Advisory Corp. ("NAC" or the "Adviser") and one board cluster
comprised of the same board members oversees all but one of the funds managed by
Nuveen Institutional Advisory Corp. ("NIAC"). Each current board cluster has a
total of six board members who are not "interested persons" (as that term is
defined in the Investment Company Act of 1940, as amended (the "1940 Act")) and
who are not affiliated with Nuveen or a fund's investment adviser (the
"Independent Board Members") and one board member who is an "interested person."
Below is a list of board members of each board cluster.
The Boards of each Fund have proposed to consolidate both board clusters into a
single board cluster so that the same individuals serve on the boards of most of
the Nuveen funds. All individuals serving on both board clusters are nominated
to serve on the combined board except James E. Bacon, who is retiring. Mr. Bacon
currently serves as a Board Member on the NIAC board cluster.
3
The following is a list of the nominees under the proposal who are continuing
Board Members of each Fund and the nominees who are new board members:
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------
CONTINUING BOARD MEMBERS (NAC BOARD CLUSTER): NEW BOARD MEMBER NOMINEES (NIAC BOARD CLUSTER):
- ------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger* William E. Bennett
Robert P. Bremner Jack B. Evans
Lawrence H. Brown William L. Kissick
Anne E. Impellizzeri Thomas E. Leafstrand
Peter R. Sawers Sheila W. Wellington
William J. Schneider
Judith M. Stockdale
- ------------------------------------------------------------------------------------------------------------
</Table>
* Interested person. Mr. Schwertfeger currently serves on both board clusters.
In part, the proposal to create a single board is being recommended because of
the large number of retirements that will occur over the next few years. Within
two years, the aggregate number of Independent Board Members that serve on both
board clusters (currently 12) is expected to fall to six, due to a number of
retirements because of age and/or tenure limitations for board membership.
Combining the board will avoid the need to add new board members to each board
cluster at various later dates to maintain the current size and structure of
each board cluster and thereby avoid the costs associated with multiple meetings
to fill such vacancies. In addition, combining the board ensures that each Fund
will gain new board members that are already knowledgeable about Nuveen and
investment companies in general.
Historically, the two separate board clusters have had separate meetings but
often have reviewed similar policy issues, contractual arrangements and other
matters. Among other potential efficiencies, the Board of each Fund believes
that consolidating the board clusters into one board would reduce the
duplication of board materials and reports covering the same issues and would
avoid the need for repeated presentation of the same material by the same
personnel at different meetings. This would permit the Adviser and its personnel
to focus on non-administrative matters. In addition, a single board overseeing
all operations of the Nuveen family of funds will have a better picture of all
issues facing shareholders.
At its May 15, 2003 meeting, each board cluster reviewed the compensation paid
to Independent Board Members and determined that compensation should be
increased because of the expanded responsibilities of the Board Members due to
(a) the increase in the number and types of investment companies overseen by the
Board Members and (b) recent additional legal and regulatory requirements.
Effective July 1, 2003, for all Nuveen Funds overseen, Independent Board Members
will receive a $65,000 annual retainer plus (a) a fee of $2,000 per day for
attendance in person or by telephone at a regularly scheduled meeting of the
Board; (b) a fee of $1,000 per day for attendance in person where such in-person
attendance is required and $500 per day for attendance by telephone or in person
where in-person attendance is not required at a special, non-regularly
scheduled, board meeting; (c) a fee of $1,000 per day for attendance in person
at an Audit Committee meeting where in-person attendance is required and $500
per day for attendance by telephone or in person where in-person attendance is
not required; (d) a fee of $500 per day for attendance in person or by telephone
for a meeting of the dividend committee; and (e) a fee of $500 per day for
attendance in person at all other committee meetings on a day on which no
regularly scheduled Board meeting is held in which in-person attendance is
required and $250 per day for attendance by telephone or in person at such
meetings where in-person attendance is not required, plus, in each case,
expenses incurred in attending such meetings. Compensation to the Independent
Board Members is allocated among the Nuveen family of funds based on assets per
fund. The Boards do not anticipate any further change in the compensation
schedule as a result of the board consolidation.
Currently, for all Nuveen Funds overseen, the continuing Independent Board
Members of the Funds receive a $60,000 annual retainer for serving as a board
member and a $1,750 fee per day plus expenses for attendance in person or by
telephone at all meetings (including any committee meetings) held on a day on
which a regularly scheduled Board meeting is held, a $1,000 fee per day plus
expenses for attendance in person or a $500 fee per day plus expenses for
attendance by telephone at all meetings (including any committee meetings) held
on a day on which no regular Board meeting is held, and a $500 per day fee per
day plus expenses for attendance in person or $250 if by telephone at a meeting
of any committee.
The proposal to combine boards, which increases the number of Board Members for
each Fund, will increase the total compensation paid by each Fund to Board
Members. Management, however, believes that such increase in compensation is not
material to each Fund and is justified by the benefits to each Fund and its
shareholders. Moreover, as the size of the combined board declines due to
retirements over the next two years, the total compensation paid by a Fund to
Independent Board Members will decrease to the extent fewer board members will
be compensated.
At each Fund's Annual Meeting (except Municipal Value and Municipal Income),
twelve (12) Board Members are nominated to be elected to serve until the next
Annual Meeting or until their successors shall have been duly elected and
qualified. Under the terms of each Fund's organizational documents (except
Municipal Value and Municipal Income), under normal circumstances holders of
MuniPreferred are entitled to elect two (2) Board Members, and the remaining
Board Members are to be elected by holders of Common Shares and MuniPreferred,
voting together as a single class. Pursuant to the organizational documents of
Municipal Value and Municipal Income, the Board is divided into three classes,
with each class
4
being elected to serve a term of three years. For each of Municipal Value and
Municipal Income, eight (8) Board Members are nominated to be elected at this
meeting to serve for multiple year terms.
A. FOR PREMIUM INCOME, PERFORMANCE PLUS, MUNICIPAL ADVANTAGE, MUNICIPAL MARKET
OPPORTUNITY, INVESTMENT QUALITY, INSURED QUALITY, SELECT QUALITY, QUALITY
INCOME, INSURED MUNICIPAL OPPORTUNITY, PREMIER MUNICIPAL, PREMIER INSURED,
PREMIER INCOME 2 AND PREMIUM INCOME 4:
(i) Ten (10) Board Members are to be elected by holders of Common Shares
and MuniPreferred, voting together as a single class. Board Members
Bremner, Brown, Impellizzeri, Sawers and Stockdale and Messrs.
Bennett, Evans, Kissick and Leafstrand and Ms. Wellington are nominees
for election by all shareholders.
(ii) Holders of MuniPreferred, each series voting together as a single
class, are entitled to elect two (2) of the Board Members. Board
Members Schneider and Schwertfeger are nominees for election by
holders of MuniPreferred.
B. FOR MUNICIPAL VALUE AND MUNICIPAL INCOME: The Boards of Municipal Value and
Municipal Income have designated, Robert P. Bremner, William J. Schneider,
Judith M. Stockdale and Jack B. Evans as Class III and Class II Board
Members, respectively, and as nominees for Board Members for a term expiring
at the Annual Meeting of shareholders in 2006, and until their successors
have been duly elected and qualified; William E. Bennett and Thomas E.
Leafstrand as Class II and Class I Board Members, respectively, and as
nominees for Board Members for a term expiring at the Annual Meeting of
shareholders in 2005 and until their successors have been duly elected and
qualified; and William L. Kissick and Sheila W. Wellington as Class I and
Class III Board Members, respectively, and as nominees for Board Members for
a term expiring at the Annual Meeting of shareholders in 2004, and until
their successors have been duly elected and qualified. The remaining Board
Members Brown, Impellizzeri, Sawers, and Schwertfeger are current and
continuing Board Members. The Boards of Municipal Value and Municipal Income
have designated Board Members Brown, Sawers and Schwertfeger as continuing
Class I and Class III Board Members, respectively, for terms that expire in
2004. The Boards of Municipal Value and Municipal Income have designated
Board Member Impellizzeri as a continuing Class II and Class I Board Member,
respectively, for a term that expires in 2005.
For each Fund, the affirmative vote of a majority of the shares present and
entitled to vote at the Annual Meeting will be required to elect the Board
Members of that Fund.
It is the intention of the persons named in the enclosed proxy to vote the
shares represented thereby for the election of the nominees listed below unless
the proxy is marked otherwise. Each of the nominees has agreed to serve as a
Board Member of each Fund if elected. However, should any nominee become unable
or unwilling to accept nomination for election, the proxies will be voted for
substitute nominees, if any, designated by that Fund's present Board.
All of the continuing Board Member nominees (except for Municipal Value and
Municipal Income) were last elected to the Board at the 2002 annual meeting of
shareholders. Anne E. Impellizzeri was last elected to the Board for Municipal
Value and Municipal Income at the 2002 annual meeting of shareholders. Timothy
R. Schwertfeger, Lawrence H. Brown and Peter R. Sawers were last elected to the
Board for Municipal Value and Municipal Income at the 2001 annual meeting of
shareholders. Robert P. Bremner, William J. Schneider and Judith M. Stockdale
were last elected to the Board for Municipal Value and Municipal Income at the
2000 annual meeting.
Other than Mr. Schwertfeger, none of the Board Member nominees have ever been a
director or an employee of Nuveen Investments, Inc. ("Nuveen") or any affiliate.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES NAMED BELOW.
5
BOARD NOMINEES
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
POSITION(S) TERM OF OFFICE AND OVERSEEN
NAME, ADDRESS HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) BY BOARD
AND BIRTH DATE FUND SERVED** DURING PAST 5 YEARS MEMBER
- -------------------------------------------------------------------------------------------------------------------------------
Nominees who are not interested
persons of the Funds
- -------------------------------------------------------------------------------------------------------------------------------
Continuing Board Members
- -------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner Board Term: Annual (for all Private Investor and Management 122
333 West Wacker Drive Member Funds except Consultant.
Chicago, IL 60606 (8/22/40) Municipal Income and
Municipal Value)
Municipal Income and
Municipal Value: 2006
Length of Service:
Since 1996
Lawrence H. Brown Board Term: Annual (for all Retired (August 1989) as Senior Vice 122
333 West Wacker Drive Member Funds except President of The Northern Trust
Chicago, IL 60606 (7/29/34) Municipal Income and Company; Director of the United Way
Municipal Value) of Highland Park-Highwood (since
Municipal Income and 2002).
Municipal Value: 2004
Length of Service:
Since 1993
Anne E. Impellizzeri Board Term: Annual (for all Retired; formerly, Executive Director 122
333 West Wacker Drive Member Funds except (1998-2001) of Manitoga/The Russel
Chicago, IL 60606 (1/26/33) Municipal Income and Wright Design Center; prior thereto,
Municipal Value) President and Chief Executive Officer
Municipal Income and of Blanton-Peale Institute; prior
Municipal Value: 2005 thereto, Vice President, Metropolitan
Length of Service: Life Insurance Co.
Since 1994
Peter R. Sawers Board Term: Annual (for all Adjunct Professor of Business and 122
333 West Wacker Drive Member Funds except Economics, University of Dubuque,
Chicago, IL 60606 (4/3/33) Municipal Income and Iowa; formerly (1991- 2000) Adjunct
Municipal Value) Professor, Lake Forest Graduate
Municipal Income and School of Management, Lake Forest,
Municipal Value: 2004 Illinois; Director, Executive Service
Length of Service: Corps of Chicago; prior thereto,
Since 1991 Executive Director, Towers Perrin
Australia, a management consulting
firm; Chartered Financial Analyst;
Certified Management Consultant.
William J. Schneider Board Term: Annual (for all Senior Partner and Chief Operating 122
333 West Wacker Drive Member Funds except Officer, Miller-Valentine Group, Vice
Chicago, IL 60606 (9/24/44) Municipal Income and President, Miller- Valentine Realty,
Municipal Value) a development and contract company;
Municipal Income and Chair, Miami Valley Hospital; Chair,
Municipal Value: 2006 Miami Valley Economic Development
Length of Service: Coalition; formerly, Member,
Since 1996 Community Advisory Board, National
City Bank, Dayton, Ohio; and Business
Advisory Council, Cleveland Federal
Reserve Bank.
<Caption>
- -------------------------------- -------------
OTHER
DIRECTORSHIPS
HELD BY
NAME, ADDRESS BOARD
AND BIRTH DATE MEMBER
- -------------------------------- -------------
Nominees who are not interested
persons of the Funds
- --------------------------------
Continuing Board Members
- --------------------------------
Robert P. Bremner N/A
333 West Wacker Drive
Chicago, IL 60606 (8/22/40)
Lawrence H. Brown N/A
333 West Wacker Drive
Chicago, IL 60606 (7/29/34)
Anne E. Impellizzeri N/A
333 West Wacker Drive
Chicago, IL 60606 (1/26/33)
Peter R. Sawers N/A
333 West Wacker Drive
Chicago, IL 60606 (4/3/33)
William J. Schneider N/A
333 West Wacker Drive
Chicago, IL 60606 (9/24/44)
</Table>
6
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
POSITION(S) TERM OF OFFICE AND OVERSEEN
NAME, ADDRESS HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) BY BOARD
AND BIRTH DATE FUND SERVED** DURING PAST 5 YEARS MEMBER
- -------------------------------------------------------------------------------------------------------------------------------
Judith M. Stockdale Board Term: Annual (for all Executive Director, Gaylord and 122
333 West Wacker Drive Member Funds except Dorothy Donnelley Foundation (since
Chicago, IL 60606 (12/29/47) Municipal Income and 1994); prior thereto, Executive
Municipal Value) Director, Great Lakes Protection Fund
Municipal Income and (from 1990 to 1994).
Municipal Value: 2006
Length of Service:
Since 1997
New Board Members
- ------------------------------------------------------------------------
William E. Bennett Nominee Term: Annual (for all Private Investor; previously 19
333 West Wacker Drive Funds except President and C.E.O., Draper &
Chicago, IL 60606 (10/16/46) Municipal Income and Kramer, Inc. (1995-1998).
Municipal Value)
Municipal Income and
Municipal Value: 2005
Length of Service:
Since 2001
Jack B. Evans Nominee Term: Annual (for all President, The Hall-Perrine 19
333 West Wacker Drive Funds except Foundation (a private philanthropic
Chicago, IL 60606 (10/22/48) Municipal Income and corporation); Director, Alliant
Municipal Value) Energy; Director and Vice Chairman
Municipal Income and United Fire & Casualty Company;
Municipal Value: 2006 Director, Federal Reserve Bank of
Length of Service: Chicago; previously President and
Since 1999 Chief Operating Officer, SCI
Financial Group, Inc. (a regional
financial services firm).
William L. Kissick Nominee Term: Annual (for all Professor Emeritus, School of 19
333 West Wacker Drive Funds except Medicine and the Wharton School of
Chicago, IL 60606 (7/29/32) Municipal Income and Management and former Chairman,
Municipal Value) Leonard Davis Institute of Health
Municipal Income and Economics, University of
Municipal Value: 2004 Pennsylvania; Adjunct Professor,
Length of Service: Health Policy and Management, Yale
Since 1992 University.
Thomas E. Leafstrand Nominee Term: Annual (for all Retired; previously, Vice President 19
333 West Wacker Drive Funds except in charge of Municipal Underwriting,
Chicago, IL 60606 (11/11/31) Municipal Income and Trading, and Dealer Sales at The
Municipal Value) Northern Trust Company.
Municipal Income and
Municipal Value: 2005
Length of Service:
Since 1992
Sheila W. Wellington Nominee Term: Annual (for all President of Catalyst (a 19
333 West Wacker Drive Funds except not-for-profit organization focusing
Chicago, IL 60606 (2/24/32) Municipal Income and on women's leadership development in
Municipal Value) business and the professions).
Municipal Income and
Municipal Value: 2004
Length of Service:
Since 1994
<Caption>
- -------------------------------- -------------
OTHER
DIRECTORSHIPS
HELD BY
NAME, ADDRESS BOARD
AND BIRTH DATE MEMBER
- -------------------------------- -------------
Judith M. Stockdale N/A
333 West Wacker Drive
Chicago, IL 60606 (12/29/47)
New Board Members
- --------------------------------
William E. Bennett N/A
333 West Wacker Drive
Chicago, IL 60606 (10/16/46)
Jack B. Evans See
333 West Wacker Drive Principal
Chicago, IL 60606 (10/22/48) Occupation
description.
William L. Kissick N/A
333 West Wacker Drive
Chicago, IL 60606 (7/29/32)
Thomas E. Leafstrand N/A
333 West Wacker Drive
Chicago, IL 60606 (11/11/31)
Sheila W. Wellington N/A
333 West Wacker Drive
Chicago, IL 60606 (2/24/32)
</Table>
7
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
POSITION(S) TERM OF OFFICE AND OVERSEEN
NAME, ADDRESS HELD WITH LENGTH OF TIME PRINCIPAL OCCUPATION(S) BY BOARD
AND BIRTH DATE FUND SERVED** DURING PAST 5 YEARS MEMBER
- -------------------------------------------------------------------------------------------------------------------------------
Nominee who is an interested
person* of the Funds
- -------------------------------------------------------------------------------------------------------------------------------
Timothy R. Schwertfeger Chairman of Term: Annual (for all Chairman and Director (since 1996) of 141
333 West Wacker Drive the Board Funds except Nuveen Investments, Inc. and Nuveen
Chicago, IL 60606 (3/28/49) and Municipal Income and Investments, LLC; Director (since
Director Municipal Value) 1992) and Chairman (since 1996) of
Municipal Income and Nuveen Advisory Corp. and Nuveen
Municipal Value: 2004 Institutional Advisory Corp.;
Length of Service: Chairman and Director (since 1997) of
Since 1996 Nuveen Asset Management, Inc.;
Director (since 1996) of
Institutional Capital Corporation;
Chairman and Director (since 1999) of
Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments
Advisers Inc. (since 2002).
- -------------------------------------------------------------------------------------------------------------------------------
<Caption>
- -------------------------------- -------------
OTHER
DIRECTORSHIPS
HELD BY
NAME, ADDRESS BOARD
AND BIRTH DATE MEMBER
- -------------------------------- -------------
Nominee who is an interested
person* of the Funds
- --------------------------------
Timothy R. Schwertfeger See Principal
333 West Wacker Drive Occupation
Chicago, IL 60606 (3/28/49) description.
- --------------------------------
</Table>
* "Interested Person" as defined in the Investment Company Act of 1940, as
amended, by reason of being an officer and director of the Fund's Adviser.
** Length of Service indicates the year in which the individual becomes a
Trustee or Director of a fund in the Nuveen fund complex.
8
BENEFICIAL OWNERSHIP
The following table lists the dollar range of equity securities beneficially
owned by each Board Member nominee in each Fund and in all Nuveen Funds overseen
by the Board Member nominee as of March 31, 2003:
<Table>
<Caption>
DOLLAR RANGE OF EQUITY SECURITIES
- -------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL
MUNICIPAL MUNICIPAL PREMIUM PERFORMANCE MUNICIPAL MARKET INVESTMENT INSURED
BOARD MEMBER NOMINEES VALUE INCOME INCOME PLUS ADVANTAGE OPPORTUNITY QUALITY QUALITY
- -------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 0 0 0 0 0 0 0 0
Lawrence H. Brown $10,001- 0 $10,001- 0 0 0 0 0
$50,000 $50,000
Anne E. Impellizzeri 0 0 0 0 0 0 0 0
Peter R. Sawers 0 $10,001- 0 0 $10,001- 0 0 $10,001-
$50,000 $50,000 $50,000
William J. Schneider 0 0 0 0 0 0 0 0
Judith M. Stockdale 0 0 0 0 0 $1-$10,000 0 0
Timothy R. Schwertfeger Over 0 Over Over $50,001- 0 0 0
$100,000 $100,000 $100,000 $100,000
William E. Bennett 0 0 0 0 0 0 0 0
Jack B. Evans 0 0 0 0 0 0 0 0
William L. Kissick 0 0 0 0 0 0 0 0
Thomas E. Leafstrand $10,001- 0 0 $10,001- 0 0 0 0
$50,000 $50,000
Sheila W. Wellington $10,001- 0 $10,001- 0 0 $10,001- 0 0
$50,000 $50,000 $50,000
- -------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
DOLLAR RANGE OF EQUITY SECURITIES
- ---------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR
RANGE OF EQUITY
SECURITIES IN ALL
REGISTERED
INVESTMENT
COMPANIES
OVERSEEN BY
BOARD MEMBER
NOMINEES IN
INSURED FAMILY OF
SELECT QUALITY MUNICIPAL PREMIER PREMIER PREMIUM PREMIUM INVESTMENT
BOARD MEMBER NOMINEES QUALITY INCOME OPPORTUNITY MUNICIPAL INSURED INCOME 2 INCOME 4 COMPANIES(1)
- ---------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 0 0 0 0 0 0
(0 shares)
Lawrence H. Brown 0 $10,001- $10,001- 0 0 0 0 Over $100,000
$50,000 $50,000 (8,256 shares)
Anne E. Impellizzeri 0 0 $10,001- 0 0 0 0 $10,001-$50,000
$50,000 (3,579 shares)
Peter R. Sawers 0 0 0 0 0 0 0 Over $100,000
(12,787 shares)
William J. Schneider 0 0 0 0 0 0 Over Over $100,000
$100,000 (28,085 shares)
Judith M. Stockdale 0 0 0 $10,001- 0 $10,001- 0 $10,001-$50,000
$50,000 $50,000 (2,711 shares)
Timothy R. Schwertfeger $50,001- Over $50,001- 0 0 0 0 Over $100,000
$100,000 $100,000 $100,000 (439,783 shares)
William E. Bennett 0 0 0 0 0 0 0 $50,001-$100,000
(3,411 shares)
Jack B. Evans 0 0 0 0 0 0 0 Over $100,000
(15,214 shares)
William L. Kissick 0 0 0 0 0 0 0 $50,001-$100,000
(6,706 shares)
Thomas E. Leafstrand 0 0 0 0 0 0 0 Over $100,000
(34,053 shares)
Sheila W. Wellington 0 0 0 0 $10,001- 0 0 Over $100,000
$50,000 (13,466 shares)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The amounts reflect the aggregate dollar range of equity securities and
number of shares beneficially owned by the Board Member in the Funds and in
all Nuveen funds overseen by each Board Member.
9
The following table sets forth, for each Board Member nominee and for the Board
Member nominees and officers as a group, the amount of shares beneficially owned
in each Fund as of March 31, 2003. The information as to beneficial ownership is
based on statements furnished by each Board Member nominee and officer.
<Table>
<Caption>
FUND SHARES OWNED BY BOARD MEMBER NOMINEES AND OFFICERS(1)
- -----------------------------------------------------------------------------------------------------------------------
MUNICIPAL
MUNICIPAL MUNICIPAL PREMIUM PERFORMANCE MUNICIPAL MARKET INVESTMENT
BOARD MEMBER NOMINEES VALUE INCOME INCOME PLUS ADVANTAGE OPPORTUNITY QUALITY
- -----------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 0 0 0 0 0 0 0
Lawrence H. Brown 1,000 0 1,000 0 0 0 0
Anne E. Impellizzeri 0 0 0 0 0 0 0
Peter R. Sawers 0 2,789 0 0 1,989 0 0
William J. Schneider 0 0 0 0 0 0 0
Judith M. Stockdale 0 0 0 0 0 649 0
Timothy R. Schwertfeger 22,950 0 61,477 14,000 6,533 0 0
William E. Bennett 0 0 0 0 0 0 0
Jack B. Evans 0 0 0 0 0 0 0
William L. Kissick 0 0 0 0 0 0 0
Thomas E. Leafstrand 2,000 0 0 1,000 0 0 0
Sheila W. Wellington 1,500 0 2,000 0 0 1,000 0
ALL BOARD MEMBER NOMINEES AND
OFFICERS AS A GROUP 30,182 2,789 69,557 19,000 10,422 1,649 4,218
- -----------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
FUND SHARES OWNED BY BOARD MEMBER NOMINEES AND OFFICERS(1)
- -------------------------------------------------------------------------------------------------------------------------
INSURED
INSURED SELECT QUALITY MUNICIPAL PREMIER PREMIER PREMIUM PREMIUM
BOARD MEMBER NOMINEES QUALITY QUALITY INCOME OPPORTUNITY MUNICIPAL INSURED INCOME 2 INCOME 4
- -------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 0 0 0 0 0 0 0 0
Lawrence H. Brown 0 0 889 822 0 0 0 0
Anne E. Impellizzeri 0 0 0 1,000 0 0 0 0
Peter R. Sawers 1941 0 0 0 0 0 0 0
William J. Schneider 0 0 0 0 0 0 0 12,000
Judith M. Stockdale 0 0 0 0 757 0 631 0
Timothy R. Schwertfeger 0 5,000 22,300 5,000 0 0 0 0
William E. Bennett 0 0 0 0 0 0 0 0
Jack B. Evans 0 0 0 0 0 0 0 0
William L. Kissick 0 0 0 0 0 0 0 0
Thomas E. Leafstrand 0 0 0 0 0 0 0 0
Sheila W. Wellington 0 0 0 0 0 1,900 0 0
ALL BOARD MEMBER NOMINEES AND
OFFICERS AS A GROUP 7,777 5,830 23,739 35,323 757 1,900 631 12,000
- -------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The numbers include share equivalents of certain Nuveen Funds in which the
Board Member is deemed to be invested pursuant to the Deferred Compensation
Plan for Independent Board Members as more fully described below.
10
On March 31, 2003, continuing Board Members and executive officers as a group
beneficially owned 578,368 common shares of all funds managed by NAC and NIAC
(includes Deferred Units and shares held by the executive officers in Nuveen's
401(k)/profit sharing plan). Each continuing Board Member's individual
beneficial shareholdings of each Fund constitute less than 1% of the outstanding
shares of each Fund. As of March 31, 2003, the continuing Board Members and
executive officers as a group beneficially owned less than 1% of the outstanding
common shares of each Fund. As of March 31, 2003, the Board Member nominees and
executive officers of the Funds did not own any shares of MuniPreferred. As of
May 29, 2003, no shareholder beneficially owned more than 5% of any class of
shares of any Fund.
COMPENSATION
The Board Members affiliated with Nuveen or the Adviser serve without any
compensation from the Funds. The Independent Board Members are paid an annual
retainer and fees and expenses for Board meetings and committee meetings as
described above. The annual retainer, fees and expenses are allocated among the
funds managed by the Adviser on the basis of relative net asset sizes although
Fund management may, in its discretion, establish a minimum amount to be
allocated to each Fund. The Boards of certain Nuveen Funds (the "Participating
Funds") established a Deferred Compensation Plan for Independent Board Members
("Deferred Compensation Plan"). Under the Deferred Compensation Plan,
Independent Board Members of the Participating Funds may defer receipt of all,
or a portion, of the compensation they earn for their services to the
Participating Funds, in lieu of receiving current payments of such compensation.
Any deferred amount is treated as though an equivalent dollar amount had been
invested in shares of one or more eligible Nuveen funds. Each Independent Board
Member, other than Mr. Brown, has elected to defer at least a portion of their
fees. Each of the Funds except Municipal Income are Participating Funds under
the Deferred Compensation Plan.
11
The table below shows, for each continuing Board Member who is not affiliated
with Nuveen or the Adviser, the aggregate compensation (i) paid by each Fund to
each continuing Board Member for its last fiscal year and (ii) paid (including
deferred fees) for service on the boards of the Nuveen open-end and closed-end
Funds managed by NAC ("NAC Funds") and NIAC ("NIAC Funds") for the calendar year
ended 2002. Mr. Schwertfeger, a Board Member who is an interested person of each
Fund, does not receive any compensation from a Fund or any Nuveen funds.
AGGREGATE COMPENSATION FROM THE FUNDS(1)
<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL
MUNICIPAL MUNICIPAL PREMIUM PERFORMANCE MUNICIPAL MARKET INVESTMENT INSURED
CONTINUING BOARD MEMBERS VALUE INCOME INCOME PLUS ADVANTAGE OPPORTUNITY QUALITY QUALITY
- ------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 2,995.48 135.42 2,264.12 2,119.10 1,557.72 1,619.15 1,309.15 1,391.11
Lawrence H. Brown 3,184.33 141.60 2,406.76 2,251.45 1,655.66 1,721.13 1,385.35 1,478.36
Anne E. Impellizzeri 2,204.64 135.42 1,666.38 1,570.07 1,148.19 1,192.47 965.62 1,026.41
Peter R. Sawers 2,674.77 135.42 2,021.89 2,122.77 1,391.79 1,446.03 1,169.99 1,243.52
William J. Schneider 2,777.85 135.42 2,099.76 1,969.64 1,445.40 1,501.82 1,215.08 1,291.41
Judith M. Stockdale 2,942.30 135.42 2,223.98 2,082.66 1,530.29 1,590.49 1,286.19 1,366.79
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL
COMPENSATION
FROM NUVEEN
INSURED FUNDS PAID TO
SELECT QUALITY MUNICIPAL PREMIER PREMIER PREMIUM PREMIUM BOARD
CONTINUING BOARD MEMBERS QUALITY INCOME OPPORTUNITY MUNICIPAL INSURED INCOME 2 INCOME 4 MEMBERS
- -----------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 1,206.37 1,936.17 2,967.98 716.97 701.56 1,492.46 1,418.43 77,500.00
Lawrence H. Brown 1,282.20 2,057.93 3,154.05 761.88 745.61 1,586.39 1,507.86 82,000.00
Anne E. Impellizzeri 889.05 1,427.02 2,190.49 529.08 517.70 1,098.28 1,040.94 77,500.00
Peter R. Sawers 1,077.86 1,729.78 2,653.33 641.04 627.14 1,332.92 1,266.00 79,250.00
William J. Schneider 1,119.38 1,796.48 2,755.56 665.71 651.29 1,384.22 1,314.68 77,500.00
Judith M. Stockdale 1,185.15 1,902.05 2,916.18 704.47 709.29 1,466.01 1,393.09 77,750.00
- -----------------------------------------------------------------------------------------------------------------------------
</Table>
(1) Includes deferred fees except for Municipal Income. Pursuant to a deferred
compensation agreement with certain of the Funds, deferred amounts are
treated as though an equivalent dollar amount has been invested in shares of
one or more eligible Nuveen Funds. Total deferred fees for the Funds
(including the return from the assumed investment in the eligible Nuveen
Funds) payable are:
<Table>
<Caption>
DEFERRED FEES
---------------------------------------------------------------------------------------------------------------------
MUNICIPAL
MUNICIPAL PREMIUM PERFORMANCE MUNICIPAL MARKET INVESTMENT INSURED
CONTINUING BOARD MEMBERS VALUE INCOME PLUS ADVANTAGE OPPORTUNITY QUALITY QUALITY
---------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 406.88 307.57 288.40 211.72 219.96 177.96 189.16
Lawrence H. Brown -- -- -- -- -- -- --
Anne E. Impellizzeri 2,204.64 1,666.38 1,570.07 1,148.19 1,192.47 965.62 1,026.41
Peter R. Sawers 2,674.77 2,021.89 2,122.77 1,391.79 1,446.03 1,169.99 1,243.52
William J. Schneider 2,777.85 2,099.76 1,969.64 1,445.40 1,501.82 1,215.08 1,291.41
Judith M. Stockdale 658.25 497.62 467.34 342.65 355.91 288.09 306.24
---------------------------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
DEFERRED FEES
------------------------------------------------------------------------------------------------------------------
INSURED
SELECT QUALITY MUNICIPAL PREMIER PREMIER PREMIUM PREMIUM
CONTINUING BOARD MEMBERS QUALITY INCOME OPPORTUNITY MUNICIPAL INSURED INCOME 2 INCOME 4
------------------------------------------------------------------------------------------------------------------
Robert P. Bremner 163.96 263.11 403.59 97.50 95.37 202.77 192.59
Lawrence H. Brown -- -- -- -- -- -- --
Anne E. Impellizzeri 889.05 1,427.02 2,190.49 529.08 517.70 1,098.28 1,040.94
Peter R. Sawers 1,077.86 1,729.78 2,653.33 641.04 627.14 1,332.92 1,266.00
William J. Schneider 1,119.38 1,796.48 2,755.56 665.71 651.29 1,384.22 1,314.68
Judith M. Stockdale 265.36 425.83 653.48 157.88 154.41 328.06 311.47
------------------------------------------------------------------------------------------------------------------
</Table>
Nuveen Investments, Inc. maintains charitable contributions programs to
encourage the active support and involvement of individuals in the civic
activities of their community. These programs include a matching contributions
program and a direct
12
contributions program. The Independent Board Members of the funds managed by the
Adviser are eligible to participate in the charitable contributions program of
Nuveen Investments, Inc. Under the matching program, Nuveen Investments, Inc.
will match the personal contributions of a Board Member to Section 501(c)(3)
organizations up to an aggregate maximum amount of $10,000 during any calendar
year. Under its direct (non-matching) program, Nuveen Investments, Inc. makes
contributions to qualifying Section 501(c)(3) organizations, as approved by the
Corporate Contributions Committee of Nuveen Investments, Inc. The Independent
Board Members are also eligible to submit proposals to the committee requesting
that contributions be made under this program to Section 501(c)(3) organizations
identified by the Board Member, in an aggregate amount not to exceed $5,000
during any calendar year. Any contribution made by Nuveen Investments, Inc.
under the direct program is made solely at the discretion of the Corporate
Contributions Committee.
COMMITTEES
The Board has five standing committees: the executive committee, the audit
committee, the governance committee, the dividend committee and the valuation
committee.
Peter R. Sawers and Timothy R. Schwertfeger currently serve as members of the
executive committee of the Board of each Fund. The executive committee, which
meets between regular meetings of the Board, is authorized to exercise all of
the powers of the Board; provided that the scope of the powers of the executive
committee, unless otherwise specifically authorized by the full Board, are
limited to: (i) emergency matters where assembly of the full Board is
impracticable (in which case management will take all reasonable steps to
quickly notify each individual Board Member of the actions taken by the
executive committee) or (ii) matters of an administrative or ministerial nature.
The executive committee of each Fund held no meetings during their last fiscal
year, except Performance Plus held one meeting during its last fiscal year.
Lawrence H. Brown and Timothy R. Schwertfeger are current members of the
dividend committee. The dividend committee is authorized to declare
distributions on the Funds' shares including, but not limited to, regular and
special dividends, capital gains and ordinary income distributions. The dividend
committee of each Fund held four meetings during its last fiscal year.
Lawrence H. Brown and Judith M. Stockdale are current members of the valuation
committee for each Fund. The valuation committee oversees the Fund's Pricing
Procedures including, but not limited to, the review and approval of fair value
pricing determinations made by Nuveen's Valuation Group. The valuation committee
of each Fund held one meeting during its last fiscal year.
Each Fund's Board has an audit committee composed of Independent Board Members
and who are "independent" as that term is defined in Section 303.01(B)(2)(a) and
(3) of the New York Stock Exchange's listing standards. The audit committee
monitors the accounting and reporting policies and practices of the Funds, the
quality and integrity of the financial statements of the Funds, compliance by
the Funds with legal and regulatory requirements and the independence and
performance of the external and internal auditors. The audit committee reviews
the work and any recommendations of the Fund's independent auditors. Based on
such review, it is authorized to make recommendations to the Board. A copy of
the Audit Committee Charter is attached to the proxy statement as Appendix A.
The audit committee of each Fund held three meetings during its last fiscal
year.
Nomination of those Board Members who are not "interested persons" of each Fund
is committed to a governance committee composed of all Board Members who are not
"interested persons" of that Fund. It identifies and recommends individuals to
be nominated for election as non-interested Board Members. The committee also
reviews matters relating to (1) the composition, duties, recruitment,
independence and tenure of Board Members, (2) the selection and review of
committee assignments, and (3) Board Member education, board meetings and board
performance. The governance committee of each Fund held one meeting during its
last fiscal year. In the event of a vacancy on the Board, the governance
committee receives suggestions from various sources as to suitable candidates.
Suggestions should be sent in writing to Lorna Ferguson, Vice President for
Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago, IL 60606.
The governance committee sets appropriate standards and requirements for
nominations for new Board Members and reserves the right to interview all
candidates and to make the final selection regarding the nomination of any new
Board Members.
The Board of each Fund held four regular quarterly meetings and one special
board meeting during its last fiscal year. During the last fiscal year, each
Board Member attended 75% or more of each Fund's Board meetings and the
committee meetings (if a member thereof).
THE OFFICERS
The following table sets forth information as of May 1, 2003 with respect to
each officer, other than Mr. Schwertfeger, who is a Board Member and is included
in the table relating to nominees for the Board. Officers receive no
compensation from
13
the Funds. The officers of each Fund are elected by the Board on an annual basis
to serve until successors are elected and qualified.
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
TERM OF OFFICE NUMBER OF PORTFOLIOS
NAME, ADDRESS POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) IN FUND COMPLEX
AND BIRTHDATE WITH FUND TIME SERVED* DURING PAST 5 YEARS SERVED BY OFFICER
- -----------------------------------------------------------------------------------------------------------------------
Gifford R. Zimmerman Chief Term: Annual Managing Director (since 2002), 141
333 West Wacker Drive Administrative Length of Service: Assistant Secretary and
Chicago, IL 60606 Officer Since 1988 Associate General Counsel,
(9/9/56) formerly, Vice President of
Nuveen Investments, LLC;
Managing Director (since 2002),
General Counsel and Assistant
Secretary, formerly, Vice
President of Nuveen Advisory
Corp. and Nuveen Institutional
Advisory Corp.; Managing
Director (since 2002) and
Assistant Secretary and
Associate General Counsel,
formerly Vice President (since
2000) of Nuveen Asset
Management, Inc.; Assistant
Secretary of Nuveen
Investments, Inc. (since 1994);
Assistant Secretary of NWQ
Investment Management Company,
LLC (since 2002); Vice
President and Assistant
Secretary of Nuveen Investments
Advisers Inc. (since 2002);
Managing Director, Associate
General Counsel and Assistant
Secretary of Rittenhouse Asset
Management, Inc. (since May
2003); Chartered Financial
Analyst.
Michael T. Atkinson Vice President and Term: Annual Vice President (since 2002), 141
333 West Wacker Drive Assistant Secretary Length of Service: formerly Assistant Vice
Chicago, IL 60606 Since 2002 President (from 2000),
(2/3/66) previously, Associate of Nuveen
Investments, LLC.
Paul L. Brennan Vice President Term: Annual Vice President (since 2002), 135
333 West Wacker Drive Length of Service: formerly Assistant Vice
Chicago, IL 60606 Since 1997 President (since 1997) of
(11/10/66) Nuveen Advisory Corp.;
Chartered Financial Analyst and
Certified Public Accountant.
Peter H. D'Arrigo Vice President and Term: Annual Vice President of Nuveen 141
333 West Wacker Drive Treasurer Length of Service: Investments, LLC (since 1999);
Chicago, IL 60606 Since 1999 prior thereto, Assistant Vice
(11/28/67) President (from 1997); Vice
President and Treasurer (since
1999) of Nuveen Investments,
Inc.; Vice President and
Treasurer (since 1999) of
Nuveen Advisory Corp. and
Nuveen Institutional Advisory
Corp; Vice President and
Treasurer of Nuveen Asset
Management, Inc. (since 2002)
and of Nuveen Investments
Advisers Inc. (since 2002);
Assistant Treasurer of NWQ
Investments Management Company,
LLC. (since 2002); Chartered
Financial Analyst.
Susan M. DeSanto Vice President Term: Annual Vice President of Nuveen 141
333 West Wacker Drive, Length of Service: Advisory Corp. (since 2001);
Chicago, IL 60606 Since 2001 previously, Vice President of
(9/8/54) Van Kampen Investment Advisory
Corp. (from 1998).
</Table>
14
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
TERM OF OFFICE NUMBER OF PORTFOLIOS
NAME, ADDRESS POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) IN FUND COMPLEX
AND BIRTHDATE WITH FUND TIME SERVED* DURING PAST 5 YEARS SERVED BY OFFICER
- -----------------------------------------------------------------------------------------------------------------------
Jessica R. Droeger Vice President and Term: Annual Vice President (since 2002) and 141
333 West Wacker Drive Secretary Length of Service: Assistant General Counsel
Chicago, IL 60606 Since 1998 (since 1998), formerly
(9/24/64) Assistant Vice President (from
1998) of Nuveen Investments,
LLC; Vice President (since
2002) and Assistant Secretary
(from 1998), formerly Assistant
Vice President of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory Corp.
Lorna C. Ferguson Vice President Term: Annual Vice President of Nuveen 141
333 West Wacker Drive Length of Service: Investments, LLC (since 1998);
Chicago, IL 60606 Since 1998 Vice President (since 1998) of
(10/24/45) Nuveen Advisory Corp. and
Nuveen Institutional Advisory
Corp.
William M. Fitzgerald Vice President Term: Annual Managing Director (since 2001), 141
333 West Wacker Drive Length of Service: formerly Vice President (since
Chicago, IL 60606 Since 1995 1995) of Nuveen Advisory Corp.
(3/2/64) and Nuveen Institutional
Advisory Corp.; Managing
Director of Nuveen Asset
Management, Inc. (since 2001);
Vice President of Nuveen
Investments Advisers Inc.
(since 2002); Chartered
Financial Analyst.
Stephen D. Foy Vice President and Term: Annual Vice President (since 1993) and 141
333 West Wacker Drive Controller Length of Service: Funds Controller (since 1998)
Chicago, IL 60606 Since 1993 of Nuveen Investment, LLC; Vice
(5/31/54) President and Funds Controller
(since 1998) of Nuveen
Investments, Inc.; Certified
Public Accountant.
J. Thomas Futrell Vice President Term: Annual Vice President of Nuveen 135
333 West Wacker Drive Length of Service: Advisory Corp.; Chartered
Chicago, IL 60606 Since 1992 Financial Analyst.
(7/5/55)
Richard A. Huber Vice President Term: Annual Vice President of Nuveen 135
333 West Wacker Drive Length of Service: Institutional Advisory Corp.
Chicago, IL 60606 Since 1997 (since 1998) and Nuveen
(3/26/63) Advisory Corp. (since 1997).
Steven J. Krupa Vice President Term: Annual Vice President of Nuveen 135
333 West Wacker Drive Length of Service: Advisory Corp.
Chicago, IL 60606 Since 1990
(8/21/57)
David J. Lamb Vice President Term: Annual Vice President of Nuveen 141
333 West Wacker Drive Length of Service: Investments, LLC (since 2000);
Chicago, IL 60606 Since 2000 prior thereto, Assistant Vice
(3/22/63) President (from 1999); formerly
Associate of Nuveen
Investments, LLC; Certified
Public Accountant.
Tina M. Lazar Vice President Term: Annual Vice President of Nuveen 141
333 West Wacker Drive Length of Service: Investments, LLC (since 1999);
Chicago, IL 60606 Since 2002 prior thereto, Assistant Vice
(8/27/61) President (since 1993) of
Nuveen Investments, LLC.
</Table>
15
<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
TERM OF OFFICE NUMBER OF PORTFOLIOS
NAME, ADDRESS POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) IN FUND COMPLEX
AND BIRTHDATE WITH FUND TIME SERVED* DURING PAST 5 YEARS SERVED BY OFFICER
- -----------------------------------------------------------------------------------------------------------------------
Larry W. Martin Vice President and Term: Annual Vice President, Assistant 141
333 West Wacker Drive Assistant Secretary Length of Service: Secretary and Assistant General
Chicago, IL 60606 Since 1988 Counsel of Nuveen Investments,
(7/27/51) LLC; Vice President and
Assistant Secretary of Nuveen
Advisory Corp. and Nuveen
Institutional Advisory Corp.;
Assistant Secretary of Nuveen
Investments, Inc.; Assistant
Secretary of Nuveen Asset
Management, Inc. (since 1997);
Vice President (since 2000),
Assistant Secretary and
Assistant General Counsel
(since 1998) of Rittenhouse
Asset Management, Inc.; Vice
President and Assistant
Secretary of Nuveen Investments
Advisers Inc. (since 2002);
Assistant Secretary of NWQ
Investment Management Company,
LLC (since 2002).
Edward F. Neild, IV Vice President Term: Annual Managing Director (since 2002), 141
333 West Wacker Drive Length of Service: formerly, Vice President (from
Chicago, IL 60606 Since 1996 1996) of Nuveen Institutional
(7/7/65) Advisory Corp. and Nuveen
Advisory Corp.; Managing
Director of Nuveen Asset
Management, Inc. (since 1999);
Chartered Financial Analyst.
Thomas J. O'Shaughnessy Vice President Term: Annual Vice President (since 2002), 135
333 West Wacker Drive Length of Service: previously, Assistant Vice
Chicago, IL 60606 Since 1998 President (1998) of Nuveen
(9/4/60) Advisory Corp.
Thomas C. Spalding Vice President Term: Annual Vice President of Nuveen 135
333 West Wacker Drive Length of Service: Advisory Corp. and Nuveen
Chicago, IL 60606 Since 1987 Institutional Advisory Corp.;
(7/31/51) Chartered Financial Analyst.
- -----------------------------------------------------------------------------------------------------------------------
</Table>
* Length of Service indicates the year the individual became an officer of a
fund in the Nuveen fund complex.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is responsible for assisting the Board in
monitoring (1) the quality and integrity of the Fund's financial statements, (2)
each Fund's compliance with regulatory requirements, and (3) the independence
and performance of the Fund's independent and internal auditors. Among other
responsibilities, the Committee reviews, in its oversight capacity, each Fund's
annual financial statements with both management and the independent auditors
and the Committee meets periodically with the independent and internal auditors
to consider their evaluation of the Fund's financial and internal controls. The
Committee also recommends to the Board the selection of each Fund's independent
auditors. The Committee is currently composed of six Board Members and operates
under a written charter adopted and approved by the Board. Each Committee member
is independent as defined by New York Stock Exchange.
The Committee, in discharging its duties, has met with and held discussions with
management and each Fund's independent and internal auditors. The Committee has
reviewed and discussed the audited financial statements with management.
Management has represented to the independent auditors that each Fund's
financial statements were prepared in accordance with generally accepted
accounting principles. The Committee has also discussed with the independent
auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communications with Audit Committees). Each Fund's independent auditors
provided to the Committee the written disclosure required by Independent
Standards Board Standard No. 1 (Independent Discussions with Audit Committees),
and the Committee discussed with representatives of the independent auditor
their firm's independence. As provided in the Audit Committee Charter, it is not
the Committee's responsibility to determine, and the considerations and
discussions referenced above do not ensure, that each Fund's financial
statements are complete and accurate and presented in accordance with generally
accepted accounting principles.
Based on the Committee's review and discussions with management and the
independent auditors, the representations of management and the report of the
independent auditors to the Committee, the Committee has recommended that the
Board include the audited financial statements in each Fund's Annual Report.
16
The members of the Committee are:
Robert P. Bremner
Anne E. Impellizzeri
William J. Schneider
Lawrence H. Brown
Peter R. Sawers
Judith M. Stockdale
AUDIT AND RELATED FEES
AUDIT FEES. The aggregate fees billed by Ernst & Young LLP for professional
services for the audit of each Fund's financial statements for its most recently
completed fiscal year were as follows:
<Table>
<Caption>
- --------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION
AUDIT SYSTEMS DESIGN AND ALL OTHER
FUND FEES IMPLEMENTATION FEES FEES
- --------------------------------------------------------------------------------------------------------
Municipal Value $35,962 $0 $ 421
Municipal Income 5,968 0 353
Premium Income 28,308 0 2,603
Performance Plus 26,351 0 2,601
Municipal Advantage 20,841 0 2,587
Municipal Market Opportunity 21,475 0 2,588
Investment Quality 18,227 0 2,581
Insured Quality 19,079 0 2,583
Select Quality 17,190 0 2,579
Quality Income 24,758 0 2,595
Insured Municipal Opportunity 35,508 0 2,621
Premier Municipal 12,047 0 2,567
Premier Insured 11,888 0 2,567
Premium Income 2 20,227 0 2,585
Premium Income 4 19,512 0 2,583
- --------------------------------------------------------------------------------------------------------
</Table>
ALL NON-AUDIT FEES. The Audit Committee has generally considered whether the
receipt of non-audit fees by Ernst & Young LLP from the Fund is compatible with
maintaining Ernst & Young LLP's independence.
2. PROPOSED CHANGES TO EACH FUND'S FUNDAMENTAL INVESTMENT POLICIES
The Board has proposed amending each Fund's fundamental investment policies
relating to borrowing and lending in connection with the implementation of a
proposed interfund lending program.
GENERAL
Each Fund's current fundamental investment policy regarding borrowing states:
PERFORMANCE PLUS, PREMIUM INCOME, MUNICIPAL ADVANTAGE, MUNICIPAL MARKET
OPPORTUNITY, INVESTMENT QUALITY, INSURED QUALITY, SELECT QUALITY, QUALITY
INCOME, INSURED MUNICIPAL OPPORTUNITY, PREMIER MUNICIPAL, PREMIER INSURED,
PREMIUM INCOME 2 AND PREMIUM INCOME 4: The Fund may not 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.
MUNICIPAL VALUE AND MUNICIPAL INCOME: The Fund may not borrow money, except from
banks for temporary or emergency purposes or for repurchase of its shares, and
then only in an amount not exceeding one-third of the value of the Fund's total
assets including the amount borrowed. While any such borrowings exceed 5% of the
Fund's total assets, no additional purchases of investment securities will be
made.
Each Fund's current fundamental policy regarding lending states:
MUNICIPAL INCOME, PREMIUM INCOME, MUNICIPAL ADVANTAGE, MUNICIPAL MARKET
OPPORTUNITY, INVESTMENT QUALITY, INSURED QUALITY, SELECT QUALITY, QUALITY
INCOME, INSURED MUNICIPAL OPPORTUNITY, PREMIER MUNICIPAL, PREMIER INSURED,
PREMIUM INCOME 2 AND PREMIUM INCOME 4: The Fund may not 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.
17
MUNICIPAL VALUE: The Fund may not make loans, other than by entering into
repurchase agreements and through the purchase of Municipal Obligations or
temporary investments in accordance with its investment objectives, policies and
limitations.
PERFORMANCE PLUS: The Fund may not make loans, other than by entering into
repurchase agreements and through the purchase of tax-exempt municipal
obligations or temporary investments in accordance with its investment
objective, policies and limitations.
The Board recommends that shareholders vote to replace these policies with the
following fundamental investment policy governing borrowing and the following
fundamental investment policy regarding lending:
The Fund may not borrow money, except as permitted by the Investment
Company Act of 1940 and exemptive orders granted under the 1940 Act.
The Fund may not make loans, except as permitted by the Investment Company
Act of 1940 and exemptive orders granted under the 1940 Act.
In connection with disaster recovery planning and to provide liquidity in the
event that open-end funds in the Nuveen family of funds encounter higher than
normal redemption requests that may follow a national disaster such as the
events of September 11, 2001, the Boards of the Nuveen Funds have determined
that an interfund lending program would allow the Nuveen Funds, including the
Funds, to lend and borrow cash for temporary purposes directly to and from each
other. The proposed new fundamental investment policies will enable each Fund to
participate in this interfund lending program.
Because an interfund lending program raises issues under various sections of the
1940 Act, in order to implement the proposal, all Nuveen Funds, including the
Funds, will file an application for exemption from certain provisions of the
1940 Act with the Securities and Exchange Commission ("SEC"). The application to
the SEC for exemptive relief will not limit interfund lending under the program
to emergency situations and the relief, if and when granted, would allow the
Adviser to set up a more regular program if it and the Board of a Fund
determines that a more regular program would be in the best interests of a fund.
Implementation of the interfund lending program is contingent upon the SEC
granting the exemptive relief.
Nuveen's open-end funds are far more likely to experience large net cash
outflows during an emergency situation than the closed-end funds, therefore the
open-end funds will likely be the only funds that would borrow extensively under
the program. However, because the closed-end funds might be able to lend money
at attractive rates under the program, it is proposed that all current and
future Nuveen Funds, both open-end and closed-end, may participate in the
program. Because the interest earned by the lending fund on such loans is
taxable, Nuveen anticipates that funds that invest primarily in municipal
securities would only participate in the program as lenders if the Adviser
believes that it would be in the best interests of the shareholders of such
funds. Funds that invest primarily in securities other than municipal securities
may also utilize the program in non-emergency situations.
Currently, the Nuveen open-end funds can borrow from banks for temporary
purposes and can lend to banks or other entities in the form of repurchase
agreements or investment in other short-term instruments. The proposed program
would reduce the open-end funds' borrowing costs and enhance their ability to
earn higher rates of interest on investment of their short-term cash balances.
The open-end funds would still be free to establish committed lines of credit or
other borrowing arrangements with banks.
It is currently anticipated that the interest rate that will be charged to the
funds on any interfund loan ("Interfund Loan Rate") would be the average of the
"Repo Rate"(1) and the "Bank Loan Rate."(2) The program would be administered by
employees of the Adviser, including representatives of the Funds' Administration
and Financial Analysis, Product Management, Portfolio Operations and Trading
and/or representatives of the Portfolio Management and Research Department who
are not portfolio managers ("Interfund Lending Team"). Under the proposed
program, in an emergency situation, a meeting of the Interfund Lending Team
would be called and the Team would collect data on the uninvested cash and
borrowing requirements of the funds. Once it determines the aggregate amount of
cash available for loans and borrowing demand, the Interfund Lending Team would
allocate loans among borrowing funds with input from portfolio managers.
- ---------------
(1) The "Repo Rate" for any day would be the highest rate available to the funds
from investing in overnight repurchase agreements with a highly reputable
counterparty.
(2) The "Bank Loan Rate" for any day would be calculated by Nuveen each day an
interfund loan is made according to a formula established by the Board
designed to approximate the lowest interest rate at which bank short-term
loans would be available to the funds. The formula would be based upon a
publicly available rate (e.g., Federal Funds plus 25 basis points) and would
vary with this rate so as to reflect changing bank loan rates. The Board
periodically would review the continuing appropriateness of using the
publicly available rate, as well as the relationship between the Bank Loan
Rate and current bank loan rates that would be available to the funds. The
initial formula and any subsequent modifications to the formula would be
subject to the approval of the Board.
18
The Interfund Lending Team would allocate borrowing demand and cash available
for lending among the funds on what the Interfund Lending Team believes to be an
equitable basis, subject to certain administrative procedures applicable to all
funds, such as the time of filing requests to participate, minimum loan lot
sizes, and the need to minimize the number of transactions and associated
administrative costs. To reduce transaction costs, each loan normally would be
allocated in a manner intended to minimize the number of funds necessary to
complete the loan transaction. The method of allocation and related
administrative procedures would be approved by the Board, including a majority
of the Independent Board Members, to ensure both borrowing and lending funds
participate on an equitable basis.
The Adviser would (i) monitor the interest rates charged and other terms and
conditions of the Interfund Loans, (ii) ensure compliance with each fund's
investment policies and limitations, (iii) ensure equitable treatment of each
fund, and (iv) make quarterly reports to the Board concerning any transactions
by the funds under the program and the Interfund Loan Rates. Nuveen would
administer the credit facility as part of its duties under its existing advisory
contract with each fund and would receive no additional fee as compensation for
its services. The actual terms of any Interfund Loan Program in which the Funds
may participate may change from time to time from the description presented here
both as a result of a regulatory action in connection with the granting of the
appropriate regulatory approvals, or as approved by a Board of a Fund.
Although, under the proposed new investment policies, each Fund may borrow and
lend to the full extent permitted by the 1940 Act, currently each Fund only
intends to change its current practices with respect to borrowing and lending
solely to the extent it participates in the proposed interfund lending program.
However, under the proposed new investment policies, each Fund reserves the
right to engage in borrowing and lending to the full extent permitted by the
1940 Act.
VOTES REQUIRED
Approval of the proposed changes to a Fund's fundamental investment policies
requires the affirmative vote of a "majority of the outstanding voting
securities" of the Fund. For each Fund, except Municipal Value and Municipal
Income, common shareholders and MuniPreferred shareholders will vote together as
a single class and MuniPreferred shareholders will vote separately as a single
class. For Municipal Value and Municipal Income, common shareholders will vote
together as a single class. The term "majority of the outstanding voting
securities" as defined in the 1940 Act means the affirmative vote of the lesser
of (1) 67% of the voting securities of the Fund present at the meeting if more
than 50% of the outstanding shares of the Fund are present in person or by proxy
or (2) more than 50% of the outstanding shares of the Fund. Shareholders of each
Fund will vote separately on the proposed changes to each fundamental investment
policy.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED CHANGES
TO EACH FUND'S FUNDAMENTAL INVESTMENT POLICIES.
3. APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
GENERAL
The Board of each Fund unanimously approved an Agreement and Plan of
Reorganization and Liquidation (the "Agreement") for each Fund in the form
attached hereto as Appendix B. The purpose of the reorganization is for each
Fund, currently organized as a Minnesota corporation (each, a "Minnesota Fund"),
to reorganize (each, a "Reorganization") into a newly created Massachusetts
business trust (each, a "Massachusetts Fund"). This type of reorganization may
be referred to as a "change in domicile reorganization." The terms and
conditions of the Reorganization are set forth in the Agreement. Significant
provisions of the Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Agreement.
The Board of each Fund believes that its respective Reorganization will achieve
savings and operating efficiencies by realizing economies of scale through
increased standardization of documents among the Nuveen family of funds, most of
which are organized as Massachusetts business trusts, and would permit the
Adviser and its personnel to focus more on non-administrative matters. Among
such potential efficiencies are lower expenses, particularly legal expenses,
through economies of scale associated with compliance by the Nuveen family of
funds with Massachusetts law only, rather than both Minnesota and Massachusetts
law.
Each Fund is governed by the 1940 Act as well as by the law of the state of its
organization. A Massachusetts business trust is established by trustees (who
serve the same role as directors of a Minnesota corporation) under a declaration
of trust, which sets forth various provisions relating primarily to the
authority of the trust to conduct business and the specific rules governing the
trust. The Board of each Minnesota Fund believes that a fund organized as a
Massachusetts business trust may have more flexibility in conducting its
business as a closed-end investment company than a Minnesota corporation. For
example, under each Fund's interpretation of Minnesota law, the Board of the
Fund does not have the authority, without shareholder approval, to (a) increase
the number of authorized shares of an existing series of MuniPreferred or (b)
make amendments to certain rating agency definitions in the Fund's Statement
Establishing and Fixing the Rights and Preferences of MuniPreferred. However, a
Massachusetts business trust may provide for the flexibility to take these
actions without shareholder approval. Therefore, if the Reorganizations are
approved, it is expected that the Funds' governing documents
19
would permit the Board Members to issue additional shares of MuniPreferred and
would permit rating agency definitions to be amended, subject to rating agency
approval and other limitations, without the time and expense of seeking
shareholder approval.
The Board of each Minnesota Fund considered all material issues associated with
such Fund's Reorganization and determined that the Reorganization is in the best
interest of the Fund and that existing shareholders will not be diluted as a
result of such Reorganization.
The table below shows each Reorganization:
<Table>
<Caption>
MINNESOTA FUND (MINNESOTA CORPORATION) MASSACHUSETTS FUND (MASSACHUSETTS BUSINESS TRUST)
- ------------------------------------------------------------------------------------------------
Nuveen Municipal Value Fund, Inc. Nuveen Municipal Value Fund
Nuveen Municipal Income Fund, Inc. Nuveen Municipal Income Fund
Nuveen Premier Income Fund, Inc. Nuveen Premium Income Fund
Nuveen Performance Plus Municipal Fund, Inc. Nuveen Performance Plus Municipal Fund
Nuveen Municipal Advantage Fund, Inc. Nuveen Municipal Advantage Fund
Nuveen Municipal Market Opportunity Fund, Nuveen Municipal Market Opportunity Fund
Inc.
Nuveen Investment Quality Municipal Fund, Nuveen Investment Quality Municipal Fund
Inc.
Nuveen Insured Quality Municipal Fund, Inc. Nuveen Insured Quality Municipal Fund
Nuveen Select Quality Municipal Fund, Inc. Nuveen Select Quality Municipal Fund
Nuveen Quality Income Municipal Fund, Inc. Nuveen Quality Income Municipal Fund
Nuveen Insured Municipal Opportunity Fund, Nuveen Insured Municipal Opportunity Fund
Inc.
Nuveen Premier Municipal Income Fund, Inc. Nuveen Premier Municipal Income Fund
Nuveen Premier Insured Municipal Income Fund, Nuveen Premier Insured Municipal Income Fund
Inc.
Nuveen Premier Income Fund 2, Inc. Nuveen Premier Income Fund 2
Nuveen Premier Income Fund 4, Inc. Nuveen Premier Income Fund 4
</Table>
Each Reorganization contemplates that (a) a newly established Massachusetts Fund
would acquire all of the assets of the corresponding Minnesota Fund in exchange
for newly issued common shares and newly issued shares of MuniPreferred of the
Massachusetts Fund ("Massachusetts Fund Shares") and the Massachusetts Fund's
assumption of all of the liabilities of the corresponding Minnesota Fund; and
(b) the Minnesota Fund would liquidate and distribute to its shareholders pro
rata by class the Massachusetts Fund Shares received. As a result of the
Reorganization, the shareholders of each Minnesota Fund would become
shareholders of the corresponding Massachusetts Fund.
If approved by shareholders of a Fund, the Reorganization will be made effective
(the "Effective Time") at a date and time when the Board of each Fund deems
appropriate. No Effective Time has been set forth in the Agreement, however, it
is currently expected that the Reorganization will take place before the end of
2004.
If shareholders of a Fund do not approve the Reorganization, the Fund will
continue to do business in its current corporate form.
TERMS OF EACH REORGANIZATION
In connection with the Reorganization, each Minnesota Fund, as the sole
shareholder of the corresponding Massachusetts Fund, will take the following
actions:
(1) approve the Investment Management Agreement for the Massachusetts
Fund on substantially the same terms as the Investment Management Agreement
for the corresponding Minnesota Fund; and
(2) elect as Board Members of each Massachusetts Fund the same persons
who are Board Members of the corresponding Minnesota Fund prior to the
Reorganization.
If the Reorganization is approved by shareholders and the other conditions are
satisfied or waived, at the Effective Time each Massachusetts Fund will acquire
all of the assets of the corresponding Minnesota Fund, including cash, cash
equivalents, municipal obligations and other securities, receivables and other
property owned by each Minnesota Fund. In exchange, each Massachusetts Fund
would assume from the corresponding Minnesota Fund all debts, liabilities,
obligations and duties of the Minnesota Fund, and the Massachusetts Fund would
issue to the corresponding Minnesota Fund common shares of beneficial interest
and Preferred shares of beneficial interest of the Massachusetts Fund. The
number of Massachusetts Fund common shares to be issued to the corresponding
Minnesota Fund would be the number equal to the number of common shares of the
Minnesota Fund outstanding as of the Effective Time. Shares of Massachusetts
Fund MuniPreferred would be issued to the corresponding Minnesota Fund on the
basis of one share of Massachusetts Fund MuniPreferred for each share of
Minnesota Fund MuniPreferred outstanding as of the Effective Time.
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In the event the Reorganization is consummated, as soon as practicable after the
Effective Time, each Minnesota Fund will liquidate and distribute to its common
shareholders of record the Massachusetts Fund common shares it receives, and to
its preferred shareholders of record the shares of Massachusetts Fund
MuniPreferred it receives. Such liquidation and distribution will be
accomplished by opening accounts on the books of the Massachusetts Fund in the
names of the shareholders of the corresponding Minnesota Fund and transferring
to those shareholder accounts the Massachusetts Fund Shares previously credited
on those books to the account of the corresponding Minnesota Fund. Each common
shareholder account will receive a number of Massachusetts Fund common shares
equal to the number of common shares of the Minnesota Fund held by such common
shareholder at the Effective Time, and each preferred shareholder account will
receive one share of Massachusetts Fund MuniPreferred of the same series for
each share of Minnesota Fund MuniPreferred held by such preferred shareholder at
the Effective Time.
If and to the extent the Board of a Minnesota Fund deems it advisable for
federal income tax purposes, such Minnesota Fund shall make a distribution of
net investment company taxable income, if any, and net capital gain, if any,
immediately prior to the Effective Time.
Following the Reorganization, every common shareholder of a Minnesota Fund would
own common shares of the corresponding Massachusetts Fund equal to the number of
Minnesota Fund common shares held immediately prior to the Effective Time. A
common shareholder of each Minnesota Fund will therefore acquire substantially
the same pro rata interest in the corresponding Massachusetts Fund as of the
Effective Time of the Reorganization as that common shareholder had in the
Minnesota Fund immediately prior to the Reorganization.
Following the Reorganization, every preferred shareholder of each Minnesota Fund
would own the same number of shares of the corresponding Massachusetts Fund's
MuniPreferred as he or she held of the Minnesota Fund's MuniPreferred, and the
shares of Massachusetts Fund MuniPreferred would have rights and preferences
substantially similar to those of the shares of the corresponding Minnesota
Fund's MuniPreferred. Holders of shares of Massachusetts Fund MuniPreferred
would be entitled to receive, on the date that but for Reorganization would have
been the next dividend payment date in respect of the shares of Minnesota Fund's
MuniPreferred, dividends accumulated in respect of the shares of each Minnesota
Fund's MuniPreferred dividends equal to the amount of dividends that would have
been paid on such date with respect to the shares of each Minnesota Fund's
MuniPreferred, but for the Reorganization.
Under the terms of the Agreement, each Reorganization is conditioned upon (a)
approval by the shareholders of the Minnesota Fund, as described below, (b) the
Minnesota Fund's receipt of written advice from Moody's and S&P confirming that
consummation of the Reorganization will not impair the "aaa" and "AAA" ratings
assigned to the outstanding shares of the Minnesota Fund's MuniPreferred, (c)
the Minnesota Fund's and Massachusetts Fund's receipt of an opinion
substantially to the effect that the Reorganization will qualify as a
reorganization under the Internal Revenue Code of 1986, as amended (the "Code"),
(d) the absence of legal proceedings challenging the Reorganization and (e) the
Minnesota Fund's receipt of certain routine certificates.
A Fund's Agreement may be terminated and the Reorganization abandoned, whether
before or after approval by the Minnesota Fund's shareholders, at any time prior
to the Effective Time (a) by mutual agreement, (b) by either party if any
condition to that party's obligations under the Agreement has not been satisfied
or waived and it reasonably appears that such condition will not be satisfied or
(c) by either party if the Reorganization has not occurred by December 31, 2004.
CERTAIN COMPARATIVE INFORMATION ABOUT THE MASSACHUSETTS FUNDS AND THE MINNESOTA
FUNDS
As a Massachusetts business trust, each Massachusetts Fund's operations will be
governed by a Declaration of Trust, Bylaws (collectively, the "Trust governing
documents") and applicable Massachusetts law. As Minnesota corporations, each
Minnesota Fund's operations are governed by each individual Minnesota Fund's
Articles of Incorporation, Bylaws (collectively, the "Fund governing documents")
and applicable Minnesota law. If the Reorganization is approved, the operations
of each Massachusetts Fund will be subject to the provisions of the 1940 Act and
the rules and regulations of the Securities and Exchange Commission thereunder
and applicable state securities laws. Set forth below is a discussion of the
major similarities and differences between the Massachusetts Funds and the
Minnesota Funds.
INVESTMENT OBJECTIVES, POLICIES AND GENERAL PORTFOLIO CHARACTERISTICS. The
investment objectives and policies of each Massachusetts Fund will be identical
to those of the corresponding Minnesota Fund and the general portfolio
characteristics of a Massachusetts Fund immediately after its Reorganization
will be virtually identical to that of its corresponding Minnesota Fund
immediately prior to its Reorganization.
BOARD MEMBERS AND OFFICERS. The Board Members and officers of each Minnesota
Fund serving immediately prior to a Reorganization will serve in the same
capacity for the corresponding Massachusetts Fund immediately after the
Reorganization.
COMMON SHARES. Notwithstanding that each Massachusetts Fund is organized as a
Massachusetts business trust and each Minnesota Fund is organized as a Minnesota
corporation, the common shares of each Massachusetts Fund and each Minnesota
Fund have similar voting rights and equal rights with respect to the payment of
dividends and distribution of assets upon liquidation and have no preemptive,
conversion or exchange rights or rights to cumulative voting. However,
21
shareholders of the Massachusetts Fund will not have dissenters' rights of
appraisal. The terms of the Massachusetts Fund's Dividend Reinvestment Plan will
be identical to the terms of the corresponding Minnesota Fund's Dividend
Reinvestment Plan.
PREFERRED SHARES. The terms of the Massachusetts Fund's MuniPreferred issued
pursuant to a Reorganization will be substantially similar to the terms of the
corresponding Minnesota Fund's MuniPreferred, except that, under each Minnesota
Fund's interpretation of Minnesota law, the Board of each Minnesota Fund does
not have the authority, without shareholder approval, to (a) increase the number
of authorized shares of an existing series of MuniPreferred or (b) make
amendments to certain rating agency definitions in each Minnesota Fund's
Statement Establishing and Fixing the Rights and Preferences of MuniPreferred.
After each Reorganization, the Massachusetts Fund will have the flexibility to
take such actions without shareholder approval, subject to certain limitations,
including rating agency approval. In addition, the Massachusetts Fund
MuniPreferred shareholders will not have dissenters' rights of appraisal.
PERSONAL LIABILITY. Under Massachusetts law, shareholders of each Massachusetts
Fund could, under certain circumstances, be held personally liable for the
obligations of that Massachusetts Fund. However, each Massachusetts Fund's
Declaration of Trust will contain an express disclaimer of shareholder liability
for debts or obligations of that Massachusetts Fund and requires that notice of
such limited liability be given in each agreement, obligation or instrument
entered into or executed by the Massachusetts Fund or its trustees. The
Massachusetts Funds' Declaration of Trust will further provide for
indemnification out of the assets and property of that Massachusetts Fund for
all loss and expense of any shareholder held personally liable for the
obligations of the Massachusetts Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Massachusetts Fund would be unable to meet its obligations.
Management believes that the likelihood of such circumstances is remote. In
addition, each Massachusetts Fund's Declaration of Trust will provide that the
obligations of that Massachusetts Fund are not binding upon the trustees
individually, but only upon the assets and property of the Massachusetts Fund,
and that the trustees shall not be liable for errors of judgment or mistakes of
fact or law. Nothing in each Massachusetts Fund's Declaration of Trust however,
protects a trustee against any liability to which he or she 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 or her office.
SHAREHOLDER MEETINGS. The Massachusetts Fund and Minnesota Fund governing
documents both provide that shareholder meetings (a) may be called at any time
by the Chairman of the Board, the Chief Administrative Officer or two or more
Board Members and (b) must be called upon the written request of shareholders
entitled to cast at least 10% of all the votes entitled to be cast at the
meeting.
QUORUM. The Massachusetts Fund and Minnesota Fund governing documents provide
that a majority of shares entitled to vote constitutes a quorum for shareholder
meetings, except that for the election of the two board member nominees to be
elected by holders of MuniPreferred, 33 1/3% of the MuniPreferred entitled to
vote and represented in person or by proxy constitutes a quorum except that for
Premium Income, a majority of the MuniPreferred entitled to vote and represented
in person or by proxy constitutes a quorum.
ELECTION OF BOARD MEMBERS. The Massachusetts Fund governing documents provide
that Board Members are elected by a plurality of the voting power of the shares
present and entitled to vote at any shareholder meeting. By comparison, the
Minnesota Fund governing documents provide that Board Members are elected by
vote of a majority of the voting power of the shares present and entitled to
vote at any shareholder meeting. Under normal circumstances holders of
MuniPreferred are entitled to elect two (2) board members.
CONTROL. Both the Massachusetts Fund and Minnesota Fund governing documents
include provisions that could have the effect of limiting the ability of other
entities or persons to acquire control of the fund. Specifically, they require
the affirmative vote of the holders of at least 66 2/3% of the fund's common
shares and preferred shares outstanding at the time, voting together as a single
class, except as described below, to authorize any of the following
transactions:
(a) a conversion of the fund from a closed-end to an open-end
investment company,
(b) a merger or consolidation of the fund, or any series or class of
the fund, with any corporation, association, trust or other organization or
a reorganization or recapitalization of the fund, or any series or class of
the fund,
(c) a sale, lease or transfer of all or substantially all of the
fund's assets (other than in the regular course of the fund's investment
activities), or
(d) termination of the fund or series or class of the fund by the
shareholders,
unless such transaction has been authorized by the affirmative vote of 66 2/3%
of the total number of Board Members fixed in accordance with the governing
documents, in which case the affirmative vote of the holders of at least a
majority of the fund's common shares and preferred shares outstanding at the
time, voting together as a single class, is required. In the case of the
conversion of the fund to an open-end investment company, or in the case of any
of the foregoing transactions constituting a plan of reorganization which
adversely affects the holders of preferred shares of the fund, the action in
question will also require the approval of the holders of 66 2/3% of the
preferred shares of the fund outstanding at the time,
22
voting as a separate class; provided, however, that such separate class vote
shall be a majority vote if the transaction has been authorized by the
affirmative vote of 66 2/3% of the total number of Board Members fixed in
accordance with the fund's governing documents. The vote required to approve the
conversion of the fund from a closed-end to an open-end investment company or to
approve a transaction constituting a plan of reorganization which adversely
affects the holders of preferred shares of the fund is higher than that required
by the 1940 Act.
SHAREHOLDERS' RIGHTS OF APPRAISAL
Under Minnesota law, shareholders of each Fund have dissenters' rights of
appraisal with respect to its Reorganization.
GENERAL. Sections 302A.471 and 302A.473 of the Minnesota Business Corporation
Act provide for rights of shareholders to dissent and obtain payment in cash of
the "fair value" of their shares, as defined in the statute, in the event of a
sale of substantially all of the assets of a Minnesota corporation. The
procedures for asserting dissenters' rights are set forth in such sections, the
full texts of which are reprinted as Appendix C. Shareholders of each Fund who
wish to assert their dissenters' rights must fully comply with the statutory
requirements in order to preserve the right to obtain payment for their shares
under the statute. The following summary of the applicable provisions of Section
302A.471 and 302A.473 is not intended to be a complete statement of such
provisions and is qualified in its entirety by reference to such Sections.
PROCEDURE. Any shareholder of the Fund who wishes to dissent and obtain payment
for his or her shares (a) must file with the Fund prior to the shareholder vote
with respect to the Agreement at the Annual Meeting, a written notice stating
the shareholder's intention to demand payment of the fair value of his or her
shares if the Reorganization is effectuated and (b) must not vote his or her
shares in favor of approval of the Agreement. Such notice must be filed at the
offices of the Fund at 333 West Wacker Drive, Chicago, Illinois 60606,
Attention: Secretary. A vote against approval of the Agreement does not in
itself constitute the required written notice described in (a) above. A
shareholder must satisfy requirement (b) above either by voting against approval
of the Agreement in person or by proxy at the Annual Meeting or by abstaining
from voting his or her shares. The shareholder can so abstain by not voting in
favor of approval of the Agreement at the Annual Meeting and either (i) not
signing and returning the proxy card or (ii) marking the space indicating
"Abstain" on the proxy card. If a shareholder returns a signed proxy card,
unless such proxy card indicates that the shareholder wishes to abstain or vote
against approval of the Agreement, such shareholder's shares will be voted in
favor of approval of the Agreement, and such shareholder will not be permitted
to dissent.
A shareholder of a Fund may not assert dissenters' rights as to less than all of
the shares registered in such holder's name, except in the situation in which
certain shares are beneficially owned by another person but registered in such
holder's name. If a shareholder wishes to dissent with respect to shares
beneficially owned by another person, such shareholder must dissent with respect
to all such shares and disclose the name and address of the beneficial owner on
whose behalf the holder is dissenting. A beneficial owner who is not the
shareholder of record may assert dissenters' rights with respect to all of his
or her shares if the beneficial owner submits a written consent of the
shareholder of record at the time of or prior to the assertion of such
dissenters' rights.
If the Agreement is approved by the requisite shareholder vote, the Fund will be
required to mail a notice to each Fund shareholder who filed a written notice of
intent to demand payment and refrained from voting in favor of approval of the
Agreement. The notice shall state when and where a demand for payment shall be
sent and share certificates shall be deposited in order to obtain payment. The
notice shall also include a form to be completed by the shareholder for
demanding payment and certifying the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder is dissenting, acquired the
shares. In order to receive the fair value of his or her shares, a dissenting
shareholder must demand payment and deposit his or her share certificates within
30 days after the notice is mailed by the Fund. A shareholder who fails to
demand payment or fails to deposit share certificates, as required by such
notice, shall have no right to receive payment for his or her shares under the
dissenters' rights provisions.
After the Reorganization takes effect or after receipt of a valid demand for
payment, whichever is later, the Massachusetts Fund, as successor to the Fund,
shall remit to each shareholder who has made such demand of the Fund and
deposited his or her share certificates, the amount that the Massachusetts Fund
estimates to be the fair value of the shares, plus any interest that may have
accrued commencing five days after the Effective Time up to and including the
date of payment at the judgment rate of interest then in effect under Minnesota
law (currently 4% per annum). The Massachusetts Fund shall also include with
such remittance, along with certain financial statements of the Fund, a brief
description of the method used to reach the estimated fair value of the shares
of the Fund. As used in Section 302A.473, the term "fair value of the shares"
means the value of the shares immediately before the Effective Time.
The Massachusetts Fund may withhold any remittance from a dissenting shareholder
who was not a shareholder (or who is dissenting on behalf of a person who was
not a beneficial owner) on the date of the first public announcement of the
Reorganization, if the Massachusetts Fund (a) provides to such shareholder,
along with the materials described in the preceding paragraph, a statement of
the reason for withholding the remittance and (b) offers to pay the fair value
of the shares, plus interest, if the dissenting shareholder agrees to accept
that amount in full satisfaction. The dissenting
23
shareholder may decline the offer and demand payment as described below. Failure
to make such demand entitles the dissenting shareholder only to the amount
offered by the Massachusetts Fund.
If a dissenting shareholder of the Fund believes that the amount remitted (or
the amount offered in the case of certain dissenting shareholders) by the
Massachusetts Fund is less than the fair value of his or her shares of the Fund,
plus interest, the shareholder may, within 30 days after the mailing date of the
remittance (or the offer), give written notice to the Massachusetts Fund of his
or her own estimate of the fair value of the shares of the Fund, plus interest,
and demand payment of the difference. If the shareholder fails to do so, the
shareholder is entitled only to the amount remitted (or offered).
If the Massachusetts Fund receives a demand for supplemental payment from any
dissenting shareholder, it shall, within 60 days after receipt of such demand,
either (a) pay to the dissenter the amount demanded or agreed to by the
dissenter after settlement discussions or (b) file in a court of competent
jurisdiction in Hennepin County, Minnesota, a petition requesting that the court
determine the fair value of the shares, plus interest. All shareholders of the
Fund whose demands have not been settled with the Massachusetts Fund shall be
made parties to the proceeding. The court shall determine whether each such
dissenting shareholder has complied with all statutory requirements and shall
determine the fair value of the shares, taking into account any and all factors
the court finds relevant. If the court determines that the fair value of the
shares exceeds the Massachusetts Fund's estimate of the fair value of the shares
of the Fund, then the court will enter judgment in favor of such dissenting
shareholders in an amount by which the value determined by the court exceeds the
Massachusetts Fund's estimated value.
The costs and expenses of the proceeding, including the reasonable expense and
compensation of any appraisers appointed by the court, shall be determined by
the court and assessed against the Massachusetts Fund, except that the court may
assess part or all of such costs and expenses against any dissenting shareholder
whose action in demanding supplemental payment is found by the court to be
arbitrary, vexatious or not in good faith. If the court finds that the
Massachusetts Fund has failed to comply substantially with the statutory
requirements, the court may assess against the Fund all fees and expenses of any
experts or attorneys as the court deems equitable. In addition, fees and
expenses may be assessed against any party the court determines has acted
arbitrarily, vexatiously or not in good faith in bringing a proceeding for
supplemental payment.
Cash received pursuant to the exercise of dissenters' rights may be subject to
federal or state income tax.
FEDERAL INCOME TAX CONSEQUENCES
As a condition of closing to each Reorganization, the respective Minnesota Fund
will receive an opinion from Vedder, Price, Kaufman & Kammholz, special counsel
to the Minnesota Funds, to the effect that the Reorganization will qualify as a
reorganization under Section 368(a)(1) of the Code. Accordingly, no Minnesota
Fund will recognize gain or loss for federal income tax purposes as a result of
the Reorganization. The following discussion summarizes the anticipated federal
income tax treatment to shareholders of each Minnesota Fund.
A common shareholder of the Minnesota Fund who receives solely common shares of
a corresponding Massachusetts Fund in exchange for his or her Minnesota Fund
common shares pursuant to the Reorganization will not recognize gain or loss for
federal income tax purposes. Likewise, a holder of a Minnesota Fund's
MuniPreferred shares who receives solely shares of Massachusetts Fund
MuniPreferred in exchange for his or her Minnesota Fund MuniPreferred pursuant
to the Reorganization will not recognize gain or loss for federal income tax
purposes.
The aggregate tax basis of the Massachusetts Fund shares received by a
shareholder of the Minnesota Fund will be the same as the shareholder's
aggregate tax basis in the Minnesota Fund shares surrendered in exchange
therefor, decreased by any cash received and increased by the amount of gain
recognized on the exchange.
The holding period of the Massachusetts Fund shares received by a shareholder of
the Minnesota Fund will include the period during which the shareholder's
Minnesota Fund shares were held, provided such Minnesota Fund shares were held
as a capital asset at the Effective Time.
Cash payments received by a Minnesota Fund shareholder as a result of the
exercise of his or her dissenters' rights of appraisal with respect to all of
such shareholder's shares will be treated as received by such shareholder as a
distribution in redemption by the Minnesota Fund of his or her shares and will
be treated as a distribution in full payment in exchange for his or her shares,
resulting in a capital gain or loss for federal income tax purposes, assuming
the Minnesota Fund shares exchanged for cash as a result of the exercise of his
or her dissenter's rights were held as a capital asset at the Effective Time.
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF EACH REORGANIZATION AND SHOULD NOT BE CONSIDERED TO BE TAX
ADVICE. THERE CAN BE NO ASSURANCE THAT THE INTERNAL REVENUE SERVICE WILL CONCUR
ON ALL OR ANY OF THE ISSUES DISCUSSED ABOVE. FUND SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISERS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES WITH RESPECT TO THE FOREGOING MATTERS AND ANY OTHER
CONSIDERATIONS WHICH MAY BE APPLICABLE.
24
VOTES REQUIRED
Consummation of each Reorganization is subject to approval of the Agreement by
the common and preferred shareholders of the respective Fund. Adoption of this
proposal requires the affirmative vote of the holders of at least a majority of
the outstanding common shares and shares of MuniPreferred of that Fund entitled
to vote on the proposal, voting together as a single class.
Preferred shareholders of each Fund are being asked to approve the Agreement as
a "plan of reorganization" under the 1940 Act. Section 18(a)(2)(D) of the 1940
Act provides that the terms of preferred shares issued by a registered
closed-end investment company must contain provisions requiring approval by the
vote of a majority of such shares, voting as a class, of any plan of
reorganization adversely affecting such shares. The 1940 Act makes no
distinction between a plan of reorganization that has an adverse effect as
opposed to a materially adverse effect. While the respective Boards do not
believe that the holders of shares of MuniPreferred of the Fund would be
materially adversely affected by the Reorganization, it is possible that there
may be insignificant adverse effects. Each Fund is seeking approval of the
Agreement by the holders of shares of each series of that Fund's MuniPreferred,
each such series voting separately as a class. Such approval requires the
affirmative vote of the holders of at least a majority of the outstanding shares
of that Fund's MuniPreferred entitled to vote on the proposal, each such series
voting separately as a class. Preferred shareholders of each Fund are also being
asked to approve the Agreement pursuant to Minnesota law. Such approval requires
the affirmative vote of the holders of at least a majority of the outstanding
shares of the Fund MuniPreferred entitled to vote on the proposal, each such
series voting separately as a class.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AGREEMENT AND
PLAN OF REORGANIZATION.
APPOINTMENT OF INDEPENDENT AUDITORS
Each Board has appointed Ernst & Young LLP, independent public accountants, as
independent auditors to audit the books and records of each Fund for its fiscal
year. A representative of Ernst & Young LLP will be present at the meeting to
make a statement, if such representative so desires, and to respond to
shareholders' questions. Ernst & Young LLP has informed each Fund that it has no
direct or indirect material financial interest in the Fund, Nuveen, the Adviser
or any other investment company sponsored by Nuveen.
SECTION 16(A) BENEFICIAL INTEREST REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the Securities Exchange Act
of 1934, as amended (the "1934 Act"), require Board Members and officers, the
investment adviser, affiliated persons of the investment adviser and persons who
own more than 10% of a registered class of the Funds' equity securities to file
forms reporting their affiliation with that Fund and reports of ownership and
changes in ownership of that Fund's shares with the Securities and Exchange
Commission (the "SEC") and the New York Stock Exchange. These persons and
entities are required by SEC regulation to furnish the Funds with copies of all
Section 16(a) forms they file. Based on a review of these forms furnished to
each Fund, each Fund believes that the Fund's Board Members and officers,
investment adviser and affiliated persons of the investment adviser have
complied with all applicable Section 16(a) filing requirements during its last
fiscal year. To the knowledge of management of the Funds, no shareholder of a
Fund owns more than 10% of a registered class of a Fund's equity securities.
INFORMATION ABOUT THE ADVISER
The Adviser, located at 333 West Wacker Drive, Chicago, Illinois, serves as
investment adviser and manager for each Fund. The Adviser is a wholly owned
subsidiary of Nuveen Investments, Inc., 333 West Wacker Drive, Chicago, Illinois
60606. Nuveen Investments, Inc., is approximately 79% owned by The St. Paul
Companies, Inc. ("St. Paul"). St. Paul is located at 385 Washington Street, St.
Paul, Minnesota 55102, and is principally engaged in providing
property-liability insurance through subsidiaries.
SHAREHOLDER PROPOSALS
To be considered for presentation at the Annual Meeting of shareholders of any
of the Funds to be held in 2004, a shareholder proposal submitted pursuant to
Rule 14a-8 of the 1934 Act must be received at the offices of that Fund, 333
West Wacker Drive, Chicago, Illinois 60606, not later than February 17, 2004. A
shareholder wishing to provide notice in the manner prescribed by Rule
14a-4(c)(1) of a proposal submitted outside of the process of Rule 14a-8 must
submit such written notice to the Fund not later than May 2, 2004. Timely
submission of a proposal does not mean that such proposal will be included.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement will be paid by the Funds. All other costs in
connection with the solicitation of proxies, will be paid by the Funds pro rata
based on the number
25
of shareholder accounts. Additional solicitation may be made by letter,
telephone or telegraph by officers or employees of Nuveen or the Adviser, or by
dealers and their representatives. The Funds have engaged D.F. King & Co., Inc.,
to assist in the solicitation of proxies at an estimated cost of $2,500 per Fund
plus reasonable expenses.
FISCAL YEAR
The last fiscal year end for each Fund was October 31, 2002.
ANNUAL REPORT DELIVERY
Annual reports were sent to shareholders of record of each Fund following each
Fund's fiscal year end. Each Fund will furnish, without charge, a copy of its
annual report and/or semi-annual report as available upon request. Such written
or oral requests should be directed to such Fund at 333 West Wacker Drive,
Chicago, Illinois 60606 or by calling 1-800-257-8787.
Please note that only one annual report or proxy statement may be delivered to
two or more shareholders of a Fund who share an address, unless the Fund has
received instructions to the contrary. To request a separate copy of an annual
report or proxy statement, or, for instructions as to how to request a separate
copy of such documents or as to how to request a single copy if multiple copies
of such documents are received, shareholders should contact the applicable Fund
at the address and phone number set forth above.
GENERAL
Management does not intend to present and does not have reason to believe that
any other items of business will be presented at any Annual Meeting. However, if
other matters are properly presented to the Annual Meeting for a vote, the
proxies will be voted by the persons acting under the proxies upon such matters
in accordance with their judgment of the best interests of the Fund.
A list of shareholders entitled to be present and to vote at each Annual Meeting
will be available at the offices of the Funds, 333 West Wacker Drive, Chicago,
Illinois, for inspection by any shareholder during regular business hours
beginning ten days prior to the date of that Annual Meeting.
Failure of a quorum to be present at any Annual Meeting will necessitate
adjournment and will subject that Fund to additional expense. The persons named
in the enclosed proxy may also move for an adjournment of any Annual Meeting to
permit further solicitation of proxies with respect to any of the proposals if
they determine that adjournment and further solicitation is reasonable and in
the best interests of the shareholders. Under each Fund's By-Laws, an
adjournment of a meeting requires the affirmative vote of a majority of the
shares present in person or represented by proxy at the meeting.
IF YOU CANNOT BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
Jessica R. Droeger
Vice President and Secretary
June 17, 2003
26
NUVEEN MANAGEMENT INVESTMENT COMPANIES
AUDIT COMMITTEES CHARTER
Revised May, 2003
ORGANIZATION AND MEMBERSHIP
There shall be a committee of each Board of Directors/Trustees of the Nuveen
Management Investment Companies (the "Funds") to be known as the Audit
Committee. The Audit Committee shall be composed of at least three
Directors/Trustees. Audit Committee members shall be independent of the Funds
and free of any relationship that, in the opinion of the Directors/Trustees,
would interfere with their exercise of independent judgment as a Committee
member. In particular, each member must meet the independence and experience
requirements of the New York Stock Exchange, Section 10A of the Securities
Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations of the
Securities and Exchange Commission (the "Commission"). Each such member of the
Audit Committee shall have a basic understanding of finance and accounting and
be able to read and understand fundamental financial statements. At least one
such member shall have accounting or related financial management expertise, in
each case as determined by the Directors/Trustees, exercising their business
judgment (this person may also be the Committee's "financial expert"). The Board
shall appoint the members of the Audit Committee, on the recommendation of the
Governance Committee.
STATEMENT OF POLICY
The Audit Committee shall assist the Board in monitoring (1) the accounting and
reporting policies and practices of the Management Investment Companies
(hereafter referred to as "Funds" or individually "Fund"), (2) the quality and
integrity of the financial statements of the Funds, (3) the Funds' compliance
with legal and regulatory requirements and (4) the independent auditors'
qualifications and independence, and the performance of the internal audit
function and independent auditors. In doing so, the Audit Committee shall seek
to maintain free and open means of communication among the Directors/Trustees,
the independent auditors, the internal auditors and the management of Nuveen.
The Audit Committee shall meet periodically with Nuveen management, the Funds'
internal auditor, and the Funds' independent auditors, in separate executive
sessions.
The Audit Committee shall have the authority and resources in its discretion to
retain special legal, accounting or other consultants to advise the Committee.
The Audit Committee may request any officer or employee of Nuveen Investments,
Inc. (or its affiliates) or the Funds' independent auditors or outside counsel
to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee. The Funds' independent auditors and internal
auditors shall have unrestricted accessibility at any time to Committee members.
RESPONSIBILITIES
Fund management has the primary responsibility to establish and maintain systems
for accounting, reporting and internal control.
The independent auditors have the primary responsibility to plan and implement
an audit, with proper consideration given to the accounting, reporting and
internal controls. The independent auditors are ultimately accountable to the
Board and Audit Committee. It is the ultimate responsibility of the Audit
Committee to select, retain, evaluate and replace the independent auditors and
to determine their compensation, subject to ratification of the Board, if
required.
In carrying out its responsibilities the Audit Committee believes its policies
and procedures should remain flexible, in order to react to changing conditions
and requirements applicable to the Funds.
The Audit Committee is responsible for the following:
Fund Financial Statements:
1. Reviewing the annual audited financial statements with Fund
management and the independent auditors including major issues
regarding accounting and auditing principles and practices, and the
Funds' disclosures in its periodic reports under "Management's
Discussion and Analysis."
2. Requiring the independent auditors to deliver to the Chairman of the
Committee a timely report on any issues relating to the significant
accounting policies, management judgments and accounting estimates or
other matters that would need to be communicated under Statement on
Auditing Standards (SAS) No. 90, Audit Committee Communications
(which amended SAS No. 61, Communication with Audit Committees), that
arise during the auditors' review of the Funds' financial statements,
which information the Chairman shall further communicate to the other
members of the Committee, as deemed necessary or appropriate in the
Chairman's judgment.
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3. Discussing with management the Funds' press releases regarding
dividends, as well as financial information and guidance provided to
analysts and rating agencies. This discussion may be done generally,
consisting of discussing the types of information to be disclosed and
the types of presentations to be made. The Chairman of the Audit
Committee shall be authorized to have these discussions with
management on behalf of the Audit Committee.
4. Discussing with management and the independent auditors significant
financial reporting issues and judgments made in connection with the
preparation of the Funds' financial statements, including any
significant changes in the Funds' selection or application of
accounting principles and any major issues as to the adequacy of the
Funds' internal controls and any special audit steps adopted in light
of control deficiencies.
5. Discussing with management and the independent auditors the effect of
regulatory and accounting initiatives on the Funds' financial
statements.
6. Reviewing and discussing reports from the independent auditors
regarding (a) all critical accounting policies and practices to be
used; (b) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, ramifications of the use of such alternative
treatments and disclosures, and the treatment preferred by the
independent auditors; and (c) other material written communications
between the independent auditors and management, such as any
management letter or schedule of unadjusted differences.
7. Discussing with management the Funds' major financial risk exposures
and the steps management has taken to monitor and control these
exposures, including the Funds' risk assessment and risk management
policies.
8. Reviewing disclosures made to the Audit Committee by the Funds'
principal executive officer and principal financial officer during
their certification process for the Funds' periodic reports about any
significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the
Funds' internal controls.
With respect to the independent auditors:
1. Appointing or replacing the independent auditors, subject, if
applicable, only to Board and shareholder ratification; and
compensating and overseeing the work of the independent auditor
(including the resolution of disagreements between management and the
independent auditor regarding financial reporting), who shall report
directly to the Audit Committee, for the purpose of preparing or
issuing an audit report or related work.
2. Meeting with the independent auditors and Fund management to review
the scope, fees, audit plans and staffing for the audit, for the
current year. At the conclusion of the audit, reviewing such audit
results, including the independent auditors' evaluation of the Funds'
financial and internal controls, any comments or recommendations of
the independent auditors, any audit problems or difficulties and
management's response, any significant changes required from the
originally planned audit programs and any adjustments to such
statements recommended by the auditors.
3. Pre-approving all audit services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Funds
by their independent auditors, subject to the de minimis exceptions
for non-audit services described in Section 10A of the Exchange Act
that the Audit Committee approves prior to the completion of the
audit. The Chairman of the Audit Committee shall be authorized to
give pre-approvals of such non-audit services on behalf of the Audit
Committee.
4. Obtaining and reviewing a report from the independent auditors at
least annually (including a formal written statement delineating all
relationships between the auditors and the Funds) regarding (a) the
independent auditor's internal quality-control procedures; (b) any
material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by an inquiry or
investigation by governmental or professional authorities within the
preceding five years, respecting one or more independent audits
carried out by the firm; (c) any steps taken to deal with any such
issues; and (d) all relationships between the independent auditor and
the Funds and their affiliates; and evaluating the qualifications,
performance and independence of the independent auditor, including
their membership in the SEC practice section of the AICPA and their
compliance with all applicable requirements for independence and peer
review, and a review and evaluation of the lead partner, taking into
account the opinions of management and the internal auditors, and
discussing such reports with the independent auditors. The Audit
Committee shall present its conclusions with respect to the
independent auditor to the Board.
5. Reviewing any reports from the independent auditors mandated by
Section 10A(b) of the Exchange Act regarding any illegal act detected
by the independent auditor (whether or not perceived to have a
material
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effect on the Funds' financial statements) and obtaining from the
independent auditors any information about illegal acts in accordance
with Section 10A(b).
6. Ensuring the rotation of the lead (or coordinating) audit partner
having primary responsibility for the audit and the audit partner
responsible for reviewing the audit as required by law, and further
considering the rotation of the independent auditor firm itself.
7. Recommending to the Board of Directors policies for the Funds' or the
Adviser's hiring of employees or former employees of the independent
auditor who participated in the audit of the Funds.
With respect to any internal auditor:
1. Reviewing the internal audit function as it relates to the Funds
including the proposed programs for the coming year. It is not the
obligation or responsibility of the Audit Committee to confirm the
independence of any Nuveen internal auditors performing services
relating to the Funds or to approve any termination or replacement of
the Nuveen Manager of Internal Audit.
2. Receiving a summary of findings from any completed internal audits
pertaining to the Funds and a progress report on the proposed
internal audit plan for the Funds, with explanations for significant
deviations from the original plan.
Other responsibilities:
1. Reviewing with the Funds' and the Adviser's counsel legal matters
that may have a material impact on the Fund's financial statements or
compliance policies.
2. Receiving and reviewing periodic or special reports issued on
exposure/controls, irregularities and control failures related to the
Funds.
3. Reviewing with the independent auditors, with any internal auditor
and with Fund management, the adequacy and effectiveness of the
accounting and financial controls of the Funds, and eliciting any
recommendations for the improvement of internal control procedures or
particular areas where new or more detailed controls or procedures
are desirable. Particular emphasis should be given to the adequacy of
such internal controls to expose payments, transactions or procedures
that might be deemed illegal or otherwise improper.
4. Reviewing the reports of examinations by regulatory authorities.
5. Discussing with management and the independent auditor any
correspondence with regulators or governmental agencies that raises
material issues regarding the Funds' financial statements or
accounting policies.
6. Obtaining reports from management with respect to the Funds' policies
and procedures regarding compliance with applicable laws and
regulations.
7. Reporting to the Directors/Trustees on the results of the activities
of the Committee.
8. Performing any special reviews, investigations or oversight
responsibilities requested by the Directors/ Trustees.
9. Preparing any report required by the rules of the SEC to be included
in a proxy statement for a fund.
10. Reviewing and reassessing annually the adequacy of this charter and
recommending to the Board of Directors/Trustees approval of any
proposed changes deemed necessary or advisable by the Committee.
Although the Audit Committee shall have the authority and responsibilities set
forth in this Charter, it is not the responsibility of the Audit Committee to
plan or conduct audits or to determine that the Funds' financial statements are
complete and accurate and are in accordance with generally accepted accounting
principles. That is the responsibility of management and the independent
auditors. Nor is it the duty of the Audit Committee to conduct investigations,
to resolve disagreements, if any, between management and the independent
auditors or to ensure compliance with laws and regulations.
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APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION (the "Agreement") is made
as of the day of , 200 by and between (the
"Acquiring Fund"), a newly created business trust formed under the laws of the
Commonwealth of Massachusetts and , a Minnesota corporation (the
"Target Fund") together with the Acquiring Fund, (the "Funds"). Each of the
Funds maintains its principal place of business at 333 West Wacker Drive,
Chicago, Illinois 60606.
This Agreement is intended to be, and is adopted as, a plan of reorganization
for the purpose of Section 368(a)(1) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). The reorganization will consist of (a)
the acquisition by the Acquiring Fund of all of the assets of the Target Fund in
exchange solely for common shares, par value $.01 per share, of the Acquiring
Fund ("Acquiring Fund Common Shares"), shares of Municipal Auction Rate
Cumulative Preferred Shares, par value $.01 per share ("MuniPreferred(R)"), of
the Acquiring Fund ("Acquiring Fund MuniPreferred Shares" and, collectively with
the Acquiring Fund Common Shares, "Acquiring Fund Shares") and the assumption by
the Acquiring Fund of all of the liabilities of the Target Fund, and (b)
distribution, after the Closing Date hereinafter referred to, of such Acquiring
Fund Shares to the shareholders of the Target Fund in complete liquidation and
termination of the Target Fund as provided herein, all upon the terms and
conditions hereinafter set forth in this Agreement (the "Reorganization").
In consideration of the premises and of the covenants and agreements set forth
herein, the parties covenant and agree as follows:
1. Transfer of Assets of the Target Fund in Exchange for Shares of the
Acquiring Fund and Assumption of Liabilities, if Any; Liquidation of the
Target Fund.
1.1 The Target Fund agrees to sell, assign, transfer and deliver,
as of the close of business on the Closing Date (the "Effective Time"),
all of its assets as set forth in paragraph 1.2 to the Acquiring Fund,
free and clear of all liens and encumbrances, except as otherwise
provided herein. In exchange, the Acquiring Fund agrees (a) to assume
all of the liabilities, if any, of the Target Fund, as set forth in
paragraph 1.3 and (b) to issue and deliver to the Target Fund, for
distribution in accordance with paragraph 1.5 to the Target Fund's
shareholders, (i) the number of full and fractional Acquiring Fund
Common Shares equal in number and value to the Target Fund common shares
outstanding as of Closing Date, and (ii) shares of Acquiring
Fund MuniPreferred, Series . Such transactions shall take place at
the closing provided for in paragraph 2.1 (the "Closing").
1.2 As of the Effective Time, the Acquiring Fund shall acquire all
of the assets of the Target Fund (consisting without limitation of all
cash, cash equivalents, municipal obligations and other portfolio
securities, receivables (including interest and dividends receivable)
and any deferred or prepaid expenses shown as assets) as set forth in
the Statement of Net Assets referred to in paragraph 6.3 as of the
Closing Date. The Target Fund has no plan or intent to sell or otherwise
dispose of any of its assets, other than in the Target Fund's ordinary
course of business of being an investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company
Act").
1.3 As of the Effective Time, the Acquiring Fund will assume all of
the Target Fund's debts, liabilities, obligations and duties of the
Target Fund of whatever kind or nature, whether absolute, accrued,
contingent or otherwise, whether or not arising in the ordinary course
of business, whether or not determinable as of the Effective Time and
whether or not specifically referred to in this Agreement.
1.4 On or as soon after the Closing Date as is conveniently
practicable, but in no event later than 12 months after the Closing Date
(the "Liquidation Date"), the Target Fund will distribute in complete
liquidation (a) pro rata to its common shareholders of record,
determined as of the Effective Time, the Acquiring Fund Common Shares
received by the Target Fund pursuant to paragraph 1.1 in exchange for
common shares of the Target Fund held by the common shareholders of the
Target Fund and (b) pro-rata, by series, to its preferred shareholders
of record, determined as of the Effective Time, the Acquiring Fund
MuniPreferred Shares received by the Target Fund pursuant to paragraph
1.1. Such distribution and liquidation will be accomplished by opening
accounts on the books of the Acquiring Fund in the names of the
shareholders of the Target Fund and transferring to each account (x) in
the case of a common shareholder, a number of the Acquiring Fund Common
Shares received by the Target Fund equal in number to the common shares
of the Target Fund held by such shareholder and (y) in the case of a
preferred shareholder, a number of the Acquiring Fund MuniPreferred
Shares received by the Target Fund equal in number to the shares of
Target Fund MuniPreferred held by such shareholder.
1.5 Any reporting responsibility of the Target Fund with the
Securities and Exchange Commission (the "SEC"), the New York Stock
Exchange ("NYSE"), or any state securities commission is and shall
remain the responsibility of the Target Fund up to and including the
Liquidation Date.
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1.6 All books and records of the Target Fund, including all books
and records required to be maintained under the Investment Company Act,
and the rules and regulations thereunder, shall be available to the
Acquiring Fund from and after the Closing Date and shall be turned over
to the Acquiring Fund on or prior to the Liquidation Date.
1.7 The Target Fund will dissolve, terminate and have its affairs
wound up in accordance with Minnesota state law promptly following the
Liquidation Date.
1.8 If and to the extent the Board of Directors of the Target Fund
deems it advisable for federal income tax purposes, such Target Fund
shall make a distribution of net investment company taxable income, if
any, and net capital gain, if any, immediately prior to the Effective
Time.
2. Closing and Closing Date
2.1 The Closing Date shall be such date as the Boards of each Fund
may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously as of the Effective Time unless otherwise provided.
The Closing shall be at the office of the Acquiring Fund or at such
other place as the parties may agree.
2.2 The custodian for the Target Fund shall deliver to the
Acquiring Fund at the Closing a certificate of an authorized officer
stating that (a) the Target Fund's portfolio securities, cash and any
other assets have been transferred in proper form to the Acquiring Fund
on the Closing Date and (b) all necessary taxes, if any, have been paid,
or provision for payment has been made, in conjunction with the delivery
of portfolio securities.
2.3 The Target Fund shall deliver to the Acquiring Fund on or prior
to the Closing Date a list of the names and addresses of its
shareholders and the number of outstanding shares of the Target Fund
owned by each such shareholder (the "Shareholder Lists"), all as of the
Effective Time, certified by the Secretary or Assistant Secretary of the
Target Fund. The Acquiring Fund shall issue and deliver to the Target
Fund at the Closing a confirmation or other evidence satisfactory to the
Target Fund that Acquiring Fund Shares have been or will be credited to
the Target Fund's account on the books of the Acquiring Fund. At the
Closing each party shall deliver to the other such bills of sale,
checks, assignments, stock certificates, receipts and other documents as
such other party or its counsel may reasonably request to effect the
transactions contemplated by this Agreement.
2.4 Immediately upon delivery to the Target Fund of the Acquiring
Fund Shares, the Target Fund will, as sole shareholder of the Acquiring
Fund, vote to elect Trustees of the Acquiring Fund and to approve the
investment advisory agreement for the Acquiring Fund.
3. Representations and Warranties
3.1 The Target Fund represents and warrants as follows:
3.1.1 The Target Fund is duly organized, validly existing and in
good standing under the laws of the State of Minnesota and has the
power to own all of its properties and assets and, subject to
approval of the shareholders of the Target Fund, to carry out the
Agreement.
3.1.2 The Target Fund is a closed-end diversified management
investment company duly registered under the Investment Company Act,
and such registration is in full force and effect.
3.1.3 The Target Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any
provision of the Articles of Incorporation or By-Laws of the Target
Fund or of any material agreement, indenture, instrument, contract,
lease or other undertaking to which the Target Fund is a party or by
which the Target Fund is bound.
3.1.4 The Target Fund has no material contracts or other
commitments that will not be terminated on or prior to the Closing
Date without any liability or penalty to the Target Fund or the
Acquiring Fund.
3.1.5 No material litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to the knowledge of the Target Fund, threatened
against the Target Fund or any of its properties or assets. The
Target Fund knows of no facts that might form the basis for the
institution of such proceedings, and the Target Fund is not a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body that materially and adversely affects
its business or its ability to consummate the transactions herein
contemplated.
3.1.6 The audited Statement of Net Assets, Statement of
Operations, Statement of Changes in Net Assets, Financial Highlights
and Portfolio of Investments of the Target Fund at , 200
and for the period then ended (copies of which have been furnished to
the Acquiring Fund) have been prepared in accordance with generally
accepted accounting principles consistently applied and present
fairly, in all material respects, the financial condition of the
Target Fund as of such date, and there are no known material
liabilities of the Target Fund (contingent or otherwise) not
disclosed therein.
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3.1.7 Since , 200 , there has not been any materially
adverse change in the Target Fund's financial condition, assets,
liabilities or business, other than changes occurring in the ordinary
course of business, or any incurrence by the Target Fund of
indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed to and
accepted by the Acquiring Fund. For the purposes of this paragraph
3.1.7, a decline in net asset value or net asset value per common
share of the Target Fund as a result of changes in the value of
investments held by the Target Fund or a distribution or payment of
dividends shall not constitute a materially adverse change.
3.1.8 All federal, state, local and other tax returns and
reports of the Target Fund required by law to have been timely filed
or furnished by the date hereof have been filed or furnished, and all
federal, state, local and other taxes, additions to tax, interest and
penalties required to be paid (whether or not a return or report is
required) have been paid insofar as due, or provision has been made
for the payment thereof, and, to the best of the Target Fund's
knowledge, no such return is currently under audit and no assessment
has been asserted against the Target Fund.
3.1.9 For each taxable year of its operations, the Target Fund
has met the requirements of Subchapter M of the Internal Revenue Code
for qualification and treatment as a regulated investment company
("RIC") and intends to meet those requirements for the current
taxable year.
3.1.10 The authorized capital of the Target Fund consists of
common shares and preferred shares, par value
$.01 per share. All issued and outstanding shares of the Target Fund
are duly and validly issued and outstanding, fully paid and
non-assessable. All issued and outstanding shares of the Target Fund
will, at the time of the Closing, be held by the persons and in the
amounts set forth in the applicable Shareholder List submitted to the
Acquiring Fund in accordance with the provisions of paragraph 2.3.
The Target Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the Target
Fund, nor is there outstanding any security convertible into shares
of the Target Fund.
3.1.11 At the Closing Date, the Target Fund will have good and
marketable title to the assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.1 and full right, power and authority to
sell, assign, transfer and deliver such assets hereunder free of any
liens or other encumbrances, and, upon delivery and payment for such
assets, the Acquiring Fund will acquire good and marketable title
thereto.
3.1.12 The execution, delivery and performance of this Agreement
has been duly authorized by the Board of Directors of the Target Fund
(including the determinations required by Rule 17a-8(a) under the
Investment Company Act) and by all necessary action, other than
shareholder approval, on the part of the Target Fund, and, subject to
shareholder approval, this Agreement constitutes a valid and binding
obligation of the Target Fund.
3.1.13 The information furnished and to be furnished by the
Target Fund for use in applications for orders, registration
statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby is,
and shall be, accurate and complete in all material respects and is
in compliance, and shall comply, in all material respects with
applicable federal securities and other laws and regulations.
3.1.14 On the date of the Proxy Statement referred to in
paragraph 4.5, at the time of the Annual Meeting of the Target Fund's
shareholders and on the Closing Date, the Proxy Statement (a) will
comply in all material respects with the provisions and regulations
of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the Investment Company Act and the rules and regulations
thereunder and (b) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this paragraph
3.1.14 shall not apply to statements in or omissions from the Proxy
Statement made in reliance upon and in conformity with information
furnished by the Acquiring Fund for use therein.
3.1.15 No consent, approval, authorization or order of any court
or governmental authority is required for the consummation by the
Target Fund of the transactions contemplated by this Agreement,
except such as have been obtained under the Securities Act of 1933,
as amended (the "1933 Act"), the 1934 Act and the Investment Company
Act, and such as may be required under state securities laws.
3.1.16 There are no brokers or finder's fees payable on behalf
of the Target Fund in connection with the transactions provided for
herein.
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3.2 The Acquiring Fund represents and warrants as follows:
3.2.1 The Acquiring Fund is duly organized and existing under
the laws of the Commonwealth of Massachusetts as a voluntary
association with transferable shares commonly referred to as a
"Massachusetts business trust" and has the power to own all of its
properties and assets and to carry out the Agreement.
3.2.2 The Acquiring Fund is not, and the execution, delivery and
performance of this Agreement will not result, in violation of any
provision of the Declaration of Trust or By-Laws of the Acquiring
Fund or of any material agreement, indenture, instrument, contract,
lease or other undertaking to which the Acquiring Fund is a party or
by which the Acquiring Fund is bound.
3.2.3 All Acquiring Fund Common Shares and Acquiring Fund
MuniPreferred Shares to be issued in exchange for the net assets of
the Target Fund pursuant to this Agreement will be, when so issued,
duly and validly issued and outstanding, fully paid and
non-assessable, except that shareholders of the Acquiring Fund may
under certain circumstances be held personally liable for its
obligations. Except as contemplated by this Agreement, the Acquiring
Fund does not have outstanding any options, warrants or other rights
to subscribe for or purchase any Acquiring Fund Shares, nor is there
outstanding any security convertible into any Acquiring Fund Shares.
3.2.4 The execution, delivery and performance of this Agreement
has been duly authorized by the Board of Trustees of the Acquiring
Fund (including the determinations required by Rule 17a-8(a) under
the Investment Company Act) and by all necessary action on the part
of the Acquiring Fund, this Agreement constitutes a valid and binding
obligation of the Acquiring Fund.
3.2.5 The Acquiring Fund was newly formed for the purpose of
engaging in the Reorganization and since its formation has not
engaged in any activity or business, other than such as required to
consummate the Reorganization.
3.2.6 The Acquiring Fund will meet all the requirements of
Subchapter M of the Internal Revenue Code for qualification and
treatment as a RIC for its taxable year that includes the Closing
Date and intends to continue to qualify as a RIC under the Internal
Revenue Code.
3.2.7 Prior to the Effective Time, there will be no issued or
outstanding shares of the Acquiring Fund or any other securities
issued by the Acquiring Fund.
4. Covenants of the Acquiring Fund and the Target Fund
4.1 The Target Fund will operate its business in the ordinary
course between the date hereof and the Closing Date, it being understood
that the ordinary course of business will include declaring and paying
customary dividends and other distributions.
4.2 The Target Fund will call a shareholders' meeting to consider
and act upon this Agreement and the transactions contemplated herein and
to take all other action necessary to obtain approval of the
transactions contemplated hereby.
4.3 The Target Fund will assist the Acquiring Fund in obtaining
such information as the Acquiring Fund reasonably requests concerning
the beneficial ownership of the Target Fund's shares.
4.4 Subject to the provisions of this Agreement, each Fund will
take or cause to be taken all action, and will do or cause to be done
all things, reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement.
4.5 The Target Fund will prepare and file with the SEC a Proxy
Statement (the "Proxy Statement") in compliance with the 1934 Act and
the Investment Company Act and the rules and regulations thereunder.
4.6 Each Fund will, from time to time, as and when requested by the
other Fund, execute and deliver or cause to be executed and delivered
all such assignments and other instruments, and will take or cause to be
taken such further action, as the other Fund may deem necessary or
desirable in order to (a) vest in and confirm to the Acquiring Fund
title to and possession of all the assets of the Target Fund to be sold,
assigned, transferred and delivered to the Acquiring Fund pursuant to
this Agreement, (b) vest in and confirm to the Target Fund title to and
possession of all the Acquiring Fund Shares to be transferred to the
Target Fund pursuant to this Agreement, (c) assume all of the Target
Fund's liabilities in accordance with this Agreement, and (d) otherwise
to carry out the intent and purpose of this Agreement.
4.7 The Acquiring Fund will use all reasonable efforts to obtain
the approvals and authorizations required by the 1933 Act, the
Investment Company Act and such of the state Blue Sky or securities laws
as it may deem appropriate in order to continue its operations after the
Closing Date.
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4.8 The Acquiring Fund shall not conduct any business or activity
prior to the Closing except for such activity as is required to
consummate the transactions contemplated by this Agreement.
4.9 The expenses incurred by the Funds in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
Target Fund, or assumed as a liability by the Acquiring Fund in
connection with the Reorganization.
5. Conditions Precedent to Obligations of the Target Fund
The obligations of the Target Fund to consummate the transactions provided
for herein shall, at its election, be subject to the performance by the
Acquiring Fund of all the obligations to be performed by it hereunder on or
before the Closing Date and the following further conditions:
5.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by
the transactions contemplated by this Agreement, as of the Closing Date
with the same force and effect as if made on and as of the Closing Date.
5.2 The Acquiring Fund shall have delivered to the Target Fund a
certificate executed in its name by the President or a Vice President of
the Acquiring Fund, in form and substance satisfactory to the Target
Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquiring Fund in this Agreement
are true and correct at and as of the Closing Date except as they may be
affected by the transactions contemplated by this Agreement, and as to
such other matters as the Target Fund shall reasonably request.
6. Conditions Precedent to Obligations of the Acquiring Fund
The obligations of the Acquiring Fund to consummate the transactions
provided for herein with respect to the Target Fund shall, at its election,
be subject to the performance by the Target Fund of all the obligations to
be performed by it hereunder on or before the Closing Date and the
following further conditions:
6.1 All representations and warranties of the Target Fund contained
in this Agreement shall be true and correct in all material respects as
of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date with
the same force and effect as if made on and as of the Closing Date.
6.2 The Target Fund shall have delivered to the Acquiring Fund a
certificate executed in its name by the President or Vice President of
the Target Fund, in form and substance satisfactory to the Acquiring
Fund and dated as of the Closing Date, to the effect that the
representations and warranties of the Target Fund in this Agreement are
true and correct at and as of the Closing Date except as they may be
affected by the transactions contemplated by this Agreement, and as to
such other matters as the Acquiring Fund shall reasonably request.
6.3 The Target Fund shall have delivered to the Acquiring Fund on
the Closing Date a Statement of Net Assets, which Statement shall be
prepared in accordance with generally accepted accounting principles
consistently applied, together with a list of its portfolio securities
showing the adjusted tax bases and holding periods of such securities as
of the Closing Date, certified by the Treasurer of the Target Fund.
7. Further Conditions Precedent to Obligations of The Acquiring Fund
and the Target Fund
The obligations of each Fund hereunder are subject to the further
conditions that on or before the Closing Date:
7.1 This Agreement and the transactions contemplated herein shall
have been approved by the requisite votes of (a) the Board of Trustees
of the Acquiring Fund and the Board of Directors of the Target Fund,
including as to the determinations required by Rule 17a-8(a) under the
Investment Company Act and (b) the holders of the outstanding shares of
the Target Fund in accordance with the provisions of the Target Fund's
Articles of Incorporation and By-Laws, the Investment Company Act and
the requirements of the NYSE; each Fund shall have delivered certified
copies of the resolutions evidencing such approvals to the other Fund;
and the Acquiring Fund shall have given Bankers Trust Company or its
successor, and the Depository Trust Company or its successor, at least
five business days notice of such approval.
7.2 On the Closing Date no action, suit or other proceeding shall
be pending before any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other relief in connection
with, this Agreement or the transactions contemplated herein.
7.3 All consents of other parties and all consents, orders and
permits of federal, state and local regulatory authorities (including
those of the SEC and of state Blue Sky or securities authorities,
including "no-action" positions of such federal or state authorities)
deemed necessary by the Acquiring Fund or the Target Fund to permit
consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a materially
adverse
B-5
effect on the assets or properties of the Acquiring Fund or the Target
Fund, provided that either party hereto may waive any part of this
condition as to itself.
7.4 The Funds shall have received an opinion of Vedder, Price,
Kaufman & Kammholz reasonably satisfactory to the Funds and based upon
such reasonably requested representations and warranties as requested by
counsel, substantially to the effect that, for federal income tax
purposes:
7.4.1 The acquisition by the Acquiring Fund of all the assets of
the Target Fund in exchange solely for Acquiring Fund Shares and the
assumption by the Acquiring Fund of the Target Fund's liabilities, if
any, followed by the distribution by the Target Fund of the Acquiring
Fund Shares to the shareholders of the Target Fund in exchange for
their Target Fund shares in complete liquidation of the Target Fund,
will constitute a "reorganization" within the meaning of Section
368(a)(1) of the Internal Revenue Code, and the Acquiring Fund and
the Target Fund each will be "a party to a reorganization" within the
meaning of Section 368(b) of the Internal Revenue Code;
7.4.2 The Target Fund's shareholders who receive solely
Acquiring Fund Shares in exchange for their shares of the Target Fund
will recognize no gain or loss upon the exchange of all of their
Target Fund shares in connection with the Reorganization;
7.4.3 No gain or loss will be recognized by the Target Fund upon
the transfer of all its assets to the Acquiring Fund solely in
exchange for Acquiring Fund Shares and the assumption by the
Acquiring Fund of the Target Fund's liabilities, if any, or upon the
subsequent distribution of those Acquiring Fund Shares to the Target
Fund shareholders in complete liquidation of the Target Fund;
7.4.4 No gain or loss will be recognized by the Acquiring Fund
upon the receipt of all the Target Fund's assets solely in exchange
for Acquiring Fund Shares and the assumption of the Target Fund's
liabilities, if any;
7.4.5 The basis of the Target Fund's assets to be received by
the Acquiring Fund will be, in each instance, the same as the basis
of those assets when held by the Target Fund immediately before the
transfer, and the holding period of such assets to be received by the
Acquiring Fund will include the holding period thereof when held by
the Target Fund;
7.4.6 The basis of the Acquiring Fund Shares to be received by
the Target Fund's shareholders upon liquidation of the Target Fund
will be, in each instance, the same as the basis of the Target Fund
shares surrendered in exchange therefor, decreased by any cash
received and increased by the amount of gain recognized on the
exchange; and
7.4.7 The holding period of the Acquiring Fund Shares to be
received by the Target Fund's shareholders will include the period
during which the Target Fund shares to be surrendered in exchange
therefor were held, provided such Target Fund shares were held as
capital assets by those shareholders on the date of the exchange.
Such opinion shall be based on customary assumptions and such
representations as Vedder, Price, Kaufman & Kammholz may reasonably
request, and the Target Fund and Acquiring Fund will cooperate to make and
certify the accuracy of such representations.
7.5 The Target Fund shall have obtained written confirmation from
both Moody's Investors Service, Inc. and Standard & Poor's Corporation
that consummation of the transactions contemplated by this Agreement
will not impair the "aaa" and AAA ratings, respectively, assigned by
such rating agencies to the existing shares of Target Fund
MuniPreferred, Series .
8. Entire Agreement; Survival of Warranties
8.1 This Agreement constitutes the entire agreement between the
Funds.
8.2 The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereby.
9. Termination
This Agreement may be terminated at any time prior to the Effective Time,
whether before or after approval of the shareholders of the Funds:
9.1 By mutual agreement of the Funds;
9.2 By either Fund, if a condition to the obligations of such Fund
shall not have been met and it reasonably appears that it will not or
cannot be met; or
B-6
9.3 By either Fund, if the Closing shall not have occurred on or
before , 200 ;
In the event of any such termination, there shall be no liability for
damages on the part of either Fund (other than the liability of the
Funds to pay expenses pursuant to paragraph 4.9) or any Director,
Trustee or officer of any Fund.
10. Amendment
This Agreement may be amended, modified or supplemented only in writing by
the parties; provided, however, that following the shareholders' meetings
called by the Funds pursuant to paragraph 4.2, no such amendment may have
the effect of changing the provisions for determining the number of
Acquiring Fund Common Shares or shares of Acquiring Fund MuniPreferred to
be distributed to the Target Fund's shareholders under this Agreement
without their further approval and the further approval of the Funds'
Boards of Directors or Trustees (including the determination required by
Rule 17a-8(a) under the Investment Company Act), and provided further that
nothing contained in this paragraph 10 shall be construed as requiring
additional approval to amend this Agreement to change the Closing Date or
the Effective Time.
11. Notices
Any notice, report, demand or other communication required or permitted by
any provision of this Agreement shall be in writing and shall be given by
hand delivery, prepaid certified mail or overnight delivery service
addressed to Nuveen Investments, Inc., 333 West Wacker Drive, Chicago,
Illinois 60606, Attention: .
12. Headings; Counterparts; Governing Law; Assignment
12.1 The paragraph headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.2 This Agreement may be executed in any number of counterparts,
each of which will be deemed an original.
12.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
12.4 This Agreement shall bind and inure to the benefit of the
parties and their respective successors and assigns, and no assignment
or transfer hereof or of any rights or obligations hereunder shall be
made by either party without the written consent of the other party.
Nothing herein expressed or implied is intended or shall be construed to
confer upon or give any person, firm or corporation other than the
parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
12.5 All persons dealing with the Acquiring Fund must look solely
to the property of the Acquiring Fund for the enforcement of any claims
against the Acquiring Fund as neither the Trustees, officers, agents or
shareholders of the Acquiring Fund assume any personal liability for
obligations entered into on behalf of the Acquiring Fund.
12.6 All persons dealing with the Target Fund must look solely to
the property of the Target Fund for the enforcement of any claims
against the Target Fund as neither the Directors, officers, agents or
shareholders of the Target Fund assume any personal liability for
obligations entered into on behalf of the Target Fund.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
by the President or Vice President of each Fund.
<Table>
TARGET FUND ACQUIRING FUND
By: ---------------------------------- By: ----------------------------------
</Table>
B-7
APPENDIX C
SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA BUSINESS CORPORATION ACT
RELATING TO THE TARGET FUND DISSENTING SHAREHOLDERS' RIGHTS OF APPRAISAL
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.--Subdivision 1. Actions creating
rights. A shareholder of a corporation may dissent from, and obtain payment for
the fair value of the shareholder's shares in the event of, any of the following
corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting rights;
except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but not
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in
section 302A.725, subdivision 2, or a disposition pursuant to an order of a
court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter
322B, to which the corporation is a constituent organization, except as
provided in subdivision 3, and except for a plan of merger adopted under
Section 302A.626;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares
will be acquired by the acquiring corporation except as provided in
Subdivision 3; or
(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by
the board directs that dissenting shareholders may obtain payment for their
shares.
Subdivision 2. Beneficial owners. (a) A shareholder shall not assert dissenters'
rights as to less than all of the shares registered in the name of the
shareholder, unless the shareholder dissents with respect to all the shares that
are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has dissented
and the other shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
Subdivision 3. Rights not to apply. (a) Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of (1) the surviving
corporation in a merger with respect to shares of the shareholder that are not
entitled to be voted on the merger and are not cancelled or exchanged in the
merger or (2) the corporation whose shares will be acquired by the acquiring
corporation in a plan of exchange with respect to shares of the shareholder that
are not entitled to be voted on the plan of exchange and are not exchanged in
the plan of exchange. (b) If a date is fixed according to Section 302A.445,
Subdivision 1, for the determination of shareholders entitled to receive notice
of and to vote on an action described in Subdivision 1, only shareholders as of
the date fixed, and beneficial owners as of the date fixed who hold through
shareholders, as provided, in Subdivision 2, may exercise dissenters' rights.
Subdivision 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at law
or in equity to have a corporate action described in subdivision 1 set aside or
rescinded, except when the corporate action is fraudulent with regard to the
complaining shareholder or the corporation.
C-1
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.--Subdivision
1. Definitions. (a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before the
corporate action referred to in section 302A.471, subdivision 1 or the successor
by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a corporation
immediately before the effective date of the corporate action referred to in
section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date of
the corporate action referred to in section 302A.471, subdivision 1 up to and
including the date of payment, calculated at the rate provided in section 549.09
for interest on verdicts and judgments.
Subdivision 2. Notice of action. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.
Subdivision 3. Notice of dissent. If the proposed action must be approved by the
shareholders, a shareholder who is entitled to dissent under Section 302A.471
and who wishes to exercise dissenters' rights must file with the corporation
before the vote on the proposed action a written notice of intent to demand the
fair value of the shares owned by the shareholder and must not vote the shares
in favor of the proposed action.
Subdivision 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision 3
and to all shareholders entitled to dissent if no shareholder vote was required,
a notice that contains:
(1) the address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;
(2) any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) a form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) a copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting shareholder
must demand payment and deposit certificated shares or comply with any
restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
Subdivision 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment, whichever
is later, the corporation shall remit to each dissenting shareholder who has
complied with subdivisions 3 and 4 the amount the corporation estimates to be
the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the effective date
of the corporate action, together with the latest available interim
financial statements;
(2) an estimate by the corporation of the fair value of the shares and
a brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph (a) from
a person who was not a shareholder on the date the action dissented from was
first announced to the public or who is dissenting on behalf of a person who was
not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit of
certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.
C-2
Subdivision 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest, within
30 days after the corporation mails the remittance under subdivision 5, and
demand payment of the difference. Otherwise, a dissenter is entitled only to the
amount remitted by the corporation.
Subdivision 7. Petition; determination. If the corporation receives a demand
under subdivision 6, it shall, within 60 days after receiving the demand, either
pay to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that the
court determine the fair value of the shares, plus interest.
The petition shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation that
receives a demand relating to the shares of a constituent domestic corporation
shall file the petition in the county in this state in which the last registered
office of the constituent corporation was located. The petition shall name as
parties all dissenters who have demanded payment under subdivision 6 and who
have not reached agreement with the corporation. The corporation shall, after
filing the petition, serve all parties with a summons and copy of the petition
under the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgement in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
Subdivision 8. Costs; fees; expenses. (a) The court shall determine the costs
and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply substantially
with this section, the court may assess all fees and expenses of any experts or
attorneys as the court deems equitable. These fees and expenses may also be
assessed against a person who has acted arbitrarily, vexatiously, or not in good
faith in bringing the proceeding, and may be awarded to a party injured by those
actions.
(c) The court may award, in its discretion, fees and expenses to an attorney for
the dissenters out of the amount awarded to the dissenters, if any.
C-3
[NUVEEN INVESTMENTS LOGO]
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com
ETF-MN0703
(NUVEEN LOGO)
NUVEEN
INVESTMENTS
Nuveen Investments o 333 West Wacker Dr. o Chicago
www.nuveen.com
NAC Closed-End Funds (MN)
(except Muni-Value and Muni-Income)
Common Shares
3 EASY WAYS TO VOTE YOUR PROXY
1. Automated Touch Tone Voting: Call toll-free 1-800-690-6903 and use the
control number shown.
2. On the internet at www.proxyweb.com, enter the control number shown
and follow the simple instructions.
3. Sign, Date and Return this proxy card using the enclosed postage-paid
envelope, to Proxy Tabulator, PO Box 9122, Hingham, MA 02043.
**** CONTROL NUMBER: 999 999 999 999 98 ****
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF [FUND NAME]
FOR A ANNUAL MEETING OF SHAREHOLDERS, JULY 28, 2003.
The Annual Meeting of shareholders will be held Monday, July 28, 2003 at 10:30
a.m. Central Time, in the Sixth floor auditorium of The Northern Trust Company,
50 South LaSalle Street, Chicago, Illinois. At this meeting, you will be asked
to vote on the proposal described in the proxy statement attached. The
undersigned hereby appoints Timothy R. Schwertfeger, Jessica R. Droeger and
Gifford R. Zimmerman, and each of them, with full power of substitution, proxies
for the undersigned, to represent and vote the shares of the undersigned at the
Annual Meeting of shareholders to be held on July 28, 2003 or any adjournment or
adjournments thereof.
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE COMPLETE, DATE AND
SIGN YOUR PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE
WILL BE COUNTED. AS AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE (800)
690-6903 OR OVER THE INTERNET (www.proxyweb.com).
Date:
---------------------------
SIGN HERE EXACTLY AS NAME(S) APPEAR(S) ON
LEFT. (Please sign in Box)
------------------------------------------
------------------------------------------
NOTE: PLEASE SIGN YOUR NAME EXACTLY AS IT
APPEARS ON THIS PROXY. IF SHARES ARE HELD
JOINTLY, EACH HOLDER MUST SIGN THE PROXY,
IF YOU ARE SIGNING ON BEHALF OF AN ESTATE,
TRUST, OR CORPORATION, PLEASE STATE YOUR
TITLE OR CAPACITY.
[MN COMMON]
<Table>
Please fill in box(es) as shown using black or blue ink or number 2 pencil. [X]
PLEASE DO NOT USE FINE POINT PENS.
1. Election of Board Members:
(01) Robert P. Bremner (06) William E. Bennett FOR WITHHOLD
(02) Lawrence H. Brown (07) Jack B. Evans NOMINEES AUTHORITY
(03) Anne E. Impellizzeri (08) William L. Kissick listed at left to vote for
(04) Peter R. Sawers (09) Thomas E. Leafstrand (except as all Nominees
(05) Judith M. Stockdale (10) Sheila W. Wellington marked to listed at left
the contrary)
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual Nominee(s), write
the number(s) of the nominee(s) on the line provided below.)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve a change to a fundamental Investment restriction with respect to [ ] [ ] [ ]
lending.
3. To approve a change to a fundamental Investment restriction with respect to [ ] [ ] [ ]
borrowing.
4. To approve an Agreement and Plan of Reorganization and the transactions [ ] [ ] [ ]
contemplated thereby.
[MN COMMON]
</Table>
(NUVEEN LOGO)
NUVEEN
INVESTMENTS
Nuveen Investments o 333 West Wacker Dr. o Chicago
www.nuveen.com
NAC Closed-End Funds (MN)
(except Muni-Value and Muni-Income)
Preferred Shares
3 EASY WAYS TO VOTE YOUR PROXY
1. Automated Touch Tone Voting: Call toll-free 1-800-690-6903 and use the
control number shown.
2. On the internet at www.proxyweb.com, enter the control number shown
and follow the simple instructions.
3. Sign, Date and Return this proxy card using the enclosed postage-paid
envelope, to Proxy Tabulator, PO Box 9122, Hingham, MA 02043.
**** CONTROL NUMBER: 999 999 999 999 98 ****
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF [FUND NAME]
FOR A ANNUAL MEETING OF SHAREHOLDERS, JULY 28, 2003.
The Annual Meeting of shareholders will be held Monday, July 28, 2003 at 10:30
a.m. Central Time, in the Sixth floor auditorium of The Northern Trust Company,
50 South LaSalle Street, Chicago, Illinois. At this meeting, you will be asked
to vote on the proposal described in the proxy statement attached. The
undersigned hereby appoints Timothy R. Schwertfeger, Jessica R. Droeger and
Gifford R. Zimmerman, and each of them, with full power of substitution, proxies
for the undersigned, to represent and vote the shares of the undersigned at the
Annual Meeting of shareholders to be held on July 28, 2003 or any adjournment or
adjournments thereof.
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE COMPLETE, DATE AND
SIGN YOUR PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE
WILL BE COUNTED. AS AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE (800)
690-6903 OR OVER THE INTERNET (www.proxyweb.com).
Date:
---------------------------
SIGN HERE EXACTLY AS NAME(S) APPEAR(S) ON
LEFT. (Please sign in Box)
------------------------------------------
------------------------------------------
NOTE: PLEASE SIGN YOUR NAME EXACTLY AS IT
APPEARS ON THIS PROXY. IF SHARES ARE HELD
JOINTLY, EACH HOLDER MUST SIGN THE PROXY,
IF YOU ARE SIGNING ON BEHALF OF AN ESTATE,
TRUST, OR CORPORATION, PLEASE STATE YOUR
TITLE OR CAPACITY.
<Table>
Please fill in box(es) as shown using black or blue ink or number 2 pencil. [X]
PLEASE DO NOT USE FINE POINT PENS.
1. Election of Board Members:
(01) Timothy R. Schwertfeger (07) Judith M. Stockdale FOR WITHHOLD
(02) William J. Schneider (08) William E. Bennett NOMINEES AUTHORITY
(03) Robert P. Bremner (09) Jack B. Evans listed at left to vote for
(04) Lawrence H. Brown (10) William L. Kissick (except as all Nominees
(05) Anne E. Impellizzeri (11) Thomas E. Leafstrand marked to listed at left
(06) Peter R. Sawers (12) Shelia W. Wellington the contrary)
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual Nominee(s), write
the number(s) of the nominee(s) on the line provided below.)
- --------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To approve a change to a fundamental Investment restriction with respect to [ ] [ ] [ ]
lending.
3. To approve a change to a fundamental Investment restriction with respect to [ ] [ ] [ ]
borrowing.
4. To approve an Agreement and Plan of Reorganization and the transactions [ ] [ ] [ ]
contemplated thereby.
[MN PREFERRED]
</Table>