NUVEEN SENIOR INCOME FUND, 497, 1999-10-28

NUVEEN SENIOR INCOME FUND
497, 1999-10-28

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<PAGE>

[LOGO OF NUVEEN]

26,000,000 Shares

Nuveen Senior Income Fund

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

Investment Objective. Nuveen Senior Income Fund, referred to throughout
this Prospectus as 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.
(continued on following page)

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

An investment in the Fund involves certain risks. See "Risks" beginning on
page 21.

This Prospectus sets forth concisely important information about the Fund
that you should know before deciding whether to invest. You should read the
Prospectus and retain it for future reference. A Statement of Additional
Information dated October 26, 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 43 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's web site (http://www.sec.gov).

<TABLE>
<CAPTION>
Price to Proceeds to
Public Sales Load Fund
------------ ----------- ------------
<S> <C> <C> <C>
Per Share................................ $10.00 $0.45 $9.55
Total.................................... $260,000,000 $11,700,000 $248,300,000
Total Assuming Full Exercise of Over-
Allotment Option........................ $299,000,000 $13,455,000 $285,545,000
</TABLE>

The underwriters named in this prospectus may purchase up to 3,900,000
additional common shares from the Fund in 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 $0.01
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 October 29, 1999.

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

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

PaineWebber Incorporated John Nuveen & Co.
Incorporated

Deutsche Banc Alex. Brown
A.G. Edwards & Sons, Inc.
Prudential Securities
First Union Securities, Inc.
Janney Montgomery Scott LLC
Legg Mason Wood Walker
Incorporated

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

The date of this Prospectus is October 26, 1999
<PAGE>

(continued from previous page)

Portfolio Investments. The Fund seeks to achieve its objective primarily by
investing in senior secured loans whose interest rates float or adjust
periodically based on a benchmark interest rate. Senior loans hold the most
senior position in the capital structure of the borrower, are usually secured
with specific collateral, and have a claim on the assets of the borrower that
comes before other lenders to and holders of securities of the borrower, such
as holders of subordinated debt, preferred stock or common stock. However,
senior loans typically are below investment grade quality and have speculative
characteristics.

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 Operating History. Because the Fund is newly organized, its common shares
have no history of public trading. Shares of closed-end management 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
"NSL."

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

The Fund's 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 OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................ 1
Fund Expenses..................... 10
The Fund.......................... 11
Use of Proceeds................... 11
The Fund's Investments............ 11
Risks............................. 21
Management of the Fund............ 27
Net Asset Value................... 29
Distributions..................... 30
Dividend Reinvestment Plan........ 30
Description of Capital Structure.. 31
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Certain Provisions in the
Declaration of Trust............... 35
Repurchase of Fund Shares;
Conversion to Open-End Fund........ 36
Tax Matters......................... 36
Other Matters....................... 38
Underwriting........................ 39
Custodian and Transfer Agent........ 42
Legal Opinions...................... 42
Table of Contents for the Statement
of Additional Information.......... 43
</TABLE>

You should rely only on the information contained in this Prospectus.
Neither the Fund nor the Underwriters have authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. Neither the Fund nor
the Underwriters are making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this Prospectus is accurate as of the date on the
front cover only.
<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 26,000,000 common shares of
beneficial interest at $10.00 per share through a
group of underwriters (the "Underwriters") led by
PaineWebber Incorporated, John Nuveen & Co.
Incorporated, Deutsche Bank Securities Inc., A.G.
Edwards & Sons, Inc., Prudential Securities, First
Union Securities, Inc., Janney Montgomery Scott LLC
and Legg Mason Wood Walker Incorporated. The common
shares of beneficial interest are called "Common
Shares" throughout the rest of this Prospectus. To
participate in this offering you must purchase at
least 100 Common Shares ($1,000 worth). The Fund has
given the Underwriters an option to purchase up to
3,900,000 additional Common Shares. See
"Underwriting."

Investment Objective
and Policies ..........
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, such
as the prime rate offered by one or more major United
States banks, or the London Inter-Bank Offered Rate
(known as "LIBOR").

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")
that are secured. Senior Loans are made to
corporations, partnerships, limited liability
companies 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. See "The Fund's Investments."

The Fund seeks to increase the income available for
distribution to holders of Common Shares by utilizing
financial leverage through 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"). Financial leverage of this
nature presents risks to holders of Common Shares, as
described later under "Financial Leverage" and
"Risks."

Although Senior Loans have the most senior position
in a Borrower's capital structure and the Fund
normally will invest at least 80% of its total assets
in Senior Loans that are secured by specific
collateral, Senior

1
<PAGE>

Loans are typically below investment grade quality
and may have below investment grade ratings; these
ratings are associated with securities having
speculative characteristics. Because of the features
of Senior Loans, the Fund's investment adviser
believes, based on its experience, that these ratings
do not necessarily reflect the true risk of loss of
principal or interest on a Senior Loan. For example,
the Fund's investment adviser believes that Senior
Loans tend to have more favorable loss recovery rates
as compared to other types of below investment grade
quality debt obligations. Accordingly, the Fund's
investment adviser generally does not take ratings
into account when determining whether to invest in a
Senior Loan and, in any event, does not view ratings
as a determinative factor in its investment
decisions. Investing in Senior Loans does, however,
involve investment risk, and some Borrowers default
on their Senior Loan payments. The Fund attempts to
manage these risks through portfolio diversification
and ongoing analysis and monitoring of Borrowers. As
a result, the Fund is highly dependent on the credit
analysis abilities of the Fund's investment adviser.

The Fund may invest up to 20% of its total assets in
U.S. dollar-denominated Senior Loans of Borrowers
that are organized or located in countries outside
the United States.

In addition, the Fund may invest up to 20% of its
total assets, in the aggregate, in:

. Senior Loans which are not secured by
any collateral;

. other income producing securities such
as investment and non-investment grade
corporate debt securities, high
quality, short-term debt securities
with remaining maturities of one year
or less and U.S. government securities
(subject to the limit that the Fund may
not invest more than 5% of its total
assets in junior debt securities or
fixed rate income securities with
effective maturities greater than one
year, provided that the 5% limitation
does not apply to securities acquired
in connection with the Fund's
investments in Senior Loans); and

. equity securities and warrants acquired
in connection with the Fund's
investments in Senior Loans.

The Fund may also engage in lending of its
securities, repurchase agreements, reverse repurchase
agreements and, for hedging and risk management
purposes, certain derivative transactions. See
"Risks."

Listing................. 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 "NSL."

Financial Leverage...... The Fund seeks to increase the income available for
distribution to holders of the Common Shares by
utilizing Leverage Instruments. The Fund currently
anticipates that Leverage Instruments

2
<PAGE>

will represent approximately 40% (and in no event
will exceed 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 the net asset value or
the market price of, and the distributions paid on,
the Common Shares. However, 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 in the Fund's portfolio, the Fund's investment
adviser believes that the risk of this volatility
resulting from changes in market interest rates will
be mitigated.

Investment Adviser ..... Nuveen Senior Loan Asset Management Inc. (the
"Adviser") will be the Fund's investment adviser. The
Adviser is a newly-formed, wholly-owned subsidiary of
The John Nuveen Company. The Adviser will receive an
annual fee, payable monthly, in a maximum amount
equal to .85% of the Fund's average daily managed
assets (including assets acquired through the use of
Leverage Instruments (1.42% of net assets
attributable to Common Shares, assuming 40%
leverage)), with lower fee levels for average daily
managed 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,
assuming 40% leverage), and for a declining amount
for an additional five years (through October 31,
2009). 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. Because the Senior
Loans in which the Fund will invest have interest
rates that adjust periodically with movements in
market rates of interest, the Fund's income, and
therefore its monthly distributions, should be
expected to increase when market interest rates
increase and to decline as market interest rates
fall. Over time, the Fund will distribute to holders
of Common Shares 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. The Fund expects to
declare its first distribution to investors in
approximately 30 days, and pay such distribution in
approximately 60 days, from the completion of the
Common Share offering, depending on market
conditions.

Dividend Reinvestment
Plan................... You may elect to have all dividend and capital gain
distributions on your Common Shares automatically
reinvested in additional Common Shares. See
"Distributions" and "Dividend Reinvestment Plan."

Closed-End Fund
Structure.............. Closed-end funds differ from open-end 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

3
<PAGE>

redeem their shares at the option of the shareholder.
By comparison, mutual funds issue securities
redeemable on a daily basis at a price based on its
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 use of Leverage Instruments 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. See
"Risks--Closed-End Funds." 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 holders of
Common Shares, 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 may 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 may also
consider the conversion of the Fund to an open-end
investment company. The Board of Trustees believes,
however, that the closed-end fund structure is
desirable, given the Fund's investment objective and
policies and the generally illiquid nature of the
Senior Loans. 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."

Risks................... No Operating History. The Fund is a newly organized
closed-end management investment company with no
history of operations. It is designed for long-term
investors and not as a trading vehicle.

Borrower Credit Risk. Investment in the Fund involves
the risk that Borrowers under Senior Loans may
default on their 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 non-payment 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."

4
<PAGE>

Senior Loans. Senior Loans in which the Fund will
invest may not be rated by a nationally recognized
statistical rating organization at the time of the
Fund's investment, generally will not be registered
with the Securities and Exchange Commission 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 commercial banks or
other financial institutions ("Lenders") in
connection with Senior Loans. However, the amount of
public information available with respect to Senior
Loans generally will 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."

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
that are unrated but determined by the Adviser to be
below investment grade quality. Securities that are
below investment grade quality are commonly referred
to as "junk bonds." 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, particularly in
response to economic downturns. Such investments are
also likely to result in increased fluctuation in the
Fund's net asset value.

Credit Risks Associated with Investments in
Participations. The Fund may acquire from a Lender a
portion of the Lender's rights under a loan
agreement. This is commonly referred to as purchasing
a "Participation" in a Senior Loan. After the period
of initial investment, the Fund does not currently
intend to invest more than 20% of its total assets in
Participations. 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 (as defined below). 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"). A Lender selling a
Participation and other persons interpositioned
between the Lender and the Fund with respect to a
Participation will likely conduct their principal
business activities in the banking, finance and
financial services industries. Because the Fund may
invest in Participations, the Fund may be more
susceptible than a fund without such a policy to any
single economic, political or regulatory

5
<PAGE>

occurrence affecting such industries. The Fund
intends to take measures which it believes will
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 Adviser 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.

Income Risk. The Fund invests primarily in Senior
Loans whose interest rates reset frequently. If
market interest rates fall, these interest rates will
be reset at lower levels, reducing the Fund's income
and, in turn, dividends paid to holders of Common
Shares.

Portfolio Liquidity. No active trading market
currently exists for many of the Senior Loans in
which the Fund will invest. Senior Loans are thus
relatively illiquid. Liquidity relates to the ability
of the Fund to sell an investment in a timely manner
at a price approximately equal to its value on the
Fund's books. The illiquidity of Senior Loans 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, and the Fund
may suffer capital losses as a result. The market for
relatively illiquid securities could be disrupted in
the event of an economic downturn or a substantial
increase or decrease in interest rates. Although the
Fund believes that investing in adjustable rate
Senior Loans should limit fluctuations in the Fund's
net asset value from changes in interest rates,
extraordinary and sudden changes in market interest
rates could disrupt the market for Senior Loans and
result in fluctuations in the Fund's net asset value.
See "The Fund's Investments" and "Net Asset Value."

A substantial portion of the Fund's assets may be
invested in relatively illiquid Senior Loan
interests. However, many of the Senior Loans in which
the Fund expects to invest are of a relatively large
principal amount and are held by a relatively large
number of financial institutions 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. See
"The Fund's Investments."

6
<PAGE>

In determining net asset value, the Fund will utilize
the valuations of Senior Loans furnished by an
independent third-party pricing service provider,
which typically values Senior Loans at the mean of
the highest bona fide bid and lowest bona fide ask
prices when current quotations are readily available.
Senior Loans for which current quotations are not
readily available are valued at a fair value as
determined by the pricing service provider using a
wide range of market data and other information and
analyses, including credit considerations considered
relevant by the pricing service provider, to
determine valuations. If the pricing service provider
does not provide a value for a Senior Loan or if no
pricing service provider is then acting as such for
the Fund, a value will be determined by the Adviser.

To the extent that an active secondary trading market
in Senior Loan interests develops to a reliable
degree, the pricing service provider may rely to an
increasing extent on such market prices and
quotations in determining valuations of the Senior
Loan interests in the Fund's portfolio. The Fund
purchases Senior Loans primarily to seek to achieve
its investment objective of high current income,
consistent with preservation of capital, and does not
anticipate that it will actively trade Senior Loans.
To the extent a trading market continues to develop,
certain participants in the market may have
objectives other than current income and may pursue
short-term trading strategies, which may result in
erratic movements in the market prices for Senior
Loans as a result of movements in short-term interest
rates or otherwise. Although the Fund's policy of
acquiring interests in floating rate Senior Loans is
intended to minimize fluctuations in net asset value
resulting from changes in market interest rates, the
Fund's net asset value will fluctuate.

Foreign Investments. The Fund may invest up to 20% of
its total assets in U.S. dollar-denominated Senior
Loans of Borrowers that are organized or located in
countries outside the United States. Although their
Senior Loans are denominated in U.S. dollars, these
Borrowers typically have significant non-U.S. dollar
revenues. Investment in foreign Borrowers involves
special risks, including that foreign Borrowers may
be subject to:

. less rigorous regulatory, accounting
and reporting requirements than U.S.
Borrowers;

. differing legal systems and laws
relating to creditors' rights;

7
<PAGE>

. the potential inability to enforce
legal judgments;

. economic adversity that would result if
the value of the Borrower's non-U.S.
denominated revenues and assets were to
fall (in U.S. dollar terms) because of
fluctuations in currency values; and

. the potential for political, social and
economic adversity in the foreign
Borrower's country.

Warrants, Equity Securities and Junior Debt.
Investments in warrants, equity and junior debt
securities entail certain risks in addition to those
associated with investments in Senior Loans.

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 holders of Common Shares, 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 holders of Common Shares 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 holders of Common Shares
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 holders of Common Shares 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.

8
<PAGE>

coverage and portfolio composition provisions as well
as restrictions on the Fund's investment practices.
The Adviser does not anticipate that these provisions
or restrictions will adversely affect the Adviser's
ability to manage the Fund's portfolio in accordance
with its investment objective and policies. See
"Description of Capital Structure."

Market Price of Common Shares. Shares of closed-end
management investment companies frequently trade at
prices lower than their net asset value. The Fund
cannot assure you that the Common Shares will trade
at a price equal to (or higher than) their 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 offering expenses paid
by the Fund. John Nuveen & Co. Incorporated
("Nuveen") has agreed to pay (i) all organizational
expenses and (ii) offering costs (other than the
sales load) that exceed $0.01 per Common Share. In
addition to net asset value, the market price of the
Common Shares 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."

Non-Diversification. Because the Fund is classified
as "non-diversified" under 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." In addition,
the Fund must satisfy certain asset diversification
rules in order to qualify as a regulated investment
company for federal income tax purposes.

Anti-Takeover Provisions. The Fund's organizational
documents include provisions that could limit the
ability of other entities or persons to acquire
control of the Fund or convert the Fund to an open-
end fund. The provisions of these documents 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.

9
<PAGE>

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.

Shareholder Transaction Expenses

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

Management
Fees........ 1.42%
Other
Expenses.... .40%
Leverage-
Related
Expenses.... 3.93%
----
Total Annual
Operating
Expenses.... 5.75%
Fees and
Expense
Reimbursement
(Years 1-5). (.75)%***
----
Total Net
Annual
Operating
Expenses.... 5.00%***
====
</TABLE>
Annual Expenses (as a percentage of net assets attributable to Common Shares)**
- --------
* 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.
** The Fund's Investment Management Agreement provides for the payment by the
Fund of Management Fees declining from .85% of the Fund's "managed assets,"
a defined term including the proceeds of leverage. 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 at a combined interest rate and dividend rate of 5.90%, which is
based on the Fund's estimate of current market conditions). The Management
Fees and Fees and Expense Reimbursement in the table above have been
restated from their contractual rates (which are percentages of the Fund's
managed assets) to percentages of the Fund's assets attributable only to
Common Shares. If the Fund does not utilize any leverage, the Fund estimates
that annual operating expenses (expressed as a percentage of net assets
attributable to Common Shares) would be approximately as follows:
<TABLE>
<S> <C>
Management Fees..................................................... .85%
Other Expenses...................................................... .24%
Leverage-Related Expenses........................................... 0.00%
----
Total Annual Operating Expenses..................................... 1.09%
Fees and Expense Reimbursement (Years 1-5).......................... (.45)%
----
Total Net Annual Operating Expenses................................. .64%
====
</TABLE>
*** 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, .58% in year 6, .42% in year 7, .25% in year 8, .17% in year 9
and .08% in year 10.

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

The following example illustrates the expenses (including the sales load of
$45) that you would pay on a $1,000 investment in Common Shares, assuming (1)
total net annual expenses of 5.00% in years 1 through 5, increasing to 5.67% 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............................. $93 $188 $284 $542
</TABLE>
The example should not be considered a representation of future expenses.
Actual expenses may be higher or lower.
- --------
(1) The example assumes that the estimated "Other Expenses" set forth in the
Annual Expenses table are accurate 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 $51;
3 Years $65; 5 Years $79; and 10 Years $139.
(2) Assumes reimbursement of fees and expenses (expressed as a percentage of
net assets attributable to Common Shares) of .58% in year 6, .42% in year
7, .25% in year 8, .17% in year 9 and .08% in year 10. The Adviser has not
agreed to reimburse the Fund for any portion of its fees and expenses
beyond October 31, 2009.

10
<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" management 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
intends to employ Leverage Instruments, which would result in the financial
leveraging of the Fund for investment purposes. Holders of the 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
$248,040,000 ($285,246,000 if the Underwriters exercise the over-allotment
option in full) after payment of the estimated organizational 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. It is
anticipated that, under normal market conditions, such investments will be
completed no 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 debt securities.
Nuveen has agreed to pay (i) all organizational expenses and (ii) offering
costs (other than the sales load) that exceed $0.01 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. The Fund will invest primarily in
adjustable rate U.S. dollar-denominated secured Senior Loans. Investment in
such floating rate instruments is expected to minimize changes in the
underlying principal value of the Senior Loans, and therefore the Fund's net
asset value, resulting from changes in market interest rates. The Borrowers of
such Senior Loans operate in a variety of industries and geographical regions.
The Fund provides individual investors with access to a market normally
accessible only to financial institutions and larger corporate or institutional
investors.

Under normal circumstances, the Fund will invest at least 80% of its total
assets in adjustable rate, U.S. dollar-denominated, secured Senior Loans. The
Fund may invest up to 20% of its total assets in U.S. dollar-denominated Senior
Loans of Borrowers that are organized or located in countries outside the
United States. The Fund may invest up to 20% of its total assets, in the
aggregate, in:

. Senior Loans which are not secured by any collateral;

. other income producing securities such as investment and non-
investment grade corporate debt securities, high quality, short-term
debt securities with remaining maturities of one year or less and
U.S. government securities (subject to the limit that the Fund may
not invest more than 5% of its total assets in junior debt
securities or fixed rate income securities with effective maturities

11
<PAGE>

greater than one year, provided that the 5% limitation does not apply
to securities acquired in connection with the Fund's investments in
Senior Loans); and

. equity securities and warrants acquired in connection with the
Fund's investments in Senior Loans.

Pending initial investment in Senior Loans, or 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.

Certain Characteristics of Senior Loans

General Description. Senior Loans generally are negotiated between a
Borrower and the 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 the London Inter-Bank Offered Rate
("LIBOR"), the prime rate offered by one or more major United States banks (the
"Prime Rate") or the certificate of deposit ("CD") rate or other base lending
rates used by commercial lenders. LIBOR, as provided for in Loan Agreements,
usually is an average of the interest rates quoted by several designated banks
as the rates at which they pay interest to major depositors in the London
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--Investment Practices and Special Risks."

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 (and Lenders where the Fund holds a
Participation) will also affect the Fund's net asset value. Further, a serious
deterioration in the credit quality of one or more Borrowers 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

12
<PAGE>

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.

Protective Provisions of Senior Loans. Secured Senior Loans generally 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 such as 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 in Senior Loans
which are not secured by any collateral, subject to the limitations set forth
under "The Fund's Investments--Investment Objective and Policies." Senior Loans
that are not secured by specific collateral generally pose a greater risk of
non-payment 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 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.

Investing in Senior Loans involves investment risk despite these covenants,
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.

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--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. Although Senior Loans have the most senior position in a Borrower's
capital structure and are

13
<PAGE>

usually secured by specific collateral, they are typically below investment
grade quality and may have below investment grade ratings; these ratings are
associated with securities having speculative characteristics. See "Risks--High
Yield/High Risk Securites."

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 sometimes represent attractive
investment opportunities.

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 one or more Borrowers could cause a permanent decrease in
the Fund's net asset value. See "Risks--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. Because
of the features of Senior Loans, the Adviser believes, based on its experience,
that ratings may not necessarily reflect the true risk of loss of principal or
interest on a Senior Loan. For example, the Adviser believes that Senior Loans
tend to have more favorable loss recovery rates as compared to other types of
below investment grade quality debt obligations.

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. The Adviser generally
does not take ratings into account when determining whether to invest in a
Senior Loan and does not view ratings as a determinative factor in its
investment decisions. 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. Investing in Senior Loans involves
risk and the Fund attempts to manage these risks through portfolio
diversification and ongoing analyses and monitoring of Borrowers.

The Senior Loan Market

The volume of newly issued Senior Loans increased from approximately $66
billion in 1987 to approximately $273 billion in 1998 (Source: Donaldson,
Lufkin & Jenrette; Loan Pricing Corporation) and transactions in Senior Loans
in the secondary market increased from approximately $8 billion in 1991 to
approximately $67 billion in 1998 (Source: Loan Pricing Corporation; Securities
Data Corporation). 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

14
<PAGE>

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 where such debt or obligations are 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. 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. Fees that the Fund
occasionally may receive may enhance the Fund's income.

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. The Fund will not act as sole Agent
or sole principal negotiator of a 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 all or substantially all of the
collateral or changing the maturity of a Senior Loan, frequently require the
unanimous vote or consent of all Lenders affected.

The Fund as Agent. 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
an 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 certain requirements for qualifying as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). The Fund intends to comply with those requirements and may limit its
investments in Senior Loans in which it acts as Agent in order to do so.

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,

15
<PAGE>

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. 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 have 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.
After the period of initial investment, the Fund does not currently intend to
invest more than 20% of its total assets in Participations.

The Fund has taken the following measures in an effort to minimize risks from
investing in Participations. 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 has
debt or obligations that are 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.

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 above, the Fund will take measures which it
believes reduce its exposure to any risks incident to this practice, the Fund
may be more susceptible than an investment company without such a practice 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.

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. For purposes of the Fund's policy of investing at least
80% of its total assets in secured Senior Loans, a Participation in a Senior
Loan will be deemed to be secured if the underlying Senior Loan is secured.

16
<PAGE>

Role of Agent. On behalf of the several Lenders, an 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 (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 may 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.

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 acquire equity securities and warrants issued by a Borrower or
its affiliates as part of a package of investments in the Borrower or its
affiliates issued in connection with a Senior Loan of the Borrower. The Fund
also may convert a warrant so acquired into the underlying security. The Fund
may acquire junior debt securities as part of a package of investments in the
Borrower or its affiliates issued in connection with a Senior Loan of the
Borrower, and may invest separately up to 5% of its total assets in junior debt
securities. 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. However, investments in warrants, equity and junior
debt securities entail certain risks in addition to those associated with
investments in Senior Loans. The value of these securities may be affected more
rapidly, and to a greater extent, by company-specific developments and general
market conditions. These risks may increase fluctuations in the Fund's net
asset value. The Fund may frequently possess material non-public information
about a Borrower as a result of its ownership of a Senior Loan of such
Borrower. Because 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. The Fund's investments in warrants, equity securities
and junior

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<PAGE>

debt securities are subject to the limitations set forth under "The Fund's
Investments--Investment Objective and Policies."

The Fund may invest 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. The Fund's investments in high quality, short-term debt securities
are subject to the limitations set forth under "The Fund's Investments--
Investment Objective and Policies." In spite of those limitations, pending
initial investment in Senior Loans, or 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, which
are privately negotiated debt obligations 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.

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 described in
this Prospectus 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, 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% of the
Fund's total assets immediately after such issuance. Leverage entails special
risks. See "Risks--Leverage." The management fee paid to the Adviser will be
calculated on the basis of the Fund's total managed 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

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

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<PAGE>

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 asset value
resulting from changes in interest rates, credit conditions 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. The Fund could exchange the Borrower's obligation to make fixed rate
payments 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 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 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.

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<PAGE>

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 creditworthy and when, in the judgment of the Adviser, the
consideration which can be earned currently from loans of this type justifies
the attendant risk. The creditworthiness of firms to which the Fund lends its
portfolio holdings will be monitored on an ongoing basis by the Adviser. 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" or "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 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" or "delayed delivery" transactions, it will do so
for the purpose of acquiring interests or securities for the Fund's portfolio
consistent with the Fund's investment objective and policies and not for the
purpose of investment leverage. No specific limitation 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.

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<PAGE>

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 Fund might experience delays in recovering its cash. 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

Risk is inherent in all investing. Investing in any investment company
security involves risk, including the risk that you may receive little or no
return on your investment or even that you may lose part or all of your
investment. Therefore, before investing you should consider carefully the
following risks that you assume when you invest in the Common Shares.

Closed-End Funds

The Fund is a closed-end management 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 their net asset value. The Fund cannot assure you that
the 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. Nuveen has agreed to pay (i) all
organizational expenses and (ii) offering costs (other than the sales load)
that exceed $0.01 per Common Share. 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 decrease in the Fund's net asset value. This decrease in the
Fund's net asset value would be magnified by the Fund's use of Leverage
Instruments. The risk of default increases in the event of an

21
<PAGE>

economic downturn or a substantial increase in interest rates. An increased
risk of default could result in a decline in the value of Senior Loans and in
the Fund's net asset value.

The Fund may acquire Senior Loans of Borrowers that are experiencing, or are
more likely to experience, financial difficulty, including Senior Loans of
Borrowers that have filed for bankruptcy protection. Borrowers may have Senior
Loans or other 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 dependent 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 or
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.

No active trading market currently exists for many Senior Loans. Senior
Loans are thus relatively illiquid. Liquidity relates to the ability of the
Fund to sell an investment in a timely manner at a price approximately equal to
its value on the Fund's books. The illiquidity of Senior Loans 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. 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 financial institutions. 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

22
<PAGE>

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 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.

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. 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. Any Lender, which could
include the Fund, is subject to the risk that a court could find the Lender
liable for damages in a claim by a Borrower arising under the common laws of
tort or contracts or anti-fraud provisions of certain securities laws for
actions taken or omitted to be taken by the Lenders under the relevant terms of
a Loan Agreement or in connection with actions with respect to the collateral
underlying in the Senior Loan.

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. A Lender selling a Participation and other persons interpositioned
between the Lender and the Fund with respect to Participations will likely
conduct their principal business activities in the banking, finance and
financial services industries. The Fund does not currently intend to invest
more than 20% of its total assets in such Participations but may invest a
greater portion of its assets in Participations during its period of initial
investment. To the extent the Fund invests in 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.

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.

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<PAGE>

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 Borrowers involves special risks, including that foreign
Borrowers may be subject to:

. less rigorous regulatory requirements and accounting and reporting
requirements than U.S. Borrowers;

. 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 Borrower's
non-U.S. dollar-denominated revenues and assets were to fall (in
U.S. dollar-denominated terms) because of fluctuations in currency
values; and

. the potential for political, social and economic adversity in the
foreign Borrower'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 that 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 and features, 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 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

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." The Adviser does
not anticipate that these restrictions will adversely affect the Adviser's
ability to manage the Fund's portfolio in accordance with its investment
objective and policies.

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<PAGE>

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 the risk
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 market of declining asset values 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 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. 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% of the Fund's total assets, at a combined interest and dividend rate of
5.90% 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
non-leverage expenses) in order to cover such interest payments and dividend
payments would be 2.37%. 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.

25
<PAGE>

The following table is designed to assist the investor in understanding the
effects of leverage and 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.

<TABLE>
<S> <C> <C> <C> <C> <C>
Assumed Portfolio Return (net of
expenses).............................. (10)% (5)% 0 % 5% 10%
Corresponding Common Share Return
Assuming 40% Leverage.................. (20.60)% (12.27)% (3.93)% 4.40% 12.73%
</TABLE>

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.

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. The values of
certain derivatives can be affected dramatically by even small market
movements, sometimes in ways that are difficult to predict. The successful
utilization of hedging and risk management transactions requires skills
different from those needed in the selection of the Fund's portfolio
securities. 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. If these transactions are not
successful, they may result in losses.

Interest Rate Fluctuations

Income Risk. The Fund invests primarily in Senior Loans whose interest rates
reset frequently. If market interest rates fall, these interest rates will be
reset at lower levels, reducing the Fund's income and in turn, dividends paid
to Common Shareholders.

Net Asset Value Fluctuations. The Senior Loans in which the Fund will invest
generally are not listed on any securities exchange. Certain Senior Loans are
traded by institutional investors in an over-the-counter secondary market for
Senior Loan obligations that has developed over the past several years. No
active trading market currently exists for many of the Senior Loans in which
the Fund will invest. The secondary market for those Senior Loans generally is
comparatively illiquid relative to markets for other income securities. Because
of the lack of an active trading market, Senior Loans are generally more
difficult to value than liquid securities for which an active trading market
exists. In determining net asset value, the Fund will utilize the valuations of
Senior Loans furnished by an independent third-party pricing service provider,
which typically values Senior Loans at the mean of the highest bona fide bid
and lowest bona fide ask prices when current quotations are

26
<PAGE>

readily available. Senior Loans for which current quotations are not readily
available are valued at a fair value as determined by the pricing service
provider using a wide range of market data and other information and analyses,
including credit considerations considered relevant by the pricing service
provider, to determine valuations. If the pricing service provider does not
provide a value for a Senior Loan or if no pricing service provider is then
acting as such for the Fund, a value will be determined by the Adviser. To the
extent that an active secondary trading market in Senior Loan interests
develops to a reliable degree, the pricing service provider may rely to an
increasing extent on such market prices and quotations in determining
valuations of the Senior Loan interests in the Fund's portfolio. The Fund
purchases Senior Loans primarily to seek to achieve its investment objective of
high current income, consistent with preservation of capital, and does not
anticipate that it will actively trade Senior Loans. To the extent a trading
market continues to develop, certain participants in the market may have
objectives other than current income and may pursue short-term trading
strategies, which may result in erratic movements in the market prices for
Senior Loans as a result of movements in short-term interest rates or
otherwise. Although the Fund's policy of acquiring interests in floating rate
Senior Loans is intended to minimize fluctuations in net asset value resulting
from changes in market interest rates, the Fund's net asset value will
fluctuate.

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. 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. In addition, the Fund must satisfy certain asset
diversification rules to qualify as a regulated investment company for federal
income tax purposes.

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.

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 ongoing 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

27
<PAGE>

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. He
has managed the purchase of over 2,000 Senior Loans with an aggregate
principal amount of approximately $28 billion.

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:

<TABLE>
<CAPTION>
Average Daily Managed Assets* Management Fee
- ----------------------------- --------------
<S> <C>
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%
</TABLE>
- --------
* 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 principal 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, which include the proceeds of leverage, the dollar
amount of the Adviser's fees from the Fund will be higher (and the Adviser
will be benefitted to that extent) when leverage is utilized.

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:

<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 .35%
2000 .45% 2006 .25%
2001 .45% 2007 .15%
2002 .45% 2008 .10%
2003 .45% 2009 .05%
2004 .45%
</TABLE>
- --------
* 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.

28
<PAGE>

NET ASSET VALUE

The Fund's net asset value per Common Share will be 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 (including Leverage
Instruments), 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 will invest generally are not listed on
any securities exchange. Certain Senior Loans are traded by institutional
investors in an over-the-counter secondary market for Senior Loan obligations
that has developed over the past several years. This secondary market for those
Senior Loans generally is comparatively illiquid relative to markets for other
income securities and no active trading market exists for many Senior Loans. In
determining net asset value, the Fund will utilize the valuations of Senior
Loans furnished to the Adviser by an independent third-party pricing service
approved by the Board of Trustees. The Board of Trustees has reviewed the
various alternatives for pricing the Fund's portfolio of Senior Loans and has
determined that the use of a pricing service is a reasonable, fair and
appropriate method of valuing Senior Loans. The Adviser has entered into an
agreement with a pricing service provider to provide pricing services for the
Fund. The Agreement is terminable by either party upon notice and has an
initial term of six months. The Agreement provides that the pricing service
provider assumes no fiduciary responsibility to the Fund or to any investor in
the Fund, and that the pricing service provider will have no liability under
the Agreement to any third party, including any investor in the Fund. The
Agreement provides that the pricing service provider will be indemnified by the
Adviser unless the pricing service provider has acted with willful misconduct.
The pricing service provider is explicitly permitted to act as principal for
its own account in connection with the purchase and sale (from or to the Fund
or otherwise) of any Senior Loan at any price simultaneously while it provides
pricing services to the Fund. Furthermore, the pricing service provider can
only provide valuations for a limited number of the Senior Loans that may trade
from time to time in the market. The pricing service provider has no obligation
to provide a valuation for a Senior Loan if it believes that it cannot
determine such a valuation. There can be no assurance that the pricing service
provider will continue to provide these services or will provide a value for
each Senior Loan held by the Fund. However, the Adviser believes that if the
pricing service provider declines to continue to act as such for the Fund, or
does not provide values for a significant portion of the Senior Loans in the
Fund's portfolio, one or more alternative independent third-party pricing
service providers will be available to provide comparable services on similar
terms. During any period in which no pricing service provider is acting as such
for the Fund, or for any Senior Loan for which no value from a pricing service
provider is available, the Adviser will value the Fund's Senior Loans as
described below.

A pricing service provider typically will value Senior Loans at the mean of
the highest bona fide bid and lowest bona fide ask prices when current
quotations are readily available. Senior Loans for which current quotations
will not be readily available are valued at a fair value as determined by the
pricing service provider using a wide range of market data and other
information and analysis, including credit considerations considered relevant
by the pricing service provider to determine valuations. The procedures of any
pricing service provider and its valuations will be reviewed by the officers of
the Adviser under the general supervision of the Board of Trustees. If the
Adviser believes that a value provided by a pricing service provider does not
represent a fair value as a result of information, specific to that Senior Loan
or Borrower or its affiliates, which the Adviser believes that the pricing
agent may not be aware, the Adviser may in its discretion value the Senior Loan
subject to procedures approved by the Board of Trustees and reviewed on a
periodic basis, and the Fund will utilize that price instead of the price as
determined by the pricing service provider. In addition to such information the
Adviser will consider, 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 in determining a fair
value of a Senior Loan. If the pricing service provider does not provide a
value for a Senior Loan or if no pricing service provider is then acting, a
value will be determined by the Adviser in the manner described above.

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.

29
<PAGE>

Because a secondary trading market in Senior Loans has not yet fully
developed, the pricing service or the Adviser may not rely solely on but may
consider, to the extent they believe such information to be reliable, prices or
quotations provided by banks, dealers or other pricing service providers with
respect to secondary market transactions in Senior Loans. To the extent that an
active secondary trading market in Senior Loan interests develops to a reliable
degree, the pricing service provider or the Adviser may rely to an increasing
extent on such market prices and quotations in reviewing the valuations of the
Senior Loan interests in the Fund's portfolio. To the extent a trading market
continues to develop, certain participants in the market may have objectives
other than current income and may pursue short-term trading strategies, which
may result in erratic movements in the market prices for Senior Loans as a
result of movements in short-term interest rates. Although the Fund's policy of
acquiring interests in floating rate Senior Loans is intended to minimize
fluctuations in net asset value resulting from changes in market interest
rates, the Fund's net asset value will fluctuate. 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 determining or 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. Because the Senior Loans in which the Fund
will invest have interest rates that adjust periodically with movements in
market rates of interest, the Fund's income, and therefore its monthly
distributions, should be expected to increase when market interest rates
increase and to decline as market interest rates fall. 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 or commercial paper and dividend
payments on preferred shares issued by the Fund). 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 The Chase Manhattan Bank as
dividend paying agent.

30
<PAGE>

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

(1) If on the payment date of the dividend, the Common Shares are trading
at or above net asset value, the Fund will issue new shares at a price
equal to the greater of (i) net asset value per Common Share on that
date or (ii) 95% of the market price on that date.

(2) If Common Shares are trading below net asset value at the time of
valuation, the Plan Agent will receive the dividend or distribution in
cash and will purchase Common Shares in the open market, on the 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.

In the case of Common Shareholders such as banks, brokers or nominees that
hold Common Shares for others who are the beneficial owners, the Plan Agent
will administer the Plan on the basis of the number of Common Shares certified
from time to time by the record Common Shareholder and held for the account of
beneficial owners who participate in the Plan.

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 The Chase Manhattan Bank.

DESCRIPTION OF CAPITAL STRUCTURE

Common Shares

The Declaration authorizes the issuance of an unlimited number of Common
Shares, par value $0.01 per share. All Common Shares have equal rights to the
payment of dividends and the distribution of assets upon liquidation. Common
Shares will, when issued, be fully paid and, subject to matters discussed in
"Certain Provisions in the Declaration of Trust," non-assessable, and will have
no pre-emptive or conversion rights or rights to cumulative voting. Whenever
the Fund utilizes Leverage Instruments, 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 (i) 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

31
<PAGE>

and (ii) unless asset coverage (as defined in the 1940 Act) with respect to any
borrowing or commercial paper or note issuance would be at least 300% 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 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 use of Leverage Instruments 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.

Borrowings

The Fund's Declaration 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

32
<PAGE>

under the Code, the Fund, subject to its ability to liquidate its relatively
illiquid portfolio, intends to repay the borrowings. Any borrowing will likely
be ranked senior or equal to 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 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 $0.01 per
share, in one or more classes or series, with rights as determined by the Board
of Trustees, by action of the Board of Trustees without the approval of the
Common Shareholders.

33
<PAGE>

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 seven 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 would have complete priority over the Common Shares as
to distribution of assets.

In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Fund, holders of Preferred Shares would 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 would be 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, would 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, would 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.

34
<PAGE>

CERTAIN PROVISIONS IN THE DECLARATION OF TRUST

Under Massachusetts law, shareholders could, in 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 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.

35
<PAGE>

REPURCHASE OF FUND SHARES; CONVERSION TO OPEN-END FUND

The Fund is a closed-end investment company and as such its shareholders
will not have the right to cause the Fund to redeem their shares. Instead, the
Common Shares will trade in the open market at a price that will be a function
of several factors, including dividend levels (which are in turn affected by
expenses), net asset value, 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 repay all outstanding borrowings and
commercial paper or notes, 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 a price based on 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. The Board of
Trustees believes that the closed-end fund structure is desirable, given the
Fund's investment objective and policies, and the generally illiquid nature of
Senior Loans. 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 "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.

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 net
short-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.

36
<PAGE>

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 Common 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 with respect to
securities 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 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%.

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.

37
<PAGE>

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. Discovery is
underway on that single claim. 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.

38
<PAGE>

UNDERWRITING

The underwriters named below (the "Underwriters"), acting through
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York, as
lead manager, and John Nuveen & Co. Incorporated, Deutsche Bank Securities
Inc., A.G. Edwards & Sons, Inc., Prudential Securities Incorporated, First
Union Securities, Inc., Janney Montgomery Scott LLC and Legg Mason Wood Walker
Incorporated 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.

<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
PaineWebber Incorporated....................................... 2,435,000
John Nuveen & Co. Incorporated................................. 2,435,000
Deutsche Bank Securities Inc................................... 2,435,000
A.G. Edwards & Sons, Inc....................................... 2,435,000
Prudential Securities Incorporated............................. 2,435,000
First Union Securities, Inc.................................... 2,435,000
Janney Montgomery Scott LLC.................................... 2,435,000
Legg Mason Wood Walker, Incorporated........................... 2,435,000
Bear, Stearns & Co. Inc........................................ 250,000
CIBC Oppenheimer Corp.......................................... 250,000
Schroder & Co. Inc............................................. 250,000
SG Cowen Securities Corporation................................ 250,000
Advest, Inc.................................................... 140,000
Robert W. Baird & Co. Incorporated............................. 140,000
BHC Securities, Inc............................................ 140,000
J.C. Bradford & Co............................................. 140,000
Crowell, Weedon & Co........................................... 140,000
Dain Rauscher Wessels.......................................... 140,000
Fahnestock & Co. Inc........................................... 140,000
Fidelity Capital Markets Company............................... 140,000
Fifth Third Securities, Inc.................................... 140,000
First Albany Corporation....................................... 140,000
First Security Van Kasper...................................... 140,000
Gibraltar Securities Co........................................ 140,000
Gruntal & Co., L.L.C........................................... 140,000
Josephthal & Co. Inc........................................... 140,000
McDonald Investments Inc....................................... 140,000
Morgan Keegan & Company, Inc................................... 140,000
David A. Noyes & Company....................................... 140,000
Parker/Hunter Incorporated..................................... 140,000
Pennsylvania Merchant Group.................................... 140,000
Ragen Mackenzie Incorporated................................... 140,000
The Robinson-Humphrey Company, LLC............................. 140,000
Scott & Stringfellow, Inc...................................... 140,000
Stephens Inc................................................... 140,000
Suntrust Equitable Securities Corporation...................... 140,000
Sutro & Co. Incorporated....................................... 140,000
</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
Underwriter Number of Shares
- ----------- ----------------
<S> <C>
Tucker Anthony Incorporated.................................... 140,000
C. E. Unterberg, Towbin........................................ 140,000
U.S. Bancorp Piper Jaffray Inc................................. 140,000
Wachovia Securities, Inc....................................... 140,000
Wedbush Morgan Securities Inc.................................. 140,000
Allen & Company of Florida Inc................................. 60,000
American Fronteer Financial Corporation........................ 60,000
Anderson & Strudwick Incorporated.............................. 60,000
George K. Baum & Company....................................... 60,000
Branch, Cabell & Company....................................... 60,000
City Securities Corporation.................................... 60,000
D. A. Davidson & Co., Inc...................................... 60,000
Ferris, Baker Watts, Inc....................................... 60,000
J.B. Hanauer & Co.............................................. 60,000
Hazlett, Burt & Watson, Inc.................................... 60,000
J.J.B. Hilliard, W. L. Lyons, Inc.............................. 60,000
Howe Barnes Investments, Inc................................... 60,000
Huntleigh Securities Corporation............................... 60,000
JWGenesis Securities, Inc...................................... 60,000
Kirkpatrick, Pettis, Smith, Polian Inc......................... 60,000
Mesirow Financial, Inc......................................... 60,000
Moors & Cabot, Inc............................................. 60,000
NatCity Investments, Inc....................................... 60,000
M.L. Stern & Co., Inc.......................................... 60,000
Stifel, Nicolaus & Company, Incorporated....................... 60,000
TD Securities.................................................. 60,000
H.C. Wainwright & Co., Inc..................................... 60,000
----------
Total........................................................ 26,000,000
==========
</TABLE>

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 3,900,000
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
$0.45 per Common Share (4.50% of the public offering price per Common Share) or
an aggregate amount of $11,700,000 ($13,455,000 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 $0.30
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 $0.10 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 $0.01
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 "NSL." In order to meet the requirements of listing the Common Shares on the
New York Stock Exchange, the Underwriters have

40
<PAGE>

undertaken to sell lots of 100 or more Common Shares to a minimum of 2,000
beneficial holders. The minimum investment requirement is 100 Common Shares
($1,000 worth).

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 equity securities 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
Representatives.

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.

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
the principal exchange that lists the Common Shares, (2) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
National Association of Securities Dealers Automated Quotation National Market
System ("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 or trading has been suspended on any U.S. securities exchange, (4) a
general banking moratorium has been established by U.S. 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
declaration by the United States of a national emergency or war or other
calamity or crisis occurs, the effect of which is such as to make it
impracticable or inadvisable 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.

41
<PAGE>

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

Chase Bank of Texas, National Association, 600 Travis Street, Houston, Texas
77002, 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, 4 New York Plaza, New York,
New York 10004.

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.

42
<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-28

Financial Statements....................................................... B-29

Ratings of Investments (Appendix A)........................................ A-1
</TABLE>

43
<PAGE>

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

26,000,000 Shares

Nuveen Senior Income Fund

[nuveen logo]

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

PROSPECTUS

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

PaineWebber Incorporated

John Nuveen & Co.
Incorporated

Deutsche Banc Alex. Brown

A.G. Edwards & Sons, Inc.

Prudential Securities

First Union Securities, Inc.

Janney Montgomery Scott LLC

Legg Mason Wood Walker
Incorporated

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

October 26, 1999

Until , 1999, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may
be required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as Underwriters and with respect to
their unsold allotments or subscriptions.

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 October 26,
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-28
Financial Statements B-29
Ratings of Investments (Appendix A) A-1

This Statement of Additional Information is dated October 26, 1999

B-1
<PAGE>

USE OF PROCEEDS

The net proceeds of the offering of Common Shares of the Fund will be
approximately: $248,040,000 ($285,246,000 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 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.

2. Borrow money, except as permitted by the 1940 Act.

3. Issue senior securities, as defined in the 1940 Act, other than (i)
preferred shares which immediately after issuance will have asset
coverage of at least 200%, (ii) indebtedness which immediately after
issuance will have asset coverage of at least 300%, or (iii) the
borrowings permitted by investment restriction 2. above.

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.

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. 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. 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.

3. 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.

4. 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.

For purposes of non-fundamental 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.

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 securities in anticipation of a movement in interest rates. Frequency
of 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 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 ("Borrower") and several lenders ("Lenders") represented in each case
by one or more such Lenders acting as agent of the several Lenders (the
"Agent"). 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 "Loan Agreements"). 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 Fund will not act as sole Agent in a
transaction. 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. 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 or increasing the time for payment of interest on or repayment of
principal of a Senior Loan, or releasing all or substantially all of the
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 20%
of its total assets in Senior Loans in which it acts as an Agent or co-agent and
the size of any individual loan will not exceed 5% of the Fund's total assets.

Lending Fees

In the process of buying, selling and holding Senior Loans the Fund may
receive and/or pay certain fees. These fees are in addition to interest payments
received and may include facility fees, commitment fees, commissions and
prepayment penalty fees. When the Fund buys a Senior Loan it may receive a
facility fee and when it sells a Senior Loan it may pay a facility fee. On an
ongoing basis, the Fund may receive a commitment fee based on the undrawn
portion of the underlying line of credit portion of a Senior Loan. In certain
circumstances, the Fund may receive a prepayment penalty fee upon the prepayment
of a Senior Loan by a Borrower. Other fees received by the Trust may include
covenant waiver fees and covenant modification fees.

Borrower Covenants

A Borrower must comply with various restrictive covenants contained in a
Loan Agreement. Such covenants, in addition to requiring the scheduled payment
of interest and principal, may include restrictions on dividend payments and
other distributions to stockholders, provisions requiring the Borrower to
maintain specific minimum financial ratios, and limits on total debt. In
addition, the Loan Agreement may contain a covenant requiring the Borrower to
prepay the Senior Loan with any free cash flow. Free cash flow is generally
defined as net cash flow after scheduled debt service payments and permitted
capital expenditures, and includes the proceeds from asset dispositions or sales
of securities. A breach of a covenant which is not waived by the Agent, or by
the lenders directly, as the case may be, is normally an event of acceleration;
i.e., the Agent, or the lenders directly, as the case may be, has the right to
call the outstanding Senior Loan. The typical practice of an Agent or a Lender
in relying exclusively or primarily on reports from the Borrower may involve a
risk of fraud by the Borrower. In the case of a Senior Loan in the form of a
Participation, the agreement between the buyer and seller may limit the rights
of the holder of a Senior Loan to vote on certain changes which may be made to
the Loan Agreement, such as waiving a breach of a covenant. However, the holder
of the Participation will, in almost all cases, have the right to vote on
certain fundamental issues such as changes in principal amount, payment dates
and interest rate.

Administration of Loans

In a typical Senior Loan, the Agent administers the terms of the Loan
Agreement. In such cases, the Agent is normally responsible for the collection
of principal and interest payments from the Borrower and the apportionment of
these payments to the credit of all institutions which are parties to the Loan
Agreement. The Fund will generally rely upon the Agent or an intermediate
participant to receive and forward to the Fund its portion of the principal and
interest payments on the Senior Loan. Furthermore, unless under the terms of a
Participation Agreement the Fund has direct recourse against the Borrower, the
Fund will rely on the Agent and the other members of the lending syndicate to
use appropriate credit remedies against the Borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the Loan
Agreement based upon reports prepared by the Borrower. The seller of the Senior
Loan usually does, but is often not obligated to, notify holders of Senior Loans
of any failures of compliance. The Agent may monitor the value of the collateral
and, if the value of the collateral declines, may accelerate the Senior Loan,
may give the Borrower an opportunity to provide additional collateral or may
seek other protection for the benefit of the participants in the Senior Loan.
The Agent is compensated by the Borrower for providing these services under a
Loan Agreement, and such compensation may include special fees paid upon
structuring and funding the Senior Loan and other fees paid on a continuing
basis. With respect to Senior Loans for which the Agent does not perform such
administrative and enforcement functions, the Fund will perform such tasks on
its own behalf, although a collateral bank will typically hold any collateral on
behalf of the Fund and the other lenders pursuant to the applicable Loan
Agreement.

A financial institution's appointment as Agent may be terminated in the
event that it fails to observe the requisite standard of care or becomes
insolvent, enters Federal Deposit Insurance Corporation ("FDIC") receivership,
or, if not FDIC insured, enters into bankruptcy proceedings. A successor Agent
would generally be appointed to replace the terminated Agent, and assets held by
the Agent under the Loan Agreement should remain available to holders of Senior
Loans. However, if assets held by the Agent for the benefit of the Fund were
determined to be subject to the claims of the Agent's general creditors, the
Fund might incur certain costs and delays in realizing payment on a Senior Loan,
or suffer a loss of principal and/or interest. In situations involving other
intermediate participants similar risks may arise.

Prepayments

Senior Loans may require, in addition to scheduled payments of interest
and principal, the prepayment of the Senior Loan from free cash flow or asset
sales. The degree to which Borrowers prepay Senior Loans, whether as a
contractual requirement or at their election, may be affected by general
business conditions, the financial condition of the Borrower and competitive
conditions among Lenders, among others. As such, prepayments cannot be predicted
with accuracy. Upon a prepayment, either in part or in full, the actual
outstanding debt on which the Fund derives interest income will be reduced.
However, the Fund may receive both a prepayment penalty fee from the prepaying
Borrower and a facility fee upon the purchase of a new Senior Loan with the
proceeds from the prepayment of the former. Prepayments generally will not
materially affect the Fund's performance because the Fund should be able to
reinvest prepayments in other Senior Loans that have similar or identical yields
and because receipt of such fees may mitigate any adverse impact on the Fund's
yield.

Other Information Regarding Senior Loans

From time to time, the Adviser and its affiliates may borrow money from
various banks in connection with their business activities. Such banks may also
sell Senior Loans to or acquire them from the Fund or may be intermediate
participants with respect to Senior Loans in which the Fund owns interests. Such
banks may also act as Agents for Senior Loans held by the Fund.

The Fund may acquire interests in Senior Loans which are designed to
provide temporary or "bridge" financing to a Borrower pending the sale of
identified assets or the arrangement of longer-term loans or the issuance and
sale of debt obligations. The Fund may also invest in Senior Loans of Borrowers
who have obtained bridge loans from other parties. A Borrower's use of bridge
loans involves a risk that the Borrower may be unable to locate permanent
financing to replace the bridge loan, which may impair the Borrower's perceived
creditworthiness.

To the extent that collateral consists of the stock of the Borrower's
subsidiaries or other affiliates, the Fund will be subject to the risk that this
stock will decline in value. Such a decline, whether as a result of bankruptcy
proceedings or otherwise, could cause the Senior Loan to be undercollateralized
or unsecured. In most credit agreements there is no formal requirement to pledge
additional collateral. In addition, the Fund may invest in Senior Loans
guaranteed by, or fully secured by assets of, shareholders or owners, even if
the Senior Loans are not otherwise collateralized by assets of the Borrower;
provided, however, that such guarantees are fully secured. There may be
temporary periods when the principal asset held by a Borrower is the stock of a
related company, which may not legally be pledged to secure a Senior Loan. On
occasions when such stock cannot be pledged, the Senior Loan will be temporarily
unsecured until the stock can be pledged or is exchanged for or replaced by
other assets, which will be pledged as security for the Senior Loan. However,
the Borrower's ability to dispose of such securities, other than in connection
with such pledge or replacement, will be strictly limited for the protection of
the holders of Senior Loans. During any such period in which the Senior Loan is
temporarily unsecured, such Senior Loans will not be treated as secured Senior
Loans for purposes of the Fund's policy of investing in normal circumstances at
least 80% of its total assets in secured Senior Loans.

B-6
<PAGE>

If a Borrower becomes involved in bankruptcy proceedings, a court
may invalidate the Fund's security interest in the loan collateral or
subordinate the Fund's rights under the Senior Loan to the interests of the
Borrower's unsecured creditors. Such action by a court could be based, for
example, on a "fraudulent conveyance" claim to the effect that the Borrower did
not receive fair consideration for granting the security interest in the loan
collateral to the Fund. For Senior Loans made in connection with a highly
leveraged transaction, consideration for granting a security interest may be
deemed inadequate if the proceeds of the Loan were not received or retained by
the Borrower, but were instead paid to other persons (such as shareholders of
the Borrower) in an amount which left the Borrower insolvent or without
sufficient working capital. There are also other events, such as the failure to
perfect a security interest due to faulty documentation or faulty official
filings, which could lead to the invalidation of the Fund's security interest
in loan collateral. If the Fund's security interest in loan collateral is
invalidated or the Senior Loan is subordinated to other debt of a Borrower in
bankruptcy or other proceedings, it is unlikely that the Fund would be able to
recover the full amount of the principal and interest due on the Loan.

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 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, pursuant to procedures adopted and
reviewed on an ongoing basis by the Board of Trustees, to be creditworthy. If a
default occurs by the other party to such transaction, the Fund will have
contractual remedies pursuant to the agreements related to the transaction but
such remedies may be subject to bankruptcy and insolvency laws 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.

The Fund may also engage in credit derivative transactions. Default price
risk derivatives are linked to the price of reference securities or loans after
a default by the issuer or borrower, respectively. Market spread derivatives are
based on the risk that changes in market factors, such as credit spreads, can
cause a decline in the value of a security, loan or index. There are three basic
transactional forms for credit derivatives; swaps, options and structured
instruments. The use of credit derivatives is a highly specialized activity
which involves strategies and risks different from those associated with
ordinary portfolio security transactions. If the Adviser is incorrect in its
forecasts of default risks, market spreads or other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these techniques were not used. Moreover, even if the Adviser is
correct in its forecasts, there is a risk that a credit derivative position may
correlate imperfectly with the price of the asset or liability being hedged.
Credit derivative transaction exposure will be limited to 10% of the total
assets of the Fund.

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 1940 Act) 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, President Chairman since July 1, 1996 of The John
333 West Wacker Drive and 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); Chief
Executive Officer and Director of
the Adviser (since September 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>

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 Senior Vice President (since May 1999,
333 West Wacker Drive Assistant Secretary formerly Vice President) and General
Chicago, IL 60606 Counsel (since September 1997) and Secretary
(since May 1998) of John Nuveen & Co.
Incorporated and The John Nuveen Company;
Vice President (since September 1997) and
Assistant Secretary (since July 1999) of
Nuveen Advisory Corp. and Nuveen Institutional
Advisory Corp.; Senior Vice President and Secretary
(since September 1999) of the Adviser, 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
(since September 1999); prior thereto,
Assistant Vice President (January
1997); formerly, Associate of John
Nuveen & Co. Incorporated; Chartered
Financial Analyst.
</TABLE>

B-9
<PAGE>

Stephen D. Foy 5/31/54 Vice President and Vice President of John Nuveen & Co.
333 West Wacker Drive Controller Incorporated; Vice President of the Adviser
Chicago, IL 60606 (since September 1999); Certified Public Accountant.

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); prior to 1989, assistant
portfolio manager and credit officer for The Pilgrim Group.
</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).
</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>
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
Assistant Secretary (since July 1999) of
Nuveen Advisory Corp. and Nuveen
Institutional Advisory Corp.; Vice President
and Assistant Secretary of the Adviser
(since September 1999); 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 102 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 $13,528 $45,434(1)

Jack B. Evans $13,528 $45,704(2)

William L. Kissick $14,327 $45,485(3)

Thomas E. Leafstrand $13,528 $50,159(4)

Sheila W. Wellington $13,528 $45,379(5)

* Based on the estimated compensation to be earned by the independent
trustees for the period from inception to the fiscal year ending July 31, 2000
for services to the Fund.

**Based on the estimated total compensation paid (including both deferred
compensation and compensation received in cash) to the trustees for the one year
period ending December 31, 1999 for services to the open-end and closed-end
funds advised by the Adviser.

(1) Includes $20,235 in estimated deferred compensation, including assumed
market appreciation/depreciation for each Trustee's actual investments.
(2) Includes $22,690 in estimated deferred compensation, including assumed
market appreciation/depreciation for each Trustee's actual investments.
(3) Includes $18,243 in estimated deferred compensation, including assumed
market appreciation/depreciation for each Trustee's actual investments.
(4) Includes $24,762 in estimated deferred compensation, including assumed
market appreciation/depreciation for each Trustee's actual investments.
(5) Includes $45,379 in estimated deferred compensation, including assumed
market appreciation/depreciation for each Trustee's actual investments.

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 principal 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 .35%
2000 .45% 2006 .25%
2001 .45% 2007 .15%
2002 .45% 2008 .10%
2003 .45% 2009 .05%
2004 .45%
</TABLE>
________________________________________________________________________________
*From the commencement of operations.

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 not agreed to reimburse the Fund for any portion of its fees and
expenses beyond October 31, 2009.

B-14
<PAGE>

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 "Risks" in the Prospectus.

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 assets or 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 per Common Share is calculated by
taking the fair value of the Fund's total assets, including interest or
dividends accrued but not yet collected, less liabilities (including Leverage
Instruments), 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 will invest generally are not listed on
any securities exchange. Certain Senior Loans are traded by institutional
investors in an over-the-counter secondary market for Senior Loan obligations
that has developed over the past several years. This secondary market for those
Senior Loans generally is comparatively illiquid relative to markets for other
income securities and no active trading market exists for many Senior Loans. In
determining net asset value, the Fund will utilize the valuations of Senior
Loans furnished to the Adviser by an independent third-party pricing service
approved by the Board of Trustees. The Board of trustees have reviewed the
various alternatives for pricing the Fund's portfolio of Senior Loans and has
determined that the use of a pricing service is a reasonable, fair and
appropriate method of valuing Senior Loans. The Adviser has entered into an
agreement with a pricing service provider to provide pricing services for the
Fund. The Agreement is terminable by either party upon notice and has an initial
term of six months. The Agreement provides that the pricing service provider
assumes no fiduciary responsibility to the Fund or to any investor in the Fund,
and that the pricing service provider will have no liability under the Agreement
to any third party, including any investor in the Fund. The Agreement provides
that the pricing service provider will be indemnified by the Adviser unless the
pricing service provider has acted with willful misconduct. The pricing service
provider is explicitly permitted to act as principal for its own account in
connection with the purchase and sale (from or to the Fund or otherwise) of any
Senior Loan at any price simultaneously while it provides pricing services to
the Fund. Furthermore, the pricing service provider can only provide valuations
for a limited number of the Senior Loans that may trade from time to time in the
market. The pricing service provider has no obligation to provide a valuation
for a Senior Loan if it believes that it cannot determine such a valuation.
There can be no assurance that the pricing service provider will continue to
provide these services or will provide a value for each Senior Loan held by the
Fund. However, the Adviser believes that if the pricing service provider
declines to continue to act as such for the Fund, or does not provide values for
a significant portion of the Senior Loans in the Fund's portfolio, one or more
alternative independent third-party pricing service providers will be available
to provide comparable services on similar terms. During any period in which no
pricing service provider is acting as such for the Fund, or for any Senior Loan
for which no value from a pricing service provider is available, the Adviser
will value the Fund's Senior Loans as described below.

A pricing service provider typically will value Senior Loans at the mean of
the highest bona fide bid and lowest bona fide ask prices when current
quotations are readily available. Senior Loans for which current quotations will
not be readily available are valued at a fair value as determined by the pricing
service provider using a wide range of market data and other information and
analysis, including credit considerations considered relevant by the pricing
service provider to determine valuations. The procedures of any pricing service
provider and its valuations will be reviewed by the officers of the Adviser
under the general supervision of the Board of Trustees. If the Adviser believes
that a value provided by a pricing service provider does not represent a fair
value as a result of information, specific to that Senior Loan or Borrower or
its affiliates, which the Adviser believes that the pricing agent may not be
aware, the Adviser may in its discretion value the Senior Loan subject to
procedures approved by the Board of Trustees and reviewed on a periodic basis,
and the Fund will utilize that price instead of the price as determined by the
pricing service provider. In addition to such information the Adviser will
consider, 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 in determining a fair value of a Senior
Loan. If the pricing service provider does not provide a value for a Senior Loan
or if no pricing service provider is then acting, a value will be determined by
the Adviser in the manner described above.

B-16

<PAGE>

than the net asset values of investment companies with portfolios consisting
primarily of longer term fixed-income securities.

Because a secondary trading market in Senior Loans has not yet fully
developed, the pricing service or the Adviser may not rely solely on but may
consider, to the extent they believe such information to be reliable, prices or
quotations provided by banks, dealers or other pricing service providers with
respect to secondary market transactions in Senior Loans. To the extent that an
active secondary trading market in Senior Loan interests develops to a reliable
degree, the pricing service provider or the Adviser may rely to an increasing
extent on such market prices and quotations in reviewing the valuations of the
Senior Loan interests in the Fund's portfolio. To the extent a trading market
continues to develop, certain participants in the market may have objectives
other than current income and may pursue short-term trading strategies, which
may result in erratic movements in the market prices for Senior Loans as a
result of movements in short-term interest rates or otherwise. Although the
Fund's policy of acquiring interests in floating rate Senior Loans is intended
to minimize fluctuations in net asset value resulting from changes in market
interest rates, the Fund's net asset value will fluctuate. 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 determining or 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's 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 per share 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 Adviser believes that the Fund has the potential to provide Common
Shareholders diversification within their portfolios by using an investment
which has relatively low correlations with equity and longer-term fixed-income
investments.

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 offered by one or
more major United States banks (the "Prime Rate"), the London Inter-bank Offered
Rate ("LIBOR"), the certificate of deposit ("CD") rate or other base lending
rates used by commercial lenders. The following table is intended to provide
investors with a comparison of short-term money market rates, a representative
base commercial lending rate, and a representative indicator of the premium over
such base lending rate for Senior Loans. The representative indicator shown
below is derived from the DLJ Leveraged Loan Index, which was designed in
January 1992 to mirror the investible universe of the market for Senior Loans.
The DLJ Leveraged Loan Index includes approximately $60 billion of Senior Loans
as of December 31, 1998 and new Senior Loan issues are added when they meet
certain criteria. The DLJ Leveraged Loan Index is an unmanaged index and,
although the Adviser believes that the spreads over LIBOR reported in connection
with the determination of the Index (which are an average of the contractual
spreads set forth in the loan agreements relating to the Senior Loans included
in the Index) are representative of the historical average spreads in the
overalll market for Senior Loans, the Fund will have no direct investment in,
nor will its performance be indicative of, this Index. The following comparison
should not be considered a representation of future money market rates, spreads
of Senior Loans over base reference rates nor what an investment in the Fund may
earn or what an investor's yield or total return may be in the future.

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>
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% 7.75%
3 Month Treasury Bill Rate/2/............ 3.2200% 3.0600% 5.600% 5.1400% 4.9100% 5.1790% 4.8742% 4.9600%
3 Month LIBOR/3/......................... 3.4375% 3.3750% 6.5000% 5.6250% 5.5625% 5.8125% 5.0600% 5.3700%
Average Senior Loan Spreads
Plus 3 Month LIBOR/4/................ 5.9275% 5.8450% 8.8500% 7.9450% 8.0325% 8.2125% 7.4200% 7.8100%
- -------------------------------------------------------------------------------------------------------------------------
</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 Derived from reported average Senior Loan spreads in the DLJ Leveraged Loan
Index. The data do not reflect fluctuations in the principal value of
Senior Loans included in the Index. Source: Donaldson, Lufkin & Jenrette.

B-22

<PAGE>

Comparison of Yield

The following chart compares the yield of the average Senior Loan Spread
plus three-month LIBOR/1/ to the three-month LIBOR and the three-month Treasury
Bill Rate.
<TABLE>
<CAPTION>
Date Three Month Three Month Average Senior Loan
LIBOR Treasury Bill Rate Spread Plus Three Month LIBOR
<S> <C> <C> <C>
01/31/92 4.19% 3.92% 2.18%
02/28/92 4.25% 4.02% 2.18%
03/31/92 4.31% 4.13% 2.18%
04/30/92 4.06% 3.71% 2.18%
05/29/92 4.06% 3.72% 2.19%
06/30/92 3.94% 3.60% 2.24%
07/31/92 3.44% 3.17% 2.27%
08/31/92 3.50% 3.13% 2.29%
09/30/92 3.13% 2.65% 2.28%
10/30/92 3.56% 2.84% 2.31%
</TABLE>

B-23
<PAGE>

B-24
<PAGE>

_________________________

/1/ Source: Donaldson, Lufkin & Jenrette; Bloomberg. Senior loans are
represented by adding the reported spreads of the senior loans in the DLJ
Leveraged Loan Index over three-month LIBOR. The DLJ Leveraged Loan Index was
designed in 1992 to mirror the investable universe of the U.S.
dollar-denominated leveraged loan market. The Index includes $60 billion of
tradable loans. New issues were added to the Index when they met certain
criteria. It is not possible to invest in an index. This comparison should not
be considered an expression of future market interest rates, spreads of senior
loans over base reference rates, nor an indication of what an investment in the
Fund may earn or what an investor's yield or total return might be in the
future. 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, but have
certain investor protections described elsewhere in this Statement of Additional
Information and in the Prospectus.

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 and the volume of the leveraged loan market.
Individual investors currently represent a small percentage of this market,
holding approximately $28.5 billion in Senior Loan funds as of June 30, 1999.

Senior Loan New Issue Volume
(in billions)

<TABLE>
<CAPTION>
Year Dollar
Volume
<S> <C>
1987 $ 66
1988 $163
1989 $187
1990 $ 58
1991 $ 21
1992 $ 40
1993 $ 28
1994 $ 81
1995 $101
1996 $135
1997 $194
1998 $273
</TABLE>
______________

Source: Donaldson, Lufkin & Jenrette; Loan Pricing Corporation

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

Leveraged Loan Market Volume
(in billions)

Dollar
As of March 31, Volume
- --------------- ------
1989 $317
1990 $315
1991 $192
1992 $221
1993 $150
1994 $176
1995 $224
1996 $284
1997 $318
1998 $552
June 30, 1999 $602

EXPERTS

The Statement of Net Assets of the Fund as of October 14, 1999 appearing in
this Statement of Additional Information has been audited by KPMG LLP, 303 East
Wacker Drive, Chicago, Illinois 60601, 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. KPMG 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.

B-27
<PAGE>

REPORT OF INDEPENDENT AUDITORS

To the Board of Trustees and Shareholder
Nuveen Senior Income Fund:

We have audited the accompanying statement of net assets of Nuveen Senior Income
Fund (the "Fund"), as of October 14, 1999. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit of this financial statement provides a reasonable
basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Fund as of October 14,
1999, in conformity with generally accepted accounting principles.

KPMG LLP

Chicago, Illinois
October 14, 1999

B-28
<PAGE>

FINANCIAL STATEMENTS

Nuveen Senior Income Fund
Statements of Net Assets
October 14, 1999

<S> <C>
Assets:
Cash................................................. $ 100,084
------------
Total assets........................................ 100,084
------------
Net assets............................................. $ 100,084
============

Net Assets Represent:
Cumulative preferred shares, $25,000 liquidation
value; unlimited number of shares authorized,
no shares outstanding............................... $ -
Common shares, $.01 par value; unlimited number
of shares authorized, 10,480 shares outstanding..... 105
Paid-in surplus....................................... 99,979
------------
$ 100,084
============

Net asset value per Common share outstanding ($100,084
divided by 10,480 Common Shares outstanding)........ $ 9.55
============
</TABLE>

The Fund was organized as a Massachusetts business trust on August 13, 1999, and
has been inactive since that date except for matters relating to its
organization and registration as a closed-end management investment company
under the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended, and the sale of 10,480 Common Shares to Nuveen Senior Loan
Asset Management Inc., the Fund's investment adviser (the "Adviser"), a wholly
owned subsidiary of The John Nuveen Company. John Nuveen & Co. Incorporated,
also a wholly owned subsidiary of The John Nuveen Company, has agreed to pay all
organizational expenses (approximately $10,000) and all offering costs (other
than the sales load) that exceed $.01 per common shares.

The Fund is authorized by its Declaration of trust to issue an unlimited number
of preferred shares having a liquidation value of $25,000 per share in one or
more classes or series, with dividend, liquidation preference and other rights
as determined by the Fund's Board of Trustees, by action of the Board of
Trustees without the approval of the Common Shareholders.

The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
Actual results may differ from those estimates.

B-29
<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 payment--capacity and willingness of the obligor to
meet its financial commitment on an obligation in accordance with the
terms of the obligation;

2. Nature of and provisions of the obligation;

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 meet
its financial commitment on the obligation is extremely strong.

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

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

BBB Debt rated `BBB' exhibits adequate protection parameters. However, adverse

A-1
<PAGE>

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.

Speculative Grade Rating

Debt rated `BB', `B', `CCC', `CC' and `C' is regarded as having significant
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 large uncertainties or major exposures to adverse
conditions.

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

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

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

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 Debt rated `CC' is currently highly vulnerable to nonpayment.

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 payments on this obligation are being 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 the
obligor's capacity to meet its financial commitment on the obligation is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2 An obligation rated "A-2" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than issues
designated "A-1." However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

A-3 Issues carrying this designation have adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

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

C This rating is assigned to short-term debt obligations currently vulnerable
to nonpayment and is dependent upon favorable business, financial, and
economic conditions for the obligor to meet its financial commitment on the
obligation.

D 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.

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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 edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.

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

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

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

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

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

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

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

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

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

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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 Caa 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 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.

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

Issuers rated Prime-2 (or 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 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

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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.

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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.

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