<PAGE>
As filed with the Securities and Exchange Commission on September 7, 1999
================================================================================
1933 Act File No. 333-_____
1940 Act File No. 811-09571
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 Senior Income 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 Thomas A. Hale Eric F. Fess
Bell, Boyd & Lloyd Skadden, Arps, Slate, Chapman & Cutler
70 W. Madison St. Meagher & Flom (Illinois) 111 W. Monroe
Chicago, IL 60602 333 W. Wacker Drive Chicago, Illinois 60603
Chicago, IL 60606
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
_____________________
If any of the securities being registered on this form are offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [_]
It is proposed that this filing will become effective (check appropriate
box)
[X] when declared effective pursuant to section 8(c)
_____________________
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, $.01 par value 100,000 Shares $10.00 $1,000,000 $278.00
===============================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such dates as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
NUVEEN SENIOR INCOME FUND
________________
CROSS REFERENCE SHEET
Part A - Prospectus
<TABLE>
<CAPTION>
Items in Part A of Form N-2 Location in Prospectus
--------------------------- ----------------------
<S> <C> <C>
Item 1. Outside Front Cover Cover Page
Item 2. Cover Pages; Other Offering Information Cover Page
Item 3. Fee Table and Synopsis Prospectus Summary; Summary of Fund Expenses
Item 4. Financial Highlights Not Applicable
Item 5. Plan of Distribution Cover Page; Prospectus Summary; Underwriting
Item 6. Selling Shareholders Not Applicable
Item 7. Use of Proceeds Use of Proceeds; The Fund's Investments
Item 8. General Description of the Registrant The Fund; The Fund's Investments; Risks; Description of Shares;
Certain Provisions in the Declaration of Trust
Item 9. Management Management of the Fund; Custodian and Transfer Agent
Item 10. Capital Stock, Long-Term Debt, and Other
Securities Description of Capital Structure; Distributions; Dividend
Reinvestment Plan; Certain Provisions in the Declaration of
Trust; Tax Matters
Item 11. Defaults and Arrears on Senior Securities Not Applicable
Item 12. Legal Proceedings Other Matters
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 Cover Page
Item 16. General Information and History Not Applicable
Item 17. Investment Objective and Policies The Fund's Investments; Additional Information About the
Fund's Investments; Portfolio Transactions
Item 18. Management Management of the Fund; Portfolio Transactions
Item 19. Control Persons and Principal Holders of
Securities Management of the Fund; Investment Adviser; Statement of
Net Assets
Item 20. Investment Advisory and Other Services Management of the Fund; Investment Adviser; Custodian and
Transfer Agent; Experts
Item 21. Brokerage Allocation and Other Practices Portfolio Transactions
Item 22. Tax Status Tax Matters; Distributions
Item 23. Financial Statements Report of Independent Auditors; Statement of Net Assets
</TABLE>
Part C - Other Information
Items 24-33 have been answered in Part C of this Registration Statement.
<PAGE>
The information in this Prospectus is not complete and may be changed. No
person may 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 in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION-DATED SEPTEMBER __, 1999
PROSPECTUS
[Nuveen]
100,000 Shares
Nuveen Senior Income Fund
Common Shares
$10.00 per share
Investment Objective. The Fund is a non-diversified, closed-end management
investment company. The Fund's investment objective is to seek a high level of
current income, consistent with preservation of capital.
Portfolio Investments. The Fund seeks to achieve its objective primarily
by investing in senior loans whose interest rates float or vary periodically
based on a benchmark interest rate index.
An investment in the Fund may not be appropriate for all investors and the
Fund cannot assure you that it will achieve its investment objective.
No Prior History. Because the Fund is newly organized, its common shares
have no history of public trading. Shares of closed-end investment companies
frequently trade at a discount from their net asset value. This risk may be
greater for investors expecting to sell their shares in a relatively short
period after completion of the public offering. The common shares have been
approved for listing on the New York Stock Exchange, subject to notice of
issuance. The trading or "ticker" symbol of the common shares is expected to be
"___".
____________________
These securities involve certain risks. See "Risks" beginning on page __.
This Prospectus contains important information about the Fund. You should
read the Prospectus before deciding whether to invest and retain it for future
reference. A Statement of Additional Information dated ______, 1999, containing
additional information about the Fund, has been filed with the Securities and
Exchange Commission and is hereby incorporated by reference in its entirety into
this Prospectus. You can review the table of contents of the Statement of
Additional Information on page __ of this Prospectus. You may request a free
copy of the Statement of Additional Information by calling (800) 257-8787. You
may also obtain the Statement of Additional Information on the Securities and
Exchange Commission web site (http://www.sec.gov).
The Fund's common shares do not represent a deposit or obligation of, and
are not guaranteed or endorsed by, any bank or other insured depository
institution, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency.
_____________________
<TABLE>
<CAPTION>
Total Assuming No Total Assuming
Exercise of Full Exercise of
Overallotment Overallotment
Per Share Option Option
--------- ------------- -------------
<S> <C> <C> <C>
Public Offering Price $ 10.00 $ $
Sales Load $ $ $
------------- ----------------- -------------------
Proceeds to the Fund $ $ $
</TABLE>
The underwriters named in this prospectus may purchase up to ________
additional common shares from the Fund under certain circumstances.
John Nuveen & Co. Incorporated has agreed to pay (i) all organizational
expenses and (ii) offering costs (other than the sales load) that exceed $.01
per common share.
The underwriters are offering the common shares subject to various
conditions. The underwriters expect to deliver the common shares to purchasers
on or about _______, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
________________
John Nuveen & Co.
Incorporated
__________, 1999
<PAGE>
PROSPECTUS SUMMARY
This is only a summary. You should review the more detailed information
contained in the Prospectus and in the Statement of Additional Information.
The Fund Nuveen Senior Income Fund (the "Fund") is a newly
organized, non-diversified, closed-end management
investment company organized as a Massachusetts
business trust.
The Offering The Fund is offering ________________ common shares of
beneficial interest at $10.00 per share through a
group of underwriters (the "Underwriters") led by
John Nuveen & Co. Incorporated and ___________. The
common shares of beneficial interest are called
"Common Shares" in the rest of this Prospectus. You
must purchase at least 100 Common Shares. The Fund
has given the Underwriters an option to purchase up
to _______ additional Common Shares. See
"Underwriting."
Investment Objective The Fund's investment objective is to seek a high level
of current income, consistent with preservation of
capital. There can be no assurance that the Fund will
achieve its investment objective.
The Fund seeks to achieve its objective primarily by
investing in senior secured loans whose interest
rates adjust periodically based on a benchmark index,
such as the prime rate offered by one or more major
U.S. banks, or a London Inter-Bank Offered Rate.
Under normal circumstances, the Fund will invest at
least 80% of its total assets in adjustable rate,
U.S. dollar-denominated senior loans ("Senior
Loans"). Senior Loans are made to corporations,
partnerships and other entities ("Borrowers") to
finance leveraged buyouts, recapitalizations,
mergers, acquisitions, stock repurchases, debt
refinancings and, to a lesser extent, for general
operating and other purposes. 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 invests
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 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. See "The Fund's Investments."
Proposed Leverage To seek to increase the yield on the Common Shares, the
Fund currently intends to utilize financial leverage
for investment purposes by borrowing, issuing
commercial paper or notes and/or offering preferred
shares of beneficial interest ("Preferred Shares")
(each a "Leverage Instrument" and collectively, the
"Leverage Instruments") in an amount currently
anticipated to represent approximately 40% (and in no
event exceeding 50%) of the Fund's total assets
(including the proceeds of such Leverage
Instruments). The timing and terms of transactions
relating to Leverage Instruments will be determined
by the Fund's Board of Trustees. See "The Fund's
Investments." The Fund's use of Leverage Instruments
may increase the volatility of changes in the net
asset value and the market price of, and the
distributions paid on, the Common Shares. Because
leverage achieved through use of Leverage Instruments
is expected to be based on floating rates of interest
or dividends that fluctuate similarly to the floating
rate on Senior Loans, the Adviser does not believe
that the use of Leverage Instruments will materially
increase the risk to the Fund from changes in market
rates of interest.
Investment Adviser Nuveen Senior Loan Asset Management Inc. (the
"Adviser") will be the Fund's investment adviser. The
Adviser will receive an annual fee, payable monthly,
in a maximum amount equal to .85% of the Fund's
average managed assets (including assets acquired
through the
i
<PAGE>
Fund's utilization of leverage (1.42% of net assets
attributable to Common Shares)), with lower fee
levels for assets that exceed $1 billion. The Adviser
has agreed to reimburse the Fund for fees and
expenses in an amount of .45% of average daily
managed assets of the Fund for the first five years
of the Fund's operations (through October 31, 2004)
(.75% of net assets attributable to Common Shares),
and for a declining amount for an additional five
years (through October 31, 2009). The Adviser is a
newly formed, wholly-owned subsidiary of The John
Nuveen Company. See "Management of the Fund."
Distributions Commencing with the Fund's first Common Share dividend,
the Fund intends to make monthly cash distributions
to you based on the actual and projected earnings of
the Fund. As portfolio and market conditions change,
the rate of dividends on the Common Shares and the
Fund's dividend policy could change. Over time, the
Fund will distribute to Common Shareholders all of
its net investment income (after it pays interest on
commercial paper or notes issued by the Fund and
accrued dividends on any outstanding Preferred
Shares). In addition, at least annually, the Fund
intends to distribute net realized capital gains, if
any, to you. Your initial distribution is expected to
be declared in approximately 30 days, and paid in
approximately 60 days, from the completion of this
offering, depending on market conditions. You may
elect to automatically reinvest some or all of your
distributions in additional Common Shares under the
Fund's Dividend Reinvestment Plan. See
"Distributions" and "Dividend Reinvestment Plan."
Listing The Common Shares have been approved for listing on the
New York Stock Exchange, subject to notice of
issuance. See "Description of Capital Structure-
Common Shares." The trading or "ticker" symbol of the
Common Shares is expected to be "___". The Fund does
not intend to offer to redeem or repurchase Common
Shares.
Custodian will serve as
custodian of the Fund's assets. See "Custodian and
Transfer Agent."
Closed-End Fund Closed-end funds differ from open-end investment
Structure companies (commonly referred to as mutual funds) in
that closed-end funds generally list their shares for
trading on a securities exchange and do not redeem
their shares at the option of the shareholder. By
comparison, mutual funds issue securities redeemable
at net asset value at the option of the shareholder
and typically engage in a continuous offering of
their shares. Mutual funds are subject to continuous
asset in-flows and out-flows that can complicate
portfolio management, whereas closed-end funds
generally can stay more fully invested in securities
consistent with the closed-end fund's investment
objective and policies. In addition, in comparison to
open-end funds, closed-end funds have greater
flexibility in the employment of financial leverage
and in the ability to make certain types of
investments, including investments in illiquid
securities such as Senior Loans. However, shares of
closed-end funds frequently trade at a discount from
their net asset value. In recognition of the
possibility that the Common Shares might trade at a
discount to net asset value and that any such
discount may not be in the interest of Common
Shareholders, the Fund's Board of Trustees, in
consultation with the Adviser, from time to time may
review possible actions to reduce any such discount.
The Board might consider open market repurchases or
tender offers for Common Shares at net asset value.
There can be no assurance that the Board will decide
to undertake any of these actions or that, if
undertaken, such actions would result in the Common
Shares trading at a price equal to or close to net
asset value per Common Share. The Board might also
consider the conversion of the Fund to an open-end
investment company. The Board of Trustees believes,
however, that the closed-end structure is desirable,
given the Fund's investment objective and policies.
Investors should assume, therefore, that it is highly
unlikely that the Board would vote to convert the
Fund to an open-end investment company. See
"Description of Capital Structure."
ii
<PAGE>
Although the Fund's net asset value will vary, the
Fund's policy of acquiring interests in Senior Loans
is expected to limit fluctuations in the Fund's net
asset value as a result of changes in interest rates.
See "The Fund's Investments."
Risks No Operating History. The Fund is a newly organized
closed-end investment company with no history of
operations.
Borrower Credit Risk. Investment in the Fund involves
the risk that Borrowers under Senior Loans may
default on obligations to pay principal or interest
when due. This non-payment would result in a
reduction of income to the Fund, a reduction in the
value of the Senior Loan experiencing non-payment and
a decrease in the net asset value of the Fund. Many
Senior Loans are unrated at the time of investment,
and most Borrowers with rated debt obligations,
including Senior Loans, have ratings below investment
grade credit quality. Companies of lower credit
quality present greater risk of default on interest
and principal payments. Although Senior Loans in
which the Fund invests may be secured by specific
collateral, there can be no assurance that
liquidation of such collateral would satisfy the
Borrower's obligation in the event of nonpayment of
scheduled interest or principal or that such
collateral could be readily liquidated. In the event
of bankruptcy of a Borrower, the Fund could
experience delays or limitations with respect to its
ability to realize the benefits of any collateral
securing a Senior Loan. See "The Fund's Investments."
Non-Diversification. Because the Fund is classified as
"non-diversified" under the Investment Company Act of
1940, as amended, (the "1940 Act") it can invest a
greater portion of its assets in obligations of a
single Borrower or issuer. As a result, the Fund will
be more susceptible than a more widely diversified
fund to any single corporate, economic, political or
regulatory occurrence. The Fund does not intend to
invest, however, more than 10% of the value of its
assets in interests in Senior Loans of a single
Borrower. See "The Fund's Investments."
Senior Loans. Senior Loans in which the Fund will
invest generally may not be rated by a nationally
recognized statistical rating organization at the
time of the Fund's investment, will not be registered
with the SEC or any state securities commission and
generally will not be listed on any securities
exchange. The Fund will generally have access to
financial and other information made available to the
several financial institutions ("Lenders") in
connection with Senior Loans. However, the amount of
public information available with respect to Senior
Loans will generally be less extensive than that
available for more widely rated, registered and
exchange-listed securities. As a result, the
performance of the Fund and its ability to meet its
investment objective is more dependent on the
analytical abilities of the Adviser than would be the
case for an investment company that invests primarily
in more widely rated, registered or exchange-listed
securities. See "The Fund's Investments."
Portfolio Liquidity. No active trading market may exist
for many of the Senior Loans in which the Fund will
invest. Senior Loans are thus relatively illiquid,
which may impair the Fund's ability to realize the
full value of its assets in the event of a voluntary
or involuntary liquidation of such assets. Liquidity
relates to the ability of the Fund to sell an
investment in a timely manner. The market for
relatively illiquid securities tends to be 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
in 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
more difficult to value than liquid securities for
which an active trading market exists. See "Net Asset
Value."
iii
<PAGE>
A substantial portion of the Fund's assets may be
invested in relatively illiquid Senior Loan interests
and, accordingly, the ability of the Fund to dispose
of its investments in Senior Loans in a timely
fashion and at a fair price may be restricted, and
the Fund and holders of Common Shares may suffer
capital losses as a result. However, many of the
Senior Loans in which the Fund expects to purchase
are of a relatively large principal amount and are
held by a relatively large number of owners which
should, in the Adviser's opinion, enhance the
relative liquidity of such interests. The risks
associated with illiquidity are particularly acute in
situations where the Fund's operations require cash,
such as when, based on a Board determination, the
Fund makes open market repurchases or tender offers
for its Common Shares, or if the Adviser considers it
advantageous to increase the percentage of the Fund's
portfolio invested in high quality, short-term
securities. Lack of liquidity may in certain
circumstances result in the Fund engaging in
borrowings to meet short-term cash requirements. See
"The Fund's Investments."
Credit Risks Associated with Investments in
Participations. The Fund may purchase participations
("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. If the
Lender selling the Participation becomes insolvent,
the Fund may be treated as a general creditor of such
Lender, and may not have any exclusive or senior
claim with respect to such Lender's interest in, or
the collateral with respect to, the Senior Loan. As a
result, the Fund assumes the credit risk of the
Lender selling the Participation in addition to the
credit risk of the Borrower. The Fund may pay a fee
or forgo a portion of interest payments when
acquiring Participations or purchase assignments or
novations ("Assignments"). See "The Fund's
Investments." The Lenders selling Participations and
other persons interpositioned between the Lenders and
the Fund with respect to Participations will likely
conduct their principal business activities in the
banking, finance and financial services industries.
Because the Fund may invest a relatively high
percentage of its assets in such Participations, the
Fund may be more susceptible than a fund without such
a policy to any single economic, political or
regulatory occurrence affecting such industries. The
Fund has taken measures which it believes reduce its
exposure to such risks but no assurances can be given
as to their effectiveness. See "The Fund's
Investments."
Interest Rate Fluctuations. When interest rates
decline, the value of a portfolio invested in fixed-
rate obligations can be expected to rise. Conversely,
when interest rates rise, the value of a portfolio
invested in fixed-rate obligations can be expected to
decline. Although the Fund's net asset value will
vary, the Fund's management expects the Fund's policy
of acquiring primarily interests in floating rate
Senior Loans to minimize fluctuations in net asset
value resulting from changes in market interest
rates. However, because floating or variable rates on
Senior Loans only reset periodically, changes in
prevailing interest rates can be expected to cause
some fluctuations in the Fund's net asset value.
Similarly, a sudden and significant increase in
market interest rates may cause a decline in the
Fund's net asset value.
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
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
iv
<PAGE>
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.
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 determined by the Adviser 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.
Effects of Leverage. The Fund intends to utilize
financial leverage for investment purposes by
employing Leverage Instruments in an amount currently
anticipated to represent approximately 40% of the
Fund's total assets (including the proceeds of such
Leverage Instruments), and in no event exceeding 50%
of the Fund's total assets. Financial leverage poses
certain risks for Common Shareholders, including the
possibility of higher volatility of the net asset
value and market value of, and distributions paid on,
the Common Shares. See "The Fund's Investments."
So long as the Fund is able to invest the proceeds of
Leverage Instruments in securities that provide a
higher net return than the then current interest rate
or dividend rate on the Leverage Instruments (after
taking into account the expenses of employing each
Leverage Instrument and the Fund's operating
expenses), the effect of leverage will be to cause
the Common Shareholders to realize a higher current
rate of return than if the Fund were not leveraged.
However, if the current interest rate or dividend
rate on the Leverage Instruments were to approach the
return on such proceeds after expenses, the benefit
of leverage to Common Shareholders would be reduced,
and if the current interest rate or dividend rate on
the Leverage Instruments were to exceed such net
return, the Fund's leveraged capital structure would
result in a lower rate of return to the Common
Shareholders than if the Fund had an unleveraged
capital structure. See "Risks."
As discussed under "Management of the Fund," the fee
paid to the Adviser will be calculated on the basis
of the Fund's average daily managed assets, including
proceeds from Leverage Instruments, so the fees will
be higher when leverage is utilized, giving the
Adviser an incentive to utilize leverage.
If the Fund seeks an investment grade rating from one
or more nationally recognized statistical rating
organizations for any commercial paper, notes or
Preferred Shares issued by the Fund (which the Fund
expects to do), asset coverage or portfolio
composition provisions in addition to and more
stringent than those required by the 1940 Act may be
imposed in connection with the issuance of such a
rating. In addition, restrictions may be imposed on
certain investment practices in which the Fund may
otherwise engage. Any lender from which the Fund
borrows may require additional asset coverage and
portfolio composition provisions as well as
restrictions on the Fund's investment practices. See
"Description of Capital Structure."
Market Price of Shares. Shares of closed-end investment
companies frequently trade at prices lower than net
asset value. The Fund cannot assure you that Common
Shares will trade at a price equal to (or higher
than) net asset value in the future. Net asset value
will be reduced immediately following the offering by
the sales load and the amount of offering expenses
paid by the Fund. See "Use of Proceeds." In addition
to net asset value, market price may be affected by
such factors as dividend levels (which in turn are
affected by expenses), dividend stability, portfolio
credit quality and liquidity and market supply and
demand. See "Risks," "Description of Capital
Structure," and "Repurchase of Fund Shares,
Conversion to Open-End Fund."
Although the Fund's net asset value will vary, the
Fund's policy of acquiring interests in Senior Loans
is expected to limit fluctuations in the Fund's net
asset value as a result of changes in interest rates.
See "The Fund's Investments."
v
<PAGE>
Anti-Takeover Provisions. The Agreement and Declaration
of Trust includes provisions that could limit the
ability of other entities or persons to acquire
control of the Fund or convert the Fund to open-end
status. The provisions of the Agreement and
Declaration of Trust described below could have the
effect of depriving the Common Shareholders of
opportunities to sell their Common Shares at a
premium over the then current market price of the
Common Shares.
vi
<PAGE>
SUMMARY OF FUND EXPENSES
The following tables are intended to assist investors in understanding the
various costs and expenses directly or indirectly associated with investing in
the Fund.
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Sales Load Paid by You (as a percentage of offering price)................................ %
Dividend Reinvestment Plan Fees........................................................... None*
Annual Expenses (as a percentage of net assets attributable to Common Shares)**
Management Fees............................................................................ 1.42%
Other Expenses............................................................................. [.25]%
---
Leverage-Related Expenses.................................................................. [ ]%
---
Total Annual Operating Expenses.......................................................... [1.67]%
----
Fees and Expense Reimbursement (Years 1-5)................................................. (.75)%***
Total Net Annual Operating Expenses...................................................... .92%***
</TABLE>
*You will be charged a $2.50 service charge and pay brokerage charges if you
direct the Plan Agent (as defined below) to sell your Common Shares held in
a dividend reinvestment account.
**Figures assume that the Fund utilizes Leverage Instruments in an amount
representing approximately 40% of the Fund's total assets (including the
proceeds of such Leverage Instruments). If the Fund does not utilize any
leverage, the Fund estimates that annual operating expenses (as a
percentage of net assets attributed to Common Shares) would be
approximately as follows: Management Fees .85%; Leverage-Related Expenses
0.00%; Other Expenses .15%; Total Annual Operating Expenses 1.00%; Fees and
Expense Reimbursements (Years 1-5) .45%; and Total Net Annual Operating
Expenses .55%.
***The Adviser has agreed to reimburse the Fund for fees and expenses in the
following amounts (expressed as a percentage of net assets attributable to
Common Shares): .75% for each of the first 5 years of the Fund's
operations, .70% in year 6, .65% in year 7, .60% in year 8, .55% in year 9
and .50% in year 10. Without the reimbursement, "Total Net Annual Operating
Expenses" would be estimated to be 1.67% of net assets attributable to
Common Shares.
The purpose of the table above is to help you understand all fees and
expenses that you, as a Common Shareholder, would bear directly or indirectly.
The expenses shown in the table are based on estimated amounts for the Fund's
first year of operations. See "Management of the Fund" and "Dividend
Reinvestment Plan".
The following example illustrates the expenses (including the sales load of
$___) that you would pay on a $1,000 investment in Common Shares, assuming (1)
total net annual expenses of .92% in years 1 through 5, increasing to 1.17% in
year 10 and (2) a 5% annual return:/(1)/
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years/(2)/
<S> <C> <C> <C> <C>
Assuming Leverage Representing 40% of Total Assets $50 $62 $74 $121
</TABLE>
_________
(1) The example should not be considered a representation of future expenses.
The example assumes that the estimated "Other Expenses" set forth in the
Annual Expenses table are accurate and that all dividends and distributions
are reinvested at net asset value. Actual expenses may be greater or less
than those assumed. Moreover, the Fund's actual rate of return may be
greater or less than the hypothetical 5% return shown in the example. In
the event that the Fund does not utilize any leverage an investor would pay
the following expenses based on the assumptions in the example: 1 Year
$54; 3 Years $73; 5 Years $94; and 10 Years $169.
vii
<PAGE>
(2) Assumes reimbursement of fees and expenses of .70% of average daily total
net assets in year 6, .65% in year 7, .60% in year 8, .55% in year 9 and
.50% in year 10. The Adviser has not agreed to reimburse the Fund for any
portion of its fees and expenses beyond October 31, 2009.
viii
<PAGE>
THE FUND
The Fund is a newly organized, non-diversified, closed-end management
investment company registered under the 1940 Act. The Fund was organized as a
Massachusetts business trust on August 13, 1999, pursuant to an Agreement and
Declaration of Trust governed by the laws of The Commonwealth of Massachusetts
(the "Declaration"). As a newly organized entity, the Fund has no operating
history. The Fund's principal office is located at 333 West Wacker Drive,
Chicago, Illinois 60606, and its telephone number is (800) 257-8787. The Fund
has registered as a "non-diversified" investment company. Investment in the Fund
involves certain risks and special considerations, including risks associated
with the Fund's use of leverage. See "Risks."
This Prospectus relates to the initial public offering of the Fund's Common
Shares. As soon as practicable after the date of this Prospectus, the Fund
currently intends to employ Leverage Instruments, which would result in the
financial leveraging of the Fund for investment purposes. Holders of Common
Shares are called "Common Shareholders." There can be no assurance that the Fund
will be able to employ Leverage Instruments on terms acceptable to the Fund.
USE OF PROCEEDS
The net proceeds of the offering of Common Shares will be approximately
$_____ ($____ if the Underwriters exercise the over-allotment option in full)
after payment of the estimated organization and offering costs. The Fund will
invest the net proceeds of the offering in accordance with the Fund's investment
objective and policies as soon as practicable, but in no event, under normal
market conditions, later than one month after the completion of the offering.
The Fund's actual investment timetable will depend on the availability of Senior
Loans and other market conditions. Pending such investment, it is anticipated
that the proceeds will be invested in high-quality, short-term fixed-income
securities. Nuveen has agreed to pay (i) all organizational expenses and (ii)
offering costs (other than sales load) that exceed $.01 per Common Share.
THE FUND'S INVESTMENTS
Investment Objective and Policies
The Fund's investment objective is to seek a high level of current income,
consistent with 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 "Investment Restrictions" in the
Statement of Additional Information. Under normal circumstances, the Fund will
invest at least 80% of its total assets in adjustable rate, U.S. dollar-
denominated Senior Loans. The Fund is designed to provide individual investors
with access to a market normally accessible only to financial institutions and
larger corporate or institutional investors. 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.
Certain Characteristics of Senior Loans
General Description. Senior Loans generally are negotiated between a
Borrower and 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.
Rates of Interest. 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
<PAGE>
pay interest to major depositors in the London Inter-Bank 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.
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. See "Risks-Other Investment Practices."
When interest rates decline, the value of a portfolio invested in fixed-
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested in fixed-rate obligations can be expected to
decline. Although the Fund's net asset value will vary, the Fund's management
expects the Fund's policy of acquiring interests in Senior Loans, the interest
rates on which are adjustable, to limit fluctuations in net asset value as a
result of changes in interest rates. Accordingly, the Fund's management expects
the value of the Fund's portfolio to fluctuate less than a portfolio of fixed-
rate, longer term obligations as a result of interest rate changes. However,
changes in prevailing interest rates can be expected to cause some fluctuation
in the Fund's net asset value. In addition to changes in interest rates, changes
in the credit quality of Borrowers will also affect the Fund's net asset value.
Further, a serious deterioration in the credit quality of a Borrower could cause
a prolonged or permanent decrease in the Fund's net asset value. Fluctuations in
net asset value would be magnified as a result of the Fund's use of leverage.
Maturity. 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.
Protective Provisions of Senior Loans. Senior Loans have the most senior
position in a Borrower's capital structure, although some Senior Loans may hold
an equal ranking with other senior securities of the Borrower. The capital
structure of a Borrower may include Senior Loans, senior and junior subordinated
debt (which may include "junk bonds"), preferred stock and common stock issued
by the Borrower, typically in descending order of seniority with respect to
claims on the Borrower's assets.
Senior Loans generally are secured by specific collateral, which may
include guarantees. In order to borrow money pursuant to collateralized Senior
Loans, a Borrower will frequently, for the term of the Senior Loan, pledge as
collateral assets, including but not limited to, trademarks, accounts
receivable, inventory, buildings, real estate, franchises and common and
preferred stock in its subsidiaries. In addition, in the case of some Senior
Loans, there may be additional collateral pledged in the form of guarantees or
other credit support by and/or securities of affiliates of the Borrowers. In
certain instances, a collateralized Senior Loan may be secured only by stock in
the Borrower or its subsidiaries. Collateral may consist of assets that may not
be readily liquidated, and there is no assurance that the liquidation of such
assets would satisfy fully a Borrower's obligations under a Senior Loan. The
Fund may invest up to 20% of its investments in Senior Loans in Senior Loans
which are not secured by any collateral. Senior Loans that are not secured by
specific collateral pose a greater risk of nonpayment of interest or loss of
principal than do collateralized Senior Loans.
Loan Agreements may include various restrictive covenants designed to limit
the activities of the Borrower in an effort to protect the right of the Lenders
to receive timely payments of interest on and repayment of principal of the
Senior Loans. Restrictive covenants may include mandatory prepayment provisions
arising from excess cash flows and typically include restrictions on dividend
payments, specific mandatory minimum financial ratios, limits on total debt and
other financial tests. Breach of such covenants, if not waived by the Lenders,
is generally an event of default under
2
<PAGE>
the applicable Loan Agreement and may give the Lenders the right to accelerate
principal and interest payments. The Adviser will consider the terms of such
restrictive covenants in deciding whether to invest in Senior Loans for the
Fund's portfolio. When the Fund holds a Participation in a Senior Loan it may
not have the right to vote 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
such Lenders may not consider the interests of the Fund in connection with their
votes.
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 organized or located outside the U.S. These Senior Loans must be
U.S. dollar-denominated. Investing in the Senior Loans of foreign Borrowers
involves special risks. See "Risks - Senior Loans - Investments in Foreign
Issuers".
The capital structure of a Borrower may include Senior Loans, senior and
junior subordinated debt (which may include "junk bonds"), 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 Adviser performs its own 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 deterioration in the
credit quality of a Borrower could cause a permanent decrease in the Fund's net
asset value. See "Risk--Borrower Credit Risk."
The Adviser generally relies on its own credit analysis of Borrowers and
not on analyses 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; however, most Senior Loans,
when rated, are below investment grade 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 Market
Based upon available market data, the overall market for U.S. debt
securities, including U.S. government securities, investment and non-investment
grade corporate bonds, mortgage-related securities and commercial paper, totaled
an outstanding principal amount of approximately $__ trillion at the end of
1998, and that Senior Loans represented approximately $__ billion (or __%) of
that total amount. The volume of newly issued Senior Loans increased from
approximately $21 billion in 1991 to approximately $273 billion in 1998.
Transactions in Senior Loans in the secondary market increased from
approximately $8 billion in 1991 to
3
<PAGE>
approximately $67 billion in 1998. Senior Loans in which the Fund will invest
generally pay interest at rates which are redetermined periodically by reference
to a base lending rate, plus a premium. These base lending rates generally are
the Prime Rate, LIBOR, the CD rate or other base lending rates used by
commercial lenders. See "Performance Related and Comparative Information" in the
Statement of Additional Information.
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 which the Fund has
purchased a Participation) of any adverse change in the Borrower's financial
condition. The Fund will act as a Lender with respect to a syndicated Senior
Loan only where the Agent, at the time of the Fund's 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 "Risks."
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.
Types of Senior Loan Investments
The Fund may act as one of the group of Lenders originating a Senior Loan
(an "Original Lender"), act as an Agent, purchase Assignments of portions of
Senior Loans from third parties, and invest in 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 Senior Loan will not exceed 5% of the Fund's total
assets. The Fund's ability to receive fee income may also be constrained by
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). The
Fund intends to comply with those requirements and will further limit its
investments in Senior Loans in which it acts as Agent in order to do so.
4
<PAGE>
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. The selling Lenders and other persons interpositioned
between such Lenders and the Fund with respect to such Participations will
likely conduct their principal business activities in the banking, finance and
financial services industries. Although, as discussed below, the Fund has taken
measures which it believes reduce its exposure to any risks incident to this
industry concentration policy, the Fund may be more susceptible than an
investment company without such a policy to any single economic, political or
regulatory occurrence affecting such industries. Persons engaged in such
industries may be more susceptible than are persons engaged in some other
industry to, among other things, fluctuations in interest rates, changes in the
Federal Open Market Committee's monetary policy, governmental regulations
concerning such industries and capital raising activities generally and
fluctuations in the financial markets generally.
Participations by the Fund in a Lender's portion of a Senior Loan typically
will result in the Fund having a contractual relationship only with such Lender,
not with the Borrower. As a result, the Fund may have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by such Lender of
such payments from the Borrower. In connection with purchasing Participations,
the Fund generally will have no right to enforce compliance by the Borrower with
the terms of the Loan Agreement, nor any rights with respect to any funds
acquired by other Lenders through set-off against the Borrower and the Fund may
not directly benefit from the collateral supporting the Senior Loan in which it
has purchased the Participation. As a result, the Fund may assume the credit
risk of both the Borrower and the Lender selling the Participation. In the
event of the insolvency of the Lender selling a Participation, the Fund may be
treated as a general creditor of such Lender. The Fund has taken the following
measures in an effort to minimize such risks. The Fund will only acquire
Participations if the Lender selling the Participation, and any other persons
interpositioned between the Fund and the Lender, (i) at the time of investment
has outstanding debt or deposit obligations rated investment grade (BBB or A-3
or higher by Standard & Poor's Corporation ("S&P"), Baa or P-3 or higher by
Moody's Investor Service, Inc. ("Moody's") or BBB or F3 or higher by Fitch IBCA,
Inc. ("Fitch")) or is unrated by S&P, Moody's and Fitch and 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. Long-term debt rated BBB by S&P is
regarded by S&P as having adequate capacity to pay interest and repay principal
and debt rated Baa by Moody's is regarded by Moody's as a medium grade
obligation, i.e., it is neither highly protected nor poorly secured and debt
rated BBB by Fitch is regarded by Fitch as having adequate capacity for timely
payment of financial commitments. Commercial paper rated A-3 by S&P indicates
that S&P believes such obligations exhibit adequate protection parameters but
that adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial commitment on
the obligation, issues of commercial paper rated P-3 by Moody's are considered
by Moody's to have an acceptable ability for repayment of short-term debt
obligations but the effect of industry characteristics and market compositions
may be more pronounced and issues of commercial paper rated F3 by Fitch are
considered to be of fair credit quality with an adequate capacity for timely
payment of financial commitments but near-term adverse changes could result in a
reduction to non-investment grade.
When the Fund holds a Participation in a Senior Loan, 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, the Fund 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.
Role of Agent. On behalf of the several Lenders, the Agent generally will
be required to administer and manage the Senior Loan and, with respect to
collateralized Senior Loans, to service or monitor the collateral. In this
connection, the valuation of assets pledged as collateral will reflect market
value and the Agent may rely on independent appraisals as to the value of
specific collateral. The Agent, however, may not obtain an independent
appraisal as to the value of assets pledged as collateral in all cases. The
Fund normally will rely primarily on the Agent
5
<PAGE>
(where the Fund is an Original Lender or owns an Assignment) or the selling
Lender (where the Fund owns a Participation) to collect principal of and
interest on a Senior Loan. Furthermore, the Fund usually will rely on the Agent
(where the Fund is an Original Lender or owns an Assignment) or the selling
Lender (where the Fund owns a Participation) to monitor compliance by the
Borrower with the restrictive covenants in the Loan Agreement and notify the
Fund of any adverse change in the Borrower's financial condition or any
declaration of insolvency.
Loan Agreements typically provide for the termination of the Agent's agency
status in the event that it fails to act as required under the relevant Loan
Agreement, becomes insolvent, enters FDIC receivership or, if not FDIC insured,
enters into bankruptcy. Should such an Agent, Lender or assignor with respect
to an Assignment interpositioned between the Fund and the Borrower become
insolvent or enter FDIC receivership or bankruptcy, any interest in the Senior
Loan of such person and any loan payment held by such person for the benefit of
the Fund should not be included in such person's or entity's bankruptcy estate.
If, however, any such amount were included in such person's or entity's
bankruptcy estate, the Fund would incur certain costs and delays in realizing
payment or could suffer a loss of principal or interest. In such event, the
Fund could experience a decrease in net asset value.
Fees and Commissions. 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 may include
three types: facility fees, commitment fees and prepayment penalties. Facility
fees are paid to Lenders upon origination of a Senior Loan. Commitment fees are
paid to Lenders on an ongoing basis based upon the undrawn portion committed by
the Lenders of the underlying Senior Loan. Lenders may receive prepayment
penalties when a Borrower prepays all or part of a Senior Loan. The Fund will
receive these fees directly from the Borrower if the Fund is an Original Lender,
or, in the case of commitment fees and prepayment penalties, if the Fund
acquires an interest in a Senior Loan by way of Assignment. Whether or not the
Fund receives a facility fee from the Lender in the case of an Assignment, or
any fees in the case of a Participation, depends upon negotiations between the
Fund and the Lender selling such interests. When the Fund is an assignee, it
may be required to pay a fee, or forgo a portion of interest and any fees
payable to it, to the Lender selling the Assignment. Occasionally, the assignor
will pay a fee to the assignee based on the portion of the principal amount of
the Senior Loan which is being assigned. A Lender selling a Participation to
the Fund may deduct a portion of the interest and any fees payable to the Fund
as an administrative fee prior to payment thereof to the Fund. The Fund may be
required to pay over or pass along to a purchaser of an interest in a Senior
Loan from the Fund a portion of any fees to which the Fund would otherwise be
entitled.
Prepayments. Pursuant to the relevant Loan Agreement, a Borrower may be
required in certain circumstances, and may have the option at any time, to
prepay the principal amount of a Senior Loan, often without incurring a
prepayment penalty. Because the interest rates on Senior Loans are periodically
redetermined at relatively short intervals, the Fund and the Adviser believe
that the prepayment of, and subsequent reinvestment by the Fund in, Senior Loans
will not have a materially adverse impact on the yield on the Fund's portfolio
and may have a beneficial impact on income due to receipt of prepayment
penalties, if any, and any facility fees earned in connection with reinvestment.
Commitments to Make Additional Loans. A Lender may have certain
obligations pursuant to a Loan Agreement, which may include the obligation to
make additional loans in certain circumstances. The Fund currently intends to
reserve against such contingent obligations by segregating a sufficient amount
of cash, liquid securities and liquid Senior Loans as a reserve against such
commitments. The Fund will not purchase interests in Senior Loans that would
require the Fund to make any such additional loans if such 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 diversification requirements set forth
under the heading "Investment Restrictions" in the Statement of Additional
Information.
Warrants, Equity Securities and Junior Debt; Short-Term Debt Securities
The Fund may invest up to 20% of its total assets in other investments,
including warrants, equity securities, junior debt securities, fixed-rate bonds,
including high-yield bonds, short- to medium-term notes, 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 bonds or other 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, investments in
warrants, equity and junior debt securities entail certain risks in addition to
those associated with investments in Senior Loans. These risks include the
potential for increasing fluctuations in the
6
<PAGE>
Fund's net asset value. Any equity securities, warrants 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. The Fund may frequently possess material nonpublic
information about Borrowers. As a result of prohibitions on trading in
securities of issuers while in possession of such information, the Fund might be
unable to enter into a transaction in a security of such a Borrower when it
would otherwise be advantageous to do so.
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 by S&P, Moody's or Fitch, 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.
Structured Notes
The Fund 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.
Use of Leverage
The Fund intends to utilize financial leverage for investment purposes by
employing Leverage Instruments in an amount currently anticipated to represent
approximately 40% (and in no event exceeding 50%) of its total assets (including
the proceeds from such Leverage Instruments). The Fund may employ Leverage
Instruments for the purpose of acquiring additional income-producing investments
when the Adviser believes that such use of proceeds will enhance the Fund's net
income. The amount of outstanding Leverage Instruments may vary with prevailing
market or economic conditions. The Fund currently expects to (i) borrow money
at rates generally available to institutional investors as soon as possible
after the completion of the Common Share offering and issue commercial paper or
notes within approximately three months of the completion of the Common Share
offering, in an aggregate amount currently anticipated to represent, with any
then outstanding borrowings, approximately 30% of the Fund's total assets
immediately after such borrowing or issuance and (ii) issue Preferred Shares in
an amount currently anticipated to represent approximately 10% to 20% of the
Fund's total assets immediately after such issuance. Leverage entails special
risks. See "Risks - Leverage". The fee paid to the Adviser will be calculated on
the basis of the Fund's total assets including proceeds of Leverage Instruments,
so the fees will be higher when leverage is utilized. See "Description of
Capital Structure - Borrowings" and "Description of Capital Structure -
Preferred Shares"
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 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. The Fund may also engage in
hedging transactions to seek to protect the value of its portfolio against
declines in net
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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 or 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
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. 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 Loan in its portfolio
with 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 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. The
Fund will not sell interest rate caps or floors that it does not own.
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 is 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.
Because 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 will usually 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 with respect to 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
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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 which 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 caps or 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.
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
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 may 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 of
good standing 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
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<PAGE>
the purpose of investment leverage. No specific limitation 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. In evaluating whether to enter into a repurchase agreement, the
Adviser will consider carefully the creditworthiness of the vendor. If the
member bank or member firm that is the party to the repurchase agreement
petitions for bankruptcy or otherwise becomes subject to the U.S. Bankruptcy
Code, the law regarding the rights of the Fund is unsettled. The securities
underlying a repurchase agreement will be marked to market every business day so
that the value of the collateral is at least equal to the value of the loan,
including the accrued interest thereon, and the Adviser will monitor the value
of the collateral. No specific limitation exists as to the percentage of the
Fund's assets which may be used to participate in repurchase agreements.
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 may sell an underlying debt
instrument and simultaneously obtain 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 on an agreed upon date. The Fund will maintain in a
segregated account with its custodian cash or liquid securities in an amount
sufficient to cover its obligations with respect to reverse repurchase
agreements. The Fund receives payment for such securities only upon physical
delivery or evidence of book entry transfer by its custodian. 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. An additional risk
is that the market value of securities sold by the Fund under a reverse
repurchase agreement could decline below the price at which the Fund is
obligated to repurchase them. Reverse repurchase agreements will be considered
borrowings by the Fund and as such would be subject to the restrictions on
borrowing described in the Statement of Additional Information under "Investment
Restrictions." The Fund will not hold more than 5% of the value of its total
assets in reverse repurchase agreements.
RISKS
Closed-End Funds
The Fund is a closed-end investment company with no history of operations
and is designed primarily for long-term investors and not as a trading vehicle.
The shares of closed-end investment companies frequently trade at a price lower
than net asset value. The Fund cannot assure you that Common Shares will trade
at a price equal to or higher than net asset value in the future. The Fund's
net asset value will be reduced immediately following the offering by the sales
load and the amount of the organizational and offering expenses paid by the
Fund. This market price risk may be greater for investors who intend to sell
their Common Shares within a relatively short period after completion of this
offering.
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. This
decrease in the Fund's net asset value may be magnified by the Fund's use of
Leverage Instruments. The risk of default increases in the event of an economic
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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 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 may not be rated at the time that the Fund purchases them.
However, rating agencies (including, but not limited to, Moody's, S&P and Fitch)
have begun rating Senior Loans. 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, the Adviser 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. Some Senior Loans
in which the Fund may invest are subject to the risk that a court, pursuant to
fraudulent conveyance or other similar laws, could subordinate such Senior Loans
to presently existing or future indebtedness of the Borrower to take other
action detrimental to the holders of Senior Loans, such as the Fund, including,
under certain circumstances, invalidating such Senior Loans. Lenders commonly
have certain obligations pursuant to the Loan Agreement, which may include the
obligation to make additional loans or release collateral in certain
circumstances.
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 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 (except
as noted elsewhere herein). 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
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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.
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 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.
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 United States. 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.
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 determined
by the Adviser to be below investment grade quality. Securities rated below
investment grade quality 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 price volatility of these securities due to factors such as
interest rate sensitivity, market perception of the creditworthiness of the
issuer and general market liquidity is likely to
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result in increased fluctuation in the Fund's net asset value, particularly in
response to economic downturns. See "Additional Information About the Fund's
Investments" in the Statement of Additional Information.
Leverage
The Fund intends to utilize financial leverage for investment purposes by
employing Leverage Instruments in an amount currently anticipated to represent
approximately 40% (and in no event exceeding 50%) of its total assets (including
the proceeds from such Leverage Instruments). As soon as possible after the
completion of the Common Share offering, the Fund expects to borrow money and
within approximately three months from the completion of the Common Share
offering, the Fund expects to issue commercial paper or notes in an aggregate
amount currently anticipated to represent approximately 30% of the Fund's total
assets immediately after such borrowing or issuance. The Fund also will issue
Preferred Shares in an amount currently anticipated to represent approximately
10% to 20% of the Fund's total assets immediately after such issuance. The
timing and terms of any transactions relating to Leverage Instruments will be
determined by the Fund's Board of Trustees.
Under the requirements of the 1940 Act, the value of the Fund's total
assets, less all liabilities and indebtedness of the Fund not represented by
senior securities, must be at least equal, immediately after any borrowing or
commercial paper or note issuance, to 300% of the aggregate value of borrowings
represented by senior securities. Upon the issuance of Preferred Shares, the
value of the Fund's total assets, less all liabilities and indebtedness of the
Fund not represented by senior securities, must be at least equal, immediately
after the issuance of the Preferred Shares, to 200% of the aggregate value of
borrowings represented by senior securities and the Preferred Shares.
If the Fund seeks an investment grade rating from one or more nationally
recognized statistical rating organizations for any commercial paper, notes or
Preferred Shares issued by the Fund (which the Fund expects to do), asset
coverage or portfolio composition provisions in addition to and more stringent
than those required by the 1940 Act may be imposed in connection with the
issuance of such a rating. In addition, restrictions may be imposed on certain
investment practices in which the Fund may otherwise engage. Any lender with
respect to borrowings by the Fund may require additional asset coverage and
portfolio composition provisions as well as restrictions on the Fund's
investment practices. See "Description of Capital Structure." It is not
anticipated that these restrictions will impede the Adviser in managing the
Fund's portfolio in accordance with its investment objective and policy.
There are risks associated with employing Leverage Instruments in an effort
to increase the yield on the Common Shares, including higher volatility of both
the net asset value and the market value of the Common Shares, and that
fluctuations in the interest rates or dividend rates on the Leverage Instruments
will likely affect the yield to the Common Shareholders. So long as the Fund is
able to realize a higher return after expenses on its investment of the proceeds
of the Leverage Instruments than the then current interest rate or dividend rate
on the Leverage Instruments, the effect of the leverage will be to cause the
Common Shareholders to realize a higher return than if the Fund were not so
leveraged. On the other hand, to the extent that the then current interest rate
or dividend rate on the Leverage Instruments approaches the return on such
proceeds after expenses, the benefit of leverage to the Common Shareholders will
be reduced, and if the then current interest rate or dividend rate on the
Leverage Instruments were to exceed the return on such investment after
expenses, the Fund's leveraged capital structure would result in a lower rate of
return to the Common Shareholders than if the Fund were not so structured.
Similarly, since any decline in the net asset value of the Fund's
investments will be borne entirely by the Common Shareholders, the effect of
leverage in a declining market would result in a greater decrease in net asset
value to the Common Shareholders than if the Fund were not so leveraged. Any
such decrease would likely be reflected in a decline in the market price for
Common Shares.
Because the fee paid to the Adviser will be calculated on the basis of
total managed assets, the fee will be higher when leverage is utilized, giving
the Adviser an incentive to utilize leverage.
The floating or variable rate nature of Senior Loans in which the Fund
invests helps mitigate against the risks of increased dividend or interest costs
as a result of increasing interest rates. The Adviser may also seek to manage
certain of the risks of financial leverage in anticipation of changes in
interest rates in a number of ways, including extending the length of the
interest rate period on any commercial paper, notes or borrowing so as to fix an
interest rate
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for a period of time, reducing the Fund's leverage by redeeming all or a portion
of the outstanding Preferred Shares or repaying all or a portion of any
outstanding commercial paper, notes or borrowing, entering into certain
transactions in an effort to hedge against changes in interest rates and
purchasing securities the terms of which have elements of, or are similar in
effect to, certain hedging transactions in which the Fund may engage. There can
be no assurance that the Adviser can successfully manage the risks of leverage.
Employing Leverage Instruments will entail certain initial costs and
expenses and certain ongoing administrative and accounting expenses. These
costs and expenses will be borne by the Fund and will reduce the income or net
assets available to Common Shareholders. If the Fund's current investment
income were not sufficient to meet interest expenses on any Leverage Instrument,
the Fund might have to liquidate certain of its investments in order to meet
required dividend or interest payments, thereby reducing the net asset value
attributable to the Fund's Common Shares. In addition, the Fund is not
permitted to declare any cash dividend or other distribution on its Common
Shares unless, at the time of such declaration, the Fund meets certain asset
coverage requirements (determined after deducting the amount of such dividend or
distribution). Such prohibition on the payment of dividends or other
distributions might impair the ability of the Fund to maintain its
qualification, for federal income tax purposes, as a regulated investment
company. The Fund intends, however, to the extent possible to repay commercial
paper, notes or borrowing, which may involve the payment by the Fund of a
premium and the sale by the Fund of portfolio securities at a time when it may
be disadvantageous to do so, to maintain such asset coverage requirements.
Subject to the restrictions of the 1940 Act, the Fund may "releverage" through
the reissuance of commercial paper, notes, or Preferred Shares or incurrence of
new borrowing, and in connection with which the Fund, and indirectly the Common
Shareholders, would incur the expenses of such releveraging. See "Tax Matters."
Assuming the utilization of leverage through (i) borrowing and issuing
commercial paper or notes in the aggregate amount currently anticipated to
represent approximately 30% of the Fund's total assets and (ii) issuing
Preferred Shares in an amount currently anticipated to represent approximately
10% to 20% of the Fund's total assets, and an annual interest rate of ___% and
dividend rate of _____ payable on such leverage based on market rates as of the
date of this Prospectus, the annual return that the Fund's portfolio must
experience (net of expenses) in order to cover such interest payments and
dividend payments would be ___%. The Fund's actual cost of leverage will be
based on market rates at the time the Fund undertakes a leveraging strategy, and
such actual cost of leverage may be higher or lower than that assumed in the
previous example.
The following table is designed to illustrate the effect on the return to a
holder of the Fund's Common Shares of leverage in the amount of approximately
40% of the Fund's total assets, assuming hypothetical annual returns of the
Fund's portfolio of minus 10% to plus 10%. As the table shows, leverage
generally increases the return to shareholders when portfolio return is positive
and greater than the cost of leverage and decreases the return when the
portfolio return is negative or less than the cost of leverage. The figures
appearing in the table are hypothetical and actual returns may be greater or
less than those appearing in the table.
Assumed Portfolio Return
(net of expenses)................ (10)% (5)% 0% 5% 10%
Corresponding Common
Share Return Assuming
40% Leverage.....................
If there are no Preferred Shares issued and outstanding, Common
Shareholders will elect all of the trustees of the Fund. If there are Preferred
Shares issued and outstanding, holders of any Preferred Shares will elect two
trustees. Under the 1940 Act, upon failure by the Fund to pay dividends on the
Preferred Shares in an amount equal to two full years' dividends arrearage, the
holders of the Preferred Shares shall be entitled to elect a majority of the
Board of Trustees until all such dividends arrearage has been paid or provided
for.
Until the Fund issues Leverage Instruments, the Fund's capital structure
will not be leveraged, and the special leverage considerations described in this
Prospectus will not apply. There can be no assurance that any commercial paper
or notes or Preferred Shares will be issued or, if issued, that the commercial
paper or notes or Preferred Shares will remain outstanding or that the Fund will
borrow or, if it borrows, that such borrowing will be continued.
14
<PAGE>
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 delivery" 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 Fluctuations
When interest rates decline, the value of a portfolio invested in fixed-
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested in fixed-rate obligations can be expected to
decline. Although the Fund's net asset value will vary, the Fund's management
expects the Fund's policy of acquiring primarily interests in floating rate
Senior Loans to minimize fluctuations in net asset value resulting from changes
in market interest rates. However, because floating or variable rates on
Senior Loans only reset periodically, changes in prevailing interest rates can
be expected to cause some fluctuations in the Fund's net asset value.
Similarly, a sudden and significant increase in market interest rates, may cause
a decline in the Fund's net asset value.
Non-Diversification
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.
Year 2000 Compliance
Year 2000 risk is the risk that the computer systems used by the Adviser,
its service providers and industry wide information and transaction
clearinghouses to manage the Fund's investments and process shareholder
transactions may not be able to correctly process activity occurring in the Year
2000 because of the way computers historically have stored dates. In addition,
it is possible that the markets for Senior Loans and other securities in which
the Fund invests may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.
The statements above are subject to the Year 2000 Information and Readiness
Disclosure Act, which may limit the legal rights regarding the use of such
statements in the case of a dispute.
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 "Management of the Fund" in the Statement of Additional Information.
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<PAGE>
Investment 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 assets
in the Fund's investment portfolio, managing the Fund's business affairs and
providing certain clerical, bookkeeping and administrative services. The
Adviser is a newly-formed, wholly-owned subsidiary of The John Nuveen Company,
the parent of Nuveen. The John Nuveen Company is a majority-owned subsidiary of
The St. Paul Companies, Inc., a publicly-traded company which is principally
engaged in providing property-liability insurance through subsidiaries. See the
Statement of Additional Information under "Investment Adviser."
Day to day operations and execution of specific investment strategies is
the responsibility of the Adviser. Jeffrey 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 the Adviser
since August 1999. Prior to joining the Adviser, Mr. Maillet was a Senior Vice
President of Van Kampen Investment Advisory Corp. since 1989. 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.
Investment Management Agreement
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay for the services and facilities provided by the
Adviser an annual management fee, payable on a monthly basis, according to the
following schedule:
Average Daily Managed Assets * Management Fee
------------------------------ --------------
Less than $1 billion...................... .8500 of 1%
$1 billion to $2 billion.................. .8375 of 1%
$2 billion to $5 billion.................. .8250 of 1%
$5 billion to $10 billion................. .8000 of 1%
$10 billion and over...................... .7750 of 1%
________
*For purposes of calculation of the management fee, the Fund's "managed assets"
shall mean the average daily gross asset value of the Fund, minus the sum of the
Fund's accrued and unpaid dividends on any outstanding Preferred Shares and
accrued liabilities (other than the amount of any borrowings incurred,
commercial paper or notes issued by the Fund and the liquidation preference of
any outstanding Preferred Shares).
Because the fee paid to the Adviser will be calculated on the basis of the
Fund's managed assets, the fees will be higher when leverage is utilized, giving
the Adviser an incentive to utilize leverage.
In addition to the fee of the Adviser, the Fund pays all other costs and
expenses of its operations, including compensation of its trustees (other than
those affiliated with the Adviser), custodian, transfer and dividend disbursing
expenses, legal fees, expenses of independent auditors, expenses of repurchasing
shares, expenses of preparing, printing and distributing shareholder reports,
notices, proxy statements and reports to governmental agencies, and taxes, if
any.
For the first ten years of the Fund's operations, the Adviser has agreed to
reimburse the Fund for fees and expenses in the amounts, and for the time
periods, set forth below:
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<PAGE>
<TABLE>
<CAPTION>
Percentage Percentage
Reimbursed Reimbursed
(as a percentage (as a percentage
Year Ending of Managed Year Ending of Managed
Oct. 31, Assets)* Oct. 31, Assets)*
--------- -------- --------- --------
<S> <C> <C> <C>
1999** .45% 2005 .40%
2000 .45% 2006 .35%
2001 .45% 2007 .30%
2002 .45% 2008 .25%
2003 .45% 2009 .20%
2004 .45%
</TABLE>
_________
* For purposes of the reimbursement schedule, "managed assets" shall mean the
average daily gross asset value of the Fund, minus the sum of the Fund's
accrued and unpaid dividends on any outstanding Preferred Shares and
accrued liabilities (other than the amount of any borrowings incurred,
commercial paper or notes issued by the Fund and the liquidation preference
of any outstanding Preferred Shares).
** From the commencement of operations.
The Adviser has not agreed to reimburse the Fund for any portion of its fees and
expenses beyond October 31, 2009.
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.
The Senior Loans in which the Fund invests are not listed on any securities
exchange. Rather, Senior Loans are traded by institutional traders in the
secondary market for Senior Loan obligations that has developed over the past
several years. In determining net asset value, the Fund utilizes the valuations
of Senior Loans furnished by an independent third-party pricing service approved
by the Board of Trustees. The pricing service typically values Senior Loans at
the mean of the bid and ask prices when current quotations are readily
available. Senior Loans for which current quotations are not readily available
are valued at a fair value on a consistent basis as determined by the pricing
service using pricing matrices to determine valuations. The Board of Trustees
has determined in good faith that the use of a pricing service is a fair method
of determining the valuation of Senior Loans.
The procedures of the pricing service and its valuations are reviewed by
the officers of the Fund under the general supervision of the Board of Trustees.
If a value provided by the pricing service is determined by the Fund's Board of
Trustees or the officers not to represent a fair value, the Board of Trustees or
its delegate, the Adviser, will value the Senior Loan on the basis of
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 creditworthiness 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 longer
term fixed-income 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 on
such valuations when reviewing the
17
<PAGE>
pricing service's valuations of the Senior Loan interests in the Fund's account.
In addition, because a secondary trading market in Senior Loans has not yet
fully developed, in reviewing the pricing service's valuations of 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 other 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 reviewing the pricing
service's valuations of 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 in order to
review 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 solely upon such ratings or price
fluctuations in reviewing valuations of Senior Loan interests in the Fund's
portfolio.
See "Net Asset Value" in the Statement of Additional Information.
DISTRIBUTIONS
Commencing with the first dividend, the Fund intends to make monthly cash
distributions to Common Shareholders at a rate that reflects the past and
projected performance of the Fund. Distributions can only be made from net
investment income. The net income of the Fund consists of all interest income
accrued on portfolio assets less all expenses of the Fund (including interest
expense on borrowings). Expenses of the Fund are accrued each day. Over time,
the Fund will distribute to Common Shareholders all of its net investment income
(after it pays interest on commercial paper or notes issued by the Fund and
accrued dividends on any outstanding Preferred Shares). At least annually, the
Fund also intends to distribute net capital gains, if any. Initial
distributions to Common Shareholders are expected to be declared approximately
30 days, and paid approximately 60 days, from the completion of this offering,
depending on market conditions. Although it does not now intend to do so, the
Board of Trustees may change the Fund's dividend policy and the amount or timing
of the distributions, based on a number of factors, including the amount of the
Fund's undistributed net investment income.
To permit the Fund to maintain a more stable monthly distribution, the Fund
will initially distribute less than the entire amount of net investment income
earned in a particular period. The undistributed net investment income would be
available to supplement future distributions. As a result, the distributions
paid by the Fund for any particular monthly period may be more or less than the
amount of net investment income actually earned by the Fund during the period.
Undistributed net investment income will be added to the Fund's net asset value
and, correspondingly, distributions from undistributed net investment income
will be deducted from the Fund's net asset value.
DIVIDEND REINVESTMENT PLAN
You may elect to have all dividends or capital gains distributions on your
Common Shares, or both, automatically reinvested by The Chase Manhattan Bank, as
agent for the Common Shareholders (the "Plan Agent"), in additional Common
Shares under the Dividend Reinvestment Plan (the "Plan"). You may elect to
participate in the Plan by completing the Dividend Reinvestment Plan Application
Form. If you do not participate, you will receive all distributions in cash
paid by check mailed directly to you by as dividend
paying agent.
If you decide to participate in the Plan, the number of Common Shares you
will receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value at the time
of valuation, the Fund will issue new shares at the then current
market price; or
(2) If Common Shares are trading below net asset value at the time of
valuation, the Plan Agent will receive the dividend or distribution in
cash and will purchase Common Shares in the open market, on
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<PAGE>
the New York Stock Exchange or elsewhere, for the participants'
accounts. It is possible that the market price for the Common Shares
may increase before the Plan Agent has completed its purchases.
Therefore, the average purchase price per share paid by the Plan Agent
may exceed the market price at the time of valuation, resulting in the
purchase of fewer shares than if the dividend or distribution had been
paid in Common Shares issued by the Fund. The Plan Agent will use all
dividends and distributions received in cash to purchase Common Shares
in the open market within 30 days of the dividend payment date.
Interest will not be paid on any uninvested cash payments.
You may withdraw from the Plan at any time by giving written notice to the
Plan Agent. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan and you will
receive a cash payment for any fraction of a share in your account. If you
wish, the Plan Agent will sell your shares and send you the proceeds, minus
brokerage commissions and a $2.50 service fee.
The Plan Agent maintains all shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. Any proxy you receive will include all
Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or
distributions in Common Shares. However, all participants will pay a pro rata
share of brokerage commissions incurred by the Plan Agent when it makes open
market purchases.
Automatically reinvesting dividends and distributions does not mean that
you do not have to pay income taxes due upon receiving dividends and
distributions.
The Fund reserves the right to amend or terminate the Plan if change seems
desirable to the Board of Trustees. There is no direct service charge to
participants in the Plan; however, the Fund reserves the right to amend the Plan
to include a service charge payable by the participants. Additional information
about the Plan may be obtained from .
DESCRIPTION OF CAPITAL STRUCTURE
Common Shares
General. The Declaration authorizes the issuance of an unlimited number of
Common Shares, par value $.01 per share. All Common Shares have equal rights to
the payment of dividends and the distribution of assets upon liquidation.
Common Shares will, when issued, be fully paid and, subject to matters discussed
in "Certain Provisions in the Declaration of Trust," non-assessable, and will
have no pre-emptive or conversion rights or rights to cumulative voting.
Whenever Preferred Shares are outstanding, Common Shareholders will not be
entitled to receive any distributions from the Fund unless all accrued dividends
on Preferred Shares have been paid, all interest on commercial paper or notes
has been paid and unless asset coverage (as defined in the 1940 Act) with
respect to Preferred Shares would be at least 200% after giving effect to the
distributions. See "Preferred Shares" below.
The Fund has applied for listing of the Common Shares on the New York Stock
Exchange. The Fund intends to hold annual meetings of shareholders so long as
the Common Shares are listed on a national securities exchange and such meetings
are required as a condition to such listing.
The Fund's net asset value per share generally increases when interest
rates decline, and decreases when interest rates rise, and these changes are
likely to be greater because the Fund intends to have a leveraged capital
structure.
Closed-end funds differ from open-end management investment companies
(commonly referred to as mutual funds) in that closed-end funds generally list
their shares for trading on a securities exchange and do not redeem their shares
at the option of the shareholder. By comparison, mutual funds issue securities
redeemable at net asset value at
19
<PAGE>
the option of the shareholder and typically engage in a continuous offering of
their shares. Mutual funds are subject to continuous asset in-flows and out-
flows that can complicate portfolio management, whereas closed-end funds
generally can stay more fully invested in securities consistent with the closed-
end fund's investment objective and policies. In addition, in comparison to
open-end funds, closed-end funds have greater flexibility in the employment of
financial leverage and in the ability to make certain types of investments,
including investments in illiquid securities such as Senior Loans. However,
shares of closed-end funds frequently trade at a discount from their net asset
value. In recognition of the possibility that the Common Shares might trade at a
discount to net asset value and that any such discount may not be in the
interest of Common Shareholders, the Fund's Board of Trustees, in consultation
with the Adviser, from time to time may review possible actions to reduce any
such discount. The Board might consider open market repurchases or tender offers
for Common Shares at net asset value. There can be no assurance that the Board
will decide to undertake any of these actions or that, if undertaken, such
actions would result in the Common Shares trading at a price equal to or close
to net asset value per Common Share. The Board might also consider the
conversion of the Fund to an open-end mutual fund. The Board of Trustees
believes, however, that the closed-end structure is desirable, given the Fund's
investment objective and policies. Investors should assume, therefore, that it
is highly unlikely that the Board would vote to convert the Fund to an open-end
investment company. See "Description of Capital Structure."
Borrowings
The Fund's Declaration of Trust authorizes the Fund, without prior approval
of the Common Shareholders, to borrow money. In this connection, the Fund may
issue notes or other evidence of indebtedness (including bank borrowings or
commercial paper) and may secure any such borrowings by mortgaging, pledging or
otherwise subjecting as security the Fund's assets. In connection with such
borrowing, the Fund may be required to maintain minimum average balances with
the lender or to pay a commitment or other fee to maintain a line of credit. Any
such requirements will increase the cost of borrowing over the stated interest
rate. Under the requirements of the 1940 Act, the Fund, immediately after any
such borrowings, must have an "asset coverage" of at least 300%. With respect to
any such borrowing, asset coverage means the ratio which the value of the total
assets of the Fund, less all liabilities and indebtedness not represented by
senior securities (as defined in the 1940 Act), bears to the aggregate amount of
such borrowing represented by senior securities issued by the Fund. Certain
types of borrowing may result in the Fund being subject to covenants in credit
agreements relating to asset coverages or portfolio composition or otherwise. In
addition, the Fund may be subject to certain restrictions imposed by guidelines
of one or more rating agencies which may issue ratings for commercial paper or
notes issued by the Fund. Such restrictions may be more stringent than those
imposed by the 1940 Act.
The rights of lenders to the Fund to receive interest on and repayment of
principal of any such borrowings will be senior to those of the Common
Shareholders, and the terms of any such borrowings may contain provisions which
limit certain activities of the Fund, including the payment of dividends to
Common Shareholders in certain circumstances. Further, the 1940 Act does (in
certain circumstances) grant to the lenders to the Fund certain voting rights in
the event of default in the payment of interest on or repayment of principal. In
the event that such provisions would impair the Fund's status as a regulated
investment company under the Code, the Fund, subject to its ability to liquidate
its relatively illiquid portfolio, intends to repay the borrowings. Any
borrowing will likely rank senior to or pari passu with all other existing and
future borrowings of the Fund. The Fund may also borrow up to an additional 5%
of its total assets for temporary purposes. See "Investment Restrictions" in the
Statement of Additional Information.
The Fund currently expects that it will enter into definitive agreements
with respect to a credit facility as soon as possible after the completion of
the Common Share offering. The Fund is currently in negotiations with a small
number of money center banks to arrange a senior revolving credit facility
pursuant to which the Fund expects to be entitled to borrow an amount currently
anticipated to represent approximately 30% of the Fund's total assets as of the
closing of the offer and sale of the Common Shares offered hereby (taking the
borrowed amounts into account). Any such borrowings would constitute Leverage
Instruments. The terms of any agreements relating to such a credit facility have
not been determined and are subject to definitive agreement and other
conditions, but the Fund anticipates that such a credit facility would have
terms substantially similar to the following: (i) a final maturity not expected
to exceed three years subject to possible extension by the Fund; (ii) with
respect to each draw under the facility, an interest rate equal to the lesser of
LIBOR plus a stated premium or an alternate rate on the outstanding amount of
each such draw, reset over periods ranging from one to six months; and (iii)
payment by the
20
<PAGE>
Fund of certain fees and expenses including an underwriting fee, a commitment
fee on the average undrawn amount of the facility, an ongoing administration fee
and the expenses of the lenders under the facility incurred in connection
therewith. The Fund currently expects that the aggregate annualized cost to the
Fund over the life of the facility of the interest rate and fees referred to in
clauses (ii) and (iii) will not exceed an amount equal to the stated principal
amount of the facility times an amount equal to LIBOR plus 65 basis points.
Individual draws on the facility may have maturities ranging from seven
days to one year. The facility is not expected to be convertible into any other
securities of the Fund, outstanding amounts are expected to be prepayable by the
Fund prior to final maturity without significant penalty, and there are not
expected to be any sinking fund or mandatory retirement provisions. Outstanding
amounts would be payable at maturity or such earlier times as required by the
agreement. The Fund may be required to prepay outstanding amounts under the
facility or incur a penalty rate of interest in the event of the occurrence of
certain events of default.
The Fund expects to indemnify the lenders under the facility against
liabilities they may incur in connection with the facility. In addition the Fund
expects that such a credit facility would contain covenants which, among other
things, likely will limit the Fund's ability to pay dividends in certain
circumstances, incur additional debt, change its fundamental investment policies
and engage in certain transactions including mergers and consolidations, and may
require asset coverage ratios in addition to those required by the 1940 Act. The
Fund may be required to maintain a portion of its assets in cash or high-grade
securities as a reserve against interest or principal payments and expenses. The
Fund expects that any credit facility would have customary covenant, negative
covenant and default provisions.
There can be no assurance that the Fund will enter into an agreement for a
credit facility on terms and conditions representative of the foregoing, or that
additional material terms will not apply. The Fund currently anticipates that,
within the three month period following the Common Share offering, it will issue
commercial paper in replacement of all or part of the borrowings under the bank
credit facility. If entered into, any such credit facility or issuance of
commercial paper may in the future be replaced or refinanced by commercial paper
or one or more credit facilities having substantially different terms or by the
issuance of preferred shares or debt securities.
Preferred Shares
The Fund's Agreement and Declaration of Trust (the "Declaration")
authorizes the issuance of an unlimited number of Preferred Shares, par value
$.01 per share, in one or more classes or series, with rights as determined by
the Board of Trustees, by action of the Board of Trustees without the approval
of the Common Shareholders.
Any decision to offer Preferred Shares is subject to market conditions and
to the Board's continuing belief that leveraging the Fund's capital structure
through the issuance of Preferred Shares is likely to achieve the benefits to
the Common Shareholders described in this Prospectus. Although the terms of the
Preferred Shares will be determined by the Board of Trustees (subject to
applicable law and the Fund's Declaration) if and when it authorizes a Preferred
Shares offering, the Board has determined that the Preferred Shares, at least
initially, would likely pay cumulative dividends at rates determined over
relatively shorter-term periods (such as 7 days), by providing for the periodic
redetermination of the dividend rate through an auction or remarketing
procedure. The preference on distribution, liquidation preference, voting rights
and redemption provisions of the Preferred Shares will likely be as stated
below.
Under the 1940 Act, the Fund could issue Preferred Shares with an aggregate
liquidation value of up to one-half of the value of the Fund's total net assets
measured immediately after issuance of the Preferred Shares. "Liquidation value"
means the original purchase price, less the value of any senior securities
representing indebtedness then outstanding, of the shares being liquidated plus
any accrued and unpaid dividends. In addition, the Fund is not permitted to
declare any cash dividend or other distribution on its Common Shares unless the
liquidation value of the Preferred shares is less than one-half of the value of
the Fund's total net assets (determined after deducting the amount of such
dividend or distribution) immediately after the distribution.
The Preferred Shares have complete priority over the Common Shares as to
distribution of assets.
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<PAGE>
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Fund, holders of Preferred Shares will be
entitled to receive a preferential liquidating distribution (expected to equal
the original purchase price per share plus accumulated and unpaid dividends
thereon, whether or not earned or declared) before any distribution of assets is
made to holders of Common Shares.
Preferred Shares are required to be voting shares and to have equal voting
rights with Common Shares. Except as otherwise indicated in this Prospectus or
the Statement of Additional Information and except as otherwise required by
applicable law, holders of Preferred Shares will vote together with Common
Shareholders as a single class.
Holders of Preferred Shares, voting as a separate class, will be entitled
to elect two of the Fund's trustees. The remaining trustees will be elected by
Common Shareholders and holders of Preferred Shares, voting together as a single
class. In the unlikely event that two full years of accrued dividends are unpaid
on the Preferred Shares, the holders of all outstanding Preferred Shares, voting
as a separate class, will be entitled to elect a majority of the Fund's trustees
until all dividends in arrears have been paid or declared and set apart for
payment. In order for the Fund to take certain actions or enter into certain
transactions, a separate class vote of holders of Preferred Shares will be
required, in addition to the single class vote of the holders of Preferred
Shares and Common Shares.
The terms of the Preferred Shares may provide that they are redeemable at
certain times, in whole or in part, at the original purchase price per share
plus accumulated dividends. The terms may also state that the Fund may tender
for or purchase Preferred Shares and resell any shares so tendered. Any
redemption or purchase of Preferred Shares by the Fund will reduce the leverage
applicable to Common Shares, while any resale of shares by the Fund will
increase such leverage. See "Risks."
The discussion above describes the Board of Trustees' present intention
with respect to a possible offering of Preferred Shares. If the Board of
Trustees determines to authorize such an offering, the terms of the Preferred
Shares may be the same as, or different from, the terms described above, subject
to applicable law and the Fund's Declaration.
The Fund may be subject to certain restrictions imposed by guidelines of
one or more rating agencies which may issue ratings for Preferred Shares issued
by the Fund. These guidelines may impose asset coverage or Fund composition
requirements that are more stringent than those imposed on the Fund by the 1940
Act. The Adviser does not believe that these covenants or guidelines will impede
it from managing the Fund's portfolio in accordance with the Fund's investment
objective and policies.
CERTAIN PROVISIONS IN THE DECLARATION OF TRUST
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the
Declaration contains an express disclaimer of shareholder liability for debts or
obligations of the Fund and requires that notice of such limited liability be
given in each agreement, obligation or instrument entered into or executed by
the Fund or the trustees. The Declaration further provides for indemnification
out of the assets and property of the Fund for all loss and expense of any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be unable to meet
its obligations. The Fund believes that the likelihood of such circumstances is
very remote.
The Declaration includes provisions that could limit the ability of other
entities or persons to acquire control of the Fund or to convert the Fund to
open-end status. Specifically, the Declaration requires a vote by holders of at
least two-thirds of the Common Shares and Preferred Shares, voting together as a
single class, except as described below, to authorize (1) a conversion of the
Fund from a closed-end to an open-end investment company, (2) a merger or
consolidation of the Fund, or a series or class of the Fund, with any
corporation, association, trust or other organization or a reorganization or
recapitalization of the Fund, or a series or class of the Fund, (3) a sale,
lease or transfer of all or substantially all of the Fund's assets (other than
in the regular course of the Fund's investment activities), (4) in certain
circumstances, a termination of the Fund, or a series or class of the Fund, or
(5) a removal of trustees by shareholders, and then only for cause, unless, with
respect to (1) through (4), such transaction has already been authorized by the
affirmative vote of two-thirds of the total number of trustees fixed in
accordance with the Declaration or the By-laws, in which case the affirmative
vote of the holders of at least a majority of the Fund's
22
<PAGE>
Common Shares and Preferred Shares outstanding at the time, voting together as a
single class, is required, provided, however, that where only a particular class
or series is affected (or, in the case of removing a trustee, when the trustee
has been elected by only one class), only the required vote by the applicable
class or series will be required. None of the foregoing provisions may be
amended except by the vote of at least two-thirds of the Common Shares and
Preferred Shares, voting together as a single class. In the case of the
conversion of the Fund to an open-end investment company, or in the case of any
of the foregoing transactions constituting a plan of reorganization which
adversely affects the holders of Preferred Shares, the action in question will
also require the affirmative vote of the holders of at least two-thirds of the
Fund's Preferred Shares outstanding at the time, voting as a separate class, or,
if such action has been authorized by the affirmative vote of two-thirds of the
total number of trustees fixed in accordance with the Declaration or the By-
laws, the affirmative vote of the holders of at least a majority of the Fund's
Preferred Shares outstanding at the time, voting as a separate class. The votes
required to approve the conversion of the Fund from a closed-end to an open-end
investment company or to approve transactions constituting a plan of
reorganization which adversely affects the holders of Preferred Shares are
higher than those required by the 1940 Act. The Board of Trustees believes that
the provisions of the Declaration relating to such higher votes are in the best
interest of the Fund and its shareholders.
The provisions of the Declaration described above could have the effect of
depriving the Common Shareholders of opportunities to sell their Common Shares
at a premium over the then current market price of the Common Shares by
discouraging a third party from seeking to obtain control of the Fund in a
tender offer or similar transaction. The overall effect of these provisions is
to render more difficult the accomplishment of a merger or the assumption of
control by a third party. They provide, however, the advantage of potentially
requiring persons seeking control of the Fund to negotiate with its management
regarding the price to be paid and facilitating the continuity of the Fund's
investment objective and policies. The Board of Trustees of the Fund has
considered the foregoing anti-takeover provisions and concluded that they are in
the best interests of the Fund and its Common Shareholders.
Reference should be made to the Declaration on file with the Securities and
Exchange Commission for the full text of these provisions.
REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND
The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Common Shares will trade in the open market at a price that will be a function
of several factors, including dividend levels (which are in turn affected by
expenses), net asset value, price, dividend stability, relative demand for and
supply of such shares in the market, general market and economic conditions and
other factors. Because shares of closed-end investment companies may frequently
trade at prices lower than net asset value, the Fund's Board of Trustees has
currently determined that, at least annually, it will consider action that might
be taken to reduce or eliminate any material discount from net asset value in
respect of Common Shares, which may include the repurchase of such shares in the
open market or in private transactions, the making of a tender offer for such
shares at net asset value, or the conversion of the Fund to an open-end
investment company. The Fund cannot assure you that its Board of Trustees will
decide to take any of these actions, or that share repurchases or tender offers
will actually reduce market discount.
If the Fund converted to an open-end company, it would be required to
redeem all Preferred Shares then outstanding (requiring in turn that it
liquidate a portion of its investment portfolio), and the Common Shares would no
longer be listed on the New York Stock Exchange. In contrast to a closed-end
investment company, shareholders of an open-end investment company may require
the company to redeem their shares at any time (except in certain circumstances
as authorized by or under the 1940 Act) at their net asset value, less any
redemption charge that is in effect at the time of redemption. Because its
shares are redeemable, an open-end fund is required to invest no more than 15%
of its total assets in illiquid securities. Many Senior Loans are illiquid,
which might require that the Fund change its overall investment strategy if a
decision were made to convert the Fund to an open-end fund. See "Certain
Provisions in the Declaration of Trust" for a discussion of the voting
requirements applicable to the conversion of the Fund to an open-end company.
23
<PAGE>
Before deciding whether to take any action if the Common Shares trade below
net asset value, the Board would consider all relevant factors, including the
extent and duration of the discount, the liquidity of the Fund's portfolio, the
impact of any action that might be taken on the Fund or its shareholders, and
market considerations. Based on these considerations, even if the Fund's shares
should trade at a discount, the Board of Trustees may determine that, in the
interest of the Fund and its shareholders, no action should be taken.
TAX MATTERS
The discussion below and in the Statement of Additional Information
provides general tax information related to an investment in the Common Shares.
Because tax laws are complex and often change, you should consult your tax
adviser about the tax consequences of an investment in the Fund.
The Fund intends to elect and to qualify each year to be treated as a
regulated investment company under Subchapter M of the Code. If the Fund so
qualifies and distributes each year to its Common Shareholders at least 90% of
its net investment income (including, among other things, interest and
netshort-term capital gains, but not net capital gains, which are the excess
of net long-term capital gains over net short-term capital losses) from that
year, the Fund will not be required to pay federal income taxes on any income
distributed to Common Shareholders. The Fund will not be subject to federal
income tax on any net realized capital gains distributed to Common Shareholders.
As a Massachusetts business trust, the Fund will not be subject to any excise or
income taxes in Massachusetts as long as it qualifies as a regulated investment
company for federal income tax purposes.
If the Fund failed to qualify as a regulated investment company or failed
to satisfy the 90% distribution requirement in any taxable year, the Fund would
be taxed as an ordinary corporation on its taxable income (even if such income
were distributed to its Common Shareholders) and all distributions out of
earnings and profits would be taxed to Common Shareholders as ordinary income.
Distributions
Distributions of the Fund's net investment income are taxable to Common
Shareholders as ordinary income, whether paid in cash or reinvested in
additional Common Shares. Distributions of the Fund's net realized capital gains
("capital gain dividends"), if any, are taxable to Common Shareholders at the
rates applicable to long-term capital gains regardless of the length of time
shares of the Fund have been held by such Common Shareholders. For a summary of
the tax rates applicable to capital gains (including capital gain dividends),
see "Capital Gains Rates" below. The Fund will inform Common Shareholders of the
source and tax status of all distributions promptly after the close of each
calendar year. For a discussion of the allocation of capital gain dividends
between Common Shareholders and holders of Preferred Shares, if any, see "Tax
Matters" in the Statement of Additional Information.
Sale of Shares
Except as discussed below, selling Common Shareholders will generally
recognize gain or loss in an amount equal to the difference between their
adjusted tax basis in the Common Shares and the amount received. If such Common
Shares are held as a capital asset, the gain or loss will be a capital gain or
loss. For a summary of the tax rates applicable to capital gains, see "Capital
Gains Rates" below. The federal income tax consequences of the repurchase by the
Fund of Common Shares pursuant to tender offers will be disclosed in the related
offering documents. Any loss recognized upon a taxable disposition of Common
Shares held for six months or less will be treated as a long-term capital loss
to the extent of any capital gain dividends received with respect to such Common
Shares. For purposes of determining whether Common Shares have been held for six
months or less, the holding period is suspended for any periods during which the
Common Shareholder's risk of loss is diminished as a result of holding one or
more other positions in substantially similar or related property or through
certain options or short sales.
Capital Gains Rates
The maximum tax rate applicable to net capital gains recognized by
individuals and other non-corporate taxpayers is (i) the same as the maximum
ordinary income tax rate for capital assets held for one year or less and (ii)
20% for capital assets held for more than one year. Common Shareholders should
consult their tax advisors regarding
24
<PAGE>
a certain election to mark-to-market Common Shares held on January 1, 2001. The
maximum net capital gains tax rate for corporations is 35%. Common Shareholders
should consult their own tax advisors as to the application of the new capital
gains rates to their particular circumstances.
Non-U.S. Shareholders
A Common Shareholder that is not a "United States person" within the
meaning of the Code (a "Non-U.S. Shareholder") generally will be subject to a
withholding tax of 30% (or lower applicable treaty rate) on dividends from the
Fund (other than capital gain dividends) that are not "effectively connected"
with a United States trade or business carried on by such Common Shareholder.
Accordingly, investment in the Fund is likely to be appropriate for a Non-U.S.
Shareholder only if such person can utilize a foreign tax credit or
corresponding tax benefit in respect of such United States withholding tax. Non-
effectively connected capital gain dividends and gains realized from the sale of
Common Shares will not be subject to United States federal income tax in the
case of (i) a Non-U.S. Shareholder that is a corporation and (ii) a Non-U.S.
Shareholder that is not present in the United States for more than 182 days
during the taxable year (assuming that certain other conditions are met).
Prospective foreign investors should consult their U.S. tax advisors concerning
the tax consequences to them of an investment in Common Shares.
Possible Legislative Changes
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.
OTHER MATTERS
A lawsuit brought in June 1996 (Green et al. v. Nuveen Advisory Corp., et
al.) by certain individual common shareholders of six leveraged closed-end funds
sponsored by Nuveen is currently pending in federal district court. The
plaintiffs allege that the leveraged closed-end funds engaged in certain
practices that violated various provisions of the 1940 Act and common law. The
plaintiffs also alleged, among other things, breaches of fiduciary duty by the
funds' directors and Nuveen Advisory Corp., an affiliate of the Adviser, and
various misrepresentations and omissions in prospectuses and shareholder reports
relating to the use of leverage through the issuance and periodic auctioning of
preferred stock and the basis of the calculation and payment of management fees
to Nuveen Advisory Corp. and Nuveen. Plaintiffs also filed a motion to certify
defendant and plaintiff classes.
The defendants are vigorously defending the case and filed motions to
dismiss the entire lawsuit asserting that the claims are without merit and to
oppose certification of any classes. By opinion dated March 30, 1999, the court
granted most of the defendants' motion to dismiss and denied plaintiffs' motion
to certify defendant and plaintiff classes. The court dismissed all claims
against the funds, the funds' directors and Nuveen. The court dismissed these
claims without prejudice (which means that the plaintiffs can re-file the claims
if they can correct the defects that led to the claims being dismissed) on the
ground that the claims should have been brought as derivative claims on behalf
of the funds. The only remaining claim is brought under Section 36(b) of the
1940 Act against Nuveen Advisory Corp., and relates solely to advisory fees
Nuveen Advisory Corp. received from the six relevant funds. While the Fund
cannot assure you that the litigation will be decided in Nuveen Advisory Corp.'s
favor, the Adviser believes a decision, if any, against the defendants would
have no material effect on the Fund, its Common Shares, or the ability of the
Adviser to perform its duties under the investment management agreement.
UNDERWRITING
The underwriters named below (the "Underwriters"), acting through John
Nuveen & Co. Incorporated ("Nuveen") and __________ as their representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions of the Underwriting Agreement with the Fund and the Adviser (the
"Underwriting Agreement"), to purchase from the Fund the number of Common Shares
set forth opposite their respective names. The Underwriters are committed to
purchase all of such Common Shares if any are purchased.
25
<PAGE>
Number
Underwriter of Shares
- ----------- ---------
John Nuveen & Co. Incorporated................................ _________
Total...................................................... _________
The Fund has granted to the Underwriters an option, exercisable for 45 days
from the date of this Prospectus to purchase up to an additional ________ Common
Shares to cover over-allotments, if any, at the initial offering price. The
Underwriters may exercise such option solely for the purpose of covering over-
allotments incurred in the sale of the Common Shares offered hereby. To the
extent that the Underwriters exercise this option, each of the Underwriters will
have a firm commitment, subject to certain conditions, to purchase an additional
number of Common Shares proportionate to such Underwriter's initial commitment.
The Fund has agreed to pay a commission to the Underwriters in the amount
of $__ per Common Share (____% of the public offering price per Common Share) or
an aggregate amount of $____ ($_______ assuming full exercise of the over-
allotment option) for all Common Shares covered by this Prospectus. The
Representatives have advised the Fund that the Underwriters may pay up to $__
per Common Share from such commission to selected dealers who sell the Common
Shares and that such dealers may reallow a concession of up to $__ per Common
Share to certain other dealers who sell Common Shares. As set forth on the cover
page of this Prospectus, Nuveen has agreed to pay (i) all organizational
expenses and (ii) offering costs (other than the sales load) that exceed $.01
per Common Share.
Prior to this offering, there has been no public market for the Common
Shares or any other securities of the Fund. The Common Shares have been approved
for listing on the New York Stock Exchange, subject to notice of issuance. The
trading or "ticker" symbol of the Fund is expected to be "____". In order to
meet the requirements of listing the Common Shares on the New York Stock
Exchange, the Underwriters have undertaken to sell lots of 100 or more Common
Shares to a minimum of 2,000 beneficial holders. The minimum investment
requirement is 100 shares ($1,000).
The Fund and the Adviser have agreed to indemnify the several Underwriters
for or to contribute to the losses arising out of certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Fund has agreed not to offer or sell any additional Common Shares of
the Fund, other than as contemplated by this Prospectus, for a period of 180
days after the date of the Underwriting Agreement without the prior written
consent of the Underwriters.
The Representatives have informed the Fund that the Underwriters do not
intend to confirm sale to any accounts over which they exercise discretionary
authority.
The Underwriters may take certain actions to discourage short-term trading
of Common Shares during a period of time following the initial offering date.
Included in these actions is the withholding of the concession and other
payments to dealers in connection with Common Shares which were sold by such
dealers and which are repurchased for the account of the Underwriters during
such period. In addition, physical delivery of certificates representing Common
Shares is required to transfer ownership of Common Shares for a certain period.
Until the distribution of Common Shares is completed, rules of the SEC may limit
the ability of the Underwriters and certain selling group members to bid for and
purchase the Common Shares. As an exception to these rules, the Underwriters are
permitted to engage in certain transactions that stabilize the price of the
Common Shares. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Common Shares. If the
Underwriters create a short position in this Prospectus, then the Underwriters
may reduce that short position by purchasing Common Shares in the open market.
The Underwriters may also elect to reduce any short position by exercising all
or a part of the overallotment option described above. In general, purchases of
a security for the purpose of stabilization or to reduce a short position could
cause the price of the security to be higher than it might be in the absence of
such purchases. In addition, the Underwriters may impose "penalty bids" under
contractual arrangements with dealers participating in the offering whereby they
may reclaim the selling concession with respect to Common Shares distributed in
the offering but subsequently purchased for the account of the Underwriters in
the open market. Neither the Fund nor the Underwriters make any representation
or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Common Shares. In
addition, neither the Fund nor the Underwriters make any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
26
<PAGE>
Under the terms of and subject to the conditions of the Underwriting
Agreement, the Underwriters are committed to purchase and pay for all Common
Shares offered hereby if any are purchased. The Underwriting Agreement provides
that it may be terminated at or prior to the closing date for the purchase of
the Common Shares if, in the judgement of the Representatives, payment for the
delivery of the Common Shares is rendered impracticable or inadvisable because
(1) trading in the equity securities of the Fund is suspended by the SEC, by an
exchange that lists the Common Shares, or by the National Association of
Securities Dealers Automated Quotation National Market System ("Nasdaq"), (2)
trading in securities generally on the New York Stock Exchange or Nasdaq shall
have been suspended or limited or minimum or maximum prices shall have been
generally established on such exchange or over-the-counter market, (3)
additional material governmental restrictions not in force on the date of the
Underwriting Agreement, have been imposed upon trading in securities generally
or trading in securities generally has been suspended on any U.S. securities
exchange, (4) a general moratorium has been established by Federal or New York
authorities, or (5) any material adverse change in the financial or securities
markets in the United States or in political, financial or economic conditions
in the United States or any outbreak or material escalation of hostilities or
other calamity or crisis occurs, the effect of which is such as to make it
impracticable to market any or all of the Common Shares. The Underwriting
Agreement also may be terminated if any of the conditions specified in the
Underwriting Agreement have not been fulfilled when and as required by such
agreement.
The Fund anticipates that the Representatives and certain other
Underwriters may from time to time act as brokers and dealers in connection with
the execution of its portfolio transactions after they have ceased to be
Underwriters and, subject to certain restrictions, may act as such brokers while
they are Underwriters.
Nuveen, one of the Representatives, is an affiliAte of the Adviser.
CUSTODIAN AND TRANSFER AGENT
is the custodian of the Fund and will maintain custody
of the securities and cash of the Fund. The custodian performs custodial, fund
accounting and portfolio accounting services. The Fund's transfer, shareholder
services and dividend paying agent is The Chase Manhattan Bank.
LEGAL OPINIONS
Certain legal matters in connection with the Common Shares will be passed
upon for the Fund by Bell, Boyd & Lloyd, Chicago, Illinois, and for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom (Illinois). Bell, Boyd &
Lloyd may rely as to certain matters of Massachusetts law on the opinion of
Bingham Dana LLP, Boston, Massachusetts.
27
<PAGE>
TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
- -------------------------------------------------------------------
<S> <C>
Use of Proceeds............................................ B-2
Investment Objective....................................... B-2
Investment Restrictions.................................... B-2
Additional Information About the Fund's Investments........ B-5
Management of the Fund..................................... B-8
Investment Adviser......................................... B-13
Portfolio Transactions..................................... B-15
Net Asset Value............................................ B-16
Tax Matters................................................ B-18
Performance Related and Comparative Information............ B-21
Experts.................................................... B-26
Additional Information..................................... B-27
Report of Independent Auditors............................. B-27
Financial Statements....................................... B-27
Ratings of Investments (Appendix A)........................ A-1
</TABLE>
28
<PAGE>
You should rely only on the information contained in this Prospectus. The Fund
has not authorized anyone to provide you with different information. The Fund is
not making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information provided by this
Prospectus is accurate as of any date other than the date on the front of this
Prospectus.
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
- -----------------------------------------------------
<S> <C>
Prospectus Summary.............................
Summary of Fund Expenses.......................
The Fund.......................................
Use of Proceeds................................
The Fund's Investments.........................
Risks..........................................
Management of the Fund.........................
Net Asset Value................................
Distributions..................................
Dividend Reinvestment Plan.....................
Description of Capital Structure...............
Certain Provisions in the Declaration
of Trust......................................
Repurchase of Fund Shares; Conversion
to Open-End Fund..............................
Tax Matters....................................
Other Matters..................................
Underwriting...................................
Custodian and Transfer Agent...................
Legal Opinions.................................
Table of Contents for the Statement
of Additional Information.....................
</TABLE>
================================================================================
Until ____, 1999 (25 days after the date of this Prospectus), all dealers that
buy, sell or trade the Common Shares, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
================================================================================
100,000 Shares
Nuveen Senior Income Fund
Common Shares
Prospectus
___________, 1999
John Nuveen & Co.
Incorporated
<PAGE>
The information in this Statement of Additional Information is not complete
and may be changed. No person may sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.
SUBJECT TO COMPLETION--DATED _________, 1999
Nuveen Senior Income Fund
STATEMENT OF ADDITIONAL INFORMATION
Nuveen Senior Income Fund (the "Fund") is a newly organized, closed-end,
non-diversified management investment company. The Fund's investment objective
is to seek a high level of current income, consistent with preservation of
capital. This Statement of Additional Information relating to common shares of
the Fund ("Common Shares") does not constitute a prospectus, but should be read
in conjunction with the Fund's Prospectus relating thereto dated ________, 1999
(the "Prospectus"). This Statement of Additional Information does not include
all information that a prospective investor should consider before purchasing
Common Shares, and investors should obtain and read the Prospectus prior to
purchasing such shares. A copy of the Prospectus may be obtained without charge
by calling (800) 257-8787. You may also obtain a copy of the Prospectus on the
Securities and Exchange Commission's web site (http://www.sec.gov). Capitalized
terms used but not defined in this Statement of Additional Information have the
meanings ascribed to them in the Prospectus.
TABLE OF CONTENTS
Page
----
Use of Proceeds B-2
Investment Objective B-2
Investment Restrictions B-2
Additional Information About the Fund's Investments B-5
Management of the Fund B-8
Investment Adviser B-13
Portfolio Transactions B-15
Net Asset Value B-16
Tax Matters B-18
Performance Related and Comparative Information B-21
Experts B-26
Additional Information B-27
Report of Independent Auditors B-27
Financial Statements B-27
Ratings of Investments (Appendix A) A-1
This Statement of Additional Information is dated __________, 1999
B-1
<PAGE>
USE OF PROCEEDS
The net proceeds of the offering of Common Shares of the Fund will be
approximately: $_______ ($_______ if the Underwriters exercise the over-
allotment option in full) after payment of organization and offering costs.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek a high level of current income,
consistent with preservation of capital. The Fund seeks to achieve its objective
primarily by investing in senior secured loans whose interest rates adjust
periodically based on a benchmark index such as the Prime Rate or LIBOR.
Although the Fund's net asset value will vary, the Fund's policy of acquiring
interests in floating or variable rate, U.S. dollar-denominated senior loans
("Senior Loans") is expected to minimize the fluctuations in the Fund's net
asset value as a result of changes in interest rates. The Fund's net asset value
may be affected by changes in the credit quality of Borrowers with respect to
Senior Loan interests in which the Fund invests. Fluctuations in net asset value
may be magnified as a result of the Fund's use of leverage. In addition, the
Fund's use of leverage may affect the Fund's ability to make distributions. The
Common Shares may trade at a discount or premium to net asset value. An
investment in the Fund may not be appropriate for all investors and is not
intended to be a complete investment program. No assurance can be given that the
Fund will achieve its investment objective. For further discussion of the
characteristics of Senior Loan interests and associated special risk
considerations, see "The Fund's Investments" in the Prospectus.
INVESTMENT RESTRICTIONS
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 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
B-2
<PAGE>
apply with respect to obligations issued or guaranteed by the U.S.
Government or by its agencies or instrumentalities and provided
further that for purposes of this limitation, the term "issuer" shall
not include a lender selling a participation to the Fund together with
any other person interpositioned between such lender and the Fund with
respect to a participation.
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 1, the Fund will consider
all relevant factors in determining whether to treat the Lender selling a
Participation and any persons 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:
B-3
<PAGE>
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 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 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 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 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
B-4
<PAGE>
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 responsible for 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 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.
B-5
<PAGE>
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 its own credit analysis and its 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 willful
misconduct. In the event of a Borrower's default on a loan, the Loan Agreements
generally 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 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.
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 determined by the Adviser 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 bond securities 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
B-6
<PAGE>
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.
(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 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
fundamental analysis, may decrease the value and liquidity of junk bonds,
especially in a thinly traded market.
B-7
<PAGE>
MANAGEMENT OF THE FUND
Trustees and Officers
The management of the Fund, including general supervision of the duties
performed for the Fund under the Management Agreement, is the responsibility of
the Board of Trustees of the Fund. The number of trustees of the Fund is
currently set at 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.
<TABLE>
<CAPTION>
Positions and
-------------
Date of Offices with the Principal Occupations During Past Five
------- ---------------- --------------------------------------
Name and Address Birth Fund Years
---------------- ----- ---- -----
<S> <C> <C> <C>
Timothy R. Schwertfeger* 3/28/49 Chairman and Chairman since July 1, 1996 of The John
333 West Wacker Drive Trustee Nuveen Company, John Nuveen & Co.
Chicago, IL 60606 Incorporated, Nuveen Advisory Corp. and
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); Chairman
and Director of the Adviser (since
1999).
James E. Bacon 2/27/31 Trustee Business consultant; Director of Lone
114 W. 4th St. Star Industries, Inc. (cement); retired.
New York, NY 10036
Jack B. Evans 10/22/48 Trustee President, The Hall-Perrine Foundation,
115 Third Street, S.E. a private philanthropic corporation
Cedar Rapids, IA 52401 (since 1996); formerly President and
Chief Operating Officer, SCI Financial
Group, Inc., a regional financial
services firm.
</TABLE>
B-8
<PAGE>
<TABLE>
<CAPTION>
Positions and
-------------
Date of Offices with the Principal Occupations During Past Five
------- ---------------- --------------------------------------
Name and Address Birth Fund Years
---------------- ----- ---- -----
<S> <C> <C> <C>
William L. Kissick 7/29/32 Trustee Professor, School of Medicine and the
University of Wharton School of Management and
Pennsylvania Chairman, Leonard Davis Institute of
224 NEB/2L Health Economics, University of
Philadelphia, PA 19104 Pennsylvania.
Thomas E. Leafstrand 11/11/31 Trustee Retired, previously Vice President in
412 W. Franklin charge of Municipal Underwriting and
Wheaton, IL 60187 Dealer Sales at The Northern Trust
Company.
Sheila W. Wellington 2/24/32 Trustee President (since 1993) of Catalyst (a
250 Park Avenue not-for-profit organization focusing on
New York, NY 10003 women's leadership development in
business and the professions).
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); Vice
Chicago, IL 60606 President and Treasurer of the Adviser
(September 1999); prior 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 Corp.
333 West Wacker Drive (since January 1997); prior thereto,
Chicago, IL 60606 Vice President and Portfolio Manager
(since September 1991) of Flagship
Financial.
</TABLE>
B-9
<PAGE>
<TABLE>
<CAPTION>
Positions and
-------------
Date of Offices with the Principal Occupations During Past Five
------- ---------------- --------------------------------------
Name and Address Birth Fund Years
---------------- ----- ---- -----
<S> <C> <C> <C>
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 Corp.
333 West Wacker Drive (since December 1995); Assistant Vice
Chicago, IL 60606 President of Nuveen Advisory Corp.
(from September 1992 to December 1995),
prior thereto Assistant Portfolio
Manager of Nuveen Advisory Corp.
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 Institutional
333 West Wacker Drive Advisory Corp. (since March 1998) and
Chicago, IL 60606 Nuveen Advisory Corp. (since January
1997); prior thereto, Vice President
and Portfolio Manager of Flagship
Financial.
Steven J. Krupa 8/21/57 Vice President Vice President of Nuveen Advisory Corp.
333 West Wacker Drive
Chicago, IL 60606
Jeffrey W. Maillet 9/30/56 Vice President Executive Managing Director of the Adviser (since
333 West Wacker Drive September 1999); prior thereto, Senior
Chicago, IL 60606 Vice President of Van Kampen Investment
Advisory Corp. (since 1989)
</TABLE>
B-10
<PAGE>
<TABLE>
<CAPTION>
Positions and
-------------
Date of Offices with the Principal Occupations During Past Five
------- ---------------- --------------------------------------
Name and Address Birth Fund Years
---------------- ----- ---- -----
<S> <C> <C> <C>
Larry W. Martin 7/27/51 Vice President and Vice President, Assistant Secretary and
333 West Wacker Drive Assistant Secretary Assistant General Counsel of John
Chicago, IL 60606 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; Vice
President and Assistant Secretary of
the Adviser (since September 1999).
Edward F. Neild, IV 7/7/65 Vice President Vice President (since September 1996),
333 West Wacker Drive previously Assistant Vice President
Chicago, IL 60606 (since December 1993) of Nuveen
Advisory Corp., Portfolio Manager prior
thereto; Vice President (since
September 1996), previously Assistant
Vice President (since May 1995), of
Nuveen Institutional Advisory Corp.,
Portfolio Manager prior thereto;
Chartered Financial Analyst.
Stephen S. Peterson 9/20/57 Vice President Vice President (since September 1997),
333 West Wacker Drive previously Assistant Vice President
Chicago, IL 60606 (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 Corp.
333 West Wacker Drive and Nuveen Institutional Advisory
Chicago, IL 60606 Corp.; Chartered Financial Analyst.
</TABLE>
B-11
<PAGE>
<TABLE>
<CAPTION>
Positions and
-------------
Date of Offices with the Principal Occupations During Past Five
------- ---------------- --------------------------------------
Name and Address Birth Fund 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 and
333 West Wacker Drive Secretary Associate General Counsel of John
Chicago, IL 60606 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>
Jeffrey W. Maillet will act as portfolio manager of the Fund. Mr. Maillet
has more than 18 years of experience in Senior Loan fund management and has
managed the purchase of more than 2,000 senior secured bank issues totaling in
excess of $28 billion.
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 Fund 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 Common Shareholders will elect trustees at the next annual meeting of
Common Shareholders, unless any Preferred Shares are outstanding at that time,
in which event holders of Preferred Shares, voting as a separate class, will
elect two trustees and the remaining trustees shall be elected by Common
Shareholders and holders of Preferred Shares, voting together as a single class.
Holders of Preferred Shares will be entitled to elect a majority of the Fund's
trustees under certain circumstances.
The following table sets forth estimated compensation to be paid by 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.
B-12
<PAGE>
Estimated Total
Estimated Aggregate Compensation From Fund
Name of Trustee Compensation From Fund* and Fund Complex**
- --------------- ----------------------- ------------------
James E. Bacon
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.
The Fund has no employees. Its officers are compensated by the Adviser or
Nuveen.
INVESTMENT ADVISER
The Adviser acts as investment adviser to the Fund, with responsibility for
the overall management of the Fund. Its address is 333 West Wacker Drive,
Chicago, Illinois 60606. The Adviser is also responsible for managing the
Fund's business affairs and providing day-to-day administrative services to the
Fund. For additional information regarding the management services performed by
the Adviser, see "Management of the Fund" in the Prospectus.
The Adviser is a newly-formed, wholly-owned subsidiary of The John Nuveen
Company and is an affiliated entity of Nuveen, which is also a co-managing
underwriter of the Fund's Common Shares. Nuveen is sponsor of the Nuveen
Defined Portfolios, registered unit investment trusts, is the principal
underwriter for the Nuveen Mutual Funds, and has served as co-managing
underwriter for the shares of the Nuveen Exchange-Traded Funds. Over 1,300,000
individuals have invested to date in Nuveen's funds and trusts. Founded in
1898, Nuveen brings over a century of expertise to the municipal bond market.
Overall, Nuveen and its affiliates manage or oversee more than $70 billion in
assets in a variety of products. Nuveen currently sponsors 59 funds traded on
the New York or American Stock Exchange, with more than $27 billion in assets.
Nuveen, like the Adviser, 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 a publicly-traded company located in St. Paul, Minnesota, and is
principally engaged in providing property-liability insurance through
subsidiaries.
B-13
<PAGE>
Pursuant to an investment management agreement between the Adviser and the
Fund, the Fund has agreed to pay for the services and facilities provided by the
Adviser an annual management fee, payable on a monthly basis, according to the
following schedule:
Average Daily Managed Assets* Management Fee
----------------------------- --------------
Less than $1 billion.................... .8500 of 1%
$1 billion to $2 billion................ .8375 of 1%
$2 billion to $5 billion................ .8250 of 1%
$5 billion to $10 billion............... .8000 of 1%
$10 billion and over.................... .7750 of 1%
*For purposes of calculation of the management fee, the Fund's "managed assets"
shall mean the average daily gross asset value of the Fund, minus the sum of the
Fund's accrued and unpaid dividends on any outstanding Preferred Shares and
accrued liabilities (other than the amount of any borrowings incurred,
commercial paper or notes issued by the Fund and the liquidation preference of
any outstanding Preferred Shares).
All fees and expenses are accrued daily and deducted before payment of
dividends to investors. The investment management agreement has been approved
by a majority of the disinterested trustees of the Fund and the sole shareholder
of the Fund.
For the first ten years of the Fund's operation, the Adviser has agreed to
reimburse the Fund for fees and expenses in the amounts, and for the time
periods, set forth below:
<TABLE>
<CAPTION>
Percentage Percentage
Reimbursed (as a Reimbursed(as a
Year Ending percentage of Managed Year Ending percentage of
Oct. 31, Assets)* Oct. 31, Managed Assets)*
-------------- --------------------- --------------- -----------------
<S> <C> <C> <C>
1999** .45% 2005 .40%
2000 .45% 2006 .35%
2001 .45% 2007 .30%
2002 .45% 2008 .25%
2003 .45% 2009 .20%
2004 .45%
</TABLE>
________________________________________________________________________________
*From the commencement of operations.
**For purposes of the reimbursement schedule, "managed assets" shall mean the
average daily gross asset value of the Fund, minus the sum of the Fund's accrued
and unpaid dividends on any outstanding Preferred Shares and accrued liabilities
(other than the amount of any borrowings incurred, commercial paper or notes
issued by the Fund and the liquidation preference of any outstanding Preferred
Shares)
Reducing Fund expenses in this manner will tend to increase the amount of
income available for the Common Shareholders during the period of reimbursement.
The Adviser has
B-14
<PAGE>
not agreed to reimburse the Fund for any portion of its fees and expenses beyond
October 31, 2009.
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 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
B-15
<PAGE>
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.
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.
The Senior Loans in which the Fund invests are not listed on any securities
exchange. Rather, Senior Loans are traded by institutional traders in the
secondary market for Senior Loan obligations that has developed over the past
several years. In determining net asset value, the Fund utilizes the valuations
of Senior Loans furnished by an independent third-party pricing service approved
by the Board of Trustees. The pricing service typically values Senior Loans at
the mean of the bid and ask prices when current quotations are readily
available. Senior Loans for which current quotations are not readily available
are valued at a fair value on a consistent basis as determined by the pricing
service using pricing matrices to determine valuations. The Board of Trustees
has determined in good faith that the use of a pricing service is a fair method
of determining the valuation of Senior Loans.
The procedures of the pricing service and its valuations are reviewed by
the officers of the Fund under the general supervision of the Board of Trustees.
If a value provided by the pricing service is determined by the Fund's Board of
Trustees or the officers not to represent a fair value, the Board of Trustees or
its delegate, the Adviser, will value the Senior Loan on the basis of
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 creditworthiness 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
B-16
<PAGE>
than the net asset values of investment companies with portfolios consisting
primarily of longer term fixed-income 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 on
such valuations when reviewing the pricing service's valuations of the Senior
Loan interests in the Fund's account. In addition, because a secondary trading
market in Senior Loans has not yet fully developed, in reviewing the pricing
service's valuations of 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 other 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 reviewing the pricing service's valuations of 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 in order to review 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 solely
upon such ratings or price fluctuations in reviewing valuations of Senior Loan
interests in the Fund's portfolio.
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 a fair value as determined in good faith
by or on behalf of the Trustees.
B-17
<PAGE>
TAX MATTERS
Federal Income Tax Matters
The following discussion of federal income tax matters is based upon the
advice of Bell, Boyd & Lloyd, special counsel to 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 Common
Shareholders. First, the Fund must derive at least 90% of its annual gross
income (including tax-exempt interest) from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities or foreign currencies, or other income (including but not limited
to gains from options and futures) derived with respect to its business of
investing in such stock, securities or currencies (the "90% gross income test").
Second, the Fund must diversify its holdings so that, at the close of each
quarter of its taxable year, (i) at least 50% of the value of its total assets
is comprised of cash, cash items, United States Government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater in value than 5% of the
value of the Fund's total assets and to not more than 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of 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 business.
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 Common Shareholders who, if subject to federal income tax on long-term
capital gains, (i) will be required to include in income for federal income tax
purposes, as long-term capital gain, their share of such undistributed amount,
and (ii) will be entitled to credit their proportionate shares of the tax paid
by the Fund 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 Common 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 Common Shareholder's
gross income and the tax deemed paid by the Common Shareholder under clause (ii)
of the preceding sentence. The Fund intends to distribute at least annually to
its Common Shareholders all or
B-18
<PAGE>
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 investment income and net short-term
capital gains realized by the Fund, if any, will be taxable to Common
Shareholders as ordinary income whether received in cash or additional shares.
Any net long-term capital gains realized by the Fund and distributed to Common
Shareholders in cash or additional shares will be taxable to Common 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 treated as a return of
capital to the extent of (and in reduction of) the Common Shareholder's tax
basis in his or her shares. Any excess will be treated as gain from the sale of
his or her shares, as discussed below.
The Internal Revenue Service has taken the position in a revenue ruling
that if a regulated investment company has two classes of shares, it may
designate distributions made to each class in any year as consisting of no more
than such class' proportionate share of particular types of income based on the
total distributions paid to each class for such year, including distributions of
capital gain dividends. Consequently if both Common Shares and Preferred Shares
are outstanding, the Fund intends to designate distributions made to the classes
as consisting of particular types of income in accordance with the classes'
proportionate shares of such income. Thus, capital gain dividends will be
allocated between the holders of Common Shares and the holders of Preferred
Shares in proportion to the total distributions made to each class during the
taxable year, or otherwise as required by applicable law.
If the Fund engages in hedging transactions involving financial futures and
options, these transactions will be subject to special tax rules, the effect of
which may be to accelerate income to the Fund, defer the Fund's losses, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains and convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to Common Shareholders.
Prior to purchasing shares in the Fund, an investor should carefully
consider the impact of dividends or distributions which are expected to be or
have been declared, but not paid. Any dividend or distribution declared shortly
after a purchase of such shares prior to the record date will have the effect of
reducing the per share net asset value by the per share amount of the dividend
or distribution.
Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to Common
Shareholders of record on a specified
B-19
<PAGE>
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 Common
Shareholders) on December 31.
The sale of Common Shares normally will result in capital gain or loss to
the Common Shareholders. Generally, a Common Shareholder's gain or loss will be
long-term gain or loss if the shares have been held for more than one year.
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 Common Shares cannot
be taken into account for purposes of determining gain or loss on the redemption
or exchange of such shares within 90 days after their purchase to the extent
Common Shares or shares of 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 Common
Shareholder's tax basis in the shares subsequently acquired. In addition, no
loss will be allowed on the sale of Common Shares if the Common Shareholder
purchases other shares of the Fund (whether through reinvestment of
distributions or otherwise) or the Common Shareholder acquires or enters into a
contract or option to acquire securities that are substantially identical to
shares of the Fund within a period of 61 days beginning 30 days before and
ending 30 days after such redemption or exchange. If disallowed, the loss will
be reflected in an adjustment to the basis of the shares acquired.
In order to avoid a 4% federal excise tax, the Fund must distribute or be
deemed to have distributed by December 31 of each calendar year at least 98% of
its taxable ordinary income for such year, at least 98% of the excess of its
realized capital gains over its realized capital losses (generally computed on
the basis of the one-year period ending on October 31 of such year) and 100% of
any taxable ordinary income and any excess of realized capital gains over
realized capital losses for the prior year that was not distributed during such
year and on which the Fund paid no federal income tax. For purposes of the
excise tax, a regulated investment company may reduce its capital gain net
income (but not below its net capital gain) by the amount of any net ordinary
loss for the calendar year. The Fund intends to make timely distributions in
compliance with these requirements and consequently it is anticipated that it
generally will not be required to pay the excise tax.
If in any year the Fund should fail to qualify under Subchapter M for tax
treatment as a regulated investment company, the Fund would incur a regular
corporate federal income tax upon its income for that year, and distributions to
its Common Shareholders would be taxable to Common Shareholders as ordinary
dividend income for federal income tax purposes to the extent of the Fund's
earnings and profits.
The Fund is required in certain circumstances to withhold 31% of taxable
dividends and certain other payments paid to non-corporate holders of shares who
have not furnished to the
B-20
<PAGE>
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 Common Shareholders. For complete provisions,
reference should be made to the pertinent Code sections and Treasury
Regulations. The Code and Treasury Regulations are subject to change by
legislative or administrative action, and any such change may be retroactive
with respect to Fund transactions. Common Shareholders are advised to consult
their own tax Advisers for more detailed information concerning the federal
taxation of the Fund and the income tax consequences to its Common Shareholders.
PERFORMANCE RELATED AND COMPARATIVE INFORMATION
The Fund may 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 = 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.
B-21
<PAGE>
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, Inc. or
other independent services. Comparison of the Fund to an alternative investment
should be made with consideration of differences in features and expected
performance. The Fund may obtain data from sources or reporting services, such
as Bloomberg Financial ("Bloomberg") and Lipper, that the Fund believes to be
generally accurate.
Past performance is not indicative of future results. At the time Common
Shareholders sell their shares, they may be worth more or less than their
original investment.
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.
<TABLE>
<CAPTION>
Comparison of Prime Rate,
Treasury Bill Rate and
London Inter-Bank Offered Rate and Senior Loans
(As of 12/31 of each Calendar Year)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1984 1985 1986 1987 1988 1989 1990 1991
------ ------ ------ ------ ------ ------ ------ -------------
Prime Rate/1/............................. 12.06% 9.99% 8.38% 8.15% 9.24% 10.88% 10.01% 8.46%
3 Month Treasury Bill Rate/2/............. 8.6000% 7.1000% 5.5300% 5.7700% 8.0700% 7.6300% 6.7400% 4.0700%
3 Month LIBOR/3/.......................... 8.7500% 8.0000% 6.3750% 7.4375% 9.6200% 8.3750% 7.6300% 4.3125%
Average Senior Loan Fund Yield/4/......... % % % % % % % %
1992 1993 1994 1995 1996 1997 1998 June 30, 1999
------ ------ ------ ------ ------ ------ ------ -------------
Prime Rate/1/............................ 6.25% 6.00% 8.50% 8.83% 8.50% 8.50% 7.75%
3 Month Treasury Bill Rate/2/............ 3.2200% 3.0600% 5.600% 5.1400% 4.9100% 5.1790% 4.8742%
3 Month LIBOR/3/......................... 3.4375% 3.3750% 6.5000% 5.6250% 5.5625% 5.8125% 5.0600%
Average Senior Loan Fund Yield/4/........ % % % % % % %
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
_____________________________
1 The Prime Rate quoted by a major U.S. bank is the base rate on corporate
loans at large U.S. money center commercial banks. Source: Federal Reserve
Bulletin.
2 The 3 Month Treasury Bill Rate. Source: Bloomberg.
3 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.
4 Senior loan fund yields are represented by the arithmetic average
annualized yield of the four exchange-traded senior loans funds existing at
the time. Three of these funds began operations after June 1998. These
funds have investment policies that differ from the Fund, and past
performance may not be an indication of future results.
B-22
<PAGE>
Comparison of Yield
The following chart compares the yield of the four exchange-traded senior
loan funds/1/ to the three-month LIBOR and the three-month Treasury Bill Rate.
Date Three Month Three Month Exchange-Traded
LIBOR Treasury Bill Rate Senior Loan Funds
08/31/89 9.00%
09/29/89 9.19%
10/31/89 8.69%
11/30/89 8.50%
12/29/89 8.38%
01/31/90 8.38%
02/28/90 8.38%
03/30/90 8.50%
04/30/90 8.69%
05/31/90 8.38%
06/29/90 8.38%
07/31/90 7.94%
08/31/90 8.06%
09/28/90 8.31%
10/31/90 8.06%
11/30/90 8.38%
12/31/90 7.63%
01/31/91 7.06%
02/28/91 6.88%
03/29/91 6.44%
04/30/91 6.06% 5.91%
05/31/91 6.06% 5.87%
06/28/91 6.19% 5.87%
07/31/91 6.00% 5.83%
08/30/91 5.69% 5.62%
09/30/91 5.63% 5.41%
10/31/91 5.31% 5.10%
11/29/91 4.94% 4.61%
12/31/91 4.31% 4.14%
01/31/92 4.19% 3.92%
02/28/92 4.25% 4.02%
03/31/92 4.31% 4.13% 6.84%
04/30/92 4.06% 3.71% 7.33%
05/29/92 4.06% 3.72% 6.90%
06/30/92 3.94% 3.60% 6.80%
07/31/92 3.44% 3.17% 6.75%
08/31/92 3.50% 3.13% 6.53%
09/30/92 3.13% 2.65% 6.62%
10/30/92 3.56% 2.84% 6.66%
B-23
<PAGE>
11/30/92 4.00% 3.19% 7.63%
12/31/92 3.44% 3.13% 6.27%
01/29/93 3.31% 2.95% 6.36%
02/26/93 3.19% 2.98% 6.44%
03/31/93 3.25% 2.94% 6.05%
04/30/93 3.19% 2.94% 6.49%
05/31/93 3.38% 3.11% 6.36%
06/30/93 3.31% 3.08% 6.40%
07/30/93 3.31% 3.09% 6.27%
08/31/93 3.25% 3.05% 6.27%
09/30/93 3.38% 2.96% 6.53%
10/29/93 3.44% 3.11% 6.27%
11/30/93 3.50% 3.21% 6.40%
12/31/93 3.38% 3.06% 6.58%
01/31/94 3.25% 3.02% 6.62%
02/28/94 3.75% 3.42% 6.62%
03/31/94 3.94% 3.55% 5.91%
04/29/94 4.31% 3.97% 6.65%
05/31/94 4.63% 4.26% 6.65%
06/30/94 4.88% 4.22% 7.26%
07/29/94 4.88% 4.35% 7.17%
08/31/94 5.00% 4.64% 7.37%
09/30/94 5.50% 4.86% 7.63%
10/31/94 5.63% 5.27% 7.69%
11/30/94 6.19% 5.83% 7.99%
12/30/94 6.50% 5.87% 8.42%
01/31/95 6.31% 6.17% 10.16%
02/28/95 6.25% 6.09% 9.60%
03/31/95 6.25% 6.18% 8.78%
04/28/95 6.19% 6.01% 10.01%
05/31/95 6.06% 5.91% 9.53%
06/30/95 6.06% 5.64% 9.73%
07/31/95 5.88% 5.62% 9.74%
08/31/95 5.88% 5.50% 9.60%
09/29/95 5.95% 5.48% 9.34%
10/31/95 5.94% 5.62% 9.21%
11/30/95 5.88% 5.41% 9.28%
12/29/95 5.63% 5.23% 9.28%
01/31/96 5.38% 5.06% 9.21%
02/29/96 5.30% 5.05% 8.97%
03/29/96 5.47% 5.28% 8.04%
04/30/96 5.48% 5.25% 8.45%
05/31/96 5.50% 5.24% 8.21%
06/28/96 5.58% 5.23% 8.49%
07/31/96 5.68% 5.41% 8.06%
08/30/96 5.56% 5.38% 8.45%
09/30/96 5.63% 5.17% 8.48%
10/31/96 5.50% 5.19% 8.65%
11/29/96 5.50% 5.21% 8.93%
B-24
<PAGE>
12/31/96 5.56% 5.31% 8.43%
01/31/97 5.56% 5.30% 8.59%
02/28/97 5.54% 5.34% 8.48%
03/31/97 5.77% 5.57% 7.66%
04/30/97 5.82% 5.43% 8.34%
05/30/97 5.81% 5.27% 8.17%
06/30/97 5.78% 5.35% 8.34%
07/31/97 5.71% 5.38% 8.29%
08/29/97 5.72% 5.53% 8.30%
09/30/97 5.77% 5.44% 8.19%
10/31/97 5.75% 5.32% 8.02%
11/28/97 5.90% 5.37% 8.14%
12/31/97 5.81% 5.43% 7.92%
01/30/98 5.63% 5.26% 8.20%
02/27/98 5.68% 5.33% 8.09%
03/31/98 5.71% 5.28% 7.44%
04/30/98 5.72% 5.11% 8.25%
05/29/98 5.69% 5.27% 7.96%
06/30/98 5.69% 5.32% 8.52%
07/31/98 5.69% 5.30% 8.16%
08/31/98 5.63% 5.04% 8.44%
09/30/98 5.31% 4.63% 8.17%
10/30/98 5.22% 4.57% 8.14%
11/30/98 5.28% 4.53% 8.16%
12/31/98 5.07% 4.47% 8.40%
01/29/99 4.97% 4.49% 8.39%
02/26/99 5.03% 4.75% 8.02%
03/31/99 5.00% 4.67% 8.03%
_________________________
/1/ Source: Bloomberg. Senior loans fund yields are represented by the
arithmetic average annualized yield of the exchange-traded senior loan funds
existing at the time. Three of these funds began operations after June 1998.
These funds have investment policies that differ from the Fund, and past
performance may not be an indication of future results. The LIBOR is the rate
that the most creditworthy banks dealing in the Eurodollar market charge each
other for large loans. It is not possible to invest directly in LIBOR. Treasury
bills carry a U.S. Government guarantee promising the timely payment of the
principal and interest. Senior Loans typically are below investment-grade
quality.
B-25
<PAGE>
The Senior Loan Market
The following charts show the increase in volume in the new issue and
secondary market for Senior Loans. Individual investors currently represent a
small percentage of this market, holding approximately $28.5 billion in Senior
Loan funds as of __________, 1999.
Senior Loan New Issue Volume
(in billions)
<TABLE>
<CAPTION>
Year Dollar
Volume
<S> <C>
1991 $ 21
1992 $ 40
1993 $ 28
1994 $ 81
1995 $101
1996 $135
1997 $194
1998 $273
</TABLE>
______________
Source: Loan Pricing Corporation, Chase Securities
Senior Loan Secondary Market Volume
(in billions)
<TABLE>
<CAPTION>
Year Dollar
Volume
<S> <C>
1991 $8
1992 $11
1993 $15
1994 $25
1995 $33.8
1996 $41
1997 $62
1998 $67.3
</TABLE>
______________
Source: Loan Pricing Corporation, Securities Data Corporation
EXPERTS
The Statement of Net Assets of the Fund as of __________, 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.
B-26
<PAGE>
ADDITIONAL INFORMATION
A Registration Statement on Form N-2, including amendments thereto,
relating to the shares of the Fund offered hereby, has been filed by the Fund
with the Securities and Exchange Commission (the "Commission"), Washington, D.C.
The Prospectus and this Statement of Additional Information do not contain all
of the information set forth in the Registration Statement, including any
exhibits and schedules thereto. For further information with respect to the Fund
and the shares offered hereby, reference is made to that Fund's Registration
Statement. Statements contained in the Fund's Prospectus and this Statement of
Additional Information as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. Copies of the Registration Statement may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Commission upon the payment of
certain fees prescribed by the Commission.
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholder
Nuveen Senior Income Fund
[TO COME]
NUVEEN SENIOR INCOME FUND
FINANCIAL STATEMENTS
B-27
<PAGE>
APPENDIX A
Ratings of Investments
Standard & Poor's Corporation--A brief description of the applicable Standard &
Poor's Corporation ("S&P") rating symbols and their meanings (as published by
S&P) follows:
Long Term Debt
An S&P corporate or municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell, or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended, or withdrawn as a result of
changes in, or unavailability of, such information, or based on other
circumstances.
The ratings are based, in varying degrees, on the following considerations:
1. Likelihood of default--capacity and willingness of the obligor as to
the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
2. Nature of and provisions of the obligation;
3. Protection afforded by, and relative position of, the obligation in
the event of bankruptcy, reorganization, or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
Investment Grade
AAA Debt rated `AAA' has the highest rating assigned by S&P. 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 highest 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
A-1
<PAGE>
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.
Speculative Grade Rating
Debt rated `BB', `B', `CCC', `CC' and `C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. `BB' indicates the least degree of speculation and `C' the highest.
While such debt will likely have some quality and protective characteristics
these are outweighed by major uncertainties or major exposures to adverse
conditions.
BB Debt rated `BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The `BB' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied `BBB--' rating.
B Debt rated `B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
The `B' rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied `BB' or `BB--' rating.
CCC Debt rated `CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event
of adverse business, financial, or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
The `CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied `B' or `B--' rating.
CC The rating `CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied `CCC' debt rating.
C The rating `C' typically is applied to debt subordinated to senior debt
which is assigned an actual or implied `CCC--' debt rating. The `C' rating
may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
CI The rating `CI' is reserved for income bonds on which no interest is being
paid.
D Debt rated `D' is in payment default. The `D' rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such
A-2
<PAGE>
grace period. The `D' rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (--): The ratings from `AA' to `CCC' may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
L The letter `L' indicates that the rating pertains to the principal amount
of those bonds to the extent that the underlying deposit collateral is
federally insured by the Federal Savings & Loan Insurance Corp. or the
Federal Deposit Insurance Corp.* and interest is adequately collateralized.
In the case of certificates of deposit the letter `L' indicates that the
deposit, combined with other deposits being held in the same right and
capacity will be honored for principal and accrued pre-default interest up
to the federal insurance limits within 30 days after closing of the insured
institution or, in the event that the deposit is assumed by a successor
insured institution, upon maturity.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy
of the escrow agreement or closing documentation confirming investments and cash
flow.
NR Indicates no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
Notes
An S&P note rating reflects the liquidity concerns and market access risks
unique to notes. Notes due in 3 years or less will likely receive a note
rating. Notes maturing beyond 3 years will most likely receive a long-term debt
rating. The following criteria will be used in making that assessment:
-- Amortization schedule (the larger the final maturity relative to other
maturities, the more likely it will be treated as a note).
-- Source of payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus (+) designation.
A-3
<PAGE>
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
A note rating is not a recommendation to purchase, sell, or hold a security
inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
Commercial Paper
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. These categories are as follows:
A-1 This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.
A commercial rating is not a recommendation to purchase, sell, or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor. The ratings are based on current information furnished to
S&P by the issuer or obtained by S&P from other sources it considers reliable.
S&P does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in or unavailability of such
information or based on other circumstances.
A-4
<PAGE>
Moody's Investors Service, Inc.--A brief description of the applicable Moody's
Investors Service, Inc. ("Moody's") rating symbols and their meanings (as
published by Moody's) follows:
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 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.
Con(.) Bonds for which the security depends upon the completion of some act or
the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of
A-5
<PAGE>
projects under construction, (b) earnings of projects unseasoned in
operation experience, (c) rentals which begin when facilities are
completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of condition.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
category from Aa to B in the public finance sectors. The modifier 1
indicates that the issuer is in the higher end of its letter rating
category; the modifier 2 indicates a mid-range ranking; the modifier 3
indicates that the issuer is in the lower end of the letter ranking
category.
Short-Term Loans
MIG 1/VMIG 1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broadbased access to the market for refinancing.
MIG 2/VMIG 2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3 This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well-established.
MIG 4/VMIG 4 This designation denotes adequate quality. Protection commonly
regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.
S.G. This designation denotes speculative quality. Debt instruments in this
category lack margins of protection.
Commercial Paper
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
-- Leading market positions in well-established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structures with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
A-6
<PAGE>
-- Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market composition may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
Fitch IBCA, Inc.--A brief description of the applicable Fitch IBCA, Inc.
("Fitch") ratings symbols and meanings (as published by Fitch) follows:
Long-Term Credit Ratings
Investment Grade
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of
financial commitments. This capacity is not significantly vulnerable to
foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered
strong. This capacity may, nevertheless, be more vulnerable to changes in
circumstances or in economic conditions than is the case for higher
ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances
and in economic conditions are more likely to impair this capacity. This
is the lowest investment-grade category.
Speculative Grade
BB Speculative. `BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or
A-7
<PAGE>
financial alternatives may be available to allow financial commitments to
be met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent
upon a sustained, favorable business and economic environment.
CCC, CC, C High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A `CC' rating indicates that default of
some kind appears probable. `C' ratings signal imminent default.
DDD, DD, and D Default. The ratings of obligations in this category are based
on their prospects for achieving partial or full recovery in a
reorganization or liquidation of the obligor. While expected recovery
values are highly speculative and cannot be estimated with any precision,
the following serve as general guidelines. `DDD' obligations have the
highest potential for recovery, around 90%-100% of outstanding amounts and
accrued interest. `DD' indicates potential recoveries in the range of 50%-
90%, and `D' the lowest recovery potential, i.e., below 50%. Entities
rated in this category have defaulted on some or all of their obligations.
Entities rated `DDD' have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated `DD' and `D' are generally undergoing a formal
reorganization or liquidation process; those rated `DD' are likely to
satisfy a higher portion of their outstanding obligations, while entities
rated `D' have a poor prospect for repaying all obligations.
Short-Term Credit Ratings
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F1 Highest credit quality. Indicates the strongest capacity for timely payment
of financial commitments; may have an added "+" to denote any exceptionally
strong credit feature.
F2 Good credit quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the
case of the higher ratings.
F3 Fair credit quality. The capacity for timely payment of financial
commitments is adequate; however, near-term adverse changes could result in
a reduction to non-investment grade.
B Speculative. Minimal capacity for timely payment of financial commitments,
plus vulnerability to near-term adverse changes in financial and economic
conditions.
A-8
<PAGE>
C High default risk. Default is a real possibility. Capacity for meeting
financial commitments is solely reliant upon a sustained, favorable
business and economic environment.
D Default. Denotes actual or imminent payment default.
Notes:
"+" or "-" may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the `AAA' long-term rating
category, to categories below `CCC', or to short-term ratings other than `F1'.
`NR' indicates that Fitch IBCA does not rate the issuer or issue in question.
`Withdrawn': A rating is withdrawn when Fitch IBCA deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.
RatingAlert: Ratings are placed on RatingAlert to notify investors that there is
a reasonable probability of a rating change and the likely direction of such
change. These are designated as "Positive", indicating a potential upgrade,
"Negative", for a potential downgrade, or "Evolving", if ratings may be raised,
lowered or maintained. RatingAlert is typically resolved over a relatively
short period.
A-9
<PAGE>
PART C - OTHER INFORMATION
Item 24: Financial Statements and Exhibits
1. Financial Statements:
Registrant has not conducted any business as of the date of this filing,
other than in connection with its organization. Financial Statements indicating
that the Registrant has met the net worth requirements of Section 14(a) of the
1940 Act will be filed by pre-effective amendment to this registration
statement.
2. Exhibits:
a. Declaration of Trust dated August 13, 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 Master Selected Dealer Agreement.*
h.3 Form of Letter Agreement between Nuveen and the Underwriters.*
h.4 Form of Master Agreement among Underwriters.*
h.5 Form of _________ Dealer Letter Agreement.*
i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.*
j. Form of Exchange Traded Fund Custody Agreement between Registrant and
.*
k.1 Form of Shareholder Transfer Agency Agreement between Registrant and
.*
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Senior Loan Asset Management Inc. *
C-1
<PAGE>
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. 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.
Item 25: Marketing Arrangements
See Section ___ of the Underwriting Agreement to be filed as Exhibit h.1 to this
Registration Statement;
Item 26: Other Expenses of Issuance and Distribution
Securities and Exchange Commission fees $
National Association of Securities Dealers, Inc. fees
Printing and engraving expenses *
Legal Fees *
New York Stock Exchange listing fees *
Accounting expenses *
Blue Sky filing fees and expenses *
Transfer agent fees *
Miscellaneous expenses *
-----
Total *
=====
_________
*To be completed by amendment.
Item 27: Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 28: Number of Holders of Securities
At September 7, 1999
C-2
<PAGE>
Number of
Title of Class Record Holder
-------------- -------------
Common Shares, $.01 par value 0
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.
C-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).
C-4
<PAGE>
Section 8 of the Underwriting Agreement filed as Exhibit h.1 to this
Registration Statement provides for each of the parties thereto, including the
Registrant and the Underwriters, to indemnify the others, their trustees,
directors, certain of their officers, trustees, directors and persons who
control them against certain liabilities in connection with the offering
described herein, including liabilities under the federal securities laws.
Item 30: Business and Other Connections of Investment Adviser
As of the date hereof, Nuveen Senior Loan Asset Management Inc. does not
act as investment adviser for any entity or person. 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 advisery
material of the investment adviser.
_____________________________________________________________________
________________________ is the Fund's custodian and 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.
_______________________________________________________________________
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. Registrant undertakes to suspend the offering of its shares until it
amends its prospectus if (1) subsequent to the effective date of its
Registration Statement, the net asset value declines more than 10 percent from
its net asset value as of the effective date of the Registration Statement, or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
2. Not applicable.
3. Not applicable.
4. Not applicable.
C-5
<PAGE>
5. The Registrant undertakes that:
a. For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the Registrant under Rule 497(h) under
the Securities Act of 1933 shall be deemed to be part of the Registration
Statement as of the time it was declared effective.
b. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prompt delivery within two business days of receipt
of a written or oral request, any Statement of Additional Information.
C-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 7th day of
September, 1999.
NUVEEN SENIOR INCOME FUND
/s/ Gifford R. Zimmerman
-----------------------------------------
Gifford R. Zimmerman, Vice President and
Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephen D. Foy Vice President and Controller September 7, 1999
- --------------------- (Principal Financial and
Stephen D. Foy Accounting Officer)
Chairman of the Board and
Timothy R. Schwertfeger Trustee (Principal Executive By: /s/ Gifford R. Zimmerman
Officer) ----------------------------
Gifford R. Zimmerman
Executive Officer)
Attorney-In-Fact
September 7, 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, for the trustee of Registrant on whose behalf
this Registration Statement is filed, is executed and filed as an exhibit to
this Registration Statement.
C-7
<PAGE>
INDEX TO EXHIBITS
a. Declaration of Trust dated August 13, 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 Master Selected Dealer Agreement.*
h.3 Form of Letter Agreement between Nuveen and the Underwriters.*
h.4 Form of Master Agreement among Underwriters.*
h.5 Form of __________ Dealer Letter Agreement.*
i. Nuveen Open-End and Closed-End Funds Deferred Compensation Plan for
Independent Directors and Trustees.*
j. Form of Exchange Traded Fund Custody Agreement between Registrant and
___________________________________.*
k.1 Form of Shareholder Transfer Agency Agreement between Registrant and ___
____________________.*
k.2 Form of Expense Reimbursement Agreement between Registrant and Nuveen
Senior Loan Asset Management Inc. *
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. 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>
DECLARATION OF TRUST
--------------------
OF
--
NUVEEN SENIOR INCOME FUND
-------------------------
DECLARATION OF TRUST made this 13th day of August, 1999 by the initial
Trustee hereunder.
WHEREAS, the Trustee desires to establish a trust fund for the purposes of
carrying on the business of a management investment company; and
WHEREAS, in furtherance of such purposes, the Trustee and any successor
Trustees elected in accordance with Article V hereof are acquiring and may
hereafter acquire assets and properties which they will hold and manage as
trustees of a Massachusetts business trust with transferable shares in
accordance with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees and any successor Trustees elected in
accordance with Article V hereof hereby declare that they will hold all cash,
securities and other assets and properties, which they may from time to time
acquire in any manner as Trustees hereunder, IN TRUST, that they will manage and
dispose of the same upon the following terms and conditions for the pro rata
benefit of the holders from time to time of shares of beneficial interest in
this Trust as hereinafter set forth.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
Section 1. Name. This Trust shall be known as the "Nuveen Senior Income Fund,"
and the Trustees shall conduct the business of the Trust under that name or any
other name as they may from time to time determined.
Section 2. Definitions. Whenever used herein, unless otherwise required by the
context or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary association
established by this Declaration of Trust, as amended from time to time, pursuant
to Massachusetts General Laws, Chapter 182;
(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
<PAGE>
-2-
in question have been duly elected or appointed and qualified in accordance with
Article V hereof and are then in office;
(c) "Shares" mean the shares of beneficial interest described in
Article IV hereof and include fractions of Shares as well as whole Shares;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of 1940 (and
any successor statute) and the Rules and Regulations thereunder, all as amended
from time to time;
(f) The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "vote of a majority of the
outstanding voting securities" shall have the meanings given them in the 1940
Act;
(g) "Declaration of Trust" or "Declaration" shall mean this
Declaration of Trust as amended or restated from time to time; and
(h) "By-Laws" shall mean the By-laws of the Trust as amended from time
to time.
ARTICLE II
----------
NATURE AND PURPOSE OF TRUST
---------------------------
The Trust is a voluntary association (commonly known as a business trust)
of the type referred to in Chapter 182 of the General Laws of the Commonwealth
of Massachusetts. The Trust is not intended to be, shall not be deemed to be,
and shall not be treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or Shareholders or
any of them for any purpose be deemed to be, or be treated in any way whatsoever
as though they were, liable or responsible hereunder as partners or joint
venturers. The purpose of the Trust is to engage in, operate and carry on the
business of a closed-end management investment company and to do any and all
acts or things as are necessary, convenient, appropriate incidental or customary
in connection therewith, including, without limitation, the following:
to hold, invest, and reinvest its funds, and in connection therewith
to hold part of all of its funds in cash, and to purchase or otherwise
sell, assign, negotiate, transfer, exchange or otherwise dispose of or turn
to account or realize upon securities and other negotiable or non-
negotiable instruments, obligations and evidences of
<PAGE>
-3-
indebtedness created or issued by any person, firms, associations,
corporations, syndicates, combinations, and other negotiable or non-
negotiable instruments, obligation and evidences of indebtedness; and to
exercise, as owner or holder of any securities or other instruments, all
rights, powers, and privileges in respect thereof; and to do any and all
acts and things for the preservation, protection and improvement of any and
all such securities or other instruments, and, in general, to conduct the
business of a closed-end investment company as that term is defined in the
1940 Act; and
To engage in any lawful act or activity for which business trusts may
be organized under Massachusetts law.
The Trust set forth in this instrument shall be deemed made in the
Commonwealth of Massachusetts, and it is created under and is to be
governed by and construed and administered according to the laws of said
Commonwealth. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust may exercise
all powers which are ordinarily exercised by such a trust. No provision of
this Declaration shall be effective to require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940 Act,
or of any valid rule, regulation or order of the Commission thereunder.
The enumeration herewith of the objects and purposes of the Trust
shall be construed as powers as well as objects and purposes and shall not
be deemed to exclude by inference any powers, objects or purposes which the
Trust may lawfully pursue or exercise.
ARTICLE III
-----------
REGISTERED AGENT; PRINCIPAL PLACE OF BUSINESS
---------------------------------------------
The name of the registered agent of the Trust is CT Corporation System at 2
Oliver Street, Boston, Massachusetts. The principal place of business of the
Trust is 333 West Wacker Drive, Chicago, Illinois 60606. The Trustees may,
without the approval of Shareholders, change the registered agent of the Trust
and the principal place of business of the Trust.
<PAGE>
-4-
ARTICLE IV
----------
BENEFICIAL INTEREST
-------------------
Section 1. Shares of Beneficial Interest. The beneficial interest in the Trust
shall be divided into such transferable Shares of beneficial interest, of such
classes or series, and of such designations and par values (if any), and with
such rights, preferences, privileges and restrictions as shall be determined by
the Trustees in their sole discretion, without Shareholder approval, from time
to time. The number of Shares is unlimited and each Share shall be fully paid
and nonassessable. There shall be no cumulative voting. Subject to any
provision in a Statement (as defined in Section 2 below) to the contrary, the
Trustees shall have full power and authority, in their sole discretion and
without obtaining any prior authorization or vote of the Shareholders of the
Trust or of the Shareholders of any series or class of Shares, to create and
establish (and to change in any manner) Shares or any series or classes thereof
with such preferences, voting powers, rights and privileges as the Trustees may
from time to time determine; to divide or combine the Shares or the Shares of
any series or classes thereof into a greater or lesser number including, without
limitation, such a division or combination accomplished by means of a stock
split or a reverse stock split, without thereby changing their proportionate
beneficial interest in the Trust; to classify or reclassify any issued Shares
into one or more series or classes of Shares; to abolish any one or more series
or classes of Shares; and to take such other action with respect to the Shares
as the Trustees may deem desirable. The Shares shall initially be divided into
one class, a class of an unlimited number of common Shares, $0.01 par value (the
"Common Shares") having the powers, preferences, rights, qualifications,
limitations and restrictions described below. The Trust may also, from time to
time, issue a class of an unlimited number of preferred Shares, $0.01 par value
(the "Preferred Shares"), having the powers, preferences, rights,
qualifications, limitations and restrictions described below.
(a) Common Shares.
(i) Subject to the rights of the holders of the Preferred Shares, if
any, in the event of the termination of the Trust the holders of the Common
Shares shall be entitled to receive pro rata the net distributable assets
of the Trust.
(ii) The holders of the Common Shares shall not, as such holders, have
any right to acquire, purchase or subscribe for any Common Shares or
securities of the Trust which it may hereafter issue
<PAGE>
-5-
or sell, other than such right, if any, as the Trustees in their discretion
may determine.
(iii) Subject to the rights of the holders of the Preferred Shares,
if any, dividends or other distributions, when, as and if declared by the
Trustees, shall be shared equally by the holders of Common Shares on a
share for share basis. The Trustees may direct that any dividends or other
distributions or any portion thereof as declared and distributed shall be
paid in cash to the holder, or, alternatively, may direct that any such
dividends be reinvested in full and fractional Shares of the Trust [if such
holder elects to have them reinvested.]
(iv) The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Common Shares of any series reacquired by the
Trust at their discretion from time to time. Shares shall not entitle the
Shareholder to any title in or to the whole or any part of the Trust.
(v) Common Shares may be issued from time to time, without the vote of
the Shareholders (or, if the Trustees in their sole discretion deem
advisable, with a vote of Shareholders), either for cash or for such other
consideration (which may be in any one or more instances a certain
specified consideration or certain specified considerations) and on such
terms as the Trustees, from time to time, may deem advisable, and the Trust
may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of liabilities).
(vi) The Trust may issue Common Shares in fractional denominations to
the same extent as its whole Shares, and Shares in fractional denominations
shall be Common Shares having proportionately to the respective fractions
represented thereby all the rights of whole Shares, including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon termination of the Trust,
but excluding the right to receive a certificate representing fractional
Shares.
(b) Preferred Shares. If the Trust issues Preferred Shares, such Shares
shall be issued from time to time in one or more classes or series with such
distinctive serial designations and (i) may have such voting powers, full or
limited; (ii) may be subject to redemption at such time or times and at such
price or prices; (iii) may be entitled to receive dividends (which may be
cumulative or noncumulative) at such rate or rates, on such conditions, and
<PAGE>
-6-
at such times, and payable in preference to, or in such relation to, the
dividends payable on any other class or classes of Shares; (iv) may have such
rights upon the termination of, or upon any distribution of the assets of, the
Trust; (v) may be made convertible into, or exchangeable for, Shares of any
other class or classes or of any other series of the same or any other class or
classes of Shares of the Trust, at such price or prices or at such rates of
exchange and with such adjustments; and (vi) shall have such other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, all as shall hereafter be stated and expressed in the
resolution or resolutions providing for the issue of such Preferred Shares from
time to time adopted by the Trustees (or a Committee thereof) in accordance with
Section 2 of this Article IV. Any of such matters may be made dependent upon
facts ascertainable outside this Declaration of Trust, or outside the resolution
or resolutions providing for the issue of such Preferred Shares.
Section 2. Establishment of Class or Series of Shares. The establishment and
designation of any class or series of Shares, including any Preferred Shares
issued hereunder, shall be effective upon the adoption of a resolution by a
majority of the then Trustees (or a Committee thereof) setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such class or series as set forth in a written statement either
executed by the President or a Vice President of the Trust, or executed by a
majority of the Trustees then in office (the "Statement"). At any time that
there are no Shares outstanding of any particular class or series previously
established and designated, the Trustees (or a Committee thereof) may by a
majority vote abolish that class or series and the establishment and designation
thereof. Notwithstanding any provision of this Declaration of Trust to the
contrary, no such Statement establishing and designating any class or series of
Shares shall constitute an amendment to or a part of this Declaration of Trust.
Section 3. Ownership Of Shares. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar agent. No
certificates certifying the ownership of Preferred Shares shall be issued except
as the Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the issuance of Share
certificates, transfer of Shares and similar matters. The record books of the
Trust, as kept by the Trust or any transfer or similar agent of the Trust, shall
be conclusive as to who are the holders of the Shares and as to the number of
Shares held from time to time by each Shareholder.
<PAGE>
-7-
Section 4. No Preemptive Rights, Etc. The holders of Shares of any class or
series shall not, as such holders, have any right to acquire, purchase or
subscribe for any Shares or securities of the Trust which it may hereafter issue
or sell, other than such right, if any, as the Trustees in their discretion may
determine. The holders of Shares of any class or series shall have no appraisal
rights with respect to their Shares and, except as otherwise determined by
resolution of the Trustees in their sole discretion, shall have no exchange or
conversion rights with respect to their Shares.
Section 5. Status of Shares and Limitation of Personal Liability. Shares shall
be deemed to be personal property giving only the rights provided in this
instrument. Every Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of this Declaration of
Trust and to have become a party thereto. The death of a Shareholder during the
continuance of the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Trust. Ownership of property shall not
entitle the Shareholder to any title in or to the whole or any part of the Trust
Property or right to call for a partition or division of the same or for an
accounting. Neither the Trustees, nor any officer, employee or agent of the
Trust shall have any power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise.
ARTICLE V
---------
THE TRUSTEES
------------
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. Qualification and Number. Each Trustee shall be a natural person.
A Trustee need not be a shareholder, a citizen of the United States, or a
resident of the Commonwealth of Massachusetts. By the vote or consent of the
initial Trustee, or by a majority 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
<PAGE>
-8-
decreased in conjunction with the removal of a Trustee pursuant to Section 4 of
Article V.
Section 3. Term and Election. Each Trustee shall hold office until the next
meeting of Shareholders called for the purpose of considering the election or
re-election of such Trustee or of a successor to such Trustee, and until his
successor is elected and qualified, and any Trustee who is appointed by the
Trustees in the interim to fill a vacancy as provided hereunder shall have the
same remaining term as that of his predecessor, if any, or such term as the
Trustees may determine. Any vacancy resulting from a newly created Trusteeship
or the death, resignation, retirement, removal, or incapacity of a Trustee may
be filled by the affirmative vote or consent of a majority of the Trustees then
in office. When required under the 1940 Act, one or more Trustees may be elected
by vote of holders of the Trust's "senior securities," as such term is defined
in the 1940 Act.
Section 4. Resignation and Removal. Any Trustee may resign his trust or retire
as a Trustee (without need for prior or subsequent accounting except in the
event of removal) by an instrument in writing signed by him and delivered or
mailed to the Chairman, if any, the President or the Secretary and such
resignation or retirement shall be effective upon such delivery, or at a later
date according to the terms of the instrument. Any Trustee may be removed from
office only for "Cause" (as hereinafter defined) and only (i) by action of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Shares of
the class or classes of Shares that elected such Trustee, or (ii) by written
instrument, signed by at least sixty-six and two-thirds percent (66 2/3%) of the
remaining Trustees, specifying the date when such removal shall become
effective. "Cause" shall require willful misconduct, dishonesty, fraud or a
felony conviction.
Section 5. Vacancies. The death, declination, resignation, retirement,
removal, or incapacity, of the Trustees, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust. Whenever a vacancy in the number of
Trustees shall occur, until such vacancy is filled as provided herein, or the
number of Trustees as fixed is reduced, the 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.
<PAGE>
-9-
Upon the resignation, retirement, removal, incapacity or death of a Trustee,
such Trustee shall automatically cease to have any right, title or interest in
any of the Trust property, and the right, title and interest of such Trustee in
the Trust property shall vest automatically in the remaining Trustees. Such
vesting and cessation of title shall be effective without the execution or
delivery of any conveyancing or other instruments. No Shareholder shall be
deemed to have a severable ownership in any individual asset of the Trust or any
right of partition or possession thereof.
Section 7. Voting Requirements. In addition to the voting requirements imposed
by law or by any other provision of this Declaration of Trust, the provisions
set forth in this Article V may not be amended, altered or repealed in any
respect, nor may any provision inconsistent with this Article V be adopted,
unless such action is approved by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Common
Shares, provided however that if there are then Preferred Shares outstanding,
then such vote shall be by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the outstanding Common Shares and
outstanding Preferred Shares, voting together as a single class. In the event
the holders of Common Shares or the holders of Preferred Shares, as the case may
be, are required by law or by any other provision of this Declaration of Trust
to approve such an action by a class vote of such holders, such action must be
approved by the holders of at least sixty-six and two-thirds percent (66 2/3%)
of such holders or such lower percentage as may be required by law or by any
other provision of this Declaration of Trust.
ARTICLE VI
----------
POWERS OF TRUSTEES
------------------
Section 1. Powers. The Trustees in all instances shall have full, absolute and
exclusive power, control and authority over the Trust assets and the business
and affairs of the Trust to the same extent as if the Trustees were the sole and
absolute owners thereof in their own right. The Trustees shall have full power
and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust. The enumeration of any specific
power herein shall not be construed as limiting the aforesaid powers. In
construing the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the Trustees.
Subject to any applicable limitation in this Declaration or any Statement
relating to the issuance of Preferred Shares, the Trustees shall have power and
authority:
<PAGE>
-10-
(a) To invest and reinvest in, to buy or otherwise acquire, to hold, for
investment or otherwise, to sell or otherwise dispose of, to lend or to pledge,
to trade in or deal in securities or interests of all kinds, however evidenced,
or obligations of all kinds, however evidenced, or rights, warrants, or
contracts to acquire such securities, interests, or obligations, of any private
or public company, corporation, association, general or limited partnership,
trust or other enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or domestic, or their
agencies, instrumentalities or subdivisions (including but not limited to,
bonds, debentures, bills, time notes and all other evidences of indebtedness);
negotiable or non-negotiable instruments; any and all options and futures
contracts; derivatives or structured securities; government securities and money
market instruments (including but not limited to, bank certificates of deposit,
finance paper, commercial paper, bankers acceptances, and all kinds of
repurchase agreements) and, without limitation, all kinds and types of financial
instruments;
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;
(c) To elect and remove such officers and appoint and terminate such agents
as they consider appropriate;
(d) To employ one or more banks or trust companies as custodian of any
assets of the Trust subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;
(e) To retain one or more transfer agents and shareholder servicing agents;
(f) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself or both;
(g) To set record dates for any purposes;
(h) To delegate such authority as they consider desirable to any officers
of the Trust and to any investment adviser, investment subadviser, transfer
agent, custodian or underwriter or other independent contractor of agent;
(i) Subject to Article IX, Section 1 hereof, to merge, or consolidate the
Trust with any other corporation, association, trust or other organization;
<PAGE>
-11-
or to sell, convey, transfer, or lease all or substantially all of the assets of
the Trust;
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(k) To exercise powers and rights of subscription or otherwise which in any
manner arise out of ownership of securities;
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in their or
the Trust's name or in the name of a custodian or a nominee or nominees;
(m) To authorize the issuance from time to time of one or more classes or
series of Shares, and to issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer and otherwise deal in Shares and in any
options, warrants or other rights to purchase Shares or any other interests in
the Trust other than Shares;
(n) To set apart, from time to time, out of any funds of the Trust a
reserve or reserves for any proper purpose, and to abolish any such reserve;
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security or property
of which is held in the Trust; to consent to any contract, lease, mortgage,
purchase, or sale of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in the Trust;
(p) To compromise, arbitrate, or otherwise adjust claims in favor of or
against the Trust or any matter in controversy including, but not limited to,
claims for taxes;
(q) To make distributions of income and of capital gains to shareholders;
(r) To borrow money; to issue notes, paper or other evidences of
indebtedness, to pay interest or other fees in connection with any borrowing or
indebtedness; and to pledge, mortgage, or hypothecate the assets of the Trust;
(s) To lend money or other assets of the Trust;
(t) To establish, from time to time, a minimum total investment for
shareholders, and to require the redemption of the Shares of any
<PAGE>
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shareholders whose investment is less than such minimum upon such terms as shall
be established by the Trustees;
(u) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(v) To purchase and pay for out of Trust property such insurance as they
may deem necessary or appropriate for the conduct of the business of the Trust,
including, without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio investments,
and insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers or managers, principal underwriters, or independent
contractors of the Trust individually against all claims and liabilities of
every nature arising by reason of holding, being or having held any such office
or position, or by reason of any action alleged to have been taken or omitted by
any such person as Shareholder, Trustee, officer, employee, agent, investment
adviser or manager, principal underwriter, or independent contractor, whether or
not any such action may be determined to constitute negligence, and whether or
not the Trust would have the power to indemnify such person against such
liability; and
(w) 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
<PAGE>
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cancellation of any reserves or charges and the propriety thereof (whether or
not any obligation or liability for which such reserves or charges were created
shall have been paid or discharged); the market value, or any quoted price to be
applied in determining the market value, of any security or any other asset
owned or held by the Trust; the fair value of any security for which quoted
prices are not readily available, or of any other asset owned or held by the
Trust; the number of Shares of the Trust issued or issuable; the net asset value
per Share; any matter relating to the acquisition, holding and depositing of
securities and other assets by the Trust; any question as to whether any
transaction constitutes a purchase of securities on margin, a short sale of
securities, a borrowing, or an underwriting of the sale of, or participation in
any underwriting or selling group in connection with the public distribution of,
any securities, and any matter relating to the issue, sale, redemption,
repurchase, and/or other acquisition or disposition of Shares of the Trust. No
provision of this Declaration of Trust shall be effective to protect or purport
to protect any Trustee or officer of the Trust against any liability to the
Trust or to its security holders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.
Section 2. Manner of Acting, By-Laws. The By-Laws shall make provision from
time to time for the manner in which the Trustees may take action, including,
without limitation, at meetings within or without Massachusetts, including
meetings held by means of a conference telephone or other communications
equipment, or by written consents, the quorum and notice, if any, that shall be
required for any meeting or other action, and the delegation of some or all of
the power and authority of the Trustees to any one or more committees which they
may appoint from their own number, and terminate, from time to time.
ARTICLE VII
-----------
EXPENSES OF THE TRUST
---------------------
The Trustees shall have the power to reimburse themselves from the Trust
property for their expenses and disbursements, to pay reasonable compensation to
themselves from the Trust property, and to incur and pay out of the Trust
property any other expenses which in the opinion of the Trustees are necessary
or incidental to carry out any of the purposes of this Declaration of Trust, or
to exercise any of the powers of the Trustees hereunder.
<PAGE>
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ARTICLE VIII
------------
INVESTMENT ADVISER, PRINCIPAL UNDERWRITERS AND
----------------------------------------------
TRANSFER AGE
------------
Section 1. Investment Adviser. The Trust may enter into a written contract
with one or more persons (which term shall include any firm corporation, trust
or association), hereinafter referred to as the "Investment Adviser", to act as
investment adviser to the Trust and as such to perform such functions as the
Trustees may deem reasonable and proper, including, without limitation,
investment advisory, management, research, valuation of assets, clerical and
administrative functions. Any such contract shall be subject to the approval of
those persons required by the 1940 Act to approve such contract, and shall be
terminable at any time upon not more than 60 days' notice by resolution of the
Trustees or by vote of a majority of the outstanding voting shares.
Subject to the provisions of Section 4 of this Article VIII, any such
contract may be made with any firm or corporation in which any Trustee of the
Trust may be interested. The compensation of the Investment Adviser may be
based upon a percentage of the net proceeds of the initial public offering of
the Shares after payment of underwriting discounts and organization and offering
costs, a percentage of the income or gross realized or unrealized gain of the
Trust, or a combination thereof, or otherwise, as may be provided in such
contract.
Upon the termination of any contract with Nuveen Senior Loan Asset
Management Inc., or any corporation affiliated with John Nuveen & Co.
Incorporated, acting as investment adviser or manager, the Trustees are hereby
authorized to promptly change the name of the Trust to a name which does not
include "Nuveen" or any approximation or abbreviation thereof.
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to shareholder approval, authorize the investment
adviser to employ one or more subadvisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and subadviser.
Section 2. Principal Underwriter. The Trust may enter into a written contract
or contracts with an underwriter or underwriters or distributor or distributors
whereby the Trust may either agree to sell Shares to the other party or parties
to the contract or appoint such other party or parties its sales agent or agents
for such Shares. Any such contract may provide that the Trust shall pay such
other party or parties such amounts as the Trustees
<PAGE>
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may in their discretion deem reasonable and proper, and may also provide that
such other party or parties may enter into selected dealer agreements with
registered securities dealers to further the purpose of the distribution of the
Shares. Subject to the provisions of Section 4 of this Article VIII, any such
contract may be made with any firm or corporation, including, without
limitation, the Investment Adviser or an affiliate of the Investment Advisor, or
any firm or corporation in which any Trustee of the Trust or the Investment
Adviser may be interested.
Section 3. Transfer Agent. The Trustees may in their discretion from time to
time enter into one or more transfer agency and shareholder service contract(s,)
whereby the other party shall undertake, to furnish the Trustees with transfer
agency and shareholder services. The contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Declaration or Trust or of the By-Laws. Such
services may be provided by one or more entities.
Section 4. Parties To Contract. Any contract of the character described in
Sections 1 and 2 of this Article VIII or in Article X hereof may be entered into
with any corporation, firm, partnership, trust or association, including,
without limitation, the investment adviser, any investment subadviser or an
affiliate of the investment adviser or investment subadviser, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, or
otherwise interested in such contract and no such contract shall be invalidated
or rendered voidable by reason of the existence of any such relationship, nor
shall any person holding such relationship be liable merely by reason of such
relationship for any loss or expense to the Trust under or by reason of said
contract or accountable for any profit realized directly or indirectly
therefrom, provided that the contract when entered into was not inconsistent
with the provisions of this Article VIII, Article X, or the By-Laws. The same
person (including a firm, corporation, partnership, trust or association) may be
the other party to contracts entered into pursuant to Sections 1, 2 and 3 above
or Article X, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 4.
ARTICLE IX
----------
SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
Section 1. Voting Powers. The Shareholders shall have power to vote only: (a)
for the election or removal of Trustees as provided in Article V, (b) with
respect to any investment advisory or management contract as provided in Article
VIII, Sections 1 and 5, (c) with respect to any termination of the
<PAGE>
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Trust or any series or class thereof to the extent and as provided in Article
XIII, Section 1, (d) with respect to any amendment of this Declaration of Trust
to the extent and as provided in Article XIII, Section 4, (e) with respect to a
merger or consolidation of the Trust or any series or class thereof with any
corporation, association, trust or other organization or a reorganization or
recapitalization of the Trust or class or series thereof, or a sale, lease or
transfer of all or substantially all of the assets of the Trust or any series
thereof (other than in the regular course of the Trust's investment activities)
to the extent and as provided in this Article IX, Section 1, (f) to the same
extent as the shareholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the shareholders,
provided, however that a shareholder of a particular class or series shall not
be entitled to bring any derivative or class action on behalf of any other class
or series of the Trust, and (g) with respect to such additional matters relating
to the Trust as may be required by law, the 1940 Act, this Declaration of Trust,
the By-Laws of the Trust, any Statement relating to the issuance of classes or
series of shares, or any registration of the Trust with the Commission or any
State, or otherwise as the Trustees may consider necessary or desirable.
The affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding Common Shares shall be required to approve,
adopt or authorize (i) a conversion of the Trust from a closed-end investment
company to an open-end investment company, (ii) a merger or consolidation of the
Trust or a series or class of the Trust with any corporation, association, Trust
or other organization or a reorganization or recapitalization of the Trust or a
series of class of the Trust, (iii) a sale, lease or transfer of all or
substantially all of the assets of the Trust (other than in the regular course
of the Trust's investment activities), or (iv) a termination of the Trust or a
class or a series of the Trust (other than a termination by the Trustees as
provided for in Section 1 of Article XIII hereof), unless in each and every
case such action has previously been approved, adopted or authorized by the
affirmative vote of two-thirds of the total number of Trustees fixed in
accordance with this Declaration of Trust or the By-Laws, in which case the
affirmative vote of the holders of at least a majority of the outstanding Common
Shares shall be required, provided however, that if there are then Preferred
Shares outstanding, the affirmative vote of the holders of at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding Common Shares and
outstanding Preferred Shares, voting as a single class, shall be required unless
in each and every case such action has previously been approved, adopted or
authorized by the affirmative vote of two-thirds of the total number of Trustees
fixed in accordance with this Declaration of Trust or the By-Laws, in which case
the affirmative vote of the
<PAGE>
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holders of at least a majority of the outstanding Common Shares and Preferred
Shares, voting as a single class, shall be required; provided further, that
where only a particular class or series is effected, only the required vote by
the applicable class or series shall be required, and provided further that
except as may otherwise be required by law, if there are then Preferred Shares
outstanding, in the case of the conversion of the Trust from a closed-end
investment company to an open-end investment company, or in the case of any of
the foregoing transactions constituting a plan or reorganization (as such term
is used in the 1940 Act) which adversely affects the Preferred Shares within the
meaning of Section 18(a)(2)(D) of the 1940 Act, approval, adoption or
authorization of the action in question will also require the affirmative vote
of the holders of sixty-six and two-thirds percent (66-2/3%) of the Preferred
Shares voting as a separate class; provided, however, that such separate class
vote shall be a majority vote if the action in question has previously been
approved, adopted or authorized by the affirmative vote of two-thirds of the
total number of Trustees fixed in accordance with this Declaration of Trust or
the By-Laws. Nothing contained herein shall be construed as requiring approval
of Shareholders for any transaction, whether deemed a merger, consolidation,
reorganization or otherwise whereby the Trust issues Shares in connection with
the acquisition of assets (including those subject to liabilities) from any
other investment company or similar entity).
In addition to the voting requirements imposed by law or by any other
provision of this Declaration of Trust, the provisions set forth in this Article
IX may not be amended, altered or repealed in any respect, nor may any provision
inconsistent with this Article IX be adopted, unless such action is approved by
the affirmative vote of the holders or at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding Common Shares, or if there are then outstanding
Preferred Shares, by the affirmative vote of the holders or at least sixty-six
and two-thirds percent (66-2/3%) of the outstanding Common Shares, and
outstanding Preferred Shares, voting as a single class. In the event the
holders of Common Shares or the holders of Preferred Shares, as the case may be,
are required by law to approve such an action by a class vote of such holders,
such action must be approved by the, holders of at least sixty-six and two-
thirds percent (66 2/3%) of (such holders or such lower percentage as may be
required by law. Any series of a class which is adversely affected in a manner
different from other series of the same class shall together with any other
series of the same class adversely affected in the same manner, be treated as a
separate class under this Section 1.
Section 2. Meetings. Meetings of the Shareholders may be called and held from
time to time for the purpose of taking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or
<PAGE>
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upon any other matter deemed by the Trustees to be necessary or desirable.
Meetings of the Shareholders shall be held at such place within the United
States as shall be fixed by the Trustees, and stated in the notice of the
meeting. Meetings of the Shareholders may be called by the Trustees and shall be
called by the Trustees upon the written request of Shareholders owning at least
one-tenth of the outstanding Shares entitled to vote. Shareholders shall be
entitled to at least ten days' written notice of any meeting, except where the
meeting is an adjourned meeting and the date, time and place of the meeting were
announced at the time of the adjournment.
Section 3. Quorum and Action. (a) The Trustees shall set in the By-Laws the
quorum required for the transaction of business by the Shareholders at a
meeting, which quorum shall in no event be less than thirty percent (30%) of the
Shares entitled to vote at such meeting. If a quorum is present when a duly
called or held meeting is convened, the Shareholders present may continue to
transact business until adjournment, even though the withdrawal of a number of
Shareholders originally present leaves less than the proportion or number
otherwise required for a quorum. Notwithstanding the foregoing, when holders of
Preferred Shares are entitled to elect any of the Trustees by class vote of such
holders, the holders of 33 1/3% of such Shares entitled to vote at a meeting
shall constitute a quorum for the purpose of such an election.
(b) The Shareholders shall take action by the affirmative vote of the
holders of a majority, except in the case of the election of Trustees which
shall only require a plurality, of the Shares present in person or by proxy and
entitled to vote at a meeting of Shareholders at which a quorum is present,
except as may be otherwise required by, any provision of this Declaration of
Trust, any resolution of the Trustees which authorizes the issuance of Preferred
Shares, or the By-Laws.
Section 4. Voting. Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share shall be
entitled to a proportionate fractional vote, except that Shares held in the
treasury of the Trust shall not be voted. There shall be no cumulative voting
in the election of Trustees or on any other matter submitted to a vote of the
Shareholders. Shares may be voted in person or by proxy. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action required or permitted by law, this Declaration of Trust or the By-Laws of
the Trust to be taken by Shareholders.
Section 5. Action by Written Consent in Lieu of Meeting of Shareholders. Any
action required or permitted to be taken at a meeting of
<PAGE>
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the Shareholders may be taken without a meeting by written action signed by all
of the Shareholders entitled to vote on that action. The written action is
effective when it has been signed by all of those Shareholders, unless a
different effective time is provided in the written action.
ARTICLE X
---------
CUSTODIAN
---------
All securities and cash of the Trust shall be held by one or more
custodians and subcustodians, each meeting the requirements for a custodian
contained in the 1940 Act, or shall otherwise be held in accordance with the
1940 Act. The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodians, and approved by the Trustees, provided that
in every case such sub-custodian shall meet the requirements for a custodian
contained in the 1940 Act and the rules and regulations thereunder and in any
applicable state Securities or blue sky laws.
ARTICLE XI
----------
DISTRIBUTIONS
-------------
The Trustees may in their sole discretion from time to time declare and pay
such dividends and distributions to shareholders as they may deem necessary or
desirable, after providing for actual and accrued expenses and liabilities
(including such reserves as the Trustees may establish) determined in accordance
with this Declaration of Trust and good accounting practices.
ARTICLE XII
-----------
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Liability. No personal liability for any debt or
obligation of the Trust shall attach to any Trustee of the Trust. Without
limiting the foregoing, a Trustee shall not be responsible for or liable in any
event for any neglect or wrongdoing of any officer, agent, employee, investment
adviser, subadviser, principal underwriter or custodian of the Trust, nor shall
any Trustee be responsible or liable for the act or omission of any other
Trustee. Nothing contained herein shall protect any Trustee against any
liability to which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross, negligence or reckless disregard of the duties
involved in the conduct of his office.
<PAGE>
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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 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.
<PAGE>
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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:
(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
<PAGE>
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(ii) by written opinion of independent legal counsel.
The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not affect any other
rights to which any Covered Person may now or hereafter be entitled, shall
continue as to a person who has ceased to be such a Covered Person and shall
inure to the benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to indemnification to
which Trust personnel other than Covered Persons may be entitled by contract or
otherwise under law.
Expenses of preparation and presentation of a defense to any claim, action,
suit or proceeding subject to a claim for indemnification under this Section 4
shall be advanced by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification under this
Section 4, provided that either:
(a) such undertaking is secured by a surety bond or some other appropriate
security or the Trust shall be insured against losses arising out of any such
advances; or
(b) a majority of the Disinterested Trustees acting on the matter (provided
that a majority of the Disinterested Trustees then in office act on the matter)
or independent legal counsel in a written opinion shall determine, based upon a
review of the readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the recipient ultimately will be found
entitled to indemnification.
As used in this Section 4, a "Disinterested Trustee" is one (x) who is not
an Interested Person of the Trust (including anyone, as such Disinterested
Trustee, who has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), and (y) against whom none of such
actions, suits or other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
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.
<PAGE>
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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 Shareholder for any act or obligation of the Trust and
satisfy any judgment thereon.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
Section 1. Termination of Trust. (a) Unless terminated as provided herein, the
Trust shall continue, without limitation of time. Except as may be set forth in
any Statement relating to the issuance of Preferred Shares, the Trust, or any
class or series thereof may be terminated at any time by the Trustees by written
notice to the Shareholders without a vote of the shareholders of the Trust, or
the class or series as the case may be, or by the affirmative vote of the
shareholders entitled to vote at least sixty-six and two-thirds percent (66
2/3%) of the outstanding Common Shares, in the case of the termination of the
Trust, or by the effected class or series as the case may be in the event of the
termination of a class or series, unless such action has previously been
approved, adopted or authorized by the affirmative vote of two-thirds of the
total number of Trustees fixed in accordance with this Declaration of Trust or
the By-Laws, in which case the affirmative vote of the holders of at least a
majority of the outstanding Common Shares or the applicable class or series as
the case may be, shall be required, provided however that if there are then
outstanding Preferred Shares, such vote with respect to the termination of the
Trust shall be by the affirmative vote of the shareholders entitled to vote at
least sixty-six and two-thirds percent (66 2/3%) of the outstanding Common
Shares and Preferred Shares, voting as a single class, unless such action has
previously been approved, adopted or authorized by the affirmative vote of two-
thirds of the total number of Trustees fixed in accordance with this Declaration
of Trust or the By-Laws, in which case the affirmative vote of the holders of at
least a majority of the
<PAGE>
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outstanding Common Shares and Preferred Shares voting as a single class shall be
required.
Upon termination of the Trust or any series or class thereof, after paying
or otherwise providing for all charges, taxes, expenses and liabilities, whether
due or accrued or anticipated, as may be determined by the Trustees, the Trust
shall, in accordance with such procedures as the Trustees consider appropriate,
reduce the remaining assets of the Trust or the applicable series or class to
distributable form in cash or other securities, or any combination thereof, and
distribute the proceeds to the holders of Preferred Shares, if any, in the
manner set forth by resolution of the Trustees, and to the holders of Common
Shares held by such holders on the date of termination in the event of a
termination of the Trust, or to Shareholders of the applicable series or class,
as the case may be.
Section 2. Filing of Copies, References, Headings. The original or a copy of
this instrument, each amendment hereto and any Statement authorized by Article
III, Section 2 hereof shall be kept in the office of the Trust where it may be
inspected by any Shareholder. A copy of this Declaration and of each amendment
and Statement shall be filed by the Trustees with the Secretary of State of the
Commonwealth of Massachusetts, as well as any other governmental office where
such filing may from time to time be required, provided, however, that the
failure to so file will not invalidate this Declaration or an properly
authorized amendment or Statement. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments have been made or Statements authorized and as to any matters in
connection with the Trust hereunder, and with the same effect as if it were the
original, may rely on a copy certified by an officer or Trustee of the Trust to
be a copy of this instrument or of any such amendments or Statements. In this
instrument or in any such amendment, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as a whole and as amended or affected by any such amendment.
Headings are placed herein for convenience of reference only, and in case of any
conflict, the text of this instrument, rather than the headings, shall control.
This instrument may be executed in any number of counterparts, each of which
shall be deemed an original.
Section 3. Trustees May Resolve Ambiguities. The Trustees may construe any of
the provisions of this Declaration insofar as the same may appear to be
ambiguous or inconsistent with any other provisions hereof, and any such
construction hereof by the Trustees in good faith shall be conclusive as to the
meaning to be given to such provisions.
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Section 4. Amendments. Except as otherwise specifically provided in this
Declaration of Trust, this Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees with the consent
of shareholders holding more than fifty percent (50%) of Shares entitled to
vote. In addition, notwithstanding any other provision to the contrary
contained in this Declaration of Trust, the Trustees may amend this Declaration
of Trust without the vote or consent of shareholders (i) at any time if the
Trustees deem it necessary in order for the Trust or any series or class thereby
to meet the requirements of applicable Federal or State laws or regulations, or
the requirements of the regulated investment company provisions of the Internal
Revenue Code, (ii) change the name of the Trust or to supply any omission, cure
any ambiguity or cure, correct or supplement any defective or inconsistent
provision contained herein, or (iii) for any reason at any time before a
registration statement under the Securities Act of 1933, as amended, covering
the initial public offering of Shares has become effective.
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IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, has executed this instrument as of the date first written above.
/s/ Timothy R. Schwertfeger
--------------------------------
Timothy R. Schwertfeger, Trustee
333 West Wacker Drive
Chicago, IL 60606
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STATE OF ILLINOIS )
) SS.
COUNTY OF COOK )
Then personally appeared the above-named Timothy R. Schwertfeger known to
me to be the Trustee of the Trust,. who acknowledged the foregoing instrument to
be his free act and deed, before me this 13th day of August, 1999.
/s/ Karen L. Healy
--------------------
Notary Public
My Commission Expires: 12/30/99
<PAGE>
BY-LAWS
OF
NUVEEN SENIOR INCOME 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 Senior Income Fund, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
Section 1.2. Registered Agent. The registered agent of the Trust in the
Commonwealth of Massachusetts shall be CT Corporation System, 2 Oliver Street,
Boston, Massachusetts, or such other agent as may be fixed by the Board of
Trustees.
Section 1.3 Other Offices. The Trust may have such other offices and places
of business within or without the Commonwealth of Massachusetts as the Board of
Trustees shall determine.
ARTICLE II
SHAREHOLDERS
Section 2.1. Place of Meetings. Meetings of the Shareholders may be held at
such place or places within or without the Commonwealth of Massachusetts as
shall be fixed by the Board of Trustees and stated in the notice of the meeting.
Section 2.2. Regular Meeting. Regular meetings of the Shareholders for the
election of Trustees and the transaction of such other business as may properly
come before the meeting shall be held on an annual or other less frequent
periodic basis at such date and time as the Board of Trustees by resolution
shall designate, except as otherwise required by applicable law.
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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.
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
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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 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.
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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 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
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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 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
<PAGE>
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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.
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.
<PAGE>
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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 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
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written agreement designating such bank or trust company as custodian of
the property of the Trust, as required by Section 6.6 of these By-Laws;
(b) deposit all money, drafts, and checks in the name of and to the
credit of the Trust in the banks and depositories designated by the
Trustees;
(c) endorse for deposit all notes, checks, and drafts received by the
Trust making proper vouchers therefor:
(d) disburse corporate funds and issue checks and drafts in the name
of the Trust, as ordered by the Trustees; and
(e) in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.
Section 4.11. Secretary. The Secretary shall:
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Trustees, the committees of the
Trustees and the Shareholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by statute;
(c) be custodian of the records of the Trust;
(d) see that the books, reports, statements, certificates and other
documents and records required by statute to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Trustees, the Chairman of the Board or the President.
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.
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ARTICLE V
SHARES
Section 5.1. Share Certificates. Each owner of Common Shares of the Trust
shall be entitled upon request to have a certificate, in such form as shall be
approved by the Trustees, representing the number of Common Shares of the Trust
owned by him. Certificates representing fractional Common Shares shall not be
issued. The certificates representing Common Shares shall be signed in the name
of the Trust by the Chairman of the Board, the President, the Executive Vice
President or a Vice President and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer (which signatures may be either manual or
facsimile, engraved or printed). In case any officer who shall have signed such
certificate shall have ceased to be such officer before such certificates shall
be issued, they may nevertheless be issued by the Trust with the same effect as
if such officer were still in office at the date of their issuance. No
certificates representing Preferred Shares shall be issued except as the
Trustees may otherwise authorize.
Section 5.2. Books and Records; Inspection. The Trust shall keep at its
principal executive office, or at another place or places within the United
States determined by the Trustees, a share register not more than one year old,
containing the names and addresses of the shareholders and the number of Shares
held by each Shareholder. The Trust shall also keep, at its principal executive
office, or at another place or places within the United States determined by the
Trustees, a record of the dates on which certificates representing Shares were
issued.
Section 5.3. Share Transfers. Upon compliance with any provisions
restricting the transferability of Shares that may be set forth in the
Declaration of Trust, these By-Laws, or any resolution or written agreement in
respect thereof, transfers of Shares of the Trust shall be made only on the
books of the Trust by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with an
officer of the Trust, or with a transfer agent or a registrar and on surrender
of any certificate or certificates for such Shares properly endorsed and the
payment of all taxes thereon. Except as may be otherwise provided by law or
these By-Laws, the person in whose name Shares stand on the books of the Trust
shall be deemed the owner thereof for all purposes as regards the Trust;
provided that whenever any transfer of Shares shall be made for collateral
security, and not absolutely, such fact, if known to an officer of the Trust,
shall be so expressed in the entry of transfer.
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Section 5.4. Regulations. The Trustees may make such additional rules and
regulations, not inconsistent with these By-Laws, as they may deem expedient
concerning the issue, certification, transfer and registration of Shares of the
Trust. They may appoint, or authorize any officer or officers to appoint, one or
more transfer agents or one or more transfer clerks and one or more registrars
and may require all certificates for Shares to bear the signature or signatures
of any of them.
Section 5.5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificate representing Shares of the Trust shall immediately notify the Trust
of any loss, destruction or mutilation of such certificate, and the Trust may
issue a new certificate in the place of any certificate theretofore issued by it
which the owner thereof shall allege to have been lost or destroyed or which
shall have been mutilated, and the Trustees may, in their discretion, require
such owner or his legal representatives to give to the Trust a bond in such sum,
limited or unlimited, and in such form and with such surety or sureties as the
Trustees in their absolute discretion shall determine, to indemnify the Trust
against any claim that may be made against it on account of the alleged loss or
destruction of any such certificate, or the issuance of a new certificate.
Anything herein to the contrary notwithstanding, the Trustees, in their absolute
discretion, may refuse to issue any such new certificate, except as otherwise
required by law.
Section 5.6. Record Date; Certification of Beneficial Owner. (a) The
Trustees may fix a date not more than sixty (60) days before the date of a
meeting of Shareholders as the date for the determination of the holders of
Shares entitled to notice of and entitled to vote at the meeting or any
adjournment thereof.
(b) The Trustees may fix a date for determining Shareholders entitled to
receive payment of any dividend or distribution or allotment of any rights or
entitled to exercise any rights in respect of any change, conversion or exchange
of Shares.
(c) In the absence of such fixed record date, (i) the date for
determination of Shareholders entitled to notice of and entitled to vote at a
meeting of Shareholders shall be the later of the close of business on the day
on which notice of the meeting is mailed or the thirtieth day before the
meeting, and (ii) the date for determining Shareholders entitled to receive
payment of any dividend or distribution or an allotment of any rights or
entitled to exercise any rights in respect of any change,
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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 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
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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 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
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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 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.
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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.
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Nuveen Senior Income 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 31st day of August, 1999.
/s/ Timothy R. Schwertfeger
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Timothy R. Schwertfeger
STATE OF ILLINOIS )
-------- )SS
COUNTY OF COOK )
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On this 31st 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
