<PAGE>
As filed with the Securities and Exchange Commission on August 17, 1999
================================================================================
1933 Act File No. 333-
1940 Act File No. 811-09553
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-2
(Check appropriate box or boxes)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. __________
[ ] Post-Effective Amendment No. __________
and
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[ ] Amendment No. __________
Nuveen Floating Rate Fund
Exact Name of Registrant as Specified in Declaration of Trust
333 West Wacker Drive, Chicago, Illinois 60606
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
(312) 917-7700
Registrant's Telephone Number, including Area Code
Gifford R. Zimmerman
Vice President and Secretary
333 West Wacker Drive
Chicago, Illinois 60606
Name and Address (Number, Street, City, State, Zip Code) of Agent for Service
Copies of Communications to:
Janet D. Olsen Eric Fess
Bell, Boyd & Lloyd Chapman & Cutler
70 W. Madison St. 111 W. Monroe
Chicago, IL 60602 Chicago, Illinois 60603
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
--------------------
If any of the securities being registered on this form are offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [X]
It is proposed that this filing will become effective (check appropriate
box)
--------------------
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
==============================================================================================================================
Proposed Maximum
Title of Securities Being Amount Proposed Maximum Offering Aggregate Offering Amount of
Registered Being Registered Price Per Unit Price (1) Registration Fee
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Common Shares of 2,500 Shares $10.00 $25,000 $6.95
Beneficial Interest, $.01 par
value, Class A
Common Shares of 2,500 Shares $10.00 $25,000 $6.95
Beneficial Interest, $.01 par
value, Class B
Common Shares of 2,500 Shares $10.00 $25,000 $6.95
Beneficial Interest, $.01 par
value, Class C
Common Shares of 2,500 Shares $10.00 $25,000 $6.95
Beneficial Interest, $.01 par
value, Class R
==============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
FS 1-1
<PAGE>
NUVEEN FLOATING RATE FUND
----------------
CROSS REFERENCE SHEET
Part A - Prospectus
<TABLE>
<CAPTION>
Items in Part A of Form N-2 Location in Prospectus
--------------------------- ----------------------
<C> <S> <C>
Item 1. Outside Front Cover Cover Page
Item 2. Cover Pages; Other Offering Information Cover Page
Item 3. Fee Table and Synopsis Fund Expenses; Prospectus Summary
Item 4. Financial Highlights Not Applicable
Item 5. Plan of Distribution Cover Page; Prospectus Summary; Use of Proceeds
Item 6. Selling Shareholders Not Applicable
Item 7. Use of Proceeds Use of Proceeds; Investment Objective and Policies; Special
Risk Considerations
Item 8. General Description of the Registrant Prospectus Summary; Special Risk Considerations;
Fund Expenses; Use of Proceeds; Investment Objective and
Policies; Purchase of Shares; How to Sell Shares; Special
Services; Description of the Fund
Item 9. Management Investment Management and Other Services; Description of the
Fund;
Item 10. Capital Stock, Long-Term Debt, and
Other Securities Description of the Fund; Distributions; Tax Matters
Item 11. Defaults and Arrears on Senior Securities Not Applicable
Item 12. Legal Proceedings Not Applicable
Item 13. Table of Contents of the Statement of
Additional Information Table of Contents of the Statement of
Additional Information
</TABLE>
<PAGE>
Part B - Statement of Additional Information
<TABLE>
<CAPTION>
Location in Statement of
Items in Part B of Form N-2 Additional Information
--------------------------- ----------------------
<S> <C> <C>
Item 14. Cover Page Cover Page
Item 15. Table of Contents Table of Contents
Item 16. General Information and History Additional Information on Fund Shares
Item 17. Investment Objective and Policies Investment Policies and Investment Portfolio
Item 18. Management Management; Portfolio Transactions
Item 19. Control Persons and Principal Holders of
Securities Management; Net Asset Value
Item 20. Investment Advisory and Other Services Management
Item 21. Brokerage Allocation and Other Practices Portfolio Transactions
Item 22. Tax Status Tax Matters
Item 23. Financial Statements Independent Public Accountants, Custodian and
Transfer Agent; Net Asset Value
</TABLE>
Part C - Other Information
Items 24-33 have been answered in Part C of this Registration Statement.
2
<PAGE>
The information in this prospectus is not complete and may be changed. The Fund
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and is not soliciting an offer to buy these securities.
SUBJECT TO COMPLETION
DATED _________ ______, 1999
NUVEEN FLOATING RATE FUND
Nuveen Floating Rate Fund is a non-diversified, closed-end management investment
company that is continuously offered. The Fund's investment objective is to seek
a high level of current income, consistent with the preservation of capital. The
Fund seeks to achieve its objective primarily by investing in senior loans whose
interest rates float or vary periodically based upon a benchmark interest rate
index.
Investing in Fund shares involves certain risks and special considerations,
including the possible loss of some or all of your investment, risks associated
with investing in securities that are rated below investment grade credit
quality, and risks associated with the Fund's use of borrowing. See "Special
Risk Considerations" beginning on page 16. The Fund will not engage in borrowing
to finance long-term portfolio investment, but may borrow if necessary to
satisfy Fund share repurchases and to manage cash flow.
Because the Fund is newly organized, its shares have no history of public
trading.
John Nuveen & Co. Incorporated has agreed to pay (i) all organizational expenses
and (ii) initial offering costs that exceed $___ per share.
The Securities and Exchange Commission ("SEC") has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
You should read this prospectus and retain it for future reference. This
prospectus summarizes the information about the Fund that a prospective investor
ought to know before investing. A Statement of Additional Information ("SAI")
dated , 1999 containing additional information about the Fund has been filed
with the SEC and is incorporated by reference in its entirety into this
prospectus. A copy of the SAI (the table of contents of which appears on page 40
of this prospectus) may be obtained without charge by contacting the Fund toll-
free at 800-257-8787. The SAI and other information about the Fund are also
available at the SEC's website (www.sec.gov).
<PAGE>
<TABLE>
<CAPTION>
PRICE TO PUBLIC (1) SALES CHARGE (2) PROCEEDS TO FUND (3)
-------------------- ----------------- ---------------------
<S> <C> <C> <C>
Class A share (4) N/A N/A N/A
Class B share $10.00 None $10.00
Class C share $10.00 None $10.00
Class R share (5) $10.00 None $10.00
</TABLE>
THE DATE OF THIS PROSPECTUS IS , 1999
(1) The shares are offered on a best efforts basis at a price of $10.00 per
share during an initial offering period, and at net asset value thereafter.
No escrow arrangements have been established in connection with the initial
offering period. It is estimated that the proceeds of the initial offering
will be invested over a period of one month or less, subject to market
conditions.
(2) Class B and C shares are subject to an early withdrawal charge (an "EWC"),
a distribution fee, and an service fee. John Nuveen & Co. Incorporated
("Nuveen") will pay all sales commissions to authorized dealers from its
own assets. Class R shares are not subject to any distribution fee, service
fee, initial sales charge or EWC.
(3) Assumes the sale of all shares registered hereby.
(4) Although the Fund will issue Class A shares, these shares are available
only upon conversion of Class B shares or through an exchange of Class A
shares of a Nuveen long-term mutual fund, as described below. Class A
shares are subject to a service fee.
(5) Class R shares are sold only to certain eligible investors.
The Fund's investment adviser is Nuveen Senior Loan Asset Management, Inc. (the
"Adviser").
Shares of the Fund
. are not deposits or obligations of, or guaranteed or endorsed by, any
bank or other insured depository institution, and
. are not federally insured by the federal deposit insurance
corporation, the federal reserve board or any other government agency.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SUMMARY................................................... 4
FUND EXPENSES............................................. 8
USE OF PROCEEDS........................................... 9
INVESTMENT OBJECTIVE AND POLICIES......................... 10
SPECIAL RISK CONSIDERATIONS............................... 16
PURCHASE OF SHARES........................................ 22
HOW TO SELL SHARES........................................ 27
NET ASSET VALUE........................................... 31
SPECIAL SERVICES.......................................... 32
DESCRIPTION OF THE FUND................................... 33
MANAGEMENT OF THE FUND.................................... 35
DISTRIBUTIONS............................................. 37
TAX MATTERS............................................... 37
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.. 40
</TABLE>
3
<PAGE>
SUMMARY
The following provides a summary of the more detailed description of the Fund
contained later in this prospectus.
<TABLE>
<S> <C>
The Fund The Fund is a continuously-offered, non-diversified,
closed-end management investment company organized as a
Massachusetts business trust.
Investment Objective To seek a high level of current income, consistent with
the preservation of capital. There can be no assurance
that the Fund will achieve its investment objective.
Primary Investment The Fund seeks to achieve its investment objective
Strategy primarily by investing in Senior Loans ("Senior Loans")
whose interest rates adjust periodically based on a
benchmark interest rate index, such as the prime rate
offered by one or more major U.S. banks ("Prime Rate"),
or a London Inter-Bank Offered Rate ("LIBOR"). The Fund
believes that investing in Senior Loans should limit
fluctuations in its net asset value caused by changes
in interest rates. The Fund may also borrow money, if
necessary, to accommodate cash flow and to finance
repurchase offers, but will not borrow to finance long-
term investment.
Continuous Offering The Fund intends to offer its shares at a public
offering price of $10.00 per share during an initial
offering period, and offer its shares continuously at a
price equal to the net asset value per share
thereafter. The Fund's minimum initial investment is
$3,000 ($1,000 for individual retirement accounts) and
the minimum subsequent investment is $50. The Fund
reserves the right to waive any minimum investment
requirements and to refuse any purchase order. The Fund
does not intend to list the shares on any securities
exchange.
General Investment Under normal circumstances, the Fund will invest at
Guidelines least 80% of its total assets in adjustable rate, U.S.
dollar denominated Senior Loans. Up to 20% of the
Fund's total assets may be held in other investments,
including warrants, equity securities, junior debt
securities, fixed-rate debt obligations, short- to
medium-term notes, high-yield securities, hybrid loans
and asset-backed securities, or in cash or cash
equivalents. The Senior Loans that the Fund will invest
in generally will be collateralized by assets of the
Borrower. However, up to 20% of the Fund's investments
in Senior Loans may be uncollateralized.
The Fund may invest a maximum of 25% of its total
assets in Senior Loans or other securities issued by
firms in any one industry. However, because the firms
with whom the Fund does business are primarily from the
banking, finance, and financial services industries,
the Fund may be more at risk from any single economic,
political or regulatory
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
occurrence affecting these industries. The Fund may
invest up to 20% of its total assets in U.S. dollar
denominated Senior Loans to borrowers and other
investments issued by entities that are organized or
located in countries outside the United States.
Repurchase Offers As a matter of fundamental policy, once a quarter, the
Fund will offer to repurchase up to a stated percentage
(from 5% to 25%) of its shares at net asset value.
Under normal market conditions, the Fund expects this
percentage to be 10%. The first repurchase offer is
scheduled to occur in 2000.
Distributions Income dividends normally are declared daily and paid
monthly. Distributions of net realized capital gains
normally will be made annually in December. Income
dividends and capital gains automatically are
reinvested in additional shares unless an investor
elects to receive cash.
Investment Adviser Nuveen Senior Loan Asset Management Inc. (the
"Adviser")
Distributor John Nuveen & Co. Incorporated ("Nuveen")
Special Risk Credit Risk. Investment in the Fund involves the risk
Considerations that borrowers under Senior Loans may default on
obligations to pay principal or interest when due.
Lenders may have difficulty liquidating the collateral,
if any, securing the Senior Loans or enforcing their
rights under the terms of the Senior Loans.
Senior Loans. Because there is less readily available,
reliable information about most Senior Loans than is
the case for many other types of securities, there is
no minimum rating or other independent evaluation of a
borrower or its securities to limit the Fund's
investments. The Adviser relies exclusively or
primarily on its own evaluation of borrower credit
quality in selecting Senior Loans for purchase. As a
result, the Fund is particularly dependent on the
analytical abilities of the Adviser.
Portfolio Liquidity. Senior Loans are not listed on any
securities exchange or automated quotation system, and
no active trading market exists for many Senior Loans.
As a result, many Senior Loans are illiquid, meaning
that the Fund may not be able to sell them quickly at a
fair price. The market for illiquid securities is more
volatile than the market for liquid securities. The
market could be disrupted in the event of an economic
downturn or a substantial increase or decrease in
interest rates. Although the Fund believes that
investing in adjustable rate Senior Loans should limit
fluctuations in the Fund's net asset value from changes
in interest rates, extraordinary and sudden changes in
interest rates could disrupt the market for senior
loans and result in fluctuations in the Fund's net
asset value. Because of the lack of an active trading
market, illiquid securities are also difficult to
value, and the prices that external pricing services
may quote may not reflect the fair value of the
securities. However, because many Senior Loans are of a
large principal amount and are held by a large number
of owners, this should enhance their liquidity. In
addition, in recent years the number of institutional
investors purchasing Senior Loans has increased. The
risks of illiquidity are particularly important when
the Fund's operations require cash, and may in certain
circumstances require that the Fund borrow to meet
short-term cash requirements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Non-diversification. Because the Fund is classified as
"non-diversified" under the Investment Company Act of
1940, it has greater flexibility to invest its assets
in the obligations of a single borrower or issuer. As a
result, the Fund is exposed to increased risk of loss
if such an investment underperforms expectations.
Participations. The Fund may purchase Participations in
Senior Loans. Under a Participation, the Fund generally
will have rights that are more limited than the rights
of lenders or of persons who acquire a Senior Loan by
assignment. In a Participation, the Fund typically has
a contractual relationship with the lender selling the
Participation, but not with the borrower. As a result,
the Fund assumes the credit risk of the lender selling
the Participation in addition to the credit risk of the
borrower. In the event of the insolvency of the lender
selling the Participation, the Fund may be treated as a
general creditor of the lender and may not have a
senior claim to the lender's interest in the Senior
Loan.
Foreign Investments. The Fund may invest up to 20% of
its total assets, measured at the time of investment,
in U.S. dollar-denominated Senior Loans of firms that
are organized or located in countries outside the
United States. Although their Senior Loans are
denominated in U.S. dollars, these firms may have
significant non-U.S. dollar revenues. Investment in
foreign firms involves special risks, including that
the foreign firms may be subject to less rigorous
regulatory requirements, differing legal systems and
laws relating to creditors' rights, the potential
inability to enforce legal judgments, economic
adversity that would result if the value of the
issuer's non-U.S. denominated revenues and assets were
to fall (in U.S. dollar terms) because of fluctuations
in currency values; and the potential for political,
social and economic adversity in the firm's country.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Borrowing. The Fund is authorized to borrow up to
33 1/3% of its total assets (including any amount
borrowed). The Fund will do so, if necessary, only for
short-term purposes to meet fund share redemption
requests and to help manage cash flow. The rights of
any of the Fund's lenders to receive interest and
principal payments on these borrowings will be senior
to those of the holders of the Fund's shares and the
terms of any such borrowings may limit certain
activities of the Fund, including the payment of
dividends to shareholders in certain circumstances.
Interest payments and fees incurred on these such
borrowings will reduce the amount of net income
available for payment to shareholders. The Fund will
not borrow to create financial leverage. The Fund will
not purchase additional portfolio securities at any
time that borrowings, including the Fund's commitments
pursuant to reverse repurchase agreements, exceed 5% of
the Fund's total assets (including any amount
borrowed).
High-Yield/High Risk Securities. The Fund may invest up
to 100% of its assets in Senior Loans and other
securities that are rated below investment grade or are
unrated, but that the Adviser considers to be below
investment grade quality. The purchase of such
securities exposes the Fund to financial, market and
interest-rate risks and greater credit risks than the
purchase of higher quality securities. Such investments
are also likely to result in increased fluctuation in
the Fund's net asset value, particularly in response to
economic downturns.
Anti-Takeover Provisions. The Fund's Declaration of
Trust includes provisions that could limit the ability
of other persons to acquire control of the Fund or to
change the composition of its Board of Trustees.
Fund Share Liquidity Risk. The Fund is a closed-end
investment company designed primarily for long-term
investors and not as a trading vehicle. The Fund does
not intend to list the shares for trading on any
securities exchange. There is no secondary trading
market for Fund shares. As a result, the Fund's shares
are not readily marketable. The Fund's shares are less
liquid than shares of funds that trade on a stock
exchange. Class B and C shareholders who tender Fund
shares held for less than five years and one year,
respectively, normally will pay an EWC. See "Purchase
of Shares." While the Fund will provide shareholders
with liquidity through a quarterly offer to repurchase
its shares, there is no guarantee that a shareeholder
will be able to sell the desired number of shares.
</TABLE>
7
<PAGE>
FUND EXPENSES
The following table is intended to assist prospective investors in understanding
the various costs and expenses associated with investing in shares of the Fund.
Because the Fund does not yet have an operating history, this information is
based on estimated fees, expenses and net assets for the fiscal year ending
July 31, 2000.
SHAREHOLDER TRANSACTION EXPENSES (1)
<TABLE>
<CAPTION>
Class A(2) Class B Class C Class R(3)
<S> <C> <C> <C> <C>
Maximum Initial Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price)........... N/A NONE NONE NONE
Maximum Sales Charge on Reinvested
Dividends............................................... NONE NONE NONE NONE
Maximum Early Withdrawal Charge (Load).................... NONE 3.0%(4) 1.0%(5) NONE
Exchange Fee.............................................. NONE NONE NONE NONE
</TABLE>
ANNUAL EXPENSES (6)
(estimated as a percentage of average net assets)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Management Fees (7)....................................... ___% ___% ___% ___%
Service Fee............................................... ___% ___% ___% NONE
Distribution Fee.......................................... NONE ___% ___% NONE
Other Operating Expenses (8).............................. ___% ___% ___% ___%
Total Operating Expenses - Gross (+)...................... ___% ___% ___% ___%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(+)After Expense Reimbursement
Expense Reimbursement................................ ___% ___% ___% ___%
Total Operating Expenses - Net....................... ___% ___% ___% ___%
</TABLE>
Net expenses reflect a voluntary expense limitation by the Adviser, which
may be modified or discontinued without notice at the Adviser's discretion.
(1) Broker-dealers and other firms that have entered into dealer agreements
with Nuveen ("Authorized Dealers") may charge additional fees for
shareholder transactions or for advisory services. Please see their
materials for details.
(2) Class A shares are available only upon conversion of Class B shares or upon
an exchange of a Class A share of another long-term Nuveen mutual fund.
(3) Class R shares are sold only to certain eligible investors. For more
detail, see "Purchase of Shares."
(4) The EWC on Class B shares is 3.0% if redeemed within the first year after
purchase, 2.5% during the second year, 2.0% during the third year, 1.5 %
during the fourth year and 1.0% during the fifth year. There is no EWC on
Class B shares thereafter.
8
<PAGE>
(5) The EWC on Class C shares is 1.0% if redeemed within the first year of
purchase.
(6) Long-term holders of Class B and Class C shares may pay more in
distribution fees and EWCs than the economic equivalent of the maximum
initial sales charge permitted under the National Association of Securities
Dealers Conduct Rules.
(7) Pursuant to an Investment Management Agreement with the Fund, the Adviser
is entitled to receive an investment management fee of __% of the average
daily net assets of the Fund, with graduated fee reductions based on
increased asset levels. See "Management of the Fund."
(8) "Other Operating Expenses" are based on estimated amounts for the current
fiscal year.
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other funds. The example assumes that you
invest $1,000 in the Fund for the time periods indicated and then either you
elect to have the Fund repurchase or not repurchase your shares at the end of
the period. The example assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Your actual costs may be
higher or lower.
<TABLE>
<CAPTION>
Repurchase No Repurchase
- ------------------------------------------------------------------------------------------------------------------------------
Share Class A B C R A B C R
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $______ $______ $______ $______ $______ $______ $______ $______
- -------------------------------------------------------- --------------------------------------------------------
3 Years $______ $______ $______ $______ $______ $______ $______ $______
- -------------------------------------------------------- --------------------------------------------------------
5 Years $______ $______ $______ $______ $______ $______ $______ $______
- -------------------------------------------------------- --------------------------------------------------------
10 Years $______ $______ $______ $______ $______ $______ $______ $______
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
USE OF PROCEEDS
The Adviser anticipates that the Fund will invest net proceeds received in the
initial offering period in accordance with the Fund's investment objective and
policies within one month or less after the end of the initial offering period.
The Fund's actual investment timetable will depend on the availability of senior
loans and other market conditions. Pending such investment, the Fund will invest
the net proceeds received pursuant to the initial offering period in investment
grade quality short-term or medium-term debt obligations. Nuveen has agreed to
pay (i) all organizational expenses and (ii) offering costs that exceed $____
per share.
9
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek a high level of current income,
consistent with the preservation of capital. The Fund's investment objective is
a fundamental policy of the Fund, meaning that it may be changed only by a vote
of a majority of the shareholders of the Fund. See "Description of the Fund -
Fundamental and Non-Fundamental Policies of the Fund." Under normal
circumstances, the Fund will invest at least 80% of its total assets in
adjustable-rate, U.S. dollar-denominated Senior Loans. An investment in the Fund
may not be appropriate for all investors and should not be considered a complete
investment program. There is no assurance that the Fund will achieve its
investment objective. You should carefully consider the risks of investing in
the Fund. See "Special Risk Considerations."
Description of Senior Loans
Because Senior Loans have very large minimum investments, typically $5 million
or more, the Fund provides individual investors access to a market that normally
is limited to institutional investors. Senior Loans are made to corporations,
partnerships and other entities ("Borrowers"). Senior Loans generally are
negotiated between a Borrower and several financial institutions ("Lenders")
represented by one or more Lenders acting as agent ("Agent") of all the Lenders.
The Agent is responsible for negotiating the loan agreement ("Loan Agreement")
that establishes the terms and conditions of the Senior Loan and the rights of
the Borrower and the Lenders. The Agent is paid a fee by the Borrower for its
services.
The Agent generally is required to administer and manage the Senior Loan on
behalf of other Lenders. When evaluating Senior Loans, the Adviser may consider,
and may rely in part, on analysis performed by the Agent and other Lenders. This
analysis may include an evaluation of the value and sufficiency of any
collateral securing Senior Loans. As to collateralized Senior Loans, the Agent
usually is required to monitor the collateral. The Agent may rely on independent
appraisals of specific collateral. The Agent need not, however, obtain an
independent appraisal of assets pledged as collateral in all cases. The Agent
generally is also responsible for determining that the Lenders have obtained a
perfected security interest in the collateral securing a Senior Loan.
Interest Rates and Maturity. Interest rates on Senior Loans adjust
periodically. The interest rates are adjusted based on a base rate plus a
premium or spread over the base rate. The base rate usually is a London Inter-
Bank Offered Rate ("LIBOR"), the prime rate offered by one or more major United
States banks (the "Prime Rate") or the certificate of deposit ("CD") rate or
other base lending rates used by commercial lenders. LIBOR, as provided for in
Loan Agreements, usually is an average of the interest rates quoted by several
designated banks as the rates at which they pay interest to major depositors in
the London interbank market on U.S. dollar - denominated deposits. The Adviser
believes that changes in short-term LIBOR rates are closely related to changes
in the Federal Reserve federal funds rate, although the two are not technically
linked. The Prime Rate quoted by a major U.S. bank is generally the interest
rate at which that bank is willing to lend U.S. dollars to its most creditworthy
borrowers, although it may not be the bank's lowest available rate. The CD rate,
as provided for in Loan Agreements, usually is the average rate paid on large
certificates of deposit traded in the secondary market.
10
<PAGE>
Interest rates on Senior Loans may adjust daily, monthly, quarterly, semi-
annually or annually. The Fund will not invest more than 10% of its total assets
in Senior Loans with interest rates that adjust less often than semi-annually.
The Fund's portfolio of Senior Loans will at all times have a dollar-weighted
average time until the next interest rate adjustment of 90 days or less. The
Fund may use interest rate swaps and other investment practices to shorten the
effective interest rate adjustment period of Senior Loans. If the Fund does so,
it considers the shortened period to be the adjustment period of the Senior
Loans.
As short term interest rates rise, the Fund's income should increase. As short
term interest rates decline, the Fund's income should decrease. The amount of
time before the Fund experiences the effects of changing short-term interest
rates will depend on the time until the next interest rate adjustment on each
Senior Loan in the Fund's portfolio.
When interest rates rise, the values of fixed-income securities generally
decline. When interest rates fall, the values of fixed-income securities
generally increase. The Fund believes that investing in adjustable rate Senior
Loans should limit fluctuations in the Fund's net asset value caused by changes
in interest rates. The Fund expects the values of its Senior Loan investments to
fluctuate less than the values of fixed rate, longer-term income securities in
response to the changes in interest rates. Changes in interest rates can,
however, cause some fluctuation in the Fund's net asset value. (Net asset value
also will fluctuate because of changes in Borrower credit quality and other
factors, as described below.)
The Fund expects that its Senior Loans will have stated maturities ranging from
three to ten years, although the Fund has no policy limiting the maturity of the
Senior Loans that it purchases. Senior Loans usually have mandatory and optional
prepayment provisions. Because of prepayments, the actual remaining maturity of
Senior Loans may be considerably less than their stated maturity. The Fund
estimates that the actual maturity of the Senior Loans in its portfolio at any
given time will be approximately 18-24 months. Because the interest rates on
Senior Loans adjust periodically, the Fund and the Adviser believe that
reinvestment by the Fund in Senior Loans after prepayment generally should not
result in a significant reduction in the interest payable to the Fund. Fees that
the Fund occasionally may receive may enhance the Fund's income. See "Investment
Objective and Policies - The Senior Loan Process," below.
Protective Provisions of Senior Loans. Senior Loans have the most senior
position in a Borrower's capital structure or share the senior position with its
other senior debt securities. This generally gives holders of Senior Loans a
priority claim on some or all of the Borrower's assets in the event of default.
Collateralized Senior Loans frequently will be secured by all assets of the
Borrower that qualify as collateral, such as trademarks, accounts receivable ,
inventory, buildings, real estate, franchises, and common and preferred stock in
its subsidiaries and affiliates. Collateral may also include guarantees or other
credit support by affiliates of the Borrower. In some cases, a collateralized
Senior Loan may be secured only by stock of the Borrower or its subsidiaries.
The Loan Agreement may or may not require the Borrower to pledge additional
collateral to secure the Senior Loan if the value of the initial collateral
declines. In certain circumstances, the Loan Agreement may authorize an agent to
liquidate the collateral and to distribute the liquidation proceeds pro rata
among the Lenders.
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The Fund may invest up to 20% of its total assets in Senior Loans that are not
secured by specific collateral. Such unsecured Senior Loans involve a greater
risk of loss.
Senior Loans generally also have contractual terms designed to protect Lenders.
Loan Agreements often include restrictive covenants that limit the activities of
the Borrower. These covenants may include mandatory prepayment out of excess
cash flows, restrictions on dividend payments, the maintenance of minimum
financial ratios, limits on indebtedness and other financial tests. Breach of
these covenants generally is an event of default and, if not waived by the
Lenders, may give Lenders the right to accelerate principal and interest
payments.
Borrowers. Borrowers operate in a variety of industries and geographic regions.
The Fund does not intend to invest more than 10% of its total assets in Senior
Loans of a single Borrower. In addition, the Fund will not invest more than 25%
of its total assets in Borrowers that conduct their principal businesses in the
same industry.
Most Senior Loans are made to U.S. Borrowers. The Fund may, however, invest up
to 20% of its total assets in Senior Loans made to Borrowers located outside the
U.S. These Senior Loans must be U.S. dollar denominated. Investing in Senior
Loans of foreign Borrowers involves special risks. See "Special Risk
Considerations -- Investment in Foreign Issuers."
The capital structure of a Borrower may include Senior Loans, senior and junior
subordinated debt, preferred stock and common stock. Senior Loans typically have
the most senior claim on Borrower's assets and common stock the most junior
claim. The proceeds of Senior Loans that the Fund will purchase usually will be
used by Borrowers to finance leveraged buyouts, recapitalizations, mergers,
acquisitions, stock repurchases, debt refinancings and, to a lesser extent, for
general operating and other purposes.
The Fund may purchase and retain in its portfolio Senior Loans of Borrowers that
have filed for protection under the federal bankruptcy laws or that have had
involuntary bankruptcy petitions filed against them by creditors. Because of the
protective features of Senior Loans, the Fund and the Adviser believe that
Senior Loans of Borrowers that either are experiencing, or are more likely to
experience, financial difficulty may represent attractive investment
opportunities. Investing in Senior Loans does, however, involve investment risk,
and some Borrowers default on their Senior Loan payments. The Adviser and the
Fund attempt to manage these risks through selection of a varied portfolio of
Senior Loans and analysis and monitoring of Borrowers and any collateral pledged
to secure the loans.
The Fund invests in a Senior Loan only if, in the Adviser's judgment, the
Borrower can meet its payment obligations. The Adviser performs its own
independent credit analysis of the Borrower in addition to utilizing information
prepared and supplied by an agent or other Lenders. When evaluating a Borrower,
the Adviser considers many factors, including the Borrower's past and future
projected financial performance. The Adviser also considers a Borrower's
management, collateral and industry. The Adviser continues to monitor a Borrower
on an ongoing basis for so long as the Fund continues to own the Senior Loan.
Although the Adviser will use its best judgment in selecting Senior Loans, there
can be no assurance that such analysis will disclose factors that may impair the
value of a Senior Loan. You should expect the Fund's net asset value to
fluctuate as a result of changes in the credit quality of Borrowers and other
factors. A serious
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deterioration in the credit quality of a Borrower could cause a permanent
decrease in the Fund's net asset value. See "Special Risk Considerations --
Borrower Credit Risk."
The Adviser generally relies on its own credit analysis of Borrowers and not on
analysis prepared by ratings agencies or other independent parties. There is no
minimum rating or other independent evaluation of a Borrower or its securities
limiting the Fund's investments. Although a Senior Loan often is not rated by
any rating agency at the time the Fund purchases the Senior Loan, rating
agencies have become more active in rating an increasing number of Senior Loans
and at any given time a substantial portion of the Senior Loans in the Fund's
portfolio may be rated. The lack of a rating does not necessarily imply that a
Senior Loan is of lesser investment quality. There is no limit on the percentage
of the Fund's assets that may be invested in Senior Loans that are rated below
investment grade or that are unrated but of comparable quality.
The Senior Loan Process
The Fund normally relies on the Agent to collect principal and interest payments
on a Senior Loan. Furthermore, the Fund also relies in part on the Agent to
monitor compliance by the Borrower with the restrictive covenants in the Loan
Agreement and to notify the Fund (or the Lender from who the Fund has purchased
a Participation) of any adverse change in the Borrower's financial condition.
The Fund acts as a Lender with respect to a syndicated Senior Loan only where
the Agent at the time of investment has outstanding debt or deposit obligations
rated investment grade by a rating agency or is unrated, but determined by the
Adviser to be of comparable quality. A rating agency's top four major rating
categories generally are considered to be investment grade. The lowest tier of
investment grade rating is considered to have speculative characteristics. The
Fund will not purchase interests in Senior Loans unless the Agent, Lender and
any other person positioned between the Fund and the Borrower has entered into
an agreement that provides for the holding of assets in safekeeping for, or the
prompt disbursement of assets to, the Fund. Insolvency of the Agent or other
persons positioned between the Fund and the Borrower could result in losses for
the Fund. See "Special Risk Considerations -- Senior Loans."
The Fund may be required to pay and may receive various fees and commissions in
connection with purchasing, selling and holding interests in Senior Loans. The
fees normally paid by Borrowers include three primary types: facility fees,
commitment fees and prepayment penalties. Facility fees are paid to Lenders when
a Senior Loan is originated. Commitment fees are paid to Lenders on an ongoing
basis based on the unused portion of a Senior Loan commitment. Lenders may
receive prepayment penalties when a Borrower prepays a Senior Loan. The Fund
receives these fees directly from the Borrower if the Fund is an Original Lender
(as defined below) or, in the case of commitment fees and prepayment penalties,
if the Fund acquires an Assignment (as defined below). Whether the Fund receives
a facility fee in the case of an Assignment, or any fees in the case of a
Participation, depends on negotiations between the Fund and the Lender selling
such interests. When the Fund buys an Assignment, it may be required to pay a
fee, or forgo a portion of interest and fees payable to it, to the Lender
selling the Assignment. Occasionally, the assignor pays a fee to the assignee. A
person selling a Participation to the Fund may deduct a portion of the interest
and any fees payable to the Fund as an administrative fee. The Fund may be
required to pass along to a person that buys a Senior Loan from the Fund a
portion of any fees that the Fund is entitled to.
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The Fund may have obligations under a Loan Agreement, including the obligation
to make additional loans in certain circumstances. The Fund intends to reserve
against such contingent obligations by segregating cash, liquid securities and
liquid Senior Loans as a reserve. The Fund will not purchase a Senior Loan that
would require the Fund to make additional loans if as a result of such purchase
all of the Fund's additional loan commitments in the aggregate would exceed 20%
of the Fund's total assets or would cause the Fund to fail to meet the asset
composition requirements set forth under the heading "Investment Restrictions"
in the SAI.
Types of Senior Loan Investments
The Fund may act as one of the group of Lenders originating a Senior Loan (an
"Original Lender"), may purchase assignments or novations ("Assignments") of
portions of Senior Loans from third parties, and may invest in participations
("Participations") in Senior Loans. Senior Loans also include certain foreign
debt obligations that are in the form of notes rather than Loan Agreements. All
of these interests in Senior Loans are sometimes referred to simply as Senior
Loans.
The Fund as Original Lender. When the Fund acts as an Original Lender it may
participate in structuring the Senior Loan. When the Fund is a member of the
originating syndicate group for a Senior Loan, it may share in a fee paid to the
original lenders. When the Fund is an Original Lender it will have a direct
contractual relationship with the Borrower, may enforce compliance by the
Borrower with the terms of the Loan Agreement and may have rights with respect
to any funds acquired by other Lenders through set-off. Lenders also have full
voting and consent rights under the applicable Loan Agreement. Action subject to
Lender vote or consent generally requires the vote or consent of the holders of
some specified percentage of the outstanding principal amount of the Senior
Loan. Certain decisions, such as reducing the amount of interest on or principal
of a Senior Loan, releasing collateral, changing the maturity of a Senior Loan
or a change in control of the Borrower, frequently require the unanimous vote or
consent of all Lenders affected.
Acting in the capacity of an Agent in a Senior Loan may subject the Fund to
certain risks in addition to those associated with the Fund's current role as a
Lender. In consideration of such risks, the Fund will invest no more than 20% of
its total assets in Senior Loans in which it acts as Agent or co-agent and the
size of any such individual loan will not exceed 5% of the Fund's total assets.
Assignments. The purchaser of an Assignment typically succeeds to all the
rights and obligations under the Loan Agreement of the assigning Lender and
becomes a Lender under the Loan Agreement. Assignments may, however, be arranged
through private negotiations, and the rights and obligations acquired by the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
Participations. When the Fund purchases a Participation in a Senior Loan, the
Fund will usually have a contractual relationship only with the Lender selling
the Participation and not with the Borrower. The Fund may only have the right to
receive payments of principal, interest and any fees to which it is entitled
from the Lender selling the Participation and only upon receipt by the
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Lender of such payments from the Borrower. As a result, the Fund may assume the
credit risk of both the Borrower and the Lender selling the Participation. In
the event of insolvency of the Lender selling a Participation, the Fund may be
treated as a general creditor of the Lender.
The Fund has taken the following measures in an effort to minimize these risks.
The Fund will only acquire Participations if the Lender selling the
Participation and any other persons positioned between the Fund and the Lender
(i) at the time of investment has outstanding debt or deposit obligations rated
investment grade by a rating agency or determined by the Adviser to be of
comparable quality and (ii) has entered into an agreement which provides for the
holding of assets in safekeeping for, or the prompt disbursement of assets to,
the Fund.
The Fund generally will not have the right to enforce compliance by the Borrower
with the Loan Agreement, nor rights to any funds acquired by other Lenders
through set-off against the Borrower. In addition, when the Fund holds a
Participation in a Senior Loan it may not have the right to vote on whether to
waive enforcement of any restrictive covenant breached by a Borrower. Lenders
voting in connection with a potential waiver of a restrictive covenant may have
interests different from those of the Fund and may not consider the interests of
the Fund. The Fund may not benefit directly from the collateral supporting a
Senior Loan in which it has purchased the Participation, although Lenders that
sell Participations generally are required to distribute liquidation proceeds
received by them pro rata among the holders of such Participations.
Other Senior Debt Securities. The Fund may invest up to 20% of its total assets
in certain senior debt securities that are in the form of notes rather than Loan
Agreements. The Fund expects to purchase these senior debt securities only in
the case of foreign Borrowers. The Fund will only purchase senior debt
securities if (i) the senior debt securities represent the only form of senior
debt financing of the Borrower or (ii) the senior debt securities are pari passu
in the capital structure with other Senior Loans of a Borrower and the Adviser
determines that the terms, conditions, covenants and collateral package of the
senior debt securities are substantially similar, or more favorable to the Fund,
compared to the other Senior Loans of such Borrower. There may be no person
performing the role of the Agent for senior debt securities. As a result, the
Fund may be more dependent on the ability of the Adviser to monitor and
administer these Senior Loans. Senior debt securities will be treated as Senior
Loans for purposes of the Fund's policy of normally investing at least 80% of
its total assets in Senior Loans.
The Fund also may invest up to 10% of its total assets in structured notes with
rates of return determined by reference to the total rate of return on one or
more Senior Loans referenced in such notes. The rate of return on the
structured note may be determined by applying a multiplier to the rate of total
return on the referenced loan or loans. Application of a multiplier is
comparable to the use of financial leverage, a speculative technique. Leverage
magnifies the potential for gain and the risk of loss; as a result, a relatively
small decline in the value of a referenced Senior Loan could result in a
relatively large loss in the value of a structured note. Structured notes will
be treated as Senior Loans for purposes of the Fund's policy of normally
investing at least 80% of its total assets in Senior Loans.
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Other Important Investment Policies
The Fund may invest up to 20% of its total asset in other investments, including
warrants, equity securities, junior debt securities, fixed-rate debt
obligations, short- to medium-term notes, high-yield securities, hybrid loans
and asset-backed securities, or in cash or cash equivalents. The Fund also may
convert a warrant into the underlying security. Although the Fund generally will
acquire interests in warrants, equity and junior debt securities only when the
Adviser believes that the value the Fund gives in exchange for such interests is
substantially outweighed by their potential value, investment in warrants,
equity and junior debt securities entails certain risks in addition to those
associated with investments in Senior Loans. These risks include the potential
for increasing fluctuations in the Fund's net asset value. Any equity securities
and junior debt securities held by the Fund will not be treated as Senior Loans
and thus will not count toward the 80% of the Fund's total assets that normally
will be invested in Senior Loans.
During normal market conditions, the Fund may invest up to 20% of its total
assets in high quality, short-term debt securities with remaining maturities of
one year or less. These may include commercial paper rated at least in the top
two rating categories, or unrated commercial paper considered by the Adviser to
be of similar quality; interests in short-term loans of Borrowers having short-
term debt obligations rated or a short-term credit rating at least in such top
two rating categories, or having no rating but determined by the Adviser to be
of comparable quality; certificates of deposit and bankers' acceptances; and
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities may pay interest at adjustable rates or at
fixed rates. If the Adviser determines that market conditions temporarily
warrant a defensive investment policy, the Fund may invest, subject to its
ability to liquidate its relatively illiquid portfolio of Senior Loans, up to
100% of its assets in cash and high quality, short-term debt securities.
The Fund may also enter in various interest rate hedging and risk management
transactions, which are described in further detail in "Special Risk
Considerations--Interest Rate and Other Hedging Transactions."
SPECIAL RISK CONSIDERATIONS
Borrower Credit Risk
Senior Loans, like most other debt obligations, are subject to the risk of
default. Default in the payment of interest or principal on a Senior Loan
results in a reduction in income to the Fund, a reduction in the value of the
Senior Loan and a potential decrease in the Fund's net asset value. The risk of
default increases in the event of an economic downturn or a substantial increase
in interest rates. An increased risk of default could result in a decline in the
value of Senior Loans and in the Fund's net asset value.
The Fund may acquire Senior Loans of Borrowers that are experiencing, or are
more likely to experience, financial difficulty, including Senior Loans of
Borrowers that have filed for bankruptcy protection. Borrowers may have
outstanding debt obligations that are rated below investment grade. More
recently, rating agencies (including, but not limited to Moody's Investor
Service, Inc., Standard & Poor's Corporation and Fitch IBCA, Inc.) have begun
rating Senior
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Loans, and Senior Loans in the Fund's portfolio that may be rated below
investment grade. The Fund may invest a substantial portion of its assets in
Senior Loans of Borrowers that have outstanding debt obligations rated below
investment grade or that are unrated but of comparable quality to such
securities. Debt securities rated below investment grade are viewed by the
rating agencies as speculative and are commonly known as "junk bonds." Senior
Loans generally are not rated at the time that the Fund purchases them. If a
Senior Loan is rated at the time of purchase, the Adviser may consider the
rating when evaluating the Senior Loan but, in any event, does not view ratings
as a determinative factor in investment decisions. As a result, the Fund is more
dependant on the Adviser's credit analysis abilities. Because of the protective
terms of most Senior Loans, the Adviser believes that the Fund is more likely to
recover more of its investment in a defaulted Senior Loan than would be the case
for most other types of defaulted debt securities. The values of Senior Loans of
Borrowers that have filed for bankruptcy protection or that are experiencing
payment difficulty will reflect, among other things, the Adviser's assessment of
the likelihood that the Fund ultimately will receive repayment of the principal
amount of such Senior Loans, the likely duration, if any, of a lapse in the
scheduled payment of interest and repayment of principal and prevailing interest
rates.
In the case of collateralized Senior Loans, there is no assurance that sale of
the collateral would raise enough cash to satisfy the Borrower's payment
obligation or that the collateral can or will be liquidated. In the event of
bankruptcy, liquidation may not occur and the court may not give Lenders the
full benefit of their senior positions. If the terms of a Senior Loan do not
require the Borrower to pledge additional collateral in the event of a decline
in the value of the original collateral, the Fund will be exposed to the risk
that the value of the collateral will not at all times equal or exceed the
amount of the Borrower's obligations under the Senior Loan. To the extent that a
Senior Loan is collateralized by stock in the Borrower or its subsidiaries, such
stock may lose all of its value in the event of bankruptcy of the Borrower.
Uncollateralized Senior Loans involve a greater risk of loss.
Senior Loans
Information about most Senior Loans is less readily available and reliable than
is the case for many other types of securities. In addition, there is no minimum
rating or other independent evaluation of a Borrower or its securities limiting
the Fund's investments. The Adviser relies exclusively or primarily on its own
evaluation of Borrower credit quality in selecting Senior Loans for purchase. As
a result, the Fund is particularly dependent on the analytical abilities of the
Adviser.
Senior Loans are not listed on any securities exchange or automated quotation
system and no active trading market exists for many Senior Loans. As a result,
many Senior Loans are illiquid, meaning that the Fund may not be able to sell
them quickly at a fair price. The market for illiquid securities is more
volatile than the market for liquid securities. Because of the lack of an active
trading market illiquid securities are also difficult to value, and prices
provided by external pricing services may not reflect the true fair value of the
securities. However, many Senior Loans are of a large principal amount and are
held by a large number of owners. In the Adviser's opinion, this should enhance
their liquidity. In addition, in recent years the number of institutional
investors purchasing Senior Loans has increased. The risks of illiquidity are
particularly important when the Fund's operations require cash, and may in
certain circumstances require that the Fund borrow to meet short-term cash
requirements. To the extent that a secondary market does exist for certain
Senior Loans, the market may be subject to irregular
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trading activity, wide bid/ask spreads and extended trade settlement periods.
The Fund has no limitation on the amount of its assets that may be invested in
securities that are not readily marketable or that are subject to restrictions
on resale. The substantial portion of the Fund's assets invested in Senior Loans
may restrict the ability of the Fund to dispose of its investments in a timely
fashion and at a fair price, and could result in capital losses to the Fund and
holders of its shares. The market for Senior Loans could be disrupted in the
event of an economic downturn or a substantial increase or decrease in interest
rates. This could result in increased volatility in the market and in the Fund's
net asset value and market price per share.
If legislation or state or federal regulators impose additional requirements or
restrictions on the ability of financial institutions to make loans that are
considered highly leveraged transactions, the availability of Senior Loans for
investment by the Fund may be adversely affected. In addition, such requirements
or restrictions could reduce or eliminate sources of financing for certain
Borrowers. This would increase the risk of default. If legislation or federal or
state regulators require financial institutions to dispose of Senior Loans that
are considered highly leveraged transactions or subject such Senior Loans to
increased regulatory scrutiny, financial institutions may determine to sell such
Senior Loans. Such sales could result in prices that, in the opinion of the
Adviser, do not represent fair value. If the Fund attempts to sell a Senior Loan
at a time when a financial institution is engaging in such a sale, the price the
Fund could get for the Senior Loan may be adversely affected.
Should an Agent or a Lender positioned between the Fund and a Borrower become
insolvent or enter FDIC receivership or bankruptcy, where the Fund is an
Original Lender or has purchased an Assignment any interest of such person in
the Senior Loan and in any loan payment held by such person for the benefit of
the Fund should not be included in the person's estate. If, however, these items
are included in their estate, the Fund would incur costs and delays in realizing
payment and could suffer a loss of principal or interest.
Some Senior Loans are subject to the risk that a court, pursuant to fraudulent
conveyance or other similar laws, could subordinate the Senior Loans to
presently existing or future indebtedness of the Borrower or take other action
detrimental to Lenders. Such court action could under certain circumstances
include invalidation of Senior Loans.
Non-Diversified Status
The Fund has registered as a "non-diversified" investment company. This means
that it may invest more than 5% of the value of its assets in the obligations of
any single issuer, including Senior Loans of a single Borrower and
Participations purchased from a single Lender. However, the Fund does not intend
to invest more than 10% of the value of its assets in Senior Loans of a single
Borrower and it may invest more than 5% of its assets in Participations
purchased from a single Lender. If the Fund invests a relatively high percentage
of its assets in obligations of a limited number of issuers, the Fund will be
more at risk to any single corporate, economic, political or regulatory event
that impacts one or more of those issuers.
Participations
The Fund may purchase Participations in Senior Loans. Under a Participation, the
Fund generally will have rights that are more limited than the rights of Lenders
or of persons who acquire a Senior Loan by Assignment. In a Participation the
Fund typically has a contractual relationship with the Lender selling the
Participation, but not with the Borrower. As a result, the Fund assumes the
credit risk of the Lender selling the Participation in addition to the credit
risk of the Borrower. In the event of the insolvency of the Lender selling the
Participation, the Fund may be treated as a general creditor of the Lender and
may not have a senior claim to the Lenders' interest in the Senior Loan.
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Investment in Foreign Issuers
The Fund may invest up to 20% of its total assets, measured at the time of
investment, in U.S. dollar-denominated Senior Loans to Borrowers that are
organized or located in countries outside the U.S. Although the Senior Loans
will require payment of interest and principal in U.S. dollars, these Borrowers
may have significant non-U.S. dollar revenues. Investment in foreign issuers
involves special risks, including that foreign firms may be subject to less
rigorous accounting and reporting requirements than U.S. issuers, less rigorous
regulatory requirements; differing legal systems and laws relating to creditors'
rights; the potential inability to enforce legal judgments; economic adversity
if the value of the issuer's non-U.S. dollar-denominated revenues were to fall
(in U.S. dollar-denominated terms) because of fluctuations in currency values;
and the potential for political, social and economic adversity.
Fund Borrowings
The Fund is authorized to borrow money in an amount up to 33 1/3% of the Fund's
total assets (including the amount borrowed) to finance repurchases of Shares.
The rights of any of the Fund's lenders to receive interest and principal
payments on these borrowings will be senior to the rights of shareholders. The
loan agreement for any borrowing likely will limit certain activities of the
Fund, including the payment of dividends to shareholders in certain
circumstances. Interest payments and fees incurred on these borrowings will
reduce the amount of net income available for payment to shareholders.
Borrowings may also result in greater volatility in the Fund's net asset value.
The Fund will not borrow to create financial leverage. Accordingly, the Fund
will not purchase additional portfolio securities at any time that borrowings
exceed 5% of the Fund's total assets (including the amount borrowed).
Equity Securities and Junior Debt Securities
Warrants, equity securities and junior debt securities have a subordinate claim
on a Borrower's assets as compared to Senior Loans. As a result, the values of
warrants, equity securities and junior debt securities generally are more
dependent on the financial condition of the Borrower and less dependent on
fluctuations in interest rates than are the values of many debt securities. The
values of warrants, equity securities and junior debt securities may be more
volatile than those of Senior Loans and thus may increase the volatility of the
Fund's net asset value.
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Investment Practices and Special Risks
The Fund may use interest rate and other hedging transactions, lend portfolio
holdings, purchase and sell Senior Loans and other securities on a "when issued"
or "delayed deliver" basis, and use repurchase and reverse repurchase
agreements. These investment practices involve risks. Although the Adviser
believes that these investment practices may aid the Fund in achieving its
investment objective, there is no assurance that these practices will achieve
this result.
Interest Rate and Other Hedging Transactions
The Fund may enter into various interest rate hedging and risk management
transactions. Certain of these interest rate hedging and risk management
transactions may be considered to involve derivative instruments. A derivative
is a financial instrument whose performance is derived at least in part from the
performance of an underlying index, security or asset. The values of certain
derivatives can be affected dramatically by even small market movements,
sometimes in ways that are difficult to predict. There are many different types
of derivatives, with many different uses. The Fund expects to enter into these
transactions primarily to seek to preserve a return on a particular investment
or portion of its portfolio, and may also enter into such transactions to seek
to protect against decreases in the anticipated rate of return on floating or
variable rate financial instruments the Fund owns or anticipates purchasing at a
later date, or for other risk management strategies such as managing the
effective dollar-weighted average duration of the Fund's portfolio. In addition,
the Fund may also engage in hedging transactions to seek to protect the value of
its portfolio against declines in net asset value resulting from changes in
interest rates or other market changes. The Fund does not intend to engage in
such transactions to enhance the yield on its portfolio to increase income
available for distributions. Market conditions will determine whether and in
what circumstances the Fund would employ any of the hedging and risk management
techniques described below. The Fund will not engage in any of the transactions
for speculative purposes and will use them only as a means to hedge or manage
the risks associated with assets held in, or anticipated to be purchased for,
the Fund's portfolio or obligations incurred by the Fund. The successful
utilization of hedging and risk management transactions requires skills
different from those needed in the selection of the Fund's portfolio securities.
The Fund believes that the Adviser possesses the skills necessary for the
successful utilization of hedging and risk management transactions. The Fund
will incur brokerage and other costs in connection with its hedging
transactions.
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Lending of Portfolio Holdings
The Fund may seek to increase its income by lending financial instruments in its
portfolio in accordance with present regulatory policies, including those of the
Board of Governors of the Federal Reserve System and the SEC. Such loans of Fund
portfolio assets may be made, without limit, to brokers, dealers, banks or other
recognized institutional borrowers of financial instruments and would be
required to be secured continuously by collateral, including cash, cash
equivalents or U.S. Treasury bills maintained on a current basis at an amount at
least equal to the market value of the financial instruments loaned. The Fund
would have the right to call a loan and obtain the financial instruments loaned
at any time on five days' notice. For the duration of a loan, the Fund would
continue to receive the equivalent of the interest paid by the issuer on the
financial instruments loaned and also would receive compensation from the
investment of the collateral. The Fund would not have the right to vote any
financial instruments having voting rights during the existence of the loan, but
the Fund could call the loan in anticipation of an important vote to be taken
among holders of the financial instruments or in anticipation of the giving or
withholding of their consent on a material matter affecting the financial
instruments. As with other extensions of credit, risks of delay in recovery or
even loss of rights in the collateral exist should the borrower of the financial
instruments fail financially. However, the loans would be made only to firms
deemed by the Adviser to be creditworthy and when, in the judgment of the
Adviser, the consideration which can be earned currently from loans of this type
justifies the attendant risk. The creditworthiness of firms to which the Fund
lends its portfolio holdings will be monitored on an ongoing basis by the
Adviser pursuant to procedures adopted and reviewed, on an ongoing basis, by the
Board of Trustees of the Fund. No specific limitation exists as to the
percentage of the Fund's assets which the Fund may lend.
"When Issued" and "Delayed Delivery" Transactions
The Fund may also purchase and sell interests in Senior Loans and other
portfolio securities on a "when issued" and "delayed delivery" basis. No income
accrues to the Fund on such interests or securities in connection with such
purchase transactions prior to the date the Fund actually takes delivery of such
interests or securities. These transactions are subject to market fluctuation;
the value of the interests in Senior Loans and other portfolio debt securities
at delivery may be more or less than their purchase price, and yields generally
available on such interests or securities when delivery occurs may be higher or
lower than yields on the interests or securities obtained pursuant to such
transactions. Because the Fund relies on the buyer or seller, as the case may
be, to consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. When the Fund is the buyer in such a
transaction, however, it will maintain, in a segregated account with its
custodian, cash or liquid securities having an aggregate value equal to the
amount of such purchase commitments until payment is made. The Fund will make
commitments to purchase such interests or securities on such basis only with the
intention of actually acquiring these interests or securities, but the Fund may
sell such interests or securities prior to the settlement date if such sale is
considered to be advisable. To the extent the Fund engages in "when issued" and
"delayed delivery" transactions, it will do so for the purpose of acquiring
interests or securities for the Fund's portfolio consistent with the Fund's
investment objective and policies and not for the purpose of investment
leverage. No specific limitation
21
<PAGE>
exists as to the percentage of the Fund's assets which may be used to acquire
securities on a "when issued" or "delayed delivery" basis.
Repurchase Agreements
The Fund may enter into repurchase agreements (a purchase of, and a simultaneous
commitment to resell, a financial instrument at an agreed upon price on an
agreed upon date) only with member banks of the Federal Reserve System and
member firms of the New York Stock Exchange. When participating in repurchase
agreements, the Fund buys securities from a vendor, e.g., a bank or brokerage
firm, with the agreement that the vendor will repurchase the securities at a
higher price at a later date. Such transactions afford an opportunity for the
Fund to earn a return on available cash at minimal market risk, although the
Fund may be subject to various delays and risks of loss if the vendor is unable
to meet its obligation to repurchase. Under the 1940 Act, repurchase agreements
are deemed to be collateralized loans of money by the Fund to the seller. The
Fund will treat repurchase agreements as Senior Loans.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements with respect to debt
obligations which could otherwise be sold by the Fund. A reverse repurchase
agreement is an instrument under which the Fund sells an underlying debt
instrument and simultaneously obtains the commitment of the purchaser (a
commercial bank or a broker or dealer) to sell the security back to the Fund at
an agreed-upon price and date. The Fund will maintain in a segregated account
with its custodian cash or liquid securities in an amount sufficient to cover
its obligations. The Fund receives payment for such securities only upon
physical delivery or evidence of book entry transfer by its custodian.
Regulations of the SEC require either that securities sold by the Fund under a
reverse repurchase agreement be segregated pending repurchase or that the
proceeds be segregated on the Fund's books and records pending repurchase.
Reverse repurchase agreements could involve certain risks in the event of
default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
Reverse repurchase agreements will be considered borrowings by the Fund. The
Fund will not hold more than 5% of the value of its total assets in reverse
repurchase agreements.
PURCHASE OF SHARES
You can choose from four classes of fund shares, each with a different
combination of sales charges, fees, eligibility requirements and other features.
Your financial adviser can help you determine which class is best for you.
How to Choose a Share Class
In deciding whether to purchase Class A, Class B, Class C or Class R shares, you
should consider:
. the amount of your purchase;
. how long you expect to hold the shares;
. whether an EWC would apply upon redemption;
22
<PAGE>
. the amount of any distribution or service fees that you may incur while you
own the shares;
. whether you will be reinvesting income or capital gain distributions in
additional shares;
For a summary of the charges and expenses for each class, please see the "Fund
Expenses."
During the initial offering period, the Fund will offer each class of shares at
a price of $10.00 per share. Thereafter, the Fund intends to engage in a
continuous public offering of each class of shares at net asset value per share.
You may purchase shares through any broker-dealer that is an Authorized Dealer.
You must make a minimum investment of $3,000 per share class ($1,000 for a
Traditional/Roth IRA account; $500 for an Education IRA account; and $50 through
systematic investment plan accounts) and make additional investments at any time
with as little as $50. These minimum amounts may be changed at any time in the
Fund's discretion. If you buy Fund shares through your broker-dealer, that
broker-dealer will place your order with Nuveen on your behalf.
Class A Shares
Class A shares currently are not available for direct purchase, except through
exchange of a Class A share of another Nuveen long-term mutual fund. The Fund
also will issue Class A shares upon conversion of your Class B shares. Class A
shares involve lower maximum expenses than Class B or Class C shares. Class A
shares are also subject to a service fee of __%, which compensates your
financial adviser for providing ongoing services to you.
Class B Shares
You can buy Class B shares at the net asset value per share without any initial
sales charge so that the full amount of your purchase is invested in the Fund.
However, you will pay a distribution fee of __% of average daily net assets and
a service fee of __% of average daily net assets. The service fee compensates
your financial adviser for providing ongoing services to you. The distribution
fee compensates Nuveen for paying your financial adviser a 3.00% sales
commission at the time of your purchase, which includes an advance of the first
year's service fee. If you sell your shares within five years of purchase, you
normally will have to pay an EWC based on either your purchase price or what you
sell your shares for, whichever amount is lower, according to the following
schedule. You do not pay a EWC on any Class B shares you purchase by reinvesting
dividends.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Years Since Purchase 0-1 1-2 2-3 3-4 4-5 5+
EWC 3.0% 2.5% 2.0% 1.5% 1.0% 0.0%
</TABLE>
Class B shares automatically convert to Class A shares six years after you buy
them so that the distribution fees you pay over the life of your investment are
limited. You will continue to pay a service fee on any converted Class B shares.
23
<PAGE>
Class C Shares
You can buy Class C shares at the net asset value per share without any initial
sales charge so that the full amount of your purchase is invested in the Fund.
However, you will pay a distribution fee of __% of average daily net assets and
a service fee of __% of average daily net assets. The annual service fee
compensates your financial adviser for providing ongoing service to you. The
distribution fee reimburses Nuveen for paying your financial adviser an ongoing
sales commission. Nuveen advances the first year's service and distribution
fees. If you sell your shares within 12 months of purchase, you normally will
have to pay a 1% EWC based on either your purchase price or what you sell your
shares for, whichever amount is lower.
Class R Shares
Under limited circumstances, you may purchase Class R shares at the net asset
value on the day of purchase. Class R shares are sold exclusively to certain
"eligible" investors, including (i) certain employees and directors of Nuveen
and its affiliates; (ii) employees of Authorized Dealers; (iii) bank trust
departments; (iv) investors exchanging from Class R shares of another Nuveen
fund; and (v) other individuals described in the SAI. Class R shares also may be
purchased through registered investment advisers, certified financial planners
and registered broker-dealers who charge asset-based or comprehensive "wrap"
fees for their services. The Fund reserves the right to change who it deems is
an eligible investor for purposes of acquiring Class R shares. You or your
financial adviser must notify Nuveen at the time of each purchase if you are
eligible to purchase Class R shares. Class R shares are not subject to sales
charges or ongoing service or distribution fees. Class R shares have lower
ongoing expenses than the other classes.
No Trading Market for Fund Shares
The Fund is designed for long-term investors. The Fund does not intend to list
its shares for trading on any securities exchange or automated quotation system.
There is not expected to be any secondary trading market in Fund shares. Fund
shares are illiquid. Even if the Fund does make repurchases, there is no
guarantee that you will be able to resell to the Fund all of Fund shares that
you desire to sell at any particular time.
Purchases During Initial Offering Period
Shares of the Fund are being offered during an initial period scheduled to end
on ___, 1999 on a best efforts basis through Nuveen, subject to the terms and
conditions of the Distribution Agreement. The initial offering period may be
modified by agreement between the Fund and Nuveen.
All subscriptions received by Authorized Dealers during the initial offering
period will be forwarded to the Fund on the expiration date of the initial
offering period, and shares will be issued subject to settlement of those
trades. Nuveen will not accept subscriptions from investors other than
Authorized Dealers prior to the expiration of the initial offering period. To
the extent that investors make payment to Authorized Dealers prior to the
expiration of the initial offering period, Authorized Dealers may benefit from
the temporary use of those monies.
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<PAGE>
Nuveen will compensate Authorized Dealers participating in the initial offering
period at a rate of _____% of the aggregate sales price of the shares purchased
from the Fund by or through such Authorized Dealers. Authorized Dealers that
submit orders for shares after the expiration of the initial offering period
will be compensated at a rate of 3.00% of the sales price. In addition, Nuveen
may, from time to time, pay or allow to Authorized Dealers a _____% commission
on the amount of shares of the Fund sold under the following conditions:
_______. The Fund and Nuveen reserve the right to withdraw, cancel or modify the
offering of shares during the initial offering period without notice and the
Fund reserves the right to refuse any order for shares in whole or in part.
Systematic Investing
Systematic investing allows you to make regular investments through automatic
deductions from your bank account (simply complete the appropriate section of
the account application form) or directly from your paycheck. To invest directly
from your paycheck, contact your financial adviser or call Nuveen at (800) 257-
8787. Systematic investing may also make you eligible for reduced sales charges.
The chart below illustrates the benefits of systematic investing based on a
$3,000 initial investment and subsequent monthly investments of $100 over 20
years. The example assumes you earn a return of 6%, 7% or 8% annually on your
investment and that you reinvest all dividends. These annual returns do not
reflect past or projected fund performance.
[CHART GOES HERE]
$80,000 --------Compounded 6%
$70,000 --------Compounded 7%
$60,000 --------Compounded 8%
$50,000 --------Investment Principal
$40,000
$30,000
$20,000
$10,000
$0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Year
One of the benefits of systematic investing is dollar cost averaging. Because
you regularly invest a fixed amount of money over a period of years regardless
of the share price, you buy more
25
<PAGE>
shares when the price is low and fewer shares when the price is high. As a
result, the average share price you pay should be less than the average share
price of fund shares over the same period. To be effective, dollar cost
averaging requires that you invest over a long period of time, and does not
assure that you will profit.
Systematic Investment Plan
You can make regular investments of $50 or more per month by authorizing us to
draw preauthorized checks on your bank account. You can stop the withdrawals at
any time. There is no charge for this plan.
Payroll Direct Deposit Plan
You can, with your employer's consent, make regular investments of $25 or more
per pay period (meeting the monthly minimum of $50) by authorizing your employer
to deduct this amount automatically from your paycheck. You can stop the
deductions at any time. There is no charge for this plan.
Distribution Arrangements
The Fund has entered into an Underwriting Agreement with Nuveen. Subject to the
terms and conditions of the Underwriting Agreement, the Fund may continuously
issue and sell its shares through Nuveen, which is the principal underwriter of
the shares, and through Authorized Dealers.
The Fund reserves the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders for any reason. Also, from time to
time, the Fund may temporarily suspend the offering of any class of its shares.
During the period of such suspension, persons who are already shareholders of
the Fund normally are permitted to continue to purchase additional shares of the
Fund and to have dividends reinvested.
Distribution and Service Plans
Nuveen serves as the selling agent and distributor of the Fund's shares. In this
capacity, Nuveen manages the offering of the Fund's shares and is responsible
for all sales and promotional activities. In order to reimburse Nuveen for its
costs in connection with these activities, including compensation paid to
Authorized Dealers, the Fund has adopted a distribution and service plan.
Nuveen receives the distribution fee for Class B and Class C shares primarily
for providing compensation to Authorized Dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A, Class B, and Class C shares to compensate Authorized Dealers, including
Nuveen, for providing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering shareholder
inquiries, and providing other personal services to shareholders. These fees
also compensate Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, the expenses of preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
26
<PAGE>
paid out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
HOW TO SELL SHARES
In order to provide shareholders with liquidity and the ability to receive net
asset value on a disposition of shares, the Fund, pursuant to a fundamental
policy that may only be changed upon approval of the Fund's shareholders, will
make quarterly offers to repurchase a percentage of its outstanding shares at
net asset value (each, a "Repurchase Offer"). The first Repurchase Offer will
commence in ____, 2000. Because the Fund is a closed-end investment company,
shareholders will not be able to redeem their shares on a daily basis like they
would with an open-end mutual fund. It is unlikely that a secondary market for
the Fund's shares will develop, and neither Nuveen nor the Authorized Dealers
will engage in any efforts to develop a secondary market.
It is anticipated that each quarterly "Repurchase Request Deadline" will be 5:00
p.m. Central time on the first Friday on or after the 7th business day of the
months of ____,____,____, and ____. The Fund may determine the net asset value
applicable to repurchases no later than the 14th calendar day (or, if not a
business day, the next business day) after the Repurchase Request Deadline (the
"Pricing Date"). The Fund will distribute payment to shareholders on or before
the "Repurchase Payment Deadline," which will be no later than seven calendar
days after Pricing Date. Repurchase proceeds will be paid by wire transfer or
check. Shareholders of record of the Fund will be sent notification of each
Repurchase Offer ___ to ___ days prior to the Repurchase Request Deadline for a
Repurchase Offer.
Repurchase Amount
Each quarter, the Fund's Board of Trustees will determine the percentage of
shares to be repurchased ("Repurchase Amount").
. The Repurchase Amount may vary from 5% to 25% of shares outstanding on the
Repurchase Request Deadline.
. The Fund also may offer to repurchase its shares on an additional date
between regular quarterly repurchases at the Fund's discretion. Such
discretionary additional repurchases may not be made more frequently than
once every two years (or more frequently if an exemption is obtained from
this limitation).
. There is no minimum number of shares that must be tendered before the Fund
will honor repurchase requests. In other words, if, in the aggregate, only
one share is tendered in a given quarter, the Fund must repurchase it.
However, there is a maximum Repurchase Amount, so shareholders should be
aware of the risk that the Fund may not be able to repurchase all shares
tendered in any given quarter.
27
<PAGE>
Repurchase Requests
Shareholders of record will be sent a Notification of Repurchase Offer
("Notification") 21 to 42 days before the next Repurchase Request Deadline. The
Notification will provide information about the Repurchase Offer, including
. the Repurchase Amount
. the Repurchase Request Deadline
. the manner of submitting a Repurchase Request and
. the means by which shareholders may obtain the Fund's net asset value.
Shareholders who wish to tender shares for repurchase must notify the Fund on or
before the Repurchase Request Deadline in the manner designated by the Fund in
the Notification. The Repurchase Request Deadline is a deadline that will be
strictly observed. Repurchase Requests may not be revoked after the Repurchase
Request Deadline. Shareholders that fail to submit Repurchase Requests in good
order by this deadline will be unable to liquidate shares until a subsequent
Repurchase Offer.
A shareholder may tender all or a portion of his or her holdings (although the
Fund may not be able to repurchase the shareholder's entire tender amount if
aggregate tenders exceed the Repurchase Amount (as discussed further below)).
However, a shareholder's tax results may differ depending on whether the
shareholder has tendered all or only a portion of his or her shares. See "Tax
Matters."
. Any shareholder of record may request that the Fund repurchase his or her
shares pursuant to the terms and conditions described above.
. When shares are held for the account of a shareholder by the Fund's
transfer agent, the shareholder may submit such shares for repurchase by
sending a written request with signatures guaranteed to
______________________________.
. When certificates for shares have been issued, they must be mailed to or
deposited with the Shareholder Service Agent and accompanied by a written
request for repurchase.
Repurchase requests must be endorsed by the account holder with signatures
guaranteed by a commercial bank, trust company, savings and loan association,
federal savings bank, member firm of a securities exchange or other eligible
financial institution. The repurchases must be signed exactly as the account is
registered including any special capacity of the registered owner. Additional
documentation may be requested, and a signature guarantee is normally required,
from institutional and fiduciary account holders, such as corporations,
custodians (e.g., under the Uniform Transfers to Minors Act), executors,
administrators, trustees or guardians.
If the proceeds of the repurchase (prior to the imposition of any EWC) are
$50,000 or less and the proceeds are payable to the shareholder of record at the
address of record, normally a written request without a signature guarantee is
sufficient for repurchases by account holders, and trust,
28
<PAGE>
executor, guardian and custodian account holders, provided the trustee,
executor, guardian, or custodian is named in the account registration.
Other institutional account holders may exercise this special feature of
tendering shares for repurchase by written request without signature guarantee
subject to the same conditions as individual account holders and subject to the
limitation on liability described below, provided that this privilege has been
pre-authorized by the institutional account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. This privilege of
tendering shares for repurchase by written request without a signature guarantee
may not be used if the shareholder's account has had an address change within 30
days of the Repurchase Request Deadline.
The Fund or its agents may be liable for any losses, expenses or costs arising
out of fraudulent or unauthorized requests pursuant to the pre-authorized
privilege for institutional account holders to tender shares for redemption in
writing without signature guarantee and the pre-authorized privilege of sending
proceeds of repurchases by federal wire transfer unless the Fund or its agents
reasonably believe, based upon reasonable verification procedures, that the
written instructions are genuine. The shareholder will bear the risk of loss,
including loss resulting from fraudulent or unauthorized transactions, so long
as reasonable verification procedures are followed. Verification procedures
include requiring certain identifying information before acting upon
instructions and sending written confirmations.
Determination of Repurchase Price
The Fund will establish the Repurchase Price at a share's net asset value on the
Pricing Date. The Fund will compute net asset value daily (as described under
"Net Asset Value" below), and shareholders may obtain daily net asset values by
calling 800-257-8787.
The Fund does not presently intend to deduct any repurchase fees from repurchase
proceeds (other than any applicable EWC). However, in the future, the Board of
Trustees may determine to charge a repurchase fee payable to the Fund to
compensate the Fund for its reasonable expenses directly related to the
repurchase. These fees could be used to compensate the Fund for, among other
things, its costs incurred in disposing of securities or in borrowing in order
to make payment for repurchased shares. Any repurchase fee will not exceed two
percent of the proceeds of the repurchase, unless permitted by applicable
regulation or exemption therefrom, and will be charged to all repurchased shares
on a pro rata basis. The Board may implement repurchase fees without a
shareholder vote.
Oversubscribed Repurchase Offers; Pro Rata Allocation
In any given quarter shareholders may tender a number of shares that in the
aggregate exceeds the Repurchase Offer Amount (this Prospectus refers to this
situation as an "Oversubscribed Repurchase Offer"). In the event of an
Oversubscribed Repurchase Offer, the Fund may, but is not required to,
repurchase additional shares up to a maximum aggregate of two percent of the
shares outstanding on the Repurchase Request Deadline ("Additional Repurchase
Amount"). If the Fund determines not to repurchase the Additional Repurchase
Amount, or if shareholders
29
<PAGE>
tender an amount exceeding the Repurchase Offer Amount, the Fund will repurchase
the shares on a pro rata basis.
In the event of an Oversubscribed Repurchase Offer, shareholders may be unable
to liquidate some or all of their Fund shares during that quarterly Repurchase
Offer. A shareholder may have to wait until the next quarter to tender shares
that the Fund is unable to repurchase, and would be subject to the risk of net
asset value fluctuations during this time period.
Other Considerations Relating to Repurchases
. The Fund must maintain liquid assets equal to the Repurchase Offer Amount
from the time that the Notification is sent to shareholders until the
Repurchase Date. In connection with this requirement, the Fund will
maintain a percentage of its net assets equal to at least 100 percent of
the Repurchase Amount in assets: (a) that can be sold or disposed of in the
ordinary course of business at approximately the price at which the Fund
has valued the asset within the time period between the Repurchase Request
Deadline and the Repurchase Payment Deadline; or (b) that mature by the
Repurchase Payment Deadline.
. The Fund intends to finance Repurchase Offers with cash on hand, cash
raised through borrowings, or the liquidation of portfolio securities.
There is some risk that the need to sell Senior Loans to fund Repurchase
Offers may affect the market for those Senior Loans. In turn, this could
diminish the Fund's net asset value per share.
. Although the Board believes that Repurchase Offers generally will be
beneficial to the Fund's shareholders, repurchases will decrease the Fund's
total assets and therefore have the possible effect of increasing the
Fund's expense ratio. Furthermore, if the Fund borrows to finance
repurchases, interest on that borrowing may reduce the Fund's net
investment income. The Fund intends to offer new shares continuously after
the expiration of the initial offering period, which may alleviate these
potential consequences, although there is no assurance that the Fund will
be able to sell additional shares.
. Repurchase Offers provide shareholders with the opportunity to dispose of
shares at net asset value. The Fund does not anticipate that a secondary
market will develop, but in the event that a secondary market were to
develop, it is possible that shares would trade in that market at a
discount to net asset value. The existence of periodic Repurchase Offers at
net asset value may not alleviate such a discount.
Suspension or Postponement of a Repurchase Offer
The Fund may suspend or postpone a Repurchase Offer in limited circumstances,
and only by vote of a majority of the Board, including a majority of the Fund's
Trustees who are not interested persons of the Fund. These circumstances include
the following:
. if the repurchase would cause the Fund to lose its status as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986
(the "Code");
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<PAGE>
. for any period during which an emergency exists as a result of which it is
not reasonably practicable for the Fund to dispose of securities it owns or
to determine the value of the Fund's net assets; or
. for any other periods that the SEC permits by order for the protection of
shareholders.
In addition, although the Fund currently does not intend to list its shares on a
securities exchange or trade its shares on an inter-dealer quotation system of a
national securities association (e.g., Nasdaq), if it does so in the future, the
Fund may suspend or postpone a Repurchase Offer in the event that:
. the repurchase would cause the shares to lose their status on such exchange
or inter-dealer quotation system; or
. during any period in which any market on which the shares are principally
traded is closed, or during any period in which trading on the market is
restricted.
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
trading (normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated by taking the fair
value of the Fund's total assets, including interest or dividends accrued but
not yet collected, less liabilities, and dividing by the total number of shares
outstanding. The result, rounded to the nearest cent, is the net asset value per
share.
Interests in senior loans will be valued by the Adviser on behalf of the
Fund on the basis of market quotations and transactions in instruments which the
Adviser believes may be comparable to senior loan interests with respect to the
following characteristics: credit quality, interest rate, interest rate reset
period and maturity. Such instruments may include commercial paper, negotiable
certificates of deposit and short-term variable rate securities which have
adjustment periods comparable to the senior loan interests in the Fund's
portfolio. In determining the relationship between such instruments and the
senior loan interests in the Fund's portfolio, the Adviser will consider on an
ongoing basis, among other factors, (i) the credit worthiness of the Borrower
and (ii) the current interest rate, the period until next interest rate reset
and maturity of such senior loan interests. It is expected that the Fund's net
asset value will fluctuate as a function of interest rate and credit factors.
Because of the short-term nature of such instruments, however, the Fund's net
asset value is expected to fluctuate less in response to changes in interest
rates than the net asset values of investment companies with portfolios
consisting primarily of fixed-income or longer term securities.
The Adviser believes that Lenders selling senior loan interests or
otherwise involved in a senior loan transaction may tend, in valuing senior loan
interests for their own account, to be less sensitive to interest rate and
credit quality changes and, accordingly, the Adviser does not intend to rely
solely on such valuations in valuing the senior loan interests for the Fund's
account. In addition, because a secondary trading market in senior loans has not
yet fully developed, in valuing senior loans, the Adviser may not rely solely on
but may consider, to the extent the Adviser believes such information to be
reliable, prices or quotations provided by banks, dealers
31
<PAGE>
or pricing services with respect to secondary market transactions in senior
loans. To the extent that an active secondary market in Senior Loan interests
develops to a reliable degree, the Adviser may rely to an increasing extent on
such market prices and quotations in valuing the Senior Loan interests in the
Fund's portfolio. In light of the senior nature of Senior Loan interests that
may be included in the Fund's portfolio and taking into account the Fund's
access to non-public information with respect to Borrowers relating to such
Senior Loan interests, the Adviser does not currently believe that consideration
on a systematic basis of ratings provided by any nationally recognized
statistical rating organization or price fluctuations with respect to long- or
short-term debt of such Borrowers subordinate to the Senior Loans of such
Borrowers is necessary for the determination of the value of such Senior Loan
interests. Accordingly, the Adviser generally will not systematically consider
(but may consider in certain instances) and, in any event, will not rely upon
such ratings or price fluctuations in determining the value of Senior Loan
interests in the Fund's portfolio.
All valuations are subject to review by the Fund's Board or its delegate,
the Adviser. See the SAI "Net Asset Value" for additional information.
SPECIAL SERVICES
Exchanges
You may exchange Fund shares into an identically registered account during any
quarterly repurchase period for the same class of another Nuveen mutual fund
available in your state. Your exchange must meet the minimum purchase
requirements of the fund into which you are exchanging. The Fund will treat the
EWC's on Class B and Class C shares as if they were contingent deferred sales
charges. In addition, at any time, you may exchange your shares of any Nuveen
long-term mutual fund into shares of the Fund. Because an exchange is treated
for tax purposes as a concurrent sale and purchase and any gain may be subject
to tax, you should consult your tax adviser about the tax consequences of any
contemplated exchange.
The exchange privilege is not intended to allow you to use the Fund for short-
term trading. Because excessive exchanges may interfere with portfolio
management, raise fund operating expenses or otherwise have an adverse effect on
other shareholders, the Fund reserves the right to revise or suspend the
exchange privilege, limit the amount or number of exchanges, or reject any
exchange. The Fund may change or cancel its exchange policy at any time upon 60
days' notice.
Reinstatement Privilege
If you redeem fund shares, you may reinvest all or part of your redemption
proceeds up to one year later without incurring any additional charges. You may
only reinvest into the same share class you redeemed. If you paid a EWC, we will
refund your EWC and reinstate your holding period. You may use this
reinstatement privilege only once for any given shares.
Fund Direct (SM)
You may link your Fund account to your bank account and transfer money
electronically between these accounts and perform a variety of account
transactions, including buying shares
32
<PAGE>
by telephone and systematic investing. You may also have dividends,
distributions or, repurchase payments sent directly to your bank account.
Your financial adviser can help you complete the forms for these services, or
you can call Nuveen at (800) 257-8787 for copies of the necessary forms.
DESCRIPTION OF THE FUND
The Fund was organized as a Massachusetts business trust on June 28, 1999, and
is registered with the SEC as a closed-end management investment company. The
Fund's Declaration of Trust, a copy of which is on file in the office of the
Secretary of State of the State of Massachusetts and which is included in the
Fund's registration statement of which this Prospectus is a part, authorizes the
issuance of an unlimited number of shares of beneficial interest without par
value. The Declaration of Trust provides that the Trustees may authorize
separate classes of shares of beneficial interest and may establish separate
series of shares, all without shareholder vote.
Under Massachusetts law, shareholders of a Massachusetts business trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the Fund. The Declaration of Trust contains an express disclaimer
of shareholder liability in connection with the Fund's property or the acts,
obligations or affairs of the Fund. The Declaration of Trust also provides for
indemnification out of the Fund's property of any shareholder held personally
liable for the claims and liabilities to which a shareholder may become subject
by reason of being or having been a shareholder. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Dividends, Voting and Liquidation Rights
Each common share of beneficial interest of the Fund has one vote and shares
equally in dividends and distributions when and if declared by the Fund and in
the Fund's net assets upon liquidation. All shares, when issued, are fully paid
and are non-assessable by the Fund. There are no preemptive or conversion rights
applicable to any of the common shares. Fund shares do not have cumulative
voting rights and, as such, holders of more than 50% of the shares voting for
trustees can elect all trustees and the remaining shareholders would not be able
to elect any Trustees. The Fund does not intend to hold annual meetings of
shareholders.
Status of Shares
The Board of Trustees may classify or reclassify any issued or unissued shares
of the Fund into shares of any series by redesignating such shares or by setting
or changing in any one or more respects, from time to time, prior to the
issuance of such shares, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications, or terms or
conditions of repurchase of such shares. Any such classification or
reclassification will comply with the provisions of the 1940 Act.
33
<PAGE>
Fundamental and Non-Fundamental Policies of the Fund
The Fund's investment objective, Repurchase Offer Policy and the investment
restrictions of the Fund designated as fundamental as described in the SAI are
fundamental policies of the Fund and may not be changed without a "Majority
Vote" of the shareholders of the Fund. The term "Majority Vote" means the
affirmative vote of (a) more than 50% of the outstanding shares of the Fund or
(b) 67% or more of the shares present at a meeting if more than 50% of the
outstanding shares of the Fund are represented at the meeting in person or by
proxy, whichever is less. All other policies of the Fund may be modified by
resolution of the Board of Trustees of the Fund.
Anti-Takeover Provisions in the Declaration of Trust
The Fund's Declaration of Trust includes provisions that could have the effect
of limiting the ability of other entities or persons to acquire control of the
Fund or to change the composition of its Board of Trustees by discouraging a
third party from seeking to obtain control of the Fund. In addition, in the
event a secondary market were to develop in the shares, such provisions could
have the effect of depriving holders of shares of an opportunity to sell their
shares at a premium over prevailing market prices.
The Declaration of Trust requires the favorable vote of the holders of at least
two-thirds of the outstanding shares of the Fund then entitled to vote to
approve, adopt or authorize certain transactions with 5%-or-greater holders of
the common shares (a "Principal Shareholder") and their associates, unless the
Board of Trustees shall by resolution have approved a memorandum of
understanding with such holders, in which case normal voting requirements would
be in effect. For purposes of these provisions, a Principal Shareholder refers
to any person who, whether directly or indirectly and whether alone or together
with its affiliates and associates, beneficially owns 5% or more of the
outstanding shares of the Fund. The transactions subject to these special
approval requirements are: (i) the merger or consolidation of the Fund or any
subsidiary of the Fund with or into any Principal Shareholder; (ii) the issuance
of any securities of the Fund to any Principal Shareholder for cash; (iii) the
sale, lease or exchange of all or any substantial part of the assets of the Fund
to any Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purpose of such computation
all assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period); or (iv) the sale, lease or exchange to the Fund
or any subsidiary thereof, in exchange for securities of the Fund, of any assets
of any Principal Shareholder (except assets having an aggregate fair market
value of less than $1,000,000, aggregating for the purposes of such computation
all assets sold, leased or exchanged in any series of similar transactions
within a twelve-month period).
A Trustee may be removed from office without cause by a written instrument
signed by at least two-thirds of the remaining trustees or by a vote of the
holders of at least two-thirds of the Fund's common shares of beneficial
interest.
Conversion of the Fund from a "closed-end company" to an "open-end company"
under the 1940 Act will require the vote of the holders of two-thirds of the
shares outstanding. However, if such
34
<PAGE>
conversion is unanimously recommended by the Trustees, the Majority Vote of the
shareholders of the Fund will be sufficient to authorize conversion.
The Board of Trustees has determined that the voting requirements described
above, which, in some cases, are greater than the minimum requirements under
Massachusetts law or the 1940 Act, are in the best interests of shareholders
generally. Reference should be made to the Declaration of Trust on file with the
SEC for the full text of these provisions.
MANAGEMENT OF THE FUND
Trustees and Officers
The Board of Trustees is responsible for the management of the Fund, including
supervision of the duties performed by the Adviser. There are six trustees of
the Fund, one of whom is an "interested person" (as defined in the 1940 Act) and
five of whom are not "interested persons." The names and business addresses of
the trustees and officers of the Fund and their principal occupations and other
affiliations during the past five years are set forth under "Trustees and
Officers" in the Statement of Additional Information.
Adviser
Nuveen Senior Loan Asset Management Inc., 333 West Wacker Drive, Chicago, IL
60606, serves as the investment adviser to the Fund. In this capacity, the
Adviser is responsible for the selection and on-going monitoring of the
securities in the Fund's investment portfolio, managing the Fund's business
affairs and providing certain clerical, bookkeeping and other administrative
services. The Adviser is a wholly-owned subsidiary of The John Nuveen Company,
the parent of Nuveen.
Nuveen is the sponsor and principal underwriter of the Fund's shares and has
sponsored or underwritten more than $60 billion investment company securities.
Nuveen and its affiliates have more than $50 billion in assets under management.
Today it offers a broad range of quality investments designed for individuals
seeking to building and maintain wealth.
Day-to-day investment operations and execution of a specific investment
strategies is the responsibility of the Adviser. The Adviser manages the Fund
using a team of analysts and portfolio managers that focus on a specific group
of funds.
Jeffery W. Maillet is the Executive Managing Director of the Adviser and is
primarily responsible for the day to day management of the Fund's portfolio.
Mr. Maillet has been employed by Adviser since August 1999. Prior to joining
the Adviser, Mr. Maillet was a Senior Vice President of Van Kampen Investment
Advisory Corp. Mr. Maillet has 18 years experience in managing portfolios and
creating investments, particularly those featuring floating rate senior
collateralized loans to companies and other entities in diverse industries and
regions.
Management Fees
For providing these services, the Adviser is paid an annual fund management fee
according to the following schedule:
35
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Average Daily Net Asset Value Management Fee
- --------------------------------------------------------------------------------
<S> <C>
Less than $1.0 billion _____%
- --------------------------------------------------------------------------------
$1.0 billion to $2.0 billion _____%
- --------------------------------------------------------------------------------
$2.0 billion to $5.0 billion _____%
- --------------------------------------------------------------------------------
$5.0 billion to $10.0 billion _____%
- --------------------------------------------------------------------------------
$10.0 billion and over _____%
- --------------------------------------------------------------------------------
</TABLE>
Custodian
The Fund's securities and cash are held under a custodian agreement by _____
whose principal place of business is ______
Transfer Agent, Shareholder Services Agent and Dividend Paying Agent
Chase Global Funds Services Company, 73 Tremont Street, Boston, Massachusetts
02108, serves as transfer agent, shareholder services agent and dividend paying
agent for the Fund's shares.
Year 2000 Readiness
Like other investment companies and financial and business organizations
worldwide, the Fund could be adversely affected if computer systems on which the
Fund relies, which primarily include those used by the Adviser, its affiliates
or other service providers, are unable to process correctly date-related
information on and after January 1, 2000. This risk is commonly called the Year
2000 Issue. Failure to address successfully the Year 2000 Issue could result in
interruptions to and other material adverse effects on the Fund's business and
operations. The Adviser has commenced a review of the Year 2000 Issue as it may
affect the Fund and is taking steps it believes are reasonably designed to
address the Year 2000 Issue, although there can be no assurances that these
steps will be sufficient. In addition, there can be no assurances that the Year
2000 Issue will not have an adverse effect on the companies whose senior loan
assets are held by the Fund or on global markets or economies generally.
36
<PAGE>
DISTRIBUTIONS
The fund pays dividends monthly and any taxable capital gains once a year in
December. The fund declares dividends daily to shareholders of record as of the
ninth of each month, generally payable the first business day of the following
month.
Payment and Reinvestment Options
The fund automatically reinvests your dividends in additional fund shares unless
you request otherwise. You may request to have your dividends paid to you by
check, deposited directly into your bank account, paid to a third party, sent to
an address other than your address of record or reinvested in shares of another
Nuveen fund. For further information, contact your financial adviser or call
Nuveen at 800-257-8787.
TAX MATTERS
The Fund intends to operate as a "regulated investment company" under the Code.
To do so, the Fund must meet certain income, distribution and diversification
requirements. In any fiscal year in which the Fund so qualifies and distributes
to shareholders substantially all of its net investment income and net capital
gains, the Fund itself is generally relieved of any federal income or excise
tax.
All dividends and capital gains distributed to shareholders are taxable whether
they are reinvested or received in cash, unless the shareholder is exempt from
taxation or entitled to tax deferral. Dividends paid out of the Fund's
investment company taxable income (including interest, dividends, if any, and
net short-term capital gains) will be taxable to shareholders as ordinary
income. If a portion of the Fund's income consists of dividends paid by U.S.
corporations, a portion of the dividends paid by the Fund may be eligible for
the corporate dividends-received deduction. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital losses),
if any, designated as capital gain dividends are taxable as long-term capital
gains, regardless of how long a shareholder has held the Fund's shares, and will
generally be subject to a maximum federal tax rate of 20%. Early each year,
shareholders will be notified as to the amount and federal tax status of all
dividends and capital gains paid during the prior year. Such dividends and
capital gains may also be subject to state or local taxes. Dividends declared in
October, November, or December with a record date in such month and paid during
the following January will be treated as having been paid by the Fund and
received by shareholders on December 31 of the calendar year in which declared,
rather than the calendar year in which the dividends are actually received.
If, pursuant to an offer by the Fund to repurchase its shares, a shareholder
tenders all shares of the Fund that he or she owns or is considered to own, the
shareholder may realize a taxable gain or loss. This gain or loss will be
treated as capital gain or loss if the Fund shares are held as capital assets
and will be long-term or short-term depending upon the shareholder's holding
period for the shares. If, pursuant to an offer by the Fund to repurchase its
shares, a shareholder tenders less than all of the shares of the Fund that he or
she owns or is considered to own, the repurchase may not qualify as a sale or
exchange, and the proceeds received may be treated as a dividend, return of
capital or capital gain, depending on the Fund's earning and profits and the
37
<PAGE>
shareholder's basis in the tendered shares. If that occurs, there is a remote
risk that non-tendering shareholders may be considered to have received a deemed
distribution as a result of the Fund's purchase of tendered shares, and all or a
portion of that deemed distribution may be taxable as a dividend.
If a shareholder has not furnished a certified correct taxpayer identification
number (generally a Social Security number) and has not certified that
withholding does not apply, or if the Internal Revenue Service has notified the
Fund that the taxpayer identification number listed on the account is incorrect
or that the shareholder is subject to backup withholding, federal law generally
requires the Fund to withhold 31% from any dividends and/or repurchases
(including exchange repurchases). Amounts withheld are applied to federal tax
liability; a refund may be obtained from the Internal Revenue Service if
withholding results in overpayment of taxes. Federal law also requires the Fund
to withhold 30% or the applicable tax treaty rate from ordinary income dividends
paid to certain non-resident alien and other non-U.S. shareholder accounts.
Congress is currently considering amendments to the federal income tax laws that
could, if enacted, alter the tax rates applicable to ordinary income and capital
gains and make other changes that could be relevant to shareholders of the Fund.
It cannot be predicted whether any of these changes (or other legislative
amendments) will become law or when they will take effect.
This is a brief summary of some of the current federal income tax laws that
affect an investment in the Fund. Please see the SAI and a tax adviser for
further information.
38
<PAGE>
LEGAL MATTERS
The validity of the shares offered hereby will be passed on for the Fund by
Bell, Boyd & Lloyd, Chicago, Illinois, counsel to the Fund. Bell, Boyd & Lloyd
may rely as to certain matters of Massachusetts law on the opinion of Bingham,
Dana LLP, Boston, Massachusetts.
39
<PAGE>
TABLE OF CONTENTS OF
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO.............................. B-1
REPURCHASE OFFER FUNDAMENTAL.............................................. B-12
MANAGEMENT................................................................ B-12
PRINCIPAL SHAREHOLDERS.................................................... B-18
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT.................... B-18
DISTRIBUTION ARRANGEMENTS................................................. B-19
PORTFOLIO TRANSACTIONS.................................................... B-22
LIQUIDITY REQUIREMENTS.................................................... B-23
NET ASSET VALUE........................................................... B-24
TAX MATTERS............................................................... B-25
PERFORMANCE INFORMATION................................................... B-30
ADDITIONAL INFORMATION ON FUND SHARES..................................... B-32
INDEPENDENT PUBLIC ACCOUNTANTS, CUSTODIAN AND TRANSFER AGENT.............. B-35
FINANCIAL STATEMENTS...................................................... B-35
APPENDIX A................................................................ A-1
</TABLE>
40
<PAGE>
NUVEEN MUTUAL FUNDS
Nuveen offers a variety of mutual funds designed to help you reach your
financial goals. The funds below are grouped by investment objectives.
Growth
Nuveen Rittenhouse Growth Fund
Growth and Income
European Value Fund
Growth and Income Stock Fund
Balanced Stock and Bond Fund
Balanced Municipal and Stock Fund
Dividend and Growth Fund
Income
Income Fund
Floating Rate Fund
Tax-Free Income
National Municipal Bond Funds
Long-term
Insured Long-term
Intermediate-term
Limited-term
State Municipal Bond Funds
Arizona Louisiana North Carolina
California/1/ Maryland Ohio
Colorado Massachusetts/1/ Pennsylvania
Connecticut Michigan Tennessee
Florida Missouri Virginia
Georgia New Jersey Wisconsin
Kansas New Mexico
Kentucky New York/1/
Cash Reserves
Money Market Fund
Municipal Money Market Fund
California Tax-Exempt Money Market Fund
New York Tax-Exempt Money Market Fund
Several additional sources of information are available to you. The Statement of
Additional Information (SAI), incorporated by reference into this prospectus,
contains detailed information on fund policies and operation. Shareholder
reports contain management's discussion of market, conditions, investment
strategies and performance results as of the fund's latest semi-annual or annual
fiscal year end. Call Nuveen at (800) 257-8787 to request a free copy of any of
these materials or other fund information.
You may also obtain this and other fund information directly from the Securities
and Exchange Commission (SEC). The SEC may charge a copying fee for the
information. Visit the SEC on-line at http://www.sec.gov or in person at the
SEC's Public Reference Room in Washington, D.C. Call the SEC at (800) SEC 0330
for room hours and operation. You may also request fund information by writing
to the SEC's Public Reference Section, Washington, D.C. 20549.
- -------------------
/1/ Long-term and insured long-term portfolios.
Nuveen
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
(800) 257-8787
www.nuveen.com
- --------------
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus in connection with the offer made by this prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Fund or the Adviser. This prospectus does not constitute an
offer to sell or the solicitation of any offer to buy any security other than
the shares offered by this prospectus, nor does it constitute an offer to sell
or a solicitation of any offer to buy the shares by anyone in any jurisdiction
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any such
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information contained herein is
correct as of any time subsequent to the date hereof. However, if any material
change occurs while this prospectus is required by law to be delivered, this
prospectus will be amended or supplemented accordingly.
PROSPECTUS , 1999
<PAGE>
SUBJECT TO COMPLETION
DATED _________, 1999
The information in this statement of additional information is not complete
and may be changed. The Fund may not sell these securities until the
registration statement filed with the securities and exchange commission is
effective. This statement of additional information is not a prospectus.
NUVEEN FLOATING RATE FUND
STATEMENT OF ADDITIONAL INFORMATION
, 1999
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information should be read in conjunction with the
Prospectus for the Fund dated ______, 1999. This Statement of Additional
Information does not include all information that a prospective investor should
consider before purchasing shares of the Fund, and investors should obtain and
read the Prospectus prior to purchasing shares. The Prospectus may be obtained
without charge from certain securities representatives, banks, and other
financial institutions that have entered into sales agreements with John Nuveen
& Co. Incorporated, 333 West Wacker Drive, Chicago, Illinois 60606 or by calling
(800) 257-8787. Capitalized terms used but not defined in this Statement of
Additional Information have the meanings given to them in the Prospectus.
B-1
<PAGE>
TABLE OF CONTENTS
Page
----
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO.................. B-2
REPURCHASE OFFER FUNDAMENTAL POLICY........................... B-13
MANAGEMENT.................................................... B-13
PRINCIPAL SHAREHOLDERS........................................ B-19
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT........ B-19
DISTRIBUTION ARRANGEMENTS..................................... B-20
PORTFOLIO TRANSACTIONS........................................ B-23
LIQUIDITY REQUIREMENTS........................................ B-24
NET ASSET VALUE............................................... B-25
TAX MATTERS................................................... B-26
PERFORMANCE INFORMATION....................................... B-31
ADDITIONAL INFORMATION ON FUND SHARES......................... B-33
INDEPENDENT PUBLIC ACCOUNTANTS, CUSTODIAN AND TRANSFER AGENT.. B-36
FINANCIAL STATEMENTS.......................................... B-36
APPENDIX A.................................................... A-1
INVESTMENT POLICIES AND INVESTMENT PORTFOLIO
Investment Policies
The Fund's investment objective and certain fundamental investment policies
of the Fund are described in the Prospectus. The Fund, as a fundamental policy,
may not, without the approval of the holders of a majority of the shares of the
Fund:
1. Purchase any securities (other than obligations issued or guaranteed
by the United States Government or by its agencies or
instrumentalities), if as a result more than 10% of the Fund's total
assets would then be invested in securities of a single
B-2
<PAGE>
issuer or if as a result the Fund would hold more than 10% of the
outstanding voting securities of any single issuer; provided that,
with respect to 50% of the Fund's assets, the Fund may invest up to
25% of its assets in the securities of any one issuer. For purposes of
this restriction, the term issuer includes both the borrower under a
loan agreement and the lender selling a participation to the Fund
together with any other persons interpositioned between such lender
and the Fund with respect to a participation.
2. Purchase any security if, as a result of such purchase, 25% or more of
the Fund's total assets (taken at current value) would be invested in
the securities of borrowers and other issuers having their principal
business activities in the same industry (the electric, gas, water and
telephone utility industries, commercial banks, thrift institutions
and finance companies being treated as separate industries for
purposes of this restriction); provided, that this limitation shall
not apply with respect to obligations issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities.
3. Issue senior securities (including borrowing money or entering into
reverse repurchase agreements) in excess of 33 1/3% of its total
assets (including the amount of senior securities issued but excluding
any liabilities and indebtedness not constituting senior securities)
except that the Fund may borrow up to an additional 5% of its total
assets for temporary purposes, or pledge its assets other than to
secure such issuance or in connection with hedging transactions, when-
issued and delayed delivery transactions and similar investment
strategies. The Fund will not purchase additional portfolio securities
at any time that borrowings, including the Fund's commitments pursuant
to reverse repurchase agreements, exceed 5% of the Fund's total assets
(after giving effect to the amount borrowed).
4. Make loans of money or property to any person, except for obtaining
interests in Senior Loans in accordance with its investment objective,
through loans of portfolio securities or the acquisition of securities
subject to repurchase agreements.
5. Act as an underwriter of securities, except to the extent the Fund may
be deemed to be an underwriter in certain cases when disposing of its
portfolio investments or acting as an agent or one of a group of co-
agents in originating Senior Loans.
6. Purchase or sell real estate, commodities or commodities contracts
except pursuant to the exercise by the Fund of its rights under Loan
Agreements, except to the extent the interests in Senior Loans the
Fund may invest in are considered to be interests in real estate,
commodities or commodities contracts and except to the extent that
hedging instruments the Fund may invest in are considered to be
commodities or commodities contracts.
For purposes of investment restriction number 2, the Fund will consider all
relevant factors in determining whether to treat the Lender selling a
Participation and any persons
B-3
<PAGE>
interpositioned between such Lender and the Fund as an issuer, including: the
terms of the Loan Agreement and other relevant agreements (including inter-
creditor agreements and any agreements between such person and the Fund's
custodian); the credit quality of such Lender or interpositioned person; general
economic conditions applicable to such Lender or interpositioned person; and
other factors relating to the degree of credit risk, if any, of such Lender or
interpositioned person incurred by the Fund.
In addition to the foregoing fundamental investment policies, the Fund is
also subject to the following non-fundamental restrictions and policies, which
may be changed by the Board of Trustees. The Fund may not:
1. Sell any security "short," write, purchase or sell puts, calls or
combinations thereof, or purchase or sell financial futures or
options, except to the extent that the hedging transactions in which
the Fund may engage would be deemed to be any of the foregoing
transactions.
2. Invest in securities of other investment companies, except that the
Fund may purchase securities of other investment companies to the
extent permitted by (i) the 1940 Act, as amended from time to time,
(ii) the rules and regulations promulgated by the Securities and
exchange Commission under the 1940 Act, as amended from time to time,
or (iii) an exemption or other relief from the provisions of the 1940
Act. The Fund will rely on representations of Borrowers in Loan
Agreements in determining whether such Borrowers are investment
companies.
3. Make investments for the purpose of exercising control or
participation in management, except to the extent that exercise by the
Fund of its rights under Loan Agreements would be deemed to constitute
such control or participation.
The Fund generally will not engage in the trading of securities for the
purpose of realizing short-term profits, but it will adjust its portfolio as it
deems advisable in view of prevailing or anticipated market conditions to
accomplish the Fund's investment objective. For example, the Fund may sell
portfolio turnover will not be a limiting factor if the Fund considers it
advantageous to purchase or sell securities. The Fund anticipates that the
annual portfolio turnover rate of the Fund will not be in excess of 100%. A high
rate of portfolio turnover involves correspondingly greater expenses than a
lower rate, which expenses must be borne by the Fund and its shareholders.
The foregoing restrictions and limitations will apply only at the time of
purchase of securities, and the percentage limitations will not be considered
violated unless an excess or deficiency occurs or exists immediately after and
as a result of an acquisition of securities, unless otherwise indicated.
The foregoing fundamental investment policies, together with the investment
objective of the Fund, cannot be changed without approval by holders of a
"majority of the Fund's outstanding voting shares." As defined in the Investment
Company Act of 1940 (the "1940
B-4
<PAGE>
Act"), this means the vote of (i) 67% or more of the Fund's shares present at a
meeting, if the holders of more than 50% of the Fund's shares are present or
represented by proxy, or (ii) more than 50% of the Fund's shares, whichever is
less.
The Fund is a newly organized, non-diversified, closed-end management
investment company registered under the 1940 Act, that continuously offers its
shares to the public. The Fund will conduct quarterly repurchase offers for its
shares. The Fund's investment manager is Nuveen Senior Loan Asset Management,
Inc. (the "Adviser"). The Fund's name was changed from Nuveen Prime Rate Fund on
July 19, 1999. The Fund's investment objective is to seek a high level of
current income, consistent with the preservation of capital. The Fund's
principal office is located at 333 West Wacker Drive, Chicago, Illinois 60606.
The Fund is an entity commonly known as a "Massachusetts business trust."
Under Massachusetts law, shareholders of a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Fund and requires that notice of this
disclaimer be given in each agreement, obligation or instrument entered into or
executed by the Fund or the trustees. The Declaration of Trust further provides
for indemnification out of the assets and property of the Fund for all loss and
expense of any shareholder personally liable for the obligations of the Fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Fund itself were unable to meet its obligations. The
Fund believes the likelihood of these circumstances is remote.
Additional Information About the Fund's Investments
Originating Senior Loans. Senior Loans are typically arranged through
private negotiations between a Borrower and several Lenders represented in each
case by one or more such Lenders acting as Agent of the several Lenders. On
behalf of the several Lenders, the Agent, which is frequently the entity that
originates the Senior Loan and invites the other parties to join the lending
syndicate, will be primarily responsible for negotiating the Senior Loan
agreements that establish the relative terms, conditions and rights of the
Borrower and the several Lenders. The co-agents, on the other hand, are not
responsible for administration of a Senior Loan, but are part of the initial
group of Lenders that commit to providing funding for a Senior Loan. In large
transactions, it is common to have several Agents; however, one such Agent
typically has primary responsibility for documentation and administration of the
Senior Loan. The Agent is required to administer and manage the Senior Loan and
to service or monitor the collateral. The Agent is also responsible for the
collection of principal and interest and fee payments from the Borrower and the
apportionment of these payments to the credit of all Lenders which are parties
to the loan agreement. The Agent is charge with the responsibility of monitoring
compliance by the Borrower with the restrictive covenants in the loan agreement
and of notifying the Lenders of any adverse change in the Borrower's financial
condition. In addition, the Agent generally is responsible for determining
B-5
<PAGE>
that the Lenders have obtained a perfected security interest in the collateral
securing the Senior Loan.
Lenders generally rely on the Agent to collect their portion of the
payments on the Senior Loan and to use appropriate creditor remedies against the
Borrower. Typically under loan agreements, the Agent is given broad discretion
in enforcing the loan agreement and is obligated to use the same care it would
use in the management of its own property. The Borrower compensates the Agent
for these services. Such compensation may include special fees paid on
structuring and funding the Senior Loan and other fees paid on a continuing
basis. The precise duties and rights of an Agent are defined in the loan
agreement.
When the Fund is an Agent, it has, as a party to the loan agreement, a
direct contractual relationship with the Borrower and, prior to allocating
portions of the Senior Loan to Lenders, if any, assumes all risks associated
with the Senior Loan. The Agent may enforce compliance by the Borrower with the
terms of the loan agreement. Agents also have voting and consent rights under
the applicable loan agreement. Action subject to Agent vote or consent generally
requires the vote or consent of the holders of some specified percentage of the
outstanding principal amount of the Senior Loan, which percentage varies
depending on the relevant loan agreement. Certain decisions, such as reducing
the amount of increasing the time for payment of interest on or repayment of
principal of a Senior Loan, or releasing collateral therefor, frequently require
the unanimous or consent of all Lenders affected.
Pursuant to the terms of a loan agreement, the Fund as Agent typically has
sole responsibility for servicing and administering a loan on behalf of the
other Lenders. Each Lender in a Senior Loan is generally responsible for
performing their own credit analysis and their own investigation of the
financial condition of the Borrower. Generally, loan agreements will hold the
Fund liable for any action taken or omitted that amounts to gross negligence or
will misconduct. In the event of a Borrower's default on a loan, the loan
agreements provide that the Lenders do not have recourse against the Fund for
its activities as Agent. Instead, Lenders will be required to look to the
Borrower for recourse.
Acting in the capacity of an Agent in a Senior Loan may subject the Fund to
certain risks in addition to those associated with the Fund's current role as a
Lender. An Agent is charged with the above described duties and responsibilities
to Lenders and Borrowers subject to the terms of the loan agreement. Failure to
adequately discharge such responsibilities in accordance with the standard of
care set forth in the loan agreement may expose the Fund to liability for breach
of contract. If a relationship of trust is found between the Agent and the
Lenders, the Agent will be held to a higher standard of conduct in administering
the loan. In consideration of such risks, the Fund will invest no more than 10%
of its total assets in Senior Loans in which it acts as Agent or co-agent and
the size of any individual loan will not exceed 5% of the Fund's total assets.
Interest Rate and Other Hedging Transactions. The Fund may enter into
various interest rate hedging and risk management transactions. Certain of these
interest rate hedging and risk management transactions may be considered to
involve derivative instruments. A derivative is a
B-6
<PAGE>
financial instrument whose performance is derived at least in part from the
performance of an underlying index, security or asset. The values of certain
derivatives can be affected dramatically by even small market movements,
sometimes in ways that are difficult to predict. There are many different types
of derivatives, with many different uses. The Fund expects to enter into these
transactions primarily to seek to preserve a return on a particular investment
or portion of its portfolio, and may also enter into such transactions to seek
to protect against decreases in the anticipated rate of return on floating or
variable rate financial instruments the Fund owns or anticipates purchasing at a
later date, or for other risk management strategies such as managing the
effective dollar-weighted average duration of the Fund's portfolio. In addition,
the Fund may also engage in hedging transactions to seek to protect the value of
its portfolio against declines in net asset value resulting from changes in
interest rates or other market changes. The Fund does not intend to engage in
such transactions to enhance the yield on its portfolio to increase income
available for distributions. Market conditions will determine whether and in
what circumstances the Fund would employ any of the hedging and risk management
techniques described below. The Fund will not engage in any of the transactions
for speculative purposes and will use them only as a means to hedge or manage
the risks associated with assets held in, or anticipated to be purchased for,
the Fund's portfolio or obligations incurred by the Fund. The successful
utilization of hedging and risk management transactions requires skills
different from those needed in the selection of the Fund's portfolio securities.
The Fund believes that the Adviser possesses the skills necessary for the
successful utilization of hedging and risk management transactions. The Fund
will incur brokerage and other costs in connection with its hedging
transactions.
The Fund may enter into interest rate swaps or purchase or sell interest
rate caps or floors. The Fund will not sell interest rate caps or floors that it
does not own. Interest rate swaps involve the exchange by the Fund with another
party of their respective obligations to pay or receive interest, e.g., an
exchange of an obligation to make floating rate payments for an obligation to
make fixed rate payments. For example, the Fund may seek to shorten the
effective interest rate redetermination period of a senior bank loan in its
portfolio, the Borrower to which has selected an interest rate redetermination
period of one year. The Fund could exchange the Borrower's obligation to make
fixed rate payments for one year for an obligation to make payments that
readjust monthly. In such event, the Fund would consider the interest rate
redetermination period of such senior bank loan to be the shorter period.
The purchase of an interest rate cap entitles the purchaser, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest at the difference of the index and the predetermined rate
on a notional principal amount (the reference amount with respect to which
interest obligations are determined although no actual exchange of principal
occurs) from the party selling such interest rate cap. The purchase of an
interest rate floor entitles the purchaser, to the extent that a specified index
falls below a predetermined interest rate, to receive payments of interest at
the difference of the index and the predetermined rate on a notional principal
amount from the party selling such interest rate floor. The Fund will not enter
into swaps, caps or floors if, on a net basis, the aggregate notional principal
amount with respect to such agreements exceeds the net assets of the Fund.
B-7
<PAGE>
In circumstances in which the Adviser anticipates that interest rates will
decline, the Fund might, for example, enter into an interest rate swap as the
floating rate payor or, alternatively, purchase an interest rate floor. In the
case of purchasing an interest rate floor, if interest rates declined below the
floor rate, the Fund would receive payments from its counterparty which would
wholly or partially offset the decrease in the payments it would receive in
respect of the portfolio assets being hedged. In the case where the Fund
purchases such an interest rate swap, if the floating rate payments fell below
the level of the fixed rate payment set in the swap agreement, the Fund's
counterparty would pay the Fund amounts equal to interest computed at the
difference between the fixed and floating rates over the notional principal
amount. Such payments would offset or partially offset the decrease in the
payments the Fund would receive in respect of floating rate portfolio assets
being hedged.
The successful use of swaps, caps and floors to preserve the rate of return
on a portfolio of financial instruments depends on the Adviser's ability to
predict correctly the direction and extent of movements in interest rates.
Although the Fund believes that use of the hedging and risk management
techniques described above will benefit the Fund, if the Adviser's judgment
about the direction or extent of the movement in interest rates in incorrect,
the Fund's overall performance would be worse than if it had not entered into
any such transactions. For example, if the Fund had purchased an interest rate
swap or an interest rate floor to hedge against its expectation that interest
rates would decline but instead interest rates rose, the Fund would lose part or
all of the benefit of the increased payments it would receive as a result of the
rising interest rates because it would have to pay amounts to its counterparty
under the swap agreement or would have paid the purchase price of the interest
rate floor.
Inasmuch as these hedging transactions are entered into for good-faith risk
management purposes, the Adviser and the Fund believe such obligations do not
constitute senior securities. The Fund usually will enter into interest rate
swaps on a net basis, i.e., where the two parties make net payments with the
Fund receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of the Fund's obligations over
its entitlements for each interest rate swap will be accrued and an amount of
cash or liquid securities having an aggregate net asset value at least equal to
the accrued excess will be maintained in a segregated account by the Fund's
custodian. If the Fund enters into a swap on other than a net basis, the Fund
will maintain in the segregated account the full amount of the Fund's
obligations under each such swap. Accordingly, the Fund does not treat swaps as
senior securities. The Fund may enter into swaps, caps and floors with member
banks of the Federal Reserve System, members of the New York Stock Exchange or
other entities determined by the Adviser, pursuant to procedures adopted and
reviewed on an ongoing basis by the Board of Trustees, to be creditworthy. If a
default occurs by the other party to such transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction but
such remedies may be subject to bankruptcy and insolvency laws that could affect
the Fund's rights as a creditor. The swap market has grown substantially in
recent years with a large number of banks and financial services firms acting
both as principals and as Agents utilizing standardized swap documentation. As a
result, the swap market has become relatively liquid. Caps and floors are more
recent innovations and they are less liquid than swaps. There can be no
assurance, however, that the Fund will be able to enter into interest rate swaps
or to purchase interest rate
B-8
<PAGE>
caps of floors at prices or on terms the Adviser believes are advantageous to
the Fund. In addition, although the terms of interest rate swaps, caps and
floors may provide for termination, there can be no assurance that the Fund will
be able to terminate an interest rate swap or to sell or offset interest rate
caps or floors that it has purchased.
New financial products continue to be developed and the Fund may invest in
any such products as may be developed to the extent consistent with its
investment objective and the regulatory and federal tax requirements applicable
to investment companies.
High-Yield/High Risk Securities ("Junk Bonds"). The Fund may purchase
senior bank loans and other securities that are rated below investment grade or
are unrated but that the Adviser considers to be of comparable quality.
Securities rated below investment grade (BB/Ba or lower) are commonly known as
"high-yield," "high risk" or "junk" bonds. Junk bonds, while generally offering
higher yields than investment grade securities with similar maturities, involve
greater risks, including the possibility of default or bankruptcy. They are
regarded as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal. The special risk considerations in connection
with investments in these securities are discussed below. Refer to Appendix A of
this Statement of Additional Information for a discussion of securities ratings.
(1) Effect of Interest Rates and Economic Changes. The junk bond
market is relatively new and its growth has paralleled a long economic
expansion. As a result, it is not clear how this market may withstand a
prolonged recession or economic downturn. Such an economic downturn could
severely disrupt the market for and adversely affect the value of such
securities.
All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. In
addition, the market values of junk bonds tend to reflect individual
corporate developments to a greater extent than do the market values of
higher rated securities, which react primarily to fluctuations in the
general level of interest rates. Junk bonds also tend to be more sensitive
to economic conditions than are higher rated securities. As a result, they
generally involve more credit risk than securities in the higher rated
categories. During an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of junk bonds may experience
financial stress and may not have sufficient revenues to meet their payment
obligations. The risk of loss due to default by an issuer of these
securities is significantly greater than by an issuer of higher rated
securities because such securities are generally unsecured and are often
subordinated to other creditors. Further, if the issuer of a junk bond
defaults, the Fund may incur additional expenses to seek recovery. Periods
of economic uncertainty and changes would also generally result in
increased volatility in the market prices of these and thus in the Fund's
net asset value.
As previously stated, the value of a junk bond will generally decrease
in a rising interest rate market and, accordingly, so will the Fund's net
asset value. If the Fund experiences unexpected net redemptions in such a
market, it may be forced to liquidate a
B-9
<PAGE>
portion of its portfolio securities without regard to their investment
merits. Due to the limited liquidity of junk bonds, the Fund may be forced
to liquidate these securities at a substantial discount. Any such
liquidation would reduce the Fund's asset base over which expenses could be
allocated and could result in a reduced rate of return for the Fund.
(2) Payment Expectations. Junk bond securities typically contain
redemption, call, or prepayment provisions that permit the issuer of
securities containing such provisions to redeem the securities at its
discretion. During periods of falling interest rates, issuers of these
securities are likely to redeem or prepay the securities and refinance them
with debt securities with a lower interest rate. To the extent an issuer is
able to refinance the securities, or otherwise redeem them, the Fund may
have to replace the securities with a lower yielding securities, which
could result in a lower return for the Fund.
(3) Credit Ratings. Credit ratings are issued by credit rating
agencies and are indicative of the rated securities' safety of principal
and interest payments. They do not, however, evaluate the market value risk
of junk bonds and, therefore, may not fully reflect the true risks of such
an investment. In addition, credit rating agencies may not make timely
changes in a rating to reflect changes in the economy or in the condition
of the issuer that affect the value of the security. Consequently, credit
ratings are used only as a preliminary indicator of investment quality.
Investments in junk bonds will depend more upon credit analysis by the
Adviser than investments in investment grade debt securities. The Adviser
employs its own credit research and analysis, which includes a study of the
issuer's existing debt, capital structure, ability to service debts and pay
dividends, sensitivity to economic conditions, operating history, and
current earnings trend. The Adviser continually monitors the Fund's
investments and carefully evaluates whether to dispose of or to retain junk
bonds whose credit ratings or credit quality may have changed.
(4) Liquidity and Valuation. The Fund may have difficulty disposing
of certain junk bonds because there may be a thin trading market for such
securities. Not all dealers maintain markets in all junk bonds. As a
result, there is no established retail secondary market for many of these
securities. The Fund anticipates that such securities could be sold only to
a limited number of dealers or institutional investors. To the extent a
secondary trading market does exist, it is generally not as liquid as the
secondary market for higher rated securities. The lack of a liquid
secondary market may have an adverse impact on the market price of the
security. The lack of a liquid secondary market for certain securities may
also make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing its securities. Market quotations are
generally available on many junk bond issues only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales. During periods of thin trading, the spread between
bid and asked prices is likely to increase significantly. In addition,
adverse publicity and investor perceptions, whether or not based on
B-10
<PAGE>
fundamental analysis, may decrease the value and liquidity of junk bonds,
especially in a thinly traded market.
Equity Securities and Warrants. The Fund can invest up to 20% of its total
assets in warrants, equity securities and, and, in limited circumstances, junior
debt securities acquired in connection with the Fund's investments in senior
bank loans. Equity securities fluctuate in price, and short-term volatility at
times may be great. To the extent that the Fund invests in equity securities,
the value of the Fund's portfolio will be affected by changes in the stock
markets. Market risk can affect the Fund's net asset value per share, which will
fluctuate as the values of the Fund's portfolio holdings change. The prices of
individual stocks do not all move in the same direction uniformly or at the same
time. Different stock markets may behave differently from each other. Warrants
are options to purchase equity securities at prices valid for a specific period
of time. Their prices do not necessarily parallel to the prices of the
underlying securities. Warrants have no voting rights, no dividends and no
rights with respect to the assets of the issuer.
Short-Term Securities. During normal market conditions, the Fund may invest
up to 20% of its total assets in high quality, short-term debt securities with
remaining maturities of one year or less. These may include:
(1) U.S. government securities, including bills, notes and bonds differing
as to maturity and rates of interest that are either issued or guaranteed
by the U.S. Treasury or by U.S. government agencies or instrumentalities.
U.S. government agency securities include securities issued by (a) the
Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration, and the
Government National Mortgage Association, whose securities are supported by
the full faith and credit of the United States; (b) the Federal Home Loan
Banks, Federal Intermediate Credit Banks, and the Tennessee Valley
Authority, whose securities are supported by the right of the agency to
borrow from the U.S. Treasury; (c) the Federal National Mortgage
Association, whose securities are supported by the discretionary authority
of the U.S. government to purchase certain obligations of the agency or
instrumentality; and (d) the Student Loan Marketing Association, whose
securities are supported only by its credit. While the U.S. government
provides financial support to such U.S. government-sponsored agencies or
instrumentalities, no assurance can be given that it always will do so
since it is not so obligated by law. The U.S. government, its agencies, and
instrumentalities do not guarantee the market value of their securities.
Consequently, the value of such securities may fluctuate.
(2) Certificates of Deposit issued against funds deposited in a bank or a
savings and loan association. Such certificates are for a definite period
of time, earn a specified rate of return, and are normally negotiable. If
such certificates of deposit are non-negotiable, they will be considered
illiquid securities and be subject to the Fund's applicable restriction on
investment in illiquid securities. The issuer of a certificate of deposit
agrees to pay the amount deposited plus interest to the bearer of the
certificate on the dated specified thereon. Under current FDIC regulations,
the maximum insurance
B-11
<PAGE>
payable as to any one certificate of deposit is $100,000; therefore,
certificates of deposit purchased by the Fund may not be fully insured.
(3) Bankers' acceptances, which are short-term credit instruments used to
finance commercial transactions. Generally, an acceptance is a time draft
drawn on a bank by an exporter or an importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then "accepted" by a
bank that, in effect, unconditionally guarantees to pay the face value of
the instrument on its maturity date. The acceptance may then be held by the
accepting bank as an asset or it may be sold in the secondary market at the
going rate of interest for a specific maturity.
(4) Repurchase agreements, which involve purchases of debt securities. At
the time the Fund purchases securities pursuant to a repurchase agreement,
it simultaneously agrees to resell and redeliver such securities to the
seller, who also simultaneously agrees to buy back the securities at a
fixed price and time. This assures a predetermined yield for the Fund
during its holding period, since the resale price is always greater than
the purchase price and reflects an agreed-upon market rate. Such actions
afford an opportunity for the Fund to invest temporarily available cash.
The Fund may enter into repurchase agreements only with respect to
obligations of the U.S. government, its agencies or instrumentalities;
certificates of deposit; or bankers' acceptances in which the Fund may
invest. Repurchase agreements may be considered loans to the seller,
collateralized by the underlying securities. The risk to the Fund is
limited to the ability of the seller to pay the agreed-upon sum on the
repurchase date; in the event of default, the repurchase agreement provides
that the Fund is entitled to sell the underlying collateral. If the value
of the collateral declines after the agreement is entered into, and if the
seller defaults under a repurchase agreement when the value of the
underlying collateral is less than the repurchase price, the Fund could
incur a loss of both principal and interest. The Adviser monitors the value
of the collateral at the time of the transaction and at all times during
the term of the repurchase agreement. The Adviser does so in an effort to
determine that the value of the collateral always equals or exceeds the
agreed-upon repurchase price to be paid to the Fund. If the seller were to
be subject to a federal bankruptcy proceeding, the ability of the Fund to
liquidate the collateral could be delayed or impaired because of certain
provisions of the bankruptcy laws.
(5) Bank time deposits, which are monies kept on deposit with banks or
savings and loan associations for a stated period of time at a fixed rate
of interest. There may be penalties for the early withdrawal of such time
deposits, in which case the yields of these investments will be reduced.
(6) Commercial paper, which consists of short-term unsecured promissory
notes, including variable rate master demand notes issued by corporations
to finance their current operations. Master demand notes are direct lending
arrangements between the Fund and a corporation. There is no secondary
market for such notes. However, they are redeemable by the Fund at any
time. The Adviser will consider the financial condition of the corporation
(e.g., earning power, cash flow, and other liquidity ratios) and will
B-12
<PAGE>
continuously monitor the corporation's ability to meet all of its financial
obligations, because the Fund's liquidity might be impaired if the
corporation were unable to pay principal and interest on demand.
Investments in commercial paper will be limited to commercial paper rated
in the two highest categories by a major rating agency or unrated
commercial paper which is, in the opinion of the Adviser, of comparable
quality.
REPURCHASE OFFER FUNDAMENTAL POLICY
The Board of Trustees has adopted a resolution setting forth the Fund's
fundamental policy that it will conduct quarterly Repurchase Offers (the
"Repurchase Offer Fundamental Policy").
The Repurchase Offer Fundamental Policy states that the Fund will make
Repurchase Offers at periodic intervals of three months between Repurchase
Request Deadlines, such Repurchase Request Deadlines to be on the ______ of the
months of ____, _____, _____ and _____. The Repurchase Offer Fundamental Policy
also provides that the Pricing Date will be no later than __ calendar days after
each Repurchase Request Deadline (or the next business day if the __th calendar
day is not a business day).
The Repurchase Offer Fundamental Policy may be changed only with approval
of a majority of the Fund's outstanding voting securities.
The First Repurchase Offer is scheduled to commence in _______.
MANAGEMENT
Trustees and Officers
The management of the Fund, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
the Board of Trustees of the Fund. The number of trustees of the Fund is
currently set at six, one of whom is an "interested person" (as the term
"interested" persons is defined in the Investment Company Act of 1940) and five
of whom are not "interested" persons. None of the trustees who are not
"interested" persons of the Fund has ever been a director or employee of, or
consultant to, Nuveen or its affiliates. The names and business addresses of the
trustees and officers of the Fund and their principal occupations and other
affiliations during the past five years are set forth below, with those trustees
who are "interested persons" of the Fund indicated by an asterisk. As of August
17, 1999 Timothy R. Schwertfeger was the sole Trustee of the Fund. However, it
is expected that the other Trustees listed below will be elected at the
organizational meeting of the Fund prior to the effective date of the Fund's
registration statement.
<TABLE>
<CAPTION>
Date of Positions and Principal Occupations During Past
Name and Address Birth Offices with the Fund Five Years
- --------------------------- --------- --------------------- -------------------------------------
<S> <C> <C> <C>
Timothy R. Schwertfeger* 3/28/49 Chairman and Trustee Chairman since July 1, 1996 of The
333 West Wacker Drive John Nuveen Company, John Nuveen &
Chicago, IL 60606 Co. Incorporated, Nuveen Advisory
Corp. and
</TABLE>
B-13
<PAGE>
<TABLE>
<CAPTION>
Date of Positions and Principal Occupations During Past
Name and Address Birth Offices with the Fund Five Years
- --------------------------- --------- --------------------- -------------------------------------
<S> <C> <C> <C>
Nuveen Institutional Advisory
Corp.; prior thereto, Executive Vice
President and Director of The John
Nuveen Company, John Nuveen &
Co. Incorporated, Nuveen Advisory
Corp. and Nuveen Institutional
Advisory Corp.; Chairman and
Director (since January 1997) of
Nuveen Asset Management, Inc.;
Director (since 1996) of
Institutional Capital Corporation;
Chairman and Director of Rittenhouse
Financial Services Inc. (since 1999).
James E. Bacon 2/27/31 Trustee Business consultant; Director of
114 W. 4th St. Lone Star Industries, Inc. (cement);
New York, NY 10036 retired.
Jack B. Evans 10/22/48 Trustee President, The Hall-Perrine
115 Third Street, S.E. Foundation, a private philanthropic
Cedar Rapids, IA 52401 corporation (since 1996); formerly
President and Chief Operating
Officer, SCI Financial Group, Inc.,
a regional financial services firm.
William L. Kissick 7/29/32 Trustee Professor, School of Medicine and
University of Pennsylvania the Wharton School of Management and
224 NEB/2L Chairman, Leonard Davis Institute of
Philadelphia, PA 19104 Health Economics, University of
Pennsylvania.
Thomas E. Leafstrand 11/11/31 Trustee Retired, previously Vice President
412 W. Franklin in charge of Municipal Underwriting
Wheaton, IL 60187 and Dealer Sales at The Northern
Trust Company.
Sheila W. Wellington 2/24/32 Trustee President (since 1993) of Catalyst
250 Park Avenue (a not-for-profit organization
New York, NY 10003 focusing on women's leadership
development in business and the
professions).
</TABLE>
B-14
<PAGE>
<TABLE>
<CAPTION>
Date of Positions and Principal Occupations During Past
Name and Address Birth Offices with the Fund Five Years
- --------------------------- --------- --------------------- -------------------------------------
<S> <C> <C> <C>
Alan G. Berkshire 12/28/60 Vice President and Vice President and General Counsel
333 West Wacker Drive Assistant Secretary (since September 1997) and Secretary
Chicago, IL 60606 (since May 1998) of the John Nuveen &
Co. Incorporated; Vice President
(since Sept. 1997) and Assistant
Secretary (since July 1999) of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp., prior
thereto, Partner in the law firm of
Kirkland & Ellis.
Peter H. D'Arrigo 11/28/67 Vice President and Vice President of John Nuveen & Co.
333 West Wacker Drive Treasurer Incorporated; (January 1999), prior
Chicago, IL 60606 thereto, Assistant Vice President
(January 1997); formerly, Associate
of John Nuveen & Co. Incorporated;
Chartered Financial Analyst.
Michael S. Davern 6/26/57 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp. (since January 1997); prior
Chicago, IL 60606 thereto, Vice President and
Portfolio Manager (since September
1991) of Flagship Financial.
Lorna C. Ferguson 10/24/45 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated; Vice President (since
Chicago, IL 60606 January 1998) of Nuveen Advisory
Corp. and Nuveen Institutional
Advisory Corp.
William M. Fitzgerald 3/2/64 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp. (since December 1995);
Chicago, IL 60606 Assistant Vice President of Nuveen
Advisory Corp. (from September 1992
to December 1995), prior thereto
Assistant Portfolio Manager of
Nuveen Advisory Corp.
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
Date of Positions and Principal Occupations During Past
Name and Address Birth Offices with the Fund Five Years
- ------------------------- --------- --------------------- -------------------------------------
<S> <C> <C> <C>
Stephen D. Foy 5/31/54 Vice President and Vice President of John Nuveen & Co.
333 West Wacker Drive Controller Incorporated; Certified Public
Chicago, IL 60606 Accountant.
J. Thomas Futrell 7/5/55 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp.; Chartered Financial Analyst.
Chicago, IL 60606
Richard A. Huber 3/26/63 Vice President Vice President of Nuveen
333 West Wacker Drive Institutional Advisory Corp. (since
Chicago, IL 60606 March 1998) and Nuveen Advisory
Corp. (since January 1997); prior
thereto, Vice President and
Portfolio Manager of Flagship
Financial.
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp.
Chicago, IL 60606
Jeffrey W. Maillet 9/30/56 Vice President Executive Managing Director of the
333 West Wacker Drive Adviser; prior thereto, Senior Vice
Chicago, IL 60606 President of Van Kampen Investment
Advisory Corp.
</TABLE>
B-16
<PAGE>
<TABLE>
<CAPTION>
Date of Positions and Principal Occupations During Past
Name and Address Birth Offices with the Fund Five Years
- ------------------------ --------- --------------------- ---------------------------------
<S> <C> <C> <C>
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant Secretary
333 West Wacker Drive Assistant Secretary and Assistant General Counsel of
Chicago, IL 60606 John Nuveen & Co. Incorporated; Vice
President and Assistant Secretary of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Vice
President and Assistant Secretary
(since January 1997) of Nuveen Asset
Management, Inc.; Assistant
Secretary of The John Nuveen Company.
Edward F. Neild, IV 7/7/65 Vice President Vice President (since September
333 West Wacker Drive 1996), previously Assistant Vice
Chicago, IL 60606 President (since December 1993) of
Nuveen Advisory Corp., Portfolio
Manager prior thereto; Vice
President (since September 1996),
previously Assistant Vice President
(since May 1995), of Nuveen
Institutional Advisory Corp.,
Portfolio Manager prior thereto;
Chartered Financial Analyst.
Stephen S. Peterson 9/20/57 Vice President Vice President (since September
333 West Wacker Drive 1997), previously Assistant Vice
Chicago, IL 60606 President (since September 1996),
Portfolio Manager prior thereto;
Chartered Financial Analyst.
Stuart W. Rogers 5/1/56 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated.
Chicago, IL 60606
Thomas C. Spalding, Jr. 7/31/51 Vice President Vice President of Nuveen Advisory
333 West Wacker Drive Corp. and Nuveen Institutional
Chicago, IL 60606 Advisory Corp.; Chartered Financial
Analyst.
</TABLE>
B-17
<PAGE>
<TABLE>
<CAPTION>
Date of Positions and Principal Occupations During Past
Name and Address Birth Offices with the Fund Five Years
- ---------------------- --------- --------------------- -------------------------------------
<S> <C> <C> <C>
William S. Swanson 7/20/65 Vice President Vice President of John Nuveen & Co.
333 West Wacker Drive Incorporated (since October 1997),
Chicago, IL 60606 prior thereto, Assistant Vice
President (since September 1996);
formerly, Associate of John Nuveen &
Co. Incorporated; Chartered
Financial Analyst.
Gifford R. Zimmerman 9/9/56 Vice President and Vice President, Assistant Secretary
333 West Wacker Drive Secretary and Associate General Counsel of
Chicago, IL 60606 John Nuveen & Co. Incorporated; Vice
President (since May 1993) and
Secretary (since July 1999) of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.;
Assistant Secretary, The John Nuveen
Company (since May 1994); Chartered
Financial Analyst.
</TABLE>
Thomas E. Leafstrand and Timothy R. Schwertfeger serve as members of the
Executive Committee of the Board of Trustees of the Fund. The Executive
Committee, which meets between regular meetings of the Board of Trustees, is
authorized to exercise all of the powers of the Board of Trustees. Mr.
Schwertfeger is also a director or trustee, as the case may be, of 103 Nuveen
open-end and closed-end funds advised by Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.
The other trustees of the Trust are directors or trustees, as the case may
be, of 6 Nuveen open-end funds and 6 Nuveen closed-end funds advised by Nuveen
Institutional Advisory Corp.
The following table sets forth estimated compensation to be paid the Fund
projected through the end of the Fund's first full fiscal year. The Fund has no
retirement or pension plans. The officers and trustees affiliated with Nuveen
serve without any compensation from the Fund.
<TABLE>
<CAPTION>
Estimated Aggregate Estimated Total Compensation
Name of Trustee Compensation From Fund* From Fund and Fund Complex**
- --------------- ----------------------- ----------------------------
<S> <C> <C>
James E. Bacon
</TABLE>
B-18
<PAGE>
Jack B. Evans
William L. Kissick
Thomas E. Leafstrand
Sheila W. Wellington
- --------------------
* Based on the estimated compensation to be earned by the independent
trustees for the period from inception to the fiscal year ending _______ for
services to the Fund.
**Based on the estimated compensation paid to the trustees for the one year
period ending 12/31/99 for services to the open-end and closed-end funds advised
by the Adviser.
(1) Includes $_____ in estimated deferred compensation.
(2) Includes $_____ in estimated deferred compensation.
(3) includes $_____ in estimated deferred compensation.
No Fund has any employees. Its officers are compensated by the Adviser or
Nuveen.
PRINCIPAL SHAREHOLDERS
As of the date of this prospectus, _______ owns 100% of the issued and
outstanding Shares and, until the Fund completes the public offering of the
Shares, _______ will be deemed to control the Fund under the 1940 Act.
INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT
Nuveen Senior Loan Asset Management Inc. acts as investment adviser for
and manages the investment and reinvestment of the assets of the Fund. The
Adviser also administers the Fund's business affairs, provides office facilities
and equipment and certain clerical, bookkeeping and administrative services, and
permits any of its officers or employees to serve without compensation as
Trustees or officers of the Fund if elected to such positions.
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay an annual management fee at the rates set forth
below.
Average Daily Net Asset Value Fee Management Fee
- --------------------------------- --------------
Less than $1.0 billion %
$1.0 billion to $2.0 billion %
$2.0 billion to $5.0 billion %
$5.0 billion to $10.0 billion %
$10.0 billion and over %
B-19
<PAGE>
The Adviser has entered into a voluntarily expense limitation of ______
which may be modified or discontinued without notice at the Adviser's
discretion.
In addition to the management fee, the Fund pays all other costs and
expenses of its operations and a portion of the Fund's general administrative
expenses.
The Adviser is a wholly owned subsidiary of John Nuveen & Co. Incorporated
("Nuveen"), the Fund's principal underwriter. Nuveen and its affiliates have
sponsored or underwritten more than $60 billion of investment company
securities. Over 1,300,000 individuals have invested to date in Nuveen
investment products. Founded in 1898, Nuveen is a subsidiary of The John Nuveen
Company which, in turn, is approximately 78% owned by The St. Paul Companies,
Inc. ("St. Paul"). St. Paul is located in St. Paul, Minnesota and is
principally engaged in providing property-liability insurance through
subsidiaries.
The Fund, the other Nuveen funds, the Adviser and other related entities
have adopted a code of ethics which essentially prohibits all Nuveen fund
management personnel, including Nuveen fund portfolio managers, from engaging in
personal investments which compete or interfere with, or attempt to take
advantage of, the Fund's anticipated or actual portfolio transactions, and is
designed to assure that the interests of Fund shareholders are placed before the
interests of Nuveen personnel in connection with personal investment
transactions.
DISTRIBUTION ARRANGEMENTS
The Fund has entered into an Underwriting and Distribution Services
Agreement with Nuveen (the "Distribution Agreement"), which has been filed as an
exhibit to the Registration Statement of which this SAI is a part. The
summary of the Distribution Agreement contained herein is qualified by reference
to the Distribution Agreement. Subject to the terms and conditions of the
Distribution Agreement, the Fund may issue and sell shares of the Fund from time
to time through Nuveen, which is the principal underwriter of the shares, and
through certain broker-dealers and other financial services firms which have
entered into dealer agreements with Nuveen ("Authorized Dealers"). Each class
of shares will be offered on a continuous basis, at net asset value per share
after the Initial Offering Period. Shareholders will have the option of
submitting shares for repurchase quarterly.
Shares of the Fund are being offered during an initial period scheduled to
end on ____________, 1999 on a best efforts basis through Nuveen, subject to the
terms and conditions of the Distribution Agreement (the "Initial Offering
Period"). The Initial Offering Period is subject to adjustment by agreement
between the Fund and Nuveen.
All subscriptions received by Authorized Dealers during the Initial
Offering Period will be forwarded to the Fund on the expiration date of the
Initial Offering Period, and shares will be issued subject to settlement of
those trades. Nuveen will not accept subscriptions from investors other than
Authorized Dealers prior to the expiration of the Initial Offering Period. To
the extent that investors make payment to Authorized Dealers prior to the
expiration of the Initial Offering Period, Authorized Dealers may benefit from
the temporary use of the funds.
B-20
<PAGE>
Nuveen is the principal underwriter and distributor of the Fund's shares
and acts as agent of the Fund in the continuous offering of the Fund's shares.
The Fund and Nuveen reserve the right to withdraw, cancel or modify the offering
of shares during the Initial Offering Period without notice and the Fund
reserves the right to refuse any order for shares in whole or in part.
Nuveen will compensate Authorized Dealers participating in the Initial
Offering Period at a rate of _____% of the aggregate sales price of the shares
purchased from the Fund by or through such Authorized Dealers.
Authorized Dealers that submit orders for shares after the expiration of the
Initial Offering Period will be compensated at a rate of 3.00% of the sales
price. In addition, Nuveen may, from time to time, pay or allow to Authorized
Dealers a _____% commission on the amount of shares of the Fund sold under the
following conditions: _____
In addition to the discounts or commissions described above, Nuveen may,
during the Initial Offering Period and from time to time, pay or allow
additional discounts, commissions or promotional incentives, in the form of cash
compensation, to Authorized Dealers that sell shares of the Fund. In some
instances, such discounts, commissions or other incentives will be offered only
to certain Authorized Dealers that sell or are expected to sell during specified
time periods certain minimum amounts of shares of the Fund, or other funds
underwritten by Nuveen.
After the expiration of the Initial Offering Period, Nuveen and Authorized
Dealers will sell shares of the Fund in a continuous offering through Nuveen and
Authorized Dealers at the public offering price, which will be the net asset
value per share next determined after receipt of an order by Nuveen.
Settlements of sales of shares will normally occur on the third business
day following the date on which any such sales are made.
The Fund anticipates that, from time to time, certain Authorized Dealers
may act as brokers or dealers in connection with the execution of its portfolio
transactions.
Share certificates will not be issued unless requested in writing and may
not be available for certain types of account registrations. It is recommended
that investors not request share certificates unless needed for a specific
purpose. Delays may be experienced in the share repurchase procedure, described
below, if share certificates have been issued. A lost or destroyed certificate
is difficult to replace and can be expensive to the shareholder (a bond value of
2% or more of the certificate value is normally required).
Brokers, banks and other financial service providers may provide
administrative services related to order placement and payment to facilitate
transactions in shares of the Fund for their clients, and Nuveen may pay them a
transaction fee up to the level of the discount or commission allowable or
payable to the Authorized Dealers, as described above. Banks are currently
prohibited under the Glass-Steagall Act from providing certain underwriting or
distribution services. Brokers, banks or other financial service providers may
be subject to various state laws regarding the services described above and may
be required to register as dealers pursuant to state law. If banking firms were
prohibited from acting in any capacity or providing any of the
B-21
<PAGE>
described services, management would consider what action, if any, would be
appropriate. Nuveen does not believe that termination of a relationship with a
bank would result in any material adverse consequences to the Fund.
After the Initial Offering Period, orders for the purchase of shares will
be confirmed at a price based on the net asset value per share of the Fund next
determined after receipt in good order by Nuveen of the order accompanied by
payment. However, orders received by Authorized Dealers prior to the
determination of net asset value and received in good order by Nuveen prior to
the close of its business day will be confirmed at a price based on the net
asset value per share on that day. The Fund reserves the right to determine its
net asset value more frequently than once a day if deemed desirable. Authorized
Dealers are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
Authorized Dealers provide varying arrangements for their clients to
purchase, and submit to the Fund for repurchase the Fund's shares. Some may
establish higher minimum investment requirements than set forth above.
Authorized Dealers may arrange with their clients for other investment or
administrative services. Such Authorized Dealers may independently establish
and charge additional amounts to their clients for such services, which charges
would reduce the clients' return. Authorized Dealers also may hold the Fund's
shares in nominee or street name as agent for and on behalf of their customers.
In such instances, the Fund's transfer agent will have no information with
respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their Authorized Dealer. Certain of these Authorized Dealers
may receive compensation from the Fund through Nuveen for record keeping and
other expenses relating to these nominee accounts. In addition, certain
privileges with respect to the purchase and repurchase of shares or the
reinvestment of dividends may not be available through such Authorized Dealers.
Some Authorized Dealers may participate in a program allowing them access to
their clients' accounts for servicing, including, without limitation, transfers
or registration and dividend payee changes; and may perform functions such as
generation of confirmation statements and disbursement of cash dividends. Such
Authorized Dealers, including affiliates of Nuveen, may receive compensation
from the Fund for these services. This Prospectus should be read in connection
with such Authorized Dealers' materials regarding their fees and services.
Distribution Expenses
Nuveen serves as the selling agent and distributor of the Fund's shares.
In this capacity, Nuveen manages the offering of the Fund's shares and is
responsible for all sales and promotional activities. In order to reimburse
Nuveen for its costs in connection with these activities, including compensation
paid to Authorized Dealers, the Fund has adopted a distribution and service
plan.
B-22
<PAGE>
Nuveen receives the distribution fee for Class B and Class C shares
primarily for providing compensation to Authorized Dealers, including Nuveen, in
connection with the distribution of shares. Nuveen uses the service fee for
Class A, Class B, and Class C shares to compensate Authorized Dealers, including
Nuveen, for providing account services to shareholders. These services may
include establishing and maintaining shareholder accounts, answering shareholder
inquiries, and providing other personal services to shareholders. These fees
also compensate Nuveen for other expenses, including printing and distributing
prospectuses to persons other than shareholders, the expenses of preparing,
printing, and distributing advertising and sales literature and reports to
shareholders used in connection with the sale of shares. Because these fees are
paid out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.
Certain Trustees or officers of the Fund are also Trustees or officers of
the Adviser or the Distributor, as indicated under "Officers and Trustees."
PORTFOLIO TRANSACTIONS
The Adviser is responsible for decisions to buy and sell securities for the
Fund and for the placement of the Fund's securities business, the negotiation of
the prices to be paid for principal trades and the allocation of its
transactions among various dealer firms. Portfolio securities will normally be
purchased directly from an underwriter or in the over-the-counter market from
the principal dealers in such securities, unless it appears that a better price
or execution may be obtained through other means. Portfolio securities will not
be purchased from Nuveen or its affiliates except in compliance with the 1940
Act.
With respect to interests in Senior Loans, the Fund generally will engage
in privately negotiated transactions for purchase or sale in which the Adviser
will negotiate on behalf of the Fund, although a more developed market may exist
for certain Senior Loans. The Fund may be required to pay fees, or forgo a
portion of interest and any fees payable to the Fund, to the Lender selling
Participations or Assignments to the Fund. The Adviser will determine the
Lenders from whom the Fund will purchase Assignments and Participations by
considering their professional ability, level of service, relationship with the
Borrower, financial condition, credit standards and quality of management.
Although the Fund intends generally to hold interests in Senior Loans until
maturity or prepayment of the Senior Loan, the illiquidity of many Senior Loans
may restrict the ability of the Adviser to locate in a timely manner persons
willing to purchase the Fund's interests in Senior Loans at a fair price should
the Fund desire to sell such interests. See "The Fund's Investments."
The Fund expects that substantially all other portfolio transactions will
be effected on a principal (as opposed to an agency) basis and, accordingly,
does not expect to pay any brokerage commissions. Purchases from underwriters
will include a commission or concession paid by the issuer to the underwriter,
and purchases from dealers will include the spread between the bid and asked
price. It is the policy of the Adviser to seek the best execution under the
circumstances of each trade. The Adviser evaluates price as the primary
consideration, with the financial
B-23
<PAGE>
condition, reputation and responsiveness of the dealer considered secondary in
determining best execution. Given the best execution obtainable, it will be the
Adviser's practice to select dealers which, in addition, furnish research
information (primarily credit analyses of issuers and general economic reports)
and statistical and other services to the Adviser. It is not possible to place a
dollar value on information and statistical and other services received from
dealers. Since it is only supplementary to the Adviser's own research efforts,
the receipt of research information is not expected to reduce significantly the
Adviser's expenses. While the Adviser will be primarily responsible for the
placement of the business of the Fund, the policies and practices of the Adviser
in this regard must be consistent with the foregoing and will, at all times, be
subject to review by the Board of Trustees of the Fund.
The Adviser may manage other investment accounts and investment companies
for other clients which have investment objectives similar to those of the Fund.
Subject to applicable laws and regulations, the Adviser seeks to allocate
portfolio transactions equitably whenever concurrent decisions are made to
purchase or sell securities by the Fund and another advisory account. In making
such allocations the main factors to be considered will be the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment and the size of
investment commitments generally held. While this procedure could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Board of Trustees that the
benefits available from the Adviser's organization will outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
Under the 1940 Act, the Fund may not purchase portfolio securities from any
underwriting syndicate of which Nuveen is a member except under certain limited
conditions set forth in Rule 10f-3. The rule sets forth requirements relating
to, among other things, the terms of an issue purchased by the Fund, the amount
which may be purchased in any one issue and the assets of the Fund that may be
invested in a particular issue. In addition, purchases of securities made
pursuant to the terms of the rule must be approved at least quarterly by the
Board of Trustees of the Fund, including a majority of the members thereof who
are not interested persons of that Fund.
LIQUIDITY REQUIREMENTS
From the time that the Fund sends a Notification to shareholders until the
Pricing Date, the Fund will maintain a percentage of the Fund's assets equal to
at least 100 percent of the Repurchase Offer Amount in assets: (a) that can be
sold or disposed of in the ordinary course of business at approximately the
price at which the Fund has valued the asset within the time period between the
Repurchase Request Deadline and the next Repurchase Payment Deadline; or (b)
that mature by the next Repurchase Payment Deadline.
In the event that the Fund's assets fail to comply with the requirements in
the preceding paragraph, the Board shall cause the Fund to take such action as
the Board deems appropriate to ensure compliance.
B-24
<PAGE>
NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
trading (normally 4:00 p.m. eastern time) on each day the New York Stock
Exchange is open for business. Net asset value is calculated by taking the fair
value of the Fund's total assets, including interest or dividends accrued but
not yet collected, less liabilities, and dividing by the total number of shares
outstanding. The result rounded to the nearest cent, is the net asset value per
share. All valuations are subject to review by the Fund's Board of Trustees or
its delegate, the Adviser.
Interests in Senior Loans will be valued by the Adviser on behalf of the
Fund on the basis of market quotations and transactions in instruments which the
Adviser believes may be comparable to Senior Loan interests with respect to the
following characteristics: credit quality, interest rate, interest rate reset
period and maturity. Such instruments may include commercial paper, negotiable
certificates of deposit and short-term variable rate securities which have
adjustment periods comparable to the Senior Loan interests in the Fund's
portfolio. In determining the relationship between such instruments and the
Senior Loan interests in the Fund's portfolio, the Adviser will consider on an
ongoing basis, among other factors, (i) the credit worthiness of the Borrower
and (ii) the current interest rate, the period until next interest rate reset
and maturity of such Senior Loan interests. It is expected that the Fund's net
asset value will fluctuate as a function of interest rate and credit factors.
Because of the short-term nature of such instruments, however, the Fund's net
asset value is expected to fluctuate less in response to changes in interest
rates than the net asset values of investment companies with portfolios
consisting primarily of fixed-income or longer term securities.
The Adviser believes that Lenders selling Senior Loan interests or
otherwise involved in a Senior Loan transaction may tend, in valuing Senior Loan
interests for their own account, to be less sensitive to interest rate and
credit quality changes and, accordingly, the Adviser does not intend to rely
solely on such valuations in valuing the Senior Loan interests for the Fund's
account. In addition, because a secondary trading market in Senior Loans has
not yet fully developed, in valuing Senior Loans, the Adviser may not rely
solely on but may consider, to the extent the Adviser believes such information
to be reliable, prices or quotations provided by banks, dealers or pricing
services with respect to secondary market transactions in Senior Loans. To the
extent that an active secondary market in Senior Loan interests develops to a
reliable degree, the Adviser may rely to an increasing extent on such market
prices and quotations in valuing the Senior Loan interests in the Fund's
portfolio. In light of the senior nature of Senior Loan interests that may be
included in the Fund's portfolio and taking into account the Fund's access to
non-public information with respect to Borrowers relating to such Senior Loan
interests, the Adviser does not currently believe that consideration on a
systematic basis of ratings provided by any nationally recognized statistical
rating organization or price fluctuations with respect to long- or short-term
debt of such Borrowers subordinate to the Senior Loans of such Borrowers is
necessary for the determination of the value of such Senior Loan interests.
Accordingly, the Adviser generally will not systematically consider (but may
consider in certain instances) and, in any event, will not rely upon such
ratings or price fluctuations in determining the value of Senior Loan interests
in the Fund's portfolio.
B-25
<PAGE>
Other portfolio securities (other than short-term obligations, but
including listed issues) may be valued on the basis of prices furnished by one
or more pricing services which determine prices for normal, institutional-size
trading units of such securities using market information, transactions for
comparable securities and various relationships between securities which are
generally recognized by institutional traders. In certain circumstances,
portfolio securities will be valued at the last sale price on the exchange that
is the primary market for such securities, or the last quoted bid price for
those securities for which the over-the-counter market is the primary market or
for listed securities in which there were no sales during the day. The value of
interest rate swaps will be determined in accordance with a discounted present
value formula and then confirmed by obtaining a bank quotation.
Short-term obligations which mature in 60 days or less will be valued at
amortized cost, if their original term to maturity when acquired by the Fund was
60 days or less, or will be valued at amortized cost using their value on the
61st day prior to maturity, if their original term to maturity when acquired by
the Fund was more than 60 days, unless in each case this is determined not to
represent fair value. Repurchase agreements will be valued at cost plus accrued
interest. Securities for which there exist no price quotations or valuations and
all other assets will be valued at fair value as determined in good faith by or
on behalf of the Trustees.
TAX MATTERS
Set forth below is a discussion of certain U.S. Federal income tax issues
concerning the Fund and the purchase, ownership, and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retroactive. Prospective
investors should consult their own tax advisers with regard to the federal tax
consequences of the purchase, ownership, or disposition of Fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
Tax Status of the Fund
The Fund intends to qualify under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code") for tax treatment as a regulated investment
company. In order to qualify as a regulated investment company, the Fund must
satisfy certain requirements relating to the source of its income,
diversification of its assets, and distributions of its income to shareholders.
First, the Fund must derive at least 90% of its annual gross income (including
tax-exempt interest) from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock or
securities, foreign currencies or other income (including but not limited to
gains from options and futures) derived with respect to its business of
investing in such stock or securities (the "90% gross income test"). Second, the
Fund must diversify its holdings so that, at the close of each quarter of the
taxable year, (i) at least 50% of the value of its total assets is comprised of
cash, cash items, United States Government securities, securities of
B-26
<PAGE>
other regulated investment companies and other securities limited in respect of
any one issuer to an amount not greater in value than 5% of the value of its
total assets and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of the total assets is
invested in the securities of any one issuer (other than United States
Government securities and securities of other regulated investment companies) or
two or more issuers controlled by the Fund and engaged in the same, similar or
related trades or businesses.
As a regulated investment company, the Fund will not be subject to federal
income tax in any taxable year for which it distributes at least 90% of the sum
of (i) its "investment company taxable income" (which includes dividends,
taxable interest, taxable original issue discount and market discount income,
income from securities lending, net short-term capital gain in excess of long-
term capital loss, and any other taxable income other than "net capital gain"
(as defined below) and is reduced by deductible expenses) and (ii) its net tax-
exempt interest (the excess of its gross tax-exempt interest income over certain
disallowed deductions). The Fund may retain for investment its net capital gain
(which consists of the excess of its net long-term capital gain over its short-
term capital loss). However, if the Fund retains any net capital gain or any
investment company taxable income, it will be subject to tax at regular
corporate rates on the amount retained. If the Fund retains any capital gain, it
may designate the retained amount as undistributed capital gains in a notice to
its shareholders who, if subject to federal income tax on long-term capital
gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their shares of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by the Fund against their federal income tax liabilities if any, and to claim
refunds to the extent the credit exceeds such liabilities. For federal income
tax purposes, the tax basis of shares owned by a shareholder of the Fund will be
increased by an amount equal under current law to the difference between the
amount of undistributed capital gains included in the shareholder's gross income
and the tax deemed paid by the Shareholder under clause (ii) of the preceding
sentence. The Fund intends to distribute at least annually to its shareholders
all or substantially all of its net tax-exempt interest and any investment
company taxable income and net capital gain.
Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain, i.e., the excess of
net long-term capital gain over net short-term capital loss for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or part of any net capital loss, any
net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
Distributions by the Fund of net interest received from certain taxable
temporary investments (such as certificates of deposit, commercial paper and
obligations of the U.S. Government, its agencies and instrumentalities) and net
short-term capital gains realized by the Fund, if any, will be taxable to
shareholders as ordinary income whether received in cash or additional shares.
Any net long-term capital gains realized by the Fund and distributed to
shareholders in cash or additional shares, will be taxable to shareholders as
long-term capital gains regardless of the length of time investors have owned
shares of the Fund. Distributions by the Fund that do not constitute ordinary
income dividends or capital gain dividends will be
B-27
<PAGE>
treated as a return of capital to the extent of (and in reduction of) the
shareholder's tax basis in his or her shares. Any excess will be treated as gain
from the sale of his or her shares, as discussed below.
If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to a Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing, and character of distributions to shareholders.
Prior to purchasing shares in the Fund, an investor should carefully
consider the impact of dividends or distributions which are expected to be or
have been declared, but not paid. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January, will be treated as having been distributed by the Fund (and received by
the shareholders) on December 31.
If pursuant to an offer by the Fund to repurchase its shares, a shareholder
tenders all shares of the Fund that he or she owns or is considered to own, the
shareholder may realize a taxable gain or loss. Generally, a shareholder's gain
or loss will be long-term gain or loss if the shares have been held for more
than one year. Present law taxes both long- and short-term capital gains of
corporations at the rates applicable to ordinary income. For non-corporate
taxpayers, however, net capital gains (i.e., the excess of net long-term capital
gain over net short-term capital loss) with respect to securities will be taxed
at a maximum rate of 20%, while short-term capital gains and other ordinary
income will be taxed at a maximum rate of 39.6%. Because of the limitations on
itemized deductions and the deduction for personal exemptions applicable to
higher income taxpayers, the effective tax rate may be higher in certain
circumstances.
All or a portion of a sales charge paid in purchasing shares of the Fund
cannot be taken into account for purposes of determining gain or loss on the
redemption or exchange of such shares within 90 days after their purchase to the
extent shares of the Fund or another fund are subsequently acquired without
payment of a sales charge pursuant to the reinvestment or exchange privilege.
Any disregarded portion of such charge will result in an increase in the
shareholder's tax basis in the shares subsequently acquired. In addition, no
loss will be allowed on the redemption or exchange of shares of the Fund if the
shareholder purchases other shares of the Fund (whether through reinvestment of
distributions or otherwise) or the shareholder acquires or enters into a
contract or option to acquire securities that are substantially identical to
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after such
B-28
<PAGE>
redemption or exchange. If disallowed, the loss will be reflected in an
adjustment to the basis of the shares acquired.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and the excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Fund intends to make timely distributions in
compliance with these requirements and consequently it is anticipated that it
generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions to
its shareholders would be taxable to shareholders as ordinary dividend income
for federal income tax purposes to the extent of the Fund's earnings and
profits.
The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares who
have not furnished to the Fund their correct taxpayer identification number (in
the case of individuals, their social security number) and certain
certifications, or who are otherwise subject to backup withholding.
The foregoing is a general and abbreviated summary of the provisions of the
Code and Treasury Regulations presently in effect as they directly govern the
taxation of the Fund and its shareholders. For complete provisions, reference
should be made to the pertinent Code sections and Treasury Regulations. The Code
and Treasury Regulations are subject to change by legislative or administrative
action, and any such change may be retroactive with respect to Fund
transactions. Shareholders are advised to consult their own tax advisers for
more detailed information concerning the federal taxation of the Funds and the
income tax consequences to their shareholders.
Fund Investments
Market Discount. If the Fund purchases a debt security at a price lower
than the stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount a portion of such market
discount must be included as ordinary income (not capital gain) by the Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. In particular, the Fund will be required to
allocate that principal payment first to the portion of the market discount on
the debt security that has accrued but has not previously been includable in
income. In general, the amount of market discount that must be included for each
period is equal to the lesser of (i) the amount of market discount
B-29
<PAGE>
accruing during such period (plus any accrued market discount for prior periods
not previously taken into account) or (ii) the amount of the principal payment
with respect to such period. Generally, market discount accrues on a daily basis
for each day the debt security is held by the Fund at a constant rate over the
time remaining to the debt security's maturity or, at the election of the Fund,
at a constant yield to maturity which takes into account the semi-annual
compounding of interest. Gain realized on the disposition of a market discount
obligation must be recognized as ordinary interest income (not capital gain) to
the extent of the "accrued market discount."
Original Issue Discount. Certain debt securities acquired by the Fund may
be treated as debt securities that were originally issued at a discount. Very
generally, original issue discount is defined as the difference between the
price at which a security was issued and its stated redemption price at
maturity. Although no cash income on account of such discount is actually
received by the Fund, original issue discount that accrues on a debt security in
a given year generally is treated for federal income tax purposes as interest
and, therefore, such income would be subject to the distribution requirements
applicable to regulated investment companies. Some debt securities may be
purchased by the Fund at a discount that exceeds the original issue discount on
such debt securities, if any. This additional discount represents market
discount for federal income tax purposes (see above).
Options, Futures and Forward Contracts. Any regulated futures contracts
and certain options (namely, nonequity options and dealer equity options) in
which the Fund may invest may be "section 1256 contracts." Gains (or losses) on
these contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses. Also, section 1256 contracts held by the Fund at the
end of each taxable year (and on certain other dates prescribed in the Code) are
"marked to market" with the result that unrealized gains or losses are treated
as though they were realized.
Transactions in options, futures and forward contracts undertaken by the
Fund may result in "straddles" for federal income tax purposes. The straddle
rules may affect the character of gains (or losses) realized by the Fund, and
losses realized by the Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the losses are
realized. In addition, certain carrying charges (including interest expense)
associated with positions in a straddle may be required to be capitalized rather
than deducted currently. Certain elections that the Fund may make with respect
to its straddle positions may also affect the amount, character and timing of
the recognition of gains or losses from the affected positions.
Because only a few regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to the Fund are not entirely
clear. The straddle rules may increase the amount of short-term capital gain
realized by the Fund, which is taxed as ordinary income when distributed to
shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as
B-30
<PAGE>
ordinary income or long-term capital gain may be increased or decreased
substantially as compared to a fund that did not engage in such transactions.
Constructive Sales. Under certain circumstances, the Fund may recognize
gain from a constructive sale of an "appreciated financial position" it holds if
it enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated position.
In that event, the Fund would be treated as if it had sold and immediately
repurchased the property and would be taxed on any gain (but not loss) from the
constructive sale. The character of gain from a constructive sale would depend
upon the Fund's holding period in the property. Loss from a constructive sale
would be recognized when the property was subsequently disposed of, and its
character would depend on the Fund's holding period and the application of
various loss deferral provisions of the Code. Constructive sale treatment does
not apply to transactions closed in the 90-day period ending with the 30th day
after the close of the taxable year, if certain conditions are met.
Section 988 Gains or Losses. Gains or losses attributable to fluctuations
in exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities and
certain forward contracts denominated in a foreign currency, gains or losses
attributable to fluctuations in the value of the foreign currency between the
acquisition and disposition of the position also are treated as ordinary gain or
loss. These gains and losses, referred to under the Code as "section 988" gains
or losses, increase or decrease the amount of the Fund's investment company
taxable income available to be distributed to its shareholders as ordinary
income. If section 988 losses exceed other investment company taxable income
during a taxable year, the Fund would not be able to make any ordinary dividend
distributions, or distributions made before the losses were realized would be
recharacterized as a return of capital to shareholders, rather than as an
ordinary dividend, reducing each shareholder's basis in his or her Fund shares.
PERFORMANCE INFORMATION
The Fund may quote yield figures from time to time. The "Yield" of the Fund
is computed by dividing the net investment income per share earned during a 30-
day period (using the average number of shares entitled to receive dividends) by
the net asset value per share on the last day of the period. The Yield formula
provides for semiannual compounding which assumes that net investment income is
earned and reinvested at a constant rate and annualized at the end of a six-
month period.
The Yield formula is as follows: YIELD = 2[((a-b/cd) +1)/6/ -1].
Where: a = dividends and interest earned during the period.
(For this purpose, the Fund will recalculate the
yield to maturity based on market value of each
portfolio security on each business day on which
net asset value is calculated.)
B-31
<PAGE>
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the ending net asset value of the Fund for the
period.
The Fund may quote total return figures from time to time. A "Total Return"
on a per share basis is the amount of dividends received per share plus or minus
the change in the net asset value per share for a period. A "Total Return
Percentage" may be calculated by dividing the value of a share at the end of a
period (including reinvestment of distributions) by the value of the share at
the beginning of the period and subtracting one. For a given period, an "Average
Annual Total Return" may be computed by finding the average annual compounded
rate that would equate a hypothetical initial amount invested of $1,000 to the
ending redeemable value.
Average Annual Total Return is computed as follows: ERV = P(1+T)/n/
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period at the end
of the period (or fractional portion thereof).
The Fund may quote certain performance-related information and may compare
certain aspects of its portfolio and structure to other substantially similar
closed-end funds as categorized by Lipper, Inc. ("Lipper"), Morningstar or other
independent services. Comparison of the Fund to an alternative investment should
be made with consideration of differences in features and expected performance.
The Fund may obtain data from sources or reporting services, such as Bloomberg
Financial ("Bloomberg") and Lipper, that the Fund believes to be generally
accurate.
Past performance is not indicative of future results. At the time Common
Shareholders sell their shares, they may be worth more or less than their
original investment.
The following table is intended to provide investors with a comparison of
short-term money market rates. This comparison should not be considered a
representation of future money market rates, nor what an investment in the Fund
may earn or what an investor's yield or total return may be in the future.
COMPARISON OF
MONEY MARKET RATE AND
LONDON INTER-BANK OFFERED RATE
(AS OF 12/31 OF EACH CALENDAR YEAR)
<TABLE>
<CAPTION>
1985 1986 1987 1988 1989
<S> <C> <C> <C> <C> <C>
3 Month Treasury 7.1000% 5.5300% 5.7700% 8.0700%
Bill Rate (1)
</TABLE>
B-32
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
3 Month LIBOR (2) 8.0000% 6.3750% 7.4375% 9.6200%
</TABLE>
COMPARISON OF
MONEY MARKET RATE AND
LONDON INTER-BANK OFFERED RATE
(AS OF 12/31 OF EACH CALENDAR YEAR)
<TABLE>
<CAPTION>
1995 1996 1997 1998
<S> <C> <C> <C> <C>
3 Month Treasury Bill 5.1400% 4.9100% 5.1600%
Rate (1)
3 Month LIBOR (2) 6.6250% 5.5625% 5.8125%
</TABLE>
(1) The 3 Month Treasury Bill Rate. Source: Bloomberg.
(2) The 3 Month London Inter-Bank Offered Rate represents the rate at which
most creditworthy international banks dealing in Eurodollars charge each
other for large loans. Source: Bloomberg.
ADDITIONAL INFORMATION ON FUND SHARES
Each class of shares of a Fund represents an interest in the same portfolio
of investments. Each class of shares is identical in all respects except that
each class bears its own class expenses, including distribution and
administration expenses, and each class has exclusive voting rights with respect
to any distribution or service plan applicable to its shares. As a result of the
differences in the expenses borne by each class of shares, net income per share,
dividends per share and net asset value per share will vary among the Fund's
classes of shares.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares will
bear only those expenses that are directly attributable to that class, where the
type or amount of services received by a class varies from one class to another.
For example, class-specific expenses generally will include distribution and
service fees.
The minimum initial investment is $3,000 per Fund share class ($1,000 for a
Traditional/Roth IRA account; $500 for an Education IRA account; $500 for
accounts opened through certain fee based programs for which the program sponsor
has established a single master account with the fund's transfer agent and
performs all sub-accounting services related to that account; and $50 through
systematic investment plan accounts).
Class R Shares are available for purchases of $2.5 million or more and for
purchases using dividends and capital gains distributions on Class R Shares.
Class R Shares also are available for the following categories of investors:
B-33
<PAGE>
. officers, trustees and former trustees of Nuveen and Flagship Funds
and their immediate family members or trustees/directors of any fund
sponsored by Nuveen, any parent company of Nuveen and subsidiaries
thereof and their immediate family members;
. bona fide, full-time and retired employees and directors of Nuveen,
any parent company of Nuveen, and subsidiaries thereof, or their
immediate family members;
. any person who, for at least 90 days, has been an officer, director or
bona fide employee of any Authorized Dealer, or their immediate family
members;
. officers and directors of bank holding companies that make Fund shares
available directly or through subsidiaries or bank affiliates, or
their immediate family members;
. bank or broker-affiliated trust departments investing funds over which
they exercise exclusive discretionary authority and that are held in a
fiduciary, agency, advisory, custodial or similar capacity;
. investors purchasing on a periodic fee, asset-based fee or no
transaction fee basis through a broker-dealer sponsored mutual fund
purchase program;
. clients of investment advisers, financial planners or other financial
intermediaries that charge periodic or asset-based fees for their
services.
Any shares purchased by investors falling within any of the first four
categories listed above must be acquired for investment purposes and on the
condition that they will not be transferred or resold except through redemption
by the Fund.
In addition, purchasers of Nuveen Defined Portfolios may reinvest their
distributions from such unit investment trusts in Class R Shares, if, before
September 6, 1994, such purchasers of Nuveen unit investment trusts had elected
to reinvest distributions in Nuveen Fund shares (before June 13, 1995 for Nuveen
Municipal Bond Fund shares). Shareholders may exchange their Class R Shares of
any Nuveen fund into Class R Shares of any other Nuveen fund.
The reduced sales charge programs may be modified or discontinued by the
Fund at any time.
Class R Shares are not subject to a distribution or service fee and,
consequently, holders of Class R Shares may not receive the sale types or levels
of services from Authorized Dealers as other classes of shares.
For more information, call Nuveen toll-free at (800) 257-8787.
Reduction or Elimination of Early Withdrawal Charge
In the case of Class B Shares repurchased within five years of purchase, an
early withdrawal charge ("EWC") is imposed, beginning at 3% for repurchases
within the first year,
B-34
<PAGE>
declining to 2.5% for repurchases within year two and declining by .5% each year
thereafter until disappearing after the fifth year. Class C Shares are
repurchased at net asset value, without any EWC, except that a EWC of 1% is
imposed upon Class C Shares that are repurchased within 12 months of purchase.
In determining whether a EWC is payable, the Fund will first repurchase
shares not subject to any charge, or that represent an increase in the value of
the Fund account due to capital appreciation, and then will repurchase shares
held for the longest period, unless the shareholder specifies another order. No
EWC is charged on shares purchased as a result of automatic reinvestment of
dividends or capital gains paid. In addition, no EWC will be charged on
exchanges of Fund shares into another Nuveen mutual fund or Nuveen money market
fund. You may not exchange Class B Shares for shares of a Nuveen money market
fund.
The holding period is calculated on a monthly basis and begins the first
day of the month in which the order for investment is received. The EWC is
calculated based on the lower of the repurchased shares' cost or net asset value
at the time of the repurchase and is deducted from the proceeds. Nuveen receives
the amount of any EWC shareholders pay. If Class A or Class C Shares subject to
a EWC are exchanged for shares of a Nuveen money market fund, the EWC would be
imposed on the subsequent redemption of those money market shares, and the
period during which the shareholder holds the money market fund shares would be
counted in determining the remaining duration of the EWC. The Fund may elect not
to so count the period during which the shareholder held the money market fund
shares, in which event the amount of any applicable EWC would be reduced in
accordance with applicable rules by the amount of any service or distribution
plan payments to which those money market funds shares may be subject.
The EWC may be waived or reduced under the following six special
circumstances: 1) redemptions within one year following the death or disability,
as defined in Section 72(m)(7) of the Internal Revenue Code of 1986, as amended,
of a shareholder; and 2) in connection with the exercise of a reinstatement
privilege whereby the proceeds of a repurchase of the Fund's shares subject to a
sales charge are reinvested in shares of certain Funds within a specified number
of days; and If the Fund waives or reduces the EWC, such waiver or reduction
would be uniformly applied to all Fund shares in the particular category. In
waiving or reducing a EWC, the Funds will comply with the requirements of Rule
22d-1 of the Investment Company Act of 1940, as amended, as if the Fund were an
open-end investment company.
General Matters
Exchanges of Fund shares for the same class of another Nuveen mutual fund
or Nuveen money market fund may be made during any quarterly repurchase period.
Exchanges of shares of the Fund for shares of a Nuveen money market fund may be
made only on days when both funds calculate a net asset value and make shares
available for public purchase. Shares of the Nuveen money market funds may be
purchased on days on which the Federal Reserve Bank of Boston is normally open
for business. In addition to the holidays observed by the Fund, the Nuveen money
market funds observe and will not make fund shares available for purchase on the
following holidays: Martin Luther King's Birthday, Columbus Day and Veterans
Day.
B-35
<PAGE>
Shares will be registered in the name of the investor or the investor's
financial adviser. A change in registration or transfer of shares held in the
name of a financial adviser may only be made by an order in good form from the
financial adviser acting on the investor's behalf. Share certificates will only
be issued upon written request to the Funds' transfer agent. No share
certificates will be issued for fractional shares.
INDEPENDENT PUBLIC ACCOUNTANTS, CUSTODIAN AND TRANSFER AGENT
The Statement of Net Assets of the Fund as of September __, 1999 appearing
in this Statement of Additional Information has been audited by Ernst & Young
LLP, 223 South Wacker Drive, Chicago, Illinois 60606, independent auditors, as
set forth in their report thereon appearing elsewhere herein, and is included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing. Ernst & Young LLP provides accounting and auditing
services to the Fund.
_________________ is the Fund's custodian and maintains custody of all
securities and cash held by the Fund. The Fund's transfer, shareholder services
and dividend paying agent is The Chase Manhattan Bank.
FINANCIAL STATEMENTS
[TO COME]
B-36
<PAGE>
APPENDIX A -- RATINGS OF FIXED INCOME INVESTMENTS
STANDARD & POOR'S RATINGS GROUP BOND RATINGS
AAA. Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC, C. Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CI. The rating CI is reserved for income bonds on which no interest is being
paid.
D. Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
AAA. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt--
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest
A-1
<PAGE>
are considered adequate but elements may be present which suggest a
susceptibility to impairment sometime in the future.
BAA. Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA. Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B. Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA. Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
A-2
<PAGE>
PART C - OTHER INFORMATION
Item 24: Financial Statements and Exhibits
1. Financial Statements:
Registrant has not conducted any business as of the date of this filing,
other than in connection with its organization. Financial Statements indicating
that the Registrant has met the net worth requirements of Section 14(a) of the
1940 Act will be filed by pre-effective amendment to this registration
statement.
2. Exhibits:
a. Amended and Restated Declaration of Trust dated July 16, 1999.
b. By-Laws of Registrant.
c. None.
d. None.
e. None.
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Senior Loan Asset Management Inc.*
h.1 Form of Underwriting Agreement.*
h.2 Form of Selling Agreement.*
i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.*
j. Form of Custody Agreement between Registrant and ________________________.*
k.1 Form of Shareholder Transfer Agency Agreement between Registrant and The
Chase Manhattan Bank.*
k.2 Form of Distribution and Service Plan.*
k.3 Form of Multiple Class Plan.*
l.1 Opinion and consent of Bell, Boyd & Lloyd.*
l.2 Opinion and consent of Bingham Dana LLP.*
II-1
<PAGE>
m. None.
n. Consent of Ernst & Young LLP.*
o. None.
p. Form of Subscription Agreement of Nuveen Senior Loan Asset Management Inc.
dated ____, 1999.*
q. None.
r. None.
s. Power of Attorney for Timothy R. Schwertfeger.
___________________
* To be filed by amendment.
Item 25: Marketing Arrangements
See form of Selling Agreement to be filed by amendment as exhibit h.2 to this
registration statement.
Item 26: Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
Securities and Exchange Commission fees $
National Association of Securities Dealers, Inc. fees
Printing and engraving expenses *
Legal Fees *
Accounting expenses *
Blue Sky filing fees and expenses *
Transfer agent fees *
Miscellaneous expenses *
-------
Total *
=======
</TABLE>
- ------------
*To be completed by amendment. Expenses may be reduced pursuant to the
agreement of John Nuveen & Co. Incorporated to pay (i) all Registrant's
organizational expenses and (ii) offering costs that exceed $.__ per Common
Share.
Item 27: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 28: Number of Holders of Securities
At August 13, 1999
II-2
<PAGE>
<TABLE>
<CAPTION>
Title of Class Record Holder
-------------- -------------
<S> <C>
Common Shares, $.01 par value 0
</TABLE>
Item 29: Indemnification
Section 4 of Article XII of the Registrant's Declaration of Trust provides
as follows:
Subject to the exceptions and limitations contained in this Section 4,
every person who is, or has been, a Trustee, officer, employee or agent of the
Trust, including persons who serve at the request of the Trust as directors,
trustees, officers, employees or agents of another organization in which the
Trust has an interest as a shareholder, creditor or otherwise (hereinafter
referred to as a "Covered Person"), shall be indemnified by the Trust to the
fullest extent permitted by law against liability and against all expenses
reasonably incurred or paid by him in connection with any claim, action, suit or
proceeding in which he becomes involved as a party or otherwise by virtue of his
being or having been such a Trustee, director, officer, employee or agent and
against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
(a) against any liability to the Trust or its Shareholders by reason of a final
adjudication by the court or other body before which the proceeding was
brought that he engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a final
adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
II - 3
<PAGE>
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising
out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act
on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including, as such Disinterested Trustee,
anyone who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
The trustees and officers of the Registrant are covered by Investment Trust
Errors and Omission policies in the aggregate amount of $20,000,000 (with a
maximum deductible of $500,000) against liability and expenses of claims of
wrongful acts arising out of their position with the Registrant, except for
matters which involve willful acts, bad faith, gross negligence and willful
disregard of duty (i.e., where the insured did not act in good faith for a
purpose he or she reasonably believed to be in the best interest of Registrant
or where he or she had reasonable cause to believe this conduct was unlawful).
II - 4
<PAGE>
Section 8 of the Underwriting Agreement filed as Exhibit h to this
Registration Statement provides for each of the parties thereto, including the
Registrant and the Underwriters, to indemnify the others, their trustees,
directors, certain of their officers, trustees, directors and persons who
control them against certain liabilities in connection with the offering
described herein, including liabilities under the federal securities laws.
Item 30: Business and Other Connections of Investment Adviser
Nuveen Senior Loan Asset Management Inc. serves as investment adviser to
Registrant. Nuveen Senior Loan Asset Management Inc. has no other clients or
business at the present time. For a description of other business, profession,
vocation or employment of a substantial nature in which any director or officer
of the investment adviser has engaged during the last two years for his account
or in the capacity of director, officer, employee, partner or trustee, see the
descriptions under "Management of the Fund" in Part A of this Registration
Statement.
Item 31: Location of Accounts and Records
Nuveen Senior Loan Asset Management Inc., 333 West Wacker Drive, Chicago,
Illinois 60606, maintains the Declaration of Trust, By-Laws, minutes of trustees
and shareholders meetings and contracts of the Registrant and all advisory
material of the investment adviser.
The Fund's custodian, who is not yet named, will maintain all general and
subsidiary ledgers, journals, trial balances, records of all portfolio purchases
and sales, and all other required records not maintained by Nuveen Senior Loan
Asset Management Inc. Prior to the selection of a custodian, Nuveen Senior Loan
Asset Management Inc. will maintain the above-noted documents and records.
The Chase Manhattan Bank, 4 New York Plaza, New York, New York 10004-2413,
maintains all the required records in its capacity as transfer and dividend
paying agent for the Registrant.
Item 32: Management Services
Not applicable.
Item 33: Undertakings
1. Not applicable.
2. Not applicable.
3. Not applicable.
4. The Registrant undertakes:
(a) To file during any period in which offers or sales are being made, a
post-effective amendment to the registration statement (i) to include any
prospectus required
II - 5
<PAGE>
by Section 10(a)(3) of the 1933 Act; (2) to reflect in the
prospectus any fats or events after the effective date of the registration
statement (or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and (3) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(b) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of those
securities at that time shall be deemed to be the initial bona fide offering
thereof; and
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
5. Not applicable.
6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of receipt
of a written or oral request, any Statement of Additional Information.
II - 6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Chicago, and State of Illinois, on the 17th day of
August, 1999.
NUVEEN FLOATING RATE FUND
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Vice President and Controller August 17, 1999
/s/ Stephen D. Foy (Principal Financial and
- -------------------------- Accounting Officer)
Stephen D. Foy
Chairman of the Board and
Timothy R. Schwertfeger Trustee (Principal Executive By: /s/ Gifford R. Zimmerman
Officer) ------------------------
Gifford R. Zimmerman
Attorney-In-Fact
August 17, 1999
</TABLE>
An original power of attorney authorizing Alan G. Berkshire and Gifford R.
Zimmerman, among others, to execute this Registration Statement, and Amendments
to this Registration Statement, the trustee of Registrant on whose behalf this
Registration Statement is filed, is executed and filed as an exhibit to this
Registration Statement.
<PAGE>
INDEX TO EXHIBITS
a. Amended and Restated Declaration of Trust dated July 16, 1999.
b. By-Laws of Registrant.
c. None.
d. None.
e. Terms and Conditions of the Dividend Investment Plan.*
f. None.
g. Form of Investment Management Agreement between Registrant and Nuveen
Senior Loan Asset Management Inc.
h.1 Form of Underwriting Agreement.*
h.2 Form of Selling Agreement.*
i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.*
j. Form of Custody Agreement between Registrant and _____________.*
k.1 Form of Shareholder Transfer Agency Agreement between Registrant and Chase
Manhattan Bank.*
k.2 Form of Distribution and Service Plan.*
k.3 Form of Multiple Class Plan.*
l.1 Opinion and consent of Bell, Boyd & Lloyd.*
l.2 Opinion and consent of Bingham Dana LLP.*
m. None.
n. Consent of Ernst & Young LLP.*
o. None.
p. Form of Subscription Agreement of Nuveen Senior Loan Asset Management Inc.
dated ____ __, 1999.*
q. None.
r. None.
s. Power of Attorney of Timothy R. Schwertfeger.
___________________
* To be filed by amendment.
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
NUVEEN FLOATING RATE FUND
AMENDED AND RESTATED DECLARATION OF TRUST/1/ made as of this 16th day of
July, 1999 by the initial Trustee hereunder.
WHEREAS, the initial Trustee and any successor Trustees desire to establish
a trust fund for the purposes of carrying on the business of a management
investment company; and
WHEREAS, in furtherance of such purpose, the initial Trustee and any
successor Trustees elected in accordance with Article V hereof are acquiring and
may hereafter acquire assets and properties which they will hold and manage as
trustees of a Massachusetts business trust with transferable shares in
accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the initial Trustee and any successor Trustees elected or
appointed in accordance with Article V hereof hereby declare that they will hold
all cash, securities and other assets and properties, which they may from time
to time acquire in any manner as Trustees hereunder, IN TRUST, and that they
will manage and dispose of the same upon the following terms and conditions for
the benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.
ARTICLE I
NAME AND DEFINITIONS
- ---------------------
/1/On July 16, 1999, the initial Trustee of Nuveen Prime Rate Income Fund
approved a change in the name of the Trust to Nuveen Floating Rate Fund and
executed this Amended and Restated Declaration of Trust evidencing the name
change.
<PAGE>
-2-
Section 1. Name. This Trust shall be known as the "Nuveen Floating Rate
Fund" and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary association
established by this Declaration of Trust, as amended from time to time;
(b) "Trustee" or "Trustees" refers to each signatory to this
Declaration of Trust so long as such signatory shall continue in office in
accordance with the terms hereof, and all other individuals who at the time
in question have been duly elected or appointed and qualified in accordance
with Article V hereof and are then in office;
(c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Commission," "Interested Person," "Principal
Underwriter" and "vote of a majority of the outstanding voting securities"
shall have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" or "Declaration" shall mean this
Declaration of Trust as amended or restated from time to time; and
(h) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time.
ARTICLE II
NATURE AND PURPOSE OF TRUST
<PAGE>
-3-
The Trust is a voluntary association with transferable shares (commonly
known as a business trust) of the type referred to in Chapter 182 of the General
Laws of the Commonwealth of Massachusetts. The Trust is not intended to be,
shall not be deemed to be, and shall not be treated as, a general or a limited
partnership, joint venture, corporation or joint stock company, nor shall the
Trustees or Shareholders or any of them for any purpose be deemed to be, or be
treated in any way whatsoever as though they were, liable or responsible
hereunder as partners or joint venturers. The purpose of the Trust is to engage
in, operate and carry on the business of an closed-end management investment
company and to do any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.
The Trust set forth in this instrument shall be deemed made in the
Commonwealth of Massachusetts, and it is created under and is to be governed by
and construed and administered according to the laws of said Commonwealth. The
Trust shall be of the type commonly called a business trust, and without
limiting the provisions hereof, the Trust may exercise all powers which are
ordinarily exercised by such a trust. No provision of this Declaration shall be
effective to require a waiver of compliance with any provision of the Securities
Act of 1933, as amended, or the 1940 Act, or of any valid rule, regulation or
order of the Commission thereunder.
ARTICLE III
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
The name of the registered agent of the Trust is CT Corporation System at 2
Oliver Street, Boston, Massachusetts. The principal place of business of the
Trust is 333 West Wacker Drive, Chicago, Illinois 60606. The Trustees may,
without the approval of Shareholders, change the registered agent of the Trust
and the principal place of business of the Trust.
ARTICLE IV
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall be divided into such transferable Shares of beneficial
<PAGE>
-4-
interest, of such classes, and of such designations and par values (if any) and
with such rights, preferences, privileges and restrictions as shall be
determined by the Trustees in their sole discretion, without Shareholder
approval, from time to time and shall initially consist of one class of
transferable shares, par value $.01 per share. The number of Shares is unlimited
and each Share shall be fully paid and nonassessable. The Trustees shall have
full power and authority, in their sole discretion and without obtaining any
prior authorization or vote of the Shareholders of the Trust or of the
Shareholders of any class of Shares, to create and establish (and to change in
any manner) classes of Shares with such preferences, voting powers, rights and
privileges as the Trustees may from time to time determine; to divide or combine
the Shares or the Shares of any classes into a greater or lesser number; to
classify or reclassify any issued Shares into one or more classes of Shares; to
abolish any one or more classes of Shares; and to take such other action with
respect to the Shares as the Trustees may deem desirable. Except as may be
specifically set forth in this Declaration or in an instrument establishing and
designating classes of Shares, the Shares shall have the powers, preferences,
rights, qualifications, limitations and restrictions described below:
(i) In the event of the termination of the Trust the holders of the
Shares shall be entitled to receive pro rata the net distributable assets
of the Trust.
(ii) Each holder of Shares shall be entitled to one vote for each
Share held on each matter submitted to a vote of Shareholders, and the
holders of outstanding Shares shall vote together as a single class.
(iii) Dividends or other distributions to Shareholders, when, as and
if declared or made by the Trustees, shall be shared equally by the holders
of Shares on a share for share basis, such dividends or other distributions
or any portion thereof to be paid in cash or to be reinvested in full and
fractional Shares of the Trust as the Trustees shall direct.
(iv) Any Shares purchased, redeemed or otherwise reacquired by the
Trust shall be retired automatically and such retired Shares shall have the
status of authorized but unissued Shares.
(v) Shares may be issued from time to time, without the vote of the
Shareholders (or, if the Trustees in their sole discretion
<PAGE>
-5-
deem advisable, with a vote of Shareholders), either for cash or for such
other consideration (which may be in any one or more instances a certain
specified consideration or certain specified considerations) and on such
terms as the Trustees, from time to time, may deem advisable, and the Trust
may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities).
(vi) The Trust may issue Shares in fractional denominations to the
same extent as its whole Shares, and Shares in fractional denominations
shall be Shares having proportionately to the respective fractions
represented thereby all the rights of whole Shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon termination of the Trust.
The Trustees may from time to time, without the vote of Shareholders,
divide or combine Shares into a greater or lesser number without thereby
changing their proportionate beneficial interest in the Trust, including,
without limitation, such a division or combination accomplished by means of
a stock split or a reverse stock split, without thereby changing their
proportionate beneficial interest in the Trust.
Section 2. Establishment of Classes of Shares. The Trustees, in their sole
discretion, without obtaining any prior authorization or vote of the
Shareholders of the Trust or of the Shareholders of any class of Shares, from
time to time may authorize the division of Shares into two or more classes, the
number and relative rights, privileges and preferences of which shall be
established and designated by the Trustees, in their discretion, upon and
subject to the following provisions:
(i) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
classes as to purchase price, right of redemption, and the price, terms and
manner of redemption, exchange or conversion rights, if any, and special and
relative rights as to dividends and on liquidation.
(ii) The number of authorized Shares and the number of Shares of each
class that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any class into one or more classes that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other class), reissue for such consideration and on such terms as they may
determine, or cancel any
<PAGE>
-6-
Shares of any class reacquired by the Trust at their discretion from time to
time.
(iii) All dividends and distributions on Shares of a particular class
shall be distributed pro rata to the Shareholders of that class in proportion to
the number of Shares of that class held by such Shareholders at the date and
time of record established for the payment of such dividends or distributions.
(iv) On any matter submitted to a vote of the Shareholders of the
Trust, all Shares then entitled to vote shall be voted together as a single
class, except as otherwise provided in this Declaration or as may be set forth
in the instrument establishing and designating any class.
(v) The division of Shares of the Trust into Shares of one or more
classes from time to time shall be authorized by the vote of a majority of the
Trustees and shall be evidenced by the execution by a majority of the Trustees
of an instrument setting forth such establishment and designation and the
relative rights and preferences of such class or classes, and the effective date
of such establishment and designation or by the execution of such an instrument
by the Secretary or an Assistant Secretary pursuant to a vote of the majority of
the Trustees.
Section 3. Ownership of Shares. The ownership and transfer of Shares
shall be recorded on the books of the Trust or its transfer or similar agent.
No certificates certifying the ownership of Shares shall be issued except as the
Trustees may otherwise determine from time to time. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates,
transfer of Shares and similar matters. The record books of the Trust, as kept
by the Trust or any transfer or similar agent of the Trust, shall be conclusive
as to who are the holders of Shares and as to the number of Shares held from
time to time by each Shareholder.
Section 4. No Preemptive Rights, Etc. The holders of Shares shall not, as
such holders, have any right to acquire, purchase or subscribe for any Shares or
securities of the Trust which it may hereafter issue or sell, other than such
right, if any, as the Trustees in their discretion may determine. The holders
of Shares shall have no appraisal rights with respect to their Shares and,
except as otherwise determined by resolution of the Trustees in their sole
discretion, shall have no exchange or conversion rights with respect to their
Shares.
<PAGE>
-7-
Section 5. Status of Shares and Limitation of Personal Liability. Shares
shall be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of this Declaration of
Trust and to have become a party thereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of the Trust
property or right to call for a partition or division of the same or for an
accounting. Neither the Trustees, nor any officer, employee or agent of the
Trust shall have any power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise.
ARTICLE V
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. Qualification and Number. Each Trustee shall be a natural
person. A Trustee need not be a Shareholder, a citizen of the United States, or
a resident of the Commonwealth of Massachusetts. By the vote or consent of the
initial Trustee, or by a majority vote or consent of the Trustees as may
subsequently then be in office, the Trustees may fix the number of Trustees at a
number not less than two (2) nor more than twelve (12) and may fill the
vacancies created by any such increase in the number of Trustees. Except as
determined from time to time by resolution of the Trustees, no decrease in the
number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of his term, but the number of Trustees may be decreased
in conjunction with the removal of a Trustee pursuant to Section 4 of Article V.
Section 3. Term and Election. Each Trustee shall hold office until the
next meeting of Shareholders called for the purpose of considering the election
or re-election of such Trustee or of a successor to such Trustee,
<PAGE>
-8-
and until his successor is elected and qualified, and any Trustee who is
appointed by the Trustees in the interim to fill a vacancy as provided hereunder
shall have the same remaining term as that of his predecessor, if any, or such
term as the Trustees may determine. Any vacancy resulting from a newly created
Trusteeship or the death, resignation, retirement, removal, or incapacity of a
Trustee may be filled by the affirmative vote or consent of a majority of the
Trustees then in office.
Section 4. Resignation and Removal. Any Trustee may resign his trust or
retire as a Trustee (without need for prior or subsequent accounting except in
the event of removal) by an instrument in writing signed by him and delivered or
mailed to the Chairman, if any, the President or the Secretary, and such
resignation or retirement shall be effective upon such delivery, or at a later
date according to the terms of the instrument. Any Trustee who has become
incapacitated by illness or injury as determined by a majority of the other
Trustees, may be retired by written instrument signed by a majority of the other
Trustees. Except as aforesaid, any Trustee may be removed from office only for
"Cause" (as hereinafter defined) and only (i) by action of at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding Shares, or (ii) by written
instrument, signed by at least sixty-six and two-thirds percent (66-2/3%) of the
remaining Trustees, specifying the date when such removal shall become
effective. "Cause" shall require willful misconduct, dishonesty, fraud or a
felony conviction.
Section 5. Vacancies. The death, declination, resignation, retirement,
removal, or incapacity, of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided herein, or the
number of Trustees as fixed is reduced, the Trustees in office, regardless of
their number, shall have all the powers granted to the Trustees, and during the
period during which any such vacancy shall occur, only the Trustees then in
office shall be counted for the purposes of the existence of a quorum or any
action to be taken by such Trustees.
Section 6. Ownership of Assets of the Trust. The assets of the Trust
shall be held separate and apart from any assets now or hereafter held in any
capacity other than as Trustee hereunder by the Trustees or any successor
Trustees. All of the assets of the Trust shall at all times be considered as
automatically vested in the Trustees as shall be from time to time in office.
Upon the resignation, retirement, removal, incapacity or death of a Trustee,
such Trustee shall automatically cease to have any
<PAGE>
-9-
right, title or interest in any of the Trust property, and the right, title and
interest of such Trustee in the Trust property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
without the execution or delivery of any conveyancing or other instruments. No
Shareholder shall be deemed to have a severable ownership in any individual
asset of the Trust or any right of partition or possession thereof.
Section 7. Voting Requirements. In addition to the voting requirements
imposed by law or by any other provision of this Declaration of Trust, the
provisions set forth in this Article V may not be amended, altered or repealed
in any respect, nor may any provision inconsistent with this Article V be
adopted, without the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding Shares. In the event the
holders of the outstanding shares of any class are required by law or any other
provision of this Declaration of Trust to approve such an action by a class vote
of such holders, such action must be approved by the holders of at least sixty-
six and two-thirds percent (66 2/3%) of the outstanding Shares of such class or
such lower percentage as may be required by law or any other provision of this
Declaration of Trust.
ARTICLE VI
POWERS OF TRUSTEES
Section 1. Powers. The Trustees in all instances shall have full,
absolute and exclusive power, control and authority over the Trust assets and
the business and affairs of the Trust to the same extent as if the Trustees were
the sole and absolute owners thereof in their own right. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary or
appropriate in connection with the management of the Trust. The enumeration of
any specific power herein shall not be construed as limiting the aforesaid
powers. In construing the provisions of this Declaration of Trust, there shall
be a presumption in favor of the grant of power and authority to the Trustees.
Subject to any applicable limitation in this Declaration, the Trustees shall
have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire, to hold,
for investment or otherwise, to sell or otherwise dispose of, to lend or to
pledge, to trade in or deal in securities or interests of all kinds,
however evidenced, or obligations of all kinds, however
<PAGE>
-10-
evidenced, or rights, warrants, or contracts to acquire such securities,
interests, or obligations, of any private or public company, corporation,
association, general or limited partnership, trust or other enterprise or
organization, foreign or domestic, or issued or guaranteed by any national
or state government, foreign or domestic, or their agencies,
instrumentalities or subdivisions (including but not limited to, bonds,
debentures, bills, time notes and all other evidences of indebtedness);
negotiable or non-negotiable instruments; any and all options and futures
contracts, derivatives or structured securities; government securities and
money market instruments (including but not limited to, bank certificates
of deposit, finance paper, commercial paper, bankers acceptances, and all
kinds of repurchase agreements) and, without limitation, all other kinds
and types of financial instruments;
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and
repeal them to the extent that they do not reserve that right to the
Shareholders;
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(d) To set record dates for any purpose;
(e) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, investment subadviser,
transfer agent, custodian, underwriter or other independent contractor or
agent;
(f) Subject to Article IX, Section 1 hereof, to merge, or consolidate
the Trust with any other corporation, association, trust or other
organization; or to sell, convey, transfer, or lease all or substantially
all of the assets of the Trust;
(g) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver proxies or powers of attorney to such person or persons as the
Trustees shall deem proper, granting to such person or persons such power
and discretion with relation to securities or property as the Trustees
shall deem proper;
(h) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
<PAGE>
-11-
(i) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either
in their or the Trust's name or in the name of a custodian or a nominee or
nominees;
(j) To issue, sell, repurchase, retire, cancel, acquire, hold, resell,
reissue, dispose of, transfer and otherwise deal in Shares and in any
options, warrants or other rights to purchase Shares or any other interests
in the Trust other than Shares;
(k) To set apart, from time to time, out of any funds of the Trust a
reserve or reserves for any proper purpose, and to abolish any such
reserve;
(l) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or
property of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or issuer, and
to pay calls or subscriptions with respect to any security held in the
Trust;
(m) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(n) To make distributions to Shareholders;
(o) To borrow money and to pledge, mortgage, or hypothecate the assets
of the Trust;
(p) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any
Shareholders whose investment is less than such minimum upon such terms as
shall be established by the Trustees;
(q) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority
with relation to any security (whether or not so deposited or transferred)
as the Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and
<PAGE>
-12-
compensation of such committee, depositary or trustee as the Trustees shall
deem proper;
(r) To purchase and pay for out of Trust property such insurance as
they may deem necessary or appropriate for the conduct of the business of
the Trust, including, without limitation, insurance policies insuring the
assets of the Trust and payment of distributions and principal on its
portfolio investments, and insurance policies insuring the Shareholders,
Trustees, officers, employees, agents, investment advisers, investment
subadvisers or managers, principal underwriters, or independent contractors
of the Trust individually against all claims and liabilities of every
nature arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken or
omitted by any such person as Shareholder, Trustee, officer, employee,
agent, investment adviser, subadviser or manager, principal underwriter, or
independent contractor, whether or not any such action may be determined to
constitute negligence, and whether or not the Trust would have the power to
indemnify such person against such liability; and
(s) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement,
incentive and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a means of providing
such retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
Any determination made by or pursuant to the direction of the Trustees in
good faith and consistent with the provisions of this Declaration of Trust shall
be final and conclusive and shall be binding upon the Trust and every holder at
any time of Shares, including, but not limited to the following matters: the
amount of the assets, obligations, liabilities and expenses of the Trust; the
amount of the net income of the Trust from dividends, capital gains, interest or
other sources for any period and the amount of assets at any time legally
available for the payment of dividends or distributions; the amount, purpose,
time of creation, increase or decrease, alteration or cancellation of any
reserves or charges and the propriety thereof (whether or not any obligation or
liability for which such reserves or charges were created shall have been paid
or discharged); the market value, or any quoted price to be applied in
determining the market value, of any security or other asset owned or
<PAGE>
-13-
held by the Trust; the fair value of any security for which quoted prices are
not readily available, or of any other asset owned or held by the Trust; the
number of Shares of the Trust issued or issuable; the net asset value per Share;
any matter relating to the acquisition, holding and depositing of securities and
other assets by the Trust; any question as to whether any transaction
constitutes a purchase of securities on margin, a short sale of securities, a
borrowing, or an underwriting of the sale of, or participation in any
underwriting or selling group in connection with the public distribution of, any
securities, and any matter relating to the issue, sale, redemption, repurchase,
and/or other acquisition or disposition of Shares of the Trust. No provision of
this Declaration of Trust shall be effective to protect or purport to protect
any Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Section 2. Manner of Acting, By-Laws. The By-Laws shall make provision
from time to time for the manner in which the Trustees may take action,
including, without limitation, at meetings within or without Massachusetts,
including meetings held by means of a conference telephone or other
communications equipment, or by written consents, the quorum and notice, if any,
that shall be required for any meeting or other action, and the delegation of
some or all of the power and authority of the Trustees to any one or more
committees which they may appoint from their own number, or the establishment of
any other committees, and the termination of the same, from time to time.
ARTICLE VII
EXPENSES OF THE TRUST
The Trustees shall have the power to reimburse themselves from the Trust
property for their expenses and disbursements, to pay reasonable compensation to
themselves from the Trust property, and to incur and pay out of the Trust
property any other expenses which in the opinion of the Trustees are necessary
or incidental to carry out any of the purposes of this Declaration of Trust, or
to exercise any of the powers of the Trustees hereunder.
<PAGE>
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ARTICLE VIII
INVESTMENT ADVISER, UNDERWRITER
AND TRANSFER AGENT
Section 1. Investment Adviser. The Trust may enter into written contracts
with one or more persons (which term shall include any firm, corporation, trust
or association), to act as investment adviser or investment subadviser to the
Trust, and as such to perform such functions as the Trustees may deem reasonable
and proper, including, without limitation, investment advisory, management,
research, valuation of assets, clerical and administrative functions, under such
terms and conditions, and for such compensation, as the Trustees may in their
discretion deem advisable.
Upon the termination of any contract with Nuveen Institutional Advisory
Corp., or any corporation affiliated with John Nuveen & Co. Incorporated, acting
as investment adviser or manager, the Trustees are hereby required to promptly
change the name of the Trust to a name which does not include "Nuveen" or any
approximation or abbreviation thereof.
Section 2. Underwriter; Transfer Agent. The Trust may enter into a
written contract or contracts with an underwriter or underwriters or distributor
or distributors whereby the Trust may either agree to sell Shares to the other
party or parties to the contract or appoint such other party or parties its
sales agent or agents for such Shares and with such other provisions and
providing for such compensation if any, as the Trustees may in their discretion
deem reasonable and proper, and the Trustees may in their discretion from time
to time enter into transfer agency and/or shareholder service contract(s), in
each case with such terms and conditions, and providing for such compensation,
as the Trustees may in their discretion deem advisable.
Section 3. Parties to Contract. Any contract of the character described
in Sections 1 and 2 of this Article VIII or in Article X hereof may be entered
into with any corporation, firm, partnership, trust or association, including,
without limitation, the investment adviser, any investment subadviser or an
affiliate of the investment adviser or investment subadviser, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or
otherwise interested in such contract and no such contract shall be invalidated
or rendered voidable by reason of the existence of any such relationship, nor
shall any person holding
<PAGE>
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such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of said contract or accountable for
any profit realized directly or indirectly therefrom, provided that the contract
when entered into was not inconsistent with the provisions of this Article VIII,
Article X, or the By-Laws. The same person (including a firm, corporation,
partnership, trust or association) may be the other party to contracts entered
into pursuant to Sections 1 and 2 above or Article X, and any individual may be
financially interested or otherwise affiliated with persons who are parties to
any or all of the contracts mentioned in this Section 3.
ARTICLE IX
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote only:
(a) for the election or removal of Trustees as provided in Article V, (b) with
respect to any investment advisory or management contract to the extent required
by the 1940 Act, (c) with respect to any termination of the Trust to the extent
and as provided in this Article IX, Section 1, (d) with respect to any amendment
of this Declaration of Trust to the extent and as provided in Article XIII,
Section 4, (e) with respect to a merger or consolidation of the Trust with any
corporation, association, trust or other organization or a reorganization or
recapitalization of the Trust, or a sale, lease or transfer of all or
substantially all of the assets of the Trust (other than in the regular course
of the Trust's investment activities) to the extent and as provided in this
Article IX, Section 1, (f) to the same extent as the shareholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should be brought or maintained derivatively or as a class
action on behalf of the Trust or the Shareholders, provided, however that a
shareholder of a particular class shall not be entitled to bring any derivative
or class action on behalf of any other class of the Trust and (g) with respect
to such additional matters relating to the Trust as may be required by law, the
1940 Act, this Declaration of Trust, the By-Laws of the Trust, or any
registration of the Trust with the Commission or any State, or as the Trustees
may consider necessary or desirable.
An affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Shares of the Trust (or, in the event of
any action set forth below affecting only one or more classes of the Trust, an
affirmative vote of the holders of at least sixty-six and two-thirds percent of
the outstanding Shares of such affected class) shall be
<PAGE>
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required to approve, adopt or authorize (i) conversion of the Trust from a
closed-end investment company to an open-end investment company, (ii) a merger
or consolidation of the Trust with any corporation, association, trust or other
organization or a reorganization or recapitalization of the Trust or a class of
the Trust, (iii) a sale, lease or transfer of all or substantially all of the
assets of the Trust (other than in the regular course of the Trust's investment
activities), or (iv) a termination of the Trust (other than a termination by the
Trustees as provided for in Section 1 of Article XIII hereof), unless in any
case such action has previously been approved, adopted or authorized by the
affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with this Declaration of Trust or the ByLaws, in which case the
affirmative vote of the holders of at least a majority of the outstanding voting
securities of the Trust or the affected class shall be required. Nothing
contained herein shall be construed as requiring approval of Shareholders for
any transaction, whether deemed a merger, consolidation, reorganization or
otherwise whereby the Trust issues Shares in connection with the acquisition of
assets (including those subject to liabilities) from any other investment
company or similar entity).
In addition to the voting requirements imposed by law or by any other
provision of this Declaration of Trust, the provisions set forth in this Article
IX may not be amended, altered or repealed in any respect, nor may any provision
inconsistent with this Article IX be adopted, unless such action is approved by
the affirmative vote of the holders or at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding Shares, voting as a single class. In the event the
holders of any class of Shares are required by law to approve such an action by
a class vote of such holders, such action must be approved by the holders of at
least sixty-six and two-thirds percent (66 2/3%) of such holders or such lower
percentage as may be required by law.
Section 2. Meetings. Meetings of the Shareholders of the Trust or any one
or more classes thereof may be called and held from time to time for the purpose
of taking action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter deemed by the Trustees
to be necessary or desirable. Meetings of the Shareholders shall be held at
such place within the United States as shall be fixed by the Trustees, and
stated in the notice of the meeting. Meetings of the Shareholders may be called
by the Trustees and shall be called by the Trustees upon the written request of
Shareholders owning at least one-tenth of the outstanding Shares entitled to
vote. Shareholders shall be entitled to at least ten days' written notice of
any meeting, except
<PAGE>
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where the meeting is an adjourned meeting and the date, time and place of the
meeting were announced at the time of the adjournment.
Section 3. Quorum and Action. (a) The Trustees shall set in the By-Laws
the quorum required for the transaction of business by the Shareholders at a
meeting, which quorum shall in no event be less than thirty percent (30%) of the
Shares entitled to vote at such meeting. If a quorum is present when a duly
called or held meeting is convened, the Shareholders present may continue to
transact business until adjournment, even though the withdrawal of a number of
Shareholders originally present leaves less than the proportion or number
otherwise required for a quorum.
(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the Shares present in person or by proxy and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by any provision of this Declaration of
Trust or the By-Laws.
Section 4. Voting. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. There shall be no cumulative voting in
the election of Trustees or on any other matter submitted to a vote of the
Shareholders. Shares may be voted in person or by proxy. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Declaration of Trust or the By-Laws of
the Trust to be taken by Shareholders.
Section 5. Action by Written Consent in Lieu of Meeting of Shareholders.
Any action required or permitted to be taken at a meeting of the Shareholders
may be taken without a meeting by written action signed by all of the
Shareholders entitled to vote on that action. The written action is effective
when it has been signed by all of those Shareholders, unless a different
effective time is provided in the written action.
<PAGE>
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ARTICLE X
CUSTODIAN
All securities and cash of the Trust shall be held by one or more
custodians and subcustodians, each meeting the requirements for a custodian
contained in the 1940 Act, or shall otherwise be held in accordance with the
1940 Act.
ARTICLE XI
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions. The Trustees may in their sole discretion from
time to time declare and pay, or may prescribe and set forth in a duly adopted
vote or votes of the Trustees, the bases and time for the declaration and
payment of, such dividends and distributions to Shareholders as they may deem
necessary or desirable, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish) determined
in accordance with good accounting practices.
Section 2. Redemption of Shares. From time to time the Trust may redeem
or repurchase its Shares all upon such terms and conditions as may be determined
by the Trustees and subject to any applicable provisions of the 1940 Act, as it
may be amended from time to time, or in accordance with any order of the
Securities and Exchange Commission authorizing such redemption. The Trust shall
redeem the Shares of the Trust at the price determined as hereinafter set forth,
upon the appropriately verified application of the record holder thereof (or
upon such other form of request as the Trustees may determine) at such office or
agency as may be designated from time to time for that purpose by the Trustees.
The Trustees may from time to time specify additional conditions, not
inconsistent with the 1940 Act, regarding the redemption of Shares in the
Trust's then effective prospectus under the Securities Act of 1933.
Section 3. Redemption Price. Shares shall be redeemed at their net asset
value (less any applicable repurchase fee, withdrawal fee or sales charge
payable to the Trust, to the underwriter or to any other person designated by
the Trustees) determined as set forth in Section 7 of this Article XI as of such
time as the Trustees shall have theretofore prescribed by resolution. In the
absence of such resolution, the redemption price of Shares deposited shall be
the net asset value of such
<PAGE>
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Shares next determined in accordance with the procedures set forth in the
Trust's then effective prospectus under the Securities Act of 1933.
Section 4. Payment. Payment of the redemption price of Shares of the
Trust or any class thereof shall be made in cash (or, at the option of the
Trustees if permitted under the 1940 Act or any order thereunder, in property or
partly in cash and partly in property) to the Shareholder at such time and in
the manner, not inconsistent with the 1940 Act or other applicable laws, as may
be specified from time to time in the Trust's then effective prospectus under
the Securities Act of 1933.
Section 5. Redemption of Shareholder's Interest. The Trustees, in their
sole discretion, may cause the Trust to redeem all of the Shares of the Trust or
one or more classes of the Trust held by any Shareholder if the value of such
Shares held by such Shareholder is less than the minimum amount established from
time to time by the Trustees.
Section 6. Suspension of Right of Redemption. Notwithstanding the
foregoing, the Trust may suspend the right of the holders of Shares to require
the Trust to redeem Shares (a) if the repurchase would cause the Trust to lose
its status as a regulated investment company under Subchapter M of the Internal
Revenue Code; (b) if the repurchase would cause the shares, if listed on a
national securities exchange or quoted on an inter-dealer quotation system of a
national securities association to be neither listed on any national securities
exchange nor quoted on any inter-dealer quotation system of a national
securities association; (c) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (d) when trading
in the markets the Trust normally utilizes is restricted, or an emergency exists
as determined by the Commission so that disposal of the Trust's investments or
determination of its net asset value is not reasonably practicable, or (e) for
such other periods as the Commission may by order, rule or otherwise permit.
Section 7. Determination of Net Asset Value and Valuation of Portfolio
Assets. The Trustees may in their sole discretion from time to time prescribe
and shall set forth in the By-Laws or in a duly adopted vote or votes of the
Trustees such bases and times for determining the per Share net asset value of
the Shares and the valuation of portfolio assets as they may deem necessary or
desirable.
The Trust may suspend the determination of net asset value during any
period when it may suspend the right of the holders of Shares to require the
Trust to redeem Shares.
<PAGE>
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ARTICLE XII
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee. Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of the
Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been executed or done only in or with respect to
their or his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of State of the Commonwealth
of Massachusetts, shall recite that the same was executed or made by or on
behalf of the Trust by them as Trustees or Trustee or as officers or officer and
not individually and that the obligations of such instrument are not binding
upon any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further recitals as they
or he may deem appropriate, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
All persons extending credit to, contracting with or having any claim
against the Trust shall look only to the assets of the Trust for payment under
such credit, contract or claim; and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees
<PAGE>
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or agents, whether past, present or future, shall be personally liable therefor.
Section 2. Trustees' Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder shall be
binding upon everyone interested. A Trustee shall be liable only for his own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and for nothing else,
and shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the meaning
and operation of this Declaration of Trust and their duties as Trustees
hereunder, and shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. In discharging their
duties, the Trustees, when acting in good faith, shall be entitled to rely upon
the books of account of the Trust and upon written reports made to the Trustees
by any officer appointed by them, any independent public accountant and (with
respect to the subject matter of the contract involved) any officer, partner or
responsible employee of any other party to any contract entered into hereunder.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Indemnification. Subject to the exceptions and limitations
contained in this Section 4, every person who is, or has been, a Trustee,
officer, employee or agent of the Trust, including persons who serve at the
request of the Trust as directors, trustees, officers, employees or agents of
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a "Covered Person"), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person:
<PAGE>
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(a) against any liability to the Trust or its Shareholders by reason
of a final adjudication by the court or other body before which the
proceeding was brought that he engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office;
(b) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that
his action was in the best interests of the Trust; or
(c) in the event of a settlement or other disposition not involving a
final adjudication (as provided in paragraph (a) or (b)) and resulting in a
payment by a Covered Person, unless there has been either a determination
that such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office by the court or other body approving the settlement
or other disposition, or a reasonable determination, based on a review of
readily available facts (as opposed to a full trial-type inquiry), that he
did not engage in such conduct:
(i) by a vote of a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the Disinterested Trustees
then in office act on the matter); or
(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
<PAGE>
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(a) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising
out of any such advances; or
(b) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act
on the matter) or independent legal counsel in a written opinion shall
determine, based upon a review of the readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the
recipient ultimately will be found entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
As used in this Section 4, the words "claim," "action," "suit" or
"proceeding" shall apply to all claims, actions, suits, proceedings (civil,
criminal, administrative or other, including appeals), actual or threatened; and
the words "liability" and "expenses" shall include without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
Section 5. Shareholders. No personal liability for any debt or obligation
of the Trust shall attach to any Shareholder or former Shareholder of the Trust.
In case any Shareholder or former Shareholder of the Trust shall be held to be
personally liable solely by reason of his being or having been a Shareholder and
not because of his acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Trust to
be held harmless from and indemnified against all loss and expense arising from
such liability; provided, however, there shall be no liability or obligation of
the Trust arising hereunder to reimburse any Shareholder for taxes paid by
reason of such Shareholder's ownership of any Share or for losses suffered by
reason of any changes in value of any Trust assets. The Trust shall, upon
request by the Shareholder or former Shareholder, assume the defense of any
claim made against the
<PAGE>
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Shareholder for any act or obligation of the Trust and satisfy any judgment
thereon.
ARTICLE XIII
MISCELLANEOUS
Section 1. Termination of Trust. Unless terminated as provided herein,
the Trust shall continue without limitation of time. The Trust or any class of
the Trust may be terminated at any time by the Trustees by written notice to the
Shareholders of the Trust, or such class as the case may be, without a vote of
the Shareholders of the Trust, or of such class, or the Trust may be terminated
by the affirmative vote of the Shareholders in accordance with Section 1 of
Article IX hereof.
Upon termination of the Trust or any class thereof, after paying or
otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets of the Trust or of the particular class thereof to
distributable form in cash or other securities, or any combination thereof, and
distribute the proceeds to the holders of the Shares of the Trust or such class
in the manner set forth by resolution of the Trustees.
Section 2. Filing of Copies, References, Headings. The original or a copy
of this instrument and of each amendment hereto shall be kept in the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment shall be filed by the Trustees with the
Secretary of State of the Commonwealth of Massachusetts, as well as any other
governmental office where such filing may from time to time be required,
provided, however, that the failure to so file will not invalidate this
instrument or any properly authorized amendment hereto. Anyone dealing with the
Trust may rely on a certificate by an officer or Trustee of the Trust as to
whether or not any such amendments have been made and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this instrument or of any such amendments. In this instrument or
in any such amendment, references to this instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this instrument
as a whole and as amended or affected by any such amendment, and masculine
pronouns shall be deemed to include the feminine and the neuter, as the
<PAGE>
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context shall require. Headings are placed herein for convenience of reference
only, and in case of any conflict, the text of this instrument, rather than the
headings, shall control. This instrument may be executed in any number of
counterparts, each of which shall be deemed an original.
Section 3. Trustees May Resolve Ambiguities. The Trustees may construe
any of the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.
Section 4. Amendments. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by
vote of a majority of the then Trustees with the consent of Shareholders holding
more than fifty percent (50%) of Shares entitled to vote except that an
amendment which in the determination of the Trustees shall affect the holders of
one or more classes of Shares but not the holders of all outstanding classes
shall be authorized by vote of the Shareholders holding a majority of the Shares
entitled to vote of each class affected and no vote of Shareholders of a class
not affected shall be required. In addition, notwithstanding any other
provision to the contrary contained in this Declaration of Trust, the Trustees
may amend this Declaration of Trust without the vote or consent of Shareholders
(i) at any time if the Trustees deem it necessary in order for the Trust or any
class thereby to meet the requirements of applicable Federal or State laws or
regulations, or the requirements of the regulated investment company provisions
of the Internal Revenue Code, (ii) to designate classes or exercise other powers
with respect thereto in accordance with Section 1 and 2 or Article IV hereof,
(iii) change the name of the Trust or to supply any omission, cure any ambiguity
or cure, correct or supplement any defective or inconsistent provision contained
herein, or (iv) for any reason at any time before a registration statement under
the Securities Act of 1933, as amended, covering the initial public offering of
Shares has become effective. A certification in recordable form signed by a
majority of the Trustees or by the Secretary or any Assistant Secretary of the
Trust setting forth such amendment and reciting that it was duly adopted by the
shareholders or by the Trustees as aforesaid or a copy of the Declaration, as
amended, in recordable form, and executed by a majority of the Trustees or
certified by the Secretary or any Assistant Secretary of the Trust, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
<PAGE>
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IN WITNESS WHEREOF, the undersigned, being the sole Trustee of the Trust, has
executed this instrument as of the date first written above.
___________________________
Timothy R. Schwertfeger,
as Trustee
333 West Wacker Drive
Chicago, Illinois 60606
STATE OF ILLINOlS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named person(s) who are known to me to
be Trustee(s) of the Trust whose name(s) and signature(s) are affixed to the
foregoing Declaration of Trust and who acknowledged the same to be his/her free
act and deed, before me this 16th day of July, 1999.
__________________________________
Notary Public
My Commission Expires: ___________
<PAGE>
BY-LAWS
OF
NUVEEN FLOATING RATE FUND*
ARTICLE I
DECLARATION OF TRUST
AND
OFFICES
Section 1.1. Declaration of Trust. These By-Laws shall be subject to the
Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of Nuveen Floating Rate Fund, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
Section 1.2. Registered Agent. The registered agent of the Trust in the
Commonwealth of Massachusetts shall be CT Corporation System, 2 Oliver Street,
Boston, Massachusetts, or such other agent as may be fixed by the Board of
Trustees.
Section 1.3. Other Offices. The Trust may have such other offices and
places of business within or without the Commonwealth of Massachusetts as the
Board of Trustees shall determine.
ARTICLE II
SHAREHOLDERS
Section 2.1. Place of Meetings. Meetings of the Shareholders may be held
at such place or places within or without the Commonwealth of Massachusetts as
shall be fixed by the Board of Trustees and stated in the notice of the meeting.
- ------------------
* The name of this Fund was changed from Nuveen Prime Rate Income Fund to
Nuveen Floating Rate Fund on July 16, 1999.
<PAGE>
-2-
Section 2.2. Regular Meeting. Regular meetings of the Shareholders for
the election of Trustees and the transaction of such other business as may
properly come before the meeting shall be held on an annual or other less
frequent periodic basis at such date and time as the Board of Trustees by
resolution shall designate, except as otherwise required by applicable law.
Section 2.3. Special Meeting. Special meetings of the Shareholders for
any purpose or purposes may be called by the Chairman of the Board, the
President or two or more Trustees, and must be called at the written request
stating the purpose or purposes of the meeting, of Shareholders entitled to cast
at least l0 percent of all the votes entitled to be cast at the meeting.
Section 2.4. Notice of Meetings. Notice stating the time and place of the
meeting and in the case of a special meeting the purpose or purposes thereof and
by whom called, shall be delivered to each Shareholder not less than ten nor
more than sixty days prior to the meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of the adjournment.
Section 2.5. Quorum and Action. (a) The holders of a majority of the
voting power of the shares of beneficial interest of the Trust (the "Shares")
entitled to vote at a meeting are a quorum for the transaction of business. If
a quorum is present when a duly called or held meeting is convened, the
Shareholders present may continue to transact business until adjournment, even
though the withdrawal of a number of Shareholders originally present leaves less
than the proportion or number otherwise required for a quorum. Notwithstanding
the foregoing, when the holders of Preferred Shares are entitled to elect any of
the Trust's Trustees by class vote of such holders, the holders of 33 1/3% of
the Shares entitled to vote at a meeting shall constitute a quorum for the
purpose of such an election.
(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the voting power of the Shares present and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by the Investment Company Act of 1940, as
amended (the "1940 Act"), the Declaration of Trust or any resolution of the
Trustees which authorizes the issuance of Preferred Shares.
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Section 2.6. Voting. At each meeting of the Shareholders, every, holder
of Shares then entitled to vote may vote in person or by proxy and, except as
otherwise provided by the 1940 Act, the Declaration of Trust or any resolution
of the Trustees which authorizes the issuance of Preferred Shares, shall have
one vote for each Share registered in his name.
Section 2.7. Proxy Representation. A Shareholder may cast or authorize
the casting of a vote by filing a written appointment of a proxy with an officer
of the Trust at or before the meeting at which the appointment is to be
effective. The placing of a Shareholder's name on a proxy pursuant to
telephonic or electronically transmitted instructions obtained pursuant to
procedures which are reasonably designed to verify that such instructions have
been authorized by such Shareholder, shall constitute execution of such proxy by
or on behalf of such Shareholder. The appointment of a proxy is valid for eleven
months, unless a longer period is expressly provided in the appointment. No
appointment is irrevocable unless the appointment is coupled with an interest in
the Shares or in the Trust. Any copy, facsimile telecommunication or other
reliable reproduction of a proxy may be substituted for or used in lieu of the
original proxy for any and all purposes for which the original proxy could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original proxy.
Section 2.8. Adjourned Meetings. Any meeting of Shareholders may by
announcement thereat, be adjourned to a designated time and place by the vote of
the holders of a majority of the Shares present and entitled to vote thereat
even though less than a quorum is so present. An adjourned meeting may
reconvene as designed, and when a quorum is present any business may be
transacted which might have been transacted at the meeting as originally called.
Section 2.9. Action by Written Consent in Lieu of Meeting of Shareholders.
See Section 6.3 of these By-Laws.
ARTICLE III
TRUSTEES
Section 3.1. Qualifications and Number: Vacancies. Each Trustee shall be
a natural person. A Trustee need not be a Shareholder, a citizen of the United
States, or a resident of the Commonwealth of Massachusetts. The number of
Trustees of the Trust, their term and
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election and the filling of vacancies, shall be as provided in the Declaration
of Trust.
Section 3.2. Powers. The business and affairs of the Trust shall be
managed under the direction of the Board of Trustees. All powers of the Trust
may be exercised by or under the authority of the Board of Trustees, except
those conferred on or reserved to the Shareholders by statute, the Declaration
of Trust or these By-Laws.
Section 3.3. Investment Policies. It shall be the duty of the Board of
Trustees to ensure that the purchase, sale, retention and disposal of portfolio
securities and the other investment practices of the Trust are at all times
consistent with the investment objectives, policies and restrictions with
respect to securities investments and otherwise of the Trust filed from time to
time with the Securities and Exchange Commission and as required by the 1940
Act, unless such duty is delegated to an investment adviser pursuant to a
written contract, as provided in the Declaration of Trust. The Trustees,
however, may delegate the duty of management of the assets of the Trust and may
delegate such other of their powers and duties to the Executive Committee or any
other committee, or to an individual or corporate investment adviser to act as
investment adviser or subadviser pursuant to a written contract.
Section 3.4. Meetings. Regular meetings of the Trustees may be held
without notice at such times as the Trustees shall fix. Special meetings of the
Trustees may be called by the Chairman of the Board or the President, and shall
be called at the written request of two or more Trustees. Unless waived by each
Trustee, three days' notice of special meetings shall be given to each Trustee
in person, by mail, by telephone, or by telegram or cable, or by any other means
that reasonably may be expected to provide similar notice. Notice of special
meetings need not state the purpose or purposes thereof. Meetings of the
Trustees may be held at any place within or outside the Commonwealth of
Massachusetts. A conference among Trustees by any means of communication
through which the Trustees may simultaneously hear each other during the
conference constitutes a meeting of the Trustees or of a committee of the
Trustees, if the notice requirements have been met (or waived) and if the number
of Trustees participating in the conference would be sufficient to constitute a
quorum at such meeting. Participation in such meeting by that means constitutes
presence in person at the meeting.
Section 3.5. Quorum and Action. A majority of the Trustees currently
holding office, or in the case of a meeting of a committee of the
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Trustees, a majority of the members of such committee, shall constitute a quorum
for the transaction of business at any meeting. If a quorum is present when a
duly called or held meeting is convened, the Trustees present may continue to
transact business until adjournment, even though the withdrawal of a number of
Trustees originally present leaves less than the proportion or number otherwise
required for a quorum. At any duly held meeting at which a quorum is present,
the affirmative vote of the majority of the Trustees present shall be the act of
the Trustees or the committee, as the case may be, on any question, except where
the act of a greater number is required by these By-Laws or by the Declaration
of Trust.
Section 3.6. Action by Written Consent in Lieu of Meetings of Trustees.
See Section 6.3 of these By-Laws.
Section 3.7. Committees. The Trustees, by resolution adopted by the
affirmative vote of a majority of the Trustees, may designate from their members
an Executive Committee, an Audit Committee (whose function shall be to advise
the Trustees as to the selection of and review of the work of the independent
public accountants of the Trust) and any other committee or committees, each
such committee to consist of two or more Trustees and to have such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Any such committee may be terminated at any time by the affirmative
vote of a majority of the Trustees.
ARTICLE IV
OFFICERS
Section 4.1. Number and Qualifications. The officers of the Trust shall
include a Chairman of the Board, a President, a Controller, one or more Vice
Presidents (one of whom may be designated Executive Vice President), a
Treasurer, and a Secretary. Any two or more offices may be held by the same
person. Unless otherwise determined by the Trustees, each officer shall be
appointed by the Trustees for a term which shall continue until the meeting of
the Trustees following the next regular meeting of Shareholders and until his
successor shall have been duly elected and qualified, or until his death, or
until he shall have resigned or have been removed, as hereinafter provided in
these By-Laws. The Trustees may from time to time elect, or delegate to the
Chairman of the Board or the President, or both, the power to appoint, such
officers (including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents as may be
necessary or desirable for the business of the Trust. Such other
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officers shall hold office for such terms as may be prescribed by the Trustees
or by the appointing authority.
Section 4.2. Resignations. Any officer of the Trust may resign at any
time by giving written notice of his resignation to the Trustees, the Chairman
of the Board, the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 4.3. Removal. An officer may be removed at any time, with or
without cause, by a resolution approved by the affirmative vote of a majority of
the Trustees present at a duly convened meeting of the Trustees.
Section 4.4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause, may be filled for the
unexpired portion of the term by the Trustees, or in the manner determined by
the Trustees.
Section 4.5. The Chairman of the Board. The Chairman of the Board shall
be elected from among the Trustees. He shall be the chief executive officer of
the Trust and shall:
(a) have general active management of the business of the Trust;
(b) when present, preside at all meetings of the Trustees and of the
Shareholders;
(c) see that all orders and resolutions of the Trustees are carried
into effect;
(d) sign and deliver in the name of the Trust any deeds, mortgages,
bonds, contracts or other instruments pertaining to the business of the
Trust, except in cases in which the authority to sign and deliver is
required by law to be exercised by another person or is expressly delegated
by the Declaration of Trust or By-Laws or by the Trustees to some other
officer or agent of the Trust; and
(e) maintain records of and, whenever necessary, certify all
proceedings of the Trustees and the Shareholders.
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The Chairman of the Board shall be authorized to do or cause to be done all
things necessary or appropriate, including preparation, execution and filing of
any documents, to effectuate the registration from time to time of the Common
Shares or Preferred Shares of the Trust with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. He shall perform
all duties incident to the office of Chairman of the Board and such other duties
as from time to time may be assigned to him by the Trustees or by these By-Laws.
Section 4.6. The President. The President shall be the chief operating
officer of the Trust and, subject to the Chairman of the Board, he shall have
general authority over and general management and control of the business and
affairs of the Trust. In general, he shall discharge all duties incident to the
office of the chief operating officer of the Trust and such other duties as may
be prescribed by the Trustees and the Chairman of the Board from time to time.
In the absence of the Chairman of the Board or in the event of his disability,
or inability to act or to continue to act, the President shall perform the
duties of the Chairman of the Board and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the Chairman of the Board.
Section 4.7. Executive Vice-President. In the case of the absence or
inability to act of the President and the Chairman of the Board, the Executive
Vice-President shall perform the duties of the President and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Executive Vice-President shall perform all duties incident to
the office of Executive Vice-President and such other duties as from time to
time may be assigned to him by the Trustees, the President or these By-Laws.
Section 4.8. Vice Presidents. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Trustees, the Chairman
of the Board or the President.
Section 4.9. Controller. The Controller shall:
(a) keep accurate financial records for the Trust;
(b) render to the Chairman of the Board, the President and the
Trustees, whenever requested, an account of all transactions by and of the
financial condition of the Trust; and
(c) in general, perform all the duties incident to the office of
Controller and such other duties as from time to time may be
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assigned to him by the Trustees, the Chairman of the Board or the
President.
Section 4.10. Treasurer. The Treasurer shall:
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Trust, except those which the Trust has placed in the
custody of a bank or trust company pursuant to a written agreement
designating such bank or trust company as custodian of the property of the
Trust, as required by Section 6.6 of these By-Laws;
(b) deposit all money, drafts, and checks in the name of and to the
credit of the Trust in the banks and depositories designated by the
Trustees;
(c) endorse for deposit all notes, checks, and drafts received by the
Trust making proper vouchers therefor:
(d) disburse corporate funds and issue checks and drafts in the name
of the Trust, as ordered by the Trustees; and
(e) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.
Section 4.11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Trustees, the committees of the
Trustees and the Shareholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by statute;
(c) be custodian of the records of the Trust;
(d) see that the books, reports, statements, certificates and other
documents and records required by statute to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be
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assigned to him by the Trustees, the Chairman of the Board or the
President.
Section 4.12. Salaries. The salaries of all officers shall be fixed by
the Trustees and the Trustees have the authority by majority vote to reimburse
expenses and to establish reasonable compensation of all Trustees for services
to the Trust as Trustees, officers, or otherwise.
ARTICLE V
SHARES
Section 5.1. Share Certificates. Each owner of Common Shares of the Trust
shall be entitled upon request to have a certificate, in such form as shall be
approved by the Trustees, representing the number of Common Shares of the Trust
owned by him. Certificates representing fractional Common Shares shall not be
issued. The certificates representing Common Shares shall be signed in the name
of the Trust by the Chairman of the Board, the President, the Executive Vice
President or a Vice President and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer (which signatures may be either manual or
facsimile, engraved or printed). In case any officer who shall have signed such
certificate shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Trust with the same effect as
if such officer were still in office at the date of their issuance. No
certificates representing Preferred Shares shall be issued except as the
Trustees may otherwise authorize.
Section 5.2. Books and Records; Inspection. The Trust shall keep at its
principal executive office, or at another place or places within the United
States determined by the Trustees, a share register not more than one year old,
containing the names and addresses of the shareholders and the number of Shares
held by each Shareholder. The Trust shall also keep, at its principal executive
office, or at another place or places within the United States determined by the
Trustees, a record of the dates on which certificates representing Shares were
issued.
Section 5.3. Share Transfers. Upon compliance with any provisions
restricting the transferability of Shares that may be set forth in the
Declaration of Trust, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of Shares of the Trust shall be made only on the
books of the Trust by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the Trust, or with a transfer agent or a registrar
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and on surrender of any certificate or certificates for such Shares properly
endorsed and the payment of all taxes thereon. Except as may be otherwise
provided by law or these By-Laws, the person in whose name Shares stand on the
books of the Trust shall be deemed the owner thereof for all purposes as regards
the Trust; provided that whenever any transfer of Shares shall be made for
collateral security, and not absolutely, such fact, if known to an officer of
the Trust, shall be so expressed in the entry of transfer.
Section 5.4. Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the issue, certification, transfer and registration of Shares of the
Trust. They may appoint, or authorize any officer or officers to appoint, one
or more transfer agents or one or more transfer clerks and one or more
registrars and may require all certificates for Shares to bear the signature or
signatures of any of them.
Section 5.5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing Shares of the Trust shall immediately notify the Trust
of any loss, destruction or mutilation of such certificate, and the Trust may
issue a new certificate in the place of any certificate theretofore issued by it
which the owner thereof shall allege to have been lost or destroyed or which
shall have been mutilated, and the Trustees may, in their discretion, require
such owner or his legal representatives to give to the Trust a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties as the
Trustees in their absolute discretion shall determine, to indemnify the Trust
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or the issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Trustees, in their absolute
discretion, may refuse to issue any such new certificate, except as otherwise
required by law.
Section 5.6. Record Date; Certification of Beneficial Owner. (a) The
Trustees may fix a date not more than sixty (60) days before the date of a
meeting of Shareholders as the date for the determination of the holders of
Shares entitled to notice of and entitled to vote at the meeting or any
adjournment thereof.
(b) The Trustees may fix a date for determining Shareholders entitled to
receive payment of any dividend or distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares.
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(c) In the absence of such fixed record date, (i) the date for
determination of Shareholders entitled to notice of and entitled to vote at a
meeting of Shareholders shall be the later of the close of business on the day
on which notice of the meeting is mailed or the thirtieth day before the
meeting, and (ii) the date for determining Shareholders entitled to receive
payment of any dividend or distribution or an allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares shall be the close of business on the day on which the resolution of
the Trustees is adopted.
(c) A resolution approved by the affirmative vote of a majority of the
Trustees present may establish a procedure whereby a Shareholder may certify in
writing to the Trust that all or a portion of the Shares registered in the name
of the Shareholder are held for the account of one or more beneficial owners.
Upon receipt by the Trust of the writing, the persons specified as beneficial
owners, rather than the actual Shareholders, are deemed the Shareholders for the
purposes specified in the writing.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Fiscal Year. The fiscal year of the Trust shall be as fixed
by the Trustees of the Trust.
Section 6.2. Notice and Waiver of Notice. (a) Any notice of a meeting
required to be given under these By-Laws to Shareholders or Trustees, or both,
may be waived by any such person (i) orally or in writing signed by such person
before, at or after the meeting or (ii) by attendance at the meeting in person
or, in the case of a Shareholder, by proxy.
(b) Except as otherwise specifically provided herein, all notices required
by these By-Laws shall be printed or written, and shall be delivered either
personally, by telecopy, telegraph or cable, or by mail or courier or delivery
service, and, if mailed, shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the Shareholder or Trustee at
his address as it appears on the records of the Trust.
Section 6.3. Action by Written Consent in Lieu of Meeting. (a) An action
required or permitted to be taken at a meeting of the Shareholders may be taken
without a meeting by written action signed by all of the
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Shareholders entitled to vote on that action. The written action is effective
when it has been signed by all of those Shareholders, unless a different
effective time is provided in the written action.
(b) An action which requires Shareholder approval and which is required or
permitted to be taken at a meeting of Trustees may be taken by written action
signed by all of the Trustees. An action which does not require Shareholder
approval and which is required or permitted to be taken at a meeting of the
Trustees or a Committee of the Trustees may be taken by written action signed by
the number of Trustees that would be required to take the same action at a
meeting of the Trustees or Committee, as the case may be, at which all Trustees
were present. The written action is effective when signed by the required
number of Trustees, unless a different effective time is provided in the written
action. When written action is taken by less than all Trustees, all Trustees
shall be notified immediately of this text and effective date.
Section 6.4. Reports to Shareholders. The books of account of the Trust
shall be examined by an independent firm of public accountants at the close of
each annual period of the Trust and at such other times, if any, as may be
directed by the Trustees. A report to the Shareholders based upon such
examination shall be mailed to each Shareholder of the Trust of record at his
address as the same appears on the books of the Trust. Each such report shall
show the assets and liabilities of the Trust as of the annual or other period
covered by the report and the securities in which the funds of the Trust were
then invested; such report shall also show the Trust's income and expenses for
the period from the end of the Trust's preceding fiscal year to the close of the
annual or other period covered by the report and any other information required
by the 1940 Act, and shall set forth such other matters as the Trustees or such
independent firm of public accountants shall determine.
Section 6.5. Approval of Firm of Independent Public Accountants. At any
regular meeting of the Shareholders of the Trust there may be submitted, for
ratification or rejection, the name of the firm of independent public
accountants which has been selected for the fiscal year in which such meeting is
held by a majority of those members of the Trustees who are not investment
advisers of, or affiliated persons of an investment adviser of, or officers or
employees of, the Trust, as such terms are defined in the 1940 Act.
Section 6.6. Custodian. All securities and cash of the Trust shall be
held by a custodian meeting the requirements for a custodian contained in the
1940 Act and the rules and regulations thereunder and in any
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applicable state securities or blue sky laws. The Trust shall enter into a
written contract with the custodian regarding the powers, duties and
compensation of the custodian with respect to the cash and securities of the
Trust held by the custodian. Said contract and all amendments thereto shall be
approved by the Trustees of the Trust. The Trust shall upon the resignation or
inability to serve of the custodian obtain a successor custodian and require
that the cash and securities owned by the Trust be delivered to the successor
custodian.
Section 6.7. Prohibited Transactions. No officer or Trustee of the Trust
or of its investment adviser shall deal for or on behalf of the Trust with
himself, as principal or agent, or with any corporation or partnership in which
he has a financial interest. This prohibition shall not prevent: (a) officers
or Trustees of the Trust from having a financial interest in the Trust, its
principal underwriter or its investment adviser; (b) the purchase of securities
for the portfolio of the Trust or the sale of securities owned by the Trust
through a securities dealer, one or more of whose partners, officers or
directors is an officer or Trustee of the Trust, provided such transactions are
handled in the capacity of broker only and provided commission charged do not
exceed customary brokerage charges for such service; (c) the purchase or sale of
securities for the portfolio of the Trust pursuant to a rule under the 1940 Act
or pursuant to an exemptive order of the Securities and Exchange Commission; or
(d) the employment of legal counsel, registrar, transfer agent, dividend
disbursing agent, or custodian having a partner, officer or director who is an
officer or Trustee of the Trust, provided only customary fees are charged for
services rendered to or for the benefit of the Trust.
Section 6.8. Bonds. The Trustees may require any officer, agent or
employee of the Trust to give a bond to the Trust, conditioned upon the faithful
discharge of his duties, with one or more sureties and in such amount as may be
satisfactory to the Trustee. The Trustees shall, in any event, require the
Trust to provide and maintain a bond issued by a reputable fidelity insurance
company, authorized to do business in the place where the bond is issued,
against larceny and embezzlement, covering each officer and employee of the
Trust, who may singly, or jointly with others, have access to securities or
funds of the Trust, either directly or through authority to draw upon such funds
or to direct generally the disposition of such securities, such bond or bonds to
be in such reasonable form and amount as a majority of the Trustees who are not
"interested persons" of the Trust as defined in the 1940 Act shall approve not
less than once every twelve months, with due consideration to all relevant
factors including, but not limited to, the value of the aggregate assets of the
Trust to which any such officer or employee may have access, the type
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and terms of the arrangements made for the custody and safekeeping of such
assets, and the nature of the securities in the Trust's portfolio, and as meet
all requirements which the Securities and Exchange Commission may prescribe by
order, rule or regulation.
ARTICLE VII
AMENDMENTS
Section 7.1. These By-Laws may be amended or repealed, or new By-Laws may
be adopted, by the Trustees at any meeting thereof provided that notice of such
meeting shall have been given if required by these By-Laws, which notice, if
required, shall state that amendment or repeal of the By-Laws or adoption of
new By-Laws, is one of the purposes of such meeting, or by action of the
Trustees by written consent in lieu of a meeting.
<PAGE>
NUVEEN FLOATING RATE FUND
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, a trustee of the above-
referenced organizations, hereby constitutes and appoints ALAN G. BERKSHIRE,
LARRY W. MARTIN and GIFFORD R. ZIMMERMAN, and each of them (with full power to
each of them to act alone) his true and lawful attorney-in-fact and agent, for
him on his behalf and in Registration Statements on form N-2 under the
Securities Act of 1933 and the Investment Company Act of 1940, including any
amendment or amendments thereto, with all exhibits, and any and all other
documents required to be filed with any regulatory authority, federal or state,
relating to the registration thereof, or the issuance of shares thereof, without
limitation, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises in order to effectuate the same as fully to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned trustee of the above-referenced
organizations has hereunto set his hand this 13th day of August, 1999.
/s/ Timothy R. Schwertfeger
---------------------------
Timothy R. Schwertfeger
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
On this 13th day of August, 1999, personally appeared before me, a Notary Public
in and for said County and State, the person named above who is known to me to
be the person whose name and signature is affixed to the foregoing Power of
Attorney and who acknowledged the same to be his voluntary act and deed for the
intent and purposes therein set forth.
"OFFICIAL SEAL"
Virginia L. Corcoran /s/ Virginia L. Corcoran
Notary Public, State of Illinois -------------------------
My Commission Expires: 10/27/01 Notary Public
