FORM N-14 8C
As filed
with the Securities and Exchange Commission on March 16, 2009
File No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
o
Pre-Effective Amendment No.
o Post-Effective Amendment No.
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
(Exact Name of Registrant as Specified in Charter)
333 West Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices, Zip Code)
Registrants Telephone Number, including Area Code
(800) 257-8787
Kevin J. McCarthy
Vice President and Secretary
Nuveen Investments
333 West Wacker Drive
Chicago, Illinois 60606
(Name and Address of Agent for Service)
Copy to:
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David A. Sturms
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Eric F. Fess |
Vedder Price P.C.
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Chapman and Cutler LLP |
222 North LaSalle Street
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111 West Monroe Street |
Chicago, Illinois 60601
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Chicago, Illinois 60603 |
Approximate date of proposed public offering: As soon as practicable after the effective date of this Registration
Statement.
CALCULATION
OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
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Proposed |
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Maximum |
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Proposed |
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Offering |
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Maximum |
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Amount of |
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Amount Being |
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Price Per |
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Aggregate |
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Registration |
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Title of Securities Being Registered |
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Registered (1) |
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Unit(1)(2) |
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Offering Price(1) |
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Fee (1)(3) |
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Common Stock, $.01 Par Value Per Share |
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60,100 Shares |
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$11.65 |
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$700,165.00(2) |
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$39.07 |
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Municipal Auction Rate Cumulative
Preferred Stock, Series W3 |
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6 Shares |
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$25,000.00 |
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$150,000.00 |
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$8.37 |
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Municipal Auction Rate Cumulative
Preferred Stock, Series TH3 |
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6 Shares |
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$25,000.00 |
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$150,000.00 |
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$8.37 |
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(1) |
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Estimated solely for the purpose of calculating the
registration fee, pursuant to Rule 457(o) under the Securities Act of
1933. |
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(2) |
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Closing share price of common stock on March 12, 2009. |
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(3) |
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Transmitted prior to filing. |
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The Registrant hereby amends this registration statement on such date or dates as may be necessary
to delay its effective date until the Registrant shall file a further amendment which specifically
states that his registration statement shall thereafter become effective in accordance with Section
8(a) of the Securities Act of 1933 or until this registration statement shall become effective on
such date as the Securities and Exchange Commission, action pursuant to said Section 8(a), may
determine.
IMPORTANT NOTICE
TO
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC. (NIO) AND
NUVEEN INSURED FLORIDA PREMIUM INCOME MUNICIPAL FUND (NFL)
SHAREHOLDERS
MARCH ,
2009
Although we recommend that you read the complete Proxy
Statement/Prospectus, for your convenience, we have provided a
brief overview of the issues to be voted on.
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Q. |
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Why am I receiving this Proxy Statement/Prospectus? |
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The Board of Directors of the Nuveen Insured Municipal
Opportunity Fund, Inc. (the National Fund) and Board
of Trustees of the Nuveen Insured Florida Premium Income
Municipal Fund (the Florida Fund) recently voted to
recommend a merger of the Funds to shareholders. As a Fund
shareholder, you are being asked to vote to approve this
proposed merger at a special shareholders meeting to be held
on ,
2009. |
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Why has the Board of Directors of National Fund and the Board
of Trustees of Florida Fund (each a Board)
recommended merging the Florida Fund into the National Fund? |
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This recommendation reflects various considerations, among them:
(i) the price level at which the Florida Funds common
shares have traded over time in relation to their underlying net
asset value on an absolute basis as well as relative to other
closed-end funds; (ii) prior efforts to enhance, over time,
the secondary market for the Florida Funds common shares,
including investment strategies aimed at increasing common net
earnings as well as common share repurchases; and (iii) the
repeal of Floridas intangible personal property tax which
eliminated the state tax benefit to a Florida resident of owning
a Florida-specific portfolio of municipal bonds. Each Board
believes the proposed merger is in the best interests of both
the National Fund and the Florida Fund. |
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What are the proposed mergers potential benefits to me
as a Fund shareholder? |
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Each Board believes the proposed merger offers the following
potential benefits to National Fund and Florida Fund
shareholders: |
National Fund:
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Lower fees and expenses per common share from greater
economies of scale as the combined funds size results in a
lower management fee rate and allows fixed operating expenses to
be spread over a larger asset base.
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Enhanced relative investment performance from increased
common net earnings as well as expanded opportunities for
enhanced total returns over time from the combined funds
larger asset base.
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Improved secondary market trading as higher common net
earnings and enhanced total returns over time may lead to higher
common share market prices relative to net asset value, and the
combined funds greater market liquidity may lead to
narrower bid-ask spreads and smaller trade-to-trade price
movements.
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Expanded auction rate preferred securities (ARPS)
refinancing opportunities because the combined funds
larger asset base may increase its ability to refinance ARPS
with tender option bonds. Through such refinancings the Fund
seeks to provide liquidity at par for ARPS
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shareholders and to lower the relative cost of leverage over
time for common shareholders.
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Florida Fund:
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Lower fees and expenses per common share from greater
economies of scale as the combined funds size results in a
lower management fee rate and allows fixed operating expenses to
be spread over a larger asset base.
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Enhanced relative investment performance from increased
common net earnings as well as expanded opportunities for
enhanced total returns over time from a nationally-diversified
portfolio and the combined funds larger asset base.
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Continuity of investment strategy by maintaining the
Funds use of leverage, which offers common shareholders
the potential for higher monthly tax-exempt distributions and
enhanced total returns on average over market cycles, at a time
when the municipal yield spreads are particularly wide or
attractive.
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Improved secondary market trading as a national fund
instead of a Florida-specific fund potential investor base is
expected to promote higher common share market prices relative
to net asset value, and the combined funds greater market
liquidity may lead to narrower bid-ask spreads and smaller
trade-to-trade price movements.
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Expanded ARPS refinancing opportunities because greater
portfolio diversification and the combined funds larger
asset base may increase its ability to refinance ARPS with
tender option bonds. Through such refinancings the Fund seeks to
provide liquidity at par for ARPS shareholders and to lower the
relative cost of leverage over time for common shareholders.
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Do the Funds have similar investment objectives and
policies? |
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Yes. The Funds have similar investment objectives and policies
except for the Florida Funds policy of concentrating its
investment portfolio in Florida state-specific municipal
securities in comparison to the National Funds policy of
investing in a nationally diversified portfolio of municipal
securities. |
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What specific proposals will I be asked to vote on in
connection with the proposed merger? |
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Depending on whether you are a National Fund or Florida Fund
shareholder, you will be asked to vote on one or both of the
following proposals: |
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(i)
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Approve Agreement and Plan of Reorganization (Both
Funds). To approve an Agreement and Plan of
Reorganization (the Agreement), pursuant to which
the Florida Fund would (i) transfer all of its assets to
the National Fund in exchange solely for National Fund shares of
common stock (common shares) and shares of Municipal
Auction Rate Cumulative Preferred stock
(MuniPreferred), Series W3 and Series TH3,
and the National Funds assumption of all the liabilities
of Florida Fund, (ii) distribute such shares of the
National Fund to the common shareholders and MuniPreferred,
Series W and Series TH, shareholders of the Florida Fund
and (iii) be liquidated, dissolved and terminated as a
trust in accordance with the Florida Funds Declaration of
Trust (collectively, the Reorganization).
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(ii)
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Approve Issuance of Common Shares (National
Fund). To approve the issuance of additional
National Fund common shares in connection with the
Reorganization.
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Your Funds Board, including your Boards independent
members, unanimously recommends that you vote FOR your
Funds applicable proposal(s). The Reorganization is
dependent upon shareholder approval of both proposals. If
shareholder approval of both proposals is not obtained, the
Reorganization will not occur.
Your vote is very important. We encourage you as a
shareholder to participate in your Funds governance by
returning your vote as soon as possible. If enough shareholders
dont cast their votes, your Fund may not be able to hold
its meeting or the vote on each issue, and will be required to
incur additional solicitation costs in order to obtain
sufficient shareholder participation.
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How does the Board recommend that I vote? |
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After careful consideration, each Board agreed unanimously that
the Reorganization is in the best interests of the Funds and
recommends that you vote FOR your Funds
proposal(s). |
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Will Florida Fund shareholders receive new shares in exchange
for their current shares? |
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Yes. Upon approval of the Reorganization, common shareholders of
the Florida Fund in exchange for their Fund shares will receive
common shares of the National Fund of equivalent total value.
Upon approval of the Reorganization, shareholders of the Florida
Funds MuniPreferred, Series W and Series TH,
will receive in exchange one share of the National Funds
MuniPreferred, Series W3 and Series TH3, for each
share of the Florida Funds MuniPreferred, Series W
and Series TH, respectively, held. |
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Is the Reorganization a taxable event for Florida Fund
shareholders? |
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No. The Reorganization is intended to qualify as a
reorganization for federal income tax purposes. It is expected
that you will recognize no gain or loss for federal income tax
purposes as a result of the Reorganization. |
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What will happen if shareholders do not approve each
proposal? |
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If both proposals are not approved, the Reorganization will not
occur. If the Reorganization does not occur, the Board will take
such actions as it deems to be in the best interests of the
Florida Fund based upon the Funds current circumstances
and market conditions. |
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Will I have to pay any direct fees or expenses in connection
with the Reorganization? |
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No. However, the Funds expenses associated with the
Reorganization will be allocated between the Funds and paid out
of the Funds net assets. Fund shareholders will indirectly
bear the costs of the Reorganization. |
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What is the timetable for the Reorganization? |
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If Fund shareholders approve each respective proposal at the
special shareholders meeting
on ,
2009, the Reorganization is expected to take effect
on ,
2009 or as soon as practicable thereafter. |
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Who do I call if I have questions? |
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If you need any assistance, or have any questions regarding the
proposal or how to vote your shares, please call Georgeson Inc.,
your proxy solicitor, at
( ) - ,
weekdays during its business hours of 7:00 a.m. to
7:00 p.m. Central time. Please have your proxy
material available when you call. |
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How do I vote my shares? |
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You may vote by mail, telephone or over the Internet: |
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To vote by mail, please mark, sign, date and mail the
enclosed proxy card. No postage is required if mailed in the
United States.
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To vote by telephone, please call the toll-free number
located on your proxy card and follow the recorded instructions,
using your proxy card as a guide.
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To vote over the Internet, go to the Internet address
provided on your proxy card and follow the instructions, using
your proxy card as a guide.
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Will Nuveen contact me? |
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You may receive a call to verify that you received your proxy
materials and to answer any questions you may have about the
Reorganization. |
,
2009
NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC. (NIO)
NUVEEN INSURED FLORIDA PREMIUM INCOME MUNICIPAL FUND
(NFL)
NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS
TO BE HELD
ON ,
2009
To the
Shareholders:
Notice is hereby given that the Special Meeting of Shareholders
of Nuveen Insured Municipal Opportunity Fund, Inc.
(National Fund or Acquiring Fund) and
Nuveen Insured Florida Premium Income Municipal Fund
(Florida Fund or Acquired Fund), will be
held , , , ,
on , ,
2009,
at : a.m.,
Central time (the Special Meeting), for the
following purposes:
1. For shareholders of the Florida Fund and preferred
shareholders of the National Fund, to approve an Agreement and
Plan of Reorganization (the Agreement), pursuant to
which Florida Fund would (i) transfer all of its assets to
National Fund in exchange solely for shares of common stock
(common shares) and shares of Municipal Auction Rate
Cumulative Preferred stock (MuniPreferred),
Series W3 and Series TH3, of National Fund and the
National Funds assumption of all the liabilities of
Florida Fund, (ii) distribute such shares of the National
Fund to the common shareholders and MuniPreferred, Series W
and Series TH, shareholders of the Florida Fund and
(iii) be liquidated, dissolved and terminated as a trust in
accordance with the Florida Funds Declaration of Trust
(collectively, the Reorganization).
2. For common shareholders of the National Fund, to approve
the issuance of additional common shares of the National Fund in
connection with the Reorganization.
Only shareholders of record as of the close of business
on ,
2009 are entitled to notice of and to vote at the Special
Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Special
Meeting. In order to avoid delay and additional expense for the
Funds, and to assure that your shares are represented, please
vote as promptly as possible, whether or not you plan to attend
the Special Meeting. You may vote by mail, telephone or over the
Internet.
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To vote by mail, please mark, sign, date and mail the
enclosed proxy card. No postage is required if mailed in the
United States.
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To vote by telephone, please call the toll-free number
located on your proxy card and follow the recorded instructions,
using your proxy card as a guide.
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To vote over the Internet, go to the Internet address
provided on your proxy card and follow the instructions, using
your proxy card as a guide.
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Kevin J. McCarthy
Vice President and Secretary
333 WEST WACKER
DRIVE
CHICAGO, ILLINOIS 60606
(800) 257-8787
PROXY
STATEMENT/PROSPECTUS
NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC. (N10)
NUVEEN INSURED FLORIDA PREMIUM INCOME MUNICIPAL FUND
(NFL)
,
2009
This Proxy Statement/Prospectus is being furnished to the
shareholders of Nuveen Insured Municipal Opportunity Fund, Inc.
(National Fund or Acquiring Fund), a
closed-end management investment company, and Nuveen Insured
Florida Premium Income Municipal Fund (Florida Fund
or Acquired Fund and, together with the Acquiring
Fund, the Funds), a closed-end management investment
company, in connection with the solicitation of proxies by the
Acquiring Funds Board of Directors and the Acquired
Funds Board of Trustees (each a Board and each
Director or Trustee a Board Member) for use at the
Special Meeting of Shareholders of each Fund to be held
on
day, ,
2009,
at : a.m.,
Central time, and at any and all adjournments thereof (the
Special Meeting). The enclosed proxy and this Proxy
Statement/Prospectus are first being sent to shareholders of the
Funds on or
about ,
2009. Shareholders of record of the Funds as of the close of
business
on ,
2009 are entitled to notice and to vote at the Special Meeting
and any adjournment thereof. The enclosed proxy and this Proxy
Statement/Prospectus are first being sent to shareholders of the
Funds on or
about ,
2009.
The purposes of the Special Meeting are:
For shareholders of the Acquired Fund and preferred shareholders
of the Acquiring Fund:
1. To approve an Agreement and Plan of Reorganization (the
Agreement), pursuant to which the Acquired Fund
would (i) transfer all of its assets to the Acquiring Fund
in exchange solely for shares of common stock (common
shares) and shares of Municipal Auction Rate Cumulative
Preferred stock (MuniPreferred), Series W3 and
Series TH3, of the Acquiring Fund and the Acquiring
Funds assumption of all the liabilities of the Acquired
Fund, (ii) distribute such shares of the Acquiring Fund to
the common shareholders and MuniPreferred, Series W and
Series TH, shareholders of the Acquired Fund and
(iii) be liquidated, dissolved and terminated as a trust in
accordance with the Acquired Funds Declaration of Trust
(collectively, the Reorganization).
For common shareholders of the Acquiring Fund:
2. To approve the issuance of additional common shares of
the Acquiring Fund in connection with the Reorganization.
The Agreement provides for (i) the Acquiring Funds
acquisition of all the assets of the Acquired Fund in exchange
for newly issued common shares of the Acquiring Fund, par value
$0.01 per share (Acquiring Fund Common Shares),
and newly issued MuniPreferred, Series W3 and
Series TH3, of the Acquiring Fund, with a par value of
$0.01 per share and liquidation preference of $25,000 per share
(Acquiring Fund MuniPreferred Shares), and the
Acquiring Funds assumption of all the liabilities of the
Acquired Fund, (ii) the distribution of the Acquiring
Fund Common Shares and Acquiring
i
Fund MuniPreferred Shares held by the Acquired Fund to its
common and MuniPreferred shareholders, respectively, and
(iii) the liquidation, dissolution and termination of the
Acquired Fund as a Trust in accordance with the Acquired
Funds Declaration of Trust. The number of Acquiring
Fund Common Shares to be issued to the Acquired Fund would
be that number having an aggregate per share net asset value
equal to the aggregate value of the net assets of the Acquired
Fund transferred to the Acquiring Fund. The aggregate net asset
value of Acquiring Fund Common Shares received in the
Reorganization will equal the aggregate net asset value of
Acquired Fund common shares held immediately prior to the
Reorganization less the costs of the Reorganization borne by the
Acquired Fund. Shareholders of Acquired Fund MuniPreferred,
Series W and Series TH, will receive the same number
of Acquiring Fund MuniPreferred, Series W3 and
Series TH3, respectively. The aggregate liquidation
preference of the Acquiring Fund MuniPreferred Shares
received in the Reorganization will equal the aggregate
liquidation preference of the Acquired Fund MuniPreferred
held immediately prior to the Reorganization. The Acquiring Fund
will continue to operate after the Reorganization as a
registered closed-end investment company with the investment
objectives and policies described in this Proxy
Statement/Prospectus.
In connection with the Reorganization, common shareholders of
the Acquiring Fund are being asked to approve the issuance of
additional Acquiring Fund Common Shares.
The Board of each Fund has determined that including all
proposals in one Proxy Statement/Prospectus will reduce costs
and is in the best interests of each Fund.
In the event that each Funds shareholders do not approve
the Reorganization or that the Acquiring Fund common
shareholders do not approve the issuance of Acquiring
Fund Common Shares, the Acquired Fund will continue to
exist and the Board of the Acquired Fund will consider what
additional action to take, if any.
This Proxy Statement/Prospectus concisely sets forth the
information shareholders of the Funds should know before voting
on the proposals and constitutes an offering of common shares
and MuniPreferred, Series W3 and Series TH3, of the
Acquiring Fund only. Please read it carefully and retain it for
future reference.
The following documents have been filed with the Securities and
Exchange Commission (SEC) and are incorporated into
this Proxy Statement/Prospectus by reference:
(i) the Statement of Additional Information relating to the
proposed Reorganization,
dated ,
2009 (the Reorganization SAI);
(ii) the audited financial statements and related
independent registered public accounting firms report for
the Acquiring Fund and the financial highlights for the
Acquiring Fund contained in the Funds Annual Report for
the fiscal year ended October 31, 2008;
(iii) the audited financial statements and related
independent registered public accounting firms report for
the Acquired Fund and the financial highlights for the Acquired
Fund contained in the Funds Annual Report for the fiscal
year ended April 30, 2008; and
(iv) the unaudited financial statements and the financial
highlights for the Acquired Fund contained in the Funds
Semi-Annual Report for the period ended October 31, 2008.
No other parts of the Funds Annual or Semi-Annual Reports
are incorporated by reference herein.
ii
Copies of the foregoing may be obtained without charge by
calling or writing the Funds at the telephone number or address
shown above. If you wish to request the Reorganization SAI,
please ask for the Reorganization SAI. In addition,
the Acquiring Fund will furnish, without charge, a copy of its
most recent annual report and subsequent semiannual report to a
shareholder upon request. Any such request should be directed to
the Acquiring Fund by calling
(800) 257-8787
or by writing the Acquiring Fund at 333 West Wacker Drive,
Chicago, Illinois 60606.
The Funds are both closed-end management investment companies,
with similar objectives and policies. Each Funds primary
investment objective is to provide current income exempt from
regular federal income tax. The Acquiring Funds secondary
investment objective is to enhance portfolio value relative to
the municipal bond market by investing in tax-exempt municipal
bonds that, in the opinion of the Funds investment
adviser, are underrated or undervalued. The Acquired Funds
secondary investment objective is the enhancement of portfolio
value relative to the Florida municipal bond market through
investments in tax-exempt Florida municipal obligations that, in
the opinion of the Funds investment adviser, are
underrated or undervalued or that represent municipal market
sectors that are undervalued. The Acquired Funds shares
also will be exempt from Florida intangible personal property
tax. Each Fund is a diversified management investment company.
The Funds are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the Investment
Company Act of 1940, as amended (the 1940 Act), and
in accordance therewith file reports and other information with
the SEC. Reports, proxy statements, registration statements and
other information filed by the Funds (including the Registration
Statement relating to the Acquiring Fund on
Form N-14
of which this Proxy Statement/Prospectus is a part may be
inspected without charge and copied (for a duplication fee at
prescribed rates) at the SECs public reference room at
100 F Street, N.E., Washington, D.C. 20549 or at
the SECs Northeast Regional Office (3 World Financial
Center, New York, New York 10281) or Midwest Regional
Office (175 W. Jackson Boulevard, Suite 900,
Chicago, Illinois 60604). You may call the SEC at
(202) 551-5850
for information about the operation of the public reference
room. You may obtain copies of this information, with payment of
a duplication fee, by electronic request at the following
e-mail
address: publicinfo@sec.gov, or by writing the SECs Public
Reference Branch, Office of Consumer Affairs and Information
Services, Securities and Exchange Commission,
Washington, D.C. 20549. You may also access reports and
other information about the Funds on the EDGAR database on the
SECs Internet site at
http://www.sec.gov.
The shares of the Funds are listed on the New York Stock
Exchange (NYSE); reports, proxy statements and other
information concerning the Acquired Fund can be inspected at the
offices of the NYSE, 11 Wall Street, New York, New York 10005.
This Proxy Statement/Prospectus serves as a prospectus of the
Acquiring Fund in connection with the issuance of the Acquiring
Fund Common Shares and the Acquiring
Fund MuniPreferred Shares in the Reorganization. No person
has been authorized to give any information or make any
representation not contained in this Proxy Statement/Prospectus
and, if so given or made, such information or representation
must not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell or a
solicitation of an offer to
iii
buy any securities in any jurisdiction in which, or to any
person to whom, it is unlawful to make such offer or
solicitation.
The Securities and Exchange Commission has not approved or
disapproved these securities or determined whether the
information in this Proxy Statement/Prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
iv
PROXY
STATEMENT/PROSPECTUS
,
2009
NUVEEN INSURED
MUNICIPAL OPPORTUNITY FUND, INC. (NIO)
NUVEEN INSURED FLORIDA PREMIUM INCOME MUNICIPAL FUND
(NFL)
TABLE OF
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vi
SUMMARY
The following is a summary of certain information contained
elsewhere in this Proxy Statement/Prospectus and is qualified in
its entirety by reference to the more complete information
contained in this Proxy Statement/Prospectus and in the
Reorganization SAI and the appendices thereto. Shareholders
should read the entire Proxy Statement/Prospectus carefully.
Certain capitalized terms used but not defined in this summary
are defined elsewhere in the text of this Proxy
Statement/Prospectus or in the Acquiring Funds Statement
Establishing and Fixing the Rights and Preferences of Municipal
Auction Rate Cumulative Preferred Shares (the Acquiring
Fund Statement) attached as
Appendix
to the Reorganization SAI.
Proposal 1:
The Reorganizations
If the shareholders of the Acquired Fund and MuniPreferred
shareholders of the Acquiring Fund approve the Reorganization,
and the common shareholders of the Acquiring Fund approve the
issuance of additional Acquiring Fund Common Shares (see
Proposal 2: Issuance of Additional Acquiring
Fund Common Shares): (i) the Acquiring Fund will
acquire all the assets of the Acquired Fund in exchange for
newly issued Acquiring Fund Common Shares and newly issued
Acquiring Fund MuniPreferred Shares, and the Acquiring
Funds assumption of all the liabilities of the Acquired
Fund, (ii) the distribution of the Acquiring
Fund Common Shares and Acquiring Fund MuniPreferred
Shares held by the Acquired Fund to its common and preferred
shareholders, respectively and (iii) the liquidation,
dissolution and termination of the Acquired Fund as a Trust in
accordance with the Acquired Funds Declaration of Trust.
The number of Acquiring Fund Common Shares to be issued to
the Acquired Fund would be that number having an aggregate per
share net asset value equal to the aggregate value of the net
assets of the Acquired Fund transferred to the Acquiring Fund.
The aggregate net asset value of Acquiring Fund Common
Shares received in the Reorganization will equal the aggregate
net asset value of Acquired Fund common shares held immediately
prior to the Reorganization less the costs of the Reorganization
borne by the Acquired Fund. The number of Acquiring
Fund MuniPreferred Shares to be issued to the Acquired Fund
would be that number of shares of Acquiring
Fund MuniPreferred Shares, Series W3 and
Series TH3, as was held of Acquired Fund MuniPreferred
shares, Series W and Series TH, respectively. The
aggregate liquidation preference of the Acquiring
Fund MuniPreferred Shares received in the Reorganization
will equal the aggregate liquidation preference of the Acquired
Fund MuniPreferred shares held immediately prior to the
Reorganization.
The Board of each Fund, including the Board Members who are not
interested members, as defined in the 1940 Act, of
each Fund, has unanimously approved the Reorganization. The
Board of each Fund recommends that the shareholders vote
FOR the approval of the Reorganization. See
Proposal No. 1 The
Reorganization.
Background
and Reasons for the Reorganization
The Boards recommendation of the Reorganization reflects
various considerations, among them: (i) the price level at
which the Acquired Funds common shares have traded over
time in relation to their underlying net asset value on an
absolute basis as well as relative to other closed-end funds;
(ii) prior efforts to enhance, over time, the secondary
market for the Acquired Funds common shares, including
investment strategies aimed at increasing common net earnings as
well as common share repurchases; and (iii) the repeal of
Floridas intangible personal property tax which eliminated
the state tax benefit to a Florida resident of owning a
1
Florida-specific portfolio of municipal bonds. The Board of the
Acquiring Fund and the Acquired Fund believes the proposed
merger is in the best interests of the Acquiring Fund and the
Acquired Fund, respectively.
As a result of the Reorganization, the net assets of the
Acquiring Fund and the Acquired Fund would be combined and the
shareholders of the Acquired Fund would become shareholders of
the Acquiring Fund. The investment objectives and policies of
the Funds are similar except that the Acquired Fund invests in
municipal bonds that that are exempt from the Florida intangible
personal property tax and concentrates its assets in municipal
bonds generally issued by the State of Florida, a municipality
in Florida, or a political subdivision or agency or
instrumentality of such State or municipality (Florida
municipal bonds). The Board Members and officers of the
larger combined entity would be identical to those of the Funds.
The general portfolio characteristics of the larger combined
entity would be similar to both Funds.
The Board of each Fund believes that the proposed Reorganization
would be in the best interests of the Funds. In approving the
Reorganization, the Boards considered information regarding the
Funds, the proposed Reorganization and a number of factors,
including, among other things:
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the secondary market trading history of the Funds (i.e., the
price level at which the Funds shares have traded over
time in relation to their underlying net asset value on an
absolute basis and as compared to other closed-end funds) and
prior efforts to enhance the secondary market for the common
shares of the Acquired Fund;
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the elimination of the Florida intangibles tax;
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the compatibility of the investment objectives, policies and
strategies of the Funds;
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the potential opportunities to refinance MuniPreferred;
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the relative fees and expense ratios of the Funds, including
caps on the Funds expenses agreed to by each Funds
adviser;
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the investment performance of the Funds;
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the anticipated tax-free nature of the Reorganization;
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the expected costs of the Reorganization and the extent to which
the Funds would bear any such costs;
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the terms of the Reorganization and whether the Reorganization
would dilute the interests of shareholders of the Funds; and
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any potential benefits of the Reorganization to the adviser as a
result of the Reorganization.
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In approving the Reorganization, the Boards considered, in
particular, the following potential benefits:
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Expected lower fees and expenses. After the
Reorganization, the combined fund is expected to have lower fees
and expenses per common share than the Acquiring Fund and
Acquired Fund from achieving greater economies of scale as the
larger asset size of the combined fund is expected to result in
a lower management fee rate and allow for the fixed operating
costs to be spread over a larger asset base.
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2
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Enhanced relative investment performance. The
combined fund is estimated to have an increase in common net
earnings after the Reorganization compared to that of the
Acquiring Fund and Acquired Fund and expected to have expanded
opportunities for enhanced total returns due to the larger asset
base (and in relation to the Acquired Fund, a
nationally-diversified portfolio).
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Improved secondary market trading. The
estimated higher common net earnings, expected enhanced total
returns over time, and the larger asset base of the combined
fund after the Reorganization may lead to higher common share
market prices relative to net asset value and the combined
funds greater market liquidity may lead to narrower
bid-ask spreads and smaller trade-to-trade price movements. In
addition, with respect to the Acquired Fund, the Board of the
Acquired Fund also considered that a broader potential investor
base of a national fund may also promote a higher common share
price to net asset value.
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Expanded MuniPreferred refinancing
opportunities. After the Reorganization, the
larger asset size of the combined fund may increase the ability
to refinance the MuniPreferred with tender option bonds
(TOBs). The greater portfolio diversification of the
Acquiring Fund compared to the Acquired Fund may also enhance
the combined funds ability to refinance the MuniPreferred
compared to that of the Acquired Fund. The Boards also
considered that such refinancings may provide liquidity at par
for MuniPreferred shareholders and lower the relative costs of
leverage over time for common shareholders.
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Continuity of investment objectives and
strategies. The Boards considered the
compatibility of the Funds investment objectives, policies
and strategies except in relevant part, the Acquired Fund would
invest primarily in municipal securities that pay interest
exempt from an intangible personal property tax assessed by
Florida on the value of stocks, bonds, other evidences of
indebtedness and mutual fund shares. Florida repealed the
intangible personal property tax in 2007 reducing the
attractiveness of Florida bonds to investors formerly subject to
the tax. Accordingly, a primary reason for the policy of the
Acquired Fund to invest primarily in Florida municipal bonds was
eliminated and the continuation of such policy is no longer
necessary. With the Reorganization, the Acquired Fund common
shareholders would be invested in a more diversified portfolio
and their exposure to Florida obligations would decrease. In
addition, both Funds have issued MuniPreferred to create
leverage. Through the use of leverage, the Funds seek to enhance
potential common share earnings over time by borrowing at
short-term municipal rates and investing at long-term municipal
rates which generally are higher. Although there are no
assurances that the use of leverage will result in a higher
yield or return to common shareholders, the Boards believe that
the Acquiring Funds use of leverage would continue to
provide Acquired Fund common shareholders with the potential for
higher monthly tax-exempt distributions and enhanced total
returns on average over market cycles at a time when the
municipal yield spreads are particularly wide or attractive. In
addition, as discussed in more detail above, the larger asset
base of the combined fund may increase its ability to refinance
MuniPreferred with TOBs.
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For a fuller discussion of the Boards considerations
regarding the approval of the Reorganization, see
Proposal No. 1 The
Reorganization Reasons for the Reorganization.
Certain
Federal Income Tax Consequences of the Reorganization
The Reorganization is intended to qualify as a reorganization
for federal income tax purposes. If the Reorganization so
qualifies, neither the Acquired Fund nor its shareholders will
recognize
3
any gain or loss as a direct result of the transfers
contemplated by the Reorganization. See
Proposal No. 1 The
Reorganization Certain Federal Income Tax
Consequences of the Reorganization.
Comparison
of the Acquiring Fund and the Acquired Fund
General. The Acquiring Fund and the Acquired
Fund are both closed-end management investment companies. Each
Fund is a diversified management investment company. The
Acquiring Fund common shares are listed and trade on the NYSE
under the symbol NIO and the Acquired Fund common shares are
listed and trade on the NYSE under the symbol NFL. The Acquiring
Fund is organized as a corporation under the laws of the State
of Minnesota. The Acquired Fund is organized as a business trust
under the laws of the Commonwealth of Massachusetts. The common
shares of each Fund have equal voting rights and equal rights
with respect to the payment of dividends and distribution of
assets upon liquidation and have no preemptive, conversion or
exchange rights or rights to cumulative voting. All outstanding
shares of Acquiring Fund MuniPreferred and Acquired
Fund MuniPreferred are rated AAA by S&P
and Aaa by Moodys. The Acquiring
Fund MuniPreferred Shares issued to the Acquired Fund
pursuant to the Reorganization will have rights and preferences,
including liquidation preferences, that are substantially
similar to those of the outstanding shares of Acquired
Fund MuniPreferred. See
Proposal No. 1 The
Reorganization.
Investment Objectives and Policies. The
Acquiring Fund and Acquired Fund have similar investment
objectives. Each Funds primary investment objective is to
provide current income exempt from regular federal income tax.
The Acquiring Funds secondary investment objective is to
enhance portfolio value relative to the municipal bond market by
investing in tax-exempt municipal bonds that, in the opinion of
the Funds investment adviser, are underrated or
undervalued. The Acquired Funds secondary investment
objective is the enhancement of portfolio value relative to the
Florida municipal bond market through investments in tax-exempt
Florida municipal obligations that, in the opinion of the
Funds investment adviser, are underrated or undervalued or
that represent municipal market sectors that are undervalued.
The Acquired Funds shares also will be exempt from Florida
intangible personal property tax. For purposes of the
Funds objectives, policies and investment strategies,
municipal bonds and municipal obligations are treated as
municipal securities.
The Acquiring Fund and Acquired Fund also have similar
investment policies. Except to the extent that the Acquiring
Fund buys temporary investments, the Fund will invest
substantially all of its assets in tax-exempt municipal bonds
that are either covered by insurance guaranteeing the timely
payment of principal and interest on the bonds, or are backed by
an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities
to ensure timely payment of principal and interest. Uninsured
municipal bonds backed by an escrow or trust account will not
constitute more than 20% of the Acquiring Funds assets.
Except to the extent the Acquired Fund invests in temporary
investments as described below, the Fund will invest
substantially all of its assets in tax-exempt Florida municipal
obligations which are either covered by insurance guaranteeing
the timely payment of principal and interest thereon or backed
by an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities
to ensure timely payment of principal and interest. Municipal
obligations backed by an escrow or trust account will not
constitute more than 20% of the Acquired Funds assets. The
primary difference between the Funds stated policies is
that the Acquired Fund invests substantially all of its assets
in municipal bonds that are exempt from
4
the Florida intangible personal property tax and therefore
concentrates its assets in Florida municipal bonds. Effective
January 1, 2007, the State of Florida repealed the
states intangible personal property tax, which eliminated
the state tax benefit to a Florida resident of owning a
Florida-specific portfolio of municipal bonds. See Reasons
for the Reorganization Elimination of the Florida
Intangibles Tax.
Board Members and Officers. The Acquiring Fund
and the Acquired Fund have the same Board Members and officers.
The management of each Fund, including general supervision of
the duties performed by the Adviser (as defined below) under the
Investment Management Agreement for each Fund, is the
responsibility of its Board. There are currently nine
(9) Board Members of the Funds, one (1) of whom is an
interested person (as defined in the 1940 Act) and
eight (8) of whom are not interested persons (the
independent board members). The names and business
addresses of the Board Members and officers of the Funds and
their principal occupations and other affiliations during the
past five years are set forth under Management in
the Reorganization SAI incorporated herein by reference.
Investment Adviser. Nuveen Asset Management
(the Adviser or NAM) is responsible for
investing each Funds net assets. NAM oversees the
management of the Funds portfolios, manages the
Funds business affairs and provides certain clerical,
bookkeeping and other administrative services. NAM is located at
333 West Wacker Drive, Chicago, Illinois 60606.
NAM, a registered investment adviser, is a wholly owned
subsidiary of Nuveen Investments, Inc. (Nuveen
Investments). Founded in 1898, Nuveen Investments and its
affiliates had approximately
$ billion of assets under
management as of December 31, 2008. On November 13,
2007, Nuveen Investments was acquired by investors led by
Madison Dearborn Partners, LLC. Madison Dearborn Partners, LLC
is a private equity investment firm based in Chicago, Illinois.
See Management of the Funds-Investment Adviser.
The portfolio manager for the Acquiring Fund is Paul Brennan,
CFA, CPA. Mr. Brennan manages several national open- and
closed-end funds. Mr. Brennan began his career in the
investment business in 1991 when he was a municipal credit
analyst, then became a portfolio manager in 1994. He joined
Nuveen Investments in 1997 while at Flagship Financial which
Nuveen acquired. He earned his BS in Accountancy and Finance
from Wright State University. He is a CPA, has earned the
Chartered Financial Analyst designation, and currently sits on
the Nuveen Asset Management Investment Management Committee.
Prior to joining Flagship, Paul was employed at
Deloitte & Touche within the audit group which
participated in auditing mutual funds and investment advisers.
The portfolio manager for the Acquired Fund is Daniel Close,
CFA. Mr. Close joined Nuveen Investments in 2000 as a
member of Nuveens product management and development team,
where he was responsible for the oversight and development of
Nuveens mutual fund product line. He then served as a
research analyst for Nuveens municipal investing team,
covering corporate-backed, energy, transportation and utility
credits. He received his BS in Business from Miami University
and his MBA from Northwestern Universitys Kellogg School
of Management. Mr. Close has earned the Chartered Financial
Analyst designation.
5
Pursuant to an Investment Management Agreement between the
Adviser and each Fund, each Fund pays an annual management fee
for the services and facilities furnished by the Adviser on a
monthly basis at the following annual rates:
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Management Fee Schedule
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Average Daily Net Assets
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Rate
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Up to $125 million
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0.4500
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%
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$125 to $250 million
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0.4375
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%
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$250 to $500 million
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0.4250
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%
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$500 million to $1 billion
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0.4125
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%
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$1 billion to $2 billion
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0.4000
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%
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$2 billion to $5 billion
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0.3875
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%
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$5 billion and over
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0.3750
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%
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In addition to the fund-level fee, each Fund pays a
complex-level fee. The complex-level fee is the same for each
Fund and begins at a maximum rate of 0.20% of each Funds
net assets, based upon complex-level assets of $55 billion,
with breakpoints for assets above that level. Therefore, the
maximum management fee rate for each Fund is the fund-level fee
plus 0.20%. As of December 31, 2008, the effective
complex-level fee for each Fund was 0.20% of net assets. See
Management of the Funds Investment
Adviser.
The Acquiring Fund paid aggregate management fees of $10,976,183
for the fiscal year ended October 31, 2008, for an
effective management fee rate of 0.94% based on net assets
applicable to common shares (0.60% based on managed assets). The
Acquired Fund paid aggregate management fees of $2,031,193 for
the fiscal year ended April 30, 2008, for an effective
management fee rate of 0.95% based on net assets applicable to
common shares (0.62% based on managed assets).
Dividends and Distributions. The Funds have
identical dividend policies with respect to the payment of
dividends on their common shares. Each Funds present
policy, which may be changed by its Board, is to make regular
monthly cash distributions to holders of its common shares at a
level rate (stated in terms of a fixed cents per common share
dividend rate) that reflects the past and projected performance
of the Fund. Distributions can only be made from net investment
income after paying any accrued dividends to MuniPreferred
shareholders. Each Funds ability to maintain a level
dividend rate will depend on a number of factors, including
dividends payable on the MuniPreferred shares. The net income of
each consists of all interest income accrued on portfolio assets
less all expenses of the Fund. Over time, all the net investment
income of each Fund will be distributed. At least annually, each
Fund also intends to distribute net capital gain and ordinary
taxable income, if any, after paying any accrued dividends or
making any liquidation payments to MuniPreferred shareholders.
Holders of common shares of each Fund may elect to have all
distributions automatically reinvested in common shares of the
Fund pursuant to that Funds Dividend Reinvestment Plan.
See Proposal No. 1 The
Reorganization Description of Common Shares Issued
by the Acquiring Fund Distributions and
Dividend Reinvestment Plan and
Additional Information About the Funds Tax
Matters Associated with Investment in the Funds.
The dividend rates on shares of each Funds MuniPreferred,
including the Acquiring Fund MuniPreferred Shares issued
pursuant to the Reorganization, are structured to be determined
on the basis of auctions, which are scheduled to be held weekly.
In February 2008, escalating liquidity
6
pressures across financial markets led to the systemic failure
of the auction rate preferred securities (ARPS)
market and the auction process used to set the ARPS
dividend rate. This failure is ongoing and affects the
Funds MuniPreferred Shares whose dividend rates are
currently set by reference to a predetermined, index-based
formula (the Maximum Rate). See
Proposal No. 1 The
Reorganization Description of MuniPreferred Issued
by the Acquiring Fund and The
Auction and the Reorganization SAI.
Credit Quality. A comparison of the credit
quality of the respective portfolios of the Acquiring Fund and
the Acquired Fund, as of January 31, 2009, is set forth in
the table below.
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Acquiring
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Acquired
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Combined Fund
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Credit Rating
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Fund
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Fund
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Pro-Forma(1)
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Aaa/AAA*
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40.7
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%
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32.0
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%
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39.4
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%
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Aa/AA
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43.4
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52.0
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44.7
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A/A
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13.8
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9.7
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13.2
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Baa/BBB
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1.0
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1.1
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1.0
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Below investment grade
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0.3
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5.2
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0.3
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Unrated
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0.8
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0.0
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1.4
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TOTAL
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100.0
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%
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100.0
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%
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100.0
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%
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*
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Includes securities that are backed
by an escrow or trust containing sufficient U.S. Government
Securities to ensure the timely payment of principal and
interest.
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(1)
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Reflects the effect of the
Reorganization.
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Maturity and Duration. A comparison of the
maturity and duration of the respective portfolios of the
Acquiring Fund and the Acquired Fund, as of January 30,
2009, is set forth in the table below.
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Weighted Average Leverage
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Weighted Average
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Fund
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Adjusted Duration
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Maturity
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Acquiring
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12.38
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19.32
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Acquired
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10.44
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15.22
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Combined Fund
Pro-Forma(1)
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12.08
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18.69
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(1) Reflects the effect of the
Reorganization.
Capitalization
The following table sets forth the unaudited capitalization of
the Funds as of October 31, 2008 and the pro-forma combined
capitalization of the combined Fund as if the Reorganization had
occurred on that date. The table reflects a pro-forma exchange
ratio of approximately below investment grade common shares of
the Acquiring Fund issued for each common share of the
7
Acquired Fund. If the Reorganization is consummated, the actual
exchange ratio may vary from the ratio indicated below.
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Acquiring
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Acquired
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Combined Fund
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Fund
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Fund
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Pro Forma(1)
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Shareholders Equity:
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Common Shares, $.01 par value per share;
81,138,036 shares outstanding for Acquiring Fund;
14,218,896 shares outstanding for Acquired Fund;
96,068,418 shares outstanding for Combined Fund
Pro Forma
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$
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811,380
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$
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142,189
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$
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960,684
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(2)
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Paid-in surplus
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1,128,874,275
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201,990,758
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1,330,197,918
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(3)
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Undistributed (over-distribution of) net investment income
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(2,109,393
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)
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(368,571
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)
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(2,477,964
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)
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Accumulated net realized gain (loss) from investments and
derivative transactions
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(12,504,908
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)
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(1,353,582
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)
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(13,858,490
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)
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Net unrealized appreciation (depreciation) of investments and
derivative transactions
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(109,853,385
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)
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(14,843,606
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)
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(124,696,991
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)
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Net assets applicable to common shares
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|
$
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1,005,217,969
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$
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185,567,188
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$
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1,190,125,157
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(1)
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The adjusted balances are presented
as if the Reorganization were effective as of October 31,
2008 for information purposes only. The actual closing date of
the Reorganization is expected to
be ,
2009, at which time the results would be reflective of the
actual composition of shareholders equity at that date.
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(2)
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Assumes the issuance of 14,930,382
Acquiring Fund Common Shares in exchange for the net assets
of the Acquired Fund, which number is based on the net asset
value of the Acquiring Fund Common Shares and the net asset
value of the Acquired Fund Common Shares, as of
October 31, 2008, after adjustment for the Reorganization
costs referred to in (3) below.
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(3)
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Includes the impact of estimated
Reorganization costs of $660,000 which will be borne by the
shareholders of the Acquiring Fund and the Acquired Fund
($55,000 and $605,000, respectively).
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8
Comparative
Performance Information
Comparative total return investment performance for the Funds
for periods ended December 31, 2008:
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Average Annual Total Return
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|
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Average Annual Total Return
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|
|
|
on Net Asset Value
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|
|
on Market Value
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|
|
|
One
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|
|
Three
|
|
|
Five
|
|
|
Ten
|
|
|
One
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|
|
Three
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|
|
Five
|
|
|
Ten
|
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Year
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
|
|
Acquiring Fund
|
|
|
−13.59
|
%
|
|
|
−2.61
|
%
|
|
|
0.24
|
%
|
|
|
3.42
|
%
|
|
|
−15.09
|
%
|
|
|
−4.46
|
%
|
|
|
−2.30
|
%
|
|
|
1.80
|
%
|
Acquired Fund
|
|
|
−7.68
|
%
|
|
|
−0.38
|
%
|
|
|
1.47
|
%
|
|
|
3.99
|
%
|
|
|
−18.49
|
%
|
|
|
−6.99
|
%
|
|
|
−4.23
|
%
|
|
|
1.56
|
%
|
|
|
Total Return on Market Value is the average annual return on an
investment in common shares of each Fund, taking into account
income and capital gains distributions, if any, as well as
changes in market price per share. Total Return on Net Asset
Value is the average annual return on investment in common
shares of each Fund, taking into account income, capital gains
distributions, if any, as well as changes in net asset value per
share. Past performance information is not necessarily
indicative of future results.
Comparative
Fee
Table(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquiring
|
|
|
|
|
|
Combined Fund
|
|
|
|
Fund
|
|
|
Acquired Fund
|
|
|
Pro-Forma
|
|
|
|
10/31/08
|
|
|
4/30/08
|
|
|
10/31/08
|
|
|
|
|
Annual Expenses (as a percentage of net assets applicable to
common shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Fees
|
|
|
0.94
|
%
|
|
|
0.95
|
%
|
|
|
0.94
|
%
|
Interest Expense
|
|
|
0.24
|
%
|
|
|
0.19
|
%
|
|
|
0.21
|
%
|
Other Expenses
|
|
|
0.25
|
%
|
|
|
0.23
|
%
|
|
|
0.23
|
%
|
Total Annual Expenses Gross
|
|
|
1.43
|
%
|
|
|
1.37
|
%
|
|
|
1.38
|
%
|
Custodian Fee Credit
|
|
|
(0.02
|
%)
|
|
|
(0.01
|
%)
|
|
|
(0.02
|
%)
|
Total Annual Expenses Net
|
|
|
1.41
|
%
|
|
|
1.36
|
%
|
|
|
1.36
|
%
|
|
|
|
|
|
(1) |
|
The Comparative Fee Table is
presented as of each Funds fiscal year end
(October 31, 2008 for the Acquiring Fund and April 30,
2008 for the Acquired Fund). The pro forma combined figures
assume the consummation of the Reorganization on
October 31, 2008 and reflect average net asset levels for
both the Acquiring Fund and Acquired Fund for the
12-month
period ended October 31, 2008. It is important for you to
understand that a decline in the Funds average net assets
during the current fiscal year due to recent unprecedented
market volatility or other factors could cause the Funds
expense ratios for the Funds current fiscal year to be
higher than the expense information presented.
|
Example: The following table illustrates the
expenses on a $1,000 investment based upon the Total Annual
Expenses Gross shown above and assuming a 5%
annual return.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Year
|
|
|
3 Years
|
|
|
5 Years
|
|
|
10 Years
|
|
|
|
|
Acquiring Fund
|
|
$
|
15
|
|
|
$
|
45
|
|
|
$
|
78
|
|
|
$
|
171
|
|
Acquired Fund
|
|
$
|
14
|
|
|
$
|
43
|
|
|
$
|
75
|
|
|
$
|
165
|
|
Combined Fund Pro-Forma
|
|
$
|
14
|
|
|
$
|
44
|
|
|
$
|
76
|
|
|
$
|
166
|
|
|
|
The purpose of the comparative fee table is to assist you in
understanding the various costs and expenses of investing in
shares of the Funds. The information in the table is based upon
annualized expenses for the fiscal year ended October 31,
2008 for the Acquiring Fund and the fiscal year ended
April 30, 2008 for the Acquired Fund. The figures in the
Example are not necessarily indicative of past or future
expenses, and actual expenses may be greater or less than those
shown. The Funds actual rate of return may be greater or
less than the hypothetical 5% annual return shown in the Example.
9
Proposal 2:
Issuance of Acquiring Fund Common Shares
In connection with the proposed Reorganization described under
Proposal 1: Reorganization, the Acquiring Fund
will issue additional Acquiring Fund Common Shares and list
such shares on the NYSE. The Acquiring Fund will acquire all the
assets and assume all the liabilities of the Acquired Fund in
exchange for the newly-issued Acquiring Fund Common Shares
and newly-issued Acquiring Fund
MuniPreferred Shares. The Reorganization will result in no
reduction of net asset value of the Acquiring Fund Common
Shares, other than the costs of the Reorganization. No gain or
loss will be recognized by the Acquiring Fund or its
shareholders in connection with the Reorganization. The
Acquiring Fund Board, based upon its evaluation of all
relevant information, anticipates that the Reorganization will
benefit holders of Acquiring Fund Common Shares. In
particular, the Acquiring Fund Board believes, based on
data presented by the Adviser, that the Acquiring Fund will
experience a reduced annual operating expense ratio as a result
of the Reorganization. See
Proposal No. 1 Reasons for the
Reorganization.
The Board of the Acquiring Fund recommends that common
shareholders of the Acquiring Fund vote FOR the
approval of the issuance of additional Acquiring
Fund Common Shares in connection with the Reorganization.
See Proposal No. 2 Issuance of
Acquiring Fund Common Shares.
RISK
FACTORS
Investment in either Fund may not be appropriate for all
investors. The Funds are not intended to be a complete
investment program and due to the uncertainty inherent in all
investments, there can be no assurance that a Fund will achieve
its investment objectives. Investors should consider their
long-term investment goals and financial needs when making an
investment decision with respect to the Funds. An investment in
either Fund is intended to be a long-term investment and should
not be used as a trading vehicle. Your shares at any point in
time may be worth less than your original investment, even after
taking into account the reinvestment of fund dividends and
distributions, if applicable.
The following risks and special considerations should be
considered by shareholders of each Fund in their evaluation of
the Reorganization:
Differences
in Risks
The primary difference between the Funds is that the Acquired
Fund invests substantially all of its assets in municipal bonds
that are exempt from the Florida intangible personal property
tax and therefore concentrates its assets in Florida municipal
bonds.
The Acquired Fund invests in Florida municipal bonds which gives
rise to the following risks:
Special Considerations Relating to Florida Municipal
Bonds. Except to the extent the Acquired Fund
invests in temporary investments or in U.S. Territorial
bonds, the Acquired Fund will invest substantially all of its
net assets in Florida municipal bonds. The Acquired Fund is
therefore more susceptible to political, economic or regulatory
factors affecting issuers of Florida municipal bonds. The
information set forth below and the related information in the
Reorganization SAI is derived from sources that are generally
available to investors. The information is provided as general
information intended to give a recent historical description and
is not intended to indicate future or continuing trends in the
financial or other positions of
10
Florida. It should be noted that the creditworthiness of
obligations issued by local Florida issuers may be unrelated to
the creditworthiness of obligations issued by the State of
Florida, and that there is no obligation on the part of the
State to make payment on such local obligations in the event of
default.
Beginning in September 2007, Floridas job growth began a
negative trend that has continued to the present. From December
2007 until December 2008 non-agricultural or nonfarm employment
decreased 3.1%. The unemployment rate in Florida as of December
2008 was 8.1%. The national unemployment rate in December 2008
was 7.2%. Much of the state of Floridas decrease in
employment stems from declines in construction jobs, declines in
manufacturing jobs, declines in jobs in information, and
declines in jobs in financial activities. However, according to
the State of Florida Agency for Workforce Innovation employment
is expected to grow at a 1.65% annual rate for the period 2008
until 2016.
Additionally, Floridas statewide economic activity has
recently been on a downward trend. Taxable sales have decreased
by 12.6% for the period November 2007 until November 2008 with
the largest percentage decrease in autos and accessories and the
largest absolute decrease in consumer nondurables. Sales tax
collections for fiscal year
2007-08 were
5.8% below the previous fiscal years collections.
Corporate income tax collections were 9.7% below the previous
fiscal years corporate income tax collections. Finally,
documentary stamp tax collections in Fiscal Year
2007-08
decreased 36% from the previous years collections.
In 2007, Floridas GDP increased by 2.51%, which
underperformed the nation as a whole the
nations GDP increased by 4.75%. Florida had consistently
outperformed the nation in GDP growth over the previous nine
years.
In 2008, per capita personal income increased by 2.5%, which is
down significantly from the personal income growth rates of
7.08% in 2005, 6.30% in 2006 and 3.74% rate in 2007. In the
upcoming fiscal year, personal income growth is expected to
increase at a rate of 2.0%, which is below the expected 3.1%
forecast nationally. In 2007, the United States annual per
capita income was $38,611. During the same year Florida annual
per capita income was $38,444.
Population growth has slowed from a rate that hovered between
2.0% and 2.6% since the mid-1990s. The State is expected
to add an average of about 209,000 residents a year between 2007
and 2010, compared with annual increases of 418,000 people
between 2002 and 2006.
A voter-approved amendment to Floridas Constitution that
became effective in 1996 limits the rate of growth of state
revenues to the growth rate of personal income. Revenues that
are pledged to bonds, including new issuance, are exempt from
the limitation. Another constitutional amendment requires the
State to maintain a budget stabilization fund. The fund provides
a counterbalance to the States reliance on
economically-sensitive sales tax revenues. As of
February 24, 2009, Floridas general obligation bonds
carry ratings of AAA by Standard & Poors, Aa1 by
Moodys, and AA+ by Fitch. Ratings for Florida municipal
bonds may differ from the ratings granted to the general
obligation bonds.
On January 29, 2008, the voters of Florida approved a
constitutional amendment for property tax relief which:
(1) provides for an additional exemption for $25,000 for
homes valued over $50,000, except for school levies;
(2) provides for transfer of accumulated
Save-Our-Homes benefits, applicable to all tax
levies; (3) establishes an exemption from property taxes of
$25,000 of assessed value of tangible personal property,
applicable to all tax levies; and (4) limits the assessment
increases for specified non-homestead real property to
10 percent
11
each year, except for school levies. Such amendment should have
little to no financial impact on the State budget; however, such
amendment will reduce ad valorem taxes received by local
governments.
In addition to the constitutional amendment for property tax
relief, Florida sales activity for homes is down approximately
5% from the same period last year and the median sales price is
down 16% over the same period last year. Furthermore, there
still remains a large inventory of unsold homes, and access to
construction and mortgage financing is still tightening. These
factors in conjunction with slower income growth will suppress
growth in the housing sector for at least another 12 months.
The economic downturn has also negatively affected
Floridas tourism industry. Approximately 2.3% less
tourists visited Florida in 2008 than in 2007. The growth rate
for tourism is expected to weakly increase over the next few
years. Growth rates for fiscal years
2009-10,
2010-11, and
2011-12 are
0.6%, 1.0% and 1.8% respectively.
The Citizens Property Insurance Corporation is a
quasi-governmental company that was created as an insurer of
last resort in 2002. However, it has become Floridas top
underwriter of homeowners insurance, with more than
$433 billion of property exposure on its books.
Furthermore, Florida has taken on $28 billion worth or
reinsurance risk itself. The reinsurance pool would have to
issue bonds for anything over $7.8 billion in losses. A
major hurricane or series of hurricanes has the potential to
exceed Floridas reserves to cover the losses.
On February 17, 2009 President Obama signed into law a
federal stimulus package. Florida is expected to receive as much
as $12.2 billion from the stimulus package.
$3.2 billion is expected to be received in the
2008-09
fiscal year, $5.2 billion is expected to be received in the
2009-10
fiscal year, and the final $3.8 billion is expected to be
received in the
2010-11
fiscal year. The stimulus payments received are expected to be
used for health and human services, education, and
transportation and economic development.
Furthermore, the validity of a compact that Governor Charlie
Crist signed with the Seminole Indian Tribe in 2007 is under
debate. The compact could provide $288 million to the
2009-10
fiscal year state budget. The compact allowed casino gambling on
Seminole Indian territory found located in Florida. However, the
Florida legislature has not ratified the compact and has set the
money aside until the issue is settled.
As of December 2008, Florida faced a budget deficit of at least
$2.3 billion. The Florida constitution requires that the
Legislature pass a balanced budget. Thus, the legislature will
be required to decrease certain expenditures or cut certain
programs to balance the budget.
The foregoing information constitutes only a brief summary of
some of the general factors which may impact certain issuers of
municipal bonds and does not purport to be a complete or
exhaustive description of all adverse conditions to which the
issuers of municipal bonds held by the Fund are subject.
Additionally, many factors including national economic, social
and environmental policies and conditions, which are not within
the control of the issuers of the municipal bonds, could affect
or could have an adverse impact on the financial condition of
the issuers. The Fund is unable to predict whether or to what
extent such factors or other factors may affect the issuers of
the municipal bonds, the market value or marketability of the
municipal bonds or the ability of the respective issuers of the
municipal bonds acquired by the Fund to pay interest on or
principal of the municipal bonds. This information has not been
independently verified. It should also be noted that the
creditworthiness of obligations issued
12
by local Florida issuers may be unrelated to the
creditworthiness of obligations issued by the State of Florida,
and that there is no obligation on the part of the State to make
payment on such local obligations in the event of default.
Economic Sector Risk. The Acquired Fund may
invest 25% or more of its total assets in municipal bonds in the
same economic sector. Subject to the concentration limits of the
Acquired Funds investment policies and guidelines, the
Fund may invest a significant portion of its net assets in
certain sectors of the municipal bond market, such as hospitals
and other health care facilities, charter schools and other
private educational facilities, special taxing districts and
start-up
utility districts, and private activity bonds including
industrial development bonds on behalf of transportation
companies such as airline companies, whose credit quality and
performance may be more susceptible to economic, business,
political, regulatory and other developments than other sectors
of municipal issuers. If the Acquired Fund invests a significant
portion of its net assets in the sectors noted above, the
Funds performance may be subject to additional risk and
variability. To the extent that the Acquired Fund focuses its
net assets in the hospital and healthcare facilities sector, for
example, the Fund will be subject to risks associated with such
sector, including adverse government regulation and reduction in
reimbursement rates, as well as government approval of products
and services and intense competition. Securities issued with
respect to special taxing districts will be subject to various
risks, including real-estate development related risks and
taxpayer concentration risk. Further, the fees, special taxes or
tax allocations and other revenues established to secure the
obligations of securities issued with respect to special taxing
districts are generally limited as to the rate or amount that
may be levied or assessed and are not subject to increase
pursuant to rate covenants or municipal or corporate guarantees.
Charter schools and other private educational facilities are
subject to various risks, including the reversal of legislation
authorizing or funding charter schools, the failure to renew or
secure a charter, the failure of a funding entity to appropriate
necessary funds and competition from alternatives such as
voucher programs. Issuers of municipal utility securities can be
significantly affected by government regulation, financing
difficulties, supply and demand of services or fuel and natural
resource conservation. The transportation sector, including
airports, airlines, ports and other transportation facilities,
can be significantly affected by changes in the economy, fuel
prices, labor relations, insurance costs and government
regulation.
Similarity
of Risks
Despite the differences noted above, the Funds face more of the
same type of risks, including the following:
Investment and Market Risk. An investment in
the Funds shares is subject to investment risk, including
the possible loss of the entire principal amount that you
invest. Your investment in common shares represents an indirect
investment in the municipal securities owned by a Fund, which
generally trade in the over-the-counter markets. Your shares at
any point in time may be worth less than your original
investment, even after taking into account the reinvestment of
Fund dividends and distributions, if applicable. In addition, if
the current national economic downturn deteriorates into a
prolonged recession, the ability of municipalities to collect
revenue and service their obligations could be materially and
adversely affected.
Current Economic Conditions Credit Crisis
Liquidity and Volatility Risk. The markets for
credit instruments, including municipal securities, have
experienced periods of extreme illiquidity and volatility since
the latter half of 2007. General market uncertainty and
13
consequent repricing risk have led to market imbalances of
sellers and buyers, which in turn have resulted in significant
valuation uncertainties in a variety of debt securities,
including municipal securities. These conditions resulted, and
in many cases continue to result in, greater volatility, less
liquidity, widening credit spreads and a lack of price
transparency, with many debt securities remaining illiquid and
of uncertain value. These market conditions may make valuation
of some of the Funds municipal securities uncertain
and/or
result in sudden and significant valuation increases or declines
in its holdings. A significant decline in the value of your
Funds portfolio would likely result in a significant
decline in the value of your investment. In addition,
illiquidity and volatility in the credit markets may directly
and adversely affect the setting of dividend rates on the common
and MuniPreferred shares. This volatility may also impact the
liquidity of inverse floating rate securities in your
Funds portfolio. See Risks Inverse
Floating Rate Securities Risk.
In response to the current national economic condition,
governmental cost burdens may be reallocated among federal,
state and local governments. In addition, laws enacted in the
future by Congress or state legislatures or referenda could
extend the time for payment of principal
and/or
interest, or impose other constraints on enforcement of such
obligations, or on the ability of municipalities to levy taxes.
Issuers of municipal securities might seek protection under the
bankruptcy laws. See Risks Municipal
Securities Market Risk.
Market Discount from Net Asset Value. Shares
of closed-end investment companies like the Funds have during
some periods traded at prices higher than net asset value and
have during other periods traded at prices lower than net asset
value. The Funds cannot predict whether common shares will trade
at, above or below net asset value. This characteristic is a
risk separate and distinct from the risk that a Funds net
asset value could decrease as a result of investment activities.
Investors bear a risk of loss to the extent that the price at
which they sell their shares is lower in relation to the
Funds net asset value than at the time of purchase,
assuming a stable net asset value. The common shares are
designed primarily for long-term investors, and you should not
view the Funds as a vehicle for trading purposes.
Credit Risk. Credit risk is the risk that one
or more municipal securities in a Funds portfolio will
decline in price, or the issuer thereof will fail to pay
interest or principal when due, because the issuer experiences a
decline in its financial status. In general, lower-rated
municipal securities carry a greater degree of risk that the
issuer will lose its ability to make interest and principal
payments, which could have a negative impact on a Funds
net asset value or dividends. Ratings may not accurately reflect
the actual credit risk associated with a municipal security.
Each Fund will not be required to dispose of a security if a
downgrade occurs after the time of investment. If a downgrade
occurs, NAM will consider what action, including the sale of the
security, is in the best interests of a Fund. Also, to the
extent that the rating assigned to a municipal security in a
Funds portfolio is downgraded by any National Recognized
Statistical Rating Organization (NRSRO), the market
price and liquidity of such security may be adversely affected.
Interest Rate Risk. Generally, when market
interest rates rise, bond prices fall, and vice versa. Interest
rate risk is the risk that the municipal securities in a
Funds portfolio will decline in value because of increases
in market interest rates. In typical market interest rate
environments, the prices of longer-term municipal securities
generally fluctuate more than prices of shorter-term municipal
securities as interest rates change. Because the Funds invest
primarily in longer-term municipal securities, the common share
net asset value and market price per share will fluctuate more
in response to changes in market interest rates than if a Fund
invested
14
primarily in shorter-term municipal securities. Because the
values of lower-rated and comparable unrated debt securities are
affected both by credit risk and interest rate risk, the price
movements of such lower grade securities are not typically
highly correlated to the fluctuations of the prices of
investment grade quality securities in response to changes in
interest rates. The Funds investments in inverse floating
rate securities, as described herein under Inverse
Floating Rate Securities Risk, will tend to increase
common share interest rate risk.
Municipal Securities Market Risk. Investing in
the municipal securities market involves certain risks. The
municipal market is one in which dealer firms make markets in
bonds on a principal basis using their proprietary capital, and
during the recent market turmoil these firms capital was
severely constrained. As a result, some firms were unwilling to
commit their capital to purchase and to serve as a dealer for
municipal bonds. The amount of public information available
about the municipal securities in each Funds portfolio is
generally less than that for corporate equities or bonds, and
each Funds investment performance may therefore be more
dependant on NAMs analytical abilities than if such Fund
were to invest in stocks or taxable bonds. The secondary market
for municipal securities also tends to be less well-developed or
liquid than many other securities markets, which may adversely
affect each Funds ability to sell its municipal securities
at attractive prices or at prices approximating those at which
such Fund currently values them.
The ability of municipal issuers to make timely payments of
interest and principal may be diminished during general economic
downturns and as governmental cost burdens are reallocated among
federal, state and local governments. In addition, laws enacted
in the future by Congress or state legislatures or referenda
could extend the time for payment of principal
and/or
interest, or impose other constraints on enforcement of such
obligations, or on the ability of municipalities to levy taxes.
Issues of municipal securities might seek protection under the
bankruptcy laws. In the event of bankruptcy of such an issuer, a
Fund could experience delays in collecting principal and
interest and the Fund may not, in all circumstances, be able to
collect all principal and interest to which it is entitled. To
enforce its rights in the event of a default in the payment of
interest or repayment of principal, or both, a Fund may take
possession of and manage the assets securing the issuers
obligations on such securities, which may increase the
Funds operating expenses. Any income derived from a
Funds ownership or operation of such assets may not be
tax-exempt.
Revenue bonds issued by state or local agencies to finance the
development of low-income, multi-family housing involve special
risks in addition to those associated with municipal securities
generally, including that the underlying properties may not
generate sufficient income to pay expenses and interest costs.
These bonds are generally non-recourse against the property
owner, may be junior to the rights of others with an interest in
the properties, may pay interest that changes based in part on
the financial performance of the property, may be prepayable
without penalty and may be used to finance the construction of
housing developments which, until completed and rented, do not
generate income to pay interest.
Reinvestment Risk. Reinvestment risk is the
risk that income from a Funds portfolio will decline if
and when the Fund invests the proceeds from matured, traded or
called bonds at market interest rates that are below the
portfolios current earnings rate. A decline in income
could affect the common shares market price or your
overall returns.
Inverse Floating Rate Securities Risk. Each
Fund may invest in inverse floating rate securities. Typically,
inverse floating rate securities represent beneficial interests
in a special purpose
15
trust (sometimes called a tender option bond trust)
formed by a third party sponsor for the purpose of holding
municipal bonds. See Municipal Securities
Inverse Floating Rate Securities. In general, income on
inverse floating rate securities will decrease when interest
rates increase and increase when interest rates decrease.
Investments in inverse floating rate securities may subject the
Fund to the risks of reduced or eliminated interest payments and
losses of principal.
Inverse floating rate securities may increase or decrease in
value at a greater rate than the underlying interest rate, which
effectively leverages a Funds investment. As a result, the
market value of such securities generally will be more volatile
than that of fixed rate securities.
Any economic effect of leverage through a Funds purchase
of inverse floating rate securities will create an opportunity
for increased common share net income and returns, but will also
create the possibility that common share long-term returns will
be diminished if the cost of leverage exceeds the return on the
inverse floating rate securities purchased by the Fund.
There is no assurance that a Funds strategy of investing
in inverse floating rate securities will be successful.
Inverse floating rate securities have varying degrees of
liquidity based, among other things, upon the liquidity of the
underlying securities deposited in a tender option bond trust.
The market price of inverse floating rate securities is more
volatile than the underlying securities due to leverage. In
circumstances where Fund has a need for cash and the securities
in a tender option bond trust are not actively trading, the Fund
may be required to sell its inverse floating rate securities at
less than favorable prices, or liquidate other Fund portfolio
holdings.
Insurance Risk. Each Fund may purchase
municipal securities that are secured by insurance, bank credit
agreements or escrow accounts. The credit quality of the
companies that provide such credit enhancements will affect the
value of those securities. Certain significant providers of
insurance for municipal securities have recently incurred
significant losses as a result of exposure to sub-prime
mortgages and other lower credit quality investments that have
experienced recent defaults or otherwise suffered extreme credit
deterioration. As a result, such losses have reduced the
insurers capital and called into question their continued
ability to perform their obligations under such insurance if
they are called upon to do so in the future. While an insured
municipal security will typically be deemed to have the rating
of its insurer, if the insurer of a municipal security suffers a
downgrade in its credit rating or the market discounts the value
of the insurance provided by the insurer, the rating of the
underlying municipal security will be more relevant and the
value of the municipal security would more closely, if not
entirely, reflect such rating. In such a case, the value of
insurance associated with a municipal security would decline and
may not add any value. The insurance feature of a municipal
security does not guarantee the full payment of principal and
interest through the life of an insured obligation, the market
value of the insured obligation or the net asset value of the
common shares represented by such insured obligation.
In addition, a Fund may be subject to certain restrictions on
investments imposed by guidelines of the insurance companies
issuing master municipal insurance policy purchased by the Fund
(Portfolio Insurance). Each Fund does not expect
these guidelines to prevent NAM from managing the Funds
portfolio in accordance with the Funds investment
objectives and policies.
Leverage Risk. Leverage risk is the risk
associated with the use of a Funds outstanding
MuniPreferred shares or the use of tender option bonds to
leverage the common shares. There
16
can be no assurance that a Funds leveraging strategy will
be successful. Through the use of financial leverage, the Funds
seek to enhance potential common share earnings over time by
borrowing at short-term municipal rates and investing at
long-term municipal rates which are typically, though not
always, higher. Because the long-term municipal securities in
which the Funds invest generally pay fixed rates of interest
while the Funds costs of leverage generally fluctuate with
short-term yields, the incremental earnings from leverage will
vary over time. Accordingly, a Fund cannot assure you that the
use of leverage will result in a higher yield or return to
common shareholders. The benefit from leverage will be reduced
(increase) to the extent that the difference narrows (widens)
between the net earnings on a Funds portfolio securities
and its cost of leverage. If short-term rates rise, a
Funds cost of leverage could exceed the rate of return on
longer-term bonds held by the Fund that were acquired during
periods of lower interest rates, reducing returns to common
shareholders. A Funds cost of leverage includes both the
interest rate paid on its borrowings as well as any on-going
fees and expenses associated with those borrowings.
In February 2008, escalating liquidity pressures across
financial markets led to the systemic failure of the ARPS market
and the auction process used to set the ARPS dividend
rate. This failure is on-going and affects the Funds
MuniPreferred shares whose dividend rates are currently set by
reference to the Maximum Rate. Because the Funds Maximum
Rates over time are expected to result in a higher relative cost
of leverage compared with historical levels, the potential
incremental earnings from the Funds use of MuniPreferred
shares would be expected to be reduced relative to historical
levels. Each Fund and NAM continue to explore various
alternatives for refinancing the Funds outstanding
MuniPreferred shares in order to reduce the Funds relative
cost of leverage over time and to provide liquidity at
par for MuniPreferred shareholders.
A Funds use of financial leverage also creates incremental
common share net asset value risk because the full impact of
price changes in the Funds investment portfolio, including
assets attributable to leverage, is borne by common
shareholders. This can lead to a greater increase in net asset
values in rising markets than if a Fund were not leveraged, but
also can result in a greater decrease in net asset values in
declining markets. A Funds use of financial leverage
similarly can magnify the impact of changing market conditions
on common share market prices. Each Fund is required to maintain
certain regulatory and rating agency asset coverage requirements
in connection with its outstanding MuniPreferred shares, in
order to be able to maintain the ability to declare and pay
common share distributions and to maintain the MuniPreferred
shares AAA/Aaa rating. In order to maintain required asset
coverage levels, a Fund may be required to alter the composition
of its investment portfolio or take other actions, such as
redeeming MuniPreferred shares with the proceeds from portfolio
transactions, at what might be an inopportune time in the
market. Such actions could reduce the net earnings or returns to
common shareholders over time.
Each Fund may invest in the securities of other investment
companies, which may themselves be leveraged and therefore
present similar risks to those described above.
The amount of fees paid to NAM for investment advisory services
will be higher since each Fund uses financial leverage because
the fees will be calculated based on the Funds Managed
Assets.
17
Each Fund seeks to manage the risks associated with its use of
financial leverage as described below under Management of
Investment Portfolio and Capital Structure to Limit Leverage
Risk.
Tax Risk. To qualify for the favorable
U.S. federal income tax treatment generally accorded to
regulated investment companies, among other things, a Fund must
derive in each taxable year at least 90% of its gross income
from certain prescribed sources. If for any taxable year a Fund
does not qualify as a regulated investment company, all of its
taxable income (including its net capital gain) would be subject
to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions would be
taxable as ordinary dividends to the extent of the Funds
current and accumulated earnings and profits.
The value of a Funds investments and its net asset value
may be adversely affected by changes in tax rates and policies.
Because interest income from municipal securities is normally
not subject to regular federal income taxation, the
attractiveness of municipal securities in relation to other
investment alternatives is affected by changes in federal income
tax rates or changes in the tax-exempt status of interest income
from municipal securities. Any proposed or actual changes in
such rates or exempt status, therefore, can significantly affect
the demand for and supply, liquidity and marketability of
municipal securities. This could in turn affect a Funds
net asset value and ability to acquire and dispose of municipal
securities at desirable yield and price levels. Additionally,
the Funds are not suitable investments for individual retirement
accounts, for other tax-exempt or tax-deferred accounts or for
investors who are not sensitive to the federal income tax
consequences of their investments.
Each Funds policy of generally investing in bonds that are
exempt from the federal alternative minimum tax applicable to
individuals may prevent the Fund from investing in certain kinds
of bonds and thereby limit the Funds ability to optimally
diversify its portfolio.
Taxability Risk. Each Fund will invest in
municipal securities in reliance at the time of purchase on an
opinion of bond counsel to the issuer that the interest paid on
those securities will be excludable from gross income for
federal income tax purposes, and NAM will not independently
verify that opinion. Subsequent to a Funds acquisition of
such a municipal security, however, the security may be
determined to pay, or to have paid, taxable income. As a result,
the treatment of dividends previously paid or to be paid by the
Fund as exempt-interest dividends could be adversely
affected, subjecting a Funds shareholders to increased
federal income tax liabilities.
Under highly unusual circumstances, the IRS may determine that a
municipal bond issued as tax-exempt should in fact be taxable.
If a Fund holds such a bond, it might have to distribute taxable
ordinary income dividends or reclassify as taxable income
previously distributed as exempt-interest dividends.
Distributions of ordinary taxable income (including any net
short-term capital gain) will be taxable to shareholders as
ordinary income (and not eligible for favorable taxation as
qualified dividend income), and capital gain
dividends will be subject to capital gains taxes. See Tax
Matters.
Borrowing Risks. Each Fund may borrow for
temporary or emergency purposes, including to pay dividends,
repurchase its shares, or clear portfolio transactions.
Borrowing may exaggerate changes in the net asset value of a
Funds shares and may affect a Funds net income. When
a Fund borrows money, it must pay interest and other fees, which
will reduce the Funds returns if
18
such costs exceed the returns on the portfolio securities
purchased or retained with such borrowings. Any such borrowings
are intended to be temporary. However, under certain market
conditions, including periods of low demand or decreased
liquidity in the municipal bond market such borrowings might be
outstanding for longer periods of time.
Inflation Risk. Inflation risk is the risk
that the value of assets or income from investment will be worth
less in the future as inflation decreases the value of money. As
inflation increases, the real value of the dividends paid to
MuniPreferred shareholders can decline.
Special Risks Related to Certain Municipal
Obligations. Each Fund may invest in municipal
leases and certificates of participation in such leases.
Municipal leases and certificates of participation involve
special risks not normally associated with general obligations
or revenue bonds. Leases and installment purchase or conditional
sale contracts (which normally provide for title to the leased
asset to pass eventually to the governmental issuer) have
evolved as a means for governmental issuers to acquire property
and equipment without meeting the constitutional and statutory
requirements for the issuance of debt. The debt issuance
limitations are deemed to be inapplicable because of the
inclusion in many leases or contracts of
non-appropriation clauses that relieve the
governmental issuer of any obligation to make future payments
under the lease or contract unless money is appropriated for
such purpose by the appropriate legislative body on a yearly or
other periodic basis. In addition, such leases or contracts may
be subject to the temporary abatement of payments in the event
the governmental issuer is prevented from maintaining occupancy
of the leased premises or utilizing the leased equipment.
Although the obligations may be secured by the leased equipment
or facilities, the disposition of the property in the event of
non-appropriation or foreclosure might prove difficult, time
consuming and costly, and may result in a delay in recovering or
the failure to fully recover a Funds original investment.
In the event of non-appropriation, the issuer would be in
default and taking ownership of the assets may be a remedy
available to a Fund, although the Fund does not anticipate that
such a remedy would normally be pursued. To the extent that a
Fund invests in unrated municipal leases or participates in such
leases, the credit quality rating and risk of cancellation of
such unrated leases will be monitored on an ongoing basis.
Certificates of participation, which represent interests in
unmanaged pools of municipal leases or installment contracts,
involve the same risks as the underlying municipal leases. In
addition, a Fund may be dependent upon the municipal authority
issuing the certificates of participation to exercise remedies
with respect to the underlying securities. Certificates of
participation also entail a risk of default or bankruptcy, both
of the issuer of the municipal lease and also the municipal
agency issuing the certificate of participation.
Derivatives Risk, Including the Risk of
Swaps. Each Funds use of derivatives
involves risks different from, and possibly greater than, the
risks associated with investing directly in the investments
underlying the derivatives. Whether a Funds use of
derivatives is successful will depend on, among other things, if
NAM correctly forecasts market values, interest rates and other
applicable factors. If NAM incorrectly forecasts these and other
factors, the investment performance of a Fund will be
unfavorably affected. In addition, the derivatives market is
largely unregulated. It is possible that developments in the
derivatives market could adversely affect the Funds
ability to successfully use derivative instruments.
Each Fund may enter into debt-related derivatives instruments
including credit default swap contracts and interest rate swaps.
Like most derivative instruments, the use of swaps is a highly
specialized activity that involves investment techniques and
risks different from those associated with ordinary portfolio
securities transactions. In addition, the use of swaps
19
requires an understanding by NAM of not only of the referenced
asset, rate or index, but also of the swap itself. Because they
are two-party contracts and because they may have terms of
greater than seven days, swap agreements may be considered to be
illiquid. Moreover, a Fund bears the risk of loss of the amount
expected to be received under a swap agreement in the event of
the default or bankruptcy of a swap agreement counterparty. It
is possible that developments in the swaps market, including
potential government regulation, could adversely affect a
Funds ability to terminate existing swap agreements or to
realize amounts to be received under such agreements. See
Counterparty Risk,
Hedging Risk and the Reorganization SAI.
Counterparty Risk. Changes in the credit
quality of the companies that serve as a Funds
counterparties with respect to derivatives, insured municipal
securities or other transactions supported by another
partys credit will affect the value of those instruments.
Certain entities that have served as counterparties in the
markets for these transactions have recently incurred
significant financial hardships including bankruptcy and losses
as a result of exposure to sub-prime mortgages and other lower
quality credit investments that have experienced recent defaults
or otherwise suffered extreme credit deterioration. As a result,
such hardships have reduced these entities capital and
called into question their continued ability to perform their
obligations under such transactions. By using such derivatives
or other transactions, a Fund assumes the risk that its
counterparties could experience similar financial hardships.
Hedging Risk. Each Funds use of
derivatives or other transactions to reduce risk involves costs
and will be subject to NAMs ability to predict correctly
changes in the relationships of such hedge instruments to the
Funds portfolio holdings or other factors. No assurance
can be given that NAMs judgment in this respect will be
correct. In addition, no assurance can be given that a Fund will
enter into hedging or other transactions at times or under
circumstances in which it may be advisable to do so.
Deflation Risk. Deflation risk is the risk
that prices throughout the economy decline over time, which may
have an adverse effect on the market valuation of companies,
their assets and revenues. In addition, deflation may have an
adverse effect on the creditworthiness of issuers and may make
issuer default more likely, which may result in a decline in the
value of a Funds portfolio.
Illiquid Securities Risk. Each Fund may invest
in municipal securities and other instruments that, at the time
of investment, are illiquid. Illiquid securities are securities
that are not readily marketable and may include some restricted
securities, which are securities that may not be resold to the
public without an effective registration statement under the
Securities Act of 1933, as amended, if they are unregistered,
may be sold only in a privately negotiated transaction or
pursuant to an exemption from registration. Illiquid securities
involve the risk that the securities will not be able to be sold
at the time desired by a Fund or at prices approximating the
value at which the Fund is carrying the securities on its books.
Market Disruption Risk. Certain events have a
disruptive effect on the securities markets, such as terrorist
attacks (including the terrorist attacks in the U.S. on
September 11, 2001), war and other geopolitical events. A
Fund cannot predict the effects of similar events in the future
on the U.S. economy.
Call Risk. If interest rates fall, it is
possible that issuers of callable bonds with higher interest
coupons will call (or prepay) their bonds before
their maturity date. If a call were exercised by
20
the issuer during a period of declining interest rates, a Fund
is likely to replace such called security with a lower yielding
security.
Certain Affiliations. Certain broker-dealers
may be considered to be affiliated persons of the Funds, NAM,
Nuveen Investments
and/or
Nuveen. Absent an exemption from the SEC or other regulatory
relief, each Fund is generally precluded from effecting certain
principal transactions with affiliated brokers, and its ability
to purchase securities being underwritten by an affiliated
broker or a syndicate including an affiliated broker, or to
utilize affiliated brokers for agency transactions, is subject
to restrictions. This could limit a Funds ability to
engage in securities transactions, purchase certain adjustable
rate senior loans, if applicable, and take advantage of market
opportunities.
Anti-Takeover Provisions. Each Funds
Declaration and By-laws includes provisions that could limit the
ability of other entities or persons to acquire control of the
Fund or convert the Fund to open-end status. These provisions
could have the effect of depriving common shareholders of
opportunities to sell their common shares at a premium over the
then current market price of the Common Shares. For further
information on the Acquiring Fund, see Certain Provisions
in the Acquiring Fund Articles of Incorporation.
MuniPreferred Interest Rate Risk. The Funds
issue MuniPreferred shares, which pay dividends based on
short-term interest rates, and use the proceeds to buy municipal
bonds, which pay interest based on long-term yields. Long-term
municipal bond yields are typically, although not always, higher
than short-term interest rates. Both long-term and short term
interest rates may fluctuate. If short-term interest rates rise,
MuniPreferred rates may rise so that the amount of dividends
paid to MuniPreferred shareholders exceeds the income from a
Funds portfolio securities. Because income from each
Funds entire investment portfolio (not just the portion of
the portfolio purchased with the proceeds of the MuniPreferred
share offering) is available to pay MuniPreferred dividends,
however, MuniPreferred dividend rates would need to greatly
exceed the Funds net portfolio income before the
Funds ability to pay MuniPreferred dividends would be
jeopardized. Due to the systematic failure of the ARPS market
and the auction process used to set the ARPS dividend
rate, the Funds MuniPreferred dividend rates are currently
set by reference to the Maximum Rate. Because the Funds
Maximum Rates over time are expected to result in a higher
relative cost of leverage compared with historical levels, the
potential incremental earnings from the Funds use of
MuniPreferred shares would be expected to be reduced relative to
historical levels.
Auction Risk. Since mid-February 2008 the
functioning of the auction markets for certain types of auction
rate securities (including MuniPreferred) has been disrupted by
an imbalance between buy and sell orders. As a result of this
imbalance, auctions for MuniPreferred have not cleared and
MuniPreferred generally have become illiquid. There is no
current expectation that these circumstances will change
following the Reorganization and it is possible that the
MuniPreferred markets will never resume normal functioning. The
dividend rate on MuniPreferred when MuniPreferred auctions do
not clear is the Maximum Rate. In normally functioning auctions,
if you place hold orders (orders to retain MuniPreferred shares)
at an auction only at a specified rate, and that bid rate
exceeds the rate set at the auction, you will not retain your
MuniPreferred shares. Finally, if you buy shares or elect to
retain shares without specifying a rate below which you would
not wish to continue to hold those shares, and the auction sets
a below-market rate, you may receive a lower rate of return on
your shares than the market rate. Description of MuniPreferred
shares and The Auction Auction
Procedures.
21
Secondary Market Risk. There is currently no
established secondary market for MuniPreferred and, if one
should develop, it may only be possible to sell them for a price
of less than $25,000 per share plus any accumulated dividends.
If either Fund has designated a Special Dividend
Period (a dividend period of more than 7 days),
changes in interest rates could affect the price of
MuniPreferred sold in the secondary market. Broker-dealers may
maintain a secondary trading market in the MuniPreferred;
however, they have no obligation to do so and there can be no
assurance that a secondary market for the MuniPreferred will
develop or, if it does develop, that it will provide holders
with a liquid trading market
(i.e., trading will depend on the presence of willing buyers and
sellers and the trading price is subject to variables to be
determined at the time of the trade by the broker-dealers).
MuniPreferred are not be registered on any stock exchange or on
any automated quotation system. An increase in the level of
interest rates, particularly during dividend periods between one
and five years, likely will have an adverse effect on the
secondary market price of the MuniPreferred, and a selling
shareholder may sell MuniPreferred between auctions at a price
per share of less than $25,000. Accrued MuniPreferred dividends,
however, should at least partially compensate for the increased
market interest rate.
Ratings and Asset Coverage Risk. While
Moodys and S&P assign ratings of Aaa and
AAA, respectively, to each Funds MuniPreferred
shares, the ratings do not eliminate or necessarily mitigate the
risks of investing in MuniPreferred shares. A rating agency
could downgrade MuniPreferred shares, which may negatively
affect your MuniPreferred Shares. If a rating agency downgrades
MuniPreferred shares, a Fund will alter its portfolio or redeem
MuniPreferred shares. A Fund may voluntarily redeem
MuniPreferred shares under certain circumstances.
Income Risk. A Funds income is based
primarily on the interest it earns from its investments, which
can vary widely over the short-term and long-term. If interest
rates drop, a Funds income available over time to make
dividend payments with respect to the MuniPreferred could drop
as well if the Fund purchases securities with lower interest
coupons.
THE
SPECIAL MEETING
General
This Proxy Statement/Prospectus is furnished in connection with
the solicitation by the Boards of the Funds of proxies to be
voted at the Special Meeting to be
held , , , ,
on , ,
2009,
at : a.m.,
Central time, and at any and all adjournments of such Special
Meeting. The cost of preparing, printing and mailing the
enclosed proxy, accompanying notice and Proxy
Statement/Prospectus, and all other costs in connection with the
solicitation of proxies will be allocated between the Funds.
Additional solicitation may be made by officers of the Funds, by
officers or employees of the Adviser or Nuveen Investments, or
by dealers and their representatives. The Funds have engaged
Georgeson Inc. to assist in the solicitation of proxies at an
estimated cost of $ plus
reasonable expenses.
The Board of each Fund has fixed the close of business
on ,
2009 as the record date (the Record Date) for
determining holders of such Funds common shares and shares
of MuniPreferred entitled to notice of and to vote at the
Special Meeting. Each shareholder will be entitled to one vote
for each common share or share of MuniPreferred held.
22
At the close of business on the Record Date, (a) the
Acquiring Fund had
outstanding
common shares and shares of MuniPreferred as follows:
Series M- shares;
Series T- shares;
Series W- shares;
Series W2- shares;
Series TH1- shares;
Series TH2- shares;
Series F- shares,
and (b) the Acquired Fund had
outstanding
common shares and shares of MuniPreferred as follows:
Series W- shares
and
Series TH- shares.
Voting;
Proxies
Common shares and MuniPreferred shares of the Funds entitled to
vote at the Special Meeting that are represented by properly
executed proxies will, unless such proxies have been revoked, be
voted in accordance with the shareholders instructions
indicated on such proxies.
A quorum of shareholders is required to take action at the
Special Meeting. A majority of the shares entitled to vote at
the Special Meeting, represented in person or by proxy, will
constitute a quorum of shareholders at the Special Meeting.
Votes cast by proxy or in person at the Special Meeting will be
tabulated by the inspectors of election appointed for Special
Meeting. The inspectors of election will determine whether or
not a quorum is present at the Special Meeting. The inspectors
of election will treat abstentions and broker
non-votes (i.e., shares held by brokers or nominees,
typically in street name, as to which
(i) instructions have not been received from the beneficial
owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular
matter) as present for purposes of determining a quorum. For
purposes of determining the approval of Proposal 1 and
Proposal 2, abstentions and broker non-votes will have the
same effect as shares voted against the proposal.
MuniPreferred shares 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 Special Meeting, or, if adjourned, one business day before
the day to which the Special 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 the proposal in the same proportion as
the votes cast by all holders of MuniPreferred shares as a class
who have voted on the proposal or in the same proportion as the
votes cast by all holders of MuniPreferred shares of the Fund
who have voted on that item. Rule 452 permits proportionate
voting of MuniPreferred shares with respect to a particular item
if, among other things, (i) a minimum of 30% of the
MuniPreferred shares or shares of a series of MuniPreferred
shares outstanding has been voted by the holders of such shares
with respect to such item and (ii) less than 10% of the
MuniPreferred shares or shares of a series of MuniPreferred
shares 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.
The details of each proposal to be voted on by the shareholders
of each Fund and the vote required for approval of each proposal
are set forth under the description of each proposal below.
Shareholders of either Fund who execute proxies may revoke them
at any time before they are voted by filing with their Fund a
written notice of revocation, by delivering a duly executed
proxy bearing a later date or by attending the meeting and
voting in person.
23
PROPOSAL NO. 1
THE REORGANIZATION
(ACQUIRED FUND SHAREHOLDERS AND ACQUIRING FUND
MUNIPREFERRED SHAREHOLDERS ONLY)
The terms and conditions of the Reorganization are set forth in
the Agreement and Plan of Reorganization. Significant provisions
of the Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Agreement, a copy
of which is attached as Appendix A to this Proxy
Statement/Prospectus.
General
The Agreement sets forth the terms of the Reorganization, under
which (i) the Acquiring Fund will acquire all the
assets of the Acquired Fund in exchange for newly issued
Acquiring Fund Common Shares and newly issued Acquiring
Fund MuniPreferred Shares, and the Acquiring Funds
assumption of all the liabilities of the Acquired Fund,
(ii) the distribution of the Acquiring Fund Common
Shares and Acquiring Fund MuniPreferred Shares held by the
Acquired Fund to its common and preferred shareholders,
respectively and (iii) the liquidation, dissolution and
termination of the Acquired Fund as a Trust in accordance with
the Acquired Funds Declaration of Trust. As a result
of the Reorganization, the assets of the Acquiring Fund and
the Acquired Fund would be combined and the shareholders of the
Acquired Fund would become shareholders of the Acquiring
Fund. The Board Members and officers of the Acquiring Fund are
identical to those of the Acquired Fund. The investment
objectives and policies of the Acquiring Fund are similar to the
Acquired Fund except that the Acquired Fund invests in municipal
bonds that are exempt from the Florida intangible personal
property tax and concentrates its assets in Florida municipal
bonds. If all proposals are approved, the [closing date] is
expected to be the close of business
on ,
2009. Following the Reorganization, the Acquired Fund would
terminate its registration as an investment company under the
1940 Act.
Terms of
the Reorganization
Valuation of Assets and Liabilities. If the
Reorganization is approved and the other conditions are
satisfied or waived, the value of the net assets of the Acquired
Fund shall be the value of its assets, less its liabilities,
computed as of the close of regular trading on the New York
Stock Exchange (NYSE) on the business day
immediately prior to the Closing Date (such time and date being
hereinafter called the Valuation Date). The value of
the Acquired Funds assets shall be determined by using the
valuation procedures set forth in the Acquired Funds
Declaration of Trust and the Funds Proxy
Statement/Prospectus to be used in connection with the
Reorganization or such other valuation procedures as shall be
mutually agreed upon by the parties. The value of the Acquired
Funds net assets shall be calculated net of the
liquidation preference (including accumulated and unpaid
dividends) of all outstanding Acquired Fund MuniPreferred shares.
Dividends will accumulate on shares of Acquired
Fund MuniPreferred, Series W and Series TH, up to
and including the day on which the [closing] occurs and will be
paid, together with the dividends then payable in respect of the
shares of Acquiring Fund MuniPreferred Shares to the
holders thereof on the Dividend Payment Date in respect of the
Initial Rate Period of such shares. The Initial Rate Period of
the shares of Acquiring Fund MuniPreferred Shares will be a
period consisting of the number of days following the day on
which the [closing] occurs that
24
would have remained in the rate period of the shares of Acquired
Fund MuniPreferred, Series W and Series TH, in
effect immediately prior to the [closing date]. The dividend
rate for the Acquiring Fund MuniPreferred Shares for such
Initial Rate Period thereof will be the dividend rate in effect
immediately prior to the [closing date] for the shares of
Acquired Fund MuniPreferred, Series W or
Series TH. The initial auction for the
Acquiring Fund MuniPreferred Shares issued pursuant to
the Reorganization will be held on the day on which the auction
next succeeding the [closing date] would have been held for the
shares of Acquired Fund MuniPreferred, Series W or
Series TH, but for the Reorganization.
Following the Reorganization, every common shareholder of the
Acquired Fund would own common shares of the Acquiring Fund that
will have an aggregate per share net asset value immediately
after the [closing date] equal to the aggregate per share net
asset value of that shareholders Acquired Fund common
shares immediately prior to the [closing date]. See
Description of Common Shares Issued by the Acquiring
Fund for a description of the rights of such shareholders.
Since the Acquiring Fund Common Shares issued to the common
shareholders of the Acquired Fund would be issued at net asset
value in exchange for net assets of the Acquired Fund having a
value equal to the aggregate per share net asset value of those
Acquiring Fund Common Shares so issued, the net asset value
of the Acquiring Fund common shares should remain virtually
unchanged by the Reorganization, excluding Reorganization
expenses. However, as a result of the Reorganization, common
shareholders of both Funds would hold reduced percentages of
ownership in the larger combined entity than they held in the
Acquiring Fund or the Acquired Fund, as the case may be.
Following the Reorganization, every preferred shareholder of the
Acquired Fund would own the same number of shares of Acquiring
Fund MuniPreferred Shares as was held of Acquired
Fund MuniPreferred, Series W and Series TH,
respectively, and the shares of Acquiring
Fund MuniPreferred Shares would have rights and preferences
substantially similar to those of the shares of Acquired
Fund MuniPreferred, Series W and Series TH. See
Description of MuniPreferred Issued by the
Acquiring Fund and Comparison of Rights
of Holders of MuniPreferred of the Acquiring Fund and the
Acquired Fund.
Amendments and Conditions. Under the terms of
the Agreement, See Rating Agency
Considerations and Certain Federal
Income Tax Consequences of the Reorganization.
Termination or Postponement.
Reasons
for the Reorganization
Based on the considerations below, the Board of each Fund,
including the Board Members who are not interested
persons (as defined in the 1940 Act) of the Funds (the
Independent Board Members), has determined that the
Reorganization would be in the best interests of each Fund and
that the interests of the existing shareholders of the Funds
would not be diluted as a result of the Reorganization. The
Boards approved the Reorganization and recommended that
shareholders of the respective Funds approve the Reorganization.
In preparation for a meeting of the Boards held on
January 13, 2009 (the Meeting) at which the
Reorganization was proposed, NAM provided the Boards with
information regarding the proposed Reorganization, including the
rationale therefor and alternatives considered to the
Reorganization. Prior to approving the Reorganization, the
Independent Board Members reviewed the foregoing information
with their independent legal counsel and with management,
reviewed with independent counsel applicable law and their
duties in considering such
25
matters, and met with independent legal counsel in a private
session without management present. The Boards considered a
number of principal factors in reaching their respective
determination, including the following:
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the secondary market trading history of the Funds (i.e., the
price level at which the Funds shares have traded over
time in relation to their underlying net asset value on an
absolute basis and as compared to other closed-end funds) and
prior efforts to enhance the secondary market for the common
shares of the Acquired Fund;
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the elimination of the Florida intangibles tax;
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the compatibility of the investment objectives, policies and
strategies of the Funds;
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the potential opportunities to refinance MuniPreferred;
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the relative fees and expense ratios of the Funds, including
caps on the Funds expenses agreed to by NAM;
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the investment performance of the Funds;
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the anticipated tax-free nature of the Reorganization;
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the expected costs of the Reorganization and the extent to which
the Funds would bear any such costs;
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the terms of the Reorganization and whether the Reorganization
would dilute the interests of shareholders of the Funds; and
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any potential benefits of the Reorganization to NAM as a result
of the Reorganization.
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Elimination of Florida Intangibles Tax. Prior
to January 1, 2007, the State of Florida imposed an
intangibles tax on the value of stocks, bonds, other
evidences of indebtedness and mutual fund shares. Florida
municipal obligations were exempt from this tax. The repeal of
the Florida state intangibles tax in 2007 reduced the
attractiveness of Florida bonds to investors formerly subject to
the intangibles tax. In light of the Acquired Funds
secondary market trading history over time as well as previous
efforts to enhance the secondary market for its common shares,
the Board of the Acquired Fund considered various responses to
the repeal of the intangibles tax, including merging the
Acquired Fund into an existing national municipal closed-end
fund, reorganizing it into a newly created shell fund, and
amending the Acquired Funds investment mandates (e.g.,
converting from a Florida-specific mandate to a national or
Florida-preference mandate). After considering the alternatives,
given the similarities between the Acquiring Fund and the
Acquired Fund and the expected benefits from combining the
Funds, the Boards believe the proposed Reorganization would be
in the best interests of the respective Funds.
Continuity of Objectives and Policies. The
Boards considered the compatibility of the Funds
investment objectives, policies and strategies except in
relevant part, the Acquired Fund also would invest primarily in
municipal securities that pay interest exempt from the Florida
intangible personal property tax and thus would concentrate its
assets in Florida municipal bonds. As noted above, Florida
repealed the intangible personal property tax eliminating a
primary reason for the policy of the Acquired Fund to invest in
Florida municipal bonds and making the continuation of this
policy is no longer necessary. With the Reorganization, the
Acquired Fund common shareholders would be invested in a more
diversified portfolio and their exposure to Florida obligations
would decrease. Each Fund has also issued MuniPreferred to
create leverage. Through the use of leverage, the Funds seek to
enhance potential common
26
share earnings over time by borrowing at short-term municipal
rates and investing at long-term municipal rates which generally
are higher. Although there are no assurances that the use of
leverage will result in a higher yield or return to common
shareholders, the Boards believe that the Acquiring Funds
use of leverage would continue to provide common shareholders of
the Acquired Fund the potential for higher monthly tax-exempt
distributions and enhanced total returns on average over market
cycles at a time when the municipal yield spreads are
particularly wide or attractive. In addition, as discussed in
more detail below, the larger asset base of the combined fund
may increase its ability to refinance the MuniPreferred with
TOBs.
Expanded MuniPreferred Refinancing
Opportunities. As noted, both Funds have issued
MuniPreferred to create leverage. The Boards recognize the
systematic failure of the MuniPreferred market and the auction
process used to set the MuniPreferreds dividend rate. This
failure continues and the Funds MuniPreferred shares are
currently set by reference to the Maximum the Rate. The larger
asset base of the combined fund may increase its ability to
refinance MuniPreferred with TOBs. In addition, the greater
portfolio diversification of the Acquiring Fund compared to the
Acquired Fund may also enhance the combined funds ability
to refinance the MuniPreferred compared to that of the Acquired
Fund. The use of TOBs to replace MuniPreferred is expected to
benefit the Funds common shareholders because it is
expected to lower the relative cost of leverage over time for
common shareholders. Further, through such refinancings, the
Funds seek to provide liquidity at par for MuniPreferred
shareholders.
Expected Lower Fund Fees and
Expenses. The combined fund offers economies of
scale that may lead to lower per share expenses for common
shareholders of the Funds. The Boards considered the fees and
expense ratios of their respective Funds, including the
estimated expenses of the combined fund after the
Reorganization. As a result of greater economies of scale from
the larger asset size of the combined fund, it is expected that
the management fees and net expenses of the combined fund (after
any expense reimbursements) would be lower than that of both
Funds. In this regard, the Funds are subject to the same
management fee rate schedule pursuant to their respective
investment management agreements with NAM. Accordingly, after
the Reorganization, the greater asset size of the combined fund
is expected to result in a lower management fee rate. Further,
the fixed operating expenses of the combined fund may be spread
over a larger asset base.
Improved Secondary Market Trading. While it is
not possible to predict trading levels at the time the
Reorganization closes, a reduction in a Funds trading
discount would be in the best interests of the Funds
common shareholders. The Board of the Acquired Fund considered
that over the past year, the Acquired Fund shares generally have
traded at a wider discount to net asset value (NAV)
than has been the case for national funds. The broader potential
investor base of a national fund instead of a Florida-specific
fund may promote higher common share prices relative to net
asset value and the combined funds greater market
liquidity may lead to narrower bid-ask spreads and smaller trade
to trade price movements. Similarly, with respect to the
Acquiring Fund, the Board of the Acquiring Fund considered that
the potential for higher common net earnings and enhanced total
returns over time may also lead to higher common share market
prices relative to net asset value and the combined funds
greater market liquidity may lead to narrower bid-ask spreads
and smaller trade to trade price movements. There can, however,
be no assurance that after the Reorganization, the common shares
of the combined fund will trade at a premium to NAV, or at a
smaller discount to NAV, than is currently the case for the
common shares of the Acquiring Fund and Acquired Fund.
27
Investment Performance. The Boards considered
the estimated increase in common net earnings of the combined
Fund after the Reorganization compared to that of the Acquiring
Fund and Acquired Fund based on information provided by NAM and
expected expanded opportunities for enhanced total returns due
to the larger asset base (and in relation to the Acquired Fund,
a nationally-diversified portfolio). This information
supplemented the historic investment performance information of
the Funds the Boards receive at their meetings during the year.
No Dilution. The terms of the Reorganization
are intended to avoid dilution of the interests of the
shareholders of the Funds. In this regard, each shareholder of
common shares of the Acquired Fund will receive common shares of
the Acquiring Fund equal to the aggregate per share net asset
value of that shareholders Acquired Fund common shares
immediately prior to the closing of the Reorganization. With
respect to preferred shareholders, every preferred shareholder
of the Acquired Fund will receive the same number of shares of
Acquiring Fund MuniPreferred Shares as was held of the
Acquired Fund MuniPreferred shares, Series W or
Series TH, respectively, and the Acquiring
Fund MuniPreferred Shares would have rights and preferences
substantially similar to those of the Acquired
Fund MuniPreferred shares, Series W and
Series TH. The aggregate liquidation preference of
Acquiring Fund MuniPreferred Shares received in the
Reorganization will equal the aggregate liquidation preference
of the Acquired Funds preferred shares held immediately
prior to the Reorganization.
Tax-Free Reorganization. The Reorganization
will be structured with the intention that it qualify as a
tax-free reorganization for federal income tax purposes. The
Funds will obtain an opinion of counsel (based on certain
factual representations and certain customary assumptions)
substantially to the effect that the Reorganization will be
tax-free for federal income tax purposes.
Costs of the Reorganization. The Boards
considered the terms and conditions of the Agreement, including
the estimated costs associated with the Reorganization and the
allocation of such costs between the Acquiring Fund and the
Acquired Fund.
Potential Benefits to NAM. The Boards
recognized that the Reorganization may result in benefits and
economies for NAM. These may include, for example, a reduction
in the level of operational expenses incurred for
administrative, compliance and portfolio management services as
a result of the elimination of the Acquired Fund as a separate
Nuveen Fund.
Conclusion. The Boards, including the
Independent Board Members, approved the Reorganization,
concluding that the Reorganization is in the best interests of
both Funds and that the interests of existing shareholders of
the Funds will not be diluted as a result of the Reorganization.
Votes
Required
The Reorganization is required to be approved by the affirmative
vote of the holders of a majority of the outstanding shares of
the Acquired Funds common shares and the MuniPreferred,
voting together as a single class, and by the affirmative vote
of a majority of the Funds outstanding MuniPreferred,
voting as a separate class. In addition, the Reorganization is
required to be approved by the affirmative vote of the holders
of a majority of the outstanding shares of the Acquiring
Funds MuniPreferred shares voting together as a single
class.
28
MuniPreferred 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 management investment company must contain
provisions requiring approval by the vote of a majority of such
shares, voting as a class, of any plan of reorganization
adversely affecting such shares. The 1940 Act makes no
distinction between a plan of reorganization that has an adverse
effect as opposed to a materially adverse effect. While the
respective Boards do not believe that the holders of shares of
MuniPreferred of either Fund would be materially adversely
affected by the Reorganization, it is possible that there may be
insignificant adverse effects (such as where the asset coverage
with respect to the shares of Acquiring Fund MuniPreferred
Shares issued pursuant to the Reorganization is slightly more or
less than the asset coverage with respect to the shares of
Acquired Fund MuniPreferred for which they are exchanged).
Each Fund is seeking approval of the Agreement by the holders of
shares of that Funds MuniPreferred, each 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
Funds MuniPreferred entitled to vote on the proposal,
voting separately as a class.
Rating
Agency Considerations
Under the terms of the Agreement, the Reorganization is
conditioned upon (a) approval by the shareholders of the
Acquiring Fund, as described under Votes Required
above, (b) the Funds receipt of written advice from
Moodys and S&P (i) confirming that consummation
of the Reorganization will not impair the AAA and
Aaa ratings assigned to the outstanding shares of
Acquiring Fund MuniPreferred shares, Series M,
Series T, Series W, Series W2, Series TH1,
Series TH2 and Series F and (ii) assigning
AAA or Aaa ratings to the shares of Acquiring
Fund MuniPreferred, Series W3 and Series TH3,
(c) the Funds receipt of an opinion to the effect
that the Reorganization will qualify as a tax-free
reorganization under the Code, (d) the absence of legal
proceedings challenging the Reorganization and (e) the
Funds receipt of certain routine certificates and legal
opinions. See Certain Federal Income Tax
Consequences of the Reorganization.
Description
of Common Shares Issued by the Acquiring Fund
General
The Articles of Incorporation of the Acquiring Fund (the
Acquiring Fund Articles) authorize 200,000,000
common shares, par value $.01 per share. As
of ,
2009, there were issued and
outstanding
common shares of the Acquiring Fund. If the Reorganization is
approved, at the [closing date] the Acquiring Fund will issue
additional common shares. The number of such additional
Acquiring Fund Common Shares will be based on the relative
aggregate per share net asset values of the Acquiring Fund and
the Acquired Fund, in each case as of the [closing date]. Based
on the relative per share net asset values as
of ,
2009, the Acquiring Fund would have issued
approximately
additional common shares if the Reorganization had occurred as
of that date.
The terms of the Acquiring Fund Common Shares to be issued
pursuant to the Reorganization will be identical to the terms of
the Acquiring Fund common shares that are then outstanding. All
of the Acquiring Fund common shares have equal rights with
respect to the payment of dividends and the distribution of
assets upon liquidation. The Acquiring Fund common shares
29
are, when issued, fully paid and non-assessable and have no
preemptive, conversion or exchange rights or right to cumulative
voting. The Acquiring Fund will not be permitted to declare, pay
or set apart for payment any cash dividend or distribution on
the Acquiring Fund Common Shares, unless
(a) cumulative dividends on all outstanding shares of
Acquiring Fund MuniPreferred have been paid in full and
(b) the Acquiring Fund meets the asset coverage test
described in the Reorganization SAI under Description of
MuniPreferred Issued by the Acquiring Fund
Dividends Restrictions on Dividends and Other
Payments. This latter limitation on the Acquiring
Funds ability to make distributions on common shares could
under certain circumstances impair the ability of the Acquiring
Fund to maintain its qualification for taxation as a regulated
investment company under the Code. See Tax Matters
Associated with Investment in the Funds under
Additional Information About the Funds below and in
the Reorganization SAI.
Distributions
The Acquiring Funds intent is to pay regular monthly cash
distributions to common shareholders at a level rate (stated in
terms of a fixed cents per common share dividend rate) that
reflects the past and projected performance of the Acquiring
Fund. Distributions can only be made from net investment income
after paying any accrued dividends to MuniPreferred
shareholders. The Acquiring Funds ability to maintain a
level dividend rate will depend on a number of factors,
including the rate at which dividends are payable on the shares
of MuniPreferred. The net income of the Acquiring Fund consists
of all interest income accrued on portfolio assets less all
expenses of the Fund. Expenses of the Acquiring Fund are accrued
each day. Over time, all the net investment income of the
Acquiring Fund will be distributed. At least annually, the
Acquiring Fund also intends to effectively distribute net
capital gain and ordinary taxable income, if any, after paying
any accrued dividends or making any liquidation payments to
MuniPreferred shareholders. Although it does not now intend to
do so, the Board may change the Acquiring Funds dividend
policy and the amount or timing of the distributions, based on a
number of factors, including the amount of the Funds
undistributed net investment income and historical and projected
investment income and the amount of the expenses and dividend
rates on the outstanding shares of MuniPreferred.
As explained more fully below in Tax Matters Associated
with Investments in the Funds, at least annually, the
Acquiring Fund may elect to retain rather than distribute all or
a portion of any net capital gain (which is the excess of net
long-term capital gain over net
short-term
capital loss) otherwise allocable to common shareholders and pay
federal income tax on the retained gain. As provided under
federal income tax law, common shareholders of record as of the
end of the Acquiring Funds taxable year will include their
attributable share of the retained net capital gain in their
income for the year as a long-term capital gain (regardless of
their holding period in the common shares), and will be entitled
to an income tax credit or refund for the tax deemed paid on
their behalf by the Acquiring Fund.
The Acquiring Fund reserves the right to change its distribution
policy and the basis for establishing the rate of its monthly
distributions at any time.
See Tax Matters Associated with Investment in the
Funds under Additional Information About the
Funds below and in the Reorganization SAI.
Fund management does not expect the level of monthly
distributions to the common shareholders of the Acquiring Fund
and the Acquired Fund to be affected by the Reorganization.
30
There can be no assurance, however, that a stable level of
distributions may be maintained over the life of either Fund.
Dividend
Reinvestment Plan
Under the Acquiring Funds Dividend Reinvestment Plan (the
Plan), you may elect to have all dividends,
including any capital gain distributions, on your common shares
automatically reinvested by the State Street Bank and
Trust Company (the Plan Agent) in additional
common shares under the Plan. You may elect to participate in
the Plan by completing the Dividend Reinvestment Plan
Application Form. If you do not participate, you will receive
all distributions in cash paid by check mailed directly to you
by State Street Bank and Trust Company as dividend paying
agent.
If you decide to participate in the Plan of the Acquiring Fund,
the number of common shares you will receive will be determined
as follows:
(1) If common shares are trading at or above net asset
value at the time of valuation, the Acquiring Fund will issue
new shares at the then current market price; or
(2) If common shares are trading below net asset value at
the time of valuation, the Plan Agent will receive the dividend
or distribution in cash and will purchase common shares in the
open market, on the NYSE or elsewhere, for the
participants accounts. It is possible that the market
price for the common shares may increase before the Plan Agent
has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market
price at the time of valuation, resulting in the purchase of
fewer shares than if the dividend or distribution had been paid
in common shares issued by the Acquiring Fund. The Plan Agent
will use all dividends and distributions received in cash to
purchase common shares in the open market within 30 days of
the valuation date. Interest will not be paid on any uninvested
cash payments.
If the Plan Agent begins purchasing Acquiring Fund shares on the
open market while shares are trading below net asset value, but
the Funds shares subsequently trade at or above their net
asset value before the Plan Agent is able to complete its
purchases, the Plan Agent may cease open-market purchases and
may invest the uninvested portion of the distribution in
newly-issued
Fund shares at a price equal to the greater of the shares
net asset value or 95% of the shares market value.
You may withdraw from the Plan at any time by giving written
notice to the Plan Agent. If you withdraw or the Plan is
terminated, you will receive a cash payment for any fraction of
a share in your account. If you wish, the Plan Agent will sell
your shares and send you the proceeds, minus brokerage
commissions and a $2.50 service fee.
The Plan Agent maintains all shareholders accounts in the
Plan and gives written confirmation of all transactions in the
accounts, including information you may need for tax records.
Common shares in your account will be held by the Plan Agent in
non-certificated form. Any proxy you receive will include all
common shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends
or distributions in common shares. However, all participants
will pay a pro rata share of brokerage commissions incurred by
the Plan Agent when it makes open market purchases.
31
Automatically reinvesting dividends and distributions does not
mean that you do not have to pay income taxes due upon receiving
dividends and distributions. The Acquiring Fund reserves the
right to amend or terminate the Plan if in the judgment of the
Board of the Acquiring Fund the change is warranted. There is no
direct service charge to participants in the Plan; however, the
Acquiring Fund reserves the right to amend the Plan to include a
service charge payable by the participants. Additional
information about the Plan may be obtained
from ,
Attn: , , ,
(800) - .
Comparison
of Rights of Holders of Common Shares of the Acquiring Fund and
the Acquired Fund
The common shares of each Fund have equal voting rights with
respect to that Fund and equal rights with respect to the
payment of dividends and distribution of assets upon liquidation
of that Fund and have no preemptive, conversion or exchange
rights or rights to cumulative voting. The provisions of the
Acquiring Fund Articles are substantially similar to the
provisions of the Acquired Funds Declaration of Trust, and
both contain, among other things, identical super-majority
voting provisions, as described under Certain
Provisions in the Acquiring Fund Articles below. The
full text of the Acquiring Funds Articles and the Acquired
Funds Declaration of Trust is on file with the SEC and may
be obtained as described on page iii. The terms of the
Acquiring Funds Dividend Reinvestment Plan and
distribution policy are identical to the terms of the Acquired
Funds Dividend Reinvestment Plan and distribution policy.
Description
of MuniPreferred Issued by the Acquiring Fund
The following is a brief description of the terms of the shares
of the Acquiring Fund MuniPreferred, including the
Acquiring Fund MuniPreferred Shares to be issued pursuant
to the Agreement. This description assumes that the
Reorganization will be consummated and that the Acquiring Fund
will issue shares of its MuniPreferred pursuant to the
Agreement. This description does not purport to be complete and
is subject to and qualified in its entirety by reference to the
more detailed description of the shares of Acquiring
Fund MuniPreferred Shares in the Reorganization SAI and in
the Acquiring Fund Statement attached as
Appendix
to the Reorganization SAI. Capitalized terms used but not
defined herein have the meanings given them above or in the
Acquiring Fund Statement.
Since February 2008 existing markets for APS have become
generally illiquid and investors have not been able to sell
their securities through the regular auction process. There
currently is no established secondary market for MuniPreferred
and, in the event a secondary market develops, a MuniPreferred
holder may receive less than the price paid for MuniPreferred.
General
The Acquiring Fund Articles authorize the issuance of
1,000,000 shares of preferred stock (preferred
shares), par value $.01 per share, in one or more classes
or series, with rights as determined by the Board without the
approval of holders of common shares. The Acquiring
Fund Statement currently authorizes the issuance of
4,000 shares of each of MuniPreferred, Series M,
Series T, Series W, Series W2, Series TH1,
Series TH2 and Series F. At the [closing], the
Acquiring Fund will issue to the Acquired
Fund shares
and shares
of MuniPreferred, Series W3 and Series TH3,
respectively, which the Acquired Fund would then distribute to
the holders of Acquired Fund MuniPreferred, Series W
and Series TH, respectively.
32
All shares of MuniPreferred have a liquidation preference of
$25,000 per share plus an amount equal to accumulated but unpaid
dividends (whether or not earned or declared).
The shares of MuniPreferred of each series rank on parity with
shares of any other series of MuniPreferred and with shares of
any other series of preferred shares of the Acquiring Fund as to
the payment of dividends and the distribution of assets upon
liquidation. All shares of MuniPreferred carry one vote per
share on all matters on which such shares are entitled to be
voted. Shares of MuniPreferred are, when issued, fully paid and,
subject to matters discussed in Certain Provisions in the
Acquiring Fund Articles of Incorporation,
non-assessable and have no preemptive, conversion or cumulative
voting rights.
Dividends
and Dividend Periods
General. The dividend rate for shares of
Acquired Fund MuniPreferred Shares issued in connection
with the Reorganization for the Initial Rate Period will be
equal to the dividend rate for shares of the Acquired
Funds MuniPreferred shares, Series W and
Series TH, respectively. The Initial Rate Period of the
shares of Acquiring Fund MuniPreferred Shares issued
pursuant to the Agreement will be a period consisting of the
number of days following the day on which the [closing] occurs
that would have remained in the rate period of the shares of the
Acquired Fund MuniPreferred, Series W and
Series TH, respectively, in effect immediately prior to the
[closing]. Due to the systematic failure of the ARPS market, the
Acquired Fund MuniPreferred Shares dividend rate is set at
the Maximum Rate.
Dividends on shares of Acquiring Fund MuniPreferred Shares
issued pursuant to the Reorganization will be payable, when, as
and if declared by the Acquiring Funds Board out of funds
legally available therefor in accordance with the Acquiring
Fund Articles, including the Acquiring Fund Statement,
and applicable law. Providing that the [closing date]
is ,
2009, dividends with respect to Acquiring
Fund MuniPreferred shares, Series W3, will be payable
on
Thursday, ,
2009, and thereafter on each Thursday, and, with respect to the
Acquiring Fund MuniPreferred shares, Series TH3, will
be payable on
Friday, ,
2009, or thereafter on each Friday. However, (i) if the day
on which dividends would otherwise be payable as set forth above
is not a Business Day, then such dividends shall be payable on
such shares on the first Business Day that falls prior to such
day; and (ii) the Acquiring Fund may specify different
Dividend Payment Dates in respect of any Special Rate Period of
more than 28 Rate Period Days.
The amount of dividends per share payable on the Acquiring Fund
of MuniPreferred Shares on any date on which dividends shall be
payable on shares of such series shall be computed by
multiplying the Applicable Rate for shares of such series in
effect for such Dividend Period or Dividend Periods or part
thereof for which dividends have not been paid by a fraction,
the numerator of which shall be the number of days in such
Dividend Period or Dividend Periods or part thereof and the
denominator of which shall be 365 if such Dividend Period
consists of 7 Rate Period Days and 360 for all other
Dividend Periods, and applying the rate obtained against $25,000.
Dividends will be paid through the Securities Depository on each
Dividend Payment Date in accordance with its normal procedures,
which currently provide for it to distribute dividends in
next-day
funds to Agent Members, who in turn are expected to distribute
such dividend payments to the persons for whom they are acting
as agents. Each of the current Broker-Dealers, however, has
indicated to the Fund that such Broker-Dealer or the Agent
Member
33
designated by such Broker-Dealer will make such dividend
payments available in
same-day
funds on each Dividend Payment Date to customers that use such
Broker-Dealer or its designee as Agent Member.
Dividends on shares of the Acquiring Fund MuniPreferred
Shares will accumulate from the Date of Original Issue thereof.
The dividend rate for the Acquiring Fund MuniPreferred
Shares for the initial Rate Period for such shares shall be
. % per annum, the Maximum Rate.
For each Subsequent Rate Period of the Acquiring
Fund MuniPreferred Shares, the dividend rate for such
shares will be the Applicable Rate for such shares that the
Auction Agent advises the Acquiring Fund results from an
Auction, except as provided below. The Applicable Rate that
results from an Auction for the Acquiring
Fund MuniPreferred Shares will not be greater than the
Maximum Rate for shares of such series, which is:
(a) in the case of any Auction Date which is not the
Auction Date immediately prior to the first day of any proposed
Special Rate Period, the product of (i) the Reference Rate
on such Auction Date for the next Rate Period of shares of such
series and (ii) the Rate Multiple on such Auction Date,
unless shares of such series have or had a Special Rate Period
(other than a Special Rate Period of 28 Rate
Period Days or fewer) and an Auction at which Sufficient
Clearing Bids existed has not yet occurred for a Minimum Rate
Period of shares of such series after such Special Rate Period,
in which case the higher of:
(A) the dividend rate on shares of such series for the
then-ending Rate Period; and
(B) the product of (x) the higher of (I) the
Reference Rate on such Auction Date for a Rate Period equal in
length to the then-ending Rate Period of shares of such series,
if such then-ending Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate
Period equal in length to the then-ending Rate Period of shares
of such series, if such then-ending Rate Period was more than
364 Rate Period Days, and (II) the Reference Rate on such
Auction Date for a Rate Period equal in length to such Special
Rate Period of shares of such series, if such Special Rate
Period was 364 Rate Period Days or fewer, or the Treasury Note
Rate on such Auction Date for a Rate Period equal in length to
such Special Rate Period, if such Special Rate Period was more
than 364 Rate Period Days and (y) the Rate Multiple on such
Auction Date; or
(b) in the case of any Auction Date which is the Auction
Date immediately prior to the first day of any proposed Special
Rate Period, the product of (i) the highest of (x) the
Reference Rate on such Auction Date for a Rate Period equal in
length to the then-ending Rate Period of shares of such series,
if such then-ending Rate Period was 364 Rate Period Days or
fewer, or the Treasury Note Rate on such Auction Date for a Rate
Period equal in length to the then-ending Rate Period of shares
of such series, if such then-ending Rate Period was more than
364 Rate Period Days, (y) the Reference Rate on such
Auction Date for the Special Rate Period for which the Auction
is being held if such Special Rate Period is 364 Rate Period
Days or fewer or the Treasury Note Rate on such Auction Date for
the Special Rate Period for which the Auction is being held if
such Special Rate Period is more than 364 Rate Period Days, and
(z) the Reference Rate on such Auction Date for Minimum
Rate Periods and (ii) the Rate Multiple on such Auction
Date.
If an Auction for any Subsequent Rate Period of Acquiring
Fund MuniPreferred Shares is not held for any reason other
than as described below, the dividend rate on shares of such
series
34
for such Subsequent Rate Period will be the Maximum Rate for
shares of such series on the Auction Date for such Subsequent
Rate Period.
If the Acquiring Fund fails to pay in a timely manner to the
Auction Agent the full amount of any dividend on, or the
redemption price of, any shares of any series of MuniPreferred
during any Rate Period thereof (other than any Special Rate
Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period of more than 364 Rate Period
Days during which such a failure occurred that has not been
cured), but, prior to 12:00 noon, New York City time, on the
third Business Day next succeeding the date such failure
occurred, such failure shall have been cured and the Acquiring
Fund shall have paid a late charge, as described more fully in
the Acquiring Fund Statement, no Auction will be held in
respect of shares of such series for the Subsequent Rate Period
thereafter and the dividend rate for shares of such series for
such Subsequent Rate Period will be the Maximum Rate for shares
of such series on the Auction Date for such Subsequent Rate
Period.
If the Acquiring Fund fails to pay in a timely manner to the
Auction Agent the full amount of any dividend on, or the
redemption price of, any shares of any series of MuniPreferred
during any Rate Period thereof (other than any Special Rate
Period of more than 364 Rate Period Days or any Rate Period
succeeding any Special Rate Period of more than 364 Rate Period
Days during which such a failure occurred that has not been
cured), and, prior to 12:00 noon, New York City time, on the
third Business Day next succeeding the date on which such
failure occurred, such failure shall not have been cured or the
Acquiring Fund shall not have paid a late charge, as described
more fully in the Acquiring Fund Statement, no Auction will
be held in respect of shares of such series for the first
Subsequent Rate Period thereof thereafter (or for any Rate
Period thereof thereafter to and including the Rate Period
during which such failure is so cured and such late charge so
paid) (such late charge to be paid only in the event
Moodys is rating such shares at the time the Acquiring
Fund cures such failure), and the dividend rate for shares of
such series for each such Subsequent Rate Period shall be a rate
per annum equal to the Maximum Rate for shares of such series on
the Auction Date for such Subsequent Rate Period (but with the
prevailing rating for shares of such series, for purposes of
determining such Maximum Rate, being deemed to be Below
ba3/BB2).
If the Acquiring Fund fails to pay in a timely manner to the
Auction Agent the full amount of any dividend on, or the
redemption price of, any shares of any series of MuniPreferred
during a Special Rate Period thereof of more than 364 Rate
Period Days, or during any Rate Period thereof succeeding any
Special Rate Period of more than 364 Rate Period Days during
which such a failure occurred that has not been cured, and such
failure shall not have been cured or the Acquiring Fund shall
not have paid a late charge, as described more fully in the
Acquiring Fund Statement, no Auction will be held in
respect of shares of such series for such Subsequent Rate Period
thereof (or for any Rate Period thereof thereafter to and
including the Rate Period during which such failure is so cured
and such late charge so paid) (such late charge to be paid only
in the event Moodys is rating such shares at the time the
Acquiring Fund cures such failure), and the dividend rate for
shares of such series for each such Subsequent Rate Period shall
be a rate per annum equal to the Maximum Rate for shares of such
series on the Auction Date for each such Subsequent Rate Period
(but with the prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be
Below
ba3/BB2).
A failure to pay dividends on, or the redemption price of,
Acquiring Fund MuniPreferred Shares shall have been cured
(if such failure to deposit is not solely due to the willful
failure of the
35
Acquiring Fund to make the required payment to the Auction
Agent) with respect to any Rate Period thereof if, within the
respective time periods described in the Acquiring
Fund Statement, the Acquiring Fund shall have paid to the
Auction Agent (a) all accumulated and unpaid dividends on
the shares of such series and (b) without duplication, the
redemption price for shares, if any, of such series for which
notice of redemption has been mailed by the Acquiring Fund;
provided, however, that the foregoing clause (b) shall not
apply to the Acquiring Funds failure to pay the redemption
price in respect of Acquiring Fund MuniPreferred Shares
when the related notice of redemption provides that redemption
of such shares is subject to one or more conditions precedent
and any such condition precedent shall not have been satisfied
at the time or times and in the manner specified in such notice
of redemption.
Gross-up
Payments. Holders of Acquiring
Fund MuniPreferred Shares are entitled to receive, when, as
and if declared by the Acquiring Funds Board, out of funds
legally available therefor in accordance with the Acquiring
Fund Articles, including the Acquiring Fund Statement
and applicable law, dividends in an amount equal to the
aggregate
Gross-up
Payments in accordance with the following:
If, in the case of any Minimum Rate Period or any Special Rate
Period of 28 Rate Period Days or fewer, the Acquiring Fund
allocates any net capital gains or other income taxable for
federal income tax purposes to a dividend paid on Acquiring
Fund MuniPreferred Shares without having given advance
notice thereof to the Auction Agent as described under
The Auction Auction
Procedures (a Taxable Allocation) below solely
by reason of the fact that such allocation is made retroactively
as a result of the redemption of all or a portion of the
outstanding shares of Acquiring Fund MuniPreferred Shares
or the liquidation of the Acquiring Fund, the Acquiring Fund
will, prior to the end of the calendar year in which such
dividend was paid, provide notice thereof to the Auction Agent
and direct the Acquiring Funds dividend disbursing agent
to send such notice with a
Gross-up
Payment to each holder of shares
( ,
as nominee of the Securities Depository) that was entitled to
such dividend payment during such calendar year at such
holders address as the same appears or last appeared on
the record books of the Acquiring Fund.
If, in the case of any Special Rate Period of more than 28 Rate
Period Days without having given notice thereof to the Auction
Agent, the Acquiring Fund makes a Taxable Allocation to a
dividend paid on shares of Acquiring Fund MuniPreferred,
the Acquiring Fund shall, prior to the end of the calendar year
in which such dividend was paid, provide notice thereof to the
Auction Agent and direct the Acquiring Funds dividend
disbursing agent to send such notice with a
Gross-up
Payment to each holder of shares that was entitled to such
dividend payment during such calendar year at such holders
address as the same appears or last appeared on the record books
of the Acquiring Fund.
A
Gross-up
Payment means payment to a holder of Acquiring
Fund MuniPreferred Shares of an amount which, when taken
together with the aggregate amount of Taxable Allocations made
to such holder to which such
Gross-up
Payment relates, would cause such holders dividends in
dollars (after Federal income tax consequences) from the
aggregate of such Taxable Allocations and the related
Gross-up
Payment to be equal to the dollar amount of the dividends which
would have been received by such holder if the amount of the
aggregate Taxable Allocations had been excludable from the gross
income of such holder. Such
Gross-up
Payment shall be calculated: (a) without consideration
being given to the time value of money; (b) assuming that
no holder of Acquiring Fund MuniPreferred Shares is subject
to the Federal alternative minimum tax with respect to dividends
received from the Acquiring Fund; and
36
(c) assuming that each Taxable Allocation and each
Gross-up
Payment (except to the extent such
Gross-up
Payment is designated as an exempt-interest dividend under
Section 852(b)(5) of the Code or successor provisions)
would be taxable in the hands of each holder of Acquiring
Fund MuniPreferred Shares at the maximum marginal regular
Federal income tax rate, if any, applicable to ordinary income
(taking into account the Federal income tax deductibility of
state taxes paid or incurred) or net capital gains, as
applicable, or the maximum marginal regular federal corporate
income tax rate applicable to ordinary income or net capital
gains, as applicable, whichever is greater, in effect at the
time such
Gross-up
Payment is made.
Restrictions on Dividends and Other
Distributions. Except as otherwise described
herein, for so long as any Acquiring Fund MuniPreferred
Shares are outstanding, the Acquiring Fund may not declare, pay
or set apart for payment of any dividend or other distribution
(other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, its
common shares or other shares, if any, ranking junior to the
Acquiring Fund MuniPreferred Shares as to the payment of
dividends and the distribution of assets upon dissolution,
liquidation or winding up) in respect of its common shares or
any other shares of the Acquiring Fund ranking junior to, or on
parity with, Acquiring Fund MuniPreferred Shares as to the
payments of dividends or the distribution of assets upon
dissolution, liquidation or winding up, or call for redemption,
redeem, purchase or otherwise acquire for consideration any
common shares or any other such junior shares or other such
parity shares (except by conversion into or exchange for shares
of the Acquiring Fund ranking junior to the Acquiring
Fund MuniPreferred Shares as to the payment of dividends
and the distribution of assets upon liquidation, dissolution or
winding up of the affairs of the Acquiring Fund), unless
(a) full cumulative dividends on Acquiring
Fund MuniPreferred Shares through its most recently ended
Dividend Period shall have been paid or shall have been declared
and sufficient funds for the payment thereof deposited with the
Auction Agent and (b) the Acquiring Fund shall have
redeemed the full number of Acquiring Fund MuniPreferred
Shares required to be redeemed by any provision for mandatory
redemption pertaining thereto. Except as otherwise described
herein, for so long as any Acquiring Fund MuniPreferred
Shares are outstanding, the Acquiring Fund may not declare, pay
or set apart for payment any dividend or other distribution
(other than a dividend or distribution paid in shares of, or in
options, warrants or rights to subscribe for or purchase, common
shares or other shares, if any, ranking junior to Acquiring
Fund MuniPreferred Shares as to the payment of dividends
and the distribution of assets upon dissolution, liquidation or
winding up) in respect of common shares or any other shares of
the Acquiring Fund ranking junior to Acquiring
Fund MuniPreferred Shares as to the payment of dividends or
the distribution of assets upon dissolution, liquidation or
winding up, or call for redemption, redeem, purchase or
otherwise acquire for consideration any common shares or any
other such junior shares (except by conversion into or exchange
for shares of the Acquiring Fund ranking junior to Acquiring
Fund MuniPreferred Shares as to the payment of dividends
and the distribution of assets upon dissolution, liquidation or
winding up), unless immediately after such transaction the
Discounted Value of the Acquiring Funds portfolio would at
least equal the MuniPreferred Basic Maintenance Amount in
accordance with guidelines of the rating agency or agencies then
rating the Acquiring Fund MuniPreferred Shares.
Except as set forth in the next sentence, no dividends shall be
declared or paid or set apart for payment on the shares of any
class or series of Acquiring Fund shares ranking, as to the
payment of dividends, on a parity with Acquiring
Fund MuniPreferred Shares for any period unless full
cumulative dividends have been or contemporaneously are declared
and paid on the shares of Acquiring Fund MuniPreferred
Shares through its most recent Dividend Payment
37
Date. When dividends are not paid in full upon the shares of
Acquiring Fund MuniPreferred Shares through its most recent
Dividend Payment Date or upon the shares of any other class or
series of shares ranking on a parity as to the payment of
dividends with Acquiring Fund MuniPreferred Shares through
their most recent respective dividend payment dates, all
dividends declared upon Acquiring Fund MuniPreferred Shares
and any other such class or series of shares ranking on a parity
as to the payment of dividends with Acquiring
Fund MuniPreferred Shares shall be declared pro rata so
that the amount of dividends declared per share on Acquiring
Fund MuniPreferred Shares and such other class or series of
shares shall in all cases bear to each other the same ratio that
accumulated dividends per share on the Acquiring
Fund MuniPreferred Shares and such other class or series of
shares bear to each other.
Designation
of Special Rate Periods
The Acquiring Fund, at its option, may designate any succeeding
Subsequent Rate Period of Acquiring Fund MuniPreferred
Shares as a Special Rate Period consisting of a specified number
of Rate Period Days evenly divisible by seven and not more than
1,820 (approximately 5 years), subject to certain
adjustments. A designation of a Special Rate Period shall be
effective only if, among other things, (a) the Acquiring
Fund shall have given certain notices to the Auction Agent,
(b) an Auction for shares of such series shall have been
held on the Auction Date immediately preceding the first day of
such proposed Special Rate Period and Sufficient Clearing Bids
for shares of such series shall have existed in such Auction and
(c) if the Acquiring Fund shall have mailed a notice of
redemption with respect to any shares of such series, the
redemption price with respect to such shares shall have been
deposited with the Auction Agent. The Acquiring Fund will give
MuniPreferred shareholders notice of a special rate period as
provided in the Acquiring Fund Statement.
Voting
Rights
In addition to voting rights described under
Certain Provisions in the Acquiring
Fund Articles of Incorporation and in the
Reorganization SAI under Investment Objectives and
Policies Investment Restrictions, holders of
Acquiring Fund MuniPreferred Shares will have equal voting
rights with holders of common shares and any preferred shares
(one vote per share) and will vote together with holders of
common shares and any preferred shares as a single class.
In connection with the election of the Acquiring Funds
board members, holders of outstanding preferred shares,
including Acquiring Fund MuniPreferred Shares, voting as a
separate class, are entitled to elect two of the Acquiring
Funds board members, and the remaining board members are
elected by holders of common shares and preferred shares,
including Acquiring Fund MuniPreferred Shares, voting
together as a single class. In addition, if at any time
dividends (whether or not earned or declared) on any outstanding
preferred shares, including Acquiring Fund MuniPreferred
Shares, shall be due and unpaid in an amount equal to at least
two full years dividends thereon, and sufficient cash or
specified securities shall not have been deposited with the
Auction Agent for the payment of such dividends, then, as the
sole remedy of holders of outstanding preferred shares,
including Acquiring Fund MuniPreferred Shares, the number
of board members constituting the Board shall be automatically
increased by the smallest number that, when added to the two
board members elected exclusively by the holders of preferred
shares, including Acquiring Fund MuniPreferred Shares, as
described above, would constitute a majority of the Board as so
increased by such smallest number, and
38
at a special meeting of shareholders which will be called and
held as soon as practicable, and at all subsequent meetings at
which board members are to be elected, the holders of preferred
shares, including Acquiring Fund MuniPreferred Shares,
voting as a separate class, will be entitled to elect the
smallest number of additional board members that, together with
the two board members which such holders will be in any event
entitled to elect, constitutes a majority of the total number of
board members of the Acquiring Fund as so increased. The terms
of office of the persons who are board members at the time of
that election will continue. If the Acquiring Fund thereafter
shall pay, or declare and set apart for payment, in full, all
dividends payable on all outstanding preferred shares, including
Acquiring Fund MuniPreferred Shares, the voting rights
stated in the second preceding sentence shall cease, and the
terms of office of all of the additional board members elected
by the holders of preferred shares, including Acquiring
Fund MuniPreferred Shares (but not of the board members
with respect to whose election the holders of common shares were
entitled to vote or the two board members the holders of
preferred shares have the right to elect in any event), will
terminate automatically.
So long as any Acquiring Fund MuniPreferred Shares are
outstanding, the Acquiring Fund will not, without the
affirmative vote or consent of the holders of at least a
majority of the Acquiring Fund MuniPreferred Shares
outstanding at the time (voting as a separate class):
(a) authorize, create or issue any class or series of
shares ranking prior to or on a parity with shares of
MuniPreferred with respect to the payment of dividends or the
distribution of assets upon liquidation, dissolution or winding
up of the affairs of the Acquiring Fund or authorize, create or
issue additional shares of any series of MuniPreferred (except
that, notwithstanding the foregoing, but subject to certain
rating agency approvals, the Board, without the vote or consent
of the holders of MuniPreferred, may from time to time authorize
and create, and the Acquiring Fund may from time to time issue
additional shares of, any series of MuniPreferred or classes or
series of preferred shares ranking on a parity with shares of
MuniPreferred with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up of the affairs of the Acquiring Fund; provided, however, that
if Moodys or S&P is not then rating the shares of
MuniPreferred, the aggregate liquidation preference of all
preferred shares of the Acquiring Fund outstanding after any
such issuance, exclusive of accumulated and unpaid dividends,
may not exceed $144,000,000) or (b) amend, alter or repeal
the provisions of the Acquiring Fund Articles, including
the Acquiring Fund Statement, whether by merger,
consolidation or otherwise, so as to affect any preference,
right or power of Acquiring Fund MuniPreferred Shares or
the holders thereof; provided, however, that (i) none of
the actions permitted by the exception to (a) above will be
deemed to affect such preferences, rights or powers, (ii) a
division of a share of Acquiring Fund MuniPreferred Shares
will be deemed to affect such preferences, rights or powers only
if the terms of such division adversely affect the holders of
Acquiring Fund MuniPreferred Shares and (iii) the
authorization, creation and issuance of classes or series of
shares ranking junior to Acquiring Fund MuniPreferred
Shares with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding
up of the affairs of the Acquiring Fund will be deemed to affect
such preferences, rights or powers only if Moodys or
S&P is then rating the Acquiring Fund MuniPreferred
Shares and such issuance would, at the time thereof, cause the
Acquiring Fund not to satisfy the 1940 Act MuniPreferred Asset
Coverage or the MuniPreferred Basic Maintenance Amount. So long
as any Acquiring Fund MuniPreferred Shares are outstanding,
the Acquiring Fund shall not, without the affirmative vote or
consent of the holders of at least
662/3%
of the MuniPreferred shares outstanding at the time, voting as a
separate class, file a voluntary application for relief under
federal bankruptcy law or any similar application under state
law for so long as the Acquiring Fund is solvent and does not
foresee becoming insolvent. If any action
39
set forth above would adversely affect the rights of one or more
series (the Affected Series) of MuniPreferred shares
in a manner different from any other series of MuniPreferred
shares, the Acquiring Fund will not approve any such action
without the affirmative vote or consent of the holders of at
least a majority of the shares of each such Affected Series
outstanding at the time, in person or by proxy, either in
writing or at a meeting (each such Affected Series voting as a
separate class).
The Board may, without shareholder approval, from time to time,
amend, alter or repeal any or all of the definitions and related
provisions which have been adopted by the Acquiring Fund
pursuant to the rating agency guidelines in the event the
Acquiring Fund receives written confirmation from Moodys
or S&P, or both, as appropriate, that any such amendment,
alteration or repeal would not impair the ratings then assigned
by Moodys and S&P to Acquiring
Fund MuniPreferred Shares. Unless a higher percentage is
provided for in the Acquiring Fund Articles (see
Certain Provisions in the Acquiring
Fund Articles), (A) the affirmative vote of the
holders of at least a majority of the preferred shares,
including Acquiring Fund MuniPreferred Shares, outstanding
at the time, voting as a separate class, shall be required to
approve any conversion of the Acquiring Fund from a closed-end
to an open-end investment company and (B) the affirmative
vote of the holders of a majority of the outstanding preferred
shares, including Acquiring Fund MuniPreferred Shares,
voting as a separate class, shall be required to approve any
plan of reorganization (as such term is used in the 1940 Act)
adversely affecting such shares. The affirmative vote of the
holders of a majority of the outstanding preferred shares,
including Acquiring Fund MuniPreferred Shares, voting as a
separate class, shall be required to approve any action not
described in the preceding sentence requiring a vote of security
holders of the Acquiring Fund under Section 13(a) of the
1940 Act.
The foregoing voting provisions will not apply with respect to
Acquiring Fund MuniPreferred Shares if, at or prior to the
time when a vote is required, such shares shall have been
(i) redeemed or (ii) called for redemption and
sufficient funds shall have been deposited in trust to effect
such redemption.
Redemption
Mandatory Redemption. In the event the
Acquiring Fund does not timely cure a failure to maintain
(a) a Discounted Value of its eligible portfolio securities
equal to the MuniPreferred Basic Maintenance Amount or
(b) the 1940 Act MuniPreferred Asset Coverage, in
accordance with the requirements of the rating agency or
agencies then rating the Acquiring Fund MuniPreferred
Shares, Acquiring Fund MuniPreferred Shares will be subject
to mandatory redemption on a date fixed by the Acquiring
Funds Board, out of funds legally available therefor in
accordance with the Acquiring Fund Articles, including the
Acquiring Fund Statement and applicable law, at the
redemption price of $25,000 per share plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned
or declared) to (but not including) the date fixed for
redemption. Any such redemption will be limited to the lesser of
the (i) minimum number of Acquiring Fund MuniPreferred
Shares, together with all other preferred shares subject to
redemption or retirement, necessary to restore the required
Discounted Value or the 1940 Act MuniPreferred Asset Coverage,
as the case may be, and (ii) the maximum number of
Acquiring Fund MuniPreferred Shares, together with all
other preferred shares subject to redemption or retirement, that
can be redeemed with the funds legally available under the
Acquiring Fund Articles and applicable law.
40
Optional Redemption. Acquiring
Fund MuniPreferred Shares are redeemable, at the option of
the Acquiring Fund:
(a) as a whole or from time to time in part, on the second
Business Day preceding any Dividend Payment Date for Acquiring
Fund MuniPreferred Shares, out of funds legally available
therefor in accordance with the Acquiring Fund Articles,
including the Acquiring Fund Statement, and applicable law,
at the redemption price of $25,000 per share plus an amount
equal to accumulated but unpaid dividends thereon (whether or
not earned or declared) to (but not including) the date fixed
for redemption; provided, however, that (i) shares of such
series may not be redeemed in part if after such partial
redemption fewer than 250 shares of such series would
remain outstanding; (ii) Acquiring Fund MuniPreferred
Shares are redeemable by the Acquiring Fund during the Initial
Rate Period thereof only on the second Business Day next
preceding the last Dividend Payment Date for such Initial Rate
Period; and (iii) the notice establishing a Special Rate
Period of Acquiring Fund MuniPreferred Shares, as delivered
to the Auction Agent and filed with the Secretary of the
Acquiring Fund, may provide that shares of such series shall not
be redeemable during the whole or any part of such Special Rate
Period (except as provided in clause (b) below) or shall be
redeemable during the whole or any part of such Special Rate
Period only upon payment of such redemption premium or premiums
as shall be specified therein; and
(b) as a whole but not in part, out of funds legally
available therefor in accordance with the Acquiring
Fund Articles, including the Acquiring Fund Statement,
and applicable law, on the first day following any Dividend
Period thereof included in a Rate Period of more than 364 Rate
Period Days if, on the date of determination of the Applicable
Rate for shares of such series for such Rate Period, such
Applicable Rate equaled or exceeded on such date of
determination the Treasury Note Rate for such Rate Period, at a
redemption price of $25,000 per share plus an amount equal to
accumulated but unpaid dividends thereon (whether or not earned
or declared) to (but not including) the date fixed for
redemption.
Notwithstanding the foregoing, if any dividends on Acquiring
Fund MuniPreferred Shares (whether or not earned or
declared) are in arrears, no shares of such series shall be
redeemed unless all outstanding shares of such series are
simultaneously redeemed, and the Acquiring Fund shall not
purchase or otherwise acquire any shares of such series;
provided, however, that the foregoing shall not prevent the
purchase or acquisition of all outstanding shares of such series
pursuant to the successful completion of an otherwise lawful
purchase or exchange offer made on the same terms to, and
accepted by, holders of all outstanding shares of such series.
Liquidation
Subject to the rights of holders of any series or class or
classes of shares ranking on a parity with Acquiring
Fund MuniPreferred Shares with respect to the distribution
of assets upon the dissolution, liquidation or winding up of the
Acquiring Fund, upon a liquidation of the Acquiring Fund,
whether voluntary or involuntary, the holders of Acquiring
Fund MuniPreferred Shares then outstanding will be entitled
to receive and to be paid out of the assets of the Acquiring
Fund available for distribution to its shareholders, before any
payment or distribution shall be made on the common shares or
any other class of shares of the Acquiring Fund ranking junior
to the Acquiring Fund MuniPreferred Shares, an amount equal
to the liquidation preference with respect to such shares
($25,000 per share), plus an amount equal to all dividends
thereon (whether or not earned or declared) accumulated but
unpaid to (but not including) the date of final distribution in
same-day
funds, together with any applicable
Gross-up
Payments in
41
connection with the liquidation of the Acquiring Fund. After the
payment to the holders of Acquiring Fund MuniPreferred
Shares of the full preferential amounts provided for as
described in this paragraph, the holders of Acquiring
Fund MuniPreferred Shares as such shall have no right or
claim to any of the remaining assets of the Acquiring Fund.
Neither the sale of all or substantially all the property or
business of the Acquiring Fund, nor the merger or consolidation
of the Acquiring Fund into or with any Massachusetts business
trust or corporation nor the merger or consolidation of any
Massachusetts business trust or corporation into or with the
Acquiring Fund, shall be a dissolution, liquidation or winding
up, whether voluntary or involuntary, for the purposes of the
foregoing paragraph.
Rating
Agency Guidelines
The Acquired Fund is required under Moodys and S&P
guidelines to maintain assets having in the aggregate a
Discounted Value at least equal to the MuniPreferred Basic
Maintenance Amount. Moodys and S&P have each
established separate guidelines for determining Discounted
Value. To the extent any particular portfolio holding does not
satisfy the applicable rating agencys guidelines, all or a
portion of such holdings value will not be included in the
calculation of Discounted Value (as defined by such rating
agency). The Moodys and S&P guidelines do not impose
any limitations on the percentage of the Acquiring Funds
assets that may be invested in holdings not eligible for
inclusion in the calculation of the Discounted Value of the
Acquiring Funds portfolio. The amount of such assets
included in the portfolio at any time may vary depending upon
the rating, diversification and other characteristics of the
eligible assets included in the portfolio, although it is not
anticipated that in the normal course of business the value of
such assets would exceed 20% of the Acquiring Funds total
assets. The MuniPreferred Basis Maintenance Amount includes the
sum of (a) the aggregate liquidation preference of shares
of MuniPreferred then outstanding and (b) certain accrued
and projected payment obligations of the Acquiring Fund.
The Acquiring Fund is also required under the 1940 Act and
rating agency guidelines to maintain, with respect to shares of
MuniPreferred, as of the last Business Day of each month in
which any such shares are outstanding, asset coverage of at
least 200% with respect to all outstanding senior securities
which are shares of beneficial interest, including MuniPreferred
(or such other asset coverage as may in the future be specified
in or under the 1940 Act as the minimum asset coverage for
senior securities which are shares of a closed-end management
investment company as a condition of declaring dividends on its
common shares) (1940 Act MuniPreferred Asset
Coverage). Based on the composition of the portfolio of
the Acquiring Fund and market conditions as of October 31,
2008, 1940 Act MuniPreferred Asset Coverage with respect to
shares of MuniPreferred, assuming the issuance of
October 31 Acquiring Fund Common Shares in connection
with the Reorganization and the issuance of Acquiring
Fund MuniPreferred Shares in connection with the
Reorganization, would have been computed as follows:
|
|
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|
|
|
|
Value of Fund assets less liabilities not constituting senior
securities
|
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|
$
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|
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|
|
|
|
|
|
|
=
|
|
|
|
|
Senior securities representing indebtedness plus liquidation
value of the shares of MuniPreferred
|
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|
|
|
|
|
|
|
|
|
|
|
|
42
In the event the Acquiring Fund does not timely cure a failure
to maintain (a) a Discounted Value of its portfolio equal
to the MuniPreferred Basic Maintenance Amount or (b) the
1940 Act MuniPreferred Asset Coverage, in each case in
accordance with the requirements of the rating agency or
agencies then rating the shares of MuniPreferred, the Acquiring
Fund will be required to redeem Acquiring
Fund MuniPreferred Shares as described under
Redemption Mandatory Redemption above.
The Acquiring Fund may, but is not required to, adopt any
modifications to the guidelines that may hereafter be
established by Moodys or S&P. Failure to adopt any
such modifications, however, may result in a change in the
ratings described above or a withdrawal of ratings altogether.
In addition, any rating agency providing a rating for the
Acquiring Fund MuniPreferred Shares may, at any time,
change or withdraw any such rating. The Board may, without
shareholder approval, amend, alter or repeal any or all of the
definitions and related provisions which have been adopted by
the Acquiring Fund pursuant to the rating agency guidelines in
the event the Acquiring Fund receives written confirmation from
Moodys or S&P, or both, as appropriate, that any such
amendment, alteration or repeal would not impair the ratings
then assigned by Moodys and S&P to Acquiring
Fund MuniPreferred Shares.
As described by Moodys and S&P, a preferred share
rating is an assessment of the capacity and willingness of an
issuer to pay preferred share obligations. The ratings on the
Acquiring Fund MuniPreferred Shares are not recommendations
to purchase, hold or sell those shares, inasmuch as the ratings
do not comment as to market price or suitability for a
particular investor. The rating agency guidelines described
above also do not address the likelihood that an owner of
Acquiring Fund MuniPreferred Shares will be able to sell
such shares in an Auction or otherwise. The ratings are based on
current information furnished to Moodys and S&P by
the Acquiring Fund and the Adviser and information obtained from
other sources. The ratings may be changed, suspended or
withdrawn as a result of changes in, or the unavailability of,
such information. The common shares have not been rated by a
nationally recognized statistical rating organization.
A rating agencys guidelines will apply to Acquiring
Fund MuniPreferred Shares only so long as such rating
agency is rating such shares. The Acquiring Fund will pay
certain fees to Moodys or S&P, or both, for rating
the Acquiring Fund MuniPreferred Shares.
The
Auction
General
Since mid-February 2008 the functioning of the auction markets
for certain types of auction rate securities (including
MuniPreferred) has been disrupted by an imbalance between buy
and sell orders. As a result of this imbalance, auctions for
MuniPreferred have not cleared and MuniPreferred generally have
become illiquid. There is no current expectation that these
circumstances will change following the Reorganization and it is
possible that the MuniPreferred markets will never resume normal
functioning. The dividend rate on MuniPreferred when
MuniPreferred auctions do not clear is the Maximum Rate.
With respect to normally functioning markets, the Acquiring
Fund Statement provides that, except as otherwise described
therein, the Applicable Rate for the shares of each series of
MuniPreferred, including Acquiring Fund MuniPreferred
Shares, for each Rate Period of shares of such series after the
initial Rate Period thereof shall be equal to the rate per annum
that the Auction Agent advises has resulted on the Business Day
preceding the first day of such
43
Subsequent Rate Period (an Auction Date) from
implementation of the auction procedures (the Auction
Procedures) set forth in the Acquiring Fund Statement
and summarized below, in which persons determine to hold or
offer to sell or, based on dividend rates bid by them, offer to
purchase or sell shares of such series. Each periodic
implementation of the Auction Procedures is referred to herein
as an Auction. See the Acquiring Fund Statement
for a more complete description of the Auction process.
Auction
Procedures
Prior to the Submission Deadline on each Auction Date for
Acquiring Fund MuniPreferred Shares, each customer of a
Broker-Dealer who is listed on the records of that Broker-Dealer
(or, if applicable, the Auction Agent) as a holder of shares of
such series (a Beneficial Owner) may submit orders
(Orders) with respect to shares of such series to
that Broker-Dealer as follows:
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Hold Order indicating its desire to hold shares of
such series without regard to the Applicable Rate for shares of
such series for the next Rate Period thereof.
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Bid indicating its desire to sell shares of such
series at $25,000 per share if the Applicable Rate for shares of
such series for the next Rate Period thereof is less than the
rate specified in such Bid (also known as a
hold-at-a-rate
order).
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Sell Order indicating its desire to sell shares of
such series at $25,000 per share without regard to the
Applicable Rate for shares of such series for the next Rate
Period thereof.
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A Beneficial Owner may submit different types of Orders to its
Broker-Dealer with respect to Acquiring Fund MuniPreferred
Shares then held by such Beneficial Owner. A Beneficial Owner of
shares of such series that submits a Bid with respect to shares
of such series to its Broker-Dealer having a rate higher than
the Maximum Rate for shares of such series on the Auction Date
therefor will be treated as having submitted a Sell Order with
respect to such shares to its Broker-Dealer. A Beneficial Owner
of shares of such series that fails to submit an Order with
respect to such shares to its Broker-Dealer will be deemed to
have submitted a Hold Order with respect to such shares of such
series to its Broker-Dealer; provided, however, that if a
Beneficial Owner of shares of such series fails to submit an
Order with respect to shares of such series to its Broker-Dealer
for an Auction relating to a Rate Period of more than Rate
Period Days, such Beneficial Owner will be deemed to have
submitted a Sell Order with respect to such shares to its
Broker-Dealer. A Sell Order shall constitute an irrevocable
offer to sell the Acquiring Fund MuniPreferred Shares
subject thereto. A Beneficial Owner that offers to become the
Beneficial Owner of additional Acquiring Fund MuniPreferred
Shares is, for purposes of such offer, a Potential Beneficial
Owner as discussed below.
A customer of a Broker-Dealer that is not a Beneficial Owner of
shares of a series of MuniPreferred but that wishes to purchase
shares of such series, or that is a Beneficial Owner of shares
of such series that wishes to purchase additional shares of such
series (in each case, a Potential Beneficial Owner),
may submit Bids to its Broker-Dealer in which it offers to
purchase shares of such series at $25,000 per share if the
Applicable Rate for shares of such series for the next Rate
Period thereof is not less than the rate specified in such Bid.
A Bid placed by a Potential Beneficial Owner of shares of such
series specifying a rate higher than the Maximum Rate for shares
of such series on the Auction Date therefor will not be accepted.
44
The Broker-Dealers in turn will submit the Orders of their
respective customers who are Beneficial Owners and Potential
Beneficial Owners to the Auction Agent, designating themselves
(unless otherwise permitted by the Acquiring Fund) as Existing
Holders in respect of shares subject to Orders submitted or
deemed submitted to them by Beneficial Owners and as Potential
Holders in respect of shares subject to Orders submitted to them
by Potential Beneficial Owners. However, neither the Acquiring
Fund nor the Auction Agent will be responsible for a
Broker-Dealers failure to comply with the foregoing. Any
Order placed with the Auction Agent by a Broker-Dealer as or on
behalf of an Existing Holder or a Potential Holder will be
treated in the same manner as an Order placed with a
Broker-Dealer by a Beneficial Owner or Potential Beneficial
Owner. Similarly, any failure by a Broker-Dealer to submit to
the Auction Agent an Order in respect of any Acquiring
Fund MuniPreferred Shares held by it or customers who are
Beneficial Owners will be treated in the same manner as a
Beneficial Owners failure to submit to its Broker-Dealer
an Order in respect of Acquiring Fund MuniPreferred Shares
held by it. A Broker-Dealer may also submit Orders to the
Auction Agent for its own account as an Existing Holder or
Potential Holder, provided it is not an affiliate of the
Acquiring Fund.
If Sufficient Clearing Bids for shares of a series of
MuniPreferred exist (that is, the number of shares of such
series subject to Bids submitted or deemed submitted to the
Auction Agent by Broker-Dealers as or on behalf of Potential
Holders with rates equal to or lower than the Maximum Rate for
shares of such series is at least equal to the number of shares
of such series subject to Sell Orders submitted or deemed
submitted to the Auction Agent by Broker-Dealers as or on behalf
of Existing Holders), the Applicable Rate for shares of such
series for the next succeeding Rate Period thereof will be the
lowest rate specified in the Submitted Bids which, taking into
account such rate and all lower rates bid by Broker-Dealers as
or on behalf of Existing Holders and Potential Holders, would
result in Existing Holders and Potential Holders owning the
shares of such series available for purchase in the Auction. If
Sufficient Clearing Bids for shares of a series of MuniPreferred
do not exist, the Applicable Rate for shares of such series for
the next succeeding Rate Period thereof will be the Maximum Rate
for shares of such series on the Auction Date therefor. In such
event, Beneficial Owners of shares of such series that have
submitted or are deemed to have submitted Sell Orders may not be
able to sell in such Auction all shares of such series subject
to such Sell Orders. If Broker-Dealers submit or are deemed to
have submitted to the Auction Agent Hold Orders with respect to
all Existing Holders of shares of a series of MuniPreferred, the
Applicable Rate for shares of such series for the next
succeeding Rate Period thereof will be the All Hold Order Rate.
The Auction Procedures include a pro rata allocation of shares
for purchase and sale, which may result in an Existing Holder
continuing to hold or selling, or a Potential Holder purchasing,
a number of shares of a series of MuniPreferred that is fewer
than the number of shares of such series specified in its Order.
To the extent the allocation procedures have that result,
Broker-Dealers that have designated themselves as Existing
Holders or Potential Holders in respect of customer Orders will
be required to make appropriate pro rata allocations among their
respective customers.
Settlement of purchases and sales will be made on the next
Business Day (also a Dividend Payment Date) after the Auction
Date through the Securities Depository. Purchasers will make
payment through their Agent Members in
same-day
funds to the Securities Depository against delivery to their
respective Agent Members. The Securities Depository will make
payment to
45
the sellers Agent Members in accordance with the
Securities Depositorys normal procedures, which now
provide for payment against delivery by their Agent Members in
same-day
funds.
The Auctions for shares of MuniPreferred, Series W2, will
normally be held every Wednesday and each Subsequent Rate Period
of shares of such series will normally begin on the following
Thursday.
Whenever the Acquiring Fund intends to include any net capital
gain or other income taxable for regular federal income tax
purposes in any dividend on Acquiring Fund MuniPreferred
Shares, the Acquiring Fund shall, in the case of Minimum Rate
Periods or Special Rate Periods of 28 Rate Period Days or fewer,
and may, in the case of any other Special Rate Period, notify
the Auction Agent of the amount to be so included not later than
the Dividend Payment Date next preceding the Auction Date on
which the Applicable Rate for such dividend is to be
established. Whenever the Auction Agent receives such notice
from the Acquiring Fund, it will be required in turn to notify
each Broker-Dealer, who, on or prior to such Auction Date, in
accordance with its Broker-Dealer Agreement, will be required to
notify its customers who are Beneficial Owners and Potential
Beneficial Owners believed by it to be interested in submitting
an Order in the Auction to be held on such Auction Date.
Secondary
Market Trading and Transfer of Acquiring
Fund MuniPreferred
There is currently no established secondary market for
MuniPreferred and, if one should develop, it may only be
possible to sell them for a price of less than $25,000 per share
plus any accumulated dividends. The Broker-Dealers are not
obligated to maintain a secondary trading market in Acquiring
Fund MuniPreferred Shares outside of Auctions, and may
discontinue such activity at any time. There can be no assurance
that any secondary trading market in Acquiring
Fund MuniPreferred Shares will provide owners with
liquidity of investment. The Acquiring Fund MuniPreferred
Shares are not registered on any stock exchange or on the Nasdaq
Stock Market. Investors who purchase shares in an Auction for a
Special Rate Period should note that because the dividend rate
on such shares will be fixed for the length of such Rate Period,
the value of the shares may fluctuate in response to changes in
interest rates, and may be more or less than their original cost
if sold on the open market in advance of the next Auction
therefor, depending upon market conditions.
A Beneficial Owner or an Existing Holder may sell, transfer or
otherwise dispose of Acquiring Fund MuniPreferred Shares
only in whole shares and only (1) pursuant to a Bid or Sell
Order placed with the Auction Agent in accordance with the
Auction Procedures, (2) to a Broker-Dealer or (3) to
such other persons as may be permitted by the Acquiring Fund;
provided, however, that (a) a sale, transfer or other
disposition of Acquiring Fund MuniPreferred Shares from a
customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer as the holder of such shares to that Broker-Dealer
or another customer of that Broker-Dealer shall not be deemed to
be a sale, transfer or other disposition for purposes of the
foregoing if such Broker-Dealer remains the Existing Holder of
the shares so sold, transferred or disposed of immediately after
such sale, transfer or disposition and (b) in the case of
all transfers other than pursuant to Auctions, the Broker-Dealer
(or other person, if permitted by the Acquiring Fund) to whom
such transfer is made shall advise the Auction Agent of such
transfer.
46
Comparison
of Rights of Holders of MuniPreferred of the Acquiring Fund and
the Acquired Fund
The terms of the shares of Acquiring Fund MuniPreferred
Shares issued pursuant to the Reorganization will be
substantially similar to the outstanding shares of Acquired
Fund MuniPreferred, Series W and Series TH,
respectively.
Comparison
of the Investment Objectives and Policies of the Acquiring Fund
and the Acquired Fund
General
The Acquiring Fund and the Acquired Fund have similar investment
objectives. Each Funds primary investment objective is to
provide current income exempt from regular federal income tax.
The Acquiring Funds secondary investment objective is to
enhance portfolio value relative to the municipal bond market by
investing in tax-exempt municipal bonds that, in the opinion of
the Funds investment adviser, are underrated or
undervalued. The Acquired Funds secondary investment
objective is the enhancement of portfolio value relative to the
Florida municipal bond market through investments in tax-exempt
Florida municipal obligations that, in the opinion of the
Funds investment adviser, are underrated or undervalued or
that represent municipal market sectors that are undervalued.
The Acquired Funds shares also will be exempt from Florida
intangible personal property tax. Each Funds investment
objectives are fundamental policies of the Fund, and may not be
changed, without the approval of the holders of a majority of
the outstanding common shares and MuniPreferred shares (as
hereinafter defined) voting together as a single class, and of
the holders of a majority of the outstanding MuniPreferred
shares voting as a separate class. For purposes of the
Funds objectives, policies and investment strategies,
municipal bonds and municipal obligations are treated as
municipal securities.
Underrated municipal bonds are those whose ratings do not, in
NAMs opinion, reflect their true creditworthiness.
Undervalued municipal bonds are bonds that, in NAMs
opinion, are worth more than the value assigned to them in the
marketplace. NAM may at times believe that bonds associated with
a particular municipal market sector (for example, electric
utilities), or issued by a particular municipal issuer, are
undervalued. NAM may purchase such a bond for a Funds
portfolio because it represents a market sector or issuer that
NAM considers undervalued, even if the value of the particular
bond appears to be consistent with the value of similar bonds.
Municipal bonds of particular types (e.g., hospital bonds,
industrial revenue bonds or bonds issued by a particular
municipal issuer) may be undervalued because there is a
temporary excess of supply in that market sector, or because of
a general decline in the market price of municipal bonds of the
market sector for reasons that do not apply to the particular
municipal bonds that are considered undervalued. Each
Funds investment in underrated or undervalued municipal
bonds will be based on NAMs belief that their yield is
higher than that available on bonds bearing equivalent levels of
interest rate risk, credit risk and other forms of risk, and
that their prices will ultimately rise (relative to the market)
to reflect their true value. Each Fund attempts to increase its
portfolio value relative to the municipal bond market by prudent
selection of municipal bonds regardless of the direction the
market may move. There can be no assurance that a Funds
attempt to increase its portfolio value relative to the
municipal bond market will succeed. To the extent that it does
succeed, however, such success would increase the amount of net
capital gains or reduce the amount of net capital losses that
47
a Fund would otherwise have realized. While this incremental
increase in net realized gains due to successful value
investing, if any, is expected to be modest over time, it would
tend to result in the distribution, over time, of a modestly
greater amount of taxable capital gains to common shareholders
and MuniPreferred shareholders. See Tax
Matters Associated with Investment in the Funds and
The Auction Auction
Procedures.
Portfolio
Investments
The Acquiring Fund and the Acquired Fund have similar investment
policies. Except to the extent that the Acquiring Fund buys
temporary investments, the Fund will invest substantially all of
its assets in tax-exempt municipal bonds that are either covered
by insurance guaranteeing the timely payment of principal and
interest on the bonds, or are backed by an escrow or trust
account containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment
of principal and interest. Uninsured municipal bonds backed by
an escrow or trust account will not constitute more than 20% of
the Acquiring Funds assets. Except to the extent the
Acquired Fund invests in temporary investments as described
below, the Fund will invest all of its assets in tax-exempt
Florida municipal obligations which are either covered by
insurance guaranteeing the timely payment of principal and
interest thereon or backed by an escrow or trust account
containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment
of principal and interest. Municipal obligations backed by an
escrow or trust account will not constitute more than 20% of the
Acquired Funds assets.
For the purposes of the foregoing inverse floaters whose
underlying bonds are covered by insurance guaranteeing the
timely payment of principal and interest thereon are included
and insurers must have a claims-paying ability rated at least A
by an NRSRO with respect to the Acquiring Fund and AAA by an
NRSRO with respect to the Acquired Fund at the time of purchase
or at the time the bond is insured while in the portfolio.
Under normal circumstances, the Acquiring Fund will invest at
least 80% of its Managed Assets in municipal securities covered
by insurance from insurers with a claims-paying ability rated
Aa/AA or better by an NRSRO at the time of purchase or are
backed by an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities
to ensure timely payment of principal and interest.
Each insured municipal obligation the Acquiring Fund holds, or
Florida municipal obligation the Acquired Fund holds, will
either be (1) covered by an insurance policy applicable to
a specific security, whether obtained by the issuer of the
security or a third party at the time of original issuance
(Original Issue Insurance), or by the Fund or a
third party after the original issuance (Secondary Market
Insurance), or (2) covered by portfolio insurance
through a master municipal insurance policy the Fund has
purchased (Portfolio Insurance). The Acquiring Fund
and Acquired Fund will only obtain portfolio insurance from
insurers whose claims-paying ability Moodys rates
A or Aaa, respectively, or
Standard & Poors rates A or
AAA, respectively.
The foregoing credit quality policy applies only at the time a
security is purchased, and a Fund is not required to dispose of
a security in the event that a rating agency downgrades its
assessment of the credit characteristics of a particular issue.
In determining whether to retain or sell such a security, NAM
may consider such factors as NAMs assessment of the credit
quality of the issuer of such security, the price at which such
security could be sold and the
48
rating, if any, assigned to such security by other rating
agencies. See Municipal Securities below
for a general description of the economic and credit
characteristics of municipal securities. Each Fund may also
invest in securities of other open- or closed-end investment
companies that invest primarily in municipal bonds of the types
in which the Fund may invest directly. See
Other Investment Companies.
The credit quality of companies that provide insurance on bonds
will affect the value of those bonds. Although the insurance
feature reduces certain financial risks, the premiums for
insurance and the higher market price paid for insured
obligations may reduce a Funds income. The insurance
feature does not guarantee the market value of the insured
obligations or the net asset value of the common shares or
MuniPreferred shares.
Each Fund may invest in uninsured municipal bonds that are
entitled to the benefit of an escrow or trust account that
contains securities issued or guaranteed by the
U.S. Government or U.S. Government agencies backed by
the full faith and credit of the United States, and sufficient
in amount to ensure the payment of interest and principal on the
original interest payment and maturity dates
(collateralized obligations). These collateralized
obligations generally will not be insured and will include, but
are not limited to, municipal bonds that have been
(1) advance refunded where the proceeds of the refunding
have been used to buy U.S. Government or
U.S. Government agency securities that are placed in escrow
and whose interest or maturing principal payments, or both, are
sufficient to cover the remaining scheduled debt service on that
municipal bond; or (2) issued under state or local housing
finance programs that use the issuance proceeds to fund
mortgages that are then exchanged for U.S. Government or
U.S. Government agency securities and deposited with a
trustee as security for those municipal bonds. These
collateralized obligations are normally regarded as having the
credit characteristics of the underlying U.S. Government or
U.S. Government agency securities.
Each Fund will primarily invest in municipal securities with
long-term maturities in order to maintain a weighted average
maturity of
15-30 years,
but the weighted average maturity of obligations held by a Fund
may be shortened, depending on market conditions.
Upon NAMs recommendation, during temporary defensive
periods and in order to keep each Funds cash fully
invested, the Fund may deviate from its investment objectives
and policies and invest up to 100% of its net assets in
short-term investments including high quality, short-term
securities that may be either tax-exempt or taxable. Each Fund
intends to invest in taxable short-term investments only in the
event that suitable tax-exempt short-term investments are not
available at reasonable prices and yields. Investment in such
short-term investments would result in a portion of your
dividends being subject to regular federal income tax and the
federal alternative minimum applicable to individuals.
Municipal
Securities
General. Municipal Securities are often issued
by state and local governmental entities to finance or refinance
public projects such as roads, schools, and water supply
systems. Municipal securities may also be issued on behalf of
private entities or for private activities, such as housing,
medical and educational facility construction, or for privately
owned transportation, electric utility and pollution control
projects. Municipal securities may be issued on a long term
basis to provide permanent financing. The repayment of such debt
may be secured generally by a pledge of the full faith and
credit taxing power of the issuer, a limited or
49
special tax, or any other revenue source, including project
revenues, which may include tolls, fees and other user charges,
lease payments and mortgage payments. Municipal securities may
also be issued to finance projects on a short-term interim
basis, anticipating repayment with the proceeds of the later
issuance of long-term debt. The Funds may purchase municipal
securities in the form of bonds, notes, leases or certificates
of participation; structured as callable or non-callable; with
payment forms including fixed coupon, variable rate, zero
coupon, capital appreciation bonds, tender option bonds, and
residual interest bonds or inverse floating rate securities; or
acquired through investments in pooled vehicles, partnerships or
other investment companies. Inverse floating rate securities are
securities that pay interest at rates that vary inversely with
changes in prevailing short-term tax-exempt interest rates and
represent a leveraged investment in an underlying municipal
security, which could have the economic effect of financial
leverage.
Municipal securities are either general obligation or revenue
bonds and typically are issued to finance public projects (such
as roads or public buildings), to pay general operating
expenses, or to refinance outstanding debt.
Municipal securities may also be issued on behalf of private
entities or for private activities, such as housing, medical and
educational facility construction, or for privately owned
industrial development and pollution control projects. General
obligation bonds are backed by the full faith and credit, or
taxing authority, of the issuer and may be repaid from any
revenue source; revenue bonds may be repaid only from the
revenues of a specific facility or source. The Funds may also
purchase municipal securities that represent lease obligations,
municipal notes, pre-refunded municipal securities, private
activity bonds, tender option bonds and other related securities
and derivative instruments that create exposure to municipal
bonds, notes and securities and that provide for the payment of
interest income that is exempt from regular federal income tax.
The municipal securities in which the Acquiring Fund will invest
are generally issued by states, cities and local authorities and
certain possessions and territories of the United States (such
as Puerto Rico and Guam), and pay interest that, in the opinion
of bond counsel to the issuer (or on the basis of other
authority believed by NAM to be reliable), is exempt from
regular federal income tax and the federal alternative minimum
tax.
The municipal securities in which the Acquired Fund will invest
are Florida municipal obligations and pay interest that, in the
opinion of bond counsel to the issuer (or on the basis of other
authority believed by NAM to be reliable), is exempt from
regular federal income tax, the federal alternative minimum tax,
and the Florida intangible personal property tax.
The yields on municipal securities depend on a variety of
factors, including prevailing interest rates and the condition
of the general money market and the municipal bond market, the
size of a particular offering, the maturity of the obligation
and the rating of the issue. The market value of municipal
securities will vary with changes in interest rate levels and as
a result of changing evaluations of the ability of their issuers
to meet interest and principal payments.
A municipal securitys market value generally will depend
upon its form, maturity, call features, and interest rate, as
well as the credit quality of the issuer, all such factors
examined in the context of the municipal securities market and
interest rate levels and trends.
Each Fund will primarily invest in municipal securities with
long-term maturities in order to maintain a weighted average
maturity of 15 to 30 years, but the weighted average
maturity of
50
obligations held by the Fund may be shorter, depending on market
conditions. In comparison to maturity (which is the date on
which a debt instrument ceases and the issuer is obligated to
repay the principal amount), duration is a measure of the price
volatility of a debt instrument as a result of changes in market
rates of interest, based on the weighted average timing of the
instruments expected principal and interest payments.
Duration differs from maturity in that it considers a
securitys yield, coupon payments, principal payments and
call features in addition to the amount of time until the
security finally matures. As the value of a security changes
over time, so will its duration. Prices of securities with
longer durations tend to be more sensitive to interest rate
changes than securities with shorter durations. In general, a
portfolio of securities with a longer duration can be expected
to be more sensitive to interest rate changes than a portfolio
with a shorter duration.
Municipal
Bond Insurance
Each insured municipal bond a Fund acquires will be covered by
Original Issue Insurance, Secondary Market Insurance or
Portfolio Insurance. Each Fund expects to emphasize investments
in municipal bonds insured under bond-specific insurance
policies (i.e., Original Issue or Secondary Market Insurance).
The Acquiring Fund and Acquired Fund will only obtain portfolio
insurance from insurers whose claims-paying ability Moodys
rates A or Aaa, respectively, or
Standard & Poors rates A or
AAA, respectively. There is no limit on the
percentage of a Funds assets that may be invested in
municipal bonds insured by any one insurer.
A municipal bond covered by Original Issue Insurance or
Secondary Market Insurance is itself typically assigned the same
rating as that of the insurer. For example, if the insurer has a
rating of Aaa or AAA, a bond covered by
an Original Issue Insurance or Secondary Market Insurance policy
would also typically be assigned the same rating. Such a
municipal bond would generally be assigned a lower rating if the
ratings were based instead upon the credit characteristics of
the issuer without regard to the insurance feature. By way of
contrast, the rating, if any, assigned to a municipal bond
insured under Portfolio Insurance will be based primarily upon
the credit characteristics of the issuer, without regard to the
insurance feature, and therefore will generally carry a rating
that is below Aaa or AAA. While in the
portfolio of a Fund, however, a municipal bond backed by
Portfolio Insurance from a particular insurer will effectively
be of the same credit quality as a municipal bond issued by an
issuer of comparable credit characteristics that is backed by
Original Issue Insurance or Secondary Market Insurance from that
insurer.
The Acquiring Funds and Acquired Funds will only
obtain portfolio insurance from insurers whose claims-paying
ability Moodys rates A or Aaa,
respectively, or Standard & Poors rates
A or AAA, respectively.
The Acquiring Funds and Acquired Funds policy of
investing primarily in municipal bonds insured by insurers whose
claims-paying ability is rated A or Aaa,
respectively, by Moodys or A or
AAA, respectively by Standard &
Poors applies only at the time of purchase of a security,
and a Fund will not be required to dispose of the securities in
the event Moodys, S&P or Fitch, as the case may be,
downgrades its assessment of the claims-paying ability of a
particular insurer or the credit characteristics of a particular
issuer. In the event Moodys, S&P or Fitch (or all of
them) should downgrade its (or their) rating of a particular
insurer, it (or they) could also be expected to downgrade the
ratings assigned to municipal bonds insured under Original Issue
Insurance or Secondary Market Insurance policies by such
insurer, and municipal bonds insured under Portfolio Insurance
issued by such insurer also would be of reduced quality
51
in the portfolio of a Fund. Moodys, S&P and Fitch
continually assess the claims-paying ability of insurers and the
credit characteristics of issuers, and there can be no assurance
that they will not downgrade their assessments subsequent to the
time a Fund purchases securities.
The value of municipal bonds covered by Portfolio Insurance that
are in default or in significant risk of default will be
determined by separately establishing a value for the municipal
bond and a value for the Portfolio Insurance.
Original Issue Insurance. Original Issue
Insurance is purchased with respect to a particular issue of
municipal bonds by the issuer thereof or a third party in
conjunction with the original issuance of such municipal bonds.
Under this insurance, the insurer unconditionally guarantees to
the holder of the municipal bond the timely payment of principal
and interest on such obligations when and as these payments
become due but not paid by the issuer, except that in the event
of the acceleration of the due date of the principal by reason
of mandatory or optional redemption (other than acceleration by
reason of a mandatory sinking fund payment), default or
otherwise, the payments guaranteed may be made in the amounts
and at the times as payment of principal would have been due had
there not been any acceleration. The insurer is responsible for
these payments less any amounts received by the holder from any
trustee for the municipal bond issuer or from any other source.
Original Issue Insurance does not guarantee payment on an
accelerated basis, the payment of any redemption premium (except
with respect to certain premium payments in the case of certain
small issue industrial development and pollution control
municipal bonds), the value of a Funds shares, the market
value of municipal bonds, or payments of any tender purchase
price upon the tender of the municipal bonds. Original Issue
Insurance also does not insure against nonpayment of principal
or interest on municipal bonds resulting from the insolvency,
negligence or any other act or omission of the trustee or other
paying agent for these bonds.
Original Issue Insurance remains in effect as long as the
municipal bonds it covers remain outstanding and the insurer
remains in business, regardless of whether a Fund ultimately
disposes of these municipal bonds. Consequently, Original Issue
Insurance may be considered to represent an element of market
value with respect to the municipal bonds so insured, but the
exact effect, if any, of this insurance on the market value
cannot be estimated.
Secondary Market Insurance. Subsequent to the
time of original issuance of a municipal bond, a Fund or a third
party may, upon the payment of a single premium, purchase
insurance on that security. Secondary Market Insurance generally
provides the same type of coverage as Original Issue Insurance
and, as with Original Issue Insurance, Secondary Market
Insurance remains in effect as long as the municipal bonds it
covers remain outstanding and the insurer remains in business,
regardless of whether a Fund ultimately disposes of these
municipal bonds.
One of the purposes of acquiring Secondary Market Insurance with
respect to a particular municipal bond would be to enable a Fund
to enhance the value of the security. A Fund, for example, might
seek to purchase a particular municipal bond and obtain
Secondary Market Insurance, for it if, in NAMs opinion,
the market value of the security, as insured, less the cost of
the Secondary Market Insurance would exceed the current value of
the security without insurance. Similarly, if a Fund owns but
wishes to sell a municipal bond that is then covered by
Portfolio Insurance, the Fund might seek to obtain Secondary
Market Insurance for it if, in NAMs opinion, the net
proceeds of the Funds sale of the security, as insured,
less the cost of the Secondary Market Insurance would exceed the
current value of the security. In determining
52
whether to insure municipal bonds a Fund owns, an insurer will
apply its own standards, which correspond generally to the
standards it has established for determining the insurability of
new issues of municipal bonds. See Original
Issue Insurance above.
Portfolio Insurance. Portfolio Insurance
guarantees the payment of principal and interest on specified
eligible municipal bonds purchased by a Fund. Except as
described below, Portfolio Insurance generally provides the same
type of coverage as is provided by Original Issue Insurance or
Secondary Market Insurance. Municipal bonds insured under a
Portfolio Insurance policy would generally not be insured under
any other policy. A municipal bond is eligible for coverage
under a policy if it meets certain requirements of the insurer.
Portfolio Insurance is intended to reduce financial risk, but
the cost thereof and compliance with investment restrictions
imposed under the policy will reduce the yield to shareholders
of a Fund.
If a municipal bond is already covered by Original Issue
Insurance or Secondary Market Insurance, then the security is
not required to be additionally insured under any Portfolio
Insurance that a Fund may purchase. All premiums respecting
municipal bonds covered by Original Issue Insurance or Secondary
Market Insurance are paid in advance by the issuer or other
party obtaining the insurance.
Portfolio Insurance policies are effective only as to municipal
bonds owned by and held by a Fund, and do not cover municipal
bonds for which the contract for purchase fails. A
when-issued municipal obligation will be covered
under a Portfolio Insurance policy upon the settlement date of
the issue of such when-issued municipal bond.
In determining whether to insure municipal bonds held by a Fund,
an insurer will apply its own standards, which correspond
generally to the standards it has established for determining
the insurability of new issues of municipal bonds. See
Original Issue Insurance above.
Each Portfolio Insurance policy will be noncancellable and will
remain in effect so long as a Fund is in existence, the
municipal bonds covered by the policy continue to be held by the
Fund, and the Fund pays the premiums for the policy. Each
insurer will generally reserve the right at any time upon
90 days written notice to a Fund to refuse to insure
any additional bonds purchased by the Fund after the effective
date of such notice. A Fund generally will reserve the right to
terminate each policy upon seven days written notice to an
insurer if it determines that the cost of such policy is not
reasonable in relation to the value of the insurance to a Fund.
Each Portfolio Insurance policy will terminate as to any
municipal bond that has been redeemed from or sold by a Fund on
the date of redemption or the settlement date of sale, and an
insurer will not have any liability thereafter under a policy
for any municipal bond, except that if the redemption date or
settlement date occurs after a record date and before the
related payment date for any municipal bond, the policy will
terminate for that municipal bond on the business day
immediately following the payment date. Each policy will
terminate as to all municipal bonds covered thereby on the date
on which the last of the covered municipal bonds mature, are
redeemed or are sold by a Fund.
One or more Portfolio Insurance policies may provide a Fund,
pursuant to an irrevocable commitment of the insurer, with the
option to exercise the right to obtain permanent insurance
(Permanent Insurance) for a municipal bond that is
sold by a Fund. A Fund would exercise the right to obtain
Permanent Insurance upon payment of a single, predetermined
insurance premium payable from the sale proceeds of the
municipal bond. Each Fund expects to exercise the right to
obtain Permanent Insurance for a municipal bond only if, in
NAMs opinion, upon the
53
exercise the net proceeds from the sale of the municipal bond,
as insured, would exceed the proceeds from the sale of the
security without insurance.
The Permanent Insurance premium for each municipal bond is
determined based upon the insurability of each security as of
the date of purchase and will not be increased or decreased for
any change in the securitys creditworthiness unless the
security is in default as to payment of principal or interest,
or both. If such event occurs, the Permanent Insurance premium
will be subject to an increase predetermined at the date of a
Funds purchase.
Each Fund generally intends to retain any insured bonds covered
by Portfolio Insurance that are in default or in significant
risk of default and to place a value on the insurance, which
ordinarily will be the difference between the market value of
the defaulted bond and the market value of similar bonds of
minimum investment grade (that is, rated Baa or
BBB) that are not in default. In certain
circumstances, however, NAM may determine that an alternative
value for the insurance, such as the difference between the
market value of the defaulted bond and either its par value or
the market value of similar bonds that are not in default or in
significant risk of default, is more appropriate. Except as
described above for bonds covered by Portfolio Insurance that
are in default or subject to significant risk of default, a Fund
will not place any value on the Portfolio Insurance in valuing
the municipal bonds it holds.
Because each Portfolio Insurance policy will terminate for
municipal bonds sold by a Fund on the date of sale, in which
event the insurer will be liable only for those payments of
principal and interest that are then due and owing (unless
Permanent Insurance is obtained by a Fund), the provision for
this insurance will not enhance the marketability of the
Funds bonds, whether or not the bonds are in default or in
significant risk of default. On the other hand, because Original
Issue Insurance and Secondary Market Insurance generally will
remain in effect as long as the municipal bonds they cover are
outstanding, these insurance policies may enhance the
marketability of these bonds even when they are in default or in
significant risk of default, but the exact effect, if any, on
marketability, cannot be estimated. Accordingly, a Fund may
determine to retain or, alternatively, to sell municipal bonds
covered by Original Issue Insurance or Secondary Market
Insurance that are in default or in significant risk of default.
Premiums for a Portfolio Insurance policy are paid monthly, and
are adjusted for purchases and sales of municipal bonds covered
by the policy during the month. The yield on a Fund is reduced
to the extent of the insurance premiums it pays.
Municipal
Leases and Certificates of Participation
Each Fund also may purchase municipal securities that represent
lease obligations and certificates of participation in such
leases. These carry special risks because the issuer of the
securities may not be obligated to appropriate money annually to
make payments under the lease. A municipal lease is an
obligation in the form of a lease or installment purchase which
is issued by a state or local government to acquire equipment
and facilities. Income from such obligations is generally exempt
from state and local taxes in the state of issuance. Leases and
installment purchase or conditional sale contracts (which
normally provide for title to the leased asset to pass
eventually to the governmental issuer) have evolved as a means
for governmental issuers to acquire property and equipment
without meeting the constitutional and statutory requirements
for the issuance of debt. The debt issuance limitations are
deemed to be inapplicable because of the inclusion in many
leases or contracts of non-appropriation clauses
that relieve the governmental issuer of any obligation to make
future payments under
54
the lease or contract unless money is appropriated for such
purpose by the appropriate legislative body on a yearly or other
periodic basis. In addition, such leases or contracts may be
subject to the temporary abatement of payments in the event the
issuer is prevented from maintaining occupancy of the leased
premises or utilizing the leased equipment or facilities.
Although the obligations may be secured by the leased equipment
or facilities, the disposition of the property in the event of
non-appropriation or foreclosure might prove difficult, time
consuming and costly, and result in a delay in recovering, or
the failure to recover fully, a Funds original investment.
To the extent that a Fund invests in unrated municipal leases or
participates in such leases, the credit quality rating and risk
of cancellation of such unrated leases will be monitored on an
ongoing basis. In order to reduce this risk, a Fund will only
purchase municipal securities representing lease obligations
where NAM believes the issuer has a strong incentive to continue
making appropriations until maturity.
A certificate of participation represents an undivided interest
in an unmanaged pool of municipal leases, an installment
purchase agreement or other instruments. The certificates are
typically issued by a municipal agency, a trust or other entity
that has received an assignment of the payments to be made by
the state or political subdivision under such leases or
installment purchase agreements. Such certificates provide a
Fund with the right to a pro rata undivided interest in the
underlying municipal securities. In addition, such
participations generally provide a Fund with the right to demand
payment, on not more than seven days notice, of all or any
part of the Funds participation interest in the underlying
municipal securities, plus accrued interest.
Municipal
Notes
Municipal securities in the form of notes generally are used to
provide for short-term capital needs, in anticipation of an
issuers receipt of other revenues or financing, and
typically have maturities of up to three years. Such instruments
may include tax anticipation notes, revenue anticipation notes,
bond anticipation notes, tax and revenue anticipation notes and
construction loan notes. Tax anticipation notes are issued to
finance the working capital needs of governments. Generally,
they are issued in anticipation of various tax revenues, such as
income, sales, property, use and business taxes, and are payable
from these specific future taxes. Revenue anticipation notes are
issued in expectation of receipt of other kinds of revenue, such
as federal revenues available under federal revenue sharing
programs. Bond anticipation notes are issued to provide interim
financing until long- term bond financing can be arranged. In
most cases, the long-term bonds then provide the funds needed
for repayment of the bond anticipation notes. Tax and revenue
anticipation notes combine the funding sources of both tax
anticipation notes and revenue anticipation notes. Construction
loan notes are sold to provide construction financing. Mortgage
notes insured by the Federal Housing Authority secure these
notes; however, the proceeds from the insurance may be less than
the economic equivalent of the payment of principal and interest
on the mortgage note if there has been a default. The
anticipated revenues from taxes, grants or bond financing
generally secure the obligations of an issuer of municipal
notes. An investment in such instruments, however, presents a
risk that the anticipated revenues will not be received or that
such revenues will be insufficient to satisfy the issuers
payment obligations under the notes or that refinancing will be
otherwise unavailable.
55
Pre-Refunded
Municipal Securities
The principal of and interest on pre-refunded municipal
securities are no longer paid from the original revenue source
for the securities. Instead, the source of such payments is
typically an escrow fund consisting of U.S. government
securities. The assets in the escrow fund are derived from the
proceeds of refunding bonds issued by the same issuer as the
pre-refunded municipal securities. Issuers of municipal
securities use this advance refunding technique to obtain more
favorable terms with respect to securities that are not yet
subject to call or redemption by the issuer. For example,
advance refunding enables an issuer to refinance debt at lower
market interest rates, restructure debt to improve cash flow or
eliminate restrictive covenants in the indenture or other
governing instrument for the pre-refunded municipal securities.
However, except for a change in the revenue source from which
principal and interest payments are made, the pre-refunded
municipal securities remain outstanding on their original terms
until they mature or are redeemed by the issuer.
Private
Activity Bonds
Private activity bonds, formerly referred to as industrial
development bonds, are issued by or on behalf of public
authorities to obtain funds to provide privately operated
housing facilities, airport, mass transit or port facilities,
sewage disposal, solid waste disposal or hazardous waste
treatment or disposal facilities and certain local facilities
for water supply, gas or electricity. Other types of private
activity bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately
operated industrial or commercial facilities, may constitute
municipal securities, although the current federal tax laws
place substantial limitations on the size of such issues. A
Funds distributions of its interest income from private
activity bonds may subject certain investors to the federal
alternative minimum tax.
Inverse
Floating Rate Securities
A Fund may invest up to 15% of its Managed Assets in inverse
floating rate securities. Inverse floating rate securities
(sometimes referred to as inverse floaters or
residual interests of a tender option bond) are securities whose
interest rates bear an inverse relationship to the interest rate
on another security or the value of an index. Generally, inverse
floating rate securities represent beneficial interests in a
special purpose trust formed by a third party sponsor for the
purpose of holding municipal bonds. The special purpose trust
typically sells two classes of beneficial interests or
securities: short-term floating rate municipal securities
(sometimes referred to as short-term floaters or tender option
bonds), which are sold to third party investors, and inverse
floating rate municipal securities, which the Fund would
purchase. The short-term floating rate securities have first
priority on the cash flow from the municipal bonds held by the
special purpose trust. Typically, a third party, such as a bank,
broker-dealer or other financial institution, grants the
floating rate security holders the option, at periodic
intervals, to tender their securities to the institution and
receive the face value thereof. As consideration for providing
the option, the financial institution receives periodic fees.
The holder of the short-term floater effectively holds a demand
obligation that bears interest at the prevailing short-term,
tax-exempt rate. However, an institution will not be obligated
to accept tendered short-term floaters in the event of certain
defaults or a significant downgrade in the credit rating
assigned to the bond issuer. For its inverse floating rate
investment, a Fund receives the residual cash flow from the
special purpose trust. Because the holder of the short-
56
term floater is generally assured liquidity at the face value of
the security, a Fund as the holder of the inverse floater
assumes the interest rate cash flow risk and the market value
risk associated with the municipal security deposited into the
special purpose trust. The volatility of the interest cash flow
and the residual market value will vary with the degree to which
the trust is leveraged. This is expressed in the ratio of the
face value of the short-term floaters in relation to the
residual inverse floaters that are issued by the special purpose
trust. Each Fund expects to make limited investments in inverse
floaters, with leverage ratios that may vary between one and
three times. In addition, all voting rights and decisions to be
made with respect to any other rights relating to the municipal
bonds held in the special purpose trust are passed through to a
Fund, as the holder of the residual inverse floating rate
securities.
Because increases in either the interest rate on the securities
or the value of indexes (with which inverse floaters maintain
their inverse relationship) reduce the residual interest paid on
inverse floaters, an inverse floaters value is generally
more volatile than that of fixed rate bonds. Inverse floaters
have varying degrees of liquidity based upon the liquidity of
the underlying securities deposited in a tender option bond
trust. The market price of inverse floating rate securities is
more volatile than the underlying securities due to leverage.
These securities generally will underperform the market of fixed
rate bonds in a rising interest rate environment, but tend to
outperform the market of fixed rate bonds when interest rates
decline or remain relatively stable. Although volatile, inverse
floaters typically offer the potential for yields exceeding the
yields available on fixed rate bonds with comparable credit
quality, coupon, call provisions and maturity.
Tender
Option Bonds
A tender option bond is a municipal security (generally held
pursuant to a custodial arrangement) having a relatively long
maturity and bearing interest at a fixed rate substantially
higher than prevailing short-term, tax-exempt rates. The bond is
typically issued with the agreement of a third party, such as a
bank, broker-dealer or other financial institution, which grants
the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face
value thereof. As consideration for providing the option, the
financial institution receives periodic fees equal to the
difference between the bonds fixed coupon rate and the
rate, as determined by a remarketing or similar agent at or near
the commencement of such period, that would cause the
securities, coupled with the tender option, to trade at par on
the date of such determination. Thus, after payment of this fee,
the security holder effectively holds a demand obligation that
bears interest at the prevailing short-term, tax-exempt rate.
However, an institution will not be obligated to accept tendered
bonds in the event of certain defaults or a significant
downgrade in the credit rating assigned to the issuer of the
bond. Each Fund intends to invest in tender option bonds the
interest on which will, in the opinion of bond counsel, counsel
for the issuer of interests therein or counsel selected by NAM,
be exempt from regular federal income tax and from the Federal
alternative minimum tax applicable to individuals. However,
because there can be no assurance that the Internal Revenue
Service (the IRS) will agree with such
counsels opinion in any particular case, there is a risk
that a Fund will not be considered the owner of such tender
option bonds and thus will not be entitled to treat such
interest as exempt from such tax. Additionally, the federal
income tax treatment of certain other aspects of these
investments, including the proper tax treatment of tender option
bonds and the associated fees in relation to various regulated
investment company tax provisions, is unclear. Each Fund intends
to manage its portfolio in a manner
57
designed to eliminate or minimize any adverse impact from the
tax rules applicable to these investments.
Special
Taxing Districts
Special taxing districts are organized to plan and finance
infrastructure developments to induce residential, commercial
and industrial growth and redevelopment. The bond financing
methods such as tax increment finance, tax assessment, special
services district and Mello-Roos bonds, are generally payable
solely from taxes or other revenues attributable to the specific
projects financed by the bonds without recourse to the credit or
taxing power of related or overlapping municipalities. They
often are exposed to real estate development-related risks and
can have more taxpayer concentration risk than general
tax-supported bonds, such as general obligation bonds. Further,
the fees, special taxes, or tax allocations and other revenues
that are established to secure such financings are generally
limited as to the rate or amount that may be levied or assessed
and are not subject to increase pursuant to rate covenants or
municipal or corporate guarantees. The bonds could default if
development failed to progress as anticipated or if larger
taxpayers failed to pay the assessments, fees and taxes as
provided in the financing plans of the districts.
When-Issued
and Delayed Delivery Transactions
Each Fund may buy and sell municipal securities on a when-issued
or delayed delivery basis, making payment or taking delivery at
a later date, normally within 15 to 45 days of the trade
date. This type of transaction may involve an element of risk
because no interest accrues on the bonds prior to settlement
and, because bonds are subject to market fluctuations, the value
of the bonds at time of delivery may be less (or more) than
cost. A separate account of each Fund will be established with
its custodian consisting of cash, cash equivalents, or liquid
securities having a market value at all times at least equal to
the amount of the commitment.
Zero
Coupon Bonds
A zero coupon bond is a bond that does not pay interest either
for the entire life of the obligation or for an initial period
after the issuance of the obligation. When held to its maturity,
its return comes from the difference between the purchase price
and its maturity value. A zero coupon bond is normally issued
and traded at a deep discount from face value. Zero coupon bonds
allow an issuer to avoid or delay the need to generate cash to
meet current interest payments and, as a result, may involve
greater credit risk than bonds that pay interest currently or in
cash. A Fund would be required to distribute the income on any
of these instruments as it accrues, even though the Fund will
not receive all of the income on a current basis or in cash.
Thus, a Fund may have to sell other investments, including when
it may not be advisable to do so, to make income distributions
to its shareholders.
Structured
Notes
Each Fund may utilize structured notes and similar instruments
for investment purposes and also for hedging purposes.
Structured notes are privately negotiated debt obligations where
the principal
and/or
interest is determined by reference to the performance of a
benchmark asset, market or interest rate (an embedded
index), such as selected securities, an index of
securities or specified interest rates, or the differential
performance of two assets or markets.
58
The terms of such structured instruments normally provide that
their principal
and/or
interest payments are to be adjusted upwards or downwards (but
not ordinarily below zero) to reflect changes in the embedded
index while the structured instruments are outstanding. As a
result, the interest
and/or
principal payments that may be made on a structured product may
vary widely, depending upon a variety of factors, including the
volatility of the embedded index and the effect of changes in
the embedded index on principal
and/or
interest payments. The rate of return on structured notes may be
determined by applying a multiplier to the performance or
differential performance of the referenced index or indices or
other assets. Application of a multiplier involves leverage that
will serve to magnify the potential for gain and the risk of
loss. These types of investments may generate taxable income.
Derivatives
Each Fund may invest in certain derivative instruments in
pursuit of its investment objectives. Such instruments include
financial futures contracts, swap contracts (including interest
rate and credit default swaps), options on financial futures,
options on swap contracts or other derivative instruments. In
particular, a Fund may use credit default swaps and interest
rate swaps. Credit default swaps may require initial premium
(discount) payments as well as periodic payments (receipts)
related to the interest leg of the swap or to the default of a
reference obligation. If a Fund is a seller of a contract, the
Fund would be required to pay the par (or other agreed upon)
value of a referenced debt obligation to the counterparty in the
event of a default or other credit event by the reference
issuer, such as a U.S. or foreign corporate issuer, with
respect to such debt obligations. In return, such Fund would
receive from the counterparty a periodic stream of payments over
the term of the contract provided that no event of default has
occurred. If no default occurs, such Fund would keep the stream
of payments and would have no payment obligations. As the
seller, a Fund would be subject to investment exposure on the
notional amount of the swap. If a Fund is a buyer of a contract,
the Fund would have the right to deliver a referenced debt
obligation and receive the par (or other
agreed-upon)
value of such debt obligation from the counterparty in the event
of a default or other credit event (such as a credit downgrade)
by the reference issuer, such as a U.S. or foreign
corporation, with respect to its debt obligations. In return,
such Fund would pay the counterparty a periodic stream of
payments over the term of the contract provided that no event of
default has occurred. If no default occurs, the counterparty
would keep the stream of payments and would have no further
obligations to such Fund. Interest rate swaps involve the
exchange by a Fund with a counterparty of their respective
commitments to pay or receive interest, such as an exchange of
fixed-rate payments for floating rate payments. A Fund will
usually enter into interest rate swaps on a net basis; that is,
the two payment streams will be netted out in a cash settlement
on the payment date or dates specified in the instrument, with
the Fund receiving or paying, as the case may be, only the net
amount of the two payments.
NAM may use derivative instruments to seek to enhance return, to
hedge some of the risk of each Funds investments in
municipal securities or as a substitute for a position in the
underlying asset. These types of strategies may generate taxable
income.
There is no assurance that these derivative strategies will be
available at any time or that NAM will determine to use them for
a Fund or, if used, that the strategies will be successful.
59
Other
Investment Companies
Each Fund may invest up to 10% of its Managed Assets in
securities of other open- or closed-end investment companies
(including exchange-traded funds (ETFs)) that invest
primarily in municipal securities of the types in which the Fund
may invest directly. In addition, each Fund may invest a portion
of its Managed Assets in pooled investment vehicles (other than
investment companies) that invest primarily in municipal
securities of the types in which the Fund may invest directly.
Each Fund generally expects that it may invest in other
investment companies
and/or other
pooled investment vehicles either during periods when it has
large amounts of uninvested cash or during periods when there is
a shortage of attractive, high-yielding municipal securities
available in the market. Each Fund may invest in investment
companies that are advised by the NAM or its affiliates to the
extent permitted by applicable law
and/or
pursuant to exemptive relief from the Securities and Exchange
Commission. As a shareholder in an investment company, a Fund
will bear its ratable share of that investment companys
expenses, and would remain subject to payment of the Funds
advisory and administrative fees with respect to assets so
invested. Common shareholders would therefore be subject to
duplicative expenses to the extent a Fund invests in other
investment companies.
NAM will take expenses into account when evaluating the
investment merits of an investment in an investment company
relative to available municipal security investments. In
addition, the securities of other investment companies may also
be leveraged and will therefore be subject to the same leverage
risks described herein. As described in the section entitled
Risk Factors, the net asset value and market value
of leveraged shares will be more volatile and the yield to
common shareholders will tend to fluctuate more than the yield
generated by unleveraged shares.
Miscellaneous
Investments
Each Fund may invest up to 5% of its net assets in tax-exempt or
taxable fixed-income or equity securities, for the purpose of
acquiring control of an issuer whose municipal bonds
(a) the Fund already owns and (b) have deteriorated or
are expected shortly to deteriorate significantly in credit
quality; provided NAM determines that such investment should
enable the Fund to better maximize its existing investment in
such issuer. Investment in such securities would result in a
portion of your dividend being subject to regular federal income
tax or the federal alternative minimum tax applicable to
individuals.
How the
Funds Manage Risk
Investment
Restrictions
Except to the extent that the Acquiring Fund buys temporary
investments, the Fund will, as a fundamental policy, invest
substantially all of its assets in tax-exempt municipal bonds
that either are covered by insurance guaranteeing the timely
payment of principal and interest on the bonds, or are backed by
an escrow or trust account containing sufficient
U.S. Government or U.S. Government agency securities
to ensure timely payment of principal and interest. Uninsured
municipal bonds backed by an escrow or trust account will not
constitute more than 20% of the Acquiring Funds assets.
Except to the extent that the Acquired Fund buys temporary
investments, the Fund will, as a fundamental policy, invest
substantially all of its assets in tax-exempt Florida municipal
obligations that are either covered by insurance guaranteeing
the timely payment of principal and interest thereon or backed
by an escrow
60
or trust account containing sufficient U.S. Government or
U.S. Government agency securities to ensure timely payment
of principal and interest. Municipal obligations backed by an
escrow or trust account will not constitute more than 20% of the
Acquired Funds assets. These policies and each Funds
investment objectives are fundamental policies, which cannot be
changed without the approval of such Funds holders of a
majority of the outstanding shares of common shares and
MuniPreferred shares, voting together, and of the holders of a
majority of the outstanding MuniPreferred shares, voting as a
single class. For this purpose, a majority of the
outstanding shares means the vote of (1) 67% or more
of the shares present at a meeting, if the holders of more than
50% of the shares are present or represented by proxy; or
(2) more than 50% of the shares, whichever is less.
Except as described below, neither Fund, as a fundamental
policy, may, without the approval of the holders of a
majority of the outstanding common shares and
preferred shares of such Fund, including shares of its
MuniPreferred, voting together as a single class, and of the
holders of a majority of the outstanding preferred
shares of such Fund, including shares of its MuniPreferred,
voting as a separate class:
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(1)
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Issue senior securities, as defined in the 1940 Act, other than
preferred stock [shares], except to the extent such issuance
might be involved with respect to borrowings described under
subparagraph (3) below or with respect to transactions
involving futures contracts or the writing of options within the
limits described [in Portfolio Investments above];
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(2)
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Make short sales of securities or purchase any securities on
margin (except for such short-term credits as are necessary for
the clearance of transactions), or write or purchase put or call
options, except to the extent that the purchase of a standby
commitment may be considered the purchase of a put, and except
for transactions involving options within the limits described
[in Portfolio Investments above];
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(3)
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Borrow money, except from banks for temporary or emergency
purposes or for repurchase of [the Funds] 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;
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(4)
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Underwrite any issue of securities, except to the extent that
the purchase of [m]unicipal [o]bligations in accordance with its
investment objective[s], policies and limitations may be deemed
to be an underwriting;
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(5)
|
Invest more than 25% of its total assets in securities of
issuers in any one industry; provided, however, that such
limitation shall not apply to [m]unicipal [o]bligations other
than those [m]unicipal [o]bligations backed only by the assets
and revenues of non-governmental users, nor shall it apply to
[m]unicipal [o]bligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities;
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(6)
|
Purchase or sell real estate, but this shall not prevent the
Fund from investing in [m]unicipal [o]bligations secured by real
estate or interests therein [or foreclosing upon and selling
such security];
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(7)
|
Purchase or sell commodities or commodities contracts, except
for transactions involving futures contracts within the limits
described [in Portfolio Investments];
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61
|
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(8)
|
Make loans, other than by entering into repurchase agreements
and through the purchase of [m]unicipal [o]bligations or
temporary investments in accordance with its investment
objective[s], policies and limitations;
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(9)
|
Invest in securities other than [Florida] [m]unicipal
[o]bligations and temporary investments as described [in
Portfolio Investments]; and purchase financial futures and
options except within the limits described [in Portfolio
Investments];
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(10)
|
Invest more than 5% of its total assets in securities of any one
issuer, except that this limitation shall not apply to
securities of the U.S. Government, its agencies and
instrumentalities or to the investment of 25% of its total
assets;
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(11)
|
Pledge, mortgage or hypothecate its assets, except that, to
secure borrowings permitted by subparagraph (3) above, it
may pledge securities having a market value at the time of
pledge not exceeding 20% of the value of its total assets;
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(12)
|
Invest more than 10% of its total assets in repurchase
agreements maturing in more than seven days; and
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(13)
|
Purchase or retain the securities of any issuer other than [its
own securities] if, to [its] knowledge, those of its directors
[trustees], or those officers and directors of the [investment
adviser] who individually own beneficially more than
1/2
of 1% of the outstanding securities of such issuer, together own
beneficially more than 5% of such outstanding securities.
|
For the purpose of applying the limitation set forth in
subparagraph (10) above, an issuer shall be deemed the sole
issuer of a security when its assets and revenues are separate
from other governmental entities and its securities are backed
only by its assets and revenues. Similarly, in the case of a
non-governmental user, such as an industrial corporation or a
privately owned or operated hospital, if the security is backed
only by the assets and revenues of the non-governmental user,
then such non-governmental user would be deemed to be the sole
issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental or other
entity, (other than a bond insurer) it shall also be included in
the computation of securities owned that are issued by such
governmental or other entity. Where a security is guaranteed by
a governmental entity or some other facility, such as a bank
guarantee or letter of credit, the guarantee or letter of credit
would be considered a separate security and would be treated as
an issue of that government or other entity. When a municipal
bond is insured by bond insurance, it shall not be considered a
security that is issued or guaranteed by the issuer; instead,
the issuer of the municipal bond will be determined in
accordance with the principles set out above. The foregoing
restrictions do not limit the percentage of the Funds
assets that may be invested in municipal bonds insured by any
given insurer.
For the purpose of applying the limitation set forth in
subparagraph (9) above with respect to each Fund, an issuer
shall be deemed the sole issuer of a security when its assets
and revenues are separate from other governmental entities and
its securities are backed only by its assets and revenues.
Similarly, in the case of a non-governmental issuer, such as an
industrial corporation or a privately owned or operated
hospital, if the security is backed only by the assets and
revenues of the non-governmental issuer, then such
non-governmental issuer would be deemed to be the sole issuer.
Where a security is also backed by the enforceable obligation of
a superior or unrelated governmental or other entity (other than
a bond insurer), it shall also be included in the computation of
securities owned that are issued by such governmental or
62
other entity. Where a security is guaranteed by a governmental
entity or some other facility, such as a bank guarantee or
letter of credit, such a guarantee or letter of credit would be
considered a separate security and would be treated as an issue
of such government, other entity or bank. When a municipal bond
is insured by bond insurance, it shall not be considered a
security that is issued or guaranteed by the insurer; instead,
the issuer of such municipal bond will be determined in
accordance with the principles set forth above. The foregoing
restrictions do not limit the percentage of a Funds assets
that may be invested in municipal bonds insured by any given
insurer.
Under the 1940 Act, a Fund may invest only up to 10% of its
Managed Assets in the aggregate in shares of other investment
companies and only up to 5% of its Managed Assets in any one
investment company, provided the investment does not represent
more than 3% of the voting stock of the acquired investment
company at the time such shares are purchased. As a shareholder
in any investment company, a Fund will bear its ratable share of
that investment companys expenses, and will remain subject
to payment of the Funds management, advisory and
administrative fees with respect to assets so invested. Holders
of common shares would therefore be subject to duplicative
expenses to the extent a Fund invests in other investment
companies. In addition, the securities of other investment
companies may also be leveraged and will therefore be subject to
the same leverage risks described herein. As described herein,
the net asset value and market value of leveraged shares will be
more volatile and the yield to shareholders will tend to
fluctuate more than the yield generated by unleveraged shares.
In addition to the foregoing fundamental investment policies,
each Fund is also subject to the following non-fundamental
restrictions and policies, which may be changed by the
Funds Board. Each Fund may not:
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(1)
|
Sell securities short, unless the Fund owns or has the right to
obtain securities equivalent in kind and amount to the
securities sold at no added cost, and provided that transactions
in options, futures contracts, options on futures contracts, or
other derivative instruments are not deemed to constitute
selling securities short;
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(2)
|
Purchase securities of open-end or closed-end investment
companies except in compliance with the Investment Company Act
of 1940 or any exemptive relief obtained thereunder;
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(3)
|
Enter into futures contracts or related options or forward
contracts, if more than 30% of the Funds net assets would
be represented by futures contracts or more than 5% of the
Funds net assets would be committed to initial margin
deposits and premiums on futures contracts and related options;
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(4)
|
Purchase securities when borrowings exceed 5% of its total
assets if and so long as MuniPreferred shares are
outstanding; and
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|
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(5)
|
Purchase securities of companies for the purpose of exercising
control, except that the Fund may invest up to 5% of its net
assets in tax-exempt or taxable fixed-income or equity
securities, for the purpose of acquiring control of an issuer
whose municipal bonds (a) the Fund already owns and
(b) have deteriorated or are expected shortly to
deteriorate significantly in credit quality, provided NAM
determines that such investment should enable the Fund to better
maximize the value of its existing investment in such issuer.
|
63
The restrictions and other limitations set forth above will
apply only at the time of purchase of securities and will not be
considered violated unless an excess or deficiency occurs or
exists immediately after and as a result of an acquisition of
securities.
Limited
Issuance of MuniPreferred Shares
Under the 1940 Act, each Fund could issue MuniPreferred shares
having a total liquidation value (original purchase price of the
shares being liquidated plus any accrued and unpaid dividends)
of up to one-half of the value of the asset coverage of the
Fund. If the total liquidation value of the MuniPreferred shares
was ever more than one-half of the value of a Funds asset
coverage, the Fund would not be able to declare dividends on the
common shares until the liquidation value, as a percentage of
the Funds assets, was reduced. As of December 31,
2008, the MuniPreferred shares represented
approximately %
and % of the Acquiring Funds
and Acquired Funds total capital, respectively. This
higher than required margin of net asset value provides a
cushion against later fluctuations in the value of a Funds
portfolio and will subject common shareholders to less income
and net asset value volatility than if the Fund were more
leveraged. Each Fund intends to purchase or redeem MuniPreferred
shares, if necessary, to keep the liquidation value of the
MuniPreferred shares below one-half of the value of the
Funds asset coverage.
Investment
Portfolio and Capital Structure Strategies to Manage Leverage
Risk
Common shareholders of each Fund are subject to the risks of
leverage primarily in the form of additional common share
earnings and net asset value risk, associated with a Funds
use of financial leverage in the form of MuniPreferred shares or
tender option bonds. See Risk Factors Leverage
Risk.
In an effort to mitigate these risks, each Fund and NAM seek to
maintain the Funds financial leverage within an
established range, and to rebalance leverage levels if the
Funds leverage ratio moves outside this range to a
meaningful degree for a persistent period of time. A Fund may
rebalance leverage levels in one or more ways, including by
increasing/reducing the amount of leverage outstanding and
issuing/repurchasing common shares. [Each Fund currently expects
that it would increase leverage levels through the use of tender
option bonds.] Reducing leverage may require a Fund to raise
cash through the sale of portfolio securities at times
and/or at
prices that would otherwise be unattractive for the Fund. Each
Fund may also seek to diversify its capital structure and the
risks associated with leverage by employing multiple forms of
leverage. Each Fund and NAM will weigh the relative potential
benefits and risks as well as the costs associated with a
particular action, and will take such action only if it
determines that on balance the likely potential benefits
outweigh the associated risks and costs.
Because the long-term municipal securities in which a Fund
invests generally pay fixed rates of interest while the
Funds costs of leverage generally fluctuate with
short-term yields, common shareholders bear incremental earnings
risk from leverage. Each Fund believes this risk increased as a
result of the systemic failure of the ARPS market in February
2008 which caused dividend rates on the Funds
MuniPreferred shares to be set at the Maximum Rate according to
a pre-determined, index-based formula rather than through a
weekly auction process. In seeking to manage the earnings risk
from leverage, each Fund may from time to time refinance
64
MuniPreferred shares with alternative forms of leverage that
offer the potential for a lower relative cost of leverage over
time and/or
that extend the rate reset period on its leverage.
Common shareholders also bear incremental net asset value risk
from leverage because they bear the full impact of price changes
in their Funds investment portfolio, including assets
attributable to leverage. In seeking to manage the net asset
value risk from leverage, a Fund may alter the composition of
its investment portfolio in one or more ways, including
increasing portfolio credit quality, reducing portfolio duration
and increasing the level of short-term cash equivalents.
Depending on subsequent market conditions, any such action may
increase or reduce common share net earnings
and/or
returns compared to if such Fund had taken no action.
Hedging
Strategies
Each Fund may use various investment strategies designed to
limit the risk of bond price fluctuations and to preserve
capital. These hedging strategies include using credit default
swaps, interest-rate swaps on taxable tax-exempt indices,
forward starting rate swaps and options on interest rate swaps,
financial futures contracts, options on financial futures or
options based on either an index of long-term municipal
securities or on taxable debt securities whose prices, in the
opinion of NAM, correlate with the prices of a Funds
investments. These hedging strategies may generate taxable
income.
Certain
Provisions in the Acquiring Funds Articles of
Incorporation
The Acquiring Fund Articles includes provisions that could
limit the ability of other entities or persons to acquire
control of the Fund or to convert the Fund to open-end status.
Specifically, the Acquiring Fund Articles requires a vote
by holders of at least two-thirds of the common shares and
shares of MuniPreferred, voting together as a single class,
except as described below, to authorize (1) a conversion of
the Fund from a closed-end to an open-end investment company,
(2) a merger or consolidation of the Fund, or a series or
class of the Fund, with any corporation, association, trust or
other organization or a reorganization or recapitalization of
the Fund, or a series or class of the Fund, (3) a sale,
lease or transfer of all or substantially all of the Funds
assets (other than in the regular course of the Funds
investment activities), (4) a liquidation or termination of
the Fund, or a series or class of the Fund, or (5) a
removal of directors by shareholders, and then only for cause,
unless, with respect to (1) through (4), such transaction
has already been authorized by the affirmative vote of
two-thirds of the total number of directors fixed in accordance
with the Acquiring Fund Articles or the Acquiring
Funds By-laws, in which case the affirmative vote of the
holders of at least a majority of the Funds common shares
and shares of MuniPreferred outstanding at the time, voting
together as a single class, is required, provided, however, that
where only a particular class or series is affected (or, in the
case of removing a board member, when the board member has been
elected by only one class), only the required vote by the
applicable class or series will be required. Approval of
shareholders is not required pursuant to the Acquiring
Fund Articles, however, for any transaction, whether deemed
a merger, consolidation, reorganization or otherwise whereby the
Acquiring Fund issues shares in connection with the acquisition
of assets (including those subject to liabilities) from any
other investment company or similar entity. In the case of the
conversion of the Acquiring Fund to an open-end investment
company, or in the case of any of the foregoing transactions
constituting a plan of reorganization which adversely affects
the holders of shares of MuniPreferred, the action in question
will also require the
65
affirmative vote of the holders of at least two-thirds of the
Acquiring Funds shares of MuniPreferred outstanding at the
time, voting as a separate class, or, if such action has been
authorized by the affirmative vote of two-thirds of the total
number of directors fixed in accordance with the Acquiring
Fund Articles or the Acquiring Funds By-Laws, the
affirmative vote of the holders of at least a majority of the
Acquiring Funds shares of MuniPreferred outstanding at the
time, voting as a separate class. None of the foregoing
provisions may be amended except by the vote of at least
two-thirds of the common shares and shares of MuniPreferred,
voting together as a single class. The votes required to approve
the conversion of the Acquiring Fund from a closed-end to an
open-end investment company or to approve transactions
constituting a plan of reorganization which adversely affects
the holders of shares of MuniPreferred are higher than those
required by the 1940 Act. The Acquiring Funds Board
believes that the provisions of the Acquiring Fund Articles
relating to such higher votes are in the best interest of the
Acquiring Fund. See the Reorganization SAI under Certain
Provisions in the Articles of Incorporation.
Reference should be made to the Acquiring Fund Articles on
file with the SEC for the full text of these provisions.
Expenses
Associated with the Reorganization
In evaluating the Reorganization, management of the Funds
estimated the amount of expenses the Funds would incur to be
approximately $660,000, which includes additional stock exchange
listing fees, Commission registration fees, legal and accounting
fees, proxy solicitation and distribution costs. These estimated
expenses will be borne by the Acquiring Fund and Acquired Fund
in the amounts of $55,000 and $605,000, respectively.
Additional solicitation may be made by letter or telephone by
officers or employees of Nuveen Investments or the Adviser, or
by dealers and their representatives. The Funds have engaged
Computershare Fund Services to assist in the solicitation of
proxies at an estimated cost of $18,000 per Fund plus reasonable
expenses, which is included in the estimate above.
Reorganization expenses have been or will be expensed prior to
the [closing date]. Management of the Funds expects that
increased common net earnings resulting from one or more of the
following: (i) reduced operating expenses resulting from
economies of scale, (ii) changes in the embedded yield, and
(iii) lower leverage costs from the use of tender option bond
financing, should allow the recovery of the projected costs of
the Reorganization within approximately nine months after the
[closing date] with respect to each Fund.
Dissenting
Shareholders Rights of Appraisal
Under Massachusetts law and the Acquired Funds charter
documents, shareholders of the Acquired Fund do not have
dissenters rights of appraisal with respect to the
Reorganization. Under Minnesota law and the Acquiring
Funds charter documents, shareholders of the Acquired Fund
do not have dissenters rights of appraisal with respect to
the Reorganization.
Certain
Federal Income Tax Consequences of the Reorganization
As a condition to each Funds obligation to consummate the
Reorganization, each Fund will receive a tax opinion from Vedder
Price P.C. (which opinion will be based on certain factual
representations and certain customary assumptions) substantially
to the effect that, on the
66
basis of the existing provisions of the Internal Revenue Code of
1986, as amended (the Code), current administrative
rules and court decisions, for federal income tax purposes:
1. The transfer of all the assets of the Acquired Fund to
the Acquiring Fund in exchange solely for Acquiring Fund shares
and the assumption by the Acquiring Fund of all the liabilities
of the Acquired Fund, followed by the pro rata distribution to
the Acquired Fund shareholders of all the Acquiring Fund shares
received by the Acquired Fund in complete liquidation of the
Acquired Fund will constitute a reorganization
within the meaning of Section 368(a) of the Code and the
Acquiring Fund and the Acquired Fund will each be a party
to a reorganization, within the meaning of Section 368(b)
of the Code, with respect to the Reorganization.
2. No gain or loss will be recognized by the Acquiring Fund
upon the receipt of all the assets of the Acquired Fund solely
in exchange for Acquiring Fund shares and the assumption by the
Acquiring Fund of all the liabilities of the Acquired Fund.
3. No gain or loss will be recognized by the Acquired Fund
upon the transfer of all the Acquired Funds assets to the
Acquiring Fund solely in exchange for Acquiring Fund shares and
the assumption by the Acquiring Fund of all the liabilities of
the Acquired Fund or upon the distribution (whether actual or
constructive) of all such Acquiring Fund shares to the Acquired
Fund shareholders solely in exchange for such shareholders
shares of the Acquired Fund in complete liquidation of the
Acquired Fund.
4. No gain or loss will be recognized by the Acquired Fund
shareholders upon the exchange of their Acquired Fund shares
solely for Acquiring Fund shares in the Reorganization.
5. The aggregate basis of the Acquiring Fund shares
received by each Acquired Fund shareholder pursuant to the
Reorganization will be the same as the aggregate basis of the
Acquired Fund shares exchanged therefor by such shareholder. The
holding period of the Acquiring Fund shares received by each
Acquired Fund shareholder will include the period during which
the Acquired Fund shares exchanged therefor were held by such
shareholder, provided such Acquired Fund shares are held as
capital assets at the time of the Reorganization.
6. The tax basis of the Acquired Funds assets
acquired by the Acquiring Fund will be the same as the tax basis
of such assets to the Acquired Fund immediately before the
Reorganization. The holding period of the assets of the Acquired
Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Acquired Fund.
Prior to the date of the Reorganization, the Acquired Fund will
declare a distribution to its shareholders, which together with
all previous distributions, will have the effect of distributing
to shareholders all its net investment income and realized net
capital gains (after reduction by any capital loss
carryforwards), if any, through the date of the Reorganization.
This distribution will be taxable to shareholders for federal
income tax purposes and will include any net capital gains
resulting from the sale of portfolio assets discussed below.
Additional distributions may be made if necessary. All dividends
and distributions will be reinvested in additional shares of the
Acquired Fund unless a shareholder has made an election to
receive dividends and distributions in cash. Dividends and
distributions are treated the same for federal income tax
purposes whether received in cash or additional shares.
67
After the Reorganization, the combined funds ability to
use the Acquired Funds or the Acquiring Funds
pre-Reorganization capital losses may be limited under certain
federal income tax rules applicable to reorganizations of this
type. Therefore, in certain circumstances, former shareholders
of the Acquired Fund may pay federal income taxes sooner, or pay
more federal income taxes, than they would have had had the
Reorganization not occurred. The effect of these potential
limitations, however, will depend on a number of factors
including the amount of the losses, the amount of gains to be
offset, the exact timing of the Reorganization and the amount of
unrealized capital gains in the Funds at the time of the
Reorganization.
In addition, the shareholders of the Acquired Fund will receive
a proportionate share of any taxable income and gains realized
by the Acquiring Fund and not distributed to its shareholders
prior to the Reorganization when such income and gains are
eventually distributed by the Acquiring Fund. As a result,
shareholders of the Acquired Fund may receive a greater amount
of taxable distributions than they would have had the
Reorganization not occurred.
This description of the federal income tax consequences of the
Reorganization is made without regard to the particular facts
and circumstances of any shareholder. Shareholders are urged to
consult their own tax advisors as to the specific consequences
to them of the Reorganization, including the applicability and
effect of state, local,
non-U.S. and
other tax laws.
Exchange
of Acquired Fund Shares Solely for Acquiring
Fund Shares
The foregoing is intended to be only a summary of the
principal federal income tax consequences of the Reorganization
and should not be considered to be tax advice. There can be no
assurance that the IRS will concur on all or any of the issues
discussed above. Acquired Fund shareholders are urged to consult
their own tax advisers regarding the federal, state and local
tax consequences with respect to the foregoing matters and any
other considerations which may be applicable to them.
The Board of each Fund recommends that the shareholders vote
FOR the approval of the Reorganization.
PROPOSAL
NO. 2. ISSUANCE OF ADDITIONAL
ACQUIRING FUND COMMON SHARES
(ACQUIRING FUND COMMON SHAREHOLDERS ONLY)
In connection with the proposed Reorganization, the Acquiring
Fund will issue additional Acquiring Fund Common Shares and
list such shares on the NYSE. The Acquiring Fund will acquire
all the assets and assume all the liabilities of the Acquired
Fund in exchange for newly-issued Acquiring Fund Common
Shares and newly-issued Acquiring Fund MuniPreferred
Shares. The Acquired Fund will distribute Acquiring
Fund Common Shares to its common shareholders and Acquiring
Fund MuniPreferred Shares to its preferred shareholders and
will then terminate its registration under the 1940 Act and
dissolve under applicable state law. The Acquiring Funds
Board, based upon its evaluation of all relevant information,
anticipates that the Reorganization will benefit holders of
Acquiring Fund common shares.
The aggregate net asset value of Acquiring Fund Common
Shares received in the Reorganization will equal the aggregate
net asset value of the Acquired Funds common shares held
immediately prior to the Reorganization, less the costs of the
Reorganization (though common shareholders may receive cash for
their fractional shares). The aggregate liquidation preference
of Acquiring Fund MuniPreferred Shares received in the
Reorganization will equal the
68
aggregate liquidation preference of the Acquired Funds
preferred shares held immediately prior to the Reorganization.
The Reorganization will result in no dilution of net asset value
of the Acquiring Funds current common shares, other than
to reflect the costs of the Reorganization. No gain or loss will
be recognized by the Acquiring Fund or its shareholders in
connection with the Reorganization. The Acquiring Fund will
continue to operate as a registered closed-end management
investment company with the investment objectives and policies
described in this Proxy Statement/Prospectus.
While applicable state and federal law does not require the
common shareholders of the Acquiring Fund to approve the
Reorganization, applicable NYSE rules require the common
shareholders of the Acquiring Fund to approve the issuance of
additional Acquiring Fund Common Shares to be issued in
connection with the Reorganization.
Shareholder approval of the issuance of additional Acquiring
Fund Common Shares requires the affirmative vote of a
majority of the votes cast on the proposal, provided that the
total votes cast on the proposal represent over 50% in interest
of all securities entitled to vote on the matter. Subject to the
requisite approval of each proposal described herein, it is
expected that the closing date of the Acquired Fund will be on
the relevant dividend payment date immediately following the
Special Meeting.
The Board of the Acquiring Fund recommends that common
shareholders of the Acquiring Fund vote FOR the
approval of the issuance of additional Acquiring
Fund Common Shares in connection with the
Reorganization.
MANAGEMENT
OF THE FUNDS
Board
Members and Officers
The same individuals constitute the Boards of both Funds, and
the Funds have the same officers.
The management of each Fund, including general supervision of
the duties performed by the Adviser under the Investment
Management Agreement for each Fund, is the responsibility of its
Board. There are currently nine (9) Board Members of each
Funds Board, one (1) of whom is an interested
person (as defined in the 1940 Act) and eight (8) of
whom are not interested persons (the independent board
members). The names and business addresses of the Board
Members and officers of the Funds and their principal
occupations and other affiliations during the past five years
are set forth under Management in the Reorganization
SAI incorporated herein by reference.
Investment
Adviser
Nuveen Asset Management acts as the investment adviser for each
Fund. NAM offers advisory and investment management services to
a broad range of mutual fund and closed-end fund clients. NAM is
responsible for the selection and on-going monitoring of the
securities in the Funds investment portfolios, managing
the Funds business affairs and providing certain clerical,
bookkeeping and other administrative services. NAM is located at
333 West Wacker Drive, Chicago, Illinois 60606. NAM is a
wholly-owned subsidiary of Nuveen Investments.
On November 13, 2007, Nuveen Investments was acquired by
Investors led by Madison Dearborn Partners, LLC (the MDP
Acquisition). The investor group led by Madison Dearborn
69
Partners, LLC, a private equity firm based in Chicago, Illinois,
includes affiliates of Merrill Lynch, Pierce, Fenner &
Smith Incorporated (Merrill Lynch). Merrill Lynch
has since been acquired by Bank of America Corporation. NAM has
adopted policies and procedures that address arrangements
involving NAM and Bank of America Corporation (including Merrill
Lynch) that may give rise to certain conflicts of interest.
Each Fund is dependent upon services and resources provided by
its investment adviser, NAM, and therefore the investment
advisers parent, Nuveen Investments. Nuveen Investments
significantly increased its level of debt in connection with the
MDP Acquisition. While Nuveen Investments believes that monies
generated from operations and cash on hand will be adequate to
fund debt service requirements, capital expenditures and working
capital requirements for the foreseeable future, there can be no
assurance that Nuveen Investments business will generate
sufficient cash flow from operations or that future borrowings
will be available in an amount sufficient to enable Nuveen
Investments to pay its indebtedness (with scheduled maturities
beginning in 2014) or to fund its other liquidity needs.
Nuveen Investments believes that potential adverse changes to
its overall financial position and business operations would not
adversely affect NAMs portfolio management operations and
would not otherwise adversely affect NAMs ability to
fulfill its obligations to the Funds under their investment
management agreements.
Pursuant to an Investment Management Agreement between the
Adviser and each Fund, each Funds management fee is
separated into two components a complex-level
component, based on the aggregate amount of all fund assets
managed by NAM, and a fund-level component, based only on the
amount of assets within such Fund. The pricing structure enables
the Funds shareholders to benefit from growth in assets within
each individual fund as well as from growth of complex-wide
assets managed by NAM.
The annual fund-level fee for each Fund is based upon the
average daily net assets (including assets attributable to
MuniPreferred Shares) of each Fund as follows:
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|
|
|
|
Management Fee Schedule
|
|
Average Daily Net Assets
|
|
Rate
|
|
|
|
|
Up to $125 million
|
|
|
0.4500
|
%
|
$125 to $250 million
|
|
|
0.4375
|
%
|
$250 to $500 million
|
|
|
0.4250
|
%
|
$500 million to $1 billion
|
|
|
0.4125
|
%
|
$1 billion to $2 billion
|
|
|
0.4000
|
%
|
$2 billion to $5 billion
|
|
|
0.3875
|
%
|
$5 billion and over
|
|
|
0.3750
|
%
|
|
|
The management fee compensates NAM for overall investment
advisory and administrative services and general office
facilities. Each Fund pays all of its other costs and expenses
of its operations, including compensation of its board members
(other than those affiliated with NAM), custodian, transfer
agency and dividend disbursing expenses, legal fees, expenses of
independent auditors, expenses of repurchasing shares, expenses
of issuing any MuniPreferred shares, expenses of preparing,
printing and distributing shareholder reports, notices, proxy
statements and reports to governmental agencies, and taxes, if
any.
70
Each Fund also pays a complex-level fee to NAM, which is payable
monthly and is in addition to the fund-level fee. The
complex-level fee is based on the aggregate daily amount of
total Managed Assets for all Nuveen sponsored funds in the U.S.,
as stated in the table below. As of December 31, 2008, the
complex-level fee rate was 0.20%.
The complex-level fee rate is as follows:
|
|
|
|
|
Complex-Level Fee Rates
|
|
Complex-Level Asset
|
|
Effective Rate at
|
|
Breakpoint
Level(1)
|
|
Breakpoint Level
|
|
|
|
|
$55 billion
|
|
|
0.2000
|
%
|
$56 billion
|
|
|
0.1996
|
%
|
$57 billion
|
|
|
0.1989
|
%
|
$60 billion
|
|
|
0.1961
|
%
|
$63 billion
|
|
|
0.1931
|
%
|
$66 billion
|
|
|
0.1900
|
%
|
$71 billion
|
|
|
0.1851
|
%
|
$76 billion
|
|
|
0.1806
|
%
|
$80 billion
|
|
|
0.1773
|
%
|
$91 billion
|
|
|
0.1691
|
%
|
$125 billion
|
|
|
0.1599
|
%
|
$200 billion
|
|
|
0.1505
|
%
|
$250 billion
|
|
|
0.1469
|
%
|
$300 billion
|
|
|
0.1445
|
%
|
|
|
|
|
|
(1)
|
|
The complex-level fee component of
the management fee for the funds is calculated based upon the
aggregate Managed Assets (Managed Assets means the
average daily net assets of each fund including assets
attributable to preferred stock issued by or borrowings by the
Nuveen funds) of Nuveen sponsored funds in the U.S. Complex
Managed Assets were approximately $53.6 billion as of
December 31, 2008.
|
The Acquiring Fund paid aggregate management fees of $10,976,183
for the fiscal year ended October 31, 2008, for an
effective management fee rate of 0.94% based on net assets
applicable to common shares (0.60% based on managed assets). The
Acquired Fund paid aggregate management fees of $2,031,193 for
the fiscal year ended April 30, 2008, for an effective
management fee rate of 0.95% based on net assets applicable to
common shares (0.62% based on managed assets). A discussion of
each Boards basis for approving the Investment Advisory
Agreement with respect to a Fund, is available in the
Funds annual report to shareholders each year.
Portfolio
Management
NAM is responsible for execution of specific investment
strategies and day-to-day investment operations. NAM manages the
Funds using a team of analysts and portfolio managers that focus
on a specific group of funds. Paul Brennan is the portfolio
manager of the Acquiring Fund and Daniel Close is the portfolio
manager of the Acquired Fund. Each provide daily oversight for,
and execution of, the respective Funds investment
activities.
Paul Brennan, CFA, CPA manages several national open- and
closed-end funds. Mr. Brennan began his career in the
investment business in 1991 when he was a municipal credit
analyst,
71
then became a portfolio manager in 1994. He joined Nuveen
Investments in 1997 while at Flagship Financial which Nuveen
acquired. He earned his BS in Accountancy and Finance from
Wright State University. He is a CPA, has earned the Chartered
Financial Analyst designation, and currently sits on the Nuveen
Asset Management Investment Committee. Prior to joining
Flagship, Paul was employed at Deloitte & Touche
within the audit group which participated in auditing mutual
funds and investment advisors.
Daniel J. Close, CFA joined Nuveen Investments in 2000 as a
member of Nuveens product management and development team,
where he was responsible for the oversight and development of
Nuveens mutual fund product line. He then served as a
research analyst for Nuveens municipal investing team,
covering corporate-backed, energy, transportation and utility
credits. He received his BS in Business from Miami University
and his MBA from Northwestern Universitys Kellogg School
of Management.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
General
History
The following table sets forth the number of outstanding common
shares and shares of MuniPreferred and certain other share
information, of each Fund as
of , .
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4)
|
|
|
|
|
|
|
(3)
|
|
|
Amount Outstanding
|
|
(1)
|
|
(2)
|
|
|
Amount Held by Fund
|
|
|
Exclusive of Amount
|
|
Title of Class
|
|
Amount Authorized
|
|
|
for its Own Account
|
|
|
Shown Under (3)
|
|
|
|
|
Acquiring Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Acquiring Fund common shares are listed and trade on the
NYSE under the symbol NIO. The Acquired Fund common shares are
listed and trade on the NYSE under the symbol NFL.
72
The following table sets forth the high and low sales prices for
each Funds common shares as reported on the consolidated
transaction reporting system for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquiring Fund
|
|
|
|
|
|
|
|
|
|
Premium/
|
|
|
|
Market Price
|
|
|
Net Asset Value
|
|
|
Discount
|
|
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
January 2009
|
|
|
12.01
|
|
|
|
8.90
|
|
|
|
13.37
|
|
|
|
11.29
|
|
|
|
0.09
|
|
|
|
0.25
|
|
October 2008
|
|
|
12.86
|
|
|
|
8.30
|
|
|
|
14.37
|
|
|
|
11.33
|
|
|
|
0.07
|
|
|
|
0.33
|
|
July 2008
|
|
|
13.85
|
|
|
|
12.51
|
|
|
|
14.76
|
|
|
|
13.95
|
|
|
|
0.05
|
|
|
|
0.13
|
|
April 2008
|
|
|
14.60
|
|
|
|
12.64
|
|
|
|
15.11
|
|
|
|
13.66
|
|
|
|
0.03
|
|
|
|
0.11
|
|
January 2008
|
|
|
14.42
|
|
|
|
13.08
|
|
|
|
15.41
|
|
|
|
14.78
|
|
|
|
0.05
|
|
|
|
0.12
|
|
October 2007
|
|
|
14.46
|
|
|
|
13.41
|
|
|
|
15.21
|
|
|
|
14.45
|
|
|
|
0.03
|
|
|
|
0.11
|
|
July 2007
|
|
|
15.02
|
|
|
|
14.03
|
|
|
|
15.40
|
|
|
|
14.71
|
|
|
|
0.02
|
|
|
|
0.06
|
|
April 2007
|
|
|
14.96
|
|
|
|
14.66
|
|
|
|
15.61
|
|
|
|
15.24
|
|
|
|
0.03
|
|
|
|
0.05
|
|
January 2007
|
|
|
14.94
|
|
|
|
14.43
|
|
|
|
15.71
|
|
|
|
15.29
|
|
|
|
0.03
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Fund
|
|
|
|
|
|
|
|
|
|
Premium/
|
|
|
|
Market Price
|
|
|
Net Asset Value
|
|
|
Discount
|
|
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
|
|
January 2009
|
|
|
11.88
|
|
|
|
9.12
|
|
|
|
14.33
|
|
|
|
12.20
|
|
|
|
0.15
|
|
|
|
0.29
|
|
October 2008
|
|
|
12.73
|
|
|
|
7.85
|
|
|
|
14.73
|
|
|
|
11.91
|
|
|
|
0.13
|
|
|
|
0.40
|
|
July 2008
|
|
|
13.32
|
|
|
|
12.45
|
|
|
|
14.89
|
|
|
|
14.34
|
|
|
|
0.10
|
|
|
|
0.15
|
|
April 2008
|
|
|
13.83
|
|
|
|
12.75
|
|
|
|
15.26
|
|
|
|
14.04
|
|
|
|
0.08
|
|
|
|
0.12
|
|
January 2008
|
|
|
13.91
|
|
|
|
12.77
|
|
|
|
15.46
|
|
|
|
14.94
|
|
|
|
0.09
|
|
|
|
0.15
|
|
October 2007
|
|
|
14.20
|
|
|
|
13.13
|
|
|
|
15.25
|
|
|
|
14.67
|
|
|
|
0.07
|
|
|
|
0.12
|
|
July 2007
|
|
|
14.73
|
|
|
|
13.54
|
|
|
|
15.37
|
|
|
|
14.79
|
|
|
|
0.04
|
|
|
|
0.10
|
|
April 2007
|
|
|
15.03
|
|
|
|
14.58
|
|
|
|
15.53
|
|
|
|
15.24
|
|
|
|
0.02
|
|
|
|
0.05
|
|
January 2007
|
|
|
15.06
|
|
|
|
14.48
|
|
|
|
15.64
|
|
|
|
15.31
|
|
|
|
0.03
|
|
|
|
0.06
|
|
|
|
On [latest date
practical] , ,
the closing sale prices of the Acquiring Fund and Acquired Fund
common shares were $ and
$ , respectively. These prices
represent a discount to net asset value of the Acquiring Fund
of % and a discount to net asset
value of the Acquired Fund of %.
Common shares of each Fund have generally traded at prices close
to net asset value, with varying premiums or discounts to net
asset value being reflected in the market value of the common
shares from time to time. Prices for Acquiring Fund common
shares have fluctuated between a maximum premium
of % and a maximum discount
of % and for the Acquired Fund have
fluctuated between a maximum premium
of % and a maximum discount
of %. It is not possible to state
whether Acquiring Fund common shares will trade at a premium or
discount to net asset value following the Reorganization, or
what the extent of any such premium or discount might be.
73
Shareholders
of the Acquiring Fund and the Acquired Fund
As
of ,
2009, the board members and officers of the Acquiring Fund as a
group owned [less than 1% of the total outstanding shares common
shares and less than 1% of the total outstanding MuniPreferred
shares of the Acquiring Fund] [ %
and % of the common shares and
MuniPreferred shares of the Acquiring Fund, respectively]. The
following table sets forth the percentage of each person who, as
of ,
2009, owns of record, or is known by the Acquiring Fund to own
of record or beneficially, 5% or more of common shares or
MuniPreferred shares of the Acquiring Fund.
|
|
|
|
|
|
|
|
|
|
|
Name and Address
|
|
|
Percentage of
|
|
Class
|
|
of Owner
|
|
|
Ownership
|
|
|
|
|
As
of ,
2009, the board members and officers of the Acquired Fund as a
group owned [less than 1% of the total outstanding shares common
shares and less than 1% of the total outstanding shares of
MuniPreferred shares of the Acquired Fund]
[ %
and % of the common shares and
MuniPreferred shares of the Acquired Fund, respectively]. The
following table sets forth the percentage of each person who, as
of ,
2009, owns of record, or is known by the Acquired Fund to own of
record or beneficially, 5% or more of common shares or
MuniPreferred shares of the Acquired Fund. The table also sets
forth the pro forma percentages of the Acquiring Fund common
shares and MuniPreferred shares that would have been owned by
such parties if the Reorganization had occurred
on ,
200 . These amounts may differ on the [closing date].
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Ownership of
|
|
|
|
|
|
|
Percentage of
|
|
|
Each Class of
|
|
|
|
|
|
|
Ownership of
|
|
|
the Acquiring
|
|
|
|
Name and
|
|
|
Each Class of the
|
|
|
Fund Shares After
|
|
Class
|
|
Address of Owner
|
|
|
Acquired Fund
|
|
|
Reorganization
|
|
|
|
|
Repurchase
of Common Shares; Conversion to Open-End Fund
Each Fund is a closed-end management investment company and as
such its shareholders will not have the right to cause the Fund
to redeem their shares. Instead, the common shares of each Fund
trade in the open market at a price that is a function of
several factors, including dividend levels (which are in turn
affected by expenses), net asset value, call protection,
dividend stability, portfolio credit quality, relative demand
for and supply of such shares in the market, general market and
economic conditions and other factors. Because shares of
closed-end management investment companies may frequently trade
at prices lower than net asset value, each Funds Board has
currently determined that, at least annually, it will consider
action that might be taken to reduce or eliminate any material
discount from net asset value in respect of common shares, which
may include the repurchase of such shares in the open market or
in private transactions, the making of a tender offer for such
shares at net asset value, or the conversion of the Fund to an
open-end investment company. Neither Fund can assure you that
its Board will decide to take any of these actions, or that
share repurchases or tender offers will actually reduce market
discount.
74
If a Fund converted to an open-end investment company, it would
be required to redeem all MuniPreferred shares then outstanding
(requiring in turn that it liquidate a portion of its investment
portfolio), and the common shares would no longer be listed on
the NYSE. In contrast to a closed-end management investment
company, shareholders of an open-end management investment
company may require the company to redeem their shares at any
time (except in certain circumstances as authorized by or under
the 1940 Act) at their net asset value, less any redemption
charge that is in effect at the time of redemption. See the
Reorganization SAI under Certain Provisions in the
Articles of Incorporation for a discussion of the voting
requirements applicable to the conversion of a Fund to an
open-end management investment company.
Before deciding whether to take any action if the common shares
trade below net asset value, the Board would consider all
relevant factors, including the extent and duration of the
discount, the liquidity of a Funds portfolio, the impact
of any action that might be taken on the Fund or its
shareholders, and market considerations. Based on these
considerations, even if a Funds shares should trade at a
discount, the Board may determine that, in the interest of the
Fund, no action should be taken. See the Reorganization SAI
under Repurchase of Common Shares; Conversion to Open-End
Fund for a further discussion of possible action to reduce
or eliminate such discount to net asset value.
Custodian,
Transfer Agent, Dividend Disbursing Agent and
Redemption Agent
The custodian of the assets of and transfer, shareholder
services and dividend paying agent for the Funds is [State
Street Bank Corp., 225 Franklin Street, Boston, Massachusetts
02110]. The custodian performs custodial, fund accounting and
portfolio accounting services. [Deutsche Bank Trust Company
Americas, 100 Plaza One, 6th Floor, Jersey City, NJ 07311,
a banking corporation organized under the laws of New York], is
the Auction Agent with respect to shares of MuniPreferred and
acts as transfer agent, registrar, dividend disbursing agent and
redemption agent with respect to such shares.
Federal
Income Tax Matters Associated with Investment in the
Funds
The following information is meant as a general summary for
U.S. shareholders. Please see the Reorganization SAI for
additional information. Investors should rely on their own tax
adviser for advice about the particular federal, state and local
tax consequences to them of investing in the Funds. The Funds
intend to elect to be treated and to qualify each year as a
regulated investment company (RIC) under Subchapter
M of the Code. In order to qualify as a RIC, each Fund must
satisfy certain requirements regarding the sources of its
income, the diversification of its assets and the distribution
of its income. As a RIC, each Fund is not expected to be subject
to federal income tax. The Acquiring Fund primarily invests in
municipal securities issued by states, cities and local
authorities and certain possessions and territories of the
United States (such as Puerto Rico or Guam) or municipal
securities whose income is otherwise exempt from regular federal
income taxes. The Acquired Fund primarily invests in municipal
securities issued by Florida, its cities and local authorities.
Thus, substantially all of a Funds dividends paid to you
should qualify as exempt-interest dividends. A
shareholder treats an exempt-interest dividend as interest on
state and local bonds exempt from regular federal income tax.
Federal income tax law imposes an alternative minimum tax with
respect to corporations, individuals,
75
trust and estates. Interest on certain municipal obligations,
such as certain private activity bonds is included as an item of
tax preference in determining the amount of a taxpayers
alternative minimum taxable income. To the extent that a Fund
receives income from such municipal obligations, a portion of
the dividends paid by the Fund, although exempt from regular
federal income tax, will be taxable to shareholders to the
extent that their tax liability is determined under the federal
alternative minimum tax. Each Fund will annually provide a
report indicating the percentage of the Funds income
attributable to municipal obligations subject to the federal
alternative minimum tax. Corporations are subject to special
rules in calculating their federal alternative minimum taxable
income with respect to interest from such municipal obligations.
In addition to exempt-interest dividends, a Fund may also
distribute to its shareholders amounts that are treated as
long-term capital gain or ordinary income (which may include
short-term capital gains). These distributions may be subject to
federal, state and local taxation, depending on a
shareholders situation. If so, they are taxable whether or
not such distributions are reinvested. Capital gain
distributions are generally taxable at rates applicable to
long-term capital gains regardless of how long a shareholder has
held its shares. Long-term capital gains are currently taxable
at a maximum rate of 15%. Absent further legislation, the
maximum 15% rate on long-term capital gains will cease to apply
to taxable years beginning after December 31, 2010. Each
Fund does not expect that any part of its distributions to
shareholders from its investments will qualify for the
dividends-received deduction available to corporate shareholders
or as qualified dividend income available to
noncorporate shareholders.
As a regulated investment company, each Fund will not be subject
to federal income tax in any taxable year provided that it meets
certain distribution requirements. Each Fund may retain for
investment some (or all) of its net capital gain. If a Fund
retains any net capital gain or investment company taxable
income, it will be subject to tax at regular corporate rates on
the amount retained. If a Fund retains any net capital gain, it
may designate the retained amount as undistributed capital gains
in a notice to its shareholders who, if subject to federal
income tax on long-term capital gains, (i) will be required
to include in income for federal income tax purposes, as
long-term capital gain, their share of such undistributed
amount; (ii) will be entitled to credit their proportionate
shares of the tax paid by the Fund on such undistributed amount
against their federal income tax liabilities, if any; and
(iii) to claim refunds to the extent the credit exceeds
such liabilities. For federal income tax purposes, the tax basis
of shares owned by a shareholder of the Fund will be increased
by an amount equal to the difference between the amount of
undistributed capital gains included in the shareholders
gross income and the tax deemed paid by the shareholder under
clause (ii) of the preceding sentence.
Dividends declared by a Fund in October, November or December
and paid during the following January may be treated as having
been received by shareholders in the year the distributions were
declared.
Each shareholder will receive an annual statement summarizing
the shareholders dividend and capital gains distributions.
The redemption, sale or exchange of common shares normally will
result in capital gain or loss to holders of common shares who
hold their shares as capital assets. Generally a
shareholders gain or loss will be longterm capital gain or
loss if the shares have been held for more than one year even
though the increase in value in such common shares is
attributable to tax-exempt interest income. Present law taxes
both long-term and shortterm capital gains of corporations
76
at the same rates applicable to ordinary income. For
non-corporate taxpayers, however, long-term capital gains are
currently taxed at a maximum rate of 15%, while short-term
capital gains and other ordinary income are currently taxes at
ordinary income rates. As noted above, absent further
legislation, the maximum rates applicable to long-term capital
gains will cease to apply to taxable years beginning after
December 31, 2010. Any loss on the sale of common shares
that have been held for six months or less will be disallowed to
the extent of any distribution of exempt-interest dividends
received with respect to such common shares. If a shareholder
sells or otherwise disposes of common shares before holding them
for six months, any loss on the sale or disposition will be
treated as a long-term capital loss to the extent of any capital
gain dividends received by the common shareholder. Any loss
realized on a sale or exchange of shares of a Fund will be
disallowed to the extent those shares of the Fund are replaced
by other substantially identical shares of the Fund within a
period of 61 days beginning 30 days before and ending
30 days after the date of disposition of the original
shares. In that event, the basis of the replacement shares of
the Fund will be adjusted to reflect the disallowed loss.
Any interest on indebtedness incurred or continued to purchase
or carry a Funds shares to which exempt interest dividends
are allocated is not deductible. Under certain applicable rules,
the purchase or ownership of shares may be considered to have
been made with borrowed funds even though such funds are not
directly used for the purchase or ownership of the shares. In
addition, if you receive social security or certain railroad
retirement benefits, you may be subject to U.S. federal
income tax on a portion of such benefits as a result of
receiving investment income, including exempt-interest dividends
and other distributions paid by a Fund.
As with all investment companies, each Fund may be required to
withhold U.S. federal income tax at the current rate of 28%
of all taxable distributions payable to a shareholder if the
shareholder fails to provide the Fund with his or her correct
taxpayer identification number or to make required
certifications, or if the shareholder has been notified by the
IRS that he or she is subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in
which the IRS ensures it will collect taxes otherwise due. Any
amounts withheld may be credited against a shareholders
U.S. federal income tax liability.
NET ASSET
VALUE
Each Funds net asset value per share is determined as of
the close of regular session trading (normally 4:00 p.m.
eastern time) on each day the New York Stock Exchange is open
for business. Net asset value is calculated by taking the market
value of a Funds total assets, including interest or
dividends accrued but not yet collected, less all liabilities,
and dividing by the total number of shares outstanding. The
result, rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by such Funds
Board or its delegate.
In determining net asset value, expenses are accrued and applied
daily and securities and other assets for which market
quotations are available are valued at market value. The prices
of municipal bonds are provided by a pricing service approved by
such Funds Board. When market price quotes are not readily
available (which is usually the case for municipal securities),
the pricing service, or, in the absence of a pricing service for
a particular security, the Board of such Fund, or its designee,
may establish fair market value using a wide variety of market
data including yields or prices of municipal bonds of comparable
quality, type of issue, coupon, maturity and rating, market
quotes or indications of value from securities dealers,
evaluations of anticipated cash flows or collateral, general
market conditions and other information and
77
analysis, including the obligors credit characteristics
considered relevant by the pricing service or the Boards
designee. Exchange-listed securities are generally valued at the
last sales price on the securities exchange on which such
securities are primarily traded. Securities traded on a
securities exchange for which there are no transactions on a
given day or securities not listed on a securities exchange are
valued at the mean of the closing bid and asked prices.
Securities traded on Nasdaq are valued at the Nasdaq Official
Closing Price. Temporary investments in securities that have
variable rate and demand features qualifying them as short-term
investments are valued at amortized cost, which approximates
market value. See Net Asset Value in the SAI for
more information.
LEGAL
OPINIONS
Certain legal matters in connection with the common shares and
shares of MuniPreferred of the Acquiring Fund to be issued
pursuant to the Reorganization will be passed upon by Vedder
Price P.C., Chicago, Illinois. [Vedder Price P.C. will rely as
to certain matters of Minnesota law on the opinion
of ,
LLP, Boston, Massachusetts.]
EXPERTS
The financial highlights of the Acquiring Fund and the Acquired
Fund as of October 31, 2008 and as of April 30, 2008,
respectively, attached to this Proxy Statement/Prospectus as
Appendix B, and the financial statements of the Acquiring
Fund and the Acquired Fund as of October 31, 2008 and as of
April 30, 2008, respectively, appearing in the
Reorganization SAI, have been audited
by
LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in
accounting and
auditing.
LLP audits and reports on the Funds annual financial
statements, reviews certain regulatory reports and the
Funds federal income tax returns, and performs other
professional accounting, auditing, tax and advisory services
when engaged to do so by the Funds.
SHAREHOLDER
PROPOSALS
To be considered for presentation at the annual meeting of
shareholders of the Acquiring Fund to be held in 2009,
shareholder proposals submitted pursuant to
Rule 14a-8
under the 1934 Act must have been received at the offices
of the Fund, 333 West Wacker Drive, Chicago, Illinois
60606, not later than January 19, 2009. 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
for the annual meeting must, pursuant to the Acquiring
Funds By-Laws, submit such written notice to the Acquiring
Fund not later than April 4, 2009 or prior to
March 20, 2009. Timely submission of a proposal does not
mean that such proposal will be included in a proxy statement.
If all proposals are approved and the Reorganization is
consummated, the Acquired Fund will cease to exist and will not
hold its 2009 Annual Meeting. If the Reorganization is not
approved or is not consummated, the Acquired Fund will hold its
2009 annual meeting of shareholders, expected to be held in
November 2009. Based upon last years proxy statement for
the Acquired Fund, a shareholder proposal submitted pursuant to
Rule 14a-8
under the 1934 Act must be received at the offices of the
Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not
later than June 8, 2009. A shareholder wishing to provide
notice in the manner prescribed by
78
Rule 14a-4(c)(1)
of a proposal submitted outside of the process of
Rule 14a-8
must, pursuant to the Acquired Funds By-Laws, submit such
written notice to the Acquired Fund not later than
August 21, 2009 or prior to August 6, 2009. Timely
submission of a proposal does not mean that such proposal will
be included in a proxy statement.
The anticipated date of the next special shareholders
meeting, if any, of either Fund cannot be provided. Shareholders
wishing to submit proposals for inclusion in a proxy statement
for a subsequent shareholders meeting of a Fund should
send their written proposal to the Fund at 333 West Wacker
Drive, Chicago, Illinois 60606. Proposals must be received a
reasonable time before a Fund begins to print and mail its proxy
materials for the meeting.
GENERAL
Management of the Funds does not intend to present and does not
have reason to believe that others will present any items of
business at the Special Meeting, except as described in this
Proxy Statement/Prospectus. However, if other matters are
properly presented at the meetings for a vote, the proxies will
be voted upon such matters in accordance with the judgment of
the persons acting under the proxies.
A list of shareholders of each Fund entitled to be present and
to vote at the Special Meeting will be available at the offices
of the Funds, 333 West Wacker Drive, Chicago, Illinois, for
inspection by any shareholder of the Funds during regular
business hours for ten days prior to the date of the Special
Meeting.
Failure of a quorum of either Fund to be present at the Special
Meeting will necessitate adjournment and will subject the Funds
to additional expense. The persons named in the enclosed proxy
may also move for an adjournment of the meeting to permit
further solicitation of proxies with respect to any of the
proposals if they determine that adjournment and further
solicitation is reasonable and in the best interests of the
shareholders. Under each Funds By-Laws, an adjournment of
a meeting requires the affirmative vote of a majority of the
shares present in person or represented by proxy at such meeting.
IF YOU CANNOT BE PRESENT 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.
Kevin J. McCarthy
Vice President and Secretary
79
APPENDIX A
AGREEMENT
AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the
Agreement) is made as of
this
th day
of ,
2009 by Nuveen Insured Municipal Opportunity Fund, Inc., a
Minnesota corporation (the Acquiring Fund), and
Nuveen Insured Florida Premium Income Municipal Fund, a
Massachusetts business trust (the Acquired Fund and,
together with the Acquiring Fund, the Funds).
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the
United States Internal Revenue Code of 1986, as amended (the
Code), and the Treasury Regulations promulgated
thereunder. The reorganization will consist of: (i) the
transfer of all the assets of the Acquired Fund to the Acquiring
Fund in exchange solely for shares of common stock (common
shares), par value $0.01 per share, of the Acquiring Fund
(Acquiring Fund Common Shares), Municipal
Action Rate Cumulative Preferred stock
(MuniPreferred), Series W3 and Series TH3,
par value $0.01 per share, 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 the liabilities of the Acquired Fund;
and (ii) the pro rata distribution of all the Acquiring
Fund Common Shares and Acquiring Fund MuniPreferred
Shares, respectively, to the common and MuniPreferred
shareholders of the Acquired Fund, respectively, as part of the
termination, dissolution and complete liquidation of the
Acquired Fund as provided herein, all upon the terms and
conditions set forth in this Agreement (the
Reorganization).
WHEREAS, each Fund is a closed-end, management investment
company registered under the Investment Company Act of 1940, as
amended (the 1940 Act), and the Acquired Fund owns
securities that generally are assets of the character in which
the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund is authorized to issue its shares of
beneficial interests; and
WHEREAS, the Board of Directors of the Acquiring Fund (the
Acquiring Board) has determined that the
Reorganization is in the best interests of the Acquiring Fund
and that the interests of the existing shareholders of the
Acquiring Fund will not be diluted as a result of the
Reorganization, and the Board of Trustees of the Acquired Fund
(the Acquired Board) has determined that the
Reorganization is in the best interests of the Acquired Fund and
that the interests of the existing shareholders of the Acquired
Fund will not be diluted as a result of the Reorganization.
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NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements hereinafter set forth, the parties
hereto covenant and agree as follows:
ARTICLE I
TRANSFER
OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING
FUND SHARES AND THE ASSUMPTION
OF THE ACQUIRED FUND LIABILITIES AND TERMINATION
AND LIQUIDATION OF THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and
conditions contained herein and on the basis of the
representations and warranties contained herein, the Acquired
Fund agrees to transfer all of its assets, as set forth in
Section 1.2, to the Acquiring Fund. In exchange, the
Acquiring Fund agrees: (i) to issue and deliver to the
Acquired Fund the number of Acquiring Fund Common Shares,
computed in the manner set forth in Section 2.3
and
Acquiring Fund MuniPreferred Shares; and (ii) to
assume all the liabilities of the Acquired Fund, as set forth in
Section 1.3. The preferences, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption of the Acquiring
Fund MuniPreferred Shares shall be identical in all
material respects to those of the Acquiring Funds existing
series of MuniPreferred shares. Dividends on shares of Acquired
Fund MuniPreferred shares, Series W and
Series TH, shall accumulate to and including the day before
the Closing Date, as such term is defined in Section 3.1,
and then cease to accumulate, and dividends on shares of
Acquiring Fund MuniPreferred Shares, issued pursuant to the
Reorganization shall accumulate in respect of their
Initial Rate Period from and including the Closing
Date at the same rate borne on the day before the Closing Date
by the Acquired Fund MuniPreferred shares, Series W
and Series TH. The Subsequent Rate Periods,
Dividend Payment Dates in respect of such
Subsequent Rate Periods and initial and subsequent
Auctions for the shares of Acquiring
Fund MuniPreferred Shares, issued pursuant to this
paragraph 1.1 shall be fixed to be identical to the
dividend and auction provisions applicable to the outstanding
Acquired Fund MuniPreferred shares, Series W and
Series TH, as of immediately prior to the Closing Date. The
Initial Rate Period and Dividend Payment
Rate in respect of such Initial Rate Period, for shares of
Acquiring Fund MuniPreferred Shares, issued pursuant to the
Reorganization, shall be as set forth in the Proxy
Statement/Prospectus, as hereinafter defined. Such transactions
shall take place at the closing provided for in Section 3.1
(the Closing).
1.2 ASSETS TO BE TRANSFERRED. The Acquired Fund
shall transfer all of its assets to the Acquiring Fund,
including, without limitation, all cash, securities,
commodities, interests in futures and dividends or interest
receivables owned by the Acquired Fund and any deferred or
prepaid expenses shown as an asset on the books of the Acquired
Fund on the Closing Date.
The Acquired Fund will, within a reasonable period of time
before the Closing Date, furnish the Acquiring Fund with a list
of the Acquired Funds portfolio securities and other
investments. The Acquiring Fund will, within a reasonable period
of time before the Closing Date, furnish the Acquired Fund with
a list of the securities, if any, on the Acquired Funds
list referred to above that do not conform to the Acquiring
Funds investment objectives, policies, and restrictions.
The Acquired Fund, if requested by the Acquiring Fund, will
dispose of securities on the Acquiring Funds list before
the Closing Date. In addition, if it is determined that the
portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain
percentage limitations imposed upon the Acquiring Fund with
respect to such
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investments, the Acquired Fund, if requested by the Acquiring
Fund, will dispose of a sufficient amount of such investments as
may be necessary to avoid violating such limitations as of the
Closing Date. Notwithstanding the foregoing, nothing herein will
require the Acquired Fund to dispose of any investments or
securities if, in the reasonable judgment of the Acquired
Fund Board or Nuveen Asset Management (the
Adviser), such disposition would adversely affect
the tax-free nature of the Reorganization for federal income tax
purposes or would otherwise not be in the best interests of the
Acquired Fund.
1.3 LIABILITIES TO BE ASSUMED. The Acquired Fund
will endeavor to discharge all of its known liabilities and
obligations to the extent possible before the Closing Date.
Notwithstanding the foregoing, any liabilities not so discharged
shall be assumed by the Acquiring Fund, which assumed
liabilities shall include all of the Acquired Funds
liabilities, debts, obligations, and duties 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 at the Closing Date, and whether or
not specifically referred to in this Agreement.
1.4 DECLARATION OF PREFERRED DIVIDENDS. At or
prior to the Closing Date, the Acquired Fund (a) will
declare all accumulated but unpaid dividends on the Acquired
Fund MuniPreferred shares, Series W and
Series TH, respectively, up to and including the day before
which the Closing Date occurs, such dividends to be paid to the
holders thereof on the Dividend Payment Date in respect of the
Initial Rate Period of Acquiring Fund MuniPreferred Shares,
for which such Acquired Fund MuniPreferred shares,
Series W and Series TH, respectively, were exchanged.
1.5 LIQUIDATION AND DISTRIBUTION. 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): (a) the Acquired Fund will
distribute in complete liquidation of the Acquired Fund, pro
rata to its common shareholders of record, determined as of the
close of business on the Valuation Date, as such term is defined
in Section 2.1 (the Acquired Fund Common
Shareholders), all of the Acquiring Fund Common
Shares received by the Acquired Fund pursuant to
Section 1.1 (together with any dividends declared with
respect thereto to holders of record as of a time after the
Valuation Date and prior to the Liquidation Date (Interim
Dividends)) and to its preferred shareholders of record,
determined as of the Valuation Date (Acquired
Fund Preferred Shareholders and, collectively, with
the Acquired Fund Common Shareholders, the Acquired
Fund Shareholders), one share of Acquiring
Fund MuniPreferred Shares (together with any Interim
Dividends), in exchange for each Acquired
Fund MuniPreferred share, Series W and Series TH,
respectively, held by the Acquired Fund Preferred
Shareholders; and (b) the Acquired Fund will thereupon
proceed to dissolve and terminate as set forth in
Section 1.9 below. Such distribution will be accomplished
by the transfer of Acquiring Fund Shares credited to the
account of the Acquired Fund on the books of the Acquiring Fund
to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund Shareholders and
representing, in the case of an Acquired Fund Common
Shareholder, such shareholders pro rata share of the
Acquiring Fund Common Shares received by the Acquired Fund
and in the case of an Acquired Fund Preferred Shareholder,
a number of Acquiring Fund MuniPreferred Shares received by
the Acquired Fund equal to the number of Acquired
Fund MuniPreferred shares, Series W and
Series TH, respectivley, held by such shareholder, and by
paying to the shareholders of the Acquired Fund any Interim
Dividends on such transferred shares. All issued and outstanding
common and MuniPreferred shares of the Acquired Fund will
simultaneously be canceled on the books of the Acquired Fund.
The
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Acquiring Fund shall not issue certificates representing
Acquiring Fund Shares in connection with such transfer.
1.6 OWNERSHIP OF SHARES. Ownership of Acquiring
Fund Shares will be shown on the books of the Acquiring
Funds transfer agent. Acquiring Fund Shares will be
issued simultaneously to the Acquired Fund, in an amount
computed in the manner set forth in Section 2.3, to be
distributed to Acquired Fund Shareholders.
1.7 TRANSFER TAXES. Any transfer taxes payable
upon the issuance of Acquiring Fund Shares in a name other
than the registered holder of the Acquired Fund common or
MuniPreferred shares on the books of the Acquired Fund as of
that time shall, as a condition of such issuance and transfer,
be paid by the person to whom such Acquiring Fund Shares
are to be issued and transferred.
1.8 REPORTING. Any reporting responsibility of
the Acquired Fund with the Securities and Exchange Commission
(the SEC), the New York Stock Exchange (the
NYSE), or any state securities commission is and
shall remain the responsibility of the Acquired Fund up to and
including the Liquidation Date.
1.9 TERMINATION. The Acquired Fund shall
completely liquidate and be dissolved, terminated and have its
affairs wound up in accordance with Massachusetts state law,
promptly following the Closing Date and the making of all
distributions pursuant to Section 1.5.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the net
assets of the Acquired Fund shall be the value of its assets,
less its liabilities, computed as of the close of regular
trading on the NYSE on the business day immediately prior to the
Closing Date (such time and date being hereinafter called the
Valuation Date). The value of the Acquired
Funds assets shall be determined by using the valuation
procedures set forth in the Acquired Funds Declaration of
Trust and the Funds Proxy Statement/Prospectus to be used
in connection with the Reorganization or such other valuation
procedures as shall be mutually agreed upon by the parties. The
value of the Acquired Funds net assets shall be calculated
net of the liquidation preference (including accumulated and
unpaid dividends) of all outstanding Acquired
Fund MuniPreferred shares.
2.2 VALUATION OF SHARES. The net asset value per
Acquiring Fund common share shall be the net asset value per
share computed on the Valuation Date, using the valuation
procedures set forth in the Acquiring Funds Articles of
Incorporation (Articles) and the Funds Proxy
Statement/Prospectus to be used in connection with the
Reorganization or such other valuation procedures as shall be
mutually agreed upon by the parties. The value of the Acquiring
Funds net assets shall be calculated net of the
liquidation preference (including accumulated and unpaid
dividends) of all outstanding Acquiring Fund MuniPreferred
shares.
2.3 SHARES TO BE ISSUED. The number of Acquiring
Fund Common Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Funds net
assets, shall be determined by dividing the value of the
Acquired Funds net assets determined in accordance with
Section 2.1 by the net asset value per Acquiring
Fund Common Share determined in accordance with
Section 2.2.
A-4
2.4 EFFECT OF SUSPENSION IN TRADING. In the
event that on the Valuation Date, either: (a) the NYSE or
another primary exchange on which the portfolio securities of
the Acquiring Fund or the Acquired Fund are purchased or sold
shall be closed to trading or trading on such exchange shall be
restricted; or (b) trading or the reporting of trading on
the NYSE or elsewhere shall be disrupted so that accurate
appraisal of the value of the net assets of the Acquiring Fund
or the Acquired Fund is impracticable, the Valuation Date shall
be postponed until the first business day after the day when
trading is fully resumed and reporting is restored provided that
such day is not a day on which an Auction would normally occur
with respect to the Acquired Fund MuniPreferred shares,
Series W and Series TH.
2.5 COMPUTATIONS OF NET ASSETS. All computations
of net asset value shall be made by or under the direction
of
( )
in accordance with its regular practice as custodian of the
Funds.
ARTICLE III
CLOSING
AND CLOSING DATE
3.1 CLOSING DATE. The Closing shall occur
on ,
2009 or such other date as the parties may agree (the
Closing Date) provided that the Closing Date shall
not be a date on which an Auction would ordinarily
occur with respect to Acquired Fund MuniPreferred shares,
Series W. All acts taking place at the Closing shall be
deemed to take place as of immediately after the close of
regular trading on the NYSE on the Valuation Date. The Closing
shall be held as of [8:00 a.m.] Central time (the
Effective Time) at the offices of Vedder Price P.C.
in Chicago, Illinois or at such other time
and/or place
as the parties may agree.
3.2 CUSTODIANS CERTIFICATE. The Acquired
Fund shall
cause ,
as custodian for the Acquired Fund (the Custodian),
to deliver to the Acquiring Fund at the Closing a certificate of
an authorized officer stating that: (a) the Acquired
Funds portfolio securities, cash, and any other assets
shall have been delivered in proper form to the Acquiring Fund
on the Closing Date; and (b) all necessary taxes, including
all applicable federal and state stock transfer stamps, if any,
shall have been paid, or provision for payment shall have been
made, in conjunction with the delivery of portfolio securities
by the Acquired Fund.
3.3 TRANSFER AGENTS CERTIFICATE. The
Acquired Fund shall
cause ,
as transfer agent for the Acquired Fund, to deliver to the
Acquiring Fund at the Closing a certificate of an authorized
officer stating that its records contain the names and addresses
of all the Acquired Fund Shareholders, and the number and
percentage ownership of outstanding common and MuniPreferred
shares owned by each such shareholder immediately prior to the
Closing. The Acquiring Fund shall issue and deliver or
cause ,
its transfer agent, to issue and deliver to the Acquired Fund a
confirmation evidencing the Acquiring Fund Shares to be
credited on the Closing Date to the Secretary of the Trust or
provide evidence satisfactory to the Acquired Fund that such
Acquiring Fund Shares have been credited to the Acquired
Funds account on the books of the Acquiring Fund.
3.4 DELIVERY OF ADDITIONAL ITEMS. At the
Closing, each party shall deliver to the other such bills of
sale, checks, assignments, share certificates, receipts and
other documents, if any, as such other party or its counsel may
reasonably request to effect the transactions contemplated by
this Agreement.
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ARTICLE IV
REPRESENTATIONS
AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The
Acquired Fund represents and warrants as follows:
(a) The Acquired Fund is a business trust duly organized,
validly existing and in good standing under the laws of the
Commonwealth of Massachusetts.
(b) The Acquired Fund is registered as a closed-end
non-diversified management investment company under the 1940
Act, and such registration is in full force and effect.
(c) The Acquired Fund is not, and the execution, delivery,
and performance of this Agreement (subject to shareholder
approval) will not result, in the violation of any provision of
the Acquired Funds Declaration of Trust or By-Laws or of
any material agreement, indenture, instrument, contract, lease,
or other undertaking to which the Acquired Fund is a party or by
which it is bound.
(d) Except as otherwise disclosed in writing to and
accepted by the Acquiring Fund, the Acquired Fund has no
material contracts or other commitments (other than this
Agreement and the obligations to pay the dividends
and/or
distributions contemplated by Section 1.4) that will be
terminated with liability to it before the Closing Date.
(e) No litigation, administrative proceeding, or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquired Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business, or the ability
of the Acquired Fund to carry out the transactions contemplated
by this Agreement. The Acquired Fund knows of no facts that
might form the basis for the institution of such proceedings and
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 contemplated herein.
(f) The audited financial statements of the Acquired Fund
as of April 30, 2008, and for the year then ended have been
prepared in accordance with generally accepted accounting
principles, and such statements (copies of which have been
furnished to the Acquiring Fund) fairly reflect the financial
condition of the Acquired Fund as of April 30, 2008, and
there are no known contingent liabilities of the Acquired Fund
as of such date that are not disclosed in such statements. The
unaudited financial statements of the Acquired Fund as of
October 31, 2008, and for the semi-annual period then
ended, will be prepared in accordance with generally accepted
accounting principles, and such statements (copies of which will
be furnished to the Acquiring Fund) will fairly reflect the
financial condition of the Acquired Fund as of October 31,
2008, and there will not by any known contingent liabilities of
the Acquired Fund as of such date that are not disclosed in such
statements. [The audited financial statements of the Acquired
Fund as of April 30, 2009, and for the year then will have
been prepared in accordance with generally accepted accounting
principles, and such statements (copies of which will be
furnished to the Acquiring Fund) will fairly reflect the
financial condition of the Acquired Fund as of April 30,
2009, and there will be no known contingent liabilities of the
Acquired Fund as of such date that are not disclosed in such
statements.]
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(g) Since the date of the financial statements referred to
in subsection (f) above, there have been no material
adverse changes in the Acquired Funds financial condition,
assets, liabilities or business (other than changes occurring in
the ordinary course of business) and there are no known
contingent liabilities of the Acquired Fund arising after such
date. For the purposes of this subsection (g), a decline in the
net asset value of the Acquired Fund shall not constitute a
material adverse change.
(h) All federal, state, local and other tax returns and
reports of the Acquired Fund required by law to be filed by it
(taking into account permitted extensions for filing) have been
timely filed and are correct in all material respects. All
federal, state, local and other taxes of the Acquired Fund
required to be paid (whether or not shown on any such return or
report) have been paid, or provision shall have been made for
the payment thereof and any such unpaid taxes are properly
reflected on the financial statements referred to in
subsection (f) above. To the best of the Acquired
Funds knowledge, no tax authority is currently auditing or
preparing to audit the Acquired Fund, and no assessment for
taxes, interest, additions to tax, or penalties has been
asserted against the Acquired Fund.
(i) The authorized capital of the Acquired Fund consists of
an unlimited number of common and preferred shares, par value
$.01 per share. All issued and outstanding shares of the
Acquired Fund are duly and validly issued and outstanding, fully
paid and non-assessable by the Acquired Fund. All of the issued
and outstanding shares of the Acquired Fund will, at the time of
the Closing Date, be held by the persons and in the amounts set
forth in the records of the Acquired Funds transfer agent
as provided in Section 3.3. The Acquired Fund has no
outstanding options, warrants, or other rights to subscribe for
or purchase any shares of the Acquired Fund, and has no
outstanding securities convertible into shares of the Acquired
Fund.
(j) At the Closing Date, the Acquired Fund will have good
and marketable title to the Acquired Funds assets to be
transferred to the Acquiring Fund pursuant to Section 1.2,
and full right, power, and authority to sell, assign, transfer,
and deliver such assets, and the Acquiring Fund will acquire
good and marketable title thereto.
(k) The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on
the part of the Acquired Fund. Subject to approval by
shareholders, this Agreement constitutes a valid and binding
obligation of the Acquired Fund, enforceable in accordance with
its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium, and other laws relating to or
affecting creditors rights and to general equity
principles.
(l) The information to be furnished by the Acquired Fund
for use in no-action letters, applications for orders,
registration statements, proxy materials, and other documents
that may be necessary in connection with the transactions
contemplated herein shall be accurate and complete in all
material respects and shall comply in all material respects with
federal securities and other laws and regulations.
(m) From the effective date of the Registration Statement
(as defined in Section 5.7), through the time of the
meeting of the shareholders and on the Closing Date, any written
information furnished by the Acquired Fund with respect to the
Acquired Fund for use in the Proxy Materials (as defined in
Section 5.7), or any other materials provided in connection
with the Reorganization, does not and will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to
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make the statements, in light of the circumstances under which
such statements were made, not misleading.
(n) For each taxable year of its operations, including the
short taxable year ending with the Closing Date, the Acquired
Fund (i) has elected to qualify, and has qualified or will
qualify (in the case of the short taxable year ending with the
Closing Date), as a regulated investment company
under the Code (a RIC), (ii) has been eligible
to and has computed its federal income tax under
Section 852 of the Code, and will do so for the short
taxable year ending with the Closing Date and (iii) has
been, and will be (in the case of the short taxable year ending
with the Closing Date), treated as a separate corporation for
federal income tax purposes pursuant to Section 851(g) of
the Code.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The
Acquiring Fund represents and warrants as follows:
(a) The Acquiring Fund is a corporation, duly organized,
validly existing and in good standing under the laws of the
State of Minnesota.
(b) The Acquiring Fund is registered as a closed-end
diversified management investment company under the 1940 Act,
and such registration is in full force and effect.
(c) The Acquiring Fund is not, and the execution, delivery
and performance of this Agreement will not result, in a
violation of the Acquiring Funds Articles of Incorporation
or By-Laws or of any material agreement, indenture, instrument,
contract, lease, or other undertaking to which the Acquiring
Fund is a party or by which it is bound.
(d) No litigation, administrative proceeding or
investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the
Acquiring Fund or any of its properties or assets, which, if
adversely determined, would materially and adversely affect its
financial condition, the conduct of its business or the ability
of the Acquiring Fund to carry out the transactions contemplated
by this Agreement. The Acquiring Fund knows of no facts that
might form the basis for the institution of such proceedings and
it 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 transaction contemplated herein.
(e) The audited financial statements of the Acquiring Fund
as of October 31, 2008 and for the fiscal year then ended
have been prepared in accordance with generally accepted
accounting principles and have been audited by independent
auditors, and such statements (copies of which have been
furnished to the Acquired Fund) fairly reflect the financial
condition of the Acquiring Fund as of October 31, 2008, and
there are no known contingent liabilities of the Acquiring Fund
as of such date that are not disclosed in such statements. [The
unaudited financial statements of the Acquiring Fund as of
April 30, 2009, and for the semi-annual period then ended,
will be prepared in accordance with generally accepted
accounting principles, and such statements (copies of which will
be furnished to the Acquired Fund) will fairly reflect the
financial condition of the Acquiring Fund as of April 30,
2009, and there will not be any known contingent liabilities of
the Acquiring Fund as of such date that are not disclosed in
such statement.]
(f) Since the date of the financial statements referred to
in subsection (e) above, there have been no material
adverse changes in the Acquiring Funds financial
condition, assets, liabilities or business (other than changes
occurring in the ordinary course of
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business) and there are no known contingent liabilities of the
Acquiring Fund arising after such date. For the purposes of this
subsection (f), a decline in the net asset value of the
Acquiring Fund shall not constitute a material adverse change.
(g) All federal, state, local and other tax returns and
reports of the Acquiring Fund required by law to be filed by it
(taking into account permitted extensions for filing) have been
timely filed and are correct in all material respects. All
federal, state, local and other taxes of the Acquiring Fund
required to be paid (whether or not shown on any such return or
report) have been paid or provision shall have been made for
their payment and any such unpaid taxes are properly reflected
on the financial statements referred to in subsection (e)
above. To the best of the Acquiring Funds knowledge, no
tax authority is currently auditing or preparing to audit the
Acquiring Fund, and no assessment for taxes, interest, additions
to tax or penalties has been asserted against the Acquiring Fund.
(h) The authorized capital of the Acquiring Fund consists
of 200,000,000 common shares and 1,000,000 preferred shares, par
value $0.01 per share. All issued and outstanding Acquiring
Fund Shares are duly and validly issued and outstanding,
fully paid and non-assessable by the Acquiring Fund. The
Acquiring Fund has no outstanding options, warrants, or other
rights to subscribe for or purchase shares of the Acquiring
Fund, and there are no outstanding securities convertible into
shares of the Acquiring Fund.
(i) The execution, delivery and performance of this
Agreement have been duly authorized by all necessary action on
the part of the Acquiring Fund. Subject to approval by
shareholders of the Acquiring Fund, this Agreement constitutes a
valid and binding obligation of the Acquiring Fund, enforceable
in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium, and other
laws relating to or affecting creditors rights and to
general equity principles.
(j) The Acquiring Fund Shares to be issued and
delivered to the Acquired Fund for the account of the Acquired
Fund Shareholders pursuant to the terms of this Agreement
will, at the Closing Date, have been duly authorized. When so
issued and delivered, such shares will be duly and validly
issued shares of the Acquiring Fund, and will be fully paid and
non-assessable.
(k) The information to be furnished by the Acquiring Fund
for use in no-action letters, applications for orders,
registration statements, proxy materials, and other documents
that may be necessary in connection with the transactions
contemplated herein shall be accurate and complete in all
material respects and shall comply in all material respects with
federal securities and other laws and regulations.
(l) From the effective date of the Registration Statement
(as defined in Section 5.7), through the time of the
meeting of the shareholders and on the Closing Date, any written
information furnished by the Acquiring Fund with respect to the
Acquiring Fund for use in the Proxy Materials (as defined in
Section 5.7), or any other materials provided in connection
with the Reorganization, does not and will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated or necessary to make the statements,
in light of the circumstances under which such statements were
made, not misleading.
(m) For each taxable year of its operations, including the
taxable year that includes the Closing Date, the Acquiring Fund
(i) has elected to qualify, has qualified or will qualify
(in
A-9
the case of the year that includes the Closing Date) and intends
to continue to qualify as a RIC under the Code, (ii) has
been eligible to and has computed its federal income tax under
Section 852 of the Code, and will do so for the taxable
year that includes the Closing Date and (iii) has been, and
will be (in the case of the taxable year that includes the
Closing Date), treated as a separate corporation for federal
income tax purposes pursuant to Section 851(g) of the Code.
(n) The Acquiring Fund agrees to use all reasonable efforts
to obtain the approvals and authorizations required by the
Securities Act of 1933, as amended (the
1933 Act), the 1940 Act, and any state
securities laws as it may deem appropriate in order to continue
its operations after the Closing Date.
ARTICLE V
COVENANTS
OF THE FUNDS
5.1 OPERATION IN ORDINARY COURSE. Subject to
Sections 1.2, 1.4 and 8.5, the Acquiring Fund and the
Acquired Fund will operate its respective business in the
ordinary course between the date of this Agreement and the
Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions, any
other distribution necessary or desirable to avoid federal
income or excise taxes, and shareholder purchases and
redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The Acquiring Fund
and Acquired Fund will call a special meeting of their
respective shareholders to consider and act upon this Agreement
(or transactions contemplated thereby) and to take all other
appropriate action necessary to obtain approval of the
transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund
covenants that the Acquiring Fund Shares to be issued
pursuant to this Agreement are not being acquired for the
purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this
Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund
will assist the Acquiring Fund in obtaining such information as
the Acquiring Fund reasonably requests concerning the beneficial
ownership of the Acquired Funds shares.
5.5 FURTHER ACTION. Subject to the provisions of
this Agreement, each Fund will take or cause to be taken, all
action, and do or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective
the transactions contemplated by this Agreement, including any
actions required to be taken after the Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As
promptly as practicable, but in any case within 60 days
after the Closing Date, the Acquired Fund shall furnish the
Acquiring Fund, in such form as is reasonably satisfactory to
the Acquiring Fund and which shall be certified by the Acquired
Funds Controller, a statement of the earnings and profits
of the Acquired Fund for federal income tax purposes, as well as
any net operating loss carryovers and capital loss carryovers,
that will be carried over to the Acquiring Fund as a result of
Section 381 of the Code.
5.7 PREPARATION OF REGISTRATION STATEMENT AND PROXY
MATERIALS. The Funds will prepare and file with the
Securities and Exchange Commission (the Commission)
a
A-10
registration statement on
Form N-14
relating to the Acquiring Fund Shares to be issued to the
Acquired Fund Shareholders (the Registration
Statement). The Registration Statement shall include a
proxy statement of the Acquired Fund and a prospectus of the
Acquiring Fund relating to the transaction contemplated by this
Agreement. The Registration Statement shall be in compliance
with the 1933 Act, the Securities Exchange Act of 1934, as
amended (the 1934 Act), and the 1940 Act, as
applicable. Each party will provide the other party with the
materials and information necessary to prepare the proxy
statement and related materials (the Proxy
Materials), for inclusion therein, in connection with the
meetings of the Funds shareholders to consider the
approval of this Agreement and the transactions contemplated
herein.
ARTICLE VI
CONDITION
PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the
transactions provided for herein shall be subject to the
following condition:
6.1 All representations, covenants, 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 as of
the Closing Date, with the same force and effect as if made on
and as of the Closing Date. The Acquiring Fund shall have
delivered to the Acquired Fund a certificate executed in the
Acquiring Funds name by the Acquiring Funds
President or Vice President and its Controller, in form and
substance satisfactory to the Acquired Fund and dated as of the
Closing Date, to such effect and as to such other matters as the
Acquired Fund shall reasonably request.
ARTICLE VII
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the
transactions provided for herein shall be subject to the
following conditions:
7.1 All representations, covenants, and warranties of the
Acquired Fund contained in this Agreement shall be true and
correct in all material respects as of the date hereof and as of
the Closing Date, with the same force and effect as if made on
and as of the Closing Date. The Acquired Fund shall have
delivered to the Acquiring Fund on the Closing Date a
certificate executed in the Acquired Funds name by the
Acquired Funds President or Vice President and the
Controller, in form and substance satisfactory to the Acquiring
Fund and dated as of the Closing Date, to such effect and as to
such other matters as the Acquiring Fund shall reasonably
request.
7.2 The Acquired Fund shall have delivered to the Acquiring
Fund a statement of the Acquired Funds assets and
liabilities, together with a list of the Acquired Funds
portfolio securities showing the tax basis of such securities by
lot and the holding periods of such securities, as of the
Closing Date, certified by the Controller of the Trust.
A-11
7.3 On or immediately prior to the Closing Date, the
Acquired Fund shall have declared the dividends
and/or
distributions contemplated by Section 1.4.
ARTICLE VIII
FURTHER
CONDITIONS PRECEDENT
The obligations of the Acquired Fund or the Acquiring Fund
hereunder shall also be subject to the following:
8.1 This Agreement and the transactions contemplated
herein, with respect to the Acquired Fund, shall have been
approved by the requisite vote of the holders of the outstanding
shares of the Acquired Fund in accordance with applicable law
and the provisions of the Acquired Funds Declaration of
Trust and By-Laws. In addition, this Agreement, the issuance of
common shares and the transactions contemplated herein, with
respect to the Acquiring Fund, shall have been approved by the
requisite vote of the holders of the outstanding shares of the
Acquiring Fund in accordance with applicable law, the
requirements of the NYSE and the provisions of the Acquiring
Funds Articles and By-Laws. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the
Acquired Fund may waive the conditions set forth in this
Section 8.1.
8.2 On the Closing Date, the Commission shall not have
issued an unfavorable report under Section 25(b) of the
1940 Act, or instituted any proceeding seeking to enjoin the
consummation of the transactions contemplated by this Agreement
under Section 25(c) of the 1940 Act. Furthermore, no
action, suit or other proceeding shall be threatened or 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.
8.3 All required consents of other parties and all other
consents, orders, and permits of federal, state and local
regulatory authorities (including those of the Commission and of
state securities authorities, including any necessary
no-action positions and exemptive orders from such
federal and state authorities) to permit consummation of the
transactions contemplated herein shall have been obtained.
8.4 The Registration Statement shall have become effective
under the 1933 Act, and no stop orders suspending the
effectiveness thereof shall have been issued. To the best
knowledge of the parties to this Agreement, no investigation or
proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 The Acquired Fund shall have declared and paid a
dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to its
shareholders all of the Acquired Funds investment company
taxable income for all taxable periods ending on or before the
Closing Date (computed without regard to any deduction for
dividends paid), if any, plus the excess of its interest income
excludible from gross income under Section 103(a) of the
Code, if any, over its deductions disallowed under
Sections 265 and 171(a)(2) of the Code for all taxable
periods ending on or before the Closing Date and all of its net
capital gains realized in all taxable periods ending on or
before the Closing Date (after reduction for any capital loss
carry forward).
A-12
8.6 The Funds shall have received on the Closing Date an
opinion from Vedder Price P.C., dated as of the Closing Date,
substantially to the effect that:
(a) The Acquired Fund is a business trust, duly organized
and validly existing under the laws of the Commonwealth of
Massachusetts, which, to such counsels knowledge, has the
power to own all of its properties and assets and to carry on
its business as presently conducted.
(b) The Acquiring Fund is a corporation, duly organized and
validly existing under the laws of the State of Minnesota,
which, to such counsels knowledge, has the power to own
all of its properties and assets and to carry on its business as
presently conducted.
(c) Each Fund is registered as a closed-end management
investment company under the 1940 Act, and, to such
counsels knowledge, such registration under the 1940 Act
is in full force and effect.
(d) Assuming that consideration of not less than the net
asset value of the Acquired Fund common shares has been paid,
and assuming that such shares were issued in accordance with the
terms of the Acquired Funds registration statement, or any
amendment thereto, in effect at the time of such issuance, all
issued and outstanding shares of the Acquired Fund are legally
issued and fully paid and non-assessable, and no shareholder of
the Acquired Fund has any preemptive rights with respect to the
Acquired Funds shares.
(e) Assuming that the Acquiring Fund Shares have been
issued in accordance with the terms of this Agreement, the
Acquiring Fund Shares to be issued and delivered to the
Acquired Fund on behalf of the Acquired Fund Shareholders
as provided by this Agreement are duly authorized and upon such
delivery will be legally issued and outstanding and fully paid
and non-assessable, and no shareholder of the Acquiring Fund has
any preemptive rights with respect to Acquiring Fund Shares.
(f) The Registration Statement is effective and, to such
counsels knowledge, no stop order under the 1933 Act
pertaining thereto has been issued, and to the knowledge of such
counsel, no consent, approval, authorization or order of any
court or governmental authority of the United States or the
State of Minnesota is required for consummation by the Funds of
the transactions contemplated herein, except as have been
obtained.
(g) The execution and delivery of this Agreement did not,
and the consummation of the transactions contemplated herein
will not, result in a violation of the Acquired Funds
Declaration of Trust (assuming approval of shareholders of the
Funds has been obtained) or By-Laws or the Acquiring Funds
Articles (assuming approval of shareholders of the Funds has
been obtained) or By-Laws.
Insofar as the opinion expressed above relates to or is
dependent upon matters governed by the State of Minnesota,
Vedder Price P.C. may rely on the opinion
of .
Insofar as the opinion expressed above relates to or is
dependent upon matters governed by the Commonwealth of
Massachusetts, Vedder Price P.C. may rely on the opinion
of .
8.7 The Funds shall have received an opinion of Vedder
Price P.C. addressed to the Acquiring Fund and the Acquired Fund
substantially to the effect that for federal income tax purposes:
(a) The transfer of all the Acquired Funds assets to
the Acquiring Fund in exchange solely for Acquiring
Fund Shares and the assumption by the Acquiring Fund of all
the liabilities of
A-13
the Acquired Fund followed by the pro rata distribution to the
Acquired Fund shareholders of all the Acquiring Fund Shares
received by the Acquired Fund in complete liquidation of the
Acquired Fund will constitute a reorganization
within the meaning of Section 368(a) of the Code and the
Acquiring Fund and the Acquired Fund will each be a party
to a reorganization, within the meaning of
Section 368(b) of the Code, with respect to the
Reorganization.
(b) No gain or loss will be recognized by the Acquiring
Fund upon the receipt of all the assets of the Acquired Fund
solely in exchange for Acquiring Fund Shares and the
assumption by the Acquiring Fund of all the liabilities of the
Acquired Fund.
(c) No gain or loss will be recognized by the Acquired Fund
upon the transfer of all the Acquired Funds assets to the
Acquiring Fund solely in exchange for Acquiring Fund Shares
and the assumption by the Acquiring Fund of all the liabilities
of the Acquired Fund or upon the distribution (whether actual or
constructive) of the Acquiring Fund Shares, respectively,
to the Acquired Fund Shareholders solely in exchange for
such shareholders common and MuniPreferred shares,
respectively, of the Acquired Fund in complete liquidation of
the Acquired Fund.
(d) No gain or loss will be recognized by the Acquired
Fund Shareholders upon the exchange of their Acquired Fund
shares solely for Acquiring Fund Shares, respectively, in
the Reorganization.
(e) The aggregate basis of the Acquiring Fund Shares
received by each Acquired Fund Shareholder, respectively,
pursuant to the Reorganization will be the same as the aggregate
basis of the Acquired Fund shares exchanged therefor by such
shareholder. The holding period of the Acquiring
Fund Shares received by each Acquired Fund Shareholder
will include the period during which the Acquired Fund shares
exchanged therefor were held by such shareholder, provided such
Acquired Fund shares are held as capital assets at the time of
the Reorganization.
(f) The basis of the Acquired Funds assets
transferred to the Acquiring Fund will be the same as the basis
of such assets to the Acquired Fund immediately before the
Reorganization. The holding period of the assets of the Acquired
Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Acquired Fund.
Such opinion shall be based on customary assumptions and such
representations as Vedder Price P.C. may reasonably request of
the Funds, and the Acquired Fund and the Acquiring Fund will
cooperate to make and certify the accuracy of such
representations. Notwithstanding anything herein to the
contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the conditions set forth in this Section 8.7.
8.8 The Acquiring Fund shall have obtained written
confirmation from both Moodys Investors Service, Inc. and
Standard & Poors Corporation that
(a) consummation of the transactions contemplated by this
Agreement will not impair the Aaa and AAA ratings,
respectively, assigned by such rating agencies to the existing
shares of Acquiring Fund MuniPreferred shares,
Series M, Series T, Series W, Series W2,
Series TH1, Series TH2 and Series F, and
(b) the shares of Acquiring Fund MuniPreferred Shares
to be issued pursuant to Section 1.1 will be rated
Aaa or AAA, respectively, by such rating agencies.
A-14
ARTICLE IX
EXPENSES
9.1 The expenses incurred in connection with the
Reorganization will be allocated between the Funds according to
the following percentages: Acquired
Fund, % and Acquiring
Fund, %. Reorganization expenses
include, without limitation: (a) expenses associated with
the preparation and filing of the Registration Statement and
other Proxy Materials; (b) postage; (c) printing;
(d) accounting fees; (e) legal fees incurred by each
Fund; (f) solicitation costs; and (g) other related
administrative or operational costs.
9.2 Each party represents and warrants to the other that
there is no person or entity entitled to receive any
brokers fees or similar fees or commission payments in
connection with the transactions provided for herein.
ARTICLE X
ENTIRE
AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties agree that no party has made to the other
parties any representation, warranty
and/or
covenant not set forth herein, and that this Agreement
constitutes the entire agreement between and among the parties.
10.2 The representations, warranties, and covenants
contained in this Agreement or in any document delivered
pursuant to or in connection with this Agreement shall not
survive the consummation of the transactions contemplated
hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual
agreement of the parties and such termination may be effected by
each Funds President or the Vice President without further
action by the Board. In addition, either Fund may at its option
terminate this Agreement at or before the Closing Date due to:
(a) a breach by any other party of any representation,
warranty, or agreement contained herein to be performed at or
before the Closing Date, if not cured within 30 days;
(b) a condition precedent to the obligations of the
terminating party that has not been met and it reasonably
appears that it will not or cannot be met; or
(c) a determination by the Board that the consummation of
the transactions contemplated herein is not in the best
interests of the Fund.
11.2 In the event of any such termination, in the absence
of willful default, there shall be no liability for damages on
the part of the Acquired Funds Board of Trustees, the
Acquiring Funds Board of Directors, the Acquiring Fund,
the Acquired Fund, Nuveen Asset Management (the
Adviser), or the Funds or Advisers
officers.
A-15
ARTICLE XII
AMENDMENTS
12.1 This Agreement may be amended, modified, or
supplemented in such manner as may be mutually agreed upon in
writing by the officers of each Fund as specifically authorized
by each of the Funds Board; provided, however, that
following the meeting of the shareholders of the Funds called by
each Fund pursuant to Section 5.2 of this Agreement, no
such amendment may have the effect of changing the provisions
for determining the number of Acquiring Fund Shares to be
issued to the Acquired Fund Shareholders under this
Agreement to the detriment of such shareholders without their
further approval.
ARTICLE XIII
HEADINGS;
COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
13.1 The article and section headings contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
13.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
13.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
13.4 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns,
but, except as provided in this section, no assignment or
transfer hereof or of any rights or obligations hereunder shall
be made by any party without the written consent of the other
parties. 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 hereto and their respective
successors and assigns, any rights or remedies under or by
reason of this Agreement.
13.5 It is expressly agreed that the obligations of each
Fund hereunder shall not be binding upon any of the Trustees of
the Acquired Fund, the Directors of the Acquiring Fund,
shareholders, nominees, officers, agents, or employees of either
Fund personally, but shall bind only the fund property of the
respective Fund, as provided in the Acquired Funds
Declaration of Trust and the Acquiring Funds Articles. The
execution and delivery of this Agreement have been authorized by
the Board Members of each Fund and signed by authorized officers
of each Fund, acting as such. Neither the authorization by such
Board Members nor the execution and delivery by such officers
shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, but shall
bind only the fund property of the respective Fund as provided
in the Acquired Funds Declaration of Trust or the
Acquiring Funds Articles, as applicable.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement, all as of the date first written above.
NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
Name: Gifford R. Zimmerman
Title: Chief Administrative Officer
ACKNOWLEDGED:
Name: Mark L. Winget
Title: Vice President and Assistant Secretary
NUVEEN INSURED FLORIDA PREMIUM
MUNICIPAL INCOME FUND
Name: Gifford R. Zimmerman
Title: Chief Administrative Officer
ACKNOWLEDGED:
Name: Mark L. Winget
Title: Vice President and Assistant Secretary
A-17
APPENDIX B
FINANCIAL
HIGHLIGHTS
Information contained in the tables below under the headings
Per Share Operating Performance and
Ratios/Supplemental Data shows the operating
performance of the Fund for the last ten fiscal years.
Acquiring
Fund
The following financial highlights table is intended to help you
understand the Funds financial performance. Certain
information reflects financial results from a single Fund common
share outstanding throughout each period. The information in the
financial highlights is derived from the Funds financial
statements audited
by ,
independent registered public accounting firm, whose report on
such financial statements appears in the Funds Annual
Report to shareholders. The Annual and Semi-Annual Reports may
be obtained without charge by calling
(800) 257-8787.
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Year Ended October 31,
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Per Share Operating Performance
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2008
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2007
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2006
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2005
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2004
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2003
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2002
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2001
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2000
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1999
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Beginning Common Share Net Asset Value
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$
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15.04
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$
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15.57
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$
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15.46
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$
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16.06
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$
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15.89
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$
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15.83
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$
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15.72
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$
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14.64
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$
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14.25
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$
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16.04
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|
|
|
|
|
|
|
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
0.97
|
|
|
|
0.98
|
|
|
|
0.98
|
|
|
|
1.01
|
|
|
|
1.05
|
|
|
|
1.06
|
|
|
|
1.15
|
|
|
|
1.17
|
|
|
|
1.21
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Realized/Unrealized Gain (Loss)
|
|
|
(2.62
|
)
|
|
|
(0.45
|
)
|
|
|
0.34
|
|
|
|
(0.50
|
)
|
|
|
0.20
|
|
|
|
0.17
|
|
|
|
0.03
|
|
|
|
1.04
|
|
|
|
0.39
|
|
|
|
(1.73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from Net Investment Income to Preferred
Shareholders
|
|
|
(0.30
|
)
|
|
|
(0.30
|
)
|
|
|
(0.24
|
)
|
|
|
(0.16
|
)
|
|
|
(0.08
|
)
|
|
|
(0.07
|
)
|
|
|
(0.11
|
)
|
|
|
(0.26
|
)
|
|
|
(0.33
|
)
|
|
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from Capital Gains to Preferred Shareholders
|
|
|
|
*
|
|
|
(0.01
|
)
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1.95
|
)
|
|
|
0.22
|
|
|
|
1.05
|
|
|
|
0.35
|
|
|
|
1.17
|
|
|
|
1.15
|
|
|
|
1.06
|
|
|
|
1.95
|
|
|
|
1.27
|
|
|
|
(0.80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income to Common Shareholders
|
|
|
(0.70
|
)
|
|
|
(0.73
|
)
|
|
|
(0.80
|
)
|
|
|
(0.92
|
)
|
|
|
(0.97
|
)
|
|
|
(0.97
|
)
|
|
|
(0.93
|
)
|
|
|
(0.87
|
)
|
|
|
(0.88
|
)
|
|
|
(0.94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Gains to Common Shareholders
|
|
|
|
*
|
|
|
(0.02
|
)
|
|
|
(0.14
|
)
|
|
|
(0.03
|
)
|
|
|
(0.03
|
)
|
|
|
(0.12
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(0.70
|
)
|
|
|
(0.75
|
)
|
|
|
(0.94
|
)
|
|
|
(0.95
|
)
|
|
|
(1.00
|
)
|
|
|
(1.09
|
)
|
|
|
(0.95
|
)
|
|
|
(0.87
|
)
|
|
|
(0.88
|
)
|
|
|
(0.98
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering Costs and Preferred Share Underwriting Discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Common Share Net Asset Value
|
|
$
|
12.39
|
|
|
$
|
15.04
|
|
|
$
|
15.57
|
|
|
$
|
15.46
|
|
|
$
|
16.06
|
|
|
$
|
15.89
|
|
|
$
|
15.83
|
|
|
$
|
15.72
|
|
|
$
|
14.64
|
|
|
$
|
14.25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Market Value
|
|
$
|
11.15
|
|
|
$
|
13.56
|
|
|
$
|
14.75
|
|
|
$
|
14.52
|
|
|
$
|
16.05
|
|
|
$
|
15.64
|
|
|
$
|
15.21
|
|
|
$
|
14.74
|
|
|
$
|
13.06
|
|
|
$
|
13.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Market Value**
|
|
|
(13.17
|
)%
|
|
|
(3.18
|
)%
|
|
|
8.26
|
%
|
|
|
(3.72
|
)%
|
|
|
9.47
|
%
|
|
|
10.22
|
%
|
|
|
9.80
|
%
|
|
|
19.84
|
%
|
|
|
5.06
|
%
|
|
|
(14.71
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Common Share Net Asset Value**
|
|
|
(13.45
|
)%
|
|
|
1.49
|
%
|
|
|
7.05
|
%****
|
|
|
2.21
|
%
|
|
|
7.64
|
%
|
|
|
7.51
|
%
|
|
|
7.01
|
%
|
|
|
13.61
|
%
|
|
|
9.25
|
%
|
|
|
(5.33
|
)%
|
B-1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended October 31,
|
|
Per Share Operating Performance
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Net Assets Applicable to Common Shares (000)
|
|
$
|
1,005,218
|
|
|
$
|
1,220,297
|
|
|
$
|
1,263,172
|
|
|
$
|
1,254,638
|
|
|
$
|
1,302,985
|
|
|
$
|
1,288,087
|
|
|
$
|
1,283,353
|
|
|
$
|
1,274,659
|
|
|
$
|
1,186,701
|
|
|
$
|
1,155,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets Applicable to Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Credit/Reimbursement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Including Interest(a)
|
|
|
1.43
|
%
|
|
|
1.41
|
%
|
|
|
1.17
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.17
|
%
|
|
|
1.20
|
%
|
|
|
1.21
|
%
|
|
|
1.20
|
%
|
|
|
1.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Excluding Interest(a)
|
|
|
1.19
|
%
|
|
|
1.16
|
%
|
|
|
1.17
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.17
|
%
|
|
|
1.20
|
%
|
|
|
1.21
|
%
|
|
|
1.20
|
%
|
|
|
1.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
6.76
|
%
|
|
|
6.39
|
%
|
|
|
6.38
|
%
|
|
|
6.35
|
%
|
|
|
6.59
|
%
|
|
|
6.67
|
%
|
|
|
7.42
|
%
|
|
|
7.69
|
%
|
|
|
8.47
|
%
|
|
|
7.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets Applicable to Common Shares After
Credit/Reimbursement***:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Including Interest(a)
|
|
|
1.41
|
%
|
|
|
1.40
|
%
|
|
|
1.17
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.19
|
%
|
|
|
1.20
|
%
|
|
|
1.20
|
%
|
|
|
1.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Excluding Interest(a)
|
|
|
1.17
|
%
|
|
|
1.14
|
%
|
|
|
1.17
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.19
|
%
|
|
|
1.20
|
%
|
|
|
1.20
|
%
|
|
|
1.16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
6.78
|
%
|
|
|
6.41
|
%
|
|
|
6.38
|
%
|
|
|
6.35
|
%
|
|
|
6.59
|
%
|
|
|
6.68
|
%
|
|
|
7.42
|
%
|
|
|
7.70
|
%
|
|
|
8.48
|
%
|
|
|
7.67
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Turnover Rate
|
|
|
9
|
%
|
|
|
5
|
%
|
|
|
13
|
%
|
|
|
25
|
%
|
|
|
8
|
%
|
|
|
21
|
%
|
|
|
37
|
%
|
|
|
39
|
%
|
|
|
16
|
%
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Shares at End of Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Amount Outstanding (000)
|
|
$
|
623,350
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
$
|
680,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidation and Market Value Per Share
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Coverage Per Share
|
|
$
|
65,315
|
|
|
$
|
69,864
|
|
|
$
|
71,440
|
|
|
$
|
71,126
|
|
|
$
|
72,904
|
|
|
$
|
72,356
|
|
|
$
|
72,182
|
|
|
$
|
71,862
|
|
|
$
|
68,629
|
|
|
$
|
67,482
|
|
|
|
|
|
|
*
|
|
Rounds to less than $.01 per share.
|
|
|
|
**
|
|
Total Return Based on Market Value
is the combination of changes in the market price per share and
the effect of reinvested dividend income and reinvested capital
gains distributions, if any, at the average price paid per share
at the time of reinvestment. The last dividend declared in the
period, which is typically paid on the first business day of the
following month, is assumed to be reinvested at the ending
market price. The actual reinvestment for the last dividend
declared in the period may take place over several days, and in
some instances may not be based on the market price, so the
actual reinvestment price may be different from the price used
in the calculation. Total returns are not annualized.
|
|
|
|
Total Return Based on Common Share
Net Asset Value is the combination of changes in common share
net asset value, reinvested dividend income at net asset value
and reinvested capital gains distributions at net asset value,
if any. The last dividend declared in the period, which is
typically paid on the first business day of the following month,
is assumed to be reinvested at the ending net asset value. The
actual reinvest price for the last dividend declared in the
period may often be based on the Funds market price (and
not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not
annualized.
|
|
|
|
***
|
|
After custodian fee credit and
expense reimbursement, where applicable.
|
|
|
|
****
|
|
During the fiscal year ended
October 31, 2006, the Fund received a payment from the
Adviser of $42,338 to offset losses realized on the disposal of
investments purchased in violation of the Funds investment
restrictions. This reimbursement did not have an impact on the
Funds Total Return on Common Share Net Asset Value.
|
|
|
|
|
|
The amounts shown are based on
common share equivalents.
|
|
|
|
|
|
Ratios do not reflect the effect of
dividend payments to preferred shareholders; income ratios
reflect income earned on assets attributable to preferred shares.
|
|
|
|
(a)
|
|
Interest expense arises from the
application of SFAS No. 140 to certain inverse
floating rate transactions entered into by the Fund as more
fully described in Footnote 1 Inverse Floating Rate
Securities, in the Funds annual report.
|
B-2
Acquired
Fund
The following financial highlights table is intended to help you
understand the Funds financial performance. Certain
information reflects financial results from a single Fund common
share outstanding throughout each period. Except where noted,
the information in the financial highlights is derived from the
Funds financial statements audited
by ,
independent registered public accounting firm, whose report on
such financial statements appears in the Funds Annual
Report to shareholders. The information as of October 31,
2008 appears in the Funds unaudited interim financial
statements as filed with the SEC in the Funds
Semi-Annual
Report to shareholders. The Annual and Semi-Annual Reports may
be obtained without charge by calling (800) 257-8787.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30,
|
|
|
Year Ended June 30,
|
|
Per Share Operating Performance
|
|
2009(a)
|
|
|
2008
|
|
|
2007(b)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Common Share Net Asset Value
|
|
$
|
14.74
|
|
|
$
|
15.43
|
|
|
$
|
15.14
|
|
|
$
|
16.26
|
|
|
$
|
15.59
|
|
|
$
|
16.57
|
|
|
$
|
15.66
|
|
|
$
|
15.30
|
|
|
$
|
14.25
|
|
|
$
|
14.86
|
|
|
$
|
15.49
|
|
|
$
|
14.70
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income
|
|
|
0.47
|
|
|
|
0.95
|
|
|
|
0.79
|
|
|
|
0.96
|
|
|
|
0.99
|
|
|
|
1.02
|
|
|
|
1.04
|
|
|
|
1.07
|
|
|
|
1.09
|
|
|
|
1.06
|
|
|
|
1.03
|
|
|
|
1.02
|
|
Net Realized/Unrealized Gain (Loss)
|
|
|
(1.67
|
)
|
|
|
(0.60
|
)
|
|
|
0.38
|
|
|
|
(0.91
|
)
|
|
|
0.86
|
|
|
|
(0.88
|
)
|
|
|
0.89
|
|
|
|
0.27
|
|
|
|
1.02
|
|
|
|
(0.59
|
)
|
|
|
(0.67
|
)
|
|
|
0.81
|
|
Distributions from Net Investment Income to Preferred
Shareholders
|
|
|
(0.15
|
)
|
|
|
(0.27
|
)
|
|
|
(0.22
|
)
|
|
|
(0.19
|
)
|
|
|
(0.11
|
)
|
|
|
(0.05
|
)
|
|
|
(0.08
|
)
|
|
|
(0.12
|
)
|
|
|
(0.28
|
)
|
|
|
(0.28
|
)
|
|
|
(0.23
|
)
|
|
|
(0.26
|
)
|
Distributions from Capital Gains to Preferred Shareholders
|
|
|
|
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1.35
|
)
|
|
|
0.06
|
|
|
|
0.94
|
|
|
|
(0.16
|
)
|
|
|
1.73
|
|
|
|
0.08
|
|
|
|
1.85
|
|
|
|
1.22
|
|
|
|
1.83
|
|
|
|
0.19
|
|
|
|
0.13
|
|
|
|
1.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Investment Income to Common Shareholders
|
|
|
(0.34
|
)
|
|
|
(0.69
|
)
|
|
|
(0.63
|
)
|
|
|
(0.82
|
)
|
|
|
(0.95
|
)
|
|
|
(0.96
|
)
|
|
|
(0.93
|
)
|
|
|
(0.86
|
)
|
|
|
(0.78
|
)
|
|
|
(0.80
|
)
|
|
|
(0.76
|
)
|
|
|
(0.78
|
)
|
Capital Gains to Common Shareholders
|
|
|
|
|
|
|
(0.06
|
)
|
|
|
(0.02
|
)
|
|
|
(0.14
|
)
|
|
|
(0.11
|
)
|
|
|
(0.10
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(0.34
|
)
|
|
|
(0.75
|
)
|
|
|
(0.65
|
)
|
|
|
(0.96
|
)
|
|
|
(1.06
|
)
|
|
|
(1.06
|
)
|
|
|
(0.94
|
)
|
|
|
(0.86
|
)
|
|
|
(0.78
|
)
|
|
|
(0.80
|
)
|
|
|
(0.76
|
)
|
|
|
(0.78
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Offering Costs and Preferred Share Underwriting Discounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Common Share Net Asset Value
|
|
$
|
13.05
|
|
|
$
|
14.74
|
|
|
$
|
15.43
|
|
|
$
|
15.14
|
|
|
$
|
16.26
|
|
|
$
|
15.59
|
|
|
$
|
16.57
|
|
|
$
|
15.66
|
|
|
$
|
15.30
|
|
|
$
|
14.25
|
|
|
$
|
14.86
|
|
|
$
|
15.49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Market Value
|
|
$
|
10.47
|
|
|
$
|
13.26
|
|
|
$
|
14.74
|
|
|
$
|
13.74
|
|
|
$
|
16.74
|
|
|
$
|
14.24
|
|
|
$
|
17.22
|
|
|
$
|
15.71
|
|
|
$
|
14.54
|
|
|
$
|
13.00
|
|
|
$
|
14.56
|
|
|
$
|
14.19
|
|
Total Returns:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Market Value*
|
|
|
(18.76
|
)%
|
|
|
(4.90
|
)%
|
|
|
12.05
|
%
|
|
|
(12.56
|
)%
|
|
|
25.54
|
%
|
|
|
(11.70
|
)%
|
|
|
16.05
|
%
|
|
|
14.29
|
%
|
|
|
18.32
|
%
|
|
|
(5.17
|
)%
|
|
|
7.98
|
%
|
|
|
7.38
|
%
|
Based on Common Share Net Asset Value*
|
|
|
(9.29
|
)%
|
|
|
0.47
|
%
|
|
|
6.24
|
%
|
|
|
(0.95
|
)%
|
|
|
11.33
|
%
|
|
|
0.46
|
%
|
|
|
12.10
|
%
|
|
|
8.13
|
%
|
|
|
13.09
|
%
|
|
|
1.47
|
%
|
|
|
0.73
|
%
|
|
|
10.87
|
%
|
B-3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended April 30,
|
|
|
Year Ended June 30,
|
|
Per Share Operating Performance
|
|
2009(a)
|
|
|
2008
|
|
|
2007(b)
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
1999
|
|
|
1998
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending Net Assets Applicable to Common Shares (000)
|
|
$
|
185,567
|
|
|
$
|
209,621
|
|
|
$
|
222,058
|
|
|
$
|
217,904
|
|
|
$
|
233,779
|
|
|
$
|
223,965
|
|
|
$
|
237,490
|
|
|
$
|
223,961
|
|
|
$
|
218,642
|
|
|
$
|
203,591
|
|
|
$
|
212,428
|
|
|
$
|
221,383
|
|
Ratios to Average Net Assets Applicable to Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Credit/Reimbursement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Including Interest(c)
|
|
|
1.22
|
%***
|
|
|
1.37
|
%
|
|
|
1.25
|
%***
|
|
|
1.18
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.18
|
%
|
|
|
1.21
|
%
|
|
|
1.27
|
%
|
|
|
1.30
|
%
|
|
|
1.20
|
%
|
|
|
1.21
|
%
|
Expenses Excluding Interest(c)
|
|
|
1.22
|
%***
|
|
|
1.19
|
%
|
|
|
1.18
|
%***
|
|
|
1.18
|
%
|
|
|
1.16
|
%
|
|
|
1.16
|
%
|
|
|
1.18
|
%
|
|
|
1.21
|
%
|
|
|
1.27
|
%
|
|
|
1.30
|
%
|
|
|
1.20
|
%
|
|
|
1.21
|
%
|
Net Investment Income
|
|
|
6.45
|
%***
|
|
|
6.32
|
%
|
|
|
6.13
|
%***
|
|
|
6.13
|
%
|
|
|
6.14
|
%
|
|
|
6.36
|
%
|
|
|
6.41
|
%
|
|
|
6.89
|
%
|
|
|
7.22
|
%
|
|
|
7.53
|
%
|
|
|
6.58
|
%
|
|
|
6.69
|
%
|
Ratios to Average Net Assets Applicable to Common Shares After
Credit/Reimbursement**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses Including Interest(c)
|
|
|
1.19
|
%***
|
|
|
1.36
|
%
|
|
|
1.24
|
%***
|
|
|
1.17
|
%
|
|
|
1.16
|
%
|
|
|
1.15
|
%
|
|
|
1.16
|
%
|
|
|
1.21
|
%
|
|
|
1.26
|
%
|
|
|
1.29
|
%
|
|
|
1.20
|
%
|
|
|
1.21
|
%
|
Expenses Excluding Interest(c)
|
|
|
1.19
|
%***
|
|
|
1.17
|
%
|
|
|
1.17
|
%***
|
|
|
1.17
|
%
|
|
|
1.16
|
%
|
|
|
1.15
|
%
|
|
|
1.16
|
%
|
|
|
1.21
|
%
|
|
|
1.26
|
%
|
|
|
1.29
|
%
|
|
|
1.20
|
%
|
|
|
1.21
|
%
|
Net Investment Income
|
|
|
6.48
|
%***
|
|
|
6.33
|
%
|
|
|
6.14
|
%***
|
|
|
6.14
|
%
|
|
|
6.15
|
%
|
|
|
6.36
|
%
|
|
|
6.42
|
%
|
|
|
6.89
|
%
|
|
|
7.23
|
%
|
|
|
7.54
|
%
|
|
|
6.58
|
%
|
|
|
6.69
|
%
|
Portfolio Turnover Rate
|
|
|
4
|
%
|
|
|
28
|
%
|
|
|
6
|
%
|
|
|
9
|
%
|
|
|
12
|
%
|
|
|
38
|
%
|
|
|
14
|
%
|
|
|
8
|
%
|
|
|
20
|
%
|
|
|
22
|
%
|
|
|
11
|
%
|
|
|
11
|
%
|
Preferred Shares at End of Period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Amount Outstanding (000)
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
|
$
|
111,000
|
|
Liquidation and Market Value Per Share
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
|
$
|
25,000
|
|
Asset Coverage Per Share
|
|
$
|
66,794
|
|
|
$
|
72,212
|
|
|
$
|
75,013
|
|
|
$
|
74,077
|
|
|
$
|
77,653
|
|
|
$
|
75,443
|
|
|
$
|
78,489
|
|
|
$
|
75,442
|
|
|
$
|
74,244
|
|
|
$
|
70,854
|
|
|
$
|
72,844
|
|
|
$
|
74,861
|
|
|
|
|
|
|
*
|
|
Total Return Based on Market Value
is the combination of changes in the market price per share and
the effect of reinvested dividend income and reinvested capital
gains distributions, if any, at the average price paid per share
at the time of reinvestment. The last dividend declared in the
period, which is typically paid on the first business day of the
following month, is assumed to be reinvested at the ending
market price. The actual reinvestment for the last dividend
declared in the period may take place over several days, and in
some instances may not be based on the market price, so the
actual reinvestment price may be different from the price used
in the calculation. Total returns are not annualized.
|
|
|
|
|
|
Total Return Based on Common Share
Net Asset Value is the combination of changes in common share
net asset value, reinvested dividend income at net asset value
and reinvested capital gains distributions at net asset value,
if any. The last dividend declared in the period, which is
typically paid on the first business day of the following month,
is assumed to be reinvested at the ending net asset value. The
actual reinvest price for the last dividend declared in the
period may often be based on the Funds market price (and
not its net asset value), and therefore may be different from
the price used in the calculation. Total returns are not
annualized.
|
|
|
|
**
|
|
After custodian fee credit and
expense reimbursement, where applicable.
|
|
|
|
|
|
The amounts shown are based on
common share equivalents.
|
|
|
|
|
|
Ratios do not reflect the effect of
dividend payments to preferred shareholders; income ratios
reflect income earned on assets attributable to preferred shares.
|
|
|
|
(a)
|
|
For the six months ended
October 31, 2008.
|
|
(b)
|
|
For the ten months ended
April 30, 2007.
|
|
|
|
(c)
|
|
Interest expense arises from the
application of SFAS No. 140 to certain inverse
floating rate transactions entered into by the Fund as more
fully described in Footnote 1 Inverse Floating Rate
Securities, in the Funds annual report.
|
B-4
Nuveen
Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
STATEMENT OF ADDITIONAL INFORMATION
RELATING TO THE ACQUISITION OF THE ASSETS AND LIABILITIES OF
NUVEEN INSURED FLORIDA PREMIUM INCOME MUNICIPAL FUND
(the Florida Fund or the Acquired Fund)
BY AND IN EXCHANGE FOR SHARES OF
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
(the National Fund or the Acquiring Fund and, together with the Florida Fund, the Funds
and each a Fund)
This Statement of Additional Information is available to shareholders of the Nuveen Insured
Florida Premium Income Municipal Fund in connection with the proposed reorganization whereby the
National Fund would (i) acquire all of the assets and assume all of the liabilities of the Florida
Fund in exchange solely for common shares and Municipal Auction Rate Cumulative Preferred Shares
(MuniPreferred), Series W3 and Series TH3, of the National Fund, (ii) distribute such shares of
the National Fund to the common shareholders and MuniPreferred, Series W and Series TH,
shareholders of the Florida Fund and (iii) be liquidated, dissolved and terminated as a trust in
accordance with the Florida Funds Declaration of Trust (collectively, the Reorganization). This
Statement of Additional Information is not a prospectus and should be read in conjunction with the
Proxy Statement/Prospectus dated , 2009 relating to the proposed Reorganization of the
Florida Fund into the National Fund (the Proxy Statement/Prospectus). A copy of the Proxy
Statement/Prospectus and other information may be obtained without charge by calling (800)
257-8787, by writing to the Funds or from the Funds website (http://www.nuveen.com). The
information contained in, or that can be accessed through, the Funds website is not part of the
Proxy Statement/Prospectus or this Statement of Additional Information. You may also obtain a copy
of the Proxy Statement/Prospectus on the Securities and Exchange Commissions website
(http://www.sec.gov). Capitalized terms used but not defined in this Statement of Additional
Information have the meanings ascribed to them in the Proxy Statement/Prospectus.
TABLE OF CONTENTS
|
|
|
|
|
|
|
Page |
|
|
|
1 |
|
|
|
|
4 |
|
|
|
|
4 |
|
|
|
|
7 |
|
|
|
|
21 |
|
|
|
|
36 |
|
|
|
|
36 |
|
|
|
|
39 |
|
|
|
|
40 |
|
|
|
|
42 |
|
|
|
|
46 |
|
|
|
|
46 |
|
|
|
|
47 |
|
|
|
|
48 |
|
|
|
|
A-1 |
|
|
|
|
B-1 |
|
|
|
|
C-1 |
|
i
INVESTMENT OBJECTIVES AND POLICIES
The Funds have similar investment objectives. Each Funds primary investment objective is to
provide current income exempt from regular federal income tax. The Acquiring Funds secondary
investment objective is to enhance portfolio value relative to the municipal bond market by
investing in tax-exempt municipal bonds that, in the opinion of the Funds investment adviser, are
underrated or undervalued. The Acquired Funds secondary investment objective is the enhancement
of portfolio value relative to the Florida municipal bond market through investments in tax-exempt
Florida municipal obligations that, in the opinion of the Funds investment adviser, are underrated
or undervalued or that represent municipal market sectors that are undervalued. The Acquired
Funds shares also will be exempt from Florida intangible personal property tax. Each Funds
investment objectives are fundamental policies of the Fund, and may not be changed, without the
approval of the holders of a majority of the outstanding common shares and preferred shares,
including MuniPreferred shares, voting together as a single class, and of the holders of a majority
of the outstanding preferred shares, including MuniPreferred shares, voting as a separate class.
Additionally, both Funds are closed-end, diversified management investment companies. For purposes
of the Funds objectives, policies and investment strategies, municipal bonds and municipal
obligations are treated as municipal securities.
Each Fund seeks to achieve its investment objectives by investing in a portfolio of municipal
securities (defined below), a significant portion of which NAM believes are underrated and
undervalued, based upon its bottom-up, research-driven investment strategy. Underrated municipal
securities are those whose ratings do not, in NAMs opinion, reflect their true creditworthiness.
Undervalued municipal securities are securities that, in NAMs opinion, are worth more than the
value assigned to them in the marketplace. NAM believes its value oriented strategy offers the
opportunity to construct a well diversified portfolio of municipal securities that has the
potential to outperform major municipal market benchmarks over the longer term. A municipal
securitys market value generally will depend upon its form, maturity, call features, and interest
rate, as well as the issuers credit quality or credit rating, all such factors examined in the
context of the municipal securities market and interest rate levels and trends. NAM may at times
believe that securities associated with a particular municipal market sector (for example, electric
utilities), or issued by a particular municipal issuer, are undervalued. NAM may purchase such a
security for each Funds portfolio because it represents a market sector or issuer that NAM
considers undervalued, even if the value of the particular security appears to be consistent with
the value of similar securities. Municipal securities of particular types (e.g., hospital bonds,
industrial revenue bonds or securities issued by a particular municipal issuer) may be undervalued
because there is a temporary excess of supply in that market sector, or because of a general
decline in the market price of municipal securities of the market sector for reasons that do not
apply to the particular municipal securities that are considered undervalued. Each Funds
investment in underrated or undervalued municipal securities will be based on NAMs belief that
their yield is higher than that available on securities bearing equivalent levels of interest rate
risk, credit risk and other forms of risk, and that their prices will ultimately rise (relative to
the market) to reflect their true value. Each Fund attempts to increase its portfolio value
relative to the municipal bond market by prudent selection of municipal securities regardless of
the direction the market may move. Any capital appreciation realized by the Funds will generally
result in the distribution of taxable capital gains to common shareholders.
Each Fund may invest in various municipal securities, including municipal bonds and notes,
other securities issued to finance and refinance public projects, and other related securities and
derivative instruments creating exposure to municipal securities that provide for the payment of
interest income that is exempt from regular federal income tax (collectively, municipal
securities). Municipal securities are often issued by state and local governmental entities to
finance or refinance public projects, such as roads, schools, and water supply systems. Municipal
securities also may be issued on behalf of private entities or for private activities, such as
housing, medical and educational facility construction, or for privately
owned transportation, electric utility and pollution control projects. Municipal securities
may be issued on a long-term basis to provide long-term financing. The repayment of such debt may
be secured generally by a pledge of the full faith and credit taxing power of the issuer, a limited
or special tax, or any other revenue source, including project revenues, which may include tolls,
fees and other user charges, lease payments, and mortgage payments. Municipal securities also may
be issued to finance projects on a short-term interim basis, anticipating repayment with the
proceeds of the later issuance of long-term debt. Each Fund may purchase municipal securities in
the form of bonds, notes, leases or certificates of participation; structured as callable or
non-callable; with payment forms that include fixed coupon, variable rate, zero coupon, capital
appreciation bonds, tender-option bonds, and residual interest bonds or inverse floating rate
securities. Such municipal securities may also be acquired through investments in pooled vehicles,
partnerships, or other investment companies.
The Funds also may invest in certain derivative instruments in pursuit of their investment
objectives. Such instruments include financial futures contracts, swap contracts (including
interest rate and credit default swaps), options on financial futures, options on swap contracts,
or other derivative instruments. NAM may use derivative instruments to seek to enhance return, to
hedge some of the risk of the Funds investments in municipal securities or as a substitute for a
position in the underlying asset. These types of strategies may generate taxable income.
The Acquiring Fund and the Acquired Fund have similar investment policies. Except to the
extent that the Acquiring Fund buys temporary investments, the Fund will invest substantially all
of its assets in tax-exempt municipal bonds that are either covered by insurance guaranteeing the
timely payment of principal and interest on the bonds, or are backed by an escrow or trust account
containing sufficient U.S. Government or U.S. Government agency securities to ensure timely payment
of principal and interest. Uninsured municipal bonds backed by an escrow or trust account will not
constitute more than 20% of the Acquiring Funds assets. Except to the extent the Acquired Fund
invests in temporary investments as described below, the Fund will invest all of its assets in
tax-exempt Florida municipal obligations which are either covered by insurance guaranteeing the
timely payment of principal and interest thereon or backed by an escrow or trust account containing
sufficient U.S. Government or U.S. Government agency securities to ensure timely payment of
principal and interest. Municipal obligations backed by an escrow or trust account will not
constitute more than 20% of the Acquired Funds assets.
For the purposes of the foregoing inverse floaters whose underlying bonds are covered by
insurance guaranteeing the timely payment of principal and interest thereon are included and
insurers must have a claims-paying ability rated at least A by an NRSRO with respect to the
Acquiring Fund and AAA by an NRSRO with respect to the Acquired Fund at the time of purchase or at
the time the bond is insured while in the portfolio.
Under normal circumstances, the Acquiring Fund will invest at least 80% of its Managed Assets
in municipal securities covered by insurance from insurers with a claims-paying ability rated Aa/AA
or better by an NRSRO at the time of purchase or are backed by an escrow or trust account
containing sufficient U.S. Government or U.S. Government agency securities to ensure timely payment
of principal and interest.
Each insured municipal obligation the Acquiring Fund holds, or Florida municipal obligation
the Acquired Fund holds, will either be (1) covered by an insurance policy applicable to a specific
security, whether obtained by the issuer of the security or a third party at the time of original
issuance (Original Issue Insurance), or by the Fund or a third party after the original issuance
(Secondary Market Insurance), or (2) covered by portfolio insurance through a master municipal
insurance policy the Fund has purchased (Portfolio Insurance). The Acquiring Fund and Acquired
Fund will only obtain portfolio
2
insurance from insurers whose claims-paying ability Moodys rates A or Aaa, respectively,
or Standard & Poors rates A or AAA, respectively.
The foregoing credit quality policy applies only at the time a security is purchased, and a
Fund is not required to dispose of a security in the event that a rating agency downgrades its
assessment of the credit characteristics of a particular issue. In determining whether to retain
or sell such a security, NAM may consider such factors as NAMs assessment of the credit quality of
the issuer of such security, the price at which such security could be sold and the rating, if any,
assigned to such security by other rating agencies. See Municipal Securities below for a
general description of the economic and credit characteristics of municipal securities. Each Fund
may also invest in securities of other open- or closed-end investment companies that invest
primarily in municipal bonds of the types in which the Fund may invest directly.
The credit quality of companies that provide insurance on bonds will affect the value of those
bonds. Although the insurance feature reduces certain financial risks, the premiums for insurance
and the higher market price paid for insured obligations may reduce a Funds income. The insurance
feature does not guarantee the market value of the insured obligations or the net asset value of
the common shares or MuniPreferred shares.
Each Fund may invest in uninsured municipal bonds that are entitled to the benefit of an
escrow or trust account that contains securities issued or guaranteed by the U.S. Government or
U.S. Government agencies backed by the full faith and credit of the United States, and sufficient
in amount to ensure the payment of interest and principal on the original interest payment and
maturity dates (collateralized obligations). These collateralized obligations generally will not
be insured and will include, but are not limited to, municipal bonds that have been (1) advance
refunded where the proceeds of the refunding have been used to buy U.S. Government or U.S.
Government agency securities that are placed in escrow and whose interest or maturing principal
payments, or both, are sufficient to cover the remaining scheduled debt service on that municipal
bond; or (2) issued under state or local housing finance programs that use the issuance proceeds to
fund mortgages that are then exchanged for U.S. Government or U.S. Government agency securities and
deposited with a trustee as security for those municipal bonds. These collateralized obligations
are normally regarded as having the credit characteristics of the underlying U.S. Government or
U.S. Government agency securities.
Each Fund will primarily invest in municipal securities with long-term maturities in order to
maintain a weighted average maturity of 15-30 years, but the weighted average maturity of
obligations held by a Fund may be shortened, depending on market conditions.
Upon NAMs recommendation, during temporary defensive periods and in order to keep each Funds
cash fully invested, the Fund may deviate from its investment objectives and policies and invest up
to 100% of its net assets in short-term investments including high quality, short-term securities
that may be either tax-exempt or taxable. Each Fund intends to invest in taxable short-term
investments only in the event that suitable tax-exempt short-term investments are not available at
reasonable prices and yields. Investment in such short-term investments would result in a portion
of your dividends being subject to regular federal income tax and the federal alternative minimum
applicable to individuals.
The credit quality policies noted above apply only at the time a security is purchased, and
the Funds are not required to dispose of a security in the event that a rating agency downgrades
its assessment of the credit characteristics of a particular issue. In determining whether to
retain or sell such a security, NAM may consider such factors as NAMs assessment of the credit
quality of the issuer of such security, the price at which such security could be sold and the
rating, if any, assigned to such security by other rating agencies. A general description of the
ratings of S&P, Moodys and Fitch of municipal securities is set forth in Appendix B to this
Statement of Additional Information.
3
A more complete description of each Funds investment objectives and policies is set forth in
the Proxy Statement/Prospectus.
ADDITIONAL INFORMATION ON MUNICIPAL BOND INSURANCE
Original Issue Insurance. If interest or principal on a municipal bond is due, but the issuer
fails to pay it, the insurer will make payments in the amount due to the fiscal agent no later than
one business day after the insurer has been notified of the issuers nonpayment. The fiscal agent
will pay the amount due to a Fund after the fiscal agent receives evidence of the Funds right to
receive payment of the principal and/or interest, and evidence that all of the rights of payment
due shall thereupon vest in the insurer. When the insurer pays a Fund the payment due from the
issuer, the insurer will succeed to the Funds rights to that payment.
Secondary Market Insurance. After a municipal bond is issued, the Fund or a third party may
purchase insurance on that security. Secondary market insurance generally provides the same type
of coverage as original issue insurance and, as with original issue insurance, secondary market
insurance remains in effect as long as the municipal bonds it covers remain outstanding and the
insurer remains in business, regardless of whether the Fund ultimately disposes of these municipal
bonds.
Portfolio Insurance. Each portfolio insurance policy will be noncancellable and will remain
in effect so long as a Fund is in existence, the Fund continues to own the municipal bonds covered
by the policy, and the Fund pays the premiums for the policy. Each insurer generally will reserve
the right at any time upon 90 days written notice to a Fund to refuse to insure any additional
bonds the Fund buys after the effective date of the notice. The Acquiring Funds Board of
Directors and the Acquired Funds Board of Trustees (each a Board and each Director or Trustee a
Board Member) will generally reserve the right to terminate each policy upon seven days written
notice to an insurer if it determines that the cost of the policy is not reasonable in relation to
the value of the insurance to the Fund.
INVESTMENT RESTRICTIONS
Except as described below, neither Fund, as a fundamental policy, may, without the approval of
the holders of a majority of the outstanding common shares and preferred shares of such Fund,
including shares of its MuniPreferred, voting together as a single class, and of the holders of a
majority of the outstanding preferred shares of such Fund, including shares of its MuniPreferred,
voting as a separate class:
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(1) |
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Issue senior securities, as defined in the 1940 Act, other than preferred stock
[shares], except to the extent such issuance might be involved with respect to
borrowings described under subparagraph (3) below or with respect to transactions
involving futures contracts or the writing of options within the limits described in
the [Funds] Proxy Statement/Prospectus; |
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(2) |
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Make short sales of securities or purchase any securities on margin (except for
such short-term credits as are necessary for the clearance of transactions), or write
or purchase put or call options, except to the extent that the purchase of a standby
commitment may be considered the purchase of a put, and except for transactions
involving options within the limits described in the [Funds] Proxy
Statement/Prospectus; |
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(3) |
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Borrow money, except from banks for temporary or emergency purposes or for
repurchase of [the Funds] shares, and then only in an amount not exceeding one-third
of |
4
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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; |
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(4) |
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Underwrite any issue of securities, except to the extent that the purchase of
[m]unicipal [o]bligations in accordance with its investment objective[s], policies and
limitations may be deemed to be an underwriting; |
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(5) |
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Invest more than 25% of its total assets in securities of issuers in any one
industry; provided, however, that such limitation shall not apply to [m]unicipal
[o]bligations other than those [m]unicipal [o]bligations backed only by the assets and
revenues of non-governmental users, nor shall it apply to [m]unicipal [o]bligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities; |
|
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(6) |
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Purchase or sell real estate, but this shall not prevent the Fund from
investing in [m]unicipal [o]bligations secured by real estate or interests therein [or
foreclosing upon and selling such security]; |
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(7) |
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Purchase or sell commodities or commodities contracts, except for transactions
involving futures contracts within the limits described in the [Funds] Proxy
Statement/Prospectus; |
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(8) |
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Make loans, other than by entering into repurchase agreements and through the
purchase of [m]unicipal [o]bligations or temporary investments in accordance with its
investment objective[s], policies and limitations; |
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(9) |
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Invest in securities other than [Florida] [m]unicipal [o]bligations and
temporary investments as described [in Portfolio Investments]; and purchase financial
futures and options except within the limits described in the [Funds] Proxy
Statement/Prospectus; |
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(10) |
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Invest more than 5% of its total assets in securities of any one issuer, except
that this limitation shall not apply to securities of the U.S. Government, its agencies
and instrumentalities or to the investment of 25% of its total assets; |
|
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(11) |
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Pledge, mortgage or hypothecate its assets, except that, to secure borrowings
permitted by subparagraph (3) above, it may pledge securities having a market value at
the time of pledge not exceeding 20% of the value of its total assets; |
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(12) |
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Invest more than 10% of its total assets in repurchase agreements maturing in
more than seven days; and |
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(13) |
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Purchase or retain the securities of any issuer other than [its own securities]
if, to [its] knowledge, those of its directors [trustees], or those officers and
directors of the [investment adviser] who individually own beneficially more than 1/2
of 1% of the outstanding securities of such issuer, together own beneficially more than
5% of such outstanding securities. |
For purposes of the foregoing, majority of the outstanding, when used with respect to
particular shares of a Fund, means (i) 67% or more of the shares present at a meeting, if the
holders of more than 50% of the shares are present or represented by proxy, or (ii) more than 50%
of the shares, whichever is less.
5
For the purpose of applying the limitation set forth in subparagraph (10) above, an issuer
shall be deemed the sole issuer of a security when its assets and revenues are separate from other
governmental entities and its securities are backed only by its assets and revenues. Similarly, in
the case of a non-governmental user, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of the
non-governmental user, then such non-governmental user would be deemed to be the sole issuer.
Where a security is also backed by the enforceable obligation of a superior or unrelated
governmental or other entity, (other than a bond insurer) it shall also be included in the
computation of securities owned that are issued by such governmental or other entity. Where a
security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or
letter of credit, the guarantee or letter of credit would be considered a separate security and
would be treated as an issue of that government or other entity. When a municipal bond is insured
by bond insurance, it shall not be considered a security that is issued or guaranteed by the
issuer; instead, the issuer of the municipal bond will be determined in accordance with the
principles set out above. The foregoing restrictions do not limit the percentage of the Funds
assets that may be invested in municipal bonds insured by any given insurer.
For the purpose of applying the limitation set forth in subparagraph (9) above with respect to
each Fund, an issuer shall be deemed the sole issuer of a security when its assets and revenues are
separate from other governmental entities and its securities are backed only by its assets and
revenues. Similarly, in the case of a non-governmental issuer, such as an industrial corporation
or a privately owned or operated hospital, if the security is backed only by the assets and
revenues of the non-governmental issuer, then such non-governmental issuer would be deemed to be
the sole issuer. Where a security is also backed by the enforceable obligation of a superior or
unrelated governmental or other entity (other than a bond insurer), it shall also be included in
the computation of securities owned that are issued by such governmental or other entity. Where a
security is guaranteed by a governmental entity or some other facility, such as a bank guarantee or
letter of credit, such a guarantee or letter of credit would be considered a separate security and
would be treated as an issue of such government, other entity or bank. When a municipal bond is
insured by bond insurance, it shall not be considered a security that is issued or guaranteed by
the insurer; instead, the issuer of such municipal bond will be determined in accordance with the
principles set forth above. The foregoing restrictions do not limit the percentage of a Funds
assets that may be invested in municipal bonds insured by any given insurer.
Under the 1940 Act, a Fund may invest only up to 10% of its Managed Assets in the aggregate in
shares of other investment companies and only up to 5% of its Managed Assets in any one investment
company, provided the investment does not represent more than 3% of the voting stock of the
acquired investment company at the time such shares are purchased. As a shareholder in any
investment company, a Fund will bear its ratable share of that investment companys expenses, and
will remain subject to payment of the Funds management, advisory and administrative fees with
respect to assets so invested. Holders of common shares would therefore be subject to duplicative
expenses to the extent a Fund invests in other investment companies. In addition, the securities
of other investment companies may also be leveraged and will therefore be subject to the same
leverage risks described herein. As described herein, the net asset value and market value of
leveraged shares will be more volatile and the yield to shareholders will tend to fluctuate more
than the yield generated by unleveraged shares.
In addition to the foregoing fundamental investment policies, each Fund is also subject to the
following non-fundamental restrictions and policies, which may be changed by the Funds Board.
Each Fund may not:
|
(1) |
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Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold at no added cost, and
provided that transactions |
6
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in options, futures contracts, options on futures contracts, or other derivative
instruments are not deemed to constitute selling securities short; |
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(2) |
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Purchase securities of open-end or closed-end investment companies except in
compliance with the Investment Company Act of 1940 or any exemptive relief obtained
thereunder; |
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(3) |
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Enter into futures contracts or related options or forward contracts, if more
than 30% of the Funds net assets would be represented by futures contracts or more
than 5% of the Funds net assets would be committed to initial margin deposits and
premiums on futures contracts and related options; |
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(4) |
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Purchase securities when borrowings exceed 5% of its total assets if and so
long as MuniPreferred shares are outstanding; and |
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(5) |
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Purchase securities of companies for the purpose of exercising control, except
that the Fund may invest up to 5% of its net assets in tax-exempt or taxable
fixed-income or equity securities, for the purpose of acquiring control of an issuer
whose municipal bonds (a) the Fund already owns and (b) have deteriorated or are
expected shortly to deteriorate significantly in credit quality, provided NAM
determines that such investment should enable the Fund to better maximize the value of
its existing investment in such issuer. |
The restrictions and other limitations set forth above will apply only at the time of purchase
of securities and will not be considered violated unless an excess or deficiency occurs or exists
immediately after and as a result of an acquisition of securities.
The Funds may be subject to certain restrictions imposed by either guidelines of one or more
NRSROs that may issue ratings for commercial paper or notes, or, if the Funds borrow from a lender,
by the lender. These guidelines may impose asset coverage or portfolio composition requirements
that are more stringent than those imposed on the Funds by the 1940 Act. If these restrictions
were to apply, it is not anticipated that these covenants or guidelines would impede NAM from
managing the Funds portfolios in accordance with the Funds investment objectives and policies.
PORTFOLIO COMPOSITION
In addition to and supplementing the Proxy Statement/Prospectus section, Comparison of the
Investment Objectives and Policies of the Acquiring Fund and the Acquired Fund, the Funds
portfolios will be composed principally of the investments described below.
Municipal Securities
Municipal securities are either general obligation or revenue bonds and typically are issued
to finance public projects (such as roads or public buildings), to pay general operating expenses
or to refinance outstanding debt.
Municipal securities may also be issued on behalf of private entities or for private
activities, such as housing, medical and educational facility construction, or for privately owned
industrial development and pollution control projects. General obligation bonds are backed by the
full faith and credit, or taxing authority, of the issuer and may be repaid from any revenue
source; revenue bonds may be repaid only from the revenues of a specific facility or source. Each
Fund may also purchase municipal securities that
7
represent lease obligations, municipal notes, pre-refunded municipal bonds, private activity
bonds, tender option bonds and other forms of municipal bonds and securities.
Municipal securities of below investment grade quality (Ba/BB or below) are commonly referred
to as junk bonds. Issuers of securities rated Ba/BB or B are regarded as having current capacity
to make principal and interest payments but are subject to business, financial or economic
conditions which could adversely affect such payment capacity. Municipal securities rated Baa or
BBB or above are considered investment grade securities; municipal securities rated Baa are
considered medium grade obligations that lack outstanding investment characteristics and have
speculative characteristics, while municipal securities rated BBB are regarded as having adequate
capacity to pay principal and interest. Municipal securities rated Aaa or AAA in which the Funds
may invest may have been so rated on the basis of the existence of insurance guaranteeing the
timely payment, when due, of all principal and interest. Municipal securities rated below
investment grade quality are obligations of issuers that are considered predominately speculative
with respect to the issuers capacity to pay interest and repay principal according to the terms of
the obligation and, therefore, carry greater investment risk, including the possibility of issuer
default and bankruptcy and increased market price volatility. Municipal securities rated below
investment grade tend to be less marketable than higher-quality securities because the market for
them is less broad. The market for municipal securities unrated by any NRSRO is even narrower.
During periods of thin trading in these markets, the spread between bid and asked prices is likely
to increase significantly and the Funds may have greater difficulty selling its portfolio
securities. The Funds will be more dependent on NAMs research and analysis when investing in
these securities.
A general description of Moodys, S&Ps and Fitchs ratings of municipal securities is set
forth in Appendix B hereto. The ratings of Moodys, S&P and Fitch represent their opinions as to
the quality of the municipal securities they rate. It should be emphasized, however, that ratings
are general and are not absolute standards of quality. Consequently, municipal securities with the
same maturity, coupon and rating may have different yields while obligations of the same maturity
and coupon with different ratings may have the same yield.
The Fund will generally invest in municipal securities with long-term maturities in order to
maintain a weighted average maturity of 15 to 30 years. The weighted average maturity of
securities held by the Funds may be shortened or lengthened, depending on market conditions and on
an assessment by the Funds portfolio manager of which segments of the municipal securities market
offer the most favorable relative investment values and opportunities for tax-exempt income and
total return. During temporary defensive periods (e.g., times when, in NAMs opinion, temporary
imbalances of supply and demand or other temporary dislocations in the tax-exempt securities market
adversely affect the price at which long-term or intermediate-term municipal securities are
available), and in order to keep the Funds cash fully invested, including the period during which
the net proceeds of an offering are being invested, the Funds may invest any percentage of their
net assets in short-term investments including high quality, short-term securities that may be
either tax-exempt or taxable and up to 10% of their net assets in securities of other open or
closed-end investment companies that invest primarily in municipal securities of the type in which
the Funds may invest directly. The Funds intend to invest in taxable short-term investments only
in the event that suitable tax-exempt short-term investments are not available at reasonable prices
and yields, as determined by NAM, and in amounts limited to ensure that the Funds are eligible to
pay exempt-interest dividends (as described in Tax Matters below). Tax-exempt short-term
investments include various obligations issued by state and local governmental issuers, such as
tax-exempt notes (bond anticipation notes, tax anticipation notes and revenue anticipation notes or
other such municipal bonds maturing in three years or less from the date of issuance) and municipal
commercial paper. The Funds will invest only in taxable short-term investments which are U.S.
Government securities or securities rated within the highest grade by Moodys, S&P or Fitch, and
which mature within one year from the date of purchase or carry a variable or floating rate of
interest. See Appendix B for a
8
general description of Moodys, S&Ps and Fitchs ratings of securities in such categories.
Taxable short-term investments of the Funds may include certificates of deposit issued by U.S.
banks with assets of at least $1 billion, or commercial paper or corporate notes, bonds or
debentures with a remaining maturity of one year or less, or repurchase agreements. To the extent
a Fund invests in taxable investments, the Fund will not at such times be in a position to achieve
its investment objective of tax-exempt income.
The foregoing policies as to ratings of portfolio investments will apply only at the time of
the purchase of a security, and the Funds will not be required to dispose of securities in the
event Moodys, S&P or Fitch downgrades its assessment of the credit characteristics of a particular
issuer.
Obligations of issuers of municipal securities are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors. In addition, the
obligations of such issuers may become subject to the laws enacted in the future by Congress, state
legislatures or referenda extending the time for payment of principal or interest, or both, or
imposing other constraints upon enforcement of such obligations or upon municipalities to levy
taxes. There is also the possibility that, as a result of legislation or other conditions, the
power or ability of any issuer to pay, when due, the principal of, and interest on, its municipal
securities may be materially affected.
Municipal Leases and Certificates of Participation. Included within the general category of
municipal securities described in the Proxy Statement/Prospectus are municipal leases, certificates
of participation in such lease obligations or installment purchase contract obligations
(hereinafter collectively called Municipal Lease Obligations) of municipal authorities or
entities. Although a Municipal Lease Obligation does not constitute a general obligation of the
municipality for which the municipalitys taxing power is pledged, a Municipal Lease Obligation is
ordinarily backed by the municipalitys covenant to budget for, appropriate and make the payments
due under the Municipal Lease Obligation. However, certain Municipal Lease Obligations contain
nonappropriation clauses which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated for such purpose on a
yearly basis. In the case of a non-appropriation lease, the Funds ability to recover under the
lease in the event of non-appropriation or default will be limited solely to the repossession of
the leased property, without recourse to the general credit of the lessee, and disposition or
releasing of the property might prove difficult. To the extent that the Funds invest in unrated
municipal leases or participates in such leases, the credit quality rating and risk of cancellation
of such unrated leases will be monitored on an ongoing basis. In order to reduce this risk, the
Funds will only purchase Municipal Lease Obligations where NAM believes the issuer has a strong
incentive to continue making appropriations until maturity.
Hedging Strategies and Other Uses of Derivatives
The Funds may periodically engage in hedging transactions, and otherwise use various types of
derivative instruments, described below, to reduce risk, to effectively gain particular market
exposures, to seek to enhance returns, and to reduce transaction costs, among other reasons.
Hedging is a term used for various methods of seeking to preserve portfolio capital value by
offsetting price changes in one investment through making another investment whose price should
tend to move in the opposite direction.
A derivative is a financial contract whose value is based on (or derived from) a
traditional security (such as a stock or a bond), an asset (such as a commodity like gold), or a
market index (such as the Barclays Capital Municipal Bond Index). Some forms of derivatives may
trade on exchanges, while non-standardized derivatives, which tend to be more specialized and
complex, trade in over-the-counter markets or on a one-on-one basis. It may be desirable and
possible in various market environments to partially hedge the portfolio against fluctuations in
market value due to market interest rate or credit
9
quality fluctuations, or instead to gain a desired investment exposure, by entering into
various types of derivative transactions, including financial futures and index futures as well as
related put and call options on such instruments, structured notes, or interest rate swaps on
taxable or tax-exempt securities or indexes (which may be forward-starting), credit default
swaps, and options on interest rate swaps, among others.
These transactions present certain risks. In particular, the imperfect correlation between
price movements in the futures contract and price movements in the securities being hedged creates
the possibility that losses on the hedge by the Funds may be greater than gains in the value of the
securities in the Funds portfolios. In addition, futures and options markets may not be liquid in
all circumstances. As a result, in volatile markets, the Funds may not be able to close out the
transaction without incurring losses substantially greater than the initial deposit. Losses due to
hedging transactions will reduce each Funds net asset value which in turn could reduce yield. Net
gains, if any, from hedging and other portfolio transactions will be distributed as taxable
distributions to shareholders. A Fund will not make any investment (whether an initial premium or
deposit or a subsequent deposit) other than as necessary to close a prior investment if,
immediately after such investment, the sum of the amount of its premiums and deposits would exceed
15% of the Funds net assets. The Funds will invest in these instruments only in markets believed
by NAM to be active and sufficiently liquid. Successful implementation of most hedging strategies
would generate taxable income.
Both parties entering into a financial futures contract are required to post an initial
deposit, typically equal to from 1% to 5% of the total contract price. Typically, option holders
enter into offsetting closing transactions to enable settlement in cash rather than take delivery
of the position in the future of the underlying security. Interest rate swap and credit default
swap transactions are typically entered on a net basis, meaning that the two payment streams are
netted out with the Funds receiving or paying, as the case may be, only the net amount of the two
payments. The Funds will only sell covered futures contracts, which means that the Funds segregate
assets equal to the amount of the obligations.
Bond Futures and Forward Contracts. Bond futures contracts are agreements in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar amount times the
difference between the value of a specific bond at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of securities is made.
Forward contracts are agreements to purchase or sell a specified security or currency at a
specified future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks, foreign exchange dealers or
broker-dealers and are usually for less than one year, but may be renewed. Forward contracts are
generally purchased or sold in over-the-counter (OTC) transactions.
Under regulations of the Commodity Futures Trading Commission (the CFTC) currently in
effect, which may change from time to time, with respect to futures contracts purchased by the
Funds, the Funds will set aside in a segregated account liquid securities with a value at least
equal to the value of instruments underlying such futures contracts less the amount of initial
margin on deposit for such contracts. The current view of the staff of the Securities and Exchange
Commission is that the Funds long and short positions in futures contracts must be collateralized
with cash or certain liquid assets held in a segregated account or covered in order to counter
the impact of any potential leveraging.
Parties to a futures contract must make initial margin deposits to secure performance of the
contract. There are also requirements to make variation margin deposits from time to time as the
value of the futures contract fluctuates.
Options on Currency Futures Contracts. Currency futures contracts are standardized agreements
between two parties to buy and sell a specific amount of a currency at a set price on a future
date. While similar to currency forward contracts, currency futures contracts are traded on
commodities exchanges
10
and are standardized as to contract size and delivery date. An option on a currency futures
contract gives the holder of the option the right to buy or sell a position in a currency futures
contract, at a set price and on or before a specified expiration date. Trading options on
international (non-U.S.) currency futures contracts is relatively new. The ability to establish
and close out positions on such options is subject to the maintenance of a liquid secondary market.
Each of the Funds and NAM have claimed, respectively, an exclusion from registration as a
commodity pool operator and as a commodity trading advisor under the Commodity Exchange Act (the
CEA) and, therefore, neither Fund, NAM, nor their officers and directors, are subject to the
registration requirements of the CEA or regulation as a commodity pool operator or a commodity
trading adviser under the CEA. The Funds reserve the right to engage in transactions involving
futures and options thereon to the extent allowed by CFTC regulations in effect from time to time
and in accordance with the Funds policies. In addition, certain provisions of the Code (as
defined under Tax MattersFederal Income Tax Matters) may limit the extent to which the Fund may
enter into futures contracts or engage in options transactions. See Tax Matters.
Index Futures. An index future is a bilateral agreement pursuant to which two parties agree
to take or make delivery of an amount of cashrather than any securityequal to a specified
dollar amount times the difference between the index value at the close of the last trading day of
the contract and the price at which the index future was originally written. Thus, an index future
is similar to traditional financial futures except that settlement is made in cash. The Funds may
invest in index futures or similar contracts if available in a form, with market liquidity and
settlement and payment features, acceptable to the Funds.
Index Options. The Funds may also purchase put or call options on U.S. Government or
tax-exempt bond index futures and enter into closing transactions with respect to such options to
terminate an existing position. Options on index futures are similar to options on debt
instruments except that an option on an index future gives the purchaser the right, in return for
the premium paid, to assume a position in an index contract rather than an underlying security at a
specified exercise price at any time during the period of the option. Upon exercise of the option,
the delivery of the futures position by the writer of the option to the holder of the option will
be accompanied by delivery of the accumulated balance of the writers futures margin account which
represents the amount by which the market price of the index futures contract, at exercise, is less
than the exercise price of the option on the index future.
Bond index futures and options transactions would be subject to risks similar to transactions
in financial futures and options thereon as described above.
In addition to the general risks associated with hedging strategies and the use of derivatives
set forth above, there are several risks associated with the use of futures contracts and futures
options as hedging techniques.
Futures contracts on U.S. Government securities historically have reacted to an increase or
decrease in interest rates in a manner similar to that in which the underlying U.S. Government
securities reacted. To the extent, however, that the Funds enter into such futures contracts, the
value of such futures will not vary in direct proportion to the value of the Funds holdings of
municipal securities. Thus, the anticipated spread between the price of the futures contract and
the hedged security may be distorted due to differences in the nature of the markets. The spread
also may be distorted by differences in initial and variation margin requirements, the liquidity of
such markets and the participation of speculators in such markets.
Futures exchanges may limit the amount of fluctuation permitted in certain futures contract
prices during a single trading day. The daily limit establishes the maximum amount that the price
of a futures
11
contract may vary either up or down from the previous days settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures contract subject to
the limit, no more trades may be made on that day at a price beyond that limit. The daily limit
governs only price movements during a particular trading day and therefore does not limit potential
losses because the limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several consecutive trading
days with little or no trading, thereby preventing prompt liquidation of positions and subjecting
some holders of futures contracts to substantial losses.
Interest Rate Transactions and Total Return Swaps. The Funds may enter into various interest
rate transactions, such as interest rate swaps and the purchase or sale of interest rate caps and
floors, as well as total return swaps and other debt related derivative instruments. The Funds may
enter into these transactions in order to seek to hedge the value of the Funds portfolios to seek
to increase its return, to preserve a return or spread on a particular investment or portion of its
portfolio, or to seek to protect against any increase in the price of securities the Funds
anticipate purchasing at a later date.
Interest rate swaps involve the exchange by each Fund with a counterparty of their respective
commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating
rate payments. In a total return swap, the Funds exchange with another party their respective
commitments to pay or receive the total return of an underlying asset and a floating local
short-term interest rate.
The Funds may use an interest rate cap, which would require it to pay a premium to the cap
counterparty and would entitle it, to the extent that a specified variable rate index exceeds a
predetermined fixed rate, to receive from the counterparty payment of the difference based on the
notional amount. The Funds would use interest rate swaps or caps only with the intent to reduce or
eliminate the risk that an increase in short-term interest rates could have on common share net
earnings as a result of leverage.
The Funds will usually enter into swaps or caps on a net basis; that is, the two payment
streams will be netted out in a cash settlement on the payment date or dates specified in the
instrument, with the Funds receiving or paying, as the case may be, only the net amount of the two
payments. The Funds intend to maintain in a segregated account with its custodian cash or liquid
securities having a value at least equal to the Funds net payment obligations under any swap
transaction, marked-to-market daily. If the interest rate swap transaction is entered into on
other than a net basis, the full amount of the Funds obligations will be accrued on a daily basis,
and the full amount of the Funds obligations will be segregated by the Funds.
The use of swaps and caps is a highly specialized activity that involves investment techniques
and risks different from those associated with ordinary portfolio security transactions, including
the risk that the counterparty may be unable to fulfill the transaction. If there is a default by
the other party to such a transaction, the Funds will have contractual remedies pursuant to the
agreements related to the transaction. If NAM is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment performance of the Funds will be
unfavorably affected. Depending on the state of interest rates in general, the Funds use of
interest rate swaps or caps could enhance or harm the overall performance on the common shares. To
the extent there is a decline in interest rates, the value of the interest rate swap or cap could
decline, and could result in a decline in the net asset value of the common shares. In addition,
if short-term interest rates are lower than the Funds fixed rate of payment on the interest rate
swap, the swap will reduce common share net earnings. If, on the other hand, short-term interest
rates are higher than the fixed rate of payment on the interest rate swap, the swap will enhance
common share net earnings. Buying interest rate caps could enhance the performance of the common
shares by providing a maximum leverage expense. Buying interest rate caps could also decrease the
net
12
earnings of the common shares in the event that the premiums paid by the Funds to the
counterparty exceed the additional amount the Funds would have been required to pay had they not
entered into the cap agreement.
Swaps and caps do not involve the delivery of securities or other underlying assets or
principal. Accordingly, the risk of loss with respect to swaps is limited to the net amount of
payments that the Funds are contractually obligated to make. If the counterparty defaults, the
Funds would not be able to use the anticipated net receipts under the swap or cap to offset
payments. Depending on whether the Funds would be entitled to receive net payments from the
counterparty on the swap or cap, such a default could negatively impact the performance of the
common shares. In addition, because they are two-party contracts and because they may have terms
of greater than seven days, swaps and caps may be considered to be illiquid. It is possible that
developments in the swaps and caps markets, including potential government regulation, could
adversely affect the Funds ability to terminate existing agreements or to realize amounts to be
received under such agreements.
Although this will not guarantee that the counterparty does not default, the Funds will not
enter into a swap or cap transaction with any counter-party that NAM believes does not have the
financial resources to honor its obligation under the swap or cap transaction. Further, NAM will
continually monitor the financial stability of a counterparty to a swap or cap transaction in an
effort to proactively protect the Funds investments.
In addition, at the time the swap or cap transaction reaches its scheduled termination date,
there is a risk that the Funds would not be able to obtain a replacement transaction or that the
terms of the replacement would not be as favorable as on the expiring transaction. If this occurs,
it could have a negative impact on the performance of the Funds common shares.
Repurchase Agreements. The Funds may enter into repurchase agreements (the purchase of a
security coupled with an agreement to resell that security at a higher price) with respect to their
permitted investments. The Funds repurchase agreements will provide that the value of the
collateral underlying the repurchase agreement will always be at least equal to the repurchase
price, including any accrued interest earned on the agreement, and will be marked-to-market daily.
The agreed-upon repurchase price determines the yield during the Funds holding period.
Repurchase agreements are considered to be loans collateralized by the underlying security
that is the subject of the repurchase contract. The Funds will only enter into repurchase
agreements with registered securities dealers or domestic banks that, in NAMs opinion, present
minimal credit risk. The risk to the Funds is limited to the ability of the issuer to pay the
agreed-upon repurchase price on the delivery date; however, although the value of the underlying
collateral at the time the transaction is entered into always equals or exceeds the agreed-upon
repurchase price, if the value of the collateral declines there is a risk of loss of both principal
and interest. In the event of default, the collateral may be sold but the Funds might incur a loss
if the value of the collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the security, realization upon the collateral by the Funds may be
delayed or limited. NAM will monitor the value of the collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase agreement in an effort
to determine that such value always equals or exceeds the agreed-upon repurchase price. In the
event the value of the collateral declines below the repurchase price, NAM will demand additional
collateral from the issuer to increase the value of the collateral to at least that of the
repurchase price, including interest.
13
Segregation of Assets
As closed-end investment companies registered with the Securities and Exchange Commission, the
Funds are subject to the federal securities laws, including the 1940 Act, the rules thereunder, and
various interpretive provisions of the Securities and Exchange Commission and its staff. In
accordance with these laws, rules and positions, the Funds must set aside (often referred to as
asset segregation) liquid assets, or engage in other Securities and Exchange Commission or
staff-approved measures, to cover open positions with respect to certain kinds of derivatives
instruments. In the case of forward currency contracts that are not contractually required to cash
settle, for example, the Funds must set aside liquid assets equal to such contracts full notional
value while the positions are open. With respect to forward currency contracts that are
contractually required to cash settle, however, the Funds are permitted to set aside liquid assets
in an amount equal to the Funds daily marked-to-market net obligations (i.e., the Funds daily net
liability) under the contracts, if any, rather than such contracts full notional value. The Funds
reserve the right to modify their asset segregation policies in the future to comply with any
changes in the positions from time to time articulated by the Securities and Exchange Commission or
its staff regarding asset segregation.
The Funds generally will use their assets to cover their obligations as required by the 1940
Act, the rules thereunder, and applicable positions of the Securities and Exchange Commission and
its staff. As a result of their segregation, such assets may not be used for other operational
purposes. NAM will monitor the Funds use of derivatives and will take action as necessary for the
purpose of complying with the asset segregation policy stated above. Such actions may include the
sale of the Funds portfolio investments.
Short-Term Investments
Short-Term Taxable Fixed Income Securities. For temporary defensive purposes or to keep cash
on hand fully invested, the Funds may invest up to 100% of their net assets in cash equivalents and
short-term taxable fixed-income securities, although the Funds intend to invest in taxable
short-term investments only in the event that suitable tax-exempt short-term investments are not
available at reasonable prices and yields. Short-term taxable fixed income investments are defined
to include, without limitation, the following:
(1) U.S. Government securities, including bills, notes and bonds differing as to maturity and
rates of interest that are either issued or guaranteed by the U.S. Treasury or by U.S. Government
agencies or instrumentalities. U.S. Government agency securities include securities issued by (a)
the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, and the Government National Mortgage Association, whose
securities are supported by the full faith and credit of the United States; (b) the Federal Home
Loan Banks, Federal Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities
are supported by the right of the agency to borrow from the U.S. Treasury; (c) the Federal National
Mortgage Association, whose securities are supported by the discretionary authority of the U.S.
Government to purchase certain obligations of the agency or instrumentality; and (d) the Student
Loan Marketing Association, whose securities are supported only by its credit. While the U.S.
Government provides financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it always will do so since it is not so obligated
by law. The U.S. Government, its agencies, and instrumentalities do not guarantee the market value
of their securities. Consequently, the value of such securities may fluctuate.
(2) Certificates of Deposit issued against funds deposited in a bank or a savings and loan
association. Such certificates are for a definite period of time, earn a specified rate of return,
and are normally negotiable. The issuer of a certificate of deposit agrees to pay the amount
deposited plus interest to the bearer of the certificate on the date specified thereon. Under
current Federal Deposit
14
Insurance Company regulations, the maximum insurance payable as to any one certificate of
deposit is $250,000; therefore, certificates of deposit purchased by the Fund may not be fully
insured.
(3) Repurchase agreements, which involve purchases of debt securities. At the time the Fund
purchases securities pursuant to a repurchase agreement, it simultaneously agrees to resell and
redeliver such securities to the seller, who also simultaneously agrees to buy back the securities
at a fixed price and time. This assures a predetermined yield for the Fund during its holding
period, since the resale price is always greater than the purchase price and reflects an
agreed-upon market rate. Such actions afford an opportunity for the Fund to invest temporarily
available cash. The Fund may enter into repurchase agreements only with respect to obligations of
the U.S. Government, its agencies or instrumentalities; certificates of deposit; or bankers
acceptances in which the Fund may invest. Repurchase agreements may be considered loans to the
seller, collateralized by the underlying securities. The risk to the Fund is limited to the
ability of the seller to pay the agreed-upon sum on the repurchase date; in the event of default,
the repurchase agreement provides that the Fund is entitled to sell the underlying collateral. If
the value of the collateral declines after the agreement is entered into, and if the seller
defaults under a repurchase agreement when the value of the underlying collateral is less than the
repurchase price, the Fund could incur a loss of both principal and interest. The investment
adviser monitors the value of the collateral at the time the action is entered into and at all
times during the term of the repurchase agreement. The investment adviser does so in an effort to
determine that the value of the collateral always equals or exceeds the agreed-upon repurchase
price to be paid to the Fund. If the seller were to be subject to a federal bankruptcy proceeding,
the ability of the Fund to liquidate the collateral could be delayed or impaired because of certain
provisions of the bankruptcy laws.
(4) Commercial paper, which consists of short-term unsecured promissory notes, including
variable rate master demand notes issued by corporations to finance their current operations.
Master demand notes are direct lending arrangements between the Fund and a corporation. There is
no secondary market for such notes. However, they are redeemable by the Fund at any time. NAM
will consider the financial condition of the corporation (e.g., earning power, cash flow, and other
liquidity measures) and will continuously monitor the corporations ability to meet all of its
financial obligations, because the Funds liquidity might be impaired if the corporation were
unable to pay principal and interest on demand. Investments in commercial paper will be limited to
commercial paper rated in the highest categories by a major rating agency and which mature within
one year of the date of purchase or carry a variable or floating rate of interest.
Short-Term Tax-Exempt Municipal Securities. Short-term tax-exempt municipal securities are
securities that are exempt from regular federal income tax and mature within three years or less
from the date of issuance. Short-term tax-exempt municipal income securities are defined to
include, without limitation, the following:
Bond Anticipation Notes (BANs) are usually general obligations of state and local
governmental issuers which are sold to obtain interim financing for projects that will eventually
be funded through the sale of long-term debt obligations or bonds. The ability of an issuer to
meet its obligations on its BANs is primarily dependent on the issuers access to the long-term
municipal bond market and the likelihood that the proceeds of such bond sales will be used to pay
the principal and interest on the BANs.
Tax Anticipation Notes (TANs) are issued by state and local governments to finance the
current operations of such governments. Repayment is generally to be derived from specific future
tax revenues. TANs are usually general obligations of the issuer. A weakness in an issuers
capacity to raise taxes due to, among other things, a decline in its tax base or a rise in
delinquencies, could adversely affect the issuers ability to meet its obligations on outstanding
TANs.
15
Revenue Anticipation Notes (RANs) are issued by governments or governmental bodies with the
expectation that future revenues from a designated source will be used to repay the notes. In
general, they also constitute general obligations of the issuer. A decline in the receipt of
projected revenues, such as anticipated revenues from another level of government, could adversely
affect an issuers ability to meet its obligations on outstanding RANs. In addition, the
possibility that the revenues would, when received, be used to meet other obligations could affect
the ability of the issuer to pay the principal and interest on RANs.
Construction Loan Notes are issued to provide construction financing for specific projects.
Frequently, these notes are redeemed with funds obtained from the Federal Housing Administration.
Bank Notes are notes issued by local government bodies and agencies, such as those described
above to commercial banks as evidence of borrowings. The purposes for which the notes are issued
are varied but they are frequently issued to meet short-term working capital or capital-project
needs. These notes may have risks similar to the risks associated with TANs and RANs.
Tax-Exempt Commercial Paper (Municipal Paper) represent very short-term unsecured,
negotiable promissory notes issued by states, municipalities and their agencies. Payment of
principal and interest on issues of municipal paper may be made from various sources, to the extent
the funds are available therefrom. Maturities of municipal paper generally will be shorter than
the maturities of TANs, BANs or RANs. There is a limited secondary market for issues of Municipal
Paper.
Certain municipal securities may carry variable or floating rates of interest whereby the rate
of interest is not fixed but varies with changes in specified market rates or indices, such as a
bank prime rate or a tax-exempt money market index.
While the various types of notes described above as a group represent the major portion of the
short-term tax-exempt note market, other types of notes are available in the marketplace and the
Fund may invest in such other types of notes to the extent permitted under its investment
objectives, policies and limitations. Such notes may be issued for different purposes and may be
secured differently from those mentioned above.
Illiquid Securities
The Funds may invest in municipal securities and other instruments that, at the time of
investment, are illiquid (i.e., securities that are not readily marketable). For this purpose,
illiquid securities may include, but are not limited to, restricted securities (securities the
disposition of which is restricted under the federal securities laws), securities that may only be
resold pursuant to Rule 144A under the Securities Act, that are deemed to be illiquid, and certain
repurchase agreements. The Board or its delegate has the ultimate authority to determine which
securities are liquid or illiquid. The Board has delegated to NAM the day-to-day determination of
the illiquidity of any security held by the Funds, although it has retained oversight and ultimate
responsibility for such determinations. No definitive liquidity criteria are used. The Board has
directed NAM when making liquidity determinations to look for such factors as (i) the nature of the
market for a security (including the institutional private resale market; the frequency of trades
and quotes for the security; the number of dealers willing to purchase or sell the security; the
amount of time normally needed to dispose of the security; and the method of soliciting offers and
the mechanics of transfer), (ii) the terms of certain securities or other instruments allowing for
the disposition to a third party or the issuer thereof (e.g., certain repurchase obligations and
demand instruments), and (iii) other relevant factors. The assets used to cover OTC derivatives
used by the Funds will be considered illiquid until the OTC derivatives are sold to qualified
dealers who agree that the Funds may repurchase them at a maximum price to be calculated by a
formula set forth in an agreement. The cover for an OTC derivative subject to this procedure
would be considered illiquid
16
only to the extent that the maximum repurchase price under the formula exceeds the intrinsic
value of the derivative.
Restricted securities may be sold only in privately negotiated transactions or in a public
offering with respect to which a registration statement is in effect under the Securities Act.
Where registration is required, the Funds may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision to sell and the time
the Funds may be permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Funds might obtain a less
favorable price than that which prevailed when they decided to sell. Illiquid securities will be
priced at fair value as determined in good faith by the Board or its delegate. If, through the
appreciation of illiquid securities or the depreciation of liquid securities, the Funds should be
in a position where more than 50% of the value of their net assets is invested in illiquid
securities, including restricted securities that are not readily marketable, the Funds will take
such steps as are deemed advisable by NAM, if any, to protect liquidity.
Inverse Floating Rate Securities and Tender Option Bonds
Inverse Floating Rate Securities. Inverse floating rate securities (sometimes referred to as
inverse floaters) are securities whose interest rates bear an inverse relationship to the
interest rate on another security or the value of an index. Generally, inverse floating rate
securities represent beneficial interests in a special purpose trust formed by a third party
sponsor for the purpose of holding municipal bonds. The special purpose trust typically sells two
classes of beneficial interests or securities: short-term floating rate municipal securities
(sometimes referred to as short-term floaters or tender option bonds), which are sold to third
party investors, and inverse floating rate municipal securities, which the Funds would purchase.
The short-term floating rate securities have first priority on the cash flow from the municipal
bonds held by the special purpose trust. Typically, a third party, such as a bank, broker-dealer
or other financial institution, grants the floating rate security holders the option, at periodic
intervals, to tender their securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives periodic fees. The
holder of the short-term floater effectively holds a demand obligation that bears interest at the
prevailing short-term, tax-exempt rate. However, an institution will not be obligated to accept
tendered short-term floaters in the event of certain defaults or a significant downgrade in the
credit rating assigned to the bond issuer. For its inverse floating rate investment, the Funds
receive the residual cash flow from the special purpose trust. Because the holder of the
short-term floater is generally assured liquidity at the face value of the security, a Fund as the
holder of the inverse floater assumes the interest rate cash flow risk and the market value risk
associated with the municipal security deposited into the special purpose trust. The volatility of
the interest cash flow and the residual market value will vary with the degree to which the trust
is leveraged. This is expressed in the ratio of the face value of the short-term floaters in
relation to the residual inverse floaters that are issued by the special purpose trust. The Funds
expect to make limited investments in inverse floaters, with leverage ratios that may vary between
one and three times. In addition, all voting rights and decisions to be made with respect to any
other rights relating to the municipal bonds held in the special purpose trust are passed through
to the Funds, as the holder of the residual inverse floating rate securities.
Because increases in either the interest rate on the securities or the value of indexes (with
which inverse floaters maintain their inverse relationship) reduce the residual interest paid on
inverse floaters, inverse floaters value is generally more volatile than that of fixed rate bonds.
Inverse floaters have varying degrees of liquidity based upon, among other things, the liquidity
of the underlying securities deposited in a tender option bond trust. The market price of inverse
floating rate securities is more volatile than the underlying securities due to leverage. These
securities generally will underperform the market of fixed rate bonds in a rising interest rate
environment, but tend to outperform the market of fixed
17
rate bonds when interest rates decline or remain relatively stable. Although volatile,
inverse floaters typically offer the potential for yields exceeding the yields available on fixed
rate bonds with comparable credit quality, coupon, call provisions and maturity.
Tender Option Bonds. The Funds may also invest in tender option bonds, as described above,
issued by special purpose trusts. Tender option bonds may take the form of short-term floating
rate securities or the option period may be substantially longer. Generally, the interest rate
earned will be based upon the market rates for municipal securities with maturities or remarketing
provisions that are comparable in duration to the periodic interval of the tender option, which may
vary from weekly, to monthly, to extended periods of one year or multiple years. Since the option
feature has a shorter term than the final maturity or first call date of the underlying bond
deposited in the trust, a Fund as the holder of the tender option bond relies upon the terms of the
agreement with the financial institution furnishing the option as well as the credit strength of
that institution. As further assurance of liquidity, the terms of the trust provide for a
liquidation of the municipal security deposited in the trust and the application of the proceeds to
pay off the tender option bond. The trusts that are organized to issue both short-term floating
rate securities and inverse floaters generally include liquidation triggers to protect the investor
in the tender option bond. Generally, the trusts do not have recourse to the investors in the
residual inverse floating rate securities.
Auction Rate Securities
Municipal securities also include auction rate municipal securities and auction rate preferred
securities issued by closed-end investment companies that invest primarily in municipal securities
(collectively, auction rate securities). In certain recent market environments, auction failures
have been widespread, which may adversely affect the liquidity and price of auction rate
securities. Provided that the auction mechanism is successful, auction rate securities usually
permit the holder to sell the securities in an auction at par value at specified intervals. The
dividend is reset by Dutch auction in which bids are made by broker-dealers and other
institutions for a certain amount of securities at a specified minimum yield. The dividend rate
set by the auction is the lowest interest or dividend rate that covers all securities offered for
sale. While this process is designed to permit auction rate securities to be traded at par value,
there is a risk that an auction will fail due to insufficient demand for the securities. Moreover,
between auctions, there may be no secondary market for these securities, and sales conducted on a
secondary market may not be on terms favorable to the seller. Thus, with respect to liquidity and
price stability, auction rate securities may differ substantially from cash equivalents,
notwithstanding the frequency of auctions and the credit quality of the security. The Funds
investments in auction rate securities of closed-end funds are subject to the limitations
prescribed by the 1940 Act. The Funds will indirectly bear their proportionate shares of any
management and other fees paid by such closed-end funds in addition to the advisory fees payable
directly by the Funds.
When-Issued and Delayed Delivery Transactions
The Funds may buy and sell municipal securities on a when-issued or delayed delivery basis,
making payment or taking delivery at a later date, normally within 15 to 45 days of the trade date.
On such transactions, the payment obligation and the interest rate are fixed at the time the
purchaser enters into the commitment. Beginning on the date a Fund enters into a commitment to
purchase securities on a when-issued or delayed delivery basis, the Fund is required under the
rules of the Securities and Exchange Commission to maintain in a separate account liquid assets,
consisting of cash, cash equivalents or liquid securities having a market value at all times of at
least equal to the amount of any delayed payment commitment. Income generated by any such assets
which provide taxable income for federal income tax purposes is includable in the taxable income of
a Fund and, to the extent distributed, will be taxable distributions to shareholders. The Funds
may enter into contracts to purchase securities on a
18
forward basis (i.e., where settlement will occur more than 60 days from the date of the
transaction) only to the extent that the Funds specifically collateralize such obligations with a
security that is expected to be called or mature within 60 days before or after the settlement date
of the forward transaction. The commitment to purchase securities on a when-issued, delayed
delivery or forward basis may involve an element of risk because no interest accrues on the bonds
prior to settlement and at the time of delivery the market value may be less than their cost.
Other Investments
Zero Coupon Securities. Each Funds investments in debt securities may be in the form of a
zero coupon bond. Zero coupon bonds are debt obligations that do not entitle the holder to any
periodic payments of interest for the entire life of the obligation. When held to its maturity,
its return comes from the difference between the purchase price and its maturity value. These
instruments are typically issued and traded at a deep discount from their face amounts. The amount
of the discount varies depending on such factors as the time remaining until maturity of the
securities, prevailing interest rates, the liquidity of the security and the perceived credit
quality of the issuer. The market prices of zero coupon bonds generally are more volatile than the
market prices of debt instruments that pay interest currently and in cash and are likely to respond
to changes in interest rates to a greater degree than do other types of securities having similar
maturities and credit quality. In order to satisfy a requirement for qualification to be taxed as
a regulated investment company under the Code (as defined under Tax MattersFederal Income Tax
Matters), an investment company, such as the Fund, must distribute each year at least 90% of its
investment company taxable income (as described under Tax MattersFederal Income Tax Matters),
including the original issue discount accrued on zero coupon bonds. Because the Funds will not on
a current basis receive cash payments from the issuer of these securities in respect of any accrued
original issue discount, in some years each Fund may have to distribute cash obtained from selling
other portfolio holdings of the Fund in order to avoid unfavorable tax consequences. In some
circumstances, such sales might be necessary in order to satisfy cash distribution requirements to
its common shareholders even though investment considerations might otherwise make it undesirable
for the Fund to sell securities at such time. Under many market conditions, investments in zero
coupon bonds may be illiquid, making it difficult for the Funds to dispose of them or determine
their current value.
Structured Notes. The Funds may utilize structured notes and similar instruments for
investment purposes and also for hedging purposes. Structured notes are privately negotiated debt
obligations where the principal and/or interest is determined by reference to the performance of a
benchmark asset, market or interest rate (an embedded index), such as selected securities, an
index of securities or specified interest rates, or the differential performance of two assets or
markets. The terms of such structured instruments normally provide that their principal and/or
interest payments are to be adjusted upwards or downwards (but not ordinarily below zero) to
reflect changes in the embedded index while the structured instruments are outstanding. As a
result, the interest and/or principal payments that may be made on a structured product may vary
widely, depending upon a variety of factors, including the volatility of the embedded index and the
effect of changes in the embedded index on principal and/or interest payments. The rate of return
on structured notes may be determined by applying a multiplier to the performance or differential
performance of the referenced index or indices or other assets. Application of a multiplier
involves leverage that will serve to magnify the potential for gain and the risk of loss. These
types of investments may generate taxable income.
Defensive Position
During temporary defensive periods or in order to keep the Funds cash fully invested, each
Fund may deviate from its investment policies and objectives and may not be able to achieve its
investment objectives. Moreover, during temporary defensive periods (e.g., times when, in NAMs
opinion,
19
temporary imbalances of supply and demand or other temporary dislocations in the tax-exempt
securities market adversely affect the price at which long-term or intermediate-term municipal
securities are available), and in order to keep each Funds cash fully invested, each Fund may
invest any percentage of its net assets in short-term investments including high quality,
short-term debt securities that may be either tax-exempt or taxable and up to 10% of its net assets
in securities of other open-or closed-end investment companies (including exchange-traded funds
(often referred to as ETFs)) that invest primarily in municipal securities of the types in which
the Fund may invest directly. Each Fund intends to invest in taxable short-term investments only
in the event that suitable tax-exempt short-term investments are not available at reasonable prices
and yields. Tax-exempt short-term investments include various obligations issued by state and
local governmental issuers, such as tax-exempt notes (bond anticipation notes, tax anticipation
notes and revenue anticipation notes or other such municipal securities maturing in three years or
less from the date of issuance) and municipal commercial paper. Each Fund will invest only in
taxable short-term investments which are U.S. government securities or securities rated within the
highest grade by Fitch, Moodys or S&P, and which mature within one year from the date of purchase
or carry a variable or floating rate of interest. Taxable short-term investments of the Funds may
include certificates of deposit issued by U.S. banks with assets of at least $1 billion, or
commercial paper or corporate notes, bonds or debentures with a remaining maturity of one year or
less, or repurchase agreements. To the extent the Funds invest in taxable investments, the Funds
will not at such times be in a position to achieve their investment objective of providing
tax-exempt income.
Other Investment Companies
Each Fund may invest up to 10% of its Managed Assets in securities of other open- or
closed-end investment companies (including ETFs) that invest primarily in municipal securities of
the types in which the Fund may invest directly. The Funds generally expect that they may invest
in other investment companies either during periods when they have large amounts of uninvested cash
or during periods when there is a shortage of attractive municipal securities available in the
market. Each Fund may invest in investment companies that are advised by the NAM or its affiliates
to the extent permitted by applicable law and/or pursuant to exemptive relief from the Securities
and Exchange Commission. As a shareholder in an investment company, each Fund will bear its
ratable share of that investment companys expenses, and would remain subject to payment of the
Funds advisory and administrative fees with respect to assets so invested. Common shareholders
would therefore be subject to duplicative expenses to the extent the Funds invest in other
investment companies.
NAM will take expenses into account when evaluating the investment merits of an investment in
the investment company relative to available municipal security instruments. In addition, because
the securities of other investment companies may be leveraged and subject to the same leverage
risk, each Fund may indirectly be subject to those risks described in the Proxy
Statement/Prospectus. Market value will tend to fluctuate more than the yield generated by
unleveraged shares.
Portfolio Trading and Turnover Rate
Portfolio trading may be undertaken to accomplish the Funds investment objectives. In
addition, a security may be sold and another of comparable quality purchased at approximately the
same time to take advantage of what NAM believes to be a temporary price disparity between the two
securities. Temporary price disparities between two comparable securities may result from supply
and demand imbalances where, for example, a temporary oversupply of certain securities may cause a
temporarily low price for such securities, as compared with other securities of like quality and
characteristics. The Funds may also engage to a limited extent in short-term trading consistent
with their investment objectives. Securities may be sold in anticipation of a market decline (a
rise in interest rates) or purchased in
20
anticipation of a market rise (a decline in interest rates) and later sold, but the Funds will
not engage in trading solely to recognize a gain.
Each Fund may engage in portfolio trading when considered appropriate, but short-term trading
will not be used as the primary means of achieving the Funds investment objectives. Although the
Funds cannot accurately predict their annual portfolio turnover rate, it is generally not expected
to exceed 100% under normal circumstances. However, there are no limits on the Funds rate of
portfolio turnover, and investments may be sold without regard to length of time held when, in
NAMs opinion, investment considerations warrant such action. A higher portfolio turnover rate
would result in correspondingly greater brokerage commissions and other transactional expenses that
are borne by the Fund. In addition, high portfolio turnover may result in the realization of net
short-term capital gains by the Fund which, when distributed to shareholders, will be taxable as
ordinary income. See Tax Matters.
MANAGEMENT OF THE FUNDS
Board Members and Officers
The management of the Funds, including general supervision of the duties performed for each
Fund under its investment management agreement with NAM (the management agreement), is the
responsibility of each Funds Board. (The Board of each Fund is the same and thus the same Board
members and officers oversee both Funds.) The number of Board Members of the Funds is nine, one of
whom is an interested person (as the term interested person is defined in the 1940 Act) and
eight of whom are not interested persons (referred to herein as independent board members). None
of the independent board members has ever been a trustee, director or employee of, or consultant
to, Nuveen, NAM or their affiliates. The Florida Funds Board Members are classified as Class I,
Class II and Class III Board Members and are elected by the holders of the Funds outstanding
common shares and MuniPreferred Shares, voting together as a single class. Board Members are
elected for a three-year term, the Class II Board Members serving until the 2011 annual meeting,
the Class III Board Members serving until the 2009 annual meeting and the Class I Board Members
serving until the 2010 annual meeting, in each case until their respective successors are elected
and qualified. Two Board Members are elected solely by the holders of the Funds outstanding
MuniPreferred Shares (the MuniPreferred Board Members). The MuniPreferred Board Members are
elected by holders of MuniPreferred Shares on an annual basis. For the National Fund the Board
Members are classified in a single class and are elected annually by holders of Common Shares and
Preferred Shares, voting together as a single class. The officers of the Funds serve annual terms
and are elected on an annual basis. The names, business addresses and birthdates of the Board
Members and officers of the Funds, their principal occupations and other affiliations during the
past five years, the number of portfolios each oversees and other directorships they hold are set
forth below. The Board Members of the Funds are directors or trustees, as the case may be, of
72 Nuveen-sponsored open-end funds (the Nuveen Mutual Funds) and 121 Nuveen-sponsored closed-end
funds (collectively with the Nuveen Mutual Funds, the Nuveen Funds).
21
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of |
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Portfolios |
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in Fund |
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Other |
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Term of Office |
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Complex |
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Directorships |
Name, Business |
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Position(s) |
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and Length of |
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Principal |
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Overseen |
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Held by |
Address and |
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Held with |
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Time Served |
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Occupation(s) During |
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by Board |
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Board |
Birthdate |
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Funds |
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with Funds |
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Past Five Years |
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Member |
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Member |
Independent Board Members: |
Robert P. Bremner
333 West Wacker Drive
Chicago, IL 60606
(8/22/40)
|
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Chairman of the Board and
Board Member
|
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Class III/Annual
Length of
service-Since 1996
|
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Private Investor and
Management Consultant.
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193 |
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N/A |
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Jack B. Evans
333 West Wacker Drive
Chicago, IL 60606
(10/22/48)
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Board Member
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Class III/Annual
Length of
service-Since 1999
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President, The
Hall-Perrine Foundation,
a private philanthropic
corporation (since
1996); Director and Vice
Chairman, United Fire
Group, a publicly held
company; Member of the
Board of Regents for the
State of Iowa University
System; Director,
Gazettte Companies; Life
Trustee of Coe College
and Iowa College
Foundation; Member of
the Advisory Council of
the Department of
Finance in the Tippie
College of Business,
University of Iowa;
formerly, Director,
Alliant Energy;
formerly, Director,
Federal Reserve Bank of
Chicago; formerly,
President and Chief
Operating Officer, SCI
Financial Group, Inc., a
regional financial
services firm.
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193 |
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See Principal
Occupation
description |
22
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of |
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Portfolios |
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in Fund |
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Other |
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Term of Office |
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Complex |
|
Directorships |
Name, Business |
|
Position(s) |
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and Length of |
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Principal |
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Overseen |
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Held by |
Address and |
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Held with |
|
Time Served |
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Occupation(s) During |
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by Board |
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Board |
Birthdate |
|
Funds |
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with Funds |
|
Past Five Years |
|
Member |
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Member |
William C. Hunter
333 West Wacker Drive
Chicago, IL 60606
(3/6/48)
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Board
Member
|
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Annual Length of
service-Since 2004
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Dean, Tippie College of
Business, University of
Iowa (since July 2006);
Director (since 1997),
Credit Research Center
at Georgetown
University; Director
(since 2004) of Xerox
Corporation; Director
(since 2005), Beta Gamma
Sigma International
Honor Society; formerly
Director, SS&C
Technologies, Inc.
(May 2005-October 2005);
formerly, Dean and
Distinguished Professor
of Finance, School of
Business at the
University of
Connecticut (2003-2006);
previously, Senior Vice
President and Director
of Research at the
Federal Reserve Bank of
Chicago (1995-2003).
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193 |
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See Principal
Occupation
description |
23
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Number |
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of |
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Portfolios |
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in Fund |
|
Other |
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Term of Office |
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Complex |
|
Directorships |
Name, Business |
|
Position(s) |
|
and Length of |
|
Principal |
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Overseen |
|
Held by |
Address and |
|
Held with |
|
Time Served |
|
Occupation(s) During |
|
by Board |
|
Board |
Birthdate |
|
Funds |
|
with Funds |
|
Past Five Years |
|
Member |
|
Member |
David J. Kundert
333 West Wacker Drive
Chicago, IL 60606
(10/28/42)
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Board
Member
|
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Class II/Annual
Length of
service-Since 2005
|
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Director, Northwestern
Mutual Wealth Management
Company, retired (since
2004) as Chairman,
JPMorgan Fleming Asset
Management, President
and CEO, Banc One
Investment Advisors
Corporation, and
President, One Group
Mutual Funds; prior
thereto, Executive Vice
President, Bank One
Corporation and Chairman
and CEO, Banc One
Investment Management
Group; Member of the
Board of Regents, Luther
College; member of the
Wisconsin Bar
Association; member of
Board of Directors,
Friends of Boerner
Botanical Gardens;
Member of Investment
Committee, Greater
Milwaukee Foundation.
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193 |
|
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See Principal
Occupation
description |
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William J. Schneider
333 West Wacker Drive
Chicago, IL 60606
(9/24/44)
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Board
Member
|
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Annual
Length of
service-Since 1996
|
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Chairman, formerly,
Senior Partner and Chief
Operating Officer
(retired 2004) of
Miller-Valentine
Partners Ltd., a real
estate investment
company; Director,
Dayton Development
Coalition; formerly,
Member, Business
Advisory Council,
Cleveland Federal
Reserve Bank.
|
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193 |
|
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See Principal
Occupation
description |
24
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Number |
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of |
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Portfolios |
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in Fund |
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Other |
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Term of Office |
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Complex |
|
Directorships |
Name, Business |
|
Position(s) |
|
and Length of |
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Principal |
|
Overseen |
|
Held by |
Address and |
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Held with |
|
Time Served |
|
Occupation(s) During |
|
by Board |
|
Board |
Birthdate |
|
Funds |
|
with Funds |
|
Past Five Years |
|
Member |
|
Member |
Judith M. Stockdale
333 West Wacker Drive
Chicago, IL 60606
(12/29/47)
|
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Board
Member
|
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Class I/Annual
Length of
service-Since 1997
|
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Executive Director,
Gaylord and Dorothy
Donnelley Foundation
(since 1994); prior
thereto, Executive
Director, Great Lakes
Protection Fund
(1990-1994).
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193 |
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N/A |
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Carole E. Stone
333 West Wacker Drive
Chicago, IL 60606
(6/28/47)
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Board
Member
|
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Class I/Annual
Length of
service-Since 2007
|
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Director, Chicago Board
Options Exchange (since
2006); Commissioner, New
York State Commission on
Public Authority Reform
(since 2005); formerly,
Director, New York State
Division of the Budget
(2000-2004), Chair,
Public Authorities
Control Board
(2000-2004), Director,
Local Government
Assistance Corporation
(2000-2004), formerly
Chair, New York Racing
Association Oversight
Board (2005-2007).
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193 |
|
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See Principal
Occupation
description |
25
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Number |
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of |
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Portfolios |
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in Fund |
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Other |
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Term of Office |
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Complex |
|
Directorships |
Name, Business |
|
Position(s) |
|
and Length of |
|
Principal |
|
Overseen |
|
Held by |
Address and |
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Held with |
|
Time Served |
|
Occupation(s) During |
|
by Board |
|
Board |
Birthdate |
|
Funds |
|
with Funds |
|
Past Five Years |
|
Member |
|
Member |
Terence J. Toth
333 West Wacker Drive
Chicago, IL 60606
(9/29/59)
|
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Board
Member
|
|
Class II/Annual
Length of
service-Since 2008
|
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Director, Legal &
General Investment
Management (since 2008);
Private Investor (since
2007); CEO and
President, Northern
Trust Investments
(2004-2007); Executive
Vice President,
Quantitative
Management & Securities
Lending (2000-2004);
prior thereto, various
positions with Northern
Trust Company (since
1994); Member: Goodman
Theatre Board (since
2004); Chicago
Fellowship Board (since
2005), University of
Illinois Leadership
Council Board (since
2007) and Catalyst
Schools of Chicago Board
(since 2008); formerly
Member: Northern Trust
Mutual Funds Board
(2005-2007), Northern
Trust Japan Board
(2004-2007), Northern
Trust Securities Inc.
Board (2003-2007) and
Northern Trust Hong Kong
Board (1997-2004).
|
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193 |
|
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N/A |
26
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Number |
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of |
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Portfolios |
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in Fund |
|
Other |
|
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Term of Office |
|
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Complex |
|
Directorships |
Name, Business |
|
Position(s) |
|
and Length of |
|
Principal |
|
Overseen |
|
Held by |
Address and |
|
Held with |
|
Time Served |
|
Occupation(s) During |
|
by Board |
|
Board |
Birthdate |
|
Funds |
|
with Funds |
|
Past Five Years |
|
Member |
|
Member |
Interested Board Member: |
John P. Amboian*
333 West Wacker Drive
Chicago, IL 60606
(6/14/61)
|
|
Board
Member
|
|
Class II/Annual
Length of
service-Since 2008
|
|
Chief Executive Officer
(since July 2007) and
Director (since 1999) of
Nuveen Investments,
Inc.; Chief Executive
Officer (since 2007) of
Nuveen Asset Management,
Rittenhouse Asset
Management, Nuveen
Investments Advisors,
Inc.; formerly,
President (1999-2004) of
Nuveen Advisory Corp.
and Nuveen Institutional
Advisory Corp.**
|
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193 |
|
|
See Principal
Occupation
description |
|
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|
* |
|
Mr. Amboian is an interested person of the Funds, as defined in the 1940 Act, by reason of
his positions with Nuveen Investments, Inc. (Nuveen Investments) and certain of its
subsidiaries. |
|
** |
|
Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were reorganized into NAM,
effective January 1, 2005. |
27
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Number of |
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Portfolios |
|
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Position(s) |
|
Term of Office and |
|
|
|
in Fund |
Name, Business |
|
Held with |
|
Length of Time |
|
Principal Occupation(s) |
|
Complex |
Address and Birthdate |
|
Funds |
|
Served with Funds |
|
During Past Five Years |
|
Overseen |
Officers of the Funds: |
Gifford R. Zimmerman
333 West Wacker
Drive
Chicago, IL 60606
(9/9/56)
|
|
Chief
Administrative
Officer
|
|
Term-Until
July 2009-Length of
Service-Since 1988
|
|
Managing Director
(since 2002),
Assistant Secretary
and Associate
General Counsel of
Nuveen Investments,
LLC; Managing
Director (since
2002) and Assistant
Secretary and
Associate General
Counsel of Nuveen
Asset Management;
Managing Director
(since 2004) and
Assistant Secretary
(since 1994) of
Nuveen Investments,
Inc.; Vice
President and
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. and Symphony
Asset Management
LLC (since 2003);
Vice President and
Assistant Secretary
of Tradewinds
Global Investors,
LLC and Santa
Barbara Asset
Management, LLC
(since 2006), and
Nuveen HydePark
Group, LLC and
Nuveen Investment
Solutions, Inc.
(since 2007);
formerly, Managing
Director
(2002-2004),
General Counsel
(1998-2004) and
Assistant Secretary
of Nuveen Advisory
Corp. and Nuveen
Institutional
Advisory Corp.*;
Chartered Financial
Analyst.
|
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193 |
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|
Williams Adams IV
333 West Wacker Drive
Chicago, IL 60606
(6/9/55)
|
|
Vice President
|
|
Term-Until
July 2009-Length of
Service-Since 2007
|
|
Executive Vice
President, U.S.
Structured Products
of Nuveen
Investments, LLC
(since 1999), prior
thereto, Managing
Director of
Structured
Investments.
|
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121 |
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28
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|
Number of |
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|
|
Portfolios |
|
|
Position(s) |
|
Term of Office and |
|
|
|
in Fund |
Name, Business |
|
Held with |
|
Length of Time |
|
Principal Occupation(s) |
|
Complex |
Address and Birthdate |
|
Funds |
|
Served with Funds |
|
During Past Five Years |
|
Overseen |
Cedric H. Antosiewicz
333 West Wacker Drive
Chicago, IL 60606
(1/11/62)
|
|
Vice President
|
|
Term-Until
July 2009-Length of
Service-Since 2007
|
|
Managing Director
(since 2004),
previously, Vice
President
(1993-2004) of
Nuveen Investments
LLC.
|
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|
121 |
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Michael T. Atkinson
333 West Wacker Drive
Chicago, IL 60606
(2/3/66)
|
|
Vice President
|
|
Term-Until
July 2009-Length of
Service-Since 2002
|
|
Vice President of
Nuveen Investments,
LLC (since 2002)
and Nuveen Asset
Management (since
2005).
|
|
|
193 |
|
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|
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|
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|
|
Lorna C. Ferguson
333 West Wacker Drive
Chicago, IL 60606
(10/24/45)
|
|
Vice President
|
|
Term-Until
July 2009-Length of
Service-Since 1998
|
|
Managing Director
(since 2004),
formerly, Vice
President of Nuveen
Investments, LLC;
Managing Director
(since 2005) of
Nuveen Asset
Management;
Managing Director
(2004-2005),
formerly, Vice
President
(1998-2004) of
Nuveen Advisory
Corp. and Nuveen
Institutional
Advisory Corp.*
|
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|
193 |
|
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|
|
Stephen D. Foy
333 West Wacker Drive
Chicago, IL 60606
(5/31/54)
|
|
Vice President and
Controller
|
|
Term-Until
July 2009-Length of
Service-Since 1993
|
|
Vice President
(since 1993) and
Funds Controller
(since 1998) of
Nuveen Investments,
LLC; Vice President
(since 2005) of
Nuveen Asset
Management;
formerly, Vice
President and Funds
Controller of
Nuveen Investments,
Inc. (1998-2004);
Certified Public
Accountant.
|
|
|
193 |
|
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|
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|
|
Walter M. Kelly
333 West Wacker Drive
Chicago, IL 60606
(2/24/70)
|
|
Chief Compliance
Officer and Vice
President
|
|
Term-Until
July 2009-Length of
Service-Since 2003
|
|
Senior Vice
President (since
2008), formerly,
Vice President,
formerly, Assistant
Vice President and
Assistant General
Counsel (2003-2006)
of Nuveen
Investments, LLC;
Senior Vice
President (since
2008) and Assistant
Secretary (since
2003), formerly,
Vice President
(2006-2008) of
Nuveen Asset
Management;
previously,
Assistant Vice
President and
Assistant Secretary
of the Nuveen Funds
(2003-2006).
|
|
|
193 |
|
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|
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|
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|
|
David J. Lamb
333 West Wacker Drive
Chicago, IL 60606
(3/22/63)
|
|
Vice President
|
|
Term-Until
July 2009- Length
of Service-Since
2000
|
|
Vice President of
Nuveen Investments,
LLC (since 2000)
and Nuveen Asset
Management (since
2005); Certified
Public Accountant. |
|
|
193 |
|
29
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|
|
Number of |
|
|
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|
|
|
|
|
Portfolios |
|
|
Position(s) |
|
Term of Office and |
|
|
|
in Fund |
Name, Business |
|
Held with |
|
Length of Time |
|
Principal Occupation(s) |
|
Complex |
Address and Birthdate |
|
Funds |
|
Served with Funds |
|
During Past Five Years |
|
Overseen |
Tina M. Lazar
333 West Wacker Drive
Chicago, IL 60606
(8/27/61)
|
|
Vice President
|
|
Term-Until
July 2009-Length of
Service-Since 2002
|
|
Vice President of
Nuveen Investments,
LLC (since 1999)
and Nuveen Asset
Management (since
2005).
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
Larry W. Martin
333 West Wacker Drive
Chicago, IL 60606
(7/27/51)
|
|
Vice President and
Assistant Secretary
|
|
Term-Until
July 2009-Length of
Service-Since 1998
|
|
Vice President,
Assistant Secretary
and Assistant
General Counsel of
Nuveen Investments,
LLC; Vice President
(since 2005) and
Assistant Secretary
of Nuveen
Investments, Inc.;
Vice President
(since 2005) and
Assistant Secretary
(since 1997) of
Nuveen Asset
Management; 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), NWQ
Investment
Management Company,
LLC (since 2002),
Symphony Asset
Management LLC
(since 2003),
Tradewinds Global
Investors, LLC and
Santa Barbara Asset
Management LLC
(since 2006) and of
Nuveen HydePark
Group, LLC and
Nuveen Investment
Solutions, Inc.
(since 2007);
formerly, Vice
President and
Assistant Secretary
of Nuveen Advisory
Corp. and Nuveen
Institutional
Advisory Corp.*
|
|
|
193 |
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
Portfolios |
|
|
Position(s) |
|
Term of Office and |
|
|
|
in Fund |
Name, Business |
|
Held with |
|
Length of Time |
|
Principal Occupation(s) |
|
Complex |
Address and Birthdate |
|
Funds |
|
Served with Funds |
|
During Past Five Years |
|
Overseen |
Kevin J. McCarthy
333 West Wacker Drive
Chicago, IL 60606
(3/26/66)
|
|
Vice President and
Secretary
|
|
Term-Until
July 2009- Length
of Service-Since
2007
|
|
Managing Director
(since 2008),
formerly, Vice
President
(2007-2008) of
Nuveen Investments,
LLC; Managing
Director (since
2008), Vice
President and
Assistant Secretary
(since 2007) of
Nuveen Asset
Management and
Rittenhouse Asset
Management, Inc.;
Vice President and
Assistant Secretary
(since 2007) of
Nuveen Investment
Advisers Inc.,
Nuveen Investment
Institutional
Services Group LLC,
NWQ Investment
Management Company,
LLC, Tradewinds
Global Investors,
LLC, NWQ Holdings,
LLC, Symphony Asset
Management LLC,
Santa Barbara Asset
Management, LLC,
Nuveen HydePark
Group, LLC and
Nuveen Investment
Solutions, Inc.;
prior thereto,
Partner, Bell,
Boyd & Lloyd LLP
(1997-2007).
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
John V. Miller
333 West Wacker Drive
Chicago, IL 60606
(4/10/67)
|
|
Vice President
|
|
Term-Until
July 2009-Length of
Service-Since 2007
|
|
Managing Director
(since 2007),
formerly, Vice
President
(2002-2007) of
Nuveen Asset
Management and
Nuveen Investments,
LLC; Chartered
Financial Analyst.
|
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
Christopher M.
|
|
Vice President and
|
|
Term-Until
|
|
Vice President and
|
|
|
193 |
|
Rohrbacher
333 West Wacker Drive
Chicago, IL 60606
(8/1/71)
|
|
Assistant Secretary
|
|
July 2009-Length of
Service-Since 2008
|
|
Assistant Secretary
of Nuveen
Investments, LLC
(since 2008); Vice
President and
Assistant Secretary
of Nuveen Asset
Management (since
2008); prior
thereto, Associate,
Skadden, Arps,
Slate Meagher &
Flom LLP
(2002-2008) |
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
Portfolios |
|
|
Position(s) |
|
Term of Office and |
|
|
|
in Fund |
Name, Business |
|
Held with |
|
Length of Time |
|
Principal Occupation(s) |
|
Complex |
Address and Birthdate |
|
Funds |
|
Served with Funds |
|
During Past Five Years |
|
Overseen |
James F. Ruane
|
|
Vice President and
|
|
Term-Until
|
|
Vice President of
|
|
|
193 |
|
333 West Wacker Drive
Chicago, IL 60606
(7/3/62)
|
|
Assistant Secretary
|
|
July 2009-Length of
Service-Since 2007
|
|
Nuveen Investments,
LLC (since 2007);
prior thereto,
Partner, Deloitte &
Touche USA LLP
(2005-2007),
formerly, senior
tax manager
(2002-2005);
Certified Public
Accountant. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark L. Winget
|
|
Vice President and
|
|
Term-Until
|
|
Vice President and
|
|
|
193 |
|
333 West Wacker Drive
Chicago, IL 60606
(12/21/68)
|
|
Assistant Secretary
|
|
July 2009-Length of
Service-Since 2008
|
|
Assistant Secretary
of Nuveen
Investments, LLC
(since 2008); Vice
President and
Assistant Secretary
of Nuveen Asset
Management (since
2008); prior
thereto, Counsel,
Vedder Price P.C.
(1997-2007). |
|
|
|
|
|
|
|
* |
|
Nuveen Advisory Corp. and Nuveen Institutional Advisory Corp. were reorganized into NAM,
effective January 1, 2005. |
Board Committees
The Board has five standing committees: the Executive Committee, the Audit Committee, the
Nominating and Governance Committee, the Dividend Committee and the Compliance, Risk Management and
Regulatory Oversight Committee.
Robert P. Bremner, Chair, Judith M. Stockdale and John P. Amboian, serve as members of the
Executive Committee of the Board of the Funds. The Executive Committee, which meets between
regular meetings of the Board, is authorized to exercise all of the powers of the Board. The
Executive Committee held ___meetings during the last fiscal year.
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 members of the Audit Committee are Robert P. Bremner, Jack B. Evans, David J.
Kundert, Chair, William J. Schneider and Terence J. Toth. The Audit Committee held ___meetings
during the last fiscal year.
The Nominating and Governance Committee is composed of the independent Board Members of the
Funds. The Nominating and Governance Committee operates under a written charter adopted and
approved by the Board. The Nominating and Governance Committee is responsible for board member
selection and tenure; selection and review of committees; and Board education and operations. In
addition, the Nominating and Governance Committee monitors performance of legal counsel and other
service providers; periodically reviews and makes recommendations about any appropriate changes to
board member compensation; and has the resources and authority to discharge its responsibilities,
including retaining special counsel and other experts or consultants at the expense of the Funds.
In the event of a vacancy on the Board, the Nominating and Governance Committee receives
suggestions from various sources as to suitable candidates. Suggestions should be sent in writing
to Lorna Ferguson, Manager of Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago,
IL 60606. The
32
Nominating and 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 of any new board members. The members of the Nominating and Governance
Committee are Robert P. Bremner, Chair, Jack B. Evans, William C. Hunter, David J. Kundert,
William J. Schneider, Judith M. Stockdale, Carole E. Stone and Terence J. Toth. The Nominating and
Governance Committee held ___meetings during the last fiscal year.
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 members of the Dividend Committee are Jack B. Evans, Judith M. Stockdale and Terence J. Toth.
The Dividend Committee held ___meetings during the last fiscal year.
The Compliance, Risk Management and Regulatory Oversight Committee is responsible for the
oversight of compliance issues, risk management, and other regulatory matters affecting the Funds
that are not otherwise the jurisdiction of the other committees. As part of its duties regarding
compliance matters, the Committee is responsible for the oversight of the Pricing Procedures of the
Funds and the Valuation Group. The members of the Compliance, Risk Management and Regulatory
Oversight Committee are William J. Schneider, Chair, William C. Hunter, Judith M. Stockdale and
Carole E. Stone. The Committee has adopted a written charter. The Compliance, Risk Management and
Regulatory Oversight Committee held ___meetings during the last fiscal year.
Independent Chairman
The Board Members have elected Robert P. Bremner as the independent Chairman of the Board.
Specific responsibilities of the Chairman include (a) presiding at all meetings of the Board and of
the shareholders; (b) seeing that all orders and resolutions of the Board Members are carried into
effect; and (c) maintaining records of and, whenever necessary, certifying all proceedings of the
Board Members and the shareholders.
With respect to the Acquiring Fund, each director is elected annually at the annual meeting
and serves until the next annual meeting or until a successor has been duly elected and qualified.
With respect to the Acquired Fund, Class I board members will serve until the annual meeting
of shareholders in 2010; Class II board members will serve until the annual meeting of shareholders
in 2011; and Class III board members will serve until the annual meeting of shareholders in 2012.
As each board members term expires, shareholders will be asked to elect board members and such
board members shall be elected for a term expiring at the time of the third succeeding annual
meeting subsequent to their election or thereafter in each case when their respective successors
are duly elected and qualified. These provisions could delay for up to two years the replacement
of a majority of the Board. See the Proxy Statement/Prospectus under Certain Provisions in the
Acquiring Funds Articles of Incorporation.
[The Board held four regular quarterly meetings and seven special meetings during the last
fiscal year. During the last fiscal year, each Board Member attended 75% or more of the Funds
Board meetings and the committee meetings (if a member thereof) held during the period for which
such Board Member was a Board Member.] The policy of the Board relating to attendance by Board
Members at annual meetings of the Fund and the number of Board Members who attended the last annual
meeting of shareholders of the Fund is posted on the Funds website at
www.nuveen.com/etf/products/fundgovernance.aspx.
33
Share Ownership
The following table sets forth the dollar range of equity securities beneficially owned by
each board member as of October 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Dollar Range |
|
|
|
|
|
|
|
|
|
|
of Equity Securities in |
|
|
|
|
|
|
|
|
|
|
All Registered |
|
|
Dollar Range |
|
Dollar Range |
|
Investment Companies |
|
|
of Equity |
|
of Equity |
|
Overseen by Board |
|
|
Securities in |
|
Securities in |
|
Member in |
|
|
the Acquiring |
|
the Acquired |
|
Family of Investment |
Name of Board Member |
|
Fund |
|
Funds |
|
Companies |
John M. Amboian |
|
None |
|
None |
|
Over $100,000 |
Robert P. Bremner |
|
None |
|
None |
|
Over $100,000 |
Jack B. Evans |
|
None |
|
None |
|
Over $100,000 |
William C. Hunter |
|
None |
|
None |
|
Over $100,000 |
David J. Kundert |
|
None |
|
None |
|
Over $100,000 |
William S. Schneider |
|
None |
|
None |
|
Over $100,000 |
Judith M. Stockdale |
|
None |
|
None |
|
Over $100,000 |
Carole E. Stone |
|
None |
|
None |
|
$ |
10,001 - $50,000 |
|
Terence J. Toth |
|
None |
|
None |
|
$ |
10,001 - $50,000 |
|
No Board Member who is not an interested person of the Funds or his immediate family member
owns beneficially or of record, any security of NAM, Nuveen or any person (other than a registered
investment company) directly or indirectly controlling, controlled by or under common control with
NAM or Nuveen.
Compensation
The following table sets forth the compensation paid by the Funds during the year ended
October 31, 2008.1 The Funds do not have a retirement or pension plan. The officers
and Board Members affiliated with Nuveen serve without any compensation from the Funds. The Funds
have a deferred compensation plan (the Plan) that permits any Board Member who is not an
interested person of the Funds to elect to defer receipt of all or a portion of his or her
compensation as a Board Member. The deferred compensation of a participating Board Member is
credited to a book reserve account of the Funds when the compensation would otherwise have been
paid to the Board Member. The value of the Board Members deferral account at any time is equal to
the value that the account would have had if contributions to the account had been invested and
reinvested in shares of one or more of the eligible Nuveen funds. At the time for commencing
distributions from a Board Members deferral account, the Board Member may elect to receive
distributions in a lump sum or over a period of five years. The Funds will not be liable for any
other funds obligations to make distributions under the Plan.
|
|
|
1 |
|
October 31, 2008 would have marked the fiscal
year end for the Acquiring Fund and the semi-annual period for the
Acquired Fund. |
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Total |
|
|
|
|
|
|
Aggregate |
|
|
Compensation |
|
|
Total Compensation |
|
|
|
Compensation |
|
|
That Has |
|
|
from Funds and |
|
|
|
from Funds(1) |
|
|
Been Deferred(2) |
|
|
Fund Complex(3) |
|
Robert P. Bremner |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Jack B. Evans |
|
|
|
|
|
|
|
|
|
|
|
|
William C. Hunter |
|
|
|
|
|
|
|
|
|
|
|
|
David J. Kundert |
|
|
|
|
|
|
|
|
|
|
|
|
William J. Schneider |
|
|
|
|
|
|
|
|
|
|
|
|
Judith M. Stockdale |
|
|
|
|
|
|
|
|
|
|
|
|
Carole E. Stone |
|
|
|
|
|
|
|
|
|
|
|
|
Terence J. Toth(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
[Describe compensation from each Fund.] |
|
(2) |
|
Pursuant to a deferred compensation agreement with certain of the Nuveen 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 stated above. |
|
(3) |
|
Based on the compensation paid (including any amounts deferred) for the one year period
ending for services to the Nuveen open-end and closed-end funds. |
|
(4) |
|
Mr. Toth was appointed to the Board of the Nuveen Funds, effective July 1, 2008. |
Independent Board Members receive a $100,000 annual retainer plus (a) a fee of $3,250 per day
for attendance in person or by telephone at a regularly scheduled meeting of the Board; (b) a fee
of $2,500 per meeting for attendance in person where such in-person attendance is required and
$1,500 per meeting 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 $2,000 per meeting for
attendance in person or by telephone at an Audit Committee meeting; (d) a fee of $2,000 per meeting
for attendance in person at a Compliance, Risk Management and Regulatory Oversight Committee
meeting where in-person attendance is required and $1,000 per meeting for attendance by telephone
where in-person attendance is not required; (e) a fee of $1,000 per meeting for attendance in
person or by telephone for a meeting of the Dividend Committee; and (f) a fee of $500 per meeting
for attendance in person at all other committee meetings ($1,000 for shareholder meetings) on a day
on which no regularly scheduled board meeting is held in which in-person attendance is required and
$250 per meeting for attendance by telephone or in person at such committee meetings (excluding
shareholder meetings) where in-person attendance is not required and $100 per meeting when the
Executive Committee acts as pricing committee for IPOs, plus, in each case, expenses incurred in
attending such meetings. In addition to the payments described above, the independent Chairman of
the Board receives $50,000, the chairpersons of the Audit Committee, the Dividend Committee and the
Compliance, Risk Management and Regulatory Oversight Committee receive $7,500 and the chairperson
of the Nominating and Governance Committee receives $5,000 as additional retainers. Independent
Board Members also receive a fee of $2,500 per day for site visits to entities that provide
services to the Nuveen Funds on days on which no regularly scheduled board meeting is held. When
ad hoc committees are organized, the Nominating and Governance Committee will at the time of
formation determine compensation to be paid to the members of such committee; however, in general,
such fees will be $1,000 per meeting for attendance in person at any ad hoc committee meeting where
in-person attendance is required and $500 per meeting for attendance by telephone or in person at
such meetings where in-person attendance is not required. The annual retainer, fees and expenses
are allocated among the Nuveen Funds 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 Funds have no employees. Their officers are compensated by Nuveen Investments or its
affiliates.
35
INVESTMENT ADVISER
NAM, the Funds investment adviser, is responsible for determining each Funds overall
investment strategy and its implementation. NAM also is responsible for managing operations and
each Funds business affairs and providing certain clerical, bookkeeping and other administrative
services to the Fund. For additional information regarding the management services performed by
NAM, including biographies of each of the Funds portfolio managers and further information about
the investment management agreement between the Fund and NAM, see Management of the Fund in the
Proxy Statement/Prospectus.
NAM, 333 West Wacker Drive, Chicago, Illinois 60606, a registered investment adviser, is a
wholly-owned subsidiary of Nuveen Investments. Founded in 1898, Nuveen Investments and its
affiliates had approximately $134 billion of assets under management as of September 30, 2008.
On November 13, 2007, Nuveen Investments was acquired by an investor group led by Madison
Dearborn Partners, LLC, a private equity firm based in Chicago, Illinois (previously defined as the
MDP Acquisition). The investor group led by Madison Dearborn Partners, LLC includes affiliates
of Merrill Lynch & Co. (Merrill Lynch). Merrill Lynch has since been acquired by Bank of America
Corporation. NAM has adopted policies and procedures that address arrangements involving NAM and
Bank of America Corporation and its affiliates that may give rise to certain conflicts of interest.
The Funds are dependent upon services and resources provided by the adviser, NAM, and
therefore the investment advisers parent Nuveen Investments. Nuveen Investments significantly
increased its level of debt in connection with the MDP Acquisition. While Nuveen Investments
believes that monies generated from operations and cash on hand will be adequate to fund debt
service requirements, capital expenditures and working capital requirements for the foreseeable
future, there can be no assurance that Nuveen Investments business will generate sufficient cash
flow from operations or that future borrowings will be available in an amount sufficient to enable
Nuveen Investments to pay its indebtedness (with scheduled maturities beginning in 2014) or to fund
its other liquidity needs. Nuveen Investments believes that potential adverse changes to the
overall financial position and business operations of Nuveen Investments would not adversely affect
NAMs credit research and portfolio management operations and would not otherwise adversely affect
NAMs ability to fulfill its obligations to the Fund under the Funds investment management
agreement. There was no change in the portfolio management of the Fund or in the Funds investment
objective or policies as a result of these transactions.
PORTFOLIO MANAGERS
Unless otherwise indicated, the information below is provided as of the date of this Statement
of Additional Information.
Portfolio Management Team. Paul Brennan, CFA, CPA is the Acquiring Funds portfolio manager
at NAM and has primary responsibility for providing daily oversight for, and execution of, the
Acquiring Funds investment activities.
In addition to managing the Acquiring Fund, Mr. Brennan is also primarily responsible for the
day-to-day portfolio management of the following accounts. Information is provided as of
October 31, 2008 unless otherwise indicated:
36
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Type of Account Managed |
|
Accounts |
|
Assets* |
Registered Investment Company |
|
|
|
|
|
$____billion |
Other Pooled Investment Vehicles |
|
|
|
|
|
$ |
|
|
Other Accounts |
|
|
|
|
|
$___ million |
|
|
|
* |
|
None of the assets in these accounts are subject to an advisory fee based on performance. |
Daniel J. Close, CFA is the Acquired Funds portfolio manager at NAM and has primary
responsibility for providing daily oversight for, and execution of, the Acquired Funds investment
activities.
In addition to managing the Acquired Fund, Mr. Close is also primarily responsible for the
day-to-day portfolio management of the following accounts. Information is provided as of
October 31, 2008 unless otherwise indicated:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Type of Account Managed |
|
Accounts |
|
Assets* |
Registered Investment Company |
|
|
|
|
|
$____billion |
Other Pooled Investment Vehicles |
|
|
|
|
|
$ |
|
|
Other Accounts |
|
|
|
|
|
$___ million |
|
|
|
* |
|
None of the assets in these accounts are subject to an advisory fee based on performance. |
Compensation. Each Funds portfolio managers compensation consists of three basic
elementsbase salary, cash bonus and long-term incentive compensation. The compensation strategy
is to annually compare overall compensation, to the market in order to create a compensation
structure that is competitive and consistent with similar financial services companies. As
discussed below, several factors are considered in determining each portfolio managers total
compensation. In any year these factors may include, among others, the effectiveness of the
investment strategies recommended by the portfolio managers investment team, the investment
performance of the accounts managed by the portfolio manager, and the overall performance of Nuveen
Investments (the parent company of NAM). Although investment performance is a factor in
determining the portfolio managers compensation, it is not necessarily a decisive factor. The
portfolio managers performance is evaluated in part by comparing the portfolio managers
performance against a specified investment benchmark. This fund-specific benchmark is a customized
subset (limited to bonds in each Funds specific state and with certain maturity parameters) of the
S&P/Investortools Municipal Bond index, an index comprised of bonds held by managed municipal bond
fund customers of Standard & Poors Securities Pricing, Inc. that are priced daily and whose fund
holdings aggregate at least $2 million. As of October 31, 2008, the S&P/Investortools Municipal
Bond index was comprised of 52,959 securities with an aggregate current market value of $1,009
billion.
Base salary. Each Funds portfolio manager is paid a base salary that is set at a level
determined by NAM in accordance with its overall compensation strategy discussed above. NAM is not
under any current contractual obligation to increase a portfolio managers base salary.
Cash bonus. Each Funds portfolio manager is also eligible to receive an annual cash bonus.
The level of this bonus is based upon evaluations and determinations made by each portfolio
managers supervisors, along with reviews submitted by his peers. These reviews and evaluations
often take into account a number of factors, including the effectiveness of the investment
strategies recommended to the NAMs investment team, the performance of the accounts for which he
serves as portfolio manager relative to any benchmarks established for those accounts, his
effectiveness in communicating investment
37
performance to stockholders and their representatives,
and his contribution to the NAMs investment process and to the execution of investment strategies.
The cash bonus component is also impacted by the overall performance of Nuveen Investments in
achieving its business objectives.
Long-term incentive compensation. In connection with the acquisition of Nuveen Investments,
by a group of investors lead by Madison Dearborn Partners LLC in November 2007, certain employees,
including portfolio managers, received profit interests in Nuveen Investments. These profit
interests entitle the holders to participate in the appreciation in the value of Nuveen Investments
beyond the issue date and vest over five to seven years, or earlier in the case of a liquidity
event.
Conflicts of Interest. Each portfolio managers simultaneous management of the Funds and the
other accounts noted above may present actual or apparent conflicts of interest with respect to the
allocation and aggregation of securities orders placed on behalf of each Fund and the other
account. NAM, however, believes that such potential conflicts are mitigated by the fact that the
NAM has adopted several policies that address potential conflicts of interest, including best
execution and trade allocation policies that are designed to ensure (1) that portfolio management
is seeking the best price for portfolio securities under the circumstances, (2) fair and equitable
allocation of investment opportunities among accounts over time and (3) compliance with applicable
regulatory requirements. All accounts are to be treated in a non-preferential manner, such that
allocations are not based upon account performance, fee structure or preference of the portfolio
manager. In addition, NAM has adopted a Code of Conduct that sets forth policies regarding
conflicts of interest.
Beneficial Ownership of Securities. [As of the date of this Statement of Additional
Information, neither Mr. Brennan not Mr. Close beneficially own any stock issued by the Funds.]
[Unless earlier terminated as described below, each Funds management agreement with NAM will
remain in effect until 200___.] Each Funds management agreement continues in effect from year to
year so long as such continuation is approved at least annually by (1) the Board of Board Members
or the vote of a majority of the outstanding voting securities of each Fund and (2) a majority of
the Board Members who are not interested persons of any party to the management agreement, cast in
person at a meeting called for the purpose of voting on such approval. The management agreements
may be terminated at any time, without penalty, by either the Funds or NAM upon 60 days written
notice, and are automatically terminated in the event of its assignment as defined in the 1940 Act.
The Funds, NAM, Nuveen and other related entities have adopted codes of ethics that
essentially prohibit certain of their personnel, including the Funds portfolio managers, from
engaging in personal investments that compete or interfere with, or attempt to take advantage of a
clients, including the Funds, anticipated or actual portfolio transactions, and are designed to
assure that the interests of clients, including Fund shareholders, are placed before the interests
of personnel in connection with personal investment transactions. Text-only versions of the codes
of ethics of the Funds, NAM and Nuveen can be viewed online or downloaded from the EDGAR Database
on the Securities and Exchange Commissions internet web site at www.sec.gov. You may also review
and copy those documents by visiting the Securities and Exchange Commissions Public Reference Room
in Washington, DC. Information on the operation of the Public Reference Room may be obtained by
calling the Securities and Exchange Commission at 202-942-8090. In addition, copies of those codes
of ethics may be obtained, after mailing the appropriate duplicating fee, by writing to the
Securities and Exchange Commissions Public Reference Section, 100 F Street, N.E., Washington, DC
20549 or by e-mail request at publicinfo@sec.gov.
Each Fund invests its assets generally in municipal securities. On rare occasions the Funds
may acquire, directly or through a special purpose vehicle, equity securities of certain issuers
whose securities the Funds already own when such securities have deteriorated or are expected
shortly to deteriorate
38
significantly in credit quality. The purpose of acquiring equity securities
generally will be to acquire control of the issuer and to seek to prevent the credit deterioration
or facilitate the liquidation or other workout of the distressed issuers credit problem. In the
course of exercising control of a distressed issuer, NAM may pursue the Funds interests in a
variety of ways, which may entail negotiating and executing consents, agreements and other
arrangements, and otherwise influencing the management of the issuer. NAM does not consider such
activities proxy voting for purposes of Rule 206(4)-6 under the Investment Advisers Act of 1940, as
amended (the Advisers Act), but nevertheless provides reports to the Funds Board on its control
activities on a quarterly basis.
In the rare event that an issuer were to issue a proxy or that the Funds were to receive a
proxy issued by a cash management security, NAM would either engage an independent third party to
determine how the proxy should be voted or vote the proxy with the consent, or based on the
instructions, of the Funds Board or its representative. A member of NAMs legal department would
oversee the administration of the voting and ensure that records maintained in accordance with Rule
206(4)-6 of the Advisers Act were filed with the Securities and Exchange Commission on Form N-PX,
provided to the Funds Board and made available to shareholders as required by applicable rules.
In the event of a conflict of interest that might arise when voting proxies for the Funds, NAM
will defer to the recommendation of an independent third party engaged to determine how the proxy
should be voted, or, alternatively, members of NAMs legal and compliance departments, in
consultation with the Board, will examine the conflict of interest and seek to resolve such
conflict in the best interest of each Fund. If a member of NAMs legal or compliance department or
the Board has a personal conflict of interest, that member will refrain from participating in the
consultation.
Information regarding how each Fund voted proxies relating to portfolio securities during the
most recent twelve-month period ended June 30 will be available without charge by calling
(800) 257-8787 or by accessing the Securities and Exchange Commissions website at
http://www.sec.gov.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board, NAM is responsible for decisions to purchase and sell
securities for the Funds, the negotiation of the prices to be paid and the allocation of
transactions among various dealer firms. Transactions on stock exchanges involve the payment by
the Funds of brokerage commissions. There generally is no stated commission in the case of
securities traded in the OTC market but the prices paid by the Funds usually include an undisclosed
dealer commission or mark-up. Transactions in the OTC market can also be placed with
broker-dealers who act as agents and charge brokerage commissions for effecting OTC transactions.
Each Fund may place its OTC transactions either directly with principal market makers, or with
broker-dealers if that is consistent with NAMs obligation to obtain best qualitative execution.
In certain instances, the Funds may make purchases of underwritten issues at prices that include
underwriting fees.
Portfolio securities may be purchased directly from an underwriter or in the OTC market from
the principal dealers in such securities, unless it appears that a better price or execution may be
obtained through other means. Portfolio securities will not be purchased from Nuveen or its
affiliates or affiliates of NAM except in compliance with the 1940 Act.
It is NAMs policy to seek the best execution under the circumstances of each trade. NAM will
evaluate price as the primary consideration, with the financial condition, reputation and
responsiveness of the dealer considered secondary in determining best execution. Given the best
execution obtainable, it will be NAMs practice to select dealers that, in addition, furnish
research information (primarily credit analyses of issuers and general economic reports) and
statistical and other services to NAM. It is not
39
possible to place a dollar value on information
and statistical and other services received from dealers. Since it is only supplementary to NAMs
own research efforts, the receipt of research information is not expected to reduce significantly
NAMs expenses.
While NAM will be primarily responsible for the placement of the business of the Funds, NAMs
policies and practices in this regard must be consistent with the foregoing and will, at all times,
be subject to review by the Board of the Funds.
NAM may manage other investment accounts and investment companies for other clients that may
invest in the same types of securities as the Funds and that may have investment objectives similar
to those of the Funds. NAM seeks to allocate portfolio transactions equitably whenever concurrent
decisions are made to purchase or sell assets or securities by each Fund and another advisory
account. If an aggregated order cannot be filled completely, allocations will generally be made on
a pro rata basis. An order may not be allocated on a pro rata basis where, for example
(i) consideration is given to portfolio managers who have been instrumental in developing or
negotiating a particular investment; (ii) consideration is given to an account with specialized
investment policies that coincide with the particulars of a specific investment; (iii) pro rata
allocation would result in odd-lot or de minimis amounts being allocated to a portfolio or other
client; or (iv) where NAM reasonably determines that departure from a pro rata allocation is
advisable. There may also be instances where a Fund will not participate at all in a transaction
that is allocated among other accounts. While these allocation procedures could have a detrimental
effect on the price or amount of the securities available to the Fund from time to time, it is the
opinion of the Board that the benefits available from NAMs management outweigh any disadvantage
that may arise from NAMs larger management activities and its need to allocate securities.
The National Fund paid $___, $___, and $___in aggregate brokerage commissions for the fiscal
years ended October 31, 2006, October 31, 2007, and October 31, 2008, including $___, $___, and
$___to ___, which represented ___%, ___% and ___% of the Funds aggregate brokerage fees paid
for the respective fiscal year, and ___%, ___%, and ___% of the Funds aggregate dollar amount of
transactions involving brokerage commissions for the respective fiscal year.
The Florida Fund paid $___, $___, and $___in aggregate brokerage commissions for the fiscal
years ended April 30, 2006, April 30, 2007, and April 30, 2008, including $___, $___, and $___to
___, which represented ___%, ___% and ___% of the Funds aggregate brokerage fees paid for the
respective fiscal year, and ___%, ___%, and ___% of the Funds aggregate dollar amount of
transactions involving brokerage commissions for the respective fiscal year.
REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND
The National Fund is a closed-end investment company and as such its shareholders will not
have the right to cause the Fund to redeem their shares. Instead, the Funds Common Shares will
trade in the open market at a price that will be a function of several factors, including dividend
levels (which are in turn affected by expenses), net asset value, dividend stability, relative
demand for and supply of such shares in the market, general market and economic conditions and
other factors. Because shares of a closed-end investment company may frequently trade at prices
lower than net asset value, the National Funds Board of Directors has currently determined that,
at least annually, it will consider action that might be taken to reduce or eliminate any material
discount from net asset value in respect of Common Shares, which may include the repurchase of such
shares in the open market or in private transactions, the making of a tender offer for such shares
at net asset value, or the conversion of the Fund to an open-end investment company. There can be
no assurance, however, that the Board of Directors will decide to take any of these actions, or
that share repurchases or tender offers, if undertaken, will reduce market discount.
40
The staff of the Securities and Exchange Commission currently requires that any tender offer
made by a closed-end investment company for its shares must be at a price equal to the net asset
value of such shares on the close of business on the last day of the tender offer. Any service
fees incurred in connection with any tender offer made by the Fund will be borne by the National
Fund and will not reduce the stated consideration to be paid to tendering shareholders.
Subject to its investment limitations, the National Fund may borrow to finance the repurchase
of shares or to make a tender offer. Interest on any borrowings to finance share repurchase
transactions or the accumulation of cash by the Fund in anticipation of share repurchases or
tenders will reduce the Funds net income. Any share repurchase, tender offer or borrowing that
might be approved by the Board of Directors would have to comply with the Securities Exchange Act
of 1934, as amended, and the 1940 Act and the rules and regulations thereunder.
Although the decision to take action in response to a discount from net asset value will be
made by the Board of Directors at the time it considers such issue, it is the Boards present
policy, which may be changed by the Board, not to authorize repurchases of Common Shares or a
tender offer for such shares if (1) such transactions, if consummated, would (a) result in the
delisting of the Common Shares from the NYSE or elsewhere, or (b) impair the Funds status as a
regulated investment company under the Code (which would make the Fund a taxable entity, causing
the Funds income to be taxed at the corporate level in addition to the taxation of shareholders
who receive dividends from the Fund) or as a registered closed-end investment company under the
1940 Act; (2) the Fund would not be able to liquidate portfolio securities in an orderly manner and
consistent with the Funds investment objectives and policies in order to repurchase shares; or
(3) there is, in the Boards judgment, any (a) material legal action or proceeding instituted or
threatened challenging such transactions or otherwise materially adversely affecting the Fund,
(b) general suspension of or limitation on prices for trading securities on the NYSE or elsewhere,
(c) declaration of a banking moratorium by Federal or state authorities or any suspension of
payment by United States or state banks in which the Fund invests, (d) material limitation
affecting the Fund or the issuers of its portfolio securities by Federal or state authorities on
the extension of credit by lending institutions or on the exchange of non-U.S. currency,
(e) commencement of war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, or (f) other event or condition that would have a material
adverse effect (including any adverse tax effect) on the Fund or its shareholders if shares were
repurchased. The Board of Directors of the National Fund may in the future modify these conditions
in light of experience.
Conversion to an open-end company would require the approval of the holders of at least
two-thirds of the National Funds outstanding Common Shares and outstanding Preferred Shares,
including MuniPreferred, voting together as a single class, unless such action was previously
approved, adopted or authorized by the affirmative vote of two-thirds of the directors, in which
case the affirmative vote of the holders of at least a majority of the outstanding Common Shares
and outstanding Preferred Shares, voting as a single class, is required. Additionally, the
affirmative vote of the holders of at least a majority of the Preferred Shares, including
MuniPreferred, outstanding at the time, voting as a separate class, shall also be required to
approve any conversion of the Fund from a closed-end to an open-end investment company. See the
Proxy Statement/Prospectus under Certain Provisions in the Acquiring Funds Articles of
Incorporation for a discussion of voting requirements applicable to conversion of the Fund to an
open-end investment company. If the Fund converted to an open-end investment company, the Funds
Common Shares would no longer be listed on the NYSE or elsewhere. In contrast to a closed-end
investment company, shareholders of an open-end investment company may require the company to
redeem their shares on any business day (except in certain circumstances as authorized by or under
the 1940 Act or rules thereunder) at their net asset value, less such redemption charge, if any, as
might be in effect at the time of redemption. In order to avoid maintaining large cash positions
or liquidating favorable investments to meet redemptions, open-end investment companies typically
engage in a
41
continuous offering of their shares. Open-end investment companies are thus subject to
periodic asset in-flows and out-flows that can complicate portfolio management. The Board of
Directors of the Fund may at any time propose conversion of the Fund to an open-end investment
company depending upon their judgment as to the advisability of such action in light of
circumstances then prevailing.
The repurchase by the National Fund of its shares at prices below net asset value will result
in an increase in the net asset value of those shares that remain outstanding. However, there can
be no assurance that share repurchases or tenders at or below net asset value will result in the
Funds shares trading at a price equal to their net asset value. Nevertheless, the fact that the
Funds shares may be the subject of repurchase or tender offers at net asset value from time to
time, or that the Fund may be converted to an open-end investment company, may reduce any spread
between market price and net asset value that might otherwise exist.
In addition, a purchase by the Fund of its Common Shares will decrease the Funds total
assets, which would likely have the effect of increasing the Funds expense ratio.
Before deciding whether to take any action if the National Funds Common Shares trade below
net asset value, the Board of Directors would consider all relevant factors, including the extent
and duration of the discount, the liquidity of the Funds portfolio, the impact of any action that
might be taken on the Fund or its shareholders, and market considerations. Based on these
considerations, even if the Funds shares should trade at a discount, the Board may determine that,
in the interest of the Fund and its shareholders, no action should be taken.
TAX MATTERS
Fede
ral Income Tax Matters
The following discussion of U.S. federal income tax matters is based on the advice of Vedder
Price P.C., special counsel to the Fund.
The following is intended to be a general summary of certain U.S. federal income tax
consequences of investing, holding and disposing of Common Shares of the Funds. It is not intended
to be a complete discussion of all such federal income tax consequences, nor does it purport to
deal with all categories of investors (including Common Shareholders with large positions in the
Funds). Investors are advised to consult with their own tax advisors before investing in the
Funds.
Each Fund has elected to be treated, and intends to continue to qualify each year, as a
regulated investment company, under Subchapter M of the Internal Revenue Code of 1986, as amended
(the Code), and to satisfy conditions which enable dividends on Common Shares which are
attributable to interest on municipal securities to be exempt from federal income tax in the hands
of owners of such stock, subject to the possible application of the federal alternative minimum
tax.
To qualify for the favorable U.S. federal income tax treatment generally accorded to regulated
investment companies, each Fund must, among other things, (a) derive in each taxable year at least
90% of its gross income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or non-U.S. currencies, or other
income derived with respect to its business of investing in such stock, securities or currencies,
or net income derived from interests in qualified publicly traded partnerships, as defined in the
Code; (b) diversify its holdings so that, at the end of each quarter of each taxable year, (i) at
least 50% of the value of the Funds assets is represented by cash and cash items (including
receivables), U.S. Government securities, the securities of other regulated investment companies
and other securities, with such other securities of any one issuer limited
42
for the purposes of this calculation to an amount not greater than 5% of the value of the
Funds total assets and not greater than 10% of the outstanding voting securities of such issuer,
and (ii) not more than 25% of the value of its total assets is invested in the securities (other
than U.S. Government securities or the securities of other regulated investment companies) of a
single issuer, or two or more issuers that the Fund controls and are engaged in the same, similar
or related trades or businesses, or the securities of one or more qualified publicly traded
partnerships; and (c) distribute each year an amount equal to or greater than the sum of 90% of its
investment company taxable income (as that term is defined in the Code, but without regard to the
deduction for dividends paid) and 90% of its net tax-exempt interest.
As a regulated investment company, each Fund generally will not be subject to U.S. federal
income tax on its investment company taxable income and net capital gain (the excess of net
long-term capital gain over net short-term capital loss), if any, that it distributes to
shareholders. Each Fund may retain for investment its net capital gain. However, if the Fund
retains any net capital gain or any investment company taxable income, it will be subject to tax at
regular corporate rates on the amount retained. If a Fund retains any net capital gain, it may
designate the retained amount as undistributed capital gains in a notice to its shareholders who,
if subject to U.S. federal income tax on long-term capital gains, (i) will be required to include
in income for U.S. federal income tax purposes, as long-term capital gain, their share of such
undistributed amount, and (ii) will be entitled to credit their proportionate shares of the tax
paid by the Fund on such undistributed amount against their U.S. federal income tax liabilities, if
any, and to claim refunds to the extent the credit exceeds such liabilities. For U.S. federal
income tax purposes, the tax basis of shares owned by a shareholder of a Fund will be increased by
an amount equal to the difference between the amount of undistributed capital gains included in the
shareholders gross income and the tax deemed paid by the shareholder under clause (ii) of the
preceding sentence. Each Fund intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and the net capital gain not otherwise
retained by the Fund.
Amounts not distributed on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To prevent imposition of the excise tax,
the Fund must distribute during each calendar year an amount at least equal to the sum of (1) 98%
of its ordinary taxable income (not taking into account any capital gains or losses) for the
calendar year, (2) 98% of its capital gains in excess of its capital losses (adjusted for certain
ordinary losses) for the one-year period ending October 31 of the calendar year, and (3) any
ordinary taxable income and capital gains for previous years that were not distributed during those
years and on which the Fund paid no U.S. federal income tax. To prevent application of the excise
tax, each Fund intends to make its distributions in accordance with the calendar year distribution
requirement.
If a Fund failed to qualify as a regulated investment company or failed to satisfy the 90%
distribution requirement in any taxable year, the Fund would be taxed in the same manner as an
ordinary corporation on its taxable income (even if such income were distributed to its
shareholders) and distributions to shareholders would not be deductible by the Fund in computing
its taxable income. Additionally, all distributions out of earnings and profits would be taxed to
shareholders as ordinary dividend income. Such distributions generally would be eligible (i) to be
treated as qualified dividend income, as discussed below in the case of noncorporate shareholders
and (ii) for the dividends received deduction under Section 243 of the Code (the Dividends
Received Deduction) in the case of corporate shareholders.
Each Fund intends to continue to qualify to pay exempt-interest dividends, as defined in the
Code, on its Common Shares by satisfying the requirement that, at the close of each quarter of its
taxable year, at least 50% of the value of its total assets consist of tax-exempt municipal bonds.
Exempt-interest dividends are dividends or any part thereof (other than a capital gain dividend)
paid by the Fund which are attributable to interest on municipal bonds and are so designated by the Fund.
Exempt-interest
43
dividends will be exempt from U.S. federal income tax, subject to the possible
application of the federal alternative minimum tax. Gains of a Fund that are attributable to
market discount on certain municipal securities are treated as ordinary income to the extent of
accrued market discount on the bond.
A portion of each Funds expenditures that would otherwise be deductible may not be allowed as
deductions by reason of the Funds investment in municipal securities (with such disallowed
portion, in general, being the same percentage of the Funds aggregate expenses as the percentage
of the Funds aggregate income (other than capital gain income) that constitutes exempt-interest
income from municipal securities). A similar disallowance rule also applies to interest expense
paid or incurred by the Fund, if any. Such disallowed deductions, if any, will reduce the amount
that the Fund can designate as exempt-interest dividends by the disallowed amount. As a result,
income distributions by a Fund in excess of the amount of the Funds exempt-interest dividends may
be taxable as ordinary income.
Each Funds investment in zero coupon bonds will cause it to realize income prior to the
receipt of cash payments with respect to these bonds. Such income will be accrued daily by the
Fund and, in order to avoid a tax payable by the Fund, the Fund may be required to liquidate
securities that it might otherwise continue to hold in order to generate cash so that the Fund may
make required distributions to its shareholders.
Distributions to shareholders of net investment income received by a Fund from taxable
temporary investments, if any, and of net short-term capital gains realized by the Fund, if any,
will be taxable to its shareholders as ordinary income. Distributions by the Fund of net capital
gain (i.e., the excess of net long-term capital gain over net short-term capital loss), if any, are
taxable as long-term capital gain, regardless of the length of time the shareholder has owned the
shares with respect to which such distributions are made. The amount of taxable income allocable
to a Funds shares will depend upon the amount of such income realized by the Fund, but is not
generally expected to be significant. Distributions, if any, in excess of a Funds earnings and
profits will first reduce the adjusted tax basis of a shareholders shares and, after that basis
has been reduced to zero, will constitute capital gain to the shareholder (assuming the shares are
held as a capital asset). For taxable years beginning before January 1, 2011, qualified dividend
income received by noncorporate shareholders is taxed at rates equivalent to long-term capital
gain tax rates, which reach a maximum of 15%. Qualified dividend income generally includes
dividends from domestic corporations and dividends from non-U.S. corporations that meet certain
specified criteria. For taxable years beginning on or after January 1, 2011, qualified dividend
income will no longer be taxed at the rates applicable to long-term capital gains, and the maximum
individual tax rate on long-term capital gains will increase to 20%, unless Congress enacts
legislation providing otherwise. As long as the Fund qualifies as a regulated investment company
under the Code, it is not expected that any part of its distributions to shareholders from its
investments will qualify for the dividends-received deduction available to corporate shareholders
or as qualified dividend income in the case of noncorporate shareholders.
The Internal Revenue Service (the IRS) indicates that each Fund is required to designate
distributions paid with respect to its Common Shares and its preferred shares as consisting of a
portion of each type of income distributed by the Fund. The portion of each type of income deemed
received by the holders of each class of shares will be equal to the portion of total Fund
dividends received by such class. Thus, each Fund will designate dividends paid as exempt-interest
dividends in a manner that allocates such dividends between the holders of the Common Shares and
the preferred shares in proportion to the total dividends paid to each such class during or with
respect to the taxable year, or otherwise as required by applicable law. Capital gain dividends
and ordinary income dividends will similarly be allocated between the two classes.
44
The Code provides that interest on indebtedness incurred or continued to purchase or carry the
Funds shares to which exempt-interest dividends are allocated is not deductible. Under rules used
by the IRS for determining when borrowed funds are considered used for the purpose of purchasing or
carrying particular assets, the purchase or ownership of shares may be considered to have been made
with borrowed funds even though such funds are not directly used for the purchase or ownership of
such shares.
The interest on private activity bonds in most instances is not federally tax-exempt to a
person who is a substantial user of a facility financed by such bonds or a related person of
such substantial user. As a result, the Fund may not be an appropriate investment for a
shareholder who is considered either a substantial user or a related person within the meaning
of the Code. In general, a substantial user of a facility includes a nonexempt person who
regularly uses a part of such facility in his trade or business. Related persons are in general
defined to include persons among whom there exists a relationship, either by family or business,
which would result in a disallowance of losses in transactions among them under various provisions
of the Code (or if they are members of the same controlled group of corporations under the Code),
including a partnership and each of its partners (and certain members of their families), an S
corporation and each of its shareholders (and certain members of their families) and various
combinations of these and other relationships. The foregoing is not a complete description of all
of the provisions of the Code covering the definitions of substantial user and related person.
Although dividends generally will be treated as distributed when paid, dividends declared in
October, November or December, payable to shareholders of record on a specified date in one of
those months and paid during the following January, will be treated as having been distributed by a
Fund (and received by the shareholders) on December 31 of the year declared.
Certain of each Funds investment practices are subject to special provisions of the Code
that, among other things, may defer the use of certain deductions or losses of the Fund, affect the
holding period of securities held by the Fund and alter the character of the gains or losses
realized by the Fund. These provisions may also require each Fund to recognize income or gain
without receiving cash with which to make distributions in the amounts necessary to satisfy the
requirements for maintaining regulated investment company status and for avoiding income and excise
taxes. Each Fund will monitor its transactions and may make certain tax elections in order to
mitigate the effect of these rules and prevent disqualification of the Fund as a regulated
investment company.
The redemption, sale or exchange of Common Shares normally will result in capital gain or loss
to holders of Common Shares who hold their shares as capital assets. Generally, a shareholders
gain or loss will be long-term capital gain or loss if the shares have been held for more than one
year even though the increase in value in such Common Shares is attributable to tax-exempt interest
income. Present law taxes both long-term and short-term capital gains of corporations at the same
rates applicable to ordinary income. For non-corporate taxpayers, however, long-term capital gains
are currently taxed at a maximum rate of 15%, while short-term capital gains and other ordinary
income are currently taxed at ordinary income rates. Absent further legislation, the 15% maximum
rate applicable to long-term capital gains will increase to 20% for taxable years beginning after
December 31, 2010. Any loss on the sale of Common Shares that have been held for six months or
less will be disallowed to the extent of any distribution of exempt-interest dividends received
with respect to such Common Shares. If a shareholder sells or otherwise disposes of Common Shares
before holding them for six months, any loss on the sale or disposition will be treated as a
long-term capital loss to the extent of any capital gain dividends received by the Common
Shareholder. Any loss realized on a sale or exchange of shares of a Fund will be disallowed to the
extent those shares of the Fund are replaced by other substantially identical shares of the Fund
within a period of 61 days beginning 30 days before and ending 30 days after the date of
disposition
45
of the original shares. In that event, the basis of the replacement shares of the Fund will
be adjusted to reflect the disallowed loss.
Federal income tax law imposes an alternative minimum tax with respect to corporations,
individuals, trusts and estates. Interest on certain private activity bonds is included as an
item of tax preference in determining the amount of a taxpayers alternative minimum taxable
income. The Funds will not invest in AMT Bonds. To the extent that a Fund received income from
municipal securities subject to the federal alternative minimum tax, a portion of the dividends
paid by the Fund, although otherwise exempt from U.S. federal income tax, would be taxable to its
shareholders to the extent that their tax liability is determined under the federal alternative
minimum tax. Each Fund will annually provide a report indicating the percentage of the Funds
income attributable to municipal securities subject to the federal alternative minimum tax. In
addition, for certain corporations, federal alternative minimum taxable income is increased by 75%
of the difference between an alternative measure of income (adjusted current earnings) and the
amount otherwise determined to be the alternative minimum taxable income. Interest on all
municipal securities, and therefore a distribution by the Fund that would otherwise be tax-exempt,
is included in calculating a corporations adjusted current earnings. Certain small corporations
are not subject to the federal alternative minimum tax.
Tax-exempt income, including exempt-interest dividends paid by a Fund, is taken into account
in calculating the amount of social security and railroad retirement benefits that may be subject
to federal income tax.
Each Fund may be required to withhold U.S. federal income tax from all taxable distributions
and redemption proceeds payable to shareholders who fail to provide the Fund with their correct
taxpayer identification number or to make required certifications, or who have been notified by the
IRS that they are subject to backup withholding. The backup withholding percentage is 28% for
amounts paid through 2010, after which time the rate will increase to 31% absent legislative
change. Corporate shareholders and certain other shareholders specified in the Code generally are
exempt from such backup withholding. This withholding is not an additional tax. Any amounts
withheld may be credited against the shareholders federal income tax liability, provided the
required information is furnished to the IRS.
The Code provides that every shareholder required to file a tax return must include for
information purposes on such return the amount of tax-exempt interest received during the taxable
year, including any exempt-interest dividends received from the Fund.
EXPERTS
The Financial Statements of the Fund as of , 2009 appearing in this Statement of
Additional Information have been by , an independent registered public
accounting firm provides auditing services to the Fund. The principal
business address of is .
CUSTODIAN AND TRANSFER AGENT
The custodian of the assets of the Fund is State Street Bank and Trust Company, One Federal
Street, Boston, Massachusetts 02110. The custodian performs custodial, fund accounting and
portfolio accounting services. The Funds transfer, shareholder services and dividend paying agent
is also State Street Bank and Trust Company, 250 Royall Street, Canton, Massachusetts 02021.
46
ADDITIONAL INFORMATION
A Registration Statement on Form N-14, including amendments thereto, relating to the shares of
the Acquiring Fund offered hereby, has been filed by the Acquiring Fund with the Securities and
Exchange Commission, Washington, D.C. The Proxy Statement/Prospectus and this Statement of
Additional Information do not contain all of the information set forth in the Registration
Statement, including any exhibits and schedules thereto. For further information with respect to
the Acquiring Fund and the shares offered hereby, reference is made to the Acquiring Funds
Registration Statement. Statements contained in the Proxy Statement/Prospectus and this Statement
of Additional Information as to the contents of any contract or other document referred to are not
necessarily complete and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. Copies of the Registration Statement may be inspected without
charge at the Securities and Exchange Commissions principal office in Washington, D.C., and copies
of all or any part thereof may be obtained from the Securities and Exchange Commission upon the
payment of certain fees prescribed by the Securities and Exchange Commission.
47
FINANCIAL STATEMENTS
Pro Forma Financial Statements for the Reorganization of Nuveen Florida Premium Income Municipal Fund (NFL)
into Nuveen Insured Municipal Opportunity Fund, Inc. (NIO)
Pro Forma Portfolio of Investments (Unaudited)
October 31, 2008
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|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Alabama 9.6% (5.8% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,500 |
|
|
$ |
|
|
|
$ |
3,500 |
|
|
Birmingham Waterworks And Sewer Board, Alabama, Water and Sewer Revenue Bonds, Tender Option
Bond Trust 2707, 0.596%, 1/01/43 AMBAC Insured (IF) |
|
1/17 at 100.00 |
|
|
A3 |
|
|
$ |
1,052,660 |
|
|
$ |
|
|
|
|
|
|
|
$ |
1,052,660 |
|
|
11,175 |
|
|
|
|
|
|
|
11,175 |
|
|
Hoover Board of Education, Alabama, Capital Outlay Tax Anticipation Warrants, Series 2001,
5.250%, 2/15/22 MBIA Insured |
|
2/11 at 100.00 |
|
AA |
|
|
11,197,909 |
|
|
|
|
|
|
|
|
|
|
|
11,197,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jefferson County, Alabama, Sewer Revenue Capital Improvement Warrants, Series 1999A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,815 |
|
|
|
|
|
|
|
10,815 |
|
|
5.000%, 2/01/33 (Pre-refunded 2/01/09) FGIC Insured |
|
2/09 at 101.00 |
|
AAA |
|
|
11,004,154 |
|
|
|
|
|
|
|
|
|
|
|
11,004,154 |
|
|
9,790 |
|
|
|
|
|
|
|
9,790 |
|
|
5.000%, 2/01/33 (Pre-refunded 2/01/09) FGIC Insured |
|
2/09 at 101.00 |
|
AAA |
|
|
9,961,227 |
|
|
|
|
|
|
|
|
|
|
|
9,961,227 |
|
|
29,860 |
|
|
|
|
|
|
|
29,860 |
|
|
5.750%, 2/01/38 (Pre-refunded 2/01/09) FGIC Insured |
|
2/09 at 101.00 |
|
AAA |
|
|
30,454,511 |
|
|
|
|
|
|
|
|
|
|
|
30,454,511 |
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
Jefferson County, Alabama, Sewer Revenue Capital Improvement Warrants, Series 2002B, 5.125%,
2/01/42 (Pre-refunded 8/01/12) FGIC Insured |
|
8/12 at 100.00 |
|
AAA |
|
|
2,681,275 |
|
|
|
|
|
|
|
|
|
|
|
2,681,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Jefferson County, Alabama, Sewer Revenue Capital Improvement Warrants, Series 2002D: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
425 |
|
|
|
|
|
|
|
425 |
|
|
5.000%, 2/01/38 (Pre-refunded 8/01/12) FGIC Insured |
|
8/12 at 100.00 |
|
AAA |
|
|
449,931 |
|
|
|
|
|
|
|
|
|
|
|
449,931 |
|
|
14,800 |
|
|
|
|
|
|
|
14,800 |
|
|
5.000%, 2/01/42 (Pre-refunded 8/01/12) FGIC Insured |
|
8/12 at 100.00 |
|
AAA |
|
|
15,808,176 |
|
|
|
|
|
|
|
|
|
|
|
15,808,176 |
|
|
18,760 |
|
|
|
|
|
|
|
18,760 |
|
|
Jefferson County, Alabama, Sewer Revenue Capital Improvement Warrants, Series 2001A, 5.000%,
2/01/41 (Pre-refunded 2/01/11) FGIC Insured |
|
2/11 at 101.00 |
|
AAA |
|
|
19,775,291 |
|
|
|
|
|
|
|
|
|
|
|
19,775,291 |
|
|
10,195 |
|
|
|
|
|
|
|
10,195 |
|
|
Jefferson County, Alabama, Sewer Revenue Refunding Warrants, Series 1997A, 5.375%, 2/01/27
FGIC Insured |
|
2/09 at 100.00 |
|
BB |
|
|
6,888,252 |
|
|
|
|
|
|
|
|
|
|
|
6,888,252 |
|
|
5,240 |
|
|
|
|
|
|
|
5,240 |
|
|
Jefferson County, Alabama, Sewer Revenue Refunding Warrants, Series 2003B, 5.000%, 2/01/41
(Pre-refunded 2/01/11) FGIC Insured |
|
2/11 at 101.00 |
|
AAA |
|
|
5,554,295 |
|
|
|
|
|
|
|
|
|
|
|
5,554,295 |
|
|
|
117,060 |
|
|
|
|
|
|
|
117,060 |
|
|
Total Alabama |
|
|
|
|
|
|
|
|
|
|
114,827,681 |
|
|
|
|
|
|
|
|
|
|
|
114,827,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alaska 1.1% (0.7% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,425 |
|
|
|
|
|
|
|
2,425 |
|
|
Alaska Housing Finance Corporation, Collateralized Veterans Mortgage Program Bonds, First
Series 1999A-1, 6.150%, 6/01/39 |
|
12/09 at 100.00 |
|
AAA |
|
|
2,366,145 |
|
|
|
|
|
|
|
|
|
|
|
2,366,145 |
|
|
11,245 |
|
|
|
|
|
|
|
11,245 |
|
|
Alaska Housing Finance Corporation, General Mortgage Revenue Bonds, Series 1999A, 6.050%,
6/01/39 MBIA Insured |
|
6/09 at 100.00 |
|
AAA |
|
|
10,820,839 |
|
|
|
|
|
|
|
|
|
|
|
10,820,839 |
|
|
|
13,670 |
|
|
|
|
|
|
|
13,670 |
|
|
Total Alaska |
|
|
|
|
|
|
|
|
|
|
13,186,984 |
|
|
|
|
|
|
|
|
|
|
|
13,186,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona 1.9% (1.2% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arizona State University, Certificates of Participation, Resh Infrastructure Projects, Series 2005A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
5.000%, 9/01/25 AMBAC Insured |
|
3/15 at 100.00 |
|
AA |
|
|
1,876,360 |
|
|
|
|
|
|
|
|
|
|
|
1,876,360 |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
5.000%, 9/01/27 AMBAC Insured |
|
3/15 at 100.00 |
|
AA |
|
|
1,852,520 |
|
|
|
|
|
|
|
|
|
|
|
1,852,520 |
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
Arizona State University, System Revenue Bonds, Series 2005, 5.000%, 7/01/27 AMBAC Insured |
|
7/15 at 100.00 |
|
AA |
|
|
883,410 |
|
|
|
|
|
|
|
|
|
|
|
883,410 |
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
Maricopa County Union High School District 210, Phoenix, Arizona, General Obligation Bonds,
Series 2004A, 5.000%, 7/01/22 (Pre-refunded 7/01/14) FSA Insured |
|
7/14 at 100.00 |
|
AAA |
|
|
1,077,250 |
|
|
|
|
|
|
|
|
|
|
|
1,077,250 |
|
|
5,200 |
|
|
|
|
|
|
|
5,200 |
|
|
Mesa, Arizona, Utility System Revenue Bonds, Reset Option Longs, Series 11032- 11034, 8.606%,
7/01/31 FSA Insured (IF) |
|
7/17 at 100.00 |
|
AAA |
|
|
840,320 |
|
|
|
|
|
|
|
|
|
|
|
840,320 |
|
|
1,150 |
|
|
|
|
|
|
|
1,150 |
|
|
Phoenix Civic Improvement Corporation, Arizona, Junior Lien Wastewater System Revenue Bonds,
Series 2004, 5.000%, 7/01/27 MBIA Insured |
|
7/14 at 100.00 |
|
AA+ |
|
|
1,108,025 |
|
|
|
|
|
|
|
|
|
|
|
1,108,025 |
|
|
13,490 |
|
|
|
|
|
|
|
13,490 |
|
|
Phoenix Civic Improvement Corporation, Arizona, Junior Lien Water System Revenue Bonds, Series
2005, 4.750%, 7/01/25 MBIA Insured |
|
7/15 at 100.00 |
|
AA |
|
|
12,435,757 |
|
|
|
|
|
|
|
|
|
|
|
12,435,757 |
|
|
2,905 |
|
|
|
|
|
|
|
2,905 |
|
|
Pima County Industrial Development Authority, Arizona, Lease Obligation Revenue Refunding
Bonds, Tucson Electric Power Company, Series 1988A, 7.250%, 7/15/10 FSA Insured |
|
1/09 at 100.00 |
|
Aaa |
|
|
2,919,496 |
|
|
|
|
|
|
|
|
|
|
|
2,919,496 |
|
|
|
28,745 |
|
|
|
|
|
|
|
28,745 |
|
|
Total Arizona |
|
|
|
|
|
|
|
|
|
|
22,993,138 |
|
|
|
|
|
|
|
|
|
|
|
22,993,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arkansas 0.3% (0.2% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,660 |
|
|
|
|
|
|
|
3,660 |
|
|
Arkansas State University, Student Fee Revenue Bonds, Beebe Campus, Series 2006, 5.000%,
9/01/35 AMBAC Insured |
|
9/15 at 100.00 |
|
Aa3 |
|
|
3,026,966 |
|
|
|
|
|
|
|
|
|
|
|
3,026,966 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
California 27.0% (16.3% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,600 |
|
|
|
|
|
|
|
5,600 |
|
|
Alameda Corridor Transportation Authority, California, Subordinate Lien Revenue Bonds, Series
2004A, 0.000%, 10/01/20 AMBAC Insured |
|
No Opt. Call |
|
|
A |
|
|
|
2,802,296 |
|
|
|
|
|
|
|
|
|
|
|
2,802,296 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
California Department of Veterans Affairs, Home Purchase Revenue Bonds, Series 2002A, 5.300%,
12/01/21 AMBAC Insured |
|
6/12 at 101.00 |
|
AA |
|
|
9,983,600 |
|
|
|
|
|
|
|
|
|
|
|
9,983,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
California Department of Water Resources, Power Supply Revenue Bonds, Series 2002A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
30,000 |
|
|
5.375%, 5/01/17 (Pre-refunded 5/01/12) SYNCORA GTY Insured |
|
5/12 at 101.00 |
|
Aaa |
|
|
32,741,398 |
|
|
|
|
|
|
|
|
|
|
|
32,741,398 |
|
|
25,000 |
|
|
|
|
|
|
|
25,000 |
|
|
5.375%, 5/01/18 (Pre-refunded 5/01/12) AMBAC Insured |
|
5/12 at 101.00 |
|
Aaa |
|
|
27,284,500 |
|
|
|
|
|
|
|
|
|
|
|
27,284,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
California Department of Water Resources, Water System Revenue Bonds, Central Valley Project,
Series 2005AC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
30 |
|
|
5.000%, 12/01/24 (Pre-refunded 12/01/14) MBIA Insured |
|
12/14 at 100.00 |
|
AAA |
|
|
32,734 |
|
|
|
|
|
|
|
|
|
|
|
32,734 |
|
|
25 |
|
|
|
|
|
|
|
25 |
|
|
5.000%, 12/01/27 (Pre-refunded 12/01/14) MBIA Insured |
|
12/14 at 100.00 |
|
AAA |
|
|
27,279 |
|
|
|
|
|
|
|
|
|
|
|
27,279 |
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
|
|
|
|
|
|
|
California Department of Water Resources, Water System Revenue Bonds, Central Valley Project,
Series 2005AC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,670 |
|
|
|
|
|
|
|
3,670 |
|
|
5.000%, 12/01/24 MBIA Insured |
|
12/14 at 100.00 |
|
AAA |
|
|
3,618,033 |
|
|
|
|
|
|
|
|
|
|
|
3,618,033 |
|
|
2,795 |
|
|
|
|
|
|
|
2,795 |
|
|
5.000%, 12/01/27 MBIA Insured |
|
12/14 at 100.00 |
|
AAA |
|
|
2,704,749 |
|
|
|
|
|
|
|
|
|
|
|
2,704,749 |
|
|
10,150 |
|
|
|
|
|
|
|
10,150 |
|
|
California, General Obligation Bonds, Series 2004, 5.000%, 6/01/31 AMBAC Insured |
|
12/14 at 100.00 |
|
AA |
|
|
9,386,619 |
|
|
|
|
|
|
|
|
|
|
|
9,386,619 |
|
|
3,500 |
|
|
|
|
|
|
|
3,500 |
|
|
Coachella Valley Unified School District, Riverside County, California, General Obligation
Bonds, Series 2005A, 5.000%, 8/01/26 FGIC Insured |
|
8/15 at 100.00 |
|
|
A- |
|
|
|
3,265,395 |
|
|
|
|
|
|
|
|
|
|
|
3,265,395 |
|
|
20,000 |
|
|
|
|
|
|
|
20,000 |
|
|
Cucamonga County Water District, San Bernardino County, California, Certificates of
Participation, Water Shares Purchase, Series 2000, 5.125%, 9/01/35 FGIC Insured |
|
9/11 at 101.00 |
|
|
A+ |
|
|
|
17,321,000 |
|
|
|
|
|
|
|
|
|
|
|
17,321,000 |
|
|
5,750 |
|
|
|
|
|
|
|
5,750 |
|
|
East Bay Municipal Utility District, Alameda and Contra Costa Counties, California, Water
System Subordinated Revenue Bonds, Series 2005A, 5.000%, 6/01/27 MBIA Insured |
|
6/15 at 100.00 |
|
AA+ |
|
|
5,534,260 |
|
|
|
|
|
|
|
|
|
|
|
5,534,260 |
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
Golden State Tobacco Securitization Corporation, California, Tobacco Settlement Asset-Backed
Revenue Bonds, Series 2005A, Trust 2448, 0.891%, 6/01/38 FGIC Insured (IF) |
|
6/15 at 100.00 |
|
|
A2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,520 |
|
|
|
|
|
|
|
1,520 |
|
|
Hayward Redevelopment Agency, California, Downtown Redevelopment Project Tax Allocation Bonds,
Series 2006, 5.000%, 3/01/36 SYNCORA GTY Insured |
|
3/16 at 100.00 |
|
|
A- |
|
|
|
1,284,628 |
|
|
|
|
|
|
|
|
|
|
|
1,284,628 |
|
|
5,600 |
|
|
|
|
|
|
|
5,600 |
|
|
Kern Community College District, California, General Obligation Bonds, Series 2006, 0.000%,
11/01/24 FSA Insured (4) |
|
No Opt. Call |
|
AAA |
|
|
2,196,432 |
|
|
|
|
|
|
|
|
|
|
|
2,196,432 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
Long Beach Bond Financing Authority, California, Lease Revenue Refunding Bonds, Long Beach
Aquarium of the South Pacific, Series 2001, 5.250%, 11/01/30 AMBAC Insured |
|
11/11 at 101.00 |
|
AA |
|
|
4,428,350 |
|
|
|
|
|
|
|
|
|
|
|
4,428,350 |
|
|
2,740 |
|
|
|
|
|
|
|
2,740 |
|
|
Los Angeles Harbors Department, California, Revenue Bonds, Series 2006A, 5.000%, 8/01/22
FGIC Insured (Alternative Minimum Tax) |
|
8/16 at 102.00 |
|
AA |
|
|
2,325,411 |
|
|
|
|
|
|
|
|
|
|
|
2,325,411 |
|
|
20,000 |
|
|
|
|
|
|
|
20,000 |
|
|
Los Angeles Unified School District, California, General Obligation Bonds, Series 2003A,
5.000%, 7/01/21 FSA Insured |
|
7/13 at 100.00 |
|
AAA |
|
|
19,998,600 |
|
|
|
|
|
|
|
|
|
|
|
19,998,600 |
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
|
Los Angeles Unified School District, California, General Obligation Bonds, Series 2006F,
5.000%, 7/01/24 FGIC Insured |
|
7/16 at 100.00 |
|
AA- |
|
|
2,895,510 |
|
|
|
|
|
|
|
|
|
|
|
2,895,510 |
|
|
6,205 |
|
|
|
|
|
|
|
6,205 |
|
|
Port of Oakland, California, Revenue Bonds, Series 2002L, 5.000%, 11/01/22 FGIC Insured
(Alternative Minimum Tax) |
|
11/12 at 100.00 |
|
|
A+ |
|
|
|
5,137,864 |
|
|
|
|
|
|
|
|
|
|
|
5,137,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Poway Redevelopment Agency, California, Tax Allocation Bonds, Paguay Redevelopment Project,
Series 2001: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
5.200%, 6/15/30 AMBAC Insured |
|
12/11 at 101.00 |
|
AA |
|
|
13,215,900 |
|
|
|
|
|
|
|
|
|
|
|
13,215,900 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.125%, 6/15/33 AMBAC Insured |
|
12/11 at 101.00 |
|
AA |
|
|
4,275,100 |
|
|
|
|
|
|
|
|
|
|
|
4,275,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
California (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,035 |
|
|
|
|
|
|
|
2,035 |
|
|
Redding, California, Electric System Revenue Certificates of Participation, Series 2005,
5.000%, 6/01/30 FGIC Insured |
|
6/15 at 100.00 |
|
AA |
|
|
1,635,163 |
|
|
|
|
|
|
|
|
|
|
|
1,635,163 |
|
|
6,000 |
|
|
|
|
|
|
|
6,000 |
|
|
Redlands Unified School District, San Bernardino County, California, General Obligation Bonds,
Series 2003, 5.000%, 7/01/26 FSA Insured |
|
7/13 at 100.00 |
|
AAA |
|
|
5,814,780 |
|
|
|
|
|
|
|
|
|
|
|
5,814,780 |
|
|
2,970 |
|
|
|
|
|
|
|
2,970 |
|
|
Riverside Community College District, California, General Obligation Bonds, Series 2005,
5.000%, 8/01/22 FSA Insured |
|
8/15 at 100.00 |
|
AAA |
|
|
2,955,180 |
|
|
|
|
|
|
|
|
|
|
|
2,955,180 |
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
Sacramento County Sanitation District Financing Authority, California, Revenue Bonds, Series
2005B, 4.750%, 12/01/21 FGIC Insured |
|
12/15 at 100.00 |
|
AA |
|
|
2,399,125 |
|
|
|
|
|
|
|
|
|
|
|
2,399,125 |
|
|
13,710 |
|
|
|
|
|
|
|
13,710 |
|
|
San Francisco Airports Commission, California, Revenue Refunding Bonds, San Francisco
International Airport, Second Series 2001, Issue 27A, 5.250%, 5/01/26 MBIA Insured
(Alternative Minimum Tax) |
|
5/11 at 100.00 |
|
AA |
|
|
11,334,743 |
|
|
|
|
|
|
|
|
|
|
|
11,334,743 |
|
|
3,030 |
|
|
|
|
|
|
|
3,030 |
|
|
San Francisco Bay Area Rapid Transit District, California, Sales Tax Revenue Bonds, Series
2001, 5.125%, 7/01/36 AMBAC Insured |
|
7/11 at 100.00 |
|
AA+ |
|
|
2,846,715 |
|
|
|
|
|
|
|
|
|
|
|
2,846,715 |
|
|
8,470 |
|
|
|
|
|
|
|
8,470 |
|
|
San Francisco Bay Area Rapid Transit District, California, Sales Tax Revenue Bonds, Series
2001, 5.125%, 7/01/36 (Pre-refunded 7/01/11) AMBAC Insured |
|
7/11 at 100.00 |
|
AA+ (5) |
|
|
9,018,348 |
|
|
|
|
|
|
|
|
|
|
|
9,018,348 |
|
|
1,220 |
|
|
|
|
|
|
|
1,220 |
|
|
San Francisco Bay Area Rapid Transit District, California, Sales Tax Revenue Bonds, Series
2005A, 5.000%, 7/01/22 MBIA Insured |
|
7/15 at 100.00 |
|
AA+ |
|
|
1,213,949 |
|
|
|
|
|
|
|
|
|
|
|
1,213,949 |
|
|
66,685 |
|
|
|
|
|
|
|
66,685 |
|
|
San Joaquin Hills Transportation Corridor Agency, Orange County, California, Senior Lien Toll
Road Revenue Bonds, Series 1993, 0.000%, 1/01/21 (ETM) |
|
No Opt. Call |
|
AAA |
|
|
35,371,719 |
|
|
|
|
|
|
|
|
|
|
|
35,371,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
San Joaquin Hills Transportation Corridor Agency, Orange County, California, Toll Road Revenue
Refunding Bonds, Series 1997A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,615 |
|
|
|
|
|
|
|
31,615 |
|
|
5.250%, 1/15/30 MBIA Insured |
|
1/09 at 100.00 |
|
AA |
|
|
23,877,861 |
|
|
|
|
|
|
|
|
|
|
|
23,877,861 |
|
|
21,500 |
|
|
|
|
|
|
|
21,500 |
|
|
0.000%, 1/15/32 MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
4,484,470 |
|
|
|
|
|
|
|
|
|
|
|
4,484,470 |
|
|
12,525 |
|
|
|
|
|
|
|
12,525 |
|
|
San Jose Redevelopment Agency, California, Tax Allocation Bonds, Merged Area Redevelopment
Project, Series 2002, 5.000%, 8/01/20 (Pre-refunded 8/01/10) MBIA Insured |
|
8/10 at 101.00 |
|
AA (5) |
|
|
13,252,452 |
|
|
|
|
|
|
|
|
|
|
|
13,252,452 |
|
|
19,595 |
|
|
|
|
|
|
|
19,595 |
|
|
San Jose Redevelopment Agency, California, Tax Allocation Bonds, Merged Area Redevelopment
Project, Series 2006C, 4.250%, 8/01/30 MBIA Insured |
|
8/17 at 100.00 |
|
AA |
|
|
14,932,762 |
|
|
|
|
|
|
|
|
|
|
|
14,932,762 |
|
|
11,250 |
|
|
|
|
|
|
|
11,250 |
|
|
Santa Ana Financing Authority, California, Lease Revenue Bonds, Police Administration and
Housing Facility, Series 1994A, 6.250%, 7/01/24 MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
11,915,663 |
|
|
|
|
|
|
|
|
|
|
|
11,915,663 |
|
|
6,785 |
|
|
|
|
|
|
|
6,785 |
|
|
Santa Clara Valley Water District, California, Water Revenue Bonds, Series 2006A, 3.750%,
6/01/25 (WI/DD, Settling 11/03/08) FSA Insured |
|
6/16 at 100.00 |
|
AAA |
|
|
5,427,593 |
|
|
|
|
|
|
|
|
|
|
|
5,427,593 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
Walnut Energy Center Authority, California, Electric Revenue Bonds, Turlock Irrigation
District, Series 2004A, 5.000%, 1/01/34 AMBAC Insured |
|
1/14 at 100.00 |
|
AA |
|
|
4,534,800 |
|
|
|
|
|
|
|
|
|
|
|
4,534,800 |
|
|
|
397,975 |
|
|
|
|
|
|
|
397,975 |
|
|
Total California |
|
|
|
|
|
|
|
|
|
|
321,474,981 |
|
|
|
|
|
|
|
|
|
|
|
321,474,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado 6.4% (3.9% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,080 |
|
|
|
|
|
|
|
1,080 |
|
|
Arkansas River Power Authority, Colorado, Power Revenue Bonds, Series 2006, 5.250%, 10/01/40
SYNCORA GTY Insured |
|
10/16 at 100.00 |
|
BBB |
|
|
824,515 |
|
|
|
|
|
|
|
|
|
|
|
824,515 |
|
|
1,900 |
|
|
|
|
|
|
|
1,900 |
|
|
Aspen, Colorado, Sales Tax Revenue Bonds, Parks and Open Space, Series 2005B, 5.250%, 11/01/24
FSA Insured |
|
11/15 at 100.00 |
|
AAA |
|
|
1,911,058 |
|
|
|
|
|
|
|
|
|
|
|
1,911,058 |
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
Colorado Department of Transportation, Certificates of Participation, Series 2004, 5.000%,
6/15/25 MBIA Insured |
|
6/14 at 100.00 |
|
AA |
|
|
974,610 |
|
|
|
|
|
|
|
|
|
|
|
974,610 |
|
|
4,950 |
|
|
|
|
|
|
|
4,950 |
|
|
Denver Convention Center Hotel Authority, Colorado, Senior Revenue Bonds, Convention Center
Hotel, Series 2003A, 5.000%, 12/01/33 (Pre-refunded 12/01/13) SYNCORA GTY Insured |
|
12/13 at 100.00 |
|
|
N/R |
(5) |
|
|
5,256,158 |
|
|
|
|
|
|
|
|
|
|
|
5,256,158 |
|
|
1,740 |
|
|
|
|
|
|
|
1,740 |
|
|
Douglas County School District RE1, Douglas and Elbert Counties, Colorado, General Obligation
Bonds, Series 2005B, 5.000%, 12/15/28 FSA Insured |
|
12/14 at 100.00 |
|
Aaa |
|
|
1,665,406 |
|
|
|
|
|
|
|
|
|
|
|
1,665,406 |
|
|
35,995 |
|
|
|
|
|
|
|
35,995 |
|
|
E-470 Public Highway Authority, Colorado, Senior Revenue Bonds, Series 1997B, 0.000%, 9/01/23
MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
13,465,010 |
|
|
|
|
|
|
|
|
|
|
|
13,465,010 |
|
|
30,800 |
|
|
|
|
|
|
|
30,800 |
|
|
E-470 Public Highway Authority, Colorado, Senior Revenue Bonds, Series 2000A, 5.750%, 9/01/35
(Pre-refunded 9/01/10) MBIA Insured |
|
9/10 at 102.00 |
|
AAA |
|
|
33,130,326 |
|
|
|
|
|
|
|
|
|
|
|
33,130,326 |
|
|
11,800 |
|
|
|
|
|
|
|
11,800 |
|
|
E-470 Public Highway Authority, Colorado, Senior Revenue Bonds, Series 2000B, 0.000%, 9/01/15
(Pre-refunded 9/01/10) MBIA Insured |
|
9/10 at 74.80 |
|
Aaa |
|
|
8,369,032 |
|
|
|
|
|
|
|
|
|
|
|
8,369,032 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
E-470 Public Highway Authority, Colorado, Toll Revenue Bonds, Series 2004A, 0.000%, 9/01/27
MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
2,751,800 |
|
|
|
|
|
|
|
|
|
|
|
2,751,800 |
|
|
4,520 |
|
|
|
|
|
|
|
4,520 |
|
|
Jefferson County School District R1, Colorado, General Obligation Bonds, Series 2004,
5.000%, 12/15/24 FSA Insured (UB) |
|
12/14 at 100.00 |
|
AAA |
|
|
4,397,870 |
|
|
|
|
|
|
|
|
|
|
|
4,397,870 |
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
Summit County School District RE-1, Summit, Colorado, General Obligation Bonds, Series 2004B,
5.000%, 12/01/24 FGIC Insured |
|
12/14 at 100.00 |
|
Aa3 |
|
|
2,501,200 |
|
|
|
|
|
|
|
|
|
|
|
2,501,200 |
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
University of Colorado, Enterprise System Revenue Bonds, Series 2005, 5.000%, 6/01/30
FGIC Insured |
|
6/15 at 100.00 |
|
AA |
|
|
927,700 |
|
|
|
|
|
|
|
|
|
|
|
927,700 |
|
|
|
107,285 |
|
|
|
|
|
|
|
107,285 |
|
|
Total Colorado |
|
|
|
|
|
|
|
|
|
|
76,174,685 |
|
|
|
|
|
|
|
|
|
|
|
76,174,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
District of Columbia 0.9% (0.6% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
District of Columbia Water and Sewerage Authority, Subordinate Lien Public Utility Revenue
Bonds, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.125%, 10/01/24 FGIC Insured |
|
10/13 at 100.00 |
|
AA |
|
|
4,854,150 |
|
|
|
|
|
|
|
|
|
|
|
4,854,150 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.125%, 10/01/25 FGIC Insured |
|
10/13 at 100.00 |
|
AA |
|
|
4,821,650 |
|
|
|
|
|
|
|
|
|
|
|
4,821,650 |
|
|
2,670 |
|
|
|
|
|
|
|
2,670 |
|
|
Washington Convention Center Authority, District of Columbia, Senior Lien Dedicated Tax
Revenue Bonds, Series 2007, Residuals 1606, 1.947%, 10/01/30 AMBAC Insured (IF) |
|
10/16 at 100.00 |
|
AA |
|
|
1,255,194 |
|
|
|
|
|
|
|
|
|
|
|
1,255,194 |
|
|
|
12,670 |
|
|
|
|
|
|
|
12,670 |
|
|
Total District of Columbia |
|
|
|
|
|
|
|
|
|
|
10,930,994 |
|
|
|
|
|
|
|
|
|
|
|
10,930,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
29.9% (18.0% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,250 |
|
|
|
1,250 |
|
|
Bay County, Florida, Water System Revenue Bonds, Series 2005, 5.000%, 9/01/24 AMBAC Insured |
|
9/15 at 100.00 |
|
Aa3 |
|
|
|
|
|
|
1,154,525 |
|
|
|
|
|
|
|
1,154,525 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Brevard County Health Facilities Authority, Florida, Hospital Revenue Bonds, Holmes Regional
Medical Center Project, Series 1996, 5.625%, 10/01/14 MBIA Insured |
|
4/09 at 100.00 |
|
AA |
|
|
|
|
|
|
2,000,300 |
|
|
|
|
|
|
|
2,000,300 |
|
|
|
|
|
|
2,150 |
|
|
|
2,150 |
|
|
Broward County, Florida, Airport System Revenue Bonds, Series 2004L, 5.000%, 10/01/23
AMBAC Insured |
|
10/14 at 100.00 |
|
AA |
|
|
|
|
|
|
1,991,889 |
|
|
|
|
|
|
|
1,991,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Broward County, Florida, Water and Sewer Utility Revenue Bonds, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
5,000 |
|
|
5.000%, 10/01/21 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
4,920,400 |
|
|
|
|
|
|
|
4,920,400 |
|
|
|
|
|
|
4,500 |
|
|
|
4,500 |
|
|
5.000%, 10/01/24 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
4,327,785 |
|
|
|
|
|
|
|
4,327,785 |
|
|
|
|
|
|
975 |
|
|
|
975 |
|
|
Broward County Housing Finance Authority, Florida, GNMA Collateralized Multifamily Housing
Revenue Refunding Bonds, Pompano Oaks Apartments, Series 1997, 6.000%, 12/01/27 (Alternative
Minimum Tax) |
|
12/08 at 101.00 |
|
Aaa |
|
|
|
|
|
|
893,217 |
|
|
|
|
|
|
|
893,217 |
|
|
|
|
|
|
30 |
|
|
|
30 |
|
|
Broward County Housing Finance Authority, Florida, Single Family Mortgage Revenue Refunding
Bonds, Series 1999B, 5.250%, 4/01/31 MBIA Insured (Alternative Minimum Tax) |
|
4/09 at 101.00 |
|
BBB+ |
|
|
|
|
|
|
24,102 |
|
|
|
|
|
|
|
24,102 |
|
|
|
|
|
|
3,820 |
|
|
|
3,820 |
|
|
Broward County School Board, Florida, Certificates of Participation, Series 2003, 5.250%,
7/01/19 MBIA Insured |
|
7/13 at 100.00 |
|
AA |
|
|
|
|
|
|
3,790,471 |
|
|
|
|
|
|
|
3,790,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Clay County, Florida, Utility System Revenue Bonds, Series 2007: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,110 |
|
|
|
5,110 |
|
|
5.000%, 11/01/27 SYNCORA GTY Insured |
|
11/17 at 100.00 |
|
AAA |
|
|
|
|
|
|
4,834,162 |
|
|
|
|
|
|
|
4,834,162 |
|
|
|
|
|
|
12,585 |
|
|
|
12,585 |
|
|
5.000%, 11/01/32 SYNCORA GTY Insured |
|
11/17 at 100.00 |
|
AAA |
|
|
|
|
|
|
11,359,974 |
|
|
|
|
|
|
|
11,359,974 |
|
|
|
|
|
|
1,500 |
|
|
|
1,500 |
|
|
Collier County, Florida, Capital Improvement Revenue Bonds, Series 2005, 5.000%, 10/01/23
MBIA Insured |
|
10/14 at 100.00 |
|
AA |
|
|
|
|
|
|
1,452,435 |
|
|
|
|
|
|
|
1,452,435 |
|
|
|
|
|
|
3,000 |
|
|
|
3,000 |
|
|
Collier County, Florida, Gas Tax Revenue Bonds, Series 2005, 5.000%, 6/01/22 AMBAC Insured |
|
6/15 at 100.00 |
|
AA |
|
|
|
|
|
|
2,822,070 |
|
|
|
|
|
|
|
2,822,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collier County Housing Finance Authority, Florida, Multifamily Housing Revenue Bonds, Saxon
Manor Isles Project, Series 1998B: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,260 |
|
|
|
1,260 |
|
|
5.350%, 9/01/18 FSA Insured (Alternative Minimum Tax) |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,191,393 |
|
|
|
|
|
|
|
1,191,393 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
5.400%, 9/01/23 FSA Insured (Alternative Minimum Tax) |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
887,050 |
|
|
|
|
|
|
|
887,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Collier County Housing Finance Authority, Florida, Multifamily Housing Revenue Refunding
Bonds, Saxon Manor Isles Project, Series 1998A, Subseries 1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,040 |
|
|
|
1,040 |
|
|
5.350%, 9/01/18 FSA Insured (Alternative Minimum Tax) |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
983,372 |
|
|
|
|
|
|
|
983,372 |
|
|
|
|
|
|
1,400 |
|
|
|
1,400 |
|
|
5.400%, 9/01/23 FSA Insured (Alternative Minimum Tax) |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,241,870 |
|
|
|
|
|
|
|
1,241,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dade County Housing Finance Authority, Florida, Multifamily Mortgage Revenue Bonds, Siesta
Pointe Apartments Project, Series 1997A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,230 |
|
|
|
1,230 |
|
|
5.650%, 9/01/17 FSA Insured (Alternative Minimum Tax) |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,206,716 |
|
|
|
|
|
|
|
1,206,716 |
|
|
|
|
|
|
1,890 |
|
|
|
1,890 |
|
|
5.750%, 9/01/29 FSA Insured (Alternative Minimum Tax) (4) |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,653,334 |
|
|
|
|
|
|
|
1,653,334 |
|
|
|
|
|
|
1,100 |
|
|
|
1,100 |
|
|
Dade County, Florida, Seaport Revenue Refunding Bonds, Series 1995, 5.750%, 10/01/15
MBIA Insured |
|
4/09 at 100.00 |
|
AA |
|
|
|
|
|
|
1,102,420 |
|
|
|
|
|
|
|
1,102,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Davie, Florida, Water and Sewerage Revenue Refunding and Improvement Bonds, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
910 |
|
|
|
910 |
|
|
5.250%, 10/01/17 AMBAC Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
919,573 |
|
|
|
|
|
|
|
919,573 |
|
|
|
|
|
|
475 |
|
|
|
475 |
|
|
5.250%, 10/01/18 AMBAC Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
480,510 |
|
|
|
|
|
|
|
480,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deltona, Florida, Utility Systems Water and Sewer Revenue Bonds, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
1,250 |
|
|
|
1,250 |
|
|
5.250%, 10/01/22 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,204,525 |
|
|
|
|
|
|
|
1,204,525 |
|
|
|
|
|
|
1,095 |
|
|
|
1,095 |
|
|
5.000%, 10/01/23 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,020,704 |
|
|
|
|
|
|
|
1,020,704 |
|
|
|
|
|
|
1,225 |
|
|
|
1,225 |
|
|
5.000%, 10/01/24 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,131,177 |
|
|
|
|
|
|
|
1,131,177 |
|
|
|
|
|
|
1,555 |
|
|
|
1,555 |
|
|
DeSoto County, Florida, Capital Improvement Revenue Bonds, Series 2002, 5.250%, 10/01/20
MBIA Insured |
|
4/12 at 101.00 |
|
AA |
|
|
|
|
|
|
1,549,480 |
|
|
|
|
|
|
|
1,549,480 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Destin, Florida, Capital Improvement Revenue Bonds, Series 2002: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
5.000%, 8/01/27 MBIA Insured |
|
8/12 at 101.00 |
|
|
A2 |
|
|
|
|
|
|
|
995,350 |
|
|
|
|
|
|
|
995,350 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
5.125%, 8/01/31 MBIA Insured |
|
8/12 at 101.00 |
|
|
A2 |
|
|
|
|
|
|
|
929,520 |
|
|
|
|
|
|
|
929,520 |
|
|
|
|
|
|
5,325 |
|
|
|
5,325 |
|
|
Escambia County Housing Finance Authority, Florida, Dormitory Revenue Bonds, University of
West Florida Foundation Inc., Series 1999, 5.750%, 6/01/31 (Pre-refunded 6/01/09)
MBIA Insured |
|
6/09 at 101.00 |
|
AA (5) |
|
|
|
|
|
|
5,505,518 |
|
|
|
|
|
|
|
5,505,518 |
|
|
|
|
|
|
670 |
|
|
|
670 |
|
|
Escambia County Housing Finance Authority, Florida, Multi-County Single Family Mortgage
Revenue Bonds, Series 1999, 5.200%, 4/01/32 MBIA Insured (Alternative Minimum Tax) |
|
4/09 at 101.00 |
|
Aaa |
|
|
|
|
|
|
530,138 |
|
|
|
|
|
|
|
530,138 |
|
|
|
|
|
|
2,500 |
|
|
|
2,500 |
|
|
Escambia County School Board, Florida, Certificates of Participation, Series 2004, 5.000%,
2/01/22 MBIA Insured |
|
2/15 at 100.00 |
|
AA |
|
|
|
|
|
|
2,323,175 |
|
|
|
|
|
|
|
2,323,175 |
|
|
|
|
|
|
1,200 |
|
|
|
1,200 |
|
|
Flagler County, Florida, Capital Improvement Revenue Bonds, Series 2005, 5.000%, 10/01/30
MBIA Insured |
|
10/15 at 100.00 |
|
AA |
|
|
|
|
|
|
1,058,676 |
|
|
|
|
|
|
|
1,058,676 |
|
|
|
|
|
|
2,500 |
|
|
|
2,500 |
|
|
Flagler County School Board, Florida, Certificates of Participation, Master Lease Revenue
Program, Series 2005A, 5.000%, 8/01/30 FSA Insured |
|
8/15 at 100.00 |
|
AAA |
|
|
|
|
|
|
2,237,350 |
|
|
|
|
|
|
|
2,237,350 |
|
|
|
|
|
|
1,435 |
|
|
|
1,435 |
|
|
Florida Department of Environmental Protection, Florida Forever Revenue Bonds, Series 2003A,
-5.000%, 7/01/19 FGIC Insured |
|
7/13 at 101.00 |
|
AA |
|
|
|
|
|
|
1,444,758 |
|
|
|
|
|
|
|
1,444,758 |
|
|
|
|
|
|
3,945 |
|
|
|
3,945 |
|
|
Florida Governmental Utility Authority, Utility System Revenue Bonds, Citrus Project, Series
2003, 5.000%, 10/01/23 (Pre-refunded 10/01/13) AMBAC Insured |
|
10/13 at 100.00 |
|
AA (5) |
|
|
|
|
|
|
4,257,207 |
|
|
|
|
|
|
|
4,257,207 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Florida Governmental Utility Authority, Utility System Revenue Bonds, Golden Gate Project,
Series 1999, 5.000%, 7/01/29 AMBAC Insured |
|
7/09 at 101.00 |
|
Aa3 |
|
|
|
|
|
|
865,350 |
|
|
|
|
|
|
|
865,350 |
|
|
|
|
|
|
1,395 |
|
|
|
1,395 |
|
|
Florida Housing Finance Agency, Housing Revenue Bonds, Riverfront Apartments, Series 1997A,
6.250%, 4/01/37 AMBAC Insured (Alternative Minimum Tax) |
|
4/09 at 100.00 |
|
AA |
|
|
|
|
|
|
1,243,154 |
|
|
|
|
|
|
|
1,243,154 |
|
|
|
|
|
|
950 |
|
|
|
950 |
|
|
Florida Housing Finance Agency, Housing Revenue Bonds, Turtle Creek Apartments, Series
1996C-1, 6.100%, 5/01/16 AMBAC Insured (Alternative Minimum Tax) |
|
11/08 at 100.00 |
|
AA |
|
|
|
|
|
|
949,972 |
|
|
|
|
|
|
|
949,972 |
|
|
|
|
|
|
2,040 |
|
|
|
2,040 |
|
|
Florida Housing Finance Corporation, GNMA Collateralized Housing Revenue Bonds, Cobblestone
Apartments, Series 2000K-1, 6.000%, 12/01/33 (Alternative Minimum Tax) |
|
12/10 at 102.00 |
|
Aaa |
|
|
|
|
|
|
1,907,318 |
|
|
|
|
|
|
|
1,907,318 |
|
|
|
|
|
|
2,475 |
|
|
|
2,475 |
|
|
Florida Housing Finance Corporation, GNMA Collateralized Housing Revenue Bonds, Raintree
Apartments, Series 2000J-1, 5.950%, 3/01/35 (Alternative Minimum Tax) |
|
9/10 at 102.00 |
|
AAA |
|
|
|
|
|
|
2,135,059 |
|
|
|
|
|
|
|
2,135,059 |
|
|
|
|
|
|
3,495 |
|
|
|
3,495 |
|
|
Florida Housing Finance Corporation, Homeowner Mortgage Revenue Bonds, Series 2000-4 , 0.000%,
7/01/30 FSA Insured (Alternative Minimum Tax) |
|
1/10 at 24.65 |
|
Aaa |
|
|
|
|
|
|
808,079 |
|
|
|
|
|
|
|
808,079 |
|
|
|
|
|
|
4,750 |
|
|
|
4,750 |
|
|
Florida Housing Finance Corporation, Housing Revenue Bonds, Augustine Club Apartments, Series
2000D-1, 5.750%, 10/01/30 (Pre-refunded 10/01/10) MBIA Insured |
|
10/10 at 102.00 |
|
Aaa |
|
|
|
|
|
|
5,137,458 |
|
|
|
|
|
|
|
5,137,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida Municipal Loan Council, Revenue Bonds, Series 2000B: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,365 |
|
|
|
3,365 |
|
|
5.375%, 11/01/25 MBIA Insured |
|
11/10 at 101.00 |
|
AA |
|
|
|
|
|
|
3,190,828 |
|
|
|
|
|
|
|
3,190,828 |
|
|
|
|
|
|
3,345 |
|
|
|
3,345 |
|
|
5.375%, 11/01/30 MBIA Insured |
|
11/10 at 101.00 |
|
AA |
|
|
|
|
|
|
3,076,162 |
|
|
|
|
|
|
|
3,076,162 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Florida Municipal Loan Council, Revenue Bonds, Series 2001A, 5.250%, 11/01/18 MBIA Insured |
|
11/11 at 101.00 |
|
AA |
|
|
|
|
|
|
1,000,820 |
|
|
|
|
|
|
|
1,000,820 |
|
|
|
|
|
|
2,230 |
|
|
|
2,230 |
|
|
Florida Ports Financing Commission, Revenue Bonds, State Transportation Trust Fund
Intermodal Program, Series 1999, 5.500%, 10/01/23 FGIC Insured (Alternative Minimum Tax) |
|
10/09 at 101.00 |
|
AA+ |
|
|
|
|
|
|
1,934,391 |
|
|
|
|
|
|
|
1,934,391 |
|
|
|
|
|
|
940 |
|
|
|
940 |
|
|
Florida State Board of Education, Full Faith and Credit, Public Education Capital Outlay
Bonds, Series 2001C, 5.125%, 6/01/29 FGIC Insured |
|
6/11 at 101.00 |
|
AAA |
|
|
|
|
|
|
891,299 |
|
|
|
|
|
|
|
891,299 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Greater Orlando Aviation Authority, Florida, Airport Facilities Revenue Refunding Bonds,
Series 2003A, 5.000%, 10/01/17 FSA Insured |
|
10/13 at 100.00 |
|
AAA |
|
|
|
|
|
|
2,040,940 |
|
|
|
|
|
|
|
2,040,940 |
|
|
|
|
|
|
5,200 |
|
|
|
5,200 |
|
|
Gulf Breeze, Florida, Local Government Loan Program, Remarketed 6-1-2001, Series 1985E,
4.750%, 12/01/20 (Mandatory put 12/01/11) FGIC Insured |
|
12/11 at 101.00 |
|
|
N/R |
|
|
|
|
|
|
|
5,264,896 |
|
|
|
|
|
|
|
5,264,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Obligation/Limited (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,080 |
|
|
|
1,080 |
|
|
Gulf Breeze, Florida, Local Government Loan Program, Remarketed 6-3-1996, Series 1985B,
5.900%, 12/01/15 (Mandatory put 12/01/10) FGIC Insured |
|
12/08 at 100.00 |
|
|
N/R |
|
|
|
|
|
|
|
1,081,944 |
|
|
|
|
|
|
|
1,081,944 |
|
|
|
|
|
|
1,020 |
|
|
|
1,020 |
|
|
Gulf Breeze, Florida, Local Government Loan Program, Remarketed 6-3-1996, Series 1985C,
5.900%, 12/01/15 (Mandatory put 12/01/08) FGIC Insured |
|
12/08 at 100.00 |
|
|
N/R |
|
|
|
|
|
|
|
1,021,836 |
|
|
|
|
|
|
|
1,021,836 |
|
|
|
|
|
|
1,500 |
|
|
|
1,500 |
|
|
Gulf Breeze, Florida, Local Government Loan Program, Remarketed 7-3-2000, Series 1985E,
5.750%, 12/01/20 (Mandatory put 12/01/19) FGIC Insured |
|
12/10 at 101.00 |
|
Baa3 |
|
|
|
|
|
|
1,509,825 |
|
|
|
|
|
|
|
1,509,825 |
|
|
|
|
|
|
1,915 |
|
|
|
1,915 |
|
|
Halifax Hospital Medical Center, Florida, Revenue Bonds, Series 2006, 5.500%, 6/01/38
FSA Insured |
|
6/18 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,680,508 |
|
|
|
|
|
|
|
1,680,508 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Hillsborough County, Florida, Community Investment Tax Revenue Bonds, Series 2004, 5.000%,
5/01/23 AMBAC Insured |
|
11/13 at 101.00 |
|
AA+ |
|
|
|
|
|
|
1,951,660 |
|
|
|
|
|
|
|
1,951,660 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Hillsborough County, Florida, Revenue Refunding Bonds, Tampa Bay Arena, Series 2005, 5.000%,
10/01/25 FGIC Insured |
|
10/15 at 100.00 |
|
AA+ |
|
|
|
|
|
|
952,760 |
|
|
|
|
|
|
|
952,760 |
|
|
|
|
|
|
2,500 |
|
|
|
2,500 |
|
|
Hillsborough County Industrial Development Authority, Florida, Industrial Development Revenue
Bonds, University Community Hospital, Series 1994, 6.500%, 8/15/19 MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
|
|
|
|
2,764,450 |
|
|
|
|
|
|
|
2,764,450 |
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
Hillsborough County School Board, Florida, Certificates of Participation, Master Lease
Program, Series 2005A, 5.000%, 7/01/26 MBIA Insured |
|
7/15 at 100.00 |
|
AA |
|
|
952,560 |
|
|
|
|
|
|
|
|
|
|
|
952,560 |
|
|
|
|
|
|
6,000 |
|
|
|
6,000 |
|
|
Hillsborough County School Board, Florida, Certificates of Participation, Series 2003, 5.000%,
7/01/29 MBIA Insured |
|
7/13 at 100.00 |
|
AA |
|
|
|
|
|
|
5,603,760 |
|
|
|
|
|
|
|
5,603,760 |
|
|
|
|
|
|
8,000 |
|
|
|
8,000 |
|
|
Indian River County, Florida, Water and Sewer Revenue Bonds, Series 1993A, 5.250%, 9/01/24
FGIC Insured |
|
3/09 at 102.00 |
|
AA |
|
|
|
|
|
|
7,603,120 |
|
|
|
|
|
|
|
7,603,120 |
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
2,595 |
|
|
|
2,595 |
|
|
Indian River County School Board, Florida, Certificates of Participation, Series 2005, 5.000%,
7/01/22 MBIA Insured |
|
7/15 at 100.00 |
|
AA |
|
|
|
|
|
|
2,440,390 |
|
|
|
|
|
|
|
2,440,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Indian Trace Development District, Florida, Water Management Special Benefit Assessment Bonds,
Series 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
645 |
|
|
|
1,000 |
|
|
|
1,645 |
|
|
5.000%, 5/01/25 MBIA Insured |
|
5/15 at 102.00 |
|
|
A2 |
|
|
|
581,784 |
|
|
|
901,990 |
|
|
|
|
|
|
|
1,483,774 |
|
|
1,830 |
|
|
|
|
|
|
|
1,830 |
|
|
5.000%, 5/01/27 MBIA Insured |
|
5/15 at 102.00 |
|
|
A2 |
|
|
|
1,617,830 |
|
|
|
|
|
|
|
|
|
|
|
1,617,830 |
|
|
4,425 |
|
|
|
|
|
|
|
4,425 |
|
|
Jacksonville Economic Development Commission, Florida, Healthcare Facilities Revenue Bonds,
Mayo Clinic, Series 2001C, 5.500%, 11/15/36 MBIA Insured |
|
11/12 at 100.00 |
|
AA |
|
|
3,929,931 |
|
|
|
|
|
|
|
|
|
|
|
3,929,931 |
|
|
|
|
|
|
1,480 |
|
|
|
1,480 |
|
|
Jacksonville, Florida, Better Jacksonville Sales Tax Revenue Bonds, Series 2003, 5.250%,
10/01/20 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,492,032 |
|
|
|
|
|
|
|
1,492,032 |
|
|
|
|
|
|
3,290 |
|
|
|
3,290 |
|
|
Jacksonville, Florida, GNMA Collateralized Housing Revenue Refunding Bonds, Windermere Manor
Apartments, Series 1993A, 5.875%, 3/20/28 |
|
3/09 at 100.00 |
|
AAA |
|
|
|
|
|
|
3,330,105 |
|
|
|
|
|
|
|
3,330,105 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
JEA, Florida, Water and Sewerage System Revenue Bonds, Series 2004A, 5.000%, 10/01/14
FGIC Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,034,720 |
|
|
|
|
|
|
|
1,034,720 |
|
|
|
|
|
|
1,500 |
|
|
|
1,500 |
|
|
JEA, Florida, Water and Sewerage System Revenue Bonds, Series 2007B, 5.000%, 10/01/24
MBIA Insured |
|
10/14 at 100.00 |
|
AA |
|
|
|
|
|
|
1,425,645 |
|
|
|
|
|
|
|
1,425,645 |
|
|
|
|
|
|
1,450 |
|
|
|
1,450 |
|
|
Jupiter, Florida, Water Revenue Bonds, Series 2003, 5.000%, 10/01/22 AMBAC Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,428,511 |
|
|
|
|
|
|
|
1,428,511 |
|
|
|
|
|
|
1,280 |
|
|
|
1,280 |
|
|
Lake County School Board, Florida, Certificates of Participation, Series 2004A, 5.000%, |
|
7/14 at 100.00 |
|
AA |
|
|
|
|
|
|
1,214,234 |
|
|
|
|
|
|
|
1,214,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
7/01/21 AMBAC Insured
Lakeland, Florida, Utility Tax Revenue Bonds, Series 2003B: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,730 |
|
|
|
1,730 |
|
|
5.000%, 10/01/18 AMBAC Insured |
|
10/12 at 100.00 |
|
AA |
|
|
|
|
|
|
1,702,597 |
|
|
|
|
|
|
|
1,702,597 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
5.000%, 10/01/19 AMBAC Insured |
|
10/12 at 100.00 |
|
AA |
|
|
|
|
|
|
1,980,040 |
|
|
|
|
|
|
|
1,980,040 |
|
|
|
|
|
|
1,230 |
|
|
|
1,230 |
|
|
Lee County, Florida, Local Option Gas Tax Revenue Bonds, Series 2004, 5.000%, 10/01/20
FGIC Insured |
|
10/14 at 100.00 |
|
|
A3 |
|
|
|
|
|
|
|
1,198,709 |
|
|
|
|
|
|
|
1,198,709 |
|
|
1,505 |
|
|
|
|
|
|
|
1,505 |
|
|
Lee County, Florida, Transportation Facilities Revenue Bonds, Series 2004B, 5.000%, 10/01/21
AMBAC Insured |
|
10/14 at 100.00 |
|
AA |
|
|
1,468,579 |
|
|
|
|
|
|
|
|
|
|
|
1,468,579 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Lee Memorial Health System, Florida, Hospital Revenue Bonds, Series 2007A, 5.000%, 4/01/32
MBIA Insured |
|
4/17 at 100.00 |
|
AA |
|
|
|
|
|
|
833,130 |
|
|
|
|
|
|
|
833,130 |
|
|
|
|
|
|
3,000 |
|
|
|
3,000 |
|
|
Leesburg, Florida, Utility Revenue Bonds, Series 2007, 5.000%, 10/01/37 MBIA Insured |
|
10/17 at 100.00 |
|
AA |
|
|
|
|
|
|
2,539,740 |
|
|
|
|
|
|
|
2,539,740 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Manatee County, Florida, Public Utilities Revenue Bonds, Series 2003, 5.125%, 10/01/20
MBIA Insured |
|
10/13 at 100.00 |
|
Aa3 |
|
|
|
|
|
|
2,008,100 |
|
|
|
|
|
|
|
2,008,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Marco Island, Florida, Water Utility System Revenue Bonds, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,350 |
|
|
|
1,350 |
|
|
5.250%, 10/01/17 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,388,583 |
|
|
|
|
|
|
|
1,388,583 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
5.250%, 10/01/18 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,019,020 |
|
|
|
|
|
|
|
1,019,020 |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
5.000%, 10/01/27 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
1,889,980 |
|
|
|
|
|
|
|
|
|
|
|
1,889,980 |
|
|
|
|
|
|
5,615 |
|
|
|
5,615 |
|
|
Miami-Dade County, Florida, Aviation Revenue Bonds, Miami International Airport, Series 2002,
5.750%, 10/01/19 FGIC Insured (Alternative Minimum Tax) |
|
10/12 at 100.00 |
|
|
A2 |
|
|
|
|
|
|
|
5,217,739 |
|
|
|
|
|
|
|
5,217,739 |
|
|
35,920 |
|
|
|
|
|
|
|
35,920 |
|
|
5.375%, 10/01/32 FGIC Insured (Alternative Minimum Tax) |
|
10/12 at 100.00 |
|
|
A2 |
|
|
|
28,644,761 |
|
|
|
|
|
|
|
|
|
|
|
28,644,761 |
|
|
2,150 |
|
|
|
|
|
|
|
2,150 |
|
|
Miami-Dade County, Florida, Aviation Revenue Bonds, Miami International Airport, Series 2002A,
5.125%, 10/01/35 FSA Insured (Alternative Minimum Tax) |
|
10/12 at 100.00 |
|
AAA |
|
|
1,639,074 |
|
|
|
|
|
|
|
|
|
|
|
1,639,074 |
|
|
12,930 |
|
|
|
|
|
|
|
12,930 |
|
|
Miami-Dade County, Florida, Public Facilities Revenue Bonds, Jackson Health System, Series |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005A, 5.000%, 6/01/32 MBIA Insured |
|
12/15 at 100.00 |
|
AA |
|
|
10,957,529 |
|
|
|
|
|
|
|
|
|
|
|
10,957,529 |
|
|
5,320 |
|
|
|
|
|
|
|
5,320 |
|
|
Miami-Dade County, Florida, Public Facilities Revenue Bonds, Jackson Health System, Series |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005B, 5.000%, 6/01/25 MBIA Insured |
|
6/15 at 100.00 |
|
AA |
|
|
4,807,152 |
|
|
|
|
|
|
|
|
|
|
|
4,807,152 |
|
|
|
|
|
|
18,000 |
|
|
|
18,000 |
|
|
Miami-Dade County, Florida, Subordinate Special Obligation Bonds, Series 1997A, 0.000%,
10/01/21 MBIA Insured |
|
4/09 at 52.08 |
|
AA |
|
|
|
|
|
|
8,149,320 |
|
|
|
|
|
|
|
8,149,320 |
|
|
|
|
|
|
4,000 |
|
|
|
4,000 |
|
|
Miami-Dade County, Florida, Transit System Sales Surtax Revenue Bonds, Series 2008, 5.000%,
7/01/35 FSA Insured |
|
7/18 at 100.00 |
|
AAA |
|
|
|
|
|
|
3,523,800 |
|
|
|
|
|
|
|
3,523,800 |
|
|
|
|
|
|
1,425 |
|
|
|
1,425 |
|
|
Miami-Dade County Housing Finance Authority, Florida, Multifamily Mortgage Revenue Bonds,
Country Club Villas II Project, Series 2001-1A, 5.750%, 7/01/27
FSA Insured (Alternative Minimum Tax) |
|
6/11 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,269,347 |
|
|
|
|
|
|
|
1,269,347 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Miami-Dade County School Board, Florida, Certificates of Participation, Series 2006B, 5.000%,
11/01/31 AMBAC Insured |
|
11/16 at 100.00 |
|
AA |
|
|
|
|
|
|
1,752,240 |
|
|
|
|
|
|
|
1,752,240 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Miami-Dade County, Florida, Water and Sewer System Revenue Bonds, Series 2008B, 5.250%,
10/01/22 FSA Insured |
|
No Opt. Call |
|
AAA |
|
|
|
|
|
|
1,990,140 |
|
|
|
|
|
|
|
1,990,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern Palm Beach County Improvement District, Florida, Revenue Bonds, Water Control and
Improvement Development Unit 9B, Series 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,290 |
|
|
|
|
|
|
|
1,290 |
|
|
5.000%, 8/01/23 MBIA Insured |
|
8/15 at 102.00 |
|
AA |
|
|
1,186,116 |
|
|
|
|
|
|
|
|
|
|
|
1,186,116 |
|
|
2,145 |
|
|
|
|
|
|
|
2,145 |
|
|
5.000%, 8/01/29 MBIA Insured |
|
8/15 at 102.00 |
|
AA |
|
|
1,855,575 |
|
|
|
|
|
|
|
|
|
|
|
1,855,575 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Orange County School Board, Florida, Certificates of Participation, Series 2007A, 5.000%, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8/01/27 FGIC Insured |
|
8/17 at 100.00 |
|
AA |
|
|
|
|
|
|
879,040 |
|
|
|
|
|
|
|
879,040 |
|
|
|
|
|
|
3,180 |
|
|
|
3,180 |
|
|
Orange County, Florida, Sales Tax Revenue Bonds, Series 2002B, 5.125%, 1/01/19 FGIC Insured |
|
1/13 at 100.00 |
|
AA |
|
|
|
|
|
|
3,181,526 |
|
|
|
|
|
|
|
3,181,526 |
|
|
|
|
|
|
2,500 |
|
|
|
2,500 |
|
|
Orange
County, Florida, Tourist Development Tax Revenue Bonds, Series 2006, 5.000%, 10/01/31 SYNCORA GTY Insured |
|
10/16 at 100.00 |
|
|
A+ |
|
|
|
|
|
|
|
2,179,475 |
|
|
|
|
|
|
|
2,179,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Osceola County, Florida, Transportation Revenue Bonds, Osceola Parkway, Series 2004: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
2,500 |
|
|
5.000%, 4/01/21 MBIA Insured |
|
4/14 at 100.00 |
|
|
A2 |
|
|
|
|
|
|
|
2,461,300 |
|
|
|
|
|
|
|
2,461,300 |
|
|
2,320 |
|
|
|
5,500 |
|
|
|
7,820 |
|
|
5.000%, 4/01/23 MBIA Insured |
|
4/14 at 100.00 |
|
|
A2 |
|
|
|
2,166,022 |
|
|
|
5,134,965 |
|
|
|
|
|
|
|
7,300,987 |
|
|
|
|
|
|
1,750 |
|
|
|
1,750 |
|
|
Palm Bay, Florida, Utility System Revenue Bonds, Palm Bay Utility Corporation, Series 2003,
5.000%, 10/01/20 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,731,363 |
|
|
|
|
|
|
|
1,731,363 |
|
|
|
|
|
|
4,115 |
|
|
|
4,115 |
|
|
Palm Beach County, Florida, Administrative Complex Revenue Refunding Bonds, Series 1993,
5.250%, 6/01/11 FGIC Insured |
|
No Opt. Call |
|
AA |
|
|
|
|
|
|
4,174,462 |
|
|
|
|
|
|
|
4,174,462 |
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
4,000 |
|
|
|
4,000 |
|
|
Palm Beach County, Florida, Revenue Refunding Bonds, Criminal Justice Facilities, Series 1993,
5.375%, 6/01/10 FGIC Insured |
|
No Opt. Call |
|
AA |
|
|
|
|
|
|
4,104,400 |
|
|
|
|
|
|
|
4,104,400 |
|
|
|
|
|
|
1,065 |
|
|
|
1,065 |
|
|
Palm Beach County Housing Finance Authority, Florida, Multifamily Housing Revenue Bonds,
Westlake Apartments Phase II, Series 2002, 5.150%, 7/01/22 FSA Insured (Alternative
Minimum Tax) |
|
7/12 at 100.00 |
|
AAA |
|
|
|
|
|
|
930,299 |
|
|
|
|
|
|
|
930,299 |
|
|
|
|
|
|
2,150 |
|
|
|
2,150 |
|
|
Palm Beach County School Board, Florida, Certificates of Participation, Series 2004A, 5.000%,
8/01/24 FGIC Insured |
|
8/14 at 100.00 |
|
AA |
|
|
|
|
|
|
1,977,936 |
|
|
|
|
|
|
|
1,977,936 |
|
|
|
|
|
|
3,000 |
|
|
|
3,000 |
|
|
Palm Beach County School Board, Florida, Certificates of Participation, Series 2007E, 5.000%,
8/01/27 MBIA Insured |
|
8/17 at 100.00 |
|
AA |
|
|
|
|
|
|
2,708,520 |
|
|
|
|
|
|
|
2,708,520 |
|
|
|
|
|
|
8,000 |
|
|
|
8,000 |
|
|
Palm Beach County Solid Waste Authority, Florida, Revenue Bonds, Series 2002B, 0.000%,
10/01/14 AMBAC Insured |
|
No Opt. Call |
|
AA |
|
|
|
|
|
|
6,187,360 |
|
|
|
|
|
|
|
6,187,360 |
|
|
|
|
|
|
3,525 |
|
|
|
3,525 |
|
|
Palm Beach County Solid Waste Authority, Florida, Revenue Refunding Bonds, Series 1997A,
6.000%, 10/01/09 AMBAC Insured |
|
No Opt. Call |
|
AA |
|
|
|
|
|
|
3,651,054 |
|
|
|
|
|
|
|
3,651,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Palm Coast, Florida, Water Utility System Revenue Bonds, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
5.250%, 10/01/19 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,012,910 |
|
|
|
|
|
|
|
1,012,910 |
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
5.250%, 10/01/20 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
502,770 |
|
|
|
|
|
|
|
502,770 |
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
5.250%, 10/01/21 MBIA Insured |
|
10/13 at 100.00 |
|
AA |
|
|
|
|
|
|
499,510 |
|
|
|
|
|
|
|
499,510 |
|
|
2,225 |
|
|
|
|
|
|
|
2,225 |
|
|
Plantation, Florida, Non-Ad Valorem Revenue Refunding and Improvement Bonds, Series 2003,
5.000%, 8/15/18 FSA Insured |
|
8/13 at 100.00 |
|
Aaa |
|
|
2,251,277 |
|
|
|
|
|
|
|
|
|
|
|
2,251,277 |
|
|
|
|
|
|
1,170 |
|
|
|
1,170 |
|
|
Polk County, Florida, Utility System Revenue Bonds, Series 2004A, 5.000%, 10/01/24
FGIC Insured |
|
10/14 at 100.00 |
|
|
A2 |
|
|
|
|
|
|
|
1,075,803 |
|
|
|
|
|
|
|
1,075,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Port St. Lucie, Florida, Stormwater Utility System Revenue Refunding Bonds, Series 2002: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,190 |
|
|
|
1,190 |
|
|
5.250%, 5/01/15 MBIA Insured |
|
5/12 at 100.00 |
|
AA |
|
|
|
|
|
|
1,217,798 |
|
|
|
|
|
|
|
1,217,798 |
|
|
|
|
|
|
1,980 |
|
|
|
1,980 |
|
|
5.250%, 5/01/17 MBIA Insured |
|
5/12 at 100.00 |
|
AA |
|
|
|
|
|
|
1,996,276 |
|
|
|
|
|
|
|
1,996,276 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Port St. Lucie, Florida, Utility System Revenue Bonds, Series 2004, 5.000%, 9/01/21
MBIA Insured |
|
9/14 at 100.00 |
|
|
A2 |
|
|
|
|
|
|
|
947,540 |
|
|
|
|
|
|
|
947,540 |
|
|
|
|
|
|
1,300 |
|
|
|
1,300 |
|
|
Plantation, Florida, Non-Ad Valorem Revenue Refunding and Improvement Bonds, Series 2003,
5.000%, 8/15/21 FSA Insured |
|
8/13 at 100.00 |
|
Aaa |
|
|
|
|
|
|
1,279,408 |
|
|
|
|
|
|
|
1,279,408 |
|
|
|
|
|
|
1,000 |
|
|
|
1,000 |
|
|
Port Saint Lucie. Florida, Special Assessment Revenue Bonds, Southwest Annexation District 1B,
Series 2007, 5.000%, 7/01/33 MBIA Insured |
|
7/17 at 100.00 |
|
AA |
|
|
|
|
|
|
840,440 |
|
|
|
|
|
|
|
840,440 |
|
|
|
|
|
|
10,000 |
|
|
|
10,000 |
|
|
Port St. Lucie, Florida, Utility System Revenue Bonds, Series 2001, 0.000%, 9/01/29
(Pre-refunded 9/01/11) MBIA Insured |
|
9/11 at 34.97 |
|
AA (5) |
|
|
|
|
|
|
3,184,900 |
|
|
|
|
|
|
|
3,184,900 |
|
|
|
|
|
|
1,830 |
|
|
|
1,830 |
|
|
Port St. Lucie, Florida, Utility System Revenue Bonds, Series 2003, 5.000%, 9/01/21
(Pre-refunded 9/01/13) MBIA Insured |
|
9/13 at 100.00 |
|
AA (5) |
|
|
|
|
|
|
1,973,124 |
|
|
|
|
|
|
|
1,973,124 |
|
|
|
|
|
|
1,895 |
|
|
|
1,895 |
|
|
Reedy Creek Improvement District, Orange and Osceola Counties, Florida, General Obligation
Bonds, Series 2005B, 5.000%, 6/01/25 AMBAC Insured |
|
6/15 at 100.00 |
|
AA |
|
|
|
|
|
|
1,788,766 |
|
|
|
|
|
|
|
1,788,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sebring, Florida, Water and Wastewater Revenue Refunding Bonds, Series 2002: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,360 |
|
|
|
1,360 |
|
|
5.250%, 1/01/17 FGIC Insured |
|
1/13 at 100.00 |
|
AA |
|
|
|
|
|
|
1,373,573 |
|
|
|
|
|
|
|
1,373,573 |
|
|
|
|
|
|
770 |
|
|
|
770 |
|
|
5.250%, 1/01/18 FGIC Insured |
|
1/13 at 100.00 |
|
AA |
|
|
|
|
|
|
777,685 |
|
|
|
|
|
|
|
777,685 |
|
|
|
|
|
|
500 |
|
|
|
500 |
|
|
5.250%, 1/01/20 FGIC Insured |
|
1/13 at 100.00 |
|
AA |
|
|
|
|
|
|
498,290 |
|
|
|
|
|
|
|
498,290 |
|
|
|
|
|
|
3,500 |
|
|
|
3,500 |
|
|
School Board of Duval County, Florida, Certificates of Participation, Master Lease Program,
Series 2008, 5.000%, 7/01/33 FSA Insured |
|
7/17 at 100.00 |
|
Aaa |
|
|
|
|
|
|
3,072,475 |
|
|
|
|
|
|
|
3,072,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Seminole County, Florida, Water and Sewer Revenue Refunding and Improvement Bonds, Series 1992: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,715 |
|
|
|
5,715 |
|
|
6.000%, 10/01/19 MBIA Insured (ETM) |
|
No Opt. Call |
|
AAA |
|
|
|
|
|
|
6,330,620 |
|
|
|
|
|
|
|
6,330,620 |
|
|
|
|
|
|
3,530 |
|
|
|
3,530 |
|
|
6.000%, 10/01/19 MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
|
|
|
|
3,770,993 |
|
|
|
|
|
|
|
3,770,993 |
|
|
|
|
|
|
1,300 |
|
|
|
1,300 |
|
|
Sunrise, Florida, Utility System Revenue Refunding Bonds, Series 1996, 5.800%, 10/01/11
AMBAC Insured |
|
4/09 at 100.00 |
|
AA |
|
|
|
|
|
|
1,302,340 |
|
|
|
|
|
|
|
1,302,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
St. Lucie County, Florida, Utility System Revenue Refunding Bonds, Series 1993: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
5,000 |
|
|
5.500%, 10/01/15 FGIC Insured (ETM) |
|
No Opt. Call |
|
|
N/R |
(5) |
|
|
|
|
|
|
5,377,800 |
|
|
|
|
|
|
|
5,377,800 |
|
|
|
|
|
|
1,200 |
|
|
|
1,200 |
|
|
5.500%, 10/01/21 FGIC Insured (ETM) |
|
No Opt. Call |
|
|
N/R |
(5) |
|
|
|
|
|
|
1,260,624 |
|
|
|
|
|
|
|
1,260,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Guaranteed (5) (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,260 |
|
|
|
4,260 |
|
|
St. Lucie County School Board, Florida, Certificates of Participation, Master Lease Program,
Series 2004A, 5.000%, 7/01/24 FSA Insured |
|
7/14 at 100.00 |
|
AAA |
|
|
|
|
|
|
4,016,584 |
|
|
|
|
|
|
|
4,016,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
St. Petersburg, Florida, Sales Tax Revenue Bonds, Professional Sports Facility, Series 2003: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,475 |
|
|
|
1,475 |
|
|
5.125%, 10/01/20 FSA Insured |
|
10/13 at 100.00 |
|
Aaa |
|
|
|
|
|
|
1,480,974 |
|
|
|
|
|
|
|
1,480,974 |
|
|
|
|
|
|
1,555 |
|
|
|
1,555 |
|
|
5.125%, 10/01/21 FSA Insured |
|
10/13 at 100.00 |
|
Aaa |
|
|
|
|
|
|
1,548,391 |
|
|
|
|
|
|
|
1,548,391 |
|
|
|
|
|
|
2,500 |
|
|
|
2,500 |
|
|
Tallahassee, Florida, Energy System Revenue Bonds, Series 2005, 5.000%, 10/01/29 MBIA Insured |
|
10/15 at 100.00 |
|
AA |
|
|
|
|
|
|
2,342,725 |
|
|
|
|
|
|
|
2,342,725 |
|
|
|
|
|
|
1,245 |
|
|
|
1,245 |
|
|
Tamarac, Florida, Sales Tax Revenue Bonds, Series 2002, 5.000%, 4/01/22 FGIC Insured |
|
4/12 at 100.00 |
|
|
A+ |
|
|
|
|
|
|
|
1,209,405 |
|
|
|
|
|
|
|
1,209,405 |
|
|
|
|
|
|
1,500 |
|
|
|
1,500 |
|
|
Tampa, Florida, Healthcare System Revenue Bonds, Allegany Health System St. Josephs
Hospital, Series 1993, 5.125%, 12/01/23 MBIA Insured (ETM) |
|
12/08 at 100.00 |
|
AA (5) |
|
|
|
|
|
|
1,520,595 |
|
|
|
|
|
|
|
1,520,595 |
|
|
|
|
|
|
10,255 |
|
|
|
10,255 |
|
|
Tampa, Florida, Revenue Bonds, University of Tampa, Series 2006, 5.000%, 4/01/35 CIFG Insured |
|
4/16 at 100.00 |
|
|
N/R |
|
|
|
|
|
|
|
8,458,427 |
|
|
|
|
|
|
|
8,458,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care 3.9% (2.5% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,390 |
|
|
|
1,390 |
|
|
Venice, Florida, General Obligation Bonds, Series 2004, 5.000%, 2/01/24 AMBAC Insured |
|
2/14 at 100.00 |
|
AA |
|
|
|
|
|
|
1,322,891 |
|
|
|
|
|
|
|
1,322,891 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Village Center Community Development District, Florida, Utility Revenue Bonds, Series 2003,
5.250%, 10/01/23 MBIA Insured |
|
10/13 at 101.00 |
|
AA |
|
|
|
|
|
|
1,947,480 |
|
|
|
|
|
|
|
1,947,480 |
|
|
|
|
|
|
2,000 |
|
|
|
2,000 |
|
|
Volusia County, Florida, Gas Tax Revenue Bonds, Series 2004, 5.000%, 10/01/21 FSA Insured |
|
10/14 at 100.00 |
|
AAA |
|
|
|
|
|
|
1,968,160 |
|
|
|
|
|
|
|
1,968,160 |
|
|
|
|
|
|
6,000 |
|
|
|
6,000 |
|
|
Volusia County, Florida, School Board Certificates of Participation, Series 2007, Trust 1035,
6.906%, 8/01/32 FSA Insured (IF) |
|
8/17 at 100.00 |
|
Aa3 |
|
|
|
|
|
|
4,541,160 |
|
|
|
|
|
|
|
4,541,160 |
|
|
|
|
|
|
1,785 |
|
|
|
1,785 |
|
|
Volusia County, Florida, Tax Revenue Bonds, Tourist Development, Series 2004, 5.000%,
12/01/24 FSA Insured |
|
12/14 at 100.00 |
|
Aaa |
|
|
|
|
|
|
1,695,929 |
|
|
|
|
|
|
|
1,695,929 |
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
4,275 |
|
|
|
4,275 |
|
|
Volusia County School Board, Florida, Certificates of Participation, Series 2005B, 5.000%,
8/01/24 FSA Insured |
|
8/15 at 100.00 |
|
Aaa |
|
|
|
|
|
|
4,021,322 |
|
|
|
|
|
|
|
4,021,322 |
|
|
|
75,705 |
|
|
|
324,835 |
|
|
|
400,540 |
|
|
Total Florida |
|
|
|
|
|
|
|
|
|
|
63,948,170 |
|
|
|
291,340,255 |
|
|
|
|
|
|
|
355,288,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgia 0.9% (0.5% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
Atlanta, Georgia, Water and Wastewater Revenue Bonds, Series 2004, 5.000%, 11/01/22
FSA Insured |
|
11/14 at 100.00 |
|
AAA |
|
|
977,660 |
|
|
|
|
|
|
|
|
|
|
|
977,660 |
|
|
1,520 |
|
|
|
|
|
|
|
1,520 |
|
|
College Park Business and Industrial Development Authority, Georgia, Revenue Bonds, Public
Safety Project, Series 2004, 5.250%, 9/01/23 MBIA Insured |
|
9/14 at 102.00 |
|
AA |
|
|
1,510,606 |
|
|
|
|
|
|
|
|
|
|
|
1,510,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fulton County Development Authority, Georgia, Revenue Bonds, Georgia Tech Molecular Science
Building, Series 2004: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,695 |
|
|
|
|
|
|
|
1,695 |
|
|
5.250%, 5/01/19 MBIA Insured |
|
5/14 at 100.00 |
|
AA |
|
|
1,735,595 |
|
|
|
|
|
|
|
|
|
|
|
1,735,595 |
|
|
1,135 |
|
|
|
|
|
|
|
1,135 |
|
|
5.250%, 5/01/20 MBIA Insured |
|
5/14 at 100.00 |
|
AA |
|
|
1,152,854 |
|
|
|
|
|
|
|
|
|
|
|
1,152,854 |
|
|
4,500 |
|
|
|
|
|
|
|
4,500 |
|
|
5.000%, 5/01/36 MBIA Insured |
|
5/14 at 100.00 |
|
AA |
|
|
4,042,215 |
|
|
|
|
|
|
|
|
|
|
|
4,042,215 |
|
|
1,250 |
|
|
|
|
|
|
|
1,250 |
|
|
Glynn-Brunswick Memorial Hospital Authority, Georgia, Revenue Bonds, Southeast Georgia Health
Systems, Series 1996, 5.250%, 8/01/13 MBIA Insured |
|
2/09 at 100.00 |
|
AA |
|
|
1,250,025 |
|
|
|
|
|
|
|
|
|
|
|
1,250,025 |
|
|
|
11,100 |
|
|
|
|
|
|
|
11,100 |
|
|
Total Georgia |
|
|
|
|
|
|
|
|
|
|
10,668,955 |
|
|
|
|
|
|
|
|
|
|
|
10,668,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Idaho 0.2% (0.1% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
235 |
|
|
|
|
|
|
|
235 |
|
|
Idaho Housing Agency, Single Family Mortgage Senior Bonds, Series 1994B-1, 6.750%, 7/01/22 |
|
No Opt. Call |
|
Aa1 |
|
|
243,606 |
|
|
|
|
|
|
|
|
|
|
|
243,606 |
|
|
195 |
|
|
|
|
|
|
|
195 |
|
|
Idaho Housing Agency, Single Family Mortgage Senior Bonds, Series 1994B-2, 6.900%, 7/01/26
(Alternative Minimum Tax) |
|
No Opt. Call |
|
Aa1 |
|
|
200,060 |
|
|
|
|
|
|
|
|
|
|
|
200,060 |
|
|
280 |
|
|
|
|
|
|
|
280 |
|
|
Idaho Housing Agency, Single Family Mortgage Senior Bonds, Series 1995B, 6.600%, 7/01/27
(Alternative Minimum Tax) |
|
1/09 at 100.00 |
|
Aaa |
|
|
285,452 |
|
|
|
|
|
|
|
|
|
|
|
285,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Idaho Housing and Finance Association, Grant and Revenue Anticipation Bonds, Federal Highway
Trust Funds, Series 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
5.000%, 7/15/23 MBIA Insured |
|
7/16 at 100.00 |
|
Aa3 |
|
|
1,006,920 |
|
|
|
|
|
|
|
|
|
|
|
1,006,920 |
|
|
1,065 |
|
|
|
|
|
|
|
1,065 |
|
|
5.000%, 7/15/24 MBIA Insured |
|
7/16 at 100.00 |
|
Aa3 |
|
|
1,068,302 |
|
|
|
|
|
|
|
|
|
|
|
1,068,302 |
|
|
|
2,775 |
|
|
|
|
|
|
|
2,775 |
|
|
Total Idaho |
|
|
|
|
|
|
|
|
|
|
2,804,340 |
|
|
|
|
|
|
|
|
|
|
|
2,804,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Illinois 4.9% (2.9% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050 |
|
|
|
|
|
|
|
1,050 |
|
|
Bedford Park, Illinois, General Obligation Bonds, Series 2004A, 5.250%, 12/15/20 FSA Insured |
|
12/14 at 100.00 |
|
AAA |
|
|
1,071,399 |
|
|
|
|
|
|
|
|
|
|
|
1,071,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago, Illinois, Second Lien Passenger Facility Charge Revenue Refunding Bonds, OHare
International Airport, Series 2001E: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,615 |
|
|
|
|
|
|
|
4,615 |
|
|
5.500%, 1/01/17 AMBAC Insured (Alternative Minimum Tax) |
|
1/11 at 101.00 |
|
AA |
|
|
4,384,481 |
|
|
|
|
|
|
|
|
|
|
|
4,384,481 |
|
|
4,870 |
|
|
|
|
|
|
|
4,870 |
|
|
5.500%, 1/01/18 AMBAC Insured (Alternative Minimum Tax) |
|
1/11 at 101.00 |
|
AA |
|
|
4,562,703 |
|
|
|
|
|
|
|
|
|
|
|
4,562,703 |
|
|
7,200 |
|
|
|
|
|
|
|
7,200 |
|
|
Chicago, Illinois, Third Lien General Airport Revenue Bonds, OHare International Airport,
Series 2005A, 5.250%, 1/01/24 MBIA Insured |
|
1/16 at 100.00 |
|
AA |
|
|
6,838,344 |
|
|
|
|
|
|
|
|
|
|
|
6,838,344 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Illinois Development Finance Authority, Revenue Bonds, Provena Health, Series 1998A, 5.500%,
5/15/21 MBIA Insured |
|
11/08 at 101.00 |
|
AA |
|
|
9,260,100 |
|
|
|
|
|
|
|
|
|
|
|
9,260,100 |
|
|
2,095 |
|
|
|
|
|
|
|
2,095 |
|
|
Illinois Educational Facilities Authority, Revenue Bonds, Robert Morris College, Series 2000,
5.800%, 6/01/30 MBIA Insured |
|
12/08 at 100.00 |
|
|
A2 |
|
|
|
1,983,986 |
|
|
|
|
|
|
|
|
|
|
|
1,983,986 |
|
|
22,510 |
|
|
|
|
|
|
|
22,510 |
|
|
Illinois, General Obligation Bonds, Illinois FIRST Program, Series 2002, 5.125%, 2/01/27
FGIC Insured |
|
2/12 at 100.00 |
|
AA |
|
|
21,999,473 |
|
|
|
|
|
|
|
|
|
|
|
21,999,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Schaumburg, Illinois, General Obligation Bonds, Series 2004B: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,260 |
|
|
|
|
|
|
|
4,260 |
|
|
5.000%, 12/01/22 FGIC Insured |
|
12/14 at 100.00 |
|
AA+ |
|
|
4,235,122 |
|
|
|
|
|
|
|
|
|
|
|
4,235,122 |
|
|
2,365 |
|
|
|
|
|
|
|
2,365 |
|
|
5.000%, 12/01/23 FGIC Insured |
|
12/14 at 100.00 |
|
AA+ |
|
|
2,340,215 |
|
|
|
|
|
|
|
|
|
|
|
2,340,215 |
|
|
4,000 |
|
|
|
|
|
|
|
4,000 |
|
|
Southwestern Illinois Development Authority, School Revenue Bonds, Triad School District 2,
Madison County, Illinois, Series 2006, 0.000%, 10/01/25 MBIA Insured |
|
No Opt. Call |
|
AA |
|
|
1,421,560 |
|
|
|
|
|
|
|
|
|
|
|
1,421,560 |
|
|
|
62,965 |
|
|
|
|
|
|
|
62,965 |
|
|
Total Illinois |
|
|
|
|
|
|
|
|
|
|
58,097,383 |
|
|
|
|
|
|
|
|
|
|
|
58,097,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indiana 3.2% (2.0% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,030 |
|
|
|
|
|
|
|
2,030 |
|
|
Decatur Township-Marion County Multi-School Building Corporation, Indiana, First Mortgage
Bonds, Series 2003, 5.000%, 7/15/20 (Pre-refunded 7/15/13) FGIC Insured |
|
7/13 at 100.00 |
|
AA+ (5) |
|
|
2,185,782 |
|
|
|
|
|
|
|
|
|
|
|
2,185,782 |
|
|
8,000 |
|
|
|
|
|
|
|
8,000 |
|
|
Indiana Municipal Power Agency, Power Supply Revenue Bonds, Series 2007A, 5.000%, 1/01/42
MBIA Insured |
|
1/17 at 100.00 |
|
AA |
|
|
6,535,920 |
|
|
|
|
|
|
|
|
|
|
|
6,535,920 |
|
|
20,000 |
|
|
|
|
|
|
|
20,000 |
|
|
Indianapolis Local Public Improvement Bond Bank, Indiana, Series 1999E, 0.000%, 2/01/28
AMBAC Insured |
|
No Opt. Call |
|
AA |
|
|
6,220,400 |
|
|
|
|
|
|
|
|
|
|
|
6,220,400 |
|
|
3,250 |
|
|
|
|
|
|
|
3,250 |
|
|
Indianapolis Local Public Improvement Bond Bank, Indiana, Waterworks Project, Series 2002A,
5.250%, 7/01/33 (Pre-refunded 7/01/12) MBIA Insured |
|
7/12 at 100.00 |
|
AAA |
|
|
3,492,028 |
|
|
|
|
|
|
|
|
|
|
|
3,492,028 |
|
|
1,340 |
|
|
|
|
|
|
|
1,340 |
|
|
Monroe-Gregg Grade School Building Corporation, Morgan County, Indiana, First Mortgage Bonds,
Series 2004, 5.000%, 1/15/25 (Pre-refunded 1/15/14) FSA Insured |
|
1/14 at 100.00 |
|
AAA |
|
|
1,436,346 |
|
|
|
|
|
|
|
|
|
|
|
1,436,346 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
Noblesville Redevelopment Authority, Indiana, Economic Development Lease Rental Bonds, Exit 10
Project, Series 2003, 5.000%, 1/15/28 AMBAC Insured |
|
7/13 at 100.00 |
|
AA |
|
|
4,728,050 |
|
|
|
|
|
|
|
|
|
|
|
4,728,050 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Purdue University, Indiana, Student Fee Bonds, Series 2002O, 5.000%, 7/01/19 MBIA Insured |
|
1/12 at 100.00 |
|
Aa1 |
|
|
10,066,200 |
|
|
|
|
|
|
|
|
|
|
|
10,066,200 |
|
|
3,705 |
|
|
|
|
|
|
|
3,705 |
|
|
Whitley County Middle School Building Corporation, Columbia City, Indiana, First Mortgage
Bonds, Series 2003, 5.000%, 7/15/16 (Pre-refunded 7/15/13) FSA Insured |
|
7/13 at 100.00 |
|
AAA |
|
|
3,989,322 |
|
|
|
|
|
|
|
|
|
|
|
3,989,322 |
|
|
|
53,325 |
|
|
|
|
|
|
|
53,325 |
|
|
Total Indiana |
|
|
|
|
|
|
|
|
|
|
38,654,048 |
|
|
|
|
|
|
|
|
|
|
|
38,654,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kansas 1.2% (0.7% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,055 |
|
|
|
|
|
|
|
2,055 |
|
|
Kansas Turnpike Authority, Revenue Bonds, Series 2004A-2, 5.000%, 9/01/23 FSA Insured |
|
9/14 at 101.00 |
|
AAA |
|
|
2,069,426 |
|
|
|
|
|
|
|
|
|
|
|
2,069,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Neosho County Unified School District 413, Kansas, General Obligation Bonds, Series 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,145 |
|
|
|
|
|
|
|
2,145 |
|
|
5.000%, 9/01/27 FSA Insured |
|
9/14 at 100.00 |
|
Aaa |
|
|
2,144,850 |
|
|
|
|
|
|
|
|
|
|
|
2,144,850 |
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
4,835 |
|
|
|
|
|
|
|
4,835 |
|
|
5.000%, 9/01/29 FSA Insured |
|
9/14 at 100.00 |
|
Aaa |
|
|
4,791,437 |
|
|
|
|
|
|
|
|
|
|
|
4,791,437 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
University of Kansas Hospital Authority, Health Facilities Revenue Bonds, KU Health System,
Series 1999A, 5.650%, 9/01/29 (Pre-refunded 9/01/09) AMBAC Insured |
|
9/09 at 100.00 |
|
AAA |
|
|
5,165,800 |
|
|
|
|
|
|
|
|
|
|
|
5,165,800 |
|
|
|
14,035 |
|
|
|
|
|
|
|
14,035 |
|
|
Total Kansas |
|
|
|
|
|
|
|
|
|
|
14,171,513 |
|
|
|
|
|
|
|
|
|
|
|
14,171,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kentucky 2.0% (1.2% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,870 |
|
|
|
|
|
|
|
3,870 |
|
|
Kenton County School District Finance Corporation, Kentucky, School Building Revenue Bonds,
Series 2004, 5.000%, 6/01/20 MBIA Insured |
|
6/14 at 100.00 |
|
Aa3 |
|
|
3,773,560 |
|
|
|
|
|
|
|
|
|
|
|
3,773,560 |
|
|
7,500 |
|
|
|
|
|
|
|
7,500 |
|
|
Kentucky Turnpike Authority, Economic Development Road Revenue Bonds, Revitalization Project,
Series 2006B, 5.000%, 7/01/25 AMBAC Insured |
|
7/16 at 100.00 |
|
AA+ |
|
|
7,317,300 |
|
|
|
|
|
|
|
|
|
|
|
7,317,300 |
|
|
12,980 |
|
|
|
|
|
|
|
12,980 |
|
|
Louisville and Jefferson County Metropolitan Sewer District, Kentucky, Sewer and Drainage
System Revenue Bonds, Series 2001A, 5.500%, 5/15/34 MBIA Insured |
|
11/11 at 101.00 |
|
AA |
|
|
12,598,648 |
|
|
|
|
|
|
|
|
|
|
|
12,598,648 |
|
|
|
24,350 |
|
|
|
|
|
|
|
24,350 |
|
|
Total Kentucky |
|
|
|
|
|
|
|
|
|
|
23,689,508 |
|
|
|
|
|
|
|
|
|
|
|
23,689,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louisiana 5.0% (3.0% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
DeSoto Parish, Louisiana, Pollution Control Revenue Refunding Bonds, Cleco Utility Group Inc.
Project, Series 1999, 5.875%, 9/01/29 AMBAC Insured |
|
9/09 at 102.00 |
|
AA |
|
|
5,027,350 |
|
|
|
|
|
|
|
|
|
|
|
5,027,350 |
|
|
3,025 |
|
|
|
|
|
|
|
3,025 |
|
|
Lafayette City and Parish, Louisiana, Utilities Revenue Bonds, Series 2004, 5.250%, 11/01/22
MBIA Insured |
|
11/14 at 100.00 |
|
AA |
|
|
3,022,036 |
|
|
|
|
|
|
|
|
|
|
|
3,022,036 |
|
|
5,140 |
|
|
|
|
|
|
|
5,140 |
|
|
Louisiana Public Facilities Authority, Revenue Bonds, Baton Rouge General Hospital, Series
2004, 5.250%, 7/01/24 MBIA Insured |
|
7/14 at 100.00 |
|
AA |
|
|
4,821,012 |
|
|
|
|
|
|
|
|
|
|
|
4,821,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Louisiana State, Gasoline and Fuels Tax Revenue Bonds, Series 2005A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,400 |
|
|
|
|
|
|
|
2,400 |
|
|
5.000%, 5/01/25 FGIC Insured |
|
5/15 at 100.00 |
|
AA |
|
|
2,301,072 |
|
|
|
|
|
|
|
|
|
|
|
2,301,072 |
|
|
4,415 |
|
|
|
|
|
|
|
4,415 |
|
|
5.000%, 5/01/26 FGIC Insured |
|
5/15 at 100.00 |
|
AA |
|
|
4,216,678 |
|
|
|
|
|
|
|
|
|
|
|
4,216,678 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.000%, 5/01/27 FGIC Insured |
|
5/15 at 100.00 |
|
AA |
|
|
4,739,850 |
|
|
|
|
|
|
|
|
|
|
|
4,739,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Louisiana State, Gasoline and Fuels Tax Revenue Bonds, Series 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,300 |
|
|
|
|
|
|
|
3,300 |
|
|
4.750%, 5/01/39 FSA Insured (UB) |
|
5/16 at 100.00 |
|
AAA |
|
|
2,678,841 |
|
|
|
|
|
|
|
|
|
|
|
2,678,841 |
|
|
35,725 |
|
|
|
|
|
|
|
35,725 |
|
|
4.500%, 5/01/41 FGIC Insured (UB) |
|
5/16 at 100.00 |
|
Aa3 |
|
|
27,390,000 |
|
|
|
|
|
|
|
|
|
|
|
27,390,000 |
|
|
38 |
|
|
|
|
|
|
|
38 |
|
|
Louisiana State, Gasoline Tax Revenue Bonds, Series 2006, Residuals 660-1, 10.855%, 5/01/41
FGIC Insured (IF) |
|
5/16 at 100.00 |
|
Aa3 |
|
|
2,559 |
|
|
|
|
|
|
|
|
|
|
|
2,559 |
|
|
4,950 |
|
|
|
|
|
|
|
4,950 |
|
|
Orleans Levee District, Louisiana, Levee District General Obligation Bonds, Series 1986,
5.950%, 11/01/15 FSA Insured |
|
12/08 at 100.00 |
|
AAA |
|
|
4,956,237 |
|
|
|
|
|
|
|
|
|
|
|
4,956,237 |
|
|
|
68,993 |
|
|
|
|
|
|
|
68,993 |
|
|
Total Louisiana |
|
|
|
|
|
|
|
|
|
|
59,155,635 |
|
|
|
|
|
|
|
|
|
|
|
59,155,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maine
0.3% (0.1% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
|
Maine Health and Higher Educational Facilities Authority, Revenue Bonds, Series 2003B, 5.000%,
7/01/28 FSA Insured |
|
7/13 at 100.00 |
|
AAA |
|
|
2,873,010 |
|
|
|
|
|
|
|
|
|
|
|
2,873,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maryland 0.4% (0.2% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,345 |
|
|
|
|
|
|
|
5,345 |
|
|
Baltimore, Maryland, Senior Lien Convention Center Hotel Revenue Bonds, Series 2006A, 5.250%,
9/01/28 SYNCORA GTY Insured |
|
9/16 at 100.00 |
|
BBB- |
|
|
4,459,761 |
|
|
|
|
|
|
|
|
|
|
|
4,459,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Massachusetts 4.9% (2.9% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
|
|
|
|
|
|
|
22,500 |
|
|
Massachusetts Development Finance Authority, Revenue Bonds, WGBH Educational Foundation,
Series 2002A, 5.375%, 1/01/42 (Pre-refunded 1/01/12) AMBAC Insured |
|
1/12 at 101.00 |
|
AA (5) |
|
|
24,345,675 |
|
|
|
|
|
|
|
|
|
|
|
24,345,675 |
|
|
11,000 |
|
|
|
|
|
|
|
11,000 |
|
|
Massachusetts School Building Authority, Dedicated Sales Tax Revenue Bonds, Series 2005A,
5.000%, 8/15/23 FSA Insured (UB) |
|
8/15 at 100.00 |
|
AAA |
|
|
11,043,230 |
|
|
|
|
|
|
|
|
|
|
|
11,043,230 |
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
Massachusetts, Special Obligation Dedicated Tax Revenue Bonds, Series 2004, 5.250%, 1/01/23
(Pre-refunded 1/01/14) FGIC Insured |
|
1/14 at 100.00 |
|
|
A |
(5) |
|
|
15,600,150 |
|
|
|
|
|
|
|
|
|
|
|
15,600,150 |
|
|
7,255 |
|
|
|
|
|
|
|
7,255 |
|
|
Massachusetts Water Resources Authority, General Revenue Bonds, 4.500%, 8/01/46 FSA
Insured (UB) |
|
2/17 at 100.00 |
|
AAA |
|
|
5,597,015 |
|
|
|
|
|
|
|
|
|
|
|
5,597,015 |
|
|
1,500 |
|
|
|
|
|
|
|
1,500 |
|
|
University of Massachusetts Building Authority, Senior Lien Project Revenue Bonds, Series
2004-1, 5.375%, 11/01/20 (Pre-refunded 11/01/14) AMBAC Insured |
|
11/14 at 100.00 |
|
AA (5) |
|
|
1,655,460 |
|
|
|
|
|
|
|
|
|
|
|
1,655,460 |
|
|
|
57,255 |
|
|
|
|
|
|
|
57,255 |
|
|
Total Massachusetts |
|
|
|
|
|
|
|
|
|
|
58,241,530 |
|
|
|
|
|
|
|
|
|
|
|
58,241,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michigan 6.2% (3.7% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,490 |
|
|
|
|
|
|
|
5,490 |
|
|
Detroit City School District, Wayne County, Michigan, Unlimited Tax School Building and Site
Improvement Bonds, Series 2001A, 6.000%, 5/01/29 FSA Insured (UB) |
|
No Opt. Call |
|
AAA |
|
|
5,839,713 |
|
|
|
|
|
|
|
|
|
|
|
5,839,713 |
|
|
6,000 |
|
|
|
|
|
|
|
6,000 |
|
|
Detroit, Michigan, General Obligation Bonds, Series 2001A-1, 5.375%, 4/01/18 MBIA Insured |
|
10/11 at 100.00 |
|
AA |
|
|
5,962,560 |
|
|
|
|
|
|
|
|
|
|
|
5,962,560 |
|
|
7,420 |
|
|
|
|
|
|
|
7,420 |
|
|
Detroit, Michigan, Senior Lien Water Supply System Revenue Bonds, Series 1997A, 5.000%,
7/01/27 MBIA Insured |
|
1/09 at 100.00 |
|
AA |
|
|
6,700,928 |
|
|
|
|
|
|
|
|
|
|
|
6,700,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Detroit, Michigan, Sewerage Disposal System Revenue Bonds, Series 1999A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,825 |
|
|
|
|
|
|
|
15,825 |
|
|
5.750%, 7/01/26 (Pre-refunded 1/01/10) FGIC Insured |
|
1/10 at 101.00 |
|
Aaa |
|
|
16,563,078 |
|
|
|
|
|
|
|
|
|
|
|
16,563,078 |
|
|
20,000 |
|
|
|
|
|
|
|
20,000 |
|
|
5.875%, 7/01/27 (Pre-refunded 1/01/10) FGIC Insured |
|
1/10 at 101.00 |
|
Aaa |
|
|
20,961,200 |
|
|
|
|
|
|
|
|
|
|
|
20,961,200 |
|
|
1,085 |
|
|
|
|
|
|
|
1,085 |
|
|
Grand Rapids Community College, Kent County, Michigan, General Obligation Refunding Bonds,
Series 2003, 5.250%, 5/01/20 AMBAC Insured |
|
5/13 at 100.00 |
|
AA |
|
|
1,101,915 |
|
|
|
|
|
|
|
|
|
|
|
1,101,915 |
|
|
6,850 |
|
|
|
|
|
|
|
6,850 |
|
|
Wayne
County, Michigan, Airport Revenue Bonds, Detroit Metropolitan Wayne County Airport, Series 1998A, 5.375%, 12/01/15 MBIA Insured (Alternative Minimum Tax) |
|
12/08 at 101.00 |
|
AA |
|
|
6,558,670 |
|
|
|
|
|
|
|
|
|
|
|
6,558,670 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Wayne County, Michigan, Limited Tax General Obligation Airport Hotel Revenue Bonds, Detroit
Metropolitan Wayne County Airport, Series 2001A, 5.250%, 12/01/25 MBIA Insured |
|
12/11 at 101.00 |
|
AA |
|
|
9,822,600 |
|
|
|
|
|
|
|
|
|
|
|
9,822,600 |
|
|
|
72,670 |
|
|
|
|
|
|
|
72,670 |
|
|
Total Michigan |
|
|
|
|
|
|
|
|
|
|
73,510,664 |
|
|
|
|
|
|
|
|
|
|
|
73,510,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minnesota 1.2% (0.7% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,020 |
|
|
|
|
|
|
|
13,020 |
|
|
Saint Paul Housing and Redevelopment Authority, Minnesota, Multifamily Housing Revenue Bonds,
Marian Center Project, Series 2001A, 6.450%, 6/20/43 (Pre-refunded 12/20/11) |
|
12/11 at 102.00 |
|
Aaa |
|
|
14,640,469 |
|
|
|
|
|
|
|
|
|
|
|
14,640,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nebraska 1.9% (1.1% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
27,125 |
|
|
|
|
|
|
|
27,125 |
|
|
Lincoln, Nebraska, Electric System Revenue Bonds, Series 2007A, 4.500%, 9/01/37
FGIC Insured (UB) |
|
9/17 at 100.00 |
|
AA |
|
|
21,318,894 |
|
|
|
|
|
|
|
|
|
|
|
21,318,894 |
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
Nebraska Public Power District, General Revenue Bonds, Series 2005A, 5.000%, 1/01/25
FSA Insured |
|
1/15 at 100.00 |
|
AAA |
|
|
979,310 |
|
|
|
|
|
|
|
|
|
|
|
979,310 |
|
|
|
28,125 |
|
|
|
|
|
|
|
28,125 |
|
|
Total Nebraska |
|
|
|
|
|
|
|
|
|
|
22,298,204 |
|
|
|
|
|
|
|
|
|
|
|
22,298,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nevada 7.3% (4.4% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,475 |
|
|
|
|
|
|
|
8,475 |
|
|
Clark County, Nevada, General Obligation Bank Bonds, Southern Nevada Water Authority Loan,
Series 2002, 5.000%, 6/01/32 MBIA Insured |
|
12/12 at 100.00 |
|
AA+ |
|
|
7,710,301 |
|
|
|
|
|
|
|
|
|
|
|
7,710,301 |
|
|
3,630 |
|
|
|
|
|
|
|
3,630 |
|
|
Clark County, Nevada, General Obligation Bank Bonds, Southern Nevada Water Authority Loan,
Series 2002, 5.000%, 6/01/32 (Pre-refunded 12/01/12) MBIA Insured |
|
12/12 at 100.00 |
|
Aa1 (5) |
|
|
3,894,264 |
|
|
|
|
|
|
|
|
|
|
|
3,894,264 |
|
|
|
7,370 |
|
|
|
|
|
|
|
7,370 |
|
|
Clark
County, Nevada, Subordinate Lien Airport Revenue Bonds, Series 2004A-2, 5.125%, 7/01/25
FGIC Insured |
|
7/14 at 100.00 |
|
Aa3 |
|
|
6,775,978 |
|
|
|
|
|
|
|
|
|
|
|
6,775,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Director of Nevada State Department of Business and Industry, Revenue Bonds, Las Vegas
Monorail Project, First Tier, Series 2000: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
5.625%, 1/01/34 AMBAC Insured |
|
1/10 at 102.00 |
|
AA |
|
|
9,038,250 |
|
|
|
|
|
|
|
|
|
|
|
9,038,250 |
|
|
13,000 |
|
|
|
|
|
|
|
13,000 |
|
|
5.375%, 1/01/40 AMBAC Insured |
|
1/10 at 100.00 |
|
AA |
|
|
7,814,820 |
|
|
|
|
|
|
|
|
|
|
|
7,814,820 |
|
|
14,985 |
|
|
|
|
|
|
|
14,985 |
|
|
Reno, Nevada, Capital Improvement Revenue Bonds, Series 2002, 5.375%, 6/01/32 FGIC Insured |
|
6/12 at 100.00 |
|
Baa1 |
|
|
13,253,333 |
|
|
|
|
|
|
|
|
|
|
|
13,253,333 |
|
|
25,300 |
|
|
|
|
|
|
|
25,300 |
|
|
Reno, Nevada, Capital Improvement Revenue Bonds, Series 2002, 5.375%, 6/01/32 (Pre-refunded
6/01/12) FGIC Insured |
|
6/12 at 100.00 |
|
Baa1 (5) |
|
|
27,223,812 |
|
|
|
|
|
|
|
|
|
|
|
27,223,812 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Reno, Nevada, Senior Lien Sales and Room Tax Revenue Bonds, Reno Transportation Rail Access
Corridor Project, Series 2002, 5.125%, 6/01/27 (Pre-refunded 6/01/12) AMBAC Insured |
|
6/12 at 100.00 |
|
AA (5) |
|
|
10,690,300 |
|
|
|
|
|
|
|
|
|
|
|
10,690,300 |
|
|
|
97,760 |
|
|
|
|
|
|
|
97,760 |
|
|
Total Nevada |
|
|
|
|
|
|
|
|
|
|
86,401,058 |
|
|
|
|
|
|
|
|
|
|
|
86,401,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Jersey 2.1% (1.3% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Essex County Improvement Authority, New Jersey, Guaranteed Revenue Bonds, Project
Consolidation, Series 2004: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
5.125%, 10/01/21 MBIA Insured |
|
10/14 at 100.00 |
|
|
A1 |
|
|
|
2,006,480 |
|
|
|
|
|
|
|
|
|
|
|
2,006,480 |
|
|
2,250 |
|
|
|
|
|
|
|
2,250 |
|
|
5.125%, 10/01/22 MBIA Insured |
|
10/14 at 100.00 |
|
|
A1 |
|
|
|
2,244,353 |
|
|
|
|
|
|
|
|
|
|
|
2,244,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
New Jersey Economic Development Authority, Revenue Bonds, Motor Vehicle Surcharge, Series 2004A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,850 |
|
|
|
|
|
|
|
3,850 |
|
|
5.000%, 7/01/22 MBIA Insured |
|
7/14 at 100.00 |
|
AA |
|
|
3,753,019 |
|
|
|
|
|
|
|
|
|
|
|
3,753,019 |
|
|
3,850 |
|
|
|
|
|
|
|
3,850 |
|
|
5.000%, 7/01/23 MBIA Insured |
|
7/14 at 100.00 |
|
AA |
|
|
3,729,149 |
|
|
|
|
|
|
|
|
|
|
|
3,729,149 |
|
|
8,250 |
|
|
|
|
|
|
|
8,250 |
|
|
New Jersey Turnpike Authority, Revenue Bonds, Series 2003A, 5.000%, 1/01/19 FGIC Insured |
|
7/13 at 100.00 |
|
AA |
|
|
8,152,403 |
|
|
|
|
|
|
|
|
|
|
|
8,152,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
New Jersey Turnpike Authority, Revenue Bonds, Series 2005A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,320 |
|
|
|
|
|
|
|
3,320 |
|
|
5.000%, 1/01/21 FSA Insured (UB) |
|
1/15 at 100.00 |
|
AAA |
|
|
3,346,062 |
|
|
|
|
|
|
|
|
|
|
|
3,346,062 |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
5.000%, 1/01/23 FSA Insured (UB) |
|
7/13 at 100.00 |
|
AAA |
|
|
1,938,660 |
|
|
|
|
|
|
|
|
|
|
|
1,938,660 |
|
|
|
25,520 |
|
|
|
|
|
|
|
25,520 |
|
|
Total New Jersey |
|
|
|
|
|
|
|
|
|
|
25,170,126 |
|
|
|
|
|
|
|
|
|
|
|
25,170,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Mexico 0.3% (0.2% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,660 |
|
|
|
|
|
|
|
3,660 |
|
|
San Juan County, New Mexico, Subordinate Gross Receipts Tax Revenue Bonds, Series 2005,
5.000%, 6/15/25 MBIA Insured |
|
6/15 at 100.00 |
|
AA |
|
|
3,508,220 |
|
|
|
|
|
|
|
|
|
|
|
3,508,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York 5.7% (3.5% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,880 |
|
|
|
|
|
|
|
1,880 |
|
|
Dormitory Authority of the State of New York, FHA-Insured Mortgage Revenue Bonds, Montefiore
Hospital, Series 2004, 5.000%, 8/01/23 FGIC Insured |
|
2/15 at 100.00 |
|
AA |
|
|
1,690,684 |
|
|
|
|
|
|
|
|
|
|
|
1,690,684 |
|
|
3,335 |
|
|
|
|
|
|
|
3,335 |
|
|
Dormitory Authority of the State of New York, State Personal Income Tax Revenue Bonds, Series
2005F, 5.000%, 3/15/24 AMBAC Insured |
|
3/15 at 100.00 |
|
AAA |
|
|
3,303,051 |
|
|
|
|
|
|
|
|
|
|
|
3,303,051 |
|
|
3,820 |
|
|
|
|
|
|
|
3,820 |
|
|
Hudson Yards Infrastructure Corporation, New York, Revenue Bonds, Series 2006A,
4.500%, 2/15/47 MBIA Insured (UB) |
|
2/17 at 100.00 |
|
AA |
|
|
2,718,579 |
|
|
|
|
|
|
|
|
|
|
|
2,718,579 |
|
|
12,500 |
|
|
|
|
|
|
|
12,500 |
|
|
Long Island Power Authority, New York, Electric System General Revenue Bonds, Series 2006A,
5.000%, 12/01/25 FGIC Insured |
|
6/16 at 100.00 |
|
|
A- |
|
|
|
11,411,750 |
|
|
|
|
|
|
|
|
|
|
|
11,411,750 |
|
|
6,900 |
|
|
|
|
|
|
|
6,900 |
|
|
Long Island Power Authority, New York, Electric System General Revenue Bonds, Series 2006F,
4.250%, 5/01/33 MBIA Insured (UB) |
|
11/16 at 100.00 |
|
AA |
|
|
5,129,529 |
|
|
|
|
|
|
|
|
|
|
|
5,129,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Metropolitan Transportation Authority, New York, State Service Contract Refunding Bonds,
Series 2002A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,500 |
|
|
|
|
|
|
|
1,500 |
|
|
5.000%, 7/01/21 FGIC Insured |
|
7/12 at 100.00 |
|
AA |
|
|
1,461,450 |
|
|
|
|
|
|
|
|
|
|
|
1,461,450 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.000%, 7/01/25 FGIC Insured |
|
7/12 at 100.00 |
|
AA |
|
|
4,776,350 |
|
|
|
|
|
|
|
|
|
|
|
4,776,350 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
New York City, New York, General Obligation Bonds, Fiscal Series 2005F-1, 5.000%, 9/01/21
AMBAC Insured |
|
9/15 at 100.00 |
|
AA |
|
|
4,856,700 |
|
|
|
|
|
|
|
|
|
|
|
4,856,700 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
New York City, New York, General Obligation Bonds, Fiscal Series 2005M, 5.000%, 4/01/26
FGIC Insured |
|
4/15 at 100.00 |
|
AA |
|
|
9,337,500 |
|
|
|
|
|
|
|
|
|
|
|
9,337,500 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
New York State Thruway Authority, General Revenue Bonds, Series 2005F, 5.000%, 1/01/26
AMBAC Insured |
|
1/15 at 100.00 |
|
AA |
|
|
4,831,900 |
|
|
|
|
|
|
|
|
|
|
|
4,831,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
New York State Urban Development Corporation, State Personal Income Tax Revenue Bonds,
Series 2004A-1: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
|
|
|
|
|
|
1,000 |
|
|
5.000%, 3/15/23 FGIC Insured |
|
3/14 at 100.00 |
|
AAA |
|
|
989,840 |
|
|
|
|
|
|
|
|
|
|
|
989,840 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.000%, 3/15/25 FGIC Insured |
|
3/14 at 100.00 |
|
AAA |
|
|
4,885,000 |
|
|
|
|
|
|
|
|
|
|
|
4,885,000 |
|
|
3,650 |
|
|
|
|
|
|
|
3,650 |
|
|
New York State Urban Development Corporation, State Personal Income Tax Revenue Bonds, Series
2005B, 5.000%, 3/15/25 FSA Insured (UB) |
|
3/15 at 100.00 |
|
AAA |
|
|
3,585,797 |
|
|
|
|
|
|
|
|
|
|
|
3,585,797 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Triborough Bridge and Tunnel Authority, New York, Subordinate Lien General Purpose Revenue
Refunding Bonds, Series 2002E, 5.000%, 11/15/32 MBIA Insured |
|
11/12 at 100.00 |
|
AA |
|
|
9,212,400 |
|
|
|
|
|
|
|
|
|
|
|
9,212,400 |
|
|
|
74,585 |
|
|
|
|
|
|
|
74,585 |
|
|
Total New York |
|
|
|
|
|
|
|
|
|
|
68,190,530 |
|
|
|
|
|
|
|
|
|
|
|
68,190,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina 1.3% (0.8% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mooresville, North Carolina, Enterprise System Revenue Bonds, Series 2004: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,115 |
|
|
|
|
|
|
|
2,115 |
|
|
5.000%, 5/01/22 FGIC Insured |
|
5/14 at 100.00 |
|
AA |
|
|
2,054,363 |
|
|
|
|
|
|
|
|
|
|
|
2,054,363 |
|
|
2,575 |
|
|
|
|
|
|
|
2,575 |
|
|
5.000%, 5/01/26 FGIC Insured |
|
5/14 at 100.00 |
|
AA |
|
|
2,332,023 |
|
|
|
|
|
|
|
|
|
|
|
2,332,023 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
North Carolina Municipal Power Agency 1, Catawba Electric Revenue Bonds, Series 2003A, 5.250%,
1/01/16 FSA Insured |
|
1/13 at 100.00 |
|
AAA |
|
|
5,157,750 |
|
|
|
|
|
|
|
|
|
|
|
5,157,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Raleigh Durham Airport Authority, North Carolina, Airport Revenue Bonds, Series 2005A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,205 |
|
|
|
|
|
|
|
3,205 |
|
|
5.000%, 5/01/23 AMBAC Insured |
|
5/15 at 100.00 |
|
Aa3 |
|
|
3,009,719 |
|
|
|
|
|
|
|
|
|
|
|
3,009,719 |
|
|
3,295 |
|
|
|
|
|
|
|
3,295 |
|
|
5.000%, 5/01/24 AMBAC Insured |
|
5/15 at 100.00 |
|
Aa3 |
|
|
3,066,096 |
|
|
|
|
|
|
|
|
|
|
|
3,066,096 |
|
|
|
16,190 |
|
|
|
|
|
|
|
16,190 |
|
|
Total North Carolina |
|
|
|
|
|
|
|
|
|
|
15,619,951 |
|
|
|
|
|
|
|
|
|
|
|
15,619,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Dakota 0.5% (0.3% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Forks, North Dakota, Sales Tax Revenue Bonds, Alerus Project, Series 2005A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,195 |
|
|
|
|
|
|
|
2,195 |
|
|
5.000%, 12/15/22 MBIA Insured |
|
12/15 at 100.00 |
|
|
A1 |
|
|
|
2,147,039 |
|
|
|
|
|
|
|
|
|
|
|
2,147,039 |
|
|
1,355 |
|
|
|
|
|
|
|
1,355 |
|
|
5.000%, 12/15/23 MBIA Insured |
|
12/15 at 100.00 |
|
|
A1 |
|
|
|
1,336,545 |
|
|
|
|
|
|
|
|
|
|
|
1,336,545 |
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
|
5.000%, 12/15/24 MBIA Insured |
|
12/15 at 100.00 |
|
|
A1 |
|
|
|
2,938,080 |
|
|
|
|
|
|
|
|
|
|
|
2,938,080 |
|
|
|
6,550 |
|
|
|
|
|
|
|
6,550 |
|
|
Total North Dakota |
|
|
|
|
|
|
|
|
|
|
6,421,664 |
|
|
|
|
|
|
|
|
|
|
|
6,421,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ohio 2.5% (1.5% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,650 |
|
|
|
|
|
|
|
2,650 |
|
|
Cleveland State University, Ohio, General Receipts Bonds, Series 2004, 5.250%, 6/01/24
FGIC Insured |
|
6/14 at 100.00 |
|
AA |
|
|
2,608,342 |
|
|
|
|
|
|
|
|
|
|
|
2,608,342 |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
Columbus City School District, Franklin County, Ohio, General Obligation Bonds, Series 2004,
5.250%, 12/01/25 (Pre-refunded 12/01/14) FSA Insured |
|
12/14 at 100.00 |
|
AAA |
|
|
2,190,000 |
|
|
|
|
|
|
|
|
|
|
|
2,190,000 |
|
|
2,385 |
|
|
|
|
|
|
|
2,385 |
|
|
Columbus, Ohio, Tax Increment Financing Bonds, Easton Project, Series 2004A, 5.000%, 12/01/22
AMBAC Insured |
|
6/14 at 100.00 |
|
AA |
|
|
2,209,464 |
|
|
|
|
|
|
|
|
|
|
|
2,209,464 |
|
|
2,205 |
|
|
|
|
|
|
|
2,205 |
|
|
Hamilton City School District, Ohio, General Obligation Bonds, Series 2005, 5.000%, 12/01/24
MBIA Insured |
|
6/15 at 100.00 |
|
|
A2 |
|
|
|
2,136,226 |
|
|
|
|
|
|
|
|
|
|
|
2,136,226 |
|
|
6,535 |
|
|
|
|
|
|
|
6,535 |
|
|
Hamilton County, Ohio, Sales Tax Revenue Bonds, Tender Option Bond Trust 2706, 0.472%,
12/01/32 AMBAC Insured (IF) |
|
12/16 at 100.00 |
|
|
A2 |
|
|
|
2,032,320 |
|
|
|
|
|
|
|
|
|
|
|
2,032,320 |
|
|
20,100 |
|
|
|
|
|
|
|
20,100 |
|
|
Lucas County, Ohio, Hospital Revenue Bonds, ProMedica Healthcare Obligated Group, Series 1999,
5.375%, 11/15/39 AMBAC Insured |
|
11/09 at 101.00 |
|
AA |
|
|
15,846,438 |
|
|
|
|
|
|
|
|
|
|
|
15,846,438 |
|
|
3,000 |
|
|
|
|
|
|
|
3,000 |
|
|
Ross Local School District, Butler County, Ohio, General Obligation Bonds, Series 2003,
5.000%, 12/01/28 (Pre-refunded 12/01/13) FSA Insured |
|
12/13 at 100.00 |
|
Aaa |
|
|
3,243,360 |
|
|
|
|
|
|
|
|
|
|
|
3,243,360 |
|
|
|
38,875 |
|
|
|
|
|
|
|
38,875 |
|
|
Total Ohio |
|
|
|
|
|
|
|
|
|
|
30,266,150 |
|
|
|
|
|
|
|
|
|
|
|
30,266,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oklahoma 2.6% (1.6% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,500 |
|
|
|
|
|
|
|
3,500 |
|
|
Oklahoma Capitol Improvement Authority, State Facilities Revenue Bonds, Series 2005F, 5.000%,
7/01/24 AMBAC Insured |
|
7/15 at 100.00 |
|
AA |
|
|
3,385,305 |
|
|
|
|
|
|
|
|
|
|
|
3,385,305 |
|
|
3,050 |
|
|
|
|
|
|
|
3,050 |
|
|
Oklahoma Housing Finance Agency, GNMA Collateralized Single Family Mortgage Revenue Bonds,
Series 1987A, 7.997%, 8/01/18 (Alternative Minimum Tax) |
|
No Opt. Call |
|
AAA |
|
|
3,150,101 |
|
|
|
|
|
|
|
|
|
|
|
3,150,101 |
|
|
21,000 |
|
|
|
|
|
|
|
21,000 |
|
|
Oklahoma Municipal Power Authority, Power Supply System Revenue Bonds, Series 2007, 4.500%,
1/01/47 FGIC Insured |
|
1/17 at 100.00 |
|
AA |
|
|
15,009,540 |
|
|
|
|
|
|
|
|
|
|
|
15,009,540 |
|
|
5,245 |
|
|
|
|
|
|
|
5,245 |
|
|
Oklahoma State Industries Authority, Revenue Bonds, Oklahoma Medical Research Foundation,
Series 2001, 5.250%, 2/01/21 AMBAC Insured |
|
2/11 at 100.00 |
|
Aa3 |
|
|
5,104,644 |
|
|
|
|
|
|
|
|
|
|
|
5,104,644 |
|
|
4,880 |
|
|
|
|
|
|
|
4,880 |
|
|
University of Oklahoma, Student Housing Revenue Bonds, Series 2004, 5.000%, 7/01/22
AMBAC Insured |
|
7/14 at 100.00 |
|
Aa3 |
|
|
4,757,073 |
|
|
|
|
|
|
|
|
|
|
|
4,757,073 |
|
|
|
37,675 |
|
|
|
|
|
|
|
37,675 |
|
|
Total Oklahoma |
|
|
|
|
|
|
|
|
|
|
31,406,663 |
|
|
|
|
|
|
|
|
|
|
|
31,406,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oregon 0.3% (0.2% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,535 |
|
|
|
|
|
|
|
2,535 |
|
|
Oregon Department of Administrative Services, Certificates of Participation, Series 2005A,
5.000%, 5/01/25 FSA Insured |
|
5/15 at 100.00 |
|
AAA |
|
|
2,460,167 |
|
|
|
|
|
|
|
|
|
|
|
2,460,167 |
|
|
1,040 |
|
|
|
|
|
|
|
1,040 |
|
|
Oregon Housing and Community Services Department, Single Family Mortgage Revenue Bonds, Series
1995A, 6.450%, 7/01/26 (Alternative Minimum Tax) |
|
1/09 at 100.00 |
|
Aa2 |
|
|
1,008,166 |
|
|
|
|
|
|
|
|
|
|
|
1,008,166 |
|
|
|
3,575 |
|
|
|
|
|
|
|
3,575 |
|
|
Total Oregon |
|
|
|
|
|
|
|
|
|
|
3,468,333 |
|
|
|
|
|
|
|
|
|
|
|
3,468,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pennsylvania 2.9% (1.7% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,925 |
|
|
|
|
|
|
|
7,925 |
|
|
Commonwealth Financing Authority, Pennsylvania, State Appropriation Lease Bonds, Series 2006A,
5.000%, 6/01/26 FSA Insured (UB) |
|
6/16 at 100.00 |
|
AAA |
|
|
7,725,766 |
|
|
|
|
|
|
|
|
|
|
|
7,725,766 |
|
|
1,800 |
|
|
|
|
|
|
|
1,800 |
|
|
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Drexel University, Series
2005A, 5.000%, 5/01/28 MBIA Insured |
|
5/15 at 100.00 |
|
AA |
|
|
1,695,222 |
|
|
|
|
|
|
|
|
|
|
|
1,695,222 |
|
|
11,740 |
|
|
|
|
|
|
|
11,740 |
|
|
Pennsylvania Public School Building Authority, Lease Revenue Bonds, School District of
Philadelphia, Series 2006B, 4.500%, 6/01/32 FSA Insured (UB) |
|
12/16 at 100.00 |
|
AAA |
|
|
9,332,478 |
|
|
|
|
|
|
|
|
|
|
|
9,332,478 |
|
|
2,625 |
|
|
|
|
|
|
|
2,625 |
|
|
Pennsylvania Turnpike Commission, Turnpike Revenue Bonds, Series 2006A, 5.000%, 12/01/26
AMBAC Insured |
|
6/16 at 100.00 |
|
AA |
|
|
2,507,531 |
|
|
|
|
|
|
|
|
|
|
|
2,507,531 |
|
|
6,335 |
|
|
|
|
|
|
|
6,335 |
|
|
Radnor Township School District, Delaware County, Pennsylvania, General Obligation Bonds,
Series 2005B, 5.000%, 2/15/30 FSA Insured |
|
8/15 at 100.00 |
|
Aaa |
|
|
6,101,492 |
|
|
|
|
|
|
|
|
|
|
|
6,101,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reading School District, Berts County, Pennsylvania, General Obligation Bonds, Series 2005: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,285 |
|
|
|
|
|
|
|
3,285 |
|
|
5.000%, 1/15/22 FSA Insured (UB) |
|
1/16 at 100.00 |
|
AAA |
|
|
3,277,050 |
|
|
|
|
|
|
|
|
|
|
|
3,277,050 |
|
|
3,450 |
|
|
|
|
|
|
|
3,450 |
|
|
5.000%, 1/15/23 FSA Insured (UB) |
|
1/16 at 100.00 |
|
AAA |
|
|
3,422,090 |
|
|
|
|
|
|
|
|
|
|
|
3,422,090 |
|
|
|
37,160 |
|
|
|
|
|
|
|
37,160 |
|
|
Total Pennsylvania |
|
|
|
|
|
|
|
|
|
|
34,061,629 |
|
|
|
|
|
|
|
|
|
|
|
34,061,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Puerto Rico 0.8% (0.5% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
Puerto Rico Electric Power Authority, Power Revenue Bonds, Series 2005RR, 5.000%, 7/01/30
(Pre-refunded 7/01/15) SYNCORA GTY Insured |
|
7/15 at 100.00 |
|
AAA |
|
|
2,711,075 |
|
|
|
|
|
|
|
|
|
|
|
2,711,075 |
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
Puerto Rico Highway and Transportation Authority, Highway Revenue Bonds, Series 2003G, 5.250%,
7/01/19 FGIC Insured |
|
7/13 at 100.00 |
|
BBB+ |
|
|
1,891,180 |
|
|
|
|
|
|
|
|
|
|
|
1,891,180 |
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
1,550 |
|
|
|
|
|
|
|
1,550 |
|
|
Puerto Rico Municipal Finance Agency, Series 2005C, 5.250%, 8/01/21 CIFG Insured |
|
No Opt. Call |
|
BBB- |
|
|
1,432,960 |
|
|
|
|
|
|
|
|
|
|
|
1,432,960 |
|
|
36,000 |
|
|
|
|
|
|
|
36,000 |
|
|
Puerto Rico Sales Tax Financing Corporation, Sales Tax Revenue Bonds, Series 2007A, 0.000%,
8/01/42 FGIC Insured |
|
No Opt. Call |
|
|
A+ |
|
|
|
3,645,000 |
|
|
|
|
|
|
|
|
|
|
|
3,645,000 |
|
|
|
42,050 |
|
|
|
|
|
|
|
42,050 |
|
|
Total Puerto Rico |
|
|
|
|
|
|
|
|
|
|
9,680,215 |
|
|
|
|
|
|
|
|
|
|
|
9,680,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rhode Island 2.1% (1.3% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,195 |
|
|
|
|
|
|
|
2,195 |
|
|
Providence Housing Development Corporation, Rhode Island, FHA-Insured Section 8 Assisted Mortgage
Revenue Refunding Bonds, Barbara Jordan Apartments, Series 1994A, 6.750%, 7/01/25 MBIA Insured |
|
1/09 at 100.00 |
|
AA |
|
|
2,278,212 |
|
|
|
|
|
|
|
|
|
|
|
2,278,212 |
|
|
20,475 |
|
|
|
|
|
|
|
20,475 |
|
|
Rhode Island Depositors Economic Protection Corporation, Special Obligation Refunding Bonds,
Series 1993B, 5.250%, 8/01/21 (Pre-refunded 2/01/11) MBIA Insured |
|
2/11 at 100.00 |
|
AA (5) |
|
|
21,589,045 |
|
|
|
|
|
|
|
|
|
|
|
21,589,045 |
|
|
1,405 |
|
|
|
|
|
|
|
1,405 |
|
|
Rhode Island Health & Educational Building Corporation, Higher Education Auxiliary Enterprise
Revenue Bonds, Series 2004A, 5.500%, 9/15/24 AMBAC Insured |
|
9/14 at 100.00 |
|
Aa3 |
|
|
1,423,869 |
|
|
|
|
|
|
|
|
|
|
|
1,423,869 |
|
|
|
24,075 |
|
|
|
|
|
|
|
24,075 |
|
|
Total Rhode Island |
|
|
|
|
|
|
|
|
|
|
25,291,126 |
|
|
|
|
|
|
|
|
|
|
|
25,291,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South Carolina 5.7% (3.4% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,650 |
|
|
|
|
|
|
|
14,650 |
|
|
Anderson County School District 5, South Carolina, General Obligation Bonds, Series 2008,
Trust 1181, 7.194%, 2/01/38 FSA Insured (IF) |
|
2/18 at 100.00 |
|
AAA |
|
|
12,781,832 |
|
|
|
|
|
|
|
|
|
|
|
12,781,832 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Beaufort County, South Carolina, Tax Increment Bonds, New River Redevelopment Project, Series
2002, 5.000%, 6/01/27 MBIA Insured |
|
12/12 at 100.00 |
|
AA |
|
|
9,477,800 |
|
|
|
|
|
|
|
|
|
|
|
9,477,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical University Hospital Authority, South Carolina, FHA-Insured Mortgage Revenue Bonds,
Series 2004A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
5.250%, 8/15/22 MBIA Insured |
|
8/14 at 100.00 |
|
AA |
|
|
1,972,840 |
|
|
|
|
|
|
|
|
|
|
|
1,972,840 |
|
|
2,105 |
|
|
|
|
|
|
|
2,105 |
|
|
5.250%, 8/15/23 MBIA Insured |
|
8/14 at 100.00 |
|
AA |
|
|
2,068,731 |
|
|
|
|
|
|
|
|
|
|
|
2,068,731 |
|
|
4,855 |
|
|
|
|
|
|
|
4,855 |
|
|
Piedmont Municipal Power Agency, South Carolina, Electric Revenue Bonds, Series 1988A, 0.000%,
1/01/13 AMBAC Insured (ETM) |
|
No Opt. Call |
|
Aaa |
|
|
4,002,559 |
|
|
|
|
|
|
|
|
|
|
|
4,002,559 |
|
|
2,750 |
|
|
|
|
|
|
|
2,750 |
|
|
Piedmont Municipal Power Agency, South Carolina, Electric Revenue Bonds, Series 1988A, 0.000%,
1/01/13 (Pre-refunded 7/01/09) AMBAC Insured |
|
7/09 at 76.63 |
|
Aa3 (5) |
|
|
2,035,605 |
|
|
|
|
|
|
|
|
|
|
|
2,035,605 |
|
|
7,955 |
|
|
|
|
|
|
|
7,955 |
|
|
Piedmont Municipal Power Agency, South Carolina, Electric Revenue Bonds, Series 1988A, 0.000%,
1/01/13 AMBAC Insured |
|
No Opt. Call |
|
AA |
|
|
6,328,680 |
|
|
|
|
|
|
|
|
|
|
|
6,328,680 |
|
|
8,000 |
|
|
|
|
|
|
|
8,000 |
|
|
South Carolina JOBS Economic Development Authority, Industrial Revenue Bonds, South Carolina
Electric and Gas Company, Series 2002A, 5.200%, 11/01/27 AMBAC Insured |
|
11/12 at 100.00 |
|
AA |
|
|
7,610,720 |
|
|
|
|
|
|
|
|
|
|
|
7,610,720 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
South Carolina JOBS Economic Development Authority, Industrial Revenue Bonds, South Carolina Electric
and Gas Company, Series 2002B, 5.450%, 11/01/32 AMBAC Insured (Alternative Minimum Tax) |
|
11/12 at 100.00 |
|
AA |
|
|
8,115,500 |
|
|
|
|
|
|
|
|
|
|
|
8,115,500 |
|
|
17,500 |
|
|
|
|
|
|
|
17,500 |
|
|
South Carolina Transportation Infrastructure Bank, Revenue Bonds, Series 2007A, 4.500%,
10/01/34 SYNCORA GTY Insured |
|
10/16 at 100.00 |
|
|
A1 |
|
|
|
13,523,125 |
|
|
|
|
|
|
|
|
|
|
|
13,523,125 |
|
|
|
79,815 |
|
|
|
|
|
|
|
79,815 |
|
|
Total South Carolina |
|
|
|
|
|
|
|
|
|
|
67,917,392 |
|
|
|
|
|
|
|
|
|
|
|
67,917,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tennessee 0.5% (0.3% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,455 |
|
|
|
|
|
|
|
6,455 |
|
|
Memphis-Shelby County Airport Authority, Tennessee, Airport Revenue Bonds, Series 2001A,
5.500%, 3/01/18 FSA Insured (Alternative Minimum Tax) |
|
3/11 at 100.00 |
|
AAA |
|
|
6,097,199 |
|
|
|
|
|
|
|
|
|
|
|
6,097,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas 13.4% (8.1% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,650 |
|
|
|
|
|
|
|
22,650 |
|
|
Brazos River Authority, Texas, Revenue Refunding Bonds, Houston Industries Inc., Series 1998C,
5.125%, 5/01/19 AMBAC Insured |
|
11/08 at 102.00 |
|
AA |
|
|
21,747,171 |
|
|
|
|
|
|
|
|
|
|
|
21,747,171 |
|
|
521 |
|
|
|
|
|
|
|
521 |
|
|
Capital Area Housing Finance Corporation, Texas, FNMA Backed Single Family Mortgage Revenue
Refunding Bonds, Series 2002A-2, 6.300%, 4/01/35 AMBAC Insured (Alternative Minimum Tax) |
|
4/12 at 106.00 |
|
Aaa |
|
|
532,477 |
|
|
|
|
|
|
|
|
|
|
|
532,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500 |
|
|
|
|
|
|
|
12,500 |
|
|
Dallas-Ft. Worth International Airport, Texas, Joint Revenue Bonds, Series 2000A, 6.125%,
11/01/35 FGIC Insured (Alternative Minimum Tax) |
|
11/09 at 100.00 |
|
|
A+ |
|
|
|
10,832,000 |
|
|
|
|
|
|
|
|
|
|
|
10,832,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Harris County, Texas, Toll Road Senior Lien Revenue Bonds, Series 1989: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000 |
|
|
|
|
|
|
|
9,000 |
|
|
0.000%, 8/15/18 (Pre-refunded 8/15/09) AMBAC Insured |
|
8/09 at 53.84 |
|
Aaa |
|
|
4,764,150 |
|
|
|
|
|
|
|
|
|
|
|
4,764,150 |
|
|
39,000 |
|
|
|
|
|
|
|
39,000 |
|
|
0.000%, 8/15/19 (Pre-refunded 8/15/09) AMBAC Insured |
|
8/09 at 50.26 |
|
Aaa |
|
|
19,271,850 |
|
|
|
|
|
|
|
|
|
|
|
19,271,850 |
|
|
7,280 |
|
|
|
|
|
|
|
7,280 |
|
|
0.000%, 8/15/20 (Pre-refunded 8/15/09) AMBAC Insured |
|
8/09 at 46.91 |
|
Aaa |
|
|
3,358,264 |
|
|
|
|
|
|
|
|
|
|
|
3,358,264 |
|
|
5,085 |
|
|
|
|
|
|
|
5,085 |
|
|
0.000%, 8/15/21 (Pre-refunded 8/15/09) AMBAC Insured |
|
8/09 at 43.80 |
|
Aaa |
|
|
2,189,703 |
|
|
|
|
|
|
|
|
|
|
|
2,189,703 |
|
|
25,000 |
|
|
|
|
|
|
|
25,000 |
|
|
Harris County-Houston Sports Authority, Texas, Junior Lien Revenue Refunding Bonds, Series
2001B, 5.250%, 11/15/40 MBIA Insured |
|
11/11 at 100.00 |
|
AA |
|
|
20,243,750 |
|
|
|
|
|
|
|
|
|
|
|
20,243,750 |
|
|
4,671 |
|
|
|
|
|
|
|
4,671 |
|
|
Houston Housing Finance Corporation, Texas, GNMA Collateralized Mortgage Multifamily Housing
Revenue Bonds, RRG Apartments Project, Series 2001, 6.350%, 3/20/42 |
|
9/11 at 105.00 |
|
Aaa |
|
|
4,331,185 |
|
|
|
|
|
|
|
|
|
|
|
4,331,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Houston, Texas, First Lien Combined Utility System Revenue Bonds, Series 2004A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
|
|
|
|
|
|
4,000 |
|
|
5.250%, 5/15/24 FGIC Insured |
|
5/14 at 100.00 |
|
AA |
|
|
3,726,200 |
|
|
|
|
|
|
|
|
|
|
|
3,726,200 |
|
|
5,000 |
|
|
|
|
|
|
|
5,000 |
|
|
5.250%, 5/15/25 MBIA Insured |
|
5/14 at 100.00 |
|
AA |
|
|
4,865,250 |
|
|
|
|
|
|
|
|
|
|
|
4,865,250 |
|
|
17,500 |
|
|
|
|
|
|
|
17,500 |
|
|
Houston, Texas, Hotel Occupancy Tax and Special Revenue Bonds, Convention and Entertainment
Project, Series 2001B, 5.250%, 9/01/33 AMBAC Insured |
|
9/11 at 100.00 |
|
AA |
|
|
16,349,200 |
|
|
|
|
|
|
|
|
|
|
|
16,349,200 |
|
|
23,865 |
|
|
|
|
|
|
|
23,865 |
|
|
Jefferson County Health Facilities Development Corporation, Texas, FHA-Insured Mortgage Revenue
Bonds, Baptist Hospital of Southeast Texas, Series 2001, 5.500%, 8/15/41 AMBAC Insured |
|
8/11 at 100.00 |
|
AA |
|
|
17,704,728 |
|
|
|
|
|
|
|
|
|
|
|
17,704,728 |
|
|
140 |
|
|
|
|
|
|
|
140 |
|
|
Lower Colorado River Authority, Texas, Revenue Refunding and Improvement Bonds, Series 2001A,
5.000%, 5/15/21 (Pre-refunded 5/15/11) MBIA Insured |
|
5/11 at 100.00 |
|
AA (5) |
|
|
147,816 |
|
|
|
|
|
|
|
|
|
|
|
147,816 |
|
|
8,065 |
|
|
|
|
|
|
|
8,065 |
|
|
Lower Colorado River Authority, Texas, Revenue Refunding and Improvement Bonds, Series 2001A,
5.000%, 5/15/21 MBIA Insured |
|
5/11 at 100.00 |
|
AA |
|
|
7,874,101 |
|
|
|
|
|
|
|
|
|
|
|
7,874,101 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Port of Houston Authority, Harris County, Texas, General Obligation Port Improvement Bonds,
Series 2001B: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,205 |
|
|
|
|
|
|
|
3,205 |
|
|
5.500%, 10/01/18 FGIC Insured (Alternative Minimum Tax) |
|
10/11 at 100.00 |
|
AAA |
|
|
2,957,766 |
|
|
|
|
|
|
|
|
|
|
|
2,957,766 |
|
|
3,375 |
|
|
|
|
|
|
|
3,375 |
|
|
5.500%, 10/01/19 FGIC Insured (Alternative Minimum Tax) |
|
10/11 at 100.00 |
|
AAA |
|
|
3,069,090 |
|
|
|
|
|
|
|
|
|
|
|
3,069,090 |
|
|
7,205 |
|
|
|
|
|
|
|
7,205 |
|
|
San Antonio, Texas, Airport System Improvement Revenue Bonds, Series 2001, 5.375%, 7/01/15
FGIC Insured (Alternative Minimum Tax) |
|
7/11 at 101.00 |
|
|
A+ |
|
|
|
6,887,548 |
|
|
|
|
|
|
|
|
|
|
|
6,887,548 |
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
Amount (000) |
|
|
|
|
|
|
|
|
|
|
|
Value |
National |
|
|
|
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund |
|
Florida Fund |
|
Fund (Pro |
|
|
|
|
|
|
|
Optional Call |
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
(Actual) |
|
(Actual) |
|
Forma) |
|
Description (1) |
|
Provisions (2) |
|
Ratings (3) |
|
(Actual) |
|
(Actual) |
|
Adjustments |
|
(Pro Forma) |
|
|
7,550 |
|
|
|
|
|
|
|
7,550 |
|
|
Waco Health Facilities Development Corporation, Texas, Hillcrest Health System Project, FHA
Insured Mortgage Revenue Bonds, Series 2006A, 5.000%, 8/01/31 MBIA Insured |
|
8/16 at 100.00 |
|
AA |
|
|
6,493,378 |
|
|
|
|
|
|
|
|
|
|
|
6,493,378 |
|
|
1,840 |
|
|
|
|
|
|
|
1,840 |
|
|
Ysleta Independent School District Public Facility Corporation, Texas, Lease Revenue Refunding
Bonds, Series 2001, 5.375%, 11/15/24 AMBAC Insured |
|
11/09 at 100.00 |
|
AA |
|
|
1,835,050 |
|
|
|
|
|
|
|
|
|
|
|
1,835,050 |
|
|
|
207,452 |
|
|
|
|
|
|
|
207,452 |
|
|
Total Texas |
|
|
|
|
|
|
|
|
|
|
159,180,677 |
|
|
|
|
|
|
|
|
|
|
|
159,180,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utah 1.4% (0.8% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
|
|
|
|
2,000 |
|
|
Clearfield City, Utah, Sales Tax Revenue Bonds, Series 2003, 5.000%, 7/01/28 (Pre-refunded
7/01/13) FGIC Insured |
|
7/13 at 100.00 |
|
AA- (5) |
|
|
2,152,580 |
|
|
|
|
|
|
|
|
|
|
|
2,152,580 |
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
Utah Transit Authority, Sales Tax Revenue Bonds, Series 2008A, 5.000%, 6/15/32 FSA Insured |
|
6/18 at 100.00 |
|
AAA |
|
|
14,222,700 |
|
|
|
|
|
|
|
|
|
|
|
14,222,700 |
|
|
|
17,000 |
|
|
|
|
|
|
|
17,000 |
|
|
Total Utah |
|
|
|
|
|
|
|
|
|
|
16,375,280 |
|
|
|
|
|
|
|
|
|
|
|
16,375,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia 1.2% (0.7% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,035 |
|
|
|
|
|
|
|
1,035 |
|
|
Loudoun County Industrial Development Authority, Virginia, Lease Revenue Bonds, Public Safety
Facilities, Series 2003A, 5.250%, 12/15/20 FSA Insured |
|
6/14 at 100.00 |
|
AAA |
|
|
1,054,593 |
|
|
|
|
|
|
|
|
|
|
|
1,054,593 |
|
|
4,840 |
|
|
|
|
|
|
|
4,840 |
|
|
Metropolitan Washington D.C. Airports Authority, Airport System Revenue Bonds, Series 2001A,
5.500%, 10/01/19 MBIA Insured (Alternative Minimum Tax) |
|
10/11 at 101.00 |
|
AA |
|
|
4,518,188 |
|
|
|
|
|
|
|
|
|
|
|
4,518,188 |
|
|
10,000 |
|
|
|
|
|
|
|
10,000 |
|
|
Virginia Housing Development Authority, Commonwealth Mortgage Bonds, Series 2001H-1, 5.375%,
7/01/36 MBIA Insured |
|
7/11 at 100.00 |
|
AAA |
|
|
8,974,800 |
|
|
|
|
|
|
|
|
|
|
|
8,974,800 |
|
|
|
15,875 |
|
|
|
|
|
|
|
15,875 |
|
|
Total Virginia |
|
|
|
|
|
|
|
|
|
|
14,547,581 |
|
|
|
|
|
|
|
|
|
|
|
14,547,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington 2.2% (1.3% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500 |
|
|
|
|
|
|
|
2,500 |
|
|
Grant County Public Utility District 2, Washington, Revenue Bonds, Wanapum Hydroelectric
Development, Series 2005A, 5.000%, 1/01/29 FGIC Insured |
|
1/15 at 100.00 |
|
AA |
|
|
2,334,200 |
|
|
|
|
|
|
|
|
|
|
|
2,334,200 |
|
|
3,500 |
|
|
|
|
|
|
|
3,500 |
|
|
King County School District 401, Highline, Washington, General Obligation Bonds, Series 2004,
5.000%, 10/01/24 FGIC Insured |
|
12/14 at 100.00 |
|
AA+ |
|
|
3,465,770 |
|
|
|
|
|
|
|
|
|
|
|
3,465,770 |
|
|
3,195 |
|
|
|
|
|
|
|
3,195 |
|
|
Kitsap County, Washington, Limited Tax General Obligation Bonds, Series 2000, 5.500%, 7/01/25
(Pre-refunded 7/01/10) AMBAC Insured |
|
7/10 at 100.00 |
|
AA (5) |
|
|
3,361,939 |
|
|
|
|
|
|
|
|
|
|
|
3,361,939 |
|
|
4,250 |
|
|
|
|
|
|
|
4,250 |
|
|
Snohomish County Public Utility District 1, Washington, Generation System Revenue Bonds,
Series 1989, 6.650%, 1/01/16 FGIC Insured (ETM) |
|
No Opt. Call |
|
Aaa |
|
|
5,004,248 |
|
|
|
|
|
|
|
|
|
|
|
5,004,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tacoma, Washington, Solid Waste Utility Revenue Refunding Bonds, Series 2006: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,890 |
|
|
|
|
|
|
|
3,890 |
|
|
5.000%, 12/01/24 SYNCORA GTY Insured |
|
12/16 at 100.00 |
|
AA |
|
|
3,703,902 |
|
|
|
|
|
|
|
|
|
|
|
3,703,902 |
|
|
4,085 |
|
|
|
|
|
|
|
4,085 |
|
|
5.000%, 12/01/25 SYNCORA GTY Insured |
|
12/16 at 100.00 |
|
AA |
|
|
3,860,407 |
|
|
|
|
|
|
|
|
|
|
|
3,860,407 |
|
|
4,290 |
|
|
|
|
|
|
|
4,290 |
|
|
5.000%, 12/01/26 SYNCORA GTY Insured |
|
12/16 at 100.00 |
|
AA |
|
|
4,027,280 |
|
|
|
|
|
|
|
|
|
|
|
4,027,280 |
|
|
|
25,710 |
|
|
|
|
|
|
|
25,710 |
|
|
Total Washington |
|
|
|
|
|
|
|
|
|
|
25,757,746 |
|
|
|
|
|
|
|
|
|
|
|
25,757,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wisconsin 2.3% (1.4% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000 |
|
|
|
|
|
|
|
15,000 |
|
|
Wisconsin Health and Educational Facilities Authority, Revenue Bonds, Marshfield Clinic,
Series 1997, 5.750%, 2/15/27 MBIA Insured |
|
2/09 at 100.00 |
|
AA |
|
|
12,778,800 |
|
|
|
|
|
|
|
|
|
|
|
12,778,800 |
|
|
290 |
|
|
|
|
|
|
|
290 |
|
|
Wisconsin, General Obligation Bonds, Series 2004-3, 5.250%, 5/01/20 FGIC Insured |
|
5/14 at 100.00 |
|
Aa3 |
|
|
295,404 |
|
|
|
|
|
|
|
|
|
|
|
295,404 |
|
|
2,600 |
|
|
|
|
|
|
|
2,600 |
|
|
Wisconsin, General Obligation Bonds, Series 2004-3, 5.250%, 5/01/20 (Pre-refunded 5/01/14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FGIC Insured |
|
5/14 at 100.00 |
|
Aa3 (5) |
|
|
2,827,474 |
|
|
|
|
|
|
|
|
|
|
|
2,827,474 |
|
|
10,946 |
|
|
|
|
|
|
|
10,946 |
|
|
Wisconsin, General Obligation Bonds, Series 2004-4, 5.000%, 5/01/20 MBIA Insured |
|
5/14 at 100.00 |
|
AA |
|
|
11,018,222 |
|
|
|
|
|
|
|
|
|
|
|
11,018,222 |
|
|
|
28,836 |
|
|
|
|
|
|
|
28,836 |
|
|
Total Wisconsin |
|
|
|
|
|
|
|
|
|
|
26,919,900 |
|
|
|
|
|
|
|
|
|
|
|
26,919,900 |
|
|
$ |
1,962,546 |
|
|
$ |
324,835 |
|
|
$ |
2,287,381 |
|
|
Total Long-Term Investments
(cost $1,775,939,594, $306,183,861 and $2,082,123,455, respectively)
164.5% |
|
|
|
|
|
|
|
|
|
|
1,666,110,059 |
|
|
|
291,340,255 |
|
|
|
|
|
|
|
1,957,450,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-Term Investments 1.5% (0.9% of Total Investments) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,240 |
|
|
|
|
|
|
|
4,240 |
|
|
Indianapolis Local Public Improvement Bond Bank, Indiana, Waterworks Revenue Bonds, Macon Trust Series S,
Variable Rate Demand Obligations, 3.820%, 1/01/21 MBIA Insured (6) |
|
|
|
|
|
|
A-1+ |
|
|
|
4,240,000 |
|
|
|
|
|
|
|
|
|
|
|
4,240,000 |
|
|
7,500 |
|
|
|
|
|
|
|
7,500 |
|
|
King County, Washington, Sewer Revenue Bonds, Series 2005, Trust 1200,
Variable Rate Demand Obligations, 3.500%, 1/01/35 FSA Insured (6) |
|
|
|
|
|
|
A-1 |
|
|
|
7,500,000 |
|
|
|
|
|
|
|
|
|
|
|
7,500,000 |
|
|
1,645 |
|
|
|
|
|
|
|
1,645 |
|
|
Massachusetts Water Resources Authority, General Revenue Bonds, Tender Option Bond, Trust 1080,
8/12 at 100.00, Variable Rate Demand Obligations, 3.000%, 8/01/32 FSA Insured (6) |
|
|
|
|
|
VMIG-1 |
|
|
1,645,000 |
|
|
|
|
|
|
|
|
|
|
|
1,645,000 |
|
|
4,060 |
|
|
|
|
|
|
|
4,060 |
|
|
Mesa County Valley School District 51, Grand Junction, Colorado, General Obligation Bonds,
Trust 2696, Variable Rate Demand Obligations, 2.270%, 6/01/13 MBIA Insured (6) |
|
|
|
|
|
VMIG-1 |
|
|
4,060,000 |
|
|
|
|
|
|
|
|
|
|
|
4,060,000 |
|
|
$ |
17,445 |
|
|
$ |
|
|
|
$ |
17,445 |
|
|
Total Short-Term Investments (cost $17,445,000, $0 and $17,445,000 respectively) |
|
|
|
|
|
|
|
|
|
|
17,445,000 |
|
|
|
|
|
|
|
|
|
|
|
17,445,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Investments (cost $1,793,384,594, $306,183,861 and $2,099,568,455,
respectively) 166.0% |
|
|
|
|
|
|
|
|
|
|
1,683,555,059 |
|
|
|
291,340,255 |
|
|
|
|
|
|
|
1,974,895,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floating Rate Obligations (8.2)% |
|
|
|
|
|
|
|
|
|
|
(97,378,333 |
) |
|
|
|
|
|
|
|
|
|
|
(97,378,333 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Assets
Less Liabilities 3.9% |
|
|
|
|
|
|
|
|
|
|
42,391,243 |
|
|
|
5,226,933 |
|
|
|
(660,000 |
) (8) |
|
|
46,958,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Shares, at Liquidation Value (61.7)% (7) |
|
|
|
|
|
|
|
|
|
|
(623,350,000 |
) |
|
|
(111,000,000 |
) |
|
|
|
|
|
|
(734,350,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Assets Applicable to Common Shares 100% |
|
|
|
|
|
|
|
|
|
$ |
1,005,217,969 |
|
|
$ |
185,567,188 |
|
|
$ |
(660,000 |
) |
|
$ |
1,190,125,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At least 80% of the Funds net assets (including net assets attributable to Preferred shares) are invested in municipal securities that are covered by insurance or backed by an escrow
or trust account containing sufficient U.S. Government or U.S. Treasury-issued State and Local Government Series securities to ensure the timely payment of principal and interest.
|
|
|
|
See Notes to Financial Statements, Footnote 2 Insurance, for more information. |
|
|
|
(1) |
|
All percentages shown in the Portfolio of Investments are
based on net assets applicable to Common shares of the Combined Fund unless otherwise noted. |
|
(2) |
|
Optional Call Provisions: Dates (month and year) and prices of the earliest optional call or redemption. There may be other call provisions at varying prices at later dates. Certain
mortgage-backed securities may be subject to periodic principal paydowns. |
|
(3) |
|
Ratings: Using the higher of Standard & Poors Group (Standard & Poors) or Moodys Investor Service, Inc. (Moodys) rating. Ratings below BBB by Standard & Poors or Baa
by Moodys are considered to be below investment grade. |
59
|
|
|
|
|
The Portfolio of Investments may reflect the ratings on certain bonds insured by AGC, AMBAC, CIFG, FGIC, FSA, MBIA, RAAI and SYNCORA as of October 31, 2008.
|
|
(4) |
|
Portion of investment has been pledged as collateral for Recourse Trusts. |
|
(5) |
|
Backed by an escrow or trust containing sufficient U.S. Government or U.S. Government agency securities which ensure the timely payment of principal and interest. Such investments are
normally considered to be equivalent to AAA rated securities. |
|
(6) |
|
Investment has a maturity of more than one year, but has variable rate and demand features which qualify it as a short-term investment. The rate disclosed is that in effect at the end of the
reporting period. This rate changes periodically based on market
conditions or a specified market index. |
|
(7) |
|
Preferred Shares, at Liquidation Value as a percentage of
Total Investments of the Combined Fund is 37.2%. |
|
(8) |
|
Non-recurring costs associated with the proposed
Reorganization (estimated to be $660,000) which will be borne by the
shareholders of the National Fund and the Florida Fund ($55,000 abd
$605,000,
respectively). |
|
N/R |
|
Not rated. |
|
WI/DD |
|
Purchased on a when-issued or delayed delivery basis. |
|
(ETM) |
|
Escrowed to maturity. |
|
(IF) |
|
Inverse floating rate investment. |
|
(UB) |
|
Underlying bond of an inverse floating rate trust reflected as a financing transaction pursuant to the provisions of SFAS No. 140.
|
|
|
|
See accompanying notes to financial statements. |
60
Pro Forma Statement of Assets and Liabilities (Unaudited)
October 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
|
|
|
|
|
|
(Actual) |
|
(Actual) |
|
(Adjustments) |
|
(As Adjusted) |
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at value (cost $1,793,384,594, $306,183,861 and 2,099,568,455, respectively) |
|
$ |
1,683,555,059 |
|
|
$ |
291,340,255 |
|
|
|
|
|
|
$ |
1,974,895,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
|
24,694,557 |
|
|
|
2,679,264 |
|
|
|
|
|
|
|
27,373,821 |
|
|
|
|
|
Receivables from dividends and interest |
|
|
27,871,203 |
|
|
|
3,439,450 |
|
|
|
|
|
|
|
31,310,653 |
|
|
|
|
|
Investments sold |
|
|
560,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
610,000 |
|
|
|
|
|
Other assets |
|
|
185,630 |
|
|
|
40,888 |
|
|
|
|
|
|
|
226,518 |
|
|
|
|
|
|
Total assets |
|
|
1,736,866,449 |
|
|
|
297,549,857 |
|
|
|
|
|
|
|
2,034,416,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized depreciation on Recourse Trusts |
|
|
23,850 |
|
|
|
|
|
|
|
|
|
|
|
23,850 |
|
|
|
|
|
|
Floating rate obligations |
|
|
97,378,333 |
|
|
|
|
|
|
|
|
|
|
|
97,378,333 |
|
|
|
|
|
Payables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments purchased |
|
|
5,214,363 |
|
|
|
|
|
|
|
|
|
|
|
5,214,363 |
|
|
|
|
|
Common share dividends |
|
|
4,136,839 |
|
|
|
721,338 |
|
|
|
|
|
|
|
4,858,177 |
|
|
|
|
|
Preferred share dividends |
|
|
141,765 |
|
|
|
12,467 |
|
|
|
|
|
|
|
154,232 |
|
|
|
|
|
Accrued expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
|
842,533 |
|
|
|
159,331 |
|
|
|
|
|
|
|
1,001,864 |
|
|
|
|
|
Other |
|
|
560,797 |
|
|
|
89,533 |
|
|
|
|
|
|
|
650,330 |
|
|
|
|
|
Reorganization costs |
|
|
|
|
|
|
|
|
|
|
660,000 |
(a) |
|
|
660,000 |
|
|
|
|
|
|
Total liabilities |
|
|
108,298,480 |
|
|
|
982,669 |
|
|
|
660,000 |
|
|
|
109,941,149 |
|
|
|
|
|
|
Auction rate preferred shares, at liquidation value |
|
|
623,350,000 |
|
|
|
111,000,000 |
|
|
|
|
|
|
|
734,350,000 |
|
|
|
|
|
|
Net assets applicable to common shares |
|
$ |
1,005,217,969 |
|
|
$ |
185,567,188 |
|
|
$ |
(660,000 |
) |
|
$ |
1,190,125,157 |
|
|
|
|
|
|
Common shares outstanding |
|
|
81,138,036 |
|
|
|
14,218,896 |
|
|
|
711,486 |
(b) |
|
|
96,068,418 |
|
|
|
|
|
|
Net asset value per common share outstanding (net assets applicable to common
shares, divided by common shares outstanding) |
|
$ |
12.39 |
|
|
$ |
13.05 |
|
|
|
|
|
|
$ |
12.39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets applicable to common shares consist of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares, $.01 par value per share |
|
$ |
811,380 |
|
|
$ |
142,189 |
|
|
$ |
7,115 |
(a) |
|
$ |
960,684 |
|
|
|
|
|
Paid-in surplus |
|
|
1,128,874,275 |
|
|
|
201,990,758 |
|
|
|
(667,115 |
) (a) |
|
|
1,330,197,918 |
|
|
|
|
|
Undistributed (Over-distribution of) net investment income |
|
|
(2,109,393 |
) |
|
|
(368,571 |
) |
|
|
|
|
|
|
(2,477,964 |
) |
|
|
|
|
Accumulated net realized gain (loss) from investments and derivative transactions |
|
|
(12,504,908 |
) |
|
|
(1,353,582 |
) |
|
|
|
|
|
|
(13,858,490 |
) |
|
|
|
|
Net
unrealized appreciation (depreciation) of investments and derivative transactions |
|
|
(109,853,385 |
) |
|
|
(14,843,606 |
) |
|
|
|
|
|
|
(124,696,991 |
) |
|
|
|
|
|
Net assets applicable to common shares |
|
$ |
1,005,217,969 |
|
|
$ |
185,567,188 |
|
|
$ |
(660,000 |
) |
|
$ |
1,190,125,157 |
|
|
|
|
|
|
Authorized shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
200,000,000 |
|
|
Unlimited |
|
|
|
|
|
200,000,000 |
|
|
|
|
|
Preferred |
|
|
1,000,000 |
|
|
Unlimited |
|
|
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
(a) |
|
Non-recurring cost associated with the proposed
Reorganization (estimated to be $660,000) which will be borne by the
shareholders of the National Fund and the Florida Fund ($55,000 and
$605,000,
respectively). |
|
(b) |
|
The pro forma statements presume the issuance by the National Fund of approximately
14,930,382 common shares in exchange for the assets and liabilities of the Florida Fund after the
reduction for the costs associated with the proposed reorganization. |
61
Pro Forma Statement of Operations (Unaudited)
Year Ended October 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
National Fund |
|
Florida Fund |
|
Pro Forma |
|
Combined Fund |
|
|
|
|
|
|
(Actual) |
|
(Actual) |
|
(Adjustments) |
|
(As Adjusted) |
|
|
|
|
|
Investment Income |
|
$ |
95,322,713 |
|
|
$ |
15,906,085 |
|
|
|
|
|
|
$ |
111,228,798 |
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees |
|
|
10,976,183 |
|
|
|
2,000,457 |
|
|
|
(148,807 |
) (a) |
|
|
12,827,833 |
|
|
|
|
|
Auction fees |
|
|
1,663,913 |
|
|
|
277,882 |
|
|
|
|
|
|
|
1,941,795 |
|
|
|
|
|
Dividend disbursing agent fees |
|
|
69,996 |
|
|
|
20,000 |
|
|
|
(20,000 |
) (b) |
|
|
69,996 |
|
|
|
|
|
Shareholders servicing agent fees and expenses |
|
|
110,001 |
|
|
|
12,432 |
|
|
|
|
|
|
|
122,433 |
|
|
|
|
|
Interest expense |
|
|
2,785,237 |
|
|
|
53,059 |
|
|
|
|
|
|
|
2,838,296 |
|
|
|
|
|
Custodians fees and expenses |
|
|
266,698 |
|
|
|
72,006 |
|
|
|
(1,890 |
) (b) |
|
|
336,814 |
|
|
|
|
|
Directors/Trustees fees and expenses |
|
|
37,489 |
|
|
|
6,562 |
|
|
|
|
|
|
|
44,051 |
|
|
|
|
|
Professional fees |
|
|
113,791 |
|
|
|
25,437 |
|
|
|
(10,787 |
) (b) |
|
|
128,441 |
|
|
|
|
|
Shareholders reports printing and mailing expenses |
|
|
236,259 |
|
|
|
38,106 |
|
|
|
|
|
|
|
274,365 |
|
|
|
|
|
Stock exchange listing fees |
|
|
28,052 |
|
|
|
9,297 |
|
|
|
(4,200 |
) (b) |
|
|
33,149 |
|
|
|
|
|
Investor relations expense |
|
|
231,260 |
|
|
|
31,160 |
|
|
|
|
|
|
|
262,420 |
|
|
|
|
|
Portfolio Insurance Expense |
|
|
9,119 |
|
|
|
|
|
|
|
|
|
|
|
9,119 |
|
|
|
|
|
Other expenses |
|
|
67,900 |
|
|
|
18,532 |
|
|
|
(11,200 |
) (b) |
|
|
75,232 |
|
|
|
|
|
|
Total expenses before custodian fee credit and expense reimbursement |
|
|
16,595,898 |
|
|
|
2,564,930 |
|
|
|
(196,884 |
) |
|
|
18,963,944 |
|
|
|
|
|
Custodian fee credit |
|
|
(213,160 |
) |
|
|
(44,620 |
) |
|
|
|
|
|
|
(257,780 |
) |
|
|
|
|
Expense reimbursement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expenses |
|
|
16,382,738 |
|
|
|
2,520,310 |
|
|
|
(196,884 |
) |
|
|
18,706,164 |
|
|
|
|
|
|
Net investment income |
|
|
78,939,975 |
|
|
|
13,385,775 |
|
|
|
196,884 |
|
|
|
92,522,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
(12,623,776 |
) |
|
|
(1,885,064 |
) |
|
|
|
|
|
|
(14,508,840 |
) |
|
|
|
|
Forward swaps |
|
|
|
|
|
|
104,696 |
|
|
|
|
|
|
|
104,696 |
|
|
|
|
|
Futures |
|
|
|
|
|
|
523,422 |
|
|
|
|
|
|
|
523,422 |
|
|
|
|
|
Change in net unrealized appreciation (depreciation) of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
(199,798,296 |
) |
|
|
(27,339,352 |
) |
|
|
|
|
|
|
(227,137,648 |
) |
|
|
|
|
Forward swaps |
|
|
|
|
|
|
(47,296 |
) |
|
|
|
|
|
|
(47,296 |
) |
|
|
|
|
|
Net realized and unrealized gain (loss) |
|
|
(212,422,072 |
) |
|
|
(28,643,594 |
) |
|
|
|
|
|
|
(241,065,666 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to Preferred Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From net investment income |
|
|
(24,746,755 |
) |
|
|
(3,943,564 |
) |
|
|
|
|
|
|
(28,690,319 |
) |
|
|
|
|
From accumulated net realized gains |
|
|
(61,352 |
) |
|
|
(327,094 |
) |
|
|
|
|
|
|
(388,446 |
) |
|
|
|
|
|
Decrease in net assets applicable to common shares from
distributions to preferred shareholders |
|
|
(24,808,107 |
) |
|
$ |
(4,270,658 |
) |
|
|
|
|
|
|
(29,078,765 |
) |
|
|
|
|
|
Net increase (decrease) in net assets applicable to common shares from operations |
|
$ |
(158,290,204 |
) |
|
$ |
(19,528,477 |
) |
|
|
196,884 |
|
|
$ |
(177,621,797 |
) |
|
|
|
|
|
|
|
|
(a) |
|
Reflects the impact of applying the Combined Funds fund-level management fee schedule to the
Combined Funds average net assets. |
|
(b) |
|
Reflects the anticipated reduction of certain duplicative expenses eliminated as a result of
the Reorganization. |
62
1. Basis of Combination
The accompanying unaudited pro forma financial statements are presented to show the effect of the
proposed Reorganization of Nuveen Insured Florida Premium Income Municipal Fund, Inc. (Florida
Fund) into Nuveen Insured Municipal Opportunity Fund, Inc. (National Fund) as if such
Reorganization had taken place as of October 31, 2008.
Under the terms of the Agreement and Plan of Reorganization, the combination of the Florida Fund
and the National Fund (the Combined Fund) will be accounted for by the method of accounting for
tax-free mergers of investment companies. The Reorganization would be accomplished by an
acquisition of the net assets of the Florida Fund in exchange for shares of the National Fund at
net asset value. The statement of assets and liabilities and the related statement of operations of
the Florida Fund and the National Fund have been combined as of and for the twelve months ended
October 31, 2008. Following the acquisition, the National Fund will be the accounting survivor. In
accordance with accounting principles generally accepted in the United States of America, the
historical cost of investment securities will be carried forward to the surviving fund and the
results of operations for pre-combination periods of the surviving fund will not be restated.
The accompanying pro forma financial statements and notes to financial statements should be read in
conjunction with the financial statements of the Florida Fund included in its annual report dated
April 30, 2008 and semi-annual report dated October 31, 2008 and the financial statements of the
National Fund included in its annual report dated October 31, 2008.
2. General Information and Significant Accounting Policies
The Combined Funds Common shares are traded on the New York Stock Exchange under the symbol NIO.
The Combined Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company.
The Combined Fund seeks to provide current income exempt from regular federal income tax by
investing primarily in a diversified portfolio of municipal obligations issued by state and local
government authorities or certain U.S. territories.
The following is a summary of significant accounting policies followed by the Combined Fund in the
preparation of its financial statements in accordance with U.S. generally accepted accounting
principles.
Investment Valuation
The prices of municipal bonds in the Combined Funds investment portfolio are provided by a pricing
service approved by the Combined Funds Board of Directors. When market price quotes are not
readily available (which is usually the case for municipal securities), the pricing service may
establish fair value based on yields or prices of municipal bonds of comparable quality, type of
issue, coupon, maturity and rating, indications of value from securities dealers, evaluations of
anticipated cash flows or collateral and general market conditions.
Future contracts are valued using the closing settlement price, or in the absence
of such a price, at the mean of the bid and asked prices.
Prices of forward swap
contracts are also provided by an independent pricing service approved by the Combined Funds Board of Directors.
63
If the
pricing service is
unable to supply a price for an investment or derivative instrument, the Combined Fund may use
market quotes provided by major broker/dealers in such investments. If it is determined that the
market price for an investment or derivative instrument is unavailable or inappropriate, the Board
of Directors of the Combined Fund, or its designee, may establish fair value in accordance with
procedures established in good faith by the Board of Directors. Temporary investments in securities
that have variable rate and demand features qualifying them as short-term investments are valued at
amortized cost, which approximates value.
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from
transactions are determined on the specific identification method. Investments purchased on a
when-issued/delayed delivery basis may have extended settlement periods. Any investments so
purchased are subject to market fluctuation during this period. The Combined Fund has instructed
the custodian to segregate assets with a current value at least equal to the amount of the
when-issued/delayed delivery purchase commitments.
Investment Income
Interest income, which includes the amortization of premiums and accretion of discounts for
financial reporting purposes, is recorded on an accrual basis. Investment income also includes
paydown gains and losses, if any. Dividend income, if any, is recorded on the ex-dividend date.
Income Taxes
The Combined Fund intends to distribute substantially all of its net investment income and net
capital gains to shareholders and to otherwise comply with the requirements of Subchapter M of the
Internal Revenue Code applicable to regulated investment companies. Therefore, no federal income
tax provision is required. Furthermore, the Combined Fund intends to satisfy conditions which will
enable interest from municipal securities, which is exempt from regular federal and applicable
state income taxes, if any, to retain such tax-exempt status when distributed to shareholders of
the Combined Fund. Net realized capital gains and ordinary income distributions paid by the
Combined Fund are subject to federal taxation.
Effective April 30, 2008, the Combined Fund adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48 Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48 provides
guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in
the financial statements. FIN 48 requires the affirmative evaluation of tax positions taken or
expected to be taken in the course of preparing the Combined Funds tax returns to determine
whether it is more-likely-than-not (i.e., a greater than 50-percent likelihood) of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold may result in a tax expense in the current year.
64
Implementation of FIN 48 required management of the Combined Fund to analyze all open tax years, as
defined by the statute of limitations, for all major jurisdictions, which includes federal and
certain states. Open tax years are those that are open for examination by taxing authorities (i.e.,
generally the last four tax year ends and the interim tax period since then). The Combined Fund has
no examinations in progress.
For all open tax years and all major taxing jurisdictions through the end of the reporting period,
management of the Combined Fund has reviewed all tax positions taken or expected to be taken in the
preparation of the Combined Funds tax returns and concluded the adoption of FIN 48 resulted in no
impact to the Funds net assets or results of operations as of and during the fiscal year ended
October 31, 2008.
The Combined Fund is also not aware of any tax positions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Dividends and Distributions to Common Shareholders
Dividends from tax-exempt net investment income are declared monthly. Net realized capital gains
and/or market discount from investment transactions, if any, are distributed to shareholders at
least annually. Furthermore, capital gains are distributed only to the extent they exceed available
capital loss carryforwards.
Distributions to Common shareholders of tax-exempt net investment income, net realized capital
gains and/or market discount, if any, are recorded on the ex-dividend date. The amount and timing
of distributions are determined in accordance with federal income tax regulations, which may differ
from U.S. generally accepted accounting principles.
Preferred Shares
The Combined Fund has issued and outstanding Preferred shares, $25,000 stated value
per share, as a means of effecting financial leverage. The Combined Funds Preferred
shares are issued in more than one Series. The dividend rate paid by the Combined Fund on each
Series is determined every seven days, pursuant to a dutch auction process overseen by the auction
agent, and is payable at the end of each rate period. As of October 31, 2008, the number of Preferred shares outstanding, by Series and in total, for the Combined Fund is as follows:
|
|
|
|
|
Number of shares: |
|
|
|
|
Series M |
|
|
3,666 |
|
Series T |
|
|
3,666 |
|
Series W |
|
|
5,307 |
|
Series W2 |
|
|
2,934 |
|
Series TH |
|
|
6,467 |
|
Series TH2 |
|
|
3,668 |
|
Series F |
|
|
3,666 |
|
|
|
|
|
29,374 |
|
|
65
Beginning
in February 2008, more shares for sale were submitted in the regularly scheduled auctions
for the Preferred shares issued by the Combined Fund than there were offers to buy. This meant that these
auctions failed to clear, and that many Preferred shareholders who wanted to sell
their shares in these auctions were unable to do so. Preferred shareholders unable to
sell their shares received distributions at the maximum rate applicable to failed auctions as
calculated in accordance with the pre-established terms of the Preferred shares.
These developments generally do not affect the management or investment policies of the Combined
Fund. However, one implication of these auction failures for Common shareholders is that the
Combined Funds cost of leverage will likely be higher, at least temporarily, than it otherwise
would have been had the auctions continued to be successful. As a result, the Combined Funds
future Common share earnings may be lower than they otherwise would have been.
On June 11, 2008, Nuveen Investments, Inc. (Nuveen) announced the Combined Fund Boards approval
of plans to use tender option bonds (TOBs), also known as floaters or floating rate obligations,
to refinance a portion of the municipal funds outstanding Auction Rate Preferred shares, whose
auctions have been failing for several months. The plan included an initial phase of approximately
$1 billion in forty-one funds.
Insurance
Under normal circumstances, the Combined Fund will invest at least 80% of its net assets (including
net assets attributable to Preferred shares) in municipal securities that are covered
by insurance guaranteeing the timely payment of principal and interest. For purposes of this 80%
test, insurers must have a claims paying ability rated at least A at the time of purchase by at
least one independent rating agency. In addition, the Combined Fund will invest at least 80% of its
net assets (including net assets attributable to Preferred shares) in municipal
securities that are rated at least AA at the time of purchase (based on the higher of the rating
of the insurer, if any, or the underlying security) by at least one independent rating agency, or
are unrated but judged to be of similar credit quality by Nuveen Asset Management (the Adviser),
a wholly-owned subsidiary of Nuveen, or municipal bonds backed by an escrow or trust account
containing sufficient U.S. government or U.S. government agency securities or U.S. Treasury-issued
State and Local Government Series securities to ensure timely payment of principal and interest.
The Combined Fund may also invest up to 20% of its net assets (including net assets attributable to
Preferred shares) in municipal securities rated below AA (based on the higher rating
of the insurer, if any, or the underlying bond) or are unrated but judged to be of comparable
quality by the Adviser.
66
Each insured municipal security is covered by Original Issue Insurance, Secondary Market Insurance
or Portfolio Insurance. Such insurance does not guarantee the market value of the municipal
securities or the value of the Combined Funds Common shares. Original Issue Insurance and
Secondary Market Insurance remain in effect as long as the municipal securities covered thereby
remain outstanding and the insurer remains in business, regardless of whether the Combined Fund
ultimately disposes of such municipal securities. Consequently, the market value of the municipal
securities covered by Original Issue Insurance or Secondary Market Insurance may reflect value
attributable to the insurance. Portfolio Insurance, in contrast, is effective only while the
municipal securities are held by the Combined Fund. Accordingly, neither the prices used in
determining the market value of the underlying municipal securities nor the Common share net asset
value of the Combined Fund includes value, if any, attributable to the Portfolio Insurance. Each
policy of the Portfolio Insurance does, however, give the Combined Fund the right to obtain
permanent insurance with respect to the municipal security covered by the Portfolio Insurance
policy at the time of its sale.
Inverse Floating Rate Securities
The Combined Fund is authorized to invest in inverse floating rate securities. An inverse floating
rate security is created by depositing a municipal bond, typically with a fixed interest rate, into
a special purpose trust created by a broker-dealer. In turn, this trust (a) issues floating rate
certificates, in face amounts equal to some fraction of the deposited bonds par amount or market
value, that typically pay short-term tax-exempt interest rates to third parties, and (b) issues to
a long-term investor (such as the Combined Fund) an inverse floating rate certificate (sometimes
referred to as an inverse floater) that represents all remaining or residual interest in the
trust. The income received by the inverse floater holder varies inversely with the short-term rate
paid to the floating rate certificates holders, and in most circumstances the inverse floater
holder bears substantially all of the underlying bonds downside investment risk and also benefits
disproportionately from any potential appreciation of the underlying bonds value. The price of an
inverse floating rate security will be more volatile than that of the underlying bond because the
interest rate is dependent on not only the fixed coupon rate of the underlying bond but also on the
short-term interest paid on the floating rate certificates, and because the inverse floating rate
security essentially bears the risk of loss of the greater face value of the underlying bond.
The Combined Fund may purchase an inverse floating rate security in a secondary market transaction
without first owning the underlying bond (referred to as an externally-deposited inverse
floater), or instead by first selling a fixed-rate bond to a broker-dealer for deposit into the
special purpose trust and receiving in turn the residual interest in the trust (referred to as a
self-deposited inverse floater). The inverse floater held by The Combined Fund gives the Combined
Fund the right (a) to cause the holders of the floating rate certificates to tender their notes at
par, and (b) to have the broker transfer the fixed-rate bond held by the trust to the Combined
Fund, thereby collapsing the trust. An investment in an externally-deposited inverse floater is
identified in the Portfolio of Investments as an Inverse floating rate investment. An investment
in a self-deposited inverse floater is accounted for as a financing transaction in accordance with
Statement of Financial Accounting Standards
67
No. 140 (SFAS No. 140) Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities. In such instances, a fixed-rate bond deposited
into a special purpose trust is identified in the Portfolio of Investments as an Underlying bond
of an inverse floating rate trust, with the Combined Fund accounting for the short-term floating
rate certificates issued by the trust as Floating rate obligations on the Statement of Assets and
Liabilities. In addition, the Combined Fund reflects in Investment Income the entire earnings of
the underlying bond and the related interest paid to the holders of the short-term floating rate
certificates is included as a component of Interest expense on the Statement of Operations.
The Combined Fund may also enter into shortfall and forbearance agreements (sometimes referred to
as a recourse trust or credit recovery swap) (such agreements referred to herein as Recourse
Trusts) with a broker-dealer by which the Combined Fund agrees to reimburse the broker-dealer, in
certain circumstances, for the difference between the liquidation value of the fixed-rate bond held
by the trust and the liquidation value of the floating rate certificates issued by the trust plus
any shortfalls in interest cash flows. Under these agreements, the Combined Funds potential
exposure to losses related to or on inverse floaters may increase beyond the value of the Combined
Funds inverse floater investments as the Combined Fund may potentially be liable to fulfill all
amounts owed to holders of the floating rate certificates. At period end, any such shortfall is
included as Unrealized depreciation on Recourse Trusts on the Statement of Assets and
Liabilities.
During the fiscal year ended October 31, 2008, the Combined Fund invested in externally deposited
inverse floaters and/or self deposited inverse floaters.
Forward Swap Transactions
The Combined Fund is authorized to invest in forward interest rate swap transactions. The Combined
Funds use of forward interest rate swap transactions is intended to help the Combined Fund manage
its overall interest rate sensitivity, either shorter or longer, generally to more closely align
the Combined Funds interest rate sensitivity with that of the broader municipal market. Forward
interest rate swap transactions involve the Combined Funds agreement with a counterparty to pay,
in the future, a fixed or variable rate payment in exchange for the counterparty paying the
Combined Fund a variable or fixed rate payment, the accruals for which would begin at a specified
date in the future (the effective date). The amount of the payment obligation is based on the
notional amount of the forward swap contract and the termination date of the swap (which is akin to
a bonds maturity). The value of the Combined Funds swap commitment would increase or decrease
based primarily on the extent to which long-term interest rates for bonds having a maturity of the swaps termination
date increases or decreases.
68
The Combined Fund
may terminate a swap contract prior to the effective date, at which point a realized gain or loss
is recognized. When a forward swap is terminated, it ordinarily does not involve the delivery of
securities or other underlying assets or principal, but rather is settled in cash on a net basis.
The Combined Fund intends, but is not obligated, to terminate its forward swaps before the
effective date. Accordingly, the risk of loss with respect to the swap counterparty on such
transactions is limited to the credit risk associated with a counterparty failing to honor its
commitment to pay any realized gain to the Combined Fund upon termination. To reduce such credit
risk, all counterparties are required to pledge collateral daily (based on the daily valuation of
each swap) on behalf of the Combined Fund with a value approximately equal to the amount of any
unrealized gain above a pre-determined threshold. Reciprocally, when the Combined Fund has an
unrealized loss on a swap contract, the Combined Fund has instructed the custodian to pledge assets
of the Combined Fund as collateral with a value approximately equal to the amount of the unrealized
loss above a pre-determined threshold. Collateral pledges are monitored and subsequently adjusted
if and when the swap valuations fluctuate, either up or down, by at least the pre-determined
threshold amount. During the fiscal year ended October 31, 2008, the
Combined Fund invested in forward interest rate swap transactions.
Futures Contracts
The Combined Fund is authorized to invest in futures contracts.
Upon entering into a futures contract, the Combined Fund is required to deposit
with the broker an amount of cash or liquid securities equal to a specified percentage
of the contract amount. This is known as the initial margin. Subsequent payments
(variation margin) are made or received by the Combined Fund each day, depending on
the daily fluctuation of the value of the contract.
During the period the futures contract is open, changes in the value of the
contract are recognized as an unrealized gain or loss by marking-to-market on
a daily basis to reflect the changes in market value of the contract. When the contract
is closed or expired, the Combined Fund records a realized gain or loss equal to the difference
between the value of the contract on the closing date and the value of the contract when
originally entered into. Cash held by the broker to cover initial
margin requirements
on open future contracts, if any, is recognized on the Statement of Assets and Liabilities.
Additionally, the Statement of Assets and Liabilities reflects a receivable or payable to the
variation margin, when applicable. During the fiscal year ended
October 31, 2008, the
Combined Fund invested in futures contracts.
Risks of investments in futures contracts include the possible adverse movement of the
securities or indices underlying the contracts, the possibility that there may not be
a liquid secondary market for the contracts and/or that a change in the value of the
contract may not correlate with a change in the value of the underlying securities or
indices.
Zero Coupon Securities
The Combined Fund is authorized to invest in zero coupon securities. A zero coupon security does
not pay a regular interest coupon to its holders during the life of the security. Tax-exempt income
to the holder of the security comes from accretion of the difference between the original purchase
price of the security at issuance and the par value of the security at maturity and is effectively
paid at maturity. Such securities are included in the Portfolios of Investments with a 0.000%
coupon rate in their description. The market prices of zero coupon securities generally are more
volatile than the market prices of securities that pay interest periodically.
Custodian Fee Credit
The Combined Fund has an arrangement with the custodian bank whereby certain custodian fees and
expenses are reduced by net credits earned on the Combined Funds cash on deposit with the bank.
Such deposit arrangements are an alternative to overnight investments. Credits for cash balances
may be offset by charges for any days on which the Combined Fund overdraws its account at the
custodian bank.
Indemnifications
Under the Combined Funds organizational documents, its Officers and Directors are indemnified
against certain liabilities arising out of the performance of their duties to the Combined Fund. In
addition, in the normal course of business, the Combined Fund enters into contracts that provide
general indemnifications to other parties. The Combined Funds maximum exposure under these
arrangements is unknown as this would involve future claims that may be made against the Combined
Fund that have not yet occurred. However, the Combined Fund has not had prior claims or losses
pursuant to these contracts and expects the risk of loss to be remote.
69
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the reported amounts of
increases and decreases in net assets applicable to Common shares from operations during the
reporting period. Actual results may differ from those estimates.
3. Income Tax Information
The following information is presented on an income tax basis. Differences between amounts for
financial statement and federal income tax purposes are primarily due to timing differences in
recognizing taxable market discount, timing differences in recognizing certain gains and losses on
investment transactions and the treatment of investments in inverse floating rate transactions subject to SFAS No. 140.
70
To the extent that differences arise that are permanent in nature, such amounts are reclassified within the capital
accounts on the Statement of Assets and Liabilities presented in the annual report, based on their
federal tax basis treatment; temporary differences do not require reclassification. Temporary and
permanent differences do not impact the net asset values of the Combined Fund.
At October 31, 2008, the cost of investments was $2,000,965,601.
Gross unrealized appreciation and gross unrealized depreciation of investments at October 31, 2008,
were as follows:
|
|
|
|
|
Gross unrealized: |
|
|
|
|
Appreciation |
|
$ |
47,738,085 |
|
Depreciation |
|
|
(171,184,742 |
) |
|
Net unrealized appreciation
(depreciation) of investments |
|
$ |
(123,446,657 |
) |
|
At October 31, 2008, the Combined Funds tax year end, the
Combined Fund had $ 11,531,354 of unused
capital loss carryforwards available for federal income tax purposes to be applied against future
capital gains, if any. If not applied, the carryforwards will expire on October 31, 2016.
71
4. Management Fees and Other Transactions with Affiliates
The Combined Funds management fee is separated into two components a complex-level component,
based on the aggregate amount of all fund assets managed by the Adviser, and a specific fund-level
component, based only on the amount of assets within the Combined Fund. This pricing structure
enables Nuveen fund shareholders to benefit from growth in the assets within each individual fund
as well as from growth in the amount of complex-wide assets managed by the Adviser.
The annual fund-level fee, payable monthly, for the Combined Fund is based upon the average daily
net assets (including net assets attributable to Preferred shares) as follows:
|
|
|
|
|
Average
Daily Net Assets (including net assets attributable to
Preferred shares) |
|
|
Fund-Level Fee Rate |
|
|
For the first $125 million |
|
|
.4500 |
% |
For the next $125 million |
|
|
.4375 |
|
For the next $250 million |
|
|
.4250 |
|
For the next $500 million |
|
|
.4125 |
|
For the next $1 billion |
|
|
.4000 |
|
For the next $3 billion |
|
|
.3875 |
|
For net assets over $5 billion |
|
|
.3750 |
|
|
The annual complex-level fee, payable monthly, which is additive to the fund-level fee, for all
Nuveen sponsored funds in the U.S., is based on the aggregate amount of total fund assets managed
as stated in the following table. As of December 31, 2008, the
complex-level fee rate was .2000%.
The complex-level fee schedule is as follows:
|
|
|
|
|
Complex-Level Asset Breakpoint Level |
|
|
Effective Rate at Breakpoint Level |
|
|
$55 billion |
|
|
.2000 |
% |
$56 billion |
|
|
.1996 |
|
$57 billion |
|
|
.1989 |
|
$60 billion |
|
|
.1961 |
|
$63 billion |
|
|
.1931 |
|
$66 billion |
|
|
.1900 |
|
$71 billion |
|
|
.1851 |
|
$76 billion |
|
|
.1806 |
|
$80 billion |
|
|
.1773 |
|
|
72
|
|
|
|
|
$91 billion |
|
|
.1691 |
|
$125 billion |
|
|
.1599 |
|
$200 billion |
|
|
.1505 |
|
$250 billion |
|
|
.1469 |
|
$300 billion |
|
|
.1445 |
|
|
|
(1) The complex-level component of the management fee for the funds is calculated based upon the aggregate daily net assets of all Nuveen funds, with such daily net assets to include assets attributable to preferred stock issued by or borrowings by such funds but to exclude assets attributable to investments in other Nuveen funds.
The management fee compensates the Adviser for overall investment advisory and administrative
services and general office facilities. The Combined Fund pays no compensation directly to those of
its Directors who are affiliated with the Adviser or to its Officers, all of whom receive
remuneration for their services to the Combined Fund from the Adviser or its affiliates. The Board
of Directors has adopted a deferred compensation plan for independent Directors that enables
Directors to elect to defer receipt of all or a portion of the annual compensation they are
entitled to receive from certain Nuveen advised funds. Under the plan, deferred amounts are treated
as though equal dollar amounts had been invested in shares of select Nuveen advised funds.
5. New Accounting Pronouncements
Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157 (SFAS No.
157)
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This standard
establishes a single authoritative definition of fair value, sets out a framework for measuring
fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies
to fair value measurements already required or permitted by existing standards. SFAS No. 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. The changes to current generally accepted accounting
principles from the application of this standard relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair value measurements. As
of October 31, 2008, management does not believe the adoption of SFAS No. 157 will impact the
financial statement amounts; however, additional disclosures may be required about the inputs used
to develop the measurements and the effect of certain of the measurements included within the
Statement of Operations for the period. The Combined Fund first adopted SFAS No. 157 with respect to its report filed on Form N-Q for the quarterly period ended January 31, 2009.
Financial Accounting Standards Board Statement of Financial Accounting Standards No. 161 (SFAS No.
161)
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities. This standard is intended to enhance financial statement disclosures for derivative
instruments and hedging activities and enable investors to understand: a) how and why a fund uses
derivative instruments, b) how derivative instruments and related hedge items are accounted for,
and c) how derivative instruments and related hedge items affect a funds financial position,
results of operations and cash flows. SFAS No. 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008. As of October 31, 2008,
management does not believe the adoption of SFAS No. 161 will impact the
financial statement amounts; however, additional footnote disclosures may be required about the use
of derivative instruments and hedging items.
73
Appendix A
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
AMENDMENT AND RESTATEMENT OF
STATEMENT ESTABLISHING AND FIXING THE RIGHTS
AND PREFERENCES OF
MUNICIPAL AUCTION RATE
CUMULATIVE PREFERRED STOCK (MUNIPREFERRED®)
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
TABLE OF CONTENTS
|
|
|
|
|
DEFINITIONS |
|
|
1 |
|
AA Composite Commercial Paper Rate |
|
|
1 |
|
Accountants Confirmation |
|
|
2 |
|
Affiliate |
|
|
2 |
|
Agent Member |
|
|
2 |
|
Anticipation Notes |
|
|
2 |
|
Applicable Rate |
|
|
2 |
|
Articles |
|
|
2 |
|
Auction |
|
|
2 |
|
Auction Agency Agreement |
|
|
2 |
|
Auction Agent |
|
|
3 |
|
Auction Date |
|
|
3 |
|
Auction Procedures |
|
|
3 |
|
Available MuniPreferred |
|
|
3 |
|
Benchmark Rate |
|
|
3 |
|
Beneficial Owner |
|
|
3 |
|
Bid and Bids |
|
|
3 |
|
Bidder and Bidders |
|
|
3 |
|
Board of Directors |
|
|
3 |
|
Broker Dealer |
|
|
3 |
|
Broker Dealer Agreement |
|
|
3 |
|
Business Day |
|
|
3 |
|
Code |
|
|
4 |
|
Commercial Paper Dealers |
|
|
4 |
|
Common Stock |
|
|
4 |
|
Cure Date |
|
|
4 |
|
Date of Original Issue |
|
|
4 |
|
Deposit Securities |
|
|
4 |
|
Discounted Value |
|
|
4 |
|
Dividend Payment Date |
|
|
4 |
|
Dividend Period |
|
|
4 |
|
Existing Holder |
|
|
4 |
|
Failure to Deposit |
|
|
5 |
|
Federal Tax Rate Increase |
|
|
5 |
|
Fund |
|
|
5 |
|
Gross up Payment |
|
|
5 |
|
Hold Order and Hold Orders |
|
|
5 |
|
Holder |
|
|
5 |
|
Independent Accountant |
|
|
5 |
|
Initial Rate Period |
|
|
5 |
|
Interest Equivalent |
|
|
5 |
|
Issue Type Category |
|
|
5 |
|
Kenny Index |
|
|
6 |
|
i
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
Late Charge |
|
|
6 |
|
Liquidation Preference |
|
|
6 |
|
Market Value |
|
|
6 |
|
Maximum Potential Gross up Payment Liability |
|
|
6 |
|
Maximum Rate |
|
|
6 |
|
Minimum Rate Period |
|
|
7 |
|
Moodys |
|
|
7 |
|
Moodys Discount Factor |
|
|
7 |
|
Moodys Eligible Asset |
|
|
7 |
|
Moodys Exposure Period |
|
|
7 |
|
Moodys Volatility Factor |
|
|
7 |
|
Municipal Obligations shall mean Municipal Obligations |
|
|
9 |
|
MuniPreferred |
|
|
8 |
|
MuniPreferred Basic Maintenance Amount |
|
|
8 |
|
MuniPreferred Basic Maintenance Cure Date |
|
|
9 |
|
MuniPreferred Basic Maintenance Report |
|
|
9 |
|
1940 Act |
|
|
10 |
|
1940 Act Cure Date |
|
|
10 |
|
1940 Act MuniPreferred Asset Coverage |
|
|
10 |
|
Notice of Redemption |
|
|
10 |
|
Notice of Special Rate Period |
|
|
10 |
|
Order and Orders |
|
|
10 |
|
Original Issue Insurance |
|
|
10 |
|
Other Issues |
|
|
10 |
|
Outstanding |
|
|
10 |
|
Permanent Insurance |
|
|
10 |
|
Person |
|
|
10 |
|
Portfolio Insurance |
|
|
11 |
|
Potential Beneficial Owner |
|
|
11 |
|
Potential Holder |
|
|
11 |
|
Preferred Stock |
|
|
11 |
|
Quarterly Valuation Date |
|
|
11 |
|
Rate Multiple |
|
|
11 |
|
Rate Period |
|
|
11 |
|
Rate Period Days |
|
|
11 |
|
Receivables for Municipal Obligations Sold |
|
|
11 |
|
Redemption Price |
|
|
12 |
|
Reference Rate |
|
|
12 |
|
Registration Statement |
|
|
12 |
|
S&P |
|
|
12 |
|
S&P Discount Factor |
|
|
12 |
|
S&P Eligible Asset |
|
|
12 |
|
S&P Exposure Period |
|
|
12 |
|
ii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
S&P Volatility Factor |
|
|
12 |
|
Secondary Market Insurance |
|
|
12 |
|
Securities Depository |
|
|
12 |
|
Sell Order and Sell Orders |
|
|
12 |
|
Special Rate Period |
|
|
13 |
|
Special Redemption Provisions |
|
|
13 |
|
Submission Deadline |
|
|
13 |
|
Submitted Bid and Submitted Bids |
|
|
13 |
|
Submitted Hold Order and Submitted Hold Orders |
|
|
13 |
|
Submitted Order and Submitted Orders |
|
|
13 |
|
Subsequent Rate Period |
|
|
13 |
|
Substitute Commercial Paper Dealer |
|
|
13 |
|
Substitute U.S. Government Securities Dealer |
|
|
13 |
|
Sufficient Clearing Bids |
|
|
14 |
|
Taxable Allocation |
|
|
14 |
|
Taxable Equivalent of the Short Term Municipal Bond Rate |
|
|
14 |
|
Taxable Income |
|
|
14 |
|
Treasury Bill |
|
|
14 |
|
Treasury Bill Rate |
|
|
14 |
|
Treasury Note |
|
|
15 |
|
Treasury Note Rate |
|
|
15 |
|
U.S. Government Securities Dealer |
|
|
15 |
|
Valuation Date |
|
|
15 |
|
Volatility Factor |
|
|
15 |
|
Voting Period |
|
|
15 |
|
Winning Bid Rate |
|
|
15 |
|
|
|
|
|
|
|
|
PART I. |
|
|
|
|
|
15 |
1. |
|
Number of Authorized Shares |
|
15 |
2. |
|
Dividends |
|
15 |
|
|
(a) |
|
Ranking |
|
15 |
|
|
(b) |
|
Cumulative Cash Dividends |
|
15 |
|
|
(c) |
|
Dividends Cumulative From Date of Original Issue |
|
15 |
|
|
(d) |
|
Dividend Payment Dates and Adjustment Thereof |
|
16 |
|
|
(e) |
|
Dividend Rates and Calculation of Dividends |
|
16 |
|
|
|
|
(i) Dividend Rates |
|
16 |
|
|
|
|
(ii) Calculation of Dividends |
|
18 |
|
|
(f) |
|
Curing a Failure to Deposit |
|
18 |
|
|
(g) |
|
Dividend Payments by Fund to Auction Agent |
|
19 |
|
|
(h) |
|
Auction Agent as Trustee of Dividend Payments by Fund |
|
19 |
|
|
(i) |
|
Dividends Paid to Holders |
|
19 |
|
|
(j) |
|
Dividends Credited Against Earliest Accumulated But Unpaid Dividends |
|
19 |
iii
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
|
|
|
(k) |
|
Dividends Designated as Exempt Interest Dividends |
|
|
19 |
|
3. |
|
Gross up Payments |
|
|
19 |
|
|
|
(a) |
|
Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days or Fewer |
|
|
19 |
|
|
|
(b) |
|
Special Rate Periods of More Than 28 Rate Period Days |
|
|
20 |
|
|
|
(c) |
|
No Gross up Payments In the Event of a Reallocation |
|
|
20 |
|
4. |
|
Designation of Special Rate Periods |
|
|
20 |
|
|
|
(a) |
|
Length of and Preconditions for Special Rate Period |
|
|
20 |
|
|
|
(b) |
|
Adjustment of Length of Special Rate Period |
|
|
20 |
|
|
|
(c) |
|
Notice of Proposed Special Rate Period |
|
|
21 |
|
|
|
(d) |
|
Notice of Special Rate Period |
|
|
21 |
|
|
|
(e) |
|
Failure to Deliver Notice of Special Rate Period |
|
|
22 |
|
5. |
|
Voting Rights |
|
|
22 |
|
|
|
(a) |
|
One Vote Per Share of MuniPreferred |
|
|
22 |
|
|
|
(b) |
|
Voting For Additional Directors |
|
|
23 |
|
|
|
|
|
(i) Voting Period |
|
|
23 |
|
|
|
|
|
(ii) Notice of Special Meeting |
|
|
23 |
|
|
|
|
|
(iii) Terms of Office of Existing Directors |
|
|
24 |
|
|
|
|
|
(iv) Terms of Office of Certain Directors to Terminate Upon Termination of Voting Period |
|
|
24 |
|
|
|
(c) |
|
Holders of MuniPreferred To Vote On Certain Other Matters |
|
|
24 |
|
|
|
|
|
(i) Increases in Capitalization |
|
|
24 |
|
|
|
|
|
(ii) 1940 Act Matters |
|
|
25 |
|
|
|
(d) |
|
Board May Take Certain Actions Without Shareholder Approval |
|
|
25 |
|
|
|
(e) |
|
Voting Rights Set Forth Herein Are Sole Voting Rights |
|
|
26 |
|
|
|
(f) |
|
No Preemptive Rights or Cumulative Voting |
|
|
26 |
|
|
|
(g) |
|
Voting for Directors Sole Remedy for Funds Failure to Pay Dividends |
|
|
26 |
|
|
|
(h) |
|
Holders Entitled to Vote |
|
|
26 |
|
6. |
|
1940 Act MuniPreferred Asset Coverage |
|
|
27 |
|
7. |
|
MuniPreferred Basic Maintenance Amount |
|
|
27 |
|
8. |
|
[Reserved] |
|
|
29 |
|
9. |
|
Restrictions on Dividends and Other Distributions |
|
|
29 |
|
|
|
(a) |
|
Dividends on Preferred Stock Other Than MuniPreferred |
|
|
29 |
|
|
|
(b) |
|
Dividends and Other Distributions With Respect to Common Stock Under the 1940 Act |
|
|
29 |
|
|
|
(c) |
|
Other Restrictions On Dividends and Other Distributions |
|
|
29 |
|
10. |
|
Rating Agency Restrictions |
|
|
30 |
|
11. |
|
Redemption |
|
|
31 |
|
|
|
(a) |
|
Optional Redemption |
|
|
31 |
|
|
|
(b) |
|
Mandatory Redemption |
|
|
32 |
|
|
|
(c) |
|
Notice of Redemption |
|
|
33 |
|
|
|
(d) |
|
No Redemption Under Certain Circumstances |
|
|
34 |
|
iv
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
|
|
|
(e) |
|
Absence of Funds Available for Redemption |
|
|
34 |
|
|
|
(f) |
|
Auction Agent as Trustee of Redemption Payments by Fund |
|
|
34 |
|
|
|
(g) |
|
Shares for Which Notice of Redemption Has Been Given Are No Longer Outstanding |
|
|
34 |
|
|
|
(h) |
|
Compliance With Applicable Law |
|
|
35 |
|
|
|
(i) |
|
Only Whole Shares of MuniPreferred May Be Redeemed |
|
|
35 |
|
12. |
|
Liquidation Rights |
|
|
35 |
|
|
|
(a) |
|
Ranking |
|
|
35 |
|
|
|
(b) |
|
Distributions Upon Liquidation |
|
|
35 |
|
|
|
(c) |
|
Pro Rata Distributions |
|
|
35 |
|
|
|
(d) |
|
Rights of Junior Stock |
|
|
36 |
|
|
|
(e) |
|
Certain Events Not Constituting Liquidation |
|
|
36 |
|
13. |
|
Miscellaneous |
|
|
36 |
|
|
|
(a) |
|
Amendment of Appendix A to Add Additional Series |
|
|
36 |
|
|
|
(b) |
|
Appendix A Incorporated By Reference |
|
|
36 |
|
|
|
(c) |
|
No Fractional Shares |
|
|
36 |
|
|
|
(d) |
|
Status of Shares of MuniPreferred Redeemed, Exchanged or Otherwise Acquired by the Fund |
|
|
36 |
|
|
|
(e) |
|
Board May Resolve Ambiguities |
|
|
37 |
|
|
|
(f) |
|
Headings Not Determinative |
|
|
37 |
|
|
|
(g) |
|
Notices |
|
|
37 |
|
PART II. |
|
|
|
|
37 |
|
1. |
|
Orders |
|
|
37 |
|
2. |
|
Submission of Orders by Broker Dealers to Auction Agent |
|
|
39 |
|
3. |
|
Determination of Sufficient Clearing Bids, Winning Bid Rate and
Applicable Rate |
|
|
41 |
|
4. |
|
Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation of Shares |
|
|
42 |
|
5. |
|
Notification of Allocations |
|
|
45 |
|
6. |
|
Auction Agent |
|
|
45 |
|
7. |
|
Transfer of Shares of MuniPreferred |
|
|
46 |
|
8. |
|
Global Certificate |
|
|
46 |
|
APPENDIX A |
|
|
|
|
48 |
|
Section 1. |
|
Designation As To Series |
|
|
48 |
|
Section 2. |
|
Number of Authorized Shares Per Series |
|
|
49 |
|
Section 3. |
|
Exceptions to Certain Definitions |
|
|
49 |
|
Section 4. |
|
Certain Definitions |
|
|
49 |
|
Section 5. |
|
Initial Rate Periods |
|
|
55 |
|
Section 6. |
|
Date for Purposes of Paragraph (yyy) Contained Under the Heading
Definitions in this Statement |
|
|
56 |
|
Section 7. |
|
Party Named for Purposes of the Definition of
Rate Multiple in this Statement |
|
|
56 |
|
Section 8. |
|
Additional Definitions |
|
|
56 |
|
v
TABLE OF CONTENTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Page |
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Section 9. |
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Dividend Payment Dates |
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56 |
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Section 10. |
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Amount for Purposes of Subparagraph (c)(i) of Section 5 of Part I of this Statement |
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57 |
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Section 11. |
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Redemption Provisions Applicable to Initial Rate Periods |
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57 |
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Section 12. |
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Applicable Rate for Purposes of Subparagraph(b)(iii) of Section 3 of Part II of this Statement |
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57 |
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vi
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC., a Minnesota corporation (the Fund),
certifies to the Secretary of State of the State of Minnesota that:
First: Pursuant to authority expressly vested in the Board of Directors of the Fund by
Article FIFTH of the Funds Articles of Incorporation, as amended (which, as hereafter restated or
amended from time to time are, together with this Statement, herein called the Articles), the
Board of Directors has, by resolution, authorized the issuance of shares of the Funds authorized
Preferred Stock, par value $.01 per share, liquidation preference $25,000 per share, having such
designation or designations as to series as is set forth in Section 1 of Appendix A hereto and such
number of shares per such series as is set forth in Section 2 of Appendix A hereto.
Second: The preferences, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption, of the shares of each series of
MuniPreferred described in Section 1 of Appendix A hereto are as follows (each such series being
referred to herein as a series of MuniPreferred, and shares of all such series being referred to
herein individually as a share of MuniPreferred and collectively as shares of MuniPreferred):
DEFINITIONS
Except as otherwise specifically provided in Section 3 of Appendix A hereto, as used in Parts
I and II of this Statement, the following terms shall have the following meanings (with terms
defined in the singular having comparable meanings when used in the plural and vice versa), unless
the context otherwise requires:
(a) AA Composite Commercial Paper Rate, on any date for any Rate Period of shares of a
series of MuniPreferred, shall mean (i) (A) in the case of any Minimum Rate Period or any Special
Rate Period of fewer than 49 Rate Period Days, the interest equivalent of the 30 day rate;
provided, however, that if such Rate Period is a Minimum Rate Period and the AA Composite
Commercial Paper Rate is being used to determine the Applicable Rate for shares of such series when
all of the Outstanding shares of such series are subject to Submitted Hold Orders, then the
interest equivalent of the seven day rate, and (B) in the case of any Special Rate Period of (1) 49
or more but fewer than 70 Rate Period Days, the interest equivalent of the 60 day rate; (2) 70 or
more but fewer than 85 Rate Period Days, the arithmetic average of the interest equivalent of the
60 day and 90 day rates; (3) 85 or more but fewer than 99 Rate Period Days, the interest equivalent
of the 90 day rate; (4) 99 or more but fewer than 120 Rate Period Days, the arithmetic average of
the interest equivalent of the 90 day and 120 day rates; (5) 120 or more but fewer than 141 Rate
Period Days, the interest equivalent of the 120 day rate; (6) 141 or more but fewer than 162 Rate
Period Days, the arithmetic average of the 120 day and 180 day rates; and (7) 162 or more but fewer
than 183 Rate Period Days, the interest equivalent of the 180 day rate, in each case on commercial
paper placed on behalf of issuers whose corporate bonds are rated AA by S&P or the equivalent of
such rating by S&P or another rating agency, as made available on a discount basis or otherwise by
the Federal Reserve Bank of New York for the Business Day next preceding such date; or (ii) in the
event that the Federal Reserve Bank of New York does not make available any such rate, then the
arithmetic average of such rates, as quoted on a discount basis or otherwise, by the Commercial
Paper Dealers to the Auction Agent for the close of business on the Business Day next preceding
such date. If any Commercial Paper Dealer does
not quote a rate required to determine the AA Composite Commercial Paper
Rate, the AA
Composite Commercial Paper Rate shall be determined on the basis of the quotation or quotations
furnished by the remaining Commercial Paper Dealer or Commercial Paper Dealers and any Substitute
Commercial Paper Dealer or Substitute Commercial Paper Dealers selected by the Fund to provide such
rate or rates not being supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as the
case may be, or, if the Fund does not select any such Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or Commercial Paper
Dealers. For purposes of this definition, the interest equivalent of a rate stated on a discount
basis (a discount rate) for commercial paper of a given days maturity shall be equal to the
quotient (rounded upwards to the next higher one thousandth (.001) of 1%) of (A) the discount rate
divided by (B) the difference between (x) 1.00 and (y) a fraction the numerator of which shall be
the product of the discount rate times the number of days in which such commercial paper matures
and the denominator of which shall be 360.
(b) Accountants Confirmation shall have the meaning specified in paragraph (c) of Section 7
of Part I of this Statement.
(c) Affiliate shall mean, for purposes of the definition of Outstanding, any Person known
to the Auction Agent to be controlled by, in control of or under common control with the Fund;
provided, however, that no Broker Dealer controlled by, in control of or under common control with
the Fund shall be deemed to be an Affiliate nor shall any corporation or any Person controlled by,
in control of or under common control with such corporation one of the directors, trustees or
executive officers of which is a director of the Fund be deemed to be an Affiliate solely because
such director, trustee or executive officer is also a director of the Fund.
(d) Agent Member shall mean a member of or participant in the Securities Depository that
will act on behalf of a Bidder.
(e) Anticipation Notes shall mean Tax Anticipation Notes (TANs), Revenue Anticipation Notes
(RANs), Tax and Revenue Anticipation Notes (TRANs), Grant Anticipation Notes (GANs) that are rated
by S&P and Bond Anticipation Notes (BANs) that are rated by S&P.
(f) Applicable Rate shall have the meaning specified in subparagraph (e)(i) of Section 2 of
Part I of this Statement.
(g) Articles shall have the meaning specified on the first page of this Statement.
(h) Auction shall mean each periodic implementation of the Auction Procedures.
(i) Auction Agency Agreement shall mean the agreement between the Fund and the Auction Agent
which provides, among other things, that the Auction Agent will follow the Auction Procedures for
purposes of determining the
Applicable Rate for shares of a series of MuniPreferred so long as the Applicable Rate for
shares of such series is to be based on the results of an Auction.
(j) Auction Agent shall mean the entity appointed as such by a resolution of the Board of
Directors in accordance with Section 6 of Part II of this Statement.
2
(k) Auction Date, with respect to any Rate Period, shall mean the Business Day next
preceding the first day of such Rate Period.
(l) Auction Procedures shall mean the procedures for conducting Auctions set forth in Part
II of this Statement.
(m) Available MuniPreferred shall have the meaning specified in paragraph (a) of Section 3
of Part II of this Statement.
(n) Benchmark Rate shall have the meaning specified in Section 12 of Appendix A hereto.
(o) Beneficial Owner, with respect to shares of a series of MuniPreferred, means a customer
of a Broker Dealer who is listed on the records of that Broker Dealer (or, if applicable, the
Auction Agent) as a holder of shares of such series.
(p) Bid and Bids shall have the respective meanings specified in paragraph (a) of Section
1 of Part II of this Statement.
(q) Bidder and Bidders shall have the respective meanings specified in paragraph (a) of
Section 1 of Part II of this Statement; provided, however, that neither the Fund nor any affiliate
thereof shall be permitted to be a Bidder in an Auction, except that any Broker Dealer that is an
affiliate of the Fund may be a Bidder in an Auction, but only if the Orders placed by such Broker
Dealer are not for its own account.
(r) Board of Directors shall mean the Board of Directors of the Fund or any duly authorized
committee thereof.
(s) Broker Dealer shall mean any broker dealer, commercial bank or other entity permitted by
law to perform the functions required of a Broker Dealer in Part II of this Statement, that is a
member of, or a participant in, the Securities Depository or is an affiliate of such member or
participant, has been selected by the Fund and has entered into a Broker Dealer Agreement that
remains effective.
(t) Broker Dealer Agreement shall mean an agreement among the Fund, the Auction Agent and a
Broker Dealer pursuant to which such Broker Dealer agrees to follow the procedures specified in
Part II of this Statement.
(u) Business Day shall mean a day on which the New York Stock Exchange is open for trading
and which is neither a Saturday, Sunday nor any other day on which banks in The City of New York,
New York, are authorized by law to close.
(v) Code means the Internal Revenue Code of 1986, as amended.
(w) Commercial Paper Dealers shall mean Lehman Commercial Paper Incorporated, Goldman, Sachs
& Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or, in lieu of any thereof, their
respective affiliates or successors, if such entity is a commercial paper dealer.
3
(x) Common Stock shall mean the common stock, par value $.01 per share, of the Fund.
(y) Cure Date shall mean the MuniPreferred Basic Maintenance Cure Date or the 1940 Act Cure
Date, as the case may be.
(z) Date of Original Issue, with respect to shares of a series of MuniPreferred, shall mean
the date on which the Fund initially issued such shares.
(aa) Deposit Securities shall mean cash and Municipal Obligations rated at least A-1+ or
SP-1+ by S&P, except that, for purposes of subparagraph (a)(v) of Section 11 of Part I of this
Statement, such Municipal Obligations shall be considered Deposit Securities only if they are
also rated P-1, MIG-1 or VMIG-1 by Moodys.
(bb) Discounted Value, as of any Valuation Date, shall mean, (i) with respect to an S&P
Eligible Asset, the quotient of the Market Value thereof divided by the applicable S&P Discount
Factor and (ii) (a) with respect to a Moodys Eligible Asset that is not currently callable as of
such Valuation Date at the option of the issuer thereof, the quotient of the Market Value thereof
divided by the applicable Moodys Discount Factor, or (b) with respect to a Moodys Eligible Asset
that is currently callable as of such Valuation Date at the option of the issuer thereof, the
quotient of (1) the lesser of the Market Value or call price thereof, including any call premium,
divided by (2) the applicable Moodys Discount Factor.
(cc) [Reserved]
(dd) [Reserved]
(ee) Dividend Payment Date, with respect to shares of a series of MuniPreferred, shall mean
any date on which dividends are payable on shares of such series pursuant to the provisions of
paragraph (d) of Section 2 of Part I of this Statement.
(ff) Dividend Period, with respect to shares of a series of MuniPreferred, shall mean the
period from and including the Date of Original Issue of shares of such series to but excluding the
initial Dividend Payment Date for shares of such series and any period thereafter from and
including one Dividend Payment Date for shares of such series to but excluding the next succeeding
Dividend Payment Date for shares of such series.
(gg) Existing Holder, with respect to shares of a series of MuniPreferred, shall mean a
Broker Dealer (or any such other Person as may be permitted by the Fund) that is listed on the
records of the Auction Agent as a holder of shares of such series.
(hh) Failure to Deposit, with respect to shares of a series of MuniPreferred, shall mean a
failure by the Fund to pay to the Auction Agent, not later than 12:00 noon, New York City time, (A)
on the Business Day next preceding any Dividend Payment Date for shares of such series, in funds
available on such Dividend Payment Date in The City of New York, New York, the full amount of any
dividend (whether or not earned or declared) to be paid on such Dividend Payment Date on any share
of such series or (B) on the Business Day next preceding any redemption date in funds available on
such redemption date for shares of such series in The
4
City of New York, New York, the Redemption
Price to be paid on such redemption date for any share of such series after notice of redemption is
mailed pursuant to paragraph (c) of Section 11 of Part I of this Statement; provided, however, that
the foregoing clause (B) shall not apply to the Funds failure to pay the Redemption Price in
respect of shares of MuniPreferred when the related Notice of Redemption provides that redemption
of such shares is subject to one or more conditions precedent and any such condition precedent
shall not have been satisfied at the time or times and in the manner specified in such Notice of
Redemption.
(ii) Federal Tax Rate Increase shall have the meaning specified in the definition of
Moodys Volatility Factor.
(jj) Fund shall mean the entity named on the first page of this Statement, which is the
issuer of the shares of MuniPreferred.
(kk) Gross up Payment shall have the meaning specified in Section 4 of Appendix A hereto.
(ll) Holder, with respect to shares of a series of MuniPreferred, shall mean the registered
holder of such shares as the same appears on the stock books of the Fund.
(mm) Hold Order and Hold Orders shall have the respective meanings specified in paragraph
(a) of Section 1 of Part II of this Statement.
(nn) Independent Accountant shall mean a nationally recognized accountant, or firm of
accountants, that is with respect to the Fund an independent public accountant or firm of
independent public accountants under the Securities Act of 1933, as amended from time to time.
(oo) Initial Rate Period, with respect to shares of a series of MuniPreferred, shall have
the meaning specified with respect to shares of such series in Section 5 of Appendix A hereto.
(pp) Interest Equivalent means a yield on a 360 day basis of a discount basis security which
is equal to the yield on an equivalent interest bearing security.
(qq) Issue Type Category, if defined in Section 4 of Appendix A hereto, shall have the
meaning specified in that section.
(rr) Kenny Index shall have the meaning specified in the definition of Taxable Equivalent
of the Short Term Municipal Bond Rate.
(ss) Late Charge shall have the meaning specified in subparagraph (e)(1)(B) of Section 2 of
Part I of this Statement.
(tt) Liquidation Preference, with respect to a given number of shares of MuniPreferred,
means $25,000 times that number.
(uu) Market Value of any asset of the Fund shall mean the market value thereof determined by
the pricing service designated from time to time by the Board of Directors.
5
Market Value of any
asset shall include any interest accrued thereon. The pricing service values portfolio securities
at the mean between the quoted bid and asked price or the yield equivalent when quotations are
readily available. Securities for which quotations are not readily available are valued at fair
value as determined by the pricing service using methods which include consideration of: yields or
prices of municipal bonds of comparable quality, type of issue, coupon, maturity and rating;
indications as to value from dealers; and general market conditions. The pricing service may
employ electronic data processing techniques or a matrix system, or both, to determine valuations.
(vv) Maximum Potential Gross up Payment Liability, as of any Valuation Date, shall mean the
aggregate amount of Gross up Payments that would be due if the Fund were to make Taxable
Allocations, with respect to any taxable year, estimated based upon dividends paid and the amount
of undistributed realized net capital gains and other taxable income earned by the Fund, as of the
end of the calendar month immediately preceding such Valuation Date, and assuming such Gross up
Payments are fully taxable.
(ww) Maximum Rate, for shares of a series of MuniPreferred on any Auction Date for shares of
such series, shall mean:
(i) in the case of any Auction Date which is not the Auction Date immediately prior to the
first day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part
I of this Statement, the product of (A) the Reference Rate on such Auction Date for the next Rate
Period of shares of such series and (B) the Rate Multiple on such Auction Date, unless shares of
such series have or had a Special Rate Period (other than a Special Rate Period of 28 Rate Period
Days or fewer) and an Auction at which Sufficient Clearing Bids existed has not yet occurred for a
Minimum Rate Period of shares of such series after such Special Rate Period, in which case the
higher of:
(A) the dividend rate on shares of such series for the then ending Rate Period; and
(B) the product of (1) the higher of (x) the Reference Rate on such Auction Date for a
Rate Period equal in length to the then ending Rate Period of shares of such series, if such
then ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such
Auction Date for a Rate Period equal in length to the then ending Rate Period of shares of
such series, if such then ending Rate Period was more
than 364 Rate Period Days, and (y) the Reference Rate on such Auction Date for a Rate
Period equal in length to such Special Rate Period of shares of such series, if such Special
Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to such Special Rate Period, if such Special Rate
Period was more than 364 Rate Period Days and (2) the Rate Multiple on such Auction Date; or
(ii) in the case of any Auction Date which is the Auction Date immediately prior to the first
day of any proposed Special Rate Period designated by the Fund pursuant to Section 4 of Part I of
this Statement, the product of (A) the highest of (1) the Reference Rate on such Auction Date for a
Rate Period equal in length to the then ending Rate Period of shares of
6
such series, if such then
ending Rate Period was 364 Rate Period Days or fewer, or the Treasury Note Rate on such Auction
Date for a Rate Period equal in length to the then ending Rate Period of shares of such series, if
such then ending Rate Period was more than 364 Rate Period Days, (2) the Reference Rate on such
Auction Date for the Special Rate Period for which the Auction is being held if such Special Rate
Period is 364 Rate Period Days or fewer or the Treasury Note Rate on such Auction Date for the
Special Rate Period for which the Auction is being held if such Special Rate Period is more than
364 Rate Period Days, and (3) the Reference Rate on such Auction Date for Minimum Rate Periods and
(B) the Rate Multiple on such Auction Date.
(xx) [Reserved]
(yy) Minimum Rate Period shall mean any Rate Period consisting of 7 Rate Period Days.
(zz) Moodys shall mean Moodys Investors Service, Inc., a Delaware corporation, and its
successors.
(aaa) Moodys Discount Factor shall have the meaning specified in Section 4 of Appendix A
hereto.
(bbb) Moodys Eligible Asset shall have the meaning specified in Section 4 of Appendix A
hereto.
(ccc) Moodys Exposure Period shall mean the period commencing on a given Valuation Date and
ending 56 days thereafter.
(ddd) Moodys Volatility Factor shall mean, as of any Valuation Date, (i) in the case of any
Minimum Rate Period, any Special Rate Period of 28 Rate Period Days or fewer, or any Special Rate
Period of 57 Rate Period Days or more, a multiplicative factor equal to 275%, except as otherwise
provided in the last sentence of this definition; (ii) in the case of any Special Rate Period of
more than 28 but fewer than 36 Rate Period Days, a multiplicative factor equal to 203%; (iii) in
the case of any Special Rate Period of more than 35 but fewer than 43 Rate Period Days, a
multiplicative factor equal to 217%; (iv) in the case of any Special Rate Period of more than 42
but fewer than 50 Rate Period Days, a multiplicative factor equal to 226%; and (v) in the case of
any Special Rate Period of more than 49 but fewer than 57 Rate Period Days, a multiplicative factor
equal to 235%. If, as a result of the enactment of changes to the Code, the greater of the maximum
marginal Federal individual
income tax rate applicable to ordinary income and the maximum marginal Federal corporate
income tax rate applicable to ordinary income will increase, such increase being rounded up to the
next five percentage points (the Federal Tax Rate Increase), until the effective date of such
increase, the Moodys Volatility Factor in the case of any Rate Period described in (i) above in
this definition instead shall be determined by reference to the following table:
|
|
|
Federal Volatility |
|
|
Tax Rate Increase |
|
Factor |
5%
|
|
295% |
10%
|
|
317% |
7
|
|
|
Federal Volatility |
|
|
Tax Rate Increase |
|
Factor |
|
|
|
15%
|
|
341% |
20%
|
|
369% |
25%
|
|
400% |
30%
|
|
436% |
35%
|
|
477% |
40%
|
|
525% |
(eee) MuniPreferred shall have the meaning set forth on the first page of this Statement.
(fff) MuniPreferred Basic Maintenance Amount, as of any Valuation Date, shall mean the
dollar amount equal to the sum of (i)(A) the product of the number of shares of MuniPreferred
outstanding on such date multiplied by $25,000 (plus the product of the number of shares of any
other series of Preferred Stock outstanding on such date multiplied by the liquidation preference
of such shares), plus any redemption premium applicable to shares of MuniPreferred (or other
Preferred Stock) then subject to redemption; (B) the aggregate amount of dividends that will have
accumulated at the respective Applicable Rates (whether or not earned or declared) to (but not
including) the first respective Dividend Payment Dates for shares of MuniPreferred outstanding that
follow such Valuation Date (plus the aggregate amount of dividends, whether or not earned or
declared, that will have accumulated in respect of other outstanding shares of Preferred Stock to,
but not including, the first respective dividend payment dates for such other shares that follow
such Valuation Date); (C) the aggregate amount of dividends that would accumulate on shares of each
series of MuniPreferred outstanding from such first respective Dividend Payment Date therefor
through the 56th day after such Valuation Date, at the Maximum Rate (calculated as if such
Valuation Date were the Auction Date for the Rate Period commencing on such Dividend Payment Date)
for a Minimum Rate Period of shares of such series to commence on such Dividend Payment Date,
assuming, solely for purposes of the foregoing, that if on such Valuation Date the Fund shall have
delivered a Notice of Special Rate Period to the Auction Agent pursuant to Section 4(d)(i) of this
Part I with respect to shares of such series, such Maximum Rate shall be the higher of (a) the
Maximum Rate for the Special Rate Period of shares of such series to commence on such Dividend
Payment Date and (b) the Maximum Rate for a Minimum Rate Period of shares of such series to
commence on such Dividend Payment Date, multiplied by the Volatility Factor applicable to a Minimum
Rate Period, or, in the event the Fund shall have delivered a Notice of Special Rate Period to the
Auction Agent pursuant to Section 4(d)(i) of this Part I with respect to shares of such series
designating a Special Rate
Period consisting of 56 Rate Period Days or more, the Volatility Factor applicable to a
Special Rate Period of that length (plus the aggregate amount of dividends that would accumulate at
the maximum dividend rate or rates on any other shares of Preferred Stock outstanding from such
respective dividend payment dates through the 56th day after such Valuation Date, as established by
or pursuant to the respective statements establishing and fixing the rights and preferences of such
other shares of Preferred Stock) (except that (1) if such Valuation Date occurs at a time when a
Failure to Deposit (or, in the case of shares of Preferred Stock other than MuniPreferred, a
failure similar to a Failure to Deposit) has occurred that has not been cured, the dividend for
purposes of calculation would accumulate at the current dividend rate then applicable to the shares
in respect of which such failure has occurred and (2) for those days during the period described in
this subparagraph (C) in respect of which the Applicable Rate in effect immediately prior to such
Dividend Payment Date will remain in effect
8
(or, in the case of shares of Preferred Stock other
than MuniPreferred, in respect of which the dividend rate or rates in effect immediately prior to
such respective dividend payment dates will remain in effect), the dividend for purposes of
calculation would accumulate at such Applicable Rate (or other rate or rates, as the case may be)
in respect of those days); (D) the amount of anticipated expenses of the Fund for the 90 days
subsequent to such Valuation Date; (E) the amount of the Funds Maximum Potential Gross up Payment
Liability in respect of shares of MuniPreferred (and similar amounts payable in respect of other
shares of Preferred Stock pursuant to provisions similar to those contained in Section 3 of Part I
of this Statement) as of such Valuation Date; and (F) any current liabilities as of such Valuation
Date to the extent not reflected in any of (i)(A) through (i)(E) (including, without limitation,
any payables for Municipal Obligations purchased as of such Valuation Date and any liabilities
incurred for the purpose of clearing securities transactions) less (ii) the value (i.e., for
purposes of current Moodys guidelines, the face value of cash, short term Municipal Obligations
rated MIG-1, VMIG-1 or P-1, and short term securities that are the direct obligation of the U.S.
government, provided in each case that such securities mature on or prior to the date upon which
any of (i)(A) through (i)(F) become payable, otherwise the Moodys Discounted Value) of any of the
Funds assets irrevocably deposited by the Fund for the payment of any of (i)(A) through (i)(F).
(ggg) MuniPreferred Basic Maintenance Cure Date, with respect to the failure by the Fund to
satisfy the MuniPreferred Basic Maintenance Amount (as required by paragraph (a) of Section 7 of
Part I of this Statement) as of a given Valuation Date, shall mean the seventh Business Day
following such Valuation Date.
(hhh) MuniPreferred Basic Maintenance Report shall mean a report signed by the President,
Treasurer or any Senior Vice President or Vice President of the Fund which sets forth, as of the
related Valuation Date, the assets of the Fund, the Market Value and the Discounted Value thereof
(seriatim and in aggregate), and the MuniPreferred Basic Maintenance Amount.
(iii) Municipal Obligations shall mean Municipal Obligations as defined in the Funds
registration statement on Form N 2 on file with the Securities and Exchange Commission, as such
registration statement may be amended from time to time (the Registration Statement).
(jjj) 1940 Act shall mean the Investment Company Act of 1940, as amended from time to time.
(kkk) 1940 Act Cure Date, with respect to the failure by the Fund to maintain the 1940 Act
MuniPreferred Asset Coverage (as required by Section 6 of Part I of this Statement) as of the last
Business Day of each month, shall mean the last Business Day of the following month.
(lll) 1940 Act MuniPreferred Asset Coverage shall mean asset coverage, as defined in Section
18(h) of the 1940 Act, of at least 200% with respect to all outstanding senior securities of the
Fund which are stock, including all outstanding shares of MuniPreferred (or such other asset
coverage as may in the future be specified in or under the 1940 Act as the minimum asset coverage
for senior securities which are stock of a closed end investment company as a condition of
declaring dividends on its common stock).
9
(mmm) Notice of Redemption shall mean any notice with respect to the redemption of shares of
MuniPreferred pursuant to paragraph (c) of Section 11 of Part I of this Statement.
(nnn) Notice of Special Rate Period shall mean any notice with respect to a Special Rate
Period of shares of MuniPreferred pursuant to subparagraph (d)(i) of Section 4 of Part I of this
Statement.
(ooo) Order and Orders shall have the respective meanings specified in paragraph (a) of
Section 1 of Part II of this Statement.
(ppp) Original Issue Insurance, if defined in Section 4 of Appendix A hereto, shall have the
meaning specified in that section.
(qqq) Other Issues, if defined in Section 4 of Appendix A hereto, shall have the meaning
specified in that section.
(rrr) Outstanding shall mean, as of any Auction Date with respect to shares of a series of
MuniPreferred, the number of shares of such series theretofore issued by the Fund except, without
duplication, (i) any shares of such series theretofore cancelled or delivered to the Auction Agent
for cancellation or redeemed by the Fund, (ii) any shares of such series as to which the Fund or
any Affiliate thereof shall be an Existing Holder and (iii) any shares of such series represented
by any certificate in lieu of which a new certificate has been executed and delivered by the Fund.
(sss) Permanent Insurance, if defined in Section 4 of Appendix A hereto, shall have the
meaning specified in that section.
(ttt) Person shall mean and include an individual, a partnership, a corporation, a trust, an
unincorporated association, a joint venture or other entity or a government or any agency or
political subdivision thereof.
(uuu) Portfolio Insurance, if defined in Section 4 of Appendix A hereto, shall have the
meaning specified in that section.
(vvv) Potential Beneficial Owner, with respect to shares of a series of MuniPreferred, shall
mean a customer of a Broker Dealer that is not a Beneficial Owner of shares of such series but that
wishes to purchase shares of such series, or that is a Beneficial Owner of shares of such series
that wishes to purchase additional shares of such series.
(www) Potential Holder, with respect to shares of a series of MuniPreferred, shall mean a
Broker Dealer (or any such other person as may be permitted by the Fund) that is not an Existing
Holder of shares of such series or that is an Existing Holder of shares of such series that wishes
to become the Existing Holder of additional shares of such series.
(xxx) Preferred Stock shall mean the preferred stock of the Fund, and includes the shares of
MuniPreferred.
10
(yyy) Quarterly Valuation Date shall mean the last Business Day of each February, May,
August and November of each year, commencing on the date set forth in Section 6 of Appendix A
hereto.
(zzz) Rate Multiple shall have the meaning specified in Section 4 of Appendix A hereto.
(aaaa) Rate Period, with respect to shares of a series of MuniPreferred, shall mean the
Initial Rate Period of shares of such series and any Subsequent Rate Period, including any Special
Rate Period, of shares of such series.
(bbbb) Rate Period Days, for any Rate Period or Dividend Period, means the number of days
that would constitute such Rate Period or Dividend Period but for the application of paragraph (d)
of Section 2 of Part I of this Statement or paragraph (b) of Section 4 of Part I of this Statement.
(cccc) Receivables for Municipal Obligations Sold shall mean (A) for purposes of calculation
of Moodys Eligible Assets as of any Valuation Date, no more than the aggregate of the following:
(i) the book value of receivables for Municipal Obligations sold as of or prior to such Valuation
Date if such receivables are due within five business days of such Valuation Date, and if the
trades which generated such receivables are (x) settled through clearing house firms with respect
to which the Fund has received prior written authorization from Moodys or (y) with counterparties
having a Moodys long term debt rating of at least Baa3; and (ii) the Moodys Discounted Value of
Municipal Obligations sold as of or prior to such Valuation Date which generated receivables, if
such receivables are due within five business days of such Valuation Date but do not comply with
either of the conditions specified in (i) above, and (B) for purposes of calculation of S&P
Eligible Assets as of any Valuation Date, the book value of receivables for Municipal Obligations
sold as of or prior to such Valuation Date if such receivables are due within five business days of
such Valuation Date.
(dddd) Redemption Price shall mean the applicable redemption price specified in paragraph
(a) or (b) of Section 11 of Part I of this Statement.
(eeee) Reference Rate shall mean (i) the higher of the Taxable Equivalent of the Short Term
Municipal Bond Rate and the AA Composite Commercial Paper Rate in the case of Minimum Rate
Periods and Special Rate Periods of 28 Rate Period Days or fewer; (ii) the AA Composite
Commercial Paper Rate in the case of Special Rate Periods of more than 28 Rate Period Days but
fewer than 183 Rate Period Days; and (iii) the Treasury Bill Rate in the case of Special Rate
Periods of more than 182 Rate Period Days but fewer than 365 Rate Period Days.
(ffff) Registration Statement has the meaning specified in the definition of Municipal
Obligations.
(gggg) S&P shall mean Standard & Poors Corporation, a New York corporation, and its
successors.
11
(hhhh) S&P Discount Factor shall have the meaning specified in Section 4 of Appendix A
hereto.
(iiii) S&P Eligible Asset shall have the meaning specified in Section 4 of Appendix A
hereto.
(jjjj) S&P Exposure Period shall mean the maximum period of time following a Valuation Date
that the Fund has under this Statement to cure any failure to maintain, as of such Valuation Date,
the Discounted Value for its portfolio at least equal to the MuniPreferred Basic Maintenance Amount
(as described in paragraph (a) of Section 7 of Part I of this Statement).
(kkkk) S&P Volatility Factor shall mean, as of any Valuation Date, a multiplicative factor
equal to (i) 305% in the case of any Minimum Rate Period or any Special Rate Period of 28 Rate
Period Days or fewer; (ii) 268% in the case of any Special Rate Period of more than 28 Rate Period
Days but fewer than 183 Rate Period Days; and (iii) 204% in the case of any Special Rate Period of
more than 182 Rate Period Days.
(llll) Secondary Market Insurance, if defined in Section 4 of Appendix A hereto, shall have
the meaning specified in that section.
(mmmm) Securities Depository shall mean The Depository Trust Company and its successors and
assigns or any other securities depository selected by the Fund which agrees to follow the
procedures required to be followed by such securities depository in connection with shares of
MuniPreferred.
(nnnn) Sell Order and Sell Orders shall have the respective meanings specified in
paragraph (a) of Section 1 of Part II of this Statement.
(oooo) Special Rate Period, with respect to shares of a series of MuniPreferred, shall have
the meaning specified in paragraph (a) of Section 4 of Part I of this Statement.
(pppp) Special Redemption Provisions shall have the meaning specified in subparagraph (a)(i)
of Section 11 of Part I of this Statement.
(qqqq) Submission Deadline shall mean 1:30 P.M., New York City time, on any Auction Date or
such other time on any Auction Date by which Broker Dealers are required to submit Orders to the
Auction Agent as specified by the Auction Agent from time to time.
(rrrr) Submitted Bid and Submitted Bids shall have the respective meanings specified in
paragraph (a) of Section 3 of Part II of this Statement.
(ssss) Submitted Hold Order and Submitted Hold Orders shall have the respective meanings
specified in paragraph (a) of Section 3 of Part II of this Statement.
(tttt) Submitted Order and Submitted Orders shall have the respective meanings specified
in paragraph (a) of Section 3 of Part II of this Statement.
12
(uuuu) Submitted Sell Order and Submitted Sell Orders shall have the respective meanings
specified in paragraph (a) of Section 3 of Part II of this Statement.
(vvvv) Subsequent Rate Period, with respect to shares of a series of MuniPreferred, shall
mean the period from and including the first day following the Initial Rate Period of shares of
such series to but excluding the next Dividend Payment Date for shares of such series and any
period thereafter from and including one Dividend Payment Date for shares of such series to but
excluding the next succeeding Dividend Payment Date for shares of such series; provided, however,
that if any Subsequent Rate Period is also a Special Rate Period, such term shall mean the period
commencing on the first day of such Special Rate Period and ending on the last day of the last
Dividend Period thereof.
(wwww) Substitute Commercial Paper Dealer shall mean The First Boston Company or Morgan
Stanley & Co. Incorporated or their respective affiliates or successors, if such entity is a
commercial paper dealer; provided, however, that none of such entities shall be a Commercial Paper
Dealer.
(xxxx) Substitute U.S. Government Securities Dealer shall mean The First Boston Company and
Merrill Lynch, Pierce, Fenner & Smith Incorporated or their respective affiliates or successors, if
such entity is a U.S. Government securities dealer; provided, however, that none of such entities
shall be a U.S. Government Securities Dealer.
(yyyy) Sufficient Clearing Bids shall have the meaning specified in paragraph (a) of Section
3 of Part II of this Statement.
(zzzz) Taxable Allocation shall have the meaning specified in Section 3 of Part I of this
Statement.
(aaaaa) Taxable Income shall have the meaning specified in Section 12 of Appendix A hereto.
(bbbbb) Taxable Equivalent of the Short Term Municipal Bond Rate, on any date for any
Minimum Rate Period or Special Rate Period of 28 Rate Period Days or fewer, shall mean 90% of the
quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the Kenny S&P
30 day High Grade Index or any successor index (the Kenny Index) (provided, however, that any
such successor index must be approved by Moodys (if Moodys is then rating the shares of
MuniPreferred) and S&P (if S&P is then rating the shares of MuniPreferred)), made available for the
Business Day immediately preceding such date but in any event not later than 8:30 A.M., New York
City time, on such date by Kenny S&P Evaluation Services or any successor thereto, based upon 30
day yield evaluations at par of short term bonds the interest on which is excludable for regular
Federal income tax purposes under the Code of high grade component issuers selected by Kenny S&P
Evaluation Services or any such successor from time to time in its discretion, which component
issuers shall include, without limitation, issuers of general obligation bonds, but shall exclude
any bonds the interest on which constitutes an item of tax preference under Section 57(a)(5) of the
Code, or successor provisions, for purposes of the alternative minimum tax, divided by (B) 1.00
minus the maximum marginal regular Federal individual income tax rate applicable to ordinary income
or the
13
maximum marginal regular Federal corporate income tax rate applicable to ordinary income (in
each case expressed as a decimal), whichever is greater; provided, however, that if the Kenny Index
is not made so available by 8:30 A.M., New York City time, on such date by Kenny S&P Evaluation
Services or any successor, the Taxable Equivalent of the Short Term Municipal Bond Rate shall mean
the quotient of (A) the per annum rate expressed on an interest equivalent basis equal to the most
recent Kenny Index so made available for any preceding Business Day, divided by (B) 1.00 minus the
maximum marginal regular Federal individual income tax rate applicable to ordinary income or the
maximum marginal regular Federal corporate income tax rate applicable to ordinary income (in each
case expressed as a decimal), whichever is greater.
(ccccc) Treasury Bill shall mean a direct obligation of the U.S. Government having a
maturity at the time of issuance of 364 days or less.
(ddddd) Treasury Bill Rate, on any date for any Rate Period, shall mean (i) the bond
equivalent yield, calculated in accordance with prevailing industry convention, of the rate on the
most recently auctioned Treasury Bill with a remaining maturity closest to the length of such Rate
Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding such
date; or (ii) in the event that any such rate is not published in The Wall Street Journal, then
the bond equivalent yield, calculated in accordance with prevailing industry convention, as
calculated by reference to the arithmetic average of the bid price quotations of the most recently
auctioned Treasury Bill with a remaining maturity
closest to the length of such Rate Period, as determined by bid price quotations as of the
close of business on the Business Day immediately preceding such date obtained from the U.S.
Government Securities Dealers to the Auction Agent.
(eeeee) Treasury Note shall mean a direct obligation of the U.S. Government having a
maturity at the time of issuance of five years or less but more than 364 days.
(fffff) Treasury Note Rate, on any date for any Rate Period, shall mean (i) the yield on
the most recently auctioned Treasury Note with a remaining maturity closest to the length of such
Rate Period, as quoted in The Wall Street Journal on such date for the Business Day next preceding
such date; or (ii) in the event that any such rate is not published in The Wall Street Journal,
then the yield as calculated by reference to the arithmetic average of the bid price quotations of
the most recently auctioned Treasury Note with a remaining maturity closest to the length of such
Rate Period, as determined by bid price quotations as of the close of business on the Business Day
immediately preceding such date obtained from the U.S. Government Securities Dealers to the Auction
Agent. If any U.S. Government Securities Dealer does not quote a rate required to determine the
Treasury Bill Rate or the Treasury Note Rate, the Treasury Bill Rate or the Treasury Note Rate
shall be determined on the basis of the quotation or quotations furnished by the remaining U.S.
Government Securities Dealer or U.S. Government Securities Dealers and any Substitute U.S.
Government Securities Dealers selected by the Fund to provide such rate or rates not being supplied
by any U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the case may be,
or, if the Fund does not select any such Substitute U.S. Government Securities Dealer or Substitute
U.S. Government Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S.
Government Securities Dealers.
14
(ggggg) U.S. Government Securities Dealer shall mean Lehman Government Securities
Incorporated, Goldman, Sachs & Co., Salomon Brothers Inc and Morgan Guaranty Trust Company of New
York or their respective affiliates or successors, if such entity is a U.S. Government securities
dealer.
(hhhhh) Valuation Date shall mean, for purposes of determining whether the Fund is
maintaining the MuniPreferred Basic Maintenance Amount, each Business Day.
(iiiii) Volatility Factor shall mean, as of any Valuation Date, the greater of the Moodys
Volatility Factor and the S&P Volatility Factor.
(jjjjj) Voting Period shall have the meaning specified in paragraph (b) of Section 5 of Part
I of this Statement.
(kkkkk) Winning Bid Rate shall have the meaning specified in paragraph (a) of Section 3 of
Part II of this Statement.
Any additional definitions specifically set forth in Section 8 of Appendix A hereto shall be
incorporated herein and made part hereof by reference thereto.
PART I.
1. Number of Authorized Shares. The number of authorized shares constituting a series of
MuniPreferred shall be as set forth with respect to such series in Section 2 of Appendix A hereto.
2. Dividends.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a parity with each other,
with shares of any other series of MuniPreferred and with shares of any other series of Preferred
Stock as to the payment of dividends by the Fund.
(b) Cumulative Cash Dividends. The Holders of shares of MuniPreferred of any series shall be
entitled to receive, when, as and if declared by the Board of Directors, out of funds legally
available therefor, cumulative cash dividends at the Applicable Rate for shares of such series,
determined as set forth in paragraph (e) of this Section 2, and no more (except to the extent set
forth in Section 3 of this Part I), payable on the Dividend Payment Dates with respect to shares of
such series determined pursuant to paragraph (d) of this Section 2. Holders of shares of
MuniPreferred shall not be entitled to any dividend, whether payable in cash, property or stock, in
excess of full cumulative dividends, as herein provided, on shares of MuniPreferred. No interest,
or sum of money in lieu of interest, shall be payable in respect of any dividend payment or
payments on shares of MuniPreferred which may be in arrears, and, except to the extent set forth in
subparagraph (e)(i) of this Section 2, no additional sum of money shall be payable in respect of
any such arrearage.
(c) Dividends Cumulative From Date of Original Issue. Dividends on shares of MuniPreferred of
any series shall accumulate at the Applicable Rate for shares of such series from the Date of
Original Issue thereof.
15
(d) Dividend Payment Dates and Adjustment Thereof. The Dividend Payment Dates with respect to
shares of a series of MuniPreferred shall be as set forth with respect to shares of such series in
Section 9 of Appendix A hereto; provided, however, that:
(i) (A) in the case of a series of MuniPreferred designated as Series F MuniPreferred or
Series M MuniPreferred in Section 1 of Appendix A hereto, if the Monday or Tuesday, as the case
may be, on which dividends would otherwise be payable on shares of such series is not a Business
Day, then such dividends shall be payable on such shares on the first Business Day that falls after
such Monday or Tuesday, as the case may be, and (B) in the case of a series of MuniPreferred
designated as Series T MuniPreferred, Series W MuniPreferred or Series TH MuniPreferred in
Section 1 of Appendix A hereto, if the Wednesday, Thursday or Friday, as the case may be, on which
dividends would otherwise be payable on shares of such series is not a Business Day, then such
dividends shall be payable on such shares on the first Business Day that falls prior to such
Wednesday, Thursday or Friday, as the case may be; and
(ii) notwithstanding Section 9 of Appendix A hereto, the Fund in its discretion may establish
the Dividend Payment Dates in respect of any Special Rate Period of shares of a series of
MuniPreferred consisting of more than 28 Rate Period Days; provided,
however, that such dates shall be set forth in the Notice of Special Rate Period relating to
such Special Rate Period, as delivered to the Auction Agent, which Notice of Special Rate Period
shall be filed with the Secretary of the Fund; and further provided that (1) any such Dividend
Payment Date shall be a Business Day and (2) the last Dividend Payment Date in respect of such
Special Rate Period shall be the Business Day immediately following the last day thereof, as such
last day is determined in accordance with paragraph (b) of Section 4 of this Part I.
(e) Dividend Rates and Calculation of Dividends.
(i) Dividend Rates. The dividend rate on shares of MuniPreferred of any series during the
period from and after the Date of Original Issue of shares of such series to and including the last
day of the Initial Rate Period of shares of such series shall be equal to the rate per annum set
forth with respect to shares of such series under Designation in Section 1 of Appendix A hereto.
For each Subsequent Rate Period of shares of such series thereafter, the dividend rate on shares of
such series shall be equal to the rate per annum that results from an Auction for shares of such
series on the Auction Date next preceding such Subsequent Rate Period; provided, however, that if:
(A) an Auction for any such Subsequent Rate Period is not held for any reason other
than as described below, the dividend rate on shares of such series for such Subsequent Rate
Period will be the Maximum Rate for shares of such series on the Auction Date therefor;
(B) any Failure to Deposit shall have occurred with respect to shares of such series
during any Rate Period thereof (other than any Special Rate Period consisting of more than
364 Rate Period Days or any Rate Period succeeding any Special Rate Period consisting of
more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been
cured), but, prior to 12:00 Noon, New York City time, on the
16
third Business Day next
succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall
have been cured in accordance with paragraph (f) of this Section 2 and the Fund shall have
paid to the Auction Agent a late charge (Late Charge) equal to the sum of (1) if such
Failure to Deposit consisted of the failure timely to pay to the Auction Agent the full
amount of dividends with respect to any Dividend Period of the shares of such series, an
amount computed by multiplying (x) 200% of the Reference Rate for the Rate Period during
which such Failure to Deposit occurs on the Dividend Payment Date for such Dividend Period
by (y) a fraction, the numerator of which shall be the number of days for which such Failure
to Deposit has not been cured in accordance with paragraph (f) of this Section 2 (including
the day such Failure to Deposit occurs and excluding the day such Failure to Deposit is
cured) and the denominator of which shall be 360, and applying the rate obtained against the
aggregate Liquidation Preference of the outstanding shares of such series and (2) if such
Failure to Deposit consisted of the failure timely to pay to the Auction Agent the
Redemption Price of the shares, if any, of such series for which Notice of Redemption has
been mailed by the Fund pursuant to paragraph (c) of Section 11 of this Part I, an amount
computed by multiplying (x) 200% of the Reference Rate for the Rate Period during which such
Failure to Deposit occurs on the redemption date by (y) a fraction, the numerator of which
shall be the number of days for which such Failure to Deposit is not cured in
accordance with paragraph (f) of this Section 2 (including the day such Failure to
Deposit occurs and excluding the day such Failure to Deposit is cured) and the denominator
of which shall be 360, and applying the rate obtained against the aggregate Liquidation
Preference of the outstanding shares of such series to be redeemed, no Auction will be held
in respect of shares of such series for the Subsequent Rate Period thereof and the dividend
rate for shares of such series for such Subsequent Rate Period will be the Maximum Rate for
shares of such series on the Auction Date for such Subsequent Rate Period;
(C) any Failure to Deposit shall have occurred with respect to shares of such series
during any Rate Period thereof (other than any Special Rate Period consisting of more than
364 Rate Period Days or any Rate Period succeeding any Special Rate Period consisting of
more than 364 Rate Period Days during which a Failure to Deposit occurred that has not been
cured), and, prior to 12:00 Noon, New York City time, on the third Business Day next
succeeding the date on which such Failure to Deposit occurred, such Failure to Deposit shall
not have been cured in accordance with paragraph (f) of this Section 2 or the Fund shall not
have paid the applicable Late Charge to the Auction Agent, no Auction will be held in
respect of shares of such series for the first Subsequent Rate Period thereof thereafter (or
for any Rate Period thereof thereafter to and including the Rate Period during which (1)
such Failure to Deposit is cured in accordance with paragraph (f) of this Section 2 and (2)
the Fund pays the applicable Late Charge to the Auction Agent (the condition set forth in
this clause (2) to apply only in the event Moodys is rating such shares at the time the
Fund cures such Failure to Deposit), in each case no later than 12:00 Noon, New York City
time, on the fourth Business Day prior to the end of such Rate Period), and the dividend
rate for shares of such series for each such Subsequent Rate Period shall be a rate per
annum equal to the Maximum Rate for shares of such series on the Auction Date for such
Subsequent Rate Period (but with the
17
prevailing rating for shares of such series, for
purposes of determining such Maximum Rate, being deemed to be Below ba3/BB-); or
(D) any Failure to Deposit shall have occurred with respect to shares of such series
during a Special Rate Period thereof consisting of more than 364 Rate Period Days, or during
any Rate Period thereof succeeding any Special Rate Period consisting of more than 364 Rate
Period Days during which a Failure to Deposit occurred that has not been cured, and, prior
to 12:00 Noon, New York City time, on the fourth Business Day preceding the Auction Date for
the Rate Period subsequent to such Rate Period, such Failure to Deposit shall not have been
cured in accordance with paragraph (f) of this Section 2 or, in the event Moodys is then
rating such shares, the Fund shall not have paid the applicable Late Charge to the Auction
Agent (such Late Charge, for purposes of this subparagraph (D), to be calculated by using,
as the Reference Rate, the Reference Rate applicable to a Rate Period (x) consisting of more
than 182 Rate Period Days but fewer than 365 Rate Period Days and (y) commencing on the date
on which the Rate Period during which Failure to Deposit occurs commenced), no Auction will
be held in respect of shares of such series for such Subsequent Rate Period (or for any Rate
Period thereof thereafter to and including the Rate Period during which (1) such Failure to
Deposit is cured in accordance with paragraph (f) of this Section 2 and (2) the Fund pays
the applicable Late Charge to the Auction Agent (the condition set forth in this clause (2)
to
apply only in the event Moodys is rating such shares at the time the Fund cures such
Failure to Deposit), in each case no later than 12:00 Noon, New York City time, on the
fourth Business Day prior to the end of such Rate Period), and the dividend rate for shares
of such series for each such Subsequent Rate Period shall be a rate per annum equal to the
Maximum Rate for shares of such series on the Auction Date for such Subsequent Rate Period
(but with the prevailing rating for shares of such series, for purposes of determining such
Maximum Rate, being deemed to be Below ba3/BB) (the rate per annum at which dividends
are payable on shares of a series of MuniPreferred for any Rate Period thereof being herein
referred to as the Applicable Rate for shares of such series).
(ii) Calculation of Dividends. The amount of dividends per share payable on shares of a
series of MuniPreferred on any date on which dividends shall be payable on shares of such series
shall be computed by multiplying the Applicable Rate for shares of such series in effect for such
Dividend Period or Dividend Periods or part thereof for which dividends have not been paid by a
fraction, the numerator of which shall be the number of days in such Dividend Period or Dividend
Periods or part thereof and the denominator of which shall be 365 if such Dividend Period consists
of 7 Rate Period Days and 360 for all other Dividend Periods, and applying the rate obtained
against $25,000.
(f) Curing a Failure to Deposit. A Failure to Deposit with respect to shares of a series of
MuniPreferred shall have been cured (if such Failure to Deposit is not solely due to the willful
failure of the Fund to make the required payment to the Auction Agent) with respect to any Rate
Period of shares of such series if, within the respective time periods described in subparagraph
(e)(i) of this Section 2, the Fund shall have paid to the Auction Agent (A) all accumulated and
unpaid dividends on shares of such series and (B) without duplication, the Redemption Price for
shares, if any, of such series for which Notice of Redemption has been
18
mailed by the Fund pursuant
to paragraph (c) of Section 11 of Part I of this Statement; provided, however, that the foregoing
clause (B) shall not apply to the Funds failure to pay the Redemption Price in respect of shares
of MuniPreferred when the related Redemption Notice provides that redemption of such shares is
subject to one or more conditions precedent and any such condition precedent shall not have been
satisfied at the time or times and in the manner specified in such Notice of Redemption.
(g) Dividend Payments by Fund to Auction Agent. The Fund shall pay to the Auction Agent, not
later than 12:00 Noon, New York City time, on the Business Day next preceding each Dividend Payment
Date for shares of a series of MuniPreferred, an aggregate amount of funds available on the next
Business Day in The City of New York, New York, equal to the dividends to be paid to all Holders of
shares of such series on such Dividend Payment Date.
(h) Auction Agent as Trustee of Dividend Payments by Fund. All moneys paid to the Auction
Agent for the payment of dividends (or for the payment of any Late Charge) shall be held in trust
for the payment of such dividends (and any such Late Charge) by the Auction Agent for the benefit
of the Holders specified in paragraph (i) of this Section 2. Any moneys paid to the Auction Agent
in accordance with the foregoing but not applied by the Auction Agent to the payment of dividends
(and any such Late Charge) will, to the extent
permitted by law, be repaid to the Fund at the end of 90 days from the date on which such
moneys were so to have been applied.
(i) Dividends Paid to Holders. Each dividend on shares of MuniPreferred shall be paid on the
Dividend Payment Date therefor to the Holders thereof as their names appear on the stock books of
the Fund on the Business Day next preceding such Dividend Payment Date.
(j) Dividends Credited Against Earliest Accumulated But Unpaid Dividends. Any dividend
payment made on shares of MuniPreferred shall first be credited against the earliest accumulated
but unpaid dividends due with respect to such shares. Dividends in arrears for any past Dividend
Period may be declared and paid at any time, without reference to any regular Dividend Payment
Date, to the Holders as their names appear on the stock books of the Fund on such date, not
exceeding 15 days preceding the payment date thereof, as may be fixed by the Board of Directors.
(k) Dividends Designated as Exempt Interest Dividends. Dividends on shares of MuniPreferred
shall be designated as exempt interest dividends up to the amount of tax exempt income of the Fund,
to the extent permitted by, and for purposes of, Section 852 of the Code.
3. Gross up Payments. Holders of shares of MuniPreferred shall be entitled to receive, when, as
and if declared by the Board of Directors, out of funds legally available therefor, dividends in an
amount equal to the aggregate Gross up Payments as follows:
(a) Minimum Rate Periods and Special Rate Periods of 28 Rate Period Days or Fewer. If, in the
case of any Minimum Rate Period or any Special Rate Period of 28 Rate Period Days or fewer, the
Fund allocates any net capital gains or other income taxable for Federal income tax purposes to a
dividend paid on shares of MuniPreferred without having given
19
advance notice thereof to the Auction
Agent as provided in Section 5 of Part II of this Statement (such allocation being referred to
herein as a Taxable Allocation) solely by reason of the fact that such allocation is made
retroactively as a result of the redemption of all or a portion of the outstanding shares of
MuniPreferred or the liquidation of the Fund, the Fund shall, prior to the end of the calendar year
in which such dividend was paid, provide notice thereof to the Auction Agent and direct the Funds
dividend disbursing agent to send such notice with a Gross up Payment to each Holder of such shares
that was entitled to such dividend payment during such calendar year at such Holders address as
the same appears or last appeared on the stock books of the Fund.
(b) Special Rate Periods of More Than 28 Rate Period Days. If, in the case of any Special
Rate Period of more than 28 Rate Period Days, the Fund makes a Taxable Allocation to a dividend
paid on shares of MuniPreferred, the Fund shall, prior to the end of the calendar year in which
such dividend was paid, provide notice thereof to the Auction Agent and direct the Funds dividend
disbursing agent to send such notice with a Gross up Payment to each Holder of shares that was
entitled to such dividend payment during such calendar year at such Holders address as the same
appears or last appeared on the stock books of the Fund.
(c) No Gross up Payments In the Event of a Reallocation. The Fund shall not be required to
make Gross up Payments with respect to any net capital gains or other taxable income determined by
the Internal Revenue Service to be allocable in a manner different from that allocated by the Fund.
4. Designation of Special Rate Periods.
(a) Length of and Preconditions for Special Rate Period. The Fund, at its option, may
designate any succeeding Subsequent Rate Period of shares of a series of MuniPreferred as a Special
Rate Period consisting of a specified number of Rate Period Days evenly divisible by seven and not
more than 1,820, subject to adjustment as provided in paragraph (b) of this Section 4. A
designation of a Special Rate Period shall be effective only if (A) notice thereof shall have been
given in accordance with paragraph (c) and subparagraph (d)(i) of this Section 4, (B) an Auction
for shares of such series shall have been held on the Auction Date immediately preceding the first
day of such proposed Special Rate Period and Sufficient Clearing Bids for shares of such series
shall have existed in such Auction, and (C) if any Notice of Redemption shall have been mailed by
the Fund pursuant to paragraph (c) of Section 11 of this Part I with respect to any shares of such
series, the Redemption Price with respect to such shares shall have been deposited with the Auction
Agent. In the event the Fund wishes to designate any succeeding Subsequent Rate Period for shares
of a series of MuniPreferred as a Special Rate Period consisting of more than 28 Rate Period Days,
the Fund shall notify S&P (if S&P is then rating such series) and Moodys (if Moodys is then
rating such series) in advance of the commencement of such Subsequent Rate Period that the Fund
wishes to designate such Subsequent Rate Period as a Special Rate Period and shall provide S&P (if
S&P is then rating such series) and Moodys (if Moodys is then rating such series) with such
documents as either may request.
(b) Adjustment of Length of Special Rate Period. In the event the Fund wishes to designate a
Subsequent Rate Period as a Special Rate Period, but the day following what would
20
otherwise be the
last day of such Special Rate Period is not (a) a Tuesday that is a Business Day in the case of a
series of MuniPreferred designated as Series M MuniPreferred in Section 1 of Appendix A hereto,
(b) a Wednesday that is a Business Day in the case of a series of MuniPreferred designated as
Series T MuniPreferred in Section 1 of Appendix A hereto, (c) a Thursday that is a Business Day
in the case of a series of MuniPreferred designated as Series W MuniPreferred in Section 1 of
Appendix A hereto, (d) a Friday that is a Business Day in the case of a series of MuniPreferred
designated as Series TH MuniPreferred in Section 1 of Appendix A hereto, (e) a Monday that is a
Business Day in the case of a series of MuniPreferred designated as Series F MuniPreferred in
Section 1 of Appendix A hereto, then the Fund shall designate such Subsequent Rate Period as a
Special Rate Period consisting of the period commencing on the first day following the end of the
immediately preceding Rate Period and ending (a) on the first Monday that is followed by a Tuesday
that is a Business Day preceding what would otherwise be such last day, in the case of Series M
MuniPreferred, (b) on the first Tuesday that is followed by a Wednesday that is a Business Day
preceding what would otherwise be such last day, in the case of Series T MuniPreferred, (c) on the
first Wednesday that is followed by a Thursday that is a Business Day preceding what would
otherwise be such last day, in the case of Series W MuniPreferred, (d) on the first Thursday that
is followed by a Friday that is a Business Day preceding what would otherwise be such last day, in
the case of Series TH
MuniPreferred, and (e) on the first Sunday that is followed by a Monday that is a Business Day
preceding what would otherwise be such last day, in the case of Series F MuniPreferred.
(c) Notice of Proposed Special Rate Period. If the Fund proposes to designate any succeeding
Subsequent Rate Period of shares of a series of MuniPreferred as a Special Rate Period pursuant to
paragraph (a) of this Section 4, not less than 20 (or such lesser number of days as may be agreed
to from time to time by the Auction Agent) nor more than 30 days prior to the date the Fund
proposes to designate as the first day of such Special Rate Period (which shall be such day that
would otherwise be the first day of a Minimum Rate Period), notice shall be (i) published or caused
to be published by the Fund in a newspaper of general circulation to the financial community in The
City of New York, New York, which carries financial news, and (ii) mailed by the Fund by first
class mail, postage prepaid, to the Holders of shares of such series. Each such notice shall state
(A) that the Fund may exercise its option to designate a succeeding Subsequent Rate Period of
shares of such series as a Special Rate Period, specifying the first day thereof and (B) that the
Fund will, by 11:00 A.M., New York City time, on the second Business Day next preceding such date
(or by such later time or date, or both, as may be agreed to by the Auction Agent) notify the
Auction Agent of either (x) its determination, subject to certain conditions, to exercise such
option, in which case the Fund shall specify the Special Rate Period designated, or (y) its
determination not to exercise such option.
(d) Notice of Special Rate Period. No later than 11:00 A.M., New York City time, on the
second Business Day next preceding the first day of any proposed Special Rate Period of shares of a
series of MuniPreferred as to which notice has been given as set forth in paragraph (c) of this
Section 4 (or such later time or date, or both, as may be agreed to by the Auction Agent), the Fund
shall deliver to the Auction Agent either:
(i) a notice (Notice of Special Rate Period) stating (A) that the Fund has determined to
designate the next succeeding Rate Period of shares of such series as a Special Rate Period,
specifying the same and the first day thereof, (B) the Auction Date immediately
21
prior to the first
day of such Special Rate Period, (C) that such Special Rate Period shall not commence if (1) an
Auction for shares of such series shall not be held on such Auction Date for any reason or (2) an
Auction for shares of such series shall be held on such Auction Date but Sufficient Clearing Bids
for shares of such series shall not exist in such Auction, (D) the scheduled Dividend Payment Dates
for shares of such series during such Special Rate Period and (E) the Special Redemption
Provisions, if any, applicable to shares of such series in respect of such Special Rate Period;
such notice to be accompanied by a MuniPreferred Basic Maintenance Report showing that, as of the
third Business Day next preceding such proposed Special Rate Period, Moodys Eligible Assets (if
Moodys is then rating such series) and S&P Eligible Assets (if S&P is then rating such series)
each have an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance
Amount as of such Business Day (assuming for purposes of the foregoing calculation that (a) the
Maximum Rate is the Maximum Rate on such Business Day as if such Business Day were the Auction Date
for the proposed Special Rate Period, and (b) the Moodys Discount Factors applicable to Moodys
Eligible Assets are determined by reference to the first Exposure Period longer than the Exposure
Period then applicable to the Fund, as described in the definition of Moodys Discount Factor
herein); or
(ii) a notice stating that the Fund has determined not to exercise its option to designate a
Special Rate Period of shares of such series and that the next succeeding Rate Period of shares of
such series shall be a Minimum Rate Period.
(e) Failure to Deliver Notice of Special Rate Period. If the Fund fails to deliver either of
the notices described in subparagraphs (d)(i) or (d)(ii) of this Section 4 (and, in the case of the
notice described in subparagraph (d)(i) of this Section 4, a MuniPreferred Basic Maintenance Report
to the effect set forth in such subparagraph (if either Moodys or S&P is then rating the series in
question)) with respect to any designation of any proposed Special Rate Period to the Auction Agent
by 11:00 A.M., New York City time, on the second Business Day next preceding the first day of such
proposed Special Rate Period (or by such later time or date, or both, as may be agreed to by the
Auction Agent), the Fund shall be deemed to have delivered a notice to the Auction Agent with
respect to such Special Rate Period to the effect set forth in subparagraph (d)(ii) of this Section
4. In the event the Fund delivers to the Auction Agent a notice described in subparagraph (d)(i)
of this Section 4, it shall file a copy of such notice with the Secretary of the Fund, and the
contents of such notice shall be binding on the Fund. In the event the Fund delivers to the
Auction Agent a notice described in subparagraph (d)(ii) of this Section 4, the Fund will provide
Moodys (if Moodys is then rating the series in question) and S&P (if S&P is then rating the
series in question) a copy of such notice.
5. Voting Rights.
(a) One Vote Per Share of MuniPreferred. Except as otherwise provided in the Articles or as
otherwise required by law, (i) each Holder of shares of MuniPreferred shall be entitled to one vote
for each share of MuniPreferred held by such Holder on each matter submitted to a vote of
shareholders of the Fund, and (ii) the holders of outstanding shares of Preferred Stock, including
each share of MuniPreferred, and of shares of Common Stock shall vote together as a single class;
provided, however, that, at any meeting of the shareholders of the Fund held for the election of
directors, the holders of outstanding shares of Preferred Stock, including MuniPreferred,
represented in person or by proxy at said meeting, shall be entitled, as
22
a class, to the exclusion
of the holders of all other securities and classes of capital stock of the Fund, to elect two
directors of the Fund, each share of Preferred Stock, including each share of MuniPreferred,
entitling the holder thereof to one vote. Subject to paragraph (b) of this Section 5, the holders
of outstanding shares of Common Stock and Preferred Stock, including MuniPreferred, voting
together as a single class, shall elect the balance of the directors.
(b) Voting For Additional Directors.
(i) Voting Period. During any period in which any one or more of the conditions described in
subparagraphs (A) or (B) of this subparagraph (b)(i) shall exist (such period being referred to
herein as a Voting Period), the number of directors constituting the Board of Directors shall be
automatically increased by the smallest number that, when added to the two directors elected
exclusively by the holders of shares of Preferred Stock, including shares of MuniPreferred, would
constitute a majority of the Board of Directors as so increased by such smallest number; and the
holders of shares of Preferred Stock, including MuniPreferred, shall be entitled, voting as a class
on a one vote per share basis (to the exclusion of the holders of all other securities and classes
of capital stock of the Fund), to elect such smallest number of
additional directors, together with the two directors that such holders are in any event
entitled to elect. A Voting Period shall commence:
(A) if at the close of business on any dividend payment date accumulated dividends
(whether or not earned or declared) on any outstanding share of Preferred Stock, including
MuniPreferred, equal to at least two full years dividends shall be due and unpaid and
sufficient cash or specified securities shall not have been deposited with the Auction Agent
for the payment of such accumulated dividends; or
(B) if at any time holders of shares of Preferred Stock are entitled under the 1940 Act
to elect a majority of the directors of the Fund.
Upon the termination of a Voting Period, the voting rights described in this subparagraph (b)(i)
shall cease, subject always, however, to the revesting of such voting rights in the Holders upon
the further occurrence of any of the events described in this subparagraph (b)(i).
(ii) Notice of Special Meeting. As soon as practicable after the accrual of any right of the
holders of shares of Preferred Stock to elect additional directors as described in subparagraph
(b)(i) of this Section 5, the Fund shall notify the Auction Agent and the Auction Agent shall call
a special meeting of such holders, by mailing a notice of such special meeting to such holders,
such meeting to be held not less than 10 nor more than 20 days after the date of mailing of such
notice. If the Fund fails to send such notice to the Auction Agent or if the Auction Agent does
not call such a special meeting, it may be called by any such holder on like notice. The record
date for determining the holders entitled to notice of and to vote at such special meeting shall be
the close of business on the fifth Business Day preceding the day on which such notice is mailed.
At any such special meeting and at each meeting of holders of shares of Preferred Stock held during
a Voting Period at which directors are to be elected, such holders, voting together as a class (to
the exclusion of the holders of all other securities and classes of capital stock of the Fund),
shall be entitled to elect the number of directors prescribed in subparagraph (b)(i) of this
Section 5 on a one vote per share basis.
23
(iii) Terms of Office of Existing Directors. The terms of office of all persons who are
directors of the Fund at the time of a special meeting of Holders and holders of other Preferred
Stock to elect directors shall continue, notwithstanding the election at such meeting by the
Holders and such other holders of the number of directors that they are entitled to elect, and the
persons so elected by the Holders and such other holders, together with the two incumbent directors
elected by the Holders and such other holders of Preferred Stock and the remaining incumbent
directors elected by the holders of the Common Stock and Preferred Stock, shall constitute the duly
elected directors of the Fund.
(iv) Terms of Office of Certain Directors to Terminate Upon Termination of Voting Period.
Simultaneously with the termination of a Voting Period, the terms of office of the additional
directors elected by the Holders and holders of other Preferred Stock pursuant to subparagraph
(b)(i) of this Section 5 shall terminate, the remaining directors shall constitute the directors of
the Fund and the voting rights of the Holders and such other holders to elect additional directors
pursuant to subparagraph (b)(i) of this Section 5 shall cease, subject to the provisions of the
last sentence of subparagraph (b)(i) of this Section 5.
(c) Holders of MuniPreferred To Vote On Certain Other Matters.
(i) Increases in Capitalization. So long as any shares of MuniPreferred are outstanding, the
Fund shall not, without the affirmative vote or consent of the Holders of at least a majority of
the shares of MuniPreferred outstanding at the time, in person or by proxy, either in writing or at
a meeting, voting as a separate class: (a) authorize, create or issue any class or series of stock
ranking prior to or on a parity with shares of MuniPreferred with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding up of the affairs
of the Fund, or authorize, create or issue additional shares of any series of MuniPreferred (except
that, notwithstanding the foregoing, but subject to the provisions of paragraph (c) of Section 10
of this Part I, the Board of Directors, without the vote or consent of the Holders of
MuniPreferred, may from time to time authorize and create, and the Fund may from time to time
issue, additional shares of any series of MuniPreferred or classes or series of Preferred Stock
ranking on a parity with shares of MuniPreferred with respect to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund;
provided, however, that if Moodys or S&P is not then rating the shares of MuniPreferred, the
aggregate liquidation preference of all Preferred Stock of the Fund outstanding after any such
issuance, exclusive of accumulated and unpaid dividends, may not exceed the amount set forth in
Section 10 of Appendix A hereto) or (b) amend, alter or repeal the provisions of the Articles,
including this Statement, whether by merger, consolidation or otherwise, so as to affect any
preference, right or power of such shares of MuniPreferred or the Holders thereof; provided,
however, that (i) none of the actions permitted by the exception to (a) above will be deemed to
affect such preferences, rights or powers, (ii) a division of a share of MuniPreferred will be
deemed to affect such preferences, rights or powers only if the terms of such division adversely
affect the Holders of shares of MuniPreferred and (iii) the authorization, creation and issuance of
classes or series of stock ranking junior to shares of MuniPreferred with respect to the payment of
dividends and the distribution of assets upon dissolution, liquidation or winding up of the affairs
of the Fund, will be deemed to affect such preferences, rights or powers only if Moodys or S&P is
then rating shares of MuniPreferred and such issuance would, at the time thereof, cause the Fund
not to satisfy the 1940 Act MuniPreferred Asset Coverage or the MuniPreferred
24
Basic Maintenance
Amount. So long as any shares of MuniPreferred are outstanding, the Fund shall not, without the
affirmative vote or consent of the Holders of at least 66 2/3% of the shares of MuniPreferred
outstanding at the time, in person or by proxy, either in writing or at a meeting, voting as a
separate class, file a voluntary application for relief under Federal bankruptcy law or any similar
application under state law for so long as the Fund is solvent and does not foresee becoming
insolvent. To the extent that shares of MuniPreferred constitute a series of stock under Minnesota
law and to the extent the Holders of such shares are empowered under the Minnesota Business
Corporation Act to vote as a class on the actions set forth above in this subparagraph (c)(i), the
Fund shall not approve any such action without the affirmative vote or consent of the Holders of at
least a majority of the shares of MuniPreferred of such series outstanding at the time, in person
or by proxy, either in writing or at a meeting (voting as a separate class).
(ii) 1940 Act Matters. Unless a higher percentage is provided for in the Articles, (A) the
affirmative vote of the Holders of at least a majority of the shares of Preferred Stock, including
MuniPreferred, outstanding at the time, voting as a separate class, shall be required to approve
any conversion of the Fund from a closed end to an open end
investment company and (B) the affirmative vote of the Holders of a majority of the
outstanding shares of Preferred Stock, including MuniPreferred, voting as a separate class, shall
be required to approve any plan of reorganization (as such term is used in the 1940 Act) adversely
affecting such shares. The affirmative vote of the Holders of a majority of the outstanding
shares of Preferred Stock, including MuniPreferred, voting as a separate class, shall be required
to approve any action not described in the first sentence of this Section 5(c)(ii) requiring a vote
of security holders of the Fund under Section 13(a) of the 1940 Act. For purpose of the foregoing,
majority of the outstanding shares of Preferred Stock means (i) 67% or more of such shares
present at a meeting, if the Holders of more than 50% of such shares are present or represented by
proxy, or (ii) more than 50% of such shares, whichever is less. In the event a vote of Holders of
MuniPreferred is required pursuant to the provisions of Section 13(a) of the 1940 Act, the Fund
shall, not later than ten Business Days prior to the date on which such vote is to be taken, notify
Moodys (if Moodys is then rating the shares of MuniPreferred) and S&P (if S&P is then rating the
shares of MuniPreferred) that such vote is to be taken and the nature of the action with respect to
which such vote is to be taken. The Fund shall, not later than ten Business Days after the date on
which such vote is taken, notify Moodys (if Moodys is then rating the shares of MuniPreferred) of
the results of such vote.
(d) Board May Take Certain Actions Without Shareholder Approval. The Board of Directors,
without the vote or consent of the shareholders of the Fund, may from time to time amend, alter or
repeal any or all of the definitions of the terms listed below, or any provision of this Statement
viewed by Moodys or S&P as a predicate for any such definition, and any such amendment, alteration
or repeal will not be deemed to affect the preferences, rights or powers of shares of MuniPreferred
or the Holders thereof; provided, however, that the Board of Directors receives written
confirmation from Moodys (such confirmation being required to be obtained only in the event
Moodys is rating the shares of MuniPreferred and in no event being required to be obtained in the
case of the definitions of (x) Deposit Securities, Discounted Value, Receivables for Municipal
Obligations Sold, Issue Type Category and Other Issues as such terms apply to S&P Eligible Assets
and (y) S&P Discount Factor, S&P Eligible Asset, S&P Exposure Period and S&P Volatility Factor) and
S&P (such confirmation being required to be obtained only in the event S&P is rating the shares of
MuniPreferred and in no event being required to be
25
obtained in the case of the definitions of (x)
Discounted Value, Receivables for Municipal Obligations Sold, Issue Type Category and Other Issues
as such terms apply to Moodys Eligible Assets, and (y) Moodys Discount Factor, Moodys Eligible
Asset, Moodys Exposure Period and Moodys Volatility Factor) that any such amendment, alteration
or repeal would not impair the ratings then assigned by Moodys or S&P, as the case may be, to
shares of MuniPreferred:
|
|
|
Deposit Securities
|
|
Issue Type Category |
Discounted Value
|
|
Market Value |
Escrowed Bonds
|
|
Maximum Potential Gross-up |
Payment Liability
|
|
S&P Eligible Asset |
MuniPreferred Basic Maintenance Amount
|
|
S&P Exposure Period |
|
|
S&P Volatility Factor |
MuniPreferred Basic Maintenance Cure Date
|
|
Valuation Date |
|
|
Volatility Factor |
MuniPreferred Basic Maintenance Report |
|
|
|
|
|
Moodys Discount Factor |
|
|
Moodys Eligible Asset |
|
|
Moodys Exposure Period |
|
|
Moodys Volatility Factor |
|
|
1940 Act Cure Date |
|
|
1940 Act MuniPreferred Asset Coverage |
|
|
|
|
|
Other Issues |
|
|
Quarterly Valuation Date |
|
|
Receivables for Municipal |
|
|
Obligations Sold |
|
|
S&P Discount Factor |
|
|
(e) Voting Rights Set Forth Herein Are Sole Voting Rights. Unless otherwise required by law,
the Holders of shares of MuniPreferred shall not have any relative rights or preferences or other
special rights other than those specifically set forth herein.
(f) No Preemptive Rights or Cumulative Voting. The Holders of shares of MuniPreferred shall
have no preemptive rights or rights to cumulative voting.
(g) Voting for Directors Sole Remedy for Funds Failure to Pay Dividends. In the event that
the Fund fails to pay any dividends on the shares of MuniPreferred, the exclusive remedy of the
Holders shall be the right to vote for directors pursuant to the provisions of this Section 5.
(h) Holders Entitled to Vote. For purposes of determining any rights of the Holders to vote
on any matter, whether such right is created by this Statement, by the other provisions of the
Articles, by statute or otherwise, no Holder shall be entitled to vote any share of MuniPreferred
and no share of MuniPreferred shall be deemed to be outstanding for the purpose of voting or
determining the number of shares required to constitute a quorum if, prior to or concurrently with
the time of determination of shares entitled to vote or shares deemed
26
outstanding for quorum
purposes, as the case may be, the requisite Notice of Redemption with respect to such shares shall
have been mailed as provided in paragraph (c) of Section 11 of this Part I and the Redemption Price
for the redemption of such shares shall have been deposited in trust with the Auction Agent for
that purpose. No share of MuniPreferred held by the Fund or any affiliate of the Fund (except for
shares held by a Broker Dealer that is an affiliate of the Fund for the account of its customers)
shall have any voting rights or be deemed to be outstanding for voting or other purposes.
6. 1940 Act MuniPreferred Asset Coverage. The Fund shall maintain, as of the last Business Day of
each month in which any share of MuniPreferred is outstanding, the 1940 Act MuniPreferred Asset
Coverage.
7. MuniPreferred Basic Maintenance Amount.
(a) So long as shares of MuniPreferred are outstanding, the Fund shall maintain, on each
Valuation Date, and shall verify to its satisfaction that it is maintaining on such Valuation
Date, (i) S&P Eligible Assets having an aggregate Discounted Value equal to or greater than
the MuniPreferred Basic Maintenance Amount (if S&P is then rating the shares of MuniPreferred) and
(ii) Moodys Eligible Assets having an aggregate Discounted Value equal to or greater than the
MuniPreferred Basic Maintenance Amount (if Moodys is then rating the shares of MuniPreferred).
(b) On or before 5:00 P.M., New York City time, on the third Business Day after a Valuation
Date on which the Fund fails to satisfy the MuniPreferred Basic Maintenance Amount, and on the
third Business Day after the MuniPreferred Basic Maintenance Cure Date with respect to such
Valuation Date, the Fund shall complete and deliver to S&P (if S&P is then rating the shares of
MuniPreferred), Moodys (if Moodys is then rating the shares of MuniPreferred) and the Auction
Agent (if either S&P or Moodys is then rating the shares of MuniPreferred) a MuniPreferred Basic
Maintenance Report as of the date of such failure or such MuniPreferred Basic Maintenance Cure
Date, as the case may be, which will be deemed to have been delivered to the Auction Agent if the
Auction Agent receives a copy or telecopy, telex or other electronic transcription thereof and on
the same day the Fund mails to the Auction Agent for delivery on the next Business Day the full
MuniPreferred Basic Maintenance Report. The Fund shall also deliver a MuniPreferred Basic
Maintenance Report to (i) the Auction Agent (if either Moodys or S&P is then rating the shares of
MuniPreferred) as of (A) the fifteenth day of each month (or, if such day is not a Business Day,
the next succeeding Business Day) and (B) the last Business Day of each month, (ii) Moodys (if
Moodys is then rating the shares of MuniPreferred) and S&P (if S&P is then rating the shares of
MuniPreferred) as of any Quarterly Valuation Date, in each case on or before the third Business Day
after such day, and (iii) S&P, if and when requested for any Valuation Date, on or before the third
Business Day after such request. A failure by the Fund to deliver a MuniPreferred Basic
Maintenance Report pursuant to the preceding sentence shall be deemed to be delivery of a
MuniPreferred Basic Maintenance Report indicating the Discounted Value for all assets of the Fund
is less than the MuniPreferred Basic Maintenance Amount, as of the relevant Valuation Date.
(c) Within ten Business Days after the date of delivery of a MuniPreferred Basic Maintenance
Report in accordance with paragraph (b) of this Section 7 relating to a Quarterly
27
Valuation Date,
the Fund shall cause the Independent Accountant to confirm in writing to S&P (if S&P is then rating
the shares of MuniPreferred), Moodys (if Moodys is then rating the shares of MuniPreferred) and
the Auction Agent (if either S&P or Moodys is then rating the shares of MuniPreferred) (i) the
mathematical accuracy of the calculations reflected in such Report (and in any other MuniPreferred
Basic Maintenance Report, randomly selected by the Independent Accountant, that was delivered by
the Fund during the quarter ending on such Quarterly Valuation Date) and (ii) that, in such Report
(and in such randomly selected Report), the Fund determined in accordance with this Statement
whether the Fund had, at such Quarterly Valuation Date (and at the Valuation Date addressed in such
randomly selected Report), S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred)
of an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount and
Moodys Eligible Assets (if Moodys is then rating the shares of MuniPreferred) of an aggregate
Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount (such confirmation
being herein called the Accountants Confirmation).
(d) Within ten Business Days after the date of delivery of a MuniPreferred Basic Maintenance
Report in accordance with paragraph (b) of this Section 7 relating to any Valuation Date on which
the Fund failed to satisfy the MuniPreferred Basic Maintenance Amount, and relating to the
MuniPreferred Basic Maintenance Cure Date with respect to such failure to satisfy the MuniPreferred
Basic Maintenance Amount, the Fund shall cause the Independent Accountant to provide to S&P (if S&P
is then rating the shares of MuniPreferred), Moodys (if Moodys is then rating the shares of
MuniPreferred) and the Auction Agent (if either S&P or Moodys is then rating the shares of
MuniPreferred) an Accountants Confirmation as to such MuniPreferred Basic Maintenance Report.
(e) If any Accountants Confirmation delivered pursuant to paragraph (c) or (d) of this
Section 7 shows that an error was made in the MuniPreferred Basic Maintenance Report for a
particular Valuation Date for which such Accountants Confirmation was required to be delivered, or
shows that a lower aggregate Discounted Value for the aggregate of all S&P Eligible Assets (if S&P
is then rating the shares of MuniPreferred) or Moodys Eligible Assets (if Moodys is then rating
the shares of MuniPreferred), as the case may be, of the Fund was determined by the Independent
Accountant, the calculation or determination made by such Independent Accountant shall be final and
conclusive and shall be binding on the Fund, and the Fund shall accordingly amend and deliver the
MuniPreferred Basic Maintenance Report to S&P (if S&P is then rating the shares of MuniPreferred),
Moodys (if Moodys is then rating the shares of MuniPreferred) and the Auction Agent (if either
S&P or Moodys is then rating the shares of MuniPreferred) promptly following receipt by the Fund
of such Accountants Confirmation.
(f) On or before 5:00 p.m., New York City time, on the first Business Day after the Date of
Original Issue of any shares of MuniPreferred, the Fund shall complete and deliver to S&P (if S&P
is then rating the shares of MuniPreferred) and Moodys (if Moodys is then rating the shares of
MuniPreferred) a MuniPreferred Basic Maintenance Report as of the close of business on such Date of
Original Issue. Within five Business Days of such Date of Original Issue, the Fund shall cause the
Independent Accountant to confirm in writing to S&P (if S&P is then rating the shares of
MuniPreferred) (i) the mathematical accuracy of the calculations
28
reflected in such Report and (ii)
that the Discounted Value of S&P Eligible Assets reflected thereon equals or exceeds the
MuniPreferred Basic Maintenance Amount reflected thereon.
(g) On or before 5:00 p.m., New York City time, on the third Business Day after either (i) the
Fund shall have redeemed Common Stock or (ii) the ratio of the Discounted Value of S&P Eligible
Assets or the Discounted Value of Moodys Eligible Assets to the MuniPreferred Basic Maintenance
Amount is less than or equal to 105%, the Fund shall complete and deliver to S&P (if S&P is then
rating the shares of MuniPreferred) or Moodys (if Moodys is then rating the shares of
MuniPreferred), as the case may be, a MuniPreferred Basic Maintenance Report as of the date of
either such event.
8. [Reserved]
9. Restrictions on Dividends and Other Distributions.
(a) Dividends on Preferred Stock Other Than MuniPreferred. Except as set forth in the next
sentence, no dividends shall be declared or paid or set apart for payment on the shares of any
class or series of stock ranking, as to the payment of dividends, on a parity with shares of
MuniPreferred for any period unless full cumulative dividends have been or contemporaneously are
declared and paid on the shares of each series of MuniPreferred through its most recent Dividend
Payment Date. When dividends are not paid in full upon the shares of each series of MuniPreferred
through its most recent Dividend Payment Date or upon the shares of any other class or series of
stock ranking on a parity as to the payment of dividends with shares of MuniPreferred through their
most recent respective dividend payment dates, all dividends declared upon shares of MuniPreferred
and any other such class or series of stock ranking on a parity as to the payment of dividends with
shares of MuniPreferred shall be declared pro rata so that the amount of dividends declared per
share on shares of MuniPreferred and such other class or series of stock shall in all cases bear to
each other the same ratio that accumulated dividends per share on the shares of MuniPreferred and
such other class or series of stock bear to each other (for purposes of this sentence, the amount
of dividends declared per share of MuniPreferred shall be based on the Applicable Rate for such
share for the Dividend Periods during which dividends were not paid in full).
(b) Dividends and Other Distributions With Respect to Common Stock Under the 1940 Act. The
Board of Directors shall not declare any dividend (except a dividend payable in shares of Common
Stock), or declare any other distribution, upon shares of Common Stock, or purchase shares of
Common Stock, unless in every such case the shares of Preferred Stock have, at the time of any such
declaration or purchase, an asset coverage (as defined in and determined pursuant to the 1940 Act)
of at least 200% (or such other asset coverage as may in the future be specified in or under the
1940 Act as the minimum asset coverage for senior securities which are stock of a closed end
investment company as a condition of declaring dividends on its common stock) after deducting the
amount of such dividend, distribution or purchase price, as the case may be.
(c) Other Restrictions On Dividends and Other Distributions. For so long as any share of
MuniPreferred is outstanding, and except as set forth in paragraph (a) of this Section 9 and
paragraph (c) of Section 12 of this Part I, (A) the Fund shall not declare, pay or set apart for
29
payment any dividend or other distribution (other than a dividend or distribution paid in shares
of, or in options, warrants or rights to subscribe for or purchase, Common Stock or other stock, if
any, ranking junior to the shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up) in respect of the Common Stock
or any other stock of the Fund ranking junior to or on a parity with the shares of MuniPreferred as
to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding
up, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of
Common Stock or any other such junior stock (except by conversion into or exchange for stock of the
Fund ranking junior to the shares of MuniPreferred as to the payment of dividends and the
distribution of assets upon dissolution, liquidation or winding up), or any such parity stock
(except by conversion into or exchange for stock of the Fund ranking junior to or on a parity with
MuniPreferred as to the payment of dividends and the distribution of assets upon dissolution,
liquidation or winding up), unless (i) full cumulative dividends on shares
of each series of MuniPreferred through its most recently ended Dividend Period shall have
been paid or shall have been declared and sufficient funds for the payment thereof deposited with
the Auction Agent and (ii) the Fund has redeemed the full number of shares of MuniPreferred
required to be redeemed by any provision for mandatory redemption pertaining thereto, and (B) the
Fund shall not declare, pay or set apart for payment any dividend or other distribution (other than
a dividend or distribution paid in shares of, or in options, warrants or rights to subscribe for or
purchase, Common Stock or other stock, if any, ranking junior to shares of MuniPreferred as to the
payment of dividends and the distribution of assets upon dissolution, liquidation or winding up) in
respect of Common Stock or any other stock of the Fund ranking junior to shares of MuniPreferred as
to the payment of dividends or the distribution of assets upon dissolution, liquidation or winding
up, or call for redemption, redeem, purchase or otherwise acquire for consideration any shares of
Common Stock or any other such junior stock (except by conversion into or exchange for stock of the
Fund ranking junior to shares of MuniPreferred as to the payment of dividends and the distribution
of assets upon dissolution, liquidation or winding up), unless immediately after such transaction
the Discounted Value of Moodys Eligible Assets (if Moodys is then rating the shares of
MuniPreferred) and S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) would
each at least equal the MuniPreferred Basic Maintenance Amount.
10. Rating Agency Restrictions. For so long as any shares of MuniPreferred are outstanding and
Moodys or S&P, or both, are rating such shares, the Fund will not, unless it has received written
confirmation from Moodys or S&P, or both, as appropriate, that any such action would not impair
the ratings then assigned by such rating agency to such shares, engage in any one or more of the
following transactions:
(a) buy or sell futures or write put or call options;
(b) borrow money, except that the Fund may, without obtaining the written confirmation
described above, borrow money for the purpose of clearing securities transactions if (i) the
MuniPreferred Basic Maintenance Amount would continue to be satisfied after giving effect to such
borrowing and (ii) such borrowing (A) is privately arranged with a bank or other person and is
evidenced by a promissory note or other evidence of indebtedness that is not intended to be
publicly distributed or (B) is for temporary purposes, is evidenced by a promissory note or other
evidence of indebtedness and is in an amount not exceeding 5 per
30
centum of the value of the total
assets of the Fund at the time of the borrowing; for purposes of the foregoing, temporary purpose
means that the borrowing is to be repaid within sixty days and is not to be extended or renewed;
(c) issue additional shares of any series of MuniPreferred or any class or series of stock
ranking prior to or on a parity with shares of MuniPreferred with respect to the payment of
dividends or the distribution of assets upon dissolution, liquidation or winding up of the Fund, or
reissue any shares of MuniPreferred previously purchased or redeemed by the Fund;
(d) engage in any short sales of securities;
(e) lend securities;
(f) merge or consolidate into or with any other corporation;
(g) change the pricing service (currently J.J. Kenny) referred to in the definition of Market
Value; or
(h) enter into reverse repurchase agreements.
11. Redemption.
(a) Optional Redemption. (i) Subject to the provisions of subparagraph (v) of this paragraph
(a), shares of MuniPreferred of any series may be redeemed, at the option of the Fund, as a whole
or from time to time in part, on the second Business Day preceding any Dividend Payment Date for
shares of such series, out of funds legally available therefor, at a redemption price per share
equal to the sum of $25,000 plus an amount equal to accumulated but unpaid dividends thereon
(whether or not earned or declared) to (but not including) the date fixed for redemption; provided,
however, that (1) shares of a series of MuniPreferred may not be redeemed in Part If after such
partial redemption fewer than 500 shares of such series remain outstanding; (2) unless otherwise
provided in Section 11 of Appendix A hereto, shares of a series of MuniPreferred are redeemable by
the Fund during the Initial Rate Period thereof only on the second Business Day next preceding the
last Dividend Payment Date for such Initial Rate Period; and (3) subject to subparagraph (ii) of
this paragraph (a), the Notice of Special Rate Period relating to a Special Rate Period of shares
of a series of MuniPreferred, as delivered to the Auction Agent and filed with the Secretary of the
Fund, may provide that shares of such series shall not be redeemable during the whole or any part
of such Special Rate Period (except as provided in subparagraph (iv) of this paragraph (a)) or
shall be redeemable during the whole or any part of such Special Rate Period only upon payment of
such redemption premium or premiums as shall be specified therein (Special Redemption
Provisions).
(ii) A Notice of Special Rate Period relating to shares of a series of MuniPreferred for a
Special Rate Period thereof may contain Special Redemption Provisions only if the Funds Board of
Directors, after consultation with the Broker Dealer or Broker Dealers for such Special Rate Period
of shares of such series, determines that such Special Redemption Provisions are in the best
interest of the Fund.
31
(iii) If fewer than all of the outstanding shares of a series of MuniPreferred are to be
redeemed pursuant to subparagraph (i) of this paragraph (a), the number of shares of such series to
be redeemed shall be determined by the Board of Directors, and such shares shall be redeemed pro
rata from the Holders of shares of such series in proportion to the number of shares of such series
held by such Holders.
(iv) Subject to the provisions of subparagraph (v) of this paragraph (a), shares of any series
of MuniPreferred may be redeemed, at the option of the Fund, as a whole but not in part, out of
funds legally available therefor, on the first day following any Dividend Period thereof included
in a Rate Period consisting of more than 364 Rate Period Days if, on the date of determination of
the Applicable Rate for shares of such series for such Rate Period, such Applicable Rate equalled
or exceeded on such date of determination the Treasury Note Rate for such Rate Period, at a
redemption price per share equal to the sum of $25,000 plus an amount
equal to accumulated but unpaid dividends thereon (whether or not earned or declared) to (but
not including) the date fixed for redemption.
(v) The Fund may not on any date mail a Notice of Redemption pursuant to paragraph (c) of this
Section 11 in respect of a redemption contemplated to be effected pursuant to this paragraph (a)
unless on such date (a) the Fund has available Deposit Securities with maturity or tender dates not
later than the day preceding the applicable redemption date and having a value not less than the
amount (including any applicable premium) due to Holders of shares of MuniPreferred by reason of
the redemption of such shares on such redemption date and (b) the Discounted Value of Moodys
Eligible Assets (if Moodys is then rating the shares of MuniPreferred) and the Discounted Value of
S&P Eligible Assets (if S&P is then rating the shares of MuniPreferred) each at least equal the
MuniPreferred Basic Maintenance Amount, and would at least equal the MuniPreferred Basic
Maintenance Amount immediately subsequent to such redemption if such redemption were to occur on
such date. For purposes of determining in clause (b) of the preceding sentence whether the
Discounted Value of Moodys Eligible Assets at least equals the MuniPreferred Basic Maintenance
Amount, the Moodys Discount Factors applicable to Moodys Eligible Assets shall be determined by
reference to the first Exposure Period longer than the Exposure Period then applicable to the Fund,
as described in the definition of Moodys Discount Factor herein.
(b) Mandatory Redemption. The Fund shall redeem, at a redemption price equal to $25,000 per
share plus accumulated but unpaid dividends thereon (whether or not earned or declared) to (but not
including) the date fixed by the Board of Directors for redemption, certain of the shares of
MuniPreferred, if the Fund fails to have either Moodys Eligible Assets with a Discounted Value or
S&P Eligible Assets with a Discounted Value greater than or equal to the MuniPreferred Basic
Maintenance Amount or fails to maintain the 1940 Act MuniPreferred Asset Coverage, in accordance
with the requirements of the rating agency or agencies then rating the shares of MuniPreferred, and
such failure is not cured on or before the MuniPreferred Basic Maintenance Cure Date or the 1940
Act Cure Date, as the case may be. The number of shares of MuniPreferred to be redeemed shall be
equal to the lesser of (i) the minimum number of shares of MuniPreferred, together with all shares
of other Preferred Stock subject to redemption or retirement, the redemption of which, if deemed to
have occurred immediately prior to the opening of business on the Cure Date, would have resulted in
the Funds having both Moodys Eligible Assets with a Discounted Value and S&P Eligible Assets with
a Discounted Value
32
greater than or equal to the MuniPreferred Basic Maintenance Amount or
maintaining the 1940 Act MuniPreferred Asset Coverage, as the case may be, on such Cure Date
(provided, however, that if there is no such minimum number of shares of MuniPreferred and shares
of other Preferred Stock the redemption or retirement of which would have had such result, all
shares of MuniPreferred and Preferred Stock then outstanding shall be redeemed), and (ii) the
maximum number of shares of MuniPreferred, together with all shares of other Preferred Stock
subject to redemption or retirement, that can be redeemed out of funds expected to be legally
available therefor. In determining the shares of MuniPreferred required to be redeemed in
accordance with the foregoing, the Fund shall allocate the number required to be redeemed to
satisfy the MuniPreferred Basic Maintenance Amount or the 1940 Act MuniPreferred Asset Coverage, as
the case may be, pro rata among shares of MuniPreferred and other Preferred Stock (and, then, pro
rata among each series of MuniPreferred) subject to redemption or retirement. The Fund shall
effect such redemption on the date fixed by the Fund therefor, which date shall
not be earlier than 20 days nor later than 40 days after such Cure Date, except that if the
Fund does not have funds legally available for the redemption of all of the required number of
shares of MuniPreferred and shares of other Preferred Stock which are subject to redemption or
retirement or the Fund otherwise is unable to effect such redemption on or prior to 40 days after
such Cure Date, the Fund shall redeem those shares of MuniPreferred and shares of other Preferred
Stock which it was unable to redeem on the earliest practicable date on which it is able to effect
such redemption. If fewer than all of the outstanding shares of a series of MuniPreferred are to
be redeemed pursuant to this paragraph (b), the number of shares of such series to be redeemed
shall be redeemed pro rata from the Holders of shares of such series in proportion to the number of
shares of such series held by such Holders.
(c) Notice of Redemption. If the Fund shall determine or be required to redeem shares of a
series of MuniPreferred pursuant to paragraph (a) or (b) of this Section 11, it shall mail a Notice
of Redemption with respect to such redemption by first class mail, postage prepaid, to each Holder
of the shares of such series to be redeemed, at such Holders address as the same appears on the
stock books of the Fund on the record date established by the Board of Directors. Such Notice of
Redemption shall be so mailed not less than 20 nor more than 45 days prior to the date fixed for
redemption. Each such Notice of Redemption shall state: (i) the redemption date; (ii) the number
of shares of MuniPreferred to be redeemed and the series thereof; (iii) the CUSIP number for shares
of such series; (iv) the Redemption Price; (v) the place or places where the certificate(s) for
such shares (properly endorsed or assigned for transfer, if the Board of Directors shall so require
and the Notice of Redemption shall so state) are to be surrendered for payment of the Redemption
Price; (vi) that dividends on the shares to be redeemed will cease to accumulate on such redemption
date; and (vii) the provisions of this Section 11 under which such redemption is made. If fewer
than all shares of a series of MuniPreferred held by any Holder are to be redeemed, the Notice of
Redemption mailed to such Holder shall also specify the number of shares of such series to be
redeemed from such Holder. The Fund may provide in any Notice of Redemption relating to a
redemption contemplated to be effected pursuant to paragraph (a) of this Section 11 that such
redemption is subject to one or more conditions precedent and that the Fund shall not be required
to effect such redemption unless each such condition shall have been satisfied at the time or times
and in the manner specified in such Notice of Redemption.
33
(d) No Redemption Under Certain Circumstances. Notwithstanding the provisions of paragraphs
(a) or (b) of this Section 11, if any dividends on shares of a series of MuniPreferred (whether or
not earned or declared) are in arrears, no shares of such series shall be redeemed unless all
outstanding shares of such series are simultaneously redeemed, and the Fund shall not purchase or
otherwise acquire any shares of such series; provided, however, that the foregoing shall not
prevent the purchase or acquisition of all outstanding shares of such series pursuant to the
successful completion of an otherwise lawful purchase or exchange offer made on the same terms to,
and accepted by, Holders of all outstanding shares of such series.
(e) Absence of Funds Available for Redemption. To the extent that any redemption for which
Notice of Redemption has been mailed is not made by reason of the absence of legally available
funds therefor, such redemption shall be made as soon as practicable to the extent such funds
become available. Failure to redeem shares of MuniPreferred shall be deemed to exist at any time
after the date specified for redemption in a Notice of Redemption
when the Fund shall have failed, for any reason whatsoever, to deposit in trust with the
Auction Agent the Redemption Price with respect to any shares for which such Notice of Redemption
has been mailed; provided, however, that the foregoing shall not apply in the case of the Funds
failure to deposit in trust with the Auction Agent the Redemption Price with respect to any shares
where (1) the Notice of Redemption relating to such redemption provided that such redemption was
subject to one or more conditions precedent and (2) any such condition precedent shall not have
been satisfied at the time or times and in the manner specified in such Notice of Redemption.
Notwithstanding the fact that the Fund may not have redeemed shares of MuniPreferred for which a
Notice of Redemption has been mailed, dividends may be declared and paid on shares of MuniPreferred
and shall include those shares of MuniPreferred for which a Notice of Redemption has been mailed.
(f) Auction Agent as Trustee of Redemption Payments by Fund. All moneys paid to the Auction
Agent for payment of the Redemption Price of shares of MuniPreferred called for redemption shall be
held in trust by the Auction Agent for the benefit of Holders of shares so to be redeemed.
(g) Shares for Which Notice of Redemption Has Been Given Are No Longer Outstanding. Provided
a Notice of Redemption has been mailed pursuant to paragraph (c) of this Section 11, upon the
deposit with the Auction Agent (on the Business Day next preceding the date fixed for redemption
thereby, in funds available on the next Business Day in The City of New York, New York) of funds
sufficient to redeem the shares of MuniPreferred that are the subject of such notice, dividends on
such shares shall cease to accumulate and such shares shall no longer be deemed to be outstanding
for any purpose, and all rights of the Holders of the shares so called for redemption shall cease
and terminate, except the right of such Holders to receive the Redemption Price, but without any
interest or other additional amount, except as provided in subparagraph (e)(i) of Section 2 of this
Part I and in Section 3 of this Part I. Upon surrender in accordance with the Notice of Redemption
of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the Notice of Redemption shall so state), the Redemption
Price shall be paid by the Auction Agent to the Holders of shares of MuniPreferred subject to
redemption. In the case that fewer than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued, representing the unredeemed shares, without cost to
the Holder thereof. The Fund shall
34
be entitled to receive from the Auction Agent, promptly after
the date fixed for redemption, any cash deposited with the Auction Agent in excess of (i) the
aggregate Redemption Price of the shares of MuniPreferred called for redemption on such date and
(ii) all other amounts to which Holders of shares of MuniPreferred called for redemption may be
entitled. Any funds so deposited that are unclaimed at the end of 90 days from such redemption
date shall, to the extent permitted by law, be repaid to the Fund, after which time the Holders of
shares of MuniPreferred so called for redemption may look only to the Fund for payment of the
Redemption Price and all other amounts to which they may be entitled. The Fund shall be entitled
to receive, from time to time after the date fixed for redemption, any interest on the funds so
deposited.
(h) Compliance With Applicable Law. In effecting any redemption pursuant to this Section 11,
the Fund shall use its best efforts to comply with all applicable conditions precedent to effecting
such redemption under the 1940 Act and Minnesota law, but shall effect no redemption except in
accordance with the 1940 Act and Minnesota law.
(i) Only Whole Shares of MuniPreferred May Be Redeemed. In the case of any redemption
pursuant to this Section 11, only whole shares of MuniPreferred shall be redeemed, and in the event
that any provision of the Articles would require redemption of a fractional share, the Auction
Agent shall be authorized to round up so that only whole shares are redeemed.
12. Liquidation Rights.
(a) Ranking. The shares of a series of MuniPreferred shall rank on a parity with each other,
with shares of any other series of MuniPreferred and with shares of any other series of Preferred
Stock as to the distribution of assets upon dissolution, liquidation or winding up of the affairs
of the Fund.
(b) Distributions Upon Liquidation. Upon the dissolution, liquidation or winding up of the
affairs of the Fund, whether voluntary or involuntary, the Holders of shares of MuniPreferred then
outstanding shall be entitled to receive and to be paid out of the assets of the Fund available for
distribution to its shareholders, before any payment or distribution shall be made on the Common
Stock or on any other class of stock of the Fund ranking junior to the MuniPreferred upon
dissolution, liquidation or winding up, an amount equal to the Liquidation Preference with respect
to such shares plus an amount equal to all dividends thereon (whether or not earned or declared)
accumulated but unpaid to (but not including) the date of final distribution in same day funds,
together with any payments required to be made pursuant to Section 3 of this Part I in connection
with the liquidation of the Fund. After the payment to the Holders of the shares of MuniPreferred
of the full preferential amounts provided for in this paragraph (b), the Holders of MuniPreferred
as such shall have no right or claim to any of the remaining assets of the Fund.
(c) Pro Rata Distributions. In the event the assets of the Fund available for distribution to
the Holders of shares of MuniPreferred upon any dissolution, liquidation, or winding up of the
affairs of the Fund, whether voluntary or involuntary, shall be insufficient to pay in full all
amounts to which such Holders are entitled pursuant to paragraph (b) of this Section 12, no such
distribution shall be made on account of any shares of any other class or series of Preferred Stock
ranking on a parity with the shares of MuniPreferred with respect to the
35
distribution of assets
upon such dissolution, liquidation or winding up unless proportionate distributive amounts shall be
paid on account of the shares of MuniPreferred, ratably, in proportion to the full distributable
amounts for which holders of all such parity shares are respectively entitled upon such
dissolution, liquidation or winding up.
(d) Rights of Junior Stock. Subject to the rights of the holders of shares of any series or
class or classes of stock ranking on a parity with the shares of MuniPreferred with respect to the
distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund,
after payment shall have been made in full to the Holders of the shares of MuniPreferred as
provided in paragraph (b) of this Section 12, but not prior thereto, any other series or class or
classes of stock ranking junior to the shares of MuniPreferred with respect to the distribution of
assets upon dissolution, liquidation or winding up of the affairs of the Fund shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the Holders of the shares
of MuniPreferred shall not be entitled to share therein.
(e) Certain Events Not Constituting Liquidation. Neither the sale of all or substantially all
the property or business of the Fund, nor the merger or consolidation of the Fund into or with any
other corporation nor the merger or consolidation of any other corporation into or with the Fund
shall be a dissolution, liquidation or winding up, whether voluntary or involuntary, for the
purposes of this Section 12.
13. Miscellaneous.
(a) Amendment of Appendix A to Add Additional Series. Subject to the provisions of paragraph
(c) of Section 10 of this Part I, the Board of Directors may, by resolution duly adopted, without
shareholder approval (except as otherwise provided by this Statement or required by applicable
law), amend Appendix A hereto to (1) reflect any amendments hereto which the Board of Directors is
entitled to adopt pursuant to the terms of this Statement without shareholder approval and (2) add
additional series of MuniPreferred or additional shares of a series of MuniPreferred (and terms
relating thereto) to the series and shares of MuniPreferred theretofore described thereon. Each
such additional series and all such additional shares shall be governed by the terms of this
Statement.
(b) Appendix A Incorporated By Reference. Appendix A hereto is incorporated in and made a
part of this Statement by reference thereto.
(c) No Fractional Shares. No fractional shares of MuniPreferred shall be issued.
(d) Status of Shares of MuniPreferred Redeemed, Exchanged or Otherwise Acquired by the Fund.
Shares of MuniPreferred which are redeemed, exchanged or otherwise acquired by the Fund shall
return to the status of authorized and unissued shares of Preferred Stock without designation as to
series. Upon the redemption, exchange or other acquisition by the Fund of all outstanding shares
of a series of MuniPreferred, all provisions of the Articles relating to such series (including,
without limitation, all provisions of this Statement relating to such series) shall cease to be of
further effect and shall cease to be part of the Articles. Upon the occurrence of any such event,
the Board of Directors shall have the power, pursuant to
36
Minnesota Statutes Section 302A.135,
Subdivision 5 or any successor provision and without shareholder action, to cause restated articles
of incorporation of the Fund or other appropriate documents to be prepared and filed with the
Secretary of State of the State of Minnesota which reflect such removal from the Articles of all
such provisions relating to such series or, if appropriate, the cancellation of this Statement, or
both.
(e) Board May Resolve Ambiguities. To the extent permitted by applicable law, the Board of
Directors may interpret or adjust the provisions of this Statement to resolve any inconsistency or
ambiguity or to remedy any formal defect, and may amend this Statement with respect to any series
of MuniPreferred prior to the issuance of shares of such series.
(f) Headings Not Determinative. The headings contained in this Statement are for convenience
of reference only and shall not affect the meaning or interpretation of this Statement.
(g) Notices. All notices or communications, unless otherwise specified in the By Laws of the
Fund or this Statement, shall be sufficiently given if in writing and delivered in person or mailed
by first class mail, postage prepaid.
PART II.
1. Orders. (a) Prior to the Submission Deadline on each Auction Date for shares of a series of
MuniPreferred:
(i) each Beneficial Owner of shares of such series may submit to its Broker Dealer by
telephone or otherwise information as to:
(A) the number of Outstanding shares, if any, of such series held by such Beneficial
Owner which such Beneficial Owner desires to continue to hold without regard to the
Applicable Rate for shares of such series for the next succeeding Rate Period of such shares;
(B) the number of Outstanding shares, if any, of such series held by such Beneficial
Owner which such Beneficial Owner offers to sell if the Applicable Rate for shares of such
series for the next succeeding Rate Period of shares of such series shall be less than the
rate per annum specified by such Beneficial Owner; and/or
(C) the number of Outstanding shares, if any, of such series held by such Beneficial
Owner which such Beneficial Owner offers to sell without regard to the Applicable Rate for
shares of such series for the next succeeding Rate Period of shares of such series;
and
(ii) one or more Broker Dealers, using lists of Potential Beneficial Owners, shall in good
faith for the purpose of conducting a competitive Auction in a commercially reasonable manner,
contact Potential Beneficial Owners (by telephone or otherwise), including Persons that are not
Beneficial Owners, on such lists to determine the number of shares, if any,
37
of such series which
each such Potential Beneficial Owner offers to purchase if the Applicable Rate for shares of such
series for the next succeeding Rate Period of shares of such series shall not be less than the rate
per annum specified by such Potential Beneficial Owner.
For the purposes hereof, the communication by a Beneficial Owner or Potential Beneficial Owner to a
Broker Dealer, or by a Broker Dealer to the Auction Agent, of information referred to in clause
(i)(A), (i)(B), (i)(C) or (ii) of this paragraph (a) is hereinafter referred to as an Order and
collectively as Orders and each Beneficial Owner and each Potential Beneficial Owner placing an
Order with a Broker Dealer, and such Broker Dealer placing an Order with the Auction Agent, is
hereinafter referred to as a Bidder and collectively as Bidders; an Order containing the
information referred to in clause (i)(A) of this paragraph (a) is hereinafter referred
to as a Hold Order and collectively as Hold Orders; an Order containing the information
referred to in clause (i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a Bid
and collectively as Bids; and an Order containing the information referred to in clause (i)(C) of
this paragraph (a) is hereinafter referred to as a Sell Order and collectively as Sell Orders.
(b) (i) A Bid by a Beneficial Owner or an Existing Holder of shares of a series of
MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to
sell:
(A) the number of Outstanding shares of such series specified in such Bid if the
Applicable Rate for shares of such series determined on such Auction Date shall be less than
the rate specified therein;
(B) such number or a lesser number of Outstanding shares of such series to be
determined as set forth in clause (iv) of paragraph (a) of Section 4 of this Part II if the
Applicable Rate for shares of such series determined on such Auction Date shall be equal to
the rate specified therein; or
(C) the number of Outstanding shares of such series specified in such Bid if the rate
specified therein shall be higher than the Maximum Rate for shares of such series, or such
number or a lesser number of Outstanding shares of such series to be determined as set forth
in clause (iii) of paragraph (b) of Section 4 of this Part II if the rate specified therein
shall be higher than the Maximum Rate for shares of such series and Sufficient Clearing Bids
for shares of such series do not exist.
(ii) A Sell Order by a Beneficial Owner or an Existing Holder of shares of a series of
MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to
sell:
(A) the number of Outstanding shares of such series specified in such Sell Order; or
(B) such number or a lesser number of Outstanding shares of such series as set forth in
clause (iii) of paragraph (b) of Section 4 of this Part II if Sufficient Clearing Bids for
shares of such series do not exist;
38
provided, however, that a Broker Dealer that is an Existing Holder with respect to shares of a
series of MuniPreferred shall not be liable to any Person for failing to sell such shares pursuant
to a Sell Order described in the proviso to paragraph (c) of Section 2 of this Part II if (1) such
shares were transferred by the Beneficial Owner thereof without compliance by such Beneficial Owner
or its transferee Broker Dealer (or other transferee person, if permitted by the Fund) with the
provisions of Section 7 of this Part II or (2) such Broker Dealer has informed the Auction Agent
pursuant to the terms of its Broker Dealer Agreement that, according to such Broker Dealers
records, such Broker Dealer believes it is not the Existing Holder of such shares.
(iii) A Bid by a Potential Beneficial Holder or a Potential Holder of shares of a series of
MuniPreferred subject to an Auction on any Auction Date shall constitute an irrevocable offer to
purchase:
(A) the number of Outstanding shares of such series specified in such Bid if the
Applicable Rate for shares of such series determined on such Auction Date shall be higher
than the rate specified therein; or
(B) such number or a lesser number of Outstanding shares of such series as set forth in
clause (v) of paragraph (a) of Section 4 of this Part II if the Applicable Rate for shares
of such series determined on such Auction Date shall be equal to the rate specified therein.
(c) No Order for any number of shares of MuniPreferred other than whole shares shall be valid.
2. Submission of Orders by Broker Dealers to Auction Agent. (a) Each Broker Dealer shall submit in
writing to the Auction Agent prior to the Submission Deadline on each Auction Date all Orders for
shares of MuniPreferred of a series subject to an Auction on such Auction Date obtained by such
Broker Dealer, designating itself (unless otherwise permitted by the Fund) as an Existing Holder in
respect of shares subject to Orders submitted or deemed submitted to it by Beneficial Owners and as
a Potential Holder in respect of shares subject to Orders submitted to it by Potential Beneficial
Owners, and shall specify with respect to each Order for such shares:
(i) the name of the Bidder placing such Order (which shall be the Broker Dealer unless
otherwise permitted by the Fund);
(ii) the aggregate number of shares of such series that are the subject of such Order;
(iii) to the extent that such Bidder is an Existing Holder of shares of such series:
(A) the number of shares, if any, of such series subject to any Hold Order of such
Existing Holder;
(B) the number of shares, if any, of such series subject to any Bid of such Existing
Holder and the rate specified in such Bid; and
39
(C) the number of shares, if any, of such series subject to any Sell Order of such
Existing Holder; and
(iv) to the extent such Bidder is a Potential Holder of shares of such series, the rate and
number of shares of such series specified in such Potential Holders Bid.
(b) If any rate specified in any Bid contains more than three figures to the right of the
decimal point, the Auction Agent shall round such rate up to the next highest one thousandth (.001)
of 1%.
(c) If an Order or Orders covering all of the Outstanding shares of MuniPreferred of a series
held by any Existing Holder is not submitted to the Auction Agent prior to the Submission
Deadline, the Auction Agent shall deem a Hold Order to have been submitted by or on behalf of
such Existing Holder covering the number of Outstanding shares of such series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided, however, that if an
Order or Orders covering all of the Outstanding shares of such series held by any Existing Holder
is not submitted to the Auction Agent prior to the Submission Deadline for an Auction relating to a
Special Rate Period consisting of more than 28 Rate Period Days, the Auction Agent shall deem a
Sell Order to have been submitted by or on behalf of such Existing Holder covering the number of
outstanding shares of such series held by such Existing Holder and not subject to Orders submitted
to the Auction Agent.
(d) If one or more Orders of an Existing Holder is submitted to the Auction Agent covering in
the aggregate more than the number of Outstanding shares of MuniPreferred of a series subject to an
Auction held by such Existing Holder, such Orders shall be considered valid in the following order
of priority:
(i) all Hold Orders for shares of such series shall be considered valid, but only up to and
including in the aggregate the number of Outstanding shares of such series held by such Existing
Holder, and if the number of shares of such series subject to such Hold Orders exceeds the number
of Outstanding shares of such series held by such Existing Holder, the number of shares subject to
each such Hold Order shall be reduced pro rata to cover the number of Outstanding shares of such
series held by such Existing Holder;
(ii) (A) any Bid for shares of such series shall be considered valid up to and including the
excess of the number of Outstanding shares of such series held by such Existing Holder over the
number of shares of such series subject to any Hold Orders referred to in clause (i) above;
(B) subject to subclause (A), if more than one Bid of an Existing Holder for shares of
such series is submitted to the Auction Agent with the same rate and the number of
Outstanding shares of such series subject to such Bids is greater than such excess, such
Bids shall be considered valid up to and including the amount of such excess, and the number
of shares of such series subject to each Bid with the same rate shall be reduced pro rata to
cover the number of shares of such series equal to such excess;
40
(C) subject to subclauses (A) and (B), if more than one Bid of an Existing Holder for
shares of such series is submitted to the Auction Agent with different rates, such Bids
shall be considered valid in the ascending order of their respective rates up to and
including the amount of such excess; and
(D) in any such event, the number, if any, of such Outstanding shares of such series
subject to any portion of Bids considered not valid in whole or in part under this clause
(ii) shall be treated as the subject of a Bid for shares of such series by or on behalf of a
Potential Holder at the rate therein specified; and
(iii) all Sell Orders for shares of such series shall be considered valid up to and including
the excess of the number of Outstanding shares of such series held by such Existing
Holder over the sum of shares of such series subject to valid Hold Orders referred to in
clause (i) above and valid Bids referred to in clause (ii) above.
(e) If more than one Bid for one or more shares of a series of MuniPreferred is submitted to
the Auction Agent by or on behalf of any Potential Holder, each such Bid submitted shall be a
separate Bid with the rate and number of shares therein specified.
(f) Any Order submitted by a Beneficial Owner or a Potential Beneficial Owner to its Broker
Dealer, or by a Broker Dealer to the Auction Agent, prior to the Submission Deadline on any Auction
Date, shall be irrevocable.
3. Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate. (a) Not
earlier than the Submission Deadline on each Auction Date for shares of a series of MuniPreferred,
the Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the Broker
Dealers in respect of shares of such series (each such Order as submitted or deemed submitted by a
Broker Dealer being hereinafter referred to individually as a Submitted Hold Order, a Submitted
Bid or a Submitted Sell Order, as the case may be, or as a Submitted Order and collectively as
Submitted Hold Orders, Submitted Bids or Submitted Sell Orders, as the case may be, or as
Submitted Orders) and shall determine for such series:
(i) the excess of the number of Outstanding shares of such series over the number of
Outstanding shares of such series subject to Submitted Hold Orders (such excess being hereinafter
referred to as the Available MuniPreferred of such series);
(ii) from the Submitted Orders for shares of such series whether:
(A) the number of Outstanding shares of such series subject to Submitted Bids of
Potential Holders specifying one or more rates equal to or lower than the Maximum Rate for
shares of such series;
exceeds or is equal to the sum of:
(B) the number of Outstanding shares of such series subject to Submitted Bids of
Existing Holders specifying one or more rates higher than the Maximum Rate for shares of
such series; and
41
(C) the number of Outstanding shares of such series subject to Submitted Sell Orders
(in the event such excess or such equality exists (other than because the number of shares of such
series in subclauses (B) and (C) above is zero because all of the Outstanding shares of such series
are subject to Submitted Hold Orders), such Submitted Bids in subclause (A) above being hereinafter
referred to collectively as Sufficient Clearing Bids for shares of such series); and
(iii) if Sufficient Clearing Bids for shares of such series exist, the lowest rate specified
in such Submitted Bids (the Winning Bid Rate for shares of such series) which if:
(A) (I) each such Submitted Bid of Existing Holders specifying such lowest rate and
(II) all other such Submitted Bids of Existing Holders specifying lower rates were rejected,
thus entitling such Existing Holders to continue to hold the shares of such series that are
subject to such Submitted Bids; and
(B) (I) each such Submitted Bid of Potential Holders specifying such lowest rate and
(II) all other such Submitted Bids of Potential Holders specifying lower rates were
accepted;
would result in such Existing Holders described in subclause (A) above continuing to hold an
aggregate number of Outstanding shares of such series which, when added to the number of
Outstanding shares of such series to be purchased by such Potential Holders described in
subclause (B) above, would equal not less than the Available MuniPreferred of such series.
(b) Promptly after the Auction Agent has made the determinations pursuant to paragraph (a) of
this Section 3, the Auction Agent shall advise the Fund of the Maximum Rate for shares of the
series of MuniPreferred for which an Auction is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of such series for the next succeeding Rate Period
thereof as follows:
(i) if Sufficient Clearing Bids for shares of such series exist, that the Applicable Rate for
all shares of such series for the next succeeding Rate Period thereof shall be equal to the Winning
Bid Rate for shares of such series so determined;
(ii) if Sufficient Clearing Bids for shares of such series do not exist (other than because
all of the Outstanding shares of such series are subject to Submitted Hold Orders), that the
Applicable Rate for all shares of such series for the next succeeding Rate Period thereof shall be
equal to the Maximum Rate for shares of such series; or
(iii) if all of the Outstanding shares of such series are subject to Submitted Hold Orders,
that the Applicable Rate for all shares of such series for the next succeeding Rate Period thereof
shall be as set forth in Section 12 of Appendix A hereto.
4. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of Shares.
Existing Holders shall continue to hold the shares of MuniPreferred that are subject to Submitted
Hold Orders, and, based on the determinations made pursuant to
42
paragraph (a) of Section 3 of this Part II, the Submitted Bids and Submitted Sell
Orders shall be accepted or rejected by the Auction Agent and the Auction Agent shall take such
other action as set forth below:
(a) If Sufficient Clearing Bids for shares of a series of MuniPreferred have been made, all
Submitted Sell Orders with respect to shares of such series shall be accepted and, subject to the
provisions of paragraphs (d) and (e) of this Section 4, Submitted Bids with respect to shares of
such series shall be accepted or rejected as follows in the following order of priority and all
other Submitted Bids with respect to shares of such series shall be rejected:
(i) Existing Holders Submitted Bids for shares of such series specifying any rate that is
higher than the Winning Bid Rate for shares of such series shall be accepted, thus requiring each
such Existing Holder to sell the shares of MuniPreferred subject to such Submitted Bids;
(ii) Existing Holders Submitted Bids for shares of such series specifying any rate that is
lower than the Winning Bid Rate for shares of such series shall be rejected, thus entitling each
such Existing Holder to continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(iii) Potential Holders Submitted Bids for shares of such series specifying any rate that is
lower than the Winning Bid Rate for shares of such series shall be accepted;
(iv) each Existing Holders Submitted Bid for shares of such series specifying a rate that is
equal to the Winning Bid Rate for shares of such series shall be rejected, thus entitling such
Existing Holder to continue to hold the shares of MuniPreferred subject to such Submitted Bid,
unless the number of Outstanding shares of MuniPreferred subject to all such Submitted Bids shall
be greater than the number of shares of MuniPreferred (remaining shares) in the excess of the
Available MuniPreferred of such series over the number of shares of MuniPreferred subject to
Submitted Bids described in clauses (ii) and (iii) of this paragraph (a), in which event such
Submitted Bid of such Existing Holder shall be rejected in part, and such Existing Holder shall be
entitled to continue to hold shares of MuniPreferred subject to such Submitted Bid, but only in an
amount equal to the number of shares of MuniPreferred of such series obtained by multiplying the
number of remaining shares by a fraction, the numerator of which shall be the number of Outstanding
shares of MuniPreferred held by such Existing Holder subject to such Submitted Bid and the
denominator of which shall be the aggregate number of Outstanding shares of MuniPreferred subject
to such Submitted Bids made by all such Existing Holders that specified a rate equal to the Winning
Bid Rate for shares of such series; and
(v) each Potential Holders Submitted Bid for shares of such series specifying a rate that is
equal to the Winning Bid Rate for shares of such series shall be accepted but only in an amount
equal to the number of shares of such series obtained by multiplying the number of shares in the
excess of the Available MuniPreferred of such series over the number of shares of MuniPreferred
subject to Submitted Bids described in clauses (ii) through (iv) of this paragraph (a) by a
fraction, the numerator of which shall be the number of Outstanding shares of MuniPreferred subject
to such Submitted Bid and the denominator of which shall be the aggregate number of Outstanding
shares of MuniPreferred subject to such Submitted Bids made
43
by all such Potential Holders that specified a rate equal to the Winning Bid Rate for shares
of such series.
(b) If Sufficient Clearing Bids for shares of a series of MuniPreferred have not been made
(other than because all of the Outstanding shares of such series are subject to Submitted Hold
Orders), subject to the provisions of paragraph (d) of this Section 4, Submitted Orders for shares
of such series shall be accepted or rejected as follows in the following order of priority and all
other Submitted Bids for shares of such series shall be rejected:
(i) Existing Holders Submitted Bids for shares of such series specifying any rate that is
equal to or lower than the Maximum Rate for shares of such series shall be rejected, thus entitling
such Existing Holders to continue to hold the shares of MuniPreferred subject to such Submitted
Bids;
(ii) Potential Holders Submitted Bids for shares of such series specifying any rate that is
equal to or lower than the Maximum Rate for shares of such series shall be accepted; and
(iii) Each Existing Holders Submitted Bid for shares of such series specifying any rate that
is higher than the Maximum Rate for shares of such series and the Submitted Sell Orders for shares
of such series of each Existing Holder shall be accepted, thus entitling each Existing Holder that
submitted or on whose behalf was submitted any such Submitted Bid or Submitted Sell Order to sell
the shares of such series subject to such Submitted Bid or Submitted Sell Order, but in both cases
only in an amount equal to the number of shares of such series obtained by multiplying the number
of shares of such series subject to Submitted Bids described in clause (ii) of this paragraph (b)
by a fraction, the numerator of which shall be the number of Outstanding shares of such series held
by such Existing Holder subject to such Submitted Bid or Submitted Sell Order and the denominator
of which shall be the aggregate number of Outstanding shares of such series subject to all such
Submitted Bids and Submitted Sell Orders.
(c) If all of the Outstanding shares of a series of MuniPreferred are subject to Submitted
Hold Orders, all Submitted Bids for shares of such series shall be rejected.
(d) If, as a result of the procedures described in clause (iv) or (v) of paragraph (a) or
clause (iii) of paragraph (b) of this Section 4, any Existing Holder would be entitled or required
to sell, or any Potential Holder would be entitled or required to purchase, a fraction of a share
of a series of MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it
shall determine in its sole discretion, round up or down the number of shares of MuniPreferred of
such series to be purchased or sold by any Existing Holder or Potential Holder on such Auction Date
as a result of such procedures so that the number of shares so purchased or sold by each Existing
Holder or Potential Holder on such Auction Date shall be whole shares of MuniPreferred.
(e) If, as a result of the procedures described in clause (v) of paragraph (a) of this Section
4, any Potential Holder would be entitled or required to purchase less than a whole share of a
series of MuniPreferred on any Auction Date, the Auction Agent shall, in such manner as it shall
determine in its sole discretion, allocate shares of MuniPreferred of such series for purchase
44
among Potential Holders so that only whole shares of MuniPreferred of such series are
purchased on such Auction Date as a result of such procedures by any Potential Holder, even if such
allocation results in one or more Potential Holders not purchasing shares of MuniPreferred of such
series on such Auction Date.
(f) Based on the results of each Auction for shares of a series of MuniPreferred, the Auction
Agent shall determine the aggregate number of shares of such series to be purchased and the
aggregate number of shares of such series to be sold by Potential Holders and Existing Holders and,
with respect to each Potential Holder and Existing Holder, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold differ, determine to which
other Potential Holder(s) or Existing Holder(s) they shall deliver, or from which other Potential
Holder(s) or Existing Holder(s) they shall receive, as the case may be, shares of MuniPreferred of
such series. Notwithstanding any provision of the Auction Procedures or the Settlement Procedures
to the contrary, in the event an Existing Holder or Beneficial Owner of shares of a series of
MuniPreferred with respect to whom a Broker Dealer submitted a Bid to the Auction Agent for such
shares that was accepted in whole or in part, or submitted or is deemed to have submitted a Sell
Order for such shares that was accepted in whole or in part, fails to instruct its Agent Member to
deliver such shares against payment therefor, partial deliveries of shares of MuniPreferred that
have been made in respect of Potential Holders or Potential Beneficial Owners Submitted Bids for
shares of such series that have been accepted in whole or in part shall constitute good delivery to
such Potential Holders and Potential Beneficial Owners.
(g) Neither the Fund nor the Auction Agent nor any affiliate of either shall have any
responsibility or liability with respect to the failure of an Existing Holder, a Potential Holder,
a Beneficial Owner, a Potential Beneficial Owner or its respective Agent Member to deliver shares
of MuniPreferred of any series or to pay for shares of MuniPreferred of any series sold or
purchased pursuant to the Auction Procedures or otherwise.
5. Notification of Allocations. Whenever the Fund intends to include any net capital gains or
other income taxable for Federal income tax purposes in any dividend on shares of MuniPreferred,
the Fund shall, in the case of a Minimum Rate Period or a Special Rate Period of 28 Rate Period
Days or fewer, and may, in the case of any other Special Rate Period, notify the Auction Agent of
the amount to be so included not later than the Dividend Payment Date next preceding the Auction
Date on which the Applicable Rate for such dividend is to be established. Whenever the Auction
Agent receives such notice from the Fund, it will be required in turn to notify each Broker Dealer,
who, on or prior to such Auction Date, in accordance with its Broker Dealer Agreement, will be
required to notify its Beneficial Owners and Potential Beneficial Owners of shares of MuniPreferred
believed by it to be interested in submitting an Order in the Auction to be held on such Auction
Date.
6. Auction Agent. For so long as any shares of MuniPreferred are outstanding, the Auction Agent,
duly appointed by the Fund to so act, shall be in each case a commercial bank, trust company or
other financial institution independent of the Fund and its affiliates (which however, may engage
or have engaged in business transactions with the Fund or its affiliates) and at no time shall the
Fund or any of its affiliates act as the Auction Agent in connection with the Auction Procedures.
If the Auction Agent resigns or for any reason its appointment is terminated
45
during any period that any shares of MuniPreferred are outstanding, the Board of
Directors shall use its best efforts promptly thereafter to appoint another qualified commercial
bank, trust company or financial institution to act as the Auction Agent. The Auction Agents
registry of Existing Holders of shares of a series of MuniPreferred shall be conclusive and binding
on the Broker Dealers. A Broker Dealer may inquire of the Auction Agent between 3:00 p.m. on the
Business Day preceding an Auction for shares of a series of MuniPreferred and 9:30 a.m. on the
Auction Date for such Auction to ascertain the number of shares of such series in respect of which
the Auction Agent has determined such Broker Dealer to be an Existing Holder. If such Broker
Dealer believes it is the Existing Holder of fewer shares of such series than specified by the
Auction Agent in response to such Broker Dealers inquiry, such Broker Dealer may so inform the
Auction Agent of that belief. Such Broker Dealer shall not, in its capacity as Existing Holder of
shares of such series, submit Orders in such Auction in respect of shares of such series covering
in the aggregate more than the number of shares of such series specified by the Auction Agent in
response to such Broker Dealers inquiry.
7. Transfer of Shares of MuniPreferred. Unless otherwise permitted by the Fund, a Beneficial Owner
or an Existing Holder may sell, transfer or otherwise dispose of shares of MuniPreferred only in
whole shares and only pursuant to a Bid or Sell Order placed with the Auction Agent in accordance
with the procedures described in this Part II or to a Broker Dealer; provided, however, that (a) a
sale, transfer or other disposition of shares of MuniPreferred from a customer of a Broker Dealer
who is listed on the records of that Broker Dealer as the holder of such shares to that Broker
Dealer or another customer of that Broker Dealer shall not be deemed to be a sale, transfer or
other disposition for purposes of this Section 7 if such Broker Dealer remains the Existing Holder
of the shares so sold, transferred or disposed of immediately after such sale, transfer or
disposition and (b) in the case of all transfers other than pursuant to Auctions, the Broker Dealer
(or other Person, if permitted by the Fund) to whom such transfer is made shall advise the Auction
Agent of such transfer.
8. Global Certificate. Prior to the commencement of a Voting Period, (i) all of the shares of a
series of MuniPreferred outstanding from time to time shall be represented by one global
certificate registered in the name of the Securities Depository or its nominee and (ii) no
registration of transfer of shares of a series of MuniPreferred shall be made on the books of the
Fund to any Person other than the Securities Depository or its nominee. The foregoing restriction
on registration of transfer shall be conspicuously noted on the face or back of the certificates of
MuniPreferred in such a manner as to comply with the requirements of Minnesota Statute Section
302A.429, Subd. 2, and Section 8 204 of the Uniform Commercial Code as in effect in the State of
Minnesota, or any successor provisions.
46
IN WITNESS WHEREOF, NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC., has caused these presents
to be signed in its name and on its behalf by its Vice President and attested by its Assistant
Secretary, and the said officers of the Fund further acknowledged said instrument to be the
corporate act of the Fund, and stated under penalty of perjury that to the best of their knowledge,
information and belief the matters and facts therein set forth with respect to approval are true in
all material respects, all on ________, 2009.
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NUVEEN INSURED MUNICIPAL OPPORTUNITY
FUND, INC.
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By: |
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Kevin J. McCarthy |
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Vice President |
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ATTEST: |
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Virginia ONeal |
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Assistant Secretary |
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47
NUVEEN INSURED MUNICIPAL OPPORTUNITY FUND, INC.
APPENDIX A
Section 1. Designation As To Series.
Series M: A series of 4,000 shares of Preferred Stock, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative Preferred
Stock, Series M. Each share of Series M MuniPreferred shall be issued on December 20, 1991; have
an Applicable Rate for its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 7, 1992; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement. The Series M
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund, and each share of
Series M MuniPreferred shall be identical except as provided in Section 11 of Part I of this
Statement.
Series T: A series of 4,000 shares of Preferred Stock, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative Preferred
Stock, Series T. Each share of Series T MuniPreferred shall be issued on December 20, 1991; have
an Applicable Rate for its Initial Rate Period equal to 4.75% per annum; have an initial Dividend
Payment Date of January 8, 1992; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement. The Series T
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund, and each share of
Series T MuniPreferred shall be identical except as provided in Section 11 of Part I of this
Statement.
Series W: A series of 4,000 shares of Preferred Stock, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative Preferred
Stock, Series W. Each share of Series W MuniPreferred shall be issued on February 28, 1992; have
an Applicable Rate for its Initial Rate Period equal to 3.25% per annum; have an initial Dividend
Payment Date of March 5, 1992; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement. The Series W
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund, and each share of
Series W MuniPreferred shall be identical except as provided in Section 11 of Part I of this
Statement.
Series W2: A series of ___shares of Preferred Stock, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative Preferred
Stock, Series W2. Each share of Series W2 MuniPreferred shall be issued on ______, 2009; have
an Applicable Rate for its Initial Rate Period equal to ___% per annum; have an initial Dividend
Payment Date of ______, 2009; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement. The Series W2
MuniPreferred shall constitute a separate series of
48
Preferred Stock of the Fund, and each share of Series W2 MuniPreferred shall be identical except as
provided in Section 11 of Part I of this Statement.
Series W3: A series of ___shares of Preferred Stock, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative Preferred
Stock, Series W3. Each share of Series W3 MuniPreferred shall be issued on ________, 2009; have
an Applicable Rate for its Initial Rate Period equal to ___% per annum; have an initial Dividend
Payment Date of _____, 2009; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement. The Series W3
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund, and each share of
Series W3 MuniPreferred shall be identical except as provided in Section 11 of Part I of this
Statement.
Series TH1: A series of 4,000 shares of Preferred Stock, par value $.01 per share,
liquidation preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative
Preferred Stock, Series TH1. Each share of Series TH1 MuniPreferred shall be issued on December
20, 1991; have an Applicable Rate for its Initial Rate Period equal to 4.75% per annum; have an
initial Dividend Payment Date of January 10, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set forth in the
Articles applicable to Preferred Stock of the Fund, as set forth in Part I and Part II of this
Statement. The Series TH1 MuniPreferred shall constitute a separate series of Preferred Stock of
the Fund, and each share of Series TH1 MuniPreferred shall be identical except as provided in
Section 11 of Part I of this Statement.
Series TH2: A series of 4,000 shares of Preferred Stock, par value of $.01 per share,
liquidation preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative
Preferred Stock, Series TH2. Each share of Series TH2 MuniPreferred shall be issued on February
28, 1992; have an Applicable Rate for its Initial Rate Period equal to 3.25% per annum; have an
initial Dividend Payment Date of March 9, 1992; and have such other preferences, limitations and
relative voting rights, in addition to those required by applicable law or set forth in the
Articles applicable to Preferred Stock of the Fund, as set forth in Part I and Part II of this
Statement. The Series TH2 MuniPreferred shall constitute a separate series of Preferred Stock of
the Fund, and each share of Series TH2 MuniPreferred shall be identical except as provided in
Section 11 of Part I of this Statement.
Series TH3: A series of ___shares of Preferred Stock, par value $.01 per share,
liquidation preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative
Preferred Stock, Series TH3. Each share of Series TH3 MuniPreferred shall be issued on ________,
2009; have an Applicable Rate for its Initial Rate Period equal to ___% per annum; have an initial
Dividend Payment Date of _____, 2009; and have such other preferences, limitations and relative
voting rights, in addition to those required by applicable law or set forth in the Articles
applicable to Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement.
The Series TH3 MuniPreferred shall constitute a separate series of Preferred Stock of the Fund, and
each share of Series TH3 MuniPreferred shall be identical except as provided in Section 11 of Part
I of this Statement.
49
Series F: A series of 4,000 shares of Preferred Stock, par value $.01 per share, liquidation
preference $25,000 per share, is hereby designated Municipal Auction Rate Cumulative Preferred
Stock, Series F. Each share of Series F MuniPreferred shall be issued on February 28, 1992; have
an Applicable Rate for its Initial Rate Period equal to 3.25% per annum; have an initial Dividend
Payment Date of March 9, 1992; and have such other preferences, limitations and relative voting
rights, in addition to those required by applicable law or set forth in the Articles applicable to
Preferred Stock of the Fund, as set forth in Part I and Part II of this Statement. The Series F
MuniPreferred shall constitute a separate series of Preferred Stock of the Fund, and each share of
Series F MuniPreferred shall be identical except as provided in Section 11 of Part I of this
Statement.
Section 2. Number of Authorized Shares Per Series.
The number of authorized shares constituting Series M MuniPreferred is 4,000; Series T
MuniPreferred is 4,000; Series W MuniPreferred is 4,000; Series W2 MuniPreferred is ___; Series
W3 MuniPreferred is ___; Series TH1 MuniPreferred is 4,000; Series TH2 MuniPreferred is 4,000;
Series TH3 MuniPreferred is ___; and Series F MuniPreferred is 4,000.
Section 3. Exceptions to Certain Definitions.
Notwithstanding the definitions contained under the heading Definitions in this Statement,
the following terms shall have the following meanings for purposes of this Statement:
Not applicable.
Section 4. Certain Definitions.
For purposes of this Statement, the following terms shall have the following meanings (with
terms defined in the singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
Gross up Payment means payment to a Holder of shares of MuniPreferred of an amount which,
when taken together with the aggregate amount of Taxable Allocations made to such Holder to which
such Gross up Payment relates, would cause such Holders dividends in dollars (after Federal income
tax consequences) from the aggregate of such Taxable Allocations and the related Gross up Payment
to be equal to the dollar amount of the dividends which would have been received by such Holder if
the amount of such aggregate Taxable Allocations would have been excludable from the gross income
of such Holder. Such Gross up Payment shall be calculated (i) without consideration being given to
the time value of money; (ii) assuming that no Holder of shares of MuniPreferred is subject to the
Federal alternative minimum tax with respect to dividends received from the Fund; and (iii)
assuming that each Taxable Allocation and each Gross up Payment (except to the extent such Gross up
Payment is designated as an exempt interest dividend under Section 852(b)(5) of the Code or
successor provisions) would be taxable in the hands of each Holder of shares of MuniPreferred at
the maximum marginal regular Federal individual income tax rate applicable to ordinary income or
net capital gains, as applicable, or the maximum marginal regular Federal corporate income tax rate
applicable to ordinary income
50
or net capital gains, as applicable, whichever is greater, in effect at the time such Gross up
Payment is made.
Moodys Discount Factor shall mean, for purposes of determining the Discounted Value of any
Moodys Eligible Asset, the percentage determined by reference to (i) (A) in the event such
Municipal Obligation is covered by an Original Issue Insurance policy or a Portfolio Insurance
policy which does not provide the Fund with the option to obtain Permanent Insurance with respect
to such Municipal Obligation, or is not covered by bond insurance, the Moodys or S&P rating on
such Municipal Obligation, (B) in the event such Municipal Obligation is covered by a Secondary
Market Insurance Policy, the Moodys insurance claims-paying ability rating of the issuer of the
policy, or (C) in the event such Municipal Obligation is covered by a Portfolio Insurance policy
which provides the Fund with the option to obtain Permanent Insurance with respect to such
Municipal Obligation, at the Funds option, the Moodys or S&P rating on such Municipal Obligation
or the Moodys insurance claims-paying ability rating of the issuer of the Portfolio Insurance
policy and (ii) the shortest Exposure Period set forth opposite such rating that is the same length
as or is longer than the Moodys Exposure Period, in accordance with the table set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating Category |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(V)MIG |
|
|
|
|
|
SP-1 |
|
|
Exposure Period |
|
Aaa* |
|
Aa* |
|
A* |
|
Baa* |
|
Other** |
|
-1*** |
|
+*** |
7 weeks |
|
|
151 |
% |
|
|
159 |
% |
|
|
168 |
% |
|
|
202 |
% |
|
|
229 |
% |
|
|
136 |
% |
|
|
148 |
% |
8 weeks or less but
greater than seven
weeks |
|
|
154 |
|
|
|
164 |
|
|
|
173 |
|
|
|
205 |
|
|
|
235 |
|
|
|
137 |
|
|
|
149 |
|
9 weeks or less but
greater than eight
weeks |
|
|
158 |
|
|
|
169 |
|
|
|
179 |
|
|
|
209 |
|
|
|
242 |
|
|
|
138 |
|
|
|
150 |
|
|
|
|
* |
|
Moodys rating. |
|
** |
|
Municipal Obligations not rated by Moodys but rated BBB by S&P. |
|
*** |
|
Municipal Obligations rated MIG-1 or VMIG-1 or, if not rated by Moodys, rated SP-1+ by S&P,
which do not mature or have a demand feature at par exercisable in 30 days and which do not
have a long term rating. |
If the Moodys Discount Factor used to discount a particular Municipal Obligation is
determined by reference to the insurance claims-paying ability rating of the insurer of such
Municipal Obligation, such Moodys Discount Factor will be increased by an amount equal to 50% of
the difference between (i) the percentage set forth in the above table under the applicable rating
category, and (ii) the percentage set forth in the above table under the rating category that is
one rating category below the applicable rating category. Notwithstanding the foregoing, (i) the
Moodys Discount Factor for short term Municipal Obligations will be 115%, so long as such
Municipal Obligations are rated at least MIG-1, VMIG-1 or P-1 by Moodys and mature or have a
demand feature at par exercisable in 30 days or less or 125% as long as such Municipal Obligations
are rated at least A-1+/AA or SP-1+/AA by S&P and mature or have a demand
51
feature at par exercisable in 30 days or less and (ii) no Moodys Discount Factor will be
applied to cash or to Receivables for Municipal Obligations Sold.
Moodys Eligible Asset shall mean cash, Receivables for Municipal Obligations Sold or a
Municipal Obligation that (i) pays interest in cash, (ii) is publicly rated Baa or higher by
Moodys or, if not rated by Moodys but rated by S&P, is rated at least BBB by S&P (provided,
however, that for purposes of determining the Moodys Discount Factor applicable to any such S&P
rated Municipal Obligation, such Municipal Obligation (excluding any short term Municipal
Obligation) shall be deemed to have a Moodys rating which is one full rating category lower than
its S&P rating), (iii) does not have its Moodys rating suspended by Moodys, and (iv) is part of
an issue of Municipal Obligations of at least $10,000,000. Municipal Obligations issued by any one
issuer and rated BBB by S&P may comprise no more than 4% of total Moodys Eligible Assets; such BBB
rated Municipal Obligations, if any, together with any Municipal Obligations issued by the same
issuer and rated Baa by Moodys or A by S&P, may comprise no more than 6% of total Moodys Eligible
Assets; such BBB, Baa and A rated Municipal Obligations, if any, together with any Municipal
Obligations issued by the same issuer and rated A by Moodys or AA by S&P, may comprise no more
than 10% of total Moodys Eligible Assets; and such BBB, Baa, A and AA rated Municipal Obligations,
if any, together with any Municipal Obligations issued by the same issuer and rated Aa by Moodys
or AAA by S&P, may comprise no more than 20% of total Moodys Eligible Assets. For purposes of the
foregoing sentence, any Municipal Obligation backed by the guaranty, letter of credit or insurance
issued by a third party shall be deemed to be issued by such third party if the issuance of such
third party credit is the sole determinant of the rating on such Municipal Obligation. Municipal
Obligations issued by issuers located within a single state or territory and rated BBB by S&P may
comprise no more than 12% of total Moodys Eligible Assets; such BBB rated Municipal Obligations,
if any, together with any Municipal Obligations issued by issuers located within the same state or
territory and rated Baa by Moodys or A by S&P, may comprise no more than 20% of total Moodys
Eligible Assets; such BBB, Baa and A rated Municipal Obligations, if any, together with any
Municipal Obligations issued by issuers located within the same state or territory and rated A by
Moodys or AA by S&P, may comprise no more than 40% of total Moodys Eligible Assets; and such BBB,
Baa, A and AA rated Municipal Obligations, if any, together with any Municipal Obligations issued
by issuers located within the same state or territory and rated Aa by Moodys or AAA by S&P, may
comprise no more than 60% of total Moodys Eligible Assets. For purposes of applying the foregoing
requirements, a Municipal Obligation shall be deemed to be rated BBB by S&P if rated BBB , BBB or
BBB+ by S&P, Moodys Eligible Assets shall be calculated without including cash, and Municipal
Obligations rated MIG-1, VMIG-1 or P-1 or, if not rated by Moodys, rated A-1+/AA or SP-1+/AA by
S&P, shall be considered to have a long term rating of A. When the Fund sells a Municipal
Obligation and agrees to repurchase such Municipal Obligation at a future date, such Municipal
Obligation shall be valued at its Discounted Value for purposes of determining Moodys Eligible
Assets, and the amount of the repurchase price of such Municipal Obligation shall be included as a
liability for purposes of calculating the MuniPreferred Basic Maintenance Amount. When the Fund
purchases a Moodys Eligible Asset and agrees to sell it at a future date, such Eligible Asset
shall be valued at the amount of cash to be received by the Fund upon such future date, provided
that the counterparty to the transaction has a long term debt rating of at least A2 from Moodys
and the transaction has a term of no more than 30 days, otherwise such Eligible Asset shall be
valued at the Discounted Value of such Eligible Asset.
52
Notwithstanding the foregoing, an asset will not be considered a Moodys Eligible Asset to the
extent it is (i) subject to any material lien, mortgage, pledge, security interest or security
agreement of any kind (collectively, Liens), except for (a) Liens which are being contested in
good faith by appropriate proceedings and which Moodys has indicated to the Fund will not affect
the status of such asset as a Moodys Eligible Asset, (b) Liens for taxes that are not then due and
payable or that can be paid thereafter without penalty, (c) Liens to secure payment for services
rendered or cash advanced to the Fund by Nuveen Advisory Corp., The Chase Manhattan Bank, N.A. or
the Auction Agent and (d) Liens by virtue of any repurchase agreement; or (ii) deposited
irrevocably for the payment of any liabilities for purposes of determining the MuniPreferred Basic
Maintenance Amount.
For purposes of determining as of any Valuation Date whether the Fund has Moodys Eligible
Assets with an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance
Amount, the Fund shall include as a liability in the calculation of the MuniPreferred Basic
Maintenance Amount an amount calculated semi-annually equal to 150% of the estimated cost of
obtaining Permanent Insurance with respect to Moodys Eligible Assets that are (i) covered by
Portfolio Insurance policies which provide the Fund with the option to obtain such Permanent
Insurance and (ii) discounted by a Moodys Discount Factor determined by reference to the insurance
claims-paying ability rating of the issuer of such Portfolio Insurance policy.
Original Issue Insurance shall mean Original Issue Insurance as defined in the Funds
Registration Statement.
Permanent Insurance shall mean Permanent Insurance as defined in the Funds Registration
Statement.
Portfolio Insurance shall mean Portfolio Insurance as defined in the Funds Registration
Statement.
Rate Multiple, for shares of a series of MuniPreferred on any Auction Date for shares of
such series, shall mean the percentage, determined as set forth below, based on the prevailing
rating of shares of such series in effect at the close of business on the Business Day next
preceding such Auction Date:
|
|
|
|
|
Prevailing Rating |
|
Percentage |
|
|
|
|
|
aa3/AA- or higher
|
|
|
110 |
% |
a3/A-
|
|
|
125 |
% |
baa3/BBB-
|
|
|
150 |
% |
ba3/BB-
|
|
|
200 |
% |
Below ba3/BB-
|
|
|
250 |
% |
provided, however, that in the event the Fund has notified the Auction Agent of its intent to
allocate income taxable for Federal income tax purposes to shares of such series prior to the
Auction establishing the Applicable Rate for shares of such series, the applicable percentage in
the foregoing table shall be divided by the quantity 1 minus the maximum marginal regular
53
Federal individual income tax rate applicable to ordinary income or the maximum marginal regular
Federal corporate income tax rate applicable to ordinary income, whichever is greater.
For purposes of this definition, the prevailing rating of shares of a series of
MuniPreferred shall be (i) aa3/AA- or higher if such shares have a rating of aa3 or better by
Moodys and AA- or better by S&P or the equivalent of such ratings by such agencies or a substitute
rating agency or substitute rating agencies selected as provided below, (ii) if not aa3/AA- or
higher, then a3/A- if such shares have a rating of a3 or better by Moodys and A- or better by
S&P or the equivalent of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (iii) if not aa3/AA- or higher or a3/A-, then
baa3/BBB- if such shares have a rating of baa3 or better by Moodys and BBB- or better by S&P
or the equivalent of such ratings by such agencies or a substitute rating agency or substitute
rating agencies selected as provided below, (iv) if not aa3/AA- or higher, a3/A- or
baa3/BBB-, then ba3/BB- if such shares have a rating of ba3 or better by Moodys and BB- or
better by S&P or the equivalent of such ratings by such agencies or a substitute rating agency or
substitute rating agencies selected as provided below, and (v) if not aa3/AA- or higher, a3/A-,
baa3/BBB-, or ba3/BB-, then Below ba3/BB-; provided, however, that if such shares are rated
by only one rating agency, the prevailing rating will be determined without reference to the rating
of any other rating agency. The Fund shall take all reasonable action necessary to enable either
S&P or Moodys to provide a rating for shares of MuniPreferred. If neither S&P nor Moodys shall
make such a rating available, the party set forth in Section 7 of Appendix A or its successor shall
select at least one nationally recognized statistical rating organization (as that term is used in
the rules and regulations of the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended from time to time) to act as a substitute rating agency in respect of
shares of the series of MuniPreferred set forth opposite such partys name in Section 7 of Appendix
A and the Fund shall take all reasonable action to enable such rating agency to provide a rating
for such shares.
S&P Discount Factor shall mean, for purposes of determining the Discounted Value of any S&P
Eligible Asset, the percentage determined by reference to (i) (A) in the event such Municipal
Obligation is covered by an Original Issue Insurance policy or a Portfolio Insurance policy which
does not provide the Fund with the option to obtain Permanent Insurance with respect to such
Municipal Obligation, or is not covered by bond insurance, the S&P or Moodys rating on such
Municipal Obligation, (B) in the event such Municipal Obligation is covered by a Secondary Market
Insurance policy, the S&P insurance claims-paying ability rating of the issuer of the policy, or
(C) in the event such Municipal Obligation is covered by a Portfolio Insurance policy which
provides the Fund with the option to obtain Permanent Insurance with respect to such Municipal
Obligation, at the Funds option, the S&P or Moodys rating on such Municipal Obligation or the S&P
insurance claims-paying ability rating of the issuer of the Portfolio Insurance policy and (ii) the
shortest Exposure Period set forth opposite such rating that is the same length as or is longer
than the S&P Exposure Period, in accordance with the table set forth below:
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rating Category |
Exposure Period |
|
AAA* |
|
AA* |
|
A* |
|
BBB* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40 Business Days |
|
|
190 |
% |
|
|
195 |
% |
|
|
210 |
% |
|
|
250 |
% |
22 Business Days |
|
|
170 |
|
|
|
175 |
|
|
|
190 |
|
|
|
230 |
|
10 Business Days |
|
|
155 |
|
|
|
160 |
|
|
|
175 |
|
|
|
215 |
|
7 Business Days |
|
|
150 |
|
|
|
155 |
|
|
|
170 |
|
|
|
210 |
|
3 Business Days |
|
|
130 |
|
|
|
135 |
|
|
|
150 |
|
|
|
190 |
|
Notwithstanding the foregoing, (i) the S&P Discount Factor for short term Municipal
Obligations will be 115%, so long as such Municipal Obligations are rated A-1+ or SP-1+ by S&P and
mature or have a demand feature exercisable within 30 days or less, or 125% if such Municipal
Obligations are not rated by S&P but are rated VMIG-1, P-1 or MIG-1 by Moodys; provided, however,
that any such Moodys rated short term Municipal Obligations which have demand features exercisable
within 30 days or less must be backed by a letter of credit, liquidity facility or guarantee from a
bank or other financial institution with a short term rating of at least A-1+ from S&P; and further
provided that such Moodys rated short term Municipal Obligations may comprise no more than 50% of
short term Municipal Obligations that qualify as S&P Eligible Assets; (ii) no S&P Discount Factor
will be applied to cash or to Receivables for Municipal Obligations Sold. For purposes of the
foregoing, Anticipation Notes rated SP-1+ or, if not rated by S&P, rated MIG-1 or VMIG-1 by
Moodys, which do not mature or have a demand feature at par exercisable in 30 days and which do
not have a long term rating, shall be considered to be short term Municipal Obligations.
S&P Eligible Asset shall mean cash (excluding any cash irrevocably deposited by the Fund for
the payment of any liabilities within the meaning of MuniPreferred Basic Maintenance Amount),
Receivables for Municipal Obligations Sold or a Municipal Obligation owned by the Fund that (i) is
interest bearing and pays interest at least semi annually; (ii) is payable with respect to
principal and interest in U.S. Dollars (provided, however, that such Moodys-rated Municipal
Obligations will be included in S&P Eligible Assets only to the extent the Market Value of such
Municipal Obligations does not exceed 50% of the aggregate Market Value of such S&P Eligible
Assets; and further provided that, for purposes of determining the S&P Discount Factor applicable
to any such Moodys-rated Municipal Obligation, such Municipal Obligation will be deemed to have an
S&P rating which is one full rating category lower than its Moodys rating); (iii) is publicly
rated BBB or higher by S&P or, if not rated by S&P but rated by Moodys, is rated at least A by
Moodys; (iv) is not part of a private placement of Municipal Obligations; and (v) is part of an
issue of Municipal Obligations with an original issue size of at least $20 million or, if of an
issue with an original issue size below $20 million (but in no event below $10 million), is issued
by an issuer with a total of at least $50 million of securities outstanding. Solely for purposes
of this definition, the term Municipal Obligation means any obligation the interest on which is
exempt from regular Federal income taxation and which is issued by any of the fifty United States,
the District of Columbia or any of the territories of the United States, their subdivisions,
counties, cities, towns, villages, school districts and agencies (including authorities and special
districts created by the states), and federally sponsored agencies such as local housing
authorities. Notwithstanding the foregoing limitations:
(1) Municipal Obligations of any one issuer or guarantor (excluding bond insurers) shall be
considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 10% of the aggregate Market Value of S&P Eligible Assets,
55
provided that 2% is added to the applicable S&P Discount Factor for every 1% by which the
Market Value of such Municipal Obligations exceeds 5% of the aggregate Market Value of S&P Eligible
Assets;
(2) Long Term Municipal Obligations issued by issuers in any one state or territory shall be
considered S&P Eligible Assets only to the extent the Market Value of such Municipal Obligations
does not exceed 20% of the aggregate Market Value of S&P Eligible Assets.
For purposes of determining as of any Valuation Date whether the Fund has S&P Eligible Assets
with an aggregate Discounted Value at least equal to the MuniPreferred Basic Maintenance Amount,
the Fund shall include as a liability in the calculation of the MuniPreferred Basic Maintenance
Amount an amount calculated semi-annually equal to 150% of the estimated cost of obtaining
Permanent Insurance with respect to S&P Eligible Assets that are (i) covered by Portfolio Insurance
policies which provide the Fund with the option to obtain such Permanent Insurance and (ii)
discounted by an S&P Discount Factor determined by reference to the insurance claims-paying ability
rating of the issuer of such Portfolio Insurance policy.
Secondary Market Insurance shall mean Secondary Market Insurance as defined in the Funds
Registration Statement.
Section 5. Initial Rate Periods.
The Initial Rate Period for shares of Series M MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding January 7, 1992.
The Initial Rate Period for shares of Series T MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding January 8, 1992.
The Initial Rate Period for shares of Series W MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding March 5, 1992.
The Initial Rate Period for shares of Series W2 MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding _____, 2009.
The Initial Rate Period for shares of Series W3 MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding _____, 2009.
The Initial Rate Period for shares of Series TH1 MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding January 10, 1992.
The Initial Rate Period for shares of Series TH2 MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding March 6, 1992.
The Initial Rate Period for shares of Series TH3 MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding _____, 2009.
56
The Initial Rate Period for shares of Series F MuniPreferred shall be the period from and
including the Date of Original Issue thereof to but excluding March 9, 1992.
Section 6. Date for Purposes of Paragraph (yyy) Contained Under the Heading Definitions in this
Statement.
February 29, 1992 for Series M MuniPreferred, Series T MuniPreferred and Series TH1
MuniPreferred; May 31, 1992 for Series W MuniPreferred, Series TH2 MuniPreferred and Series F
MuniPreferred; ___, ___for Series W2 MuniPreferred; and ____, 2009 for Series W3
MuniPreferred and Series TH3 MuniPreferred.
Section 7. Party Named for Purposes of the Definition of Rate Multiple in this Statement.
|
|
|
Party: |
|
Series of MuniPreferred: |
Merrill Lynch, Pierce, Fenner & Smith Incorporated
|
|
Series M |
Smith Barney Shearson Inc.
|
|
Series T |
Merrill Lynch, Pierce, Fenner & Smith Incorporated
|
|
Series W |
|
|
Series W2 |
|
|
Series W3 |
Lehman Brothers, Inc.
|
|
Series TH1 |
Merrill Lynch, Pierce, Fenner & Smith Incorporated
|
|
Series TH2 |
|
|
Series TH3 |
Lehman Brothers, Inc.
|
|
Series F |
Section 8. Additional Definitions.
Not applicable.
Section 9. Dividend Payment Dates.
Except as otherwise provided in paragraph (d) of Section 2 of Part I of this Statement,
dividends shall be payable on shares of:
Series M MuniPreferred on Tuesday, January 7, 1992, and on each Tuesday thereafter;
Series T MuniPreferred on Wednesday, January 8, 1992, and on each Wednesday thereafter;
Series W MuniPreferred on Thursday, March 5, 1992, and on each Thursday thereafter;
Series W2 MuniPreferred on ___, ___, ___, and on each Thursday thereafter;
Series W3 MuniPreferred on ___, ___, 2009, and on each Thursday thereafter;
Series TH1 MuniPreferred on Friday, January 10, 1992, and on each Friday thereafter;
Series TH2 MuniPreferred on Friday, March 6, 1992, and on each Friday thereafter;
57
Series TH3 MuniPreferred on ___, ___, 2009, and on each Friday thereafter;
Series F MuniPreferred on Monday, March 9, 1992, and on each Monday thereafter.
Section 10. Amount for Purposes of Subparagraph (c)(i) of Section 5 of Part I of this Statement.
$___,000,000
Section 11. Redemption Provisions Applicable to Initial Rate Periods.
Not applicable.
Section 12. Applicable Rate for Purposes of Subparagraph(b)(iii) of Section 3 of Part II of this
Statement.
For purpose of subparagraph (b)(iii) of Section 3 of Part II of this Statement, the Applicable
Rate for shares of such series for the next succeeding Rate Period of shares of such series shall
be equal to the lesser of the Kenny Index (if such Rate Period consists of fewer than 183 Rate
Period Days) or the product of (A) (I) the AA Composite Commercial Paper Rate on such Auction
Date for such Rate Period, if such Rate Period consists of fewer than 183 Rate Period Days; (II)
the Treasury Bill Rate on such Auction Date for such Rate Period, if such Rate Period consists of
more than 182 but fewer than 365 Rate Period Days; or (III) the Treasury Note Rate on such Auction
Date for such Rate Period, if such Rate Period is more than 364 Rate Period Days (the rate
described in the foregoing clause (A)(I), (II) or (III), as applicable, being referred to herein as
the Benchmark Rate) and (B) 1 minus the maximum marginal regular Federal individual income tax
rate applicable to ordinary income or the maximum marginal regular Federal corporate income tax
rate applicable to ordinary income, whichever is greater; provided, however, that if the Fund has
notified the Auction Agent of its intent to allocate to shares of such series in such Rate Period
any net capital gains or other income taxable for Federal income tax purposes (Taxable Income),
the Applicable Rate for shares of such series for such Rate Period will be (i) if the Taxable Yield
Rate (as defined below) is greater than the Benchmark Rate, then the Benchmark Rate, or (ii) if the
Taxable Yield Rate is less than or equal to the Benchmark Rate, then the rate equal to the sum of
(x) the lesser of the Kenny Index (if such Rate Period consists of fewer than 183 Rate Period Days)
or the product of the Benchmark Rate multiplied by the factor set forth in the preceding clause (B)
and (y) the product of the maximum marginal regular Federal individual income tax rate applicable
to ordinary income or the maximum marginal regular Federal corporate income tax applicable to
ordinary income, whichever is greater, multiplied by the Taxable Yield Rate. For purposes of the
foregoing, Taxable Yield Rate means the rate determined by (a) dividing the amount of Taxable
Income available for distribution per such share of MuniPreferred by the number of days in the
Dividend Period in respect of which such Taxable Income is contemplated to be distributed, (b)
multiplying the amount determined in (a) above by 365 (in the case of a Dividend Period of 7 Rate
Period Days) or 360 (in the case of any other Dividend Period), and (c) dividing the amount
determined in (b) above by $25,000.
58
APPENDIX B
RATINGS OF INVESTMENTS
Standard & Poors CorporationA brief description of the applicable Standard & Poors
Corporation Ratings Group, a division of The McGraw-Hill Companies (Standard & Poors or S&P),
rating symbols and their meanings (as published by S&P) follows:
A Standard & Poors issue credit rating is a current opinion of the creditworthiness of an
obligor with respect to a specific financial obligation, a specific class of financial obligations,
or a specific financial program (including ratings on medium term note programs and commercial
paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or
other forms of credit enhancement on the obligation and takes into account the currency in which
the obligation is denominated. The issue credit rating is not a recommendation to purchase, sell,
or hold a financial obligation, inasmuch as it does not comment as to market price or suitability
for a particular investor.
Issue credit ratings are based on current information furnished by the obligors or obtained by
Standard & Poors from other sources it considers reliable. Standard & Poors does not perform an
audit in connection with any credit rating and may, on occasion, rely on unaudited financial
information. Credit ratings may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.
Issue credit ratings can be either long-term or short-term. Short-term ratings are generally
assigned to those obligations considered short-term in the relevant market. In the U.S., for
example, that means obligations with an original maturity of no more than 365 daysincluding
commercial paper.
Short-term ratings are also used to indicate the creditworthiness of an obligor with respect
to put features on long-term obligations. The result is a dual rating, in which the short-term
rating addresses the put feature, in addition to the usual long-term rating. Medium-term notes are
assigned long-term ratings.
Long-Term Issue Credit Ratings
Issue credit ratings are based in varying degrees, on the following considerations:
1. Likelihood of payment capacity and willingness of the obligor to meet its financial
commitment on an obligation in accordance with the terms of the obligation;
2. Nature of and provisions of the obligation; and
3. Protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy and other laws
affecting creditors rights.
The issue ratings definitions are expressed in terms of default risk. As such, they pertain
to senior obligations of an entity. Junior obligations are typically rated lower than senior
obligations, to reflect the lower priority in bankruptcy, as noted above. (Such differentiation
applies when an entity has both senior and subordinated obligations, secured and unsecured
obligations, or operating company and holding company obligations.) Accordingly, in the case of
junior debt, the rating may not conform exactly with the category definition.
B-1
AAA
An obligation rated AAA has the highest rating assigned by Standard & Poors. The obligors
capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated AA differs from the highest-rated obligations only in small degree. The
obligors capacity to meet its financial commitment on the obligation is very strong.
A
An obligation rated A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated categories. However, the
obligors capacity to meet its financial commitment on the obligation is still strong.
BBB
An obligation rated BBB exhibits adequate protection parameters. However, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
BB, B, CCC, CC, and C
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C the highest.
While such obligations will likely have some quality and protective characteristics, these may be
outweighed by large uncertainties or major exposures to adverse conditions.
BB
An obligation rated BB is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business, financial, or
economic conditions, which could lead to the obligors inadequate capacity to meet its financial
commitment on the obligation.
B
An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on the obligation. Adverse
business, financial, or economic conditions will likely impair the obligors capacity or
willingness to meet its financial commitment on the obligation.
CCC
An obligation rated CCC is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business, financial, or economic conditions,
the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
CC
An obligation rated CC is currently highly vulnerable to nonpayment.
B-2
C
A Subordinated debt or preferred stock obligation rated C is CURRENTLY HIGHLY VULNERABLE to
nonpayment. The C rating may be used to cover a situation where a bankruptcy petition has been
filed or similar action has been taken, but payments on this obligation are being continued. A C
also will be assigned to a preferred stock issue in arrears on dividends or sinking fund payments,
but that is currently paying.
D
An obligation rated D is in payment default. The D rating category is used when payments
on an obligation are not made on the date due even if the applicable grace period has not expired,
unless Standard & Poors believes that such payments will be made during such grace period. The
D rating also will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
Plus (+) or minus (-). The ratings from AA to CCC may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.
r
This symbol is attached to the ratings of instruments with significant noncredit risks. It
highlights risks to principal or volatility of expected returns which are not addressed in the
credit rating.
N.R.
This indicates that no rating has been requested, that there is insufficient information on
which to base a rating, or that Standard & Poors does not rate a particular obligation as a matter
of policy.
Short-Term Issue Credit Ratings
A-1
A short-term obligation rated A-1 is rated in the highest category by Standard & Poors.
The obligors capacity to meet its financial commitment on the obligation is strong. Within this
category, certain obligations are designated with a plus sign (+). This indicates that the
obligors capacity to meet its financial commitment on these obligations is extremely strong.
A-2
A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher rating categories.
However, the obligors capacity to meet its financial commitment on the obligation is satisfactory.
A-3
A short-term obligation rated A-3 exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitment on the obligation.
B-3
B
A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties which could lead to the obligors
inadequate capacity to meet its financial commitment on the obligation.
C
A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet its financial
commitment on the obligation.
D
A short-term obligation rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable grace period has not
expired, unless Standard & Poors believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a bankruptcy petition or the taking of
a similar action if payments on an obligation are jeopardized.
Moodys Investors Service, Inc.A brief description of the applicable Moodys Investors
Service, Inc. (Moodys) rating symbols and their meanings (as published by Moodys) follows:
Municipal Bonds
Aaa
Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as gilt edged. Interest payments are
protected by a large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such issues.
Aa
Bonds that are rated Aa are judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be other elements
present that make the long-term risks appear somewhat larger than in Aaa securities.
A
Bonds that are rated A possess many favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present that suggest a susceptibility to impairment
sometime in the future.
Baa
Bonds that are rated Baa are considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be characteristically unreliable
over any
B-4
great length of time. Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds that are rated Ba are judged to have speculative elements; their future cannot be
considered as well assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds that are rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa
Bonds that are rated Caa are of poor standing. Such issues may be in default or there may
be present elements of danger with respect to principal or interest.
Ca
Bonds that are rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings.
C
Bonds that are rated C are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real investment standing.
#(hatchmark): Represents issues that are secured by escrowed funds held in cash, held in
trust, invested and reinvested in direct, non-callable, non-prepayable United States Government
obligations or non-callable, non-prepayable obligations unconditionally guaranteed by the U.S.
Government, Resolution Funding Corporation debt obligations.
Con. (...): Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals that begin when facilities are completed, or (d) payments to which some other limiting
condition attaches. The parenthetical rating denotes probable credit stature upon completion of
construction or elimination of the basis of the condition.
(P): When applied to forward delivery bonds, indicates the rating is provisional pending
delivery of the bonds. The rating may be revised prior to delivery if changes occur in the legal
documents or the underlying credit quality of the bonds.
Note: Moodys applies numerical modifiers 1, 2 and 3 in each generic rating classification
from Aa through Caa. The modifier 1 indicates that the issue ranks in the higher end of its
generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
B-5
Short-Term Loans
MIG 1/VMIG 1
This designation denotes superior credit quality. Excellent protection is afforded by
established cash flows, highly reliable liquidity support, or demonstrated broad-based access to
the market for refinancing.
MIG 2/VMIG 2
This designation denotes strong credit quality. Margins of protection are ample, although not
as large as in the preceding group.
MIG 3/VMIG 3
This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be
narrow, and market access for refinancing is likely to be less well-established.
SG
This designation denotes speculative-grade credit quality. Debt instruments in this category
may lack sufficient margins of protection.
Commercial Paper
Issuers (or supporting institutions) rated Prime-1 have a superior ability for repayment of
senior short-term debt obligations. Prime-1 repayment ability will normally be evidenced by the
following characteristics:
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Leading market positions in well-established industries. |
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High rates of return on funds employed. |
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Conservative capitalization structures with moderate reliance on debt and ample
asset protection. |
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Broad margins in earnings coverage of fixed financial charges and high internal cash
generation. |
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Well-established access to a range of financial markets and assured sources of
alternate liquidity. |
Issuers (or supporting institutions) rated Prime-2 have a strong ability for repayment of
senior short-term debt obligations. This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation than is the case for Prime-2 securities. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample alternate liquidity is
maintained.
Issuers (or supporting institutions) rated Prime-3 have an acceptable ability for repayment of
senior short-term debt obligations. The effect of industry characteristics and market composition
may be more pronounced. Variability in earnings and profitability may result in changes in the
level of debt protection measurements and the requirement for relatively high financial leverage.
Adequate alternate liquidity is maintained.
B-6
Issuers rated Not Prime do not fall within any of the Prime rating categories.
Fitch Ratings, Inc.A brief description of the applicable Fitch Ratings, Inc. (Fitch)
ratings symbols and meanings (as published by Fitch) follows:
Long-Term Credit Ratings
Investment Grade
AAA
Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They are
assigned only in case of exceptionally strong capacity for timely payment of financial commitments.
This capacity is highly unlikely to be adversely affected by foreseeable events.
AA
Very high credit quality. AA ratings denote a very low expectation of credit risk. They
indicate very strong capacity for timely payment of financial commitments. This capacity is not
significantly vulnerable to foreseeable events.
A
High credit quality. A ratings denote a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered strong. This capacity may, nevertheless, be
more vulnerable to changes in circumstances or in economic conditions than is the case for higher
ratings.
BBB
Good credit quality. BBB ratings indicate that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is considered adequate, but
adverse changes in circumstances and in economic conditions are more likely to impair this
capacity. This is the lowest investment-grade category.
Speculative Grade
BB
Speculative. BB ratings indicate that there is a possibility of credit risk developing,
particularly as the result of adverse economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be met. Securities rated in this
category are not investment grade.
B
Highly speculative. B ratings indicate that significant credit risk is present, but a
limited margin of safety remains. Financial commitments are currently being met; however, capacity
for continued payment is contingent upon a sustained, favorable business and economic environment.
B-7
CCC, CC, C
High default risk. Default is a real possibility. Capacity for meeting financial commitments
is solely reliant upon sustained, favorable business or economic developments. A CC rating
indicates that default of some kind appears probable. C ratings signal imminent default.
DDD, DD, and D Default
The ratings of obligations in this category are based on their prospects for achieving partial
or full recovery in a reorganization or liquidation of the obligor. While expected recovery values
are highly speculative and cannot be estimated with any precision, the following serve as general
guidelines. DDD obligations have the highest potential for recovery, around 90%100% of
outstanding amounts and accrued interest. DD indicates potential recoveries in the range of
50%90%, and D the lowest recovery potential, i.e., below 50%. Entities rated in this category
have defaulted on some or all of their obligations. Entities rated DDD have the highest prospect
for resumption of performance or continued operation with or without a formal reorganization
process. Entities rated DD and D are generally undergoing a formal reorganization or
liquidation process; those rated DD are likely to satisfy a higher portion of their outstanding
obligations, while entities rated D have a poor prospect for repaying all obligations.
Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most obligations, or up to
three years for U.S. public finance securities, and thus places greater emphasis on the liquidity
necessary to meet financial commitments in a timely manner.
F1
Highest credit quality. Indicates the strongest capacity for timely payment of financial
commitments; may have an added + to denote any exceptionally strong credit feature.
F2
Good credit quality. A satisfactory capacity for timely payment of financial commitments, but
the margin of safety is not as great as in the case of the higher ratings.
F3
Fair credit quality. The capacity for timely payment of financial commitments is adequate;
however, near-term adverse changes could result in a reduction to non-investment grade. B
Speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to
near-term adverse changes in financial and economic conditions.
B
Speculative Minimal capacity for timely payment of financial commitments, plus vulnerability
to near-term adverse changes in financial and economic conditions.
C
High default risk. Default is a real possibility. Capacity for meeting financial commitments
is solely reliant upon a sustained, favorable business and economic environment.
B-8
D
Default. Denotes actual or imminent payment default.
Notes to Long-term and Short-term ratings:
+ or - may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA Long-term rating category, to categories
below CCC, or to Short-term ratings other than F1.
NR indicates that Fitch Ratings does not rate the issuer or issue in question.
Withdrawn: A rating is withdrawn when Fitch Ratings deems the amount of information
available to be inadequate for rating purposes, or when an obligation matures, is called, or
refinanced.
Rating Watch: Ratings are placed on Rating Watch to notify investors that there is a
reasonable probability of a rating change and the likely direction of such change. These are
designated as Positive, indicating a potential upgrade, Negative, for a potential downgrade, or
Evolving, if ratings may be raised, lowered or maintained. Rating Watch is typically resolved
over a relatively short period.
A Rating Outlook indicates the direction a rating is likely to move over a one to two year
period. Outlooks may be positive, stable, or negative. A positive or negative Rating Outlook does
not imply a rating change is inevitable. Similarly, ratings for which outlooks are stable could
be downgraded before an outlook moves to positive or negative if circumstances warrant such an
action. Occasionally, Fitch Ratings may be unable to identify the fundamental trend. In these
cases, the Rating Outlook may be described as evolving.
B-9
APPENDIX C
TAXABLE EQUIVALENT YIELD TABLE
The taxable equivalent yield is the current yield you would need to earn on a taxable
investment in order to equal a stated tax-free yield on a municipal investment. To assist you to
more easily compare municipal investments like the Fund with taxable alternative investments, the
table below presents the approximate taxable equivalent yields for individuals for a range of
hypothetical tax-free yields assuming the stated marginal federal tax rates for 2008 listed below.
This table should not be considered a representation or guarantee of future results.
TAXABLE EQUIVALENT OF TAX-FREE YIELDS*
TAX-FREE YIELDS
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SINGLE- |
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FEDERAL |
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RETURN |
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JOINT-RETURN |
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TAX |
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BRACKET |
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BRACKET |
|
RATE |
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4.00% |
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4.25% |
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4.50% |
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4.75% |
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5.00% |
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5.25% |
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5.50% |
0-$8,025 |
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0-$16,050 |
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10.0 |
% |
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4.44 |
% |
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5.00 |
% |
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5.56 |
% |
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6.11 |
% |
$8,025-$32,550 |
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$16,050-$65,100 |
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15.0 |
% |
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4.71 |
% |
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5.29 |
% |
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5.88 |
% |
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6.47 |
% |
$32,550-$78,850 |
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$65,100-$131,450 |
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25.0 |
% |
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5.33 |
% |
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6.00 |
% |
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6.67 |
% |
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7.33 |
% |
$78,850-$164,550 |
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$131,450-$200,300 |
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28.0 |
% |
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5.56 |
% |
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6.25 |
% |
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6.94 |
% |
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7.64 |
% |
$164,550-$357,700 |
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$200,300-$357,700 |
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33.0 |
% |
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5.97 |
% |
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6.72 |
% |
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7.46 |
% |
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8.21 |
% |
Over $357,700 |
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Over $357,700 |
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35.0 |
% |
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6.15 |
% |
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6.92 |
% |
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7.69 |
% |
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8.46 |
% |
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5.75% |
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6.00% |
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6.25% |
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6.50% |
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6.75% |
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7.00% |
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7.25% |
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7.50% |
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6.67 |
% |
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7.22 |
% |
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7.78 |
% |
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8.33 |
% |
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7.06 |
% |
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7.65 |
% |
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8.24 |
% |
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8.82 |
% |
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8.00 |
% |
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8.67 |
% |
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9.33 |
% |
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10.00 |
% |
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8.33 |
% |
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9.03 |
% |
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9.72 |
% |
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10.42 |
% |
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8.96 |
% |
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9.70 |
% |
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10.45 |
% |
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11.19 |
% |
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9.23 |
% |
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10.00 |
% |
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10.77 |
% |
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11.54 |
% |
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* |
|
Please note that the table does not reflect (i) any federal limitations on the amounts of
allowable itemized deductions, phase-outs of personal or dependent exemption credits or other
allowable credits, (ii) any state or local taxes imposed, or (iii) any alternative minimum
taxes or any taxes other than federal personal income taxes. |
C-1
PART COTHER INFORMATION
Item 15. Indemnification:
Article EIGHTH of the Registrants Articles of Incorporation provides as follows:
EIGHTH: To the maximum extent permitted by the Minnesota Business Corporation Act, as from
time to time amended, the Corporation shall indemnify its currently acting and its former
directors, officers, employees and agents, and those persons who, at the request of the
Corporation, serve or have served another corporation, partnership, joint venture, trust or other
enterprise in one or more such capacities. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which those seeking indemnification may otherwise be
entitled.
Expenses (including attorneys fees) incurred in defending a civil or criminal action, suit or
proceeding (including costs connected with the preparation of a settlement) may be paid by the
Corporation in advance of the final disposition of such action, suit or proceeding, if authorized
by the Board of Directors in the specific case, upon receipt of an undertaking by or on behalf of
the director, officer, employee or agent to repay that amount of the advance which exceeds the
amount which it is ultimately determined that he is entitled to receive from the Corporation by
reason of indemnification as authorized herein; provided, however, that prior to making any such
advance at least one of the following conditions shall have been met: (1) the indemnitee shall
provide a security for his undertaking, (2) the Corporation shall be insured against losses arising
by reason of any lawful advances, or (3) a majority of a quorum of the disinterested, non-party
directors of the Corporation, or an independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
Nothing in these Articles of Incorporation or in the By-Laws shall be deemed to protect or
provide indemnification to any director or officer of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office (disabling conduct), and the Corporation shall not indemnify any of its
officers or directors against any liability to the Corporation or to its security holders unless a
determination shall have been made in the manner provided hereafter that such liability has not
arisen from such officers or directors disabling conduct. A determination that an officer or
director is entitled to indemnification shall have been properly made if it is based upon (1) a
final decision on the merits by a court or other body before whom the proceeding was brought that
the indemnitee was not liable by reason of disabling conduct or, (2) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that the indemnitee was not
liable by reason of disabling conduct, by (a) the vote of a majority of a quorum of directors who
are neither interested persons of the Corporation as defined in the Investment Company Act of
1940 nor parties to the proceeding, or (b) an independent legal counsel in a written opinion.
The directors and officers of the Registrant are covered by Investment Trust Directors and
officers Errors and Omission policies in the aggregate amount of $50,000,000 against liability and
expenses of claims of wrongful acts arising out of their position with the Registrant, except for
matters which involved willful acts, bad faith, gross negligence and willful disregard of duty
(i.e., where the insured did not act in good faith for a purpose he or she reasonably believed to
be in the best interest of Registrant or where he or she shall have had reasonable cause to believe
this conduct was unlawful). The policy has a $500,000 deductible, which does not apply to
individual trustees or officers.
[Section 8 of the Underwriting Agreement provides for each of the parties thereto, including
the Registrant and the Underwriters, to indemnify the others, their trustees, directors, certain of
their officers, trustees, directors and persons who control them against certain liabilities in
connection with the offering described herein, including liabilities under the federal securities
laws.]
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to the directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of
such issue.
Item 16: Exhibits:
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(1)(a)
|
|
Restated Articles of Incorporation of Registrant, dated July 25, 1991.(1) |
|
|
|
(2)(a)
|
|
By-Laws of Registrant.(2) |
|
|
|
(2)(b)
|
|
Amended and Restated By-Laws of
Registrant, dated February 20, 2006.(4) |
|
|
|
(3)
|
|
Not Applicable. |
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|
|
(4)
|
|
Form of Agreement and Plan of Reorganization is filed herein as Appendix
A to Part A of this Registration Statement. |
|
|
|
(5)
|
|
Form of Specimen Certificate of
Shares of the Registrant.(4) |
|
(6)(a)
|
|
Investment Management Agreement
between Registrant and Nuveen Asset Management, dated
November 13, 2007.(4) |
|
|
|
(7)
|
|
Not Applicable. |
|
|
|
(8)
|
|
Not Applicable. |
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(9)
|
|
Amended and Restated Master
Custodian Agreement between Registrant and State Street Bank and
Trust Company, dated February 25, 2005.(4) |
|
|
|
(10)
|
|
Not Applicable. |
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(11)
|
|
Opinion and Consent of Vedder Price
P.C.(4) |
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|
|
(12)
|
|
Form of Opinion and Consent of Vedder Price P.C. supporting tax matters
and consequences.(4) |
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|
|
(13)
|
|
Not Applicable. |
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(14)
|
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Consent of Independent Public
Accountants.(4) |
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|
(15)
|
|
Not Applicable. |
|
|
|
(16)
|
|
Original Powers of Attorney,dated
February 27, 2009.(3) |
|
|
|
(17)(a)
|
|
Form of Proxy.(4) |
|
|
|
(17)(b)
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Terms and Conditions of the Dividend Reinvestment Plan.(2) |
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(1) |
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Incorporated by reference to Pre Effective Amendment No. 2 to
Registrants registration statement on Form N-2 (File No.
333-75987), as filed on April 23, 1999. |
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(2) |
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Incorporated by reference to Registrants registration statement on
Form N-2 (File No. 333-75987), as filed on March 12, 1999. |
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(3) |
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Filed herewith. |
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(4) |
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To be filed by amendment. |
Item 17: Undertakings
(1) |
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Registrant undertakes to suspend the offering of its shares until it amends its prospectus if
(1) subsequent to the effective date of its Registration Statement, the net asset value
declines more than 10 percent from its net asset value as of the effective date of the
Registration Statement, or (2) the net asset value increases to an amount greater than its net
proceeds as stated in the prospectus. |
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(2) |
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Not Applicable. |
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(3) |
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Not Applicable. |
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(4) |
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Not Applicable. |
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(5) |
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The Registrant undertakes that: |
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(1) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of a registration statement
in reliance upon Rule 430A and contained in the form of prospectus filed by the
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Registrant under Rule 497(h) under the Securities Act of 1933 shall be deemed to be part of
the Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering thereof.
(6) |
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Registrant undertakes to send by first class mail or other means designed to ensure equally
prompt delivery, within two business days of receipt of a written or oral request, any
Statement of Additional Information. |
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(7) |
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action, suit or
proceeding (is asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such issue. |
SIGNATURES
As required by the Securities Act of 1933, this registration statement has been signed on behalf of
the registrant, in the City of Chicago, and State of Illinois, on the 16th day of March, 2009.
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NUVEEN INSURED MUNICIPAL
OPPORTUNITY FUND, INC.
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/s/ Kevin J. McCarthy
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Kevin J. McCarthy |
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Vice President and Secretary |
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As required by the Securities Act of 1933, this registration statement has been signed by the
following persons in the capacities and on the date indicated.
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Signature |
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Title |
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Date |
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/s/ Stephen D. Foy
Stephen D. Foy
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Vice President and
Controller
(principal
financial and
accounting officer)
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March 16, 2009 |
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/s/ Gifford R. Zimmerman
Gifford R. Zimmerman
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Chief
Administrative
Officer (principal
executive officer)
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March 16, 2009 |
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Robert P. Bremner*
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Chairman and Trustee |
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John P. Amboian*
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Trustee |
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Jack B. Evans*
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Trustee |
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William C. Hunter*
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Trustee |
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By |
/s/ Kevin J. McCarthy |
David J. Kundert*
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Trustee |
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Kevin J. McCarthy |
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Attorney-in-Fact |
William J. Schneider*
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Trustee |
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March 16, 2009 |
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Judith M. Stockdale*
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Trustee |
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Carole E. Stone*
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Trustee |
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Terence J. Toth*
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Trustee |
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* |
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An original power of attorney authorizing, among others, Kevin J. McCarthy, Larry W. Martin
and Gifford R. Zimmerman to execute this registration statement, and amendments thereto, for
each of the trustees of the Registrant on whose behalf this registration statement is filed,
has been executed and is filed herein as Exhibit 16 and is incorporated by reference herein. |
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EXHIBIT INDEX
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Exhibit |
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Number |
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Exhibit |
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(16) |
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Powers of Attorney for Méssrs.
Amboian, Bremner, Evans, Hunter, Kundert, Schneider and Toth and Mss.
Stockdale and Stone. |