UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14A-11(c) or Section 240.14a-12
NUVEEN REAL ESTATE INCOME FUND (JRS)
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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IMPORTANT NOTICE
TO FUND SHAREHOLDERS
JUNE 21, 2005
Although we recommend that you read the complete Proxy Statement, for your
convenience, we have provided a brief overview of the issues to be voted on.
Q. WHY AM I RECEIVING THIS PROXY STATEMENT?
A. Pursuant to an investment management agreement between your Fund and Nuveen
Asset Management ("NAM"), NAM has served as your Fund's investment adviser
and has been responsible for the overall investment strategy of your Fund.
In addition, for certain Funds, NAM entered into an investment sub-advisory
agreement pursuant to which a sub-adviser was retained to furnish
investment advisory services to the Fund. NAM is a wholly-owned subsidiary
of Nuveen Investments, Inc. ("Nuveen"). Nuveen is a publicly traded company
and, until recently, was a majority-owned subsidiary of The St. Paul
Travelers Companies, Inc. ("St. Paul Travelers").
As part of St. Paul Travelers' previously announced three-part program to
sell its entire equity interest in Nuveen (the "Sale"), St. Paul Travelers
sold 39.3 million shares of Nuveen through a secondary public offering on
April 12, 2005. Nuveen also repurchased $600 million of its shares from St.
Paul Travelers. The repurchase of these shares is being completed through
two steps--a $200 million repurchase that closed on April 12, 2005, and a
$400 million forward purchase (plus interest) that will settle later this
year. Finally, St. Paul Travelers also entered into an agreement with two
other parties to sell approximately 12 million common shares of Nuveen for
settlement later this year. After completion of the Sale, Nuveen will
emerge as a fully independent public company.
Upon completion of the Sale, the investment management agreement between
your Fund and NAM and the sub-advisory agreement between NAM and the
sub-adviser of your Fund may be terminated. In order for NAM and the
sub-advisers to continue to serve as investment adviser and sub-adviser
after the completion of the Sale, the shareholders of your Fund must
approve a new investment management agreement and a new sub-advisory
agreement. The enclosed Proxy Statement gives you additional information on
the proposed new investment management agreement and new sub-advisory
agreement, as well as certain other matters. The Board of Trustees of each
Fund (the "Board," and each Trustee, a "Board Member"), including those
Board Members who are not affiliated with NAM or any sub-adviser,
unanimously recommend that you vote FOR the approval of the new investment
management agreement and new sub-advisory agreement, if applicable, for
your Fund.
Please refer to the Proxy Statement for a detailed explanation of the items
you are being asked to vote on.
Q WHY IS A VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT AGREEMENT AND
SUB-ADVISORY AGREEMENT REQUIRED?
A. The completion of the Sale could be deemed to be an "assignment," as that
term is defined in the Investment Company Act of 1940 ("1940 Act"), of the
investment
management agreement between each Fund and NAM and the sub-advisory
agreement between NAM and your Fund's sub-adviser. As required by the 1940
Act, under its terms, each investment management agreement and sub-advisory
agreement would automatically terminate in the event of its assignment. As
a result, shareholder approval of a new investment management agreement
and, if applicable, a new sub-advisory agreement will permit NAM and each
sub-adviser to continue to serve your Fund.
Q. WHAT WILL HAPPEN IF SHAREHOLDERS DO NOT APPROVE THE NEW INVESTMENT
MANAGEMENT AGREEMENT OR SUB-ADVISORY AGREEMENT?
A. If the new investment management agreement or sub-advisory agreement is not
approved, your Fund's Board will take such actions as it deems to be in the
best interests of your Fund. This is discussed in more detail in the Proxy
Statement.
Q. HOW WILL THE SALE AFFECT ME AS A FUND SHAREHOLDER?
A. Your investment in your Fund will not change as a result of the Sale. You
will still own the same shares in the Fund, and the value of your
investment will not change as a result of the Sale. The new investment
management agreement and sub-advisory agreement, if approved by
shareholders, will still be with NAM and the same sub-adviser and the terms
of the new investment management agreement and sub-advisory agreement are
substantially identical to the terms of the original investment management
agreement and sub-advisory agreement. In addition, the portfolio managers
of your Fund will not change as a result of the new investment management
agreement and sub-advisory agreement.
Q. WILL THE INVESTMENT MANAGEMENT AND SUB-ADVISORY FEE RATES BE THE SAME
UPON THE APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT AND SUB-
ADVISORY AGREEMENT?
A. Yes, the investment management and sub-advisory fee rates will remain the
same.
Q. HOW DO THE BOARD MEMBERS SUGGEST THAT I VOTE IN CONNECTION WITH THE NEW
INVESTMENT MANAGEMENT AGREEMENT AND SUB-ADVISORY AGREEMENT?
A. After careful consideration, the Board of your Fund unanimously recommends
that you vote "FOR" the approval of the new investment management agreement
and sub-advisory agreement.
Q. WILL MY VOTE MAKE A DIFFERENCE?
A. Your vote is needed to ensure that the proposals can be acted upon.
Additionally, your immediate response will help save on the costs of any
future solicitations for these shareholder votes. We encourage all
shareholders to participate in the governance of their Fund.
Q. WHO DO I CALL IF I HAVE QUESTIONS?
A. If you need any assistance, or have any questions regarding the proposals
or how to vote your shares, please call your financial advisor.
Alternatively, you may call Nuveen at (800) 257-8787 weekdays from 8:00
a.m. to 6:00 p.m. Central time.
Q. HOW DO I VOTE MY SHARES?
A. You can vote your shares by completing and signing the enclosed proxy card,
and mailing it in the enclosed postage-paid envelope. Alternatively, you
may vote by telephone by calling the toll-free number on the proxy card or
by computer by going to the Internet address provided on the proxy card and
following the instructions, using your proxy card as a guide.
Q. WILL ANYONE CONTACT ME?
A. You may receive a call to verify that you received your proxy materials, to
answer any questions you may have about the proposals and to encourage you
to vote.
NOTICE OF SPECIAL MEETING 333 West Wacker Drive
OF SHAREHOLDERS Chicago, Illinois
JULY 26, 2005 60606
(800) 257-8787
JUNE 21, 2005
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD)
NUVEEN EQUITY PREMIUM INCOME FUND (JPZ)
NUVEEN EQUITY PREMIUM OPPORTUNITY FUND (JSN)
NUVEEN FLOATING RATE INCOME FUND (JFR)
NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND (JRO)
NUVEEN PREFERRED AND CONVERTIBLE INCOME FUND (JPC)
NUVEEN PREFERRED AND CONVERTIBLE INCOME FUND 2 (JQC)
NUVEEN REAL ESTATE INCOME FUND (JRS)
NUVEEN QUALITY PREFERRED INCOME FUND (JTP)
NUVEEN QUALITY PREFERRED INCOME FUND 2 (JPS)
NUVEEN QUALITY PREFERRED INCOME FUND 3 (JHP)
NUVEEN SENIOR INCOME FUND (NSL)
NUVEEN TAX-ADVANTAGED FLOATING RATE FUND (JFP)
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA)
TO THE SHAREHOLDERS OF THE ABOVE FUNDS:
Notice is hereby given that a Special Meeting of Shareholders (the "Meeting") of
Nuveen Diversified Dividend and Income Fund ("Diversified Dividend"), Nuveen
Equity Premium Income Fund ("Equity Premium"), Nuveen Equity Premium Opportunity
Fund ("Equity Premium Opportunity"), Nuveen Floating Rate Income Fund ("Floating
Rate"), Nuveen Floating Rate Income Opportunity Fund ("Floating Rate Income
Opportunity"), Nuveen Preferred and Convertible Income Fund ("Preferred and
Convertible"), Nuveen Preferred and Convertible Income Fund 2 ("Preferred and
Convertible 2"), Nuveen Real Estate Income Fund ("Real Estate"), Nuveen Quality
Preferred Income Fund ("Quality Preferred"), Nuveen Quality Preferred Income
Fund 2 ("Quality Preferred 2"), Nuveen Quality Preferred Income Fund 3 ("Quality
Preferred 3"), Nuveen Senior Income Fund ("Senior Income"), Nuveen Tax-
Advantaged Floating Rate Fund ("Tax-Advantaged Floating Rate") and Nuveen
Tax-Advantaged Total Return Strategy Fund ("Total Return"), each a Massachusetts
business trust (individually, a "Fund" and collectively, the "Funds"), will be
held (along with the meeting of shareholders of several other Nuveen funds) in
the Assembly Room of The Northern Trust Company, 50 South LaSalle Street,
Chicago, Illinois 60675, on Tuesday, July 26, 2005, at 10:30 a.m., Chicago time,
for the following purposes and to transact such other business, if any, as may
properly come before the Meeting:
MATTERS TO BE VOTED ON BY SHAREHOLDERS:
1. To approve a new investment management agreement between each Fund and Nuveen
Asset Management ("NAM"), each Fund's investment adviser.
2. To approve a new sub-advisory agreement between NAM and each sub-adviser
below:
a. (For shareholders of Preferred and Convertible and Preferred and
Convertible 2 only) to approve a new sub-advisory agreement between NAM
and Froley, Revy Investment Co.;
b. (For shareholders of Equity Premium and Equity Premium Opportunity only)
to approve a new sub-advisory agreement between NAM and Gateway
Investment Advisers, L.P.;
c. (For shareholders of Diversified Dividend and Total Return only) to
approve a new sub-advisory agreement between NAM and NWQ Investment
Management Company, LLC;
d. (For shareholders of Diversified Dividend and Real Estate only) to
approve a new sub-advisory agreement between NAM and Security Capital
Research & Management Incorporated;
e. (For shareholders of Preferred and Convertible, Preferred and
Convertible 2, Quality Preferred, Quality Preferred 2, Quality Preferred
3 and Tax-Advantaged Floating Rate only) to approve a new sub-advisory
agreement between NAM and Spectrum Asset Management, Inc.;
f. (For shareholders of Diversified Dividend, Floating Rate, Floating Rate
Income Opportunity, Preferred and Convertible, Preferred and Convertible
2, Senior Income and Total Return only) to approve a new sub-advisory
agreement between NAM and Symphony Asset Management LLC; and
g. (For shareholders of Diversified Dividend only) to approve a new
sub-advisory agreement between NAM and Wellington Management Company,
LLP.
3. To transact such other business as may properly come before the Meeting.
Shareholders of record at the close of business on May 31, 2005 are entitled to
notice of and to vote at the Meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IN ORDER TO AVOID
DELAY AND ADDITIONAL EXPENSE, AND TO ASSURE THAT YOUR SHARES ARE REPRESENTED,
PLEASE VOTE AS PROMPTLY AS POSSIBLE, REGARDLESS OF WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. YOU MAY VOTE BY MAIL, TELEPHONE OR OVER THE INTERNET. TO
VOTE BY MAIL, PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. TO VOTE BY TELEPHONE, PLEASE
CALL THE TOLL-FREE NUMBER LOCATED ON YOUR PROXY CARD AND FOLLOW THE RECORDED
INSTRUCTIONS, USING YOUR PROXY CARD AS A GUIDE. 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.
Jessica R. Droeger
Vice President and Secretary
JOINT PROXY STATEMENT 333 West Wacker Drive
Chicago, Illinois
60606
(800) 257-8787
JUNE 21, 2005
NUVEEN DIVERSIFIED DIVIDEND AND INCOME FUND (JDD)
NUVEEN EQUITY PREMIUM INCOME FUND (JPZ)
NUVEEN EQUITY PREMIUM OPPORTUNITY FUND (JSN)
NUVEEN FLOATING RATE INCOME FUND (JFR)
NUVEEN FLOATING RATE INCOME OPPORTUNITY FUND (JRO)
NUVEEN PREFERRED AND CONVERTIBLE INCOME FUND (JPC)
NUVEEN PREFERRED AND CONVERTIBLE INCOME FUND 2 (JQC)
NUVEEN REAL ESTATE INCOME FUND (JRS)
NUVEEN QUALITY PREFERRED INCOME FUND (JTP)
NUVEEN QUALITY PREFERRED INCOME FUND 2 (JPS)
NUVEEN QUALITY PREFERRED INCOME FUND 3 (JHP)
NUVEEN SENIOR INCOME FUND (NSL)
NUVEEN TAX-ADVANTAGED FLOATING RATE FUND (JFP)
NUVEEN TAX-ADVANTAGED TOTAL RETURN STRATEGY FUND (JTA)
GENERAL INFORMATION
This Joint Proxy Statement is furnished in connection with the solicitation by
the Board of Trustees (each a "Board" and collectively, the "Boards," and each
Trustee, a "Board Member" and collectively, the "Board Members") of Nuveen
Diversified Dividend and Income Fund ("Diversified Dividend"), Nuveen Equity
Premium Income Fund ("Equity Premium"), Nuveen Equity Premium Opportunity Fund
("Equity Premium Opportunity"), Nuveen Floating Rate Income Fund ("Floating
Rate"), Nuveen Floating Rate Income Opportunity Fund ("Floating Rate Income
Opportunity"), Nuveen Preferred and Convertible Income Fund ("Preferred and
Convertible"), Nuveen Preferred and Convertible Income Fund 2 ("Preferred and
Convertible 2"), Nuveen Real Estate Income Fund ("Real Estate"), Nuveen Quality
Preferred Income Fund ("Quality Preferred"), Nuveen Quality Preferred Income
Fund 2 ("Quality Preferred 2"), Nuveen Quality Preferred Income Fund 3 ("Quality
Preferred 3"), Nuveen Senior Income Fund ("Senior Income"), Nuveen
Tax-Advantaged Floating Rate Fund ("Tax-Advantaged Floating Rate") and Nuveen
Tax-Advantaged Total Return Strategy Fund ("Total Return"), each a Massachusetts
business trust (each, a "Fund" and collectively, the "Funds"), of proxies to be
voted at a Special Meeting of Shareholders to be held (along with the meeting of
shareholders of several other Nuveen funds) in the Assembly Room of The Northern
Trust Company, 50 South LaSalle Street, Chicago, Illinois 60675, on Tuesday,
July 26, 2005, at 10:30 a.m., Chicago time, (for each Fund, a "Meeting" and
collectively, the "Meetings"), and at any and all adjournments thereof.
1
On the matters coming before each Meeting as to which a choice has been
specified by shareholders on the proxy, the shares will be voted accordingly. If
a proxy is returned and no choice is specified, the shares will be voted FOR
approval of the new investment management agreement and FOR the approval of the
new sub-advisory agreement. Shareholders who execute proxies may revoke them at
any time before they are voted by filing with that Fund a written notice of
revocation, by delivering a duly executed proxy bearing a later date or by
attending the Meeting and voting in person.
This Joint Proxy Statement is first being mailed to shareholders on or about
June 21, 2005.
The Board of each Fund has determined that the use of this Joint Proxy Statement
for each Meeting is in the best interest of each Fund and its shareholders in
light of the similar matters being considered and voted on by the shareholders.
2
The following table indicates which shareholders are solicited with respect to
each matter:
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MATTER COMMON SHARES PREFERRED SHARES(1)
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1. To approve a new investment management X X
agreement for the Fund
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2. To approve a new sub-advisory agreement X X
between NAM and each sub-adviser below:
a. (For shareholders of Preferred and X X
Convertible and Preferred and Convertible 2
only) to approve a new sub-advisory
agreement between NAM and Froley, Revy
Investment Co. ("Froley");
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b. (For shareholders of Equity Premium and X N/A
Equity Premium Opportunity only) to approve
a new sub-advisory agreement between NAM
and Gateway Investment Advisers, L.P.
("Gateway");
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c. (For shareholders of Diversified Dividend X X
and Total Return only) to approve a new
sub-advisory agreement between NAM and NWQ
Investment Management Company, LLC ("NWQ");
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d. (For shareholders of Diversified Dividend X X
and Real Estate only) to approve a new
sub-advisory agreement between NAM and
Security Capital Research & Management
Incorporated ("SCRM");
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e. (For shareholders of Preferred and X X
Convertible, Preferred and Convertible 2,
Quality Preferred, Quality Preferred 2,
Quality Preferred 3 and Tax-Advantaged
Floating Rate only) to approve a new
sub-advisory agreement between NAM and
Spectrum Asset Management, Inc.
("Spectrum");
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f. (For shareholders of Diversified Dividend, X X
Floating Rate, Floating Rate Income
Opportunity, Preferred and Convertible,
Preferred and Convertible 2, Senior Income
and Total Return only) to approve a new
sub-advisory agreement between NAM and
Symphony Asset Management LLC ("Symphony");
and
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g. (For shareholders of Diversified Dividend X X
only) to approve a new sub-advisory
agreement between NAM and Wellington
Management Company, LLP ("Wellington
Management")
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(1) Taxable Auctioned Preferred and FundPreferred shares are referred to as
"Preferred Shares."
A quorum of shareholders is required to take action at each Meeting. A majority
of the shares entitled to vote at each Meeting, represented in person or by
proxy, will constitute a quorum of shareholders at that Meeting. Votes cast by
proxy or in person at each Meeting will be tabulated by the inspectors of
election appointed for that Meeting. The inspectors of
3
election will determine whether or not a quorum is present at the Meeting. The
inspectors of election will treat abstentions and "broker non-votes" (i.e.,
shares held by brokers or nominees, typically in "street name," as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power on a particular matter) as present for purposes of determining a
quorum.
For purposes of determining the approval of the new investment management
agreement and sub-advisory agreement, abstentions and broker non-votes will be
treated as shares voted against the proposal. The details of the proposals to be
voted on by the shareholders of each Fund and the vote required for approval of
the proposals are set forth under the description of the proposals below.
Preferred 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 Meeting, or, if adjourned, one business day before the
day to which the Meeting is adjourned, and that would otherwise be treated as
"broker non-votes" may, pursuant to Rule 452 of the New York Stock Exchange, be
voted by the broker on the proposal in the same proportion as the votes cast by
all Preferred shareholders as a class who have voted on the proposal or in the
same proportion as the votes cast by all Preferred shareholders of the Fund who
have voted on that item. Rule 452 permits proportionate voting of Preferred
Shares with respect to a particular item if, among other things, (i) a minimum
of 30% of the Preferred Shares or shares of a series of Preferred Shares
outstanding has been voted by the holders of such shares with respect to such
item and (ii) less than 10% of the Preferred Shares or shares of a series of
Preferred 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.
4
Those persons who were shareholders of record at the close of business on May
31, 2005 will be entitled to one vote for each share held. As of May 31, 2005,
the shares of the Funds were issued and outstanding as follows:
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FUND TICKER SYMBOL* COMMON SHARES PREFERRED SHARES
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Diversified Dividend JDD 20,145,123 Series T 2,400
Series W 2,400
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Equity Premium JPZ 37,880,726 N/A
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Equity Premium Opportunity JSN 64,783,744 N/A
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Floating Rate JFR 47,286,920 Series M 4,000
Series T 4,000
Series W 4,000
Series F 4,000
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Floating Rate Income JRO 28,397,051 Series M 3,200
Opportunity
Series TH 3,200
Series F 3,200
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Preferred and Convertible JPC 100,123,177 Series M 4,720
Series T 4,720
Series W 4,720
Series TH 4,720
Series F 4,720
Series F2 4,720
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Preferred and Convertible 2 JQC 141,007,000 Series M 3,860
Series M2 3,860
Series T 3,860
Series T2 3,860
Series W 3,860
Series W2 3,860
Series TH 3,860
Series TH2 3,860
Series F 3,860
Series F2 3,860
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Real Estate JRS 28,136,413 Series M 1,720
Series T 1,720
Series W 1,720
Series F 1,720
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Quality Preferred JTP 64,462,104 Series M 3,520
Series T 3,520
Series W 3,520
Series TH 3,520
Series F 3,520
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Quality Preferred 2 JPS 119,541,842 Series M 4,800
Series T 4,800
Series T2 4,000
Series W 4,800
Series TH 4,800
Series TH2 4,000
Series F 4,800
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5
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FUND TICKER SYMBOL* COMMON SHARES PREFERRED SHARES
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Quality Preferred 3 JHP 23,642,721 Series M 3,320
Series TH 3,320
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Senior Income NSL 29,798,480 Series TH 1,840
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Tax-Advantaged Floating JFP 13,842,000 Series TH 3,120
Rate
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Total Return JTA 13,855,240 Series W 1,800
Series F 3,120
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* The Common Shares of all of the Funds are listed on the New York Stock
Exchange, except JRS, which is listed on the American Stock Exchange.
The number of shares of each Fund beneficially owned by each Board Member and by
the Board Members and officers of the Funds as a group as of December 31, 2004
is set forth in Appendix A. On December 31, 2004, Board Members and executive
officers as a group beneficially owned 1,196,807 shares of all funds managed by
Nuveen Asset Management ("NAM" or the "Adviser") (includes shares held by Board
Members through the Deferred Compensation Plan for Independent Board Members and
by executive officers in Nuveen's 401(k)/profit sharing plan). Each Board
Member's individual beneficial shareholdings of each Fund constituted less than
1% of the outstanding shares of each Fund. As of May 31, 2005, the Board Members
and executive officers as a group beneficially owned less than 1% of the
outstanding Common Shares of each Fund. As of May 31, 2005, no shareholder
beneficially owned more than 5% of any class of shares of any Fund.
1. APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENTS
BACKGROUND
Under an investment management agreement between the Adviser and each Fund
(each, an "Original Investment Management Agreement" and collectively, the
"Original Investment Management Agreements"), NAM has served as each Fund's
investment adviser and has been responsible for each Fund's overall investment
strategy and its implementation. The date of each Fund's Original Investment
Management Agreement and the date on which it was last approved by shareholders
and approved for continuance by the Board is provided in Appendix B. NAM is a
wholly-owned subsidiary of Nuveen Investments, Inc. ("Nuveen"). Nuveen is a
publicly traded company and, until recently, was a majority-owned subsidiary of
The St. Paul Travelers Companies, Inc. ("St. Paul Travelers"), 385 Washington
Street, St. Paul, Minnesota 55102. St. Paul Travelers is a publicly-traded
company that is principally engaged in providing property-liability insurance
through subsidiaries.
On March 25, 2005, Nuveen and St. Paul Travelers announced that St. Paul
Travelers planned to implement a three-part program to sell its equity interest
in Nuveen (the "Sale"). As part of St. Paul Travelers' previously announced
three-part divestiture program, St. Paul Travelers sold 39.3 million shares of
Nuveen's approximately 94 million outstanding common shares through a secondary
public offering on April 12, 2005. Nuveen also repurchased $600 million of its
common shares from St. Paul Travelers at a price of $32.98 per share, or
approximately 18.2 million shares. The repurchase of these shares is being
completed through two steps--a $200 million repurchase that closed on April 12,
2005, and a $400 million forward purchase (plus interest) that will settle later
this year. St. Paul Travelers also entered into an agreement with two other
parties to sell approximately 12 million common shares of Nuveen for settlement
later this year. Upon the closing of the secondary offering and the initial
6
repurchase by Nuveen as well as the closing for the forward sale transactions
later this year, Nuveen will emerge as a fully independent public company.
Each Original Investment Management Agreement, as required by Section 15 of the
Investment Company Act of 1940, as amended (the "1940 Act"), provides for its
automatic termination in the event of its "assignment" (as defined in the 1940
Act). Any change in control of the Adviser is deemed to be an assignment. The
consummation of the Sale may be deemed a change in control of the Adviser and
therefore cause the automatic termination of each Original Investment Management
Agreement, as required by the 1940 Act.
In anticipation of the Sale, each Board met in person at a joint meeting of each
Fund's Board on May 10-12, 2005 for purposes of, among other things, considering
whether it would be in the best interests of each Fund and its shareholders to
approve a new investment management agreement between the Fund and NAM (each, a
"New Investment Management Agreement" and collectively, the "New Investment
Management Agreements").
The 1940 Act requires that each New Investment Management Agreement be approved
by the Fund's shareholders in order for it to become effective. At the Board
meeting, and for the reasons discussed below (see "Board Considerations in
Approving New Investment Management Agreements and New Sub-Advisory Agreements"
after Proposal 2), each Board, including a majority of the Board Members who are
not parties to the Original Investment Management Agreements, New Investment
Management Agreements or any sub-advisory agreement entered into by the Adviser
with respect to any Fund or who are not "interested persons" of the Funds or the
Adviser as defined in the 1940 Act (the "Independent Board Members"),
unanimously approved the New Investment Management Agreement and unanimously
recommended its approval by shareholders in order to assure continuity of
investment advisory services to the Fund after the Sale. In the event
shareholders of a Fund do not approve the New Investment Management Agreement,
the Board will take such action as it deems to be in the best interests of the
Fund and its shareholders. The form of the New Investment Management Agreement
is attached hereto as Appendix C.
COMPARISON OF ORIGINAL INVESTMENT MANAGEMENT AGREEMENT AND NEW INVESTMENT
MANAGEMENT AGREEMENT
The terms of each New Investment Management Agreement, including fees payable to
the Adviser by the Fund thereunder, are substantially identical to those of the
Original Investment Management Agreement, except for the date of effectiveness.
There is no change in the fee rate payable by each Fund to the Adviser. If
approved by shareholders of a Fund, the New Investment Management Agreement for
the Fund will expire on August 1, 2006, unless continued. Each New Investment
Management Agreement will continue in effect from year to year thereafter if
such continuance is approved for the Fund at least annually in the manner
required by the 1940 Act and the rules and regulations thereunder. Below is a
comparison of certain terms of the Original Investment Management Agreement to
the terms of the New Investment Management Agreement.
INVESTMENT MANAGEMENT SERVICES. The investment management services to be
provided by the Adviser to each Fund under the New Investment Management
Agreements will be identical to those services currently provided by the Adviser
to each Fund under the Original Investment Management Agreements. Both the
Original Investment Management Agreements and New Investment Management
Agreements provide that the Adviser shall manage
7
the investment and reinvestment of the Fund's assets in accordance with the
Fund's investment objective and policies and limitations and administer the
Fund's affairs to the extent requested by and subject to the supervision of the
Fund's Board. In addition, the investment management services will be provided
by the same Adviser personnel under the New Investment Management Agreements as
under the Original Investment Management Agreements. The Adviser does not
anticipate that the Sale will have any adverse effect on the performance of its
obligations under the New Investment Management Agreements.
FEES. Under each Original Investment Management Agreement and New Investment
Management Agreement, the Fund pays to the Adviser an investment management fee
that consists of two components--a fund-level component, based only on the
amount of assets within each individual Fund, and a complex-level component,
based on the aggregate managed assets (which includes assets attributable to all
types of leverage used in leveraged funds) of all Nuveen-branded closed-end and
open-end registered investment companies organized in the United States. The
investment management fee paid by each Fund equals the sum of the fund-level
component and complex-level component.
The fee schedules for the fund-level component and complex-level component to be
paid to the Adviser under the New Investment Management Agreements are identical
to the fund-level component and complex-level component paid to the Adviser
under the Original Investment Management Agreements. The annual fund-level
component for each Fund under the Original Investment Management Agreements and
the New Investment Management Agreements, the fees paid by each Fund to the
Adviser during each Fund's last fiscal year and the Fund's net assets as of May
1, 2005 are set forth in Appendix D to this Proxy Statement. The fee schedule
for the complex-level component is the same for each Fund under both the
Original Investment Management Agreements and New Investment Management
Agreements and is also set forth in Appendix D.
PAYMENT OF EXPENSES. Under each Original Investment Management Agreement and
each New Investment Management Agreement, the Adviser shall furnish office
facilities and equipment and clerical, bookkeeping and administrative services
(other than such services, if any, provided by the Fund's transfer agent) for
the Fund.
LIMITATION ON LIABILITY. The Original Investment Management Agreements and New
Investment Management Agreements provide that the Adviser will not be liable for
any loss sustained by reason of the purchase, sale or retention of any security,
whether or not such purchase, sale or retention shall have been based upon the
investigation and research made by any other individual, firm or corporation, if
such recommendation shall have been selected with due care and in good faith,
except loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Adviser in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
Agreement.
CONTINUANCE. The Original Investment Management Agreement of each Fund
originally was in effect for an initial term and could be continued thereafter
for successive one-year periods if such continuance was specifically approved at
least annually in the manner required by the 1940 Act. If the shareholders of a
Fund approve the New Investment Management Agreement for that Fund, the New
Investment Management Agreement will expire on August 1, 2006, unless continued.
The New Investment Management Agreement may be continued for successive one-year
periods if approved at least annually in the manner required by the 1940 Act.
8
TERMINATION. The Original Investment Management Agreement and New Investment
Management Agreement for each Fund provide that the Agreement may be terminated
at any time without the payment of any penalty by the Fund or the Adviser on
sixty (60) days' written notice to the other party. A Fund may effect
termination by action of the Board or with respect to any Fund by vote of a
majority of the outstanding voting securities of the Fund, accompanied by
appropriate notice.
INFORMATION ABOUT THE ADVISER
NAM, a registered investment adviser, is a wholly-owned subsidiary of Nuveen.
Founded in 1898, Nuveen and its affiliates had approximately $119 billion in
assets under management as of March 31, 2005. Nuveen is a publicly traded
company and is listed on the New York Stock Exchange and trades under the symbol
"JNC."
The principal occupation of the officers and directors of NAM is shown in
Appendix E. The business address of NAM, Nuveen and each principal executive
officer and director of NAM is 333 West Wacker Drive, Chicago, Illinois 60606.
Board Member Schwertfeger sold 285,950 shares of Class A Stock of Nuveen on the
New York Stock Exchange since August 1, 2003. Mr. Schwertfeger received
$8,224,821 in exchange for his shares of Nuveen sold.
SHAREHOLDER APPROVAL
To become effective with respect to a particular Fund, the New Investment
Management Agreement must be approved by a vote of a majority of the outstanding
voting securities of the Fund, with the Common and Preferred shareholders voting
together as a single class. The "vote of a majority of the outstanding voting
securities" is defined in the 1940 Act as the lesser of the vote of (i) 67% or
more of the shares of the Fund entitled to vote thereon present at the meeting
if the holders of more than 50% of such outstanding shares are present in person
or represented by proxy; or (ii) more than 50% of such outstanding shares of the
Fund entitled to vote thereon. Each New Investment Management Agreement was
approved by the Board of the respective Fund on behalf of the Funds after
consideration of all factors which it determined to be relevant to its
deliberations, including those discussed below. The Board of each Fund also
determined to submit the Fund's New Investment Management Agreement for
consideration by the shareholders of the Fund.
THE BOARD OF EACH FUND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE
FOR APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT.
2. APPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS
BACKGROUND
NAM entered into investment sub-advisory agreements (each, an "Original
Sub-Advisory Agreement" and collectively, the "Original Sub-Advisory
Agreements") with various
9
sub-advisers (each, a "Sub-Adviser" and collectively, the "Sub-Advisers") for
each Fund as set forth below:
-------------------------------------------------------------------------------------
FUND SUB-ADVISER
-------------------------------------------------------------------------------------
Diversified Dividend NWQ(1), SCRM(2), Symphony(3) and Wellington
Management(4)
Equity Premium Gateway(5)
Equity Premium Opportunity Gateway
Floating Rate Symphony
Floating Rate Income Opportunity Symphony
Preferred and Convertible Froley(6), Spectrum(7) and Symphony(3)
Preferred and Convertible 2 Froley(6), Spectrum(7) and Symphony(3)
Real Estate SCRM
Quality Preferred Spectrum
Quality Preferred 2 Spectrum
Quality Preferred 3 Spectrum
Senior Income Symphony
Tax-Advantaged Floating Rate Spectrum
Total Return NWQ(1) and Symphony(3)
-------------------------------------------------------------------------------------
(1) NWQ Investment Management Company, LLC ("NWQ") is the sub-adviser only with
respect to the Fund's dividend paying equity securities.
(2) Security Capital Research & Management Incorporated ("SCRM") is the
sub-adviser only with respect to the Fund's REIT preferred and common stock
and convertible securities investments.
(3) Symphony Asset Management LLC ("Symphony") is the sub-adviser only with
respect to the Fund's senior loans and other debt instruments.
(4) Wellington Management Company, LLP ("Wellington Management") is the
sub-adviser only with respect to the Fund's emerging markets and sovereign
debt.
(5) Gateway Investment Advisers, L.P. ("Gateway")
(6) Froley, Revy Investment Co. ("Froley") is the sub-adviser only with respect
to the Fund's convertible securities.
(7) Spectrum Asset Management LLC ("Spectrum") is the sub-adviser only with
respect to the Fund's preferred securities.
The date of each Original Sub-Advisory Agreement and the date it was last
approved by shareholders and approved for continuance by the Board is provided
in Appendix F.
As with the Original Investment Management Agreements, each Original
Sub-Advisory Agreement, as required by Section 15 of the 1940 Act, provides for
its automatic termination in the event of its assignment. A change in control of
the investment adviser or sub-adviser is deemed to be an assignment. The
completion of the Sale may be deemed a change in control of NAM and therefore
may be deemed an assignment of each Original Sub-Advisory Agreement resulting in
its automatic termination, as required by the 1940 Act. In addition, for NWQ and
Symphony, which are wholly-owned by Nuveen, the completion of the Sale may be
deemed a change in control of NWQ and Symphony and therefore may be deemed an
assignment of each Original Sub-Advisory Agreement resulting in its automatic
termination, as required by the 1940 Act.
In anticipation of the Sale, the Board of each Fund met in person on May 10-12,
2005 for purposes of considering whether it would be in the best interests of
each Fund and its shareholders to approve a new sub-advisory agreement between
NAM and the respective Sub-Adviser (each a "New Sub-Advisory Agreement" and
collectively, the "New Sub-Advisory
10
Agreements"). At the Board meeting, and for the reasons discussed below (see
"Board Considerations in Approving New Investment Management Agreements and New
Sub-Advisory Agreements"), the Board of each Fund, including a majority of the
Independent Board Members, unanimously determined that the Fund's New
Sub-Advisory Agreement was in the best interests of the Fund and its
shareholders and approved the Fund entering into the New Sub-Advisory Agreement,
subject to the consummation of the Sale and approval by shareholders.
The 1940 Act requires that each New Sub-Advisory Agreement be approved by that
Fund's shareholders in order for it to become effective. The Board of each Fund
unanimously recommends that shareholders approve the New Sub-Advisory Agreement.
In the event shareholders of a Fund do not approve the New Sub-Advisory
Agreement, the Board will take such action as it deems to be in the best
interests of the Fund and its shareholders. The form of the New Sub-Advisory
Agreement is attached hereto as Appendix G.
COMPARISON OF ORIGINAL SUB-ADVISORY AGREEMENT AND NEW SUB-ADVISORY AGREEMENT
The terms of each New Sub-Advisory Agreement, including fees payable to the
Sub-Adviser by NAM thereunder, are substantially identical to those of the
Original Sub-Advisory Agreement, except for the date of effectiveness. There is
no change in the fee rate payable by NAM to the Sub-Adviser. If approved by
shareholders of a Fund, the New Sub-Advisory Agreement for the Fund will expire
on August 1, 2006, unless continued. Each New Sub-Advisory Agreement will
continue in effect from year to year thereafter if such continuance is approved
for the Fund at least annually in the manner required by the 1940 Act and the
rules and regulations thereunder. Below is a comparison of certain terms of the
Original Sub-Advisory Agreements to the terms of the New Sub-Advisory
Agreements.
ADVISORY SERVICES. The advisory services to be provided by the Sub-Adviser to
each Fund under the New Sub-Advisory Agreements will be identical to those
advisory services currently provided by the Sub-Adviser to each Fund under the
Original Sub-Advisory Agreements. Both the Original Sub-Advisory Agreements and
New Sub-Advisory Agreements provide that the Sub-Adviser will furnish an
investment program in respect of, make investment decisions for and place all
orders for the purchase and sale of securities for the portion of the Fund's
investment portfolio allocated by the Adviser to the Sub-Adviser, all on behalf
of the Fund and subject to supervision of the Fund's Board and the Adviser. In
performing its duties under both the Original Sub-Advisory Agreements and the
New Sub-Advisory Agreements, the Sub-Adviser will monitor the Fund's investments
and will comply with the provisions of the Fund's Declaration of Trust and
By-Laws and the stated investment objectives, policies and restrictions of the
Fund. It is not anticipated that the Sale will have any adverse effect on the
performance of a Sub-Adviser's obligations under the New Sub-Advisory
Agreements.
BROKERAGE. Both the Original Sub-Advisory Agreements and New Sub-Advisory
Agreements authorize the Sub-Adviser to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Funds, subject
to its obligation to obtain best execution under the circumstances, which may
take account of the overall quality of brokerage and research services provided
to the Sub-Adviser.
Preferred and Convertible, Preferred and Convertible 2, Quality Preferred,
Quality Preferred 2 and Quality Preferred 3 paid affiliated brokerage
commissions within the last fiscal year to
11
Spectrum, which is also the Sub-Adviser to each Fund. The affiliated brokerage
commission paid by each Fund is shown in Appendix H.
FEES. Under both the Original Sub-Advisory Agreements and New Sub-Advisory
Agreements, the Adviser pays the Sub-Adviser a portfolio management fee out of
the investment management fee it receives from the Fund. The rate of the
portfolio management fees payable by the Adviser to the Sub-Adviser under the
New Sub-Advisory Agreements is identical to the rate of the fees paid under the
Original Sub-Advisory Agreements. The annual rate of portfolio management fees
payable to the Sub-Adviser under the Original Sub-Advisory Agreements and the
New Sub-Advisory Agreements and the fees paid by the Adviser to the Sub-Adviser
with respect to each Fund during each Fund's last fiscal year is set forth in
Appendix I to this Proxy Statement. Appendix I also includes the advisory fee
rates and net assets of Funds not included in this Proxy Statement advised by
each Sub-Adviser with similar investment objectives as the Funds the Sub-Adviser
sub-advises.
PAYMENT OF EXPENSES. Under each Original Sub-Advisory Agreement and New
Sub-Advisory Agreement, the Sub-Adviser agrees to pay all expenses it incurs in
connection with its activities under the Agreement other than the cost of
securities (including brokerage commissions) purchased for the Fund.
LIMITATION ON LIABILITY. The Original Sub-Advisory Agreements and New
Sub-Advisory Agreements provide that the Sub-Adviser will not be liable for, and
the Adviser will not take any action against the Sub-Adviser to hold the
Sub-Adviser liable for, any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of the Sub-Adviser's
duties under the Agreement, except for a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser in the
performance of duties under the Agreement, or by reason of its reckless
disregard of its obligations and duties under the Agreement.
CONTINUANCE. The Original Sub-Advisory Agreement of each Fund originally was in
effect for an initial term and could be continued thereafter for successive
one-year periods if such continuance was specifically approved at least annually
in the manner required by the 1940 Act. If the shareholders of a Fund approve
the New Sub-Advisory Agreement for that Fund, the New Sub-Advisory Agreement
will expire on August 1, 2006, unless continued. Thereafter, the New
Sub-Advisory Agreement may be continued for successive one-year periods if
approved at least annually in the manner required by the 1940 Act.
TERMINATION. The Original Sub-Advisory Agreement and New Sub-Advisory Agreement
for each Fund provide that the Agreement may be terminated at any time without
the payment of any penalty by NAM on sixty (60) days' written notice to the
Sub-Adviser. The Original Sub-Advisory Agreement and New Sub-Advisory Agreement
may also be terminated by a Fund with respect to that Fund by action of the
Fund's Board or by a vote of a majority of the outstanding voting securities of
that Fund, accompanied by 60 days' written notice.
The Original Sub-Advisory Agreement and New Sub-Advisory Agreement for each Fund
is also terminable with respect to that Fund at any time without the payment of
any penalty, by the Adviser, the Board or by vote of a majority of the
outstanding voting securities of that Fund in the event that it is established
by a court of competent jurisdiction that the Sub-Adviser or any of its officers
or directors has taken any action that results in a breach of the
representations of the Sub-Adviser set forth in the Agreement.
12
INFORMATION ABOUT SUB-ADVISERS
FROLEY. Froley manages the investment portfolios of Preferred and Convertible
and Preferred and Convertible 2. Froley specializes in the management of
convertible securities. Froley, a registered investment adviser, commenced
operations in 1975. As of April 30, 2005, Froley managed over $3.77 billion in
assets. Froley is an independently managed wholly-owned subsidiary of First
Republic Bank, which is a publicly-traded commercial bank and wealth management
firm. The principal occupation of the officers and directors of Froley is shown
in Appendix J. The business address of Froley and each officer and director of
Froley is 10900 Wilshire Boulevard, Los Angeles, California 90024.
GATEWAY. Gateway manages the investment portfolios of Equity Premium and Equity
Premium Opportunity. Gateway specializes in the management of index option-based
strategies for managing risk in equity portfolios. Gateway is the investment
adviser or sub-adviser to two mutual funds that invest in integrated equity
index option strategies. Gateway also manages index option-based strategies for,
employee benefit plans, high net worth individuals, endowments, foundations and
other institutions. Gateway, a registered investment adviser, and its
predecessor commenced operations in 1977. Gateway is a limited partnership and
its majority-owner and general partner is Gateway Investment Advisers, Inc. As
of April 30, 2005, Gateway managed over $4.9 billion in assets. The principal
occupation of the officers and directors of Gateway is shown in Appendix J. The
business address of Gateway and each officer and director of Gateway is Rookwood
Tower, 3805 Edwards Road, Suite 600, Cincinnati, Ohio 45209.
NWQ. NWQ manages the investment portfolios of Diversified Dividend and Total
Return. Nuveen purchased NWQ on August 1, 2002. NWQ is organized as a
member-managed limited liability company, and its sole managing member is
Nuveen. NWQ has provided investment management services to institutions and high
net worth individuals since 1982. As of March 31, 2005, NWQ managed
approximately $32 billion in assets. The principal occupation of the officers
and directors of NWQ is shown in Appendix J. The business address of NWQ and
each officer and director of NWQ is 2409 Century Park East, 4th Floor, Los
Angeles, California 90067.
SCRM. SCRM manages the investment portfolios of Diversified Dividend and Real
Estate. As of July 1, 2004, SCRM is an indirect wholly-owned subsidiary of
JPMorgan Chase. As of March 31, 2005, SCRM managed over $5.2 billion in assets.
The principal occupation of the officers and directors of SCRM is shown in
Appendix J. The business address of SCRM and each officer and director of SCRM
is 10 South Dearborn, Suite 1400, Chicago, Illinois 60603.
SPECTRUM. Spectrum manages the investment portfolios of Preferred and
Convertible, Preferred and Convertible 2, Quality Preferred, Quality Preferred
2, Quality Preferred 3, and Tax-Advantaged Floating Rate. Spectrum specializes
in the management of diversified preferred security portfolios for institutional
investors, including Fortune 500 companies, pension funds, insurance companies
and foundations. Spectrum, a registered investment adviser, commenced operations
in 1987. Spectrum is an independently managed wholly-owned subsidiary of
Principal Global Investors, LLC, which is part of Principal Financial Group
Inc., a publicly traded, diversified, insurance and financial services company.
As of May 31, 2005, Spectrum managed over $13 billion in assets. The principal
occupation of the officers
13
and directors of Spectrum is shown in Appendix J. The business address of
Spectrum and each officer and director of Spectrum is 2 High Ridge Park,
Stamford, Connecticut 06905.
SYMPHONY. Symphony manages the investment portfolios of Diversified Dividend,
Floating Rate, Floating Rate Income Opportunity, Preferred and Convertible,
Preferred and Convertible 2, Senior Income, and Total Return. Symphony
specializes in the management of market neutral equity and debt strategies and
senior loan and other debt portfolios. Symphony, a registered investment
adviser, commenced operations in 1994. Symphony is an indirect wholly-owned
subsidiary of Nuveen. As of March 31, 2005, Symphony managed over $5.6 billion
in assets. The principal occupation of the officers and directors of Symphony is
shown in Appendix J. The business address of Symphony and each officer and
director of Symphony is 555 California Street, San Francisco, California 94104.
WELLINGTON MANAGEMENT. Wellington Management manages the investment portfolio of
Diversified Dividend. Wellington Management provides services to investment
companies, employee benefit plans, endowments, foundations and other
institutions. Wellington Management manages assets for clients using a broad
range of equity and fixed-income approaches. Wellington Management, a registered
investment adviser, and its predecessor organizations commenced operations in
1928. Wellington Management is a Massachusetts limited liability partnership
owned by its 87 partners, all of whom are active in the business. As of April
30, 2005, Wellington Management managed over $468 billion in assets. A listing
of the partners of Wellington Management is shown in Appendix J. The business
address of Wellington and each partner of Wellington Management is 75 State
Street, Boston, Massachusetts 02109.
SHAREHOLDER APPROVAL
To become effective, each New Sub-Advisory Agreement must be approved by a vote
of a majority of the outstanding voting securities of the Fund, with the Common
and Preferred shareholders voting together as a single class. The "vote of a
majority of the outstanding voting securities" is defined in the 1940 Act as the
lesser of the vote of (i) 67% or more of the shares of the Fund entitled to vote
thereon present at the meeting if the holders of more than 50% of such
outstanding shares are present in person or represented by proxy; or (ii) more
than 50% of such outstanding shares of the Fund entitled to vote thereon. Each
New Sub-Advisory Agreement was approved by the Board after consideration of all
factors which it determined to be relevant to its deliberations, including those
discussed below. The Board also determined to submit the New Sub-Advisory
Agreement for consideration by the shareholders of the Fund.
THE BOARD OF EACH SUB-ADVISED FUND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF
THE FUND VOTE FOR APPROVAL OF THE FUND'S NEW SUB-ADVISORY AGREEMENT.
BOARD CONSIDERATIONS IN APPROVING NEW INVESTMENT MANAGEMENT AGREEMENTS AND NEW
SUB-ADVISORY AGREEMENTS
At a meeting held on May 10-12, 2005, the Board of each Fund, including the
Independent Board Members, unanimously approved the New Investment Management
Agreement between each Fund and NAM and the New Sub-Advisory Agreement between
NAM and a Fund's respective sub-adviser (NAM and the Sub-Advisers are each, a
"Fund Adviser").
14
To assist the Board in its evaluation of an advisory contract with a Fund
Adviser, the Independent Board Members received a report in adequate time in
advance of their meeting which outlined, among other things, the services
provided by the Fund Adviser; the organization of the Fund Adviser, including
the responsibilities of various departments and key personnel; the Fund's past
performance as well as the Fund's performance compared to funds of similar
investment objectives compiled by an independent third party (a "Peer Group") as
described below and if available, with recognized or, in certain cases,
customized benchmarks; the profitability of the Fund Adviser and certain
industry profitability analyses for advisers to unaffiliated investment
companies; the expenses of the Fund Adviser in providing the various services;
the advisory fees of the Fund Adviser, including comparisons of such fees with
the management fees of comparable funds in its Peer Group as well as comparisons
of the Fund Adviser's management fees with the fees the Fund Adviser assesses to
other types of investment products or accounts, if any; the soft dollar
practices of the Fund Adviser; and the expenses of each Fund, including
comparisons of the Fund's expense ratios (after any fee waivers) with the
expense ratios of its Peer Group. This information supplements that received by
the Board throughout the year regarding Fund performance, expense ratios,
portfolio composition, trade execution and sales activity.
In addition to the foregoing materials, independent legal counsel to the
Independent Board Members provided, in advance of the meeting, a legal
memorandum outlining, among other things, the duties of the Board Members under
the 1940 Act as well as the general principles of relevant state law in
reviewing and approving advisory contracts; the requirements of the 1940 Act in
such matters; an adviser's fiduciary duty with respect to advisory agreements
and compensation; the standards used by courts in determining whether investment
company boards of directors have fulfilled their duties and factors to be
considered by the board in voting on advisory agreements.
At the Board meeting, NAM made a presentation to and responded to questions from
the Board. In addition, the Independent Board Members noted that each
Sub-Adviser also previously made written or oral presentations to the Board
providing the respective Sub-Adviser with the opportunity to explain its
investment strategies, discuss market conditions, and highlight any material
issues. Many of these presentations were part of site visits by the Board
throughout the year. After the presentations and after reviewing the written
materials, the Independent Board Members met privately with their legal counsel
to review the Board's duties in reviewing advisory contracts and consider the
renewal of the advisory contract. It is with this background that the Board
Members considered each advisory contract (which includes sub-advisory
contracts) with a Fund Adviser. The Independent Board Members, in consultation
with independent counsel, reviewed the factors set out in judicial decisions and
Securities and Exchange Commission directives relating to the renewal of
advisory contracts. As outlined in more detail below, the Board Members
considered all factors they believed relevant with respect to each Fund,
including the following: (a) the nature, extent and quality of the services to
be provided by the Fund Adviser; (b) the investment performance of the Fund and
the Fund Adviser; (c) the costs of the services to be provided and profits to be
realized by the Fund Adviser and its affiliates from the relationship with the
Fund; (d) the extent to which economies of scale would be realized as the Fund
grows; and (e) whether fee levels reflect these economies of scale for the
benefit of Fund investors.
15
A. NATURE, EXTENT AND QUALITY OF SERVICES
In evaluating the nature, extent and quality of the respective Fund Adviser's
services, the Board Members reviewed information concerning the types of
services that a Fund Adviser or its affiliates provide and are expected to
provide to the Nuveen Funds; narrative and statistical information concerning
the Fund's performance record and how such performance compares to the Fund's
Peer Group and, if available, recognized benchmarks or, in certain cases,
customized benchmarks (as described in further detail in Section B below);
information describing the Fund Adviser's organization and its various
departments, the experience and responsibilities of key personnel, and available
resources. In the discussion of key personnel, the Board Members received
materials regarding the changes or additions in personnel of the applicable Fund
Adviser. The Board Members further noted the willingness of the personnel of NAM
to engage in open, candid discussions with the Board. The Board Members further
considered the quality of the Fund Adviser's investment process in making
portfolio management decisions, including any refinements or improvements to the
portfolio management processes, enhancements to technology and systems that are
available to portfolio managers, and any additions of new personnel which may
strengthen or expand the research and investment capabilities of the Fund
Adviser. In their review, the Board Members also noted that Nuveen won the
Lipper Award for Best Fund Family: Fixed Income-Large Asset Class, for 2004.
Given the Board Members' experience with the Funds, other Nuveen funds and the
Fund Advisers, the Board Members noted that they were familiar with and continue
to have a good understanding of the organization, operations and personnel of
the Fund Advisers.
In addition to advisory services, the Independent Board Members considered the
quality of the administrative or non-advisory services provided. In this regard,
NAM provides the Fund with such administrative and other services (exclusive of,
and in addition to, any such services provided by others for the Funds) and
officers and other personnel as are necessary for the operations of the
respective Fund. In addition to investment management services, NAM and its
affiliates provide each Fund with a wide range of services, including: preparing
shareholder reports; providing daily accounting; providing quarterly financial
statements; overseeing and coordinating the activities of other service
providers; administering and organizing Board meetings and preparing the Board
materials for such meetings; providing legal support (such as helping to prepare
registration statements, amendments thereto and proxy statements and responding
to regulatory inquiries); and performing other Fund administrative tasks
necessary for the operation of the respective Fund (such as tax reporting and
fulfilling regulatory filing requirements). In addition, in evaluating the
administrative services, the Board Members considered, in particular, a Fund
Adviser's policies and procedures for assuring compliance with applicable laws
and regulations in light of the new Securities and Exchange Commission
regulations governing compliance. The Board Members noted NAM's focus on
compliance and its compliance systems. In their review, the Board Members
considered, among other things, the additions of experienced personnel to NAM's
compliance group and modifications and other enhancements to NAM's computer
systems. In addition to the foregoing, the Board Members also noted that NAM
outsources certain services that cannot be replicated without significant costs
or at the same level of expertise. Such outsourcing has been a beneficial and
efficient use of resources by keeping expenses low while obtaining quality
services. Further, as the Funds utilize Sub-Advisers, the Board Members
considered NAM's ability and procedures to monitor the respective Sub-Adviser's
performance, business practices and compliance policies and procedures. In this
regard, the
16
Board Members noted the role of NAM's investment oversight committee, including
its increased personnel, the responsibilities and experience of the staff, and
procedures to monitor Sub-Advisers, including the use of site visits.
In addition to the above, in reviewing the variety of additional services that
NAM or its affiliates must provide to closed-end funds, such as the Funds, the
Independent Board Members determined that Nuveen's commitment to supporting the
secondary market for the common shares of its closed-end funds is particularly
noteworthy. In this regard, the Board Members noted Nuveen's efforts to sponsor
numerous forums for analysts and specialists regarding the various Nuveen
closed-end funds, its creation of a new senior position dedicated to providing
secondary market support services and enhancing communications with investors
and analysts, and its advertising and media relations efforts designed to raise
investor and analyst awareness of the closed-end funds.
In evaluating the services of the various Sub-Advisers, the Independent Board
Members noted that the Sub-Advisory Agreements were essentially agreements for
portfolio management services only and the respective Sub-Adviser was not
expected to supply other significant administrative services to the Funds.
Based on their review, the Board Members found that, overall, the nature, extent
and quality of services provided (and expected to be provided) to the Fund under
the Investment Management Agreement or Sub-Advisory Agreement, as applicable,
were of a high level and were quite satisfactory.
B. THE INVESTMENT PERFORMANCE OF THE FUND AND FUND ADVISERS
As previously noted, the Board received a myriad of performance information
regarding each Fund and its Peer Group, if available. Among other things, the
Board received materials reflecting a Fund's historic performance, the Fund's
performance compared to its Peer Group (as available), its performance compared
to recognized and, in certain cases, customized benchmarks (as applicable). The
Board Members reviewed performance information including, among other things,
total return information compared with a Fund's Peer Group as well as recognized
and, in some cases, customized benchmarks for the one-, three- and five-year
periods (as applicable) ending December 31, 2004, subject to certain exceptions.
Certain Funds (e.g., Diversified Dividend) may not have comparable peers in
which case their performance was measured against custom benchmarks for
applicable periods during the life of the Fund. This information supplements the
Fund performance information provided to the Board at each of their quarterly
meetings. Based on their review, the Board Members determined that the
respective Fund's absolute and relative investment performance over time had
been satisfactory.
C. FEES, EXPENSES AND PROFITABILITY
FEES AND EXPENSES. In evaluating the management fees and expenses that a Fund is
expected to bear, the Board Members considered the Fund's current management fee
structure, the sub-advisory fee arrangements and the Fund's expected expense
ratios in absolute terms as well as compared with the fees and expense ratios of
the unaffiliated funds in its Peer Group. The Board Members reviewed the
financial information of the respective Fund Adviser, including its respective
revenues, expenses and profitability. In reviewing fees, the Board Members,
among other things, reviewed comparisons of the Fund's
17
gross management fees (fees after fund-level and complex-wide level breakpoints
but before reimbursement and fee waivers), net management fees (after
breakpoints and reimbursements and fee waivers) and total expense ratios (before
and after waivers) with those of the unaffiliated funds in its Peer Group and
peer averages. In this regard, the Board Members noted that the relative ranking
of the Nuveen Funds on fees and expenses was aided by the significant level of
fee reductions provided by the fund-level and complex-wide breakpoint schedules,
and the fee waivers and reimbursements provided by Nuveen for certain Funds
launched since 1999. The complex-wide breakpoint schedule was instituted in 2004
and is described in further detail below in Section D entitled "Economies of
Scale and Whether Fee Levels Reflect these Economies of Scale." In its review,
the Board Members noted that all taxable closed-end exchange-traded Funds had
net expense ratios below or within an acceptable range compared to peers.
COMPARISONS WITH THE FEES OF OTHER CLIENTS. The Board Members further compared
the fees of NAM to the fees NAM or an affiliate thereof assessed for other types
of clients (such as separate managed accounts as well as fees charged on funds
that are not offered by Nuveen but are sub-advised by one of Nuveen's investment
management teams). With respect to separately managed accounts, the advisory
fees to such separate managed accounts are generally lower than those charged to
the comparable Fund. The Board Members noted, however, the additional services
that are provided and the costs incurred by Nuveen in managing and operating
registered investment companies, such as the Funds, compared to individually
managed separate accounts. For instance, as described above, NAM and its
affiliates provide numerous services to the Funds including, but not limited to,
preparing shareholder reports; providing daily accounting; preparing quarterly
financial statements; overseeing and coordinating the activities of other
service providers; administering and organizing Board meetings and preparing the
Board materials for such meetings; providing legal support; and administering
all other aspects of the Fund's operations. Further, the Board Members noted the
increased compliance requirements for funds in light of new Securities and
Exchange Commission regulations and other legislation. These services are
generally not required to the same extent, if at all, for separate accounts. In
addition to the differences in services, the Board Members also considered,
among other things, the differences in product distribution, investor profiles
and account sizes. Accordingly, the Board Members believe that the nature and
number of services provided to operate a Fund merit the higher fees than those
to separate managed accounts.
In considering the fees of the Sub-Adviser, the Board Members also considered
the pricing schedule the Sub-Adviser charges for similar investment management
services for other fund sponsors or clients (except for Wellington for which
information was not made available). With respect to Symphony, the Board Members
also compared the sub-advisory fees to the significantly higher fees assessed to
hedge funds advised by Symphony. Generally, the sub-advisory fees were at the
lower end of the Sub-Adviser's fee schedule. In addition, the Board Members
noted that such sub-advisory fees and arrangements with the unaffiliated Sub-
Advisers were established through arms-length negotiations between the
respective Sub-Adviser and NAM.
PROFITABILITY OF FUND ADVISERS. In conjunction with its review of fees, the
Board Members also considered the profitability of NAM (which incorporated
Nuveen's wholly-owned subsidiaries--NWQ and Symphony) as well as the
profitability of the other Sub-Advisers. The Board Members reviewed the
respective Fund Adviser's revenues, expenses and
18
profitability margins (on both a pre-tax and after-tax basis). In reviewing
profitability, the Board Members recognized that one of the most difficult
issues in determining profitability is establishing a method of allocating
expenses. Accordingly, the Board Members reviewed a Fund Adviser's assumptions
and methodology of allocating expenses. In this regard, the methods of
allocation used appeared reasonable but the Board noted the inherent limitations
in allocating costs among various advisory products. The Board Members also
recognized that individual fund or product line profitability of other advisers
is generally not publicly available. Further, profitability may be affected by
numerous factors including the types of funds managed, expense allocations,
business mix, etc. and therefore comparability of profitability is somewhat
limited. Nevertheless, to the extent available, the Board Members considered the
respective Fund Adviser's profit margin compared to the profitability of various
publicly-traded investment management companies and/or investment management
companies that publicly disclose some or all of their financial results compiled
by three independent third-party service providers. The Board Members also
reviewed the revenues, expenses and profit margins of various unaffiliated
advisory firms with similar amounts of assets under management for the last year
prepared by NAM. Based on their review, the Board Members were satisfied that
each Fund Adviser's level of profitability from its relationship with each Fund
was reasonable in light of the services provided.
In evaluating the reasonableness of the compensation, the Board Members also
considered any other revenues paid to a Fund Adviser as well as any indirect
benefits (such as soft dollar arrangements, if any) the Fund Adviser and its
affiliates are expected to receive that are directly attributable to their
management of the Funds, if any. See Section E below for additional information.
Based on their review of the overall fee arrangements of the applicable Fund,
the Board Members determined that the advisory fees and expenses of the
respective Fund were reasonable.
D. ECONOMIES OF SCALE AND WHETHER FEE LEVELS REFLECT THESE ECONOMIES OF
SCALE
In reviewing the compensation, the Board Members have long understood the
benefits of economies of scale as the assets of a fund grows and have sought to
ensure that shareholders share in these benefits. One method for shareholders to
share in economies of scale is to include breakpoints in the advisory fee
schedules that reduce fees as fund assets grow. Accordingly, the Board Members
received and reviewed the schedules of advisory fees for each Fund, including
fund-level breakpoints thereto. In addition, after lengthy negotiations with
management, the Board in May 2004 approved a complex-wide fee arrangement
pursuant to which fees of the funds in the Nuveen complex, including the Funds,
are reduced as the assets in the fund complex reach certain levels. The
complex-wide fee arrangement was introduced on August 1, 2004 and the Board
Members reviewed data regarding the reductions of fees for the Funds for the
period of August 1, 2004 to December 31, 2004. In evaluating the complex-wide
fee arrangement, the Board Members considered, among other things, the historic
and expected fee savings to shareholders as assets grow, the amount of fee
reductions at various asset levels, and that the arrangement would extend to all
Funds in the Nuveen complex. The Board Members also considered the impact, if
any, the complex-wide fee arrangement may have on the level of services
provided. Based on their review, the Board Members concluded that the breakpoint
schedule and complex-wide fee arrangement currently was acceptable and desirable
in providing benefits from economies of scale to shareholders.
19
E. INDIRECT BENEFITS
In evaluating fees, the Board Members also considered any indirect benefits or
profits the respective Fund Adviser or its affiliates may receive as a result of
its relationship with each Fund. In this regard, the Board Members considered
any benefits from soft dollar arrangements. The Board Members noted that
although NAM manages a large amount of assets, it has very little, if any,
brokerage to allocate. This is due to the fact that NAM typically manages the
portfolios of the municipal funds in the Nuveen complex and municipal bonds
generally trade on a principal basis. Accordingly, NAM does not currently have
any soft dollar arrangements and does not pay excess brokerage commissions (or
spreads on principal transactions) in order to receive research services. The
Board Members also considered the soft dollar arrangements of the Sub-Advisers.
The Board Members noted that Froley, Gateway, and NWQ have engaged in soft
dollar arrangements. With respect to such Sub-Advisers, the Board Members
considered that the respective Sub-Adviser benefits from its soft dollar
arrangements pursuant to which such Sub-Adviser receives research from brokers
that execute the applicable Fund's portfolio transactions. The Board Members
received and reviewed materials concerning such Sub-Adviser's brokerage
practices, including its broker allocation policies and procedures, the types of
research and brokerage services received, the brokers providing such services,
and the dollar amount of commissions allocated to brokers for soft dollar
arrangements for the last calendar year. In considering the types of research
received, the Board Members noted that each such Sub-Adviser either has already
limited (or has agreed to modify its practices to limit) the use of soft dollars
to research with intellectual content. The Board Members recognized that a
Sub-Adviser's profitability may be lower if the Sub-Adviser was required to pay
for this research with hard dollars. With respect to SCRM and Symphony, the
Board Members noted that these Sub-Advisers do not use soft dollar arrangements.
The Board Members also noted that Spectrum does not use soft dollar
arrangements. However, the Board Members also received materials and considered
any revenues received by Spectrum in executing trades through its internal
broker-dealer. Finally, with respect to Wellington Management, the Board Members
noted that while Wellington Management does have soft dollar arrangements with
respect to some of its agency trades, the trades in fixed income securities held
in Diversified Dividend are done on a principal basis and, therefore, do not
generate soft dollar credits.
In addition to soft dollar arrangements, the Board Members also considered any
other revenues, if any, received by NAM or its affiliates. In this regard, for
Funds with outstanding preferred shares and new closed-end funds, the Board
Members also considered revenues received by Nuveen for serving as agent for
broker-dealers at its preferred trading desk and for acting as co-manager in the
initial public offering of new closed-end exchange-traded funds.
F. OTHER CONSIDERATIONS
Nuveen, until recently, was a majority owned subsidiary of St. Paul Travelers.
As noted, St. Paul Travelers earlier this year announced its intention to divest
its equity stake in Nuveen. Nuveen is the parent of NAM. Pursuant to a series of
transactions, St. Paul Travelers has begun to reduce its interest in Nuveen
which will ultimately result in a change of control of Nuveen and therefore NAM.
As mandated by the 1940 Act, such a change in control would result in an
assignment of the Investment Management Agreement with NAM and the automatic
termination of such agreement. Accordingly, the Board also considered the
20
approval of a New Investment Management Agreement with each Fund in light of,
and which would take effect upon, the anticipated change of control. More
specifically, the Board considered for each Fund a New Investment Management
Agreement on substantially identical terms to the existing Investment Management
Agreement, to take effect after the change of control has occurred and the
contract has been approved by Fund shareholders. In its review, the Board
considered whether the various transactions necessary to divest St. Paul
Travelers' interest will have an impact on the various factors they considered
in approving NAM, such as the scope and quality of services to be provided
following the change of control. In reviewing the St. Paul Travelers
transactions, the Board considered, among other things, the impact, if any, on
the operations and organizational structure of NAM; the possible benefits and
costs of the transactions to the respective Fund; the potential implications of
any arrangements used by Nuveen to finance certain of the transactions; the
ability of NAM to perform its duties after the transactions; whether a Fund's
fee structure or expense ratio would change; any changes to the current
practices of the respective Fund; any changes to the terms of the advisory
agreement; and any anticipated changes to the operations of NAM. Based on its
review, the Board determined that St. Paul Travelers' divestiture would not
affect the nature and quality of services provided by NAM, the terms of the
Investment Management Agreement, including the fees thereunder, and would not
materially affect the organization or operations of NAM. Accordingly, the Board
determined that their analysis of the various factors regarding their approval
of NAM would continue to apply after the change of control.
In addition to the foregoing, a change in control of NAM may be deemed an
assignment of the Sub-Advisory Agreement between NAM and the respective
Sub-Adviser. Further, NWQ and Symphony are wholly-owned subsidiaries of Nuveen.
Accordingly, the change of control of Nuveen would also result in a change of
control of such Sub-Advisers resulting in the automatic termination of their
existing Sub-Advisory Agreements. The Board therefore considered approval of a
New Sub-Advisory Agreement with each Sub-Adviser in light of the anticipated
change of control. More specially, the Board considered approval of each New
Sub-Advisory Agreement on substantially identical terms as the respective
Original Sub-Advisory Agreement, to take effect after the change of control has
occurred and the agreement has been approved by Fund shareholders. In reviewing
the impact of the St. Paul Travelers divesture on the respective Sub-Adviser,
the Board considered the same factors as outlined previously with respect to
their review of NAM. As with NAM, the Board concluded that the St. Paul
Travelers divestiture would not affect the nature and quality of services
provided by the respective Sub-Adviser, the terms of the Sub-Advisory Agreement,
including the fees paid thereunder, and would not materially affect the
organization or operations of the Sub-Adviser. Accordingly, the Board determined
that their analysis of the various factors regarding their review and approval
of the respective Sub-Adviser would continue to apply following the change in
control.
G. APPROVAL
The Board Members did not identify any single factor discussed previously as
all-important or controlling. The Board Members, including a majority of
Independent Board Members, concluded that the terms of the Investment Management
and Sub-Advisory Agreements were fair and reasonable, that the respective Fund
Adviser's fees are reasonable in light of the services provided to each Fund,
that the renewal of the NAM Investment Management Agreement and each
Sub-Advisory Agreement should be approved, and that the new,
21
post-change of control NAM Investment Management Agreement and the Sub-Advisory
Agreements be approved and recommended to shareholders.
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
To be considered for presentation at the annual meeting of shareholders of the
Funds to be held in 2006, a shareholder proposal submitted pursuant to Rule
14a-8 of the Securities Exchange Act of 1934 must be received at the offices of
that Fund, 333 West Wacker Drive, Chicago, Illinois 60606, not later than
October 20, 2005, (except for Equity Premium, Equity Premium Opportunity
Floating Rate, Floating Rate Income Opportunity, Senior Income and
Tax-Advantaged Floating Rate). A shareholder wishing to provide notice in the
manner prescribed by Rule 14a-4(c)(1) of a proposal submitted outside of the
process of Rule 14a-8 must submit such written notice to the Fund not later than
January 3, 2006, (except for Equity Premium, Equity Premium Opportunity Floating
Rate, Floating Rate Income Opportunity, Senior Income and Tax-Advantage Floating
Rate). Floating Rate and Senior Income have yet to hold their 2005 annual
meeting of shareholders. For their 2005 annual meeting, shareholder proposals
submitted pursuant to Rule 14a-8 had to be received by June 20, 2005. Any notice
of a shareholder proposal submitted pursuant to Rule 14-4(c)(l) and outside the
process of Rule 14a-8 must be submitted in writing no later than September 3,
2005. Equity Premium, Equity Premium Opportunity, Floating Rate Income
Opportunity and Tax-Advantaged Floating Rate have yet to hold an annual
shareholders' meeting as these Funds were recently organized. The anticipated
date of the first shareholders' meeting is not known at this time. To be
considered for presentation at a meeting of the Funds' shareholders, proposals
must be received a reasonable time before the Funds begins to print and mail its
proxy materials for the meeting.
Timely submission of a proposal does not mean that such proposal will be
included in a proxy statement.
SHAREHOLDER COMMUNICATIONS
Shareholders who want to communicate with the Board or any individual Board
Member should write their Fund to the attention of Lorna Ferguson, Manager of
Fund Board Relations, Nuveen Investments, 333 West Wacker Drive, Chicago,
Illinois 60606. The letter should indicate that you are a Fund shareholder. If
the communication is intended for a specific Board Member and so indicates it
will be sent only to that Board Member. If a communication does not indicate a
specific Board Member it will be sent to the chair of the nominating and
governance committee and the outside counsel to the Independent Board Members
for further distribution as deemed appropriate by such persons.
EXPENSES OF PROXY SOLICITATION
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with the
solicitation of proxies will be paid by Nuveen. Solicitation may be made by
letter or telephone by officers or employees of Nuveen or the Adviser, or by
dealers and their representatives.
22
FISCAL YEAR
The last fiscal year end for each Fund, except Floating Rate, Floating Rate
Income Opportunity, Senior Income, Equity Premium Opportunity and Tax-Advantaged
Floating Rate, was December 31, 2004. The last fiscal year end for Floating
Rate, Floating Rate Income Opportunity, and Senior Income was July 31, 2004.
Equity Premium Opportunity and Tax-Advantaged Floating Rate have inception dates
of January 26, 2005 and March 28, 2005, respectively, and have not completed a
full fiscal year.
ANNUAL REPORT DELIVERY
Annual reports will be sent to shareholders of record of each Fund following
each Fund's fiscal year end. Each Fund will furnish, without charge, a copy of
its annual report and/or semi-annual report as available upon request. Such
written or oral requests should be directed to such Fund at 333 West Wacker
Drive, Chicago, Illinois 60606 or by calling 1-800-257-8787.
Please note that only one annual report or proxy statement may be delivered to
two or more shareholders of a Fund who share an address, unless the Fund has
received instructions to the contrary. To request a separate copy of an annual
report or proxy statement, or for instructions as to how to request a separate
copy of such documents or as to how to request a single copy if multiple copies
of such documents are received, shareholders should contact the applicable Fund
at the address and phone number set forth above.
GENERAL
Management does not intend to present and does not have reason to believe that
any other items of business will be presented at the Meetings. However, if other
matters are properly presented to the Meetings for a vote, the proxies will be
voted by the persons acting under the proxies upon such matters in accordance
with their judgment of the best interests of the Fund.
A list of shareholders entitled to be present and to vote at each Meeting will
be available at the offices of the Funds, 333 West Wacker Drive, Chicago,
Illinois, for inspection by any shareholder during regular business hours
beginning ten days prior to the date of the Meetings.
Failure of a quorum to be present at any Meeting will necessitate adjournment
and will subject that Fund to additional expense. The persons named in the
enclosed proxy may also move for an adjournment of any Meeting to permit further
solicitation of proxies with respect to any of the proposals if they determine
that adjournment and further solicitation is reasonable and in the best
interests of the shareholders. Under each Fund's By-Laws, an adjournment of a
meeting requires the affirmative vote of a majority of the shares present in
person or represented by proxy at the meeting.
IF YOU CANNOT BE PRESENT AT THE MEETING, YOU ARE REQUESTED TO FILL IN, SIGN AND
RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
Jessica R. Droeger
Vice President and Secretary
June 21, 2005
23
APPENDIX A
NUMBER OF SHARES BENEFICIALLY OWNED
BY BOARD MEMBERS AND OFFICERS
FUND SHARES OWNED BY BOARD MEMBERS AND OFFICERS(1)
------------------------------------------------------------------------------------------------------------------------------
EQUITY FLOATING RATE PREFERRED PREFERRED
DIVERSIFIED EQUITY PREMIUM FLOATING INCOME AND AND
BOARD MEMBER DIVIDEND PREMIUM OPPORTUNITY RATE OPPORTUNITY CONVERTIBLE CONVERTIBLE 2
------------------------------------------------------------------------------------------------------------------------------
Robert P. Bremner............. 13,200 0 0 0 0 3,500 0
Lawrence H. Brown............. 0 0 0 0 0 1,000 0
Jack B. Evans................. 0 0 0 0 0 3,500 0
William C. Hunter............. 0 0 0 0 0 0 0
David J. Kundert.............. 0 0 0 0 0 0 0
William J. Schneider.......... 650 3,250 0 1,000 0 1,000 0
Timothy R. Schwertfeger....... 0 0 0 0 0 200 0
Judith M. Stockdale........... 585 0 0 0 0 0 0
Eugene S. Sunshine............ 0 0 0 0 0 0 0
ALL BOARD MEMBERS AND OFFICERS
AS A GROUP.................. 1,805 3,620 0 1,000 0 10,200 1,000
------------------------------------------------------------------------------------------------------------------------------
FUND SHARES OWNED BY BOARD MEMBERS AND OFFICERS(1)
----------------------------------------------------------------------------------------------------------------------
TAX-
ADVANTAGED
REAL QUALITY QUALITY QUALITY SENIOR FLOATING TOTAL
BOARD MEMBER ESTATE PREFERRED PREFERRED 2 PREFERRED 3 INCOME RATE RETURN
----------------------------------------------------------------------------------------------------------------------
Robert P. Bremner............. 0 0 0 0 0 0 12,500
Lawrence H. Brown............. 1,000 1,000 1,000 1,000 1,000 0 0
Jack B. Evans................. 1,100 0 8,400 0 5,000 0 0
William C. Hunter............. 0 0 0 0 0 0 0
David J. Kundert.............. 0 0 0 0 0 0 0
William J. Schneider.......... 0 0 0 0 0 0 0
Timothy R. Schwertfeger....... 25,000 0 50,000 0 49,000 0 73,000
Judith M. Stockdale........... 0 0 0 0 0 0 0
Eugene S. Sunshine............ 0 2,000 2,000 0 0 0 0
ALL BOARD MEMBERS AND OFFICERS
AS A GROUP.................. 30,824 3,103 61,700 1,000 59,525 0 85,800
----------------------------------------------------------------------------------------------------------------------
(1) The numbers include share equivalents of certain Nuveen funds in which the
Board Member is deemed to be invested pursuant to the Deferred Compensation
Plan for Independent Board Members. The information as to beneficial
ownership is based on statements furnished by each Board Member and officer.
A-1
APPENDIX B
DATES RELATING TO ORIGINAL
INVESTMENT MANAGEMENT AGREEMENTS(1)
--------------------------------------------------------------------------------------------
DATE ORIGINAL DATE ORIGINAL
DATE OF ORIGINAL INVESTMENT MANAGEMENT INVESTMENT MANAGEMENT
INVESTMENT AGREEMENT WAS LAST AGREEMENT WAS LAST
MANAGEMENT APPROVED BY APPROVED FOR
FUND AGREEMENT SHAREHOLDERS CONTINUANCE BY BOARD
--------------------------------------------------------------------------------------------
Diversified Dividend July 30, 2003 September 24, 2003 May 11, 2005
Equity Premium October 25, 2004 October 22, 2004 N/A
Equity Premium
Opportunity January 26, 2005 January 21, 2005 N/A
Floating Rate February 24, 2004 March 10, 2004 May 11, 2005
Floating Rate Income
Opportunity June 22, 2004 June 22, 2004 May 11, 2005
Preferred and
Convertible March 14, 2003 March 25, 2003 May 11, 2005
Preferred and
Convertible 2 May 15, 2003 June 24, 2003 May 11, 2005
Real Estate May 14, 2002 November 15, 2001 May 11, 2005
Quality Preferred June 1, 2002 June 18, 2002 May 11, 2005
Quality Preferred 2 August 1, 2002 September 19, 2002 May 11, 2005
Quality Preferred 3 December 18, 2002 December 16, 2002 May 11, 2005
Senior Income August 1, 2002 October 25, 1999 May 11, 2005
Tax-Advantaged
Floating Rate March 24, 2005 March 16, 2005 N/A
Total Return November 20, 2003 January 12, 2004 May 11, 2005
--------------------------------------------------------------------------------------------
(1) The Original Investment Management Agreements were between the Funds and
Nuveen Institutional Advisory Corp. ("NIAC"). Effective January 1, 2005,
NIAC was merged into NAM. As a result, NIAC became a part of NAM and ceased
to exist separately. NAM assumed all of NIAC's obligations under the
Original Investment Management Agreements. Like NIAC, NAM is a wholly-owned
subsidiary of Nuveen. The merger did not constitute a change in control.
There was no change in who manages the Funds or in the Funds' investment
objectives or policies as a result of the merger.
B-1
APPENDIX C
FORM OF INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this [31st] day of [July, 2005], by and between , a
Massachusetts business trust (the "Fund"), and NUVEEN ASSET MANAGEMENT, a
Delaware corporation (the "Adviser").
W I T N E S S E T H
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby employs the Adviser to act as the investment adviser
for, and to manage the investment and reinvestment of the assets of the
Fund in accordance with the Fund's investment objective and policies
and limitations, and to administer the Fund's affairs to the extent
requested by and subject to the supervision of the Board of Trustees of
the Fund for the period and upon the terms herein set forth. The
investment of the Fund's assets shall be subject to the Fund's
policies, restrictions and limitations with respect to securities
investments as set forth in the Fund's then current registration
statement under the Investment Company Act of 1940, and all applicable
laws and the regulations of the Securities and Exchange Commission
relating to the management of registered closed-end, diversified
management investment companies.
The Adviser accepts such employment and agrees during such period to
render such services, to furnish office facilities and equipment and
clerical, bookkeeping and administrative services (other than such
services, if any, provided by the Fund's transfer agent) for the Fund,
to permit any of its officers or employees to serve without
compensation as trustees or officers of the Fund if elected to such
positions, and to assume the obligations herein set forth for the
compensation herein provided. The Adviser shall, for all purposes
herein provided, be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to
act for nor represent the Fund in any way, nor otherwise be deemed an
agent of the Fund.
2. For the services and facilities described in Section l, the Fund will
pay to the Adviser, at the end of each calendar month, an investment
management fee equal to the sum of a Fund-Level Fee and a Complex-Level
Fee.
A. The Fund-Level Fee shall be computed by applying the following annual
rate to the average total daily net assets of the Fund:
--------------------------------------------------------------------
AVERAGE TOTAL DAILY NET ASSETS RATE
--------------------------------------------------------------------
--------------------------------------------------------------------
B. The Complex-Level Fee shall be calculated by reference to the daily
net assets of the Eligible Funds, as defined below (with such daily
net assets to include, in the case of Eligible Funds whose advisory
fees are calculated by reference to net assets that include net
assets attributable to preferred stock issued by or
C-1
borrowings by the fund, such leveraging net assets) ("Complex-Level
Assets"), pursuant to the following annual fee schedule:
-------------------------------------------------------------------
COMPLEX-LEVEL DAILY MANAGED ASSETS(1) RATE
-------------------------------------------------------------------
First $55 billion .2000%
Next $1 billion .1800%
Next $1 billion .1600%
Next $3 billion .1425%
Next $3 billion .1325%
Next $3 billion .1250%
Next $5 billion .1200%
Next $5 billion .1175%
Next $15 billion .1150%
-------------------------------------------------------------------
(1) With respect to Complex-Level Assets over $91 billion, the fee
rate or rates that will apply to such assets will be determined
at a later date. The parties agree that, in the unlikely event
that Complex-Wide Assets reach $91 billion prior to the parties
reaching an agreement as to the Complex-Level Fee rate or rates
to be applied to such assets, the Complex-Level Fee rate for
such Complex-Level Assets shall be .1400% until such time as the
parties agree to a different rate or rates.
C. "Eligible Funds", for purposes of this Agreement, shall mean all
Nuveen-branded closed-end and open-end registered investment companies
organized in the United States. Any open-end or closed-end funds that
subsequently become part of the Nuveen complex because either (a)
Nuveen Investments, Inc. or its affiliates acquire the investment
adviser to such funds (or the adviser's parent), or (b) Nuveen
Investments, Inc. or its affiliates acquire the fund's adviser's
rights under the management agreement for such fund, will be evaluated
by both Nuveen management and the Nuveen Funds' Board, on a
case-by-case basis, as to whether or not these acquired funds would be
included in the Nuveen complex of Eligible Funds and, if so, whether
there would be a basis for any adjustments to the complex-level
breakpoints.
D. For the month and year in which this Agreement becomes effective, or
terminates, there shall be an appropriate proration on the basis of
the number of days that the Agreement shall have been in effect during
the month and year, respectively. The services of the Adviser to the
Fund under this Agreement are not to be deemed exclusive, and the
Adviser shall be free to render similar services or other services to
others so long as its services hereunder are not impaired thereby.
3. The Adviser shall arrange for officers or employees of the Adviser to
serve, without compensation from the Fund, as trustees, officers or
agents of the Fund, if duly elected or appointed to such positions, and
subject to their individual consent and to any limitations imposed by
law.
4. Subject to applicable statutes and regulations, it is understood that
officers, trustees, or agents of the Fund are, or may be, interested in
the Adviser as officers, directors, agents, shareholders or otherwise,
and that the officers, directors,
C-2
shareholders and agents of the Adviser may be interested in the Fund
otherwise than as trustees, officers or agents.
5. The Adviser shall not be liable for any loss sustained by reason of the
purchase, sale or retention of any security, whether or not such
purchase, sale or retention shall have been based upon the
investigation and research made by any other individual, firm or
corporation, if such recommendation shall have been selected with due
care and in good faith, except loss resulting from willful misfeasance,
bad faith, or gross negligence on the part of the Adviser in the
performance of its obligations and duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
6. The Adviser currently manages other investment accounts and funds,
including those with investment objectives similar to the Fund, and
reserves the right to manage other such accounts and funds in the
future. Securities considered as investments for the Fund may also be
appropriate for other investment accounts and funds that may be managed
by the Adviser. Subject to applicable laws and regulations, the Adviser
will attempt to allocate equitably portfolio transactions among the
portfolios of its other investment accounts and funds purchasing
securities whenever decisions are made to purchase or sell securities
by the Fund and one or more of such other accounts or funds
simultaneously. In making such allocations, the main factors to be
considered by the Adviser will be the respective investment objectives
of the Fund and such other accounts and funds, the relative size of
portfolio holdings of the same or comparable securities, the
availability of cash for investment by the Fund and such other accounts
and funds, the size of investment commitments generally held by the
Fund and such accounts and funds, and the opinions of the persons
responsible for recommending investments to the Fund and such other
accounts and funds.
7. This Agreement shall continue in effect until [August l, 2006], unless
and until terminated by either party as hereinafter provided, and shall
continue in force from year to year thereafter, but only as long as
such continuance is specifically approved, at least annually, in the
manner required by the Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of
any penalty by the Fund or by the Adviser upon no less than sixty (60)
days' written notice to the other party. The Fund may effect
termination by action of the Board of Trustees or by vote of a majority
of the outstanding voting securities of the Fund, accompanied by
appropriate notice.
This Agreement may be terminated, at any time, without the payment of
any penalty, by the Board of Trustees of the Fund, or by vote of a
majority of the outstanding voting securities of the Fund, in the event
that it shall have been established by a court of competent
jurisdiction that the Adviser, or any officer or director of the
Adviser, has taken any action which results in a breach of the
covenants of the Adviser set forth herein.
C-3
Termination of this Agreement shall not affect the right of the Adviser
to receive payments on any unpaid balance of the compensation,
described in Section 2, earned prior to such termination.
8. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder shall not be
thereby affected.
9. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such
address as such other party may designate for receipt of such notice.
10. The Fund's Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts. This Agreement is executed on behalf of
the Fund by the Fund's officers as officers and not individually and
the obligations imposed upon the Fund by this Agreement are not binding
upon any of the Fund's Trustees, officers or shareholders individually
but are binding only upon the assets and property of the Fund.
11. This Agreement shall be construed in accordance with applicable federal
law and (except as to Section 10 hereof which shall be construed in
accordance with the laws of Massachusetts) the laws of the State of
Illinois.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to be
executed on the day and year above written.
By:
-------------------------
Vice President
Attest:
-------------------------
Assistant Secretary
NUVEEN ASSET MANAGEMENT
By:
-------------------------
Managing Director
Attest:
-------------------------
Assistant Secretary
C-4
APPENDIX D
COMPLEX-LEVEL FEE RATES
----------------------------------------------------------------------
COMPLEX DAILY NET ASSETS FEE RATE
----------------------------------------------------------------------
First $55 billion 0.2000%
Next $1 billion 0.1800%
Next $1 billion 0.1600%
Next $3 billion 0.1425%
Next $3 billion 0.1325%
Next $3 billion 0.1250%
Next $5 billion 0.1200%
Next $5 billion 0.1175%
Next $15 billion 0.1150%
----------------------------------------------------------------------
FUND-LEVEL FEE RATES, AGGREGATE MANAGEMENT FEES
PAID AND NET ASSETS
---------------------------------------------------------------------------------------------------------------
FEES PAID
TO THE ADVISER
DURING LAST NET ASSETS
FUND FUND AVERAGE DAILY NET ASSETS FEE RATE(1) FISCAL YEAR(2) AS OF 5/1/05
---------------------------------------------------------------------------------------------------------------
Diversified Dividend For the first $500 million 0.7000% $2,497,915(3) $ 446,101,522.12
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Equity Premium For the first $500 million 0.7000% $697,104(4)(5) $ 708,834,956.59
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Equity Premium
Opportunity For the first $500 million 0.7000% N/A(4) $1,199,795,530.11
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Floating Rate For the first $500 million 0.6500% $1,537,287(3)(6) $1,064,016,735.25
For the next $500 million 0.6250%
For the next $500 million 0.6000%
For the next $500 million 0.5750%
For net assets $2 billion and over 0.5500%
---------------------------------------------------------------------------------------------------------------
D-1
---------------------------------------------------------------------------------------------------------------
FEES PAID
TO THE ADVISER
DURING LAST NET ASSETS
FUND FUND AVERAGE DAILY NET ASSETS FEE RATE(1) FISCAL YEAR(2) AS OF 5/1/05
---------------------------------------------------------------------------------------------------------------
Floating Rate Income
Opportunity For the first $500 million 0.6500% $41(4)(7) $ 636,760,634.09
For the next $500 million 0.6250%
For the next $500 million 0.6000%
For the next $500 million 0.5750%
For net assets $2 billion and over 0.5500%
---------------------------------------------------------------------------------------------------------------
Preferred and
Convertible For the first $500 million 0.7000% $11,822,107(3)(8) $2,139,043,848.02
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Preferred and
Convertible 2
For the first $500 million 0.7000% $15,530,450(3)(9) $2,962,376,837.61
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Real Estate For the first $500 million 0.7000% $4,255,088(4) $ 766,723,468.07
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Quality Preferred For the first $500 million 0.7000% $7,713,105(3) $1,378,303,815.94
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Quality Preferred 2 For the first $500 million 0.7000% $14,023,936(3) $2,629,556,555.08
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
D-2
---------------------------------------------------------------------------------------------------------------
FEES PAID
TO THE ADVISER
DURING LAST NET ASSETS
FUND FUND AVERAGE DAILY NET ASSETS FEE RATE(1) FISCAL YEAR(2) AS OF 5/1/05
---------------------------------------------------------------------------------------------------------------
Quality Preferred 3 For the first $500 million 0.7000% $3,009,396(3) $ 515,005,416.56
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Senior Income For the first $1 billion 0.6500% $1,569,804(10) $ 299,395,943.57
For the next $1 billion 0.6375%
For the next $3 billion 0.6250%
For the next $5 billion 0.6000%
For net assets $10 billion and 0.5750%
over
---------------------------------------------------------------------------------------------------------------
Tax-Advantaged
Floating Rate For the first $500 million 0.7000% N/A $ 186,160,453.38
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
Total Return For the first $500 million 0.7000% $1,902,129(3) $ 335,370,192.38
For the next $500 million 0.6750%
For the next $500 million 0.6500%
For the next $500 million 0.6250%
For net assets $2 billion and over 0.6000%
---------------------------------------------------------------------------------------------------------------
(1) The fee rates shown above went into effect on August 1, 2004. Prior to
August 1, 2004, the investment management fee paid by each Fund was
calculated using the above fund-level fee rates plus 0.20% at each
breakpoint asset level. There was no complex-level component of the
investment management fee prior to August 1, 2004.
(2) Prior to January 1, 2005, investment management services were provided to
the Funds by Nuveen Institutional Advisory Corp. ("NIAC"). Effective
January 1, 2005, NIAC merged into NAM. As a result, NIAC became a part of
NAM and ceased to exist separately. Prior to the reorganization, management
fees were paid to NIAC. Currently and under the New Investment Management
Agreements, all management fees will be paid to NAM. Like NAM, NIAC was a
wholly-owned subsidiaries of Nuveen.
(3) Includes mandatory fee waiver of 0.32%.
(4) Includes mandatory fee waiver of 0.30%.
(5) For the period October 26, 2004 (commencement of operations) through fiscal
year end December 31, 2004.
(6) For the period March 25, 2004 (commencement of operations) through fiscal
year end July 31, 2004.
(7) For the period July 27, 2004 (commencement of operations) through fiscal
year end July 31, 2004.
(8) After July 31, 2004, the funds' fiscal year end changed to December 31. For
the period August 1, 2004 through December 31, 2004, the fees paid to the
adviser were $4,934,832.
(9) After July 31, 2004, the funds' fiscal year end changed to December 31. For
the period August 1, 2004 through December 31, 2004, the fees paid to the
adviser were $6,574,931.
(10) Includes a mandatory fee waiver of 0.45%.
D-3
APPENDIX E
OFFICERS AND DIRECTORS OF
NUVEEN ASSET MANAGEMENT ("NAM")
---------------------------------------------------------------------------------
NAME PRINCIPAL OCCUPATION
---------------------------------------------------------------------------------
John P. Amboian President and Director of Nuveen Investments, Inc.,
Nuveen Asset Management, Nuveen Investments, LLC,
Rittenhouse Asset Management, Inc., Nuveen Investments
Advisers Inc. and Nuveen Investments Holdings, Inc.
Alan Berkshire Senior Vice President, Secretary and General Counsel of
Nuveen Investments, Inc., Nuveen Asset Management,
Nuveen Investments, LLC, Rittenhouse Asset Management,
Inc. and Nuveen Investments Holdings, Inc.; Senior Vice
President and Secretary of Nuveen Investments Advisers
Inc.; Assistant Secretary of NWQ Investment Management
Company, LLC and Secretary of Symphony Asset
Management, LLC.
Stuart J. Cohen Vice President, Assistant Secretary and Assistant
General Counsel of Nuveen Asset Management, Nuveen
Investments, LLC, Nuveen Investments Holdings, Inc. and
Rittenhouse Asset Management, Inc.; Vice President of
Nuveen Investments Advisers, Inc.
Peter H. D'Arrigo Vice President of Nuveen Investments, LLC and Nuveen
Asset Management; Assistant Vice President and
Treasurer of Nuveen Investments, Inc.; Assistant
Treasurer of NWQ Investments Management Company, LLC;
Vice President and Treasurer of Nuveen Rittenhouse
Asset Management, Inc.; Vice President and Treasurer of
funds in Nuveen Fund complex.
Jessica R. Droeger Vice President and Assistant Secretary of Nuveen Asset
Management; Assistant General Counsel of Nuveen
Investments, LLC; Vice President and Secretary of funds
in Nuveen fund complex.
William M. Fitzgerald Managing Director of Nuveen Asset Management; Vice
President of Nuveen Investments Advisers Inc.; Vice
President of funds in Nuveen fund complex.
James D. Grassi Vice President and Deputy Director of Compliance of
Nuveen Investments, LLC, Nuveen Asset Management,
Nuveen Investments Advisers Inc. and Rittenhouse Asset
Management, Inc.; Vice President and Chief Compliance
Officer of funds in Nuveen fund complex.
Sherri A. Hlavacek Vice President and Corporate Controller of Nuveen Asset
Management, Nuveen Investments, LLC, Nuveen Investments
Holdings, Inc., Nuveen Investments Advisers, Inc. and
Rittenhouse Asset Management, Inc.; Vice President and
Controller of Nuveen Investments, Inc.; Certified
Public Accountant.
Mary E. Keefe Managing Director of Nuveen Investments, Inc.; Managing
Director and Chief Compliance Officer of Nuveen Asset
Management, Nuveen Investments, LLC, Nuveen Investments
Advisers Inc. and Rittenhouse Asset Management, Inc.;
Chief Compliance Officer of Symphony Asset Management
LLC.
E-1
---------------------------------------------------------------------------------
NAME PRINCIPAL OCCUPATION
---------------------------------------------------------------------------------
Larry W. Martin Vice President, Assistant Secretary and Assistant
General Counsel of Nuveen Investments, LLC, Nuveen
Investments, Inc. and Rittenhouse Asset Management,
Inc.; .Vice President and Assistant Secretary of Nuveen
Asset Management and Nuveen Investments Advisers Inc.;
Assistant Secretary of NWQ Investment Management
Company, LLC; Vice President and Assistant Secretary of
funds in Nuveen fund complex.
Timothy R.
Schwertfeger Chairman and Director of Nuveen Investments, Inc.,
Nuveen Asset Management and Nuveen Investments, LLC;
Director of Institutional Capital Corporation; Chairman
and Director of Rittenhouse Asset Management, Inc.;
Chairman of Nuveen Investments Advisers, Inc.; Chairman
of the Board and Board Member of funds in Nuveen fund
complex.
Margaret E. Wilson Senior Vice President, Finance of Nuveen Investments,
Inc., Nuveen Asset Management, Nuveen Investments, LLC,
Rittenhouse Asset Management, Inc., Nuveen Investments
Advisers Inc. and Nuveen Investments Holdings, Inc.
Gifford R. Zimmerman Managing Director, Assistant Secretary and Associate
General Counsel of Nuveen Investments, LLC and Nuveen
Asset Management; Managing Director and Assistant
Secretary of Nuveen Investments, Inc.; Assistant
Secretary of NWQ Investment Management Company, LLC;
Vice President and Assistant Secretary of Nuveen
Investments Advisers Inc.; Managing Director, Associate
General Counsel and Assistant Secretary of Rittenhouse
Asset Management, Inc.; Chief Administrative Officer of
funds in Nuveen fund complex.
---------------------------------------------------------------------------------
E-2
APPENDIX F
DATES RELATING TO SUB-ADVISORY AGREEMENTS
----------------------------------------------------------------------------------------------------
DATE ORIGINAL
DATE ORIGINAL SUB-ADVISORY
SUB-ADVISORY AGREEMENT WAS
DATE OF ORIGINAL AGREEMENT WAS LAST APPROVED
SUB-ADVISORY LAST APPROVED FOR CONTINUANCE
FUND SUB-ADVISER AGREEMENT(S) BY SHAREHOLDERS BY BOARD
----------------------------------------------------------------------------------------------------
Diversified Dividend NWQ, Wellington July 30, 2003 September 24, 2003 May 11, 2005
Management and
Symphony
SCRM March 24, 2004 March 24, 2004 May 11, 2005
Equity Premium Gateway October 25, 2004 October 22, 2004 N/A
Equity Premium
Opportunity Gateway January 26, 2005 January 21, 2005 N/A
Floating Rate Symphony February 24, 2004 March 10, 2004 May 11, 2005
Floating Rate Income
Opportunity Symphony June 22, 2004 June 22, 2004 May 11, 2005
Preferred and
Convertible Froley, Spectrum March 14, 2003 March 25, 2003 May 11, 2005
and Symphony December 1, 2004 March 25, 2003 May 11, 2005
Preferred and
Convertible 2 Froley, Spectrum May 15, 2003 June 24, 2003 May 11, 2005
and Symphony December 1, 2004 June 24, 2003 May 11, 2005
Real Estate SCRM January 20, 2004 January 20, 2004 May 11, 2005
Quality Preferred Spectrum June 1, 2002 June 18, 2002 May 11, 2005
Quality Preferred 2 Spectrum August 1, 2002 September 19, 2002 May 11, 2005
Quality Preferred 3 Spectrum December 18, 2002 December 16, 2002 May 11, 2005
Senior Income Symphony August 1, 2002 October 25, 1999 May 11, 2005
Tax-Advantaged Floating
Rate Spectrum March 24, 2005 March 16, 2005 N/A
Total Return NWQ and Symphony November 20, 2003 January 12, 2004 May 11, 2005
----------------------------------------------------------------------------------------------------
F-1
APPENDIX G
FORM OF INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this [31st] day of [July, 2005] by and between Nuveen Asset
Management, a Delaware corporation and a federally registered investment adviser
("Manager"), and , ("Sub-Adviser").
WHEREAS, Manager serves as the investment manager for the (the
"Fund"), a closed-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act") pursuant to an
Investment Management Agreement between Manager and the Fund (as such agreement
may be modified from time to time, the "Management Agreement"); and
WHEREAS, Manager desires to retain Sub-Adviser to furnish investment advisory
services for a certain designated portion of the Fund's investment portfolio,
upon the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Appointment. Manager hereby appoints Sub-Adviser to provide certain
sub-investment advisory services to the Fund for the period and on the
terms set forth in this Agreement. Sub-Adviser accepts such appointment
and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Services to be Performed. Subject always to the supervision of Fund's
Board of Trustees and the Manager, Sub-Adviser will furnish an
investment program in respect of, make investment decisions for, and
place all orders for the purchase and sale of securities for the
portion of the Fund's investment portfolio allocated by Manager to
Sub-Adviser, all on behalf of the Fund and as described in the Fund's
initial registration statement on Form N-2 as declared effective by the
Securities and Exchange Commission, consistent with the investment
objectives and restrictions of the Fund described therein and as they
may subsequently be changed by the Fund's Board of Trustees and
publicly described and as the Sub-Adviser is notified of such changes.
In the performance of its duties, Sub-Adviser will satisfy its
fiduciary duties to the Fund, will monitor the Fund's investments in
securities selected for the Fund by the Sub-Adviser hereunder, and will
comply with the provisions of the Fund's Declaration of Trust and
By-laws, as amended from time to time, and the investment objectives,
policies and restrictions of the Fund, to the extent the Sub-Adviser
has been notified of such objectives, policies and restrictions.
Manager will provide Sub-Adviser with current copies of the Fund's
Declaration of Trust, By-laws, prospectus and any amendments thereto,
and any written objectives, policies, procedures or limitations not
appearing therein as they may be relevant to Sub-Adviser's performance
under this Agreement. Sub-Adviser and Manager will each make its
officers and employees available to the other from time to time at
reasonable times to review investment policies of the Fund and to
consult with each other regarding the investment affairs of the Fund.
Sub-Adviser will report to the Board of Trustees and to Manager with
respect to the implementation of such program.
G-1
Manager shall arrange for the Fund's custodian to forward to Sub-Adviser
or Sub-Adviser's designated proxy agent on a timely basis copies of all
proxies and shareholder communications relating to securities in which
assets of the Fund's investment portfolio allocated by Manager to
Sub-Adviser are invested. The Sub-Adviser will vote all such proxies
delivered to Sub-Adviser or Sub-Adviser's designated proxy agent
consistent with the Sub-Adviser's proxy voting guidelines and the best
interests of the Fund. The Sub-Adviser will maintain appropriate records
detailing its voting of proxies on behalf of the Fund and upon reasonable
request will provide a report setting forth the proposals voted on and
how the Fund's shares were voted, including the name of the corresponding
issuers.
Sub-Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund, and
is directed to use its commercially reasonable efforts to obtain best
execution, which includes most favorable net results and execution of the
Fund's orders, taking into account all appropriate factors, including
price, dealer spread or commission, size and difficulty of the
transaction and research or other services provided. It is understood
that the Sub-Adviser will not be deemed to have acted unlawfully, or to
have breached a fiduciary duty to the Fund, or be in breach of any
obligation owing to the Fund under this Agreement, or otherwise, solely
by reason of its having caused the Fund to pay a member of a securities
exchange, a broker or a dealer a commission for effecting a securities
transaction for the Fund in excess of the amount of commission another
member of an exchange, broker or dealer would have charged if the
Sub-Adviser determined in good faith that the commission paid was
reasonable in relation to the brokerage or research services provided by
such member, broker or dealer, viewed in terms of that particular
transaction or the Sub-Adviser's overall responsibilities with respect to
its accounts, including the Fund, as to which it exercises investment
discretion. In addition, if in the judgment of the Sub-Adviser, the Fund
would be benefited by supplemental services, the Sub-Adviser is
authorized to pay spreads or commissions to brokers or dealers furnishing
such services in excess of spreads or commissions that another broker or
dealer may charge for the same transaction, provided that the Sub-Adviser
determined in good faith that the commission or spread paid was
reasonable in relation to the services provided. The Sub-Adviser will
properly communicate to the officers and trustees of the Fund such
information relating to transactions for the Fund as they may reasonably
request. In no instance will portfolio securities be purchased from or
sold to the Manager, Sub-Adviser or any affiliated person of the Fund,
Manager, or Sub-Adviser, except as may be permitted under the 1940 Act.
Sub-Adviser further agrees that it:
a) will use the same degree of skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it
has investment responsibilities;
b) will conform to all applicable Rules and Regulations of the Securities
and Exchange Commission in all material respects and in addition will
conduct its activities under this Agreement in accordance with any
applicable regulations of any governmental authority pertaining to its
investment advisory activities;
G-2
c) will report regularly to Manager and to the Board of Trustees of the
Fund and will make appropriate persons available for the purpose of
reviewing with representatives of Manager and the Board of Trustees
on a regular basis at reasonable times the management of the Fund,
including, without limitation, review of the general investment
strategies of the Fund with respect to the portion of the Fund's
portfolio allocated to the Sub-Adviser, the performance of the Fund's
investment portfolio allocated to the Sub-Adviser in relation to
standard industry indices and general conditions affecting the
marketplace and will provide various other reports from time to time
as reasonably requested by Manager;
d) will monitor the pricing of option contracts each day on which the
Fund calculates a net asset value, to determine whether market
movements between 4:00 p.m. and 4:15 p.m. indicate that it is
necessary for the Fund to determine a fair value of such option
contracts and will promptly notify the Manager of such evaluation
provided that, this provision is not intended to limit the Sub-
Adviser's responsibility to promptly notify the Manager of market or
security-specific events that have come to the attention of the
Sub-Adviser, that could call into question the validity of the
pricing of one or more securities in the Fund's portfolio; and
e) will prepare such books and records with respect to the Fund's
securities transactions for the portion of the Fund's investment
portfolio allocated to the Sub-Adviser as reasonably requested by the
Manager and will furnish Manager and Fund's Board of Trustees such
periodic and special reports as the Board or Manager may reasonably
request.
f) The Sub-Adviser is prohibited from consulting with any other
sub-adviser of the Fund or any other sub-adviser to a fund under
common control with the Fund concerning transactions of the Fund in
securities or other assets.
3. Representations of Manager. Manager hereby represents that it:
a) is registered as an investment adviser under the Advisers Act and
will continue to be so registered for so long as this Agreement
remains in effect;
b) is not prohibited by the 1940 Act or the Investment Advisers Act of
1940, as amended (the "Adviser Act"), from performing investment
advisory services to the Fund;
c) has met, and will continue to meet for so long as this Agreement
remains in effect, any applicable federal or state requirements, or
the applicable requirements of any regulatory or industry
self-regulatory agency, or the applicable licensing requirements for
the use of any trademarks necessary to be met in order to perform
investment advisory services for the Fund; and
d) will immediately notify the Sub-Adviser of the occurrence of any
event that would disqualify the Manager from serving as an investment
adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
G-3
4. Representations of Sub-Adviser. Sub-Adviser hereby represents that it:
a) is registered as an investment adviser under the Advisers Act and
will continue to be so registered for so long as this Agreement
remains in effect;
b) is not prohibited by the 1940 Act or the Advisers Act from performing
investment advisory services to the Fund;
c) has met, and will continue to meet for so long as this Agreement
remains in effect, any applicable federal or state requirements, or
the applicable requirements of any regulatory or industry
self-regulatory agency necessary to be met in order to perform
investment advisory services for the Fund; and
d) will immediately notify the Manager of the occurrence of any event
that would disqualify the Sub-Adviser from serving as an investment
adviser of an investment company pursuant to Section 9 (a) of the
1940 Act or otherwise.
5. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities (including brokerage
commissions and other related expenses) purchased for the Fund.
6. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, Manager will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a portfolio
management fee calculated based on the Sub-Adviser's allocation of Fund
net assets (including net assets attributable to
Shares and the principal amount of any borrowings) in accordance with
the following schedule from the date hereof through [August 1, 2006]:
DAILY NET ASSETS SUB-ADVISER'S ANNUAL FEE RATE
-----------------------------------------------------------------------
-----------------------------------------------------------------------
The portfolio management fee shall accrue on each calendar day, and
shall be payable monthly on the first business day of the next
succeeding calendar month. The daily fee accrual shall be computed by
multiplying the fraction of one divided by the number of days in the
calendar year by the applicable annual rate of fee, and multiplying this
product by the net assets of the Fund allocated to the Sub-Adviser,
determined in the manner established by the Fund's Board of Trustees, as
of the close of business on the last preceding business day on which the
Fund's net asset value was determined.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the
number of days that the Agreement is in effect during the month and
year, respectively.
Manager shall not agree to amend the financial terms of the Expense
Reimbursement Agreement or the Management Agreement to the detriment of
the Sub-Adviser by operation of this Section 6 without the express
written consent of the Sub-Adviser.
G-4
7. Services to Others. Manager understands, and has advised Fund's Board
of Trustees, that Sub-Adviser now acts, or may in the future act, as an
investment adviser to other investment portfolios including investment
companies, provided that whenever the Fund and one or more other
investment advisory clients of Sub-Adviser have available funds for
investment, investments suitable and appropriate for each will be
allocated in a manner believed by Sub-Adviser to be equitable to each.
Manager recognizes, and has advised Fund's Board of Trustees, that in
some cases this procedure may adversely affect the size of the position
that the Fund may obtain in a particular security. It is further agreed
that, on occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interests of the Fund as well as other
accounts, it may, to the extent permitted by applicable law, but will
not be obligated to, aggregate the securities to be so sold or
purchased for the Fund with those to be sold or purchased for other
accounts in order to obtain favorable execution and lower brokerage
commissions. In addition, Manager understands, and has advised Fund's
Board of Trustees, that the persons employed by Sub-Adviser to assist
in Sub-Adviser's duties under this Agreement will not devote their full
such efforts and service to the Fund. It is also agreed that the
Sub-Adviser may use any supplemental research obtained for the benefit
of the Fund in providing investment advice to its other investment
advisory accounts or for managing its own accounts.
8. Limitation of Liability. The Sub-Adviser shall not be liable for, and
Manager will not take any action against the Sub-Adviser to hold
Sub-Adviser liable for, any error of judgment or mistake of law or for
any loss suffered by the Fund (including, without limitation, by reason
of the purchase, sale or retention of any security) in connection with
the performance of the Sub-Adviser's duties under this Agreement,
except for a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of
its duties under this Agreement, or by reason of its reckless disregard
of its obligations and duties under this Agreement.
9. Term; Termination; Amendment. This Agreement shall become effective
with respect to the Fund on the same date as the Management Agreement
between the Fund and the Manager becomes effective, provided that it
has been approved by a vote of a majority of the outstanding voting
securities of the Fund in accordance with the requirements of the 1940
Act, and shall remain in full force until [August 1, 2006] unless
sooner terminated as hereinafter provided. This Agreement shall
continue in force from year to year thereafter with respect to the
Fund, but only as long as such continuance is specifically approved for
the Fund at least annually in the manner required by the 1940 Act and
the rules and regulations thereunder; provided, however, that if the
continuation of this Agreement is not approved for the Fund, the
Sub-Adviser may continue to serve in such capacity for the Fund in the
manner and to the extent permitted by the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any
penalty by the Manager on no less than sixty (60) days' written notice
to the Sub-Adviser. This Agreement may be terminated at any time without
the payment of any penalty by the Sub-
G-5
Adviser on no less than sixty (60) days' written notice to the Manager.
This Agreement may also be terminated by the Fund with respect to the
Fund by action of the Board of Trustees or by a vote of a majority of the
outstanding voting securities of such Fund on no less than sixty (60)
days' written notice to the Sub-Adviser by the Fund.
This Agreement may be terminated with respect to the Fund at any time
without the payment of any penalty by the Manager, the Board of Trustees
or by vote of a majority of the outstanding voting securities of the
Fund in the event that it shall have been established by a court of
competent jurisdiction that the Sub-Adviser or any officer or director
of the Sub-Adviser has taken any action that results in a breach of the
representations of the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the
rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Section 6 earned prior to the effective date
of such termination. This Agreement shall automatically terminate in the
event the Management Agreement between the Manager and the Fund is
terminated, assigned or not renewed.
10. Name. Manager shall furnish to Sub-Adviser all
prospectuses, proxy statements, reports to shareholders, sales
literature or other material prepared for distribution which refers to
the Sub-Adviser by name prior to the use thereof. Manager shall not use
any such materials if the Sub-Adviser reasonably objects to such use.
This paragraph shall survive the termination of this Agreement.
11. Notice. Any notice under this Agreement shall be in writing, addressed
and delivered or mailed, postage prepaid, to the other party
If to the Manager:
If to the Sub-Adviser:
With a copy to:
Nuveen Investments, Inc.
333 West Wacker Drive
Chicago, Illinois 60606
Attention: General Counsel
or such address as each such party may designate for the receipt of such
notice.
G-6
12. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's Agreement and Declaration of Trust and all
amendments thereto, a copy of which is on file with the Secretary of
the Commonwealth of Massachusetts, and the limitation of shareholder
and trustee liability contained therein. The obligations of the Fund
entered in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually but only in such
capacities and are not binding upon any of the Trustees, officers, or
shareholders of the Fund individually but are binding upon only the
assets and property of the Fund, and persons dealing with the Fund must
look solely to the assets of the Fund and those assets belonging to the
subject Fund, for the enforcement of any claims.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of
the provisions hereof or otherwise affect their construction or effect.
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
will not be affected thereby. This Agreement will be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors.
14. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 9 hereof which shall
be construed in accordance with the laws of Massachusetts) the laws of
the State of Illinois.
IN WITNESS WHEREOF, the Manager and the Sub-Adviser have caused this Agreement
to be executed as of the day and year first above written.
By:
-------------------------
Title:
-------------------------
By:
-------------------------
Title:
-------------------------
G-7
APPENDIX H
BROKERAGE COMMISSIONS PAID TO
SPECTRUM ASSET MANAGEMENT, INC.
DURING LAST FISCAL YEAR
------------------------------------------------------------------------------------------
AGGREGATE AMOUNT OF PERCENTAGE OF AGGREGATE
BROKERAGE COMMISSIONS PAID TO BROKERAGE COMMISSIONS PAID TO
FUND SPECTRUM ASSET MANAGEMENT, INC. SPECTRUM ASSET MANAGEMENT, INC.
------------------------------------------------------------------------------------------
Preferred and
Convertible(1) $ 167,005 42%
Preferred and
Convertible 2(1) 499,420 43%
Real Estate 0 0%
Quality Preferred(1) 169,065 100%
Quality Preferred 2(1) 226,120 100%
Quality Preferred 3(1) 48,572 100%
Tax-Advantaged Floating
Rate 0 0%
------------------------------------------------------------------------------------------
(1) After July 31, 2004, the funds' fiscal year end changed to December 31. For
the period of August 1, 2004 through December 31, 2004, the commissions and
percentages for Spectrum Asset Management, Inc. were:
-----------------------------------------------------------------
Preferred and Convertible $ 67,044 30%
Preferred and Convertible 2 37,519 10%
Quality Preferred 78,183 100%
Quality Preferred 2 108,349 100%
Quality Preferred 3 26,134 100%
-----------------------------------------------------------------
H-1
APPENDIX I
SUB-ADVISORY FEE RATES AND
AGGREGATE SUB-ADVISORY FEES PAID
-----------------------------------------------------------------------------------------------------------------
PERCENTAGE FEES PAID
OF THE NAM TO THE
ADVISORY FEE SUB-ADVISER
FUND AVERAGE DAILY NET PAID TO DURING LAST NET ASSETS AS
FUND SUB-ADVISER ASSETS OF FUND SUB-ADVISER FISCAL YEAR OF 5/1/05
-----------------------------------------------------------------------------------------------------------------
Preferred and Froley Up to $500 million 40.0% $ 1,373,689(1) $2,139,043,848.02
Convertible Over $500 million 35.0%
-----------------------------------------------------------------------------------------------------------------
Preferred and Froley Up to $500 million 40.0% $ 1,754,098(1) $2,962,376,837.61
Convertible 2 Over $500 million 35.0%
-----------------------------------------------------------------------------------------------------------------
Equity Premium Gateway Up to $200 million 55.0% $ 376,871 $ 708,834,956.59
$200 million to $300 million 52.5%
$300 million and over 50.0%
-----------------------------------------------------------------------------------------------------------------
Equity Premium Gateway Up to $200 million 55.0% $ N/A $1,199,795,530.11
Opportunity $200 million to $300 million 52.5%
$300 million and over 50.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Dividend NWQ Up to $200 million 55.0% $ 369,978 $ 446,101,522.12
$200 million to $300 million 52.5%
$300 million and over 50.0%
-----------------------------------------------------------------------------------------------------------------
Total Return NWQ Up to $200 million 55.0% $ 832,033 $ 335,370,192.38
$200 million to $300 million 52.5%
$300 million and over 50.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Dividend SCRM Up to $200 million 55.0% $ 356,764 $ 446,101,522.12
$200 million to $300 million 52.5%
$300 million and over 50.0%
-----------------------------------------------------------------------------------------------------------------
Real Estate SCRM Up to $125 million 50.0% $ 1,798,570 $ 766,723,468.07
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Preferred and Spectrum Up to $500 million 40.0% $ 2,471,601(1) $2,139,043,848.02
Convertible Over $500 million 35.0%
-----------------------------------------------------------------------------------------------------------------
Preferred and Spectrum Up to $500 million 40.0% $ 3,261,606(1) $2,962,376,837.61
Convertible 2 Over $500 million 35.0%
-----------------------------------------------------------------------------------------------------------------
Quality Preferred Spectrum Up to $125 million 50.0% $ 3,177,145 $1,378,303,815.94
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
I-1
-----------------------------------------------------------------------------------------------------------------
PERCENTAGE FEES PAID
OF THE NAM TO THE
ADVISORY FEE SUB-ADVISER
FUND AVERAGE DAILY NET PAID TO DURING LAST NET ASSETS AS
FUND SUB-ADVISER ASSETS OF FUND SUB-ADVISER FISCAL YEAR OF 5/1/05
-----------------------------------------------------------------------------------------------------------------
Quality Preferred 2 Spectrum 40.0% of the advisory fee 40.0% $ 5,607,347 $2,629,556,555.08
paid to NAM for its services
to the Fund
-----------------------------------------------------------------------------------------------------------------
Quality Preferred 3 Spectrum Up to $500 million 40.0% $ 1,203,714 $ 515,005,416.56
Over $500 million 35.0%
-----------------------------------------------------------------------------------------------------------------
Tax-Advantaged Spectrum Up to $125 million 50.0% $ N/A $ 186,160,453.38
Floating Rate $125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Dividend Symphony Up to $125 million 50.0% $ 294,434 $ 446,101,522.12
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Floating Rate Symphony Up to $125 million 50.0% $ 648,877 $1,064,016,735.25
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Floating Rate Income Symphony Up to $125 million 50.0% $ 5,105 $ 636,760,634.09
Opportunity $125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Preferred and Symphony Up to $125 million 50.0% $ N/A(1) $2,139,043,848.02
Convertible $125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Preferred and Symphony Up to $125 million 50.0% $ N/A(1) $2,962,376,837.61
Convertible 2 $125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Senior Income Symphony Up to $125 million 50.0% $693,236.31 $ 299,395,943.57
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
I-2
-----------------------------------------------------------------------------------------------------------------
PERCENTAGE FEES PAID
OF THE NAM TO THE
ADVISORY FEE SUB-ADVISER
FUND AVERAGE DAILY NET PAID TO DURING LAST NET ASSETS AS
FUND SUB-ADVISER ASSETS OF FUND SUB-ADVISER FISCAL YEAR OF 5/1/05
-----------------------------------------------------------------------------------------------------------------
Total Return Symphony Up to $125 million 50.0% $ 188,130 $ 335,370,192.38
$125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
Diversified Dividend Wellington Up to $125 million 50.0% $ 309,709 $ 446,101,522.12
Management $125 million to $150 million 47.5%
$150 million to $175 million 45.0%
$175 million to $200 million 42.5%
$200 million and over 40.0%
-----------------------------------------------------------------------------------------------------------------
(1) After July 31, 2004 the funds' fiscal year end changed to December 31. For
the period August 31, 2004 through December 31, 2004, the sub-adviser fees
were as follows:
--------------------------------------------------------
PREFERRED PREFERRED
AND AND
CONVERTIBLE CONVERTIBLE 2
--------------------------------------------------------
Froley $ 720,361 $ 867,371
Spectrum 1,123,093 1,448,588
Symphony 49,271 62,305
--------------------------------------------------------
FEE RATES AND NET ASSETS OF OTHER FUNDS ADVISED BY SUB-ADVISERS WITH SIMILAR
INVESTMENT OBJECTIVES AS THE SUB-ADVISED FUNDS
------------------------------------------------------------------------------------------
FEE RATES
------------------------------
FUND AVERAGE DAILY NET ASSETS
SUB-ADVISER SIMILAR FUND NET ASSETS FEE RATE AS OF 5/1/05
------------------------------------------------------------------------------------------
Froley Hallmark Not Less Than .35% $9,795,943.57
Investment of Current
Series Trust Shareholder Value
Convertible Not Less Than .30%
Securities of Class R Value
Fund I Not Less Than .20%
of Class I Value
------------------------------------------------------------------------------------------
Gateway Gateway Fund All 0.57%(1) $2,300,000,000(2)
------------------------------------------------------------------------------------------
Gateway TA IDEX Up to $100 million 0.40% $51,800,000(2)
Protected Over $100 million 0.375%
Principal
Stock
------------------------------------------------------------------------------------------
Spectrum PIF All 0.20% $258,464,590
Preferred
Securities
Fund
------------------------------------------------------------------------------------------
(1) This fee reflects the terms of the Management Agreement under which Gateway
is paid 0.925% of the average value of the daily net assets of the Gateway
Fund minus the amount of the Gateway Fund's expenses incurred pursuant to
its Distribution Plan. Also under the Management Agreement, Gateway receives
no separate fee for its transfer agency, fund accounting and other services
to the Gateway Fund, and Gateway pays the Gateway Fund's expenses of
reporting to shareholders.
(2) Approximated
I-3
APPENDIX J
OFFICERS AND DIRECTORS OF SUB-ADVISERS
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Froley George A. Froley, III,
Director, Chairman and
Managing Director
Jim Herbert, Director President, Chief Executive Officer
and Director of First Republic Bank.
Katherine Chief Operating Officer, Executive
Auguste-DeWilde, Director Vice President and Director of First
Republic.
Ed Dobranski, Director Senior Vice President, General
Counsel and Secretary of First
Republic Bank.
K. Andrea O'Connell,
Director, President,
Chief Executive Officer,
Managing Director and
Assistant Secretary
Michael Revy, Managing
Director and Senior Vice
President
Ravi Malik, Managing
Director and Senior Vice
President
Warren Chun, Senior Vice
President
Mike Opre, Senior Vice
President
Monica Erickson, Vice
President
Florian Eitner, Vice
President
David Epstein, Vice
President
Kim Nicholas, Vice
President
Melissa Shanahan, Vice
President
John Padden, Vice
President
Ed Hackney, Vice
President
Lily Yu, Senior Vice
President
Ann Houlihan, First
Senior Vice President,
CCO
Brenda Smith, Assistant
Secretary, CFO and
Controller
Brande Davis Winget, Vice
President
J-1
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Gateway Walter G. Sall Chairman and Trustee, Gateway Trust
Chairman and Chief and Gateway Variable Insurance Trust;
Executive Officer Director, Melmedica Children's
Healthcare, Inc.; Director, Anderson
Bank Company of Cincinnati, Ohio.
J. Patrick Rogers President, Gateway Trust and Gateway
President, Chief Variable Insurance Trust; Trustee,
Investment Officer and Gateway Trust; Portfolio Manager,
Director Gateway Fund and Gateway VIT Fund.
Geoffrey Keenan Vice President, Gateway Trust and
Executive Vice President Gateway Variable Insurance Trust.
and Chief Operating
Officer
Gary H. Goldschmidt Vice President and Treasurer, Gateway
Vice President and Chief Trust and Gateway Variable Insurance
Financial Officer Trust.
Harry E. Merriken
Senior Vice President
Paul R. Stewart
Senior Vice President
Donna M. Squeri Secretary, Gateway Trust and Gateway
General Counsel and Variable Insurance Trust.
Secretary
Kenneth H. Toft
Vice President
NWQ Michael C. Mendez President and Director (since
Chief Executive Officer 1999),Managing Director (1992-1999)
of NWQ Investment Management Company,
Inc.
Jon D. Bosse Managing Director, Portfolio Manager
Chief Investment Officer (since 1996), Director of Research
and Managing Director (1996-2001) of NWQ Investment
Management Company, Inc.; Chartered
Financial Analyst.
Edward C. Friedel Managing Director (since 1992) of NWQ
Senior Managing Director Investment Management Company, Inc.;
Chartered Financial Analyst.
Peter H. D'Arrigo, Vice President of Nuveen Investments,
Assistant Treasurer LLC; Vice President and Treasurer of
Nuveen Investments, Inc.; Vice
President and Treasurer of Nuveen
Asset Management and of Nuveen
Investments Advisers Inc.; Vice
President and Treasurer of Nuveen
Rittenhouse Asset Management, Inc.;
Vice President and Treasurer of funds
in Nuveen fund complex; Charted
Financial Analyst.
J-2
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Larry M. Martin, Vice President, Assistant Secretary
Assistant Secretary and Assistant General Counsel of
Nuveen Investments, LLC; Vice
President, Assistant General Counsel
and Assistant Secretary of Nuveen
Investments, Inc.; Vice President and
Assistant Secretary of Nuveen Asset
Management; Vice President, Assistant
Secretary and Assistant General
Counsel of Rittenhouse Asset
Management, Inc.; Vice President and
Assistant Secretary of Nuveen
Investments Advisers Inc.; Vice
President and Assistant Secretary of
funds in Nuveen fund complex.
Gifford R. Zimmerman, Managing Director, Assistant
Assistant Secretary Secretary and Associate General
Counsel of Nuveen Investments, LLC
and Nuveen Asset Management; Managing
Director and Assistant Secretary of
Nuveen Investments, Inc.; Vice
President and Assistant Secretary of
Nuveen Investments Advisers Inc.;
Managing Director, Associate General
Counsel and Assistant Secretary of
Rittenhouse Asset Management, Inc.;
Chief Administrative Officer of funds
in Nuveen fund complex.
SCRM Anthony R. Manno, Jr. President, Chairman and Managing
President and Managing Director of Security Capital
Director Preferred Growth Incorporated and
Director of Bulgarian American
Enterprise Fund.
Kenneth D. Statz
Managing Director
Kevin W. Bedell
Managing Director
David E. Rosenbaum Managing Director of Security Capital
Managing Director Preferred Growth Incorporated.
Robert W. Culver Vice President of Security Capital
Vice President Preferred Growth Incorporated.
Alexander K. Daggett
Vice President
Michael J. Heller Treasurer of Security Capital
Vice President, Treasurer Preferred Growth Incorporated.
and Controller
Jonathan Y. Lulu
Vice President
Spectrum Bernard M. Sussman Executive Director, Co-Chief
Executive Director, Executive Officer and Chief
Co-Chief Executive Investment Officer of Spectrum Asset
Officer and Chief Management, Inc.; Chairman of
Investment Officer Spectrum Asset Management, Inc.
Investment Committee.
J-3
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Mark A. Lieb Executive Director, Co-Chief
Executive Director, Executive Officer and Chief Financial
Co-Chief Executive Officer for Spectrum Asset
Officer and Chief Management, Inc.; Member of Spectrum
Financial Officer Asset Management, Inc. Investment
Committee.
L. Phillip Jacoby, IV Senior Vice President and Portfolio
Senior Vice President and Manager of Spectrum Asset Management,
Portfolio Manager Inc.; Member of Spectrum Asset
Management, Inc. Investment
Committee.
Lisa D. Crossley Vice President and Chief Compliance
Vice President and Chief Officer of Spectrum Asset Management,
Compliance Officer Inc., Formerly Vice President and
Director of Compliance, Nuveen
Investments, Inc.
Patrick G. Hurley Mr. Hurley is a member of the
Senior Vice President, Spectrum Asset Management, Inc.
Chief Information Officer Investment Committee.
and Risk Manager
Joseph J. Urciuoli Mr. Urciuoli is a member of the
Senior Vice President and Spectrum Asset Management, Inc.
Director of Research Investment Committee.
Symphony Jeffrey L. Skelton President and Chief Executive Officer
President; Chief of Symphony Asset Management LLC;
Executive Officer Manager/Member, NetNet Ventures, LLC.
Neil L. Rudolph Chief Operating Officer and Chief
Chief Operating Officer; Financial Officer of Symphony Asset
Chief Financial Officer Management LLC; Manager/Member,
NetNet Ventures, LLC.
Mary E. Keefe Managing Director of Nuveen
Chief Compliance Officer Investments, Inc.; Managing Director
and Chief Compliance Officer of
Nuveen Asset Management, Nuveen
Investments, LLC, Nuveen Investments
Advisers Inc. and Rittenhouse Asset
Management, Inc.; Chief Compliance
Officer of Symphony Asset Management
LLC.
Michael J. Henman Vice President and Director of
Vice President; Director Business Development of Symphony
of Business Development Asset Management LLC; Manager/Member,
NetNet Ventures, LLC.
Praveen K. Gottipalli Portfolio Manager and Manager/Member,
Vice President; Director NetNet Ventures, LLC.
of Investments
Gunther M. Stein Vice President and Director of Fixed
Vice President; Director Income Strategies of Symphony Asset
of Fixed Income Management LLC; Portfolio Manager,
Strategies Nuveen
J-4
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Wellington Kenneth L. Abrams
Management Senior Vice President and
Partner
Nicholas C. Adams
Senior Vice President and
Partner
Rand L. Alexander
Senior Vice President and
Partner
Deborah L. Allinson
Senior Vice President and
Partner
Steven C. Angeli
Senior Vice President and
Partner
James H. Averill
Senior Vice President and
Partner
John F. Averill
Senior Vice President and
Partner
Karl E. Bandtel
Senior Vice President and
Partner
David W. Barnard
Senior Vice President and
Partner
Mark J. Beckwith
Senior Vice President and
Partner
James A. Bevilacqua
Senior Vice President and
Partner
Kevin J. Blake
Senior Vice President and
Partner
William N. Booth
Senior Vice President and
Partner
John A. Boselli
Senior Vice President and
Partner
Michael J. Boudens
Senior Vice President and
Partner
J-5
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Edward P. Bousa
Senior Vice President and
Partner
John V. Brannen
Senior Vice President and
Partner
Paul Braverman
Senior Vice President and
Partner
Robert A. Bruno
Senior Vice President and
Partner
Michael T. Carmen
Senior Vice President and
Partner
Maryann E. Carroll
Senior Vice President and
Partner
William R.H. Clark Managing Director of the Sydney
Partner Branch of Wellington International
Management Pte Ltd. and Hong Kong
Branch of Wellington Global
Investment Management, Ltd.
Cynthia M. Clarke
Senior Vice President and
Partner
Richard M. Coffman
Senior Vice President and
Partner
John DaCosta
Senior Vice President and
Partner
Pamela Dippel
Senior Vice President and
Partner
Scott M. Elliott
Senior Vice President and
Partner
Robert L. Evans
Senior Vice President and
Partner
David R. Fassnacht
Senior Vice President and
Partner
Lisa d. Finkel
Senior Vice President and
Partner
J-6
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Mark A. Flaherty
Senior Vice President and
Partner
Hollis French
Senior Vice President and
Partner
Laurie A. Gabriel
Senior Vice President and
Partner
Ann C. Gallo
Senior Vice President and
Partner
Bruce L. Glazer
Senior Vice President and
Partner
Subbiah Gopalraman
Senior Vice President and
Partner
Paul J. Hamel
Senior Vice President and
Partner
William J. Hannigan
Senior Vice President and
Partner
Lucius T. Hill, III
Senior Vice President and
Partner
James P. Hoffmann
Senior Vice President and
Partner
Jean M. Hynes
Senior Vice President and
Partner
Steven T. Irons
Senior Vice President and
Partner
Mark D. Jordy Managing Director of the London
Partner Branch of Wellington Management
International Ltd.
Paul D. Kaplan
Senior Vice President and
Partner
Lorraine A. Keady
Senior Vice President and
Partner
John C. Keogh
Senior Vice President and
Partner
J-7
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
George C. Lodge, Jr.
Senior Vice President and
Partner
Nancy T. Lukitsh
Senior Vice President and
Partner
Mark T. Lynch
Senior Vice President and
Partner
Norman L. Malcolm
Senior Vice President and
Partner
Mark D. Mandel
Senior Vice President and
Partner
Christine S. Manfredi
Senior Vice President and
Partner
Lucinda M. Marrs
Senior Vice President and
Partner
Earl E. McEvoy
Senior Vice President and
Partner
Matthew E. Megargel
Senior Vice President and
Partner
James N. Mordy
Senior Vice President and
Partner
Diane C. Nordin
Senior Vice President and
Partner
Stephen T. O'Brien
Senior Vice President and
Partner
Andrew S. Offit
Senior Vice President and
Partner
Edward P. Owens
Senior Vice President and
Partner
Saul J. Pannell
Senior Vice President and
Partner
J-8
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Thomas L. Pappas
Senior Vice President and
Partner
Jonathan M. Payson
Senior Vice President and
Partner
Philip H. Perelmuter
Senior Vice President and
Partner
Robert D. Rands
Senior Vice President and
Partner
Jamie A. Rome
Senior Vice President and
Partner
James A. Rullo
Senior Vice President and
Partner
John R. Ryan
Senior Vice President and
Partner
Joseph H. Schwartz
Senior Vice President and
Partner
James H. Shakin
Senior Vice President and
Partner
Theodore E. Shasta
Senior Vice President and
Partner
Andrew J. Shilling
Senior Vice President and
Partner
Binkley C. Shorts
Senior Vice President and
Partner
Scott E. Simpson
Senior Vice President and
Partner
Trond Skramstad
Senior Vice President and
Partner
Stephen A. Soderberg
Senior Vice President and
Partner
J-9
------------------------------------------------------------------------------
SUB-ADVISER NAME PRINCIPAL OCCUPATION
------------------------------------------------------------------------------
Haluk Soykan
Senior Vice President and
Partner
Kent M. Stahl
Senior Vice President and
Partner
Eric Stromquist
Senior Vice President and
Partner
Brendan J. Swords
Senior Vice President and
Partner
Harriett Tee Taggart
Senior Vice President and
Partner
Frank L. Teixeira
Senior Vice President and
Partner
Perry M. Traquina
Senior Vice President and
Partner
Nilesh P. Undavia
Senior Vice President and
Partner
Kim Williams
Senior Vice President and
Partner
Itsuki Yamashita Senior Managing Director of the Tokyo
Partner Branch of Wellington International
Management Pte Ltd.
David S. Zimble
Senior Vice President and
Partner
J-10
[NUVEEN INVESTMENTS LOGO]
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606-1286
(800) 257-8787
www.nuveen.com JDD0705
[NUVEEN INVESTMENTS LOGO]
Nuveen Investments
333 West Wacker Drive
Chicago, IL 60606
www.nuveen.com
3 EASY WAYS TO VOTE YOUR PROXY
1. Automated Touch Tone Voting: Call toll-free 1-800-690-6903 and follow the
recorded instructions.
2. On the Internet at www.proxyweb.com, and follow the simple instructions.
3. Sign, Date and Return this proxy card using the enclosed postage-paid
envelope, to
**** CONTROL NUMBER: 999 999 999 999 98 ****
[FUND NAME PRINTS HERE]
THIS PROXY IS SOLICITED BY THE BOARD OF THE FUND
FOR A SPECIAL MEETING OF SHAREHOLDERS, JULY 26, 2005
A Special Meeting of shareholders will be held in the Assembly Room of The
Northern Trust Company, 50 South LaSalle Street, Chicago, Illinois, on Tuesday,
July 26, 2005, at 10:30 a.m., Chicago time. At this meeting, you will be asked
to vote on the proposals described in the proxy statement attached. The
undersigned hereby appoints Timothy R. Schwertfeger, Jessica R. Droeger and
Gifford R. Zimmerman, and each of them, with full power of substitution, proxies
for the undersigned, to represent and vote the shares of the undersigned at the
Special Meeting of shareholders to be held on July 26, 2005, or any adjournment
or adjournments thereof.
WHETHER OR NOT YOU PLAN TO JOIN US AT THE MEETING, PLEASE COMPLETE, DATE AND
SIGN YOUR PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE SO THAT YOUR VOTE
WILL BE COUNTED. AS AN ALTERNATIVE, PLEASE CONSIDER VOTING BY TELEPHONE (800)
690-6903 OR OVER THE INTERNET (www.proxyweb.com).
Date: _______________________________
SIGN HERE EXACTLY AS NAME(S) APPEAR(S)
ON LEFT. (Please sign in Box)
_____________________________________
_____________________________________
NOTE: PLEASE SIGN YOUR NAME EXACTLY AS
IT APPEARS ON THIS PROXY. IF SHARES
ARE HELD JOINTLY, EACH HOLDER MUST
SIGN THE PROXY, IF YOU ARE SIGNING ON
BEHALF OF AN ESTATE, TRUST OR
CORPORATION, PLEASE STATE YOUR TITLE
OR CAPACITY.
PLEASE FILL IN BOX(es) AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL. [X]
PLEASE DO NOT USE FINE POINT PENS.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Special Meeting.
PROPERLY EXECUTED PROXIES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, SUCH SHARES WILL BE VOTED "FOR" THE PROPOSALS SET FORTH IN THIS PROXY.
FOR AGAINST ABSTAIN
1. Approval of the new investment management agreement. [ ] [ ] [ ]
2d. Approval of the new sub-advisory agreement between Nuveen FOR AGAINST ABSTAIN
Asset Management and Security Capital Research & [ ] [ ] [ ]
Management Incorporated.
PLEASE SIGN ON REVERSE SIDE