<PAGE>
NUVEEN
Investments
Floating
Rate Fund
ANNUAL REPORT MAY 31, 2000
For investors seeking a high level of current income, consistent with capital
preservation.
[PHOTOS APPEAR HERE]
INVEST WELL
LOOK AHEAD
LEAVE YOUR MARK/SM/
<PAGE>
Contents
1 Dear Shareholder
3 Nuveen Floating Rate Fund
6 Portfolio of Investments
9 Statement of Net Assets
10 Statement of Operations
10 Statement of Changes in Net Assets
11 Statement of Cash Flows
12 Notes to Financial Statements
15 Financial Highlights
16 Report of Independent Accountants
17 Fund Information
Must be preceded by or accompanied by a prospectus.
<PAGE>
DEAR
Shareholder,
[Photo of Timothy R. Schwertfeger]
Timothy R. Schwertfeger
Chairman of the Board
As personal wealth continues to grow at an ever-increasing rate, people are
realizing the power of their investments to do good and to make a difference in
their families and communities now and for generations to come.
Setting financial goals is an important first step toward building wealth. At
Nuveen Investments, we believe those goals should not be considered ends in
themselves. Rather, you and your financial advisor's focus should be on
realizing your life's dreams -- the things that matter most to you and how you
can make them happen -- or make them better.
Through a well-crafted financial plan, you have the chance to shape future
generations -- to broaden your sphere of influence -- to leave your legacy.
As you develop that plan, you'll want to consider the different ways your
success can benefit others. You may find that you want to create a new set of
goals to achieve this. Working with your financial advisor, you have the ability
to make those dreams a reality -- for yourself and future generations.
Family Wealth Management Too often, family wealth management is thought of in
one dimension -- as the stewardship of your household's financial resources. At
Nuveen Investments, we think of family wealth management as the map to help you
reach your financial, and your life's, destinations. It's a multi-faceted
strategy to plan for not just your needs, but the needs of future generations.
We are dedicated to helping you and your financial advisor develop a family
wealth management strategy unique to you and your goals and values.
A Trusted Resource As you face some of the most important, lasting decisions
you and your family will make, you'll want to draw upon the support, counsel and
objectivity of a trusted advisor. That's because your financial advisor has the
expertise and access to other professionals who can help you make informed
choices -- choices that affect not only your loved ones today, but those your
legacy will touch in the future.
Your financial advisor can provide sound financial insight, an integrated
approach to your investments and can serve as a knowledgeable friend with your
family's best interests at heart.
ANNUAL REPORT page 1
<PAGE>
In addition, we believe the potential presence of inflation and price
swings in the markets reinforce the importance of working with an advisor,
staying focused on the long term and adhering to your financial plan. With a
sound plan in place, you may be better positioned to weather the markets' ups
and downs.
In fact, you may be reading this report at the suggestion of your financial
advisor. We've prepared the following interview to let you know what the
investment and research management teams have done during your fund's fiscal
period.
For more information on any Nuveen investment, including a prospectus,
contact your financial advisor. Or call Nuveen at (800) 621-7227 or visit our
Internet site at www.nuveen.com. Please read the prospectus carefully before you
invest or send money.
Since 1898, Nuveen has been synonymous with investments that stand the test
of time. We are committed to maintaining that reputation and working with
financial advisors to provide investment solutions that help individuals achieve
their dreams of a lifetime. Thank you for your continued confidence.
Sincerely,
/s/ Timothy R. Schwertfeger
Timothy R. Schwertfeger
Chairman of the Board
July 17, 2000
ANNUAL REPORT page 2
<PAGE>
NUVEEN FLOATING RATE FUND
From the Portfolio Manager's Perspective
--------------------------------------------------------------------------------
Executive Managing Director Jeffrey Maillet leads the Nuveen Floating Rate
Fund's management team. A pioneer in the field, Jeff, who joined Nuveen in 1999,
has managed senior floating rate loan products since the market's beginnings
almost 20 years ago. He most recently managed more than $13 billion in this
asset class before creating Nuveen's senior loan investment team. In total, he
has purchased more than 2,000 senior bank issues totaling more than $20 billion.
The Nuveen Floating Rate Fund continued to perform as anticipated, offering
investors an attractive dividend yield with a relatively stable net asset value
(NAV). To help you understand the fund's performance for the fiscal year ended
May 31, 2000, we spoke with Jeff.
Q Nuveen launched the Floating Rate Fund in late November 1999. What has
affected the senior loan market from the fund's inception through May 31, 2000?
JEFF Rising interest rates have affected the market significantly since
November. In an effort to rein in the economy and the stock market, the Federal
Reserve (the Fed) made six short-term interest rate increases during the past 12
months. The most recent was a half-percentage-point increase in May, the largest
rate hike in five years. That increase boosted short-term interest rates to
6.50%, their highest level since 1991.
Given that the fund's dividend is intended to rise and fall in correlation
with changes in short-term interest rates, steady increases in those rates can
potentially lead to higher dividends for shareholders.
Q How did the dividend react to the rising interest rate environment?
JEFF We've been able to increase the fund's dividend twice since its inception.
First, in March the Class B shares increased its dividend to $0.0615 per share,
from $0.0595. We were able to increase the dividend in June, after the fiscal
year ended, again to $0.0665./1/ At the fund's fiscal year end on May 31, 2000,
days-to-reset averaged approximately 50 days. The frequent rate resets help the
fund's dividend adjust with current market conditions.
Q Part of the attraction of a floating rate is the potential for a relatively
stable NAV. How well has Nuveen Floating Rate Fund been able to deliver on this
goal?
JEFF Very well, in our opinion. NAV has remained relatively stable in the
fiscal period, ranging from $9.97 to $10.00. Rising interest rates typically put
downward price pressure on more traditional fixed-income products. Senior bank
loans are different. They have interest rates that reset every 90 days or less,
making them short-term in nature. Because the loans' interest rates can change
so frequently, changes in prevailing interest rates are likely to affect a
senior bank loan fund's income potential, but should have only a minimal effect
on its price./2/
"Given that the fund's dividend is intended to rise and fall in correlation with
changes in short-term interest rates, steady increases in those rates can
potentially lead to higher dividends for shareholders."
/1/ Performance for short-periods of time should not be the sole factor in
making an investment decision.
/2/ This fund is not a money market fund and NAV will fluctuate.
Performance figures are quoted for Class B shares at net asset value. Comments
cover the fund's fiscal period since its inception in November 1999 through May
31, 2000. The views expressed reflect those of the portfolio management team and
are subject to change at any time, based on market and other conditions.
ANNUAL REPORT page 3
<PAGE>
Q How did the fund perform, on a total return basis, for the fiscal period?
JEFF The fund reported a total return of 3.69% since its November 29, 1999,
inception through May 31, 2000. The fund's comparative benchmark is the Lipper
Loan Participation Funds category, which returned 3.22% for the period from
November 30, 1999 through May 31, 2000.*
Q What were some of your strategies during the period?
JEFF Our general strategy was to diversify the portfolio around a core group of
holdings as assets flowed into the fund. Our philosophy is to concentrate on the
basic goods and services providers that make up the fabric of the economy. We
avoided commodity sectors, such as oil and gas and real estate, and added
positions like Kansas City Southern and Nextel. [As a non-diversified fund, we
may invest more than 5% of assets in securities of a particular issuer, which
presents a greater risk than a more diversified fund.]
Diversified manufacturing was our largest sector exposure throughout the
period. However, by the close of the fiscal period, telecommunications took over
the No. 1 sector weighting. With the rapidly expanding need for broadband
transmission capabilities for data and video analog, we saw tremendous
opportunity within this arena. In addition, we believe the industry may continue
to benefit from increased mergers and acquisitions.
Q Were there any purchases during the period that stand out?
JEFF We picked up Allied Waste, following a fallout in the waste management
industry. Allied Waste is one of the largest management companies for non-
hazardous solid waste in the United States and operates as a vertically
integrated company that provides collection, transfer, recycling and disposal
services for residential, commercial and industrial customers.
Our research analysis identified Allied Waste as a victim of "guilt by
association," as other firms within the industry experienced serious problems
last year. In fact, we felt Allied Waste was a strong credit with improving
fundamentals. It has been a good addition to the portfolio thus far.
Q What is your outlook for the fund and the floating rate market?
JEFF We expect that the current Fed policy of increasing interest rates will
ultimately rein in U.S. economic growth and limit any major disruptions in the
financial markets.
The overall senior loan market appears to have benefited from the strong, but
slowing, economy. Average credit quality of new issues in the marketplace
appears to have improved. In light of the recent market volatility and potential
for future interest rate increases, we feel now may be a very opportune time to
own the Nuveen Floating Rate Fund.
* The Lipper Peer Group returns represent the average annualized total return of
the 34 funds in the Lipper Loan Participation Funds category for the period
November 30, 1999 through May 31, 2000.
Nuveen Floating Rate Fund is a continuously offered closed-end fund.
ANNUAL REPORT page 4
<PAGE>
NUVEEN FLOATING RATE FUND
Fund Spotlight as of May 31, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Quick Facts
----------------------------------------------------------------------
A Shares B Shares C Shares R Shares
<S> <C> <C> <C> <C>
Inception Date 11/99 11/99 11/99 11/99
----------------------------------------------------------------------
Net Asset Value (NAV) $ 10.00 $ 10.00 $ 10.00 $ 10.00
----------------------------------------------------------------------
Latest Monthly Dividend* $0.0670 $0.0615 $0.0605 $0.0690
----------------------------------------------------------------------
Latest Capital Gain 0 0 0 0
----------------------------------------------------------------------
Fund Symbol N/A N/A N/A N/A
----------------------------------------------------------------------
CUSIP 67066U103 67066U202 67066U301 67066U400
----------------------------------------------------------------------
*Paid June 1, 2000
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Total Returns as of 5/31/00
---------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV w/o EWC w/EWC w/o EWC w/EWC NAV
<S> <C> <C> <C> <C> <C> <C>
Year-to-date 3.35% 3.07% 0.07% 3.02% 2.02% 3.46%
---------------------------------------------------------------------------------------
Since Inception 4.03% 3.69% 0.69% 3.62% 2.62% 4.15%
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
Total Returns as of 3/31/00
---------------------------------------------------------------------------------------
A Shares B Shares C Shares R Shares
NAV w/o EWC w/EWC w/o EWC w/EWC NAV
<S> <C> <C> <C> <C> <C> <C>
Year-to-date 1.98% 1.82% -1.18% 1.79% 0.79% 2.04%
---------------------------------------------------------------------------------------
Since Inception 2.65% 2.42% -0.58% 2.38% 1.38% 2.73%
---------------------------------------------------------------------------------------
</TABLE>
-----------------------------
Top Five Senior Loan Issuers*
-----------------------------
Tenneco Inc. 7.3%
-----------------------------
Mueller Group, Inc. 7.3%
-----------------------------
Micro Warehouse Inc. 7.2%
-----------------------------
Superior Essex Corp. 7.2%
-----------------------------
SDM Corp. 5.8%
-----------------------------
----------------------------------
Top Five Industries*
----------------------------------
Telecommunications/CLEC 8.7%
----------------------------------
Diversified Manufacturing 8.6%
----------------------------------
Automotive 7.3%
----------------------------------
Construction Materials 7.3%
----------------------------------
Retail/Catalog 7.2%
----------------------------------
* Based on total investments
---------------------------------
Portfolio Statistics
---------------------------------
Fund Net Assets $68.6 million
---------------------------------
Number of
Senior Loans 37
---------------------------------
Returns are historical and do not guarantee future performance. Investment
returns and principal value will fluctuate so that when shares are redeemed,
they may be worth more or less than their original cost. Performance of classes
will differ. For additional information, please see the fund prospectus.
---------------------------------
Terms To Know
---------------------------------
The following are a few terms used throughout this report.
Federal Reserve Board (the Fed) The governing body of the Federal Reserve
System, which is the central bank of the United States. Its policy-making
committee, called the Federal Open Market Committee, meets eight times a year to
establish monetary policy and monitor the economic pulse of the United States.
Net Asset Value (NAV) The per-share value of a mutual fund, found by subtracting
the fund's liabilities from its assets and dividing by the number of shares
outstanding.
Prime Rate Interest rate banks charge for their most creditworthy customers.
Senior Loans are debt securities that have claim prior to junior obligations and
equity on a corporation's assets in the event of liquidation.
Total Return Total Return is a measure of a fund's performance that takes into
account income dividends, capital gains distribution and change in net asset
value.
ANNUAL REPORT page 5
<PAGE>
Portfolio of Investments
Nuveen Floating Rate Fund
May 31, 2000
<TABLE>
<CAPTION>
Ratings
Principal --------------------- Stated Market
Amount(000) Description Moody's S&P Maturity* Value
------------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
VARIABLE RATE SENIOR LOAN INTERESTS** - 91.5%
Automotive - 7.4%
$2,500 Tenneco Inc., Term Loan B Ba3 BB 09/30/07 $2,516,146
2,500 Tenneco Inc., Term Loan C Ba3 BB 09/30/08 2,516,146
------------------------------------------------------------------------------------------------------------------------------------
5,032,292
------------------------------------------------------------------------------------------------------------------------------------
Building & Real Estate - 1.4%
1,000 NRT Inc., Term Loan Ba3 NR 07/31/04 993,750
------------------------------------------------------------------------------------------------------------------------------------
Cargo Transportation - 2.9%
998 North American Van Lines, Term Loan B B1 B+ 11/18/07 971,627
998 RailAmerica, Incorporated, Term Loan B Ba3 BB- 12/31/06 1,003,111
------------------------------------------------------------------------------------------------------------------------------------
1,974,738
------------------------------------------------------------------------------------------------------------------------------------
Construction Materials - 7.3%
5,000 Mueller Group, Inc., Term Loan D B1 B+ 05/05/08 5,028,125
------------------------------------------------------------------------------------------------------------------------------------
Diversified Manufacturing - 8.7%
998 SPX Corporation, Term Loan B Ba2 BB+ 12/31/06 1,002,072
4,940 Superior Essex Corp., Term Loan B Ba3 B+ 11/27/05 4,925,011
------------------------------------------------------------------------------------------------------------------------------------
5,927,083
------------------------------------------------------------------------------------------------------------------------------------
Durable Consumer Products - 4.4%
3,000 Jostens, Inc., Term Loan B B1 BB- 05/31/08 3,013,125
------------------------------------------------------------------------------------------------------------------------------------
Ecological - 4.7%
1,136 Allied Waste North America, Term Loan B Ba3 BB 07/21/06 1,029,356
1,364 Allied Waste North America, Term Loan C Ba3 BB 07/21/07 1,235,227
967 Stericycle, Inc., Term Loan B B1 BB- 11/10/06 969,688
------------------------------------------------------------------------------------------------------------------------------------
3,234,271
------------------------------------------------------------------------------------------------------------------------------------
Farming & Agricultural - 1.4%
993 Shemin Holdings Corporation, Term Loan B NR NR 01/28/07 990,375
------------------------------------------------------------------------------------------------------------------------------------
Finance & Banking - 2.2%
1,500 Sovereign Bancorp, Term Loan B Ba3 NR 11/14/03 1,506,563
------------------------------------------------------------------------------------------------------------------------------------
Grocery - 1.4%
995 Big V Supermarkets, Inc., Term Loan C NR B+ 08/10/03 987,707
------------------------------------------------------------------------------------------------------------------------------------
Healthcare & Beauty Aids - 4.4%
3,000 Bergen Brunswig Corp., Term Loan B Ba3 BB 03/31/06 3,000,000
------------------------------------------------------------------------------------------------------------------------------------
Hotels, Motels, Inns & Gaming - 1.5%
533 Isle of Capri Casinos Inc., Term Loan B Ba2 BB- 03/02/06 536,500
467 Isle of Capri Casinos Inc., Term Loan C Ba2 BB- 03/02/07 469,438
------------------------------------------------------------------------------------------------------------------------------------
1,005,938
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Ratings
Principal --------------------- Stated Market
Amount(000) Description Moody's S&P Maturity* Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leisure & Entertainment - 1.4%
$ 997 Bally Total Fitness, Term Loan B1 B+ 11/10/04 $ 992,929
------------------------------------------------------------------------------------------------------------------------------------
Mining, Steel, Iron & Non-Precious Metals - 0.6%
395 ASARCO Inc., Term Loan B1 BB 05/15/01 394,891
------------------------------------------------------------------------------------------------------------------------------------
Non-Durable Consumer Products - 1.5%
1,000 Merisant Co. (fka Tabletop Acq. Corp.), Term Loan B Ba3 BB- 03/31/07 1,002,500
------------------------------------------------------------------------------------------------------------------------------------
Personal & Miscellaneous Services - 2.2%
1,496 Weight Watchers Int'l Inc., TLC Facility Ba2 B+ 09/30/06 1,506,537
------------------------------------------------------------------------------------------------------------------------------------
Printing & Publishing - 1.5%
995 Merrill Communications LLC, Term Loan B B1 BB- 11/23/07 999,664
------------------------------------------------------------------------------------------------------------------------------------
Retail/Catalog - 7.2%
5,000 Micro Warehouse Inc., Term Loan B B1 BB- 01/31/07 4,971,875
------------------------------------------------------------------------------------------------------------------------------------
Retail/Stores - 5.8%
2,000 SDM Corp., Term Loan C Ba3 BB 02/04/08 2,005,000
2,000 SDM Corp., Term Loan E Ba3 BB 02/04/09 2,005,000
------------------------------------------------------------------------------------------------------------------------------------
4,010,000
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Cellular/PCS - 4.0%
583 American Cellular Corporation, Term Loan B Ba3 B+ 03/31/08 583,819
667 American Cellular Corporation, Term Loan C Ba3 B+ 03/31/09 667,222
1,500 Voicestream PCS Holding LLC, Term Loan B B1 B+ 02/25/09 1,486,563
------------------------------------------------------------------------------------------------------------------------------------
2,737,604
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/CLEC - 8.8%
3,000 McLeod USA Inc., Term Loan B Ba2 BB- 05/30/08 2,995,500
3,000 WCI Capital Corp. (Winstar), Term Loan B B2 B+ 09/30/07 2,992,500
------------------------------------------------------------------------------------------------------------------------------------
5,988,000
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Hybrid - 3.6%
2,500 Nextel Finance Company, Term Loan D Ba2 BB- 03/31/09 2,485,137
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Satellite - 1.3%
1,000 Satelites Mexicanos SA DE CV, Bond B1 B+ 06/30/04 910,000
------------------------------------------------------------------------------------------------------------------------------------
Telecommunications/Wireless Messaging - 1.5%
1,000 Crown Castle Operating Company, Term Loan B Ba3 BB- 03/30/08 1,001,660
------------------------------------------------------------------------------------------------------------------------------------
Transportation/Rail Manufacturing - 1.5%
1,000 Kansas City Southern Railway Co., Term Loan B Ba1 BBB 12/29/06 1,006,250
------------------------------------------------------------------------------------------------------------------------------------
Utilities - 2.9%
1,000 AES Texas Funding II, LLC, Term Loan NR NR 04/24/01 1,001,250
1,000 TNP Enterprises Inc., Term Loan Ba2 BB+ 03/30/06 1,000,000
------------------------------------------------------------------------------------------------------------------------------------
2,001,250
------------------------------------------------------------------------------------------------------------------------------------
Total Variable Rate Senior Loan Interests (cost $62,656,471) 62,702,264
---------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Portfolio of Investments
Nuveen Floating Rate Fund (continued)
May 31, 2000
<TABLE>
<CAPTION>
Principal Stated Market
Amount(000) Description Maturity* Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS - 8.7%
Commercial Paper:
$3,000 Central & South West Corp., yielding 6.95% 06/01/00 $ 3,000,000
3,000 Limited Inc., yielding 6.95% 06/01/00 3,000,000
------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (cost $6,000,000) 6,000,000
---------------------------------------------------------------------------------------------------------------------
Total Investments (cost $68,656,471) - 100.2% 68,702,264
---------------------------------------------------------------------------------------------------------------------
Other Assets Less Liabilities - (0.2)% (119,107)
---------------------------------------------------------------------------------------------------------------------
Net Assets - 100% $68,583,157
=====================================================================================================================
</TABLE>
NR Not rated.
* Senior Loans in the Fund's portfolio generally are subject to
mandatory and/or optional prepayment. Because of these mandatory
prepayment conditions and because there may be significant
economic incentives for a Borrower to prepay, prepayments of
Senior Loans in the Fund's portfolio may occur. As a result, the
actual remaining maturity of Senior Loans held in the Fund's
portfolio may be substantially less than the stated maturities
shown. The Fund estimates that the actual average maturity of the
Senior Loans held in its portfolio will be approximately 18-24
months.
** Senior Loans in which the Fund invests generally pay interest at
rates which are periodically redetermined by reference to a base
lending rate plus a premium. These base lending rates are
generally (i) the prime rate offered by one or more major United
States banks, (ii) the lending rate offered by one or more major
European banks, such as the London Inter-Bank Offered Rate
("LIBOR") and (iii) the certificate of deposit rate. Senior loans
are generally considered to be restricted in that the Fund
ordinarily is contractually obligated to receive approval from
the Agent Bank and/or borrower prior to the disposition of a
Senior Loan.
See accompanying notes to financial statements.
8
<PAGE>
Statement of Net Assets
Nuveen Floating Rate Fund
May 31, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Assets
<S> <C>
Investments, at market value (cost $68,656,471) $68,702,264
Receivables:
Interest 468,646
Shares sold 806,630
Other assets 1,794
--------------------------------------------------------------------------------
Total assets 69,979,334
--------------------------------------------------------------------------------
Liabilities
Cash overdraft 684,571
Accrued expenses:
Management fees 12,468
Distribution and service fees 40,617
Other liabilities 230,865
Dividends payable 427,656
--------------------------------------------------------------------------------
Total liabilities 1,396,177
--------------------------------------------------------------------------------
Net assets $68,583,157
================================================================================
Class A Shares
Net assets $ 2,221,104
Shares outstanding 222,094
Net asset value per share $ 10.00
================================================================================
Class B Shares
Net assets $10,488,616
Shares outstanding 1,048,834
Net asset value per share $ 10.00
================================================================================
Class C Shares
Net assets $39,341,465
Shares outstanding 3,933,549
Net asset value per share $ 10.00
================================================================================
Class R Shares
Net assets $16,531,972
Shares outstanding 1,653,016
Net asset value per share $ 10.00
================================================================================
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Statement of Operations
Nuveen Floating Rate Fund
For the Period November 29, 1999 (commencement of
operations) through May 31, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
<S> <C>
Investment Income
Interest $ 2,065,202
----------------------------------------------------------------------------------------------------
Expenses
Management fees 178,318
Service fees - Class A 1,800
Distribution and service fees - Class B 30,028
Waiver of distribution fees - Class B (3,002)
Distribution and service fees - Class C 120,388
Shareholders' servicing agent fees and expenses 217,481
Custodian's fees and expenses 210,192
Legal fees 86,164
Other expenses 46,015
----------------------------------------------------------------------------------------------------
Total expenses before expense reimbursement and waivers 887,384
Expense reimbursement and waivers (571,740)
----------------------------------------------------------------------------------------------------
Net expenses 315,644
----------------------------------------------------------------------------------------------------
Net investment income 1,749,558
----------------------------------------------------------------------------------------------------
Realized and Unrealized Gain from Investments
Net realized gain from investment transactions 2,961
Change in net unrealized appreciation (depreciation) of investments 45,793
----------------------------------------------------------------------------------------------------
Net gain from investments 48,754
----------------------------------------------------------------------------------------------------
Net increase in net assets from operations $ 1,798,312
====================================================================================================
</TABLE>
Statement of Changes in Net Assets
Nuveen Floating Rate Fund
For the Period November 29, 1999 (commencement of
operations) through May 31, 2000
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
<S> <C>
Operations
Net investment income $ 1,749,558
Net realized gain from investment transactions 2,961
Change in net unrealized appreciation (depreciation) of investments 45,793
----------------------------------------------------------------------------------------------------
Net increase in net assets from operations 1,798,312
----------------------------------------------------------------------------------------------------
Distributions to Shareholders
From and in excess of net investment income:
Class A (56,996)
Class B (218,767)
Class C (861,195)
Class R (644,320)
----------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (1,781,278)
----------------------------------------------------------------------------------------------------
Fund Share Transactions
Net proceeds from sale of shares 68,520,246
Net proceeds from shares issued to shareholders due to reinvestment of distributions 447,137
----------------------------------------------------------------------------------------------------
68,967,383
Cost of shares redeemed (501,260)
----------------------------------------------------------------------------------------------------
Net increase in net assets from Fund share transactions 68,466,123
----------------------------------------------------------------------------------------------------
Net increase in net assets 68,483,157
Net assets at the beginning of period 100,000
----------------------------------------------------------------------------------------------------
Net assets at the end of period $68,583,157
====================================================================================================
Distributions in excess of net investment income at the end of period $ (31,720)
====================================================================================================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Statement of Cash Flows
Nuveen Floating Rate Fund
For the Period November 29, 1999 (commencement of operations) through May 31, 2000
<S> <C>
------------------------------------------------------------------------------------------------------------------------------------
Change in Net Assets from Operations $ 1,798,312
------------------------------------------------------------------------------------------------------------------------------------
Adjustments to Reconcile the Change in Net Assets from Operations to Net Cash used for Operating Activities:
Increase in investments at value (68,702,264)
Increase in interest receivable (468,646)
Increase in shares sold receivable (806,630)
Increase in other assets (1,794)
Increase in management fees 12,468
Increase in distribution and service fees 40,617
Increase in other liabilities 230,865
------------------------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities (67,897,072)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Increase in cash overdraft 684,571
Proceeds from shares sold 68,520,246
Cost of shares redeemed (501,260)
Cash dividends paid (906,485)
------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 67,797,072
------------------------------------------------------------------------------------------------------------------------------------
Net Decrease in Cash (100,000)
Cash at the beginning of period 100,000
------------------------------------------------------------------------------------------------------------------------------------
Cash at the End of Period $ --
====================================================================================================================================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
Notes to Financial Statements
1. General Information and Significant Accounting Policies
The Nuveen Floating Rate Fund (the "Fund") is a continuously offered, non-
diversified, closed-end management investment company registered under the
Investment Company Act of 1940, as amended. The Fund was organized as a
Massachusetts business trust on June 28, 1999. The Fund commenced operations on
November 29, 1999.
The Fund seeks to provide a high level of current income, consistent with
preservation of capital by investing primarily in senior secured loans whose
interest rates float or adjust periodically based on a benchmark interest rate
index. The Fund may also periodically borrow money (either directly from banks
or by issuing debt), the proceeds of which will be invested in senior loans.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements in accordance with generally
accepted accounting principles.
Investment Valuation
The prices of senior loans in the Fund's investment portfolio are provided by
pricing services approved by the Fund's Board of Trustees. The pricing service
providers typically value senior loans at the mean of the highest bona fide bid
and the lowest bona fide ask prices when current quotations are readily
available. Senior loans for which current quotations are not readily available
are valued at a fair value using a wide range of market data and other
information and analysis, including credit considerations considered relevant by
such pricing service providers to determine valuations. Short-term investments
which mature within 60 days are valued at amortized cost, which approximates
market value.
The senior loans in which the Fund invests are generally not listed on any
exchange and the secondary market for those senior loans is comparatively
illiquid relative to markets for other fixed income securities. Because of the
comparatively illiquid markets, the value of a senior loan may differ
significantly from the value that would have been used had there been an active
market for that senior loan.
Investment Transactions
Investment transactions are recorded on a trade date basis.
Investment Income
Interest income is determined on the basis of interest accrued, adjusted for
amortization of premiums and accretion of discounts when required for federal
income tax purposes. Facilities fees on senior loans purchased are treated as
market discounts. Market premiums and discounts are amortized over the expected
life of each respective borrowing.
Dividends and Distributions to Shareholders
The Fund intends to declare daily and pay monthly dividends from net investment
income. Generally payment is made or reinvestment is credited to shareholder
accounts on the first business day after month end. Net realized capital gains
from investment transactions, if any, are distributed to shareholders not less
frequently than annually. Furthermore, capital gains are distributed only to the
extent they exceed available capital loss carryforwards.
The amount and timing of distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations, which may differ from generally accepted accounting principles.
Accordingly, temporary over-distributions as a result of these differences may
occur and will be classified as either distributions in excess of net investment
income and/or distributions in excess of net realized gains from investment
transactions, where applicable.
Income Taxes
The Fund intends to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its net
investment income, in addition to any significant amounts of net realized
capital gains from investment transactions. The Fund currently considers
significant net realized capital gains as amounts in excess of $.001 per share.
Net realized capital gain distributions are subject to federal taxation.
Flexible Sales Charge Program
The Fund offers Class A, B, C and R Shares. Class A Shares can be purchased at
net asset value per share only upon conversion of Class B Shares, through an
exchange of Class A Shares of certain Nuveen mutual funds, by reinvesting
distributions from any Nuveen Defined Portfolio, or under certain other limited
circumstances. Class A Shares are subject to a service fee of 0.25% of the
average daily net assets. Class B Shares can be purchased at net asset value per
share without any initial sales charge. Class B Shares are subject to a
distribution fee of up to 0.75% (currently 0.65% as a result of a voluntary
expense limitation) of the average daily net assets and a service fee of 0.25%
of the average daily net assets. An investor purchasing Class B Shares agrees to
pay any early withdrawal charge ("EWC") of up to 3% depending upon the length of
time the shares are held by the investor (EWC is reduced to 0% at the end of
five years). Class B Shares convert to Class A Shares six years after purchase.
Class C Shares can be purchased at net asset value per share without any initial
sales charge. Class C Shares are subject to a distribution fee of 0.75% of the
average
12
<PAGE>
daily net assets and a service fee of 0.25% of the average daily net assets. An
investor purchasing Class C Shares agrees to pay an EWC of 1% if Class C Shares
are redeemed within one year of purchase. Class R Shares are not subject to any
sales charge or distribution or service fees. Class R Shares are available only
under limited circumstances or by specified classes of shareholders.
Derivative Financial Instruments
The Fund may invest in certain derivative financial instruments including
futures, forward, swap and option contracts, and other financial instruments
with similar characteristics. Although the Fund is authorized to invest in such
financial instruments, and may do so in the future, it did not make any such
investments during the period November 29, 1999 (commencement of operations)
through May 31, 2000.
Expense Allocation
Expenses of the Fund that are not directly attributable to a specific class of
shares are prorated among the classes based on the relative net assets of each
class. Expenses directly attributable to a class of shares, which presently only
includes distribution and service fees, are recorded to the specific class.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results may differ
from those estimates.
2. Fund Shares
Transactions in Fund shares for the period November 29, 1999 (commencement of
operations) through May 31, 2000, were as follows:
Shares Amount
-------------------------------------------------------------
Shares sold:
Class A 217,180 $ 2,171,547
Class B 1,043,389 10,431,659
Class C 3,943,184 39,425,872
Class R 1,649,139 16,491,168
Shares issued to shareholders due
to reinvestment of distributions:
Class A 2,436 24,354
Class B 7,202 72,000
Class C 33,712 337,015
Class R 1,377 13,768
-------------------------------------------------------------
6,897,619 68,967,383
-------------------------------------------------------------
Shares redeemed:
Class A (22) (216)
Class B (4,257) (42,573)
Class C (45,847) (458,471)
Class R -- --
-------------------------------------------------------------
(50,126) (501,260)
-------------------------------------------------------------
Net increase 6,847,493 $68,466,123
=============================================================
The Fund will make quarterly offers to repurchase shares at net asset value
(each, a "Repurchase Offer"). The next Repurchase Offer is scheduled to occur in
September 2000. The results of the June 2000 Repurchase Offer are as follows:
Shares Amount
-------------------------------------------------------------
Class A -- $ --
Class B 1,425 14,261
Class C 29,681 297,103
Class R 1,239 12,402
-------------------------------------------------------------
3. Investment Transactions
Purchases and sales of investments (excluding short-term investments) during the
period November 29, 1999 (commencement of operations) through May 31, 2000,
aggregated $64,752,881, and $2,124,916, respectively.
At May 31, 2000, the identified cost of investments owned for federal income tax
purposes was $68,656,471.
13
<PAGE>
Notes to Financial Statements (continued)
4. Unrealized Appreciation (Depreciation)
At May 31, 2000, net unrealized appreciation of senior loans for federal income
tax purposes aggregated $45,793 of which $178,296 related to appreciated senior
loans and $132,503 related to depreciated senior loans.
5. Management Fee and Other Transactions with Affiliates
Under the Fund's investment management agreement with Nuveen Senior Loan Asset
Management Inc. (the "Adviser"), a wholly owned subsidiary of The John Nuveen
Company, the Fund pays an annual management fee, payable monthly, of .7500 of
1%, reduced on managed assets of $1 billion or more, which is based upon the
average daily managed assets of the Fund. "Managed assets" shall mean the
average daily gross asset value of the Fund, minus the Fund's accrued
liabilities (other than the principal amount of any borrowings incurred, and
commercial paper or notes issued by the Fund).
The management fee compensates the Adviser for overall investment advisory and
administrative services, and general office facilities. The Fund pays no
compensation directly to those of its Trustees who are affiliated with the
Adviser or to its officers, all of whom receive remuneration for their services
to the Fund from the Adviser or its affiliates.
The Adviser may voluntarily reimburse or waive expenses from time to time, which
may be terminated at any time at its discretion.
During the period November 29, 1999 (commencement of operations) through May 31,
2000, John Nuveen & Co., Incorporated (the "Distributor"), a wholly owned
subsidiary of The John Nuveen Company, received service fees on Class A Shares,
substantially all of which were paid to compensate authorized dealers for
providing services to shareholders relating to their investments.
During the period November 29, 1999 (commencement of operations) through May 31,
2000, the Distributor compensated authorized dealers directly with approximately
$673,000 in commission advances at the time of purchase. To compensate for
commissions advanced to authorized dealers, all service fees collected on Class
B Shares during the first year following a purchase, all distribution fees
collected on Class B Shares, and all service and distribution fees collected on
Class C Shares during the first year following a purchase are retained by the
Distributor. During the period November 29, 1999 (commencement of operations)
through May 31, 2000, the Distributor retained approximately $116,900 in such
fees. The remaining fees charged to the Fund were paid to compensate authorized
dealers for providing services to shareholders relating to their investments.
The Distributor also collected and retained approximately $4,800 of EWC on share
redemptions during the period November 29, 1999 (commencement of operations)
through May 31, 2000.
At May 31, 2000, the Adviser owned 2,500 shares of each Class of A, B, C and R.
In addition, The John Nuveen Company owned 1,500,000 shares of Class R at May
31, 2000.
6. Composition of Net Assets
At May 31, 2000, the Fund had an unlimited number of $.01 par value shares
authorized. Net assets consisted of:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
<S> <C>
Capital paid-in $68,566,123
Distributions in excess of net investment income (31,720)
Accumulated net realized gain from investment transactions 2,961
Net unrealized appreciation of investments 45,793
-------------------------------------------------------------------------
Net assets $68,583,157
=========================================================================
</TABLE>
7. Commitments
Pursuant to the terms of certain of the Variable Rate Senior Loan agreements,
the Fund may have unfunded loan commitments. There were no such unfunded loan
commitments as of May 31, 2000. The Fund generally will maintain with its
custodian short-term investments and/or cash having an aggregate value at least
equal to the amount of unfunded loan commitments.
8. Senior Loan Participation Commitments
The Fund invests primarily in assignments, participations, or acts as a party to
the primary lending syndicate of a Variable Rate Senior Loan interest to United
States and foreign corporations, partnerships, and other entities. If the Fund
purchases a participation of a Senior Loan Interest, the Fund would typically
enter into a contractual agreement with the lender or other third party selling
the participation, but not with the borrower directly. As such, the Fund assumes
the credit risk of the Borrower, Selling Participant or other persons
interpositioned between the Fund and the Borrower. There were no such
participation commitments as of May 31, 2000.
9. Borrowings
In accordance with its investment policies, the Fund may borrow money from banks
for investment purposes in an amount up to approximately 10% of the Fund's net
assets. The Fund did not enter into any such agreements during the period
November 29, 1999 (commencement of operations) through May 31, 2000.
14
<PAGE>
Financial Highlights
Selected data for a share outstanding throughout the period November 29,
1999 (commencement of operations) through May 31, 2000:
<TABLE>
<CAPTION>
Class (Inception Date)
Investment Operations Less Distributions
--------------------------- ---------------------------
From
Realized/ and in
Unrealized Excess of
Beginning Net Invest- Net Ending
Net Invest- ment Invest- Net
Year Ended Asset ment Gain ment Capital Asset Total
May 31, Value Income (Loss) Total Income Gains Total Value Return(a)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class A (11/99)
2000 $10.00 $.40 $ -- $.40 $(.40) $-- $(.40) $10.00 4.03%
Class B (11/99)
2000 10.00 .37 (.01) .36 (.36) -- (.36) 10.00 3.69
Class C (11/99)
2000 10.00 .36 -- .36 (.36) -- (.36) 10.00 3.62
Class R (11/99)
2000 10.00 .39 .02 .41 (.41) -- (.41) 10.00 4.15
===========================================================================================================
Ratios/Supplemental Data
------------------------------------------------------------------------------------
Before After
Reimbursement Reimbursement (b)
-------------------------- --------------------------
Ratio Ratio
of Net of Net
Ratio of Investment Ratio of Investment
Ending Expenses Income Expenses Income
Net to Average to Average to Average to Average Portfolio
Assets Net Net Net Net Turnover
(000) Assets Assets Assets Assets Rate
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A (11/99)
2000 $ 2,221 3.14%* 5.66%* .95%* 7.85%* 6%
Class B (11/99)
2000 10,489 3.72* 5.16* 1.60* 7.28* 6
Class C (11/99)
2000 39,341 3.90* 4.92* 1.70* 7.12* 6
Class R (11/99)
2000 16,532 3.53* 4.85* .70* 7.68* 6
===========================================================================================================
</TABLE>
* Annualized.
(a) Total returns are calculated on net asset value and are not annualized.
(b) After expense reimbursement and waivers from the investment adviser, where
applicable.
See accompanying notes to financial statements.
15
<PAGE>
Report of Independent Accountants
The Board of Trustees and Shareholders of
Nuveen Floating Rate Fund:
We have audited the accompanying statement of assets and liabilities of Nuveen
Floating Rate Fund (the "Fund"), including the portfolio of investments, as of
May 31, 2000, and the related statements of operations, changes in net assets,
cash flows, and the financial highlights for the period from November 29, 1999
(commencement of investment operations) to May 31, 2000. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of May 31, 2000, by
correspondence with the custodian and selling or agent banks. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Nuveen Floating Rate Fund as of May 31, 2000, the results of its operations,
changes in net assets, cash flows, and the financial highlights for the period
from November 29, 1999 (commencement of investment operations) to May 31, 2000,
in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
July 20, 2000
16
<PAGE>
Fund Information
Board of Trustees Transfer Agent and
Shareholder Services
James E. Bacon Chase Global Funds Services Company
73 Tremont Street
Jack B. Evans Boston, MA 02108
William L. Kissick (800) 257-8787
Thomas E. Leafstrand Legal Counsel
Chapman and Cutler
Timothy R. Schwertfeger Chicago, IL
Shelia W. Wellington Independent
Accountants
KPMG LLP
Fund Manager Chicago, IL
Nuveen Senior Loan Asset
Management Inc.
Oak Brook, IL
17
<PAGE>
Serving
Investors
For Generations
A 100-Year Tradition of Quality Investments
[Photo of John Nuveen, Sr., appears here]
John Nuveen, Sr.
Since 1898, John Nuveen & Co. Incorporated has been synonymous with investments
that withstand the test of time. In fact, more than 1.3 million investors have
trusted Nuveen to help them build and sustain the wealth of a lifetime.
Whether your focus is long-term growth, dependable income or sustaining
accumulated wealth, Nuveen offers a wide variety of investments and services to
help meet your unique circumstances and financial planning needs. We can help
you build a better, well-diversified portfolio.
Call Your Financial Advisor Today
To find out how Nuveen Mutual Funds might round out your investment portfolio,
contact your financial advisor today. Or call Nuveen at (800) 257-8787 for more
information. Ask your advisor or call for a prospectus, which details risks,
fees and expenses. Please read the prospectus carefully before you invest.
NUVEEN
Investments
John Nuveen & Co. Incorporated
333 West Wacker Drive
Chicago, Illinois 60606-1286
www.nuveen.com
