UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-21983
Name of Fund: NASDAQ Premium Income & Growth Fund Inc. (QQQX)
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Mitchell M. Cox, Chief Executive
Officer, NASDAQ Premium Income & Growth Fund Inc., 4 World Financial
Center, 6th Floor, New York, New York 10080.
Registrant's telephone number, including area code: (877) 449-4742
Date of fiscal year end: 12/31/2007
Date of reporting period: 01/01/2007 - 12/31/2007
Item 1 - Report to Stockholders
NASDAQ Premium
Income & Growth Fund Inc.
Annual Report
December 31, 2007
[LOGO] IQ INVESTMENT [LOGO] NUVEEN
ADVISORS HYDEPARK
NASDAQ Premium Income & Growth Fund Inc.
Portfolio Information as of December 31, 2007
Percent of
Ten Largest Equity Holdings Net Assets
--------------------------------------------------------------------------------
Apple Inc. ......................................................... 14.3%
Microsoft Corp. .................................................... 7.3
Google, Inc. Class A ............................................... 4.9
QUALCOMM, Inc. ..................................................... 4.4
Research In Motion Ltd. ............................................ 4.1
Cisco Systems, Inc. ................................................ 4.1
Intel Corp. ........................................................ 4.0
Oracle Corp. ....................................................... 3.5
Gilead Sciences, Inc. .............................................. 2.4
eBay, Inc. ......................................................... 2.4
--------------------------------------------------------------------------------
Percent of
Five Largest Industries Net Assets
--------------------------------------------------------------------------------
Software ........................................................... 16.5%
Computers & Peripherals ............................................ 16.2
Communications Equipment ........................................... 13.8
Semiconductors & Semiconductor Equipment ........................... 11.1
Biotechnology ...................................................... 9.4
--------------------------------------------------------------------------------
Percent of
Sector Representation Long-Term Investments
--------------------------------------------------------------------------------
Information Technology ............................................. 67.8%
Health Care ........................................................ 14.6
Consumer Discretionary ............................................. 5.0
Industrials ........................................................ 4.3
Financials ......................................................... 3.3
Consumer Staples ................................................... 2.3
Energy ............................................................. 2.3
Materials .......................................................... 0.4
--------------------------------------------------------------------------------
For Fund portfolio compliance purposes, the Fund's industry and sector
classifications refer to any one or more of the industry and sector
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Fund management. This
definition may not apply for purposes of this report, which may combine
industry and sector sub-classifications for reporting ease.
Proxy Results
During the six-month period ended December 31, 2007, NASDAQ Premium Income &
Growth Fund Inc.`s shareholders voted on the following proposal. On November 13,
2007 and December 21, 2007, special meetings of shareholders were adjourned with
respect to the proposal until January 10, 2008, at which time it was approved. A
description of the proposal and number of shares voted are as follows:
----------------------------------------------------------------------------------------------------
Shares Voted Shares Voted Shares Voted
For Against Abstain
----------------------------------------------------------------------------------------------------
To approve a new investment subadvisory agreement
with Nuveen HydePark Group, LLC 8,702,723 237,180 459,543
----------------------------------------------------------------------------------------------------
2 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
A Summary From Your Fund's Portfolio Managers
We are pleased to provide you with this shareholder report for NASDAQ
Premium Income & Growth Fund Inc. While the Fund is advised by IQ Investment
Advisors LLC, the following is provided by Nuveen HydePark Group LLC ("Nuveen
HydePark"), the Fund's subadviser.
The investment objective of NASDAQ Premium Income & Growth Fund Inc. (the
"Fund") is to provide shareholders with premium income and capital appreciation.
The Fund pursues its objective principally through a two-part strategy. First,
the Fund will invest substantially all of its net assets in a portfolio of
investments designed to closely track the performance of the NASDAQ 100
Index(R). Second, the Fund will use certain option strategies primarily
consisting of writing NASDAQ 100 Index call options to generate premium income
and reduce the volatility of the Fund's returns, with the intent of improving
the Fund's risk adjusted returns. There can be no assurance that the Fund will
achieve its investment objective.
From the inception date of January 30, 2007 to December 31, 2007, the Fund had a
total investment return as set forth in the table below, based on the change per
share in net asset value of $19.10 to $20.63. For the same period, the Fund's
unmanaged reference index, the NASDAQ 100 Index, had a total return as shown
below. All of the Fund and index information presented includes the reinvestment
of any dividends or distributions. Distribution information may be found in the
Notes to Financial Statements, Note 5.
--------------------------------------------------------------------------------
NASDAQ
Period Fund* 100 Index** Difference
--------------------------------------------------------------------------------
Inception (January 30, 2007)
to December 31, 2007 17.95% 17.28% 0.67%
--------------------------------------------------------------------------------
* Fund performance information is net of expenses.
** The reference index has no expenses associated with performance.
For more detail with regard to the Fund's total investment return based on a
change in the per share market value of the Fund's Common Stock (as measured by
the trading price of the Fund's shares on the New York Stock Exchange), please
refer to the Financial Highlights section of this report.
As a closed-end fund, the Fund's shares may trade in the secondary market at a
premium or discount to the Fund's net asset value. As a result, total investment
returns based on changes in the market value of the Fund's Common Stock can vary
significantly from total investment returns based on changes in the Fund's net
asset value.
Rob A. Guttschow, CFA
Portfolio Manager
John Gambla, CFA
Portfolio Manager
January 15, 2008
The NASDAQ 100(R), NASDAQ 100 Index(R), and NASDAQ are trade or service marks of
the NASDAQ Stock Market, Inc.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 3
Schedule of Investments as of December 31, 2007
Shares
Industry Common Stocks Held Value
=========================================================================================
Aerospace & Defense -- 1.8%
Boeing Co. 9,629 $ 842,152
Ceradyne, Inc. (b) 25,443 1,194,040
L-3 Communications Holdings, Inc. 45,501 4,820,376
------------
6,856,568
-----------------------------------------------------------------------------------------
Airlines -- 0.5%
SkyWest, Inc. 75,557 2,028,705
-----------------------------------------------------------------------------------------
Biotechnology -- 9.4%
Amgen, Inc. (b) 181,957 8,450,083
Celgene Corp. (b) 76,039 3,513,762
Crucell NV (a)(b) 31,984 529,015
Genzyme Corp. (b) 118,866 8,848,385
Gilead Sciences, Inc. (b) 200,658 9,232,275
OSI Pharmaceuticals, Inc. (b) 101,323 4,915,179
------------
35,488,699
-----------------------------------------------------------------------------------------
Capital Markets -- 1.1%
Calamos Asset Management, Inc.
Class A 66,692 1,986,088
Northern Trust Corp. 27,608 2,114,221
------------
4,100,309
-----------------------------------------------------------------------------------------
Commercial Banks -- 0.6%
East-West Bancorp, Inc. 22,872 554,189
The PNC Financial Services Group, Inc. 7,783 510,954
SVB Financial Group (b) 23,169 1,167,718
------------
2,232,861
-----------------------------------------------------------------------------------------
Commercial Services & Supplies -- 1.2%
The Advisory Board Co. (b) 24,903 1,598,524
ChoicePoint, Inc. (b) 22,712 827,171
Stericycle, Inc. (b) 35,462 2,106,443
------------
4,532,138
-----------------------------------------------------------------------------------------
Communications Equipment -- 13.8%
ADC Telecommunications, Inc. (b) 53,884 837,896
Cisco Systems, Inc. (b) 573,326 15,519,935
Comtech Telecommunications Corp. (b) 28,408 1,534,316
F5 Networks, Inc. (b) 24,395 695,745
JDS Uniphase Corp. (b) 86,625 1,152,112
QUALCOMM, Inc. 422,161 16,612,035
Research In Motion Ltd. (b) 137,120 15,549,408
------------
51,901,447
-----------------------------------------------------------------------------------------
Computers & Peripherals -- 16.2%
Apple Inc. (b) 272,967 54,069,303
Dell, Inc. (b) 247,467 6,065,416
NCR Corp. (b) 18,586 466,509
Teradata Corp. (b) 18,586 509,442
------------
61,110,670
-----------------------------------------------------------------------------------------
Diversified Consumer Services -- 0.4%
Strayer Education, Inc. 9,793 1,670,490
-----------------------------------------------------------------------------------------
Diversified Financial Services -- 0.6%
The NASDAQ Stock Market, Inc. (b) 47,311 2,341,421
-----------------------------------------------------------------------------------------
Electronic Equipment & Instruments -- 1.6%
Electro Scientific Industries, Inc. (b) 42,651 846,622
Flir Systems, Inc. (b) 29,298 917,027
National Instruments Corp. 29,675 989,068
Smart Modular Technologies
WWH, Inc. (b) 226,585 2,306,635
Trimble Navigation Ltd. (b) 31,178 942,823
------------
6,002,175
-----------------------------------------------------------------------------------------
Energy Equipment & Services -- 1.9%
Hercules Offshore, Inc. (b) 99,606 2,368,631
Superior Energy Services, Inc. (b) 144,287 4,966,359
------------
7,334,990
-----------------------------------------------------------------------------------------
Food & Staples Retailing -- 0.5%
The Kroger Co. 21,592 576,722
Walgreen Co. 33,078 1,259,610
------------
1,836,332
-----------------------------------------------------------------------------------------
Health Care Equipment & Supplies -- 1.5%
Align Technology, Inc. (b) 71,051 1,185,131
ArthroCare Corp. (b) 23,330 1,121,006
Hologic, Inc. (b) 16,269 1,116,704
Kinetic Concepts, Inc. (b) 14,383 770,353
Respironics, Inc. (b) 20,553 1,345,810
------------
5,539,004
-----------------------------------------------------------------------------------------
Health Care Providers & Services -- 0.3%
Lincare Holdings, Inc. (b) 34,212 1,202,894
-----------------------------------------------------------------------------------------
Household Durables -- 1.7%
Garmin Ltd. 60,674 5,885,378
Mohawk Industries, Inc. (b) 6,927 515,369
------------
6,400,747
-----------------------------------------------------------------------------------------
IT Services -- 0.7%
Acxiom Corp. 38,552 452,215
CSG Systems International, Inc. (b) 36,023 530,259
Computer Sciences Corp. (b) 32,951 1,630,086
------------
2,612,560
-----------------------------------------------------------------------------------------
Insurance -- 1.0%
Arch Capital Group Ltd. (b) 39,366 2,769,398
CNA Financial Corp. 13,344 449,960
Erie Indemnity Co. Class A 11,048 573,281
------------
3,792,639
-----------------------------------------------------------------------------------------
Internet & Catalog Retail -- 1.8%
Amazon.com, Inc. (b) 74,230 6,876,667
-----------------------------------------------------------------------------------------
Internet Software & Services -- 8.2%
DivX, Inc. (b) 41,513 581,182
eBay, Inc. (b) 270,661 8,983,239
Equinix, Inc. (b) 10,382 1,049,309
Google, Inc. Class A (b) 26,951 18,636,077
Sohu.com, Inc. (b) 32,311 1,761,596
------------
31,011,403
-----------------------------------------------------------------------------------------
Life Sciences Tools & Services -- 1.1%
Invitrogen Corp. (b) 45,680 4,266,969
-----------------------------------------------------------------------------------------
Machinery -- 0.1%
Terex Corp. (b) 7,954 521,544
-----------------------------------------------------------------------------------------
Marine -- 0.5%
Quintana Maritime Ltd. 83,239 1,912,832
-----------------------------------------------------------------------------------------
Media -- 1.7%
Cablevision Systems Corp. Class A (b) 28,707 703,322
Central European Media Enterprises Ltd.
Class A (b) 12,952 1,502,173
Liberty Media Holding Corp. --
Capital (b) 29,125 3,392,771
Scholastic Corp. (b) 24,815 865,795
------------
6,464,061
-----------------------------------------------------------------------------------------
4 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Schedule of Investments (concluded)
Shares
Industry Common Stocks Held Value
=========================================================================================
Metals & Mining -- 0.4%
Freeport-McMoRan Copper & Gold, Inc.
Class B 15,198 $ 1,556,883
-----------------------------------------------------------------------------------------
Oil, Gas & Consumable Fuels -- 0.4%
Chevron Corp. 6,694 624,751
EOG Resources, Inc. 8,324 742,917
------------
1,367,668
-----------------------------------------------------------------------------------------
Personal Products -- 0.2%
USANA Health Sciences, Inc. (b) 16,269 603,254
-----------------------------------------------------------------------------------------
Pharmaceuticals -- 2.3%
GlaxoSmithKline Plc (a) 9,637 485,608
Teva Pharmaceutical Industries Ltd. (a) 173,539 8,066,093
------------
8,551,701
-----------------------------------------------------------------------------------------
Semiconductors & Semiconductor
Equipment -- 11.1%
ASML Holding NV (a) 157,343 4,923,262
Cabot Microelectronics Corp. (b) 42,838 1,538,313
Cypress Semiconductor Corp. (b) 47,331 1,705,336
Diodes, Inc. (b) 57,782 1,737,505
Integrated Device Technology, Inc. (b) 112,638 1,273,936
Intel Corp. 562,919 15,007,421
International Rectifier Corp. (b) 21,049 715,035
Intersil Corp. Class A 63,544 1,555,557
Microsemi Corp. (b) 49,008 1,085,037
Nvidia Corp. (b) 157,970 5,374,139
Texas Instruments, Inc. 123,057 4,110,104
Trident Microsystems, Inc. (b) 41,331 271,131
Varian Semiconductor Equipment
Associates, Inc. (b) 16,924 626,188
Zoran Corp. (b) 78,213 1,760,575
------------
41,683,539
-----------------------------------------------------------------------------------------
Software -- 16.5%
Adobe Systems, Inc. (b) 177,608 7,589,190
Advent Software, Inc. (b) 28,758 1,555,808
Ansys, Inc. (b) 36,591 1,517,063
Business Objects SA (a)(b) 23,144 1,409,470
CA, Inc. 44,034 1,098,648
Cognos, Inc. (b) 20,939 1,205,458
McAfee, Inc. (b) 29,871 1,120,162
Microsoft Corp. 771,055 27,449,558
Oracle Corp. (b) 578,355 13,059,256
Quality Systems, Inc. 21,487 655,139
SPSS, Inc. (b) 28,862 1,036,434
Symantec Corp. (b) 218,210 3,521,909
Synopsys, Inc. (b) 34,449 893,263
------------
62,111,358
-----------------------------------------------------------------------------------------
Specialty Retail -- 1.0%
Charlotte Russe Holding, Inc. (b) 133,518 2,156,316
Jos. A. Bank Clothiers, Inc. (b) 60,505 1,721,367
------------
3,877,683
-----------------------------------------------------------------------------------------
Trading Companies & Distributors -- 0.1%
Houston Wire & Cable Co. 36,241 512,448
-----------------------------------------------------------------------------------------
Total Common Stocks
(Cost -- $307,880,593) -- 100.2% 378,302,659
=========================================================================================
=========================================================================================
Face
Short-Term Securities Amount
=========================================================================================
Time Deposits -- 0.4%
State Street Bank & Trust Co.,
3.25% due 1/02/2008 $1,524,178 1,524,178
-----------------------------------------------------------------------------------------
Total Short-Term Securities
(Cost -- $1,524,178) -- 0.4% 1,524,178
=========================================================================================
Total Investments Before Options Written
(Cost -- $309,404,771*) -- 100.6% 379,826,837
=========================================================================================
=========================================================================================
Number of
Options Written Contracts
=========================================================================================
Call Options Written
NASDAQ Index 100, expiring
January 2008 at USD 2,100 205 (799,500)
NASDAQ Index 100, expiring
January 2008 at USD 2,150 205 (374,125)
NASDAQ Index 100, expiring
January 2008 at USD 2,200 205 (135,300)
NASDAQ Index 100, expiring
January 2008 at USD 2,750 205 (1,086,500)
-----------------------------------------------------------------------------------------
Total Options Written
(Premiums Received -- $5,079,591) -- (0.6%) (2,395,425)
=========================================================================================
Total Investments, Net of Options Written
(Cost -- $304,325,180) -- 100.0% 377,431,412
Liabilities in Excess of Other Assets -- 0.0% (183,579)
------------
Net Assets -- 100.0% $377,247,833
============
* The cost and unrealized appreciation (depreciation) of investments, as of
December 31, 2007, as computed for federal income tax purposes, were as
follows:
Aggregate cost ......................................... $ 309,503,095
=============
Gross unrealized appreciation .......................... $ 84,138,696
Gross unrealized depreciation .......................... (13,814,954)
-------------
Net unrealized appreciation ............................ $ 70,323,742
=============
(a) Depositary receipts.
(b) Non-income producing security.
o For Fund portfolio compliance purposes, the Fund's industry
classifications refer to any one or more of the industry
sub-classifications used by one or more widely recognized market indexes
or ratings group indexes, and/or as defined by Fund management. This
definition may not apply for purposes of this report, which may combine
industry sub-classifications for reporting ease. Industries are shown as a
percent of net assets. These industry classifications are unaudited.
See Notes to Financial Statements.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 5
Statement of Assets, Liabilities and Capital
As of December 31, 2007
===================================================================================================================================
Assets
-----------------------------------------------------------------------------------------------------------------------------------
Investments in unaffiliated securities, at value (identified cost -- $309,404,771) .. $379,826,837
Receivables:
Securities sold ................................................................. $ 2,074,348
Dividends ....................................................................... 132,826
Interest ........................................................................ 138 2,207,312
-----------------------------
Total assets ........................................................................ 382,034,149
------------
===================================================================================================================================
Liabilities
-----------------------------------------------------------------------------------------------------------------------------------
Options written, at value (premiums received -- $5,079,591) ......................... 2,395,425
Payables:
Dividends and distributions to shareholders ..................................... 1,884,525
Investment adviser .............................................................. 291,662 2,176,187
-------------
Accrued expenses .................................................................... 214,704
------------
Total liabilities ................................................................... 4,786,316
------------
===================================================================================================================================
Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Net assets .......................................................................... $377,247,833
============
===================================================================================================================================
Capital
-----------------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001, 100,000,000 shares authorized ........................ $ 18,289
Paid-in capital in excess of par .................................................... 316,535,008
Accumulated distributions in excess of investment income -- net ..................... $ (46,873)
Accumulated realized capital losses -- net .......................................... (12,364,823)
Unrealized appreciation -- net ...................................................... 73,106,232
-------------
Total accumulated earnings -- net ................................................... 60,694,536
------------
Total capital -- Equivalent to $20.63 per share based on 18,289,445 shares of
Common Stock outstanding (market price $18.26) .................................... $377,247,833
============
See Notes to Financial Statements.
6 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Statement of Operations
For the Period January 30, 2007* to December 31, 2007
===================================================================================================================================
Investment Income
-----------------------------------------------------------------------------------------------------------------------------------
Dividends (net of $11,008 foreign withholding tax) .................................. $ 1,936,236
Interest ............................................................................ 382,448
------------
Total income ........................................................................ 2,318,684
------------
===================================================================================================================================
Expenses
-----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees ............................................................ $ 3,001,760
Licensing fees ...................................................................... 149,536
Accounting services ................................................................. 104,281
Professional fees ................................................................... 98,423
Directors' fees and expenses ........................................................ 55,847
Transfer agent fees ................................................................. 50,428
Printing and shareholder reports .................................................... 22,630
Custodian fees ...................................................................... 21,387
Other ............................................................................... 18,939
-------------
Total expenses ...................................................................... 3,523,231
------------
Investment loss -- net .............................................................. (1,204,547)
------------
===================================================================================================================================
Realized & Unrealized Gain (Loss) -- Net
-----------------------------------------------------------------------------------------------------------------------------------
Realized loss on:
Investments -- net .............................................................. (1,732,273)
Options written -- net .......................................................... (10,632,550) (12,364,823)
-------------
Unrealized appreciation on:
Investments -- net .............................................................. 70,422,066
Options written -- net .......................................................... 2,684,166 73,106,232
-----------------------------
Total realized and unrealized gain -- net ........................................... 60,741,409
------------
Net Increase in Net Assets Resulting from Operations ................................ $ 59,536,862
============
* Commencement of operations.
See Notes to Financial Statements.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 7
Statement of Changes in Net Assets
For the Period
January 30,
2007** to
December 31,
Increase (Decrease) in Net Assets: 2007
===================================================================================================================================
Operations
-----------------------------------------------------------------------------------------------------------------------------------
Investment loss -- net ............................................................................. $ (1,204,547)
Realized loss -- net ............................................................................... (12,364,823)
Unrealized appreciation -- net ..................................................................... 73,106,232
-------------
Net increase in net assets resulting from operations ............................................... 59,536,862
-------------
===================================================================================================================================
Dividends & Distributions to Shareholders
-----------------------------------------------------------------------------------------------------------------------------------
Tax return of capital .............................................................................. (30,912,999)
-------------
===================================================================================================================================
Stock Transactions
-----------------------------------------------------------------------------------------------------------------------------------
Net proceeds from issuance of Common Stock ......................................................... 347,620,000
Value of shares issued to shareholders in reinvestment of dividends and distributions .............. 1,587,353
Offering costs resulting from the issuance of Common Stock ......................................... (683,391)
-------------
Net increase in net assets resulting from Common Stock transactions ................................ 348,523,962
-------------
===================================================================================================================================
Net Assets
-----------------------------------------------------------------------------------------------------------------------------------
Total increase in net assets ....................................................................... 377,147,825
Beginning of period ................................................................................ 100,008
-------------
End of period* ..................................................................................... $ 377,247,833
=============
* Accumulated distributions in excess of investment income -- net .............................. (46,873)
=============
** Commencement of operations.
See Notes to Financial Statements.
8 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Financial Highlights
For the Period
January 30,
2007+ to
The following per share data and ratios have been derived December 31,
from information provided in the financial statements. 2007
====================================================================================================================================
Per Share Operating Performance
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................................................... $ 19.10
--------------
Investment loss -- net** ........................................................................... (.07)
Realized and unrealized gain -- net ................................................................ 3.34
--------------
Total from investment operations ................................................................... 3.27
--------------
Less dividends and distributions from tax return of capital ........................................ (1.70)
--------------
Offering costs resulting from the issuance of Common Stock ......................................... (.04)
--------------
Net asset value, end of period ..................................................................... $ 20.63
--------------
Market price per share, end of period .............................................................. $ 18.26
==============
====================================================================================================================================
Total Investment Return++
------------------------------------------------------------------------------------------------------------------------------------
Based on net asset value per share ................................................................. 17.95%@
==============
Based on market price per share .................................................................... (.30%)@
==============
====================================================================================================================================
Ratios to Average Net Assets
------------------------------------------------------------------------------------------------------------------------------------
Expenses ........................................................................................... 1.06%*
==============
Investment loss -- net ............................................................................. (.36%)*
==============
====================================================================================================================================
Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) ........................................................... $ 377,248
==============
Portfolio turnover ................................................................................. 31%
==============
* Annualized.
** Based on average shares outstanding.
+ Commencement of operations.
++ Total investment returns based on market price, which can be significantly
greater or lesser than the net asset value, may result in substantially
different returns. Total investment returns exclude the effects of sales
charges.
@ Aggregate total investment return.
See Notes to Financial Statements.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 9
Notes to Financial Statements
1. Significant Accounting Policies:
NASDAQ Premium Income & Growth Fund Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a diversified, closed-end
management investment company. Prior to commencement of operations on January
30, 2007, the Fund had no operations other than those relating to organizational
matters and the sale of 5,236 shares of Common Stock on December 18, 2006 to IQ
Investments Advisors LLC ("IQ"), an indirect subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co.") for $100,008. The Fund's financial statements are prepared in
conformity with U.S. generally accepted accounting principles, which may require
the use of management accruals and estimates. Actual results may differ from
these estimates. The Fund determines and makes available for publication the net
asset value of its Common Stock on the last business day of each week. The
Fund's Common Stock shares are listed on the NASDAQ Stock Market LLC ("NASDAQ")
under the symbol QQQX. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments -- Equity securities held by the Fund that are
traded on stock exchanges or NASDAQ Global Market are valued at the last sale
price or official close price on the exchange, as of the close of business on
the day the securities are being valued or, lacking any sales, at the last
available bid price for long positions, and at the last available asked price
for short positions. In cases where equity securities are traded on more than
one exchange, the securities are valued on the exchange designated as the
primary market by or under the authority of the Board of Directors of the Fund.
Long positions traded in the over-the-counter ("OTC") markets, NASDAQ Capital
Market or Bulletin Board are valued at the last available bid price or yield
equivalent obtained from one or more dealers or pricing services approved by the
Board of Directors of the Fund. Short positions traded in the OTC markets are
valued at the last available asked price. Portfolio securities that are traded
both in the OTC markets and on a stock exchange are valued according to the
broadest and most representative market.
Effective September 4, 2007, exchange-traded options are valued at the mean
between the last bid and ask prices at the close of the options market in which
the options trade and previously were valued at the last sales prices. Options
traded in the OTC market are valued at the last asked price (options written) or
the last bid price (options purchased). Swap agreements are valued based upon
quoted fair valuations received daily by the Fund from a pricing service or
counterparty. Financial futures contracts and options thereon, which are traded
on exchanges, are valued at their last sale price as of the close of such
exchanges. Obligations with remaining maturities of 60 days or less are valued
at amortized cost unless the investment adviser believes this method no longer
produces fair valuations.
Repurchase agreements are valued at cost plus accrued interest. The Fund employs
pricing services to provide certain securities prices for the Fund. Securities
and assets for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the Board of
Directors of the Fund, including valuations furnished by the pricing services
retained by the Fund, which may use a matrix system for valuations. The
procedures of a pricing service and its valuations are reviewed by the officers
of the Fund under the general supervision of the Fund's Board of Directors. Such
valuations and procedures will be reviewed periodically by the Board of
Directors of the Fund.
Generally, trading in foreign securities, as well as U.S. government securities,
money market instruments and certain fixed income securities, is substantially
completed each day at various times prior to the close of business on the
NASDAQ. The values of such securities used in computing the net asset value of
the Fund's shares are determined as of such times. Foreign currency exchange
rates will generally be determined as of the close of business on the NASDAQ.
Occasionally, events affecting the values of such securities and such exchange
rates may occur between the times at which they are determined and the close of
business on the NASDAQ that may not be reflected in the computation of the
Fund's net asset value. If events (for example, a company announcement, market
volatility or a natural disaster) occur during such periods that are expected to
materially affect the value of such securities, those securities may be valued
at their fair value as determined in good faith by the Fund's Board of Directors
or by the investment adviser using a pricing service and/or procedures approved
by the Fund's Board of Directors.
(b) Derivative financial instruments -- The Fund may engage in various portfolio
investment strategies both to increase the return of the Fund and seek to hedge,
or protect, its exposure to interest rate movements and movements in the
securities markets. Losses may arise due to changes in the value of the contract
due to an unfavorable change in the price of the underlying security or index,
or if the counterparty does not perform under the contract. The counterparty for
certain instruments may pledge cash or securities as collateral.
10 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Notes to Financial Statements (continued)
o Options -- The Fund writes covered call options. When the Fund writes an
option, an amount equal to the premium received by the Fund is reflected
as an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the
option written. The Fund provides the purchaser with the right to
potentially receive a cash payment from the Fund equal to any appreciation
in the cash value of the index over the strike price on the expiration
date of the option written. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the
option to the extent of the premiums received (or gain or loss to the
extent the cost of the closing transaction exceeds the premium received).
Written options are non-income producing investments.
o Financial futures contracts -- The Fund may purchase or sell financial
futures contracts and options on such financial futures contracts.
Financial futures contracts are contracts for delayed delivery of
securities at a specific future date and at a specific price or yield.
Upon entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which the
transaction is effected. Pursuant to the contract, the Fund agrees to
receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or
losses. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
o Swaps -- The Fund may enter into swap agreements which are OTC contracts
in which the Fund and a counterparty agree to make periodic net payments
on a specified notional amount. The net payments can be made for a set
period of time or may be triggered by a predetermined credit event. The
net periodic payments may be based on a fixed or variable interest rate;
the change in market value of a specified security, basket of securities,
or index; or the return generated by a security. These periodic payments
received or made by the Fund are recorded in the accompanying Statement of
Operations as realized gains or losses, respectively. Gains or losses are
realized upon termination of the swap agreements. Swaps are marked-
to-market daily and changes in value are recorded as unrealized
appreciation (depreciation). Risks include changes in the returns of the
underlying instruments, failure of the counterparties to perform under the
contracts' terms and the possible lack of liquidity with respect to the
swap agreements.
(c) Income taxes -- It is the Fund's policy to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
(d) Security transactions and investment income -- Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Realized gains and losses on security transactions are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend dates.
Interest income is recognized on the accrual basis.
(e) Dividends and distributions -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates. All of the dividends and distributions
paid by the Fund during the period January 30, 2007 to December 31, 2007 were
characterized as a tax return of capital.
(f) Offering expenses -- Direct expenses relating to the public offering of the
Fund's Common Stock were charged to capital at the time of issuance of the
shares.
(g) Recent accounting pronouncements -- Effective June 29, 2007, the Fund
implemented Financial Accounting Standards Board ("FASB") Interpretation No. 48,
"Accounting for Uncertainty in Income Taxes -- an interpretation of FASB
Statement No. 109" ("FIN 48"). FIN 48 prescribes the minimum recognition
threshold a tax position must meet in connection with accounting for
uncertainties in income tax positions taken or expected to be taken by an
entity, including investment companies, before being measured and recognized in
the financial statements. Management has evaluated the application of FIN 48 to
the Fund, and has determined that the adoption of FIN 48 does not have a
material impact on the Fund's financial statements. The Fund files U.S. and
various state tax returns. No income tax returns are currently under
examination. All tax years of the Fund are open at this time.
In September 2006, Statement of Financial Accounting Standards No. 157, "Fair
Value Measurements" ("FAS 157"), was issued and is effective for fiscal years
beginning after November 15, 2007. FAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. The impact on the Fund's financial statement disclosures, if any,
is currently being assessed.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 11
Notes to Financial Statements (continued)
In addition, in February 2007, Statement of Financial Accounting Standards No.
159, "The Fair Value Option for Financial Assets and Financial Liabilities"
("FAS 159"), was issued and is effective for fiscal years beginning after
November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
year that begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of FAS 157. FAS 159 permits entities to choose to
measure many financial instruments and certain other items at fair value that
are not currently required to be measured at fair value. FAS 159 also
establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. The impact on the Fund's financial
statement disclosures, if any, is currently being assessed.
(h) Reclassification -- U.S. generally accepted accounting principles require
that certain components of net assets be adjusted to reflect permanent
differences between financial and tax reporting. Accordingly, during the current
year, $1,157,674 has been reclassified between paid-in capital in excess of par
and accumulated distributions in excess of net investment income as a result of
a permanent difference attributable to net operating loss. This reclassification
has no effect on net assets or net asset values per share.
2. Investment Advisory and Management Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory and Management Agreement with
IQ. IQ is responsible for the investment advisory, management and administrative
services to the Fund. In addition, IQ provides the necessary personnel,
facilities, equipment and certain other services necessary to the operations of
the Fund. For such services, the Fund pays a monthly fee at an annual rate equal
to .90% of the average daily value of the Fund's net assets plus borrowings for
leverage and other investment purposes. Prior to the Fund's commencement of
operations, IQ entered into a Subadvisory Agreement with Nuveen Asset Management
("NAM"). Pursuant to the agreement, NAM was responsible for providing certain
investment advisory services to IQ with respect to the Fund. For such services,
IQ pays NAM a monthly fee at an annual rate equal to .39% of the average daily
value of the Fund's net assets plus borrowings for leverage and other investment
purposes. The Fund does not make any direct payments to NAM for subadvisory
services.
On June 20, 2007, Nuveen Investments Inc. ("Nuveen Investments"), the parent
company of NAM, announced that it had entered into a definitive Agreement and
Plan of Merger (the "Merger Agreement") to be acquired by an investor group
majority-led by Madison Dearborn Partners, LLC. The investor group's financial
advisors and investors included ML & Co. and Merrill Lynch Global Private Equity
(both affiliates of IQ).
The merger would result in an "assignment" (as defined in the Investment Company
Act of 1940) of the Subadvisory Agreement causing its automatic termination.
At a meeting held on July 24, 2007, the Board of Directors of the Fund approved
a new investment subadvisory agreement for the Fund to be presented to
shareholders for approval. The new subadvisory agreement contains substantially
the same terms as the Subadvisory Agreement, including the same subadvisory fee.
In order to ensure continuity of services to the Fund in the event that the
merger was consummated prior to the shareholder vote (as was the case), the
Fund's Board, in reliance on Rule 15a-4 under the Investment Company Act, also
approved an interim subadvisory agreement for the Fund with a term of up to 150
days pending approval of the new subadvisory agreement by shareholders. The
Board determined that the scope and quality of services to be provided under the
interim subadvisory agreement were equivalent to the existing subadvisory
agreement and that other than the dates, parties and provisions required by Rule
15a-4, there were no material differences between the interim subadvisory
agreement and the existing subadvisory agreement.
The merger was consummated in November 2007. At a shareholder meeting held on
January 10, 2008, the new subadvisory agreement was approved.
Effective September 30, 2007, the Subadvisory Agreement was transferred to
Nuveen's affiliate, Nuveen HydePark Group, LLC ("Nuveen HydePark"), following an
internal restructuring of NAM and its affiliates. In the course of this
restructuring, NAM contributed the personnel and resources servicing the Fund to
Nuveen HydePark. The transfer of the Subadvisory Agreement was approved by the
Fund's Board of Directors at a meeting held on September 12, 2007. At that
meeting, the Board determined that the transfer of the Subadvisory Agreement
would not result in an assignment of the Subadvisory Agreement within the
meaning of the Investment Company Act of 1940. There was no change in the
aggregate fees paid for services under the agreement.
12 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Notes to Financial Statements (concluded)
IQ has entered into an Administration Agreement with Princeton Administrators,
LLC (the "Administrator"). The Administration Agreement provides that IQ will
pay the Administrator a fee from its investment advisory fee at an annual rate
equal to .12% of the average daily value of the Fund's net assets plus
borrowings for leverage and other investment purposes, for the performance of
administrative and other services necessary for the operation of the Fund. There
is no increase in the aggregate fees paid by the Fund for these services. The
Administrator is an indirect subsidiary of BlackRock, Inc. ML & Co. is a
principal owner of BlackRock, Inc.
For the period January 30, 2007 to December 31, 2007, Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), an affiliate of IQ received gross fees from
underwriting of $9,623,690 in connection with the issuance of the Fund's Common
Stock. In addition, the Fund reimbursed MLPF&S $121,394 as a partial
reimbursement of expenses incurred in connection with the issuance of the Fund's
Common Stock.
Certain officers of the Fund are officers and/or directors of IQ, ML & Co.,
BlackRock, Inc. or its affiliates.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
period January 30, 2007 to December 31, 2007 were $421,889,285 and $112,117,414,
respectively.
Transactions in options written for the period January 30, 2007 to December 31,
2007 were as follows:
-------------------------------------------------------------------------------
Number of Premiums
Contracts Received
-------------------------------------------------------------------------------
Outstanding call options written,
at beginning of period ..................... -- --
Options written .............................. 8,500 $ 32,874,761
Options closed ............................... (7,680) (27,795,170)
-----------------------
Outstanding call options written,
at end of period ........................... 820 $ 5,079,591
=======================
4. Common Stock Transactions:
The Fund is authorized to issue 100,000,000 shares of stock, all of which were
initially classified as Common Stock, par value $.001. The Board of Directors is
authorized, however, to classify and reclassify any unissued shares of Common
Stock without approval of the holders of Common Stock.
Shares issued and outstanding during the period January 30, 2007 to December 31,
2007 increased 18,200,000 from shares sold and 84,209 from dividend
reinvestments.
5. Distributions to Shareholders:
The tax character of distributions paid during the period January 30, 2007 to
December 31, 2007 was as follows:
--------------------------------------------------------------------------------
Distributions paid from tax return of capital ................ $30,912,999
-----------
Total distributions .......................................... $30,912,999
===========
As of December 31, 2007, the components of accumulated earnings on a tax basis
were as follows:
-----------------------------------------------------------------------------
Undistributed ordinary income -- net ........................ --
Undistributed long-term capital gains -- net ................ --
------------
Total undistributed earnings -- net ......................... --
Capital loss carryforward ................................... $ (9,582,334)*
Unrealized gains -- net ..................................... 70,276,870**
------------
Total accumulated earnings .................................. $ 60,694,536
============
* On December 31, 2007, the Fund had a net capital loss carryforward of
$9,582,334, all of which expires in 2015. This amount will be available to
offset like amounts of any future taxable gains.
** The difference between book-basis and tax-basis net unrealized gains is
attributable primarily to the tax deferral of losses on wash sales, the
realization for tax purposes of unrealized gains/losses on certain option
contracts and other book/tax temporary differences.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 13
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of NASDAQ Premium Income & Growth
Fund Inc.:
We have audited the accompanying statement of assets, liabilities and capital,
including the schedule of investments, of NASDAQ Premium Income & Growth Fund
Inc. (the "Fund") as of December 31, 2007, and the related statements of
operations and of changes in net assets, and the financial highlights for the
period January 30, 2007 (commencement of operations) through December 31, 2007.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2007, by correspondence with the
custodian. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of NASDAQ
Premium Income & Growth Fund Inc. as of December 31, 2007, the results of its
operations, the changes in its net assets and its financial highlights for the
period January 30, 2007 through December 31, 2007, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Princeton, NJ
February 29, 2008
14 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Approval of Investment Advisory and Subadvisory Agreements
The Board of Directors (the "Board" or the "Directors") of NASDAQ Premium Income
& Growth Fund Inc. (the "Fund"), consisting solely of Directors that are not
"interested persons" of the Fund (the "non-interested Directors"), as such term
is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended
(the "Investment Company Act"), approved the management agreement between the
Fund and IQ Investment Advisors LLC ("IQ Advisors" or the "Adviser") (the
"Management Agreement") at a meeting held on December 15, 2006.
Approval of Management Agreement
The Board of Directors of the Fund has the responsibility under the Investment
Company Act to approve the Fund's proposed Management Agreement for its initial
two-year term and for any renewal thereafter at meetings of the Board called for
the purpose of voting on such approvals or renewals. In addition, the Fund's
Board of Directors generally receives, reviews and evaluates information
concerning the services and personnel of the Adviser and its affiliates at
quarterly meetings of the Board. While particular emphasis might be placed on
information concerning profitability, comparability of fees, total expenses and
the Fund's investment performance at any future meeting at which a renewal of
the Management Agreement is considered, the process of evaluating the Adviser
and the Fund's investment advisory arrangements is an ongoing one. In this
regard, the Board's consideration of the nature, extent and quality of the
services to be provided by the Adviser under the Management Agreement will
include deliberations at future quarterly meetings.
At a Board meeting held on December 15, 2006, all of the Directors present at
the meeting approved the Management Agreement for an initial two-year term. In
considering whether to approve the Management Agreement, the Directors reviewed
an organizational meeting book and other materials from counsel to the Fund and
from the Adviser which: (i) included information concerning the services that
will be rendered to the Fund by the Adviser and the Adviser's affiliates, and
the fees that will be paid by the Fund to the Adviser and the Adviser's
affiliates; and (ii) outlined the legal duties of the Board under the Investment
Company Act. The Board also received information from Lipper, Inc. ("Lipper")
comparing the Fund's fee rate for advisory and administrative services to those
of other closed-end funds chosen by Lipper. In particular, the Board considered
the following:
(a) The nature, extent and quality of services to be provided by the Adviser --
The Directors reviewed the services that the Adviser would provide to the Fund
under the Management Agreement. The Board considered the size and experience of
the Adviser's staff, its use of technology, and the degree to which the Adviser
would exercise supervision over the actions of the Fund's subadviser, Nuveen
Asset Management ("NAM" or the "Subadviser"). In connection with the investment
advisory services to be provided to the Fund, the Directors took into account
detailed discussions they had with officers of the Adviser regarding the
management of the Fund's investments in accordance with the Fund's stated
investment objective and policies and the types of transactions that would be
entered into on behalf of the Fund. During these discussions, the Directors
asked detailed questions of, and received answers from, the officers of the
Adviser regarding the formulation and proposed implementation of the Fund's
investment strategy, its efficacy and potential risks.
In addition to the investment advisory services to be provided to the Fund, the
Board of Directors considered that the Adviser and its affiliates also will
provide administrative services, stockholder services, oversight of Fund
accounting, marketing services, assistance in meeting legal and regulatory
requirements and other services necessary for the operation of the Fund. In
particular, the Board of Directors reviewed the compliance and administrative
services to be provided to the Fund by the Adviser, including its oversight of
the Fund's day-to-day operations and its oversight of Fund accounting. The Board
noted that the Adviser has an administrative, legal and compliance staff to
ensure a high level of quality in the compliance and administrative services to
be provided to the Fund. Based on the presentations on December 15, 2006, and
the Board members' experience as Board members of other investment companies
advised by the Adviser, the Board of Directors concluded that the services to be
provided to the Fund by the Adviser under the Management Agreement were likely
to be of a high quality and would benefit the Fund.
(b) Investment performance of the Fund and the Adviser -- Because the Fund was
newly formed, the Directors did not consider the investment performance of the
Fund. The Board based its review of the Adviser's performance primarily on the
experience of the Adviser in managing other registered investment companies,
noting that other funds the Adviser manages might have investment objectives,
policies or restrictions different from those of the Fund. The Board also
considered the experience, resources and strengths of the Adviser and its
affiliates with respect to the
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 15
Approval of Investment Advisory and Subadvisory Agreements (continued)
investment strategies proposed for the Fund. The
Board of Directors considered the innovative nature of the investment product
and the creativity of the Adviser in developing the Fund's investment program.
Based on these factors, the Directors determined that the Adviser would be an
appropriate investment manager for the Fund.
(c) Cost of the services to be provided and profits to be realized by the
Adviser from the relationship with the Fund -- The Board of Directors considered
the anticipated cost of the services to be provided by the Adviser. Because the
Fund was newly formed, it had not commenced operations as of December 15, 2006,
and the eventual aggregate amount of Fund assets was uncertain, the Adviser was
not able to provide the Directors with specific information concerning the cost
of services to be provided to the Fund and the expected profits to be realized
by the Adviser and its affiliates from their relationships with the Fund. The
Directors, however, did discuss with the Adviser its general level of
anticipated profitability and noted that the Adviser would provide the Directors
with profitability information from time to time after the Fund commences
operations.
(d) Economies of scale and whether fee levels reflect these economies of scale
-- Because the Fund was newly formed and had not commenced operations as of
December 15, 2006, and the eventual aggregate amount of Fund assets was
uncertain, the Adviser was not able to provide the Directors with specific
information concerning the extent to which economies of scale would be realized
as the Fund grows and whether fee levels would reflect such economies of scale,
if any. The Directors also discussed the renewal requirements for investment
advisory agreements, and determined that they would revisit this issue no later
than when they next review the investment advisory fee after the initial
two-year term of the Management Agreement.
(e) Comparison of services to be rendered and fees to be paid to those under
other investment advisory contracts, such as contracts of the same and other
investment advisers or other clients -- The Directors compared both the services
to be rendered and the fees to be paid under the Management Agreement to other
contracts of the Adviser and to other contracts of other investment advisers
with respect to other closed-end registered investment companies with similar
investment programs as the Fund. In particular, the Board of Directors evaluated
the Fund's proposed contractual fee rate for advisory and administrative
services as compared to the contractual fee rate of other closed-end funds
chosen by Lipper. In considering this information, the Board of Directors took
into account the nature of the investment strategies of the Fund and the fact
that the peer group of closed-end equity funds provided by Lipper for comparison
might have investment strategies and restrictions different from those of the
Fund. The Board did not consider compensation paid with respect to accounts
other than registered investment companies because the Adviser only utilizes the
Fund's strategy in connection with registered funds. The Board of Directors also
considered that the Fund's proposed management fee placed it in the second
quartile for the group (that is, at least half of the funds in the group had a
management fee that was higher than the Fund's management fee).
The Fund's Board of Directors then considered the potential direct and indirect
benefits to the Adviser and its affiliates from its relationship with the Fund,
including the underwriting arrangements relating to the initial distribution of
Fund shares. The Board of Directors concluded that the Fund would benefit from
those services.
Conclusion -- No single factor was determinative to the decision of the Board.
Based on the foregoing and such other matters as were deemed relevant, all of
the Directors, including all of the non-interested Directors, concluded that the
proposed advisory fee rate and projected total expense ratio were reasonable in
relation to the services to be provided by the Adviser to the Fund, as well as
the costs to be incurred and benefits to be gained by the Adviser and its
affiliates in providing such services, including the investment advisory and
administrative components. The Board also found the proposed investment advisory
fee to be reasonable in comparison to the fees charged by advisers to other
comparable funds of similar, actual or anticipated size. As a result, all of the
Directors present at the December 15, 2006 Board meeting, including the
non-interested Directors, approved the Management Agreement. The non-interested
Directors were represented by independent counsel who assisted them in their
deliberations.
Approval of Subadvisory Agreement
At a Board meeting held on December 15, 2006, all of the Directors present at
the meeting, including all of the non-interested Directors, approved the
subadvisory agreement between the Adviser and the Subadviser (the "Subadvisory
Agreement") for an initial two-year term. In considering whether to approve the
Subadvisory Agreement, the Fund's Board of Directors reviewed an organizational
meeting book and other materials from counsel to the Fund, the Adviser and the
Subadviser which (i) included information describing the services of the
Subadviser; (ii) included information
16 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
concerning the proposed portfolio managers; (iii) included information
concerning the Subadviser's experience with managing portfolios with similar
investment objectives and strategies as the Fund; and (iv) outlined the legal
duties of the Board under the Investment Company Act. As part of its review of
the selection of the Subadviser, the Board engaged in a detailed discussion with
the Adviser regarding its selection of the Subadviser. The Board considered the
Subadviser's experience in managing other portfolios, including other registered
funds for which the Directors serve as directors, and that, in the Adviser's
judgment, the Subadviser had the experience and expertise necessary to implement
the Fund's investment program. In particular, the Board also considered the
following:
(a) The nature, extent and quality of services to be provided by the Subadviser
-- The Directors reviewed the services that the Subadviser would provide to the
Fund. The Directors considered their detailed discussions with officers of the
Adviser and members of the Subadviser's portfolio management team, the
management of the Fund's investments in accordance with the Fund's stated
investment objective and policies and the types of transactions that would be
entered into on behalf of the Fund. The Directors noted that, drawing on their
collective industry experience, they had discussed the Fund's investment
strategy with representatives from the Subadviser, including discussions
regarding the premises underlying the Fund's investment strategy, its efficacy
and potential risks. The Directors also considered the favorable history,
reputation and background of the Subadviser and its personnel, the performance
of NAM in subadvising other funds for which they serve as directors, and the
substantial experience of such Subadviser's portfolio management team. The
Directors discussed the compliance program of the Subadviser and the report of
the Fund's chief compliance officer. Following consideration of this
information, and based on management presentations during the Board meeting and
their discussion during an Executive Session, the Directors concluded that the
nature, extent and quality of services to be provided to the Fund by the
Subadviser under the Subadvisory Agreement were likely to be of a high quality
and would benefit the Fund.
(b) Investment performance of the Fund and the Subadviser -- Because the Fund
was newly formed, the Directors did not consider the investment performance of
the Fund. The Board considered the performance history of other funds managed by
the Subadviser with similar investment strategies as the Fund. The Board did not
consider the Subadviser's performance with respect to most other accounts it
manages, because these accounts might have investment objectives, policies or
restrictions different from those of the Fund. The Board further considered the
experience, compliance program and record, resources and strengths of the
Subadviser, its affiliates and the portfolio manager in implementing investment
strategies similar to the Fund's investment strategy. As a result, the Directors
determined that the Subadviser would be an appropriate Subadviser for the Fund.
(c) Cost of the services to be provided and profits to be realized by the
Subadviser from the relationship with the Fund -- The Directors also considered
the anticipated cost of the services to be provided by the Subadviser. Because
the Fund was newly formed, the Board did not review and consider any information
relating to the Subadviser's anticipated profitability. Because the Board viewed
anticipated profitability as highly speculative given the early stage of the
relationship, the Board did not consider the anticipated profitability to the
Subadviser separately from its consideration of the appropriateness of the
overall fee being charged to the Fund for the totality of services being
provided.
(d) Economies of scale and whether fee levels reflect these economies of scale
-- Because the Fund was newly formed and had not commenced operations as of
December 15, 2006, and the eventual aggregate amount of Fund assets was
uncertain, the Adviser was not able to provide the Directors with specific
information concerning the extent to which economies of scale might be realized
as the Fund grows and whether fee levels would reflect such economies of scale,
if any. The Directors also noted that the Subadviser's fees are paid by the
Adviser out of its fees and not by the Fund directly. The Directors also
discussed the renewal requirements for the Subadvisory Agreement, and determined
that they would revisit this issue no later than when they next review the
subadvisory fee after the initial two-year term of the Subadvisory Agreement.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 17
Approval of Investment Advisory and Subadvisory Agreements (concluded)
(e) Comparison of services to be rendered and fees to be paid to those under
other subadvisory contracts, such as contracts of the same and other investment
advisers or other clients -- The Board discussed the services that would be
rendered by the Subadviser, and, based on its experience overseeing other
subadvised funds, determined that such services were consistent with those
provided by subadvisers generally and sufficient for the management of the Fund.
Taking into account the totality of the information and materials provided to
the Board as noted above, including the fact that the subadvisory fee was
negotiated with the Adviser on an arm's-length basis, the Board concluded that
the subadvisory fee was reasonable for the services to be rendered.
The Fund's Board of Directors then considered the potential direct and indirect
benefits to the Subadviser and its affiliates from its relationship with the
Fund, including the reputational benefits from managing the Fund. The Board of
Directors concluded that the potential benefits to the Subadviser were
consistent with those obtained by other subadvisers in similar types of
arrangements.
Conclusion
No single factor was determinative to the decision of the Board. Based on the
foregoing and such other matters as were deemed relevant, all of the Directors,
including all of the non-interested Directors, concluded that the proposed
subadvisory fee rate and projected total expense ratio were reasonable in
relation to the services to be provided by the Subadviser. As a result, all of
the Directors present at the December 15, 2006 Board meeting, including all of
the non-interested Directors, approved the Subadvisory Agreement. The
non-interested Directors were represented by independent counsel who assisted
them in their deliberations.
Approval of New Subadvisory Agreement
On June 20, 2007, Nuveen Investments, Inc. ("Nuveen Investments"), the parent
company of Nuveen Asset Management ("NAM"), announced that it had entered into a
definitive Agreement and Plan of Merger (the "Merger") to be acquired by an
investor group majority-led by Madison Dearborn Partners, LLC. The Merger, when
consummated, has the effect of causing the Fund's Subadvisory Agreement between
IQ Investment Advisors LLC ("IQ" or the "Adviser") and NAM to be terminated
pursuant to the terms of the Subadvisory Agreement. In anticipation of the
consummation of the Merger, the Board of the Fund met in person on July 24, 2007
for purposes of, among other things, considering whether it would be in the best
interests of the Fund and its stockholders to approve a new subadvisory
agreement (the "New Subadvisory Agreement") that would take effect upon the
termination of the existing Subadvisory Agreement. The Board also approved an
interim subadvisory agreement between NAM and the Adviser that would take effect
(and continue for no more than 150 days) if the Merger was consummated prior to
shareholder approval of the New Subadvisory Agreement. The Board considered
substantially the same factors in approving the interim agreement as were
considered in approving the New Subadvisory Agreement.
On September 12, 2007, the Board of the Fund met in person to approve the
transfer of NAM's rights and duties under the Fund's then existing Subadvisory
Agreement to Nuveen HydePark Group, LLC ("Nuveen HydePark" or the "Subadviser"),
another wholly-owned subsidiary of Nuveen Investments. The transfer of NAM's
rights and duties under the Fund's then existing Subadvisory Agreement to Nuveen
HydePark was the result of an internal restructuring by Nuveen Investments. The
Board also considered whether the New Subadvisory Agreement (to be effective
upon consummation of the Merger) and the interim subadvisory agreement (to be
effective if the New Subadvisory Agreement was not approved by shareholders
prior to the effectiveness of the Merger).
The Merger was approved by the stockholders of Nuveen Investments on or about
November 13, 2007. At that time, Nuveen Investments ceased to be a publicly
traded company and is now privately held by an investor group that includes
Merrill Lynch, an affiliate of the Adviser. The shareholders of the Fund
approved the New Subadvisory Agreement on January 10, 2008.
18 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Approval of New Subadvisory Agreement (continued)
The following discussion summarizes the information considered and the
conclusions made by the Board in approving the New Subadvisory Agreement.
In considering approval of the New Subadvisory Agreement between the Adviser and
the Subadviser, the Board received and discussed various materials provided to
it in advance of the meetings which included, among other things, a copy of the
form of New Subadvisory Agreement, the materials the Board had received in
connection with its consideration and approval of the then existing Subadvisory
Agreement, due diligence materials from the Subadviser and a report on the
Merger. In addition, the Board considered materials received at previous
meetings of the Board regarding the Fund.
At the July 24, 2007 Board meeting, representatives of NAM made a presentation
regarding the Merger and responded to questions from the Board. The
non-interested Directors discussed the presentation given at the meeting by
representatives of the Subadviser and the materials distributed in connection
therewith, which provided information about the transaction that would cause the
change in control of the Subadviser and the termination of the then existing
Subadvisory Agreement. The non-interested Directors met privately with their
legal counsel to review the Board's duties in reviewing a subadvisory agreement
and approving the New Subadvisory Agreement. The Board considered all factors it
believed relevant with respect to the Fund, including the following: (a) the
nature, extent and quality of the services to be provided by the Subadviser; (b)
the investment performance of the Fund and the Subadviser; (c) the costs of the
services to be provided and profits to be realized by the Subadviser from its
relationship with the Fund; and (d) the extent to which economies of scale could
be realized as the Fund grows and whether fee levels reflect these economies of
scale for the benefit of Fund investors.
At the September 12, 2007 Board meeting, the Board considered transferring the
New Subadvisory Agreement and the interim subadvisory agreement to Nuveen
HydePark, referring to the same information and factors the Directors considered
at the July 24, 2007 Board meeting. The Board also considered additional
information relating to Nuveen HydePark.
(a) Nature, Extent and Quality of Services -- In connection with their
consideration of the New Subadvisory Agreement, the Directors considered
representations by the Adviser and the Subadviser that there would be no
diminution in the services to be rendered to the Fund by the Adviser and the
Subadviser, respectively, as a result of the change in control of the Subadviser
and the effectiveness of the New Subadvisory Agreement. The Board noted that
representatives of the Subadviser stated that they did not anticipate any change
in their personnel responsible for providing services to the Fund, and in
particular that the investment and compliance personnel of the Subadviser were
not expected to change as a result of the change in control of the Subadviser.
In reviewing the New Subadvisory Agreement, the Directors focused on the
experience of the Subadviser in managing registered funds. The Board considered
the reputation and investment experience of the Subadviser and its investment
professionals who would continue to serve as portfolio managers after the change
in control. The Board noted the representations of the Subadviser that the
change in control would have no adverse effect on the experience, resources and
strengths of the Subadviser in managing investment companies. The Board then
discussed the Subadviser's anticipated financial condition after the change in
control. The Board noted statements from the Subadviser's representatives that
the financial position of the Subadviser would not be negatively affected by the
Merger. The Board also considered representations from the Subadviser that the
change in control would not have an effect on the Subadviser's compliance
personnel or compliance procedures. The Board then discussed the due diligence
performed by personnel of the Adviser regarding the Subadviser. Based on the
discussions held and the materials presented at these meetings and prior
meetings, the Board determined that the proposed change in control of the
Subadviser would not likely cause an adverse change in the nature, extent and
quality of the services to be provided by the Subadviser under the New
Subadvisory Agreement. In addition, the Board was of the view that the
Subadviser had evidenced a commitment to maintaining a culture of compliance
that would continue after the Merger.
(b) The Investment Performance of the Fund and the Subadviser -- The Directors
reviewed the investment performance of the Fund, and primarily based their
evaluation of the Subadviser on the Fund's performance for the limited period
that the Fund had been in operation. The Directors considered the history,
experience, resources and strengths of the Subadviser in developing and
implementing the investment strategies used by the Fund. The Directors noted
that the Fund uses an innovative investment strategy and that comparisons of the
Fund's investment performance to the performance of other investment companies
was generally not meaningful. The Directors reviewed the Fund's investment
performance and compared such performance to the performance of a
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 19
Approval of New Subadvisory Agreement (concluded)
relevant reference index. The Directors discussed the degree to which the Fund
was achieving its investment objective, noting that the Fund had been in
operation for a short period of time. In particular, the Directors noted that
the Fund generally performed as expected relative to its reference index. As a
result of their discussions and review, the Directors concluded that the Fund's
performance was satisfactory. The Board did not specifically consider the
Subadviser's performance with respect to most other accounts it manages, because
these accounts might have investment objectives, policies or restrictions
different from those of the Fund. The Board considered the reputation and
investment experience of the Subadviser and its investment professionals. The
Board discussed the experience, resources and strengths of the Subadviser in
managing or sponsoring investment companies. The Board also considered the
experience of the Fund's portfolio managers and discussions held with the
managers regarding implementation of the Fund's investment programs. Following
their deliberations, the Board concluded that, while past performance is not an
indicator of future performance, the Subadviser should likely be able to
continue to effectively implement the Fund's investment strategy in attempting
to meet the Fund's investment objectives.
(c) Fees and Profitability of the Subadviser -- The Board considered
representations by the Adviser and the Subadviser that there would be no change
in the allocation of the management fees between the Adviser and Subadviser in
relation to the services provided by the Subadviser, as a result of the change
in control of Nuveen Investments and the effectiveness of the New Subadvisory
Agreement. In considering the compensation to be paid to the Subadviser, noting
that no changes to such compensation from that payable under the then existing
Subadvisory Agreement was proposed, the Board referred to the materials
presented and discussions held in connection with their consideration of the
then existing Subadvisory Agreement for the Fund. The Board noted that in
connection with such considerations they had received and reviewed fee
comparison data from Lipper Inc. (which included information regarding the fees
paid by certain investment advisers to subadvisers of peer funds), and concluded
that such information continued to be relevant to their current deliberations.
In reviewing that data, the Board noted that the subadvisory fee with respect to
the Fund was at a level that continued to be reasonable and similar to that of
comparable funds. Taking into account the totality of the information and
materials provided to them at these meetings and at prior meetings, including,
among other things, the fact that the subadvisory fees were negotiated by the
Adviser on an arm's-length basis, the Board concluded that the subadvisory fees
proposed under the New Subadvisory Agreement continued to be reasonable for the
services to be rendered.
(d) Economies of Scale and Whether Fee Levels Reflect these Economies of Scale
-- The Board also considered whether the Fund would be able to participate in
any economies of scale that the Subadviser may experience given present asset
levels of the Fund. On this point, the Board noted the uncertainty of the asset
levels of the Fund going forward. The Board discussed the renewal requirements
for investment advisory agreements in general, and determined to revisit this
issue from time to time.
The Board's Conclusions About the New Subadvisory Agreement
The Board examined the totality of the information they were provided and did
not identify any single factor discussed previously as controlling. The Board,
including all of the non-interested Directors, concluded that the terms of the
New Subadvisory Agreement were fair and reasonable, that the Subadviser's fees
are reasonable in light of the services to be provided to the Fund, and that the
New Subadvisory Agreement should be approved and recommended to the Fund's
stockholders.
20 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Automatic Dividend Reinvestment Plan
How the Plan Works -- The Fund offers a Dividend Reinvestment Plan (the "Plan")
under which income and capital gains dividends paid by the Fund are
automatically reinvested in additional shares of Common Stock of the Fund. The
Plan is administered on behalf of the shareholders by The Bank of New York
Mellon (the "Plan Agent"). Under the Plan, whenever the Fund declares a
dividend, participants in the Plan will receive the equivalent in shares of
Common Stock of the Fund. The Plan Agent will acquire the shares for the
participant's account either (i) through receipt of additional unissued but
authorized shares of the Fund ("newly issued shares") or (ii) by purchase of
outstanding shares of Common Stock on the open market on the New York Stock
Exchange or elsewhere. If, on the dividend payment date, the Fund's net asset
value per share is equal to or less than the market price per share plus
estimated brokerage commissions (a condition often referred to as a "market
premium"), the Plan Agent will invest the dividend amount in newly issued
shares. If the Fund's net asset value per share is greater than the market price
per share (a condition often referred to as a "market discount"), the Plan Agent
will invest the dividend amount by purchasing on the open market additional
shares. If the Plan Agent is unable to invest the full dividend amount in open
market purchases, or if the market discount shifts to a market premium during
the purchase period, the Plan Agent will invest any uninvested portion in newly
issued shares. The shares acquired are credited to each shareholder's account.
The amount credited is determined by dividing the dollar amount of the dividend
by either (i) when the shares are newly issued, the net asset value per share on
the date the shares are issued or (ii) when shares are purchased in the open
market, the average purchase price per share.
Participation in the Plan -- Participation in the Plan is automatic, that is, a
shareholder is automatically enrolled in the Plan when he or she purchases
shares of Common Stock of the Fund unless the shareholder specifically elects
not to participate in the Plan. Shareholders who elect not to participate will
receive all dividend distributions in cash. Shareholders who do not wish to
participate in the Plan, must advise the Plan Agent in writing (at the address
set forth below) that they elect not to participate in the Plan. Participation
in the Plan is completely voluntary and may be terminated or resumed at any time
without penalty by writing to the Plan Agent.
Benefits of the Plan -- The Plan provides an easy, convenient way for
shareholders to make additional, regular investments in the Fund. The Plan
promotes a long-term strategy of investing at a lower cost. All shares acquired
pursuant to the Plan receive voting rights. In addition, if the market price
plus commissions of the Fund's shares is above the net asset value, participants
in the Plan will receive shares of the Fund for less than they could otherwise
purchase them and with a cash value greater than the value of any cash
distribution they would have received. However, there may not be enough shares
available in the market to make distributions in shares at prices below the net
asset value. Also, since the Fund does not redeem shares, the price on resale
may be more or less than the net asset value.
Plan Fees -- There are no enrollment fees or brokerage fees for participating in
the Plan. The Plan Agent's service fees for handling the reinvestment of
distributions are paid for by the Fund. However, brokerage commissions may be
incurred when the Fund purchases shares on the open market and shareholders will
pay a pro rata share of any such commissions.
Tax Implications -- The automatic reinvestment of dividends and distributions
will not relieve participants of any federal, state or local income tax that may
be payable (or required to be withheld) on such dividends. Therefore, income and
capital gains may still be realized even though shareholders do not receive
cash. Participation in the Plan generally will not affect the tax-exempt status
of exempt interest dividends paid by the Fund. If, when the Fund's shares are
trading at a market premium, the Fund issues shares pursuant to the Plan that
have a greater fair market value than the amount of cash reinvested, it is
possible that all or a portion of the discount from the market value (which may
not exceed 5% of the fair market value of the Fund's shares) could be viewed as
a taxable distribution. If the discount is viewed as a taxable distribution, it
is also possible that the taxable character of this discount would be allocable
to all the shareholders, including shareholders who do not participate in the
Plan. Thus, shareholders who do not participate in the Plan might be required to
report as ordinary income a portion of their distributions equal to their
allocable share of the discount.
Contact Information -- All correspondence concerning the Plan, including any
questions about the Plan, should be directed to the Plan Agent at BNY Mellon
Shareowner Services, P.O. Box 358035, Pittsburgh, PA 15252-8035, Telephone:
877-296-3711.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 21
Directors and Officers
Number of
IQ Advisors-
Affiliate
Advised Funds Other Public
Position(s) Length of and Portfolios Directorships
Held with Time Overseen By Held by
Name Address & Age Fund Served** Principal Occupation(s) During Past 5 Years Director Director
====================================================================================================================================
Non-Interested Directors*
------------------------------------------------------------------------------------------------------------------------------------
Paul P.O. Box 9095 Director & 2007 to Professor, Columbia University Business School 11 None
Glasserman Princeton, NJ Chairman of present since 1991; Senior Vice Dean since July 2004.
08543-9095 the Audit
Age: 45 Committee
------------------------------------------------------------------------------------------------------------------------------------
Steven W. P.O. Box 9095 Director & 2007 to Retired since August 2002; Managing Director, 11 Ametek, Inc.
Kohlhagen Princeton, NJ Chairman of present Wachovia National Bank and its predecessors
08543-9095 Nominating (1992 - 2002).
Age: 60 & Corporate
Governance
Committee
------------------------------------------------------------------------------------------------------------------------------------
William J. P.O. Box 9095 Director & 2007 to Retired since November 2004; Chairman and 11 None
Rainer Princeton, NJ Chairman of present Chief Executive Officer, OneChicago, LLC, a
08543-9095 the Board designated contract market (2001 - 2004);
Age: 61 Chairman, U.S. Commodity Futures
Trading Commission (1999 - 2001).
------------------------------------------------------------------------------------------------------------------------------------
Laura S. P.O. Box 9095 Director 2007 to Independent Consultant; Commissioner of the 11 CA, Inc.
Unger Princeton, NJ present Securities and Exchange Commission (1997 - (software) and
08543-9095 2002), including Acting Chairperson of the SEC Ambac Financial
Age: 46 from February to August 2001; Regulatory Expert Group, Inc.
for CNBC (2002 - 2003).
------------------------------------------------------------------------------------------------------------------------
* Each of the Non-Interested Directors is a member of the Audit Committee and the Nominating and Corporate
Governance Committee.
** Each Director will serve for a term of one year and until his successor is elected and qualifies, or his earlier
death, resignation or removal as provided in the Fund's Bylaws, charter or by statute.
====================================================================================================================================
Fund Officers*
------------------------------------------------------------------------------------------------------------------------------------
Mitchell P.O. Box 9011 President 2007 to IQ Investment Advisors LLC, President since April 2004; MLPF&S, Managing
M. Cox Princeton, NJ present Director, Head of Global Investments & Insurance Solutions and Head of Global
08543-9011 Alternative Investments since 2008; MLPF&S, Managing Director, Head of Financial
Age: 42 Products Group since 2007; Head of Global Wealth Management Market Investments &
Origination (2003 - 2007); MLPF&S, FAM Distributors ("FAMD"), Director since
2006; IQ Financial Products LLC, Director since 2006.
------------------------------------------------------------------------------------------------------------------------------------
Justin C. P.O. Box 9011 Vice 2005 to IQ Investment Advisors LLC, Vice President since 2005; MLPF&S, Managing
Ferri Princeton, NJ President present Director, Structured and Alternative Solutions since 2008; MLPF&S, Director,
08543-9011 Structured and Alternative Solutions in 2007; Director, Global Wealth Management
Age: 32 Market Investments & Origination (2005 - 2007); MLPF&S, Vice President, Global
Private Client Market Investments & Origination (2005); MLPF&S, Vice President,
Head of Global Private Client Rampart Equity Derivatives (2004 - 2005); MLPF&S,
Vice President, Co-Head Global Private Client Domestic Analytic Development
(2002 - 2004); mPower Advisors LLC, Vice President, Quantitative Development
(1999 - 2002).
------------------------------------------------------------------------------------------------------------------------------------
Donald C. P.O. Box 9011 Vice 2007 to IQ Investment Advisors LLC, Secretary and Treasurer (2004 - March 2007);
Burke Princeton, NJ President present BlackRock, Inc., Managing Director since 2006; Merrill Lynch Investment
08543-9011 and Managers, L.P. ("MLIM") and Fund Asset Management ("FAM") Managing Director
Age: 47 Secretary (2006); MLIM and FAM, First Vice President (1997 - 2005) and Treasurer (1999 -
2006); Princeton Services, Inc., Senior Vice President and Treasurer (1999 -
2006).
------------------------------------------------------------------------------------------------------------------------------------
James E. P.O. Box 9011 Vice 2007 to IQ Investment Advisors LLC, Treasurer since March 2007; MLPF&S, Director,
Hillman Princeton, NJ President present Structured and Alternative Solutions since 2007; Director, Global Wealth
08543-9011 and Management Market Investments & Origination (September 2006 - 2007); Managed
Age: 50 Treasurer Account Advisors LLC, Vice President and Treasurer since November 2006;
Director, Citigroup Alternative Investments Tax Advantaged Short Term Fund in
2006; Director, Korea Equity Inc. Fund in 2006; Independent Consultant, January
to September 2006; Managing Director, The Bank of New York, Inc. (1999 - 2006).
22 NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007
Directors and Officers (concluded)
Position(s) Length of
Held with Time
Name Address & Age Fund Served Principal Occupation(s) During Past 5 Years
====================================================================================================================================
Fund Officers* (concluded)
------------------------------------------------------------------------------------------------------------------------------------
Catherine P.O. Box 9011 Chief 2007 to IQ Investment Advisors LLC, Chief Compliance Officer since April 2007; Merrill
A. Princeton, NJ Compliance present Lynch & Co., Inc., Director, Corporate Compliance since September 2007;
Johnston 08543-9011 Officer BlackRock, Inc., Director (2006 - 2007); MLIM, Director (2003 - 2006), Vice
Age: 53 President (1998 - 2003).
------------------------------------------------------------------------------------------------------------------------------------
Martin G. P.O. Box 9011 Chief 2007 to IQ Investment Advisors LLC, Chief Legal Officer since June 2006; Merrill Lynch &
Byrne Princeton, NJ Legal present Co., Inc., Office of General Counsel, Managing Director since 2006, First Vice
08543-9011 Officer President (2002 - 2006), Director (2000 - 2002); Managed Account Advisors LLC,
Age: 45 Chief Legal Officer since November 2006; FAMD, Director since 2006.
------------------------------------------------------------------------------------------------------------------------------------
Jay M. P.O. Box 9011 Vice 2007 to IQ Investment Advisors LLC, Vice President (2005 - March 2007); BlackRock, Inc.,
Fife Princeton, NJ President present Managing Director since 2007; BlackRock, Inc., Director in 2006; MLIM, Director
08543-9011 (2000 - 2006); MLPF&S, Director (2000) and Vice President (1997 - 2000).
Age: 37
------------------------------------------------------------------------------------------------------------------------------------
Colleen R. P.O. Box 9011 Vice 2007 to IQ Investment Advisors LLC, Chief Administrative Officer and Secretary since
Rusch Princeton, NJ President present 2007, Vice President since 2005; MLPF&S, Director, Structured and Alternative
08543-9011 and Solutions since 2007; MLPF&S, Director, Global Wealth Management Market
Age: 40 Assistant Investments & Origination (2005 - 2007); MLIM, Director from January 2005 to
Secretary July 2005; Vice President of MLIM (1998 - 2004).
------------------------------------------------------------------------------------------------------------------------
* Officers of the Fund serve at the pleasure of the Board of Directors.
------------------------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
BNY Mellon Shareholder Services
480 Washington Boulevard
Jersey City, NJ 07310
NASDAQ Symbol
QQQX
Availability of Quarterly Schedule of Investments
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("SEC") for the first and third quarters of each fiscal
year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at
http://www.sec.gov. The Fund's Forms N-Q may also be reviewed and copied at the
SEC's Public Reference Room in Washington, DC. Information on the operation of
the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Electronic Delivery
The Fund offers electronic delivery of communications to its shareholders. In
order to receive this service, you must register your account and provide us
with e-mail information. To sign up for this service, simply access this website
at http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification number
(PIN). You will need this PIN should you wish to update your e-mail address,
choose to discontinue this service and/or make any other changes to the service.
This service is not available for certain retirement accounts at this time.
Contact Information
For more information regarding the Fund, please visit www.IQIAFunds.com or
contact us at 1-877-449-4742.
NASDAQ PREMIUM INCOME & GROWTH FUND INC. DECEMBER 31, 2007 23
[LOGO]
IQ
INVESTMENT
ADVISORS www.IQIAFunds.com
NASDAQ Premium Income & Growth Fund Inc. seeks to provide shareholders with
premium income and capital appreciation.
This report, including the financial information herein, is transmitted to
shareholders of NASDAQ Premium Income & Growth Fund Inc. for their information.
It is not a prospectus. Past performance results shown in this report should not
be considered a representation of future performance. Statements and other
information herein are as dated and are subject to change.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge at
www.IQIAFunds.com/proxyvoting.asp or upon request by calling toll-free
1-877-449-4742 or through the Securities and Exchange Commission's website at
http://www.sec.gov. Information about how the Fund voted proxies relating to
securities held in the Fund's portfolio during the most recent 12-month period
ended June 30 is available (1) at www.IQIAFunds.com/proxyvoting.asp; and (2) on
the Securities and Exchange Commission's website at http://www.sec.gov.
NASDAQ Premium Income & Growth Fund Inc.
P.O. Box 9011
Princeton, NJ 08543-9011
#IQQQQXD -- 12/07
Item 2 - Code of Ethics - The registrant (or the "Fund") has adopted a code
of ethics, as of the end of the period covered by this report, that
applies to the registrant's principal executive officer, principal
financial officer and principal accounting officer, or persons
performing similar functions. During the period covered by this
report, there have been no amendments to or waivers granted under
the code of ethics. A copy of the code of ethics is available
without charge upon request by calling toll-free 1-877-449-4742.
Item 3 - Audit Committee Financial Expert - The registrant's board of
directors has determined that (i) the registrant has the following
audit committee financial experts serving on its audit committee and
(ii) each audit committee financial expert is independent: (1) Alan
R. Batkin (resigned as of February 22, 2007) and (2) Steven W.
Kohlhagen.
Under applicable securities laws, a person determined to be an audit
committee financial expert will not be deemed an "expert" for any
purpose, including without limitation for the purposes of Section 11
of the Securities Act of 1933, as a result of being designated or
identified as an audit committee financial expert. The designation
or identification as an audit committee financial expert does not
impose on such person any duties, obligations, or liabilities
greater than the duties, obligations, and liabilities imposed on
such person as a member of the audit committee and board of
directors in the absence of such designation or identification.
Item 4 - Principal Accountant Fees and Services
----------------------------------------------------------------------------------------------------------------------------------
(a) Audit Fees (b) Audit-Related Fees(1) (c) Tax Fees(2) (d) All Other Fees
----------------------------------------------------------------------------------------------------------------------------------
Current Previous Current Previous Current Previous Current Previous
Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal Fiscal Year Fiscal
Registrant Name End Year End End Year End End Year End End Year End
----------------------------------------------------------------------------------------------------------------------------------
NASDAQ Premium $29,100 $5,000 $0 N/A $8,500 N/A $0 N/A
Income & Growth
Fund Inc.
----------------------------------------------------------------------------------------------------------------------------------
1 The nature of the services include assurance and related services
reasonably related to the performance of the audit of financial statements
not included in Audit Fees.
2 The nature of the services include tax compliance, tax advice and tax
planning.
(e)(1) Audit Committee Pre-Approval Policies and Procedures:
The registrant's audit committee (the "Committee") has adopted
policies and procedures with regard to the pre-approval of services.
Audit, audit-related and tax compliance services provided to the
registrant on an annual basis require specific pre-approval by the
Committee. The Committee also must approve other non-audit services
provided to the registrant and those non-audit services provided to
the registrant's affiliated service providers that relate directly
to the operations and the financial reporting of the registrant.
Certain of these non-audit services that the Committee believes are
a) consistent with the SEC's auditor independence rules and b)
routine and recurring services that will not impair the independence
of the independent accountants may be approved by the Committee
without consideration on a specific case-by-case basis ("general
pre-approval"). However, such services will only be deemed
pre-approved provided that any individual project does not exceed
$5,000 attributable to the registrant or $50,000 for all of the
registrants the Committee oversees. Any proposed services exceeding
the pre-approved cost levels will require specific pre-approval by
the Committee, as will any other services not subject to general
pre-approval (e.g., unanticipated but permissible services). The
Committee is informed of each service approved subject to general
pre-approval at the next regularly scheduled in-person board
meeting.
(e)(2) None of the services described in each of Items 4(b) through
(d) were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not Applicable
(g) Affiliates' Aggregate Non-Audit Fees:
--------------------------------------------------------------------
Current Fiscal Previous Fiscal
Registrant Name Year End Year End
--------------------------------------------------------------------
NASDAQ Premium Income & $2,102,500 N/A
Growth Fund Inc.
--------------------------------------------------------------------
(h) The registrant's audit committee has considered and determined
that the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any non-affiliated
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by the registrant's investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services
to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.
Regulation S-X Rule 2-01(c)(7)(ii) - $0, 0%
Item 5 - Audit Committee of Listed Registrants - The following individuals
are members of the registrant's separately-designated standing audit
committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act (15 U.S.C. 78c(a)(58)(A)):
Alan R. Batkin (resigned as of February 22, 2007)
Steven W. Kohlhagen
Paul Glasserman
William J. Rainer
Laura S. Unger (effective September 12, 2007)
Item 6 - Schedule of Investments - The registrant's Schedule of Investments
is included as part of the Report to Stockholders filed under Item 1
of this form.
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies - The registrant has delegated the
voting of proxies relating to its voting securities to its
investment sub-adviser, Nuveen HydePark Group, LLC (the
"Sub-adviser" or "HydePark"). The Proxy Voting Policies and
Procedures of the Sub-adviser (the "Proxy Voting Policies") are
attached as an Exhibit hereto.
Item 8 - Portfolio Managers of Closed-End Management Investment Companies -
as of December 31, 2007.
(a)(1) Messrs. Rob A. Guttschow, CFA and John Gambla, CFA are
primarily responsible for the day-to-day management of the
registrant's portfolio (each a "Portfolio Manager") since 2007.
Mr. Guttschow is a Managing Director of HydePark and Nuveen Asset
Management ("NAM"). Mr. Guttschow joined NAM in May 2004 to develop
and implement a derivative overlay capability. Mr. Guttschow then
joined HydePark in September 2007, while retaining his Managing
Director status with NAM. Mr. Guttschow was a Managing Director and
Senior Portfolio Manager at Lotsoff Capital Management ("LCM") from
1993 until 2004. While at LCM, Mr. Guttschow managed a variety of
taxable fixed income portfolios and enhanced equity index products
totaling $1.5 billion. Mr. Guttschow is a Chartered Financial
Analyst ("CFA") and a member of the Association for Investment
Management Research. He has served as a member of the TRIAD group
for the Investment Analyst Society of Chicago. Education: University
of Illinois at Urbana/Champaign, B.S., M.B.A., CFA.
Mr. Gambla is a Managing Director of HydePark and a Managing
Director at NAM, since 2007. He is responsible for designing and
maintaining equity and alternative investment portfolios. Prior to
this, he was a Senior Trader and Quantitative Specialist for NAM
(since 2003), and a Portfolio Manager for Nuveen's closed-end fund
managed account. Additional responsibilities included quantitative
research and product development. Mr. Gambla joined Nuveen in 1992
as an Assistant Portfolio Manager. In 1993, he became a lead
Portfolio Manager responsible for seven closed-end and open-end bond
funds totaling $1.5 billion. In 1998, he became Manager of Defined
Portfolio Advisory which provided fundamental research, quantitative
research and trading for Nuveen's $11 billion of equity and
fixed-income Unit Trusts. Prior to his career with Nuveen, he was a
Financial Analyst with Abbott Laboratories. He is a CFA, Certified
Financial Risk Manager, Phi Beta Kappa, and is Series 7, 63 and
65-licensed. Education: University of Illinois, B.A., B.S.,
University of Chicago, M.B.A.
(a)(2) As of December 31, 2007:
-----------------------------------------------------------------------------------------------------------------------
(iii) Number of Other Accounts and
(ii) Number of Other Accounts Managed Assets for Which Advisory Fee is
and Assets by Account Type Performance-Based
-----------------------------------------------------------------------------------------------------------------------
Other Other Other Other
(i) Name of Registered Pooled Registered Pooled
Portfolio Investment Investment Other Investment Investment Other
Manager Companies Vehicles Accounts Companies Vehicles Accounts
-----------------------------------------------------------------------------------------------------------------------
Rob A.
Guttschow, CFA 5 1 3 0 1 0
-----------------------------------------------------------------------------------------------------------------------
$1,404,000,000 $20,000,000 $500,000 $0 $20,000,000 $0
-----------------------------------------------------------------------------------------------------------------------
John Gambla, CFA 5 1 2 0 1 0
-----------------------------------------------------------------------------------------------------------------------
$1,404,000,000 $20,000,000 $300,000 $0 $20,000,000 $0
-----------------------------------------------------------------------------------------------------------------------
(iv) Potential Material Conflicts of Interest
The simultaneous management of the Fund and the other registered
investment companies noted above by the Portfolio Managers may
present actual or apparent conflicts of interest with respect to the
allocation and aggregation of securities orders placed on behalf of
the Fund and the other accounts.
The Sub-adviser has adopted several policies that address potential
conflicts of interest, including best execution and trade allocation
policies that are designed to ensure (1) that portfolio management
is seeking the best price for portfolio securities under the
circumstances, (2) fair and equitable allocation of investment
opportunities among accounts over time and (3) compliance with
applicable regulatory requirements. All accounts are to be treated
in a non-preferential manner, such that allocations are not based
upon account performance, fee structure or preference of the
portfolio manager. In addition, the Sub-adviser has adopted a Code
of Conduct that sets forth policies regarding conflicts of interest.
(a)(3) As of December 31, 2007:
Compensation. Each Portfolio Manager's compensation consists of
three basic elements--base salary, cash bonus and long-term
incentive compensation. The Sub-adviser's compensation strategy is
to annually compare overall compensation, including these three
elements, to the market in order to create a compensation structure
that is competitive and consistent with similar financial services
companies. As discussed below, several factors are considered in
determining each Portfolio Manager's total compensation. In any year
these factors may include, among others, the effectiveness of the
investment strategies recommended by the Portfolio Manager's
investment team, the investment performance of the accounts managed
by the Portfolio Manager's, and the overall performance of Nuveen
Investments, Inc. (the parent company of the Sub-adviser). Although
investment performance is a factor in determining each Portfolio
Manager's compensation, it is not necessarily a decisive factor..
Base salary. Each Portfolio Manager is paid a base salary that is
set at a level determined by the Sub-adviser in accordance with its
overall compensation strategy discussed above. The Sub-adviser is
not under any current contractual obligation to increase a Portfolio
Manager's base salary.
Cash bonus. Each Portfolio Manager is also eligible to receive an
annual cash bonus. The level of this bonus is based upon evaluations
and determinations made by each Portfolio Manager's supervisors.
These reviews and evaluations often take into account a number of
factors, including the effectiveness of the investment strategies
recommended to the Sub-adviser's investment team, the performance of
the accounts for which he serves as portfolio manager relative to
any benchmarks established for those accounts, his effectiveness in
communicating investment performance to stockholders and their
representatives, and his contribution to the Sub-adviser's
investment process and to the execution of investment strategies.
The cash bonus component is also impacted by the overall performance
of Nuveen Investments, Inc. in achieving its business objectives.
Long-term incentive compensation. Each Portfolio Manager is eligible
to receive two forms of long term incentive compensation. One form
is tied to the successful revenue growth of the HydePark. The second
form of long term compensation is tied to the success of Nuveen
Investments Inc and its ability to grow its business as a private
company.
(a)(4) Beneficial Ownership of Securities. As of December 31, 2007,
neither Mr. Guttschow nor Mr. Gambla beneficially owned any stock
issued by the Fund.
Item 9 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers - Not Applicable due to no such
purchases during the period covered by this report.
Item 10 - Submission of Matters to a Vote of Security Holders - The
registrant's Nominating and Corporate Governance Committee will
consider nominees to the Board recommended by shareholders when a
vacancy becomes available. Shareholders who wish to recommend a
nominee should send nominations which include biographical
information and set forth the qualifications of the proposed nominee
to the registrant's Secretary. There have been no material changes
to these procedures.
Item 11 - Controls and Procedures
11(a) - The registrant's principal executive and principal financial
officers or persons performing similar functions have concluded that
the registrant's disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940, as amended
(the "1940 Act")) are effective as of a date within 90 days of the
filing of this report based on the evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act and Rule
13a-15(b) under the Securities and Exchange Act of 1934, as amended.
11(b) - There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably
likely to materially affect, the registrant's internal control over
financial reporting.
Item 12 - Exhibits attached hereto
12(a)(1) - Code of Ethics - See Item 2
12(a)(2) - Certifications - Attached hereto
12(a)(3) - Not Applicable
12(b) - Certifications - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
NASDAQ Premium Income & Growth Fund Inc.
By: /s/ Mitchell M. Cox
---------------------------------
Mitchell M. Cox
Chief Executive Officer (principal executive officer) of
NASDAQ Premium Income & Growth Fund Inc.
Date: February 20, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Mitchell M. Cox
---------------------------------
Mitchell M. Cox
Chief Executive Officer (principal executive officer) of
NASDAQ Premium Income & Growth Fund Inc.
Date: February 20, 2008
By: /s/ James E. Hillman
---------------------------------
James E. Hillman
Chief Financial Officer (principal financial officer) of
NASDAQ Premium Income & Growth Fund Inc.
Date: February 20, 2008