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<SEC-DOCUMENT>0000950131-01-500944.txt : 20010501
<SEC-HEADER>0000950131-01-500944.hdr.sgml : 20010501
ACCESSION NUMBER:		0000950131-01-500944
CONFORMED SUBMISSION TYPE:	N-2
PUBLIC DOCUMENT COUNT:		6
FILED AS OF DATE:		20010427

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
		CENTRAL INDEX KEY:			0001090116
		STANDARD INDUSTRIAL CLASSIFICATION:	UNKNOWN SIC - 0000 [0000]
		STATE OF INCORPORATION:			MA
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		
		SEC FILE NUMBER:	333-59770
		FILM NUMBER:		1614719

	FILING VALUES:
		FORM TYPE:		N-2
		SEC ACT:		
		SEC FILE NUMBER:	811-09475
		FILM NUMBER:		1614720

	BUSINESS ADDRESS:	
		STREET 1:		JOHN NUVEEN & CO INC
		STREET 2:		333 WEST WACKER DRIVE
		CITY:			CHICAGO
		STATE:			IL
		ZIP:			60606
		BUSINESS PHONE:		3129177794

	MAIL ADDRESS:	
		STREET 1:		JOHN NUVEEN & CO INC
		STREET 2:		333 WEST WACKER DRIVE
		CITY:			CHICAGO
		STATE:			IL
		ZIP:			60606
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2
<SEQUENCE>1
<FILENAME>dn2.txt
<DESCRIPTION>NUVEEN INSURED DIVIDEND ADVANTAGE MUNI FD
<TEXT>

<PAGE>

    As filed with the Securities and Exchange Commission on April 27, 2001
================================================================================
                                                     1933 Act File No. 333-_____

                                                     1940 Act File No. 811-09475

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                    Form N-2
                        (Check appropriate box or boxes)


[x]  REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[_]  Pre-Effective Amendment No. __________
[_]  Post-Effective Amendment No. __________

          and

[x]  REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

[_]  Amendment No. _____

               Nuveen Insured Dividend Advantage Municipal Fund
         Exact Name of Registrant as Specified in Declaration of Trust
                 333 West Wacker Drive, Chicago, Illinois 60606
 Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
                                 (800) 257-8787
               Registrant's Telephone Number, including Area Code

                              Gifford R. Zimmerman
                          Vice President and Secretary
                             333 West Wacker Drive
                            Chicago, Illinois 60606
 Name and Address (Number, Street, City, State, Zip Code) of Agent for Service
                          Copies of Communications to:


    Stacy H. Winick                                        Thomas S. Harman
Bell, Boyd & Lloyd LLC                               Morgan, Lewis & Bockius LLP
   70 W. Madison St.                                      1800 M Street, N.W.
   Chicago, IL 60602                                    Washington, D.C. 20036

                 Approximate Date of Proposed Public Offering:

 As soon as practicable after the effective date of this Registration Statement
                         ____________________________

     If any of the securities being registered on this form are offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [_]

     It is proposed that this filing will become effective (check appropriate
box)

     [X] when declared effective pursuant to section 8(c)
                         ____________________________

<TABLE>
<CAPTION>
                         CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
=====================================================================================================================
                                                                               Proposed Maximum
     Title of Securities             Amount            Proposed Maximum        Aggregate Offering         Amount of
      Being Registered          Being Registered    Offering Price Per Unit         Price(1)         Registration Fee
- ---------------------------------------------------------------------------------------------------------------------
<S>                             <C>                 <C>                        <C>                   <C>
Common Shares, $.01 per value     1,000 Shares              $15.00                  $15,000                $3.75
=====================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee.

     The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.

================================================================================

<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the     +
+Securities and Exchange Commission is effective. This prospectus is not an    +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted.             +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
                   SUBJECT TO COMPLETION, DATED        , 2001

PROSPECTUS

                                          Shares

                       Nuveen Insured Dividend Advantage
[NUVEEN LOGO]                  Municipal Fund

                                 Common Shares
                                $15.00 per share

                                  ----------
  Investment Objectives. The Fund is a newly-organized, diversified, closed-
end, management investment company. The Fund's investment objectives are:
  . to provide current income exempt from regular federal income tax; and
  . to enhance portfolio value relative to the municipal bond market by
    investing in tax-exempt municipal bonds that the Fund's investment adviser
    believes are underrated or undervalued or that represent municipal market
    sectors that are undervalued.

  Portfolio Contents. Under normal market conditions, the Fund will invest at
least 80% of its net assets in a portfolio of insured municipal bonds that are
exempt from regular federal income taxes. Insured municipal bonds are defined
to include bonds that are either (i) covered by insurance guaranteeing the
timely payment of principal and interest thereon, or (ii) backed by an escrow
or trust account containing sufficient U.S. Government or U.S. Government
agency securities to ensure timely payment of principal and interest. The Fund
also may invest up to 20% of its net assets in other municipal bonds that are
investment grade quality. Under normal market conditions, the Fund expects to
be fully invested in the tax-exempt municipal bonds described above. The Fund
cannot assure you that it will achieve its investment objectives.

  No Prior History. Because the Fund is newly organized, its common shares have
no history of public trading. Shares of closed-end investment companies
frequently trade at a discount from their net asset value. This risk may be
greater for investors expecting to sell their shares in a relatively short
period after completion of the public offering. The common shares have been
approved for listing on the                        , subject to notice of
issuance. The trading or "ticker" symbol of the common shares is expected to be
"   ."

                                  ----------
  Investing in common shares involves certain risks. See "Risks" beginning on
page 17.

  Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

                                  ----------

<TABLE>
<CAPTION>
                       Per Share    Total
                       --------- ------------
<S>                    <C>       <C>
Public Offering Price   $15.00   $
Sales Load              $ 0.675  $
Proceeds to the Fund    $14.325  $
</TABLE>


  The underwriters expect to deliver the common shares to purchasers on or
about , 2001.


                                  ----------

                               Nuveen Investments

        , 2001
<PAGE>

   You should read the Prospectus, which contains important information about
the Fund, before deciding whether to invest and retain it for future reference.
A Statement of Additional Information, dated           , 2001 and as may be
supplemented, containing additional information about the Fund, has been filed
with the Securities and Exchange Commission and is incorporated by reference in
its entirety into this Prospectus. You may request a free copy of the Statement
of Additional Information, the table of contents of which is on page 36 of this
Prospectus, by calling (800) 257-8787 or by writing to the Fund, or obtain a
copy (and other information regarding the Fund) from the Securities and
Exchange Commission web site (http://www.sec.gov).

   The Fund's common shares do not represent a deposit or obligation of, and
are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.

   The underwriters named in this Prospectus may purchase up to
additional common shares from the Fund under certain circumstances.



                                       2
<PAGE>

   You should rely only on the information contained or incorporated by
reference in this Prospectus. The Fund has not authorized anyone to provide you
with different information. The Fund is not making an offer of these securities
in any state where the offer is not permitted. You should not assume that the
information contained in this Prospectus is accurate as of any date other than
the date on the front of this Prospectus.

                                 ------------

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Prospectus Summary.........................................................   4
Summary of Fund Expenses...................................................   9
The Fund...................................................................  11
Use of Proceeds............................................................  11
The Fund's Investments.....................................................  11
MuniPreferred Shares and Leverage..........................................  17
Risks......................................................................  19
How the Fund Manages Risk..................................................  21
Management of the Fund.....................................................  23
Net Asset Value............................................................  24
Distributions..............................................................  24
Dividend Reinvestment Plan.................................................  25
Description of Shares......................................................  26
Certain Provisions in the Declaration of Trust.............................  28
Repurchase of Fund Shares; Conversion to Open-End Fund.....................  30
Tax Matters................................................................  30
Other Matters..............................................................  32
Underwriting...............................................................  33
Custodian and Transfer Agent...............................................  36
Legal Opinions.............................................................  36
Table of Contents for the Statement of Additional Information..............  37
</TABLE>

                                 ------------

   Until         , 2001 (25 days after the date of this Prospectus), all
dealers that buy, sell or trade the Common Shares, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.


                                       3
<PAGE>

                              PROSPECTUS SUMMARY

   This is only a summary. You should review the more detailed information
contained in the Prospectus and in the Statement of Additional Information.

The Fund............... Nuveen Insured Dividend Advantage Municipal Fund (the
                         "Fund") is a newly organized, diversified, closed-end
                         management investment company. See "The Fund."

The Offering........... The Fund is offering             common shares of
                         beneficial interest at $15.00 per share through a
                         group of underwriters (the "Underwriters") led by
                         Nuveen Investments ("Nuveen")              and
                               . The common shares of beneficial interest are
                         called "Common Shares" in the rest of this
                         Prospectus. You must purchase at least 100 Common
                         Shares. The Fund has given the Underwriters an option
                         to purchase up to            additional Common Shares
                         to cover orders in excess of            Common
                         Shares. See "Underwriting." Nuveen Investments has
                         agreed to pay (i) all organizational expenses and
                         (ii) offering costs (other than sales load) that
                         exceed $     per Common Share.

Investment Objectives.. The Fund's investment objectives are to provide
                         current income exempt from regular federal income tax
                         and enhance portfolio value relative to the municipal
                         bond market by investing in tax-exempt municipal
                         bonds that the Fund's investment adviser believes are
                         underrated or undervalued or that represent municipal
                         market sectors that are undervalued. Under normal
                         market conditions, the Fund will invest at least 80%
                         of its net assets in a portfolio of insured municipal
                         bonds that are exempt from regular federal income
                         taxes. Insured municipal bonds are defined to include
                         bonds that are either (i) covered by insurance
                         guaranteeing the timely payment of principal and
                         interest thereon, or (ii) backed by an escrow or
                         trust account containing sufficient U.S. Government
                         or U.S. Government agency securities to ensure timely
                         payment of principal and interest. The Fund also may
                         invest up to 20% of its net assets in other municipal
                         bonds that are rated within the four highest grades
                         (Baa or BBB or better by Moody's Investor Service,
                         Inc. ("Moody's"), Standard & Poor's Corporation
                         ("S&P") or Fitch IBCA, Inc. ("Fitch")), or bonds that
                         are unrated but judged to be of comparable quality by
                         the Fund's investment adviser. Under normal market
                         conditions, the Fund expects to be fully invested in
                         the tax-exempt municipal bonds described above. See
                         "The Fund's Investments."

Special
Considerations.........
                        The Fund expects that a substantial portion of its
                         investments will pay interest that is taxable under
                         the federal alternative minimum tax. If you are, or
                         as a result of investment in the Fund would become,
                         subject to the federal alternative minimum tax, the
                         Fund may not be a suitable investment for you. In
                         addition, distributions of ordinary

                                       4
<PAGE>

                         taxable income (including any net short-term
                         capital gain) will be taxable to shareholders as
                         ordinary income, and capital gain dividends will be
                         subject to capital gains taxes. See "Tax Matters."

Proposed Offering of
 MuniPreferred(R)
 Shares...............  Subject to market conditions approximately one to
                         three months after completion of this offering, the
                         Fund intends to offer preferred shares of
                         beneficial interest ("MuniPreferred Shares")
                         representing approximately 35% of the Fund's
                         capital after their issuance. The issuance of
                         MuniPreferred Shares will leverage your investment
                         in Common Shares. Leverage involves special risks.
                         There is no assurance that the Fund will issue
                         MuniPreferred Shares or that, if issued, the Fund's
                         leveraging strategy will be successful. See
                         "Risks--Leverage Risk." The money the Fund obtains
                         by selling the MuniPreferred Shares will be
                         invested in long-term municipal bonds, which
                         generally will pay fixed rates of interest over the
                         life of the bond. The MuniPreferred Shares will pay
                         dividends based on shorter-term rates, which will
                         be reset frequently. So long as the rate of return,
                         net of applicable Fund expenses, on the long-term
                         bonds purchased by the Fund exceeds MuniPreferred
                         Share dividend rates as reset periodically, the
                         investment of the proceeds of the MuniPreferred
                         Shares will generate more income than will be
                         needed to pay dividends on the MuniPreferred
                         Shares. If so, the excess will be used to pay
                         higher dividends to holders of Common Shares
                         ("Common Shareholders"). However, the Fund cannot
                         assure you that the issuance of MuniPreferred
                         Shares will result in a higher yield on your Common
                         Shares. Once MuniPreferred Shares are issued, the
                         net asset value and market price of the Common
                         Shares and the yield to Common Shareholders will be
                         more volatile. See "MuniPreferred Shares and
                         Leverage" and "Description of Shares--MuniPreferred
                         Shares."

Investment Adviser....  Nuveen Advisory Corp. ("Nuveen Advisory") will be
                         the Fund's investment adviser. Nuveen Advisory will
                         receive an annual fee, payable monthly, in a
                         maximum amount equal to .65% of the Fund's average
                         daily net assets (including assets attributable to
                         any MuniPreferred Shares that may be outstanding),
                         with lower fee levels for assets that exceed $125
                         million. Nuveen Advisory has contractually agreed
                         to reimburse the Fund for fees and expenses in the
                         amount of .30% of average daily net assets of the
                         Fund for the first five full years of the Fund's
                         operations (through          , 2006), and for a
                         declining amount for an additional five years
                         (through        , 2011). Nuveen Advisory is a
                         wholly owned subsidiary of Nuveen. See "Management
                         of the Fund."

Distributions.........
                        Commencing with the Fund's first dividend, the Fund
                         intends to make regular monthly cash distributions
                         to you at a level rate based on the projected
                         performance of the Fund. The Fund's ability to
                         maintain a level dividend rate will depend on a
                         number of factors, including dividends payable on
                         the MuniPreferred Shares. As portfolio and

                                       5
<PAGE>

                         market conditions change, the rate of dividends on
                         the Common Shares and the Fund's dividend policy
                         could change. Over time, the Fund will distribute
                         all of its net investment income (after it pays
                         accrued dividends on any outstanding MuniPreferred
                         Shares). In addition, at least annually, the Fund
                         intends to distribute net capital gain and taxable
                         ordinary income, if any, to you so long as the net
                         capital gain and taxable ordinary income are not
                         necessary to pay accrued dividends on, or redeem or
                         liquidate, any MuniPreferred Shares. Your initial
                         distribution is expected to be declared
                         approximately 45 days, and paid approximately 60 to
                         90 days, from the completion of this offering,
                         depending on market conditions. You may elect to
                         automatically reinvest some or all of your
                         distributions in additional Common Shares under the
                         Fund's Dividend Reinvestment Plan. See
                         "Distributions" and "Dividend Reinvestment Plan."

Listing...............  The Common Shares have been approved for listing on
                         the                       , subject to notice of
                         issuance. See "Description of Shares--Common
                         Shares." The trading or "ticker" symbol of the
                         Common Shares is expected to be "   ."

Custodian.............  The Chase Manhattan Bank will serve as custodian of
                         the Fund's assets. See "Custodian and Transfer
                         Agent."

Market Price of         Shares of closed-end investment companies frequently
Shares................   trade at prices lower than net asset value. Shares
                         of closed-end investment companies like the Fund
                         that invest predominately in investment grade
                         municipal bonds have during some periods traded at
                         prices higher than net asset value and during other
                         periods have traded at prices lower than net asset
                         value. The Fund cannot assure you that Common
                         Shares will trade at a price higher than net asset
                         value in the future. Net asset value will be
                         reduced immediately following the offering by the
                         sales load and the amount of organization and
                         offering expenses paid by the Fund. See "Use of
                         Proceeds." In addition to net asset value, market
                         price may be affected by such factors as dividend
                         levels (which are in turn affected by expenses),
                         call protection, dividend stability, portfolio
                         credit quality and liquidity and market supply and
                         demand. See "MuniPreferred Shares and Leverage,"
                         "Risks," "Description of Shares," "Repurchase of
                         Fund Shares; Conversion to Open-End Fund" and the
                         Statement of Additional Information under
                         "Repurchase of Fund Shares; Conversion to Open-End
                         Fund." The Common Shares are designed primarily for
                         long-term investors, and you should not view the
                         Fund as a vehicle for trading purposes.

Special Risk
Considerations........
                        No Operating History. The Fund is a newly organized,
                         non-diversified, closed-end management investment
                         company with no history of operations.

                                       6
<PAGE>

                        Interest Rate Risk. Generally, when market interest
                         rates fall, bond prices rise, and vice versa.
                         Interest rate risk is the risk that the municipal
                         bonds in the Fund's portfolio will decline in value
                         because of increases in market interest rates. The
                         prices of longer-term bonds fluctuate more than
                         prices of shorter-term bonds as interest rates
                         change. Conversely, the values of lower-rated and
                         comparable unrated debt securities are less likely
                         than those of investment grade and comparable unrated
                         debt securities to fluctuate inversely with changes
                         in interest rates. Because the Fund will invest
                         primarily in long-term bonds, the Common Share net
                         asset value and market price per share will fluctuate
                         more in response to changes in market interest rates
                         than if the Fund invested primarily in shorter-term
                         bonds. The Fund's use of leverage, as described
                         below, will tend to increase Common Share interest
                         rate risk.

                        Credit Risk. Credit risk is the risk that one or more
                         municipal bonds in the Fund's portfolio will decline
                         in price, or fail to pay interest or principal when
                         due, because the issuer of the bond experiences a
                         decline in its financial status.

                        Leverage Risk. The use of leverage through the
                         issuance of MuniPreferred Shares creates an
                         opportunity for increased Common Share net income,
                         but also creates special risks for Common
                         Shareholders. There is no assurance that the Fund's
                         leveraging strategy will be successful. It is
                         anticipated that MuniPreferred dividends will be
                         based on shorter-term municipal bond rates of return
                         (which would be redetermined periodically, pursuant
                         to an auction process), and that the Fund will invest
                         the proceeds of the MuniPreferred Shares offering in
                         long-term, typically fixed rate, municipal bonds. So
                         long as the Fund's municipal bond portfolio provides
                         a higher rate of return (net of Fund expenses) than
                         the MuniPreferred dividend rate, as reset
                         periodically, the leverage will cause Common
                         Shareholders to receive a higher current rate of
                         return than if the Fund were not leveraged. If,
                         however, long and/or short-term rates rise, the
                         MuniPreferred dividend rate could exceed the rate of
                         return on long-term bonds held by the Fund that were
                         acquired during periods of generally lower interest
                         rates, reducing return to Common Shareholders.
                         Leverage creates two major types of risks for Common
                         Shareholders:

                            .  the likelihood of greater volatility of net
                               asset value and market price of Common Shares,
                               because changes in the value of the Fund's bond
                               portfolio (including bonds bought with the
                               proceeds of the MuniPreferred Shares offering)
                               are borne entirely by the Common Shareholders;
                               and

                            .  the possibility either that Common Share income
                               will fall if the MuniPreferred dividend rate
                               rises, or that Common Share income will
                               fluctuate because the MuniPreferred dividend
                               rate varies.


                                       7
<PAGE>

                        Municipal Bond Market Risk. The amount of public
                         information available about the municipal bonds in
                         the Fund's portfolio is generally less than that for
                         corporate equities or bonds, and the investment
                         performance of the Fund may therefore be more
                         dependent on the analytical abilities of Nuveen
                         Advisory than would be a stock fund or taxable bond
                         fund. The secondary market for municipal bonds,
                         particularly the below investment grade bonds in
                         which the Fund may invest, also tends to be less
                         well-developed or liquid than many other securities
                         markets, which may adversely affect the Fund's
                         ability to sell its bonds at attractive prices.

                        Portfolio Insurance. The Fund may be subject to
                         certain restrictions on investments imposed by
                         guidelines of the insurance companies issuing
                         portfolio insurance. The Fund does not expect these
                         guidelines to prevent Nuveen Advisory from managing
                         the Fund's portfolio in accordance with the Fund's
                         investment objective and policies.

                        Anti-takeover Provisions. The Fund's Declaration of
                         Trust (the "Declaration") includes provisions that
                         could limit the ability of other entities or persons
                         to acquire control of the Fund or convert the Fund to
                         open-end status. The provisions of the Declaration
                         described above could have the effect of depriving
                         the Common Shareholders of opportunities to sell
                         their Common Shares at a premium over the then
                         current market price of the Common Shares.

                                       8
<PAGE>

                           SUMMARY OF FUND EXPENSES

   The following table assumes the issuance of MuniPreferred Shares in an
amount equal to 35% of the Fund's capital (after their issuance), and shows
Fund expenses both as a percentage of net assets attributable to Common Shares
and as a percentage of total net assets.

<TABLE>
   <S>                                                      <C>
   Shareholder Transaction Expenses
     Sales Load Paid by You (as a percentage of offering
      price)...............................................        4.50%
     Dividend Reinvestment Plan Fees.......................        None(1)

<CAPTION>
                                                             Percentage of Net
                                                            Assets Attributable
                                                            to Common Shares(2)
                                                            -------------------
   <S>                                                      <C>
   Annual Expenses
   Management Fees.........................................        1.00%
   Other Expenses..........................................         .31%
                                                                   ----
   Total Annual Expenses...................................        1.31%
   Fee and Expense Reimbursement (Years 1-5)...............        (.46%)(3)
                                                                   ----
   Total Net Annual Expenses (Years 1-5)...................         .85%(3)
                                                                   ----
</TABLE>
- --------
(1) You will be charged a $2.50 service charge and pay brokerage charges if
    you direct the Plan Agent to sell your Common Shares held in a dividend
    reinvestment account.

(2) Stated as percentages of the Fund's total net assets, and again assuming
    the issuance of MuniPreferred Shares in an amount equal to 35% of the
    Fund's capital (after their issuance), the Fund's expenses would be
    estimated to be as follows:
<TABLE>
<CAPTION>
                                                                    Percentage
                                                                     of Total
                                                                    Net Assets
                                                                    ----------
   <S>                                                              <C>
   Annual Expenses
   Management Fees.................................................     .65%
   Other Expenses..................................................     .20%
                                                                       ----
   Total Annual Expenses...........................................     .85%
   Fees and Expense Reimbursement (Years 1-5)......................    (.30%)(3)
                                                                       ----
   Total Net Annual Expenses (Years 1-5)...........................     .55%(3)
                                                                       ----
</TABLE>

(3) Nuveen Advisory has contractually agreed to reimburse the Fund for fees
    and expenses in the amount of .30% of average daily net assets for the
    first 5 full years of the Fund's operations, .25% of average daily net
    assets in year 6, .20% in year 7, .15% in year 8, .10% in year 9 and .05%
    in year 10. Without the reimbursement, "Total Net Annual Expenses" would
    be estimated to be 1.31% of average daily net assets attributable to
    Common Shares and .85% of average daily net assets. Nuveen has agreed to
    pay (i) all organizational expenses and (ii) offering costs (other than
    sales load) that exceed $     per Common Share (   % of offering price).

   The purpose of the table above is to help you understand all fees and
expenses that you, as a Common Shareholder, would bear directly or indirectly.
The expenses shown in the table are based on estimated amounts for the Fund's
first year of operations and assume that the Fund issues approximately
          Common Shares. See "Management of the Fund" and "Dividend
Reinvestment Plan."

                                       9
<PAGE>

   The following example illustrates the expenses (including the sales load of
$45) that you would pay on a $1,000 investment in Common Shares, assuming (1)
total net annual expenses of .85% of net assets attributable to Common Shares
in years 1 through 5, increasing to 1.23% in year 10 and (2) a 5% annual
return:(/1/)

<TABLE>
<CAPTION>
             1 Year           3 Years                 5 Years                 10 Years(/2/)
             ------           -------                 -------                 -------------
             <S>              <C>                     <C>                     <C>
              $53               $71                     $90                       $160
</TABLE>

   The example should not be considered a representation of future expenses.
Actual expenses may be higher or lower.
- --------
(1) The example assumes that the estimated Other Expenses set forth in the
    Annual Expenses table are accurate, that fees and expenses increase as
    described in note 2 below and that all dividends and distributions are
    reinvested at net asset value. Actual expenses may be greater or less than
    those assumed. Moreover, the Fund's actual rate of return may be greater
    or less than the hypothetical 5% return shown in the example. The expenses
    you would pay, based on the Fund's expenses stated as a percentage of the
    Fund's total net assets (assuming the issuance of MuniPreferred Shares in
    an amount equal to 35% of the Fund's capital after their issuance) and
    otherwise on the assumptions in the example would be: 1 year $50; 3 years
    $62; 5 years $74; and 10 years $121.

(2) Assumes reimbursement of fees and expenses of .25% of average daily net
    assets in year 6, .20% in year 7, .15% in year 8, .10% in year 9 and .05%
    in year 10. Nuveen Advisory has not agreed to reimburse the Fund for any
    portion of its fees and expenses beyond           , 2011. See "Management
    of the Fund--Investment Management Agreement."

                                      10
<PAGE>

                                   THE FUND

   The Fund is a recently organized, diversified, closed-end management
investment company registered under the 1940 Act. The Fund was organized as a
Massachusetts business trust on July 12, 1999, pursuant to a Declaration of
Trust governed by the laws of the Commonwealth of Massachusetts. As a newly
organized entity, the Fund has no operating history. The Fund's principal
office is located at 333 West Wacker Drive, Chicago, Illinois 60606, and its
telephone number is (800) 257-8787.

                                USE OF PROCEEDS

   The net proceeds of the offering of Common Shares will be approximately
$             ($            if the Underwriters exercise the over-allotment
option in full) after payment of the estimated organization and offering
costs. Nuveen has agreed to pay (i) all organizational expenses and (ii)
offering costs (other than sales load) that exceed $     per Common Share. The
Fund will invest the net proceeds of the offering in accordance with the
Fund's investment objectives and policies as stated below. It is presently
anticipated that the Fund will be able to invest substantially all of the net
proceeds in municipal bonds that meet those investment objectives and policies
within three months after the completion of the offering. Pending such
investment, it is anticipated that the proceeds will be invested in short-
term, tax-exempt securities.

                            THE FUND'S INVESTMENTS

Investment Objectives and Policies

   The Fund's investment objectives are:

  .  to provide current income exempt from regular federal income tax; and

  .  to enhance portfolio value relative to the municipal bond market by
     investing in tax-exempt municipal bonds that Nuveen Advisory believes
     are underrated or undervalued or that represent municipal market sectors
     that are undervalued.

   Underrated municipal bonds are those whose ratings do not, in Nuveen
Advisory's opinion, reflect their true creditworthiness. Undervalued municipal
bonds are bonds that, in Nuveen Advisory's opinion, are worth more than the
value assigned to them in the marketplace. Nuveen Advisory may at times
believe that bonds associated with a particular municipal market sector (for
example, electric utilities), or issued by a particular municipal issuer, are
undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio
because it represents a market sector or issuer that Nuveen Advisory considers
undervalued, even if the value of the particular bond appears to be consistent
with the value of similar bonds. Municipal bonds of particular types (e.g.,
hospital bonds, industrial revenue bonds or bonds issued by a particular
municipal issuer) may be undervalued because there is a temporary excess of
supply in that market sector, or because of a general decline in the market
price of municipal bonds of the market sector for reasons that do not apply to
the particular municipal bonds that are considered undervalued. The Fund's
investment in underrated or undervalued municipal bonds will be based on
Nuveen Advisory's belief that their yield is higher than that available on
bonds bearing equivalent levels of interest rate risk, credit risk and other
forms of risk, and that their prices will ultimately rise (relative to the
market) to reflect their true value. The Fund attempts to increase its
portfolio value relative to the municipal bond market by prudent selection of
municipal bonds regardless of the direction the market may move. Any capital
appreciation realized by the Fund will generally result in the distribution of
taxable capital gains to Common Shareholders.

                                      11
<PAGE>

   Under normal market conditions, the Fund will invest at least 80% of its
net assets in a portfolio of insured municipal bonds that are exempt from
regular federal income taxes. Insured municipal bonds are defined to include
bonds that are either (i) covered by insurance guaranteeing the timely payment
of principal and interest thereon (sometimes referred to as "Covered Bonds"),
or (ii) backed by an escrow or trust account containing sufficient U.S.
Government or U.S. Government agency securities to ensure timely payment of
principal and interest (sometimes referred to as "Backed Bonds"). The Fund
also may invest up to 20% of its net asset in other municipal bonds that are
rated, at the time of investment, within the four highest grades (Baa or BBB
or better by Moody's, S&P or Fitch) or are unrated but judged to be of
comparable quality by Nuveen Advisory. A general description of Moody's, S&P's
and Fitch's ratings of municipal bonds is set forth in Appendix A to the
Statement of Additional Information. The Fund may also invest in securities of
other open- or closed-end investment companies that invest primarily in
municipal bonds of the types in which the Fund may invest directly. See "--
Other Investment Companies" and "--Initial Portfolio Composition."

   Each Covered Bond that the Fund holds will either be (i) covered by an
insurance policy applicable to a specific security, whether obtained by the
issuer of the security or a third party at the time of original issuance, or
by the Fund or a third party after the original issuance, or (ii) covered by
portfolio insurance through a master municipal insurance policy the Fund has
purchased. The Fund will only buy portfolio insurance from insurers whose
claims-paying ability Moody's rates as "Aaa" or S&P rates "AAA."

   The Fund also may invest in Backed Bonds that are backed by an escrow or
trust account containing securities issued or guaranteed by the U.S.
Government or U.S. Government agencies and backed by the full faith and credit
of the United States, in an amount that is sufficient to ensure the payment of
interest and principal. The Fund may buy Backed Bonds that have been (i)
advance refunded, where the proceeds of the refunding have been used to buy
U.S. Government or U.S. Government agency securities that are placed in escrow
and whose interest and principal payments are sufficient to cover the
remaining scheduled debt service on that municipal bond; or (ii) issued under
state or local housing finance programs that use the issuance proceeds to fund
mortgages that are then exchanged for U.S. Government or U.S. Government
agency securities and deposited with a trustee as security for those municipal
bonds. Both types of municipal bonds are normally regarded as having the
credit characteristics of the underlying U.S. Government or U.S. Government
agency securities.

   Upon Nuveen Advisory's recommendation, during temporary defensive periods
and in order to keep the Fund's cash fully invested, including the period
during which the net proceeds of the offering are being invested, the Fund may
invest up to 100% of its net assets in short-term investments including high
quality, short-term securities that may be either tax-exempt or taxable. The
Fund intends to invest in taxable short-term investments only in the event
that suitable tax-exempt short-term investments are not available at
reasonable prices and yields. Investment in taxable short-term investments
would result in a portion of your dividends being subject to regular federal
income taxes. For more information, see the Statement of Additional
Information.

   The Fund cannot change its investment objectives without the approval of
the holders of a "majority of the outstanding" Common Shares and MuniPreferred
Shares voting together as a single class, and of the holders of a "majority of
the outstanding" MuniPreferred Shares voting as a separate class. A "majority
of the outstanding" Common Shares means (i) 67% or more of the shares present
at a meeting, if the holders of more than 50% of the shares are present or
represented by proxy, or (ii) more

                                      12
<PAGE>

than 50% of the shares, whichever is less. See "Description of Shares--
MuniPreferred Shares--Voting Rights" and the Statement of Additional
Information under "Description of Shares--MuniPreferred Shares--Voting Rights"
for additional information with respect to the voting rights of holders of
MuniPreferred Shares.

   If you are, or as a result of investment in the Fund would become, subject
to the federal alternative minimum tax, the Fund may not be a suitable
investment for you because the Fund expects that a substantial portion of its
investments will pay interest that is taxable under the federal alternative
minimum tax. Special rules apply to corporate holders. In addition, capital
gain dividends will be subject to capital gains taxes. See "Tax Matters."

Municipal Bonds

   Municipal bonds are either general obligation or revenue bonds and
typically are issued to finance public projects (such as roads or public
buildings), to pay general operating expenses, or to refinance outstanding
debt. Municipal bonds may also be issued for private activities, such as
housing, medical and educational facility construction, or for privately owned
industrial development and pollution control projects. General obligation
bonds are backed by the full faith and credit, or taxing authority, of the
issuer and may be repaid from any revenue source; revenue bonds may be repaid
only from the revenues of a specific facility or source. The Fund also may
purchase municipal bonds that represent lease obligations. These carry special
risks because the issuer of the bonds may not be obligated to appropriate
money annually to make payments under the lease. In order to reduce this risk,
the Fund will only purchase municipal bonds representing lease obligations
where Nuveen Advisory believes the issuer has a strong incentive to continue
making appropriations until maturity.

   The municipal bonds in which the Fund will invest are generally issued by
States, cities and local authorities and certain possessions and territories
of the United States (such as Puerto Rico or Guam), and pay interest that, in
the opinion of bond counsel to the issuer (or on the basis of other authority
believed by Nuveen Advisory to be reliable), is exempt from regular federal
income taxes, although the interest may be subject to the federal alternative
minimum tax.

   The yields on municipal bonds depend on a variety of factors, including
prevailing interest rates and the condition of the general money market and
the municipal bond market, the size of a particular offering, the maturity of
the obligation and the rating of the issue. The market value of municipal
bonds will vary with changes in interest rate levels and as a result of
changing evaluations of the ability of their issuers to meet interest and
principal payments.

   The Fund will primarily invest in municipal bonds with long-term maturities
in order to maintain a weighted average maturity of 15-30 years, but the
weighted average maturity of obligations held by the Fund may be shortened,
depending on market conditions.

Municipal Bond Insurance

   Each Covered Bond the Fund acquires will be covered by a specific insurance
policy (either original issue insurance or secondary market insurance) or
portfolio insurance. The Fund may emphasize investments in municipal bonds
insured under specific insurance policies. The Fund may obtain

                                      13
<PAGE>

portfolio insurance from the insurers described in Appendix C to the Statement
of Additional Information. The Fund has obtained and in the future will only
obtain portfolio insurance issued by insurers whose claims-paying ability
Moody's rates "Aaa" or S&P rates "AAA." There is no limit on the percentage of
the Fund's assets that may be invested in municipal bonds insured by any one
insurer.

   Municipal bonds covered by a specific insurance policy, rather than by
portfolio insurance, will be rated "Aaa" by Moody's or "AAA" by S&P, because
of the rating of the insurer's claims-paying ability. Municipal bonds covered
by portfolio insurance, however, will be rated based primarily on the credit
characteristics of the issuer, without regard to the portfolio insurance, and
generally will be rated below "Aaa" or "AAA." While the Fund holds a municipal
bond covered by portfolio insurance, it will, effectively, be of the same
credit quality as a municipal bond covered by a specific insurance policy.

   The Fund's policy of buying municipal bonds insured by insurers whose
claims-paying ability is rated "Aaa" or "AAA" applies only when the Fund buys
the municipal bond. If either rating agency downgrades an insurer's claims-
paying ability, the Fund is not required to sell bonds covered by that
insurer's policies. If a rating agency downgrades its rating of an insurer, it
likely would downgrade its rating of a municipal bond covered by that
insurer's original issuance insurance or secondary market insurance. Municipal
bonds in the Fund's portfolio covered by that insurer's portfolio insurance
also would be downgraded. Moody's and S&P continually assess the claims-paying
ability of insurers and the creditworthiness of municipal bond issuers, and
the Fund cannot guarantee that Moody's and S&P will not downgrade their
ratings. The value of municipal bonds covered by portfolio insurance that are
in default or in significant risk of default will be determined by separately
establishing a value for the municipal bond and a value for the portfolio
insurance.

   Original Issue Insurance. The issuer of municipal bonds or a third party
buys original issue insurance for a particular issue of municipal bonds at the
time the municipal bonds are issued. Under this insurance, the insurer
unconditionally guarantees to the holder of the municipal bond the timely
payment of principal and interest when and as these payments become due if the
issuer does not pay them. However, if the due date of the principal is
accelerated because of mandatory or optional redemption (other than
acceleration because of a mandatory sinking fund payment), default or
otherwise, the payments guaranteed may be made in the amounts and at the times
as principal payments would have been due had there not been any acceleration.
The insurer is responsible for these payments less any amounts the holders
receive from any trustee for the municipal bonds issuer or from any other
source. Original issue insurance does not guarantee the payment of any
redemption premium (except for certain premium payments for certain small
issue industrial development and pollution control municipal bonds), the value
of the Fund's shares or the market value of municipal bonds, or payments of
any tender purchase price upon the tender of the municipal bonds. Original
issue insurance also does not insure against nonpayment of principal or
interest on municipal bonds resulting from the insolvency, negligence or any
other act or omission of the trustee or other paying agent for these bonds.

   Original issue insurance remains in effect as long as the municipal bonds
it covers remain outstanding and the insurer remains in business, regardless
of whether the Fund ultimately disposes of these municipal bonds.
Consequently, original issue insurance may be considered to represent an
element of market value of the municipal bonds so insured, but the exact
effect, if any, of this insurance on the market value cannot be estimated.

   Secondary Market Insurance. After a municipal bond is issued, the Fund or a
third party may purchase insurance on that security. Secondary market
insurance generally provides the same type of

                                      14
<PAGE>

coverage as original issue insurance and, as with original issue insurance,
secondary market insurance remains in effect as log as the municipal bonds it
covers remain outstanding and the insurer remains in business, regardless of
whether the Fund ultimately disposes of these municipal bonds.

   One of the purposes of acquiring secondary market insurance for a
particular municipal bond is to enable the Fund to enhance the value of the
security. The Fund, for example, might seek to buy a particular municipal bond
and obtain secondary market insurance for it if, in Nuveen Advisory's opinion,
the market value of the security, as insured, would exceed the current value
of the security without insurance plus the cost of the secondary market
insurance. Similarly, if the Fund owns but wishes to sell a municipal bond
that is then covered by portfolio insurance, the Fund might seek to obtain
secondary market insurance for it if, in Nuveen Advisory's opinion, the net
proceeds of the Fund's sale of the security, as insured, would exceed the
current value of the security plus the cost of the secondary market insurance.
In determining whether to insure municipal bonds the Fund owns, an insurer
will apply its own standards, which correspond generally to the standards it
has established for determining the insurability of new issues of municipal
bonds. See "Original Issue Insurance" above.

   Portfolio Insurance. The Fund may also purchase policies of portfolio
insurance, each of which would guarantee the payment of principal and interest
on specified eligible municipal bonds the Fund has bought. Except as described
below, portfolio insurance generally provides the same type of coverage as
original issue insurance or secondary market insurance. Municipal bonds
insured under one portfolio insurance policy would generally not be insured
under any other policy the Fund buys. A municipal bond is eligible for
coverage under a policy if it meets certain requirements of the insurer. If a
municipal bond is already covered by original issue insurance or secondary
market insurance, then the security is not required to be additionally insured
under any portfolio insurance policy that the Fund may buy.

   Each portfolio insurance policy will terminate for any municipal bond that
has been redeemed or that the Fund has sold, on the date of redemption or the
settlement date of sale, and an insurer will not have any liability thereafter
under a policy for any municipal bond, except that if the redemption date or
settlement date occurs after a record date and before the related payment date
for any municipal bond, the policy will terminate for that municipal bond on
the business day immediately following the payment date.

   One or more portfolio insurance policies may provide the Fund, under an
irrevocable commitment of the insurer, with the option to exercise the right
to obtain permanent insurance for a municipal bond that the Fund will sell.
The Fund would exercise the right to obtain permanent insurance upon payment
of a single, predetermined insurance premium payable from the sale proceeds of
the municipal bond. The Fund expects to exercise the right to obtain permanent
insurance for a municipal bond only if, in Nuveen Advisory's opinion, upon the
exercise the net proceeds from the sale of the municipal bond, as insured,
would exceed the proceeds from the sale of the security without insurance.

   The permanent insurance premium for each municipal bond is determined based
upon the insurability of each security as of the date the Fund originally
bought the security. This premium will not be increased or decreased for any
change in the security's creditworthiness, unless the security is in default
as to payment of principal or interest, or both. If this happens, the
permanent insurance premium will be subject to an increase predetermined at
the date of the Fund's purchase.

   The Fund generally intends to retain any insured bonds covered by portfolio
insurance that are in default or in significant risk of default and to place a
value on the insurance, which ordinarily will be

                                      15
<PAGE>

the difference between the market value of the defaulted bond and the market
value of similar bonds of minimum investment grade (that is, rated "Baa" or
"BBB") that are not in default. In certain circumstances, however, Nuveen
Advisory may determine that an alternative value for the insurance, such as
the difference between the market value of the defaulted bond and either its
par value or the market value of similar bonds that are not in default or in
significant risk of default, is more appropriate. To the extent that the Fund
holds defaulted municipal bonds, it may be limited in its ability to manage
its investment portfolio and to purchase other bonds. Except as described
above for bonds covered by portfolio insurance that are in default or subject
to significant risk of default, the Fund will not place any value on the
insurance in valuing the municipal bonds it holds.

   Because each portfolio insurance policy will terminate for a particular
covered bond on the date the Fund sells that bond, the insurer will be liable
only for those payments of principal and interest that are then due and owing
(unless the Fund obtains permanent insurance). Portfolio insurance will not
enhance the marketability of the Fund's bonds, whether or not the bonds are in
default or in significant risk of default. On the other hand, because original
issue insurance and secondary market insurance will remain in effect as long
as the municipal bonds they cover are outstanding, these insurance policies
may enhance the marketability of these bonds even when they are in default or
in significant risk of default, but the exact effect, if any, on
marketability, cannot be estimated. Accordingly, the Fund may determine to
retain or, alternatively, to sell municipal bonds covered by original issue
insurance or secondary market insurance that are in default or in significant
risk of default.

   The Fund generally pays the premiums for a portfolio insurance policy
monthly, and premiums are adjusted for purchases and sales of municipal bonds
covered by the policy during the month. The yield on the Fund's portfolio is
reduced to the extent of the insurance premiums the Fund pays which, in turn,
will depend upon the characteristics of the covered municipal bonds. If the
Fund were to buy secondary market insurance for any municipal bond then
covered by a portfolio insurance policy, the coverage and the obligation to
pay monthly premiums under the portfolio policy would cease.

When-Issued and Delayed Delivery Transactions

   The Fund may buy and sell municipal bonds on a when-issued or delayed
delivery basis, making payment or taking delivery at a later date, normally
within 15 to 45 days of the trade date. This type of transaction may involve
an element of risk because no interest accrues on the bonds prior to
settlement and, since bonds are subject to market fluctuations, the value of
the bonds at time of delivery may be less (or more) than cost. A separate
account of the Fund will be established with its custodian consisting of cash,
cash equivalents, or liquid securities having a market value at all times at
least equal to the amount of the commitment. A when-issued municipal bond will
be covered under a portfolio insurance policy upon the security's settlement
date. See "The Fund's Investments--Municipal Bond Insurance."

Other Investment Companies

   The Fund may invest up to 10% of its net assets in securities of other
open- or closed-end investment companies that invest primarily in municipal
bonds of the types in which the Fund may invest directly. The Fund generally
expects to invest in other investment companies either during periods when it
has large amounts of uninvested cash, such as the period shortly after the
Fund receives the proceeds of the offering of its Common Shares or
MuniPreferred Shares, or during periods when there is a shortage of
attractive, high-yielding municipal bonds available in the market. As a
stockholder

                                      16
<PAGE>

in an investment company, the Fund will bear its ratable share of that
investment company's expenses, and would remain subject to payment of the
Fund's advisory and administrative fees with respect to assets so invested.
Common Shareholders would therefore be subject to duplicative expenses to the
extent the Fund invests in other investment companies. Nuveen Advisory will
take expenses into account when evaluating the investment merits of an
investment in the investment company relative to available municipal bond
investments. In addition, the securities of other investment companies may
also be leveraged and will therefore be subject to the same leverage risks
described herein. As described in the section entitled "Risks," the net asset
value and market value of leveraged shares will be more volatile and the yield
to shareholders will tend to fluctuate more than the yield generated by
unleveraged shares.

                       MUNIPREFERRED SHARES AND LEVERAGE

   Subject to market conditions, approximately one to three months after the
completion of the offering of the Common Shares, the Fund intends to offer
MuniPreferred Shares representing approximately 35% of the Fund's capital
immediately after the issuance of the MuniPreferred Shares. The MuniPreferred
Shares have complete priority upon distribution of assets over the Common
Shares. The issuance of MuniPreferred Shares will leverage the Common Shares.
Leverage involves special risks. There is no assurance that the Fund's
leveraging strategy will be successful. Although the timing and other terms of
the offering of the MuniPreferred Shares will be determined by the Fund's
Board of Trustees, the Fund expects to invest the proceeds of the
MuniPreferred Shares offering in long-term municipal bonds. The MuniPreferred
Shares will pay dividends based on shorter-term rates (which would be
redetermined periodically by an auction process). So long as the Fund's
portfolio is invested in securities that provide a higher rate of return than
the dividend rate of the MuniPreferred Shares (after taking expenses into
consideration), the leverage will cause you to receive a higher current rate
of return than if the Fund were not leveraged.

   Changes in the value of the Fund's bond portfolio (including bonds bought
with the proceeds of the MuniPreferred Shares offering) will be borne entirely
by the Common Shareholders. If there is a net decrease (or increase) in the
value of the Fund's investment portfolio, the leverage will decrease (or
increase) the net asset value per Common Share to a greater extent than if the
Fund were not leveraged. During periods in which the Fund is using leverage,
the fees paid to Nuveen Advisory for advisory services will be higher than if
the Fund did not use leverage because the fees paid will be calculated on the
basis of the Fund's total net assets, including the proceeds from the issuance
of MuniPreferred Shares.

   For tax purposes, the Fund is currently required to allocate net capital
gain and other taxable income, if any, between the Common Shares and
MuniPreferred Shares in proportion to total distributions paid to each class
for the year in which the net capital gain or other taxable income is
realized. If net capital gain or other taxable income is allocated to
MuniPreferred Shares (instead of solely tax-exempt income), the Fund will
likely have to pay higher total dividends to MuniPreferred Shareholders or
make special payments to MuniPreferred Shareholders to compensate them for the
increased tax liability. This would reduce the total amount of dividends paid
to the Common Shareholders, but would increase the portion of the dividend
that is tax-exempt. On an after-tax basis, Common Shareholders may still be
better off than if they had been allocated all of the Fund's net capital gain
or other taxable income (resulting in a higher amount of total dividends), but
received a lower amount of tax-exempt income. If the increase in dividend
payments or the special payments to

                                      17
<PAGE>

MuniPreferred Shareholders are not entirely offset by a reduction in the tax
liability of, and an increase in the tax-exempt dividends received by, the
Common Shareholders, the advantage of the Fund's leveraged structure to Common
Shareholders will be reduced.

   Under the 1940 Act, the Fund is not permitted to issue preferred shares
unless immediately after such issuance the value of the Fund's total net
assets is at least 200% of the liquidation value of the outstanding preferred
shares (i.e., such liquidation value may not exceed 50% of the Fund's total
net assets). In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Common Shares unless, at the time of
such declaration, the value of the Fund's total net assets is at least 200% of
such liquidation value. If MuniPreferred Shares are issued, the Fund intends,
to the extent possible, to purchase or redeem MuniPreferred Shares from time
to time to the extent necessary in order to maintain coverage of any
MuniPreferred Shares of at least 200%. If the Fund has MuniPreferred Shares
outstanding, two of the Fund's trustees will be elected by the holders of
MuniPreferred Shares, voting separately as a class. The remaining trustees of
the Fund will be elected by holders of Common Shares and MuniPreferred Shares
voting together as a single class. In the event the Fund failed to pay
dividends on MuniPreferred Shares for two years, MuniPreferred Shareholders
would be entitled to elect a majority of the trustees of the Fund.

   The Fund may be subject to certain restrictions imposed by guidelines of
one or more rating agencies which may issue ratings for MuniPreferred Shares
issued by the Fund. These guidelines may impose asset coverage or portfolio
composition requirements that are more stringent than those imposed on the
Fund by the 1940 Act. It is not anticipated that these covenants or guidelines
will impede Nuveen Advisory from managing the Fund's portfolio in accordance
with the Fund's investment objectives and policies.

   The Fund may also borrow money for repurchase of its shares or as a
temporary measure for extraordinary or emergency purposes, including the
payment of dividends and the settlement of securities transactions which
otherwise might require untimely dispositions of Fund securities.

   Assuming that the MuniPreferred Shares will represent approximately 35% of
the Fund's capital and pay dividends at an annual average rate of     %, the
income generated by the Fund's portfolio (net of estimated expenses) must
exceed     % in order to cover such dividend payments and other expenses
specifically related to the MuniPreferred Shares. Of course, these numbers are
merely estimates, used for illustration. Actual MuniPreferred Share dividend
rates will vary frequently and may be significantly higher or lower than the
rate estimated above.

   The following table is furnished in response to requirements of the
Securities and Exchange Commission. It is designed to illustrate the effect of
leverage on Common Share total return, assuming investment portfolio total
returns (comprised of income and changes in the value of bonds held in the
Fund's portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment
portfolio returns are hypothetical figures and are not necessarily indicative
of the investment portfolio returns expected to be experienced by the Fund.
The table further reflects the issuance of MuniPreferred Shares representing
35% of the Fund's total capital, a     % yield on the Fund's investment
portfolio, net of expenses, and the Fund's currently projected annual
MuniPreferred Share dividend rate of     %. See "Risks" and "MuniPreferred
Shares and Leverage."

<TABLE>
<S>                                          <C>      <C>     <C>   <C>   <C>
Assumed Portfolio Total Return.............. (10.00)% (5.00)% 0.00% 5.00% 10.00%
Common Share Total Return...................
</TABLE>

                                      18
<PAGE>

   Common Share total return is composed of two elements--the Common Share
dividends paid by the Fund (the amount of which is largely determined by the
net investment income of the Fund after paying dividends on MuniPreferred
Shares) and gains or losses on the value of the securities the Fund owns. As
required by Securities and Exchange Commission rules, the table assumes that
the Fund is more likely to suffer capital losses than to enjoy capital
appreciation. For example, to assume a total return of 0%, the Fund must
assume that the tax-exempt interest it receives on its municipal bond
investments is entirely offset by losses in the value of those bonds.

   Unless and until MuniPreferred Shares are issued, the Common Shares will
not be leveraged and this section will not apply.

                                     RISKS

   The net asset value of the Common Shares will fluctuate with and be
affected by, among other things, interest rate risk, credit risk, reinvestment
risk and leverage risk, and an investment in Common Shares will be subject to
market discount risk, inflation risk and municipal bond market risk, each of
which is more fully described below.

   Newly Organized. The Fund is a newly organized, diversified, closed-end
management investment company and has no operating history.

   Market Discount Risk. Shares of closed-end management investment companies
frequently trade at a discount from their net asset value.

   Interest Rate Risk. Interest rate risk is the risk that bonds (and the
Fund's net assets) will decline in value because of changes in interest rates.
Generally, municipal bonds will decrease in value when interest rates rise and
increase in value when interest rates decline. This means that the net asset
value of the Common Shares will fluctuate with interest rate changes and the
corresponding changes in the value of the Fund's municipal bond holdings. The
value of the longer-term bonds in which the Fund generally invests fluctuates
more in response to changes in interest rates than does the value of shorter-
term bonds. Conversely, the values of lower-rated and comparable unrated debt
securities are less likely than those of investment grade and comparable
unrated debt securities to fluctuate inversely with changes in interest rates.
Because the Fund will invest primarily in long-term bonds, the Common Share
net asset value and market price per share will fluctuate more in response to
changes in market interest rates than if the Fund invested primarily in
shorter-term bonds. The Fund's use of leverage, as described below, will tend
to increase Common Share interest rate risk.

   Credit Risk. Credit risk is the risk that an issuer of a municipal bond
will become unable to meet its obligation to make interest and principal
payments. In general, lower rated municipal bonds carry a greater degree of
risk that the issuer will lose its ability to make interest and principal
payments, which could have a negative impact on the Fund's net asset value or
dividends.

   Municipal Bond Market Risk. Investing in the municipal bond market involves
certain risks. The amount of public information available about the municipal
bonds in the Fund's portfolio is generally less than that for corporate
equities or bonds, and the investment performance of the Fund may therefore be
more dependent on the analytical abilities of Nuveen Advisory than would be a
stock fund or taxable bond fund. The secondary market for municipal bonds,
particularly the below investment

                                      19
<PAGE>

grade bonds in which the Fund may invest, also tends to be less well-developed
or liquid than many other securities markets, which may adversely affect the
Fund's ability to sell its bonds at attractive prices.

   The ability of municipal issuers to make timely payments of interest and
principal may be diminished during general economic downturns and as
governmental cost burdens are reallocated among federal, state and local
governments. In addition, laws enacted in the future by Congress or state
legislatures or referenda could extend the time for payment of principal
and/or interest, or impose other constraints on enforcement of such
obligations, or on the ability of municipalities to levy taxes. Issuers of
municipal securities might seek protection under the bankruptcy laws. In the
event of bankruptcy of such an issuer, the Fund could experience delays in
collecting principal and interest and the Fund may not, in all circumstances,
be able to collect all principal and interest to which it is entitled. To
enforce its rights in the event of a default in the payment of interest or
repayment of principal, or both, the Fund may take possession of and manage
the assets securing the issuer's obligations on such securities, which may
increase the Fund's operating expenses. Any income derived from the Fund's
ownership or operation of such assets may not be tax-exempt.

   Portfolio Insurance. The Fund may be subject to certain restrictions on
investments imposed by guidelines of the insurance companies issuing portfolio
insurance. The Fund does not expect these guidelines to prevent Nuveen
Advisory from managing the Fund's portfolio in accordance with the Fund's
investment objective and policies.

   Reinvestment Risk. Reinvestment risk is the risk that income from the
Fund's bond portfolio will decline if and when the Fund invests the proceeds
from matured, traded or called bonds at market interest rates that are below
the portfolio's current earnings rate. A decline in income could affect the
Common Shares' market price or their overall returns.

   Leverage Risk. Leverage risk is the risk associated with the issuance of
the MuniPreferred Shares to leverage the Common Shares. There can be no
assurance that the Fund's leveraging strategy will be successful. Once the
MuniPreferred Shares are issued, the net asset value and market value of
Common Shares will be more volatile, and the yield to Common Shareholders will
tend to fluctuate with changes in the shorter-term dividend rates on the
MuniPreferred Shares. Long-term municipal bond rates of return are typically,
although not always, higher than shorter-term municipal bond rates of return.
If the dividend rate on the MuniPreferred Shares approaches the net rate of
return on the Fund's investment portfolio, the benefit of leverage to Common
Shareholders would be reduced. If the dividend rate on the MuniPreferred
Shares exceeds the net rate of return on the Fund's portfolio, the leverage
will result in a lower rate of return to Common Shareholders than if the Fund
were not leveraged. Because the long-term bonds included in the Fund's
portfolio will typically pay fixed rates of interest while the dividend rate
on the MuniPreferred Shares will be adjusted periodically, this could occur
even when both long-term and short-term municipal rates rise. In addition, the
Fund will pay (and Common Shareholders will bear) any costs and expenses
relating to the issuance and ongoing maintenance of the MuniPreferred Shares.
Accordingly, the Fund cannot assure you that the issuance of MuniPreferred
Shares will result in a higher yield or return to Common Shareholders.

   Similarly, any decline in the net asset value of the Fund's investments
will be borne entirely by Common Shareholders. Therefore, if the market value
of the Fund's portfolio declines, the leverage will result in a greater
decrease in net asset value to Common Shareholders than if the Fund were not
leveraged. Such greater net asset value decrease will also tend to cause a
greater decline in the market

                                      20
<PAGE>

price for the Common Shares. The Fund might be in danger of failing to
maintain the required 200% asset coverage or of losing its expected AAA/aaa
ratings on the MuniPreferred Shares or, in an extreme case, the Fund's current
investment income might not be sufficient to meet the dividend requirements on
the MuniPreferred Shares. In order to counteract such an event, the Fund might
need to liquidate investments in order to fund a redemption of some or all of
the MuniPreferred Shares. Liquidation at times of low municipal bond prices
may result in capital loss and may reduce returns to Common Shareholders.

   While the Fund may from time to time consider reducing leverage in response
to actual or anticipated changes in interest rates in an effort to mitigate
the increased volatility of current income and net asset value associated with
leverage, there can be no assurance that the Fund will actually reduce
leverage in the future or that any reduction, if undertaken, will benefit the
Common Shareholders. Changes in the future direction of interest rates are
very difficult to predict accurately. If the Fund were to reduce leverage
based on a prediction about future changes to interest rates, and that
prediction turned out to be incorrect, the reduction in leverage would likely
operate to reduce the income and/or total returns to Common Shareholders
relative to the circumstance where the Fund had not reduced leverage. The Fund
may decide that this risk outweighs the likelihood of achieving the desired
reduction to volatility in income and share price if the prediction were to
turn out to be correct, and determine not to reduce leverage as described
above.

   The Fund may invest in the securities of other investment companies. Such
securities may also be leveraged and will therefore be subject to the leverage
risks described above. Such additional leverage may in certain market
conditions serve to reduce the net asset value of the Fund's Common Shares and
the returns to Common Shareholders.

   Inflation Risk. Inflation risk is the risk that the value of assets or
income from investment will be worth less in the future as inflation decreases
the value of money. As inflation increases, the real value of the Common
Shares and distributions can decline. In addition, during any periods of
rising inflation, MuniPreferred Share dividend rates would likely increase,
which would tend to further reduce returns to Common Shareholders.

                           HOW THE FUND MANAGES RISK

Investment Limitations

   The Fund has adopted certain investment limitations designed to limit
investment risk and maintain portfolio diversification. These limitations are
fundamental and may not be changed without the approval of the holders of a
majority of the outstanding Common Shares and, if issued, MuniPreferred Shares
voting together as a single class, and the approval of the holders of a
majority of the MuniPreferred Shares voting as a separate class. Among other
restrictions, the Fund may not invest more than 25% of total Fund assets in
securities of issuers in any one industry, except that this limitation does
not apply to municipal bonds backed by the assets and revenues of governments
or political subdivisions of governments.

   The Fund may become subject to guidelines which are more limiting than the
investment restriction set forth above in order to obtain and maintain ratings
from Moody's or S&P on the MuniPreferred Shares that it intends to issue. The
Fund does not anticipate that such guidelines would

                                      21
<PAGE>

have a material adverse effect on the Fund's Common Shareholders or the Fund's
ability to achieve its investment objectives. See "Investment Objectives" in
the Statement of Additional Information for information about these guidelines
and a complete list of the fundamental and non-fundamental investment policies
of the Fund.

Portfolio Insurance

   The Fund seeks to reduce credit risk by buying bonds that are either
covered by insurance or backed by an escrow or trust account, each with the
purpose of ensuring timely payment of principal and interest. However, the
insured municipal bonds remain subject to market risk.

Limited Issuance of MuniPreferred Shares

   Under the 1940 Act, the Fund could issue MuniPreferred Shares having a
total liquidation value (original purchase price of the shares being
liquidated plus any accrued and unpaid dividends) of up to one-half of the
value of the total net assets of the Fund. If the total liquidation value of
the MuniPreferred Shares was ever more than one-half of the value of the
Fund's total net assets, the Fund would not be able to declare dividends on
the Common Shares until the liquidation value, as a percentage of the Fund's
assets, was reduced. The Fund intends to issue MuniPreferred Shares
representing about 35% of the Fund's total capital immediately after the time
of issuance, if the Fund sells all the Common Shares discussed in this
Prospectus. This higher than required margin of net asset value provides a
cushion against later fluctuations in the value of the Fund's portfolio and
will subject Common Shareholders to less income and net asset value volatility
than if the Fund were more leveraged. The Fund intends to purchase or redeem
MuniPreferred Shares, if necessary, to keep the liquidation value of the
MuniPreferred Shares below one-half of the value of the Fund's total net
assets.

Management of Investment Portfolio and Capital Structure to Limit Leverage
Risk

   The Fund may take certain actions if short-term interest rates increase or
market conditions otherwise change (or the Fund anticipates such an increase
or change) and the Fund's leverage begins (or is expected) to adversely affect
Common Shareholders. In order to attempt to offset such a negative impact of
leverage on Common Shareholders, the Fund may shorten the average maturity of
its investment portfolio (by investing in short-term, high quality securities)
or may extend the maturity of outstanding MuniPreferred Shares. The Fund may
also attempt to reduce the leverage by redeeming or otherwise purchasing
MuniPreferred Shares. As explained above under "Risks--Leverage Risk," the
success of any such attempt to limit leverage risk depends on Nuveen
Advisory's ability to accurately predict interest rate or other market
changes. Because of the difficulty of making such predictions, the Fund may
never attempt to manage its capital structure in the manner described above.

   If market conditions suggest that additional leverage would be beneficial,
the Fund may sell previously unissued MuniPreferred Shares or MuniPreferred
Shares that the Fund previously issued but later repurchased.

   Currently, the Fund may not invest in inverse floating rate securities,
which are securities that pay interest at rates that vary inversely with
changes in prevailing short-term tax-exempt interest rates and which represent
a leveraged investment in an underlying municipal bond. This restriction is a
non-fundamental policy of the Fund that may be changed by vote of the Fund's
Board of Trustees.

                                      22
<PAGE>

Hedging Strategies

   The Fund may use various investment strategies designed to limit the risk
of bond price fluctuations and to preserve capital. These hedging strategies
include using financial futures contracts, options on financial futures or
options based on either an index of long-term municipal securities or on
taxable debt securities whose prices, in the opinion of Nuveen Advisory,
correlate with the prices of the Fund's investments. Successful implementation
of most hedging strategies would generate taxable income, and the Fund has no
present intention to use these strategies.

                            MANAGEMENT OF THE FUND

Trustees and Officers

   The Board of Trustees is responsible for the management of the Fund,
including supervision of the duties performed by Nuveen Advisory. There are
seven trustees of the Fund, one of whom is an "interested person" (as defined
in the 1940 Act) and six of whom are not "interested persons." The names and
business addresses of the trustees and officers of the Fund and their
principal occupations and other affiliations during the past five years are
set forth under "Management of the Fund" in the Statement of Additional
Information.

Investment Adviser

   Nuveen Advisory, 333 West Wacker Drive, Chicago, Illinois 60606, serves as
the investment adviser to the Fund. In this capacity, Nuveen Advisory is
responsible for the selection and on-going monitoring of the municipal bonds
in the Fund's investment portfolio, managing the Fund's business affairs and
providing certain clerical, bookkeeping and administrative services. Nuveen
Advisory serves as investment adviser to investment portfolios with more than
$35 billion in assets under management. See the Statement of Additional
Information under "Investment Adviser."

   Nuveen Advisory is responsible for execution of specific investment
strategies and day-to-day investment operations. Nuveen Advisory manages the
Fund using a team of analysts and portfolio managers that focus on a specific
group of funds. William M. Fitzgerald is the portfolio manager of the Fund and
will provide daily oversight for, and execution of, the Fund's investment
activities. Mr. Fitzgerald has been a Managing Director of Nuveen Advisory
since 2000. Prior to that time, he was a Vice President of Nuveen Advisory.
Mr. Fitzgerald has been a portfolio manager for Nuveen Advisory since 1990,
and currently manages investments for twelve Nuveen-sponsored investment
companies.

   Nuveen Advisory is a wholly owned subsidiary of Nuveen, 333 West Wacker
Drive, Chicago, Illinois 60606. Founded in 1898, Nuveen and its affiliates
have over $62 billion of net assets under management or surveillance. Nuveen
is a subsidiary of The John Nuveen Company which, in turn, is a majority-owned
subsidiary of The St. Paul Companies, Inc., a publicly-traded company which is
principally engaged in providing property-liability insurance through
subsidiaries.

Investment Management Agreement

   Pursuant to an investment management agreement between Nuveen Advisory and
the Fund, the Fund has agreed to pay for the services and facilities provided
by Nuveen Advisory an annual management fee, payable on a monthly basis,
according to the following schedule:

<TABLE>
<CAPTION>
      Average Daily Net Assets(/1/)                               Management Fee
      -----------------------------                               --------------
      <S>                                                         <C>
      Up to $125 million.........................................     .6500%
      $125 million to $250 million...............................     .6375%
      $250 million to $500 million...............................     .6250%
      $500 million to $1 billion.................................     .6125%
      $1 billion to $2 billion...................................     .6000%
      $2 billion and over........................................     .5750%
</TABLE>

                                      23
<PAGE>

- --------
(1) Including net assets attributable to MuniPreferred Shares.

   In addition to the fee of Nuveen Advisory, the Fund pays all other costs
and expenses of its operations, including compensation of its trustees (other
than those affiliated with Nuveen Advisory), custodian, transfer agency and
dividend disbursing expenses, legal fees, expenses of independent auditors,
expenses of repurchasing shares, expenses of issuing any MuniPreferred Share,
expenses of preparing, printing and distributing shareholder reports, notices,
proxy statements and reports to governmental agencies, and taxes, if any.

   For the first ten years of the Fund's operation, Nuveen Advisory has
contractually agreed to reimburse the Fund for fees and expenses in the
amounts, and for the time periods, set forth below:

<TABLE>
<CAPTION>
                      Percentage
                      Reimbursed
                   (as a percentage
   Year Ending     of average daily
                   net assets)(/1/)
   -----------     ----------------
<S>                <C>
 2001(/2/).......       0.30%
 2002............       0.30%
 2003............       0.30%
 2004............       0.30%
 2005............       0.30%
 2006............       0.30%
</TABLE>
<TABLE>
<CAPTION>
                      Percentage
                      Reimbursed
                   (as a percentage
   Year Ending     of average daily
                   net assets)(/1/)
   -----------     ----------------
<S>                <C>
 2007............       0.25%
 2008............       0.20%
 2009............       0.15%
 2010............       0.10%
 2011............       0.05%
</TABLE>
- --------
(1) Including net assets attributable to MuniPreferred Shares.
(2) From the commencement of operations.

   Nuveen Advisory has not agreed to reimburse the Fund for any portion of its
fees and expenses beyond         , 2011.

                                NET ASSET VALUE

   The Fund's net asset value per share is determined as of the close of
regular session trading (normally 4:00 p.m. eastern time) on each day the New
York Stock Exchange is open for business. Net asset value is calculated by
taking the fair value of the Fund's total assets, including interest or
dividends accrued but not yet collected, less all liabilities, and dividing by
the total number of shares outstanding. The result, rounded to the nearest
cent, is the net asset value per share.

   In determining net asset value, expenses are accrued and applied daily and
securities and other assets for which market quotations are available are
valued at market value. The prices of municipal bonds are provided by a
pricing service and based on the mean between the bid and asked price. When
price quotes are not readily available (which is usually the case for
municipal bonds), the pricing service establishes a fair market value based on
prices of comparable municipal bonds. All valuations are subject to review by
the Fund's Board of Trustees or its delegate, Nuveen Advisory.

                                 DISTRIBUTIONS

   Commencing with the first dividend, the Fund intends to make regular
monthly cash distributions to Common Shareholders at a rate that reflects the
past and projected performance of the Fund. Distributions can only be made
from net investment income after paying any accrued dividends to

                                      24
<PAGE>

MuniPreferred Shareholders. The Fund's ability to maintain a level dividend
rate will depend on a number of factors, including dividends payable on the
MuniPreferred Shares. The net income of the Fund consists of all interest
income accrued on portfolio assets less all expenses of the Fund. Expenses of
the Fund are accrued each day. Over time, all the net investment income of the
Fund will be distributed. At least annually, the Fund also intends to
distribute net capital gain and ordinary taxable income, if any, after paying
any accrued dividends or making any liquidation payments to MuniPreferred
Shareholders. Initial distributions to Common Shareholders are expected to be
declared approximately 45 days, and paid approximately 60 to 90 days, from the
completion of this offering, depending on market conditions. Although it does
not now intend to do so, the Board of Trustees may change the Fund's dividend
policy and the amount or timing of the distributions, based on a number of
factors, including the amount of the Fund's undistributed net investment
income and historical and projected investment income and the amount of the
expenses and dividend rates on the outstanding MuniPreferred Shares.

   To permit the Fund to maintain a more stable monthly distribution, the Fund
will initially distribute less than the entire amount of net investment income
earned in a particular period. The undistributed net investment income would
be available to supplement future distributions. As a result, the
distributions paid by the Fund for any particular monthly period may be more
or less than the amount of net investment income actually earned by the Fund
during the period. Undistributed net investment income will be added to the
Fund's net asset value and, correspondingly, distributions from undistributed
net investment income will be deducted from the Fund's net asset value.

                          DIVIDEND REINVESTMENT PLAN

   You may elect to have all dividends, including any capital gain dividends,
on your Common Shares automatically reinvested by The Chase Manhattan Bank, as
agent for the Common Shareholders (the "Plan Agent"), in additional Common
Shares under the Dividend Reinvestment Plan (the "Plan"). You may elect to
participate in the Plan by completing the Dividend Reinvestment Plan
Application Form. If you do not participate, you will receive all
distributions in cash paid by check mailed directly to you by The Chase
Manhattan Bank as dividend paying agent.

   If you decide to participate in the Plan, the number of Common Shares you
will receive will be determined as follows:

     (1) If Common Shares are trading at or above net asset value at the time
  of valuation, the Fund will issue new shares at the then current market
  price; or

     (2) If Common Shares are trading below net asset value at the time of
  valuation, the Plan Agent will receive the dividend or distribution in cash
  and will purchase Common Shares in the open market, on the
           or elsewhere, for the participants' accounts. It is possible that
  the market price for the Common Shares may increase before the Plan Agent
  has completed its purchases. Therefore, the average purchase price per
  share paid by the Plan Agent may exceed the market price at the time of
  valuation, resulting in the purchase of fewer shares than if the dividend
  or distribution had been paid in Common Shares issued by the Fund. The Plan
  Agent will use all dividends and distributions received in cash to purchase
  Common Shares in the open market within 30 days of the dividend payment
  date. Interest will not be paid on any uninvested cash payments.

                                      25
<PAGE>

   You may withdraw from the Plan at any time by giving written notice to the
Plan Agent. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan and you will
receive a cash payment for any fraction of a share in your account. If you
wish, the Plan Agent will sell your shares and send you the proceeds, minus
brokerage commissions and a $2.50 service fee.

   The Plan Agent maintains all shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including
information you may need for tax records. Common Shares in your account will
be held by the Plan Agent in non-certificated form. Any proxy you receive will
include all Common Shares you have received under the Plan.

   There is no brokerage charge for reinvestment of your dividends or
distributions in Common Shares. However, all participants will pay a pro rata
share of brokerage commissions incurred by the Plan Agent when it makes open
market purchases.

   Automatically reinvesting dividends and distributions does not mean that
you do not have to pay income taxes due upon receiving dividends and
distributions.

   The Fund reserves the right to amend or terminate the Plan if in the
judgment of the Board of Trustees the change is warranted. There is no direct
service charge to participants in the Plan; however, the Fund reserves the
right to amend the Plan to include a service charge payable by the
participants. Additional information about the Plan may be obtained from The
Chase Manhattan Bank, P.O. Box 660086, Dallas, Texas 75266-0086.

                             DESCRIPTION OF SHARES

Common Shares

   The Declaration authorizes the issuance of an unlimited number of Common
Shares, par value $0.01 per share. All Common Shares have equal rights to the
payment of dividends and the distribution of assets upon liquidation. Common
Shares will, when issued, be fully paid and, subject to matters discussed in
"Certain Provisions in the Declaration of Trust," non-assessable, and will
have no pre-emptive or conversion rights or rights to cumulative voting.
Whenever MuniPreferred Shares are outstanding, Common Shareholders will not be
entitled to receive any distributions from the Fund unless all accrued
dividends on MuniPreferred Shares have been paid, and unless asset coverage
(as defined in the 1940 Act) with respect to MuniPreferred Shares would be at
least 200% after giving effect to the distributions. See "--MuniPreferred
Shares" below.

   The Common Shares have been approved for listing on the
        , subject to notice of issuance. The Fund intends to hold annual
meetings of shareholders so long as the Common Shares are listed on a national
securities exchange and such meetings are required as a condition to such
listing.

   The Fund's net asset value per share generally increases when interest
rates decline, and decreases when interest rates rise, and these changes are
likely to be greater because the Fund intends to have a leveraged capital
structure. Net asset value will be reduced immediately following the offering
by the amount of the sales load and organization and offering expenses paid by
the Fund. Nuveen has agreed to pay (i) all organizational expenses and (ii)
offering costs (other than sales load) that exceed $     per Common Share. See
"Use of Proceeds."

                                      26
<PAGE>

   Unlike open-end funds, closed-end funds like the Fund do not continuously
offer shares and do not provide daily redemptions. Rather, if a shareholder
determines to buy additional Common Shares or sell shares already held, the
shareholder may conveniently do so by trading on the exchange through a broker
or otherwise. Shares of closed-end investment companies may frequently trade
on an exchange at prices lower than net asset value. Shares of closed-end
investment companies like the Fund that invest predominately in investment
grade municipal bonds have during some periods traded at prices higher than
net asset value and during other periods have traded at prices lower than net
asset value. Because the market value of the Common Shares may be influenced
by such factors as dividend levels (which are in turn affected by expenses),
call protection, dividend stability, portfolio credit quality, net asset
value, relative demand for and supply of such shares in the market, general
market and economic conditions, and other factors beyond the control of the
Fund, the Fund cannot assure you that Common Shares will trade at a price
equal to or higher than net asset value in the future. The Common Shares are
designed primarily for long-term investors, and investors in the Common Shares
should not view the Fund as a vehicle for trading purposes. See "MuniPreferred
Shares and Leverage" and the Statement of Additional Information under
"Repurchase of Fund Shares; Conversion to Open-End Fund."

MuniPreferred Shares

   The Declaration authorizes the issuance of an unlimited number of
MuniPreferred Shares, par value $0.01 per share, in one or more classes or
series, with rights as determined by the Board of Trustees, by action of the
Board of Trustees without the approval of the Common Shareholders.

   The Fund's Board of Trustees has indicated its intention to authorize an
offering of MuniPreferred Shares (representing approximately 35% of the Fund's
capital immediately after the time the MuniPreferred Shares are issued)
approximately one to three months after completion of the offering of Common
Shares. Any such decision is subject to market conditions and to the Board's
continuing belief that leveraging the Fund's capital structure through the
issuance of MuniPreferred Shares is likely to achieve the benefits to the
Common Shareholders described in this Prospectus. Although the terms of the
MuniPreferred Shares will be determined by the Board of Trustees (subject to
applicable law and the Fund's Declaration) if and when it authorizes a
MuniPreferred Shares offering, the Board has determined that the MuniPreferred
Shares, at least initially, would likely pay cumulative dividends at rates
determined over relatively shorter-term periods (such as 7 days), by providing
for the periodic redetermination of the dividend rate through an auction or
remarketing procedure. The Board of Trustees has indicated that the preference
on distribution, liquidation preference, voting rights and redemption
provisions of the MuniPreferred Shares will likely be as stated below.

   Limited Issuance of MuniPreferred Shares. Under the 1940 Act, the Fund
could issue MuniPreferred Shares with an aggregate liquidation value of up to
one-half of the value of the Fund's total net assets, measured immediately
after issuance of the MuniPreferred Shares. "Liquidation value" means the
original purchase price of the shares being liquidated plus any accrued and
unpaid dividends. In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its Common Shares unless the liquidation
value of the MuniPreferred Shares is less than one-half of the value of the
Fund's total net assets (determined after deducting the amount of such
dividend or distribution) immediately after the distribution. If the Fund
sells all the Common Shares and MuniPreferred Shares discussed in this
Prospectus, the liquidation value of the MuniPreferred Shares is expected to
be approximately 35% of the value of the Fund's total net assets. The Fund
intends to purchase or redeem MuniPreferred Shares, if necessary, to keep that
fraction below one-half.

                                      27
<PAGE>

   Distribution Preference. The MuniPreferred Shares have complete priority
over the Common Shares as to distribution of assets.

   Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Fund, holders of
MuniPreferred Shares will be entitled to receive a preferential liquidating
distribution (expected to equal the original purchase price per share plus
accumulated and unpaid dividends thereon, whether or not earned or declared)
before any distribution of assets is made to holders of Common Shares.

   Voting Rights. MuniPreferred Shares are required to be voting shares and to
have equal voting rights with Common Shares. Except as otherwise indicated in
this Prospectus or the Statement of Additional Information and except as
otherwise required by applicable law, holders of MuniPreferred Shares will
vote together with Common Shareholders as a single class.

   Holders of MuniPreferred Shares, voting as a separate class, will be
entitled to elect two of the Fund's trustees. The remaining trustees will be
elected by Common Shareholders and holders of MuniPreferred Shares, voting
together as a single class. In the unlikely event that two full years of
accrued dividends are unpaid on the MuniPreferred Shares, the holders of all
outstanding MuniPreferred Shares, voting as a separate class, will be entitled
to elect a majority of the Fund's trustees until all dividends in arrears have
been paid or declared and set apart for payment. In order for the Fund to take
certain actions or enter into certain transactions, a separate class vote of
holders of MuniPreferred Shares will be required, in addition to the single
class vote of the holders of MuniPreferred Shares and Common Shares. See the
Statement of Additional Information under "Description of Shares--
MuniPreferred Shares--Voting Rights."

   Redemption, Purchase and Sale of MuniPreferred Shares. The terms of the
MuniPreferred Shares may provide that they are redeemable at certain times, in
whole or in part, at the original purchase price per share plus accumulated
dividends. The terms may also state that the Fund may tender for or purchase
MuniPreferred Shares and resell any shares so tendered. Any redemption or
purchase of MuniPreferred Shares by the Fund will reduce the leverage
applicable to Common Shares, while any resale of shares by the Fund will
increase such leverage. See "MuniPreferred Shares and Leverage."

   The discussion above describes the Board of Trustees' present intention
with respect to a possible offering of MuniPreferred Shares. If the Board of
Trustees determines to authorize such an offering, the terms of the
MuniPreferred Shares may be the same as, or different from, the terms
described above, subject to applicable law and the Fund's Declaration.

                CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

   Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Declaration contains an express disclaimer of shareholder liability for debts
or obligations of the Fund and requires that notice of such limited liability
be given in each agreement, obligation or instrument entered into or executed
by the Fund or the trustees. The Declaration further provides for
indemnification out of the assets and property of the Fund for all loss and
expense of any shareholder held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations. The Fund believes that the likelihood of such
circumstances is remote.

                                      28
<PAGE>

   The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund or to convert the Fund to
open-end status. Specifically, the Declaration requires a vote by holders of
at least two-thirds of the Common Shares and MuniPreferred Shares, voting
together as a single class, except as described below, to authorize (1) a
conversion of the Fund from a closed-end to an open-end investment company,
(2) a merger or consolidation of the Fund, or a series or class of the Fund,
with any corporation, association, trust or other organization or a
reorganization or recapitalization of the Fund, or a series or class of the
Fund, (3) a sale, lease or transfer of all or substantially all of the Fund's
assets (other than in the regular course of the Fund's investment activities),
(4) in certain circumstances, a termination of the Fund, or a series or class
of the Fund, or (5) a removal of trustees by shareholders, and then only for
cause, unless, with respect to (1) through (4), such transaction has already
been authorized by the affirmative vote of two-thirds of the total number of
trustees fixed in accordance with the Declaration or the By-laws, in which
case the affirmative vote of the holders of at least a majority of the Fund's
Common Shares and MuniPreferred Shares outstanding at the time, voting
together as a single class, is required, provided, however, that where only a
particular class or series is affected (or, in the case of removing a trustee,
when the trustee has been elected by only one class), only the required vote
by the applicable class or series will be required. Approval of shareholders
is not required, however, for any transaction, whether deemed a merger,
consolidation, reorganization or otherwise whereby the Fund issues Shares in
connection with the acquisition of assets (including those subject to
liabilities) from any other investment company or similar entity. None of the
foregoing provisions may be amended except by the vote of at least two-thirds
of the Common Shares and MuniPreferred Shares, voting together as a single
class. In the case of the conversion of the Fund to an open-end investment
company, or in the case of any of the foregoing transactions constituting a
plan of reorganization which adversely affects the holders of MuniPreferred
Shares, the action in question will also require the affirmative vote of the
holders of at least two-thirds of the Fund's MuniPreferred Shares outstanding
at the time, voting as a separate class, or, if such action has been
authorized by the affirmative vote of two-thirds of the total number of
trustees fixed in accordance with the Declaration or the By-laws, the
affirmative vote of the holders of at least a majority of the Fund's
MuniPreferred Shares outstanding at the time, voting as a separate class. The
votes required to approve the conversion of the Fund from a closed-end to an
open-end investment company or to approve transactions constituting a plan of
reorganization which adversely affects the holders of MuniPreferred Shares are
higher than those required by the 1940 Act. The Board of Trustees believes
that the provisions of the Declaration relating to such higher votes are in
the best interest of the Fund and its shareholders. See the Statement of
Additional Information under "Certain Provisions in the Declaration of Trust."

   The provisions of the Declaration described above could have the effect of
depriving the Common Shareholders of opportunities to sell their Common Shares
at a premium over the then current market price of the Common Shares by
discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction. The overall effect of these provisions is
to render more difficult the accomplishment of a merger or the assumption of
control by a third party. They provide, however, the advantage of potentially
requiring persons seeking control of the Fund to negotiate with its management
regarding the price to be paid and facilitating the continuity of the Fund's
investment objectives and policies. The Board of Trustees of the Fund has
considered the foregoing anti-takeover provisions and concluded that they are
in the best interests of the Fund and its Common Shareholders.

   Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.

                                      29
<PAGE>

            REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

   The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Common Shares will trade in the open market at a price that will be a function
of several factors, including dividend levels (which are in turn affected by
expenses), net asset value, call protection, dividend stability, portfolio
credit quality, relative demand for and supply of such shares in the market,
general market and economic conditions and other factors. Because shares of
closed-end investment companies may frequently trade at prices lower than net
asset value, the Fund's Board of Trustees has currently determined that, at
least annually, it will consider action that might be taken to reduce or
eliminate any material discount from net asset value in respect of Common
Shares, which may include the repurchase of such shares in the open market or
in private transactions, the making of a tender offer for such shares at net
asset value, or the conversion of the Fund to an open-end investment company.
The Fund cannot assure you that its Board of Trustees will decide to take any
of these actions, or that share repurchases or tender offers will actually
reduce market discount.

   If the Fund converted to an open-end investment company, it would be
required to redeem all MuniPreferred Shares then outstanding (requiring in
turn that it liquidate a portion of its investment portfolio), and the Common
Shares would no longer be listed on the                        . In contrast
to a closed-end investment company, shareholders of an open-end investment
company may require the company to redeem their shares at any time (except in
certain circumstances as authorized by or under the 1940 Act) at their net
asset value, less any redemption charge that is in effect at the time of
redemption. See the Statement of Additional Information under "Certain
Provisions in the Declaration of Trust" for a discussion of the voting
requirements applicable to the conversion of the Fund to an open-end
investment company.

   Before deciding whether to take any action if the Common Shares trade below
net asset value, the Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Fund's portfolio,
the impact of any action that might be taken on the Fund or its shareholders,
and market considerations. Based on these considerations, even if the Fund's
shares should trade at a discount, the Board of Trustees may determine that,
in the interest of the Fund and its shareholders, no action should be taken.
See the Statement of Additional Information under "Repurchase of Fund Shares;
Conversion to Open-End Fund" for a further discussion of possible action to
reduce or eliminate such discount to net asset value.

                                  TAX MATTERS

Federal Income Tax Matters

   The discussion below and in the Statement of Additional Information provide
general tax information related to an investment in the Common Shares. Because
tax laws are complex and often change, you should consult your tax advisor
about the tax consequences of an investment in the Fund.

   The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"),
and intends to distribute substantially all of its net income and gains to its
shareholders. Therefore, it is not expected that the Fund will be subject to
any federal income tax. The Fund primarily invests in municipal bonds issued
by States, cities and local authorities and certain possessions and
territories of the United States (such as Puerto Rico or Guam) or in municipal
bonds whose income is otherwise exempt from regular federal income taxes.
Thus,

                                      30
<PAGE>

substantially all of the Fund's dividends to you will qualify as "exempt-
interest dividends." A shareholder treats an exempt-interest dividend as
interest on state and local bonds exempt from regular federal income tax. Some
or all of an exempt-interest dividend, however, may be subject to federal
alternative minimum tax imposed on the shareholder. Different federal
alternative tax rules apply to individuals and to corporations.

   Although the Fund does not seek to realize taxable income or capital gains,
the Fund may realize and distribute taxable income or capital gains from time
to time as a result of the Fund's normal investment activities. The Fund will
distribute at least annually any ordinary taxable income or net capital gain.
Distributions of net short-term capital gain are taxable as ordinary income.
Distributions of net capital gain (the excess of net long-term capital gain
over net short-term capital loss) are taxable as long-term capital gains
regardless of how long you have owned your investment. Taxable dividends do
not qualify for a dividends received deduction if you are a corporate
shareholder. The Fund will allocate distributions to shareholders that are
treated as tax-exempt interest and as long-term capital gain and ordinary
income, if any, proportionately among the Common Shares and MuniPreferred
Shares. As long as the Fund qualifies as a regulated investment company,
distributions paid by the Fund generally will not be eligible for the
dividends received deduction allowed to corporations.

   Each year, you will receive a year-end statement that describes the tax
status of dividends paid to you during the preceding year, including the
source of investment income by state and the portion of income that is subject
to the federal alternative minimum tax. You will receive this statement from
the firm where you purchased your Common Shares if you hold your investment in
street name; the Fund will send you this statement if you hold your shares in
registered form.

   The tax status of your dividends is not affected by whether you reinvest
your dividends or receive them in cash.

   In order to avoid corporate taxation of its earnings and to pay tax-free
dividends, the Fund must meet certain I.R.S. requirements that govern the
Fund's sources of income, diversification of assets and distribution of
earnings to shareholders. The Fund intends to meet these requirements. If the
Fund failed to do so, the Fund would be required to pay corporate taxes on its
earnings and all your distributions would be taxable as ordinary income. In
particular, in order for the Fund to pay exempt-interest dividends, at least
50% of the value of the Fund's total assets must consist of tax-exempt
obligations. The Fund intends to meet this requirement. If the Fund failed to
do so, it would not be able to pay exempt-interest dividends and your
distributions attributable to interest received by the Fund from any source
would be taxable as ordinary income.

   The Fund may be required to withhold 31% of certain of your dividends if
you have not provided the Fund with your correct taxpayer identification
number (normally your Social Security number) and certain certifications, or
if you are otherwise subject to backup withholding. If you receive Social
Security benefits, you should be aware that exempt-interest dividends are
taken into account in calculating the amount of these benefits that may be
subject to federal income tax. If you borrow money to buy Fund shares, you may
not deduct the interest on that loan. Under I.R.S. rules, Fund shares may be
treated as having been bought with borrowed money even if the purchase of the
Fund shares cannot be traced directly to borrowed money.

   If you are subject to the federal alternative minimum tax, a portion of
your regular monthly dividends may be taxable.

                                      31
<PAGE>

   The exemption from federal income tax for tax-exempt dividends does not
necessarily result in exemption for such dividends under the income or other
tax laws of any state or local taxing authority. You are advised to consult
with your tax adviser about state and local tax matters.

                                 OTHER MATTERS

   A lawsuit brought in June 1996 (Green et al. v. Nuveen Advisory Corp., et
al.) by certain individual common shareholders of six leveraged closed-end
funds sponsored by Nuveen is currently pending in federal district court. The
plaintiffs allege that the leveraged closed-end funds engaged in certain
practices that violated various provisions of the 1940 Act and common law. The
plaintiffs also alleged, among other things, breaches of fiduciary duty by the
funds' directors and Nuveen Advisory and various misrepresentations and
omissions in prospectuses and shareholder reports relating to the use of
leverage through the issuance and periodic auctioning of preferred stock and
the basis of the calculation and payment of management fees to Nuveen Advisory
and Nuveen. Plaintiffs also filed a motion to certify defendant and plaintiff
classes.

   The defendants are vigorously defending the case and filed motions to
dismiss the entire lawsuit asserting that the claims are without merit and to
oppose certification of any classes. By opinion dated March 30, 1999, the
court granted most of the defendants' motion to dismiss and denied plaintiffs'
motion to certify defendant and plaintiff classes. The court dismissed all
claims against the funds, the funds' directors and Nuveen. The court dismissed
these claims without prejudice (which means that the plaintiffs can re-file
the claims if they can correct the defect that led to the claim being
dismissed) on the ground that a claim should have been brought as derivative
claims on behalf of the funds. The only remaining claim is brought under
Section 36(b) of the 1940 Act against Nuveen Advisory, and relates solely to
advisory fees Nuveen Advisory received from the six relevant funds. Discovery
is underway on that single claim. While the Fund cannot assure you that the
litigation will be decided in Nuveen Advisory's favor, Nuveen Advisory
believes a decision, if any, against it would have no material adverse effect
on the Fund, its Common Shares, or the ability of Nuveen Advisory to perform
its duties under the investment management agreement.

                                      32
<PAGE>

                                 UNDERWRITING

   Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each Underwriter named below has severally agreed to
purchase, and the Fund has agreed to sell to such Underwriter, the number of
Common Shares set forth opposite the name of such Underwriter.

<TABLE>
<CAPTION>
                                                                        Number
      Underwriters                                                    of Shares
      ------------                                                    ----------
      <S>                                                             <C>
      Nuveen Investments.............................................
                                                                      ----------
        Total........................................................
                                                                      ==========
</TABLE>

   The underwriting agreement provides that the obligations of the several
Underwriters to purchase the Common Shares included in this offering are
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to purchase all the Common Shares
(other than those covered by the over-allotment option described below) if
they purchase any of the Common Shares. The representatives have advised the
Fund that the Underwriters do not intend to confirm any sales to any accounts
over which they exercise discretionary authority.

   The Underwriters, for whom Nuveen Investments and                       are
acting as representatives, propose to offer some of the Common Shares directly
to the public at the public offering price set forth on the cover page of this
Prospectus and some of the Common Shares to certain dealers at the public
offering price less a concession not in excess of $0.45 per Common Share. The
sales load the Fund will pay of $0.675 per share is equal to 4.5% of the
initial offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $0.10 per Common Share on sales to
certain other dealers. If all of the Common Shares are not sold

                                      33
<PAGE>

at the initial offering price, the representatives may change the public
offering price and other selling terms. Investors must pay for any Common
Shares purchased on or before         , 2001. In connection with this
offering, Nuveen may perform clearing services without charge for brokers and
dealers for whom it regularly provides clearing services that are
participating in the offering as members of the selling group.

   The Fund has granted to the Underwriters an option, exercisable for 45 days
from the date of this Prospectus, to purchase up to           additional
Common Shares at the public offering price less the sales load. The
Underwriters may exercise such option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent such
option is exercised, each Underwriter will be obligated, subject to certain
conditions, to purchase a number of additional Common Shares approximately
proportionate to such Underwriter's initial purchase commitment.

   The Fund and Nuveen Advisory have agreed that, for a period of 180 days
from the date of this Prospectus, they will not, without the prior written
consent of                         , on behalf of the Underwriters, dispose of
or hedge any Common Shares or any securities convertible into or exchangeable
for Common Shares.                          in its sole discretion may release
any of the securities subject to these agreements at any time without notice.

   Prior to the offering, there has been no public market for the Common
Shares. Consequently, the initial public offering price for the Common Shares
was determined by negotiation among the Fund, Nuveen Advisory and the
representatives. There can be no assurance, however, that the price at which
the Common Shares will sell in the public market after this offering will not
be lower than the price at which they are sold by the Underwriters or that an
active trading market in the Common Shares will develop and continue after
this offering. The Common Shares have been approved for listing on the
                       , subject to official notice of issuance.

   The Fund and Nuveen Advisory have each agreed to indemnify the several
Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act of 1933, as amended.

   Nuveen has agreed to pay (i) all organizational expenses and (ii) offering
costs (other than sales load) that exceed $     per share.

   In addition, the Fund has agreed to reimburse the Underwriters for certain
expenses incurred by the Underwriters in the offering.

   In connection with the requirements for listing the Fund's Common Shares on
the                        , the Underwriters have undertaken to sell lots of
100 or more Common Shares to a minimum of 400 beneficial owners in the United
States. The minimum investment requirement is 100 Common Shares.

   Certain Underwriters may make a market in the Common Shares after trading
in the Common Shares has commenced on the                        . No
Underwriter is, however, obligated to conduct market-making activities and any
such activities may be discontinued at any time without notice, at the sole
discretion of the Underwriter. No assurance can be given as to the liquidity
of, or the trading market for, the Common Shares as a result of any market-
making activities undertaken by any Underwriter. This Prospectus is to be used
by any Underwriter in connection with the offering and,

                                      34
<PAGE>

during the period in which a prospectus must be delivered, with offers and
sales of the Common Shares in market-making transactions in the over-the-
counter market at negotiated prices related to prevailing market prices at the
time of the sale.

   The Underwriters have advised the Fund that, pursuant to Regulation M under
the Securities Exchange Act of 1934, as amended, certain persons participating
in the offering may engage in transactions, including stabilizing bids,
covering transactions or the imposition of penalty bids, which may have the
effect of stabilizing or maintaining the market price of the Common Shares at
a level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the Common Shares on behalf
of an Underwriter for the purpose of fixing or maintaining the price of the
Common Shares. A "covering transaction" is a bid for or purchase of the Common
Shares on behalf of an Underwriter to reduce a short position incurred by the
Underwriters in connection with the offering.  A "penalty bid" is a
contractual arrangement whereby if, during a specified period after the
issuance of the Common Shares, the Underwriters purchase Common Shares in the
open market for the account of the underwriting syndicate and the Common
Shares purchased can be traced to a particular Underwriter or member of the
selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the Common Shares in question at
the cost price to the syndicate or may recover from (or decline to pay to) the
Underwriter or selling group member in question any or all compensation
(including, with respect to a representative, the applicable syndicate
management fee) applicable to the Common Shares in question. As a result, an
Underwriter or selling group member and, in turn, brokers may lose the fees
that they otherwise would have earned from a sale of the Common Shares if
their customer resells the Common Shares while the penalty bid is in effect.
The Underwriters are not required to engage in any of these activities, and
any such activities, if commenced, may be discontinued at any time.

   The underwriting agreement provides that it may be terminated in the
absolute discretion of the representatives without liability on the part of
any Underwriter to the Fund or Nuveen Advisory if, prior to delivery of and
payment for the Common Shares, (i) trading in the Common Shares or securities
generally on the New York Stock Exchange, American Stock Exchange, Nasdaq
National Market or the Nasdaq Stock Market shall have been suspended or
materially limited, (ii) additional material governmental restrictions not in
force on the date of the underwriting agreement have been imposed upon trading
in securities generally or a general moratorium on commercial banking
activities in New York shall have been declared by either federal or state
authorities or (iii) any outbreak or material escalation of hostilities or
other international or domestic calamity, crisis or change in political,
financial or economic conditions, occurs, the effect of which is such as to
make it, in the judgment of the representatives, impracticable or inadvisable
to commence or continue the offering of the Common Shares at the offering
price to the public set forth on the cover page of the Prospectus or to
enforce contracts for the resale of the Common Shares by the Underwriters.

   The Fund anticipates that from time to time the representatives of the
Underwriters and certain other Underwriters may act as brokers or dealers in
connection with the execution of the Fund's portfolio transactions after they
have ceased to be Underwriters and, subject to certain restrictions, may act
as brokers while they are Underwriters.

   Prior to the public offering of Common Shares, Nuveen Advisory will
purchase Common Shares from the Fund in an amount satisfying the net worth
requirements of Section 14(a) of the 1940 Act.

   Nuveen, one of the representatives of the Underwriters, is the parent
company of Nuveen Advisory.

                                      35
<PAGE>

                         CUSTODIAN AND TRANSFER AGENT

   The custodian of the assets of the Fund is The Chase Manhattan Bank,
P.O. Box 660086, Dallas, Texas 75266-0086. The Custodian performs custodial,
fund accounting and portfolio accounting services. The Fund's transfer,
shareholder services and dividend paying agent is also The Chase Manhattan
Bank.

                                LEGAL OPINIONS

   Certain legal matters in connection with the Common Shares will be passed
upon for the Fund by Bell, Boyd & Lloyd LLC, Chicago, Illinois, and for the
Underwriters by                       ,                  . Bell, Boyd & Lloyd
LLC and                         may rely as to certain matters of
Massachusetts law on the opinion of Bingham Dana LLP, Boston, Massachusetts.

                                      36
<PAGE>

                           TABLE OF CONTENTS FOR THE
                      STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
      <S>                                                                   <C>
      Use of Proceeds......................................................   3
      Investment Objectives ...............................................   5
      Investment Policies and Techniques...................................  10
      Other Investment Policies and Techniques.............................  18
      Management of the Fund...............................................  21
      Investment Adviser...................................................  27
      Portfolio Transactions...............................................  28
      Distributions........................................................  29
      Description of Shares................................................  30
      Certain Provisions in the Declaration of Trust.......................  33
      Repurchase of Fund Shares; Conversion to Open-End Fund...............  34
      Tax Matters..........................................................  37
      Performance Related and Comparative Information......................  40
      Experts..............................................................  41
      Custodian............................................................  41
      Additional Information...............................................  41
      Report of Independent Auditors.......................................  43
      Financial Statements.................................................  44
      Appendices
        Appendix A--Ratings of Investments................................. A-1
        Appendix B--Taxable Equivalent Yield Tables........................ B-1
        Appendix C--Description of Insurers................................ C-1
        Appendix D--Hedging Strategies and Risks........................... D-1
        Appendix E--Factors Pertaining to California....................... E-1
        Appendix F--Performance Related and Comparative Information........ F-1
</TABLE>

                                       37
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

                                          Shares

                Nuveen Insured Dividend Advantage Municipal Fund

                                 Common Shares

                                   --------

                                   PROSPECTUS

                                        , 2001

                                   --------


                               Nuveen Investments








- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

     The information in this Statement of Additional Information is not complete
and may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
it is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.

                  SUBJECT TO COMPLETION--DATED _____ __, 2001

               Nuveen Insured Dividend Advantage Municipal Fund

                      STATEMENT OF ADDITIONAL INFORMATION


     Nuveen Insured Dividend Advantage Municipal Fund (the "Fund") is a newly
organized, diversified closed-end management investment company.

     This Statement of Additional Information relating to common shares of the
Fund ("Common Shares") does not constitute a prospectus, but should be read in
conjunction with the Fund's Prospectus relating thereto dated ________, 2001
(the "Prospectus"). This Statement of Additional Information does not include
all information that a prospective investor should consider before purchasing
Common Shares, and investors should obtain and read the Fund's Prospectus prior
to purchasing such shares. A copy of the Fund's Prospectus may be obtained
without charge by calling (800) 257-8787. You may also obtain a copy of the
Fund's Prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the meanings ascribed to them in the Prospectus.


                                       1

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                  Page
                                                                --------
<S>                                                             <C>
Use of Proceeds                                                        3
Investment Objectives                                                  5
Investment Policies and Techniques                                    10
Other Investment Policies and Techniques                              18
Management of the Fund                                                21
Investment Adviser                                                    27
Portfolio Transactions                                                28
Distributions                                                         29
Description of Shares                                                 30
Certain Provisions in the Declaration of Trust                        33
Repurchase of Fund Shares; Conversion to Open-End Fund                34
Tax Matters                                                           37
Performance Related and Comparative Information                       40
Experts                                                               41
Custodian                                                             41
Additional Information                                                41
Report of Independent Auditors                                        43
Financial Statements                                                  44
Ratings of Investments (Appendix A)                                  A-1
Taxable Equivalent Yield Tables (Appendix B)                         B-1
Description of Insurers (Appendix C)                                 C-1
Hedging Strategies and Risks (Appendix D)                            D-1
Performance Related and Comparative Information (Appendix E)         E-1
</TABLE>

This Statement of Additional Information is dated ________, 2001

                                       2

<PAGE>


                                USE OF PROCEEDS

     The net proceeds of the offering of Common Shares of the Fund will be
approximately: $___________ ($___________ if the Underwriters exercise the over-
allotment option in full) after payment of organization and offering costs.

                                       3


<PAGE>


     For the Fund, Nuveen Advisory has agreed to pay (i) all organizational
expenses and (ii) offering costs (other than sales load) that exceed $_____ per
Common Share.


     Pending investment in municipal bonds that meet the Fund's investment
objectives and policies, the net proceeds of the offering will be invested in
high quality, short-term tax-exempt money market securities or in high quality
municipal bonds with relatively low volatility (such as pre-refunded and
intermediate-term bonds), to the extent such securities are available. If
necessary to invest fully the net proceeds of the offering immediately, the Fund
may also purchase, as temporary investments, short-term taxable investments of
the type described under "Investment Policies and Techniques--Investment in
Municipal Bonds--Portfolio Investments," the income on which is subject to
regular federal income tax and securities of other open or closed-end investment
companies that invest primarily in municipal bonds of the type in which the Fund
may invest directly.

                                       4
<PAGE>


                             INVESTMENT OBJECTIVES

The Fund's investment objective is to provide current income exempt from regular
federal income tax, and to enhance portfolio value relative to the municipal
bond market by investing in tax-exempt municipal bonds that the Fund's
investment adviser believes are underrated or undervalued or that represent
municipal market sectors that are undervalued.

                                       5

<PAGE>


     The Fund's investment in underrated or undervalued municipal bonds will be
based on Nuveen Advisory's belief that their yield is higher than that available
on bonds bearing equivalent levels of interest rate risk, credit risk and other
forms of risk, and that their prices will ultimately rise (relative to the
market) to reflect their true value. The Fund attempts to increase its
portfolio value relative to the municipal bond market by prudent selection of
municipal bonds regardless of the direction the market may move. Any capital
appreciation realized by the Fund will

                                       6
<PAGE>


generally result in the distribution of taxable capital gains to holders of
Common Shares. The Fund's investment objectives are fundamental policies of the
Fund.

     The Fund seeks to achieve its investment objectives by investing at least
80% of its net assets in a portfolio of tax-exempt municipal bonds that are
either (i) covered by insurance guaranteeing the timely payment of principal and
interest thereof (sometimes referred to as "Covered Bonds"), or (ii) backed by
an escrow or trust account containing sufficient U.S. Government or U.S.
Government agency securities to ensure timely payment of principal and interest
(sometimes referred to as "Backed Bonds"). The Fund also may invest up to 20% of
its assets in other municipal bonds that are rated, at the time of investment,
within the four highest grades (Baa or BBB or better by Moody's, S&P or Fitch)
or are unrated but judged to be of comparable quality by Nuveen Advisory.

     The Fund has not established any limit on the percentage of its portfolio
that may be invested in municipal bonds subject to the alternative minimum tax
provisions of federal tax law, and the Fund expects that a substantial portion
of the income it produces will be includable in alternative minimum taxable
income. Common Shares therefore would not ordinarily be a suitable investment
for investors who are subject to the federal alternative minimum tax or who
would become subject to such tax by purchasing Common Shares. The suitability of
an investment in Common Shares will depend upon a comparison of the after-tax
yield likely to be provided from the Fund with that from comparable tax-exempt
investments not subject to the alternative minimum tax, and from comparable
fully taxable investments, in light of each such investor's tax position.
Special considerations apply to corporate investors. See "Tax Matters."

Investment Restrictions

     Except as described below, the Fund, as a fundamental policy, may not,
without the approval of the holders of a majority of the outstanding Common
Shares and, if issued, MuniPreferred Shares (as hereinafter defined) voting
together as a single class, and of the holders of a majority of the outstanding
MuniPreferred Shares voting as a separate class:

          (1) Issue senior securities, as defined in the Investment Company Act
     of 1940, other than MuniPreferred Shares, except to the extent permitted
     under the Investment Company Act of 1940 and except as otherwise described
     in the Prospectus;

          (2) Borrow money, except from banks for temporary or emergency
     purposes or for repurchase of its shares, and then only in an amount not
     exceeding one-third of the value of the Fund's total assets (including the
     amount borrowed) less the Fund's liabilities (other than borrowings);

          (3) Act as underwriter of another issuer's securities, except to the
     extent that the Fund may be deemed to be an underwriter within the meaning
     of the Securities Act of 1933 in connection with the purchase and sale of
     portfolio securities;

          (4) Invest more than 25% of its total assets in securities of issuers
     in any one industry; provided, however, that such limitation shall not
     apply to municipal bonds other than those municipal bonds backed only by
     the assets and revenues of non-governmental users;

                                       7
<PAGE>

          (5) Purchase or sell real estate, but this shall not prevent the Fund
     from investing in municipal bonds secured by real estate or interests
     therein or foreclosing upon and selling such security;

          (6) Purchase or sell physical commodities unless acquired as a result
     of ownership of securities or other instruments (but this shall not prevent
     the Fund from purchasing or selling options, futures contracts, derivative
     instruments or from investing in securities or other instruments backed by
     physical commodities);

          (7) Make loans, other than by entering into repurchase agreements and
     through the purchase of municipal bonds or short-term investments in
     accordance with its investment objectives, policies and limitations;

          (8) Invest more than 5% of its total assets in securities of any one
     issuer, except that this limitation shall not apply to bonds issued by the
     United States Government, its agencies and instrumentalities or to the
     investment of 25% of its total assets.

     For purposes of the foregoing and "Description of Shares--MuniPreferred
Shares--Voting Rights" below, "majority of the outstanding," when used with
respect to particular shares of the Fund, means (i) 67% or more of the shares
present at a meeting, if the holders of more than 50% of the shares are present
or represented by proxy, or (ii) more than 50% of the shares, whichever is
less.

     For the purpose of applying the limitation set forth in subparagraph (8)
above, an issuer shall be deemed the sole issuer of a security when its assets
and revenues are separate from other governmental entities and its securities
are backed only by its assets and revenues. Similarly, in the case of a non-
governmental issuer, such as an industrial corporation or a privately owned or
operated hospital, if the security is backed only by the assets and revenues of
the non-governmental issuer, then such non-governmental issuer would be deemed
to be the sole issuer. Where a security is also backed by the enforceable
obligation of a superior or unrelated governmental or other entity (other than a
bond insurer), it shall also be included in the computation of securities owned
that are issued by such governmental or other entity. Where a security is
guaranteed by a governmental entity or some other facility, such as a bank
guarantee or letter of credit, such a guarantee or letter of credit would be
considered a separate security and would be treated as an issue of such
government, other entity or bank. When a municipal bond is insured by bond
insurance, it shall not be considered a security that is issued or guaranteed by
the insurer; instead, the issuer of such municipal bond will be determined in
accordance with the principles set forth above. The foregoing restrictions do
not limit the percentage of the Fund's assets that may be invested in municipal
bonds insured by any given insurer.

     Under the Investment Company Act of 1940, the Fund may invest only up to
10% of its total assets in the aggregate in shares of other investment companies
and only up to 5% of its total assets in any one investment company, provided
the investment does not represent more than 3% of the voting stock of the
acquired investment company at the time such shares are purchased. As a
stockholder in any investment company, the Fund will bear its ratable share
of

                                       8
<PAGE>


that investment company's expenses, and would remain subject to payment of the
Fund's management, advisory and administrative fees with respect to assets so
invested. Holders of Common Shares would therefore be subject to duplicative
expenses to the extent the Fund invests in other investment companies. In
addition, the securities of other investment companies may also be leveraged and
will therefore be subject to the same leverage risks described herein. As
described in the Prospectus in the section entitled "Risks", the net asset value
and market value of leveraged shares will be more volatile and the yield to
shareholders will tend to fluctuate more than the yield generated by unleveraged
shares.

     In addition to the foregoing fundamental investment policies, the Fund is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees. The Fund may not:

          (1) Sell securities short, unless the Fund owns or has the right to
     obtain securities equivalent in kind and amount to the securities sold at
     no added cost, and provided that transactions in options, futures
     contracts, options on futures contracts, or other derivative instruments
     are not deemed to constitute selling securities short.

          (2) Purchase securities of open-end or closed-end investment companies
     except in compliance with the Investment Company Act of 1940 or any
     exemptive relief obtained thereunder.

          (3) Enter into futures contracts or related options or forward
     contracts, if more than 30% of the Fund's net assets would be represented
     by futures contracts or more than 5% of the Fund's net assets would be
     committed to initial margin deposits and premiums on futures contracts and
     related options.

          (4) Purchase securities when borrowings exceed 5% of its total assets
     if and so long as MuniPreferred Shares are outstanding.

          (5) Purchase securities of companies for the purpose of exercising
     control.

          (6) Invest in inverse floating rate securities (which are securities
     that pay interest at rates that vary inversely with changes in prevailing
     short-term tax-exempt interest rates and which represent a leveraged
     investment in an underlying municipal bond).

     The restrictions and other limitations set forth above will apply only at
the time of purchase of securities and will not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of an
acquisition of securities.

     The Fund intends to apply for ratings for its preferred shares (called
"MuniPreferred Shares" herein) from Moody's and/or S&P. In order to obtain and
maintain the required ratings, the Fund may be required to comply with
investment quality, diversification and other guidelines established by Moody's
or S&P. Such guidelines will likely be more restrictive than the restrictions
set forth above. The Fund does not anticipate that such guidelines would have a
material

                                       9
<PAGE>


adverse effect on its Common Shareholders or its ability to achieve its
investment objectives. The Fund presently anticipates that any MuniPreferred
Shares that it intends to issue would be initially given the highest ratings by
Moody's ("Aaa") or by S&P ("AAA"), but no assurance can be given that such
ratings will be obtained. No minimum rating is required for the issuance of
MuniPreferred Shares by the Fund. Moody's and S&P receive fees in connection
with their ratings issuances.

                      INVESTMENT POLICIES AND TECHNIQUES

     The following information supplements the discussion of the Fund's
investment objectives, policies, and techniques that are described in the Fund's
Prospectus.

Investment in Municipal Bonds

     Portfolio Investments

     The Fund will invest its net assets in a portfolio of municipal bonds that
are exempt from regular federal income tax.

     Under normal market conditions, and except for the temporary investments
described below, the Fund expects to be fully invested (at least 95% of its
assets) in such tax-exempt municipal bonds described herein.

                                      10

<PAGE>

     A general description of Moody's, S&P's and Fitch's ratings of municipal
bonds is set forth in Appendix A hereto. The ratings of Moody's, S&P and Fitch
represent their opinions as to the quality of the municipal bonds they rate. It
should be emphasized, however, that ratings are general and are not absolute
standards of quality. Consequently, municipal bonds with the same maturity,
coupon and rating may have different yields while obligations of the same
maturity and coupon with different ratings may have the same yield.

     Except to the extent that the Fund buys temporary investments as described
herein, the Fund will, as a fundamental policy, invest at least 80% of its
assets in tax-exempt municipal bonds that are either (i) Covered Bonds
guaranteeing the timely payment of principal and interest on the bonds, or (ii)
Backed Bonds. The Fund also may invest up to 20% of its net assets in other
municipal bonds that are rated, at the time of investment, within the four
highest grades (Baa or BBB or better by Moody's, S&P or Fitch) or are unrated
but judged to be of comparable quality by Nuveen Advisory.

     Each Covered Bond that the Fund holds will either be (1) covered by an
insurance policy applicable to a specific security, whether obtained by the
issuer of the security or a third party at the time of original issuance, or (2)
covered by portfolio insurance through a master municipal insurance policy the
Fund has purchased. The Fund will only buy portfolio insurance from insurers
whose claims-paying ability Moody's rates "Aaa" or S&P's rates "AAA".

     Information about the various municipal bond insurers with whom the Fund
intends to maintain specific insurance policies for particular municipal bonds
or policies of portfolio insurance is set forth in Appendix C hereto.

     The Fund also may invest in Backed Bonds that are backed by an escrow or
trust account containing securities issued or guaranteed by the U.S. Government
or U.S. Government agencies and backed by the full faith and credit of the
United States, in an amount that is sufficient to ensure the payment of interest
and principal. These bonds generally will not be insured. The Fund may buy
municipal bonds that have been (i) advance refunded, where the proceeds of the
refunding have been used to buy U.S. Government or U.S. Government agency
securities that are placed in escrow and whose interest and principal payments
are sufficient to cover the remaining scheduled debt service on that municipal
bond; or (ii) issued under state or local housing finance programs that use the
issuance proceeds to fund mortgages that are then exchanged for U.S. Government
or U.S. Government agency securities and deposited with a trustee as security
for those municipal bonds. Both types of municipal bonds are normally regarded
as having the credit characteristics of the underlying U.S. Government or U.S.
Government agency securities.

                                      11

<PAGE>


     The Fund will primarily invest in municipal bonds with long-term maturities
in order to maintain a weighted average maturity of 15-30 years, but the average
weighted maturity of obligations held by the Fund may be shortened, depending on
market conditions. As a result, the Fund's portfolio at any given time may
include both long-term and intermediate-term municipal bonds. Moreover, during
temporary defensive periods (e.g., times when, in Nuveen Advisory's opinion,
temporary imbalances of supply and demand or other temporary dislocations in the
tax-exempt bond market adversely affect the price at which long-term or
intermediate-term municipal bonds are available), and in order to keep the
Fund's cash fully invested, including the period during which the net proceeds
of the offering are being invested, the Fund may invest any percentage of its
net assets in short-term investments including high quality, short-term
securities that may be either tax-exempt or taxable and up to 10% of its net
assets in securities of other open or closed-end investment companies that
invest primarily in municipal bonds of the type in which the Fund may invest
directly. The Fund intends to invest in taxable short-term investments only in
the event that suitable tax-exempt short-term investments are not available at
reasonable prices and yields. Tax-exempt short-term investments include various
obligations issued by state and local governmental issuers, such as tax-exempt
notes (bond anticipation notes, tax anticipation notes and revenue anticipation
notes or other such municipal bonds maturing in three years or less from the
date of issuance) and municipal commercial paper. The Fund will invest only in
taxable short-term investments which are U.S. Government securities or
securities rated within the highest grade by Moody's, S&P or Fitch, and which
mature within one year from the date of purchase or carry a variable or floating
rate of interest. See Appendix A for a general description of Moody's, S&P's and
Fitch's ratings of securities in such categories. Taxable short-term investments
of the Fund may include certificates of deposit issued by U.S. banks with assets
of at least $1 billion, or commercial paper or corporate notes, bonds or
debentures with a remaining maturity of one year or less, or repurchase
agreements. See "Other Investment Policies and Techniques--Repurchase
Agreements." To the extent the Fund invests

                                      12

<PAGE>


in taxable investments, the Fund will not at such times be in a position to
achieve its investment objective of tax-exempt income.

     The foregoing policies as to ratings of portfolio investments will apply
only at the time of the purchase of a security, and the Fund will not be
required to dispose of securities in the event Moody's, S&P or Fitch downgrades
its assessment of the credit characteristics of a particular issuer.

     Nuveen Advisory seeks to enhance portfolio value relative to the municipal
bond market by investing in tax-exempt municipal bonds that it believes are
underrated or undervalued or that represent municipal market sectors that are
undervalued. Underrated municipal bonds are those whose ratings do not, in
Nuveen Advisory's opinion, reflect their true creditworthiness. Undervalued
municipal bonds are bonds that, in Nuveen Advisory's opinion, are worth more
than the value assigned to them in the marketplace. Nuveen Advisory may at times
believe that bonds associated with a particular municipal market sector (for
example, electric utilities), or issued by a particular municipal issuer, are
undervalued. Nuveen Advisory may purchase such a bond for the Fund's portfolio
because it represents a market sector or issuer that Nuveen Advisory considers
undervalued, even if the value of the particular bond is consistent with the
value of similar bonds. Municipal bonds of particular types or purposes (e.g.,
hospital bonds, industrial revenue bonds or bonds issued by a particular
municipal issuer) may be undervalued because there is a temporary excess of
supply in that market sector, or because of a general decline in the market
price of municipal bonds of the market sector for reasons that do not apply to
the particular municipal bonds that are considered undervalued. The Fund's
investment in underrated or undervalued municipal bonds will be based on Nuveen
Advisory's belief that their yield is higher than that available on bonds
bearing equivalent levels of interest rate risk, credit risk and other forms of
risk, and that their prices will ultimately rise (relative to the market) to
reflect their true value.

     The Fund has not established any limit on the percentage of its portfolio
investments that may be invested in municipal bonds subject to the federal
alternative minimum tax provisions of federal tax law, and the Fund expects that
a substantial portion of the current income it produces will be includable in
alternative minimum taxable income. Special considerations apply to corporate
investors. See "Tax Matters."

     Also included within the general category of municipal bonds described in
the Fund's Prospectus are participations in lease obligations or installment
purchase contract obligations (hereinafter collectively called "Municipal Lease
Obligations") of municipal authorities or entities. Although a Municipal Lease
Obligation does not constitute a general obligation of the municipality for
which the municipality's taxing power is pledged, a Municipal Lease Obligation
is ordinarily backed by the municipality's covenant to budget for, appropriate
and make the payments due under the Municipal Lease Obligation. However, certain
Municipal Lease Obligations contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. In the case of a "non-appropriation" lease, the Fund's ability to
recover under the lease in the event of non-appropriation or default will be
limited solely to the repossession of the leased property, without recourse to
the general credit of the lessee, and disposition or releasing of the property
might prove difficult. In order to reduce this risk, the Fund will only

                                      13

<PAGE>

purchase Municipal Lease Obligations where Nuveen Advisory believes the issuer
has a strong incentive to continue making appropriations until maturity.

     Upon Nuveen Advisory's recommendation, during temporary defensive periods
and in order to keep the Fund's cash fully invested, including the period during
which the net proceeds of the offering are being invested, the Fund may invest
up to 100% of its net assets in short-term investments including high quality,
short-term securities that may be either tax-exempt or taxable. To the extent
the Fund invests in taxable short-term investments, the Fund will not at such
times be in a position to achieve that portion of its investment objective of
seeking current income exempt from regular federal income tax. For further
information, see, "Short-Term Investments" below.

     Obligations of issuers of municipal bonds are subject to the provisions of
bankruptcy, insolvency and other laws affecting the rights and remedies of
creditors, such as the Bankruptcy Reform Act of 1978. In addition, the
obligations of such issuers may become subject to the laws enacted in the future
by Congress, state legislatures or referenda extending the time for payment of
principal or interest, or both, or imposing other constraints upon enforcement
of such obligations or upon municipalities to levy taxes. There is also the
possibility that, as a result of legislation or other conditions, the power or
ability of any issuer to pay, when due, the principal of and interest on its
municipal bonds may be materially affected.

    The Fund also may invest up to 10% of its net assets in securities of other
open or closed-end investment companies that invest primarily in municipal bonds
of the type in which the Fund may invest directly. The Fund will generally
select obligations which may not be redeemed at the option of the issuer for
approximately seven to nine years.

Additional information on Municipal Bond Insurance

     Original Issue Insurance. If interest or principal on a municipal bond is
due, but the issuer fails to pay it, the insurer will make payments in the
amount due to the fiscal agent no later than one business day after the insurer
has been notified of the issuer's nonpayment. The fiscal agent will pay the
amount due to the Fund after the fiscal agent receives evidence of the Fund's
right to receive payment of principal and/or interest, and evidence that all of
the rights of payment due shall thereupon vest in the insurer. When the insurer
pays the Fund the payment due from the issuer, the insurer will succeed to the
Fund's rights to that payment.

     Portfolio Insurance. Each portfolio insurance policy will be noncancellable
and will remain in effect so long as the Fund is in existence, the Fund
continues to own the municipal bonds covered by the policy, and the Fund
pays the premiums for the policy. Each insurer generally will reserve the right
at any time upon 90 days' written notice to the Fund to refuse to insure any
additional bonds the Fund buys after the effective date of the notice. The
Fund's Board of Trustees will generally reserve the right to terminate each
policy upon seven day's written notice to an insurer if it determines that the
cost of the policy is not reasonable in relation to the value of the insurance
to the Fund.

                                      14
<PAGE>

Short-Term Investments

     Short-Term Taxable Fixed Income Securities

     For temporary defensive purposes or to keep cash on hand fully invested,
the Fund may invest up to 100% of its net assets in cash equivalents and short-
term taxable fixed-income securities, although the Fund intends to invest in
taxable short-term investments only in the event that suitable tax-exempt short-
term investments are not available at reasonable prices and yields. Short-term
taxable fixed income investments are defined to include, without limitation, the
following:

          (1)  U.S. government securities, including bills, notes and bonds
     differing as to maturity and rates of interest that are either issued or
     guaranteed by the U.S. Treasury or by U.S. government agencies or
     instrumentalities. U.S. government agency securities include securities
     issued by (a) the Federal Housing Administration, Farmers Home
     Administration, Export-Import Bank of the United States, Small Business
     Administration, and the Government National Mortgage Association, whose
     securities are supported by the full faith and credit of the United States;
     (b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
     Tennessee Valley Authority, whose securities are supported by the right of
     the agency to borrow from the U.S. Treasury; (c) the Federal National
     Mortgage Association, whose securities are supported by the discretionary
     authority of the U.S. government to purchase certain obligations of the
     agency or instrumentality; and (d) the Student Loan Marketing Association,
     whose securities are supported only by its credit. While the U.S.
     government provides financial support to such U.S. government-sponsored
     agencies or instrumentalities, no assurance can be given that it always
     will do so since it is not so obligated by law. The U.S. government, its
     agencies, and instrumentalities do not guarantee the market value of their
     securities. Consequently, the value of such securities may fluctuate.

          (2)  Certificates of Deposit issued against funds deposited in a bank
     or a savings and loan association. Such certificates are for a definite
     period of time, earn a specified rate of return, and are normally
     negotiable. The issuer of a certificate of deposit agrees to pay the amount
     deposited plus interest to the bearer of the certificate on the date
     specified thereon. Under current FDIC regulations, the maximum insurance
     payable as to any one certificate of deposit is $100,000; therefore,
     certificates of deposit purchased by the Fund may not be fully insured.

          (3)  Repurchase agreements, which involve purchases of debt
     securities. At the time the Fund purchases securities pursuant to a
     repurchase agreement, it simultaneously agrees to resell and redeliver such
     securities to the seller, who also simultaneously agrees to buy back the
     securities at a fixed price and time. This assures a predetermined yield
     for the Fund during its holding period, since the resale price is always
     greater than the purchase price and reflects an agreed-upon market rate.
     Such actions afford an opportunity for the Fund to invest

                                      15

<PAGE>


     temporarily available cash. The Fund may enter into repurchase agreements
     only with respect to obligations of the U.S. government, its agencies or
     instrumentalities; certificates of deposit; or bankers' acceptances in
     which the Fund may invest. Repurchase agreements may be considered loans to
     the seller, collateralized by the underlying securities. The risk to the
     Fund is limited to the ability of the seller to pay the agreed-upon sum on
     the repurchase date; in the event of default, the repurchase agreement
     provides that the Fund is entitled to sell the underlying collateral. If
     the value of the collateral declines after the agreement is entered into,
     and if the seller defaults under a repurchase agreement when the value of
     the underlying collateral is less than the repurchase price, the Fund could
     incur a loss of both principal and interest. The investment adviser
     monitors the value of the collateral at the time the action is entered into
     and at all times during the term of the repurchase agreement. The
     investment adviser does so in an effort to determine that the value of the
     collateral always equals or exceeds the agreed-upon repurchase price to be
     paid to the Fund. If the seller were to be subject to a federal bankruptcy
     proceeding, the ability of the Fund to liquidate the collateral could be
     delayed or impaired because of certain provisions of the bankruptcy laws.

          (4) Commercial paper, which consists of short-term unsecured
     promissory notes, including variable rate master demand notes issued by
     corporations to finance their current operations. Master demand notes are
     direct lending arrangements between the Fund and a corporation. There is no
     secondary market for such notes. However, they are redeemable by the Fund
     at any time. Nuveen Advisory will consider the financial condition of the
     corporation (e.g., earning power, cash flow, and other liquidity ratios)
     and will continuously monitor the corporation's ability to meet all of its
     financial obligations, because the Fund's liquidity might be impaired if
     the corporation were unable to pay principal and interest on demand.
     Investments in commercial paper will be limited to commercial paper rated
     in the highest categories by a major rating agency and which mature within
     one year of the date of purchase or carry a variable or floating rate of
     interest.

     Short-Term Tax-Exempt Fixed Income Securities

     Short-term tax-exempt fixed-income securities are securities that are
exempt from regular federal income tax and mature within three years or less
from the date of issuance. Short-term tax-exempt fixed income securities are
defined to include, without limitation, the following:

     Bond Anticipation Notes ("BANs") are usually general obligations of state
and local governmental issuers which are sold to obtain interim financing for
projects that will eventually be funded through the sale of long-term debt
obligations or bonds. The ability of an issuer to meet its obligations on its
BANs is primarily dependent on the issuer's access to the long-term municipal
bond market and the likelihood that the proceeds of such bond sales will be used
to pay the principal and interest on the BANs.

                                      16

<PAGE>

     Tax Anticipation Notes ("TANs") are issued by state and local governments
to finance the current operations of such governments. Repayment is generally to
be derived from specific future tax revenues. TANs are usually general
obligations of the issuer. A weakness in an issuer's capacity to raise taxes due
to, among other things, a decline in its tax base or a rise in delinquencies,
could adversely affect the issuer's ability to meet its obligations on
outstanding TANs.

     Revenue Anticipation Notes ("RANs") are issued by governments or
governmental bodies with the expectation that future revenues from a designated
source will be used to repay the notes. In general, they also constitute general
obligations of the issuer. A decline in the receipt of projected revenues, such
as anticipated revenues from another level of government, could adversely affect
an issuer's ability to meet its obligations on outstanding RANs. In addition,
the possibility that the revenues would, when received, be used to meet other
obligations could affect the ability of the issuer to pay the principal and
interest on RANs.

     Construction Loan Notes are issued to provide construction financing for
specific projects. Frequently, these notes are redeemed with funds obtained from
the Federal Housing Administration.

     Bank Notes are notes issued by local government bodies and agencies, such
as those described above to commercial banks as evidence of borrowings.  The
purposes for which the notes are issued are varied but they are frequently
issued to meet short-term working capital or capital-project needs. These notes
may have risks similar to the risks associated with TANs and RANs.

     Tax-Exempt Commercial Paper ("Municipal Paper") represents very short-term
unsecured, negotiable promissory notes issued by states, municipalities and
their agencies. Payment of principal and interest on issues of municipal paper
may be made from various sources, to the extent the funds are available
therefrom. Maturities or municipal paper generally will be shorter than the
maturities of TANs, BANs or RANs. There is a limited secondary market for issues
of Municipal Paper.

     Certain municipal bonds may carry variable or floating rates of interest
whereby the rate of interest is not fixed but varies with changes in specified
market rates or indices, such as a bank prime rate or a tax-exempt money market
index.

     While the various types of notes described above as a group represent the
major portion of the tax-exempt note market, other types of notes are available
in the marketplace and the Fund may invest in such other types of notes to the
extent permitted under its investment objectives, policies and limitations. Such
notes may be issued for different purposes and may be secured differently from
those mentioned above.

Hedging Strategies

     The Fund may periodically engage in hedging transactions. Hedging is a
term used for various methods of seeking to preserve portfolio capital value by
offsetting price changes in one investment through making another investment
whose price should tend to move in the opposite direction. It may be desirable
and possible in various market environments to partially hedge the portfolio
against fluctuations in market value due to interest rate fluctuations by
investment in

                                      17
<PAGE>


financial futures and index futures as well as related put and call options on
such instruments. Both parties entering into an index or financial futures
contract are required to post an initial deposit of 1% to 5% of the total
contract price. Typically, option holders enter into offsetting closing
transactions to enable settlement in cash rather than take delivery of the
position in the future of the underlying security. The Fund will only sell
covered futures contracts, which means that the Fund segregates assets equal to
the amount of the obligations.

     These transactions present certain risks. In particular, the imperfect
correlation between price movements in the futures contract and price movements
in the securities being hedged creates the possibility that losses on the hedge
by a Fund may be greater than gains in the value of the securities in the Fund's
portfolio. In addition, futures and options markets may not be liquid in all
circumstances. As a result, in volatile markets, the Fund may not be able to
close out the transaction without incurring losses substantially greater than
the initial deposit. Finally, the potential deposit requirements in futures
contracts create an ongoing greater potential financial risk than do options
transactions, where the exposure is limited to the cost of the initial premium.
Losses due to hedging transactions will reduce yield. Net gains, if any, from
hedging and other portfolio transactions will be distributed as taxable
distributions to shareholders. The Fund will not make any investment (whether an
initial premium or deposit or a subsequent deposit) other than as necessary to
close a prior investment if, immediately after such investment, the sum of the
amount of its premiums and deposits would exceed 5% of the Fund's net assets.
The Fund will invest in these instruments only in markets believed by Nuveen
Advisory to be active and sufficiently liquid. Successful implementation of most
hedging strategies would generate taxable income, and the Fund has no present
intention to use these strategies. For further information regarding these
investment strategies and risks presented thereby, see Appendix D to this
Statement of Additional Information.

                    OTHER INVESTMENT POLICIES AND TECHNIQUES

Illiquid Securities

     The Fund may invest in illiquid securities (i.e., securities that are not
readily marketable), including, but not limited to, restricted securities
(securities the disposition of which is restricted under the federal securities
laws), securities that may only be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act"); and repurchase
agreements with maturities in excess of seven days.

                                       18

<PAGE>


     Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act. Where registration is required, the Fund may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the Fund
may be permitted to sell a security under an effective registration statement.
If, during such a period, adverse market conditions were to develop, the Fund
might obtain a less favorable price than that which prevailed when it decided to
sell. Illiquid securities will be priced at a fair value as determined in good
faith by the Board of Trustees or its delegate.

Portfolio Trading and Turnover Rate

     Portfolio trading may be undertaken to accomplish the investment objectives
of the Fund in relation to actual and anticipated movements in interest rates.
In addition, a security may be sold and another of comparable quality purchased
at approximately the same time to take advantage of what Nuveen Advisory
believes to be a temporary price disparity between the two securities. Temporary
price disparities between two comparable securities may result from supply and
demand imbalances where, for example, a temporary oversupply of certain bonds
may cause a temporarily low price for such bonds, as compared with other bonds
of like quality and characteristics. The Fund may also engage to a limited
extent in short-term trading consistent with its investment objectives.
Securities may be sold in anticipation of a market decline (a rise in interest
rates) or purchased in anticipation of a market rise (a decline in interest
rates) and later sold, but the Fund will not engage in trading solely to
recognize a gain.

     Subject to the foregoing, the Fund will attempt to achieve its investment
objectives by prudent selection of municipal bonds with a view to holding them
for investment. While there can be no assurance thereof, the Fund anticipates
that its annual portfolio turnover rate will generally not exceed 100%. However,
the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Therefore, depending upon market
conditions, the annual portfolio turnover rate of the Fund may exceed 100% in
particular years.

Other Investment Companies

     The Fund may invest in securities of other open or closed-end investment
companies that invest primarily in municipal bonds of the types in which the
Fund may invest directly. The Fund generally expects to invest in other
investment companies either during periods when it has large amounts of
uninvested cash, such as the period shortly after the Fund receives the proceeds
of the offering of its Common Shares or MuniPreferred Shares, or during periods
when there is a shortage of attractive, high-yielding municipal bonds available
in the market. As a stockholder in an investment company, the Fund will bear its
ratable share of that investment company's expenses and would remain subject to
payment of the Fund's management, advisory and administrative fees with respect
to assets so invested. Common Shareholders would therefore be subject to
duplicative expenses to the extent the Fund invests in other investment
companies. Nuveen Advisory will take expenses into account when evaluating the
investment merits of an investment in the investment company relative to
available municipal bond investments. In addition, the securities of other
investment companies may also be leveraged and will therefore be subject to the
same leverage risks described herein. As described in the Fund's Prospectus in
the section entitled "Risks," the net asset value and market value of leveraged
shares will be more

                                       19

<PAGE>

volatile and the yield to shareholders will tend to fluctuate more than the
yield generated by unleveraged shares.

When-Issued and Delayed Delivery Transactions


     The Fund may buy and sell municipal bonds on a when-issued or delayed
delivery basis, making payment or taking delivery at a later date, normally
within 15-45 days of the trade date. On such transactions the payment obligation
and the interest rate are fixed at the time the buyer enters into the
commitment. Beginning on the date the Fund enters into a commitment to purchase
securities on a when-issued or delayed delivery basis, the Fund is required
under rules of the Securities and Exchange Commission to maintain in a separate
account liquid assets, consisting of cash, cash equivalents or liquid securities
having a market value at all times of at least equal to the amount of the
commitment. Income generated by any such assets which provide taxable income for
federal income tax purposes is includable in the taxable income of the Fund. The
Fund may enter into contracts to purchase municipal bonds on a forward basis
(i.e., where settlement will occur more than 60 days from the date of the
transaction) only to the extent that the Fund specifically collateralizes such
obligations with a security that is expected to be called or mature within sixty
days before or after the settlement date of the forward transaction. The
commitment to purchase securities on a when-issued, delayed delivery or forward
basis may involve an element of risk because no interest accrues on the bonds
prior to settlement and at the time of delivery the market value may be less
than cost.

Repurchase Agreements


     As temporary investments, the Fund may invest in repurchase agreements. A
repurchase agreement is a contractual agreement whereby the seller of securities
(U.S. Government securities or municipal bonds) agrees to repurchase the same
security at a specified price on a future date agreed upon by the parties. The
agreed-upon repurchase price determines the yield during the Fund's holding
period. Repurchase agreements are considered to be loans collateralized by the
underlying security that is the subject of the repurchase contract. Income
generated from transactions in repurchase agreements will be taxable. See "Tax
Matters" for information relating to the allocation of taxable income between
Common Shares and MuniPreferred Shares, if any. The Fund will only enter into
repurchase agreements with registered securities dealers or domestic banks that,
in the opinion of Nuveen Advisory, present minimal credit risk. The risk to the
Fund is limited to the ability of the issuer to pay the agreed-upon repurchase
price on the delivery date; however, although the value of the underlying
collateral at the time the transaction is entered into always equals or exceeds
the agreed-upon repurchase price, if the value of the collateral declines there
is a risk of loss of both principal and interest. In the event of default, the
collateral may be sold but the Fund might incur a loss if the value of the
collateral declines, and might incur disposition costs or experience delays in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization upon the collateral by the Fund may be delayed or limited. Nuveen
Advisory will monitor the value of the collateral at the time the transaction is
entered into and at all times subsequent during the term of the repurchase
agreement in an effort to determine that such value always equals or exceeds the
agreed-upon repurchase price. In the event the value of the collateral declines
below the repurchase price, Nuveen Advisory will

                                       20
<PAGE>

demand additional collateral from the issuer to increase the value of the
collateral to at least that of the repurchase price, including interest.

Zero Coupon Bonds


     The Fund may invest in zero coupon bonds. A zero coupon bond is a bond
that does not pay interest for its entire life. The market prices of zero coupon
bonds are affected to a greater extent by changes in prevailing levels of
interest rates and thereby tend to be more volatile in price than securities
that pay interest periodically. In addition, because the Fund accrues income
with respect to these securities prior to the receipt of such interest, it may
have to dispose of portfolio securities under disadvantageous circumstances in
order to obtain cash needed to pay income dividends in amounts necessary to
avoid unfavorable tax consequences.

                            MANAGEMENT OF THE FUND

Trustees and Officers


     The management of the Fund, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
the Board of Trustees of the Fund. The number of trustees of the Fund is
currently set at seven, one of whom is an "interested" person (as the term
"interested" persons is defined in the Investment Company Act of 1940) and six
of whom are not "interested" persons. None of the trustees who are not
"interested" persons of the Fund has ever been a director or employee of, or
consultant to, Nuveen or its affiliates. The names and business addresses of the
trustees and officers of the Fund and their principal occupations and other
affiliations during the past five years are set forth below, with those trustees
who are "interested" persons of the Fund indicated by an asterisk.


<TABLE>
<CAPTION>
  Name and Address        Birthdate    Positions and          Principal Occupations During
  ----------------        ---------    -------------          ----------------------------
                                      Offices with the              Past Five Years
                                      ----------------              ---------------
                                           Fund
                                           ----
<S>                       <C>         <C>                     <C>
Timothy R. Schwertfeger*  3/28/49     Chairman of the         Chairman and Director (since July 1996) of The John Nuveen Company,
333 West Wacker Drive                   Board, President      Nuveen Investments, Nuveen Advisory Corp. and Nuveen Institutional
Chicago, IL 60606                       and Trustee           Advisory Corp.; prior thereto, Executive Vice President and Director
                                                              of The John Nuveen Company and Nuveen Investments; Director (since
                                                              1992) and Chairman (since 1996) of Nuveen Advisory Corp. and Nuveen
                                                              Institutional Advisory Corp.; Chairman and Director (since January
                                                              1997) of Nuveen Asset Management, Inc.; Director (since 1996) of
                                                              Institutional Capital Corporation; Chairman and Director of

</TABLE>

                                      21
<PAGE>

<TABLE>
<CAPTION>
  Name and Address        Birthdate    Positions and          Principal Occupations During
  ----------------        ---------    -------------          ----------------------------
                                      Offices with the              Past Five Years
                                      ----------------              ---------------
                                           Fund
                                           ----
<S>                       <C>         <C>                     <C>
                                                              Rittenhouse Financial Services Inc. (since 1999); Chief Executive
                                                              Officer (since September 1999) of Nuveen Senior Loan Asset Management
                                                              Inc.

Robert P. Bremner         8/22/40        Trustee              Private Investor and Management Consultant.
3725 Huntington Street,
  N.W.
Washington, D.C. 20015

Lawrence H. Brown         7/29/34        Trustee              Retired (August 1989) as Senior Vice President of The Northern Trust
201 Michigan Avenue                                           Company
Highwood, IL 60040

Anne E. Impellizzeri      1/26/33        Trustee              Executive Director (since 1998) of Manitoga (Center for Russel
3 West 29th Street                                            Wright's Design with Nature), formerly President and Chief Executive
New York, NY 10001                                            Officer of Blanton-Peale Institutes of Religion and Health (since
                                                              December 1990); prior thereto, Vice President, Metropolitan Life
                                                              Insurance Co.

Peter R. Sawers           4/3/33         Trustee              Adjunct Professor of Business and Economics, University of Dubuque,
22 The Landmark                                               Iowa; formerly (1991-2000) Adjunct Professor, Lake Forest Graduate
Northfield, IL 60093                                          School of Management, Lake Forest, Illinois; prior thereto, Executive
                                                              Director, Towers Perrin Australia; Chartered Financial Analyst;
                                                              Certified Management Consultant.

William J. Schneider      9/24/44        Trustee              Senior Partner and Chief Operating Officer, Miller-Valentine Partners,
4000 Miller-Valentine Ct.                                     Vice President, Miller-Valentine Group, a development and contract
P. O. Box 744                                                 company; Member Community Advisory Board, National City Bank, Dayton,
Dayton, OH 45401                                              Ohio; Business Advisory Council, Cleveland Federal Reserve Bank.

Judith M. Stockdale       12/29/47       Trustee              Executive Director, Gaylord and Dorothy Donnelley Foundation (since
35 E. Wacker Drive                                            1994); prior thereto, Executive Director, Great Lakes Protection Fund
Suite 2600                                                    (from 1990 to 1994).
Chicago, IL 60601

Alan G. Berkshire         12/28/60    Vice President and      Senior Vice President and General Counsel (since September 1997) and
333 W. Wacker Drive                   Assistant Secretary     Secretary (since May 1998) of The
Chicago, IL 60606

</TABLE>

                                       22
<PAGE>

<TABLE>
<CAPTION>
  Name and Address        Birthdate    Positions and          Principal Occupations During
  ----------------        ---------    -------------            ----------------------------
                                      Offices with the              Past Five Years
                                      ----------------              ---------------
                                           Fund
                                           ----
<S>                       <C>         <C>                     <C>
                                                              John Nuveen Company, Nuveen
                                                              Investments, Nuveen Advisory Corp.
                                                              and Nuveen Institutional Advisory
                                                              Corp., Senior Vice President and
                                                              Secretary (since September 1999) of
                                                              Nuveen Senior Loan Management Inc.;
                                                              prior thereto, Partner in the law firm
                                                              of Kirkland & Ellis.

Peter H. D'Arrigo         11/28/67    Vice President and      Vice President of Nuveen Investments
333 W. Wacker Drive                       Treasurer           (since January 1999), prior thereto,
Chicago, IL   60606                                           Assistant Vice President (from January
                                                              1997); formerly, Associate of Nuveen
                                                              Investments; Vice President and
                                                              Treasurer (since September 1999) of
                                                              Nuveen Senior Loan Asset Management
                                                              Inc.; Chartered Financial Analyst.

Michael S. Davern         6/26/57       Vice President        Vice President of Nuveen Advisory
333 W. Wacker Drive                                           Corp. (Since January 1997); prior
Chicago, IL   60606                                           thereto, Vice President and Portfolio
                                                              Manager of Flagship Financial.

Lorna C. Ferguson         10/24/45      Vice President        Vice President of Nuveen Investments;
333 W. Wacker Drive                                           Vice President (since January 1998) of
Chicago, IL   60606                                           Nuveen Advisory Corp. and Nuveen
                                                              Institutional Advisory Corp.

William M. Fitzgerald     3/2/64        Vice President        Vice President of Nuveen Advisory
333 W. Wacker Drive                                           Corp. (since December 1995);
Chicago, IL   60606                                           Assistant Vice President of Nuveen
                                                              Advisory Corp. (from September 1992
                                                              to December 1995), prior thereto,
                                                              Assistant Portfolio Manager of Nuveen
                                                              Advisory Corp.; Chartered Financial
                                                              Analyst.

Stephen D. Foy            5/31/54     Vice President and      Vice President of Nuveen Investments
333 W. Wacker Drive                       Controller          and (since May 1998) The John Nuveen
Chicago, IL   60606                                           Company, Vice President (since
                                                              September 1999) of Nuveen Senior Loan
                                                              Management Inc.; Certified Public
                                                              Accountant.

J. Thomas Futrell         7/5/55        Vice President        Vice President of Nuveen Advisory
333 W. Wacker Drive                                           Corp.; Chartered Financial Analyst.

</TABLE>

                                       23
<PAGE>

<TABLE>
<CAPTION>
  Name and Address        Birthdate    Positions and          Principal Occupations During
  ----------------        ---------    -------------          ----------------------------
                                      Offices with the              Past Five Years
                                      ----------------              ---------------
                                           Fund
                                           ----
<S>                       <C>         <C>                     <C>
Chicago, IL 60606

Richard A. Huber          3/26/63       Vice President        Vice President of Nuveen Institutional
333 W. Wacker Drive                                           Advisory Corp. (since March 1998) and
Chicago, IL 60606                                             Nuveen Advisory Corp. (since January
                                                              1997); prior thereto, Vice President
                                                              and Portfolio Manager of Flagship
                                                              Financial, Inc.

Steven J. Krupa           8/21/57      Vice President         Vice President of Nuveen Advisory
333 W. Wacker Drive                                           Corp.
Chicago, IL 60606

David J. Lamb             3/22/63     Vice President          Vice President (since March 2000) of Nuveen
333 W. Wacker Drive                                           Investments, previously Assistant Vice
Chicago, IL 60606                                             President (since January 1999), prior thereto,
                                                              Associate of Nuveen Investments; Certified
                                                              Public Accountant

Larry W. Martin           7/27/51     Vice President and      Vice President, Assistant Secretary
333 W. Wacker Drive                   Assistant Secretary     and Assistant General Counsel of
Chicago, IL 60606                                             Nuveen Investments; Vice President and
                                                              Assistant Secretary of Nuveen Advisory
                                                              Corp. and Nuveen Institutional Advisory
                                                              Corp.; Assistant Secretary of the John
                                                              Nuveen Company and (since January 1997)
                                                              Nuveen Asset Management, Inc.; Vice
                                                              President and Assistant Secretary
                                                              (since September 1999) of Nuveen Senior
                                                              Loan Asset Management Inc.

Edward F. Neild, IV       7/7/65       Vice President         Vice President (since September 1996),
333 W. Wacker Drive                                           previously Assistant Vice President
Chicago, IL 60606                                             (since December 1993) of Nuveen
                                                              Advisory Corp., Portfolio Manager
                                                              prior thereto; Vice President (since
                                                              September 1996), previously Assistant
                                                              Vice President (since May 1995) of
                                                              Nuveen Institutional Advisory Corp.,
                                                              Portfolio Manager prior thereto;
                                                              Chartered Financial Analyst.

Stephen S. Peterson       9/20/57      Vice President         Vice President (since September 1997),
333 W. Wacker Drive                                           previously Assistant Vice President
Chicago, IL 60606                                             (since September 1996), Portfolio
                                                              Manager, prior thereto,

</TABLE>

                                       24
<PAGE>

<TABLE>
<CAPTION>
  Name and Address        Birthdate   Positions and           Principal Occupations During
  ----------------        ---------   -------------           ----------------------------
                                      Offices with the              Past Five Years
                                      ----------------              ---------------
                                           Fund
                                           ----
<S>                       <C>         <C>                     <C>
                                                              of Nuveen Advisory Corp.; Chartered
                                                              Financial Analyst.

Thomas C. Spalding, Jr.   7/31/51       Vice President        Vice President of Nuveen Advisory
333 W. Wacker Drive                                           Corp. and Nuveen Institutional
Chicago, IL 60606                                             Advisory Corp.; Chartered Financial
                                                              Analyst.

Gifford R. Zimmerman      9/9/56      Vice President and      Vice President, Assistant Secretary
333 W. Wacker Drive                       Secretary           and Associate General Counsel, formerly
Chicago, IL 60606                                             Assistant General Counsel, of Nuveen
                                                              Investments; Vice President and
                                                              Assistant Secretary of Nuveen Advisory
                                                              Corp. and Nuveen Institutional Advisory
                                                              Corp.; Vice President and Assistant
                                                              Secretary of The John Nuveen Company
                                                              (since May 1994); Vice President and
                                                              Assistant Secretary (since September
                                                              1999) of Nuveen Senior Loan Asset
                                                              Management Inc.; Chartered Financial
                                                              Analyst.
</TABLE>


     Peter R. Sawers and Timothy R. Schwertfeger serve as members of the
Executive Committee of the Board of Trustees of the Fund.  The Executive
Committee, which meets between regular meetings of the Board of Trustees, is
authorized to exercise all of the powers of the Board of Trustees.


     The trustees of the Fund are also directors or trustees, as the case may
be, of 35 Nuveen open-end funds and 65 Nuveen closed-end funds advised by Nuveen
Advisory Corp. Mr. Schwertfeger is a director or trustee, as the case may be, of
14 Nuveen open-end and closed-end funds advised by Nuveen Institutional Advisory
Corp. and two funds advised by Nuveen Senior Loan Asset Management Inc. None of
the independent trustees has ever been a director, officer, or employee of, or a
consultant to, Nuveen Advisory, Nuveen or their affiliates.


                                       25
<PAGE>



     The Common Shareholders of the Fund will elect trustees at the next annual
meeting of Common Shareholders, unless any MuniPreferred Shares are outstanding
at that time, in which event holders of MuniPreferred Shares, voting as a
separate class, will elect two trustees and the remaining trustees shall be
elected by Common Shareholders and holders of MuniPreferred Shares, voting
together as a single class. Holders of MuniPreferred Shares will be entitled to
elect a majority of the Fund's trustees under certain circumstances. See
"Description of Shares - MuniPreferred Shares - Voting Rights."

     The following table sets forth estimated compensation to be paid by the
Fund projected during the Fund's first full fiscal year after commencement of
operation. The Fund does not have a retirement or pension plan. The officers and
trustees affiliated with Nuveen serve without any compensation from the Fund.

<TABLE>
<CAPTION>
                                                                            Amount of Total
                                                    Total Compensation     Compensation that
                                 California           from Fund and             Has Been
       Name of Trustee              Fund*             Fund Complex**            Deferred
    ---------------------    --------------------   --------------------    ------------------
<S>                          <C>                    <C>                     <C>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Robert P. Bremner                   $120                  $71,000               $ 8,368
- ----------------------------------------------------------------------------------------------
Lawrence H. Brown                   $126                  $75,250               $     0
- ----------------------------------------------------------------------------------------------
Anne E. Impellizzeri                $120                  $71,000               $55,784
- ----------------------------------------------------------------------------------------------
Peter R. Sawers                     $120                  $71,000               $55,784
- ----------------------------------------------------------------------------------------------
William J. Schneider                $120                  $69,000               $54,216
- ----------------------------------------------------------------------------------------------
Judith M. Stockdale                 $120                  $71,000               $13,946
- ----------------------------------------------------------------------------------------------
</TABLE>

                                      26
<PAGE>

- --------------------

     *  Based on the estimated compensation to be earned by the independent
trustees for the period from inception through the end of the Fund's first full
fiscal year for services to the Fund.

     **Based on the estimated compensation paid to the trustees for the one year
period ending 12/31/00 for services to the open-end and closed-end funds advised
by Nuveen Advisory.


     The Fund has no employees. Its officers are compensated by Nuveen Advisory
or Nuveen.

                              INVESTMENT ADVISER

     Nuveen Advisory acts as investment adviser to the Fund, with
responsibility for the overall management of the Fund. Its address is 333 West
Wacker Drive, Chicago, Illinois 60606. Nuveen Advisory is also responsible for
managing the Fund's business affairs and providing day-to-day administrative
services to the Fund. For additional information regarding the management
services performed by Nuveen Advisory, see "Management of the Fund" in the
Fund's Prospectus.

     Nuveen Advisory is a wholly owned subsidiary of Nuveen, which is also a co-
managing underwriter of the Fund's shares. Nuveen is sponsor of the Nuveen
Defined Portfolios, registered unit investment trusts, is the principal
underwriter for the Nuveen Mutual Funds, and has served as co-managing
underwriter for the shares of the Nuveen Exchange-Traded Funds. Over 1,300,000
individuals have invested to date in Nuveen's funds and trusts. Founded in 1898,
Nuveen brings over a century of expertise to the municipal bond market.
According to data from Strategic Insight, Nuveen is the leading sponsor of
exchange-traded municipal bond funds as measured by number of funds (65) and
fund assets under management ($28 billion). Overall, Nuveen and its affiliates
have over $62 billion in assets under management or surveillance. Nuveen is a
subsidiary of The John Nuveen Company which, in turn, is approximately 77% owned
by The St. Paul Companies, Inc. ("St. Paul"). St. Paul is a publicly-traded
company

                                      27
<PAGE>


located in St. Paul, Minnesota, and is principally engaged in providing
property-liability insurance through subsidiaries.

     Pursuant to an investment management agreement between Nuveen Advisory and
the Fund, the Fund has agreed to pay for the services and facilities provided by
Nuveen Advisory an annual management fee, payable on a monthly basis, according
to the following schedule:

<TABLE>
<CAPTION>
Average Daily Net Assets(1)                                     Management Fee
- -----------------------------                                 ------------------
<S>                                                           <C>
Up to $125 million                                                  .6500%
$125 million to $250 million                                        .6375%
$250 million to $500 million                                        .6250%
$500 million to $1 billion                                          .6125%
$1 billion to $2 billion                                            .6000%
$2 billion and over                                                 .5750%
</TABLE>

(1) Including net assets attributable to MuniPreferred Shares.

     All fees and expenses are accrued daily and deducted before payment of
dividends to investors. The investment management agreement has been approved by
a majority of the disinterested trustees of the Fund and the sole shareholder of
the Fund.

     For the first ten years of the Fund's operation, Nuveen Advisory has
contractually agreed to reimburse the Fund for fees and expenses in the amounts,
and for the time periods, set forth below:

<TABLE>
<CAPTION>
                         Percentage                             Percentage
                         Reimbursed                             Reimbursed
      Year Ending    (as a percentage of     Year Ending     (as a percentage of
                     daily net assets)(1)                   daily net assets)(1)
      -----------    --------------------    -----------    --------------------
<S>                       <C>               <C>              <C>
         2001(2)             .30%               2007              .25%
         2002                .30%               2008              .20%
         2003                .30%               2009              .15%
         2004                .30%               2010              .10%
         2005                .30%               2011              .05%
         2006                .30%
</TABLE>
- -----------------------

     (1) Including net assets attributable to MuniPreferred Shares.
     (2) From the commencement of operations.

     Reducing Fund expenses in this manner will tend to increase the amount of
income available for the Common Shareholders. Nuveen Advisory has not agreed to
reimburse the Fund for any portion of its fees and expenses beyond _____ __,
2011.

     The Fund, Nuveen Advisory, Nuveen, ________ and other related entities have
adopted codes of ethics which essentially prohibit certain of their personnel,
including the Nuveen fund portfolio manager, from engaging in personal
investments which compete or interfere with, or attempt to take advantage of a
client's, including the Fund's, anticipated or actual portfolio transactions,
and are designed to assure that the interests of clients, including Fund
shareholders, are placed before the interests of personnel in connection with
personal investment transactions. Text-only versions of the codes of ethics can
be viewed online or downloaded from the EDGAR Database on the SEC's internet web
site at www.sec.gov. You may also review and copy those documents by visiting
the SEC's Public Reference Room in Washington, DC. Information on the operation
of the Public Reference Room may be obtained by calling the SEC at 202-942-8090.
In addition, copies of the codes of ethics may be obtained, after mailing the
appropriate duplicating fee, by writing to the SEC's Public Reference Section,
450 5th Street, N.W., Washington, DC 20549-0102 or by e-mail request at
publicinfo@sec.gov.


                            PORTFOLIO TRANSACTIONS

     Nuveen Advisory is responsible for decisions to buy and sell securities for
the Fund and for the placement of the Fund's securities business, the
negotiation of the prices to be paid for principal trades and the allocation of
its transactions among various dealer firms. Portfolio securities will normally
be purchased directly from an underwriter or in the over-the-counter market from
the principal dealers in such securities, unless it appears that a better price
or

                                      28
<PAGE>


execution may be obtained through other means.  Portfolio securities will not
be purchased from Nuveen or its affiliates except in compliance with the 1940
Act.

     The Fund expects that substantially all portfolio transactions will be
effected on a principal (as opposed to an agency) basis and, accordingly, does
not expect to pay any brokerage commissions. Purchases from underwriters will
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers will include the spread between the bid and asked price.
On occasion, the Fund may clear portfolio transactions through Nuveen. It is the
policy of Nuveen Advisory to seek the best execution under the circumstances of
each trade. Nuveen Advisory evaluates price as the primary consideration, with
the financial condition, reputation and responsiveness of the dealer considered
secondary in determining best execution. Given the best execution obtainable, it
will be Nuveen Advisory's practice to select dealers which, in addition, furnish
research information (primarily credit analyses of issuers and general economic
reports) and statistical and other services to Nuveen Advisory. It is not
possible to place a dollar value on information and statistical and other
services received from dealers. Since it is only supplementary to Nuveen
Advisory's own research efforts, the receipt of research information is not
expected to reduce significantly Nuveen Advisory's expenses. While Nuveen
Advisory will be primarily responsible for the placement of the business of the
Fund, the policies and practices of Nuveen Advisory in this regard must be
consistent with the foregoing and will, at all times, be subject to review by
the Board of Trustees of the Fund.

     Nuveen Advisory may manage other investment accounts and investment
companies for other clients which have investment objectives similar to those of
the Fund. Subject to applicable laws and regulations, Nuveen Advisory seeks to
allocate portfolio transactions equitably whenever concurrent decisions are made
to purchase or sell securities by the Fund and another advisory account. In
making such allocations the main factors to be considered will be the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment and the size of
investment commitments generally held. While this procedure could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Board of Trustees that the
benefits available from Nuveen Advisory's organization will outweigh any
disadvantage that may arise from exposure to simultaneous transactions.

     Under the 1940 Act, the Fund may not purchase portfolio securities from any
underwriting syndicate of which Nuveen is a member except under certain limited
conditions set forth in Rule 10f-3. The rule sets forth requirements relating
to, among other things, the terms of an issue of municipal bonds purchased by
the Fund, the amount of municipal bonds which may be purchased in any one issue
and the assets of the Fund that may be invested in a particular issue. In
addition, purchases of securities made pursuant to the terms of the Rule must be
approved at least quarterly by the Board of Trustees of the Fund, including a
majority of the members thereof who are not interested persons of the Fund.

                                 DISTRIBUTIONS

     As described in the Fund's Prospectus, initial distributions to Common
Shareholders are expected to be declared approximately 45 days, and paid
approximately 60 to 90 days, from the completion of the offering of the Common
Shares, depending on market conditions. To permit the Fund to maintain a

                                      29
<PAGE>


more stable monthly distribution, the Fund will initially (prior to its first
distribution), and may from time to time thereafter, distribute less than the
entire amount of net investment income earned in a particular period. Such
undistributed net investment income would be available to supplement future
distributions, including distributions which might otherwise have been reduced
by a decrease in the Fund's monthly net income due to fluctuations in investment
income or expenses, or due to an increase in the dividend rate on the Fund's
outstanding MuniPreferred Shares. As a result, the distributions paid by the
Fund for any particular period may be more or less than the amount of net
investment income actually earned by the Fund during such period. Undistributed
net investment income will be added to the Fund's net asset value and,
correspondingly, distributions from undistributed net investment income will be
deducted from the Fund's net asset value.

     For tax purposes, the Fund is currently required to allocate net capital
gain and other taxable income, if any, between Common Shares and MuniPreferred
Shares in proportion to total distributions paid to each class for the year in
which such net capital gain or other taxable income is realized. For
information relating to the impact of the issuance of MuniPreferred Shares on
the distributions made by a Fund to Common Shareholders, see the Fund's
Prospectus under "MuniPreferred Shares and Leverage."

     While any MuniPreferred Shares are outstanding, the Fund may not declare
any cash dividend or other distribution on its Common Shares unless at the time
of such declaration (1) all accumulated dividends on the MuniPreferred Shares
have been paid and (2) the net asset value of the Fund's portfolio (determined
after deducting the amount of such dividend or other distribution) is at least
200% of the liquidation value of any outstanding MuniPreferred Shares. This
latter limitation on the Fund's ability to make distributions on its Common
Shares could under certain circumstances impair the ability of the Fund to
maintain its qualification for taxation as a regulated investment company. See
"Tax Matters."

                             DESCRIPTION OF SHARES

Common Shares

     The Fund's Declaration of Trust (the "Declaration") authorizes the issuance
of an unlimited number of Common Shares, par value $.01 per share. All Common
Shares of the Fund have equal rights as to the payment of dividends and the
distribution of assets upon liquidation of the Fund. Common Shares will, when
issued, be fully paid and, subject to matters discussed in "Certain Provisions
in the Declaration of Trust," non-assessable, and will have no pre-emptive or
conversion rights or rights to cumulative voting. At any time when the Fund's
MuniPreferred Shares are outstanding, Common Shareholders will not be entitled
to receive any distributions from the Fund unless all accrued dividends on
MuniPreferred Shares have been paid, and unless asset coverage (as defined in
the 1940 Act) with respect to MuniPreferred Shares would be at least 200% after
giving effect to such distributions. See "MuniPreferred Shares" below.

     The Common Shares have been approved for listing on the               ,
subject to notice of issuance. The Fund intends to hold annual meetings of
shareholders so long as the Common Shares are listed on a national securities
exchange and such meetings are required as a condition to such listing.

                                      30
<PAGE>


     Shares of closed-end investment companies may frequently trade at prices
lower than net asset value. Shares of closed-end investment companies like the
Fund that invest predominately in investment grade municipal bonds have during
some periods traded at prices higher than net asset value and during other
periods have traded at prices lower than net asset value. There can be no
assurance that Common Shares or shares of other municipal funds will trade at a
price higher than net asset value in the future. Net asset value will be reduced
immediately following the offering after payment of the sales load and
organization and offering expenses. Net asset value generally increases when
interest rates decline, and decreases when interest rates rise, and these
changes are likely to be greater in the case of a fund having a leveraged
capital structure. Whether investors will realize gains or losses upon the sale
of Common Shares will not depend upon a Fund's net asset value but will depend
entirely upon whether the market price of the Common Shares at the time of sale
is above or below the original purchase price for the shares. Since the market
price of the Fund's Common Shares will be determined by factors beyond the
control of the Fund, the Fund cannot predict whether the Common Shares will
trade at, below, or above net asset value or at, below or above the initial
public offering price. Accordingly, the Common Shares are designed primarily for
long-term investors, and investors in the Common Shares should not view the Fund
as a vehicle for trading purposes. See "Repurchase of Fund Shares; Conversion to
Open-End Fund" and the Fund's Prospectus under "MuniPreferred Shares and
Leverage" and "The Fund's Investments--Municipal Bonds."

MuniPreferred Shares

     The Declaration authorizes the issuance of an unlimited number of
MuniPreferred Shares, par value $.01 per share, in one or more classes or
series, with rights as determined by the Board of Trustees of the Fund, by
action of the Board of Trustees without the approval of the Common Shareholders.

     The Fund's Board of Trustees has indicated its intention to authorize an
offering of MuniPreferred Shares (representing approximately 35% of the Fund's
capital immediately after the time the MuniPreferred Shares are issued) within
approximately one to three months after completion of the offering of Common
Shares, subject to market conditions and to the Board's continuing belief that
leveraging the Fund's capital structure through the issuance of MuniPreferred
Shares is likely to achieve the benefits to the Common Shareholders described in
this Statement of Additional Information. Although the terms of the
MuniPreferred Shares, including their dividend rate, voting rights, liquidation
preference and redemption provisions, will be determined by the Board of
Trustees (subject to applicable law and the Fund's Declaration) if and when it
authorizes a MuniPreferred Shares offering, the Board has stated that the
initial series of MuniPreferred Shares would likely pay cumulative dividends at
relatively shorter-term periods (such as 7 days); by providing for the periodic
redetermination of the dividend rate through an auction or remarketing
procedure. The Board of Trustees of the Fund has indicated that the liquidation
preference, preference on distribution, voting rights and redemption provisions
of the MuniPreferred Shares will likely be as stated below.

     Limited Issuance of MuniPreferred Shares.  Under the 1940 Act, the Fund
could issue MuniPreferred Shares with an aggregate liquidation value of up to
one-half of the value of the Fund's total net assets, measured immediately after
issuance of the MuniPreferred Shares. "Liquidation value" means the original
purchase price of the shares being liquidated plus any accrued and unpaid
dividends. In addition, the Fund is not permitted to declare any cash dividend
or other distribution on its Common Shares unless the liquidation value of the
MuniPreferred shares is less than one-half of the value of the Fund's total net
assets (determined after deducting the amount of such dividend or distribution)
immediately after the distribution. If the Fund sells all the Common Shares and
MuniPreferred Shares discussed in this Prospectus, the liquidation value of the
MuniPreferred Shares is expected to be approximately 35% of the value of the
Fund's total net assets. The Fund intends to purchase or redeem MuniPreferred
Shares, if necessary, to keep that fraction below one-half.

     Distribution Preference.  The MuniPreferred Shares have complete priority
over the Common Shares as to distribution of assets.

                                      31
<PAGE>


     Liquidation Preference. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Fund, holders of
MuniPreferred Shares will be entitled to receive a preferential liquidating
distribution (expected to equal the original purchase price per share plus
accumulated and unpaid dividends thereon, whether or not earned or declared)
before any distribution of assets is made to holders of Common Shares. After
payment of the full amount of the liquidating distribution to which they are
entitled, holders of MuniPreferred Shares will not be entitled to any further
participation in any distribution of assets by the Fund. A consolidation or
merger of the Fund with or into any Massachusetts business trust or corporation
or a sale of all or substantially all of the assets of the Fund shall not be
deemed to be a liquidation, dissolution or winding up of the Fund.

     Voting Rights. In connection with any issuance of MuniPreferred Shares, the
Fund must comply with Section 18(i) of the 1940 Act which requires, among other
things, that MuniPreferred Shares be voting shares and have equal voting rights
with Common Shares. Except as otherwise indicated in this Statement of
Additional Information and except as otherwise required by applicable law,
holders of MuniPreferred Shares will vote together with Common Shareholders as a
single class.

     In connection with the election of the Fund's trustees, holders of
MuniPreferred Shares, voting as a separate class, will be entitled to elect two
of the Fund's trustees, and the remaining trustees shall be elected by Common
Shareholders and holders of MuniPreferred Shares, voting together as a single
class. In addition, if at any time dividends on the Fund's outstanding
MuniPreferred Shares shall be unpaid in an amount equal to two full years'
dividends thereon, the holders of all outstanding MuniPreferred Shares, voting
as a separate class, will be entitled to elect a majority of the Fund's trustees
until all dividends in arrears have been paid or declared and set apart for
payment.

     The affirmative vote of the holders of a majority of the Fund's outstanding
MuniPreferred Shares of any class or series, as the case may be, voting as a
separate class, will be required to, among other things (1) take certain actions
which would affect the preferences, rights, or powers of such class or series or
(2) authorize or issue any class or series ranking prior to the MuniPreferred
Shares. Except as may otherwise be required by law, (1) the affirmative vote of
the holders of at least two-thirds of the Fund's MuniPreferred Shares
outstanding at the time, voting as a separate class, will be required to approve
any conversion of the Fund from a closed-end to an open-end investment company
and (2) the affirmative vote of the holders of at least two-thirds of the
outstanding MuniPreferred Shares, voting as a separate class, shall be required
to approve any plan of reorganization (as such term is used in the 1940 Act)
adversely affecting such shares, provided however, that such separate class vote
shall be a majority vote if the action in question has previously been approved,
adopted or authorized by the affirmative vote of two-thirds of the total number
of Trustees fixed in accordance with the Declaration or the By-laws. The
affirmative vote of the holders of a majority of the outstanding MuniPreferred
Shares, voting as a separate class, shall be required to approve any action not
described in the preceding sentence requiring a vote of security holders under
Section 13(a) of the 1940 Act including, among other things, changes in a Fund's
investment objectives or changes in the investment restrictions described as
fundamental policies under "Investment Objectives and Policies--Investment
Restrictions." The class or series vote of holders of MuniPreferred Shares
described

                                      32
<PAGE>

above shall in each case be in addition to any separate vote of the
requisite percentage of Common Shares and MuniPreferred Shares necessary to
authorize the action in question.

     The foregoing voting provisions will not apply with respect to the Fund's
MuniPreferred Shares if, at or prior to the time when a vote is required, such
shares shall have been (1) redeemed or (2) called for redemption and sufficient
funds shall have been deposited in trust to effect such redemption.

     Redemption, Purchase and Sale of MuniPreferred Shares by the Fund. The
terms of the MuniPreferred Shares may provide that they are redeemable at
certain times, in whole or in part, at the original purchase price per share
plus accumulated dividends, that the Fund may tender for or purchase
MuniPreferred Shares and that the Fund may subsequently resell any shares so
tendered for or purchased. Any redemption or purchase of MuniPreferred Shares by
the Fund will reduce the leverage applicable to Common Shares, while any resale
of shares by the Fund will increase such leverage.

     The discussion above describes the Fund's Board of Trustees' present
intention with respect to a possible offering of MuniPreferred Shares.  If the
Board of Trustees determines to authorize such an offering, the terms of the
MuniPreferred Shares may be the same as, or different from, the terms described
above, subject to applicable law and the Fund's Declaration.

                 CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

     Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Declaration contains an express disclaimer of shareholder liability for debts or
obligations of the Fund and requires that notice of such limited liability be
given in each agreement, obligation or instrument entered into or executed by
the Fund or the trustees. The Declaration further provides for indemnification
out of the assets and property of the Fund for all loss and expense of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be unable to meet
its obligations. The Fund believes that the likelihood of such circumstances is
very remote.

     The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund. Specifically, the
Declaration requires a vote by holders of at least two-thirds of the Common
Shares and MuniPreferred Shares, voting together as a single class, except as
described below, to authorize (1) a conversion of the Fund from a closed-end to
an open-end investment company, (2) a merger or consolidation of the Fund, or a
series or class of the Fund, with any corporation, association, trust or other
organization or a reorganization or recapitalization of the Fund, or a series or
class of the Fund, (3) a sale, lease or transfer of all or substantially all of
the Fund's assets (other than in the regular course of the Fund's investment
activities), (4) in certain circumstances, a termination of the Fund, or a
series or class of the Fund or (5) removal of trustees, and then only for cause,
unless, with respect to (1) through (4), such transaction has already been
authorized by the affirmative vote of two-thirds of the total number of trustees
fixed in accordance with the Declaration or the By-laws, in which case the
affirmative vote of the holders of at least a majority of the Fund's Common
Shares and MuniPreferred Shares

                                       33
<PAGE>


outstanding at the time, voting together as a single class, is required,
provided, however, that where only a particular class or series is affected (or,
in the case of removing a trustee, when the trustee has been elected by only one
class), only the required vote by the applicable class or series will be
required. Approval of shareholders is not required, however, for any
transaction, whether deemed a merger, consolidation, reorganization or otherwise
whereby the Fund issues shares in connection with the acquisition of assets
(including those subject to liabilities) from any other investment company or
similar entity. None of the foregoing provisions may be amended except by the
vote of at least two-thirds of the Common Shares and MuniPreferred Shares,
voting together as a single class. In the case of the conversion of the Fund to
an open-end investment company, or in the case of any of the foregoing
transactions constituting a plan of reorganization which adversely affects the
holders of MuniPreferred Shares, the action in question will also require the
affirmative vote of the holders of at least two-thirds of the Fund's
MuniPreferred Shares outstanding at the time, voting as a separate class, or, if
such action has been authorized by the affirmative vote of two-thirds of the
total number of trustees fixed in accordance with the Declaration or the By-
laws, the affirmative vote of the holders of at least a majority of the Fund's
MuniPreferred Shares outstanding at the time, voting as a separate class. The
votes required to approve the conversion of the Fund from a closed-end to an
open-end investment company or to approve transactions constituting a plan of
reorganization which adversely affects the holders of MuniPreferred Shares are
higher than those required by the 1940 Act. The Board of Trustees believes that
the provisions of the Declaration relating to such higher votes are in the best
interest of the Fund and its shareholders.

     The provisions of the Declaration described above could have the effect of
depriving the Common Shareholders of opportunities to sell their Common Shares
at a premium over market value by discouraging a third party from seeking to
obtain control of the Fund in a tender offer or similar transaction. The overall
effect of these provisions is to render more difficult the accomplishment of a
merger or the assumption of control by a third party. They provide, however, the
advantage of potentially requiring persons seeking control of a Fund to
negotiate with its management regarding the price to be paid and facilitating
the continuity of the Fund's investment objectives and policies. The Board of
Trustees of the Fund has considered the foregoing anti-takeover provisions and
concluded that they are in the best interests of the Fund and its Common
Shareholders.

     Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.

     The Declaration provides that the obligations of the Fund are not binding
upon the trustees of the Fund individually, but only upon the assets and
property of the Fund, and that the trustees shall not be liable for errors of
judgment or mistakes of fact or law. Nothing in the Declaration, however,
protects a trustee against any liability to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

             REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

     The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares.  Instead, the
Fund's Common Shares will trade in the open market at a price that will be a
function of several factors, including dividend levels (which are in turn
affected by expenses), net asset value, call protection, price, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic

                                       34
<PAGE>


conditions and other factors. Because shares of a closed-end investment company
may frequently trade at prices lower than net asset value, the Fund's Board of
Trustees has currently determined that, at least annually, it will consider
action that might be taken to reduce or eliminate any material discount from net
asset value in respect of Common Shares, which may include the repurchase of
such shares in the open market or in private transactions, the making of a
tender offer for such shares at net asset value, or the conversion of the Fund
to an open-end investment company. There can be no assurance, however, that the
Board of Trustees will decide to take any of these actions, or that share
repurchases or tender offers, if undertaken, will reduce market discount.

     Notwithstanding the foregoing, at any time when the Fund's MuniPreferred
Shares are outstanding, the Fund may not purchase, redeem or otherwise acquire
any of its Common Shares unless (1) all accrued MuniPreferred Shares dividends
have been paid and (2) at the time of such purchase, redemption or acquisition,
the net asset value of the Fund's portfolio (determined after deducting the
acquisition price of the Common Shares) is at least 200% of the liquidation
value of the outstanding MuniPreferred Shares (expected to equal the original
purchase price per share plus any accrued and unpaid dividends thereon). The
staff of the Securities and Exchange Commission currently requires that any
tender offer made by a closed-end investment company for its shares must be at a
price equal to the net asset value of such shares on the close of business on
the last day of the tender offer. Any service fees incurred in connection with
any tender offer made by the Fund will be borne by the Fund and will not reduce
the stated consideration to be paid to tendering shareholders.

     Subject to its investment limitations, the Fund may borrow to finance the
repurchase of shares or to make a tender offer.  Interest on any borrowings to
finance share repurchase transactions or the accumulation of cash by the Fund in
anticipation of share repurchases or tenders will reduce the Fund's net income.
Any share repurchase, tender offer or borrowing that might be approved by the
Board of Trustees would have to comply with the Securities Exchange Act of 1934,
as amended, and the 1940 Act and the rules and regulations thereunder.

     Although the decision to take action in response to a discount from net
asset value will be made by the Board of the Fund at the time it considers such
issue, it is the Board's present policy, which may be changed by the Board, not
to authorize repurchases of Common Shares or a tender offer for such shares if
(1) such transactions, if consummated, would (a) result in the delisting of the
Common Shares from the                        , or (b) impair the Fund's status
as a regulated investment company under the Internal Revenue Code of 1986, as
amended (the "Code") (which would make the Fund a taxable entity, causing the
Fund's income to be taxed at the corporate level in addition to the taxation of
shareholders who receive dividends from the Fund) or as a registered closed-end
investment company under the 1940 Act; (2) the Fund would not be able to
liquidate portfolio securities in an orderly manner and consistent with the
Fund's investment objectives and policies in order to repurchase shares; or (3)
there is, in the Board's judgment, any (a) material legal action or proceeding
instituted or threatened challenging such transactions or otherwise materially
adversely affecting the Fund, (b) general suspension of or limitation on prices
for trading securities on the                        , (c) declaration of a
banking moratorium by Federal or state authorities or any suspension of payment
by United States or state banks in which the Fund invests, (d) material
limitation affecting the Fund or the issuers of its portfolio securities by
Federal or state authorities on the extension of credit by lending institutions
or on the exchange of
                                       35
<PAGE>


foreign currency, (e) commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, or (f) other event or condition which would have a material adverse
effect (including any adverse tax effect) on the Fund or its shareholders if
shares were repurchased. The Board of Trustees of the Fund may in the future
modify these conditions in light of experience.


     Conversion to an open-end company would require the approval of the holders
of at least two-thirds of the Fund's Common Shares and MuniPreferred Shares
outstanding at the time, voting together as a single class, and of the holders
of at least two-thirds of the Fund's MuniPreferred Shares outstanding at the
time, voting as a separate class, provided however, that such separate class
vote shall be a majority vote if the action in question has previously been
approved, adopted or authorized by the affirmative vote of two-thirds of the
total number of trustees fixed in accordance with the Declaration or By-laws.
See the Prospectus under "Certain Provisions in the Declaration of Trust" for a
discussion of voting requirements applicable to conversion of the Fund to an
open-end company. If the Fund converted to an open-end company, it would be
required to redeem all MuniPreferred Shares then outstanding, and the Fund's
Common Shares would no longer be listed on the                        .
Shareholders of an open-end investment company may require the company to redeem
their shares on any business day (except in certain circumstances as authorized
by or under the 1940 Act) at their net asset value, less such redemption charge,
if any, as might be in effect at the time of redemption. In order to avoid
maintaining large cash positions or liquidating favorable investments to meet
redemptions, open-end companies typically engage in a continuous offering of
their shares. Open-end companies are thus subject to periodic asset in-flows and
out-flows that can complicate portfolio management. The Board of Trustees of the
Fund may at any time propose conversion of the Fund to an open-end company
depending upon their judgment as to the advisability of such action in light of
circumstances then prevailing.


     The repurchase by the Fund of its shares at prices below net asset value
will result in an increase in the net asset value of those shares that remain
outstanding. However, there can be no assurance that share repurchases or
tenders at or below net asset value will result in the Fund's shares trading at
a price equal to their net asset value. Nevertheless, the fact that the Fund's
shares may be the subject of repurchase or tender offers at net asset value from
time to time, or that the Fund may be converted to an open-end company, may
reduce any spread between market price and net asset value that might otherwise
exist.

     In addition, a purchase by the Fund of its Common Shares will decrease the
Fund's total assets which would likely have the effect of increasing the Fund's
expense ratio.  Any purchase by the Fund of its Common Shares at a time when
MuniPreferred Shares are outstanding will increase the leverage applicable to
the outstanding Common Shares then remaining.  See the Fund's Prospectus under
"Risks--Concentration Risk" and "Risks--Leverage Risk."

     Before deciding whether to take any action if the Fund's Common Shares
trade below net asset value, the Board of the Fund would consider all relevant
factors, including the extent and duration of the discount, the liquidity of the
Fund's portfolio, the impact of any action that might be taken on the Fund or
its shareholders and market considerations. Based on these considerations, even
if the Fund's shares should trade at a discount, the Board of Trustees may
determine that, in the interest of the Fund and its shareholders, no action
should be taken.

                                       36
<PAGE>

                                  TAX MATTERS

Federal Income Tax Matters

     The following discussion of federal income tax matters is based upon the
advice of Bell, Boyd & Lloyd LLC, special counsel to the Fund.

     The Fund intends to qualify under Subchapter M of the Code, for tax
treatment as a regulated investment company and to satisfy certain conditions
which will enable interest from municipal obligations, which is exempt from
regular federal income taxes in the hands of the Fund, to qualify as "exempt-
interest dividends" when distributed to the Fund's shareholders. In order to
qualify for tax treatment as a regulated investment company, the Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, the Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities or foreign currencies, or other income (including but not limited to
gains from options, futures and forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "90% gross
income test"). Second, the Fund must diversify its holdings so that, at the
close of each quarter of its taxable year, (i) at least 50% of the value of its
total assets is comprised of cash, cash items, United States Government
securities, securities of other regulated investment companies and other
securities limited in respect of any one issuer to an amount not greater in
value than 5% of the value of the Fund's total assets and to not more than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities of any one issuer
(other than United States Government securities and securities of other
regulated investment companies) or two or more issuers controlled by the Fund
and engaged in the same, similar or related trades or businesses.

     As a regulated investment company, the Fund will not be subject to federal
income tax in any taxable year with respect to "net investment income" (i.e.,
its "investment company taxable income," as that term is defined in the Code,
determined without reference to the deduction for dividends paid) and "net
capital gain" (i.e., the excess of the Fund's net long-term capital gain over
its net short-term capital loss), provided that it distributes at least 90% of
the sum of (i) its investment company taxable income (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of net
long-term capital loss, and any other taxable income other than net capital gain
and is reduced by deductible expenses) and (ii) its net tax-exempt interest (the
excess of its gross tax-exempt interest income over certain disallowed
deductions). The Fund may retain for investment its net capital gain. However,
if the Fund retains any net capital gain or any investment company taxable
income, it will be subject to tax at regular corporate rates on the amount
retained. If the Fund retains any net capital gain, it may designate the
retained amount as undistributed capital gains in a notice to its shareholders
who, if subject to federal income tax on long-term capital gains, (i) will be
required to include in income for federal income tax purposes, as long-term
capital gain, their share of such undistributed amount, and (ii) will be
entitled to credit their proportionate shares of the tax paid by the Fund on
such undistributed amount against their federal income tax liabilities, if any,
and to claim refunds to the extent the credit exceeds such liabilities. For
federal income tax purposes, the tax basis of shares owned by a shareholder of
the Fund will be increased by an amount equal under current law to the
difference between the amount of undistributed capital gains included in the
shareholder's gross income and the tax deemed paid by the shareholder under
clause (ii) of the preceding sentence. The

                                      37
<PAGE>


Fund intends to distribute at least annually to its shareholders all or
substantially all of its net tax-exempt interest and any investment company
taxable income and net capital gain.

     Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, to elect (unless it
has made a taxable year election for excise tax purposes as discussed below) to
treat all or part of any net capital loss, any net long-term capital loss or any
net foreign currency loss incurred after October 31 as if it had been incurred
in the succeeding year.

     The Fund intends to qualify to pay "exempt-interest dividends" by
satisfying the requirement that at the close of each quarter of the Fund's
taxable year at least 50% of the value of its total assets consist of tax-exempt
municipal obligations. Distributions from the Fund will constitute exempt-
interest dividends to the extent of its tax-exempt interest income (net of
expenses and amortized bond premium). Exempt-interest dividends distributed to
Common Shareholders are excluded from gross income for federal income tax
purposes, although they are required to be reported on the Common Shareholders'
federal income tax returns. Gain from the sale or redemption of Common Shares,
however, will be taxable to the Common Shareholders as capital gain (provided
such Common Shares were held as capital assets) even though the increase in
value of such Common Shares is attributable to tax-exempt interest income. In
addition, gain realized by the Fund from the disposition of a tax-exempt
municipal obligation that was purchased at a price less than the principal
amount of the bond will be taxable to the Fund's shareholders as ordinary income
to the extent of accrued market discount. Under the Code, interest on
indebtedness incurred or continued to purchase or carry Common Shares, which
interest is deemed to relate to exempt-interest dividends, will not be
deductible by Common Shareholders for federal income tax purposes. Moreover,
while exempt-interest dividends are excluded from gross income for federal
income tax purposes, they may be subject to alternative minimum tax ("AMT") and
may have other collateral tax consequences. Taxpayers that may be subject to the
AMT should consult their advisers before investing in Common Shares.

     Distributions by the Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gain realized by the Fund, if any, will be taxable to Common
Shareholders as ordinary income whether received in cash or additional shares.
Any net long-term capital gain realized by the Fund and distributed to Common
Shareholders in cash or additional shares will be taxable to Common Shareholders
as long-term capital gain regardless of the length of time investors have owned
shares of the Fund. Distributions by the Fund to Common Shareholders that do not
constitute ordinary income dividends or capital gain dividends will be treated
as a return of capital to the extent of (and in reduction of) the Common
Shareholder's tax basis in his or her shares. Any excess will be treated as gain
from the sale of his or her shares, as discussed below.

     The Internal Revenue Service's position in a published revenue ruling
indicates that the Fund is required to designate distributions paid with respect
to its Common Shares and its MuniPreferred Shares as consisting of a portion of
each type of income distributed by the Fund. The portion of each type of income
deemed received by the holders of each class of shares will be equal to the
portion of total Fund distributions received by such class. Thus, the Fund will
designate dividends paid as exempt-interest dividends in a manner that allocates
such dividends between the holders of the Common Shares and the holders of
MuniPreferred Shares, in proportion to the total dividends paid to each such
class during or with respect to the taxable year, or otherwise as required by
applicable law. Capital gain dividends and ordinary income dividends will
similarly be allocated between the two classes.

     If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses.  These rules could therefore affect the
amount, timing and character of distributions to Common Shareholders.

     Prior to purchasing shares in the Fund, an investor should carefully
consider the impact of dividends or distributions which are expected to be or
have been declared, but not paid. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution.

     Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received by
the shareholders) on December 31.

     The redemption or exchange of Common Shares normally will result in capital
gain or loss to the Common Shareholders who hold their Common Shares as capital
assets. However, any loss on the sale or exchange of a Common Share that has
been held for six months or less will be disallowed to the extent of any
distribution of exempt-interest dividends received with respect to such Common
Share. Generally, a Common Shareholder's gain or loss will be long-term gain or
loss if the shares have been held for more than one year. If a shareholder sells
or otherwise disposes of Common Shares before holding them for more than six
months, however, any loss on the sale or other disposition of such Common Shares
shall be treated as a long-term capital loss to the extent of any capital gain
dividends received by the Common Shareholder (or credited to the Common
Shareholder as an undistributed capital gain) with respect to such Common
Shares. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gain (i.e., the excess of net long-term capital
gain over net short-term capital loss) with respect to securities will be taxed
at a maximum rate of 20%, while short-term capital gain and other ordinary
income will be taxed at a maximum

                                      38
<PAGE>

rate of 39.6%. The maximum long-term capital gain rate will decrease from 20%
to 18% for capital assets that have been held for more than five years and whose
holding periods begin after December 31, 2000. Because of the limitations on
itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.

     All or a portion of a sales charge paid in purchasing Common Shares cannot
be taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
shares of the Fund or another fund are subsequently acquired without payment of
a sales charge pursuant to a reinvestment right. Any disregarded portion of such
charge will result in an increase in the Common Shareholder's tax basis in the
shares subsequently acquired. In addition, no loss will be allowed on the
redemption or exchange of Common Shares if the Common Shareholder purchases
other shares of the Fund (whether through reinvestment of distributions or
otherwise) or the Common Shareholder acquires or enters into a contract or
option to acquire securities that are substantially identical to shares of the
Fund within a period of 61 days beginning 30 days before and ending 30 days
after such redemption or exchange. If disallowed, the loss will be reflected in
an adjustment to the basis of the shares acquired.

     In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of its capital gain net
income (the excess of its realized capital gains over its realized capital
losses, generally computed on the basis of the one-year period ending on October
31 of such year) and 100% of any taxable ordinary income and any excess of
realized capital gains over realized capital losses for the prior year that was
not distributed during such year and on which the Fund paid no federal income
tax. For purposes of the excise tax, a regulated investment company may reduce
its capital gain net income (but not below its net capital gain) by the amount
of any net ordinary loss for the calendar year. The Fund intends to make timely
distributions in compliance with these requirements and consequently it is
anticipated that it generally will not be required to pay the excise tax.

     If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions to
its Common Shareholders would be taxable to Common Shareholders as ordinary
dividend income for federal income tax purposes to the extent of the Fund's
earnings and profits.

     The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification numbers (in
the case of individuals, their Social Security number) and certain
certifications, or who are otherwise subject to backup withholding. Backup
withholding is not an additional tax and any amounts withheld may be credited
against the shareholder's federal income tax liability.

     The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its Common Shareholders.  For complete provisions,
reference should be made to the pertinent Code sections and Treasury
Regulations.  The Code and Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions.  Common Shareholders are advised to consult
their own tax

                                       39
<PAGE>

advisors for more detailed information concerning the federal taxation of the
Fund and the income tax consequences to its Common Shareholders.

                PERFORMANCE RELATED AND COMPARATIVE INFORMATION

     The Fund may be a suitable investment for a shareholder who is thinking of
adding bond investments to his portfolio to balance the appreciated stocks that
the shareholder is holding. California municipal bonds can provide double tax-
free income (exempt from both regular federal and state income taxes) for
residents of California. Because the Fund expects that a substantial portion of
its investments will pay interest that is taxable under the federal alternative
minimum tax, the Fund may not be a suitable investment for shareholders that are
subject to the federal alternative minimum tax.

     The Fund may quote certain performance-related information and may compare
certain aspects of its portfolio and structure to other substantially similar
closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar Inc. or
other independent services. Comparison of the Fund to an alternative investment
should be made with consideration of differences in features and expected
performance. The Fund may obtain data from sources or reporting services, such
as Bloomberg Financial ("Bloomberg") and Lipper, that the Fund believes to be
generally accurate.

     Past performance is not indicative of future results.  At the time Common
Shareholders sell their shares, they may be worth more or less than their
original investment.

     See Appendix E for additional performance related and comparative
information.

                                       40
<PAGE>


                                    EXPERTS

     The Statement of Net Assets of the Fund as of _____ _, 2001, appearing in
this Statement of Additional Information has been audited by Ernst & Young LLP,
233 South Wacker Drive, Chicago, Illinois 60606, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. Ernst & Young LLP provides accounting and auditing
services to the Fund.

                                   CUSTODIAN

     The custodian of the assets of the Fund is The Chase Manhattan Bank, P.O.
Box 660086, Dallas, Texas 75266-0086. The custodian performs custodial, fund
accounting and portfolio accounting services.

                            ADDITIONAL INFORMATION

     A Registration Statement on Form N-2, including amendments thereto,
relating to the shares of the Fund offered hereby, has been filed by the Fund
with the Securities and Exchange Commission (the "Commission"), Washington, D.C.
The Fund's Prospectus and this Statement of Additional Information do not
contain all of the information set forth in the Registration Statement,
including any exhibits and schedules thereto. For further information with
respect to the Fund and the shares offered hereby, reference is made to the
Fund's Registration Statement. Statements contained in the Fund's Prospectus and
this Statement of Additional Information as to the contents of any contract or
other document referred to are not

                                      41
<PAGE>


necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. Copies of
the Registration Statement may be inspected without charge at the Commission's
principal office in Washington, D.C., and copies of all or any part thereof may
be obtained from the Commission upon the payment of certain fees prescribed by
the Commission.

                                      42
<PAGE>


                        REPORT OF INDEPENDENT AUDITORS

The Board of Trustees and Shareholder
Nuveen Insured Dividend Advantage Municipal Fund

[TO COME]

                                      43


<PAGE>


               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
                             FINANCIAL STATEMENTS

               Nuveen Insured Dividend Advantage Municipal Fund
                            Statement of Net Assets
                                 _______, 2001

[TO COME]

                                      44
<PAGE>


               Nuveen Insured Dividend Advantage Municipal Fund
                            Statement of Operations
    Period from July 12, 1999 (date of organization) through _______, 2001

[TO COME]

                                       45
<PAGE>

                                   APPENDIX A

Ratings of Investments


Standard & Poor's Corporation--A brief description of the applicable Standard &
Poor's Corporation ("Standard & Poor's" or "S&P") rating symbols and their
meanings (as published by S&P) follows:


A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation,
a specific class of financial obligations, or a specific financial program. It
takes into consideration the creditworthiness of guarantors, insurers, or other
forms of credit enhancement on the obligation. The issue credit rating is not a
recommendation to purchase, sell, or hold a financial obligation, inasmuch as it
does not comment as to market price or suitability for a particular investor.

Issue credit ratings are based on current information furnished by the obligors
or obtained by Standard & Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in connection with any credit rating
and may, on occasion, rely on unaudited financial information. Credit ratings
may be changed, suspended, or withdrawn as a result of changes in, or
unavailability of, such information, or based on other circumstances.

Issue credit ratings can be either long term or short term. Short-term ratings
are generally assigned to those obligations considered short term in the
relevant market. In the U.S., for example, that means obligations with an
original maturity of no more than 365 days - including commercial paper.
Short-term ratings are also used to indicate the creditworthiness of an obligor
with respect to put features on long-term obligations. The result is a dual
rating, in which the short-term ratings address the put feature, in addition to
the usual long-term rating. Medium-term notes are assigned long-term ratings.

Long-term Issue Credit Ratings

Issue credit ratings are based in varying degrees, on the following
considerations:

      1.  Likelihood of payment - capacity and willingness of the obligor
          to meet its financial commitment on an obligation in accordance
          with the terms of the obligation;
      2.  Nature of and provisions of the obligation; and
      3.  Protection afforded by, and relative position of, the obligation
          in the event of bankruptcy, reorganization, or other arrangement
          under the laws of bankruptcy and other laws affecting creditors'
          rights.

The issue ratings definitions are expressed in terms of default risk. As such,
they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the lower priority in
bankruptcy, as noted above.

AAA
An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's.
The obligor's capacity to meet its financial

                                    A-1





<PAGE>

     commitment on the obligation is extremely strong.

     AA

     An obligation rated `AA' differs from the highest-rated obligations only in
     small degree. The obligor's capacity to meet its financial commitment on
     the obligation is very strong.

     A

     An obligation rated `A' is somewhat more susceptible to the adverse effects
     of changes in circumstances and economic conditions than obligations in
     higher-rated categories. However, the obligor's capacity to meet it
     financial commitment on the obligation is still strong.

     BBB

     An obligation rated `BBB' exhibits adequate protection parameters. However,
     adverse economic conditions or changing circumstances are more likely to
     lead to a weakened capacity of the obligor to meet its financial commitment
     on the obligation.

     BB, B, CCC, CC, And C

     Obligations rated `BB', `B', `CCC', `CC', and `C' are regarded as having
     significant speculative characteristics. `BB' indicates the least degree of
     speculation and `C' the highest. While such obligations will likely have
     some quality and protective characteristics, these may be outweighed by
     large uncertainties or major exposures to adverse conditions.

     BB

     An obligation rated `BB' is less vulnerable to nonpayment than other
     speculative issues. However, it faces major ongoing uncertainties or
     exposure to adverse business, financial, or economic conditions, which
     could lead to the obligor's inadequate capacity to meet its financial
     commitment on the obligation.

     B

     An obligation rated `B' is more vulnerable to nonpayment than obligations
     rated `BB', but the obligor currently has the capacity to meet its
     financial commitment on the obligation. Adverse business, financial, or
     economic conditions will likely impair the obligor's capacity or
     willingness to meet its financial commitment on the obligation.

     CCC

     An obligation rated `CCC' is currently vulnerable to nonpayment and is
     dependent upon favorable business, financial, and economic conditions for
     the obligor to meet its financial commitment on the obligation. In the
     event of adverse business, financial, or economic conditions, the obligor
     is not likely to have the capacity to meet its financial commitment on the
     obligation.

     CC

     An obligation rated `CC' is currently highly vulnerable to nonpayment.



                                 A-2

<PAGE>


C

The `C' rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.

D

An obligation rated `D' is in payment default. The `D' rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The `D' rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

Plus (+) or minus (-)  The ratings from `AA' to `CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.

c    The `c' subscript is used to provide additional information to investors
     that the bank may terminate its obligation to purchase tendered bonds if
     the long-term credit rating of the issuer is below an investment-grade
     level and/or the issuer's bonds are deemed taxable.

p    The letter `p' indicates that the rating is provisional. A provisional
     rating assumes the successful completion of the project financed by the
     debt being rated and indicates that payment of debt service requirements is
     largely or entirely dependent upon the successful, timely completion of the
     project. This rating, however, while addressing credit quality subsequent
     to completion of the project, makes no comment on the likelihood of or the
     risk of default upon failure of such completion. The investor should
     exercise his own judgment with respect to such likelihood and risk.

*    Continuance of the ratings is contingent upon Standard & Poor's receipt of
     an executed copy of the escrow agreement or closing documentation
     confirming investments and cash flows.

r    The `r' highlights derivative, hybrid, and certain other obligations that
     Standard & Poor's believes may experience high volatility or high
     variability in expected returns as a result of noncredit risks. Examples of
     such obligations are securities with principal or interest return indexed
     to equities, commodities, or currencies; certain swaps and options; and
     interest-only and principal-only mortgage securities. The absence of an `r'
     symbol should not be taken as an indication that an obligation will exhibit
     no volatility or variability in total return.

N.R. Not rated.

     Debt obligations of issuers outside the United States and its territories
     are rated on the same basis as domestic corporate and municipal issues. The
     ratings measure the creditworthiness of the obligor but do not take into
     account currency exchange and related uncertainties.

Bond Investment Quality Standards Under present commercial bank regulations
issued by the Comptroller of the Currency, bonds rated in the top four
categories (`AAA', `AA', `BBB', commonly known as investment-grade ratings)
generally are regarded as eligible for bank investment. Also, the laws of
various states governing legal investments impose certain rating or other
standards for obligations eligible for investment by savings banks, trust
companies, insurance companies, and fiduciaries in general.

Short-Term Issue Credit Ratings

Notes

A Standard & Poor's note ratings reflects the liquidity factors and market
access risks unique to notes. Notes due in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment:

     .  Amortization schedule -- the larger the final maturity relative to other
        maturities, the more likely it will be treated as a note; and

     .  Source of payment -- the more dependent the issue is on the market for
        its refinancing, the more likely it will be treated as a note.

Note rating symbols are as follows:

SP-1 Strong capacity to pay principal and interest. An issue determined to
     possess a very strong capacity to pay debt service is given a plus (+)
     designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
     vulnerability to adverse financial and economic changes over the term of
     the notes.

SP-3 Speculative capacity to pay principal and interest.

                                      A-3
<PAGE>

A note rating is not a recommendation to purchase, sell, or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.

Commercial Paper

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

Ratings are graded into several categories, ranging from `A-1' for the highest
quality obligations to `D' for the lowest. These categories are as follows:

A-1  A short-term obligation rated `A-1' is rated in the highest category by
     Standard & Poor's. The obligor's capacity to meet its financial commitment
     on the obligation is strong. Within this category, certain obligations are
     designated with a plus sign (+). This indicates that the obligor's capacity
     to meet its financial commitment on these obligations is extremely strong.

A-2  A short-term obligation rated `A-2' is somewhat more susceptible to the
     adverse effects of changes in circumstances and economic conditions than
     obligations in higher rating categories. However, the obligor's capacity to
     meet its financial commitment on the obligation is satisfactory.

A-3  A short-term obligation rated `A-3' exhibits adequate protection
     parameters. However, adverse economic conditions or changing circumstances
     are more likely to lead to a weakened capacity of the obligor to meet its
     financial commitment on the obligation.

B    A short-term obligation rated `B' is regarded as having significant
     speculative characteristics. The obligor currently has the capacity to meet
     its financial commitment on the obligation; however, it faces major ongoing
     uncertainties which could lead to the obligor's inadequate capacity to meet
     its financial commitment on the obligation.

C    A short-term obligation rated `C' is currently vulnerable to nonpayment and
     is dependent upon favorable business, financial, and economic conditions
     for the obligor to meet its financial commitment on the obligation.

D    A short-term obligation rated `D' is in payment default. The `D' rating
     category is used when payments on an obligation are not made on the date
     due even if the applicable grace period has not expired, unless Standard &
     Poor's believes that such payments will be made during such grace period.
     The `D' rating also will be used upon the filing of a bankruptcy petition
     or the taking of a similar action if payments on an obligation are
     jeopardized.

A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.

                                      A-4
<PAGE>

Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:

Municipal Bonds

Aaa  Bonds which are rated `Aaa' are judged to be of the best quality. They
     carry the smallest degree of investment risk and are generally referred to
     as "gilt edged." Interest payments are protected by a large or by an
     exceptionally stable margin and principal is secure. While the various
     protective elements are likely to change, such changes as can be visualized
     are most unlikely to impair the fundamentally strong position of such
     issues.

Aa   Bonds which are rated `Aa' are judged to be of high quality by all
     standards. Together with the `Aaa' group they comprise what are generally
     known as high grade bonds. They are rated lower than the best bonds because
     margins of protection may not be as large as in `Aaa' securities or
     fluctuation of protective elements may be of greater amplitude or there may
     be other elements present which make the long-term risks appear somewhat
     larger than in `Aaa' securities.

A    Bonds which are rated `A' possess many favorable investment attributes and
     are to be considered as upper medium grade obligations. Factors giving
     security to principal and interest are considered adequate, but elements
     may be present which suggest a susceptibility to impairment sometime in the
     future.

Baa  Bonds which are rated `Baa' are considered as medium grade obligations,
     i.e., they are neither highly protected nor poorly secured. Interest
     payments and principal security appear adequate for the present but certain
     protective elements may be lacking or may be characteristically unreliable
     over any great length of time. Such bonds lack outstanding investment
     characteristics and in fact have speculative characteristics as well.

Ba   Bonds which are rated `Ba' are judged to have speculative elements; their
     future cannot be considered as well assured. Often the protection of
     interest and principal payments may be very moderate and thereby not well
     safeguarded during both good and bad times over the future.  Uncertainty of
     position characterizes bonds in this class.

B    Bonds which are rated `B' generally lack characteristics of the desirable
     investment. Assurance of interest and principal payments or of maintenance
     of other terms of the contract over any long period of time may be small.

Caa  Bonds which are rated `Caa' are of poor standing. Such issues may be in
     default or there may be present elements of danger with respect to
     principal or interest.

Ca   Bonds which are rated `Ca' represent obligations which are speculative in a
     high degree. Such issues are often in default or have other marked
     shortcomings.

C    Bonds which are rated `C' are the lowest rated class of bonds, and issues
     so rated can be regarded as having extremely poor prospects of ever
     attaining any real investment standing.

                                      A-5
<PAGE>


Issues that are secured by escrowed funds held in trust, reinvested in direct,
non-callable U.S. government obligations or non-callable obligations
unconditionally guaranteed by the U.S. Government or Resolution Funding
Corporation are identified with a # (hatchmark) symbol, e.g., #Aaa.

Con. (...):  Bonds for which the security depends upon the completion of some
             act or the fulfillment of some condition are rated conditionally.
             These are bonds secured by (a) earnings of projects under
             construction, (b) earnings of projects unseasoned in operation
             experience, (c) rentals which begin when facilities are completed,
             or (d) payments to which some other limiting condition attaches.
             The parenthetical rating denotes probable credit stature upon
             completion of construction or elimination of the basis of the
             condition.

Note:        Moody's applies numerical modifiers 1, 2 and 3 in each generic
             rating classification from Aa through Caa. The modifier 1 indicates
             that the obligation ranks in the higher end of its generic rating
             category; the modifier 2 indicates a mid-range ranking; and the
             modifier 3 indicates a ranking in the lower end of that generic
             rating category.

Short-Term Loans

MIG 1/VMIG 1  This designation denotes superior credit quality. Excellent
              protection is afforded by established cash flows, highly reliable
              liquidity support, or demonstrated broad-based access to the
              market for refinancing.

MIG 2/VMIG 2  This designation denotes strong credit quality. Margins of
              protection are ample, although not as large as in the preceding
              group.

MIG 3/VMIG 3  This designation denotes acceptable credit quality. Liquidity and
              cash-flow protection may be narrow, and market access for
              refinancing is likely to be less well-established.

SG            This designation denotes speculative-grade credit quality. Debt
              instruments in this category may lack sufficient margins of
              protection.

Commercial Paper

Issuers rated Prime-1 (or related supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will normally be evidenced by the following characteristics:

     --  Leading market positions in well-established industries.

     --  High rates of return on funds employed.

     --  Conservative capitalization structures with moderate reliance on debt
         and ample asset protection.

     --  Broad margins in earnings coverage of fixed financial charges and high
         internal cash generation.

                                      A-6
<PAGE>

     --   Well-established access to a range of financial markets and assured
          sources of alternate liquidity.

Issuers rated Prime-2 (or related supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated Prime-3 (or related supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.

Issuers rated Not Prime do not fall within any of the Prime rating categories.

     Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:

Long-Term Credit Ratings

Investment Grade

AAA  Highest credit quality. `AAA' ratings denote the lowest expectation of
     credit risk. They are assigned only in case of exceptionally strong
     capacity for timely payment of financial commitments. This capacity is
     highly unlikely to be adversely affected by foreseeable events.

AA   Very high credit quality. `AA' ratings denote a very low expectation of
     credit risk. They indicate very strong capacity for timely payment of
     financial commitments. This capacity is not significantly vulnerable to
     foreseeable events.

A    High credit quality. `A' ratings denote a low expectation of credit risk.
     The capacity for timely payment of financial commitments is considered
     strong. This capacity may, nevertheless, be more vulnerable to changes in
     circumstances or in economic conditions than is the case for higher
     ratings.

BBB  Good credit quality. `BBB' ratings indicate that there is currently a low
     expectation of credit risk. The capacity for timely payment of financial
     commitments is considered adequate, but adverse changes in circumstances
     and in economic conditions are more likely to impair this capacity. This
     is the lowest investment-grade category.

Speculative Grade

BB   Speculative. `BB' ratings indicate that there is a possibility of credit
     risk developing, particularly as the result of adverse economic change over
     time; however, business or

                                      A-7
<PAGE>


     financial alternatives may be available to allow financial commitments to
     be met. Securities rated in this category are not investment grade.

B    Highly speculative. `B' ratings indicate that significant credit risk is
     present, but a limited margin of safety remains. Financial commitments are
     currently being met; however, capacity for continued payment is contingent
     upon a sustained, favorable business and economic environment.

CCC, CC, C High default risk. Default is a real possibility. Capacity for
     meeting financial commitments is solely reliant upon sustained, favorable
     business or economic developments. A `CC' rating indicates that default of
     some kind appears probable. `C' ratings signal imminent default.

DDD, DD, and D Default. The ratings of obligations in this category are based on
     their prospects for achieving partial or full recovery in a reorganization
     or liquidation of the obligor. While expected recovery values are highly
     speculative and cannot be estimated with any precision, the following serve
     as general guidelines. `DDD' obligations have the highest potential for
     recovery, around 90%-100% of outstanding amounts and accrued interest. `DD'
     indicates potential recoveries in the range of 50%-90%, and `D' the lowest
     recovery potential, i.e., below 50%. Entities rated in this category have
     defaulted on some or all of their obligations. Entities rated `DDD' have
     the highest prospect for resumption of performance or continued operation
     with or without a formal reorganization process. Entities rated `DD' and
     `D' are generally undergoing a formal reorganization or liquidation
     process; those rated `DD' are likely to satisfy a higher portion of their
     outstanding obligations, while entities rated `D' have a poor prospect for
     repaying all obligations.

Short-Term Credit Ratings

A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.

F1   Highest credit quality. Indicates the strongest capacity for timely payment
     of financial commitments; may have an added "+" to denote any exceptionally
     strong credit feature.

F2   Good credit quality. A satisfactory capacity for timely payment of
     financial commitments, but the margin of safety is not as great as in the
     case of the higher ratings.

F3   Fair credit quality. The capacity for timely payment of financial
     commitments is adequate; however, near-term adverse changes could result in
     a reduction to non-investment grade.

B    Speculative. Minimal capacity for timely payment of financial commitments,
     plus vulnerability to near-term adverse changes in financial and economic
     conditions.

                                      A-8
<PAGE>

C    High default risk. Default is a real possibility. Capacity for meeting
     financial commitments is solely reliant upon a sustained, favorable
     business and economic environment.

D    Default. Denotes actual or imminent payment default.

Notes:

"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the `AAA' long-term rating
category, to categories below `CCC', or to short-term ratings other than `F1'.


`NR' indicates that Fitch does not rate the issuer or issue in question.

`Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.


Rating Watch: Ratings are placed on RatingWatch to notify investors that there
is a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. Rating Watch is typically resolved over a relatively
short period.

A Rating Outlook indicates the direction a rating is likely to move over a one
to two year period. Outlooks may be positive, stable, or negative. A positive or
negative Rating Outlook does not imply a rating change is inevitable. Similarly,
companies whose outlooks are `stable' could be downgraded before an outlook
moves to positive or negative if circumstances warrant such an action.
Occasionally, Fitch may be unable to identify the fundamental trend. In these
cases, the Rating Outlook may be described as evolving.

                                      A-9
<PAGE>

                                  APPENDIX B

                        TAXABLE EQUIVALENT YIELD TABLES

     The taxable equivalent yield is the current yield you would need to earn on
a taxable investment in order to equal a stated tax-free yield on a municipal
investment. To assist you to more easily compare municipal investments like
the Fund with taxable alternative investments, the table below presents the
taxable equivalent yields for a range of hypothetical tax-free yields assuming
the stated marginal Federal tax rates for 2001 listed below:

Taxable Equivalent of Tax-Free Yields

Tax Free Yields

<TABLE>
Tax Rate       4.00%        4.50%       5.00%       5.50%      6.00%      6.50%
- -------------------------------------------------------------------------------
<S>            <C>          <C>         <C>         <C>        <C>       <C>
  15.0%        4.71%        5.29%       5.88%       6.47%      7.06%      7.65%
  28.0%        5.56%        6.25%       6.94%       7.64%      8.33%      9.03%
  31.0%        5.80%        6.52%       7.25%       7.97%      8.70%      9.42%
  36.0%        6.25%        7.03%       7.81%       8.59%      9.38%     10.16%
  39.6%        6.62%        7.45%       8.28%       9.11%      9.93%     10.76%
</TABLE>


                                      B-1

<PAGE>

                                  APPENDIX C

                            DESCRIPTION OF INSURERS

     Set forth below is information about the various municipal bond insurers
with whom the Fund intends to maintain specific insurance policies for
particular municipal bonds or policies of portfolio insurance. The information
in this Appendix is based on information supplied by the insurers, and the Fund
cannot verify its accuracy and completeness.

AMBAC ASSURANCE CORPORATION ("AMBAC ASSURANCE")

     Ambac Assurance Corporation ("Ambac Assurance") is a Wisconsin-domiciled
stock insurance corporation regulated by the Office of the Commissioner of
Insurance of the State of Wisconsin and licensed to do business in 50 states,
the District of Columbia, the Territory of Guam and the Commonwealth of Puerto
Rico, with admitted assets of approximately $3,290,000,000 (unaudited) and
statutory capital of approximately $1,920,000 (unaudited) as of December 31,
1998. Statutory capital consists of Ambac Assurance's policyholders' surplus and
statutory contingency reserve. Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., Moody's Investors Service and Fitch IBCA, Inc.
have assigned a triple-A financial strength rating to Ambac Assurance. Ambac
Assurance has obtained a ruling from the Internal Revenue Service to the effect
that the insuring of an obligation to Ambac Assurance will not affect the
treatment for federal income tax purposes of interest on such obligation and
that insurance proceeds representing maturing interest paid by Ambac Assurance
under policy provisions substantially identical to those contained in its
municipal bond insurance policy shall be treated for federal income tax purposes
in the same manner as if such payments were made by the issuer of the bonds.

     Ambac Assurance makes no representation regarding the bonds or the
advisability of investing in the bonds and makes no representation regarding,
nor has it participated in the preparation of, the Prospectus and Statement of
Additional Information, other than the information supplied by Ambac Assurance
and presented under this heading "Ambac Assurance Corporation."

FINANCIAL SECURITY ASSURANCE INC. ("FINANCIAL SECURITY")

     Financial Security is a monoline insurance company incorporated under the
laws of the State of New York. Financial Security is licensed to engage in the
financial guaranty insurance business in all 50 states, the District of Columbia
and Puerto Rico.

     Financial Security is a wholly owned subsidiary of Financial Security
Assurance Holdings Ltd. ("Holdings"), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprise Holdings, Inc.,
XL Capital Ltd., MediaOne Group, Inc., and The Tokio Marine and Fire Insurance
Co., Ltd. No shareholder is obligated to pay any debts of or any claims against
Financial Security. Financial Security is domiciled in the State of New York and
is subject to regulation by the State of New York Insurance Department. As of
December 31, 1998, the total policyholders' surplus and contingency reserves and
the total unearned premium reserve, respectively, of Financial Security and its
consolidated subsidiaries.

                                      C-1

<PAGE>

were, in accordance with statutory accounting principles, approximately
$1,037,710,000 (audited) and $595,900,000 (audited), the total shareholders'
equity and total unearned premium reserve, respectively, of Financial Security
and its consolidated subsidiaries were, in accordance with generally accepted
accounting principles, approximately $1,104,591,000 (audited) and $504,603,000
(audited). Copies of Financial Security's financial statements may be obtained
in writing to Financial Security at 350 Park Avenue, New York, New York 10022,
Attention: Communications Department. Financial Security's telephone number is
(212) 826-0100. Financial Security's financial statements are included as
exhibits to the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q
filed with the Securities and Exchange Commission by Holdings and may be
reviewed at Holdings' website: www.fsa.com.

MBIA INSURANCE CORPORATION ("MBIA")

     The Insurer is the principal operating subsidiary of MBIA, Inc., a New York
Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of or
claims against the Insurer. The Insurer is domiciled in the State of New York
and licensed to do business in and subject to regulation under the laws of all
50 states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of Northern Marina Islands, the Virgin Islands of the United States
and the Territory of Guam. The Insurer has two European branches, one in the
Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the Insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.

     As of December 31, 1997 the Insurer has admitted assets of $5.3 billion
(audited), total liabilities of $3.5 billion (audited), and total capital and
surplus of $1.8 billion (audited) determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities. As of September 30, 1998, the Insurer had admitted assets of $6.3
billion (unaudited), total liabilities of $4.1 billion (unaudited), and total
capital and surplus of $2.2 billion (unaudited) determined in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.

     Furthermore, copies of the Insurer's year end financial statements prepared
in accordance with statutory accounting practices are available without charge
from the Insurer. A copy of the Annual Report on Form 10-K of MBIA Inc. is
available from the Insurer or the Securities and Exchange Commission. The
address of the Insurer is 113 King Street, Armonk, New York 10504. The telephone
number of the insurer is (914) 273-4545.

     The Insurer's policy of portfolio insurance unconditionally and irrevocably
guarantees to the Fund, the full and complete payment required to be made by or
on behalf of the issuer to the applicable paying agent or its successor of an
amount equal to (i) the principal of (either at the stated maturity or by
advancement of maturity pursuant to a mandatory sinking fund payment) and
interest on, the municipal bonds as such payments shall become due but shall not
be so paid (except that in the event of any acceleration of the due date of such
principal by reason of

                                      C-2

<PAGE>

mandatory or optional redemption or acceleration resulting from default or
otherwise, other than any advancement of maturity pursuant to a mandatory
sinking fund payment, the payments guaranteed by the Insurer's policy shall be
made in such amounts and at such times as such payments of principal would have
been due had there not been any such acceleration) and (ii) the reimbursement of
any such payment which is subsequently recovered from the Fund pursuant to a
final judgment by a court of competent jurisdiction that such payment
constitutes an avoidable preference to the Fund within the meaning of any
applicable bankruptcy law (a "Preference").

     The Insurer's policy does not insure against loss of any prepayment premium
which may at any time be payable with respect to any municipal bond. The
Insurer's policy does not, under circumstance, insure against loss relating to:
(i) optional or mandatory redemptions (other than mandatory sinking fund
redemptions); (ii) any payments to be made on an accelerated basis; (iii)
payments of the purchase price of municipal bonds upon tender thereof; or (iv)
any Preference relating to (i) through (iii) above. The Insurer's policy also
does not insure against nonpayment of principal of or interest on the municipal
bonds resulting from the insolvency, negligence or any other act or omission of
any paying agent for the municipal bonds.

     With respect to small issue industrial development bonds and pollution
control revenue bonds covered by the policy, the Insurer guarantees the full and
complete payments required to be made by or on behalf of an issuer of such bonds
if there occurs pursuant to the terms of the bonds an event which results in the
loss of the tax-exempt status of interest on such bonds, including principal,
interest or premium payments payable thereon, if any, as and when required to be
made by or on behalf of the issuer pursuant to the terms of such bonds.

     When the Insurer receives from the paying agent or the Fund, (1) telephonic
or telegraphic notice (subsequently confirmed in writing by registered or
certified mail), or (2) written notice by registered or certified mail, that a
required payment of any insured amount which is then due has not been made, the
Insurer on the due date of such payment or within one business day after receipt
of notice of such nonpayment, whichever is later, will make a deposit of funds,
in an account with State Street Bank and Trust Company, N.A., in New York, New
York, or its successor, sufficient for the payment of any such insured amounts
which are then due. Upon presentment and surrender of such municipal bonds or
presentment of such other proof of ownership of the municipal bonds, together
with any appropriate instruments of assignment to evidence the assignment of the
insured amounts due on the municipal bonds as are paid by the Insurer, and
appropriate instruments to effect the appointment of the Insurer as agent for
the Fund in any legal proceeding related to payment of insured amounts on
municipal bonds, such instruments being in a form satisfactory to State Street
Bank and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall
disburse to the Fund or the paying agent payment of the insured amounts due on
such municipal bonds, less any amount held by the paying agent for the payment
of such insured amounts and legally available therefor.

FINANCIAL GUARANTY INSURANCE COMPANY ("FINANCIAL GUARANTY")

     The Portfolio Insurance Policy is non-cancellable except for failure to pay
the premium. The premium rate for each purchase of a security covered by the
Portfolio Insurance Policy is fixed for the life of the Insured Bond. The
insurance premiums are payable monthly by the Fund and are adjusted for
purchases, sales and payments prior to maturity of Insured Bonds during the

                                      C-3
<PAGE>

month. In the event of a sale of any Insured Bond by the Fund or payment thereof
prior to maturity, the Portfolio Insurance policy terminates as to such Insured.
Under the provisions of the Portfolio Insurance Policy, Financial Guaranty
unconditionally and irrevocably agrees to pay to State Street Bank and Trust
Company, or its successor, as its agent (the "Fiscal Agent"), that portion of
the principal of and interest on the Insured Bonds which shall become due for
payment but shall be unpaid by reason of nonpayment by the issuer of the Insured
Bonds. The term "due for payment" means, when referring to the principal of an
Insured Bond, its stated maturity date or the date on which it shall have been
called for mandatory sinking fund redemption and does not refer to any earlier
date on which payment is due by reason of call for redemption (other than by
mandatory sinking fund redemption), acceleration or other advancement of
maturity and means, when referring to interest on an Insured Bond, the stated
date for payment of interest. In addition, the Portfolio Insurance Policy covers
nonpayment by the issuer that results from any payment of principal or interest
made by such issuer on the Insured Bond to the Fund which has been recovered
from the Fund or its shareholders pursuant to the United States Bankruptcy Code
by a trustee in bankruptcy in accordance with a final, nonappealable order of a
court having competent jurisdiction.

     Financial Guaranty will make such payments to the Fiscal Agent on the date
such principal or interest becomes due for payment or on the business day next
following the day on which Financial Guaranty shall have received notice of
nonpayment, whichever is later. The Fiscal Agent will disburse the Trustee the
face amount of principal and interest which is then due for payment but is
unpaid by reason of nonpayment by the issuer, but only upon receipt by the
Fiscal Agent of (i) evidence of the Trustee's right to receive payment of the
principal or interest due for payment and (ii) evidence, including any
appropriate instruments of assignment, that all of the rights to payment of such
principal or interest due for payment thereupon shall vest in Financial
Guaranty. Upon such disbursement, Financial Guaranty shall become the owner of
the Insured Bond, appurtenant coupon or right to payment of principal or
interest on such Insured Bond and shall be fully subrogated to all of the
Trustee's rights thereunder, including the right to payment, thereof.

     In determining whether to insure municipal securities held in the Fund,
Financial Guaranty will apply its own standards which are not necessarily the
same as the criteria used in regard to the selection of securities by the Fund.

     Certain of the municipal securities under the Portfolio Insurance Policy
may also be insured under an insurance policy obtained by the issuer of such
municipal securities. The premium for any insurance policy or policies obtained
by an issuer or Insured Bonds has been paid in advance by such issuer and any
such policy or policies are non-cancellable and will continue in force so long
as the Insured Bonds so insured are outstanding. Financial Guaranty has also
agreed, if requested by the Funds on or before the fifth day preceding the 1st
day of any month, to insure to maturity Insured Bonds sold by the Trustee during
the month immediately following such request of the Funds. The premium for any
such insurance to maturity provided by Financial Guaranty is paid by the Fund
and any such insurance is non-cancellable and will continue in force so long as
the Bonds so insured are outstanding.

     Financial Guaranty is a wholly-owned subsidiary of FGIC Corporation (the
"Corporation"), a Delaware holding company. The Corporation is a subsidiary of
General

                                      C-4
<PAGE>

Electric Capital Corporation. Financial Guaranty is a monoline financial
guaranty insurer domiciled in the State of New York and subject to regulation by
the State of New York Insurance Department. As of December 31, 1998, the total
capital and surplus of Financial Guaranty was $1,258,215,191. Financial Guaranty
prepares financial statements on the basis of both statutory accounting
principles and generally accepted accounting principles. Copies of such
financial statements may be obtained by writing to Financial Guaranty at 115
Broadway, New York, New York 10006, Attention: Communications Department
(telephone number: (212) 312-3000) or to the New York State Insurance Department
at 25 Beaver Street, New York, New York 10004-2319, Attention: Financial
Condition Property/Casualty Bureau (telephone number: (212) 480-5187).

     The policies of insurance obtained by the Fund from Financial Guaranty and
the negotiations in respect thereof represent the only relationship between
Financial Guaranty and the Fund. Otherwise neither Financial Guaranty nor its
parent, FGIC Corporation, or any affiliate thereof has any significant
relationship, direct or indirect, with the Fund or the Board of Directors of the
Fund.

     The above municipal bond insurers have insurance claims-paying ability
ratings of AAA from S&P and Aaa from Moody's. Financial Guaranty also has an
insurance claims-paying ability rating of AAA from Fitch. An S&P insurance
claims-paying ability rating is an assessment of an operating insurance
company's financial capacity to meet obligations under an insurance policy in
accordance with its terms. An insurer with an insurance claims-paying ability
rating of AAA has the highest rating assigned by S&P. Capacity to honor
insurance contracts is adjudged by S&P to be extremely strong and highly likely
to remain so over a long period of time. A Moody's insurance claims-paying
ability rating is an opinion of the ability of an insurance company to repay
punctually senior policyholder obligations and claims. An insurer with an
insurance claims-paying ability rating of Aaa is adjudged by Moody's to be of
the best quality. In the opinion of Moody's, the policy obligations of an
insurance company with an insurance claims-paying ability rating of Aaa carry
the smallest degree of credit risk and, while the financial strength of these
companies is likely to change, such changes as can be visualized are most
unlikely to impair the company's fundamentally strong position.

     An insurance claims-paying ability rating by S&P or Moody's does not
constitute an opinion on any specific contract in that such an opinion can only
be rendered upon the review of the specific insurance contract. Furthermore, an
insurance claims-paying ability rating does not take into account deductibles,
surrender or cancellation penalties or the timeliness of payment, nor does it
address the ability of a company to meet nonpolicy obligations (i.e., debt
contracts).

     The assignment of ratings by S&P or Moody's to debt issues that are fully
or partially supported by insurance policies, contracts or guarantees is a
separate process from the determination of claims-paying ability ratings. The
likelihood of a timely flow of funds from the insurer to the trustee for the
bondholders is a key element in the rating determination for such debt issues.

     S&P's and Moody's ratings are not recommendations to buy, sell or hold the
municipal bonds insured by policies issued by AMBAC Assurance, Financial
Security, MBIA or Financial Guaranty and such ratings may be subject to revision
or withdrawal at any time by the rating

                                      C-5
<PAGE>

agencies. Any downward revision or withdrawal of either or both ratings may have
an adverse effect on the market price of the municipal bonds insured by policies
issued by AMBAC Assurance, Financial Security, MBIA or Financial Guaranty.

     S&P's ratings of AMBAC Assurance, Financial Security, MBIA and Financial
Guaranty should be evaluated independent of Moody's ratings. Any further
explanation as to the significance of the ratings may be obtained only from the
applicable rating agency. See Appendix A for more information about ratings by
Moody's and S&P.

                                      C-6
<PAGE>

                                   APPENDIX D

                          HEDGING STRATEGIES AND RISKS

     Set forth below is additional information regarding the various defensive
hedging techniques.

Futures and Index Transactions

 Financial Futures

     A financial future is an agreement between two parties to buy and sell a
security for a set price on a future date.  They have been designed by boards of
trade which have been designated "contracts markets" by the Commodity Futures
Trading Commission ("CFTC").

     The purchase of financial futures is for the purpose of hedging the Fund's
existing or anticipated holdings of long-term debt securities.  When the Fund
purchases a financial future, it deposits in cash or securities an "initial
margin" of between 1% and 5% of the contract amount.  Thereafter, the Fund's
account is either credited or debited on a daily basis in correlation with the
fluctuation in price of the underlying future or other requirements imposed by
the exchange in order to maintain an orderly market.  The Fund must make
additional payments to cover debits to its account and has the right to withdraw
credits in excess of the liquidity, the Fund may close out its position at any
time prior to expiration of the financial future by taking an opposite position.
At closing a final determination of debits and credits is made, additional cash
is paid by or to the Fund to settle the final determination and the Fund
realizes a loss or gain depending on whether on a net basis it made or received
such payments.

     The sale of financial futures is for the purpose of hedging the Fund's
existing or anticipated holdings of long-term debt securities.  For example, if
the Fund owns long-term bonds and interest rates were expected to increase, it
might sell financial futures.  If interest rates did increase, the value of
long-term bonds in the Fund's portfolio would decline, but the value of the
Fund's financial futures would be expected to increase at approximately the same
rate thereby keeping the net asset value of the Fund from declining as much as
it otherwise would have.

     Among the risks associated with the use of financial futures by the Fund as
a hedging device, perhaps the most significant is the imperfect correlation
between movements in the price of the financial futures and movements in the
price of the debt securities which are the subject of the hedge.

     Thus, if the price of the financial future moves less or more than the
price of the securities which are the subject of the hedge, the hedge will not
be fully effective.  To compensate for this imperfect correlation, the Fund may
enter into financial futures in a greater dollar amount than the dollar amount
of the securities being hedged if the historical volatility of the prices of
such securities has been greater than the historical volatility of the financial
futures.  Conversely, the Fund may enter into fewer financial futures if the
historical volatility of the price of the securities being hedged is less than
the historical volatility of the financial futures.

                                      D-1
<PAGE>

     The market prices of financial futures may also be affected by factors
other than interest rates. One of these factors is the possibility that rapid
changes in the volume of closing transactions, whether due to volatile markets
or movements by speculators, would temporarily distort the normal relationship
between the markets in the financial future and the chosen debt securities. In
these circumstances as well as in periods of rapid and large price movements.
The Fund might find it difficult or impossible to close out a particular
transaction.

 Options on Financial Futures

     The Fund may also purchase put or call options on financial futures which
are traded on a U.S. Exchange or board of trade and enter into closing
transactions with respect to such options to terminate an existing position.
Currently, options can be purchased with respect to financial futures on U.S.
Treasury Bonds on The Chicago Board of Trade. The purchase of put options on
financial futures is analogous to the purchase of put options by the Fund on its
portfolio securities to hedge against the risk of rising interest rates. As with
options on debt securities, the holder of an option may terminate his position
by selling an option of the Fund. There is no guarantee that such closing
transactions can be effected.

Index Contracts

 Index Futures

     A tax-exempt bond index which assigns relative values to the tax-exempt
bonds included in the index is traded on the Chicago Board of Trade.  The index
fluctuates with changes in the market values of all tax-exempt bonds included
rather than a single bond.  An index future is a bilateral agreement pursuant to
which two parties agree to take or make delivery of an amount of cash-rather
than any security-equal to specified dollar amount times the difference between
the index value at the close of the last trading day of the contract and the
price at which the index future was originally written.  Thus, an index future
is similar to traditional financial futures except that settlement is made in
cash.

 Index Options

     The Fund may also purchase put or call options on U.S. Government or tax-
exempt bond index futures and enter into closing transactions with respect to
such options to terminate an existing position.  Options on index futures are
similar to options on debt instruments except that an option on an index future
gives the purchaser the right, in return for the premium paid, to assume a
position in an index contract rather than an underlying security at a specified
exercise price at any time during the period of the option.  Upon exercise of
the option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance of the writer's futures margin account which represents the amount by
which the market price of the index futures contract, at exercise, is less than
the exercise price of the option on the index future.

     Bond index futures and options transactions would be subject to risks
similar to transactions in financial futures and options thereon as described
above.  No series will enter into transactions in index or financial futures or
related options unless and until, in the Adviser's opinion, the market for such
instruments has developed sufficiently.

                                      D-2
<PAGE>

                                  APPENDIX E

                PERFORMANCE RELATED AND COMPARATIVE INFORMATION

     The Fund may be a suitable investment for a shareholder that is thinking of
adding bond investments to his portfolio to balance the appreciated stocks that
the shareholder is holding. Municipal bonds can provide double, tax-free income
(exempt from both regular federal and state income taxes) for residents of that
state. Because the Fund expects that a substantial portion of its investments
will pay interest that is taxable under the federal alternative minimum tax, the
Fund may not be a suitable investment for shareholders that are subject to the
federal alternative minimum tax.

     The Fund may quote certain performance-related information and may compare
certain aspects of its portfolio and structure to other substantially similar
closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar or other
independent services. Comparison of the Fund to an alternative investment should
be made with consideration of differences in features and expected performance.
The Fund may obtain data from sources or reporting services, such as Bloomberg
Financial ("Bloomberg") and Lipper, that the Fund believes to be generally
accurate.

                                      E-1

<PAGE>

     Past performance is not indicative of future results. At the time Common
Shareholders sell their shares, they may be worth more or less than their
original investment.

Higher Dividends Often Correlate with Higher Share Prices Scatter chart appears
here (share prices of all state closed-end municipal bond funds):

<TABLE>
<CAPTION>
          Annualized                    Share Price
           Dividend                 (Adjusted to $15 IPO)
          ----------                ---------------------
          <S>                           <C>
             0.78756                       15.12
             0.738                         13.32
             0.68496                       12.62
             0.75                          15.4125
             0.69                          13.42
             0.7908                        14.16
             0.804                         14.73
             0.918                         16.06
             0.906                         16.75
             0.774                         14.655
             0.894                         15.76
             0.768                         14
             0.942                         16.48
             0.912                         16.32
             0.87                          15.56
             0.639                         13.41
             0.882                         15.71
             0.84                          15.2
             0.918                         16.99
             0.87                          13.09
             0.792                         13.8
             0.78                          13.59
             0.8628                        14.94
             0.705                         12.25
             0.792                         13.5
             0.8406                        13.725
             0.9                           14.085
             0.75                          14.08
             0.74496                       13.05
             0.9                           15.14
             0.9                           14.1875
             0.675                         11.6375
             1.0875                        18.1375
             1.30618                       20.89888
             1.125                         20.415
             1.08                          19.08
             1.1016                        19.185
             0.75                          12.87
             0.7488                        12.88
             0.7584                        12.72
             0.7992                        13.485
             0.78                          13.17
             0.8568                        14.11
             0.8136                        13.86
             0.798                         12.82
             0.846                         14.76
             0.834                         14.36
             0.84                          14.35
             0.864                         14.5
             0.804                         14
             0.774                         13.65
             0.876                         14.85
             0.798                         13.72
             0.918                         15.15
             0.912                         14.81
             0.864                         14.44
             0.768                         12.58
             0.738                         11.8
             0.8925                        14.375
             0.906                         13.53
             0.708                         12.37
             0.774                         14.2
             0.66                          11.125
             0.792                         13.575
             0.78                          13.31
             0.9                           15.37
             0.822                         14.21
             0.72                          12.04
             0.858                         12.68
             0.876                         14.99
             0.738                         13.37
             0.7308                        14.19
             0.66                          12.05
             0.6792                        12.95
             0.67476                       13.56
             0.7884                        14.45
             0.8052                        15.02
             0.918                         15.55
             0.81                          15.32
             0.768                         14.5
             0.852                         15.78
             0.81756                       14
             0.72                          13.125
             0.675                         12.25
             0.69                          13.27
             0.78                          14.83
             0.765                         14.04
             0.87                          15.25
             0.714                         13.45
             0.792                         14.69
             0.84                          14.61
             0.96                          16.34
             0.675                         12.44
             0.67308                       12.32
             0.7644                        13.7
             0.684                         12.95
             0.816                         15.74
             0.816                         15.95
             0.768                         15.18
             0.816                         15.2
             0.78                          15.19
             0.738                         14.44
             0.75                          14.81
             0.9                           16.95
             0.858                         14.57
             0.804                         15.91
             0.828                         14.92
             0.816                         15.85
             0.696                         13.6
             0.76164                       15.13
             0.735                         14.55
             0.8172                        13.99
             0.663                         12.29
             0.792                         13.42
             0.912                         15.14
             0.78                          13.63
             0.9                           15.76
             0.882                         15.5
             0.71976                       13.36
             0.9                           15.61
             0.8184                        14.3
</TABLE>

Municipal Bond/Equity Portfolios Can
Provide Portfolio Benefits

<TABLE>
<CAPTION>
               Standard Deviation    Average Annual
Bond Portion         (Risk)         After-tax Return
- ------------   ------------------   ----------------
<S>            <C>                  <C>
      0%             14.91%              12.16%
      5%             14.39%              12.06%
     10%             13.88%              11.95%
     15%             13.37%              11.85%
     20%             12.88%              11.74%
     25%             12.40%              11.63%
     30%             11.94%              11.52%
     35%             11.48%              11.40%
     40%             11.05%              11.29%
     45%             10.64%              11.15%
     50%             10.25%              11.04%
     55%              9.88%              10.92%
     60%              9.55%              10.79%
     65%              9.25%              10.66%
     70%              8.99%              10.53%
     75%              8.78%              10.39%
     80%              8.62%              10.25%
     85%              8.53%              10.11%
     90%              8.50%               9.96%
     95%              8.55%               9.81%
    100%              8.68%               9.65%
</TABLE>

     Market price is affected by many factors, including market interest rates,
income tax rates, the common shares' net asset value and dividend stability, the
portfolio's duration, call protection and credit quality, analyst
recommendations, and other market factors. Any of these factors individually or
collectively may, at any given time, be as or more important to market price
than annualized dividend rates. A positive correlation does not necessarily mean
that higher dividends cause or result in higher market prices, and you should
not assume that any particular level of dividends will result in any particular
market price. In addition, the positive correlation between dividends and market
price of this group of funds does not necessarily mean that every fund in the
group exhibits a positive correlation between dividend and market price, and it
is possible that the Fund may not exhibit such a correlation. There can be no
assurance that the correlation suggested by the above data will continue in the
future.

                                      E-2
<PAGE>


Nuveen Insured Dividend Advantage Municipal Fund __________ Common Shares

                  ------------------------------------------

                      STATEMENT OF ADDITIONAL INFORMATION

                  ------------------------------------------

                              ________, 2001
<PAGE>

                           PART C - OTHER INFORMATION

Item 24: Financial Statements and Exhibits

     1.  Financial Statements:

     Registrant has not conducted any business as of the date of this filing,
other than in connection with its organization. Financial Statements indicating
that the Registrant has met the net worth requirements of Section 14(a) of the
1940 Act will be filed by Pre-effective Amendment to this Registration
Statement.

     2.  Exhibits:

a.   Declaration of Trust dated July 12, 1999.

b.   By-Laws of Registrant.

c.   None.

d.   Form of Share Certificate.*

e.   Terms and Conditions of the Dividend Reinvestment Plan.*

f.   None.

g.   Investment Management Agreement between Registrant and Nuveen Advisory
     Corp. dated ___________, 2001.*

h.1  Form of Underwriting Agreement.*

h.2  Form of Master Selected Dealer Agreement.*

h.3  Form of Master Agreement among Underwriters.*

h.4  Form of Dealer Letter Agreement.*

i.   Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
     Independent Directors and Trustees.*

j.   Form of Exchange Traded Fund Custody Agreement between Registrant and The
     Chase Manhattan Bank dated _____ __, 2001.*

k.1  Form of Shareholder Transfer Agency Agreement between Registrant and The
     Chase Manhattan Bank dated _____ __, 2001.*

k.2  Expense Reimbursement Agreement between Registrant and Nuveen Advisory
     Corp. dated ________ __, 2001.*

                                      C-1
<PAGE>


l.1  Opinion and consent of Bell, Boyd & Lloyd LLC.*

l.2  Opinion and consent of Bingham Dana LLP.*

m.   None.

n.   Consent of Ernst & Young LLP.

o.   None.

p.   Subscription Agreement of Nuveen Advisory Corp. dated _____ _, 2001.*

q.   None.

r.   Code of Ethics of Nuveen Advisory Corp.

s.   Powers of Attorney.

___________________

* To be filed by amendment.

Item 25: Marketing Arrangements

See Sections 2, 3 and 5(n) of the Underwriting Agreement to be filed as Exhibit
h.1 to this Registration Statement.

See the Introductory Paragraph of the Form of Master Selected Dealer Agreement
to be filed as Exhibit h.2 to this Registration Statement.

See Introductory Paragraphs and Sections 1, 3, 5, 6 and 7 of the Form of Master
Agreement Among Underwriters to be filed as Exhibit h.3 to this Registration
Statement.

See Paragraph e of the Form of Dealer Letter Agreement to be filed as
Exhibit h.4 to this Registration Statement.

Item 26: Other Expenses of Issuance and Distribution

<TABLE>
     <S>                                                             <C>
     Securities and Exchange Commission fees                         $   3.75
     National Association of Securities Dealers, Inc. fees             501.50
     Printing and engraving expenses                                        *
     Legal Fees                                                             *
                             listing fees                                   *
     Accounting expenses                                                    *
     Blue Sky filing fees and expenses                                      *
     Transfer agent fees                                                    *
     Miscellaneous expenses                                                 *
                                                                     --------
          Total                                                      $      *
                                                                     ========
</TABLE>

                                      C-2
<PAGE>

- ------------

    *To be completed by amendment. Expenses may be reduced pursuant to the
contractual agreement of Nuveen Investments to pay (i) all of Registrant's
organizational expenses and (ii) offering costs (other than the sales load)
that exceed $____ per Common Share.

Item 27: Persons Controlled by or under Common Control with Registrant

     Not applicable.

Item 28: Number of Holders of Securities

     At April 23, 2001

<TABLE>
<CAPTION>
                                                          Number of
                  Title of Class                        Record Holders
                  --------------                        --------------
       <S>                                              <C>
       Common Shares, $0.01 par value                          0
</TABLE>

Item 29: Indemnification

     Section 4 of Article XII of the Registrant's Declaration of Trust provides
as follows:

     Subject to the exceptions and limitations contained in this Section 4,
every person who is, or has been, a Trustee, officer, employee or agent of the
Trust, including persons who serve at the request of the Trust as directors,
trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (hereinafter
referred to as a "Covered Person"), shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been such a Trustee, director, officer, employee or agent and
against amounts paid or incurred by him in settlement thereof.

     No indemnification shall be provided hereunder to a Covered Person:

(a)  against any liability to the Trust or its Shareholders by reason of a final
     adjudication by the court or other body before which the proceeding was
     brought that he engaged in willful misfeasance, bad faith, gross negligence
     or reckless disregard of the duties involved in the conduct of his office;

(b)  with respect to any matter as to which he shall have been finally
     adjudicated not to have acted in good faith in the reasonable belief that
     his action was in the best interests of the Trust; or

                                      C-3


<PAGE>

(c)  in the event of a settlement or other disposition not involving a final
     adjudication (as provided in paragraph (a) or (b)) and resulting in a
     payment by a Covered Person, unless there has been either a determination
     that such Covered Person did not engage in willful misfeasance, bad faith,
     gross negligence or reckless disregard of the duties involved in the
     conduct of his office by the court or other body approving the settlement
     or other disposition or a reasonable determination, based on a review of
     readily available facts (as opposed to a full trial-type inquiry), that he
     did not engage in such conduct:

          (i)  by a vote of a majority of the Disinterested Trustees acting on
          the matter (provided that a majority of the Disinterested Trustees
          then in office act on the matter); or

          (ii)  by written opinion of independent legal counsel.

     The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person.  Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.

     Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:

     (a)  such undertaking is secured by a surety bond or some other appropriate
     security or the Trust shall be insured against losses arising out of any
     such advances; or

     (b)  a majority of the Disinterested Trustees acting on the matter
     (provided that a majority of the Disinterested Trustees then in office act
     on the matter) or independent legal counsel in a written opinion shall
     determine, based upon a review of the readily available facts (as opposed
     to a full trial-type inquiry), that there is reason to believe that the
     recipient ultimately will be found entitled to indemnification.

     As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.

                                      C-4
<PAGE>

     As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.

     The trustees and officers of the Registrant are covered by Investment Trust
Errors and Omission policies in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she had reasonable cause to believe this conduct was unlawful).


     Section 8 of the Underwriting Agreement to be filed as Exhibit h.1, to this
Registration Statement provides for each of the parties thereto, including the
Registrant and the Underwriters, to indemnify the others, their trustees,
directors, certain of their officers, trustees, directors and persons who
control them against certain liabilities in connection with the offering
described herein, including liabilities under the federal securities laws.

     Insofar as Indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.

Item 30: Business and Other Connections of Investment Adviser

     Nuveen Advisory Corp. serves as investment adviser to the following open-
end management type investment companies: Nuveen Multistate Trust I, Nuveen
Multistate Trust II, Nuveen Multistate Trust III, Nuveen Multistate Trust IV,
Nuveen Municipal Trust, Nuveen Money Market Trust, Nuveen Municipal Money Market
Fund, Inc. and Nuveen Taxable Funds Inc. Nuveen Advisory Corp. also serves as
investment adviser to the following closed-end management type investment
companies other than the Registrant: Nuveen Municipal Value Fund, Inc., Nuveen
California Municipal Value Fund, Inc., Nuveen New York Municipal Value Fund,
Inc., Nuveen Municipal Income Fund, Inc., Nuveen Premium Income Municipal Fund,
Inc., Nuveen Performance Plus Municipal Fund, Inc., Nuveen California
Performance Plus Municipal Fund, Inc., Nuveen New York Performance Plus
Municipal Fund, Inc., Nuveen Municipal Advantage Fund, Inc., Nuveen Municipal
Market Opportunity Fund, Inc., Nuveen California Municipal Market Opportunity
Fund, Inc., Nuveen New York Municipal Market Opportunity Fund, Inc., Nuveen
Investment Quality Municipal Fund, Inc., Nuveen California Investment Quality
Municipal Fund, Inc., Nuveen New York Investment Quality Municipal Fund, Inc.,
Nuveen Insured Quality Municipal Fund, Inc., Nuveen Florida Investment Quality
Municipal Fund, Nuveen New Jersey Investment Quality Municipal Fund, Inc.,
Nuveen Pennsylvania Investment Quality Municipal Fund, Nuveen Select Quality
Municipal Fund, Inc., Nuveen California Select Quality Municipal Fund, Inc.,
Nuveen New York Select Quality Municipal Fund, Inc., Nuveen Quality Income
Municipal Fund, Inc., Nuveen Insured Municipal Opportunity Fund, Inc., Nuveen
Florida Quality Income Municipal Fund, Nuveen Michigan Quality Income Municipal
Fund, Inc., Nuveen Ohio Quality Income Municipal Fund, Inc., Nuveen Texas
Quality Income Municipal Fund,


                                      C-5
<PAGE>


Nuveen California Quality Income Municipal Fund, Inc., Nuveen New York Quality
Income Municipal Fund, Inc., Nuveen Premier Municipal Income Fund, Inc., Nuveen
Premier Insured Municipal Income Fund, Inc., Nuveen Insured California Premium
Income Municipal Fund, Inc., Nuveen Insured New York Premium Income Municipal
Fund, Inc., Nuveen Premium Income Municipal Fund 2, Inc., Nuveen Select
Maturities Municipal Fund, Nuveen Arizona Premium Income Municipal Fund, Inc.,
Nuveen Insured Florida Premium Income Municipal Fund, Nuveen Michigan Premium
Income Municipal Fund, Inc., Nuveen New Jersey Premium Income Municipal Fund,
Inc., Nuveen Premium Income Municipal Fund 4, Inc., Nuveen Insured California
Premium Income Municipal Fund 2, Inc., Nuveen Insured New York Premium Income
Municipal Fund 2, Nuveen New Jersey Premium Income Municipal Fund 2, Nuveen
Pennsylvania Premium Income Municipal Fund 2, Nuveen Maryland Premium Income
Municipal Fund, Nuveen Massachusetts Premium Income Municipal Fund, Nuveen
Virginia Premium Income Municipal Fund, Nuveen Connecticut Premium Income
Municipal Fund, Nuveen Georgia Premium Income Municipal Fund, Nuveen Missouri
Premium Income Municipal Fund, Nuveen North Carolina Premium Income Municipal
Fund, Nuveen California Premium Income Municipal Fund, Nuveen Insured Premium
Income Municipal Fund 2, Nuveen New York Dividend Advantage Municipal Fund,
Nuveen California Dividend Advantage Municipal Fund, Nuveen Dividend Advantage
Municipal Fund, Nuveen Arizona Dividend Advantage Municipal Fund, Nuveen
Connecticut Dividend Advantage Municipal Fund, Nuveen North Carolina Dividend
Advantage Municipal Fund, Nuveen Virginia Dividend Advantage Municipal Fund,
Nuveen Massachusetts Dividend Advantage Municipal Fund, Nuveen Maryland Dividend
Advantage Municipal Fund, Nuveen Dividend Advantage Municipal Fund 2, Nuveen
California Dividend Advantage Municipal Fund 2, Nuveen New York Dividend
Advantage Municipal Fund 2, Nuveen New Jersey Dividend Advantage Municipal Fund,
Nuveen Ohio Dividend Advantage Municipal Fund and Nuveen Pennsylvania Dividend
Advantage Municipal Fund. Nuveen Advisory Corp. has no other clients or business
at the present time. For a description of other business, profession, vocation
or employment of a substantial nature in which any director or officer of the
investment adviser has engaged during the last two years for his account or in
the capacity of director, officer, employee, partner or trustee, see the
descriptions under "Management of the Fund" in Part A of this Registration
Statement.

Item 31: Location of Accounts and Records

     Nuveen Advisory Corp., 333 West Wacker Drive, Chicago, Illinois 60606,
maintains the Declaration of Trust, By-Laws, minutes of trustees and
shareholders meetings and contracts of the Registrant and all advisory material
of the investment adviser.

     The Chase Manhattan Bank, P.O. Box 660086, Dallas, Texas 75266-0086,
all general and subsidiary ledgers, journals, trial balances, records of all
portfolio purchases and sales, and all other required records not maintained by
Nuveen Advisory Corp.

Item 32: Management Services

     Not applicable.

                                      C-6
<PAGE>

Item 33: Undertakings

     1.   Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement, or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.

     2.   Not applicable.

     3.   Not applicable.

     4.   Not applicable.

     5.   The Registrant undertakes that:

          a.  For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of a registration statement in reliance upon Rule 430A and contained in the
     form of prospectus filed by the Registrant under Rule 497(h) under the
     Securities Act of 1933 shall be deemed to be part of the Registration
     Statement as of the time it was declared effective.

          b.  For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of the securities at that
     time shall be deemed to be the initial bona fide offering thereof.

     6.   The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery, within two business days of receipt
of a written or oral request, any Statement of Additional Information.

                                      C-7
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Chicago, and State of Illinois, on the 27th day of
April, 2001.

                                    NUVEEN INSURED CALIFORNIA DIVIDEND
                                    ADVANTAGE MUNICIPAL FUND

                                    /s/ Gifford R. Zimmerman

                                    ________________________________________
                                    Gifford R. Zimmerman, Vice President and
                                    Secretary

     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.


<TABLE>
<CAPTION>

        Signature                      Title                            Date
        ---------                      -----                            ----
<S>                          <C>                               <C>
/s/ Stephen D. Foy           Vice President and Controller       April 27, 2001
- --------------------         (Principal Financial and
    Stephen D. Foy           Accounting Officer)

                             Chairman of the Board and
Timothy R. Schwertfeger*     Trustee (Principal Executive
                             Officer)

Robert P. Bremner*           Trustee

Lawrence H. Brown*           Trustee

Anne E. Impellizzeri*        Trustee

Peter R. Sawers*             Trustee

William J. Schneider*        Trustee

Judith M. Stockdale*         Trustee

                                                               By: /s/ Gifford R. Zimmerman
                                                                   --------------------------
                                                                       Gifford R. Zimmerman
                                                                       Attorney-In-Fact
                                                                       April 27, 2001
</TABLE>

    *Original powers of attorney authorizing Alan G. Berkshire and Gifford R.
Zimmerman, among others, to execute this Registration Statement, and Amendments
thereto, for each of the trustees of Registrant on whose behalf this
Registration Statement is filed, have been executed and filed as an exhibit.
<PAGE>


                               INDEX TO EXHIBITS
<TABLE>
<C>   <S>
a.    Declaration of Trust dated July 12, 1999.
b.    By-Laws of Registrant.
c.    None.
d.    Form of Share Certificate.*
e.    Terms and Conditions of the Dividend Reinvestment Plan.*
f.    None.
g.    Investment Management Agreement between Registrant and Nuveen Advisory
      Corp. dated ___________, 2001.*
h.1   Form of Underwriting Agreement.*
h.2   Form of Master Selected Dealer Agreement.*
h.3   Form of Master Agreement among Underwriters.*
h.4   Form of Dealer Letter Agreement.*
i.    Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
      Independent Directors and Trustees.*
j.    Form of Exchange Traded Fund Custody Agreement between Registrant and The
      Chase Manhattan Bank dated ________, 2001.*
k.1   Form of Shareholder Transfer Agency Agreement between Registrant and The
      Chase Manhattan Bank dated ________, 2001.*
k.2   Expense Reimbursement Agreement between Registrant and Nuveen Advisory
      Corp. dated ___________, 2001.*
l.1   Opinion and consent of Bell, Boyd & Lloyd LLC.*
l.2   Opinion and consent of Bingham Dana LLP.*
m.    None.
n.    Consent of Ernst & Young LLP.
o.    None.
p.    Subscription Agreement of Nuveen Advisory Corp. dated _______, 2001.*
q.    None.
r.    Code of Ethics of Nuveen Advisory Corp.
s.    Powers of Attorney.
</TABLE>
___________________
 *   To be filed by amendment.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.A
<SEQUENCE>2
<FILENAME>dex99a.txt
<DESCRIPTION>DECLARATION OF TRUST
<TEXT>

<PAGE>

                             DECLARATION OF TRUST
                             --------------------
                                      OF
                                      --
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
               ------------------------------------------------

     DECLARATION OF TRUST made this 12th day of July 1999 by the initial Trustee
hereunder.

     WHEREAS, the Trustee desires to establish a trust fund for the purposes of
carrying on the business of a management investment company; and

     WHEREAS, in furtherance of such purposes, the Trustee and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Massachusetts business trust with transferable shares in
accordance with the provisions hereinafter set forth;

     NOW, THEREFORE, the Trustees and any successor Trustees elected in
accordance with Article V hereof hereby declare that they will hold all cash,
securities and other assets and properties, which they may from time to time
acquire in any manner as Trustees hereunder, IN TRUST, that they will manage and
dispose of the same upon the following terms and conditions for the pro rata
benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.

                                   ARTICLE I
                                   ---------

                             NAME AND DEFINITIONS
                             --------------------

Section 1.  Name.  This Trust shall be known as the "Nuveen Insured Dividend
Advantage Municipal Fund" and the Trustees shall conduct the business of the
Trust under that name or any other name as they may from time to time
determined.

Section 2.  Definitions.  Whenever used herein, unless otherwise required by the
context or specifically provided:

          (a) The "Trust" refers to the Massachusetts voluntary association
established by this Declaration of Trust, as amended from time to time, pursuant
to Massachusetts General Laws, Chapter 182;
<PAGE>

                                      -2-



          (b) "Trustee" or "Trustees" refers to each signatory to this
Declaration of Trust so long as such signatory shall continue in office in
accordance with the terms hereof, and all other individuals who at the time in
question have been duly elected or appointed and qualified in accordance with
Article V hereof and are then in office;

          (c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;

          (d) "Shareholder" means a record owner of Shares;

          (e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as amended
from time to time;

          (f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "vote of a majority of the
outstanding voting securities" shall have the meanings given them in the 1940
Act;

          (g) "Declaration of Trust" or "Declaration" shall mean this
Declaration of Trust as amended or restated from time to time; and

          (h) "By-Laws" shall mean the By-laws of the Trust as amended from time
to time.

                                  ARTICLE II
                                  ----------

                          NATURE AND PURPOSE OF TRUST
                          ---------------------------

     The Trust is a voluntary association (commonly known as a business trust)
of the type referred to in Chapter 182 of the General Laws of the Commonwealth
of Massachusetts.  The Trust is not intended to be, shall not be deemed to be,
and shall not be treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or Shareholders or
any of them for any purpose be deemed to be, or be treated in any way whatsoever
as though they were, liable or responsible hereunder as partners or joint
venturers.  The purpose of the Trust is to engage in, operate and carry on the
business of a closed-end management investment company and to do any and all
acts or things as are necessary, convenient, appropriate incidental or customary
in connection therewith, including, without limitation, the following:
<PAGE>

                                      -3-

          to hold, invest, and reinvest its funds, and in connection therewith
     to hold part of all of its funds in cash, and to purchase or otherwise
     sell, assign, negotiate, transfer, exchange or otherwise dispose of or turn
     to account or realize upon securities and other negotiable or non-
     negotiable instruments, obligations and evidences of indebtedness created
     or issued by any person, firms, associations, corporations, syndicates,
     combinations, and other negotiable or non-negotiable instruments,
     obligation and evidences of indebtedness; and to exercise, as owner or
     holder of any securities or other instruments, all rights, powers, and
     privileges in respect thereof; and to do any and all acts and things for
     the preservation, protection and improvement of any and all such securities
     or other instruments, and, in general, to conduct the business of a closed-
     end investment company as that term is defined in the 1940 Act; and

          To engage in any lawful act or activity for which business trusts may
     be organized under Massachusetts law.

          The Trust set forth in this instrument shall be deemed made in the
     Commonwealth of Massachusetts, and it is created under and is to be
     governed by and construed and administered according to the laws of said
     Commonwealth.  The Trust shall be of the type commonly called a business
     trust, and without limiting the provisions hereof, the Trust may exercise
     all powers which are ordinarily exercised by such a trust.  No provision of
     this Declaration shall be effective to require a waiver of compliance with
     any provision of the Securities Act of 1933, as amended, or the 1940 Act,
     or of any valid rule, regulation or order of the Commission thereunder.

          The enumeration herewith of the objects and purposes of the Trust
     shall be construed as powers as well as objects and purposes and shall not
     be deemed to exclude by inference any powers, objects or purposes which the
     Trust may lawfully pursue or exercise.

                                  ARTICLE III
                                  -----------

                 REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
                 ---------------------------------------------

     The name of the registered agent of the Trust is CT Corporation System at 2
Oliver Street, Boston, Massachusetts.  The principal place of business of the
Trust is 333 West Wacker Drive, Chicago, Illinois 60606.
<PAGE>

                                      -4-

The Trustees may, without the approval of Shareholders, change the registered
agent of the Trust and the principal place of business of the Trust.
<PAGE>

                                      -5-

                                  ARTICLE IV
                                  ----------

                              BENEFICIAL INTEREST
                              -------------------

Section 1.  Shares of Beneficial Interest.  The beneficial interest in the Trust
shall be divided into such transferable Shares of beneficial interest, of such
classes or series, and of such designations and par values (if any), and with
such rights, preferences, privileges and restrictions as shall be determined by
the Trustees in their sole discretion, without Shareholder approval, from time
to time.  The number of Shares is unlimited and each Share shall be fully paid
and nonassessable.  There shall be no cumulative voting.  Subject to any
provision in a Statement (as defined in Section 2 below) to the contrary, the
Trustees shall have full power and authority, in their sole discretion and
without obtaining any prior authorization or vote of the Shareholders of the
Trust or of the Shareholders of any series or class of Shares, to create and
establish (and to change in any manner) Shares or any series or classes thereof
with such preferences, voting powers, rights and privileges as the Trustees may
from time to time determine; to divide or combine the Shares or the Shares of
any series or classes thereof into a greater or lesser number including, without
limitation, such a division or combination accomplished by means of a stock
split or a reverse stock split, without thereby changing their proportionate
beneficial interest in the Trust; to classify or reclassify any issued Shares
into one or more series or classes of Shares; to abolish any one or more series
or classes of Shares; and to take such other action with respect to the Shares
as the Trustees may deem desirable.  The Shares shall initially be divided into
two classes, a class of an unlimited number of common Shares, $0.01 par value
(the "Common Shares"), and a class of an unlimited number of preferred Shares,
$0.01 par value (the "Preferred Shares"), each having the powers, preferences,
rights, qualifications, limitations and restrictions described below:

     (a) Preferred Shares.  The Preferred Shares shall be issued from time to
time in one or more classes or series with such distinctive serial designations
and (i) may have such voting powers, full or limited; (ii) may be subject to
redemption at such time or times and at such price or prices; (iii) may be
entitled to receive dividends (which may be cumulative or noncumulative) at such
rate or rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
of Shares; (iv) may have such rights upon the termination of, or upon any
distribution of the assets of, the Trust; (v) may be made convertible into, or
exchangeable for, Shares of
<PAGE>

                                      -6-

any other class or classes or of any other series of the same or any other class
or classes of Shares of the Trust, at such price or prices or at such rates of
exchange and with such adjustments; and (vi) shall have such other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, all as shall hereafter be stated and expressed in the
resolution or resolutions providing for the issue of such Preferred Shares from
time to time adopted by the Trustees (or a Committee thereof) in accordance with
Section 2 of this Article IV. Any of such matters may be made dependent upon
facts ascertainable outside this Declaration of Trust, or outside the resolution
or resolutions providing for the issue of such Preferred Shares.

     (b)  Common Shares.

          (i) Subject to the rights of the holders of the Preferred Shares, in
     the event of the termination of the Trust the holders of the Common Shares
     shall be entitled to receive pro rata the net distributable assets of the
     Trust.

          (ii) The holders of the Common Shares shall not, as such holders, have
     any right to acquire, purchase or subscribe for any Common Shares or
     securities of the Trust which it may hereafter issue or sell, other than
     such right, if any, as the Trustees in their discretion may determine.

          (iii)  Subject to the rights of the holders of the Preferred Shares,
     dividends or other distributions, when, as and if declared by the Trustees,
     shall be shared equally by the holders of Common Shares on a share for
     share basis.  The Trustees may direct that any dividends or other
     distributions or any portion thereof as declared and distributed shall be
     paid in cash to the holder, or, alternatively, may direct that any such
     dividends be reinvested in full and fractional Shares of the Trust [if such
     holder elects to have them reinvested.]

          (iv) The Trustees may hold as treasury shares (of the same or some
     other series), reissue for such consideration and on such terms as they may
     determine, or cancel any Common Shares of any series reacquired by the
     Trust at their discretion from time to time.  Shares shall not entitle the
     Shareholder to any title in or to the whole or any part of the Trust.

          (v) Common Shares may be issued from time to time, without the vote of
     the Shareholders (or, if the Trustees in their
<PAGE>

                                      -7-

     sole discretion deem advisable, with a vote of Shareholders), either for
     cash or for such other consideration (which may be in any one or more
     instances a certain specified consideration or certain specified
     considerations) and on such terms as the Trustees, from time to time, may
     deem advisable, and the Trust may in such manner acquire other assets
     (including the acquisition of assets subject to, and in connection with the
     assumption of liabilities).

          (vi) The Trust may issue Common Shares in fractional denominations to
     the same extent as its whole Shares, and Shares in fractional denominations
     shall be Common Shares having proportionately to the respective fractions
     represented thereby all the rights of whole Shares, including, without
     limitation, the right to vote, the right to receive dividends and
     distributions and the right to participate upon termination of the Trust,
     but excluding the right to receive a certificate representing fractional
     Shares.

Section 2.  Establishment of Class or Series of Shares.  The establishment and
designation of any class or series of Shares, including any Preferred Shares
issued hereunder, shall be effective upon the adoption of a resolution by the
initial Trustee, or by a majority of the Trustees then in office (or a Committee
thereof) setting forth such establishment and designation and the relative
rights and preferences of the Shares of such class or series as set forth in a
written statement either executed by the President or a Vice President of the
Trust, or executed by a majority of the Trustees then in office (the
"Statement").  At any time that there are no Shares outstanding of any
particular class or series previously established and designated, the Trustees
(or a Committee thereof) may by a majority vote abolish that class or series and
the establishment and designation thereof.  Notwithstanding any provision of
this Declaration of Trust to the contrary, no such Statement establishing and
designating any class or series of Shares shall constitute an amendment to or a
part of this Declaration of Trust.

Section 3.  Ownership Of Shares.  The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar agent.  No
certificates certifying the ownership of Preferred Shares shall be issued except
as the Trustees may otherwise determine from time to time.  The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, transfer of Shares and similar matters.  The record books of the
Trust, as kept by the Trust or any transfer or similar agent of the Trust, shall
be conclusive as to who
<PAGE>

                                      -8-

are the holders of the Shares and as to the number of Shares held from time to
time by each Shareholder.

Section 4.  No Preemptive Rights, Etc.  The holders of Shares of any class or
series shall not, as such holders, have any right to acquire, purchase or
subscribe for any Shares or securities of the Trust which it may hereafter issue
or sell, other than such right, if any, as the Trustees in their discretion may
determine.  The holders of Shares of any class or series shall have no appraisal
rights with respect to their Shares and, except as otherwise determined by
resolution of the Trustees in their sole discretion, shall have no exchange or
conversion rights with respect to their Shares.

Section 5.  Status of Shares and Limitation of Personal Liability.  Shares shall
be deemed to be personal property giving only the rights provided in this
instrument.  Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of this Declaration of
Trust and to have become a party thereto.  The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust.  Ownership of property shall not
entitle the Shareholder to any title in or to the whole or any part of the Trust
Property or right to call for a partition or division of the same or for an
accounting.  Neither the Trustees, nor any officer, employee or agent of the
Trust shall have any power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise.

                                   ARTICLE V
                                   ---------

                                  THE TRUSTEES
                                  ------------

Section 1.  Management of the Trust.  The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.

Section 2.  Qualification and Number.  Each Trustee shall be a natural person.
A Trustee need not be a shareholder, a citizen of the United States, or a
resident of the Commonwealth of Massachusetts. By the vote or consent of the
initial Trustee, or by a majority of Trustees as may
<PAGE>

                                      -9-

subsequently then be in office, the initial Trustee or any subsequent Trustees
may fix the number of Trustees at a number not less than two (2) nor more than
twelve (12) and may fill the vacancies created by any such increase in the
number of Trustees. Except as determined from time to time by resolution of the
Trustees, no decrease in the number of Trustees shall have the effect of
removing any Trustee from office prior to the expiration of his term, but the
number of Trustees may be decreased in conjunction with the removal of a Trustee
pursuant to Section 4 of Article V.

Section 3.  Term and Election. Each Trustee shall hold office until the next
meeting of Shareholders called for the purpose of considering the election or
re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his predecessor, if any, or such term as the
Trustees may determine.  Any vacancy resulting from a newly created Trusteeship
or the death, resignation, retirement, removal, or incapacity of a Trustee may
be filled by the affirmative vote or consent of a majority of the Trustees then
in office.

Section 4.  Resignation and Removal.  Any Trustee may resign his trust or retire
as a Trustee (without need for prior or subsequent accounting except in the
event of removal) by an instrument in writing signed by him and delivered or
mailed to the Chairman, if any, the President or the Secretary and such
resignation or retirement shall be effective upon such delivery, or at a later
date according to the terms of the instrument.  Any Trustee may be removed from
office only for "Cause" (as hereinafter defined) and only (i) by action of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Shares of
the class or classes of Shares that elected such Trustee, or (ii) by written
instrument, signed by at least sixty-six and two-thirds percent (66 2/3%) of the
remaining Trustees, specifying the date when such removal shall become
effective.  "Cause" shall require willful misconduct, dishonesty, fraud or a
felony conviction.

Section 5.  Vacancies.  The death, declination, resignation, retirement,
removal, or incapacity, of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust.  Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided herein, or the
number of Trustees as fixed is reduced, the
<PAGE>

                                      -10-

Trustees in office, regardless of their number, shall have all the powers
granted to the Trustees, and during the period during which any such vacancy
shall occur, only the Trustees then in office shall be counted for the purposes
of the existence of a quorum or any action to be taken by such Trustees.

Section 6.  Ownership of Assets of the Trust. The assets of the Trust shall be
held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or any successor Trustees.  All
of the assets of the Trust shall at all times be considered as automatically
vested in the Trustees as shall be from time to time in office.  Upon the
resignation, retirement, removal, incapacity or death of a Trustee, such Trustee
shall automatically cease to have any right, title or interest in any of the
Trust property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees.  Such vesting and
cessation of title shall be effective without the execution or delivery of any
conveyancing or other instruments.  No Shareholder shall be deemed to have a
severable ownership in any individual asset of the Trust or any right of
partition or possession thereof.

Section 7.  Voting Requirements.  In addition to the voting requirements imposed
by law or by any other provision of this Declaration of Trust, the provisions
set forth in this Article V may not be amended, altered or repealed in any
respect, nor may any provision inconsistent with this Article V be adopted,
unless such action is approved by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Common
Shares and outstanding Preferred Shares, voting together as a single class.  In
the event the holders of Common Shares or the holders of Preferred Shares, as
the case may be, are required by law or by any other provision of this
Declaration of Trust to approve such an action by a class vote of such holders,
such action must be approved by the holders of at least sixty-six and two-thirds
percent (66 2/3%) of such holders or such lower percentage as may be required by
law or by any other provision of this Declaration of Trust.

                                   ARTICLE VI
                                   ----------

                               POWERS OF TRUSTEES
                               ------------------

Section 1.  Powers.  The Trustees in all instances shall have full, absolute and
exclusive power, control and authority over the Trust assets and the business
and affairs of the Trust to the same extent as if the
<PAGE>

                                      -11-

Trustees were the sole and absolute owners thereof in their own right. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
enumeration of any specific power herein shall not be construed as limiting the
aforesaid powers. In construing the provisions of this Declaration of Trust,
there shall be a presumption in favor of the grant of power and authority to the
Trustees. Subject to any applicable limitation in this Declaration or any
Statement relating to the issuance of Preferred Shares, the Trustees shall have
power and authority:

     (a) To invest and reinvest in, to buy or otherwise acquire, to hold, for
investment or otherwise, to sell or otherwise dispose of, to lend or to pledge,
to trade in or deal in securities or interests of all kinds, however evidenced,
or obligations of all kinds, however evidenced, or rights, warrants, or
contracts to acquire such securities, interests, or obligations, of any private
or public company, corporation, association, general or limited partnership,
trust or other enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or domestic, or their
agencies, instrumentalities or subdivisions (including but not limited to,
bonds, debentures, bills, time notes and all other evidences of indebtedness);
negotiable or non-negotiable instruments; any and all options and futures
contracts; derivatives or structured securities; government securities and money
market instruments (including but not limited to, bank certificates of deposit,
finance paper, commercial paper, bankers acceptances, and all kinds of
repurchase agreements) and, without limitation, all kinds and types of financial
instruments;

     (b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;

     (c) To elect and remove such officers and appoint and terminate such agents
as they consider appropriate;

     (d) To employ one or more banks or trust companies as custodian of any
assets of the Trust subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;

     (e) To retain one or more transfer agents and shareholder servicing agents;
<PAGE>

                                      -12-


     (f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself or both;

     (g) To set record dates for any purposes;

     (h) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, investment subadviser, transfer
agent, custodian or underwriter or other independent contractor of agent;

     (i) Subject to Article IX, Section 1 hereof, to merge, or consolidate the
Trust with any other corporation, association, trust or other organization; or
to sell, convey, transfer, or lease all or substantially all of the assets of
the Trust;

     (j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;

     (k) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;

     (l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in their or
the Trust's name or in the name of a custodian or a nominee or nominees;

     (m) To authorize the issuance from time to time of one or more classes or
series of Shares, and to issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer and otherwise deal in Shares and in any
options, warrants or other rights to purchase Shares or any other interests in
the Trust other than Shares;

     (n) To set apart, from time to time, out of any funds of the Trust a
reserve or reserves for any proper purpose, and to abolish any such reserve;

     (o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or property
of which is held in the Trust; to consent to any
<PAGE>

                                      -13-

contract, lease, mortgage, purchase, or sale of property by such corporation or
issuer, and to pay calls or subscriptions with respect to any security held in
the Trust;

     (p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;

     (q) To make distributions of income and of capital gains to shareholders;

     (r) To borrow money and to pledge, mortgage, or hypothecate the assets of
the Trust;

     (s) To establish, from time to time, a minimum total investment for
shareholders, and to require the redemption of the Shares of any shareholders
whose investment is less than such minimum upon such terms as shall be
established by the Trustees;

     (t) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;

     (u) To purchase and pay for out of Trust property such insurance as they
may deem necessary or appropriate for the conduct of the business of the Trust,
including, without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers or managers, principal underwriters, or independent
contractors of the Trust individually against all claims and liabilities of
every nature arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken or omitted by
any such person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor, whether or
not any such action may be determined to constitute negligence, and whether or
not the Trust would have the power to indemnify such person against such
liability; and
<PAGE>

                                      -14-

     (v) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans, trusts and provisions, including the purchasing of life insurance
and annuity contracts as a means of providing such retirement and other
benefits, for any or all of the Trustees, officers, employees and agents of the
Trust.

     Any determination made by or pursuant to the direction of the Trustees in
good faith and consistent with the provisions of this Declaration of Trust shall
be final and conclusive and shall be binding upon the Trust and every holder at
any time of Shares, including, but not limited to the following matters:  the
amount of the assets, obligations, liabilities and expenses of the Trust; the
amount of the net income of the Trust from dividends, capital gains, interest or
other sources for any period and the amount of assets at any time legally
available for the payment of dividends or distributions; the amount, purpose,
time of creation, increase or decrease, alteration or cancellation of any
reserves or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been paid
or discharged); the market value, or any quoted price to be applied in
determining the market value, of any security or any other asset owned or held
by the Trust; the fair value of any security for which quoted prices are not
readily available, or of any other asset owned or held by the Trust; the number
of Shares of the Trust issued or issuable; the net asset value per Share; any
matter relating to the acquisition, holding and depositing of securities and
other assets by the Trust; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities, a
borrowing, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution of, any
securities, and any matter relating to the issue, sale, redemption, repurchase,
and/or other acquisition or disposition of Shares of the Trust.  No provision of
this Declaration of Trust shall be effective to protect or purport to protect
any Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

Section 2.  Manner of Acting, By-Laws.  The By-Laws shall make provision from
time to time for the manner in which the Trustees may take action, including,
without limitation, at meetings within or without Massachusetts, including
meetings held by means of a conference
<PAGE>

                                      -15-

telephone or other communications equipment, or by written consents, the quorum
and notice, if any, that shall be required for any meeting or other action, and
the delegation of some or all of the power and authority of the Trustees to any
one or more committees which they may appoint from their own number, and
terminate, from time to time.


                                  ARTICLE VII
                                  -----------

                             EXPENSES OF THE TRUST
                             ---------------------

The Trustees shall have the power to reimburse themselves from the Trust
property for their expenses and disbursements, to pay reasonable compensation to
themselves from the Trust property, and to incur and pay out of the Trust
property any other expenses which in the opinion of the Trustees are necessary
or incidental to carry out any of the purposes of this Declaration of Trust, or
to exercise any of the powers of the Trustees hereunder.

                                 ARTICLE VIII
                                 ------------

                INVESTMENT ADVISER, PRINCIPAL UNDERWRITERS AND
                ----------------------------------------------

                                 TRANSFER AGE
                                 ------------

Section 1.  Investment Adviser.  The Trust may enter into a written contract
with one or more persons (which term shall include any firm corporation, trust
or association), hereinafter referred to as the "Investment Adviser", to act as
investment adviser to the Trust and as such to perform such functions as the
Trustees may deem reasonable and proper, including, without limitation,
investment advisory, management, research, valuation of assets, clerical and
administrative functions.  Any such contract shall be subject to the approval of
those persons required by the 1940 Act to approve such contract, and shall be
terminable at any time upon not more than 60 days' notice by resolution of the
Trustees or by vote of a majority of the outstanding voting shares.

     Subject to the provisions of Section 4 of this Article VIII, any such
contract may be made with any firm or corporation in which any Trustee of the
Trust may be interested.  The compensation of the Investment Adviser may be
based upon a percentage of the net proceeds of the initial public offering of
the Shares after payment of underwriting discounts and organization and offering
costs, a percentage of the income or gross
<PAGE>

                                      -16-

realized or unrealized gain of the Trust, or a combination thereof, or
otherwise, as may be provided in such contract.

     Upon the termination of any contract with Nuveen Advisory Corp., or any
corporation affiliated with John Nuveen & Co. Incorporated, acting as investment
adviser or manager, the Trustees are hereby authorized to promptly change the
name of the Trust to a name which does not include "Nuveen" or any approximation
or abbreviation thereof.

     The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to shareholder approval, authorize the investment
adviser to employ one or more subadvisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and subadviser.

Section 2.  Principal Underwriter.  The Trust may enter into a written contract
or contracts with an underwriter or underwriters or distributor or distributors
whereby the Trust may either agree to sell Shares to the other party or parties
to the contract or appoint such other party or parties its sales agent or agents
for such Shares.  Any such contract may provide that the Trust shall pay such
other party or parties such amounts as the Trustees may in their discretion deem
reasonable and proper, and may also provide that such other party or parties may
enter into selected dealer agreements with registered securities dealers to
further the purpose of the distribution of the Shares.  Subject to the
provisions of Section 4 of this Article VIII, any such contract may be made with
any firm or corporation, including, without limitation, the Investment Adviser
or an affiliate of the Investment Advisor, or any firm or corporation in which
any Trustee of the Trust or the Investment Adviser may be interested.

Section 3.  Transfer Agent.  The Trustees may in their discretion from time to
time enter into one or more transfer agency and shareholder service contract(s,)
whereby the other party shall undertake, to furnish the Trustees with transfer
agency and shareholder services.  The contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Declaration or Trust or of the By-Laws.  Such
services  may be provided by one or more entities.

Section 4.  Parties To Contract.  Any contract of the character described in
Sections 1 and 2 of this Article VIII or in Article X hereof may be entered into
with any corporation, firm, partnership, trust or
<PAGE>

                                      -17-

association, including, without limitation, the investment adviser, any
investment subadviser or an affiliate of the investment adviser or investment
subadviser, although one or more of the Trustees or officers of the Trust may be
an officer, director, trustee, shareholder, or member of such other party to the
contract, or otherwise interested in such contract and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VIII, Article X, or the By-
Laws. The same person (including a firm, corporation, partnership, trust or
association) may be the other party to contracts entered into pursuant to
Sections 1, 2 and 3 above or Article X, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 4.


                                  ARTICLE IX
                                  ----------

                   SHAREHOLDERS' VOTING POWERS AND MEETINGS
                   ----------------------------------------

Section 1.  Voting Powers.  The Shareholders shall have power to vote only:  (a)
for the election or removal of Trustees as provided in Article V, (b) with
respect to any investment advisory or management contract as provided in Article
VIII, Sections 1 and 5, (c) with respect to any termination of the Trust or any
series or class thereof to the extent and as provided in Article XIII, Section
1, (d) with respect to any amendment of this Declaration of Trust to the extent
and as provided in Article XIII, Section 4, (e) with respect to a merger or
consolidation of the Trust or any series or class thereof with any corporation,
association, trust or other organization or a reorganization or recapitalization
of the Trust or class or series thereof, or a sale, lease or transfer of all or
substantially all of the assets of the Trust or any series thereof (other than
in the regular course of the Trust's investment activities) to the extent and as
provided in this Article IX, Section 1, (f) to the same extent as the
shareholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should be brought or maintained derivatively
or as a class action on behalf of the Trust or the shareholders, provided,
however that a shareholder of a particular class or series shall not be entitled
to bring any derivative or class action on behalf of any other class or series
of the Trust, and (g) with respect to such additional matters relating to the
Trust as may be required by law,
<PAGE>

                                      -18-


the 1940 Act, this Declaration of Trust, the By-Laws of the Trust, any Statement
relating to the issuance of classes or series of shares, or any registration of
the Trust with the Commission or any State, or otherwise as the Trustees may
consider necessary or desirable.

     The affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Common Shares and outstanding Preferred
Shares, voting as a single class, shall be required to approve, adopt or
authorize (i) a conversion of the Trust from a closed-end investment company to
an open-end investment company, (ii) a merger or consolidation of the Trust or a
series or class of the Trust with any corporation, association, Trust or other
organization or a reorganization or recapitalization of the Trust or a series of
class of the Trust, (iii) a sale, lease or transfer of all or substantially all
of the assets of the Trust (other than in the regular course of the Trust's
investment activities), or (iv) a termination of the Trust or a class or a
series of the Trust (other than a termination by the Trustees as provided for in
Section 1 of Article  XIII hereof), unless in each and every case such action
has previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of Trustees fixed in accordance with this
Declaration of Trust or the By-Laws, in which case the affirmative vote of the
holders of at least a majority of the outstanding Common Shares and outstanding
Preferred Shares, voting as a single class, shall be required, provided however,
that where only a particular class or series is effected, only the required vote
by the applicable class or series shall be required, and provided further that
except as may otherwise be required by law, in the case of the conversion of the
Trust from a closed-end investment company to an open-end investment company, or
in the case of any of the foregoing transactions constituting a plan or
reorganization (as such term is used in the 1940 Act) which adversely affects
the Preferred Shares within the meaning of Section 18(a)(2)(D) of the 1940 Act,
approval, adoption or authorization of the action in question will also require
the affirmative vote of the holders of sixty-six and two-thirds percent (66-
2/3%) of the Preferred Shares voting as a separate class; provided, however,
that such separate class vote shall be a majority vote if the action in question
has previously been approved, adopted or authorized by the affirmative vote of
two-thirds of the total number of Trustees fixed in accordance with this
Declaration of Trust or the By-Laws. Nothing contained herein shall be construed
as requiring approval of Shareholders for any transaction, whether deemed a
merger, consolidation, reorganization or otherwise whereby the Trust issues
Shares in connection with the acquisition of assets (including those
<PAGE>

                                      -19-

subject to liabilities) from any other investment company or similar entity).

     In addition to the voting requirements imposed by law or by any other
provision of this Declaration of Trust, the provisions set forth in this Article
IX may not be amended, altered or repealed in any respect, nor may any provision
inconsistent with this Article IX be adopted, unless such action is approved by
the affirmative vote of the holders or at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding Common Shares and outstanding Preferred Shares,
voting as a single class.  In the event the holders of Common Shares or the
holders of Shares of Preferred Shares, as the case may be, are required by law
to approve such an action by a class vote of such holders, such action must be
approved by the, holders of at least sixty-six and two-thirds percent (66 2/3%)
of (such holders or such lower percentage as may be required by law.  Any series
of a class which is adversely affected in a manner different from other series
of the same class shall together with any other series of the same class
adversely affected in the same manner, be treated as a separate class under this
Section 1.

Section 2.  Meetings.  Meetings of the Shareholders may be called and held from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or upon any other matter
deemed by the Trustees to be necessary or desirable.  Meetings of the
Shareholders shall be held at such place within the United States as shall be
fixed by the Trustees, and stated in the notice of the meeting. Meetings of the
Shareholders may be called by the Trustees and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of the
outstanding Shares entitled to vote.  Shareholders shall be entitled to at least
ten days' written notice of any meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.

Section 3.  Quorum and Action.  (a) The Trustees shall set in the By-Laws the
quorum required for the transaction of business by the Shareholders at a
meeting, which quorum shall in no event be less than thirty percent (30%) of the
Shares entitled to vote at such meeting.  If a quorum is present when a duly
called or held meeting is convened, the Shareholders present may continue to
transact business until adjournment, even though the withdrawal of a number of
Shareholders originally present leaves less than the proportion or number
otherwise required for a quorum. Notwithstanding the foregoing, when holders of
<PAGE>

                                      -20-

Preferred Shares are entitled to elect any of the Trustees by class vote of such
holders, the holders of 33 1/3% of such Shares entitled to vote at a meeting
shall constitute a quorum for the purpose of such an election.

     (b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the Shares present in person or by proxy and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by, any provision of this Declaration of
Trust, any resolution of the Trustees which authorizes the issuance of Preferred
Shares, or the By-Laws.

Section 4.  Voting. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted.  There shall be no cumulative voting
in the election of Trustees or on any other matter submitted to a vote of the
Shareholders.  Shares may be voted in person or by proxy.  Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Declaration of Trust or the By-Laws of
the Trust to be taken by Shareholders.

Section 5.  Action by Written Consent in Lieu of Meeting of  Shareholders.  Any
action required or permitted to be taken at a meeting of the Shareholders may be
taken without a meeting by written action signed by all of the Shareholders
entitled to vote on that action.  The written action is effective when it has
been signed by all of those Shareholders, unless a different effective time is
provided in the written action.

                                   ARTICLE X
                                   ---------

                                   CUSTODIAN
                                   ---------

     All securities and cash of the Trust shall be held by one or more
custodians and subcustodians, each meeting the requirements for a custodian
contained in the 1940 Act, or shall otherwise be held in accordance with the
1940 Act.  The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodians, and approved by the Trustees, provided that
in every case such sub-custodian shall meet the requirements for a
<PAGE>

                                      -21-

custodian contained in the 1940 Act and the rules and regulations thereunder and
in any applicable state Securities or blue sky laws.

                                   ARTICLE XI
                                   ----------

                                 DISTRIBUTIONS
                                 -------------

     The Trustees may in their sole discretion from time to time declare and pay
such dividends and distributions to shareholders as they may deem necessary or
desirable, after providing for actual and accrued expenses and liabilities
(including such reserves as the Trustees may establish) determined in accordance
with this Declaration of Trust and good accounting practices.

                                  ARTICLE XII
                                  -----------

                  LIMITATION OF LIABILITY AND INDEMNIFICATION

Section 1.  Limitation of Liability.  No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust.  Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee.  Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross, negligence or reckless disregard of the duties
involved in the conduct of his office.

     Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.

     Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of State of the Commonwealth
of Massachusetts, shall recite that the same was executed or made by or on
behalf of the Trust by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not binding
upon any of them or the
<PAGE>

                                      -22-


Shareholders individually but are binding only upon the assets and property of
the Trust, and may contain such further recitals as they or he may deem
appropriate, but the omission thereof shall not operate to bind any Trustees or
Trustee or officers or officer or Shareholders or Shareholder individually.

     All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor.

Section 2.  Trustees' Good Faith Action, Expert Advice, No Bond or Surety.  The
exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested.  A Trustee shall be liable only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law.  The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice.  In discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of any other party to any contract entered into hereunder.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.

Section 3.  Liability of Third Persons Dealing with Trustees.   No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.

Section 4.  Indemnification.  Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a
<PAGE>

                                      -23-

shareholder, creditor or otherwise (hereinafter referred to as a "Covered
Person"), shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.

     No indemnification shall be provided hereunder to a Covered Person:

     (a) against any liability to the Trust or its Shareholders by reason of a
final adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;

     (b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interests of the Trust; or

     (c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a payment by
a Covered Person, unless there has been either a determination that such Covered
Person did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or a
reasonable determination, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that he did not engage in such conduct:

          (i) by a vote of a majority of the Disinterested Trustees acting on
     the matter (provided that a majority of the Disinterested Trustees then in
     office act on the matter); or

          (ii) by written opinion of independent legal counsel.

     The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person.  Nothing contained herein shall affect
<PAGE>

                                      -24-


any rights to indemnification to which Trust personnel other than Covered
Persons may be entitled by contract or otherwise under law.

     Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:

     (a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or

     (b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the matter)
or independent legal counsel in a written opinion shall determine, based upon a
review of the readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.

     As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.

     As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.

Section 5.  Shareholders.  No personal liability for any debt or obligation of
the Trust shall attach to any Shareholder or former Shareholder of the Trust.
In case any Shareholder or former Shareholder of the Trust shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions, or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its
<PAGE>

                                      -25-

corporate or other general successor) shall be entitled out of the assets of the
Trust to be held harmless from and indemnified against all loss and expense
arising from such liability; provided, however, there shall be no liability or
obligation of the Trust arising hereunder to reimburse any Shareholder for taxes
paid by reason of such Shareholder's ownership of any Share or for losses
suffered by reason of any changes in value of any Trust assets. The Trust shall,
upon request by the Shareholder or former Shareholder, assume the defense of any
claim made against the Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.

                                 ARTICLE XIII
                                 ------------

                                 MISCELLANEOUS
                                 -------------

Section 1.  Termination of Trust.  (a) Unless terminated as provided herein, the
Trust shall continue, without limitation of time.  Except as may be set forth in
any Statement relating to the issuance of Shares, the Trust, or any class or
series thereof may be terminated at any time by the Trustees by written notice
to the Shareholders without a vote of the shareholders of the Trust, or the
class or series as the case may be, or by the affirmative vote of the
shareholders entitled to vote at least sixty-six and two-thirds percent (66
2/3%) of the outstanding Common Shares and Preferred Shares, voting as a single
class, in the case of the termination of the Trust, or by the effected class or
series as the case may be in the event of the termination of a class or series,
unless such action has previously been approved, adopted or authorized by the
affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with this Declaration of Trust or the By-Laws, in which case the
affirmative vote of the holders of at least a majority of the outstanding Common
Shares and Preferred Shares, voting as a single class or the applicable class or
series as the case may be, shall be required.

     Upon termination of the Trust or any series or class thereof, after paying
or otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets of the Trust or the applicable series or class to
distributable form in cash or other securities, or any combination thereof, and
distribute the proceeds to the holders of Preferred Shares in the manner set
forth by resolution of the Trustees, and to the holders of Common Shares held by
such holders on the date of termination in the event of a termination of the
<PAGE>

                                      -26-


Trust, or to Shareholders of the applicable series or class, as the case may be.

Section 2.  Filing of Copies, References, Headings.  The original or a copy of
this instrument, each amendment hereto and any Statement authorized by Article
III, Section 2 hereof shall be kept in the office of the Trust where it may be
inspected by any Shareholder.  A copy of this Declaration and of each amendment
and Statement shall be filed by the Trustees with the Secretary of State of the
Commonwealth of Massachusetts, as well as any other governmental office where
such filing may from time to time be required, provided, however, that the
failure to so file will not invalidate this Declaration or an properly
authorized amendment or Statement.  Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments have been made or Statements authorized and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this instrument or of any such amendments or Statements. In this
instrument or in any such amendment, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as a whole and as amended or affected by any such amendment.
Headings are placed herein for convenience of reference only, and in case of any
conflict, the text of this instrument, rather than the headings, shall control.
This instrument may be executed in any number of counterparts, each of which
shall be deemed an original.

Section 3.  Trustees May Resolve Ambiguities. The Trustees may construe any of
the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.

Section 4.  Amendments.  Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by
vote of a majority of the then Trustees with the consent of shareholders holding
more than fifty percent (50%) of Shares entitled to vote.  In addition,
notwithstanding any other provision to the contrary contained in this
Declaration of Trust, the Trustees may amend this Declaration of Trust without
the vote or consent of shareholders (i) at any time if the Trustees deem it
necessary in order for the Trust or any series or class thereby to meet the
requirements of applicable Federal or State
<PAGE>

                                      -27-

laws or regulations, or the requirements of the regulated investment company
provisions of the Internal Revenue Code, (ii) change the name of the Trust or to
supply any omission, cure any ambiguity or cure, correct or supplement any
defective or inconsistent provision contained herein, or (iii) for any reason at
any time before a registration statement under the Securities Act of 1933, as
amended, covering the initial public offering of Shares has become effective. A
certification in recordable form signed by a majority of the Trustees or by the
Secretary or any Assistant Secretary of the Trust setting forth such amendment
and reciting that it was duly adopted by the shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, in recordable form, and
executed by a majority of the Trustees or certified by the Secretary or any
Assistant Secretary of the Trust, shall be conclusive evidence of such amendment
when lodged among the records of the Trust.
<PAGE>

     IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, has, executed this instrument as of the date first written above.



                              /s/ Timothy R. Schwertfeger
                              ---------------------------
                              Timothy R. Schwertfeger, Trustee
                              333 West Wacker Drive
                              Chicago, IL  60606
<PAGE>

STATE OF ILLINOIS   )
                    )  SS.
COUNTY OF COOK      )

     Then personally appeared the above-named Timothy R. Schwertfeger known to
me to be the Trustee of the Trust, who acknowledged the foregoing instrument to
be his free act and deed, before me this 12th day of July 1999.


"OFFICIAL SEAL"
Olivia Rubio                        /s/ Olivia Rubio
                                    ----------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  3/19/01
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.B
<SEQUENCE>3
<FILENAME>dex99b.txt
<DESCRIPTION>BY-LAWS OF REGISTRANT
<TEXT>

<PAGE>

                                    BY-LAWS
                                      OF
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND



                                   ARTICLE I


                             DECLARATION OF TRUST
                                      AND
                                    OFFICES

     Section 1.1. Declaration of Trust. These By-Laws shall be subject to the
Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of Nuveen Insured Dividend Advantage Municipal Fund, the Massachusetts
business trust established by the Declaration of Trust (the "Trust").

     Section 1.2. Registered Agent. The registered agent of the Trust in the
Commonwealth of Massachusetts shall be CT Corporation System, 2 Oliver Street,
Boston, Massachusetts, or such other agent as may be fixed by the Board of
Trustees.

     Section 1.3 Other Offices. The Trust may have such other offices and places
of business within or without the Commonwealth of Massachusetts as the Board of
Trustees shall determine.

                                   ARTICLE II

                                  SHAREHOLDERS

     Section 2.1. Place of Meetings. Meetings of the Shareholders may be held at
such place or places within or without the Commonwealth of Massachusetts as
shall be fixed by the Board of Trustees and stated in the notice of the meeting.

     Section 2.2. Regular Meeting. Regular meetings of the Shareholders for the
election of Trustees and the transaction of such other business as may properly
come before the meeting shall be held on an annual or other less frequent
periodic basis at such date and time as the Board of Trustees by resolution
shall designate, except as otherwise required by applicable law.

     Section 2.3. Special Meeting. Special meetings of the Shareholders for any
purpose or purposes may be called by the Chairman of the Board, the President or
two or more Trustees, and must be called at the written request stating the
purpose or
<PAGE>

                                      -2-




purposes of the meeting, of Shareholders entitled to cast at least 10 percent of
all the votes entitled to be cast at the meeting.

     Section 2.4. Notice of Meetings. Notice stating the time and place of the
meeting and in the case of a special meeting the purpose or purposes thereof and
by whom called, shall be delivered to each Shareholder not less than ten nor
more than sixty days prior to the meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.

     Section 2.5. Quorum and Action. (a) The holders of a majority of the voting
power of the shares of beneficial interest of the Trust (the "Shares") entitled
to vote at a meeting are a quorum for the transaction of business. If a quorum
is present when a duly called or held meeting is convened, the Shareholders
present may continue to transact business until adjournment, even though the
withdrawal of a number of Shareholders originally present leaves less than the
proportion or number otherwise required for a quorum. Notwithstanding the
foregoing, when the holders of Preferred Shares are entitled to elect any of the
Trust's Trustees by class vote of such holders, the holders of 33 1/3% of the
Shares entitled to vote at a meeting shall constitute a quorum for the purpose
of such an election.

     (b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the voting power of the Shares present and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by the Investment Company Act of 1940, as
amended (the "1940 Act"), the Declaration of Trust or any resolution of the
Trustees which authorizes the issuance of Preferred Shares.

      Section 2.6. Voting. At each meeting of the Shareholders, every, holder of
Shares then entitled to vote may vote in person or by proxy and, except as
otherwise provided by the 1940 Act, the Declaration of Trust or any resolution
of the Trustees which authorizes the issuance of Preferred Shares, shall have
one vote for each Share registered in his name.

     Section 2.7. Proxy Representation. A Shareholder may cast or authorize the
casting of a vote by filing a written appointment of a proxy with an officer of
the Trust at or before the meeting at which the appointment is to be effective.
The placing of a Shareholder's name on a proxy pursuant to telephonic or
electronically transmitted instructions obtained pursuant to procedures which
are reasonably designed to verify that such instructions have been authorized by
such Shareholder, shall constitute execution of such proxy by or on behalf of
such Shareholder. The appointment of a proxy is valid for eleven months, unless
a longer period is expressly provided in the appointment. No appointment is
irrevocable unless the appointment is coupled with an interest in the Shares or
in the Trust. Any copy, facsimile telecommunication or other
<PAGE>

                                      -3-

reliable reproduction of a proxy may be substituted for or used in lieu of the
original proxy for any and all purposes for which the original proxy could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original proxy.

     Section 2.8. Adjourned Meetings. Any meeting of Shareholders may, by
announcement thereat, be adjourned to a designated time and place by the vote of
the holders of a majority of the Shares present and entitled to vote thereat
even though less than a quorum is so present. An adjourned meeting may reconvene
as designed, and when a quorum is present any business may be transacted which
might have been transacted at the meeting as originally called.

     Section 2.9. Action by Written Consent in Lieu of Meeting of Shareholders.
See Section 6.3 of these By-Laws.

                                  ARTICLE III

                                   TRUSTEES

     Section 3.1. Qualifications and Number: Vacancies. Each Trustee shall be a
natural person. A Trustee need not be a Shareholder, a citizen of the United
States, or a resident of the Commonwealth of Massachusetts. The number of
Trustees of the Trust, their term and election and the filling of vacancies,
shall be as provided in the Declaration of Trust.

     Section 3.2. Powers. The business and affairs of the Trust shall be managed
under the direction of the Board of Trustees. All powers of the Trust may be
exercised by or under the authority of the Board of Trustees, except those
conferred on or reserved to the Shareholders by statute, the Declaration of
Trust or these By-Laws.

     Section 3.3. Investment Policies. It shall be the duty of the Board of
Trustees to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Trust are at all times
consistent with the investment objectives, policies and restrictions with
respect to securities investments and otherwise of the Trust filed from time to
time with the Securities and Exchange Commission and as required by the 1940
Act, unless such duty is delegated to an investment adviser pursuant to a
written contract, as provided in the Declaration of Trust. The Trustees,
however, may delegate the duty of management of the assets of the Trust and may
delegate such other of their powers and duties to the Executive Committee or any
other committee, or to an individual or corporate investment adviser to act as
investment adviser or subadviser pursuant to a written contract.

     Section 3.4. Meetings. Regular meetings of the Trustees may be held without
notice at such times as the Trustees shall fix. Special meetings of the Trustees
may be
<PAGE>

                                      -4-


called by the Chairman of the Board or the President, and shall be called at the
written request of two or more Trustees. Unless waived by each Trustee, three
days' notice of special meetings shall be given to each Trustee in person, by
mail, by telephone, or by telegram or cable, or by any other means that
reasonably may be expected to provide similar notice. Notice of special meetings
need not state the purpose or purposes thereof. Meetings of the Trustees may be
held at any place within or outside the Commonwealth of Massachusetts. A
conference among Trustees by any means of communication through which the
Trustees may simultaneously hear each other during the conference constitutes a
meeting of the Trustees or of a committee of the Trustees, if the notice
requirements have been met (or waived) and if the number of Trustees
participating in the conference would be sufficient to constitute a quorum at
such meeting. Participation in such meeting by that means constitutes presence
in person at the meeting.

     Section 3.5. Quorum and Action. A majority of the Trustees currently
holding office, or in the case of a meeting of a committee of the Trustees, a
majority of the members of such committee, shall constitute a quorum for the
transaction of business at any meeting. If a quorum is present when a duly
called or held meeting is convened, the Trustees present may continue to
transact business until adjournment, even though the withdrawal of a number of
Trustees originally present leaves less than the proportion or number otherwise
required for a quorum. At any duly held meeting at which a quorum is present,
the affirmative vote of the majority of the Trustees present shall be the act of
the Trustees or the committee, as the case may be, on any question, except where
the act of a greater number is required by these By-Laws or by the Declaration
of Trust.

     Section 3.6. Action by Written Consent in Lieu of Meetings of Trustees. See
Section 6.3 of these By-Laws.

     Section 3.7. Committees. The Trustees, by resolution adopted by the
affirmative vote of a majority of the Trustees, may designate from their members
an Executive Committee, an Audit Committee (whose function shall be to advise
the Trustees as to the selection of and review of the work of the independent
public accountants of the Trust) and any other committee or committees, each
such committee to consist of two or more Trustees and to have such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Any such committee may be terminated at any time by the affirmative
vote of a majority of the Trustees.

                                   ARTICLE IV

                                    OFFICERS

     Section 4.1. Number and Qualifications. The officers of the Trust shall
include a Chairman of the Board, a President, a Controller, one or more Vice
Presidents (one of whom may be designated Executive Vice President), a
Treasurer,
<PAGE>

                                      -5-

and a Secretary. Any two or more offices may be held by the same person. Unless
otherwise determined by the Trustees, each officer shall be appointed by the
Trustees for a term which shall continue until the meeting of the Trustees
following the next regular meeting of Shareholders and until his successor shall
have been duly elected and qualified, or until his death, or until he shall have
resigned or have been removed, as hereinafter provided in these By-Laws. The
Trustees may from time to time elect, or delegate to the Chairman of the Board
or the President, or both, the power to appoint, such officers (including one or
more Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents as may be necessary or desirable for the
business of the Trust. Such other officers shall hold office for such terms as
may be prescribed by the Trustees or by the appointing authority.

     Section 4.2. Resignations. Any officer of the Trust may resign at any time
by giving written notice of his resignation to the Trustees, the Chairman of the
Board, the President or the Secretary. Any such resignation shall take effect at
the time specified therein or, if the time when it shall become effective shall
not be specified therein, immediately upon its receipt, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.

     Section 4.3. Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the Trustees present at a duly convened meeting of the Trustees.

     Section 4.4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled for the
unexpired portion of the term by the Trustees, or in the manner determined by
the Trustees.

     Section 4.5. The Chairman of the Board. The Chairman of the Board shall be
elected from among the Trustees. He shall be the chief executive officer of the
Trust and shall:

          (a) have general active management of the business of the Trust;

          (b) when present, preside at all meetings of the Trustees and of the
     Shareholders;

          (c) see that all orders and resolutions of the Trustees are carried
     into effect;

          (d) sign and deliver in the name of the Trust any deeds, mortgages,
     bonds, contracts or other instruments pertaining to the business of the
     Trust, except in cases in which the authority to sign and deliver is
     required by law to
<PAGE>

                                      -6-

     be exercised by another person or is expressly delegated by the Declaration
     of Trust or By-Laws or by the Trustees to some other officer or agent of
     the Trust; and

          (e) maintain records of and, whenever necessary, certify all
     proceedings of the Trustees and the Shareholders.

     The Chairman of the Board shall be authorized to do or cause to be done all
things necessary or appropriate, including preparation, execution and filing of
any documents, to effectuate the registration from time to time of the Common
Shares or Preferred Shares of the Trust with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. He shall perform
all duties incident to the office of Chairman of the Board and such other duties
as from time to time may be assigned to him by the Trustees or by these By-Laws.

     Section 4.6. The President. The President shall be the chief operating
officer of the Trust and, subject to the Chairman of the Board, he shall have
general authority over and general management and control of the business and
affairs of the Trust. In general, he shall discharge all duties incident to the
office of the chief operating officer of the Trust and such other duties as may
be prescribed by the Trustees and the Chairman of the Board from time to time.
In the absence of the Chairman of the Board or in the event of his disability,
or inability to act or to continue to act, the President shall perform the
duties of the Chairman of the Board and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the Chairman of the Board.

     Section 4.7. Executive Vice-President. In the case of the absence or
inability to act of the President and the Chairman of the Board, the Executive
Vice-President shall perform the duties of the President and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Executive Vice-President shall perform all duties incident to the
office of Executive Vice-President and such other duties as from time to time
may be assigned to him by the Trustees, the President or these By-Laws.

     Section 4.8. Vice Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Trustees, the Chairman
of the Board or the President.

     Section 4.9. Controller. The Controller shall:

          (a) keep accurate financial records for the Trust;

          (b) render to the Chairman of the Board, the President and the
     Trustees, whenever requested, an account of all transactions by and of the
     financial condition of the Trust; and
<PAGE>

                                      -7-

          (c) in general, perform all the duties incident to the office of
     Controller and such other duties as from time to time may be assigned to
     him by the Trustees, the Chairman of the Board or the President.

     Section 4.10. Treasurer. The Treasurer shall:

          (a) have charge and custody of, and be responsible for, all the funds
     and securities of the Trust, except those which the Trust has placed in the
     custody of a bank or trust company pursuant to a written agreement
     designating such bank or trust company as custodian of the property of the
     Trust, as required by Section 6.6 of these By-Laws;

          (b) deposit all money, drafts, and checks in the name of and to the
     credit of the Trust in the banks and depositories designated by the
     Trustees;

          (c) endorse for deposit all notes, checks, and drafts received by the
     Trust making proper vouchers therefor:

          (d) disburse corporate funds and issue checks and drafts in the name
     of the Trust, as ordered by the Trustees; and

          (e) in general, perform all the duties incident to the office of
     Treasurer and such other duties as from time to time may be assigned to him
     by the Trustees, the Chairman of the Board or the President.

     Section 4.11. Secretary. The Secretary shall:

          (a) keep or cause to be kept in one or more books provided for the
     purpose, the minutes of all meetings of the Trustees, the committees of the
     Trustees and the Shareholders;

          (b) see that all notices are duly given in accordance with the
     provisions of these By-Laws and as required by statute;

          (c) be custodian of the records of the Trust;

          (d) see that the books, reports, statements, certificates and other
     documents and records required by statute to be kept and filed are properly
     kept and filed; and

          (e) in general, perform all the duties incident to the office of
     Secretary and such other duties as from time to time may be assigned to him
     by the Trustees, the Chairman of the Board or the President.
<PAGE>

                                      -8-

Section 4.12. Salaries. The salaries of all officers shall be fixed by the
Trustees and the Trustees have the authority by majority vote to reimburse
expenses and to establish reasonable compensation of all Trustees for services
to the Trust as Trustees, officers, or otherwise.

                                   ARTICLE V

                                    SHARES

     Section 5.1. Share Certificates. Each owner of Common Shares of the Trust
shall be entitled upon request to have a certificate, in such form as shall be
approved by the Trustees, representing the number of Common Shares of the Trust
owned by him. Certificates representing fractional Common Shares shall not be
issued. The certificates representing Common Shares shall be signed in the name
of the Trust by the Chairman of the Board, the President, the Executive Vice
President or a Vice President and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer (which signatures may be either manual or
facsimile, engraved or printed). In case any officer who shall have signed such
certificate shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Trust with the same effect as
if such officer were still in office at the date of their issuance. No
certificates representing Preferred Shares shall be issued except as the
Trustees may otherwise authorize.

     Section 5.2. Books and Records; Inspection. The Trust shall keep at its
principal executive office, or at another place or places within the United
States determined by the Trustees, a share register not more than one year old,
containing the names and addresses of the shareholders and the number of Shares
held by each Shareholder. The Trust shall also keep, at its principal executive
office, or at another place or places within the United States determined by the
Trustees, a record of the dates on which certificates representing Shares were
issued.

     Section 5.3. Share Transfers. Upon compliance with any provisions
restricting the transferability of Shares that may be set forth in the
Declaration of Trust, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of Shares of the Trust shall be made only on the
books of the Trust by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the Trust, or with a transfer agent or a registrar and on surrender
of any certificate or certificates for such Shares properly endorsed and the
payment of all taxes thereon. Except as may be otherwise provided by law or
these By-Laws, the person in whose name Shares stand on the books of the Trust
shall be deemed the owner thereof for all purposes as regards the Trust;
provided that whenever any transfer of Shares shall be made for collateral
security, and not
<PAGE>

                                      -9-


absolutely, such fact, if known to an officer of the Trust, shall be so
expressed in the entry of transfer.

     Section 5.4. Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the issue, certification, transfer and registration of Shares of the
Trust. They may appoint, or authorize any officer or officers to appoint, one or
more transfer agents or one or more transfer clerks and one or more registrars
and may require all certificates for Shares to bear the signature or signatures
of any of them.

     Section 5.5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing Shares of the Trust shall immediately notify the Trust
of any loss, destruction or mutilation of such certificate, and the Trust may
issue a new certificate in the place of any certificate theretofore issued by it
which the owner thereof shall allege to have been lost or destroyed or which
shall have been mutilated, and the Trustees may, in their discretion, require
such owner or his legal representatives to give to the Trust a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties as the
Trustees in their absolute discretion shall determine, to indemnify the Trust
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or the issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Trustees, in their absolute
discretion, may refuse to issue any such new certificate, except as otherwise
required by law.

     Section 5.6. Record Date; Certification of Beneficial Owner. (a) The
Trustees may fix a date not more than sixty (60) days before the date of a
meeting of Shareholders as the date for the determination of the holders of
Shares entitled to notice of and entitled to vote at the meeting or any
adjournment thereof.

     (b) The Trustees may fix a date for determining Shareholders entitled to
receive payment of any dividend or distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares.

     (c) In the absence of such fixed record date, (i) the date for
determination of Shareholders entitled to notice of and entitled to vote at a
meeting of Shareholders shall be the later of the close of business on the day
on which notice of the meeting is mailed or the thirtieth day before the
meeting, and (ii) the date for determining Shareholders entitled to receive
payment of any dividend or distribution or an allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares shall be the close of business on the day on which the resolution of
the Trustees is adopted.

     (c) A resolution approved by the affirmative vote of a majority of the
Trustees present may establish a procedure whereby a Shareholder may certify in
<PAGE>

                                      -10-

writing to the Trust that all or a portion of the Shares registered in the name
of the Shareholder are held for the account of one or more beneficial owners.
Upon receipt by the Trust of the writing, the persons specified as beneficial
owners, rather than the actual Shareholders, are deemed the Shareholders for the
purposes specified in the writing.

                                  ARTICLE VI

                                 MISCELLANEOUS

     Section 6.1. Fiscal Year. The fiscal year of the Trust shall be as fixed by
the Trustees of the Trust.

     Section 6.2. Notice and Waiver of Notice. (a) Any notice of a meeting
required to be given under these By-Laws to Shareholders or Trustees, or both,
may be waived by any such person (i) orally or in writing signed by such person
before, at or after the meeting or (ii) by attendance at the meeting in person
or, in the case of a Shareholder, by proxy.

     (b) Except as otherwise specifically provided herein, all notices required
by these By-Laws shall be printed or written, and shall be delivered either
personally, by telecopy, telegraph or cable, or by mail or courier or delivery
service, and, if mailed, shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the Shareholder or Trustee at
his address as it appears on the records of the Trust.

     Section 6.3 Action by Written Consent in Lieu of Meeting. (a) An action
required or permitted to be taken at a meeting of the Shareholders may be taken
without a meeting by written action signed by all of the Shareholders entitled
to vote on that action. The written action is effective when it has been signed
by all of those Shareholders, unless a different effective time is provided in
the written action.

     (b) An action which requires Shareholder approval and which is required or
permitted to be taken at a meeting of Trustees may be taken by written action
signed by all of the Trustees. An action which does not require Shareholder
approval and which is required or permitted to be taken at a meeting of the
Trustees or a Committee of the Trustees may be taken by written action signed by
the number of Trustees that would be required to take the same action at a
meeting of the Trustees or Committee, as the case may be, at which all Trustees
were present. The written action is effective when signed by the required number
of Trustees, unless a different effective time is provided in the written
action. When written action is taken by less than all Trustees, all Trustees
shall be notified immediately of this text and effective date.
<PAGE>

                                      -11-

     Section 6.4 Reports to Shareholders. The books of account of the Trust
shall be examined by an independent firm of public accountants at the close of
each annual period of the Trust and at such other times, if any, as may be
directed by the Trustees. A report to the Shareholders based upon such
examination shall be mailed to each Shareholder of the Trust of record at his
address as the same appears on the books of the Trust. Each such report shall
show the assets and liabilities of the Trust as of the annual or other period
covered by the report and the securities in which the funds of the Trust were
then invested; such report shall also show the Trust's income and expenses for
the period from the end of the Trust's preceding fiscal year to the close of the
annual or other period covered by the report and any other information required
by the 1940 Act, and shall set forth such other matters as the Trustees or such
independent firm of public accountants shall determine.

     Section 6.5 Approval of Firm of Independent Public Accountants. At any
regular meeting of the Shareholders of the Trust there may be submitted, for
ratification or rejection, the name of the firm of independent public
accountants which has been selected for the fiscal year in which such meeting is
held by a majority of those members of the Trustees who are not investment
advisers of, or affiliated persons of an investment adviser of, or officers or
employees of, the Trust, as such terms are defined in the 1940 Act.

     Section 6.6 Custodian. All securities and cash of the Trust shall be held
by a custodian meeting the requirements for a custodian contained in the 1940
Act and the rules and regulations thereunder and in any applicable state
securities or blue sky laws. The Trust shall enter into a written contract with
the custodian regarding the powers, duties and compensation of the custodian
with respect to the cash and securities of the Trust held by the custodian. Said
contract and all amendments thereto shall be approved by the Trustees of the
Trust. The Trust shall upon the resignation or inability to serve of the
custodian obtain a successor custodian and require that the cash and securities
owned by the Trust be delivered to the successor custodian.

     Section 6.7 Prohibited Transactions. No officer or Trustee of the Trust or
of its investment adviser shall deal for or on behalf of the Trust with himself,
as principal or agent, or with any corporation or partnership in which he has a
financial interest. This prohibition shall not prevent: (a) officers or Trustees
of the Trust from having a financial interest in the Trust, its principal
underwriter or its investment adviser; (b) the purchase of securities for the
portfolio of the Trust or the sale of securities owned by the Trust through a
securities dealer, one or more of whose partners, officers or directors is an
officer or Trustee of the Trust, provided such transactions are handled in the
capacity of broker only and provided commission charged do not exceed customary
brokerage charges for such service; (c) the purchase or sale of securities for
the portfolio of the Trust pursuant to a rule under the 1940 Act or pursuant to
an exemptive order of the Securities and Exchange Commission; or (d) the
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent, or custodian having
<PAGE>

                                      -12-

a partner, officer or director who is an officer or Trustee of the Trust,
provided only customary fees are charged for services rendered to or for the
benefit of the Trust.

     Section 6.8 Bonds. The Trustees may require any officer, agent or employee
of the Trust to give a bond to the Trust, conditioned upon the faithful
discharge of his duties, with one or more sureties and in such amount as may be
satisfactory to the Trustee. The Trustees shall, in any event, require the Trust
to provide and maintain a bond issued by a reputable fidelity insurance company,
authorized to do business in the place where the bond is issued, against larceny
and embezzlement, covering each officer and employee of the Trust, who may
singly, or jointly with others, have access to securities or funds of the Trust,
either directly or through authority to draw upon such funds or to direct
generally the disposition of such securities, such bond or bonds to be in such
reasonable form and amount as a majority of the Trustees who are not "interested
persons" of the Trust as defined in the 1940 Act shall approve not less than
once every twelve months, with due consideration to all relevant factors
including, but not limited to, the value of the aggregate assets of the Trust to
which any such officer or employee may have access, the type and terms of the
arrangements made for the custody and safekeeping of such assets, and the nature
of the securities in the Trust's portfolio, and as meet all requirements which
the Securities and Exchange Commission may prescribe by order, rule or
regulation.


                                  ARTICLE VII

                                  AMENDMENTS

     Section 7.1. These By-Laws may be amended or repealed, or new By-Laws may
be adopted, by the Trustees at any meeting thereof provided that notice of such
meeting shall have been given if required by these By-Laws, which notice, if
required, shall state that amendment or repeal of the By-Laws or adoption of new
By-Laws, is one of the purposes of such meeting, or by action of the Trustees by
written consent in lieu of a meeting.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.N
<SEQUENCE>4
<FILENAME>dex99n.txt
<DESCRIPTION>CONSENT OF INDEPENDENT AUDITORS
<TEXT>

<PAGE>

                                 ERNST & YOUNG


                        Consent Of Independent Auditors


We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form N-2) and related prospectus and statement of
additional information of the Nuveen Insured Dividend Advantage Municipal Fund
filed with the Securities and Exchange Commission in the fund's initial
Registration Statement under the Securities Act of 1933 and in the fund's
Registration Statement under the Investment Company Act of 1940 (File No.
811-09475).



                                                           /s/ ERNST & YOUNG LLP

Chicago, Illinois
April 24, 2001
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.R
<SEQUENCE>5
<FILENAME>dex99r.txt
<DESCRIPTION>CODE OF ETHICS
<TEXT>

<PAGE>

                              NUVEEN MUTUAL FUNDS
                          NUVEEN EXCHANGE-TRADED FUNDS
                           NUVEEN DEFINED PORTFOLIOS
                             NUVEEN ADVISORY CORP.
                      NUVEEN INSTITUTIONAL ADVISORY CORP.
                          NUVEEN ASSET MANAGEMENT INC.
                    NUVEEN SENIOR LOAN ASSET MANAGEMENT INC.
                               NUVEEN INVESTMENTS


                        -------------------------------

                                 CODE OF ETHICS
                                      AND
                             REPORTING REQUIREMENTS

                        -------------------------------


LEGAL BACKGROUND
- ----------------

     In accordance with the rules and requirements of the Investment Company Act
     of 1940 and the Investment Advisers Act of 1940, Nuveen Investments, and
     each of its affiliated companies, has adopted this Code of Ethics and
     Reporting Requirements (the "Code") to guard against violations of the
     standards set forth in the above rules.  In addition, the Code establishes
     guidelines for the conduct of persons who:

     (1) may obtain material non-public information concerning securities held
         by or considered for purchase or sale by any series of Nuveen-sponsored
         registered managed funds (open-end and closed-end funds), Nuveen
         defined portfolios (unit investment trusts) and any managed accounts to
         which Nuveen Advisory Corp., Nuveen Asset Management Inc., Nuveen
         Institutional Advisory Corp., Nuveen Senior Loan Asset Management Inc.
         or Rittenhouse Financial Services, Inc. act as investment advisers; or

     (2) may make any recommendation or participate in the determination of
         which recommendation shall be made concerning the purchase or sale of
         any securities by a Nuveen managed fund, defined portfolio or managed
         account. Persons subject to this Code are also subject to Nuveen's
         Policies and Procedures Designed to Prevent Insider Trading.

I.   PURPOSE OF THE CODE
     -------------------

     A. The Code establishes guidelines for Nuveen employees, officers,
     directors and members of their immediate families in the conduct of their
     personal investments and is designed to:

                                       1
<PAGE>

     .  forbid transactions that the Securities and Exchange Commission or other
        regulatory bodies would view as illegal, such as front-running;

     .  avoid situations where Nuveen employees, officers, directors or members
        of their immediate family, and any Nuveen managed fund, defined
        portfolio or managed account, had personally benefited, or appeared to
        benefit, at the expense of a managed fund, defined portfolio or managed
        account shareholder or client, or taken inappropriate advantage of their
        fiduciary positions; and

     .  prevent, as well as detect, the misuse of material, non-public
        information.

     B. Employees, officers and directors should be aware that Nuveen's
     reputation could be adversely affected as the result of even a single
     transaction considered questionable in light of the fiduciary duties we owe
     to Nuveen's managed funds, defined portfolios and managed accounts.  It
     bears emphasis that technical compliance with the Code's procedures will
     not automatically insulate from scrutiny transactions which show a pattern
     of abuse of the individual's fiduciary duties to a managed fund, defined
     portfolio or managed account.  In addition, a violation of the general
     principles of the Code may subject an individual to sanctions.


II.  Definitions

     A. "Access Person" - You are an Access Person if your job normally involves
        any of the following:
        .  The purchase or sale of "Covered Securities" (as defined below) for
           Nuveen managed funds, defined portfolios or managed accounts.
        .  In connection with your regular functions or duties, you make,
           participate in, or obtain information regarding the purchase or sale
           of Covered Securities by a managed fund, defined portfolio or managed
           account, or your functions relate to the making of any
           recommendations with respect to the purchases or sale of such Covered
           Securities.
        .  You have access to information regarding the purchase or sale of
           Covered Securities for managed funds, defined portfolios or managed
           accounts.

        In addition, you are an Access Person if you are any of the following:
        .  A president, vice president or director of Nuveen Advisory Corp.,
           Nuveen Institutional Advisory Corp., Nuveen Asset Management or
           Nuveen Senior Loan Asset Management Inc.
        .  "Investment Personnel" or a "Portfolio Manager" as defined below.

 (NOTE: A list of persons deemed to be Access Persons of the various entities
 subject to this Code is attached as Exhibit A)

                                       2
<PAGE>

     B. "Investment Personnel" - Investment Personnel are portfolio managers,
        financial analysts, C. investment analysts, traders and other employees
        of Nuveen Advisory Corp., Nuveen Institutional Advisory Corp., Nuveen
        Asset Management Inc., Nuveen Senior Loan Asset Management Inc. or
        Nuveen Investments who provide information or advice to a portfolio
        management team or who execute or help execute the portfolio management
        team's decisions. Investment Personnel are also deemed Access Persons by
        definition.

     C. "Portfolio Manager" - Portfolio Managers are those employees of Nuveen
        Advisory Corp., Nuveen Institutional Advisory Corp., Nuveen Asset
        Management Inc., Nuveen Senior Loan Asset Management Inc. or Nuveen
        Investments entrusted with direct responsibility and authority to make
        investment decisions affecting a managed fund, defined portfolio or
        managed account. Portfolio Managers are also deemed Investment Personnel
        and Access Persons by definition.

     D. "Interested Director" - An Interested Director of a fund is a director
        who has a material business relationship or professional relationship
        with a managed fund, investment adviser or underwriter of the fund.
        Generally, Interested Directors are those that are employed by any one
        of the above entities. (See Investment Company Act, Section 2(a)(19).)

     E. "Covered Security" - A Covered Security is any stock, bond, debenture,
        evidence of indebtedness or in general any other instrument defined as a
        security in Section 2(a)(36) of the Investment Company Act of 1940
        except that it does not include:

           1) Direct obligation of the Government of the United States or of
              agencies of the U.S. Government that are backed by the full faith
              and credit of the U.S. Government;
           2) Bankers' acceptances, bank certificates of deposit, commercial
              paper and high quality short-term debt instruments, including
              repurchase agreements; and
           3) Shares issued by open-end investment companies.

     F. "Purchase or Sale" - includes any transaction in which a beneficial
        interest in a security is acquired or disposed of, including, but not
        limited to, the writing of an option to purchase or sell a security.

     G. "Beneficial Ownership"

        1) Generally: Beneficial Owner means any person who, directly or
        indirectly, through any contract, arrangement, understanding,
        relationship or otherwise has or shares a direct or indirect pecuniary
        interest in a security.  The term

                                       3
<PAGE>

        pecuniary interest means the opportunity, directly or indirectly, to
        profit or share in any profit derived from a transaction in the subject
        securities. (Rule 16a-1(a)(2) under the Securities Exchange Act of 1934)

        The pecuniary interest standard looks beyond the record owner of
        securities. As a result, the definition of Beneficial Ownership is
        extremely broad and encompasses many situations that might not
        ordinarily be thought to confer a "pecuniary interest" in, or
        "ownership" of securities.

        2) Family Holdings: As a general rule, you are regarded as the
        Beneficial Owner of securities not only in your name but held in the
        name of members of your Immediate Family.

           Immediate Family includes:

           .  your spouse or domestic partner;
           .  your child or other relative who shares your home or, although not
              living in your home, is economically dependent upon you; or
           .  any other person if you obtain from such securities benefits
              substantially similar to those of ownership.


        3) Partnership and Corporate Holdings: A general partner of a general or
        limited partnership will generally be deemed to Beneficially Own
        securities held by the partnership, so long as the partner has direct or
        indirect influence or control over the management and affairs of the
        partnership. A limited partner will generally not be deemed to
        Beneficially Own securities held by a limited partnership, provided he
        or she does not own a controlling voting interest in the partnership. If
        a corporation is your "alter ego" or "personal holding company", the
        corporation's holdings of securities will be attributable to you.

        4) Investment Clubs: You are deemed to Beneficially Own securities held
        by an investment club of which you or a member of your Immediate Family
        (as defined above) is a member.

        5) Trusts: You are deemed to Beneficially Own securities held in trust
        if any of the following is true:
        - You are a trustee and either you or members of your Immediate Family
        (as defined above) have a monetary interest in the trust, whether as to
        principal or income;
        - You have a vested beneficial interest in the trust; or
        - You are settlor of the trust and you have the power to revoke the
        trust without obtaining the consent of all the beneficiaries. See Rule
        16a-1(a)(2) under the Securities Exchange Act of 1934)

                                       4
<PAGE>

        Securities Deemed not to be "Beneficially Owned"

        Beneficial Ownership does not include:

        -  securities held in the portfolio of a registered investment company
           solely by reason of an individual's ownership of shares or units of
           such registered investment company;
        -  securities purchased via an automatic dividend reinvestment plan;
        -  securities purchased via a rights of accumulation plan;
        -  securities held by a pension or retirement plan holding securities of
           an issuer whose employees generally are the beneficiaries of the
           plan. However, your participation in a pension or retirement plan is
           considered Beneficial Ownership of the portfolio securities if you
           can withdraw and trade the securities without withdrawing from the
           plan.

     H. "Security Held or to be Acquired" by a managed fund, defined portfolio
        or managed account means:

        1. Any Covered Security which, within the most recent 15 days:
               a) is or has been held by the managed fund, defined portfolio or
                  managed account; or
               b) is being or has been considered by the managed fund, defined
                  portfolio or managed account; and

        2. Any option to purchase or sell, and any security convertible into or
           exchangeable for, a Covered Security.


III. Exempted Transactions (applicable to all employees)

     The trading prohibitions or restrictions listed in Section IV below of this
     Code shall not apply to the following transactions:

     A. Nuveen open-end fund purchases or redemptions.

     B. Purchases or redemptions of shares of investment companies from sponsors
        other than Nuveen.

     C. Purchases or sales of direct obligations of the U.S. Government or
        Government agencies; bankers' acceptances, bank certificates of deposit,
        commercial paper and high quality short-term debt instruments, including
        repurchase agreements.

     D. Purchases or sales effected in any account over which the party has no
        direct or indirect influence or control (e.g., assignment of management
        discretion in writing to another party). Employees will be assumed to
        have influence or

                                       5
<PAGE>

        control over transactions in managed accounts they Beneficially Own
        unless they have certified otherwise in their Initial Holdings,
        Quarterly Transaction and Annual Holdings Reports.

     E. Purchases or sales that are non-volitional on the part of either the
        individual involved or a managed fund or managed account client, for
        example, securities obtained through inheritance or gift.

     F. Purchases which are part of an automatic dividend reinvestment plan or
        similar automatic periodic investment process or when issued pro rata to
        all holders of a class of securities, such as stock splits, stock
        dividends or the exercise of rights, warrants or tender offers. However,
        these transactions should be reported by Access Persons in their
        Quarterly Transaction and Annual Holdings reports once acknowledgement
        of the transaction is received.

     G. Purchases or sales of equity securities issued by companies with an
        equity market capitalization of at least $1 billion, unless such
        securities appear on an applicable blackout list (Rittenhouse, Nuveen
        Senior Loan Asset Management Defined Portfolios). However, these
        transactions should be reported by Access Persons in their Quarterly
        Transaction and Annual Holdings reports once acknowledgement of the
        transaction is received. Transactions in securities of The John Nuveen
        Company are NOT exempted transactions under this section.

     NOTE: The fiduciary principles set forth in Section I apply to all of the
     above-described transactions.


IV.  Prohibited or Restricted Purchases and Sales

     A.   All Nuveen Employees

          1. Prohibition of purchases of IPOs.  No employee may purchase any
          securities in an initial public offering (IPO) other than an offering
          of municipal securities or U.S. Government securities.

          2. Pre-clearance of certain transactions.  Unless previously pre-
          cleared in the manner described in Section VI below, no employee may
          purchase or sell the following securities for his or her own account
          or for any account in which he or she has any Beneficial Ownership:

             (a) securities offered in a private placement; or
             (b) securities of The John Nuveen Company.

                                       6
<PAGE>

     B.   Access Persons (including Portfolio Managers and Investment Personnel)

          In addition to the requirements set out in paragraph A above, Access
          Persons of the types specified in each paragraph are subject to the
          following additional requirements:

          1.   No Trades When A Managed Fund or Managed Account has Pending
               "Buy" or "Sell" Order.

               No Portfolio Manager or Investment Personnel shall execute a
               securities transaction on a day during which a managed fund or
               managed account of a type identified on Exhibit A or B for that
               individual has a pending "buy" or "sell" order in that same
               security until that order is executed or withdrawn.  No other
               Access Person shall execute a securities transaction on a day
               during which a managed fund or managed account has a pending
               "buy" or "sell" order in that same security until that order is
               executed or withdrawn, if that person knows, or reasonably should
               have known, an order is pending.  The preceding two sentences do
               not apply to securities transactions involving a security held by
               a managed fund or managed account and invested and managed under
               a sub-advisory agreement unless the person has actual knowledge
               that the fund or account has a pending "buy" or "sell" order
               involving such security.

          2.   No Trades within Seven Days of Managed Fund or Managed Account
               Trades.

               No Portfolio Manager or Investment Personnel of a managed fund or
               managed account may purchase or sell any security within seven
               calendar days before or after the managed fund or managed account
               of a type identified on Exhibit A for that individual trades or
               considers to purchase or sell such security.  This prohibition
               does not apply to securities that are invested or managed under a
               sub-advisory agreement unless the person has actual knowledge
               that the fund or account has traded or is considering a trade
               involving such security.

          3.   No Trades in Securities on the Defined Portfolio Blackout List.

               No Access Person for Defined Portfolios shall execute a
               securities transaction in any security contained on the blackout
               list for Defined Portfolios in effect from time to time.  The
               blackout list for a portfolio will be issued approximately two
               weeks prior to the deposit date (or such later time the portfolio
               is set) and will remain in effect until seven days following the
               deposit date.  A second

                                       7
<PAGE>

               blackout list will be issued approximately two weeks prior to the
               termination date for a portfolio and will remain in effect until
               the close of business on the termination date.

          4.   Pre-clearance of Trades in Securities Identified as Eligible for
               Purchase.

               Portfolio Managers and Investment Personnel of Nuveen managed
               funds and managed accounts must pre-clear, prior to purchase or
               sale, fixed-income and equity securities identified as eligible
               for purchase or sale for a fund or product for which they
               individually have some significant responsibility.

          5.   Profits on Purchases and Sales within 60 Days.

               Portfolio Managers and Investment Personnel may not profit as a
               result of a purchase and sale, or sale and purchase, within a
               period of 60 calendar days, of the same (or equivalent) security,
               if such security is held by a managed fund or managed account for
               which they individually have some significant responsibility.


     C.   Section 16 Persons of Nuveen Exchange-Traded Funds

          Those persons who, by reason of their position with a Nuveen-sponsored
          exchange-traded fund are subject to the provisions of Section 16 of
          the Securities Exchange Act of 1934, must pre-clear all trades in any
          exchange-traded fund for which they serve as a Section 16 officer or
          director.

     D.   Nuveen Senior Loan Asset Management Exchange-Traded Funds

          Access persons of Nuveen Senior Loan Asset Management must pre-clear
          all trades in exchange-traded funds which are managed by Nuveen Senior
          Loan Asset Management.

     E.   Non-Interested Fund Directors

          Non-interested directors (as defined in the Investment Company Act of
          1940) of the Funds are:
          .  permitted to purchase or sell securities in IPOs and private
             placements;

          .  prohibited from purchasing securities of The John Nuveen Company or
             its parent, The St. Paul Companies; and

                                       8
<PAGE>

          .  subject to the pre-clearance requirements of Section VI below
             regarding purchases or sales of 1) equity securities with public
             equity market capitalization less than $1 billion, if such director
             has actual knowledge that such securities are being considered for
             purchase or sale by a Fund; and 2) shares of a Nuveen-sponsored
             exchange-traded fund for which they serve as a director or trustee.



V.   Additional Prohibited Activities

     A.   Acceptance of Gifts:

          Nuveen employees should not accept any gift from any person or entity
          that does business with or on behalf of a managed fund, defined
          portfolio or managed account.  For purposes of this prohibition,
          "gift" has the same meaning as that expressed in Rule 2830 of the
          National Association of Securities Dealers Conduct Rules.  Therefore,
          a gift may not have a market value of more than $100.  Employees are
          not prohibited from accepting non-cash compensation in the way of
          entertainment, including meals and tickets to cultural and sporting
          events within certain limits.  Please refer to Nuveen's policies and
          procedures located on the Legal/Compliance website for more
          information concerning the receipt of cash and non-cash compensation.

     B.   Service as Directors:

          Access Persons are prohibited from serving on boards of directors of
          publicly traded companies absent prior authorization from an attorney
          in the Legal Department based upon a determination that the board
          service would be consistent with the interests of defined portfolios,
          managed funds or managed accounts.  Access Persons who receive
          authorization to serve as board members must be isolated through
          "Chinese Wall" procedures from those investment personnel making
          investment decisions regarding securities issued by the entity
          involved.


VI.  Pre-Clearance of Securities Transactions

     A. In General:

          As noted in Section IV above, certain securities transactions require
          pre-clearance prior to purchase or sale, or prior to the placement or
          rescission of a self-executing order. The affected individual may
          obtain pre-clearance from the paralegal responsible for reviewing
          personal securities trading (currently, Ginny Johnson) or an attorney
          in the Legal Department.  The

                                       9
<PAGE>

          request for pre-clearance may be made orally or in writing. Requests
          for pre-clearance must include the following information:

          .  issue name;
          .  ticker symbol or CUSIP number;
          .  type of security (bond, stock, note, etc.);
          .  maximum expected dollar amount of proposed transaction;
          .  nature of the transaction (purchase, sale or self-executing order)

        The paralegal or attorney reviewing the transaction will make note of
        the outcome in a written or electronic report. If authorization is
        granted, Legal will provide the individual with a written record in the
        form attached as Exhibit B. The affected individual will have three
        business days to execute an approved transaction at market, or to place
        or cancel a self-executing order. Failure to execute the approved
        transaction within three business days will require the person to re-
        submit their pre-clearance request as described above. The automatic
        execution of an order does not require additional pre-clearance.

     B. Private Placements:

        Requests from employees for approval to purchase securities offered in a
        private placement must be submitted in writing to an attorney in the
        Legal Department prior to placing an order to purchase the securities.
        Unless specifically exempt under section III above, no such transaction
        may be effected without prior clearance.  The attorney reviewing the
        transaction will take into account, among other factors, whether the
        investment opportunity should be reserved for a defined portfolio,
        managed fund or managed account and whether the opportunity is being
        offered to an individual by virtue of his or her position.


     C. JNC Stock:

        Employees and directors must pre-clear all trades in JNC stock with an
        attorney in the Legal Department.  The following procedures also apply:

            1. Blackout period.  Employees may not trade in JNC stock during the
               period from the first day of any calendar quarter until two full
               business days have passed following the public release of
               earnings for the prior quarter, or during any other announced
               blackout period. Persons subject to Section 16 of the Securities
               Exchange Act of 1934 are subject to certain additional blackout
               periods.
            2. Short-term trading.  Employees may not engage in short-term
               trading activity in JNC stock. Jumping in and out of the market
               may create the appearance of insider trading.
            3. Options and short selling.  Employees may not engage in option
               transactions related to JNC stock (other than JNC-issued
               options), and

                                       10
<PAGE>

               may not engage in any transactions where they would profit if the
               value of JNC shares fell, such as short sales.
            4. Encouraging others' trades.  No employee should in any way
               encourage others to engage in transactions in which the employee
               him- or herself cannot engage.



VII. Reporting Requirements

     A.   All Employees:

          All employees must instruct their broker-dealer to send duplicate
          confirmations and copies of periodic statements (quarterly reports) of
          all securities transactions in their accounts, with the exception of
          those transactions exempt under Section III. A form of letter of
          instruction for broker-dealers to direct the duplicate confirmation is
          attached as Exhibit C, or may be obtained from the designated
          paralegal (currently, Ginny Johnson) in the Legal Department.

               Please note that a "broker-dealer" includes both of the
               following:

               A broker or dealer with whom a securities brokerage account is
               maintained in the employee's name; AND

               A broker or dealer who maintains an account for a person whose
               trades an employee must report as a Beneficial Owner of the
               securities.



     B.   Additional Requirements for Nuveen Access Persons:


          1. Initial Holdings Reports -

             Each Access Person must provide an Initial Holdings Report to the
             Legal Department listing all securities Beneficially Owned by the
             Access Person no later than 10 days after he or she becomes an
             Access Person.

             The Initial Holdings Report must include the following information:

             .  list of all securities accounts maintained with a broker, dealer
                or bank;

                                       11
<PAGE>

             .  a list of all securities Beneficially Owned by the Access Person
                with the exception of those exempt securities outlined in
                Section III above;
             .  the number of shares held in each security; and
             .  the principal amount (dollar value of initial investment) of
                each security Beneficially Owned.

          A sample copy is attached as Exhibit D.

          2. Quarterly Securities Transaction Reports -

             Each Access Person is responsible for reporting to the Legal
             Department quarterly all securities purchased or sold in any
             account in which the Access Person has direct or indirect
             Beneficial Ownership.  This quarterly reporting can be either in
             the form of broker, dealer or bank statements, or in the form of a
             Quarterly Securities Transaction Report, and must be received by
             the Legal Department within 10 days after the end of each calendar
             quarter.  A form of Quarterly Transaction Report is sent to all
             Access Persons by the designated paralegal (currently, Ginny
             Johnson) in the Legal Department.  If you are an Access Person and
             did not receive a Quarterly Transaction Report, it is your
             responsibility to obtain it from Legal. The Quarterly Transaction
             Report must contain the following information:

             .  the date of each transaction, the description and number of
                shares, and the principal amount of each security involved;
             .  the nature of each transaction, that is, purchase, sale or any
                other type of acquisition or disposition;
             .  the transaction price for each transaction; AND
             .  the name of the broker, dealer or bank through whom each
                transaction was effected.

          A sample copy is attached as Exhibit E.


          3. Annual Holdings Reports -

             In addition to the Initial Holdings Report and Quarterly Securities
             Transaction Reports, each Access Person is required to file an
             Annual Holdings Report with the Legal Department.  Such reports
             must be filed within 30 days after December 31st.

             The Annual Holdings Report must contain the following information:

             .  A list of all securities accounts maintained with a broker,
                dealer or bank;

                                       12
<PAGE>

             .  a list of all securities Beneficially Owned by the Access Person
                with the exception of those exempt securities described in
                Section III above;
             .  the number of shares held in each security; and
             .  the principal amount (dollar value of initial investment) of
                each security Beneficially Owned.

          A sample copy is attached as Exhibit F.


     C.   Securities Transaction Reports of "Non-interested Directors":

          Non-interested Directors of a Fund need only report a personal
          securities transaction if such Director, at the time of that
          transaction, knew that during the 15-day period immediately preceding
          or subsequent to the date of the transaction by the Director, such
          security was purchased or sold by a Fund or was being considered for
          purchase or sale by a Fund.

          Non-interested Directors must report securities transactions meeting
          the requirements of the paragraph above within 10 days after the end
          of each calendar quarter.  Such reports should be forwarded to the
          designated paralegal (currently, Ginny Johnson) in the Legal
          Department for review.

VIII. Sanctions for Violation of the Code

     Nuveen employees may be subject to sanctions for violations of the specific
     provisions or the general principles provided by the Code.  Violations will
     be reviewed and sanctions determined by the General Counsel and the
     Director of Compliance.

     A. Sanctions which may be imposed include:

        .  formal warning;
        .  restriction of trading privileges;
        .  disgorgement of trading profits;
        .  fines; AND/OR
        .  suspension or termination of employment.

     B. Sanction Factors:

        The factors that may be considered when determining the appropriate
        sanctions include, but are not limited to:

        .  the harm to a Fund's or client's interest;
        .  the extent of unjust enrichment;
        .  the frequency of occurrence;

                                       13
<PAGE>

        .  the degree to which there is personal benefit from unique knowledge
           obtained through employment with a Fund, investment adviser or
           underwriter;
        .  the degree of perception of a conflict of interest;
        .  evidence of fraud, violation of law, or reckless disregard of a
           regulatory requirement; and/or
        .  the level of accurate, honest and timely cooperation from the person
           subject to the Code.



IX.  Annual Certification of Compliance with the Code

        As a condition of employment, all Access Persons will be asked to
        certify annually that they:

        .  have read and understood the Code;
        .  agree that they are legally bound by it;
        .  have complied and will comply with its requirements; and
        .  have reported all personal securities transactions required to be
           disclosed.

        A sample copy of the certification is attached as Exhibit G.



X.   Additional Procedures

     A. The Legal Department shall review the reports, statements and confirms
        received and compare them with the pre-clearance authorization provided
        and report any trading or reporting violations to fund management.

     B. Fund management, at least once a year, must provide the fund boards of
        directors with a written report that:

            1) describes issues that arose during the previous year under the
               Code or procedures applicable to the Code, including, but not
               limited to, information about material Code or procedures
               violations and sanctions imposed in response to those material
               violations and

            2) certifies to the fund boards of directors that the funds and
               their affiliated investment advisers and underwriters have
               adopted procedures reasonably necessary to prevent their
               employees from violating the Code.

     C. This Code, a copy of employee and internal reports hereunder, and a list
        of all persons required to make reports hereunder shall be preserved
        with the

                                       14
<PAGE>

        records of the fund or investment adviser for the periods required by
        Rule 17j-1(f) of the Investment Company Act of 1940 or Rule 204-2 under
        the Investment Advisers Act of 1940.


July 2000

                                       15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.S
<SEQUENCE>6
<FILENAME>dex99s.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>

<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints ALAN G. BERKSHIRE,
LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and each of them (with full power to
each of them to act alone) his true and lawful attorney-in-fact and agent, for
him on his behalf and in Registration Statements on Form N-2 under the
Securities Act of l933 and the Investment Company Act of l940, including any
amendment or amendments thereto, with all exhibits, and any and all other
documents required to be filed with any regulatory authority, federal or state,
relating to the registration thereof, or the issuance of shares thereof, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced
organizations has hereunto set his hand this 16th day of July, 1999.


                                  /s/ Timothy R. Schwertfeger
                                  ---------------------------
                                  Timothy R. Schwertfeger
STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) her true and lawful
attorney-in-fact and agent, for her on her behalf and in her name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-2 under the Securities Act of l933 and the Investment
Company Act of l940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 27th day of July, 1999.

                                  /s/ Anne E. Impellizzeri
                                  ------------------------
                                  Anne E. Impellizzeri
STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                 NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-2 under the Securities Act of l933 and the Investment
Company Act of l940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 27th day of July, 1999.

                                  /s/ Peter R. Sawers
                                  -------------------
                                  Peter R. Sawers
STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                 NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                                 POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-2 under the Securities Act of l933 and the Investment
Company Act of l940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 27th day of July, 1999.

                                  /s/ William J. Schneider
                                  ------------------------
                                  William J. Schneider
STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                 NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) her true and lawful
attorney-in-fact and agent, for her on her behalf and in her name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-2 under the Securities Act of l933 and the Investment
Company Act of l940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set her hand this 27th day of July, 1999.

                                  /s/ Judith M. Stockdale
                                  -----------------------
                                  Judith M. Stockdale

STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-2 under the Securities Act of l933 and the Investment
Company Act of l940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 27th day of July, 1999.

                                  /s/ Robert P. Bremner
                                  ---------------------
                                  Robert P. Bremner
STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
<PAGE>

               NUVEEN ARIZONA DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN CONNECTICUT DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN INSURED DIVIDEND ADVANTAGE MUNICIPAL FUND
          NUVEEN INSURED CALIFORNIA DIVIDEND ADVANTAGE MUNICIPAL FUND
           NUVEEN INSURED NEW YORK DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN FLORIDA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MARYLAND DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN MASSACHUSETTS DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN MICHIGAN DIVIDEND ADVANTAGE MUNICIPAL FUND
              NUVEEN NEW JERSEY DIVIDEND ADVANTAGE MUNICIPAL FUND
            NUVEEN NORTH CAROLINA DIVIDEND ADVANTAGE MUNICIPAL FUND
                 NUVEEN OHIO DIVIDEND ADVANTAGE MUNICIPAL FUND
             NUVEEN PENNSYLVANIA DIVIDEND ADVANTAGE MUNICIPAL FUND
               NUVEEN VIRGINIA DIVIDEND ADVANTAGE MUNICIPAL FUND
                               POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints TIMOTHY R.
SCHWERTFEGER, ALAN G. BERKSHIRE, LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and
each of them (with full power to each of them to act alone) his true and lawful
attorney-in-fact and agent, for him on his behalf and in his name, place and
stead, in any and all capacities, to sign and file one or more Registration
Statements on Form N-2 under the Securities Act of l933 and the Investment
Company Act of l940, including any amendment or amendments thereto, with all
exhibits, and any and all other documents required to be filed with any
regulatory authority, federal or state, relating to the registration thereof, or
the issuance of shares thereof, without limitation, granting unto said
attorneys, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises
in order to effectuate the same as fully to all intents and purposes as he might
or could do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.

IN WITNESS WHEREOF, the undersigned trustee of the above-referenced organization
has hereunto set his hand this 27th day of July, 1999.

                                  /s/ Lawrence H. Brown
                                  ---------------------
                                  Lawrence H. Brown

STATE OF    ILLINOIS      )
        ----------------
                          )SS
COUNTY OF       COOK      )
          --------------

On this 27th day of July, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.

"OFFICIAL SEAL"
Virginia L. Corcoran                /s/Virginia L. Corcoran
                                    -----------------------
Notary Public, State of Illinois    Notary Public
My Commission Expires:  10/27/01
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
